THE SCOTTISH ECONOMY

HL Deb 24 November 1971 vol 325 cc1004-139

2.58 p.m.

LORD POLWARTH rose to draw attention to the state of the Scottish economy, and to the need for the determined pursuit of policies for its fundamental improvement; and to move for Papers. The noble Lord said: My Lords, it is completely by chance, though not without significance, that this Motion has found its way on to the Order Paper on the day after the considerable debate in the other place on the subject of unemployment, and also on the same afternoon as a great demonstration is due to take place on account of this cause which, alas! can achieve nothing beyond the widespread disruption of industrial activity and production. More happily, it coincides with an event this morning at which a number of your Lordships were present; namely, a service held in the Crypt of the Palace of Westminster for Members from Scotland, both of this place and of another place, conducted by the Moderator of the General Assembly of the Church of Scotland. In the course of that Service, appropriately enough, we sang in one of the hymns the words:

"When prosperous times our cities crown Our fields with plenteousness …".

Not only that, but also:

"O, hear us for our native land, The land we love the most …".

If to some of our friends from South of the Border this sounds somewhat nationalistic in character, I would only plead that we are approaching St. Andrew's-tide. I have therefore some excuse for relating my Motion to Scotland; but, in spite of some peculiar features of its own, Scotland's economy is a microcosm of that of the country as a whole and reflects in a particularly vivid way some of the problems which the whole country is facing. So I hope that the debate will be of some help not only where Scotland is concerned but nationally as well.

The first part of my Motion relates to the present state of the Scottish economy, and if I spend less time on this than on the rest it is because I believe that, in spite of the darkness of the immediate economic scene, we in fact stand at a moment of great opportunity where, with imaginative thought and vigorous action,

we can bring about a fundamental and lasting improvement in the state of Scotland and, through Scotland, of the United Kingdom as a whole. Of course, we are going through a black patch. It is depressing, after all the work that has gone into strengthening our economy, to see United Kingdom unemployment at the highest level since 1939— not far short of one million persons— even if, by consolation, Scotland's proportion of that, once as high as 20 per cent. or even over, is now down below 15 per cent. The fact that 140,000 are out of work in Scotland is very grave indeed. The attention of the world, an unwelcome attention, has in this respect been focused on the deplorable affair of Upper Clyde Shipbuilders, and here I suggest that the best service we can do to the Clyde is not to indulge in recrimination but to wish well to those who are striving to re-establish a sound nucleus of shipbuilding on the Upper Clyde, and also to remind the world that on the lower reaches of the Clyde we have highly efficient shipyards employing 8.000 people and seeking still more to fulfil their orders. That is something which is frequently forgotten.

Unemployment has not been such an emotional issue since the 1930s, and the drama of Upper Clyde has perhaps obscured the real truth. Unemployment is in fact widely spread over industry and commerce, not just in the old industries but in many of the new ones, too. We know the causes. It is a combination of forces: a recession in world trade combined with rampant inflation which is bringing home the real cost of labour and the need for economy in its use. Over the years since the war we in this country, with every encouragement from our leaders, have been demanding an ever-increasing standard of living but have not been prepared to pay the full cost in terms of efficiency and work. It is ironical that the voices raised loudest about the evils of unemployment to-day include many who in the past were most critical of industry's efficiency. All of us— Government, industry, individuals, alike— must realise, as I think we do realise, that we have a great responsibility to do everything in our power to create a state of affairs where no able and willing man or woman should not be able to find a reasonable job of work.

When the tide of trade returns there will certainly be a recovery and an improvement in the employment figures, and with the amount of money that has been, and is being, released into the economy some results must show very soon. There are indeed signs that that time is not far off—though, inevitably with a consumer boom, Scotland, so dependent still on capital goods, is always slower to benefit. In the short run, till trade revives, there is very little, or comparatively little, that can be done to take up the slack. But there arc exceptions. For instance, of all the men unemployed in Scotland in the month of October no fewer than 26,500, a quarter of the total unemployed, were in the building and construction industry. Therefore, it was very good news that the Government are to carry out a programme of £60 million worth of public works within the next two years. This should bring welcome relief to these industries as well as make Scotland a more attractive place in which to live and work. The essential thing is that the period of preparation and planning of these works should be cut to the minimum, so that the work can begin on the ground.

It is also very heartening that the Naval construction programme has been advanced and will give the shipbuilders much-needed work and time to reorganise for the future. We welcome, too, yesterday's announcement of a variety of projects, particularly of an order for a hundred light aircraft for Scottish Aviation. As a further thought, in the very short run could not local authorities be given still greater encouragement and more money to start at once on schemes of clearance of those derelict areas which are still such an eyesore on our industrial scene? This is a subject which your Lordships debated last week, though, so far as I can see, entirely with reference to England and Wales. There is to-day in The Timesa letter on the subject and I should have thought this was one of the quickest ways of creating short-term interim employment.

However, my Lords, important as these short-term measures are, particularly for human reasons, it is on the further horizon that we must set our eyes. As I said at the start, I believe we are at a point of great opportunity, and I say this because we have in Britain, and specifically in Scotland, a conjunction of favourable circumstances such as we have never had before in our history. First, we have the Common Market second, we have the development of ever larger ships which demand deep-water ports for the discharge of their cargoes, and third, we have discoveries of oil and gas off our shores which promise to exceed anything dreamt of a few years ago. I believe, with reference to the first, that the Market gives increased scope for the attraction to Scotland and to the other development areas of new industry from overseas. Much has been said in this connection about the compatibility of our own regional policies with those likely to be agreed upon by the Community, the views expressed depending very largely upon whether their exponent is for or against the Market. The truth appears to be— and I hope that either the noble Lord or the noble Baroness who are to reply to the debate will enlighten us on this point— that the question of common regional policies is still very much in the melting pot. We in this country rightly pride ourselves on our experience in this field, and we in Scotland particularly for what we have contributed in ideas and research. I am quite sure that on entry to the Market that contribution will be welcomed and will carry great weight. Whatever the details, the fact is that a common and vigorous regional policy is a basic part of the Common Market philosophy.

I should like to quote from a paper of the Commission of the European Communities, written in 1969. Referring to the inadequately developed regions it says: If a suitable regional policy does not enable us to make up the economic disparity in these Community regions and thus solve the problem of employment, in the long term they may in one way or another slow down or even halt overall economic growth. So while we are in a position to make our mark we should take a new look at our present system of incentives. On the question of grants versustax allowances I have had my doubts in the past but I am now convinced that in the end it is cash that talks. Liquidity has been the biggest problem of most developing companies, and cash, whether in the form of investment grants or regional employ meat premiums, is much the most effective encouragement. I believe that we should revert to the system of investment grants and that we should maintain regional employment premiums, or indeed consider increasing them.

When it comes to eligibility for aid we have a complicated system, with different rules for one area or another and one kind of industry or another. This is all very confusing to a potential beneficiary. I believe that the right answer is to have a single uniform scale for a substantial area, whether it be Scotland, whether it be Wales, whether it be all the development areas, and leave it to the Government to point out the growth areas by the development of roads, services, public buildings and everything that goes under that horrible but useful term of "infrastructure". In regional policy we must have continuity. Successive Governments have felt it incumbent on themselves to produce variations on the theme of their predecessors, or even their own original theme. Again, this is confusing. Industry does not know where it stands, and I think we could take a lead from the policy of the Italians over their Mezzogiorno district in the South, where continuity of purpose and policy has certainly paid dividends.

Finally, on regional policies there is the question of administration. A year ago the Scottish Council (Development and Industry) organised an international forum to discuss the whole question of centralisation and what could be done about it. Among the principal speakers whom we brought to the conference which was held at Aviemore (a good example of decentralisation in itself) were McGeorge Bundy, President of the Ford Foundation, and Jerome Monod, the civil servant in charge of the French Ministry of Regional Development. From him we heard about that Ministry's role, which lays down the broad policy but decentralises the specific study and action to the regions themselves. Here again we could well take a lesson. Regional policy is but one of the many responsibilities of that mastodon, the Department of Trade and Industry. With its many activities some people might call it a hydra. We should seriously think about a separate Ministry of Regional Development, with considerable devolution in Scotland's case to the Scottish Office and in other parts to other bodies, and through those to the new local government regions. So let us give our whole regional policies a thorough review while we can still do so and can influence the policies of the E. E. C.

May I next turn to the second of our great opportunities; namely, deep-water ports. Rather over a year ago my noble friend Lord Perth opened a debate in your Lordships' House on the Scottish Council's report entitled Oceanspan. The gist of that study was that the economics of transport to-day means the use of ever larger vessels to carry raw materials into the industrial centres of Europe; that these vessels need deep-water ports and safe approaches; and that the basic industries using materials tend to grow up around these ports and inevitably the secondary industries come in their turn. Till now most of this traffic has flowed into Europe through the great ports like Antwerp and Rotterdam, but with the growth of shipping, both in volume and size, the English Channel is becoming increasingly inadequate and unsafe. It is too narrow and too shallow, as recent disasters have shown. More and more the big ships will have to seek harbourage to the West or South of the Straits of Dover. Here Scotland has a unique resource in the deep water of the Firth of Clyde. Some of the materials arriving there in bulk could be reshipped from the East Coast in smaller vessels able to enter all the ports of Europe. With a supply of these materials, primary industries would grow up in the hinterland— steel, oil, aluminium, petrochemicals. The secondary industries would follow, right across the existing industrial central belt of Scotland, and then the products would be exported from the East Coast ports into the ports of Europe. We have all these assets— the ports, a developed industrial economy — everything to enable Scotland to become a great new centre of economic growth.

That report was generally welcomed in this House and, to quote the noble Baroness, Lady Tweedsmuir, the Government

"accepted in principle the main idea, but with certain reservations."

Now,16 months later, the scene has changed, not least in respect of our decision to join the Common Market. A second study has been made by the Scottish Council with the help of a firm of Dutch consultants versed in this field. Appropriately on this occasion it is called Eurospan, because it looks at the whole position in the context of Europe, and this report confirms the findings of the first and rubs home the need for action soon if we are not to be left at the post.1 will not go into many figures but the report concludes that in some ten years' time from the establishment of such a project the processing industries alone could provide 18,000 jobs, and, on the experience of the Continent round Rotterdam, in turn 2½ times as many jobs in ancillary industries— that is something like 60,000 jobs in all— quite apart from the construction work, which would last many years and could employ at least another 9,000.

My Lords, we cannot afford just to talk: urgency is the order of the day. The report points out that two other outstanding sites meet the criteria and are being developed fast. One is the area between Marseilles and Fos, in the South of France, and the other is at Le Harve, in the North. At both sites work is going ahead. Eighteen thousand acres have been set aside at Marseilles and 24,000 acres at Le Havre, where they are even building an artificial island— something which may create the same kind of navigational hazard as we have heard about earlier this afternoon in the North Sea. The point is that work is going ahead, and new industries are planned and are already being built around it; and if we are not to miss out we must start to act. Private enterprise and State industry will carry the main load, but first Government must make a declaration of faith and give a firm lead. Planning procedures must be streamlined, and developing industries must not be scared away from these areas by the kind of lengthy delays which some others have suffered in recent years. The scale of the whole concept is such that I believe it requires the setting up of a completely new agency or authority, with a great deal of autonomy and funds of its own; an authority to take on the planning, the allocation of land, the development of transport and all the other facilities that are needed.

There is also the aspect of amenity to be considered. The Clyde is one of the

most beautiful parts of our coastline and we must preserve as much as possible, but I believe that the amenity and industrial aspects can be reconciled perfectly well. The ports must have the power and the funds to develop on a completely new scale. For a precedent for such an authority we can look at what the Highlands and Islands Development Board has begun to achieve, given some powers and funds of its own.

Perhaps the one most vital part of the whole scheme is the establishment of a new major steelworks, for which few better sites in Europe, certainly none in Britain, could he found— not just on account of the number of men it would employ itself, but for the magnetic effect on other industries, as can be seen from looking at any of the other great new steelworks in Europe. I know that the Steel Corporation is in the midst of a prolonged pregnancy over its plans; it is still on the cards whether it will bring forth a mountain or a mouse. It is rumoured that the decision might be that we cannot compete in the world of steel on the scale necessary to-day. I only hope that this proves false; it would be a tragedy if Britain, and Scotland, who gave Andrew Carnegie to the world, were to opt out of the big league in steel and lose all the opportunities which would come in its train.

Finally, your Lordships may well ask, particularly those of your Lordships from South of the Border: what of the cost? Where are the funds to come from for the huge spending that will be needed for Government to prime the pump and give the lead to industry? Here fortune has been kind, because at the same time as this great opportunity, we have the matching promise of North Sea oil. On this I would only quote a technical publication, the Oil and Gas Journalof October 25: Any lingering doubt that the North Sea is destined to play a major role in the world oil industry has been dispelled. They were referring to the continued discoveries in the Forties Field and now the Auk Field, both off the coasts of Scotland, and richer than almost anything foreseen in the North Sea.

There are, of course, direct benefits to Scotland. Aberdeen has already been transformed by the base activities related to the exploration. Unemployment in Aberdeen is down to under 4 per cent., which is well below the average for the whole United Kingdom. Other East Coast ports are beginning to benefit too, including Invergordon, which with its existing aluminium works could become the growth point of the North. A pipeline is to be built from Peterhead to the refineries at Grangemouth. If Scottish engineering industry is quick off the mark, it can cash in on the oil equipment market. But that is not all. The Government find themselves with a rich windfall from licence fees and royalties, quite apart from the tax revenues that will accrue. Already this has become a bandwagon on which there is some competition to jump. The finds are in Scottish waters; therefore, it is argued, they should be appropriated to Scottish use. This is a seductive argument, but it could be a dangerous one with a backlash if applied in other fields. We are part of the United Kingdom and this is a United Kingdom resource.

On the other hand, I think it would be quite wrong that these vast revenues — because they will be vast— should simply disappear into the maw of the Treasury for the general taxpayers' relief. Nor should we lightly accept the proposition, the assurance, that Scotland will have something vaguely described as "her fair share". Scotland and most of the other development areas are suffering from the fact that their industries sprang from their natural resources— iron ore and coal in particular— and these resources are now nearly exhausted. Now, in oil and gas, we have found new natural wealth. We should treat these not as a windfall to be squandered but as new resources to replace the old ones that are worked out. What a wonderful opportunity to pool these revenues in a fund to be administered for the benefit of all those areas, Scotland among them, whose natural resources once built up our country to industrial greatness. I know that the earmarking of public revenues for specific purposes is anathema to the Treasury, but this is a completely new situation, and new situations demand new approaches.

To sum up, in Scotland this is not a moment of despair but a moment of hope. Two tasks confront us, and in both the Government must give a firm lead. In the short term we— that is, the Government and all of us— must do all in our power to find work for those without it, to start the vital process of restoring confidence. Looking ahead, I have tried to describe the great opportunities waiting for us to grasp. And if anyone says that these ideas are fanciful I would suggest to him to read those two Oceanspan reports. We are faced with a unique set of circumstances, which demand unique measures and a strong element of faith. I ask the Government to show that faith and make a clear declaration of intent. Scotland's morale will then be restored, and Scotland's industry and people will respond, as they always have in times of opportunity and need. The tide is running in our favour; let us take it at the flood. My Lords, I beg to move for Papers.

3.27 p.m.

LORD HUGHES

My Lords, the first duty I should undertake in speaking in this debate is to express thanks to the noble Lord, Lord Polwarth, for having given us the opportunity of discussing the Scottish economy at a time when it is most appropriate to do so. But If I do not go much further than that the noble Lord will forgive me, because I have heard him make speeches in Scottish debates which have been more appropriate to the circumstances. He will forgive me if I say that far too much of his speech took on the character of apologies for the situation rather than suggestions for its solution. That is something I have never had occasion to say before of any of his remarks, particularly when I was at the receiving end of what I often found was useful advice; but that advice was never so tempered as it has been to-day.

LORD POLWARTH

My Lords, if the noble Lord will permit me, I would only say that I spent at least two-thirds of my remarks in suggesting solutions to the problems.

LORD HUGHES

Yes, my Lords, and I would just remind the noble Lord of how he finished. He said that this is not a time for despair in Scotland, it is a time for hope, and then he went on to say that he hoped the Government would take steps to restore Scottish morale. One does not need one's morale to be restored if one is in a period of hope; one certainly needs a stimulus to morale if one is in despair.

I have not made a prepared speech for this occasion because I did not need to do so. I have been at the receiving end of unemployment. In the 'thirties I experienced the position of being a member of a family where no one worked, and once you have been on the receiving end of that, even for a few months, you never forget it. There are 140,000 families in Scotland to-day in that position. May I go back to the beginning of the noble Lord's speech? He said that this was a moment of great opportunity. Of course, the further one goes into the depths of despair on unemployment, the worse the figures get, obviously the greater the chance that sooner or later there will be a turn. Things have got so bad that I would make this prediction: that if within the next twelve months we reach a position where unemployment has fallen to 600,000 in the country as a whole, it will be hailed as a great improvement. But that was the figure which, when the present Government took office, was being described by present Ministers as the disastrous situation from which the country had to be rescued.

The noble Lord, Lord Polwarth, said that we were going through a "black patch". As Winston Churchill might have said," Some patch!". The noble Lord went on to say that while Scotland's unemployment had been as bad as 20 per cent. of the total, the situation had now improved; it was now only 15 per cent, of the total. I have not worked these things out; the noble Lord is a chartered accountant, and I will accept the complete accuracy of his arithmetic. But I would point out to him that the 15 per cent. has been accomplished not because any improvement has been achieved, but because the Government have achieved the almost impossible in raising unemployment to unprecedented levels in the Midlands of England. We are 15 per cent. of what is a lot worse, and that 15 per cent. of the figure for the country is a great deal worse for Scotland than was 20 per cent. of the previous figure.

While I am dealing with figures, may I refer to the debate on the Common Market, when I took exception to a remark which was made by the noble and learned Lord the Lord Chancellor. I have no doubt that he will read this in due course, and then return to the point. He said that his experience was that while places like Scotland might suffer from unemployment more quickly (I am paraphrasing what he said, and I took exception to his next observation), his experience was that the regions recovered more quickly than the country as a whole. I said that that was not my experience. In the debate on the Amendment to the Queen's Speech the noble and learned Lord came back to that point and said that I was wrong. I happened to find in papers which legitimately remained with me from my Ministerial days the figures of unemployment in Great Britain and in Scotland from 1952 to the middle of 1967. I have no reason to believe that the figures for 1967 to date are any different from those I am now going to give.

I have taken the month of February which, in most years, was the month during which unemployment reached its highest level, and the month of June which, by experience, is one of the months when it has fallen to its lowest level. In only four years out of 15 was the position as it was stated by the noble and learned Lord the Lord Chancellor. May I give the percentages? In these months in 1953, while the Scottish figure of unemployment fell by 27 per cent., the Great Britain figure fell by 33 per cent.; in 1954, the figure was 31 per cent. as against 39 per cent. One of the years when it went the other way was 1955, but only very marginally; there was a 24 per cent. fall in Scotland, and 23 per cent. in Great Britain. Then I have the following figures: 26 per cent. in Scotland,32 per cent. in Great Britain; 30 per cent. in Scotland,46 per cent. in Great Britain. The whole trend of the statistics shows that when there is a slump the areas which are poorest take longest to recover. I think 11 out of 15 years is a pretty fair indication of the trend. I would suggest that if the Government are basing any of their action on a belief that things will recover faster in Scotland than they do elsewhere, a little rethinking is needed.

There was one part of Lord Polwarth's speech with which I found myself most in agreement, and that was when he came to the subject of regional policies. He, like myself, lays considerable importance on the continuation of these policies. I was particularly glad to hear him say that he had come round to the view that investment grants and the regional employment premium were things which should be returned to and continued with, in that order. I was surprised that he did not go so far as he did in earlier years, because it was he who originated, in relation to regional policy, the phrase "the carrot and the stick". While it is perfectly clear that in the Common Market there may well not be any difficulty in evolving policies for the use of the carrot, there is very grave doubt as to whether the application of the stick will be equally permissible or successful. I am a complete subscriber to what I might call the "Polwarth doctrine", that the carrot and the stick are of equal importance.

I do not believe that we are just passing through a black patch. It would be more correct to say that the Scottish economy at the present time is almost in disarray. Before the last Election the previous Government were being criticised for having failed to live up to their promises on employment. We had sought to establish a net increase in the number of jobs in Scotland, because what was aimed at was the bringing in of many new jobs to more than make good the loss of jobs in what has been accepted to be the declining industries of shipbuilding, transport, agriculture and so on. Some are declining in employment. It is not always the same thing: Agriculture provides fewer jobs but greater production; but shipbuilding and the railways were providing fewer jobs because they were reducing industries.

It is the fact that during the period in office of the last Government the cutback in these industries went very much faster than had been anticipated and there was a net loss, but the loss in Scotland during these years was entirely in these older industries. What is the position to-day? We are losing jobs over the whole field of industry. The new industries, such as the bright hope of Scotland, the electronics industry, have been cut back during the last 15 months to almost the same degree as some of the old industries. Take my home town of Dundee, the bright spot of Scotland for so many years. Even the brightest jewel in the crown, the National Cash Register Company, is falling by the wayside to a certain extent. Let me try to he fair— it is difficult of course when one is on political matters, but I will try. The N. C. R., over a period of years, had a time of expansion because they were heavily involved in decimalisation programmes in South Africa, Australia, New Zealand, and then the United Kingdom, one following on the other. There was an expanded programme for that reason. But it was the expressed hope of the company that, following on these programmes, the normal expansion of business which they had experienced ever since coming to Dundee shortly after the War would enable them to hang on to most, if not all, of their increased staff. Instead, for the first time in their history, they have been cutting back. If people have retired their jobs have not been filled; if people have left, the jobs have not been filled. Even that did not take care of the situation and there was a very considerable pay-off in Dundee this year. The N. C. R. are not exceptional. This situation applies over much of what was the new industry of Scotland.

LORD STRATHCLYDE

My Lords, would the noble Lord forgive me for a moment? Am I not correct in saying that the electronics industries to which he has referred are mostly American based? And is it not a fact that the great rise of Japan in the electronics field, which has almost beaten the Americans in their own market, is the cause of the reduction in the amount of employment that is available to us in Scotland?

LORD HUGHES

No, my Lords, it is not. I am willing to concede that it is a contributory factor, but it is no more than that. It is one of a number of factors. The principal factor is the lack of confidence in this country.

LORD ORR-EWING

My Lords, surely if the noble Lord looks at the whole electronics industry on the West Coast of America, he will find exactly the same thing happening. This is not endemic to this country or to Scotland; it is happening in every advanced industrial country in the world.

LORD HUGHES

No, my Lords. In America the business of that nature is very much affected by the defence requirements of America, which have changed considerably during the last period. Businesses in America are suffering more than anybody else from the change in defence procurements. That does not affect the programme in Scotland at all. I happen to be a director of a Scottish-based American company and, as is usual in these cases, there is generally a sort of division of markets. The markets which are serviced either by Scottish companies or by European companies tend not to be the markets which are serviced by the American-based industry itself. One of the reasons why so many of these companies were set up in Scotland is because of the advantages of having access to particular markets. That may or may not be bettered by the Common Market— I hope it will be— but that is one of the reasons why they are there.

What has been done by the Government to deal with the situation? This is not a place where we need to make particular Party points, and it would be foolish if I were to pretend that I believed that the Government were deliberately creating unemployment. It would be equally foolish if I were to pretend that the Government had not clone anything about it. What I do suggest is that the unemployment has arisen from Government policies, and has failed to improve because the remedies which the Government are applying are the wrong remedies related to the wrong period of time. Take, my Lords, some of the things that have been done. There are the winter work programmes which are very successful and, in a way, it is a compliment to the previous Government that the present Government have carried them out. But we must remember that the winter work programmes, in relation to the previous Government, were intended to provide work specifically to combat unemployment in the building industry during the months of December to March, and were not related to a general unemployment situation in Scotland. If you have lost a job in the cash register factory, if you have lost a job in a jute factory, if you have lost a job in a shipyard, it is no consolation to know that a road programme which was to have taken place next year has been brought forward to this year. It is a help to those who are unemployed in the building and civil engineering industry, but it does not go any further than that.

The Chancellor of the Exchequer has made the claim— and he said it yesterday, I believe— that he did not expect unemployment to rise as it has done. A claim has been made about how much has been put into the economy. It is perfectly true that a considerable amount of money was handed back in one Budget, but it went to the wrong people. Many of those people who had considerable benefits from that Budget are not translating that spending power into the grocers' shops, the drapers' shops, the furniture shops—

LORD ORR-EWING

It is going into savings.

LORD HUGHES

My Lords, it is said that it is going into savings. That may be so. But what I say is that those people are not doing the other thing; they are not investing it in industry. The money may be being saved, but it is not being invested in industry to help stimulate the economy. It may be being salted away for a better time when the return may look a little safer. But is not this point at the root of our problems? Too many people are not investing because they are waiting for a better time, and because they have no faith in what is happening at the present time. Like many noble Lords, I have watched the programmes on television. There was a programme on "Panorama", I think the week before last, which was particularly concerned with the problem of unemployment in the Midlands, in Birmingham and so on, and, again and again, it came back to the fact that people did not have confidence in invest.

Is this a ridiculous phenomenon to have at the present time? I suggest that it is a direct result of the Government's policies. We go back to the first few months of the present Government when, for the first time, the "lame duck" policy was enunciated. The Government said that, so far as "lame ducks" were con cerned, one of two things must happen; either they must cure themselves or they must become "dead ducks". What was the first of them? It was the Mersey Docks and Harbour Board. That was followed by Rolls-Royce and then by U. C. S. I do not know— nobody knows at this stage— how many jobs will ultimately be lost in U. C. S., because successive changes that the Government have been compelled to make in relation to U. C. S. may have the effect of diminishing the total number of jobs which will be lost directly in Upper Clyde Shipbuilders.

But the worst part of U. C. S. will not be the jobs lost directly in shipbuilding on the Clyde; it will be the number of jobs in all the finishing trades associated with the shipbuilding industry which are being lost throughout Scotland. A figure of 20,000 potential lost jobs in Scotland was attached to the U. C. S. position. There was a similar state of affairs in the case of Rolls-Royce, with the bankruptcies of sub-contractors. There were the lost jobs of all those who were subcontracting from Rolls-Royce, which were spread far beyond. Surely the position at the present time is that those who have money, which might be invested in the future improvement of their industry, are not investing it, for the simple reason that far too many of them want to hang on to their liquid resources in case, in six months' time, they are "lame ducks" who will be left to find their own way out of their difficulties.

What is needed are not public works programmes, which can affect only a very small part of the total number of unemployed, but a complete re-thinking of policy; a getting-away from the idea that Government intervention to help industry is something to be avoided as if it were a plague. I know this. A fraction of the money which the Government are now committing to palliatives in relation to unemployment could have prevented the U. C. S. position which has become the canker at the heart of Scottish unemployment and of Scottish thinking about unemployment. I do not know whether demonstrations in London by the Scottish unemployed will, at the end of the day, serve any useful purpose. I do not know whether lobbying Members of Parliament and seeking to interview Ministers will alter the situation one iota. But I cannot go along with the noble Lord, Lord Polwarth, in regretting that this takes place, because I can understand why it takes place. It is the fear in so many homes in Scotland about what was thought up to a year ago to be completely impossible. A return to the bad clays of the 1930s was something which we all said could not happen. I hope that that is still the position but, so far as Scotland is concerned, we are getting precious near it.

Noble Lords will acquit me, most of the time, of making political speeches in your Lordships' House. This, I must say, is the nearest I have come to it in a long time. But I believe that, unless the Government can find radically different policies to deal with the situation, the best advice that they can take is the advice which Mr. Leopold Amery gave to the Chamberlain Government so many years ago.

3.50 p.m.

VISCOUNT THURSO

My Lords, like any other noble Lord who has any connection whatever with Scotland, or indeed like any other noble Lord who has any interest in the economy of the United Kingdom itself, I am most grateful to the noble Lord, Lord Polwarth, for instituting this debate, and I count it a privilege to be able to take part. Unlike the noble Lord. Lord Hughes, who, it seemed to me at times, was endeavouring to qualify for a place in the prologue of "Up Pompeii" by crying," Woe! Woe! "the whole time, I myself was glad to hear the note of optimism which Lord Polwarth found it possible to strike by mentioning that this was a moment of opportunity, by making a plea for full employment, by calling us to look to the future horizon, by drawing our attention to the importance of continuity and of decentralisation, and by calling upon the Government to see the urgency of the situation. In all of this I go along with the noble Lord, Lord Polwarth. I perhaps do not share with him the optimism that the Government will heed his advice— I should like to think they would— but I do not go quite so far as Lord Hughes in thinking that the situation will necessarily go on being as desperate as it may look to those of us who are concerned with the economy of Scotland.

There is another reason why I am particularly pleased to be able to take part in this debate this afternoon, and that is because later in the debate we shall have as a contribution a maiden speech from my noble kinsman Lord Caithness, who is also my noble clan chieftain. I am sure that your Lordships will detect a true and sincere love of Scotland in what the noble Earl will have to say. I myself look forward to hearing him, and wish him good fortune when it comes to his turn to speak.

My Lords, last week in your Lordships' House, during the debate on the Second Reading of the Island of Rockall Bill, distaste was expressed by the noble Lord, Lord Kennet, and other noble Lords for the wording in the Bill, which described Scotland as, that part of the United Kingdom … known as Scotland". The reason for their distaste was that they considered such a Long Title to be periphrastic, and they would have preferred to have used simply the word "Scotland". The reason why the wording was used, we were reminded, was that it was the wording used in the Act of Union. The reason why that wording was used in that Act was that the Parliaments which then agreed to merge with each other intended that merger not merely to add a union of Parliaments to the existing union of Crowns but also, by that Act, to create a new United Kingdom greater in strength and purpose than any of its parts.

All this, my Lords, makes me ask myself certain questions. Do we really believe ourselves to be part of a truly United Kingdom, or do we consider ourselves to be citizens, each of his own separate part? It is important to know in this particular debate whether we are talking about Scotland— in parenthesis, that troublesome country lying North of the Border which England is always subsidising (if you are English) or exploiting (if you are Scottish)— or whether we are talking about that part of the United Kingdom known as Scotland. If we believe the latter and, unlike James Ogilvy, the first Earl of Seafield, believe that the Act of Union was not merely an end of "ane old song" but rather the opening of a new chorus, then what we are discussing to-day becomes a matter of great moment for every noble Lord in your Lordships' House, be he English, Irish, Welsh or Scottish, and a matter of paramount importance to every subject in whatever part of the Kingdom he or she may have been born or may reside. If such is our standpoint— as mine is— then the state of the Scottish economy is not merely a small parochial matter: it is a matter which touches to the root of the prosperity of the United Kingdom.

A body cannot be considered healthy if it has a diseased limb. It cannot even be comfortable in its other parts if the circulation in one limb is impaired. If, therefore, it is shown in this debate— and I am confident that it will be so shown — there is sickness affecting the Scottish limb of the United Kingdom's body, then I hope that Her Majesty's Government will not treat the matter with stoicism, saying," Grit your teeth, United Kingdom, and the pain in Scotland will soon pass"; nor treat it with some sort of political aspirin, hoping temporarily to kill the pain while the affected part heals of its own accord. I hope, rather, that the Government will treat Scotland's ills with a proper diagnosis, with a full course of treatment and with appropriate aftercare. This, my Lords, is the long-term approach which the noble Lord, Lord Polwarth was asking us to have to this problem.

My Lords, I cannot over-emphasise the importance of Her Majesty's Government's employing a United Kingdom approach to problems such as I have indicated. Every part of the United Kingdom is entitled to equal consideration, and it is important to each part that every part is economically healthy. I make no difference between Scotland and Wales or England arid Ireland, nor between Clyde-side and Teesside or Caithness and Cornwall, except to use these names to diagnose where trouble may exist or show where treatment should be given. It is especially important that we should know how to deal effectively and sympathetically with the parts of the whole United Kingdom at a time when we are about to take that United Kingdom into the even larger association of the European Economic Community.

My Lords, let us have no doubt that the economy of Scotland is sick and requires remedial treatment. The symptoms are high and persistent unemployment. It is a chronic condition, with frequent relapses to an acute state, especially if any part of the body is exposed to an economic chill. Leaving metaphor aside, let us look at the facts. The unemployment rate in Scotland has never fallen below 2 per cent. since figures have been kept, and it is now as high as 6.6 per cent. I am talking not of that intractable part of Scotland where I live, but of the whole of Scotland, including the industrial belt and the centres of commerce and finance. At this time, when the whole country is concerned at seeing the total of unemployed soaring towards the million mark, the percentage of unemployed in Scotland is at its all-time high of 6.6 per cent., while in Great Britain as a whole it is only 4 per cent. and in some regions of England it is a mere 2.2 per cent. The situation, therefore, which is admitted to be serious in the United Kingdom as a whole, is shown by the figures to be 50 per cent. more serious in that part known as Scotland.

There is no doubt in the minds of those of us who sit on these Benches that a main cause of Scotland's relatively high rate of unemployment is the almost total lack of decision-making power in Scotland. It begins with a lack of political power and goes on to a lack of industrial power. Too much of Scotland's new and modern industry consists merely of branch factories of industrial concerns with their headquarters in other parts of the United Kingdom, or even, as Lord Hughes has brought to our notice, in other parts of the world. Is it surprising that when the economic climate grows chill such firms close their outlying factories first? Surely this is an area where the Government can set an example. What, for instance, has happened to the Conservative policy on Scottish evolution, emasculated though it was? Why have the Government picked on traditional Scottish industries, classing them as "lame ducks", while subsidising similar industries in England? Indeed, can the Government give us any reason at all to think that they recognise the magnitude of the problem or that they have diagnosed its causes, or that they have any intention whatever of trying to produce a solution?

My Lords, I return to my plea to recognise the equal importance of Scotland with any other part of the United Kingdom, and I re-emphasise the value to the United Kingdom as a whole of a healthy Scottish economy. Nature herself is making a grim geographical joke of the way in which we concentrate more and more of our resources and development in the South-East of these British Islands. The South-East is slowly tilting downwards into the sea while Scotland and the North-West are rising. London, like Venice, is slowly sinking. My authority for this is no less than the Greater London Council. We shall all be asked, indeed we are all now being asked, not merely to help a "lame duck" but to help a sinking duck. Two-thirds of the cost of saving London from being engulfed by the North Sea is to be found by the Government— and that means by the United Kingdom as a whole. One wonders whether the money would not be better spent on a literally solid foundation by building up and developing Scotland and the North-West.

I have no wish to overemphasise these curious geographical problems, and let no one think that I grudge London protection from the sea— so long, that is, as that part of the United Kingdom known as England will help to put up economic flood defences to protect Scotland from the buffeting of adverse economic tides. We in Scotland have lived with unemployment for so long that you in other parts of the United Kingdom are getting used to it. I therefore beg Her Majesty's Government to tell us that they recognise the seriousness of the plight of the Scottish economy; that they recognise the danger to the United Kingdom as a whole of a sick Scottish economy; and, finally, to tell us that they either have or will formulate adequate short-term and long-term plans to infuse life back into the Scottish economy.

4.3 p.m.

THE MINISTER OF STATE, SCOTTISH OFFICE (BARONESS TWEEDSMUIR OF BELHELVIE)

My Lords, I should like to add my thanks to the noble Lord, Lord Polwarth, for the opportunity he gives us to debate Scottish economy. I listened to his speech with very great interest and, if I may say so, found it very constructive. I listened also to the speech of the noble Lord, Lord Hughes. I can understand his being depressing, but the only solution to our problems that I could find in his speech is that he suggested what he called more Government intervention. He did not specify it; therefore one wonders whether he is going to join Mr. Michael Foot or Mr. Jenkins and in which Lobby.

LORD HUGHES

My Lords, I hope the noble Baroness will permit me. I will not interrupt her again, no matter how much she provokes me. But I did make a second suggestion: For God's sake, go!

BARONESS TWEEDSMUIR OF BELHELVIE

My Lords, I did recognise that; but I do not at the moment feel like it. Perhaps I can describe the speech of the noble Viscount, Lord Thurso, as one of qualified optimism. I felt that there was, in a way, a dichotomy in his speech. At one moment he said that we must be sure to treat Scotland as a "part of the United Kingdom known as Scotland" and at the next moment he almost asked for a separate Scottish Parliament. No doubt he will resolve that in his own mind. I can assure him that as far as the Constitutional Committee's recommendations (called Scotland's Government) are concerned— on which Committee I had the honour to serve— we are hoping to publish a White Paper on the subject in the course of this Parliament, because, as we said from the beginning, we think that local government must be reformed first.

LORD HOY

My Lords, the noble Baroness said that she hoped to publish the White Paper in the course of this Parliament. Does she mean this Parliament or does she mean this Session?

BARONESS TWEEDSMUIR OF BELHELVIE

My Lords, I specifically said "this Parliament" because we have always made it clear that we should have to get reform of local government out of the way first, and, as the noble Lord, Lord Hoy, knows, that will not be presented to Parliament until next year. May I also join with those — since I shall not have an opportunity to do so afterwards — in voicing every good wish to the noble Earl. Lord Caithness, on his maiden speech? I shall look forward to it with great interest.

My Lords, the Motion that we are asked to consider draws our attention to the state of the Scottish economy and to the need for the determined pursuit of policies for its fundamental improvement". It is of course true, as the noble Viscount said, that Scotland does not flourish unless the United Kingdom economy as a whole is sound. We have recently had debates on the British economy in both Houses and again yesterday in another place. Therefore, while I must refer to national policies, I shall try to concentrate so far as possible on our own affairs. My noble friend Lord Drumalbyn, who is to wind up the debate, will deal in particular with those matters concerning the Department of Trade and Industry and questions raised by noble Lords.

I think it is true to say that all Governments try to relate successfully four main economic factors: the balance of payments; economic growth; prices; and employment. When we took office in 1970 we found that only one of those four had been tackled with success; namely, the balance of payments. Economic growth equalled only 1½ per cent. a year; retail prices were rising by 7 per cent. in the last year of the Labour Government's term of office, and accelerating fast. There was a rising trend of unemployment which by 1970 had reached 90,600 in Scotland, a rise of 70 per cent. since 1966. On prices there are now at last clear signs from the retail price index that the acceleration rate has been brought down; but, as I think three noble Lords pointed out, unemployment in Scotland totals 141,454. These bald figures conceal the statistics of young people leaving school, men and women of every skill and of none and of every age within the normal working span.

As the noble Lord, Lord Hughes, said of his personal experience, to want to work and to find oneself unwanted must be a very searing experience. Quite apart from that, it is the sheer frustration that can mask the need in a swiftly changing world to accept change and all that it implies. We all know that current technology will operate with far fewer men and women, but it can, on the other hand, generate a far wider range of jobs, both in the ancillary and in the service industries. To give one example, technical change creates its own demand for extra jobs. If you take a computer, in itself an important labour-saving device, it generates a demand for specialised services, for the provision of consultancy advice and for what I am told is technically called "software". Technical advances open new areas of demand which are very important. We are all familiar with the rapidity with which new products change from the category of luxury goods to everyday essentials. Who would have expected ten years ago that television sets would have been classified as household necessities? With increasing industrial efficiency comes higher incomes. Higher real pay is what we all want to achieve, and this also means more leisure; and that in itself opens up a whole new demand and therefore a whole new range of employment. It is because of the importance of this range of work, which extends to a large extent to the service industries, that we have already halved the selective employment tax and intend to abolish it completely. We have also extended free depreciation to the service industries in the development areas and I am glad to say that both decisions have been welcomed in Scotland.

So, my Lords, we are in the midst of profound structural change in our economy which is why the Motion urges us to pursue a determined policy for the Scottish economy's fundamental improvement. It is for this reason that we are undertaking some long-term measures designed to meet the fundamental needs of modern economy: for example, the reform of the tax structure, the reform of industrial relations, the reform of local government, housing finance, and. of course, our entry into the European Communities. There have already been considerable measures to try to tackle the short-term needs of creating a wider range of work. When we first undertook responsibilities of office, my Lords, we felt bound to try to contain cost inflation and our own expenditure so that we could, for example— as we did later— cut taxes by £ 1,400 million a year. This is without doubt a massive stimulus to investment and, as a result, the latest C. B. I. survey of industrial trends for Scotland is more optimistic about the economic outlook than in recent surveys. Apparently the main factors behind this are thought to be the reflationary measures taken in July together with the Budget.

There is also an increase in the proportion of Scottish firms expecting new orders and output to increase over the next few months, but there is no doubt whatever that the investor is still cautious and I am sure that he needs above all else an assurance that the great stimulus to invest which has already been given will not mean that later on we shall have to put on the brakes. I am sure that what any investor needs above all is stability, and therefore I say quite categorically that we are determined to get the right balance between encouraging investment on the one hand and the containment of inflation on the other.

My noble friend Lord Polwarth and the noble Lord, Lord Hughes, spoke of regional incentives and they questioned the merits of investment grants against the present allowances. My noble friend says that what counts is cash. We did replace grants, not only by the tax allowance but by tile assistance under the Local Employment Act and also by considerable reduction in company taxation. We felt that if we had free depreciation for tax purposes it would be much more widely available than investment grants because, as noble Lords will know, it row applies to all mobile plant and machinery in the development areas; and, as I have just said, to the service industry too. If you take into account the reductions we made in corporation tax, a profitable manufacturing firm is very well placed under the free depreciation system. But I noticed that my noble friend said that, after considerable thought, he felt, as did the noble Lord opposite, that perhaps in the end it was the grant and R. E. P. added to it which would be the best answer.

My Lords, none of us ever says that any system is the complete or the final answer. My right honourable friend the Secretary of State for Trade and Industry is visiting Glasgow in the next few weeks to hear the views locally on this subject, but at the moment we feel that the present system taken as a whole is better than grants, and we do not favour the regional employment premium because we felt that it was an artificial way to keep more people than was necessary to undertake a particular job. As a short-term boost to employment we have also spent the extra £ 60 million to which reference has been made. I should say that we felt it was a help to the construction industry. My noble friend pointed out that the unemployed in the construction industry are now about a quarter of those out of work.

We have also brought forward naval orders to help shipbuilding firms in the development areas which will total £ 50 million in Scotland. Robb Caledon will receive orders worth £ 5 million, representing 700 jobs, but the main orders will go to the Clyde. There will be three frigates worth £ 20 million ordered from Yarrow's, which represents 800 jobs, and three ships, worth £ 25 million, are to be ordered from Scott Lithgow. This contract will provide jobs for a thousand men in addition to the thousand which Scott Lithgow are at present recruiting for the expansion of their merchant shipping capacity. This increased work on the Lower Clyde will give a chance to many workers from the upper reaches of the Clyde. Do not let us forget that Scott Lithgow is only 18 miles away and if you take a bus across the Erskine Bridge it is only half an hour's journey.

Yesterday my right honourable friend the Chancellor of the Exchequer announced a further considerable sum, a two-year programme of £ 185 million, to give additional employment of which Scotland will get a good share. For example, there will be additional expenditure on a Scottish fishery protection vessel and on 100 "Bulldogs"— I mean, of course, Bulldog aircraft. There will be further additions to the public works programme, particularly on roads, and there will he increased expenditure by the nationalised industries. We shall also bring forward the payment of the amounts which were due under the former Investment Grants Scheme. This was one of its troubles, many people felt that 18 months was too long a period to allow for the repayment of these investment grants.

Also, my Lords, on Monday my right honourable friend the Secretary of State for Social Services announced in another place more measures to try to help the immediate problem of unemployment. Starting at once, but, all in all, going over the next four years, the Government have decided to allocate a further £ 118 million towards the improvement of health and social work services. I am glad to be able to tell the House that in Scotland this includes an additional £ 12 million together with the extra £ 11 million announced last November. This means that we are making available resources of £ 25 million, at present prices, for the Scottish services above our normal development.

These extra amounts are quite separate from the additional sum for hospital building and social work building projects which have already been approved as part of the £ 60 million additional programme to which I have just referred and which was announced in July. Of the extra £ 12 million, about £ 7½ million will be made available to the health services, primarily for the improvement of hospital facilities, especially those for the elderly and the mentally disordered. Provision is also being made for expenditure arising out of the reform of the structure of the National Health Service in Scotland. The remainder, about £ 4½ million, is intended for the further development of Scottish social work services. This will enable the local authorities to increase by £ 3½ million their building programmes of residential homes and day centres for the elderly, the mentally disordered, physically disabled, children in care and others in need of help. The balance will be available for further development of these services, including increased staffing and additional help towards services that are provided by voluntary organisations. My Department has invited local authorities, in consultation with those concerned, to suggest proposals for development of the social work programme over the next six years.

I think that we must join with the noble Lord who opened this debate and look to the future of the Scottish economy as a whole, and I should like to take this chance to welcome the Report of the Scottish Council, Oceanspan II. It is born out of hard study of national and international developments, and I would say that it is a major contribution to our debates on the future of the Scottish economy. I agree with my noble friend that it is not intended to be an exact master plan but we have already started discussions with the Council to consider the preparatory work that can be undertaken.

The key to the later Report, Oceanspan IIis the same as to the first. It is really deep water and steel— in fact, Hunterston. And associated with that and Eurospan is the conversion of the economy. As my noble friend says, the Report deals particularly with primary industries which are of course mostly capital and land-intensive with relatively low direct employment. But the real interest comes in the ancillary industries which could be said to fan out from these basic capital investments. That is why the Government have supported the Hunterston Development Company, because we must have a professional and technical assessment of the practical investment and land use implications, such as sites, installations, borings, facilities and equipment.

Coming as I do from the North-East of Scotland, I am of course immensely interested in the development of the major new oilfields of the North Sea. The companies concerned are understandably guarded until further development, but it appears that oil will be available from the Northern sectors of the North Sea to the extent of at least 50 million tons a year by the mid-'seventies, and it is not unreasonable to think that it will reach 150 million tons a year by the end of the decade. As Britain uses about 100 million tons a year, it does not look as if we shall become either self-supporting or a net exporter of oil unless there are substantial finds elsewhere; but in any case it will be of very great benefit to us, both in the balance of payments and in what it can offer to our industry by reason of the opportunities provided to tender for the engineering and other work involved.

I should like to congratulate the Scottish Council, the Highlands and Islands Development Board, the North-East of Scotland Development Authority and a number of other local authorities on the efforts they have already made to interest Scottish firms in the wide range of work that the oil industry presents. For instance, in the North-East there are 60 firms, employing 1,000 people, already involved in work connected with the exploration of the North Sea. There will be a continuing demand for oilrig platforms and for associated equipment, pipeline construction, servicing facilities, supply vessels, housing and for all kinds of domestic provisions for the oil industry men themselves. There is a real chance here for industry in the West of Scotland to share in the work in the East. There is also the prospect of more processing plant to handle the oil when it comes ashore, and further economic growth can be generated in the form of industries for which oil is a major requirement.

There are developments already, not only in Aberdeen but also in Leith, Dundee and the Cromarty Firth, which I saw myself on a recent visit to the North. In Aberdeen, which will be very glad of this work, B. E. A. have transferred their helicopter depot from Gatwick. They fly to the North Sea daily over our house. But sometimes these helicopters fly lower and look different because they carry magnotometers to search for mineral resources which some of the most experienced companies in the world are convinced lie beneath our North-East soil.

These major developments, my Lords, are extremely important at this particular time when Parliament has voted for entry into Europe. Earlier this month the European Commissioner with responsibility for regional policy, M. Borschette, made a tour of Scotland and my noble friend Lord Polwarth asked me to assure the House that Scotland and the other regions could carry on with their regional policies. I do not wish to repeat the two speeches on the European Community on this subject, except to paraphrase them by saying that membership of the E. E. C. will not affect our ability to plan our own regional policies. Indeed, I understand that on his recent visit M. Borschette was very interested in the Highlands and Islands Development Board as an example of what can be done to try to secure a more balanced development. To strengthen my own assurance, I should like to quote what he said after his recent visit, because it took place after our debate. M. Borschette said: We know that each region is a special case often requiring special treatment. We also know that it is primarily for national Governments to produce the ideas for dealing with these special problems. My Lords, despite the present problems, not only at home but also quite considerably overseas, the recasting of the long-term structure of our economy and of the short-term stimulus to investors is hound to put this country into a strong position to seize our opportunities as the experienced trading nation that we are. I put it to this House that we have the knowledge, we have the willpower, and above all I am sure that Scots have at heart a very real confidence in themselves.

4.27 p.m.

THE EARL OF CAITHNESS

My Lords, as I rise before the House for the first time I ask your Lordships' indulgence. I shall be brief and temper some of my youthful enthusiasm for this subject. May I also take this opportunity of thanking all noble Lords who have been so kind to me and given me words of encouragement to-day.

It is over two years since a debate on this subject was held in your Lordships' House and much has happened in that time to affect our economy— in particular, the proposed entry into the E. E. C. In the consideration of the effects of this move one must not divorce agriculture from the other industries in our national economy, as both are interdependent. Mr. Rippon has assured us in glowing terms of the advantages to be forthcoming by having a bigger market for our agricultural products. However, he did not add that some problems had to be overcome and will not be easily dealt with. It has been said that hill farmers will be protected, but as yet we have heard nothing concrete about this. With the high price of beef and more stabilisation in the sheep market, the general opinion of farmers is one of complacent optimism.

On the face of it, therefore, agriculture seems to have a rosy future. Indeed, a potential market of 255 million people does sound tempting, but few realise that in foodstuffs the current E. E. C. is already 90 per cent. self-sufficient, whereas the United Kingdom is only 55 per cent. self-sufficient. Moreover, food output in the E. E. C. is increasing at a rate of per cent. per annum while the demand is expanding at only 21 per cent. per annum. Robert Burns, our great poet, said: O wad some Power the giftie gie us To see oursels as ithers see us! Is it not the E. E. C. who see us as a potential market rather than the other way round?

Where, then, is that rosy horizon? I believe that it is more in our midst than across the Channel. If we examine the sources of our food imports in 1970, we find that 36 per cent. came from the E. E. C. and potential members; 7 per cent. from the Commonwealth, which has ties with us that will continue (such as for sugar); 12 per cent. from the developing Commonwealth countries, who are likely to have Common Market ties. This leaves 45 per cent, which comes from the rest of the Commonwealth, the non-candidate EFTA countries, Austria, Portugal, Norway and Switzerland, and the rest of the world, who are likely to have no E. E. C. association because of tariff barriers. We must ensure that we capture that 45 per cent. in face of European competition, otherwise our agriculture economy will take an inevitable retrograde step.

It is known that we have a better farm size, with an average of 85 acres to 25 acres, and the protection of the English Channel (once again threatened by the development of the tunnel). But if we consider the Scottish farmers, we see the declining economy leading to the concentration of major centres of consumption in the Southern part of England. These are more accessible to the farms of France than the Lothians, Moray Firth, or Caithness. It has been proved that it is cheaper to ferry a load of grain from Liverpool to Montreal than to transport that grain from Kent to Liverpool. Paris will be only 270 miles away from London by road when the Channel Tunnel is opened, whereas Edinburgh is 386 miles away, and Wick a further 270 miles away on very much worse roads.

Furthermore, the switch of emphasis in the C. A. P. from one of high price maintenance to structural reform will favour countries like France and Italy, with working populations of 15.1 per cent. and 21.5 per cent. respectively engaged in the agricultural compound, compared with under 3 per cent. in the United Kingdom. Yet a further disadvantage is the almost genetic barrier to co-operative marketing in the United Kingdom resulting from a long history of independent farms, and at least 30 years of guaranteed prices and assured markets.

Prosperous agriculture is still regarded as essential to the nation's wellbeing. For success we must ensure that the economy as a whole is sufficiently stimulated, if necessary through regional stimulus, or any other method, to create a sound, balanced and expansive economy in Scot land to provide adequate consumption centres for farm produce near to our major farming regions. These must be secured by effective marketing structures in which individual producers can combine their productive resources and efforts to ensure adequate marketing status.

To allow the current depression to continue with its drifts in population away from Scotland will destroy not only the industry and urban life North of the Border, the language and crafts of the Islanders, but will also bring grave hardship and dereliction to our land: and that, my Lords, is our greatest heritage.

4.33 p.m.

BARONESS ELLIOT OF HARWOOD

My Lords, I rise with great pleasure to congratulate the noble Earl, Lord Caithness, on his maiden speech. He has youth on his side. He has a great inheritance of Sinclairs who have for generations been an important clan providing Scotland with many important statesmen. I am sure that he will follow in the footsteps of his ancestors and on many occasions here make interesting speeches on subjects in which he is interested. I follow him with great pleasure since I, too, am a farmer and he clearly has that interest. I hope that we may count, as we do to-day, on another Sinclair, namely, the noble Viscount, Lord Thurso, who has just contributed a speech. His father, too, was a great man who made a big contribution to our Scottish life. We in your Lordships' House are fortunate to have two Sinclairs joining in our debates.

I should like to congratulate my noble friend Lord Polwarth on his speech. I think it was an admirable and highly constructive speech. We know of the enormous amount of work that he has done for the Scottish Council for Development. This is now being continued by his successor Lord Clydesmuir.

I am afraid I was rather disappointed at the speech of the noble Lord, Lord Hughes. I have always been a great admirer of Lord Hughes, although we sit on opposite Benches. During the time when he was defending his Government's policy I often felt sympathetically towards him and thought that he had a difficult row to hoe and that he did it rather well. To-day I did not take that view. No doubt from time to time it is very agreeable to make a strong Party political speech, but to-day it did not become the noble Lord. I have known him for a long time and I know what a generous and grand person he is. Perhaps he knows the poem that was written, somewhere about 1912 or 1913, about the late Lord Birkenhead who, as F. E. Smith, played a great part in another place. If I remember rightly, the poem was by G. K. Chesterton and it had as its refrain after every verse: "Chuck it, Smith". I would recommend to the noble Lord: "Chuck it, Hughes". The methods by which the noble Lord previously interested this House were a good deal more effective than the speech that he made to-day. However, the noble Lord is entitled to his views on these matters as we all are. But I personally take the more optimistic view of the situation. I am more in line with what was said by the noble Lord, Lord Polwarth, although I do not want to enter into the same line of discussion as he did. He knows Glasgow very well and the industrial belt of Scotland as I do, too, since I was married for 25 years to someone who was the Member for Glasgow for 40 years, and I go to Lanark every month of my life. Nevertheless, at the moment I wish to talk about the area where I live now; namely, the Borders and, in particular, about the developments in industry and agriculture there.

There are in the Borders two major industries: woollen textiles and agriculture and forestry. I put the two together since they should, and do to some extent though not always, co-operate with each other. We in the Borders have forests stretching from Northumberland to Roxburghshire and over to Dumfriesshire, the largest forest area in the United Kingdom. We also have a large agricultural area and a large textile area. I should regard the textile situation as serious; there is a great recession in woollen textiles. I am sure the Government are well aware of this, and I hope that some of the money that is being made available throughout Scotland for various developments may find its way into the Borders to help the textile industry to recover. To some extent, of course, it is suffering from exactly what other industries suffer when they modernise and increase their production by cutting down the number of their employees and put in new machinery. It means that even if production does not go down, employment does. Therefore, one has, somehow or other, to find different methods of employing people in the area. I hope that when the noble Lord comes to reply he will look to the Borders as an area in which investment of capital will bring a good return.

We are suffering also, as a result of the recession in the textile industry, from depopulation. This is a serious problem. People talk about depopulation in the Highlands, but I think that that has, to some extent, been stemmed by the Highlands and Islands Development Board, which is doing a splendid job. In the Borders we are in some ways in the same sort of position as the Highlands and Islands are. If you were to take the map of Scotland and reverse it, you would find that if we were in the far North we should be just as isolated. But in fact we are in the South, and people have the habit of travelling through the Borders to the North: they are going to Edinburgh, Glasgow, Aberdeen, or wherever it may be, and they travel through. The result is that we find ourselves neglected from the point of view of industry and settlement.

In the last few years, through the enterprise of the Border consultative committees, and of burghs like Hawick and Kelso, we have developed new industries, and they are very good. We have some electronic industries, which are doing very well, but we need more in order to stem the depopulation and to develop those areas, which could very easily represent a good capital investment both for industry and for the Scottish Development Commission. We have done one thing which is very important: we have linked together four or five counties. In the Development Commission we have linked together Roxburghshire, Selkirk-shire, Peeblesshire, Berwick, Northumberland and even over to Dumfriesshire. That is a very important thing, and very good. We are still waiting— we have been waiting for a very long time— for the possible development in Tweedbank which I hope will eventually come through, after many vicissitudes, and there is a very good planned development at Berwick-onTweed. But we should like to have more development in order to stem the depopulation of the area.

I believe that our transport could be improved. Your Lordships know that I was one of the people who most strongly opposed the taking away of the Waverley line. It was a most unfortunate decision and I wish that it had not been taken. However, one cannot go on regretting the fact that it has gone: one has to find some alternative. We must, I think, have an East/West road. We have North/South roads, a road going up on the Eastern edge of the Border from Berwick to Edinburgh and, of course, the road from Carlisle to Glasgow. But the link between the two is very bad indeed. I have to drive there twice a week and therefore know this all too well. So what we need is a really good road runing East/West in the Borders: it would be very valuable for industry there.

May I say just one word about forestry and its development? Since I see that the noble Lord, Lord Taylor of Gryfe, who is at present Chairman of the Forestry Commission in Scotland, is to speak, I should like to draw his attention to some of the things which are happening. The development of forestry seems to be very haphazard. I am interested, of course— and I speak as an extensive hill farmer— in preserving as much as possible of good agricultural land for hill farming. I can honestly say that in the last ten years the return from hill farming has been so poor that many people have simply sold out, because they could not make ends meet. They have sold out to the Forestry Commission and to private forestry companies. This has happened in a quite haphazard way. Realising that they could not make ends meet, people have looked round for somebody else to buy their land, and have sold out just like that. One cannot blame them. After all, it has been a very lean time, and if one had no resources other than those of the farm one had really little alternative; and so this has happened. I am sure that this is a mistake. The planning of forestry and the planning of agriculture should somehow go hand in hand. The Commission is very much more co-operative about this, and looks at agriculture and at the relationship between forestry and agriculture. But the private forestry companies buy where they can and one cannot blame them for buying land if someone is prepared to sell— indeed, nobody can stop them. On the other hand, it is fair to say that at the present moment too much land is going over to forestry quite without any consideration to whether or not good agricultural land is being taken away or the amenity value and the beauty of the Border country is being spoilt.

I should like to say one word about the Commission which is now at work, the Commission on the National Parks set up by the noble Lord, Lord Sandford. An inquiry is going on at the present time in Northumberland, in that area which is the Northumberland National Park and which runs right up to the Border— in fact over the Border— to the South of Roxburghshire, from Carter Bar right down to Newcastleton. Some inquiry ought to be made on the Scottish side which could be linked with this National Parks inquiry in order to ensure that the use of land in the Borders should have some relation to the use of land in the Northumberland Border area, because they are together and one cannot tell the difference except that on one side of the sign of Carter Bar it says "Scotland" and on the other side it says "England". So I think this development of forestry should have some purpose behind it and we should know how much of the hill land we want to keep for farming. and for cattle raising and how much for forestry— not just have an absolutely haphazard use of the land on both sides of the Border.

I am one of the people who feel very confident that we shall do well in agriculture when we go into the Common Market, since I travel a certain amount in Europe and have seen the way in which European agriculture is conducted. I have no fears that we in the United Kingdom, and in Scotland in particular, are not going to be able to compete with any of the agricultural developments in Europe. Therefore I think there is a good future for farming in Scotland and I want to see as much as possible of the land used for that purpose. But it must, I think, be done in co-operation: forestry and agriculture must go together and not be run completely independently. I think we have great opportunities. I entirely support what the noble Lord, Lord Polwarth said about the possible development under the two schemes of Oceanspan that have fascinated me when I have been reading about them and discussing them. I entirely support, too, the developments that the noble Baroness, Lady Tweedsmuir, has just told us about, and the action in making money available in a very generous and constructive way for many developments in Scotland. I would simply put in a plea to her and to those who are at present running our Scottish policies not to forget that you do not just go through the Border to Edinburgh but you live in the Border in a splendid part of the world, unspoilt, so far, in a way which few other areas can equal. I should like to see that preserved, not for preservation's sake but because it is an important part of Scotland and something that attracts people, a place where people like to live and have their being. I hope very much that this aspect will he considered, as well as all the other magnificent developments in the industrial belt.

4.49 p.m.

THE EARL OF SELKIRK

My Lords, I should like, if I may, to add my congratulations to the noble Earl, Lord Caithness, for the very thoughtful and extremely well-informed speech that he has just given us. This House will always welcome people who speak on subjects on which they arc full of authority, and I hope that the noble Lord will come and speak to us as often as he can.

I am afraid that I disagree with my noble friend, Lady Elliot. I believe that the speech of the noble Lord, Lord Hughes, was the sort of speech that we want to hear from time to time. In the constructive and thoughtful speeches in this House it is a great pity not to realise the severity of political controversy, which is an element of the life of this country. I think he was a little less fair than he could have been to the noble Lord, Lord Polwarth, who I thought made one of the best speeches I have heard him make for a long time, and one containing a great deal of meat. I agree entirely with what the noble Lord, Lord Hughes, said about the terrible personal affliction of unemployment; and anyone who has known this, either personally or by association, cannot possibly have any doubts about the significance and importance of regional policies. But regional policies, of course, are not purely social: they have deep economic implications too. If I may say this on a small matter, anyone who has driven about London in the last two or three days must have realised that some form of regional decentralisation is essential. I could mention many other things, but this is an obvious one which stands out a yard.

I cannot help wondering sometimes whether the problem of unemployment should be dealt with separately from economic problems. The late Government had what they called a "shake-out" in employment, which was intended to reduce over-employment in certain industries. They were quite right to do so, because they wanted to make industry more efficient. To-day, one of the signs of modern industry is its low employment content. I went into a large factory at Ravenscraig recently— a huge building about three times the length of your: Lordships' House. For a moment I could not see anybody working there at all. In fact there were about six people working there. This is modern industry. Should we regard this problem of employment separately? There are powerful arguments for doing so, but there is a danger in trying to encourage two men to do one man's job. I doubt whether the 1930 situation could ever have been resolved except by a complete reinvigoration of the economy as a whole. I do not think that the situation we were in at that time could have been satisfactorily resolved by separate measures, or at least only very slowly indeed.

The Government are doing a great deal in the way of public work, and we have been told about some of that to-day. I should have liked to hear more about roads, for there are many roads urgently needing attention. We can encourage people into service industries. Productive industry will produce less, but the service industries are providing increasing employment everywhere. This was one of the major criticisms that we always made about S. E. T. because it prevented the development of service industries and, to some extent, curtailed them in a manner which was adverse to Scotland. I am glad to hear of the developments on the defence front: the frigates at Yarrow and Scott Lithgow; the Bulldogs which I believe are only the second Scottish-designed aircraft bought by the Government since the war. These are very important developments.

There is one other problem with unemployment: the big problem of morale. The Government said yesterday that they have increased the number of Government training centres by about 50 per cent. Of course, the project is still very small, and I think the figure will reach some 14,000 places. I know this will not be popular. Can we constrain any young man under twenty-five years of age, who is permanently unemployed, to train himself or educate himself in some field so that for, say, fifteen hours a week he had to attend certain training courses? If he did so, somebody would want him, he would not be left without anybody caring whether he lived or did not live. These young men arc going to be useful. I am certain that the situation will not continue, and this is something which could be considered. It presents a problem of education, but I am sure it could be overcome. My noble friend Lady Tweedsmuir said that we are going through structural changes, and that is so. I was glad to hear what she said about regional policies. Many people think that the French are interested in agriculture, whereas we arc interested to a greater extent in industrial regional policy. If this matter can be satisfactorily solved then well and good. I only hope that they will be less obstinate than they appear to be in the fisheries matter, which made an extremely unfavourable impression on me.

Another point I should like to make is that Scotland has always been orientated towards America— particularly North America— from the time of the Darren expendition of sad memory; the American War of Independence; the American Civil War; each of which had a violent effect of the Scottish economy. To-day, the relative slackness of the American scene has a good deal of effect on many of the industries which have a close connection with America. There is no doubt that to a great extent we have to reorientate ourselves to a European side— if possible without losing the North American contact. The noble Lord, Lord Hughes, made a complaint with regard to the Government and the National Cash Register Company. The company were doing work for New Zealand and Australia, and I think South Africa was mentioned. One cannot persuade all the countries in the world to go metric, but I know that the noble Lord, Lord Clydesmuir, is in China. Whether he is having any success in persuading the Chinese to go metric, I cannot say, but possibly this is a chance for the National Cash Register Company.

I should like to return to something that I have spoken about before; that is, closer personal communications with the Continent of Europe. The air services direct from Scotland to Europe are bad, and have been for a long time. I attacked the previous Government on this matter. It is no good talking about a regional policy if you cannot get there. This is a vital point. The Government have always said," We cannot do anything about it". I believe they could do something about it if they tried harder.

May I now turn to what my noble friend Lord Polwarth said about gas and oil? The position is that something in the order of 80 per cent. of the equipment used for this industry comes from outside this country. This is the experience so far. My contact with various companies, such as Esso and others, is that they are perfectly ready to purchase equipment in this country provided they get delivery dates and quality. Price perhaps is not so absolutely vital, but they must know that they are getting reliable quality and getting equipment on time. This is not an easy market to get into, for two reason: first, what is being done is pretty well to the limits of known technology. Some things are relying on advanced technology which is not yet fully developed. Secondly, this is a world market, and if you get into this market you will be selling oil rigs of this type all over the world, and it is worth an enormous effort by Government. industry, universities, and research establishments. This is where I cannot help feeling that there is a good deal in what my noble friend Lord Polwarth said: should we not try and have some authority to coordinate these people— I suspect that they are nothing like as well co-ordinated as they should be— to see that with all the resources that we have we can get into this market which presents some kind of an opportunity.

TIIE MINISTER WITHOUT PORTFOLIO (LORD DRUMALEYN)

My Lords, may I interrupt? I was not clear which people my noble friend wants coordinated.

THE EARL OF SELKIRK

I repeat that I mean everybody, and I will refer to them specifically: the steel industry, the heavy engineering industries, the research departments of the eight universities now in Scotland; the Government's research establishment at East Kilbride. They could be brought closer together. My noble friend may tell me that they already meet regularly and know exactly what each can do; that there is a division of duties. I am not yet informed on the subject, but I have some doubt about it. I do not believe that you will get into the Market unless you make a major effort to use the whole technological experience of Scotland to do so. It is well worth doing.

Turning to the point of the deep-water port, this was raised first in this House two and a half years ago. My noble friend's favourable smile on this proposal was an advance on anything that we have had up to the present time. Bluntly, the raw materials in Europe are expected to double, as my noble friend Lord Polwarth said, in the next ten years. Big ships will be required, and they will not be able to get up the Channel. My noble friend has already said that there are three ports which are already developing at considerable cost. So far as iron ore is concerned, with the exception of Swedish ore, which will probably come in smaller ships, the rest comes, via the Atlantic, from Labrador, West Africa, Brazil and Australia. Who is going to say (and I am told this matter is in the minds of the British Steel Corporation) that this ore will always be brought in ships of under 150,000 tons? The Japanese are already using ships of 270,000 tons and are said to be considering moving from 300,000 tons to 400,000 tons. I am not talking about tankers— I am talking about ore ships. Who is going to say that we shall be able in the future to confine ourselves always to ships of 150,000 tons and no more? I think no one can. A ship can be built in a year, but it takes a long time to build a deep-water port, and if the deepest water port is not provided at the present time, the opportunity to build it may never occur. We know, too, that the British Steel Corporation want two major plants— they have said so; that is to say, plants producing perhaps 7 million to 10 million tons of steel a year. Where are they to go? We are told that this decision will come soon. I believe that one is going to be put on the Tees and the other in some green field. I can only say that the Clyde has a harbour access which is unique; and the Clyde has labour and land. If this is not considered enough, and if the Government want to put the plant anywhere else. I think we shall want a very full explanation from them.

If I may, my Lords, I would add this. We who speak for Scotland are sometimes accused of arguing as if Scotland were simply part of the Welfare State. It is not. The economics of Scotland are sound basically if they are developed properly. They have made a considerable contribution to this country. To pretend, as some have done, that this is a purely (shall I say?) constitutional point, trying to gain welfare for our part of the country, is wrong. I would stress again, if I may, that if we can make some proposal about training or giving education of some kind to anyone who is permanently unemployed, something to show that he is wanted to train for a job; if we can look ahead, then this difficult period— and I admit that it is a difficult period — will pass quickly.

5.2 p.m.

LORD TAYLOR or GRYFE

My Lords, I should like to add my congratulations to the noble Earl, Lord Caithness, on his maiden speech. One of the attractions of the reform of the House of Lords which was frustrated was the fact that, had it been agreed to, young voices would have been heard more often in the House. The measure did not pass, but I am sure that all of us welcome the presence of a young voice in our midst, particularly when the speaker possesses an expertise in a field that does not attract a great deal of national publicity. I should like, too, to say a word of thanks to the noble Lord, Lord Polwarth. I am sure he is much encouraged by the fact that 23 names appear on the list of speakers on his Motion.

One of the disappointing factors, perhaps, is the almost complete absence of English and Welsh speakers, because what we are discussing is not really a Scottish affair; what we are discussing is the question of regional policy, and regional policy has a national significance. Also, as has been pointed out by the noble Earl, Lord Selkirk, the question of regional policy has implications for London, as well as for the Highlands of Scotland. So may I thank the noble Lords who are not resident in Scotland but who are present in their seats this afternoon, for their encouragement and interest.

LORD BRECON

My Lords, as the noble Lord may know, I come from Wales; and I was interested in this debate to see that Scotland does not get more than Wales does.

LORD TAYLOR or GRYFE

I am grateful to the noble Lord.

My Lords, it is important that we should look at this problem in a mood of great seriousness. Those of us who came through the entrance to the Commons to-day will be aware of the deputations that were present, of the sense of anger, the sense of annoyance and the sense of frustration that exists among trade unionists and others who have gathered there to make their protest felt. Anger is not an emotion that I admire; nevertheless, I can understand it. But I think that we in this House ought to consider the facts of this situation, not in a strictly partisan sense but in a sense of sadness and in a mood of seriousness. At the same time, we must not talk ourselves into depression. Sometimes when we anticipate difficulty we frustrate the very thing that we arc anxious to encourage. We are anxious to encourage investment, and sometimes we develop a mood which defeats the possibility of investment. Nevertheless, let us look at the facts quite objectively and try to analyse what has gone wrong. Why is there this widespread unemployment in Scotland at this stage? Five headings might suffice to answer that question, at any rate in part.

First, there is the decline of traditional industries which have not yet been replaced by new industries. Secondly, in the past year, because of the pressure of inflation, most industrialists have had to look at their wage costs and to shed their fat. All of us in a period of full employ ment held on to more labour than we could justify, but now in a period of high competition, and in a period of inflation and when some of us are trying to hold to the 5 per cent. C. B. I. prices increase maximum, we have to look seriously at the labour costs and to shed labour that we cannot afford to carry. So there is a decline of traditional industries and the shedding of our fat in industry. Thirdly, there is the technological unemployment. There was some discussion earlier on the decision of National Cash Registers in Dundee, and why it became necessary for them to pay off 1,200 workers. The manager of N. C. R. said to me," We are producing our product with less labour." And this, of course, is happening in a great variety of industries. Because of new technology, companies are now able to produce as much as they did previously with fewer employees. This again is a major factor in the situation.

Fourthly, there is stagnation of new investment. Who is going to invest when he already has a vast investment in unused capacity? This is the problem that faces the industrialist. Efforts are made to encourage him to buy new plant and machinery when he already has a great deal of plant, machinery and equipment lying under-utilised because of the present situation. It is a sad reflection upon our times that the extra money that is available is not finding its way into meaningful economic activity; it is finding its way into the property boom, because property is the hedge against inflation. Or it is finding its way into the Stock Exchange. It is an interesting fact that in a period of economic depression at the moment the Stock Exchange is doing not too bady. The Financial Times reports a very happy situation on the Stock Exchange because more money is chasing shares at the moment, rather than being invested in meaningful industrial production.

Finally (a point made already), the state of industry and commerce in Scotland will always be substantially affected by the condition of the national economy. While it is no part of my brief to speak about further depression and make the situation worse, the fact is that we are moving into a very dangerous situation at the moment, and unless there can be agreement between the Ten on trade and currency arrangements, and a halting of the retreat of America into further protectionism, this may have serious consequences on the total economy, and Scotland, in turn, will suffer.

However, we are concerned specifically to-day with the Scottish situation in so far as we can isolate it. It has been said before that there are two problems here: the short-term and the long-term. Sometimes short-term economic policies in the regions conflict with long-term economic objectives, and I should like to discuss this matter briefly this afternoon. First of all, I am sure that we all welcome the steps that are being taken by the Government to improve schools, hospitals and buildings of all kinds to revive the construction industry. Of course, the problem in these matters is that redundancies are immediate, while reinvestment always takes some time to be effective. I hope, too, that the Government will look at the constant delays that are involved in planning procedures, which sometimes frustrate immediate economic development. After all, what we are doing in new public works and infrastructural grants is simply building up public investment to offset the private investment in the traditional Keynesian manner until private investment gains sufficient confidence and until sufficient purchasing power is generated so that private investment can be resumed. But when we look at private investment, a great deal has been said about the incentives that are available. I think sometimes we underestimate the incentives that are available for industry.

I had a firm of accountants take out these figures the other day and I will go over the main incentives that are available to investors in Scotland: 45 per cent. of the capital cost of all buildings; 30 per cent. of all wages and salary costs of a project during the first three years of that project; 30 per cent. of the wages bill is met by the Government; rent free factories up to five years. If you come into Scotland as an outsider you can qualify for a period of up to five years' rent free occupancy; low interest loans for capital expenditure; training grants of £ 10 a week for men aged 18 and over, and £ 7 a week for women; substantial grants towards the expense of the removal of plant and machinery; assistance for the transfer of workers; regional employment premiums of £ 1.50 for men over 18 years of age and 75p for part-time workers; tax allowances— industrial buildings 40 per cent., additional allowance for plant and machinery and so on. I could go on. If an accountant looks at those incentives and tries to attach them to a proposition, as I did the other day, on a £ 3 million investment, he finds that a company requires to put up only 26 per cent. of that investment in cash; the balance can be made up from incentives and from local authority loans. This is a tremendous figure. In many projects which can now be brought to Scotland only about 50 per cent. of the capital cost requires to be spent; the balance is made up by various forms of Government assistance.

I can see that to multiply and add to these incentives would be foolish. I think we have reached the maximum in terms of that kind of incentive. Anyone who is in business in the West of Scotland, taking advantage of these incentives, should profit. But I am wondering why these incentives, which are so powerful, are not in fact working to the extent that they should, and I have learned that the Government are now examining the whole question of these and other forms of incentives.

I am interested in a proposition that has been submitted to the Government by the Glasgow Chamber of Commerce and which has apparently had some success in other countries. Most of our incentives to date are cost-reducing incentives. The basic proposition of the submission made by the Chamber of Commerce is a profit-retention incentive. Some time ago I acted briefly as a consultant in the island of Puerto Rico. Our job there was to try to bring industry back to Puerto Rico because Puerto Ricans were finding their way to New York, with consequent social problems. We developed the tax holiday. I realise that the tax holiday could hardly be applicable in a region; nevertheless, I think there is something to be said for profit-retention incentives. The suggestion is made that a firm in the United Kingdom which has a corporation tax liability, might readily be allowed 30 per cent., or 25 per cent., of that corporation tax liability to invest in a development area. This would require to be a long-term investment, otherwise it would be a form of tax evasion. It would be an investment for ten or twenty years in loans or equity or preference shares, but would cost the man who had a tax liability nothing. It would be at the expense of the Treasury, of course, and the Treasury might require that he should match some of the money redeemed from his tax commitment with some of his own money.

The attraction of this scheme is that it could be tried in a particular area. It would not require to be national in application, and perhaps there is something to be said for it. It would be risk capital. and if the investment was successful of course the Treasury would be recouped in so far as the new company would become liable to corporation tax. I think that this kind of profit-retention incentive might readily be examined by the Government, although there are many complications, on which I will not now dwell. From the point of view of Scotland, too, we must look at the possibilities of transport equalisation grants. The big thing that is argued against the steel complex and a good deal of industrial development in Scotland is its remoteness from main markets. It might be worth while to look again at the question of transport equalisation grants, which might make Scotland more attractive from the point of view of investment. In addition, the possible introduction of value added tax may even be given differential rates in different regions. These are some of the new ideas to be evoked, because I believe that the existing incentives are sufficient in themselves but perhaps are too complex. One of the things about incentives is that they should be sufficiently simple and readily appreciated, and while I would not argue against the volume of existing incentives I think the Government might look at other bases for incentive schemes.

I notice that it has been said in this debate that the regional employment premium, which is to cease in 1974, may be continued, and in one submission there was the suggestion that it might be doubled. It is in this area that we come up against the conflict between short-term and long-term economic policies. I have never believed that it is good economic policy to encourage people to put men on the payroll. I believe that the survival of Scotland will depend on her achieving maximum productivity and maximum efficiency, and I think that to encourage the payment of premiums to put people on the payroll is sometimes a disincentive to economic efficiency. In the Glasgow Chamber of Commerce Survey of 50 small or medium-sized firms in the area, only three would be profitable if R. E. P. were withdrawn. I look at the balance sheets of Scottish companies and I see Scottish companies paying their dividends, not out of their economic activities at all but out of their R. E. P. refund. I could not justify that kind of thing in economic terms, so that I am no lover of R. E. P. as a long-term incentive to efficiency.

My Lords, I believe that we have to recognise the fact that Scotland as a nation will not survive by added incentives and encouragements alone. We have to develop in our economy an efficiency and profitability which will make it go. In order to do so what should we do? I think we should clearly identify the areas of decline and the areas of growth, and concentrate on the latter. I was interested the other night to look at a film— and this will interest the noble Lord, Lord Polwarth— in which Aberdeen was referred to as "Abadan". This is some indication of achievement.

There are growth spots in Scotland, and these should be encouraged. When we have identified the growth areas in the Scottish economy we should have massive training schemes, in order to take advantage of that potential growth. Unemployment is a terrible thing because it carries with it a stigma of rejection and in our civilised society this should not be so. Unemployment should be regarded as a transitional phase to new things that workers are going to do. It is inevitable that there should be unemployment in declining industries, but we should not attach to these men the stigma that they are unwanted and rejected by our society. We should try to develop the psychology that men are still wanted by society and that society is prepared to train them for the new tasks in a new society with new enterprise. I am convinced that we have to get this changed psychology across; and this must be part of this massive training scheme. There should be, too, a reallocation of some of the Government Departments to the development areas. At present there is too heavy a concentration down in this corner of Britain.

This is socially as well as economically undesirable. Then I think we have to look at some of the new investments nationally, like the Channel Tunnel, and see what are the implications of that for regional development, and see whether it would not be more healthy environmentally to fan traffic through a variety of ports from Aberdeen to Southampton, rather than have a further concentration down here in the South East of England. I believe that the environmental aspects of that particular development need to be looked at very seriously.

Finally, my Lords (I have spoken too long, and I apologise), I should like to say a word or two about an experience I had last week when I accompanied a Minister in an attempt to attract investment from Germany to Scotland. We took with us in that party an American industrialist, a man who came to Scotland twenty years ago. He runs a very large factory, and an expanding factory, in Lanarkshire. We referred to him on that trip as our "Exhibit A". Not only does that man, having come to Scotland, run a very profitable unit for his American company, but he has had only five days of strike in twenty years. How is this possible? First of all, it was a growing and expanding industry. Like other employers he had to deal with a number of trade unions, but he took the trouble to understand labour relations and to encourage good labour relations. This factory is a model of what might be in Scotland, because I sincerely believe that in any attempts to attract investment to Scotland one of the major disincentives is the bad reputation we have in this field. I think we must all contribute to improving this situation if Scotland is to be able to take advantage of the opportunities before it.

Germany at the moment has two and a quarter million gastarbeiter. Germany has absorbed, I suppose, from 10 million to 11 million refugees from Eastern Europe, and on top of that is now employing in its industry 21 million people from Spain, Portugal, Greece and so on. Switzerland has 20 per cent. of her population as gastarbeiter, people coming from Italy to work. Almost one million out of 5 million Swiss now come into that category. I think it makes much more sense if, instead of bringing workers into these countries, with all the social tensions involved, language difficulties, religious problems and so on, investments are taken to where the workers are available. And in that regard Scotland has tremendous possibilities. There are eight universities in our country, for 5 million people, highly skilled people, anxious to work.

But we must create for Scotland and the name of Scotland a better image. The field of industrial relations is one aspect of it. We must never, as Scots, get into the situation that whenever we are in trouble we march on a demonstration to London or take a deputation to a Minister. We have to stand up for ourselves. Perhaps you get rid of emotions when you pass resolutions. Nevertheles, we must try to do things for ourselves and gain some pride as a people in the future. We are a great people. In Germany last week I was trying to recruit a board to supervise our exercise. I went to the general manager of Barclays Bank in Germany; he was a Scot. I went to the manager of the Chartered Bank for Europe in Germany; he was a Scot. I went to the manager of the First National City Bank of New York in Germany; he was a Scot. This is some indication of the kind of people Scotland can produce. It should be our aim to create the opportunities in our own country for those people to find outlets for their skills and for their abilities, and try, in common with one another, to create a better future for Scotland. I hope that this debate may contribute a little towards that end.

5.27 p.m.

VISCOUNT STONEHAVEN

My Lords, my first pleasant duty is to join with other noble Lords in congratulating the noble Earl, Lord Caithness, on his maiden speech, a speech full of information, well informed. I look forward to hearing him on the subject of agriculture. which he obviously knows a great deal about, on many other occasions. Secondly, I would thank the noble Lord, Lord Polwarth, for bringing this Motion before us to-day, giving us the opportunity of having this discussion. I am afraid that my views are perhaps a little biased by my early experiences as a boy. In 1929 I was apprenticed to Dorman Long making steel, bridges and so on, so that the unemployment of those days means something fairly personal to me. I entirely sympathise with the noble Lord, Lord Hughes, who made, I thought, a little out of character speech; but I entirely sympathise with his feelings on this matter.

Unfortunately, I am no economist, and I can only think of the economy from the standpoint of what I expect to get out of it. I think a thriving well-balanced economy must satisfy people somewhere between two extreme views— and I emphasise that these are extremes. The providers of capital want to get as much money from that capital as they possibly can, whereas on the other side— an extreme view again— the providers of labour want as much money as they can get for as many people as possible for doing as little as possible for the shortest possible space of time. Those are the two extreme views. There is one factor common to these two extremes; that is, that they both object to paying any more to the Government in taxes than they can possibly help. Somewhere in the middle, it seems to me, there is possibly the generation of a thriving economy. I am quite sure that we shall never get a thriving economy unless we gel complete trust and respect between the two parties, the two views— call it what you like. Of course, generally they are nothing like as extreme as that, but nevertheless it should be realised that they are different points of view. I think the success or failure of any enterprise depends on getting a satisfactory balance on both sides. Otherwise, just as labour can and does withhold labour, so the capitalists can and do withhold capital. Although you never hear it described as a "capitalist strike", nevertheless at times it is something very nearly approaching it.

In these days of vast combines and enormous projects, a great deal of forward planning is necessary. Oceanspan, which has been mentioned, is a very good example of that. Anybody who has read it will agree that it is a brilliant piece of work, and because it is so good, and because so many people will read it, the brochure is all the more marred by a most irritating and careless mistake. The mile/kilometre scale on all their maps is wrong. They do not appear to realise that one kilometre is approximately five furlongs, and that 800 miles is not 900 kilometres, as they show, but something nearer 1,288 kilometres. On page 39 there is another of their din grams; Glasgow to Le Havre on one scale is 630 miles, and on another is 580 miles. If you are producing a brochure of this importance you should at least check this sort of thing. It is not vital to the brochure but it is maddening when it is wrong. I just want to say that so that the point can be taken up.

There arc three points I should like to take up a little further on Oceanspan. They are, first, the economic necessity of using large transport units; secondly, the necessity for rapid decisions: and, thirdly, the trend away from labour-intensive projects. Those points are all brought out in various ways and analysed in the Oceanspan report. For a moment may we consider Scotland's largest industry, agriculture? Great quantities of material, both to and from the farms, have to be moved about the country in a year. To do this economically 22-ton load lorries are required. In the nature of things, farms are not on trunk roads; they are very often down by-roads— or "unclassified" and "unadopted" roads, which are the terms we use in Scotland. The bridges were never constructed for this kind of traffic, and it is quite unrealistic not to do something about them. District councils, who are allowed to rate to the limit of 2½ p— it used to be 6d., so I expect it is 2½p now— just cannot take on this responsibility. They have not got the money, and they cannot get the money. I suggest that a survey of these roads should be carried out. In the new local government reorganisation that is to come something should be done about these roads and they should be adopted, or whatever you like to call it. They should not be just left to get worse and worse, with nobody having the cash to pay for their improvement.

The same applies to forestry. One of the chief problems in forestry is to get big loads of thinnings away. Very often you cannot get them over the bridges because the bridges are not strong enough to carry the loads. It seems folly to me to spend a lot of money planting forests if you cannot then get the timber to a processing factory. It is really high time that the Forestry Commission or Her Majesty's Government, or both, made a survey of where they are going to take this growing produce, and what they are going to do with it. So far as I know, there is no official published plan on this subject at all, and they are just drifting along, planting a few more trees, and that is about it. They are planting good trees, and the trees are growing well. I have no criticism of the Forestry Commission on that score at all. However, I have very considerable reservations about what they are going to do with these trees, because it is coming to light in many cases that the roads and bridges will not take the loads. If you were to say," Use a smaller lorry", then out go your economics straight away.

Her Majesty's Government have produced a commendable amount of cash for roads in a crash programme to alleviate unemployment, but there are one or two matters they should look at. Producing the money is not always enough; you have also to make sure that the people to whom you give the money are able to spend it within the specified time. In our small county alone, so far as we know, four of our schemes are held up indefinitely. We do not know what is going to happen on the purchase or acquisition of land. I believe that this is due to an excessive work-load on the district valuer and on the assessor, who is also helping out on the unclassified and non-grant-earning roads. But the fact remains that here are four schemes which could give a good deal of employment in our own district, and which are held up because we cannot get values clear, and the acquisition of land finished. Whether anything can be expedited and extra help given, or an investigation made of what the real problem is, I do not know, but if this will help I hope that it can be done.

Scotland has been planned over, reported on very fully, and many factual surveys have been produced. Most of them have been excellent, and there is a wealth of information on what should be done to put the economy right. What is required now is a decision. All these plans, excellent though they are, are mouldering away, getting covered with dust, so far as one knows, and we are lacking a decision. A decision must be made before you can get going. Without decisions you will not get confidence; if you do not get confidence you will not get investment.

The last point I want to make is that there are going to be many redundancies, as well as voluntary severances and early retirements, all of which alleviate individual hardship. But do not forget, my Lords, that this means less jobs for the school leavers, while the general tendency of modern industry is to use less labour. So when we are taking the long-term view, we should consider limiting the number of job seekers. No country can go on indefinitely increasing job opportunities and in modern times, especially, it is getting more and more difficult to do this because technology itself prohibits it. Last year in Scotland, excluding Glasgow, there were 52,661 school leavers, and of these 22,008 came from families ranging in size between 4 and 17. Who says that the Scots are not virile? Aberdeen city is spending £ 16,000 a year on family planning advice— I stress that this is voluntary— but they are saving the ratepayers of Aberdeen city an estimated £ 160,000 a year. Surely that is good business, even for the most avaricious capitalist. I suggest that it really is high time that Her Majesty's Government did a little more about planning and advice. This service is taken up by all sections of the community. The figures for Aberdeen show that the idea of only one section of the community availing themselves of this service is rubbish. I maintain that this planning must be done. The work in Aberdeen is very commendable indeed.

I was asked by my noble friend Lord Lovat, who has, unfortunately, had to catch a plane in order to attend a meeting to-morrow, to make a point for him, and I agreed to do so because I entirely agree with it. It has to do with the inshore fishermen and the fishing limits. I feel so strongly on this point that if Her Majesty's Government allow themselves to be bullied by the French on this point, I shall walk into the Not-Contents Lobby, and I think that other noble Lords will do the same.

I am not pessimistic: I am optimistic. We can do the job in Scotland. We have the men and the young people and they are raring to go. They want only a little encouragement. Last spring I attended the turf cutting ceremony for a brand new up-to-date hotel, with 40 bedrooms, bathrooms, televisions and telephones— the lot. Within six months I was having lunch at the opening ceremony of that place. We can do it. As another illustration of what is being done in Scotland, in our small fishing port with a population under 5,000 we have a sea cadet unit. They won the efficiency cup and pennant for the whole of the United Kingdom three years running, and then, after another two years, they won it again last year. All we want is a bit of decision-making and a lead, and we need somebody on the Government side to thump the drum a bit. We are in a bad patch at the moment, but it is only temporary.

5.45 p.m.

Loan BALERNO

My Lords, I, too, wish to join with other noble Lords in congratulating the noble Earl, Lord Caithness, on his maiden speech, and particularly on the subject he chose, which is essential if we are to have a balanced life in Scotland. There must be agriculture to balance the intensive nature of the central belt and other parts. I knew the noble Earl's father as a gallant and very skilful soldier, and I was glad to serve with him in the same regiment. May I also thank the noble Lord, Lord Polwarth, for initiating this discussion. Obviously, from the number of speakers, it is stirring up the greatest interest in Scotland.

When we last had a debate of this nature I spoke of the dire straits of industry in the Valley of the Water of Leith. I now have to report that the situation has gone from bad to worse and that the last substantial mill in Balerno, Galloways Paper Mill, is now in the hands of the liquidator. It employs 300 persons. The Kinleith Mill at Currie, a mile away, closed down in 1966 with the loss of 200 jobs and there is virtually no other industry in the area. A contributory reason for this is dumping by Scandinavia. This is perhaps best illustrated by an example. Since 1966, the price of wood pulp which Scandinavia sends to us has increased by over 60 per cent., whereas the price at which the Scandinavians are willing to sell their paper to us has increased by only 30 per cent. Their paper is largely made from the same wood pulp as our paper; so I think that there is here a prima facie case of dumping and I commit that to the attention of Her Majesty's Government.

But the main reason for the crisis at Galloways is the most curious fact that the villages of Currie and Balerno are administered by the employment exchange in the City of Edinburgh. When the late Administration decreed all Scotland to be a development area, but excluded Edinburgh, they also excluded that part of Midlothian covered by the Edinburgh employment exchange. And so the lights of the mills in the Valley of the Water of Leith have gone out one by one.

Let me illustrate what that has meant. Galloways are a progressive firm producing high-quality coated papers. To meet demand and to produce efficiently, a decision was made to install a highspeed coating machine at a cost of considerably over £ 500,000. That machine was completed in 1967, and in planning it the directors had very good reason to expect substantial support from the Government. In fact, they had only some 20 per cent. support due to their being in the area of the Edinburgh employment exchange. Had the mill been anywhere else in Scotland, they would have got about 45 per cent. of their capital cost, as well as the regional employment premium. The blame for this state of affairs rests fair and square on the late Government. The present Government might before now have found it possible to redress the sins of their predecessors; but I would say that it is not too late. The mill is now working well. Though one of the two paper-making machines has been closed down, production is keeping up, and the new high-speed coating machine is producing the goods. The crisis is now one of liquidity, but with immediate action the situation can be saved.

My Lords, I do not want to harp on Scotland not getting a fair deal, but so long as there is over-centralisation in London and the South-East so long will we have a very legitimate grouse. Let me give your Lordships one example. Professional and scientific civil servants are paid for by the taxpayer. To collect the majority of them in one area means that you are literally mulcting the rest of the country. The income which the professional and scientific civil servants receive, which is very considerable, should be dispersed as evenly as is practically possible throughout Britain. On that argument, we should be getting 10 per cent. We would perhaps be content with 7 per cent. In fact, we in Scotland are getting something like 4½ per cent. Why should we in Scotland have to contribute in this way to the prosperity of London? Why should we in Scotland be deprived of their civilising influence and their ability to raise the standards of the community? I know that the past Government tried to do something about this by setting up the Civil Service Staff College in Edinburgh. I know that the present Government are bringing the Forestry Commission up to Scotland, but the actual moving of them there is rather a slow process. Please. can the Government do something to hurry up the Forestry Commission in this respect— to ask them to get a move on?

My Lords, I come now to the main burden of my speech, and I trust it will not bear too heavily upon your Lordships. Many of your Lordships will recall the striking maiden speech of the noble Lord, Lord Zuckerman. It was given on the first day of the Common Market debate. The noble Lord told us that British scientists had been responsible for advances in knowledge wholly disproportionate in their significance to our numbers. The noble Lord then said! … but relative to the growth of science-based industries which has taken place in other countries of the world, and relative to the changes that have taken place in the content of science and technology, we have slipped back, not advanced."— [OFFICIAL REPORT,26/10171, col.553.] An important supplement to this speech in the debate on the Address on November 9 by the noble Earl, Lord Shannon. The noble Earl asked us to consider carefully the implementation of much of our technological capability within our own industry instead of continuing to act mostly as a supplier of advanced ideas from which the industries of other nations can and do benefit. The noble Earl continued: It is all very well for a rich, philanthropic world Power to supply research results to the world at large while making little use of them for its own industry, but it is sheer lunacy for ourselves in our present position."— [OFFICIAL REPORT,9/11/71, col.301.] My Lords, if it is sheer lunacy for England, what is it like for a small, heavily industrialised country like Scotland? We in Scotland are far more dependent on the application of science to industry, and little is being done about it. We export our science to America and then seek for American firms to come and manufacture in Scotland. That is absolute criminal lunacy. To-day, the rate of change in technology is such that it is impossible for anyone other than the professionals to keep up with the pace of development, so perhaps it is not fair to blame the politicians for giving only lip service to the importance of technology— and heaven knows how much lip service they have given in the past ten years! I should therefore like to take this opportunity to educate our politicians somewhat.

About a hundred years ago the figure of Lord Kelvin dominated Scotland, and indeed the whole of civilisation. He was Professor of Natural Philosophy in Glasgow University. Not only was he one of the ablest physicists of his period, but he also applied his science to practical problems; and on his work the heavy industries of the period developed, as well as the beginning of the light industries in Scotland. A hundred years ago one man could make fundamental discoveries in science and also apply them to the practical needs of mankind. Lord Kelvin produced the absolute scale of temperature; he enunciated the second law of thermodynamics. Likewise, he determined the standard for electricity, and discovered the oscillatory character which was the foundation of the work of Hertz and so developed by Marconi. I could go on and give your Lordships more of his fundamental work, but Kelvin was also responsible for developing telegraphy with stranded cables and sensitive receivers. He evolved a tide gauge and predictor, a simpler method of fixing a ship's position at sea and, among many others, a radically improved compass— which the Admiralty would not use.

To-day, the field of science is so much larger, so much more specialised, that one man cannot himself apply his discoveries. Indeed, discoveries in science are no longer the work of one man: they are almost always the work of a team. And not even a modern Lord Kelvin could encompass discovery and its application. It is because so many of our generation have been brought up on the scientific discoveries of earlier generations that we fail to appreciate the position of the application of science to industry. It is a truism that innovation in industry is initially sparked off by discovery. That may be discovery in science, but equally it may well be a discovery in techniques, and this can be absolutely as productive as a new discovery in science. Compared with the scale of our national investment in pure research, the amount devoted to industrial and economic research in our universities and the like is relatively quite small. Our system of councils and committees is geared, despite some efforts to change it, to pure research support. A new policy on the part of our Government is an absolute prerequisite to industrial development in Great Britain, and I very much welcome the impending publication, which the noble Earl the Leader of the House is producing either to-day or to-morrow, of a framework for Government research and development. It seems to me that the Government have anticipated my speech in this matter, and I think they have also anticipated that of the noble Earl, Lord Selkirk, who made a similar plea. But we will see the Green Paper when it comes out.

My Lords, even though the perfect Government were to put this balance right, there is still a gap which must be recognised by politicians and civil servants. It is the immediate application of discovery, on a small scale, to a product. Here it is possible to assess the "spin-off" from discovery, iron out the snags and then get it on to the production line. Facilities for this are nearly nonexistent in Britain, although we in Scotland are edging in. The University of Strathclyde has established a Centre of Industrial Innovation. This work and the earned income from this work are both running ahead of predictions. But the money for the work is running out. The old MINTECH contributed some two-thirds of the £ 300,000-odd costs, but the new Department of Trade and Industry seems to have withdrawn Government support. If this Centre of Innovation is to continue— and for the sake of Scottish industry it absolutely must continue— then the University of Strathclyde will have to call upon its own private resources; indeed, it is doing so at the present time.

Many of us had hoped that the separation by the last Government of technology from science meant that the application of science to industry would get the support that industry requires. How can the universities get closer fruitful relations with industry if they are denied the means? Or take the case of the other technologically-based university in Scotland, the Heriot-Watt. Precisely in order to get the spin-off from its scientists, the university has established a Research Park on its new campus at Riccarton. The first company is operating and another is on the way. Scientists working here will be in and out of the laboratories of the new university when it moves on to its new site some twenty months hence. This is being done virtually without Government help, by a small emergent university that is technologically minded in the direction that Scotland needs. But I beseech the Government not to deduce from what has been accomplished that no help is needed from the Government. What has been achieved has been done by scientists, some of them English scientists, who want to help Scotland get on to a sound economy based on modern, up-to-date industries. But it is also being done at the expense of other university developments.

In the world to-day, self-help will only take you so far. For complicated development you must have strong financial backing. At the Heriot-Watt Park there are designs for a 10,000 square foot multi-occupancy building which will make it possible for a high technology industry to overcome its early teething troubles. It is a nursery for emergent industries which can then move out to New Towns such as Livingston and Glenrothes, where the contacts made during the development stage can be continued and matured during the succeeding stages of growth. My Lords, I said that there are designs for this, dreams if you like, for investment in the future of Scotland. But, like Strathclyde, no money. No money from the Government. I pause to let that sink in. No money from the bankers. You can blame the Government, but can you blame the bankers? The noble Earl, Lord Shannon, said on November 9: Bankers also. by past injudicious investment, are beginning to consider research to be more of a money spender than a wealth creator."— [OFFICIAL REPORT,9/11/71; col.301.] This is exactly where the Strathclyde Centre for Industrial Innovation and the Heriot-Watt Research Park come in. It is here that the worthiness of a new enterprise can be tested and its true potential assessed. Both the Government and the banks can gauge the opportunities and know that they will be backing winners. I think that that will apply also to the private investors, the lack of whose interest in industry by putting money into it has been given in this debate as one of the causes for the present recession. If only for what they can save of wasted expenditure by the State and by the banks, these two enterprises become vital for the development of the Scottish economy.

My Lords, looking at the problem of developing new industries in Scotland, industries that will stay with us, not the foreign fly-by-night factories, I think it is clear that Scotland has as great potentialities as she had a hundred years ago when Lord Kelvin and his disciples developed the technology for the Clyde. But I must add that cur present lopsided approach will make but small contribution to the long-term industrial prosperity of Scotland. The politicians have been warned. Lip service to technology must end.

6.5 p.m.

THE EARL OF PERTH

My Lords, I should first like to thank the noble Lord, Lord Polwarth, for introducing this Scottish debate. My second pleasant duty is to praise the noble Earl, Lord Caithness, on his maiden speech. The great thing was that he talked about what he knew. That is always of the greatest interest to all of us. Of the speeches that have been made so far, it is invidious to pick out any one from another. But I thought the speech of Lord Polwarth was notable for the constructive suggestions it contained. Here I would join issue with the noble Lord, Lord Hughes, if he were here. I felt similarly about the speech made by the noble Lord, Lord Taylor of Gryfe.

My Lords, I am not going to talk very much at all on the first part of the Motion; namely," To draw attention to the state of the Scottish economy". Others have done that. We are all aware of our tragic unemployment situation. Let me just say that I have no happiness in it. I want to turn to a particular subject, and I gave the noble Baroness warning that I wished to raise it. It concerns Cupar and the sugar beet factory there which the British Sugar Corporation is about to close. Perhaps I should declare an interest. I have 10 or even 12 acres of sugar beet— or I did have this year; but that is not what I wanted to talk about. I do not know how many noble Lords know the facts. Simply, they are that the British Sugar Corporation has announced that it wants to close, in fact is closing, the factory. The Labour Government looked at the matter and said," That is all right". The Conservatives have confirmed that judgment. A new factor has been brought into the situation. A Scottish consortium has said that they will buy the factory and use it for sugar beet from the farms. Not only is this very important to farmers but it is very important because of the employment it provides. The Government have said," Very well. You talk with the Sugar Corporation about a price for the factory".

The consortium have said that they will pay £ 200,000. My Lords, it is not worth more. But the British Sugar Corporation have said that they want half a million pounds more. The Government have said," You must settle that as a commercial matter between you". This half a million pounds is very significant. The reason why the Sugar Corporation wants the extra half-million pounds is because, by closing down the works in Scotland, it can move its quota to England for a larger throughput in its English factory and therefore make a profit from this operation which it would not otherwise do. I am not blaming the Sugar Corporation. I blame the Government, whether it be a Labour Government or a Conservative Government, because Parliament created the monopoly which made this possible and which gives this right to the Sugar Corporation to ask an unfair price for the factory for the benefit of England.

My Lords, that is not the only factor. The Government own one-third of the shares of the British Sugar Corporation. If my arithmetic is right, within this last year they have on paper made somewhere between £7 million and £8 million profit on this holding; yet they begrudge the half-million, the difference between what the consortium want to pay and the Corporation ask for the works. Surely, my Lords, this is a matter in which the Government should say," All right, this is a case where commercial factors should enter into consideration. We recognise the need of Cupar and of the farmers. Employment is what matters, and in one way or another we will meet the difference to the other shareholders." It would be easy to do so. All they would need to do would be to give up a small proportion of their holding to the other shareholders, to compensate them. It would cost nothing, but instead of having £ 3 million shares they would have 2,900,000. I am not the only one who is pleading this case. The County of Fife, the Town Council of Cupar, the National Farmers' Union, the Scottish trade unions and, obviously, the consortium itself, are all asking for the Government to intervene. I ask that they should do this. It seems to me that here is a small but important example of how the Government could help at once. When I say "at once" I mean that it is no use saying, "We will look into it a little more". Farmers have to plan, and their planning must be within the next two months.

So much for the particular, my Lords. Now I want to turn to the rest of the Motion which refers to: … the need for the determined pursuit of policies for its fundamental improvement. I ask your Lordships to join me in a flight of fancy. In the winter of 1706– 7 when the Scottish Parliament debated the Act of Union, they failed to pass it, and for the last 270 years Scotland has been on its own. It has been a Kingdom on its own. We called back Prince Charles Edward to be our King and the Stuarts have ruled ever since. I am not going into the political situation in Scotland to-day, except that I might add that we have always been somewhat to the left of our Southern neighbour. But I am going to touch for a moment on the state of the Scottish economy. We have good roads and bridges, thanks to people like Macadam, Telford or Rennie. We have hydro-electric power, but we have no atomic power stations; we cannot afford them. We have a heavy industry, thanks to coalmines and the iron ore around the centre of Scotland, but that is running out and a year ago we were worried about the situation. We have radar and a good deal of light electronic works, thanks to such people as Sir Robert Watson-Watt. We have concentrated on forestry, of course, and tourism, and we have always got whisky. But, my Lords, our standard of living in Scotland is lower than that of our Southern neighbour. We are poorer and life is harder; at least it was harder until last year when a new hope arose. That hope was oil and it turned to a reality.

The British Petroleum Corporation, in which, as a matter of interest we in Scotland have always had a considerable stake, struck oil in the Forties, and since then there has been an equally important discovery of oil in Scottish waters. We are rich by any standard, my Lords. We are excited by these riches. This is the greatest thing that has ever happened to Scotland. What have our Government done? We recognised that the ordinary machinery of Government was inadequate for our purpose and we set up a special body with experts, industrialists headed by a leading Minister of the Government. It is a Government body, but a curious one, because other people have been invited to serve on it and its terms of reference are as follows: To take action to ensure that the great oil discoveries arc used for the immediate benefit of the country; to increase employment and to build for Scotland's future as a well-balanced industrial nation.

This body has also been very conscious of our unexploited assets: the deep waters of the Clyde and the opportunity for a green field steel plant of 10 million tons costing £ 1,000 million. We could never have dreamed of doing something like that until the discovery of the oil. We realise now that it is going to be at most only two years before it comes. There is to be the setting up of an atomic power station in 1975 and afterwards, and an infrastructure of roads and so forth for the development of Oceans pan. We, too, my Lords, are applying to join the Common Market. We have called on experience from all over the world to help us in what we are setting out to do. There is something else, my Lords: we have insisted that the international oil companies to whom we have granted exploration rights undertake certain things in Scotland now; that they teach us, in one way or another, to make rigs, and order from us ships and other things needed for the servicing of the oil. We have spent on these purposes some of the money we have already got from giving exploration blocks and we have insisted that at least one refinery be set up in Scotland, in addition to the one the British Petroleum said they would build at Grangemouth. In a word, Scotland has seized its opportunity; its people are active, and confident that a great era of prosperity and work lies ahead for them. There, my Lords, is the end of my flight of fancy.

But one fact remains. We have got the oil; we have struck it rich. As the noble Lord, Lord Polwarth, said, this event is probably the greatest thing in our economic history, and not only for Scotland but for the whole of the United Kingdom. What have we done, my Lords? What have the Government done? They have not set up any special body. I was struck by what was said by the noble Earl, Lord Selkirk, and the noble Lord, Lord Polwarth, and others about there being no co-ordinated action to-day in this area. That is right, my Lords. The Government have not set up any special body to act. The Government have laid down no conditions for the oil companies, that we should help to build rigs; or insisted on our supplying ships and shipping, and refineries. The Government have left the companies to their own devices and they go their own haphazard way. I do not blame them, but at a time like this they should be directed. The Government have taken no action to utilise the wealth to come in the special circumstances for the advantage of the country. Above all, they have not considered the absolute necessity of a great steel works with all that would flow from it.

Within the last five years Belgium has spent as much on steel as this country; Germany has spent 22 times as much and Japan nine times as much. How can we think we are going to be a great industrial nation any longer, if we do not take the plunge? And we have got the money to do it. The money is coming from oil. Let us take our chance now. Let the Government think big, realise what has happened, set up a special body to act on the companies rather than have things drift, and use the great oil discoveries to build up for what must come if we are to remain the industrial nation we have been for so long. Never in our history has there been such an opportunity— curiously enough, at a time when we have the tragedy of nearly one million people longing for jobs. If we stumble for doctrinaire reasons, because we must not interfere, we shall lose that opportunity. I say to the Government that we must interfere in this case. We have never had such a unique opportunity. I would almost say," To hell with principles or socialism, or what you will! What matters now is that we should act and seize what we are offered." If we do not, the Scottish people— indeed all the people of the United Kingdom— will never forgive or forget.

6.22 p.m.

LORD TANLAW

My Lords, like many noble Lords before me, I should like to welcome the speech of the noble Earl, Lord Caithness. I was especially pleased to hear his mention of agriculture and the drift away from the land, and later on I wish to follow him on this very important fact, which has had little mention so far in your Lordships' debate. I, too, thank the noble Lord, Lord Polwarth, for giving us the opportunity of having this timely debate on this subject. It is a debate which I think is already breaking down the wall of indifference that exists on many things Scottish, especially the economical hardships which have occurred over a number of years past. The noble Lord, Lord Polwarth mentioned, very relevantly, the major projects which are on the drawing board and the push needed to get them off it. My noble friend Lord Thurso mentioned devolution and decentralisation as part of our power to look to our own future in Scotland.

So far the debate has clearly established that we have two major problems in the Scottish economy— the immediate, short-term problems and the long-term, future one. These problems need two different remedies for their solution. Many suggestions have been put forward by noble Lords so far. The poor economic situation, which has developed over the past two years into a critical one, cannot be attributable only to misguided national policies, as the noble Lord, Lord Hughes, implied in his words earlier this afternoon, when, in one form or another, countries all over the world are facing similar problems arising out of the background of a global trading recession and an unstable international currency market.

The first and most pressing need is to inject some life into the Scottish economy from the public sector in order to relieve the present hardship of the 141,000 unemployed. The censure debate in another place and yesterday's censure Motion drew attention to the real concern felt by all those Members with Scottish constituencies which were experiencing the full brunt of this vicious trade cycle. However, although some analyses of trade figures were given, too much attention was paid to percentages and totals in order to stress the magnitude of the problem and to make political points. It would have been more helpful if a breakdown of the categories of unemployed had emerged— for instance, skilled and unskilled, the proportions of white collar workers and those involved in technical management.

We should like to welcome from these Benches the new measures announced yesterday by the Chancellor of the Exchequer of increased Government expenditure on public works, locally and nationally, and the advance in the capital expenditure programmes of some of the nationalised industries. Although I am not aware, unfortunately, of the full details, I should like to hope for an expanded road building programme for Scotland and for an improvement of the airfield at Turnhouse, as well as for an increase in the removal of dereliction. These short-term measures should be designed to assist in building the longterm fabric of the economy which is so essential to Scotland's future.

I do not believe that capital assistance, other than the immediate efforts to relieve local hardship, should be given to Scotland (or elsewhere for that matter) unless it is spent on projects which have a longterm future beyond the next General Election. There is no lack of planned capital projects awaiting the decision of the Government; they have been mentioned already in this debate. But we still have 'the lack of assurance of capital from the Government Benches. These decisions could revolutionise the whole future structure of employment in Scotland. There is the exciting development of Hunterston, already mentioned; and if becoming a partner in the European Economic Community is to mean anything at all, a new deepwater port combined with a steel mill in the Clyde Estuary must have a major role to play in the European economy. The concept of Oceanspan, of Central Scotland as a land bridge between Europe and the Americas, is not unrealistic.

These are big projects, even by world standards, involving hundreds of millions of pounds— approximately £ 150 million a year for 15 years, but as was pointed out in an excellent article in the Scottish supplement of the Financial Times on November 8, this type of Government investment will also attract considerable financial support from the private sector. The span of time involved takes this kind of solution right outside the administration of one Government or of one political Party. These projects should become national projects, for they have the potential of generating up to 60,000 jobs in Scotland. For this reason alone, these schemes should receive all-Party support and action now. There is an urgency about them and I am glad that the noble Lord, Lord Polwarth, mentioned this.

Regardless of what has gone before, I think that the assurance from the noble Baroness at the beginning of her speech concerning Oceanspan seems rather futuristic. If I quote her correctly, she said that the Government were preparing to consider a preparatory report. As we are talking about urgent decisions necessary for long-term capital projects and it is taking a long time to prepare a preparatory report, perhaps some assurance call be given that the capital requirement will be kept aside when the conclusions of this report are available to us.

I opened my remarks by drawing attention to the current world trade recession; but the Chancellor of the Exchequer prophesies that good times are coming for all sections of industry: and we must believe him. The Prime Minister, in his address at the Lord Mayor's banquet on November 15, said: What we have now … is a rare combination of circumstances. There is a clear need for a large increase in industrial investment. There are good prospects of demand for additional output that will become available. And we have the spate resources readily available for the additional investment without strain on the economy. We must believe him, too. As Prime Minister, he is in a unique position to call upon these spare resources which he says are available. He should start to invest them in Hunterston, in the Highlands and Islands Development Board and Oceanspan projects, and give a lead to the distinguished audience he was addressing, which I hope included a good representation from the Scottish Chambers of Commerce.

Could it be that some of these spare resources referred to are the mineral, gas and oil resources, also referred to in your Lordships' House, and as yet lying untapped under the Scottish soil and under the sea in Scottish waters? I sincerely hope so because, according to recent newspaper reports and what noble Lords have been saying this afternoon, they are considerable. The development of mineral resources in Scotland may yet hold the key to future prosperity; but if they are exploited with no ensuing benefit to the Scottish economy by the Government, there is a grave danger of unleashing unnecessary disillusionment and bitterness that could have severe political and social consequences. To take an example, if the offshore oilfields turned out to be workable in commercial quantities and the revenue generated went direct to the Treasury the psychological effect in Scotland would be unfortunate. I mention this— it is an administrative point— because if the revenue comes in and goes down to the Treasury, we must have an assurance from the Government that it will go back again. The feeling that Scotland has become the poor relation of England because roads, grants and local government have had to rely on subsidies from a good natured Chancellor is something that rankles in every Scotsman; this again has been mentioned during this debate. The contribution of earnings from Scotland's mineral resources to the British economy may be quite incredible and would assist greatly in the financing of these large capital projects. An assurance by the Government at this stage that a proportion of that revenue will remain in Scotland to provide a future for the young generation, would give much needed hope to those who must be thinking of leaving their homeland now, as they have done before in Scotland when things became intolerable from time to time and place to place over the past 200 years.

If I may refer again, my Lords, to the Prime Minister's speech at the Mansion House, he went on to say: Now is the time to commission new factory buildings, to order new plant and equipment. For now is the time when we have available the resources to meet the additional demand. The Chancellor of the Exchequer has taken a series of measures over the last year to stimulate the growth of the economy. It takes courage to start a capital investment programme at a time when good men are being laid off and when demand is slack, but I am certain this is the time to do it in Scotland where both the management and workforce hold a reputation they are justly proud of. An editorial of the November issue of Management Today also endorses the Prime Minister's advice by advocating a rapid increase in fixed investment to increase productivity. The argument for more capital investment was based on statistics which clearly showed the direct relationship between productivity and fixed capital investment by comparing performances between Britain and Germany in the mechanical engineering field between 1964 and 1967. In the years when the Germans invested 28 per cent. more than the British companies, their productivity exceeded their British counterparts by 31 per cent. In the years when this investment lead fell to 18 per cent. their productivity lead over the British dropped to 15 per cent. I am sure this relationship is acknowledged by any board of directors with manufacturing experience. The Government appear to recognise this, too.

As noble Lords may recall, during the Second Reading of the Investment and Building Grants Bill in this Chamber, the noble Lord, Lord Sandford, explained how the Bill would assist Scottish industry and regional development through a new system of capital allowances designed to encourage fixed investment in these areas. I welcomed this at the time from these Benches, and I still do, but with some hesitation, because I think serious consideration may have to be given to reviving the capital grants system in certain circumstances. I do not believe that the capital allowances outlined in this Bill are having. a fast enough effect to relieve unemployment, or indeed to achieve the growth in Scotland that they were intended to have. Their intention was to replace antiquated machinery. However, there has been no immediate rush to do this in Scotland or elsewhere, partly because of the general lack of confidence, and partly, I-believe, because of a defect in the fiscal system which virtually taxes new investment on plant. I am no tax expert, my Lords, but I understand that when plant is replaced the tax allowances given during its life are reviewed. If old plant is sold at a profit over the written down value, those allowances are deemed to be excessive, and the excess is withdrawn by a balancing charge. In an inflationary economy there is nearly always an excess, because even worn out plant has a disproportionately high value in monetary terms; thus there is often a balancing charge payable to the Exchequer on the successful sale of old plant. This mean device, if I have it right, must act as a deterrent to management to replace plant when profits are hard to come by. If this is the case then immediate consideration should be given to waiving the balancing charge in Scotland and in other parts of the country which are struggling for economic survival.

I have tried so far to concentrate on suggestions for industrial revival in Central Scotland, but some smaller towns like Arbroath, with which I have strong family connections, and Banff, which have only one or two major sources of employment, never seem to hit the headlines. It is towns like these where the actual numbers in national terms do not amount to much, but in effect means that a majority of the menfolk of working age are without a job. The feeling of desolation must permeate everything in their life as the future must appear nonexistent. The encouragement of new industries to these areas should rate as high in any Government programme as Hunterston, the Highlands and Islands Development Board, and indeed mineral exploitation. The advance factory is certainly a possibility for these areas, but the enticement of any company to set up in Scotland should not be seen to be based on empty sheds, tax holidays and low labour costs alone. Good communications, retraining facilities and avail ability of all types of suitable housing for directors and specialist management count as high, if not higher. I wonder how many good companies failed to choose Scotland as their base because they were unable to house their skilled management and technicians adequately?

Before concluding, my Lords, I must make brief mention of the rural economy of Scotland. I feel that now is the time for new Government policies to revitalise the land and prevent the drift of good men away from it. The land requires capital investment similar to the introduction of new plant in factories. Grazing land in the marginal hill areas of Scotland has become worn out through two hundred years of exhaustive economy practised by successive generations of sheep farmers; it urgently needs rejuvenation through an injection of fresh capital, and in many cases new management to ensure its future. The availability of cheap money to invest through a Government guaranteed land bank, frequently advocated by Liberals, could greatly increase the output per acre to meet the anticipated extra demand for beef and sheep meat in Europe where there are deficiencies in both these products.

The hill land in Scotland may in the future prove to be one of the most under-utilised capital assets in Britain. A sensible policy of afforestation by the same token may also prove of immense value to the British economy over the years by providing a solid base for rural employment, a saving in imports and havens of peace and beauty for the majority who live out their lives in an urban environment. Government assistance to these areas, whatever form it takes, should recognise above all else the long-term needs of the land and the sense of temporary stewardship felt by working farmers and foresters who earn their living from it. Short-term incentives such as production grants can only, in my opinion, encourage exhaustive farm policies that will not provide future generations in the country with a livelihood that is comparable in economic terms to their counterparts in the cities. I am therefore advocating for Scottish hill and upland farm problems a serious rearporaisal of the present grant system with a view to redeploying the funds available for capital support in these areas, because the existing system does not appear to prevent a drift away from the land or radically increase the gross output per acre.

In conclusion, I am asking the Government to relieve the immediate hardship in Scotland by "crash" expenditure programrncs from the public sector. But the real problems— old-fashioned industries, worn-out plant and tired land— will remain until there is a fully committed major capital expenditure programme that will take advantage of the manpower, the mineral resources, the geography and the undeveloped land in Scotland which are there for the taking.

6.39 p.m.

LORD RANKEILLOUR

My Lords, first of all, I should like to congratulate the noble Earl, Lord Caithness, on a most sincere maiden speech. I hope that he will speak frequently in future and teach us the progressive art of estate management, preferably in Scotland, which I believe he is studying at the moment. My noble friend Lord Lovat, who was to have spoken before me, but who has had to scratch due to a meeting in Scotland, wishes me to say that he wants to see a tapered freight rate in the Highlands and in the North of Scotland. All further development may well be crippled if someone does not do something soon. The economy of our country is generally supposed to grow on some sort of Christmas tree and, because of this, has very little to do with "everyman" and, to a lesser extent, management. However, "economy" is another word, fundamentally, for manpower, and thus if men are lax and management poor (which is all too prevalent these days) then monetary circulation takes a hammering. This is not necessarily disastrous if it happens only from time to time, but no country can stand constant repetition, because at that stage its dented reputation comes on to the scene; and to recover from that kind of body blow will not be just a matter of weeks, for by that time people have begun to lose faith in the working force of the country and may well have decided to shop elsewhere, thus putting a local industry in great danger of collapsing through loss of its recent market. Thus, unemployment— and not surprising, really.

My noble friends around me have spoken about the Scottish economy as it affects the more industrialised areas out- side the West Highland sphere. They are undoubtedly well versed in their art, but I like to think that they will spare a thought for the scattered forms of employment in our more mountainous regions. It is here that the future economy of Scotland may well be increased, on a scale unthought about at this moment of debate, in the fields of mineral extraction, sport, industry, pastimes, tourism and transport, particularly railways.

I know that to ask a question within a debate which is intended to have no answer from anyone but oneself is always a dangerous move, but still I shall essay one. It is this: can the United Kingdom, let alone Scotland, be continually at the mercy of a dissident work force? My Lords, of course not. If the national economy is to prosper once more, a rapid, selfless and lively export drive should he launched by the more responsible firms in Scotland, and especially those in the Highlands. Perhaps this is all a pipe-dream; but as I wander around the Western World, including a recent visit to Canada, I am constantly asked why Scotland and the rest of the United Kingdom make so little effort to show their wares abroad. I do not know the answer to this charge at first hand, but possibly the truth of it is that the home market is the easiest with which to cope and that the export one should be contemplated if there were a surplus. Can management afford to think like this?— for I believe that they do so far too often. They are probably already partially guilty of helping to cause the present situation by such ineptitude.

The United Kingdom seems to have become a victim of the same state of affairs as that which affected England towards the end of 1811. At that period, the Luddites directed their spleen against their main form of employment: the machines, known as frames, which made stockings and lace. As your Lordships will remember from your history, the Luddites destroyed the frames because of the widespread prejudice that their use produced a scarcity of labour. Apart from this prejudice, it was inevitable that the economic and social revolution implied in the change from manual labour to work-by-machinery should give rise to misery. So, despite full order books in many cases, history to-day repeats itself. The machine has superseded hand-power. Unions, men and management unbelievably fail to come to some constructive compromise, and thus we find so many workmen out of employment. The men are there; the order books are there; the management is there; the union representatives are there. What is the common denominator, apart from money, to get the whole thing moving? To blame any British Government for this sort of mess seems ludicrous, for if the order books are even partially full then, surely, the onus lies on the firms concerned, and it is their job to sort it out while they manufacture the fount of their income. When this problem is solved and the country rises from the mire of destructive inactivity, the United Kingdom will slowly regain its lost reputation and be once more a thriving industrial nation.

Perhaps it would help if Scotland gave a lead to the rest of the country by making a supreme effort to sort out its own industrial strife. As the solution must come at some time, why not sooner rather than later? We do not have many strikes in the Highlands, perhaps because we lead a harder life than those on the outside and are thankful that we have a job at all. Would the rest of the United Kingdom like to take a leaf out of our book? Apathy towards exports, after-sales service, sound workmanship and enthusiasm by British manufacturers to-day has caused great concern to the world outside our Islands. We should be wise to take heed.

Hitherto, we in Scotland have been famed throughout the world for our shipbuilding, wool products, engineering and many other skills— and yet now where do we stand? The machine is apparently master: men have lost heart. Have we not learned from the excesses of the Luddites of 1811? We must have done. We stand on the brink of yesterday and today. To-morrow may be too late to repent. We cannot afford to go back, but can we go forward? We must: we have no choice. We are British. We do not turn our backs to disaster. We meet it head on. My Lords, not only must we go forward, but I suspect that the watching world would damn us for ever if we should now flinch from the present and the future. Once more we must stand alone, fight the battle and save our country.

6.47 p.m.

LORD BROWN

My Lords, we must be grateful to the noble Lord, Lord Polwarth, for initiating this debate, and grateful, too, that some two-thirds of his speech was devoted to constructive proposals, albeit of a rather long-term nature, but none the worse for that. I thought that my noble friend Lord Hughes, although I fully sympathised with the indignation in his whole attitude, was a little hard on the noble Lord, Lord Polwarth, because any Member on the opposite Benches who rises to his feet and suggests to the Government of his own Party that they should backtrack on some of the policies that have been put forward must, I think, in courtesy, attempt to sugar the pill a little to begin with. At least it would enhance the possibility of their taking note of his advice. I was glad that he had the courage to stand up and make some comments, because at times I, for one, get rather worried about the massive loyalty shown on the opposite Benches towards the Government because they share the same Party, although it is noticeable on this occasion that deep national feelings, which are a very good thing in their place, have succeeded in making this debate somewhat more objective than it sometimes is on these occasions.

Before I start the main burden of my speech, I must comment on the speech made by the noble Lord, Lord Rankeillour. I should not mind his general strictures on the ineffectiveness of the exports of British industry, but British industry has increased its exports since 1965 from the level of about £ 4,500 million to a figure to-day which is well in excess of £ 8,000 million. I believe that is the biggest rate of increase that we have ever seen in our history, and it scarcely seems just to accuse our industry of being as ineffective as he has suggested it is. However, he may have had his mind concentrated on some particular instances and may be generalising a little too far.

The points I wanted to make are closely related to exports and in particular to exports of the heavy engineering and capital goods industries. Scotland has always been especially dependent upon these in an industrial sense. The United Kingdom has benefited very much from the way in which these industries were developed in Scotland. One of the points about these industries which has often passed unnoticed is that if you are dealing with a consumer goods industry certain industries can disappear and new ones can appear in a relatively short space of time. For instance, in two to three years it is possible to build a firm making textiles, fancy goods, furniture, or even motor cars. But if the heavy capital goods-producing industries are lost, it is unlikely that they will reemerge. A new company to make ships or capital equipment is not built simply because some entrepreneur thinks he can do it in the space of a few years. Those industries are built on a long tradition of engineering; a long tradition of acquaintanceship with their products. Overseas customers, and customers in this country, too, do not go to new firms when they want to put down a new rolling mill or buy ships and things of that sort. In such cases long experience in the industry is essential, and it is very difficult to gain that. That is why these capital goods and engineering industries of Scotland are extremely important to the economy.

If it is clear that there is no future market for the products of some of these great engineering firms, well and good; if it is a dying industry it should go as quietly and decently as possible. But when one turns to some of the things that have been happening in Scotland— for instance, U. C. S. — is anyone really going to say that there is no future for ships in the world? That is nonsense, and we all know it. Are we going to say that there is no great technological input into ships in the future? That might well be nonsense, too. I am not an expert (although I was born on the Clyde), but I can see the day when we shall have ships of great size requiring a crew of only two or three people, because the vessels will be self-steering, self-operating and all the rest of it. We know that the Japanese have conquered the shipbuilding markets of the world because of the way they have gone about the job, and not only because of low wages. We also know that Japanese wages are rising sharply; their standard of living is going up; their country has an enormous sum to spend on their own infrastructure and their own social betterment. I do not believe that the future of shipbuilding is so bleak, yet we are letting Scottish shipbuilding down with a bit of a thump, because it is going through a very bad patch— brought about in some parts by bad management, and in other parts by a great lack of cooperation from labour. In this country it is customary for Governments to see that industries that have an important future, particularly an exporting future, are given assistance, and I think that we have done the wrong thing in the case of U. C. S.

The chief theme of what I want to say this evening is that I want to criticise the Government— I hope objectively— for what I would refer to as their extraordinarily destructive attitude in the past eighteen months. An instance like U. C. S. — and there are many others— is an example of the problem which is going to arise again and again in the future of this country. Those are problems which private enterprise cannot solve for themselves. This means that we must have institutions to deal with such problems. I have listened to speeches to-day, and have heard half a dozen proposals that we should have a new body to deal with one aspect of this and another body to deal with something else. Societies, as they grow more and more complex, require new institutions. The previous Government set up some new institutions; I am not going to suggest that they were perfect, but they were sometimes very effective. I have in mind such bodies as the Prices and Incomes Board. All the built-in experience of that body would have been of help to-day in gazing at this ghastly unemployment problem, and the dreadful problem of wage inflation. Yet it has been abolished. It might have been put to different use. But why abolish it? The I. R. C. was abolished; investment grants were abolished— and I shall say more about these matters in a moment. It seems likely, too, that less use will be made of industrial development certificates. They are a very effective form of control for helping the development areas of the country. The B. N. E. C. has been abolished. It needed some reorganisation, but a successor body has not yet been appointed. Export rates have been tinkered with, and R. E. P. is to be abolished.

The great feature of the current situation in Scotland is inflation. With a country so reliant upon heavy engineering as Scotland is, inflation is a much more serious matter for those industries. Nobody so far has mentioned this point: if you are dealing in the sales of capital goods, especially overseas— and many of the great engineering companies in Scotland and elsewhere have been exporting 40 to 70 per cent. of their output for nearly a century— if you are going for a contract worth £ 3 million to £ 15 million, knowing that delivery cannot be made until three years ahead because it takes that amount of time on design and manufacture of the product, then you have to predict what the rate of inflation will be over the next three or four years. Which of those companies can possibly foretell what it is going to run into at the 15 per cent. rate of inflation over which the present Government preside? If it added that provision on to its prices, it would not get the jobs anyhow. To-day, when a company has to confess that it is losing money on its existing contracts, what is the cry from the Government? It is "Bad management". I challenge some of the people on the opposite Benches, or in the other place, who make those cries to do any better with a company that faces a problem like that. This is hitting particularly at the capital goods and engineering industries. They cannot countenance the higher rate of inflation. If firms are making goods that can be delivered three months later they do not have this problem, which is a very serious one indeed.

My Lords, I turn from that to the linked problem of investment grants. In another place, in the debate on the Bill which abolished investment grants the Minister for Industry, Sir John Eden, referring to the changes of investment grants to investment allowances, said— and I am quoting from column 1380 of Hansard for May 5,1971: Briefly, the changes are being made because investment grants have proved to be both costly and ineffective. They have turned out to he an incentive not so much for the profitable use of new plant and machinery, as for the purchase of it. As a generalisation, that is absolute nonsense. They have no proof that investment grants have been ineffective. If they have been ineffective the Government are damning the whole of private industry. They could not have a shred of proof without examining the capital expenditure budgets of every industrial company in the country, and I know that they have not done that. At column 1381 of the same edition of Hansard the same Minister says: It must be clear to every hon. Member that the pressing need today is for efficient investment, and profitable investment is efficient investment. No busines, whatever its size, can survive if it is unprofitable …". Again, as a generalisation that is sheer nonsense. There are many companies in this country who pass through quite long periods of great unprofitability. Think back to the 1930s and consider how many companies went for long periods without making any profit at all: they made losses, yet struggled through. To suggest that every company which is unprofitable is of no use to us, and that every unprofitable investment by a company is inefficient investment, shows ignorance of the normal economic understanding of business; and this is at the root of a great deal of the legislation of this Government. As an industrial man, a man who has been in Government, I am really appalled at some of the decisions which have been taken.

Look what happens when investment grants are abolished. Heretofore, companies in Scotland and elsewhere in these heavy engineering industries, if they ran into a patch of loss, for reasons that were to some extent, as I have explained, outside their control, owing to the fact that there has been a heavy rate of inflation would have had an incentive to invest if the investment grant procedure had been continuing. Indeed, in most of Scotland they would have benefited to the extent of a 40 per cent. grant. The moment investment grant is changed to investment allowance, a company making very low profits or losses loses all incentive to invest. The very companies which might be able to get themselves out of a bad patch by heavy investment to reduce their reliance on the use of so much labour, are denied this possibility. To whom does the advantage of investment allowances go? It goes to those who are prosperous to-day— the retail establishments, the breweries. I am not criticising those industries, but the industries who are going to form in the future the most valuable part of our export drive— because it is going to be the export of the means of production which is the reliable part of our exports in the future, not the export of consumer goods— are the ones who are going to be damaged most severely by the abolition of the investment grant. So I join with the noble Lord, Lord Polwarth, and say that he is absolutely right. What puzzles me is that industries who are suffering from this change have made so little noise about it. I suspect that they are keeping quiet in the interests of loyalty. But one speaks to people in these industries quietly, and as man to man, and one hears the criticism. What is obvious is that the Government retained the investment grant in Northern Ireland— at that time the most hard hit of the areas of the United Kingdom— and it is an indication of their real thinking in the matter.

One other point about investment grants is this. Most Members of this House are well aware that the net total effect on the Treasury of having either investment grants or investment allowances is virtually nil. From the point of view of the Treasury it does not matter which we have, although it matters from the point of view of presentation of the Budget, because if we go over to investment allowances it looks to the public as if expenditure has been reduced by £700 million. But that has not been done in fact, because £700 million has been lost in revenue instead. That is the first criticism.

On selective employment tax, I am no great supporter of this particular way of helping development areas. I think it was costing about £ 100 million a year; I do not know what it is costing to-day. That sort of money should have produced more effect if spent in other ways. I have just this to say about it. In a time when the crisis in the development areas has deepened as a result of the Government's policies, they are in effect, in abolishing the selective employment tax in 1974, going to withdraw help to the tune of at least £ 100 million from the hard-stricken areas of this country. If they proposed to spend that £ 100 million in other ways I would have welcomed the move; I think there are many ways in which it could be spent. But to withdraw that degree of help at a time when these areas are more in need of it than they have ever been before since the war seems to me to be a policy that shows lack of sympathy with their plight.

I asked questions in the House last week about the export credit interest rate. Again, this is a special problem for industries producing capital goods, engineering industries and chemical industries, because these are the industries that have to give long-term credit. Export credit rates do not matter to consumer goods industries. Yet the first act of the Government when they came into office was arbitrarily to increase the rate from 5½ per cent., where the last Government had held it over a period of five years with a good deal of argument with the banks, to 7 per cent. I happen to be well aware that with a bit of arm-twisting 6 per cent. would probably have satisfied the banks, but the Government put it up to 7 per cent.; and now, when bank rate has dropped to 5 per cent., all they can do is to reduce that export credit rate to 6½ per cent. This may sound trivial, but it is one of the key factors in exporting capital goods from this country; I know that from experience at the Board of Trade. Many overseas countries, particularly developing countries, are more interested in how much interest they will have to pay on the credit price than they are in the price itself. It is an absolutely key factor.

When I was in industry I was in charge of a company that had a great interest in developing employment in Scotland, in the town of Kilmarnock. From 1947 onwards the plant we originally built there was continuously expanded. What was very noticeable was that if we had a Labour Government in office and we wanted to expand we were given "red carpet" treatment and were welcomed and told it was a jolly good thing; as soon as a Conservative Government came to power we had to argue every inch of our way. I do not know what the Government are going to do about development area policy— it may be that others know better than I do— but I am gravely suspicious. The whole policy with regard to the stimulation of the move of industry from crowded parts of the country, or parts that will be crowded when the promised resurgence of trade comes about, to the development areas is going to slow down in the way it slowed down during the 13 years of Conservative Government before the last Labour Government. The use of control by industrial development certificates should be under consideration now, and it should be strengthened, rather than limited, because even in the term of the Labour Government it was never operated with sufficient vigour.

I now turn to the Industrial Reorganisation Corporation. Had the I. R. C. been in existence I wonder whether it could not have handled the Rolls-Royce deal and got them through it without a liquidation at a figure less than £ 170 million. I bet it could! It really is unfair to abolish an institution and expect civil servants (I have no disrespect for civil servants) and busy Ministers to handle issues of that kind. I wonder whether the I. R. C. could not have been put on to the U. C. S. business and could not have handled it without all the newspaper fuss that took place. But let us look to the future a little. There are many firms in Scotland and other development areas who are suffering, for the reasons I have given— reasons outside their own control— and who will need to be kept in existence in the national good. It will be necessary not only for the sake of employing people but because these are vital industries for our future. And we shall need an instrument for handling these cases, because I think the Government are going to backtrack on their policies in the next year or two to a still greater extent, as they had to backtrack on Rolls-Royce, and if that is so they will need an institution such as I. R. C.

When the relevant Bill came before the House I argued from the Front Bench with the noble Earl, Lord Jellicoe, that it was absurd to abolish the I. R. C. He said that it would cost £40 million a year and we had to abolish it. My reply was, "It won't cost £40 million a year. That is the maximum borrowing figure which the I. R. C. may have every year. Why not keep it in existence without giving it any more money? Suggest that it revolves some of its investments— but keep the institution in being so that you have it." After all, it was manned by City men. But, now the Government have abolished it, they will have to start another organisation in order to save extremely valuable industries when these are simply going through a two, three, four or five year patch of unprotitability. To suggest that each one of these industries must be left to sink, without any reference to its effect on our total national economy, is again— I use the word deliberately— rubbish. If we are going into the European Economic Community one thing I am afraid of is that many of these great engineering and capital goods companies, which are spread throughout the country and are not only in Scotland, are going to be easy pickings for some large, similar German firms. They can be bought for a song on the Stock Exchange. Do we want that to happen because they are going through a bad patch? Who is going to save them? Can the Government go in and do it? No, they cannot. The institution that could have done it was the I. R. C. It has already saved some of our industries and kept them in British ownership— for example, the ballbearings industry. It did it very skilfully indeed. You have no instrument to do that to-day and you are going to need one.

My Lords, I could continue this tale of criticism. It sounds non-constructive but in a sense it is constructive, because what I am saying is that when you have abolished these things, for heaven's sake think of some tactful political way of regaining them!Because what you have forgotten is that if you look back through the history of this country as it developed, economically and industrially, you will find that it had to grow more and more institutions. Yet the leadership of the Government to-day is clearly saying, "We have too many institutions; we are going to abolish them. We will wipe this out, wipe that out, and wipe the next thing out." From the sociological, historical and economic viewpoint, they are wrong in principle. This whole matter must be reconsidered. I conclude by making a plea, joining with the noble Lord, Lord Polwarth, in asking for one specific thing: that the Government should reverse their policy on investment grants for Scotland.

7.11 p.m.

LORD STRATHCLYDE

My Lords, may I first congratulate the noble Earl, Lord Caithness, on what I consider to be an outstanding maiden speech. I find myself in general agreement with the majority of the helpful proposals for the improvement of our Scottish economy which have been made by those noble Lords who have already spoken, and particularly the noble Earl, Lord Perth, and the noble Lord, Lord Polwarth. I have no doubt whatsoever that the establishment of a steel complex, an oil refinery or some other industry dependent upon imported raw materials, either at Hunterston or some other convenient place, capable of berthing the enormous bulk carriers at present in operation, and of the still larger ships of even deeper draught which are being contemplated, would greatly help to improve the economy of our country in the long term and would also provide in the near future an additional source of employment that is much required. It may be that greater inducements than those now available might tempt firms situated in the overcrowded Midlands of England and the South-East corner of that country to move to Scotland, where from every point of view, industrial and otherwise, the most attractive sites are available, and where outside of working hours there are so many attractions for employees— far greater, in my opinion, than can be found in most other countries.

I remember asking a foreman in a factory in the North of Scotland whose native town, he told me, was Birmingham, whether, having experienced the rigours of our Scottish climate for a year or two, he would like to return home. His answer was: "No. There I would be quite unable to get a salmon within 20 minutes of leaving my work, as I have done and as I am going to do again." Scotland has many advantages of a similar kind to offer, but while it is difficult, I admit (and I have experienced it) to get a child to leave its mother, it is almost equally difficult to induce those industries which have been long established in the Midlands or elsewhere to move from the neighbourhood in which they have grown up and to leave the conditions to which they have become accustomed. We have to make the advantages that we have to offer in Scotland known not only throughout the United Kingdom and Europe, but further afield. We need not be shy about it, because what we have to offer compares more than favour- ably with what can be given to us by other countries.

However, my Lords, may I utter one word of warning? We must not keep people who are anxious to come to Scotland kicking their heels, waiting for answers to questions which they require to have answered and to which the answers ought to be readily available, whatever they may be, and in particular when they are concerned with the measure of assistance that they may expect, and indeed rely on, from Government and from local authority sources. I know to my sorrow— and my friend who sits on the opposite Front Bench, the noble Lord, Lord Hughes, knows also— of cases where dilatoriness in giving the information has so irritated people that they have given up the idea of coming to Scotland, and we have thereby lost an industry.

The matters of which I have spoken, while capable of relieving a situation such as that with which we are faced at this present moment, provide no permanent solution to these constantly returning predicaments, which are not fundamentally due to the Government of the day. May I suggest—and I do so with all deference — that there is something fundamentally wrong with our approach to work, and that a change of attitude is essential if we are even to preserve our present standard of living.

In other days our fellow countrymen were welcomed everywhere because they had inherited a reputation for integrity. Their word, and the product of their work, could be accepted with complete confidence; they wore trustworthy, they were not satisfied with anything that they felt was below the best that they could give; they were loyal to their work and to the organisation that employed them, and they were proud of that organisation. Often when I have been abroad, and also at times when I have been at home, when I have asked, let me say, an engineer where he had learned his trade, I have received an answer something like this: "I served my apprenticeship with Stephens of Linthouse"—that is situated on the Clyde—"and then after a year or two as a journeyman there I moved on to Fairfields, where I stayed until I came here. You know, I am very proud indeed to have worked in such great shipyards".

As a young Naval officer I had a feeling of pride— more than that, of superiority— when I served in a Clyde-built ship, because I believed that the workmanship that had been put into her was the best and the most perfect that it was humanly possible to provide. In those days I cannot remember a Clyde-built ship breaking down on her maiden voyage, nor (other than under the most exceptional circumstances) in her middle or old age. To-day, my Lords, things have changed. Abroad, where the Scot has until recently been accepted without question as having the qualities of his forbears, he is not so regarded until he has proved himself. Shipowners who for generations have had their ships built in our Scottish shipyards, mostly in those great and famous yards on Clydeside which were closely connected with my native City of Glasgow, are no longer doing so, but in sorrow— and I say that advisedly, because I have seen their sorrow— they are placing their orders abroad. When I ask them why they do so, the reply is, "Because the delivery dates are much more reliable and the prices are lower".

My Lords, why do these things happen? Sir Ian Stewart is reported as having given as one of the reasons why he retired from the Board of Upper Clyde Shipbuilders that it was because he had come to the conclusion that a week's wages were being paid for two days' work. I also read that Mr. Douglas, when giving evidence to the inquiry into the affairs of Upper Clyde Shipbuilders, which was held on Clydebank, stated that when he became the general manager he estimated that the output per man per annum could be represented by 10 tons of steel plate, while under his direction it had more than doubled in a period of 18 months. It is a pity that it was found that that was not sufficiently fast to make the industry viable once more. If we are to accept such statements as being accurate— and I cannot doubt them— then there must be something desperately wrong in our management or on the shop floor, or perhaps both of them are to blame.

There is another distressing and disruptive element affecting industry not only in our country but throughout the whole of Great Britain at the present time, and that is the constant and unceasing differences between management and the shop floor. Often it seems to me, as it must seem to many of your Lordships, that thousands of men stop work for some quite: insufficient and almost childish reason, which brings distress to many of the families of those principally concerned and to others who are nothing whatsoever to do with the dispute in question, which may do very great damage to the nation's economy.

The head of one of the two great labour unions in the United States (I forget his name) was talking to one of my friends, and he said, "What do you think my job is?" Then, without waiting, he answered the question himself. He said, "My job is to get the most money and the best conditions that I can for the members of my union, but I can only get them if the organisation where my members are employed is making a profit; the more profit they make the more money I can get and the better conditions I can get for my members. And if I sense that something is going wrong in any of the plants where my members are employed, I immediately send one of my staff to find out what is the matter, and then, in co-operation with the management, get it rectified". To that reply he added one or two sentences that I would not repeat in this House, but the sense of them was this: that he and others in his position must ever be careful to do nothing which might injure, far less destroy, the bird that laid the golden eggs. I wish some people in this country would remember that.

I am frequently astonished to find people who seem to imagine that money in this country grows on trees and that to obtain it you have only to shake the branch and it falls into your lap. It seems to me that every pupil, before he leaves his secondary school, should have drummed into him the facts that govern the standard of life in this country: the fact that we can grow only half the food we require; that we have to obtain it from other countries; the fact that we can get the money to pay for it only by exporting and selling abroad goods manufactured here, and that we have to do that at prices no higher than and of a quality as high as those other countries can produce for themselves or buy elsewhere. They should also know that the raw materials we require to manufacture those goods have also to be obtained from abroad and to be paid for as we have to pay for our food. I would hope that they might then realise that our standard of life depends on our ability to manufacture and sell abroad goods in competition with other nations.

Japan has been alluded to already in the course of this debate. I am told that in the factories and shipyards of Japan there is a feeling of one-ness, of being part of a team, a feeling of loyalty to work and comrades and to the organisation which employs them. There is in fact a complete and willing co-operation at every level, and it is this very factor perhaps which enables the Japanese industry to compete with success with every country in the world and to gain markets which hitherto have been held by European nations. I would that that same spirit animated us in this country, for I am absolutely convinced that without it not any of the remedies or all of them that have been mentioned this afternoon, helpful though they may be, can enable us to obtain that higher level of prosperity and higher standard of living we all desire, and which I believe is within our grasp if only we would change our attitude to work and return again to the virtues practised and followed by our fathers which gave Scotland an influence in the world out of all proportion to her size and her wealth and won for our people the trust, friendship and admiration of every nation.

7.25 p.m.

LADY SEMPILL

My Lords, I should like to speak very briefly on the future problems and hopes of Scottish inshore fishermen, who fish out of the ports on the North and North-East coast of Scotland. The Scottish inshore fisherman has every cause to be alarmed and cautious about his future, as he knows better than most that the foreigner, particularly the Norwegian, German, Pole, Russian, and to a lesser extent the Dutchman and the Belgian, want to fish the Scottish fishing grounds for herring. Your Lordships will know that Scottish fishermen have expressed themselves against our entry into the E. E. C. Without challenging their reasons and wisdom, I venture to say that what has been said was spoken rather more from emotion than with a logical outlook on the future. I say this because once we are members of the Community there will be no permanent trade barriers against us. Our fishermen, therefore, stand to benefit immediately, because their vessels can serve our own processing factories in Scotland which are right on the doorstep of the European market. As I have said, Europe needs the herring. But, speaking as a housewife who has spent much time living on the Continent, I am often puzzled as to why the British public do not eat more herring in the many attractive forms which are available in Europe. I also wonder sometimes how many people, not only housewives, know that the kipper is in fact a herring. Certainly one member of my family did not know.

Be that as it may, the European market for herring is a valuable one, and our entry into Europe will benefit the Scottish fisherman because of the opening it will provide him in that very valuable market. Already there is an active recognition of this market. For instance, the Dutch and Belgian fishermen are buying fish at sea straight from our Scottish vessels lying in sheltered waters off our coast, the Scots having already caught the fish on their own grounds and boxed it for this purpose. This arrangement has come about because the Belgians and the Dutch do not have to pay the tariffs on entry to their own countries which we at present have to face. As a further example of the fishing industry's changing pattern and positive reaction to the future, I may say that one major British company, Associated Fisheries Ltd., is already building a £1 million processing plant at Fraserburgh. This plant is intended mainly to process Scottish-caught herring, kippering and canning them for direct export to Europe.

I therefore ask your Lordships and our industrious fishermen not to be too apprehensive about the outcome of all aspects of agreements on fishing. My Lords, there is no one more efficient than the Scottish inshore fisherman. An experienced English trawler owner and director of Britain's largest fishing company tells me that in his opinion our Scottish vessels are among the most effective hunting and killing vessels afloat. With vessels running up to 70 feet in length, they can trawl, operate together with pair trawls or independently with seine nets. Our fishermen are hardworking and skilled in the use of modern equipment and they operate with great efficiency to catch whatever fish may be in season. I have already indicated the interest expressed in this area by one of our major processing companies, and I would add this one thought for the future. So promising is the market in Europe, and so sought after are our herring shoals, that it is expected that European-based processing firms will wish to come over to Scotland and invest in our processing plants. All this means added prosperity for Scotland.

My Lords, before I sit down I should like to add my support to one other essential factor. Whatever the limits may eventually be, we must be allowed to police our own fishing grounds— particularly around Scotland. For without adequate and honest policing, the whole industry will suffer from the sorties of fishermen of certain European countries. I will mention no names, but there are those countries which still do not even observe the international agreement on net sizes to which they themselves are party. Also, there must be some mutual agreement about penalties and fines. When a British trawler, be it Scots or English, is caught off Iceland, the skipper is fined and has his catch confiscated and, as a result, stands to lose up to £ 10,000, or more. On the other hand, if a foreign trawler is caught off our shores, his fine and confiscation of catch is modest by comparison. With some of these factors in mind, I ask your Lordships to consider a more promising future for fishermen, particularly those in Scotland, than has so far been expressed.

7.31 p.m.

THE EARL OF CROMARTIE

My Lords, I should like to start by congratulating my noble kinsman on his maiden speech. It was extremely good, and he knew what he was talking about. Secondly, may I congratulate the noble Lord, Lord Polwarth, for introducing this very important debate. It is one that we could have more frequently during the year; perhaps the list of speakers might then be shorter, which would also be an advantage. Before I start my speech — and I shall not be long— may I question one thing that my noble friend Lord Perth said. Did I understand him to say that there was no atomic development in Scotland?

THE EARL OF PERTH

My Lords, what I said in my flight of fancy was that when Scotland was on its own there was no atomic power plant. Of course, in reality there is.

THE EARL OF CROMARTIE

My Lords, I was about to say that we had the first such plant in the far North, in Caithness. The English were so frightened of having the first experimental reactor that they put it in Scotland.

As usual, I shall confine my remarks to the Highlands and Islands area of Scotland where, as many of your Lordships are well aware, we have a very high rate of unemployment. This means that we get the consequent escalation in the loss of our younger people from both the rural and island communities. One bright spot is the prospect of new employment in certain areas which we hope will be provided by the North Sea oil developments, and which we trust will not only provide employment but will help to revitalise the economy of Scotland. Here I utter a word of warning to the Government. If an unfair proportion of this wealth, springing as it will from Scottish territorial waters, is all channelled to England, especially the South-East corner of it, the people responsible will run into very serious trouble indeed, and deservedly so. I think one has to bring this out because it seems to be the prospect at the moment in the case of the steel and the sugar beet industries.

I turn to the ever-present problem of communications and transport. The inability of the Government and/or British Railways to make up their minds about the future of the Kyle Railway is deplorable. As has been mentioned many times in your Lordships' House, the necessity of retaining this railway is quite evident, and if it were properly run the financial loss would be negligible. Even as it is, compared with the millions of pounds poured out for the benefit of London commuters, the loss sustained is minimal. It must be obvious to all noble Lords that this long drawn out uncertainty makes it very difficult for those of us who are trying to attract different forms of industry to the South-West corner of Ross and Cromarty. There has been a welcome, if small, increase in the grants for the improvements of our many substandard roads. I ask the Government to consider what appears to us in local government to be an absolute necessity, a White Paper on Government policy for a national planning strategy. This is particularly important in view of the effects of North Sea oil on industrial growth.

As your Lordships have pointed out many times, there is a general decline in public transport for our rural areas. That poses some very serious questions, and the Government should be keeping it very much in mind; as indeed also the caravan problem, which has been discussed in depth by your Lordships. Recently there was a conference in Dunblane, which I was unable to attend, though representatives from my county council did go. The general impression seemed to be that it was conducted in the main by officials, and apart from clichés and certain facts which everybody knew already, nothing of real value emerged. As both sides of your Lordships' House have clearly recognised, there is a real and dangerous problem here. It is high time that the Government took adequate steps to solve this problem, and the means for doing this have been suggested more than once by many noble Lords on both sides of this House.

I was disappointed to hear my noble friend the Minister say that the formation of the promised Scottish Convention is to be postponed. I think this Convention is highly desirable. There are many who consider that the various departments of the Scottish Office in Edinburgh are inclined to be "little Sir Echoes" of Whitehall and the Treasury. There is a tendency for Government Departments to brush aside requests for comparatively small sums of money to help establish vital small industries, such as those for building or reconstructing of piers, which would go far to give employment, especially on our Western coasts, where there is arising a generation of young people who are anxious to exploit the great wealth which lies inshore: I refer, of course, to the shellfish, scampi and scallop fisheries, not to mention, as has already been said, the inshore fisheries. Again, more help must be given for the provision of public drainage facilities. I am thinking especially of the Island of Lewis. More and more tourists in tents and caravans are flooding the country throughout the summer months, and the facilities for these people arc totally inadequate. I wonder whether noble Lords surrounded by the "mod. cons." of London realise the dangers inherent in this situation.

When development starts, local authorities, who often, as in the case of the Highlands, have very low revenues, are faced with having to provide for infrastructure, involving considerable delay before an industrial complex becomes revenue producing. I wish to ask the Minister whether the Government would consider some form of bridging finance, possibly through the Public Works Loan Board, from which the developing authority could borrow for a few years at little or no interest. On the development becoming revenue producing, the authority could borrow in its normal way from the market, and repay the Government fund. To conclude, many of us are most uneasy over certain aspects of the proposed reform of local government. In the case of the Highlands too many duties are being removed from the misnamed "district level" and given to the regional set-up. One has the suspicion that the lip-service paid to the formula of local government being truly local is a smoke screen to cover still more over-centralisation and government by bureaucracy. My Lords, I hope that the Minister, when he comes to answer, will be able to give me a reply to my several questions.

7.39 p.m.

LORD BURTON

My Lords, the noble Earl, Lord Caithness, has received many well-deserved congratulations, and I can only add mine to all of those. When I saw his name on the speakers' list, I found it somewhat sobering, because I believe that he is a friend of my son, which seems to date one somewhat.

As I anticipated, the underlying theme of this debate has been the unemployment situation, and though I believe this to be a temporary situation I appreciate that it is a very serious one, so I hope that anything I say from now on will not be taken out of context. I am a substantial employer of labour, employing tradesmen, mechanics, foresters, farmworkers, drivers and the like; but I find it very difficult to get good employees. I wondered whether I was a notoriously bad employer, but I made some inquiries and found that all of my neighbours were in the same position. I was interested to hear to-day that the Lower Clyde is looking for men. It seems an extraordinary situation that although there is this vast unemployment there are people who are unable to get good employees. I wondered why it was, and I racked my brains to find the reason, so I thought it might be worth while giving my views.

There is, of course, the natural reluctance to move from an area in which one has spent most of one's life. There is a belief in some quarters that we in the Highlands live in the Arctic; and, for the record may I say that that is an erroneous belief? Recently we had to import some employees, excellent people, from South of the Border, and it seems to me extraordinary that, with so many unemployed in Scotland, we have to go South of the Border to find these people. It seems that a great many people do not want to work. My noble friend Lord Strathclyde spoke on this subject, and I do not think I need elaborate on it very greatly. But some of your Lordships may have seen reports in the papers last Sunday of a carpentry firm that was advertising for employees at £ 30 a week. Endless men had come, but had gone away because they were better off on the social security, with a wife working at £ 6 a week with no tax. The fact that many men can do better in unemployment than when they are working seems to be one of the crucial points. This is a philosophy which has been engendered by the Socialists and it may take a little while to dispel it. There are some people who feel that the country owes them a living and that they really do not have to work. Unfortunately, the idle, the skivers and the rogues are often very much better off than the conscientious ones. The noble Lord, Lord Hoy, laughs, but that is the case.

LORD HOY

No, my Lords, I am always amused when noble Lords discuss some workmen who apparently find it better not to work. Does the noble Lord never think that there are also many of his own friends in the nobility who seem to do particularly well without working?

LORD BURTON

My Lords, that may be, if they are in a fortunate position. But I find that I have to work a great deal harder than most of my employees.

What I find difficult is that our rural workers, earning around £15 a week, are getting only about half what industry pays, perhaps for a boy brewing tea. It may seem a strange thing to say, from this side of the House, but I believe that we shall have to pay our rural workers a great deal more if we are to get the right sort of man into the job. But if we are going to pay them more, then we shall require a higher price for the produce, and that may well increase the spiral of inflation.

A house used to be an incentive among the rural workers but, unfortunately, when the present Opposition were in power they altered the law. A good worker has no difficulty in finding work on the land if he wants it, but the majority who are on the move are the riff-raff. They get a job and when they are found to be useless they sit in the house rent-free. Since the law has been altered— and it was not very long ago— I have had no fewer than five employees who have done this. We should have checked on one of them before we took him on, as he had a long record as a burglar in the South of Scotland. We had another, a farm grieve, who sat on in the house where we had the farm telephone. The house was convenient for the farm, and it was the best house for the grieve. When we eventually got him to court, having in the interim offered him two alternative houses which he refused to take, the sheriff gave him yet another two months to sit there. We are now facing a similar problem. We are unable to take on a foreman forester because only last week the sheriff gave an absolute rogue another three months to sit in the house, and he said that he may give him even more time if he goes back to him after that.

LORD HUGHES

My Lords, I think the noble Lord should make it perfectly clear to your Lordships that his home is in Inverness-shire and not at Peterhead.

LORD BURTON

Be that as it may, my Lords, it is very difficult.

LORD TAYLOR OF GRYFE

My Lords, I am sorry to interrupt, but I keep hearing references to "riff-raff" and "rogues", when the noble Lord is talking about the workers. Surely he must appreciate that what we in Scotland are trying to do is to engender some kind of spirit of enterprise and community in the big task which we have to fulfil. To talk of workers as riff-raff and rogues is not conducive to the kind of spirit that will help Scotland cut of its economic distress.

LORD BURTON

My Lords, I am not sure whether the noble Lord was here, but I said earlier that I hoped what I said would not be taken out of context. I said that good men had no difficulty in getting work, and that it was difficult to find good men. But what is on the move, and what we are getting stuck with in these houses, are the people who are really of no use. I am sure that the noble Lord must have found exactly the same problem in the Forestry Commission.

We are in a very difficult position. Obviously, we cannot supervise our forestry men or train young men if we have no foreman, but we have no houses so we cannot get a foreman. What is more irksome is that when these people eventually go to court they get free legal aid at the taxpayers' expense, which we are all paying for. We have to pay for going to court and, in addition, these cases consume a great deal of our valuable time. If we are to be efficient on the land, the Government must take urgent action over the tied house situation. I should also like your Lordships to bear in mind that much of Scotland depends on its rural economy. There is now another problem with which I have not personally had to deal. I am advised that some of the youth advisory officers, who advise the young before they leave school, are advising them not to go into rural work. I suppose that if they will get only half the wage paid in industry that may be sound advice, but it will be very difficult to get good rural workers if this is being said to the young.

The Government have already made a start on cutting taxes, for which they must be congratulated, but we have to cut still further our vast Civil Service. Though there are many dedicated and admirable individuals, I wonder how many there are who really help to produce the goods which keep us in existence? I hope that when introducing new legislation the Government will watch to see what personnel are required to ad- minister it. Although it may well be a very good tax, I am particularly worried about V. A. T. in this conection. The introduction of this tax may well increase the number of personnel required, not only in the Civil Service but also in the various offices gathering the money for the Government. I am a little worried that some of those who have already been cut, such as the agricultural advisory services and the pest officers, have been useful to production.

There are other quarters where cuts are possible. I have in mind the Crofters Commission, which I believe costs more than the croft rents bring in. I believe that this Commission is moving into new premises, but I am sure there is room for a cut there. The expenditure on the Highlands and Islands Development Board could well have given us a dual-carriageway from Perth to Inverness by now, but what arc they doing? The noble Baroness on the Front Bench knows my views on the advice on transport given by the Board to the Secretary of State. And, though my views are those of many of the Inverness and Ross county councillors, she will probably agree that the less I say on this subject the better. Even if people outside the Highlands are impressed with this body, many within the Highlands are depressed. Some months ago many of us were relieved that the Secretary of State discarded the Board's advice, and announced the proposal to bridge the Beauly and Cromarty Firths. This is a wonderful proposal and I think it was unanimously accepted. It can do an enormous amount to open up the Highlands. It is a splendid development and I should like to congratulate the Secretary of State on this proposal.

My Lords, I am wondering what progress has been made with this. We have a meeting with the Highland Development Board on Friday, but I am not clear what these bridges are to do with the Highland Development Board. I thought it was a matter for the Development Department. They are the trunk roads authority, not the Highland Development Board and why the Board are mucking about with it now, I do not know. It seems to be only wasting further time. We want the bridges, and we want to get on with them. Again, we received no help from them over the proposal for a bridge to Skye. The two county councils, Ross-shire and Inverness-shire, got together and did a survey in the summer of the traffic which was likely to use this crossing. Working it out on the cost-benefit analysis used by the Development Department, we get a 16 per cent. return on capital in relation to this bridge. There are not many road projects in the country which would give a 16 per cent. return, so I hope it will not be too long before this bridge is available. The A.9 often comes up in such a discussion as this, and I am a little worried here that the old bridges are going to be repaired and that this will be abortive expenditure when much of the road will have to be realigned. The only consolation is that an aerial survey has been done on a good deal of this road.

The noble Lord, Lord Hughes, mentioned unemployment and the remarks of the noble and learned Lord the Lord Chancellor that unemployment in the remote areas will be the last to come down. I think that this is perhaps not quite correct, because the percentage of unemployment— it may mean only one man in Skye— will be quite a high percentage. We hope the road works will start soon— the Government have been very generous in giving us money for Skye roads, but they have had to be planned and it takes time to work through— and when they do start the men employed on these roads will very considerably reduce the percentage of unemployment in Skye.

LORD HUGHES

My Lords, I am afraid the noble Lord, Lord Burton, has misunderstood me. I was not talking about remote areas in Scotland. The figures I quoted were for Scotland as a whole.

LORD BURTON

But I think the noble Lord referred to a speech made previously by the noble and learned Lord the Lord Chancellor.

LORD HUGHES

Yes; which was picking up a speech which I had previously made myself.

LORD BURTON

Now may I turn briefly to the trouble we have with the railway. We find that this is most in efficient. I could give many examples but this is largely a matter for day-to-day management, and my noble friend Lord Sandford knows how difficult it is to get a reply out of the railways. Our system of waterways is another means of transport which is liable to be destroyed after 200 years. Boats are now going so fast through the canal that they are ripping out all the pitching; and the Caledonian Canal is now in a very bad state. Again, this may be a matter of day-to-day management and it may be difficult for the Government to do anything, but that is the position. However, I feel that the country has confidence in the Government. There is a look of surprise on the faces of noble Lords opposite, but one has only to lock at the papers daily to see how the stock market is going up. This is rising rapidly, and there is obviously confidence. An efficient concern is usually a happy one. People do not work as well, nor are they as happy and content, when there is inefficiency around. I urge the Government to be firm; to disregard any possible temporary unpopularity if the decision is the right one. Let us have a Government which will command respect for doing the right things. This, I am sure, the present Government are doing — and good luck to them!

7.52 p.m.

THE EARL OF LAUDERDALE

My Lords, I must first add my tribute to those of others to the noble Earl, Lord Caithness, for a speech which was thorough, thoughtful, well-researched and crisp. The noble Lord, Lord Burton, referred to a fundamental, long-term and difficult problem known all over Britain in varying degrees but more so in the remote areas; namely, demoralisation which leads to people preferring— and we all know of cases— to live on what they call the bureau. This is a fundamental problem, and of the attitudes which have been expressed towards it I personally prefer that of the noble Lord, Lord Taylor of Gryfe.

My noble friend Lord Polwarth is to be congratulated upon initiating this debate, and for, I think, claiming half a victory at the start: because the noble Baroness, Lady Tweedsmuir, to whom we always enjoy listening, and who can at any time charm a bird off a tree, did give the impression that the Government are now at least half convinced about the "Oceanspan" idea. The nub of this debate, of course, is in the words "fundamental improvement". They take me to the words that were spoken from the Liberal Benches, where it was said that we have to think in terms of a strategy over fifteen years bestriding Party differences. There is no gambling like politics, and in my view what we are discussing to-night is way beyond the range of Party politics. The 10 per cent. sample of the latest 1971 Census shows that in Scotland as a whole the total net growth population was no more than 16,400 over 10 years and that Scotland over the past decade suffered a net emigration of 350,000— a figure unmatched by any other part of the Kingdom. It shows that while the population of the Highlands is roughly stable now, the Borders continue to decline at the rate of about a half per cent. per annum.

I believe we need a major departure from the piecemeal unemployment relief and limited incentive packages of the last 40 years. We need a major departure from short-term propping up. We need something much better than a temporary package of make-work projects, such as my noble friend the Lord Chancellor listed in the winding-up debate on the Queen's speech, gratifying as those measures are and gratifying as were the measures mentioned by the noble Baroness, Lady Tweedsmuir, this afternoon.

We need a visible strategy, without panic fits and starts, for 15 years, and we need a visible strategy for long-term change in the industrial structure. We need an industrial package of large-scale steel works, oil refining, chemical and other processing to process raw materials which now come from the Southern Hemisphere so that we can supply markets both in Europe and North America. Only a visible strategy advanced with faith and trust in the new 4 per cent. growth rate which the Chancellor and, to-day, my noble friend Lady Tweedsmuir referred to, instead of the 3 per cent. used, it is said, by the Treasury in discussions with the British Steel Corporation— only such faith and trust could really capture men's hearts and minds. We should wear our faith in this and in Scotland's opportunity gaily like a button- hole. As Lord Bacon said many years ago, It is a certain sign of a wise Government and proceeding that it can hold men's hearts by hope when it cannot by satisfaction. My Lords, the Eurospan document, which has been discussed to-day, calls first of all for infrastructure investment. That must mean the improvement of land communications, and the motorway from the Ayr-Irvine area to the M.74 at once comes to mind. The trunking of the road from the Borders to the Clyde, which has been mentioned more than once in this House by myself and others, and to which my noble friend Lady Elliot of Harwood referred, again comes to mind; the air routes to Europe, which my noble friend Lord Selkirk mentioned, come to mind. Then there is the Eurospan proposal for a pipeline link with the England and Wales grid. The Eurospan report also calls for the preparation of advance sites so that we can avoid some of the miserable mistakes which have been made on the Clyde in the last 15 months.

The prize for such a policy is a share in between 300,000 and 420,000 jobs that are going to be available in Western Europe over the next 15 years, or a share in the 20,000 to 30,000 hard-core industrial jobs available in Western Europe every year. The price is put at somewhere between £ 100 million and £ 150 million a year. Where is that money to come from? How much is to come from public enterprise and how much from private?

On private sector capital, Mr. Robin McLennan, president of the Glasgow Chamber of Commerce, has put up to the Government a very serious proposal which has been tried out in other countries whereby any firm would be allowed a rebate on, or a waiver of, about 30 per cent. of its corporation tax against long-term development area investment, part of it in equity, of the same volume. Such a proposal should appeal to the major private sector corporations in oil and chemicals and, linked to free depreciation, could be a catalyst. As for the public sector, and capital from that source, the same thing would appeal greatly to the nationalised industries and not least to the British Steel Corporation. Then there is the Scottish Council scheme for royalties on oil landings to be re-invested by the Government in Scotland. I understand that the royalties are of the order of 12½ per cent. per annum and if the volume expected from the North Sea by 1975 is anything like the 50 million tons a year that my noble friend Lady Tweedsmuir mentioned this afternoon, that will give us a figure of more than £ 62 million a year. If the volume is going to rise by the end of the decade to 150 million tons a year, we get a figure for royalties of nearly £ 190 million a year. Supposing that these volumes are attained, and supposing that they are landed in the United Kingdom, let alone in Scotland, this is a very useful sum for British development area expenditure as a whole; and one use for it is investment in the sort of university extension operations about which my noble friend Lord Balerno gave us an account earlier.

Whatever be the precise purpose to which such sums could be put, there are also fiscal measures that might be called into play. There is the possibility canvassed by the Glasgow Chamber of Commerce with much local support, that special development area benefits should be made available to local firms as well as incomes. The questionnaire that they circulated has produced much more sympathetic replies than were expected in the Department of Trade and Industry. Then the noble Lord, Lord Polwarth—and I support him in this— pleaded for the restoration of investment grants, at any rate as a short-term pump primer; and he also pleaded, which again I support, for R. E. P. to he continued after 1974.

There has been much reference to steel and my noble friend the Secretary of State for Scotland seems to have hung his political reputation on the prospects of success at Hunterston. In an interview with the Scotsman, published on May 13, he said that he and his Department were "working flat out" to get B. S. C. into Hanterston. He said that he wanted to make sure that those who do take the decisions in government and in industry are fully aware of the opportunites. He was determined to ensure that the priceless asset which Scotland can contribute here is fully taken into account and he said that he had great hopes for an integrated steel plant on the Clyde. I want to emphasise what was said by my noble friend Lord Selkirk, that if we do not see a green field steel development within the foreseeable future— and by that I mean this decade— we shall have some very sharp questions to put.

There is much anxiety current now, and rightly, about the present review of the B. S. C. steel investment programme. A fortnight ago in the debate on the Queen's Speech I asked whether this review was being conducted on a basis of a 3 per cent. to 31 per cent. per annum growth rate or on a 4 per cent. to 4½ per cent. growth rate of which the Government are rightly proud. In the course of 14 days I have had no answer. I hope that I am going to get one— if not to-night, then soon. May I have an answer? This particular basis of the argument seems to mean the whole difference between green field and brown field developments for the next phase of the steel industry.

I have a second question. Do Her Majesty's Government accept the 0. E. E. C. projections for world steel demand as likely to rise by 25 per cent. in the next five years and 50 per cent. in the next 10 years?— for that, too, would have the effect of making the difference between green field or brown field development. I have a third question. Negotiations between the B. S. C. and the Clyde Port Authority for the ore terminal at Hunterston apparently were interrupted last February. Have they been resumed? If not, when will they be? I have a fourth question. Phase 2 of the Ravenscraig development seems to have receded. Are dates for its start and finish fixed yet?

On oil, I believe that enthusiasm for the implications of the North Sea is good; but enthusiasm alone is not enough. We must look at some recent mistakes. The Murphy Oil Company have gone for good so far as the Clyde is concerned. They have disposed of their Swedish marketing network which would have been served on the Clyde. Now they have little interest in looking at the Clyde a second time. So far as Chevron is concerned, the pro-Scottish lobby in that organisation is now discredited. We shall not see Chevron again here. It was futile to turn down Chevron on the grounds of its incompatibility over pollution with a still hypothetical steel plant; and all the more silly when killing investment grants made it impossible to push Chevron inland and therefore avoid this amenity and pollution collision. The opportunity now to maximise advantages for Scotland in the early stages of the North Sea oil communications lies in the opportunity to do this before the companies concerned, in the Forties field in Ekofisk, in the Auk and in the Orkneys fields firm up their own policies; especially when the Norwegian trench makes it difficult to pipe in that direction anyway.

At the present time something like 60 million tons per annum capacity of new refineries are being built in this country. But of that 60 million tons, all but 15 million tons, three quarters of it, are Ewing to the Thames, to Severnside and the Isle of Man. This argues for serious and energetic Scottish efforts to get a bigger and better share, particularly in view of the physical opportunities we have to offer.

The "Eurospan" Report calls for pipeline infrastructure. This could be a piece of public sector enterprise like railways, the gas grid or the water grid. We have already quite a lot in hand. There is the B. P. Grangemouth— Finart pipeline and an extra 12-inch capacity is available when needed. There is also the Faslane— Grangemouth pipeline of 8 inches now unused. These could be used for eastward or westward traffic, and they are usable for crude or refined oil; for liquid petroleum gas and for natural gas if brought from the North Sea across Scotland for liquefaction on the West and export to America. We have some 700,000 tons capacity of tank-age at Faslane currently let to Esso and Texaco. We could make arrangements through that net to send crude oil or refined spirit down to the West Coast of England, to the Midlands or Lancashire. This is a pipeline net and the opportunity which could be extended by public sector enterprise or by a mixture of public and private sector enterprise exists to link that with the English net which is gradually taking shape. As my noble friend Lord Perth said, the time for Government intervention on a non-doctrinaire basis is now. The Government have intervened, despite their official philosophy, in other directions that are well known.

There is another infrastructure point which arises out of the "Eurospan" Report. Flat land by even moderately deep water is hard to find anywhere in Europe. Much has been said about Hunterston. The Renfrewshire County Council have plans for a major reclamation at Longhaugh on the South Bank of the Clyde near the spot where Murco wanted to site their own refinery. I understand that Renfrewshire have asked the Government either to reclaim this land or to allow the local authority to do this, bearing in mind the 85 per cent. grant for derelict land clearance which may be won by moving colliery bings and tipping them into the sea. "Eurospan like the Oceanspan Report before it, calls for advanced industrial site provision. If the Government would authorise this particular site it would be another indication of their faith in the Clyde as a whole. By the same token, not a minute should he lost in setting on foot studies of the relevant deep-waterside reclamation possibilities, both for the Forth and the Clyde.

Finally, my Lords, I would say a word about the Borders which are losing population of the rate of one half of one per cent. per annum. When the Highlands population has been more or less stabilised, will the Government now seriously consider providing for the Borders a development board like the Highlands Development Board, of which this Government and their predecessors are so rightly proud?

My noble friend Lady Tweedsmuir of Belhelvie has said that the Government are discussing the "Eurospan" Report and its implementation with the Scottish Council and other interests. Noble Lords in all parts of the House have clamoured for an operative, enterprising organisation to tackle these opportunities. I should like to see— and I made the proposal before, when people had not yet read the Oceanspan Report or woken up to its significance— an Oceanspan Development Corporation, with powers something like those of a new town development corporation, to tackle the job. The strategy must have the confidence of both sides of the House over the next fifteen years. I welcome the Government's seemingly partial conversion to the "Oceanspan" concept. I hope that we do not waste and miss any more opportunities like those on the Clyde in the last eighteen months. It is said, my Lords, that three failures and a fire make a Scotsman's fortune. In this matter what could be achieved is determined, as Sir William Lithgow wrote in the introduction to the "Eurospan" Report, entirely by our horizons.

8.13 p.m.

LORD BELHAVEN AND STENTON

My Lords, I should like to congratulate my noble friend Lord Caithness on an excellent maiden speech. I am sorry that he is not now in his place because I wished also to congratulate him on his hours of attendance during this debate. It has been said that we should not congratulate the mover of a Motion, but I should like to thank my noble friend Lord Polwarth for moving this Motion and thus giving us an opportunity to talk about Scotland. We do not often get such an opportunity. I know that the English Members get rather bored, but this is still partly our Parliament and we have to talk about our country from time to time.

My Lords, the Scottish economy is a very large and somewhat unbalanced subject. I hope your Lordships will forgive me if I confine what I have to say to the district in which I live, the province of Galloway. The reason why I do this is that I am the only regular attender in your Lordships' House who lives in Galloway and, in comparison to some areas of Scotland, I feel that we in Galloway are under-represented here. I do not suppose that there is any part of Scotland which could be characterised as typical, and this is certainly so in relation to Galloway. The province is, politically and historically, part of Scotland, but economically it differs very little from other rural districts of Great Britain. Its communications with the M.6, now almost completed, are much better to the South than towards the rest of Scotland. There is an excellent train service from Dumfries, the train leaving Dumfries at nine in the morning and arriving at Euston at two o'clock in the afternoon. In contrast, the roads going North to Glasgow and Edinburgh are poor, and public transport is bad or non-existent.

We are not a district which in my opinion— and I have thought a lot about it— would benefit from Scottish independence. I think that we should be even more ignored by Edinburgh and Glasgow than we have been in the past by West-minister. In fact, I do not think that the "Nats" have much of an economic case in Galloway. The principal difficulty in Galloway is the problem of retaining a sufficient population for the area to remain viable. I know, from experience of having lived for a short time in the Western Isles, that if the population of an area falls below a certain level, services such as doctors, dentists, vets and food shops and all the rest begin to pack up. I think that there is a real danger— not at present but in the foreseeable future— that this could start to happen in Galloway, for the erosion of the population is now accelerating. There is a very high unemployment rate, particularly in Wigtownshire. I tried to get the figures to-day. I think that the unemployment rate for Galloway and Wigtownshire is higher than the rate for Scotland as a whole, which is quite a serious situation. The steady fall in the number of jobs on farms, where most of the population used to be employed, is to a large extent responsible.

My Lords, I think that something ought to be done, and could be done, to slow down or halt this fall in the population. It is not as though Galloway people are frantically strike happy or inclined to take things easy on the job. The sort of people bred in Galloway are not those who were taught that the world owes them a living. They have been taught that they should do an honest day's work or they will not get food or money. Given a job, they are prepared to work. With the very much improved road communication system that we now have perhaps some industries might look to Galloway, and it is possible that they may like what they see. The people there not only want to work but they are also willing to get on with the job. They are not "clock watchers". We have at present a rather difficult problem, which I have raised before in your Lordships' House, in the shape of a projected artillery range at West Freugh in Wigtownshire. I have been told, apropos of that, that if the range does come to West Freugh the Euston-Stranraer boat-train will continue to run. I should be most grateful if the noble Lord, Lord Drumalbyn, could let us know whether that is a definite pledge or not. If it is, it would make quite a difference to the way that people look at the proposal.

There is also the matter of employment connected with the range. The question is, will local people be employed there or will large numbers of people be brought there from the South of England? It would be useful to know in fairly precise terms what effect this range will have on the serious local unemployment situation. There is a large body of people— I think I may say without going too far that they are mostly middle-class — who are opposed to the range, for various reasons. I do not propose to go into their arguments now but I think it would be helpful if the Government were to permit a public inquiry. On balance, I think that the Government would get the range because such an inquiry would find in favour of it. But if we did have a public inquiry, and if it did not cost too much or take too long, it would clear the air; and when the range came it would be given a better welcome from the local people than it will have if it is imposed on them without any inquiry at all.

My Lords, while there are people and concerns doing their best to remedy the unemployment situation in Galloway, it is unfortunate that that is not so in every case. We read in the local paper this week-end of a projected amalgamation of five creameries which will result in four of them being closed, and inevitably this will create a serious problem in some villages in the province where the creameries have been important local employers. In such a widely scattered province there are areas, like my village, where people will hardly be able to commute to the new big creamery which is being created out of the five. I do not altogether know the full facts because I only read about it on Saturday, but this sort of thing can come as a heavy blow to an area which is already (I can only put it in this way) in a state of jitters. It is a rural district, struggling to keep some sort of population and social life, and this sort of news is very worrying, even if at the end it all works out.

I am not too well up on this question but I understand that the whole of Scot land, except Edinburgh, is a development area. I think it would be a good idea if Her Majesty's Government seriously considered making Galloway a special inducement area. This at least would give people the feeling that Westminster was concerned about the situation and was prepared to do something about it.

Agriculture is still very much our basic industry, and in general it is very efficient. Our farms are well run and are as productive as the quality of the land allows them to be. I am concerned here — and I declare an interest, being a small farmer myself— with the decline in the agricultural population. It is quite clear that much of this is inevitable and that we cannot expect to employ the number of farm workers and farmers who have been employed in farming in the past. But I am not one of those who think that the bigger is always the better. I think there is a size of farm above which we should not go, and now we know that there is a size below which we should not go. Ten years ago we would have put the size at a hundred acres; now it is probably 250 acres or something like that, though I am prepared to accept a figure of about that size. But somewhere we must reach a point where it is going to stop. The relatively small independent man will, in my opinion, give the nation better value than the huge capital intensive unit. Noble Lords who have eaten eggs in London or bread from the multiple baker will know the sort of horrible food that will be available to us if we allow farms to get too big. I think that the land on the smaller farm will be better cared for, because the owner is directly involved in the work itself and is not sitting in an office all the time, emerging only to show Sunday visitors his prize bulls and heifers. Most small men of this kind are dedicated farmers, and I am convinced that the health of our land depends on the maintenance of conditions in which these men can continue to farm. If the economic conditions force them out, we shall lose not only agriculturally but also socially. We should not underestimate the value of the remaining farmers and farm workers to our society. They are an industrious, cheerful and civilised people, and the country cannot afford to lose too many people of this kind.

I do not want to see a situation develop where commercial necessity and modern morality unite in forcing Naboth from his vineyard. Pressure is building up to force these people out in order to let the "big boys" get on. I think it is a proper exercise of Government in the 20th century to seek to modify this pressure. I do not at all deny that successive Governments have attempted to do this, but I do not think that they ought to give up the effort.

Nothing has hurt the smaller farmer more in recent years, I believe, than the long drawn out and vicious credit squeeze, combined with high interest rates. Farming depends more than any other industry on bank credit and it will wither and die more surely in the sort of economic blizzard we have had than under the severest assault of a March wind. In Galloway, alongside agriculture, we now have quite a large forestry industry. I think it is a pity that we do not have our own pulp mill, but this went to Whitehaven some time ago and we cannot do very much about it now, though I wish we could. Now that our forests are there one must hope that they will prove useful and prosperous. But I must say that I think the planting of the hills has gone far enough. If we continue to convert all our wild areas into parade grounds for regimented trees, we shall destroy our heritage. I am convinced that the area of afforestation should not continue to get bigger. Anyone who has seen the destruction of the landscape at present taking place in Galloway by the intensive afforestation of the wild and lonely areas ought, I think, to agree: thus far and no farther. It is enough to make one weep— and I mean that literally.

We also have a growing tourist industry in Galloway, and my prediction is that this will continue to grow. Referring back briefly to the problem of trees, it makes commercial as well as esthetic sense to leave something worth while for the tourists to see. Our landscape, I should say, is the main attraction of Galloway. It is a province of splendid views. At almost every corner one sees something new and breathtaking. Every effort should be made to preserve this. Tourism is one of the few really bright spots on our horizon, and one hopes that it will bring some money into the area without destroying its essential character. On the whole, at present the area is being developed sensibly and people are well aware of the dangers of our becoming an uncontrolled tourist paradise, such as Devon and Cornwall.

We have, as I have said, first-class communications with England but, as things are going, our main roads are not good enough to carry the heavy traffic we are now experiencing. This is particularly the case with respect to the enormous juggernauts going to and from Ireland. There is a danger here to the structure of our small towns, and I know that Her Majesty's Government are very aware of this. All I would ask in this matter is that the work of by-passing these towns should be accelerated rather than slowed down. There is a certain small town in my area, Gatehouse-of-Fleet, which Her Majesty's Government have considered with great sympathy for a by-pass, but they have said that it will have to wait for a while. If this process is slowed down at all, I can see that Gatehouse-of-Fleet, an attractive little town, will finish up by being shaken to the ground before a by-pass arrives.

Summing up, my Lords, I should like to emphasise that our problems of unemployment and population loss arc very serious ones. There is the real danger, if this continues for long enough, that our area could become depressed almost beyond redemption. I am being a little apocalyptic here; but if your Lordships were to go to the area you would not think so, and would realise that a steady erosion and attrition would eventually have this result. The situation in Galloway, if it differs in some respects from that in the rest of Scotland, is none the less very serious, and certainly is very worrying. I think it is right and proper that Her Majesty's Government should be deeply concerned about Galloway and other outlying areas of these Islands. If something is not done to halt the steady decline in population and employment in the next 25 years, there is a real danger that London and the large cities will be presiding over an Island that is half slum and half desert. I do not think it is too much to hope that enough people will be able to live and work in Galloway in the foreseeable future to enable the area to be viable and to retain the normal services that civilised life in this century needs.

My Lords, I do not apologise to your Lordships for being so parochial, because I felt that it was time Galloway had some recognition and that something was said about it in your Lordships' House. I hope that in the short time I have spoken I have been able to do something useful for the lovely province in which I live and which I hope many of your Lordships will shortly visit and learn to love as I love it.

8.29 p.m.

LORD HOY

My Lords, may I first say a word of congratulation to the noble Lord who has just sat down? I enjoyed his speech tremendously. I should also like to offer my warmest congratulations to the noble Earl, Lord Caithness, on his maiden speech. I thought that it was first-class in every way, and the fact that he dealt with agriculture found a response so far as I am concerned. I hope that on future occasions, though I know his time is limited, he will be able to come and make further contributions, perhaps on other subjects. May I also say "Thank you" to the noble Lord, Lord Polwarth, for the Motion which has allowed us to have this discussion this afternoon. Indeed, one thing it proves, if I may say so to your Lordships, is that the Scots are willing to talk, as the clock shows. But the attendance in your Lordships' House to-night also proves that the Scots are willing to listen. I think that one of the remarkable things of this debate is the attendance now in your Lordships' House.

When the noble Lord, Lord Polwarth, opened the debate, I thought he was a little hard on unemployed people. I agree with what my noble friend Lord Hughes had to say. I was a little surprised that the point that he expressed about anger was picked up even by the noble Lord, Lord Taylor of Gryfe, because if one has had experience of unemployment and lived through it, one knows what it is all about. I, like my noble friend Lord Hughes, lived through it in a family that suffered very badly from unemployment. Indeed, if the noble Lord does not remember, let me remind him that families in this country were split up because of the appalling means test that was imposed on top of the unem- ployment from which they were already suffering.

LORD POLWARTH

My Lords, if the noble Lord will allow me to interrupt, may I say that if I gave the impression that I had any lack of feeling for the unemployed, it was entirely unintentional. Indeed, if I had had the time I should have gone further into that aspect; but I should have wearied your Lordships unduly.

LORD TAYLOR OF GRYFE

My Lords, may I also interrupt the noble Lord, since he bracketed me with similar indifference. I must correct that impression. I said I could well understand the anger of the unemployed, but that was not necessarily the mood in which to analyse the unemployment problem.

LORD HOY

I do not say that you always analyse in anger: you cannot. But the noble Lord, Lord Taylor of Gryfe, then went on to refer to the "shedding of fat" by the employers, when what he really meant was that they were disposing of workers. That is another term that I find repugnant. I should have thought that if you were going in for good labour relations, those were not the sort of terms that should be employed about people out of work in this country. They are human beings. I can remember the noble Lord, Lord Taylor of Gryfe, having very different views from me even during the I. L. P. days; but we found tolerance about it, even right up to the war: because I decided, long before my colleagues, that we had to go into the Army to face up to Nazism and all that it meant. My noble friend said: "I believe in peace", and he fought as a Peace candidate. Of course he was entitled to do that. But what I am entitled to say is that those of us who have been angered by these things are entitled not to forget them, because the responsibility on every Member of your Lordships' House, as well as on Members of the House next door, is to see that these conditions never come back to our country again.

LORD TAYLOR OF GRYFE

My Lords, I am sorry to interrupt the noble Lord once more, but we were discussing unemployment as best we could. It was contrary to my religious beliefs as a Quaker to fight in the last war. I participated in peace relief work. I do not think it helps the debate to introduce that aspect at this stage. I should like to say that "shedding the fat" is a common expression, used in economic terminology in discussing the trouble of unemployment, and it does not imply any indifference to the sufferings of unemployed people.

LORD HOY

I do not care whether or not it is one of the chosen terms; it is still repugnant to me, and I am entitled to say that I consider it to be repugnant, because we are dealing with human beings. I am not introducing the other point for Party purposes. All I am saying is that we had these widely divergent views. We had this anger over unemployment. All I say to the noble Lord is that, along with my noble friend Lord Hughes, we do not forget it, even if we are living in circumstances in which most of us are a little better off than we were then.

I also thought there was some slight exaggeration about all the things that are available to us. The noble Baroness, Lady Tweedsmuir, quite rightly, because she speaks for the Government, sought to build up what the Government have done. The noble Lord, Lord Polwarth, also did it: he was not slow in recounting certain things that the Government have done. We have to get these things into their proper perspective. When the noble Baroness says: "We got rid of £ 1,400 million of taxation", what she did not add was that at the time when the Government were doing that they were putting an additional burden of £ 400 million on the ordinary people of this country. Just as they were giving cuts in taxation, so at the same time they were imposing increased charges on nearly every form of social service, whether it was for the supply of spectacles, of teeth or even of milk for school-children. So what the Government did at that time was to claw back £ 400 million in additional charges imposed on the people. That makes a considerable dent in the figure that the noble Baroness used. Indeed, if my figures arc correct, for this year it is not £1,400 million or £1,000 million but, inside the fiscal year, about £600 million. I do not say that that is a small figure. Indeed, when I was a member of the Public Accounts Committee, even when my own Party were in power, I was continually reminding the House next door that when we were talking about public money we were talking about taxpayers' money: that Governments did not have money of their own; it was money collected from the taxpayer. We have to think of it in that way.

I think that the enormity of the problem is here. I am certain that the noble Lord, Lord Polwarth, will have seen on the tape since he delivered his speech that the £185 million announced yesterday by the Government means, according to Mr. Victor Feather, the General Secretary of the T. U. C., that it will perhaps result by the end of 1972 in providing one job for every 1,000 unemployed. I do not say that disparagingly, but it is a measure of the problem that confronts us at the present time. I would say this to the noble Baroness, Lady Tweedsmuir: that when we get on to comparisons of figures and the cost of living, it is the same argument over again. The noble Baroness says: "We have given you this". But what she does not remind us of is that very soon, although S. E. T. will have gone, V. A. T. will have come in, and this is another burden that is carried by the whole community—a very substantial burden, I should have thought, at the end of the day. The noble Baroness says that the cost of living was rising in the Labour Government's day. That is true, and one would not seek to deny it. But what is equally true is that in the course of the stewardship of the present Government the cost of food has gone up by 11.3 per cent. So when the noble Baroness says that we now see it levelling off, what we are seeing is it levelling off at this very high rate. That is the problem that confronts us.

I would say that I have enjoyed this debate, but for me, as for many of your Lordships, it started much earlier in the day: because, as the noble Lord, Lord Polwarth, recalled, we attended a service in the Crypt Chapel of St. Stephen which was conducted by the Moderator of the Church of Scotland. I sang the hymn along with the noble Lord—and I thought we made not a bad job of it. But where he noted a couple of lines of the hymn, I noticed one sentence used by the Moderator in his opening prayer which I think has a lesson for many noble Lords in the House. The sentence was: Forgive us for being so easily pleased with our efforts. We might take that text for to-day, and tonight so far as we are concerned— Forgive us for being so easily pleased with our efforts. How apposite the words were, I thought, because at that time outside the Crypt there was hundreds of men from Scotland asking for the right to work; and surely if this debate is about anything at all it is about that.

As the debate draws to a close let us please remember once more what we are talking about. Unemployment in Scotland tonight totals 141,500 people. That figure compares with something less than 100,000 12 months ago— and for comparison I take the figures of November this year and November last year. In percentages, the total number has risen from 4. 6 to 6. 6 per cent. but those figures embrace that for male unemployment, which is appalling— it is the highest in Great Britain: a male unemployment figure of 8. 6 per cent. If one looks at the young people, one again gets a figure which is rather frightening. I will not go over all the figures. Suffice it to say that while the unemployment figures have been going up and up the number of unfilled vacancies in Scotland has been going down and down, and so you are getting to a real hard core. With the unemployment figure for November 1970 of 99,327, we had 12,305 unfilled vacancies in Scotland. Tonight, with 141,500 unemployed we have unfilled vacancies of only some 7,200.

LORD BURTON

My Lords, I am sorry to interrupt the noble Lord, but although that may be the figure of unfilled vacancies on the books of the Labour Exchange a great many employers do not think it is worth going to the Labour Exchange and therefore many other vacancies are not recorded.

LORD HOY

My Lords, it may well be that they are not recorded, but who is to blame? All that the unemployed can do is to go and look at the records and find what jobs are available. I should think that the position may get a lot worse because, if the noble Lord will take this from me, there is a considerable section of female labour which, when it ceases to work, does not register at the Labour Exchange. So I think there is a distinct possibility that these figures do not represent the actual numbers of people unemployed in this country.

Now within the figures there is an even greater problem, and perhaps the noble Lord, Lord Burton, might think of this when he is talking about the difficulty of finding employees. There is the problem of the long-term unemployed. There can be nothing more demoralising than being unemployed for a long time. As to the long-term unemployment figures for men aged between 20 and 39— and I think that every one of your Lordships will surely agree that this is a period when a man's production should be at its highest— in Scotland the number of people unemployed in this category is three times as high as in the rest of the country. What is even more appalling is that for every nine men in Scotland in this category there is only one in the South-Eastern area. So that we are carrying an enormous burden, and if at times we express some anger I hope it will be understood.

The responsibility for unemployment and for finding a solution is quite clearly that of the Government. Should anyone in your Lordships' House think that I am making a Party political point, let me quote what the Secretary of State for Employment said in another place last night. He was asked by Mr. Roy Jenkins to answer two questions, and in answer to the second he said: To answer at once the second of the two specific questions put by the right hon. Gentleman, we accept absolutely the essential responsibility for the level of unemployment. We accept that. We have always made it clear that we do accept it. We said in the Queen's Speech that to increase employment is our first care. I therefore answer that question quite categorically." — [OFFICIAL REPORT, Commons,23/11/71; col.1257– 8.] So it is not in Party political dispute as to where the responsibility lies.

If the Government accept that, we then have to ask ourselves," What then can be done? "I welcome any measure at all that the Government take, even in the short term, even the bringing forward of orders— anything which helps to alleviate the position at the present time one is grateful for. But we must always regard them not as substantial measures, much less as a cure for the problem that confronts us. To accept them as anything greater than that would indeed be folly, and it is a little ironic that the Government's only weapon for dealing with this problem is the bringing forward of these naval orders, social security expenditure, and nationalised industry investment. The Government are having to admit at this moment that the only way to deal with the situation is by way of public expenditure (which of course they said they would cut substantially) but they find that this is the only weapon which will meet the problem. When one thinks of their attacks on nationalised industry it does seem a little ironic— indeed, it is even more ironic to think that in another place to-night they are discussing the selling off of a profitable section of public enterprise so that the profits will pass from the public purse into the private purse— that the Government should be engaged in an exercise of that kind.

What has been said about the regional employment premium? I think most people have come to the view that it must be continued in Scotland. Whatever the reasons for the changes being made by the Government I do not doubt that the case for retention now is unanswerable. Indeed, I was surprised to hear it said that people had been surprised that R. E. P. represented profits in some industries. My goodness! had it not been for agricultural subsidies there would be no profits in many farms in Scotland. There would have been no net income without them, and there is not a noble Lord who would deny it.

VISCOUNT STONEHAVEN

My Lords, I am not going to take up time, but I should like to point out that the subsidy is one side of the coin and the controlled price of the product is the other side.

LORD HOY

Yes, my Lords, I do not differ from the noble Viscount. Indeed we enjoyed a fairly good supply of food at fairly reasonable prices. It was because of that control, and that is how the supply took place. All I am saying is that to suggest that merely because the profit might be contained in the subsidy was never a good argument for abolishing the farms. There are social responsibilities as well. Indeed, when one thinks about dependence— I think of the figure quoted by the noble Earl in his maiden speech, that we still have to import 50 per cent. of our food needs — it may well be profitable, even though it does not come out in the balance sheet, to have these farms in existence, producing what they can. That is why I suggest that R. E. P. is one of the things that should be retained. I am grateful for what has been done, but we need something more. We have to tackle R. E. P.

Now the case for investment grants, as opposed to tax allowances, is crystal clear. We opposed the changes when they were made; I do not think anyone will deny that. I do not want to say," I told you so", but one is comforted to-night that so many noble Lords have, apparently, changed their minds. There is no influential source of Scottish public opinion that has changed its mind. As the noble Lord, Lord Polwarth said, we do not want tax allowances; we want investment grants. I believe that that is now the view of the Scottish Council. If you are going to attract industry, then obviously the cash allowance is the attraction. Industry simply cannot invest and then wait to earn profits to make it worth while. While these folk have changed their minds I can only hope— and I think the noble Baroness has said that a Minister is going to visit Glasgow— that just as others have had the courage to change their minds, the Chancellor will have the courage to change his. However, while these efforts may make a substantial contribution to the solution of the problem by themselves, they are still not enough. The benefits might be lessened if we did not take certain other action at the same time. Without discussing them, because they have been discussed for a very long time, we in Scotland must have from the Government without any further delay a decision regarding Hunterston, the oil terminal and British Steel. Do not let us pretend that without steel Scotland's future might not well be a bleak one. With it, and the other projects I have mentioned. together with changes in R. E. P. and investment grants, we should be doing something substantial for Scotland. My Lords, we cannot afford to do less.

8.53 p.m.

LORD DRUMALBYN

My Lords, we are coming to the end of what has been a wide-ranging debate. We have touched on almost every part of the country. I should like to start, as so many other speakers have started, by congratulating the noble Earl, Lord Caithness, who comes from one of the farthest points of this country, and sits in one of the farthest points of this House, for having made such good contact with the House from his distance to-day. The whole House greatly enjoyed his speech; he has received tributes that must send him home with a glow in his heart, if not his face. They were well merited, and I hope that we shall hear him often in this House. He has attended regularly; he has seen how this House works before he made his maiden speech, and he has good reason to be satisfied with the results.

In this very wide-ranging debate, it would be difficult for me, even if I wished, to answer all the questions that have been raised. The noble Lord, Lord Hughes, knows this problem very well: sometimes when his plane flight was a little distance off he had the goodness to reply in great detail to a great many questions. I do not think that that would be the will of the House to-night, but I will try to touch on the main points, and will write to those noble Lords whose points I do not deal with.

There are two sides to this Motion. There is the present state of the economy and the fundamental steps that the noble Lord, Lord Polwarth, suggested in a remarkable speech should be taken in order to put Scotland on the right way. I will deal first with the short term position because this occupied quite a large part of the speech of the noble Lord, Lord Hoy. May I say right away, in order to get this matter out of the way altogether, that everyone deplores the present degree of unemployment. Those who have experienced it obviously feel a great anguish in their hearts that it may go on increasing. The purpose of this debate is for us to try together to devise methods to ensure, as the Government have been doing, that unemployment will not go much higher. One knows how difficult it is during the winter period, when unemployment tends to rise. Our objective should be to make certain that as from early next year we shall see a steady fall in unemployment, even if it is not a spectacular fall right away. This has to be our objective, and we want to get on the right road.

The noble Lord, Lord Taylor of Gryfe, in an excellent speech, put his finger on the reasons for the present situation. However they are expressed—and I understand Lord Hoy's reaction to the way in which they were expressed—it is a fact that in the keenly competitive situation that we are entering into at the present time companies are not likely to survive unless they streamline themselves, unless they maintain the maximum productivity. There is no doubt that that is what has been going on. Once they are in that position they should be better placed to compete, as should the country as a whole, and that should be to the benefit of the country. On that basis we ought to be able to see—and I do not take on the role of prophet—more investment and a steady rise in prosperity if we can keep our balance of payments right. This is the background to the whole situation.

May I say to the noble Viscount, Lord Thurso, whose speech I greatly enjoyed, that he is quite right in saying (I am paraphrasing his words) that although Scotland must not be treated as something entirely sperate, yet at the same time we have to consider it separately. We are not alone in suffering from a series of closures and redundancies in the primary industries. In the past decade there was a contraction of 600,000 jobs, or 40 per cent. in the primary side of production in the country as a whole. The brunt fell most heavily on the development areas, Northern England, Scotland and Wales, in which there is 42 per cent. of all employment in the country, but which lost 63 per cent. of its jobs in the primary sector. This illustrates the position that not only Scotland is in, but our neighbours over the Border, and those in Wales as well. There was a slowing down of foreign investment in this country. Whereas up to 1965 foreign companies accounted for about 18 per cent, of total movement to development areas, between 1965 and 1970 the proportion fell to 8 per cent. There has been a slowing up of foreign investment. We hope that when we go into the European Economic Community this will revive again.

Then there is the point to which my noble friend the Minister of State referred. As technological advance results in fewer labour requirements in production, there is a general trend towards a higher proportion of employment in the services; yet the development areas have secured only a quarter of the growth in the service section, apart from distribution, and accounted for much more than their proportionate share in the overall loss of jobs in distribution. These figures provide an interesting background to what we are discussing to-day. It is easy to point to changes in the incidence of taxation and the like. Perhaps it would be well to remember that there has been a sharp increase in unemployment benefit as well as in old-age pensions, widows' pensions and the like; that there have been allowances for low-wageearning families; that the over-80s have received special assistance; that rent rebates are being increased, and so on. I say that only because I thought perhaps the noble Lord, Lord Hoy, gave a little too much the impression that we were handing out to one section of the community and taking away from another. What we have been trying to do is to help those who receive least in the way of income, and at the same time to give encouragement to those who are making, a considerable contribution — more than an average contribution; let me put it that way— to the economy of this country.

Of course it is true that the Government have a duty to do all they can to relieve unemployment in the short term and to provide the conditions for employment opportunities in the long term. They have to ensure so far as possible that the short-term measures they take to relieve unemployment do not conflict with their long-term objectives—a point which the noble Lord, Lord Taylor of Gryfe, made. And they have to be particularly careful, at a time when we have the unusual combination of a high rate of unemployment and a high rate of inflation—unprecedented, I think, in modern times—to avoid measures which will enhance the rate of inflation and so militate against the provisions of greater employment opportunities in the long term.

LORD BROWN

My Lords—

LORD DRUMALBYN

May I conclude, my Lords? It is especially important that they should take steps to ensure that where direct Government assistance is given it is not frittered away in yielding to inordinate wage claims.

LORD BROWN

My Lords, the noble Lord is very courteous and I am interested in what he is saying. There is a point to which I would draw attention. He has rightly said that the Government must not initiate measures now which will destroy their later plans and produce inflation which will lead us back into trouble later. This is true of the country as a whole. But may I draw the noble Lord's attention to the important fact that it may well not be true of Scotland that the Government might well be justified in taking measures in Scotland now, over and above the general level taken in the country, because there is no danger that whatever measures are likely to be taken by any Government in Scotland to-day will produce inflation in Scotland in three or four years' time.

LORD DRUMALBYN

My Lords, I take the noble Lord's point, but within an economy it is very difficult to isolate a particular area and expect that what is done there should not have some general "spin-off" (if that is the right term) in the rest of the country. However, it is germane to point out that, of the £ 160 million of public expenditure that was announced, originally £43 million—quite a high proportion—came to Scotland, and later that amount was increased to £60 million. So there is there a valuable short-term initiative relating to projects which can be completed or nearly completed by March,1973. In addition to that— something I think worth mentioning, which has not been referred to— there is the very high level of assistance to the rehabilitation of Queen's Dock, in Glasgow, getting 85 per cent.; and to the modernisation of Glasgow's Underground railway,75 per cent., as well as the £5 million grant spread over five years for environmental work in Glasgow, and a similar amount for West Central Scotland. This is a point that my noble friend Lord Polwarth referred to, and I think this is one answer to his plea for a clearance of derelict land. I can also tell him that at September 30 last work was in progress on 32 schemes, covering 1,000 acres, at a cost of £1.6 million; that 30 schemes covering 900 acres had been formally approved, at a cost of another £1 million;that 94 schemes covering 4,100 acres were either provisionally approved or under consideration, and those total over £ 5 million. I think this is reassuring in the clearance of derelict land.

On the infrastructure grants, it has been said (I am not sure which noble Lord made this point, but I think it was the noble Lord, Lord Hughes) that this is local authorities' money and not Government money that is involved. That is, at best, only partially true. The expenditure on trunk roads and hospitals is met entirely by the Government—something like £7 million to £8 million—and £15 million to £16 million of the total will attract specific grant, mainly on roads. For the balance the local authorities will of course borrow, but the annual payments will be reckonable expenditure for the purpose of rate-support grant; and of course there is the reduction in interest rates, which means that the prospect of borrowing is not so formidable as it has been in recent years.

The noble Lord, Lord Hoy, questioned almost the desirability (I would not say the propriety) of bringing forward public expenditure, but it is wise to remember that public expenditure makes available more spending power and it does not only give jobs, as I think the noble Lord, Lord Hughes, suggested, in, say, the construction industry. There is again a carry-over into other industries and so it helps to get the economy moving as a whole.

LORD HOY

My Lords, the noble Lord had better get this correctly. I did not say anything of the kind. I welcomed the steps that were being taken. I said the only thing that was a little ironic was that a Government who were so bitterly opposed to these public undertakings should in fact use this as the only weapon they had to meet the present circumstances.

LORD DRUMALBYN

My Lords, it is the classical weapon to use. I am sorry if I misrepresented the noble Lord. I remember that he used the word "welcomed", but he then proceeded to question perhaps the propriety of our doing it.

It has been represented that regional employment premium should be retained and that this would be a good step to announce now. After all, its end is a long way off, and I think I can only say that it does not follow that when the regional employment premium comes to an end there will be nothing put in its place. We shall have to see when the time comes what is the appropriate thing to do.

LORD HUGHES

My Lords, may I just interrupt briefly? I know it is disconcerting to have so many interruptions in a winding-up speech, but I think the noble Lord would accept that it is not reasonable that industry should have to wait until R. E. P. comes to an end before it knows what is going in its place or whether it is going to be extended. It really ought to know some time beforehand what the future is going to be.

LORD DRUMALBYN

My Lords, I do not suggest that the decision will not be taken until the last moment. I was merely saying that it is, after all, three years ahead. A lot of things can happen in three years: we might have a complete change in the economic climate in that time.

I now turn to the question of investment grants, which many noble Lords, including my noble friend Lord Polwarth, pressed should be retained. Of course there is room for a difference of opinion on this matter. One can take certain special sections of business and say that for them it would be desirable to have investment grants, but the steady stream of criticism about changes from investment grants to free depreciation usually ignores the object of the changes, which was to relate the special incentives more directly to the provision of new jobs and to put greater emphasis on help for investment that will provide a sound base for stable employment. Moreover the plant and machinery incentives are only a part of the very substantial assistance that the Government have made available to the assisted areas—assistance which the noble Lord, Lord Taylor of Gryfe, I thought, with some astonishment. But, as he said, they are extremely valuable, especially so far as the special development areas are concerned, but in the development areas as well.

Reference has been made to the treatment of Scotland as a whole. The noble Lord, Lord Polwarth, made this point, and of course there was an area—Edinburgh—which was treated in a different way altogether from the rest of the country. We have at least modified that position by treating Edinburgh and Portobello as an intermediate area, which should help with building grants for industry in that area. I should like to say this in general about the incentives. Quite rightly and quite naturally noble Lords have pressed for the benefits available to industries coming to the special development areas to be extended to industries and services already there. Some have pressed, as did my noble friend Lord Belhaven and Stenton, for special development areas to be extended to particular places. The Government have not closed their mind to these suggestions, but I think it right that the House should be under no misapprehension about the Government's thinking in this regard. After all, special development area status was designed to meet the problems of areas with really large-scale and persistent unemployment coupled with severe environmental handicaps. Second, while the inducements to go to special development areas or development areas must be kept under review to ensure that they are appropriate to needs, it is undesirable, as my noble friend Lord Polwarth said, to make frequent changes in the inducements available, or the list of those to whom they are available, except where there are special and unexpected emergencies.

Third, the benefits of special development area status were primarily intended to compensate for special handicaps which affect new industry coming into an area—new in the sense that there is no such industry there already. My noble friend advocated a thorough overhaul of our regional policies and indicated the sort of changes he would like to see. I can assure him and your Lordships that the Department of Trade and Industry is continually looking at our regional policies, and I can also assure him that it will pay the closest attention to what he has said, and to what has been said in other parts of the House. I should add this: that during his visit to Glasgow on September 10 the Prime Minister indicated at his meeting with the Lord Provost that the case for extending operational grants to expansions and new projects by existing industry in West Central Scotland could best be supported by evidence that firms in the special development areas were being influenced against such projects because operational grants were not available to them. At the instance of Glasgow Corporation, the Glasgow Chamber of Commerce wrote to all their members and asked whether they would consider expansion if they were eligible for operational grants. The 130 firms which replied to the effect that they would, said they could undertake expansions that would lead to the creation of over 5,000 jobs. The results of the Glasgow Chamber's survey were submitted to my honourable friend the Minister for Industry earlier this month and are now being analysed.

A good deal of reference has been made to the need for training, and again the noble Lord, Lord Taylor of Gryfe, placed great stress on this. Training courses of six months or more are being stepped up at the 10 Government training centres in Scotland to a level which will cater for some 2,700 trainees a year. It is of course more difficult to place trainees in jobs at a time when skilled men are being made redundant, and further consideration has been given to that aspect. Full-time refresher course of six to eight weeks are also provided to bring unemployed skilled workers up to date and to upgrade, convert or broaden their skills. This applies particularly to craftsmen in the engineering and constructional industries, and I may say that the rate of application for refresher courses has doubled since the increase in allowances was announced. Some of this training is sponsored by employers; they pay the wages and National Health contributions of the trainees, and I think this goes particularly for the over-forties. Some employers do the training themselves, receiving weekly grants of £10 for men and £7 for women. The Engineering Industry Training Board is operating a scheme for the training of additional engineering apprentices, the Department of Employment sharing the cost with the Board, including payments to the trainees. The Scottish Education Department are encouraging technical colleges to use any spare capacity for training, especially in commercial subjects.

I would say, my Lords, because I know this from contact with my right honourable friend Mr. Robert Carr, that this is something in which he is interesting himself particularly strongly at the present time; and certainly the Government are doing their very best to see that everybody does get training. I think there are difficulties about making it compulsory. I think the word "constrained" was rather delicately used; it was said that young people should be constrained to have some training when they are out of employment. I certainly think that they should be given the maximum encouragement, both by way of grants and in other ways, but I think it would be a mistake, certainly at the present time, to make training mandatory. Finally, introductory training courses of about 12 weeks have been organised for young people under 18 in engineering under the Government vocational training scheme. Other courses in hotel and catering work, for example, are being considered, and the Scottish headquarters of the Department of Employment are in touch with the Glasgow Education Authority about the nature and extent of additional training courses which might be provided in the city with Department of Employment finance.

My noble friend Lord Balerno referred to the closures in the paper industry. I sympathise with him very much in the disappearance of the paper industry from the area from which he takes his name, and in which he lives, but I think it will be some consolation to him to know that talks have taken place on the initiative of my right honourable friend the Minister for Trade. At the EFTA ministerial meeting in May last, representatives of the industry, on both sides, had discussions, and the outcome is, I am told, regarded by the United Kingdom industry as representing some improvement in the situation so far as prices in the New Year are concerned.

I should like to refer for a moment to my noble friend's point about Government research and development. The Paper to which I think my noble friend referred is in fact a Green Paper, and it was published at 2.30 p.m. to-day. No doubt it is the one I see in my noble friend's hand: I notice that it is white— he may have taken off the cover. It represents Her Majesty's Government's comments on reports made by Lord Rothschild and Professor Dainton in the field of Government research and development. Publication is intended to set off the widest possible public debate, and the Secretary of State for Education and Science is inviting comments from all interested organisations. I was extremely interested in what my noble friend had to say about Lord Kelvin and the inspiration which he gave to Scotland a hundred years ago, and his faith that the same thing could be done to-day. I think that my noble friend was not quite right in saying that the Department of Trade and Industry had withdrawn support from Strathclyde and Heriot Watt Universities. It was not a question of withdrawing support. Strathclyde was one of seven universities for which £ 1 million, in all, was provided in 1968, to cover a period of four and a half years, as pump-priming support on a deficit-funding basis. Strathclyde centre was allocated £ 251,500, and has used up the whole of it. The original conception was that by the end of the period, which has not yet ended, these centres should be able to balance expenditure with earned income. I cannot give him an answer to-day, but plainly what now needs to be considered is to what extent universities, or indeed other agencies, should support an industrial liaison undertaking in a university which has not yet demonstrated that over a period of time it can become financially self-supporting. I am afraid I cannot go further than that in dealing with "Unilink" (as I think it is called) in his own University of Heriot Watt.

May I now turn to the longer term? The objective here must be to develop the resources of Scotland to the fullest possible extent and so ensure the maximum of employment and the best possible conditions for all who live in Scotland and are capable of working. The two subjects which obviously have received particular attention to-day are oil and the potential deep-water harbours and developments that could be associated with them. As to the North Sea oil and gas finds, undoubtedly they hold good possibilities for employment in Scotland. I do not think I need add to what my noble friend the Minister of State said on that aspect, except to say that all the suggestions that have been made in connection with oil will be fully considered. I think it is worth adding that I understand that an oilrig assembly yard at Nigg Bay is under contemplation, and oilrig platform construction yards at Alness and Dalcross. There are other plants that are being considered for the coating of pipelines and the like.

Then there is the Feasibility Study of the Scottish Council Commission for the development of a deep-sea port on the Clyde and the industry associated with it. I should like to say just a word or two about that. It is now almost a year since the Secretary of State cleared the way for industrial development at Hunterston by announcing his intention, following the public inquiry, to approve the zoning of land for an ore terminal with associated stocking yards, a general user port, and an adjacent industry which might, in certain circumstances, include a steelworks. Progress since then may not have been as swift as some would like, but it certainly would not be true to say—and I do not think anyone has said this—that nothing has been happening. Regarding the steelworks, the Secretary of State for Trade and Industry announced in March that, together with the British Steel Corporation, he was conducting a deep-seated review of the Corporation's development plans and investment programme. The results of the first phase of this review, covering the year 1971–72 were announced in June and dealt with Ravenscraig, and we hope that the second phase will be completed by the end of the year. This has taken time because it has been necessary to take account of the United Kingdom's likely steel requirements, and also the amount of resources which the country can afford to allocate to the steel industry.

I am afraid that I cannot oblige my noble friend Lord Lauderdale by either confirming or contradicting what the O. E. C. D. 's estimates are in this matter. All I can say is that a completely new steelworks would cost at least £ 1,000 million, and an investment of this magnitude, like the investments of even greater magnitude for the developments at Hunterston, must be considered carefully and thoroughly, taking into account international and technological developments.

Concurrently with the review, the British Steel Corporation are considering the case for a steelworks on a green field site, and Hunterston is known to be one of the major candidates. Depending on the outcome of the review, it will then be for the Corporation to put proposals for steelworks on their chosen site to the Government. The Government have made it clear that they will be closely concerned with all relevant aspects of the Corporation's proposals, including the regional and social implications. Negotiations about the proposed ore terminal between the Clyde Port Authority and the British Steel Corporation have taken some time. They are still in progress, and meanwhile the necessary engineering surveys, including test borings, have been undertaken. The Government have joined with the Hunterston Development Company, which, as your Lordships will know, has been set up by a number of Scottish businessmen under the chairmanship of Mr. Hugh Stenhouse, in commissioning and financing a feasibility study by the leading international consultants of the work necessary to develop the full potential of the area. The first results of this study are expected in May,1972, and it should be completed by the end of October. It will identify in particular, what has to be done to establish a viable port and industrial complex in the area on the lines of similar developments in Europe. Those of your Lordships who have read the Report of the Development Department of the Scottish Office will have seen that it is in no doubt at all about the potentialities of Hunterston. I think all Scotsmen will hope profoundly that those potentialities will be realised.

I have been asked many questions from many sides and asked to develop many topics, such as roads in Scotland, but I do not want to detain your Lordships longer than you would wish. I think I can deal with roads quite simply by saying that the present expenditure for 1971–72 is running at nearly £10 million higher than expenditure in 1969–70, and provision is being made for an expanding road programme. The aim is to complete the present network of dual carriageway roads by the end of 1975, and so to have provided about 310 miles of dual carriageway motorways and trunk roads. In the meantime, with the completion of this programme in sight, schemes are being prepared for the modernisation of trunk roads connecting central Scotland with the North-East, the Highlands, the Borders and the South-East which will serve development throughout Scotland. The total cost of the schemes now being investigated or prepared is over £ 115 million. At the same time, principal roads are being improved and there is an allocation of, I think, £ 14 million within the extra public expenditure allocation applying to roads.

I am afraid that in summing up a debate of this kind one has inevitably had to deal with a wide range of points, but I think I can truthfully say that the debate has been of immense use. The Departments concerned will be able to study what has been said, and this will most certainly be done. I should like to thank your Lordships very much for the contributions that you have made and— apart from one spasm of deep and understandable feeling— for the very even temper in which the debate has been conducted.

9.29 p.m.

LORD POLWARTH

My Lords, this has been a long debate and a very wide-ranging one. At this late hour it behoves me to be brief. The debate has I think been useful, and the number of speakers is evidence of the very great interest and concern felt in all parts of the House about the problem that we have been discussing. I think there has been a fair measure of agreement on a number of pretty far-sighted, far-looking projects for the future, and I have been encouraged by at least the attitude of my noble friend Lady Tweedsmuir and the noble Lord, Lord Drumalbyn, particularly with regard to all the matters which come within the Oceanspanorbit. I am sorry, though, that the noble Lord did not feel able to say anything about my suggestions for the use of the revenues from oil and gas— a subject to which we shall certainly come back on another occasion, because I think it is one well worth considering.

I was perhaps saddened, rather than angered, by the remarks of the noble Lords, Lord Hughes and Lord Hoy, who apparently impute to me a degree of indifference to the lot of the unemployed. Certainly, looking back at my speech, I cannot see anything in it which I think could be reasonably interpreted in that way. Indeed, I emphasised that we all have a great responsibility to do everything in our power to create a state of affairs in which no able and willing men and women should not be able to find a reasonable job of work. And if, as I said before, I did not expand further on the plight of the unemployed it was not because of indifference but simply because I thought it more profitable, in the time available, to try to suggest longterm and lasting means of remedying that plight rather than indulge in recrimination as to its causes.

LORD HUGHES

My Lords, will the noble Lord permit me to interrupt him very briefly? I should like to make it perfectly clear that neither in the words that I used nor in the thoughts that lay behind them did I impute to the noble Lord, Lord Polwarth, any indifference to the problem of unemployment. What I said was that I did not regard his speech as being in the same category as some of the other speeches which I have heard from him, on most of which — I think on all of which— I had congratulated him, although sometimes I had been at the receiving end of his criticism. What I did express was disappointment that he should have spent so much time, even though it was perhaps only a third of his speech, as an apologist for policies which I do not think are right.

LORD POLWARTH

My Lords, if the noble Lord interpreted them as apologies, he is perfectly entitled to do so.

My Lords, I think we can be moderately encouraged by a number of the suggestions which have been made and the way they have been received. In Scotland, we shall continue to press on the Government our views on all these subjects; we shall not leave them. I have a meeting before long, I think, with the Secretary of State on the subject of Oceanspan I think it would be wrong for me at this hour to do any more than thank all the noble Lords, from all parts of the House, who have taken part in the debate, not least the noble Earl, Lord Caithness, whose maiden speech, if I may say so, seemed to me commendable not only for its content but also for its brevity. My Lords, I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.