SCOTTISH DEVELOPMENT AGENCY (No. 2) BILL [H.L.]

HL Deb 15 May 1975 vol 360 cc845-903

3.38 p.m.

The MINISTER of STATE, SCOTTISH OFFICE (Lord Hughes)

My Lords, I beg to move that this Bill be now read a second time. Your Lordships may be interested to recall that it is just six weeks short of a complete decade since I addressed your Lordships' House on the Second Reading of the Bill to establish the Highlands and Islands Development Board. I see from the record of that occasion that I described that Bill as in many ways the most important with which I had then been associated. Today, almost 10 years later, I have the privilege of commending to your Lordships for Second Reading a measure which is of at least as great significance to the whole of Scotland as that earlier measure was for the Highlands. The Bill seeks to bring to the breadth of Scotland the benefits of harnessing substantial financial resources and wide executive powers within a new body—the Scottish Development Agency—charged with furthering the development of Scotland's economy and improving its environment. Today's debate is, of course, the first Parliamentary discussion on the proposals in the SDA Bill. Although it is unusual for measures of this wide-ranging financial significance to come first to your Lordships' House, I have no reason to believe that your Lordships will object on that account.

My right honourable friend the Secretary of State has described this Bill as one of historic significance for it is the first that confers on him—as Minister to whom the SDA will be responsible—substantial powers in relation to industry throughout Scotland. Together with the executive responsibilities for industrial assistance which he is shortly to assume under existing legislation, this means that my right honourable friend, in addition to being Scotland's economic planning Minister, will, to a large extent, be its industry Minister as well. These are onerous and challenging responsibilities, but I know that my right honourable friend looks forward to the closer relationship between Government and both sides of industry in Scotland which will flow from his new role.

At this point I feel I must take up that extraordinary report which appears in today's Glasgow Herald, in which the CBI in Scotland are reported as alleging that, in some mysterious fashion, the Bill makes the Agency responsible not to my right honourable friend the Secretary of State for Scotland but to the National Enterprise Board—despite the fact that the NEB is nowhere mentioned in the Bill. The CBI apparently see something sinister in the fact that the Bill refers to "the Secretary of State" without specifying my right honourable friend the Secretary of State for Scotland. But this is standard practice. Of course, the SDA will be responsible to my right honourable friend, but as I am sure the noble Lord, Lord Campbell of Croy, as a former Secretary of State for Scotland will testify, virtually all the powers exercised by Secretaries of State for Scotland—for example, in housing, planning and education—are powers vested by Statute in "the Secretary of State" un-named. There is no reason to make an exception from that constitutional practice in this Bill.

According to the CBI, the Bill is not a Scottish Bill apart from the Title. This is also rather astonishing and I must assume that Mr. Grant got tired of reading the Bill before arriving at Clause 26, because that clause contains the statement that the Bill applies to Scotland only and, as I shall seek to explain this afternoon, the Bill establishes the Agency as a body specifically designed for Scotland's needs. I realise that we have published two Scottish Development Agency Bills—one for each House of Parliament—but I can assure your Lordships that both are in identical terms and neither fits the CBI's description. May I correct that? I have no reason to assume that the views expressed in today's Glasgow Herald are the views of anyone other than Mr. Grant, and I may be wrong in attributing those views to the CBI as a body. Having set the record straight, I would not wish to dwell unduly on this incident, since my right honourable friend the Minister of State in another place had a most useful meeting on our proposals for the Agency at a meeting with the CBI earlier this year at which, with reservations, their response was not unwelcoming. My right honourable friend undertook to have continued consultations with the CBI during the passage of the Bill, and this he certainly intends to do.

The SDA is not, however, to have a narrowly industrial remit. Its tasks are to further the development of Scotland's economy and the improvement of its environment. These are two purposes which some people might think as being quite separate, or even in conflict. Their combination in the remit of a single agency is certainly a novel one. But it is the Government's view that what we need above all in Scotland today is an accelerated and co-ordinated attack on the economic and environmental decay which blights the living environment of too many of Scotland's workers and discourages those whose new enterprise is essential for the creation of a modern industrial base. In our view, an executive agency with dual responsibilities to improve both the job prospects and the quality of life in Scotland is precisely the extra element which we need to add to the already formidable array of regional development measures, in order to tackle the special development problems which face us in Scotland in 1975.

The problems and the priorities of Scotland in 1975 are different from those of 10 years ago. We have come a long way in the "British league" in that period. For example, unemployment in Scotland is now 1.3 times the average for Great Britain—the lowest relative figure since we started recording over 20 years ago. There is, of course, no room whatsoever for complacency about actual levels of unemployment, but there has been genuine progress compared with 10 years ago when Scottish unemployment was 2¼ times that of Great Britain. The improvement on the migration front has been even more dramatic. In the mid-1960s Scotland was losing as many as 45,000 people each year by net emigration. The most recent figures show a net gain of population. Naturally, the most dramatic changes have occurred in the last two years and have been directly linked to the exploitation of oil off Scotland's shores. But the improvements in Scotland's relative economic position have not all come about overnight. Scotland's industrial structure would be in a weaker position today without the vigorous regional policies which were pursued by successive United Kingdom Governments on a broad front.

There have been creditable and hard-won achievements, but they have not been enough. And, in particular, we have yet to make real inroads into the economic problems of our older industrial areas, especially in West Central Scotland, whose difficulties have emerged with increasing clarity over recent years as the most acute which Scotland has to tackle. Despite the efforts of the recent past, too much of the economic, environmental and social conditions of that region fall short of the reasonable standards of a modern industrial nation. Recent economic improvements have failed to stem the loss of population through emigration from West Central Scotland. The progressive loss of a substantial and ambitious element of its potential working-force, which West Central Scotland has sustained over the whole post-war period, cannot continue indefinitely if that region, which contains half of Scotland's population and 60 per cent. of its industrial capacity, is to provide the basis of a balanced and prosperous industrial community. The Agency will be a means of channelling extra resources to West Central Scotland so that we can seek to achieve a more balanced prosperity in Scotland; and the Agency's twin economic and environmental remit is designed with the problems of that region very much in mind. It is the West Central region which bears the worst environmental scars of our industrial past, and I am confident that direct economic benefits will flow from the Agency's efforts to speed up the clearance of industrial and urban dereliction.

We have said from the outset that West Central Scotland will have a special call on the resources of the Agency and we have been gratified to find this view endorsed by bodies from all over Scotland. However, I should emphasise that this is a Scottish Development Agency with a remit for the whole of Scotland, and the expertise which the Agency develops will be available to tackle special development problems wherever they arise in Scotland. Indeed, the Agency will have a very important role in rural areas, where it will take over and develop the excellent work that has been done in the past by the Small Industries Council for Rural Areas of Scotland and the factory-building activities currently sponsored by the Development Commission—and I shall have more to say about that later on. In two of its major functions—industrial estates development and derelict land clearance—it will have a general executive remit throughout Scotland (with special arrangements in the Highlands) and this will give it the executive strength arid geographical spread of experience and contacts to enable it to identify and respond to development needs where and when they arise.

The Agency also represents a new approach by Government to industrial development in Scotland. It will be the first body wih a Scottish remit which is able to initiate industrial development at its own hand. It will not simply have to wait for development proposals to arise in the private sector. It will be able to play an entrepreneurial role, identifying opportunities which are waiting to be seized by industry in Scotland. It can then support private industry in grasping these, or mount joint ventures, or even set up and run companies on its own account. This means that the Agency is directly in the business of creating jobs in a sense which has not previously been possible. For example, it will examine carefully the possibilities which exist in the field of offshore development and seek to exploit any opportunities which are currently being missed. The object of the Agency's industrial role will be to secure the creation and maintenance of employment and help in strengthening and restructuring Scottish industry. This will involve a larger public stake in industry in Scotland, but the Agency will also have a vital role to play in strengthening the indigenous private sector of Scottish industry through its investment funds and its management and financial advisory services which it will pursue with particular emphasis on the needs of small firms.

Having outlined the guiding principles which have led us to propose the creation of the Agency I should now like to take your Lordships through the main provisions in the Bill. Clauses 1 to 17 of the Bill deal with the establishment of the Agency with the tasks of furthering Scotland's economic development and improving its environment. Clause 2 specifies the objects, functions and general powers of the Agency in greater detail and specific powers and functions are covered in Clauses 5 to 11. The principal functions given to the Agency are based upon the policy outlined in the Consultative Document which we issued in January. The chief ones are: providing finance for industrial undertakings; engaging in industrial enterprise; providing and managing industrial estates and other industrial premises; developing, redeveloping and improving the environment; bringing derelict land into use or improving its appearance. The powers given to the Agency are wide and flexible, including powers to take shareholdings, form companies, make loans, acquire land by agreement or compulsorily, manage and dispose of land, carry out works on land, reclaim land from the sea, provide advisory services and promote publicity relating to its functions.

The Secretary of State may also direct the Agency to exercise in particular cases the functions of regional selective assistance under Section 7 of the Industry Act, which are being transferred to the Scottish Office from 1st July this year. The Agency will not be given the task of handling applications for selective assistance, but the Secretary of State will be able to use them with the applicant company's consent where their expertise will be of value in monitoring the Government's stake in a company which has received special help. In this important new role the Secretary of State will have the advice of the Scottish Industrial Development Advisory Board which is given statutory status under Clause 18 of the Bill.

For the exercise of its functions the Agency will be given an initial financial allocation of £200 million, and the Bill provides for this to be raised to £300 million subject to Parliamentary approval. These sums are of course additional to the existing spending in Scotland on selective assistance, regional development grants and regional employment premium. The assurance that sums of this magnitude will be available for the discharge of its functions will give the Agency the confidence to plan its programme on a co-ordinated long-term basis in the knowledge that funds will be made available.

Clause 1 establishes the Agency and provides for it to have a Chairman and between six and 12 other members who will be appointed by the Secretary of State from relevant backgrounds such as industry, then trade unions and local government. The Bill does not, of course, deal with the organisational arrangements for the SDA, which will be chiefly for the Agency itself to decide. However, I am happy to be in a position to announce now that it is my right honourable friend's intention that the Agency should have its main headquarters in Glasgow. I am sure that this announcement, if it does not exactly occasion much surprise, will certainly create much pleasure in the West of Scotland. I think it is fair to say that Glasgow is the natural location for the Agency. A large part of its work, both economic and environmental, lies in and around Glasgow and we have made the attraction of public sector office jobs a key part of our policies for the city's economic regeneration. And, of course, the Scottish Industrial Estates Corporation, which may account for over half the Agency's eventual staff complement, is already located in the city.

The actual siting of the Agency's headquarters will be for the SDA itself to decide but this will be looked at as part of a co-ordinated exercise for locating the many thousands of Government and related office jobs which have now been diverted to Glasgow. In saying that Glasgow will be the location for the Agency's main headquarters, this does not in any way detract from their all-Scotland remit and, to fulfil this, I think there is a very strong possibility that they will want to have a physical presence in other parts of Scotland. In particular, the Small Industries Council for the Rural Areas of Scotland, which, as the Bill provides, is to be absorbed into the Agency on a date which we will decide in full consultation with SICRAS, has its headquarters in Edinburgh and regional bases in other parts of Scotland. There are at present no plans to change that set-up and if any changes are planned in the future they will, of course, be the subject of full discussion with the staff concerned, whose interests we have seen in this Bill, and will be in the future at great pains to protect.

The Agency will be a Scottish body responsible to my right honourable friend the Secretary of State for Scotland who will in turn be accountable to Parliament for its work. The Bill gives him power to give general or specific direction to the Agency and also provides for particular functions like derelict land clearance and industrial estates provision to be performed in accordance with arrangements which will be settled in agreement with him. I want to make it quite clear from the outset that it is no part of our intention to tie up the Agency with unnecessary controls. It is my right honourable friend's intention to allow it the maximum degree of initiative and independence that is consistent with the nature of the functions which it will be performing. The Agency will have at its disposal very large sums of money; and the selection of its programme of work will involve difficult decisions about priorities. The initiative in selecting priorities will lie primarily with the Agency, but it is proper that the Secretary of State should be able to ensure that the priorities are in his view the right ones and in keeping with the Government's general strategy towards development.

It is also necessary to maintain a reasonable balance between the assistance on offer in Scotland and that in development areas in the rest of Britain. For example, the provision of industrial estates, and above all of advance factories, is a very powerful inducement—indeed, often an underrated element—in the "bunch of carrots" which are held out to industrialists. Thus, the Agency's policies in locating and letting factories need to be in general accordance with the Government's regional policies. The Bill deliberately does not attempt to spell out all the details of the things the Agency can do without approval and those which will require consent or guidelines. We shall be able to explain our intentions more fully in later stages of the Bill's passage. But these are matters in which there should be flexibility.

When we come to the Agency's so-called "industrial investment" functions—that is to say the functions of financing and undertaking industry which will closely parallel functions of the National Enterprise Board—we are involved in completely new initiatives. Apart from the specialised and inevitably smaller-scale activities of the Highlands and Islands Development Board, no independent body in Scotland has previously had these functions. It will be fundamental to their successful operation that the Agency is genuinely free to exercise and back its own judgment. Indeed, the Bill enables it to acquire a stake of up to £2 million worth in any one company without the Secretary of State's consent, provided that does not give it a larger than 30 per cent. holding in the voting rights of the company. But the Agency cannot be without some guidelines and the power to give both specific and general directions is an appropriate power for the Secretary of State in this context.

The greater part of the Agency's efforts will be a new element in the Scottish development scene. However, there will be some streamlining of existing activities. As we proposed in the Consultation Document, the Scottish Industrial Estates Corporation is to be absorbed and its staff and resources imported into the Agency. They will form part of its executive effort from the outset and will enable it to make a quick start to its work. The recently announced decision to transfer responsibility for SIEC to the Secretary of State for Scotland from 1st July will pave the way for a smooth hand-over to the Agency, and forward planning is already in hand in close consultation with the staff concerned. Clause 15 of the Bill provides for the transfer and Schedule 3 provides important safeguards for the staff of the SIEC. The same provisions also deal with the proposed transfer to the Agency of the activities and staff of the Small Industries Council. This is a logical step since its loans and advisory service which has been of great value to Scotland's rural areas will merge naturally with the financial and advisory service to industry which will be an important part of the Agency's functions. Indeed, SICRAS' experience with small firms will be of great value in developing a broader service to Scottish industry.

Here it might be helpful to your Lordships for me to say a few words about the relationship between the Agency and the Development Commission who, together with SICRAS, play such a valuable part in the economic and social development of our rural communities. Above all, I should like to emphasise to your Lordships our determination that there should be no hiatus in this work—no loss of momentum in programmes already under way—during the time when the Agency is getting itself into top gear. We have had full consultations with Mr. Donald Chapman, the Chairman of the Development Commission, and we have agreed with him that the Commission's activities in relation to rural economic development in Scotland will gradually be merged into those of the Agency but that in order to assist the Agency in the early stages the Commission will continue to make their expertise available until 1st January 1977. During this run-in period arrangements will be made to ensure the ongoing activities of the Commission in both the economic and social spheres.

As an example of the kind of co-operation we intend, I am pleased to be able to announce today that the Development Commission have been given approval for the programme of advance factories in the South-West of Scotland which they have worked out in consultation with the South-West of Scotland Development Authority. This programme provides for factories to be built in the areas of Kirkconnel, Newton Stewart, Gretna and Dalbeattie. The Scottish Industrial Estates Corporation will be authorised to act immediately as the Commission's agents in implementing this programme and when the Agency comes into being it will become fully responsible for the continuation of the work. We look forward to further similar initiatives by the Commission between now and the beginning of 1977.

I should like to say something now about the respective roles of the Scottish Development Agency and the National Enterprise Board in Scotland and the relationship between them. I think it would be true to say that it is this aspect of the SDA which attracts most attention in the media, and there has been a rather fanciful notion of Scotland as a battleground over which the NEB and the SDA will fight for the spoils. Nothing could he further from the truth. My right honourable friend will work out with my right honourable friend the Secretary of State for Industry, and with the two bodies themselves, guidelines for a complementary and co-operative relationship, and I see no inherent difficulty in this. But there is no hard and fast division between wholly Scottish industry on the one hand and industry wholly integrated in a United Kingdom sense on the other; so we consider that the division of responsibility should be dealt with by administrative rules which can be adjusted from time to time in the light of experience and according to particular circumstances. We shall publish these in due course, as it is right that Parliament—and essential that industry—should know what the arrangements are.

It has been a frequent theme of our debates on the Scottish economy over the years in your Lordships' House, that we should do more to foster and sustain the element of decision-making in industry which goes on in Scotland, and to the extent that the Agency can do anything to foster or secure this objective, it will be empowered to do so. Thus, Clause 2 empowers the Agency to do anything which will assist the establishment, growth, reorganisation, modernisation or development of industry in Scotland. But where these activities have implications for industry South of the Border—as frequently they might have—it is right that the SDA should consult the NEB about these implications, in the same way as the NEB will consult the Agency about its activities in, or affecting, Scotland. There are some activities which more naturally fall to be exercised at the United Kingdom rather than the Scottish level. The reorganisation of industries into more rational production groupings generally has to be looked at on the wider national basis, because there are extremely few industrial sectors which are confined to a single part of the United Kingdom, and reorganisation on a narrowly Scottish basis without regard to the policies being pursued at national level would be impracticable as well as shortsighted. In these cases, as I have said, the NEB will act in consultation with the SDA in any of the activities affecting Scotland.

Clause 12 of the Bill enables the Secretary of State to set financial guidelines for the Agency's activities and—as is usual—these are to be drawn up in consultation with the Treasury. We do not intend to impose an overall financial objective—a rate of return or whatever—for the Agency's activities; these are very diverse and some of them, like derelict land clearance, cannot be subjected to a particular financial objective. At the same time the SDA obviously needs to have some financial yardstick when it is investing in industry or setting up new projects. It is no part of our intention that the Agency should become what my right honourable friend has referred to as "a collector of crippled poultry". Thus, we shall expect the SDA to perform its industrial investment role in a way which is likely to secure an adequate return on its capital.

We recognise that occasions will arise when the SDA comes across worth-while cases where an element of subsidised help is also required. This is where the important new selective assistance powers of my right honourable friend come into play, and we shall encourage the Scottish Office and the SDA to work closely together on such cases.

The Agency's powers will extend to the whole of Scotland, so that its expertise and resources may be put to use in any part of the country, should the need arise. However, we have no intention of disturbing the special role which the Highlands and Islands Development Board play in the Highlands and Islands, and we do not envisage any diminution or disturbance of their work. Indeed, we have recently extended the boundaries of their area. We shall be working out arrangements with the two bodies for co-ordinating their activities—just as we have done with the Highlands and Islands Development Board and the Scottish Tourist Board, for example. We are very grateful for the many helpful comments which we received on the consultation document which was issued in January. There was a heartening amount of support for the proposals from all quarters, and to a very large extent they are now reflected in the Bill.

In particular, I should like to thank the many individual local authorities—both old and new—who took the trouble to comment at a very difficult and busy time. Our debate today takes place on the eve of a historic day for Scottish local government. Tomorow, the new regional, districts and islands authorities come into being. I am grateful to them for their general welcome of the Agency's proposals and their willingness and keenness to co-operate with it in its work. This co-operation will be absolutely vital to the Agency's success. I can assure them that the Agency is not intended to detract in any way from their powers and independence. It will bring new resources and expertise to bear on special problems which the authorities have agreed with us command special attention—cleaning up the environment and creating jobs—and it will work in partnership with them.

One aspect which is of particular interest to local authorities is our proposal for the SDA to undertake the complete financing of the derelict land clearance programme and undertake its implementation. Local authorities have strongly endorsed the case for an accelerated programme, and we have been impressed by their willingness to work closely with the Agency in achieving it. Therefore we propose in the Bill—and this is a direct result of our consultations—that the Agency should assume its derelict land powers on the same date throughout Scotland. This means that all local authorities will be relieved of derelict land expenditure at the same time. This is recognition of the fact that this is a national problem and that it should not impose an additional burden on certain areas where, quite fortuitously, the scars of the last Industrial Revolution appear at their worst. Clearly, of course, the SDA cannot take on the implementation of the entire programme at once. Therefore, we expect that it will make extensive use of the plans which local authorities themselves will formulate in the early stages. We shall be discussing the detailed arrangements to be adopted in each region with the authorities concerned, and it will be our firm intention to ensure not only that there is no loss of momentum in existing programmes but that we progress speedily to an expanded rate of clearance.

Closely related in many ways to the derelict land clearance powers in Clause 8 are the provisions of Clause 7 under which the Agency will be able, in close co-operation with local authorities, to devise and implement major schemes of environmental recovery. The kind of scheme we have in mind here is, for example, the redevelopment of the area at Cambuslang which has already been identified for a major recovery project, combining new industrial development within high amenity surroundings and for which imaginative plans have already been prepared. The implementation of these plans will be a priority task for the Agency and my right honourable friend hopes soon to be in a position to make a detailed announcement about how these will be followed through. This is just one example—but a particularly exciting one—of the sort of comprehensive development scheme which we have in mind for the Agency to undertake. Another example which comes readily to mind is the redevelopment which is needed in the Queens Dock area of Glasgow where, working with the local authorities, and with the resources and expertise which the Agency will be able to bring to bear, we can envisage the recovery of a whole area of vital strategic importance to the city and of considerable potential commercially. The Agency will not be short of ideas and we are determined that they should have the resources to turn those ideas into realities.

While the primary purpose of the Bill is to establish the SDA, it also contains a couple of additional provisions connected with the development of Scotland's economy. Clause 18 provides for a statutory Scottish Industrial Development Advisory Board, to which I have already referred. This Board will advise the Secretary of State on his new responsibilities for regional selective assistance under the Industry Act 1972. The Board in fact already exists for the purpose of advising on selective assistance cases currently decided in Scotland. It is now to have a wider role and is therefore being put on the same statutory footing as the Industrial Development Advisory Board in London.

Secondly, Clause 19 gives to the Secretary of State the power to provide financial assistance for domestic air services serving the Highlands and Islands. The Highlands and Islands remain a unique part of Scotland and despite the great progress which they have made in the past 10 years their sparse population and difficult geography continue to require special measures of assistance. An example of this is the special need for air services in the region. It is beyond dispute that these make an important contribution to its social and economic well-being and this has been recognised by successive Governments. In reply to a question in another place on 14th April my right honourable friend said that the Government accepted the conclusion of the Civil Aviation Authority—in their most informative Report Air Transport in the Scottish Highlands and Islands which they published in March 1974—that some air services in the region which are essential to the life of remote communities show little or no prospect of becoming viable. Because of this, the Government have decided that some financial support should be given to such services and Clause 19 provides the necessary powers.

I should like to recall briefly how we propose to use these powers. As noble Lords know, the British Airways Board have recently rationalised their aircraft fleet and disposed of what is called their "third level" aircraft. Loganair, a Scottish company whose whole experience is in operating short and thinly trafficked routes, are now providing services to Tiree and Barra, formerly run by British Airways. Although this still leaves Scottish Airways with a loss on their remaining network, the buoyancy of traffic in the North-East of Scotland offers the prospect that within two or three years the network as a whole could be nearing the break-even point. There is no correspondingly hopeful prospect for the network which Loganair operates. Many of their routes will clearly remain unprofitable for some time and we have entered into discussions with the company about the assistance which might be given, under the aegis ultimately of the powers in this Bill. It is not intended that all Loganair's services should be supported from public funds; the Government have in mind assistance on a selective basis, for example, on routes between the mainland and the islands; and to do so for a period of five years when the position would be reviewed. It is also a matter for consideration whether certain services might be assisted by a local authority rather than directly by Government.

In conclusion, my Lords, I would see the keynote of this Bill as the important new initiatives it embodies for securing the higher level of investment which is much needed in Scottish industry; for creating new employment possibilities; and for helping in the restructuring and modernisation of Scottish industry. These aims are vital to the future prosperity of Scotland. I mentioned earlier the beneficial effects of the vigorous regional policies which have been pursued over the years by successive Governments. Beneficial they have certainly been; but I think none of your Lordships would wish to argue they have been curative. They have provided the medicine to keep the patient alive but they have not rooted out the causes of the illness. A new initiative is therefore urgently necessary; new steps are needed to realise the growth potential of indigenous industry in Scotland and to promote and attract new developments. This new initiative is contained in this Bill in the exciting concept of the Agency, being established against the background of the Secretary of State's new powers and responsibilities to industry in Scotland. To be successful it will need the support and good will of every organisation in Scotland which has the same objectives. I wish to assure your Lordships that it will certainly be the objective of the Scottish Office and of Scottish Office Ministers to secure that full degree of co-operation.

The Bill adds two vital new elements to the existing machinery for Scotland: first, a substantial commitment of funds for a planned programme of renewal in the economic development field and, secondly, new powers to engage directly in the creation of jobs and the development of new enterprise. These are urgently needed if we are to overcome the legacy of the past and thus lay the foundations for a balanced prosperity for Scotland in the future. I therefore commend the Bill to your Lordships and beg to move its Second Reading.

Moved, That the Bill be now read 2^a.—(Lord Hughes.)

4.16 p.m.

Lord CAMPBELL of CROY

My Lords, I should like to thank the noble Lord, Lord Hughes, for introducing the Bill in his usual agreeable way and, again, for his stamina, because he had a lot to tell us. I should like to take up a point which he made at the beginning because, while this is listed as the No. 2 Bill, he gave the impression that it was not of the Government's making that it duplicates a Bill that has already been introduced in another place. But surely the Government must have miscalculated? It seems that they overlooked the right of Members in another place to have a Second Reading debate on the Floor of that place. They should have expected this to happen on a Bill of such significance, because this Bill seeks to create wide powers of the kind which the noble Lord himself said had never before existed in Scotland. There were the precedents of the Highland Development Bill 1965, and the Local Government Reorganisation Bill 1973, on neither of which there were to be Divisions, which were debated on the Floor in another place. That is how we come to find ourselves having a Second Reading debate on a Bill which is already in another place, yet switched to go through the processes here before it goes to another place. I would suggest with respect that to ease the legislative log jam which still exists, two or three Bills could be dropped altogether without anguish to anyone. Indeed it might have the immediate result among observers abroad of some accretion of confidence about the British economy if those Bills disappeared.

With much of the analysis which the noble Lord, Lord Hughes, gave us I agree, and especially with the needs of West Central Scotland, to which he drew attention. I do not agree, however, that the battery of powers to extend public ownership in this and the related Industry Bill is either necessary or wise; nor can I agree completely with the circumstances described by the noble Lord against which he is introducing this Bill. It is common ground that many people in Scotland in the last two or three years have been seeing a useful role for a new body to help finance industrial development operated within Scotland as a Scottish entity, the responsibility for it being with the Secretary of State for Scotland. Such a body, many people thought, would bring together some of the jobs which are now being done separately by other, smaller bodies.. For our part we have suggested a development fund for Scotland; others have suggested bodies with rather different functions. But all have been with the idea of supporting and complementing private industry—not replacing it or competing directly with private industry.

The bodies in Scotland representing trade and industry were well disposed towards that concept. The kind of events which have led to this are the rapid development of offshore oil installations and activity in Scotland, the arrival of grants and loans from the Common Market, and the fact that the Regional Development Fund of the EEC is expected to be making grants this autumn. Last year and the year before, when these ideas were being considered, such a body was not being contemplated in the context of an Industry Bill of the kind now worrying British industry, or of the National Enterprise Board to which a particular function is ascribed—here I am quoting from Clause 2(2)(c) of the Industry Bill— …extending public ownership into profitable areas of manufacturing industry; … I must warn your Lordships that we see this Bill as part of the Industry Bill complex. A comparison of the texts of the Industry Bill and the Scottish Development Agency Bill shows how this is so, because this Bill would give powers to the Scottish Agency greatly in excess of any it could possibly need. Instead of producing a Scottish entity, with a special mission to stimulate and support industrial activity in Scotland, it would produce a new régime, and a régime to be imposed over the whole of Britain based on the system in the Industry Bill.

Although there are to be a Scottish Agency and a Welsh Agency, many of the functions of these Agencies are those of the National Enterprise Board. If one compares the texts, one sees the Scottish Development Agency is to have many of the identical functions, but not all. This is a most significant point. Some of the most powerful functions of the National Enterprise Board are retained by it to be operated over the whole of Britain. For example, the vesting order power of Clause 10 of the Industry Bill is not one which the Scottish Development Agency is to have, nor is the function I have just described written into the Scottish Bill; extending public ownership into profitable areas of manufacturing industry.

Therefore, if the Industry Bill is passed in its present form, the situation will be that both the National Enterprise Board and the Scottish Development Agency will be operating under the same uniform system over the country, and their operations will be centralised, not devolved. The Scottish Development Agency will be operating in the name of the Secretary of State for Scotland. Comparison of the two Bills will show that in practice, he will be carrying out the requirements of the Secretary of State for Industry, or other Ministers of the Government. If one compares Clause 2 of this Bill with the Industry Bill, one finds many common functions, so that the Scottish Development Agency would become an arm of the National Enterprise Board, but would not have all its powers.

The National Enterprise Board would wield the even heavier weapons involving extending public ownership. This is unnecessary, because the 1972 Industry Act already enables the Government to help firms in difficulties. Indeed, already the Government have been able to use the 1972 Act for rescue operations. But the 1972 Act provides safeguards for industry as a whole against arbitrary expropriation by the State, either by the Government or by some marauding public body such as the National Enterprise Board. The new Bills do not provide those safeguards. Those safeguards reassured British industry, but the new Bills do not contain them.

Under Clause 2 the Scottish Development Agency's functions include acquiring premises, plant, machinery and equipment, as well as, carrying on, or establishing and carrying on,…industrial undertakings". So that the Agency will have power to acquire all that is necessary in the way of industrial plant, premises and land, and to establish or carry on industrial undertakings. This combination, together with several of the other powers proposed, makes it clear to industrialists and businessmen in Scotland that the Agency is not there mainly to support industrial activity, but is there to enter the industrial field, acquiring and competing with the advantages of all these powers to obtain information about the operations of rival firms.

As my noble friend Lord Watkinson said last week in the debate which he initiated, the efforts of businessmen who run private enterprise provide most of the financial sinews and most of our exports. Their efforts are needed now more than ever, but they will not be fully enlisted if those businessmen are antagonised by an open attempt to extend public ownership of profitable industry involving arbitrary take-overs, with the Scottish Development Agency acting for the National Enterprise Board in Scotland—if the National Enterprise Board is not directly involved. The initiative and ingenuity of Scottish firms have played a very effective part in winning business for industry, particularly in Scotland. It would be folly to discourage or stifle those attributes of the private sector; they could not be replaced.

In the running of many different kinds of industries, with all their intricacies, we rely on private firms; for example, in Scotland, in engineering of many kinds, in textiles and in whisky, and in other spheres private enterprise has been continually seeking out markets in the world and supplying them. More important, it has been foreseeing what the world will want next, and producing it in time at the right price. I mentioned whisky and in this context I should remind your Lordships that a union conference last October proposed that the distilling industry should be nationalised. It seems that nothing is any longer sacrosanct and, with the National Enterprise Board and the Scottish Development Agency prowling the land, no business could regard itself as safe.

My Lords, I should for a moment draw attention to Clause 14, and there is a similar clause in the Industry Bill. It limits the percentage of share capital and the amount of money that can be paid on the acquisition of an industrial undertaking. As the noble Lord, Lord Hughes, said, it is subject to the consent of the Secretary of State, but that is not of very much reassurance to businessmen and industrialists, nor is it much comfort to them when the purpose is stated quite plainly in the Industry Bill being to extend public ownership. The Secretary of State may well give his permission, but indicate that the limit is not enough. He may also wish to encourage the taking over of certain sectors. Scottish industrialists and businessmen are disquieted and worried about the Bill. Already they have made their objections very clear concerning the Industry Bill. Many of them in Scotland are disturbed to see a lot of the same functions being provided under the Bill for the Scottish Development Agency. The Scottish office of the Confederation of British Industry thoroughly dislikes these proposals and hopes that the role proposed for the Scottish Development Agency will be greatly altered.

The noble Lord, Lord Hughes, mentioned the report in the Glasgow Herald today. To me, it is not a question of the use of the words "Secretary of State". I think we Parliamentarians are familiar with the custom whereby that phrase is used in Bills and Acts to cover many Ministers. I confirm that it has not led to difficulties where Scottish legislation is concerned. But it is not the wording that matters; what matters is the close relationship between the wording of these two Bills, which indicates that in practice the Scottish Development Agency would be dominated by the Department of Industry and the National Enterprise Board.

This Bill and the Industry Bill, if unaltered, would spawn and let loose two new creatures which would be seeking what they could devour and presenting an ugly appearance to those who can clearly see their claws, which are the powers written into this Bill. In their presentation of the Bill I believe the Government have been guilty of trying to pull the wool over the eyes of people in Scotland.

The Bill provides for borrowing powers up to £200 million, and for further approval from Parliament to be sought for an increase up to £300 million if the economic situation and the Chancellor of the Exchequer permit. These provisions have been curiously described by the Government, and so reported in the Press in Scotland, as the injection of an extra £300 million into Scotland. But surely the total of borrowing must be limited at present; and indeed normally a great deal more than this would be going into investment expenditure in Scotland through normal channels, were it not for the parlous situation, for which the Government must take considerable responsibility. In the present situation the Government are being compelled, rightly, I am sure, to reduce overall borrowing and expenditure because of the economic situation.

As the noble Lord, Lord Hughes said, this is additional expenditure to the regional assistance, but it is very doubtful whether overall extra investment and expenditure in Scotland will occur otherwise than would be happening in other ways. If the Government were frank they should be describing the Bill to the public as follows: "The Government are setting up yet another public body to borrow your money. At the same time the Agency will be increasing public ownership and widening the bureaucratic web." I would add that this is Bennery trying to buy itself into Scotland. Having embarked on giving the false impression that extra money is being offered to Scotland, why do the Government stop there? Why not double the amount supposedly offered, make it £600 million, and offer at the same time to nationalise everything in Scotland? That, at least, would make the proposition clearer.

Now I come to a particular subsection. Perhaps your Lordships will allow me to concentrate on this, because I think it is most revealing. There is a subsection in Clause 2 which would enable the Agency to …do anything, whether in Scotland or elsewhere, which is calculated to facilitate the discharge of their functions or is incidental or conducive to their discharge. That subsection permits the Agency to "do anything"; those are the words, and then it continues as I have read. That appears to be the ultimate in granting blanket powers, and we shall certainly be seeking an explanation of what it means. We have seen it before; in the Industry Bill we find that the NEB is to enjoy the same liberties, whether to the detriment of other people or not. And they are not the only ones. In other Bills the Government are proposing similar extraordinary powers. In the very recent Petroleum and Submarine Pipelines Bill we find in Clause 2(1)(g) virtually the same words. Then in a more recent Bill concerning nationalisation of shipbuilding and aerospace industries, if one looks at Clause 3(7) one finds the same subsection.

This new form of wording giving blanket powers seems to be used by the Government in all the Bills I have mentioned, and, for all I know, in others which have all been published in the last few months. The point has already been raised in the discussion on the Industry Bill. This curious subsection has come under attack. The Government have indicated that they are unhappy about it. In due course I trust that the noble Lord will be ready to agree to Amendments on this and other points; and it looks as though Amendments should be made to the other Bills as well when they come to be considered.

In Scotland these new bodies are likely to be colliding with each other. There is the Oil Corporation, which will be active in Scotland, the shipbuilding body and the aerospace body. They will be colliding over businesses, property and land. When, in order to discharge their functions, two or three consider that the same facility needs to be expropriated under this subsection, if it continues in this form, who is to be the referee? Different Ministers are responsible for each body. Scotland would become a hunting ground for these maurauders. This example of identical wording confounds any contention that this is a Scottish project for Scot- tish conditions and dealing with distinctive Scottish problems.

Then there is another body, one already in existence to which the noble Lord referred, and that is the Highland Development Board. It has been in the field for about eight years with certain functions, mainly the awarding of grants and loans. There will be a difficult dividing line to work out, because they do not have the powers which this Bill gives to the SDA and which the NEB and ether bodies may have. Therefore, if these powers go through, those who live within their area may find themselves at a disadvantage, if they find not only the Highland Development Board but other bodies coming in and apparently all taking a hand.

The noble Lord mentioned the transfer of powers. I should mention this before I leave the Highland Development Board. In his opening remarks the noble Lord referred to June 1965 and the fact that in your Lordships' House he then Miloduced the Highland Development Bill, as it was called. I should remind him that it had already been through another place; in March 1965, when we had the Second Reading in the other place, it contained powers which were objected to. It was a greatly changed Bill when it reached this House, because the Government accepted Amendments which immediately made it impossible for the Highland Development Board to take over businesses against the wishes of the people concerned. The Government were very quick to make that Amendment, and others which followed, and I hope the noble Lord will follow that good example when it comes to the powers in this Bill.

The noble Lord referred to the transfer of functions under Section 7 of the Industry Act for selective assistance and, also, regional development grant functions which are being transferred from the Secretary of State for Industry to the Secretary of State for Scotland. I agree that this is a significant transfer of functions. I can acknowledge this, having myself been involved in the establishment of the Scottish Development Office in Glasgow, and the arrangement whereby all the work on applications for grants of various kinds started to be carried out in Scotland. But the impression is being given—the noble Lord did not do it today but he came near to doing it—that the responsibility for the sponsorship of the whole field of Scottish industry is being transferred from the Secretary of State for Industry to the Secretary of State for Scotland, and that all the continuous diologues on technical and other matters between the industries in the country and Department of Industry or to be transferred to the Scottish Office. That, of course, is a false picture, and it should be registered that it is simply the important functions concerning grants for regional development purposes which the Secretary of State for Scotland is assuming.

Any suggestion that the Secretary of State is now the Minister for Industry in Scotland is misleading. The principal industries, such as engineering, electronics and textiles, are still sponsored by the Department of Industry, as are most of the other industries in Scotland. Their health and prosperity will be in jeopardy if ragged holes are torn in them by the so-called teeth of these new agencies and boards. Before they try to alter the record, it should be noted that the SNP at present support the Government's proposals for this Agency. They can now be seen as the Scottish Nationalisation Party. They appear to welcome this nightmare world of appointed public bodies vaguely responsible to Parliament, but under the general direction of Central Government. That seems an unusual line for that Party to be adopting.

The Bill, also, as the noble Lord pointed out, deals with tidying up the environment and with derelict land. These powers are available already to local authorities, and I think it should be made clear that legislation is not necessary in order that this work should be done. But I see the point about expense. If the Government could relieve the local authorities of the expenditure by reimbursing them, that work could be carried out without this Agency taking a hand. Certainly it would have lightened the legislative programme not to have brought that side in. The noble Lord said he thought it was novel that the Agency should be dealing with these quite separate problems as well as development of industry, but it is simply the unnecessary side of it to which we should like to draw attention, because it is going to mean changes in the system and these may not be justified.

In general, the charming description which the noble Lord gave of apparently innocent proposals is not supported by the wording of the Bill, nor is it supported by the wording of the closely related Industry Bill. Scottish businessmen and others have already observed this with dismay. They know that it is powers passed by Parliament that matter, not reassurances by the noble Lord, Lord Hughes, who is always very convincing and bland in assuring us that all is well. Businessmen and industrialists know that it is what is written in Bills and finally passed that matters. Therefore, changes and amendments will be necessary.

I have seen all this before. I mentioned the Highland Development Board just now and the changes which I am glad to say transformed that Bill at an early stage and which the Government of the day accepted. But I have also seen it with the Transport Bill. I was on that marathon Committee in another place which broke all records, and during the course of nights and days no fewer than 23 pages of the Bill were dropped during the Committee stage. They were very much the same kind of thing: powers, taxes, things which were going to damage industry. I hope that the noble Lord will approach this Bill in the same frame of mind as his predecessors on those occasions, who were prepared to cut out whole sections of the Bill or make amendments to provisions which would otherwise have been damaging to industry.

The Bill as drafted will not produce the kind of body which many people in Scotland were expecting nor will it produce the kind of body which the noble Lord was describing in most agreeable terms. When one looks at the Bill and compares it with other Bills, one finds it is in fact quite a different kind of creature. Rather would this Bill as now drafted, with its parent the Industry Bill, establish a new regime over the whole country, with unprecedented powers being given to new bodies centred on London and the Department of Industry. We believe that that regime is unnecessary and that it is a threat to Scottish industry, and we shall aim to get the Bill substantially changed during its passage through Parliament.

4.43 p.m.

Lord TANLAW

My Lords, we are, as usual, grateful to the noble Lord, Lord Hughes, for his gentle and detailed presentation of this important Bill. My only criticism of it is that he was a little too modest about his own considerable achievements in regional development on both sides of your Lordships' House. He made reference to the unfortunate difficulties in another place which produce this Bill here. This is the wrong time and place to have such a Bill. Certainly when I see the Benches empty of Scottish Peers I begin to wonder what we should do with a Bill that is concerned primarily with regional issues; issues that directly concern and can be spoken un for by representatives of the constituencies in another place. However, I hope that the noble Lord, Lord Hughes, will accept the fact that we on these Benches will look upon this as a No. 2 Bill and hope that it will go through in Committee without any alteration on our part, on the basis that when it gets to another place there will be a full and detailed discussion of every clause of the Bill before it comes back to your Lordships' House.

I was also glad that the noble Lord, Lord Hughes, managed to give a description of the Secretary of State. I did not feel that the Secretary of State, as named in the Bill, represented anybody else but whom he usually does. It might also be worth saying to the noble Lord, Lord Campbell of Croy, that we are not perhaps as concerned as he is about a but-and-ben being behind every clause of this Bill, nor are we concerned that our wee doch-an-dorris is going to be infected by the National Enterprise Board. We welcome the role of the Agency as outlined by the noble Lord, Lord Hughes. We welcome the multiplicity of the roles vested in the SDA. These were outlined in the Consultative Document and developed further in the noble Lord's address. We also welcome the emphasis on urban renewal, and hopefully in Central Glasgow, where to me the housing situation is a blot on the conscience of every feeling Scotsman. At the same time the lack of housing in growth areas on the East Coast should not be overlooked by the Agency if commercial prosperity is to be maintained at the current rate in those areas.

As to the function of the Agency, it is described as an investment bank to Scottish industry. That is a fair and commendable description of the functions of such a public organisation as this. But I should like to draw the Minister's attention to a small point which is perhaps a misprint in the Consultative Document. Paragraph 5(a) states that the SDA will provide loan finance and equity. I have not known any merchant bank, industrial bank, or any other bank that actually provides equity to help its customers. This could be a misprint, and is perhaps referring to equity-linked loans, which are quite a normal way of financing industry. If it is not, perhaps the noble Lord will enlighten me, because this would be a new and avant garde form of financing unknown before.

The encouragement of industrial investment is another area which is going to be fostered by the Agency in Scotland. We warmly welcome this. The SDA has a chance of really succeeding where other efforts in this direction have been singularly unsuccessful. If the Board is as representative as is described in the Bill and the Consultative Document, there is just a chance that when loans are granted to industry for modernisation there will be a breakthrough in understanding, so that if that modernisation creates possible areas of redundancy through the introduction of new and labour-saving plant these installations can be made without any form of industrial unrest. The Agency may well prove to be an excellent link in putting forward this line of thinking. I believe that industry and boards of management have been scared stiff of cutting down their over-manning percentages and installing new machines because of the possibility, or probability in some areas, of industrial unrest that would affect the whole enterprise.

I believe that the current demand for 30 per cent. wage increases or more must cause many industries in Scotland that are already over-manned and are operating semi-labour intensive processes either to shut down or to re-equip. We should hope in these cases that the SDA would not supply the necessary loan capital for investment without ensuring first that the new plant will not be overmanned after its installation. I am worried about this matter, because there is no reference in the Bill or in the Consultative Document about retraining. From what I have just said, it will be seen that retraining is an important element, indeed an essential element, in the installation of new machinery where redundancy is to occur. I hope that this is just an oversight and, if it is, that it will be rectified in Committee.

Alternatively, it is just possible—and this is perhaps an even more worrying aspect—that it is the Agency's policy to encourage investment on the condition that there are no redundancies, even if the result is over-manning of new machinery. This would be a tragic waste of public money, and ultimately do far more harm than good to Scottish industry in the short, medium, and long term. I am sure that this doubt at least can be dispelled during the passage of this Bill through Parliament or, indeed, even at the end of this debate.

There are, however, two other doubts which must be overcome before Scottish industrialists will be trampling on their toes with cap in hand to the new office of the SDA, wherever it is to be in Glasgow, for these new loan facilities. The first doubt concerns the relationship of the SDA with the National Enterprise Board. I do not intend to dwell for any length of time on this matter, but the noble Lord the Minister states that there will be no hard and fast division between the activities of these State agencies. Indeed, he goes on to say that they should have no difficulty in "a complementary and co-operative relationship".

My Lords, sooner or later an association of this kind usually has to be formalised with a marriage certificate. Certainly, when first cousins are involved, as in this case, such liaisons should be discouraged at the outset. I am sure that the Secretary of State will want his commercial offspring from this new Agency to grow up into normal healthy enterprises. The only way he can do this is to get his pedigree right, and the only way he can do that is to dispel the doubts about the autonomy of the SDA and restrain the National Enterprise Board's activities to companies which are registered South of the Border. I think that this would clear up all the worries that the noble Lord, Lord Campbell of Croy, seemed to have about the NEB.

The second doubt that industrialists might have concerns the whole question of the continuity—this, unfortunately, I do not think the noble Minister touched on in his address—of regional development incentives. Businessmen can be excused for being extremely confused about what they are entitled to and where they are entitled to it, because not only have the investment incentives been changed time and time again since 1963—which is the 10 years which spanned the noble Lord the Minister's speech—but so have the geographical areas to which they apply.

The Economist—I suppose most noble Lords have already seen it—recently published a table to illustrate this point, but I should like to remind the noble Lords just how many and how substantial the changes of, policy have been. In 1963 the Local Employment and Finance Acts provided buildings and plant and machinery grants at varying rates, plus accelerated depreciation which applied to what were then called development districts. In 1966 the Industrial Development Act gave 40 per cent. investment grants to replace all existing allowances and applied them to the new development areas instead of the old disstricts. In 1967 special development areas were added and increases were made to certain other industrial grants.

In early 1970 the Local Employment Act created intermediate areas and advance factories, and altered the building grant. Later the same year and in the following year the Conservative Government extended the special development areas and all investment grants were replaced by "free depreciation". Further alternatives to the grant system were also put forward. But in 1972 the Industry Act changed the system back again to investment grants: 20 per cent. in development areas and 22 per cent. in special development areas. Regional executives were created, with power to award additional grants and loans of £250 million.

In 1975 we have before us the Scottish Development Agency Bill, with further changes in the system of regional assistance and at the same time retaining all those that I have been reading out. It is small wonder that British businessmen may be confused, and are suspicious of the constant changes in the system of investment incentives, because they are changing far too fast and changing in shorter periods of time than allow for any capital equipment they may have to depreciate at all. Capital equipment of the kind that the Special Development Agency is intended to support should have a minimum life of 5 years and certainly one of 10 years.

This, of course, is more than substantiated by the Second Report from the Expenditure Committee, which states at page 8 under the heading "Continuity": One of the strongest single themes to emerge from the evidence given by industrial firms was the lack of continuity in incentives. At least 13 of the 20 firms that gave oral or written evidence specifically stressed this point, as did the CBI. Paragraph 17 at page 9 says: The Government has stated that it intends to maintain the present system of incentives at least until the transitional period of entry to EEC is over, i.e., to 1st January 1978. The Department of Trade and Industry regarded this commitment as of a totally different order from anything of the kind that had occurred before, within of course the limitation that one Parliament cannot commit another. These quotations from Government Papers express quite clearly the greatest single criticism of this Bill, which is that the Government are in no position to guarantee permanence for the Scottish Development Agency or its system of incentives, not only for the reasons given by the Department of Trade and Industry but because there is still to be resolved the question of our continued membership of the EEC and Scotland's eligibility for the regional grants. Furthermore, and perhaps most important of all, a Scottish Assembly which will take on most, if not all, of the powers presently vested in the Secretary of State must have the right to decide what future role the SDA will play in the Scottish economy, with or without the National Enterprise Board. Finally, the Government's observation on the Second Report of the Expenditure Committee (House of Commons Paper 85) seems to recognise the need for continuity, but it can offer no further assurances in this direction. I think this is a serious defect in this Bill.

I should like to conclude with the matter of advance factories mentioned by the noble Minister. Indeed, they always come up under any body or any recommendation for assistance to regional areas. In this case the Scottish Development Authority was mentioned. I have already gone on record in this House with my views on advance factories, but I am very pleased—and I hope that the noble Minister will not get me wrong—that the policy of advance factories is still being pursued vigorously by the SDA; but, when all is said and done, an advance factory is only an empty shed awaiting an occupier and, according to the Report of the Sub-Committee on Regional Incentives, some of them have to wait up to 52 months before they can find a willing renter. My point about advance factory policy in Scotland is the same as I made to the noble Lord, Lord Polwarth, in a similar debate on regional incentives. It is simply this: jobs are linked more closely to the availability of housing than to factory space. Nowhere is this point more relevant than in Aberdeen. Unless proper housing is arranged by the local authority, is it unlikely that industrialists will come to set up and use advance factories? So I sincerely hope that the SDA, which will have a great influence in this area, will recognise that vital point.

I should like to say a brief word about the environmental applications. I think the noble Lord the Minister mentioned that the problem of derelict land was a United Kingdom problem and I believe I may be right in saying (the noble Lord the Minister will correct me if I am wrong) that 80 per cent. of the derelict land in this country is owned by the public sector. I feel that it is the responsibility of those industries that created the mess to clear it up. I do not see why the Special Development Agency should run around with a large dustpan and clear up the mess made by other public industries. If local councils have derelict areas that need clearing up they should do it, and I do not see why the SDA should use its valuable funds and potential in this way. The provision of proper housing in the Govan and Glasgow Central divisions, as part of an urban renewal programme, is by far the most exciting and beneficial project set out in the prospectus of the SDA. Situated in Glasgow, the Agency will be extremely well placed to supervise such a programme, and I hope that it will be given the highest priority in the years to come.

A word about Loganair, to which the noble Lord referred as being the airline which will have the duty of fulfilling the Highlands and Islands air service. Will the Minister explain why the Highlands and Islands Development Board cannot finance Loganair? Why should the SDA have to finance a Highlands and Islands operation? After all, the Highlands and Islands Development Board is right there on the spot and its clients, so to speak, will benefit from this service. There may be technical reasons for this arangement, but I suggest that the Highlands and Islands Development Board should be asked to consider doing this, because I do not believe that running an airline is part of the main duties of the SDA. Operating an airline is a specialist business and it looks as though it will be an unprofitable one in any case.

Lord HUGHES

My Lords, there is no question of the SDA running an airline. It is a question of providing a subsidy—and I will deal with the point of the Highlands and Islands Development Board later. But I suggest that if there is to be a Government subsidy Loganair will not care very much whether it comes out of the right hand or left hand trouser pocket.

Lord TANLAW

My Lords, I accept what the Minister says, but presumably if money is advanced to Loganair there will have to be representation on the Loganair board to see that it is used properly. I now gather that there is to be no such representation. Would the Minister tell me why the unfortunate ratepayers in these very under-populated areas in the Highlands and Islands should be asked to chip in to pay this subsidy? This to me seems unfair and I hope that something can he done about it. If the ratepayers can be saved from having to assist a non-profitable airline run by the Highlands and Islands Development Board, I am sure that the Minister will earn the gratitude of these people.

Lord HOY

My Lords, would the noble Lord, Lord Tanlaw, explain, when he says that local ratepayers will be asked to pay, how they will be asked to pay for this service? He must have thought it out.

Lord TANLAW

My Lords, I can best answer the noble Lord's question by recalling a mention somewhere that the local authorities—and I imagine that they are subsidised by the ratepayers and, indeed, by the Government—will also be paying. That is the only reference I have seen, but I imagine that ratepayers do pay their money to a local authority; I do not know to whom else they pay it.

I come to the financial disciplines laid down for the Special Development Agency, which are outlined in Clause 12 of this Bill. We fully accept that projects like the urban renewal programme to relieve hardship and so on can produce only human rather than commercial benefit, but it would be helpful to know how the funds offered by the SDA compared with the ordinary facilities available through the orthodox banking system. Are the rates of interest more competitive than those presently available, and what, if any, security will an enterprise have to put up as borrower for the use of the SDA's funds? Are these loans which are made by the SDA intended to be in any way equity linked, as is indicated by the Consultative Document? I ask these questions because the security that is given to a company's bankers is rarely, if ever, called in, except in cases of liquidation or when all else fails. This is primarily due to the fact that bankers want their clients to succeed and prosper and they have no desire whatever to acquire the commercial assets that are given as security or collateral. The recent slump in property prices was an example of this. The banking system suffered very badly and is still bearing the asset burden of these loans.

However, when the lender is a State Agency which sets out to be an investment bank with powers to acquire assets and equity, and not simply to lend money, it is a very different story. Many industrialists have cause to worry if, when loans are accepted from such an Agency and further recourse has to be had for an extension or for more funds, the security offered for the original loan may be taken up by the Agency as a condition of that loan agreement or under the powers of this Bill. This is the declared policy of the National Enterprise Board and it is to be hoped that this same policy will not be pursued by the SDA, which is designed, as we have heard, to assist medium and small sized companies in their expansion programmes. The greatest assurance that can be given by the Minister to industrialists in Scotland who want to take advantage of the SDA's services is for the Agency to sever all connections with the National Enterprise Board. Unless this happens, or unless, as I have suggested, the National Enterprise Board makes itself concerned only with those companies which are registered in England rather than Scotland, many opportunities will be lost in the regeneration of Scottish industry, which is the primary function of this Bill.

The top management team as outlined by the Minister is both commendably small and representative of industry as a whole. But the skills involved in investment banking are highly specialised and I hope that the Board and its advisers will call on all existing bodies with experience in this field—bodies such as the ICFC—to guide them in their investment programme. Perhaps the Minister will give some clarification of this when he replies to the debate. As to the staffing of the Agency, we are pleased to note that the Bill takes care of the security of employment, and so on, of the rather large number of staff shown to be involved with the SDA; 470 persons will be employed by the Agency, which presumably represents about 80 per cent. of this very large overheads bill of £3½ million per year.

It would be only right for the Minister to give the designations and a breakdown between those who are salaried and those who are wage earners on this new Agency. It would also be interesting to know what percentage of the 470 personnel, rising to 750, will be resident in Scotland; and I have no doubt that the Minister will say "100 per cent." loud and clear at the end of the debate. I also hope that, on the same question, the Minister will be able to explain the anticipated 50 per cent. increase in staff which is shown in the explanatory notes to the Bill because, as I see it, as the resources of the SDA become depleted it is normal commercial practice to decrease one's overheads in the form of staff. It seems from the explanatory notes that as the resources are depleted the overheads in the form of staff are increased proportionately. This goes against all commercial practice, but it may be a special formula followed in the Civil Service. I believe that some clarification is needed, because we have already mentioned the problems of over-manning. I hope that the SDA will be vigilant in the way in which it gives its loans and at the same time I hope and presume that it will not itself be overmanned.

In conclusion, I do not want to leave an impression in the mind of the noble Lord, Lord Hughes, that we do not welcome the good intentions behind the Bill or the objectives outlined for the SDA. The doubts I have expressed will, I hope, be allayed during the passage of the Bill through Parliament and when it has been fully debated in another place. Until then, it is our intention to leave the Bill as it stands.

5.11 p.m.

Lord DRUMALBYN

My Lords, first of all I should like to express my gratitude to the noble Lord, Lord Hughes, for the very clear and full explanation which he gave of the Bill. That will relieve me from saying some of the things which I had intended to say. Also, my noble friend Lord Campbell of Croy has covered so many points that I should be able to keep my remarks down to a fairly short compass. I should like to deal with the principle here. There has for so long been a demand in Scotland for more control of industry in Scotland that it would be churlish to say that what is proposed is not good enough. We are glad to see this transfer of powers and we hope that they will work well. I do not altogether share the noble Lord's optimism on the very close co-ordination which is to exist between Mr. Benn and Mr. Ross in these matters, but we shall hope for the best. I hope that they will be able to work out a proper system of deciding which industry needs attention, in what parts of the country it needs it, and so on.

I should like to deal with a question which has not really been mentioned so far; that is, do we need an agency of this sort at all? We already have the Scottish Industrial Estates, and there could be an agency with expanded powers to cover the development of particular areas. But, for the industrial and even the commercial powers that are taken over in the Bill, could the noble Lord indicate in his reply why it is he thinks it necessary to have an agency? Would we have had one at all or would it have been proposed now had it not been for the Industry Bill? After all, there is a perfectly good development Department in Scotland and surely it could have done the type of jobs which have been done by the Board of Trade, the Departments of Trade and Industry, and all the successor bodies for many years past. I am sure that the Minister will not say that a development agency can do this job more efficiently than St. Andrew's House, because I do not believe that. People like to feel that they are dealing with Government and not just an agency. There is a strong psychological element here.

The issues the Bill has to deal with on the industrial side, as I see them, are, broadly: how to finance modernisation, diversification and expansion of industry in Scotland; how to maintain and expand employment in viable undertakings which run into temporary difficulties; how to do all this under proper Parliamentary control and without impairing the initiative of the private sector and fair competition, as well as how to encourage Scottish-based undertakings and, at the same time, encourage overseas investment in Scotland? Last but not least, there is the issue of how not to stop the investment which is coming up from England and which has in many cases been guided up from London to the North. How will that be done in the future?

On these issues, there is of course a fundamental difference between the Parties on the function of Government in providing finance. It is inescapable. We see the Government's role as one of pump-priming and rescue for viable industries until they can get back on their feet again. Let no one underestimate the target set for an industry by a desire to get rid of any obligation to the State and any holding of the State in the industry. It is a great target. I am not so certain that it will be so easy to set a target with permanent participation of the State, which is what the Party opposite want the Government to do. They want the Government to participate permanently in undertakings and even to establish State undertakings in competition with a private sector. We are faced with a situation in which there is a shortage of capital, due mainly to excessive taxation and price restriction, which leaves industry with too little surplus for investment, to the lack of confidence of the private investor and of business due to Government policy, and to the failure of the Government to control inflation. In these circumstances, there is plainly a need for Government finance in one form or another. The question is how the Government are to find the very large sums of money foreshadowed in this and other Bills without stimulating inflation and without further damaging existing industry. The Bill looks clear enough on the surface, but it gives rise to many questions. I do not propose to put those questions now. We shall be raising them in Committee but, following on what was said by the noble Lord, Lord Tanlaw, perhaps the noble Lord, Lord Hughes, will be able to tell us, now that the distribution of industry provisions in the Industry Act are being taken over for Scotland—I think I understood him to say that—who will decide whether Scotland is to remain a development area and what parts of Scotland are to be special development areas in future. Who will decide whether the grants towards capital expenditure or the descriptions of qualifying activities are to he varied in Scotland and for Scotland alone? Must the decision be the same for the United Kingdom as a whole or will the Secretary of State for Scotland, with the consent of the Treasury—a phrase which is scattered throughout the Bill—be able to vary the percentages of grant to suit Scotland?

My Lords, I believe that these are relevant questions and, on the wider issues, the noble Lord, Lord Hughes, has said that, where it is a question of considering an industry on a United Kingdom basis, this can be done by the two Secretaries of State in conjunction. But is the Secretary of State for Scotland to develop sponsoring Departments for industries in Scotland? The Minister did not mention this point, but I believe that it is very important.

The noble Lord, Lord Hughes, referred to the Highlands and Islands Development (Scotland) Act 1965. He will remember that I gave that Act my blessing from this side of the House, but that I made it clear that I did so because the Highlands and Islands needed special treatment that St. Andrew's House was plainly unable to accord to them under the arrangements which existed. They were too remote and too scattered.

My Lords, I am not certain that the establishment of the Development Agency for the purposes of industry is wholly justified and I fear a very considerable diminution of Parliamentary control. It is difficult enough for Parliament to keep control of the Secretary of State's activities, but, when it is put at one remove and the Secretary of State is given powers to consent, to give directions, and so on, which at the best will probably only be revealed in the Annual Report which comes out in October the following year, I very much doubt whether the powers of Parliamentary control in the Bill are sufficient. I hope we shall do our utmost to see that Parliament is able to control what is going on. I think it is for consideration whether the powers of the Parliamentary Commissioner should be brought to apply to the Development Agency as well.

There is a detailed point I wish to mention. There seems to be some conflict or overlap between the powers under the Industry Act and Clauses 2 and 5 in this present Bill. Clause 2 gives as one of the purposes for which the Agency may exercise its functions the: …provision, maintenance or safeguarding of employment… while Section 7 of the Industry Act contains an identical provision for the purpose of financial assistance under that Act. It appears that in some cases it may be difficult for the Agency to know when it can act on its own and when it must seek a direction from the Secretary of State.

I do not think one should underestimate the extent to which "flexibility" is being given to the Agency—this is the word which the noble Lord. Lord Hughes, used—under this Bill. It is a very considerable flexibility indeed—to enable it to acquire securities without the consent of the Secretary of State, provided that the consideration for the acquisition does not exceed £2 million, and does not entitle it to more than 30 per cent. of the votes in the company.

As I understand it, the Agency will be able to form bodies corporate and set up and run an industry or an industrial undertaking without the consent of the Secretary of State. "Industrial" includes any commercial undertaking. If it gets the consent of the Secretary of State, it can acquire a majority holding, or entire ownership, of any undertaking. It can acquire land compulsorily; it can make and carry out plans for the development, redevelopment or improvement of any area. As I understand it, it can acquire an interest in the seabed. Perhaps the noble Lord will be able to explain the extent of the interest in the seabed. Does this apply only to Scotland, or to the territorial waters around Scotland?

Lord HUGHES

My Lords, I hope the noble Lord will permit me to interrupt-him for a moment, in case I forget about this later. He was referring to the acquisition of shares, and so on, in companies, and the power to acquire land compulsorily. It would be appropriate to point out that there is no power to acquire shareholdings by compulsion: it can be only by agreement with the company concerned. I think the impression was given earlier that there could be a take-over of companies against their will. There is nothing in the Bill which would permit that to be done. I shall have something to say later about the matter of acquisition of land by compulsion, and the circumstances in which that could be done. But it is important at this stage to distinguish between these two aspects.

Lord DRUMALBYN

My Lords, I am grateful to the noble Lord. I hope I did not give the impression that I thought there was such power to acquire shares by compulsion. I am really dealing with where the Secretary of State's consent is required and where it is not.

My Lords, at the Committee stage we shall expect the noble Lord to justify in considerable detail the provision of both these powers and of so much money. We shall expect him to demonstrate that the powers will be used to stimulate competition, not to stifle it. I for my part am not satisfied—at least not yet—that it is right for the same body both to take over the functions of the Scottish Industrial Estates Corporation and to undertake the development of land and areas as a whole—because in that way it becomes an industrial property developer—and to enter into the production field, very possibly in competition with its own tenants. I believe that the job of the State is to create the conditions in which industry can flourish. The Government, having brought industry almost to its knees by excessive taxation and failure to control inflation, ought at least to help it hack on to its feet again. I hope that there will be no question of bullying industry into losing its independence.

5.24 p.m.

Lord LYELL

My Lords, first I wish to thank the noble Lord, Lord Hughes, for the clarity with which he set out this very complicated Bill. I should say immediately that all of us in Scotland want to see Scottish industry and commerce flourish. But at the same time the powers given in this Bill both to the Agency and to the Secretary of State seem to be almost limitless—at least according to certain clauses of the Bill. I think immediately that the analogy of Walter Bagehot's definition of the British monarchy springs far too easily to my mind, in that the Secretary of State has the power to do a great deal that is good, yet according to the Bill he does not seem to find his powers limited when he may wish to carry out a dangerously partisan act, which could be harmful to the long-term interests of Scotland's economy.

I am sure that the noble Lord, Lord Hughes, while riot empowered to do a great deal himself under the Bill, would not do anything—and I hope his colleagues would not do anything—which would remotely qualify as harmful. But the noble Lord must know that Scotland is a diverse nation, and some of us in Scotland have doubts in that the powers in the Bill might not necessarily be used to benefit the most deserving areas. Specifically, I am rather concerned by the powers given to the Agency under Clause 2, particularly where it says that it will have powers to promote industrial democracy in undertakings which the Agency controls. While this may appear to be totally beneficial in spirit, it could mean that labour relations in these various enterprises become somewhat strained. I am sure that the noble Lord, Lord Hughes, will know that some concerns which have come to Scotland—not just to our own areas but to all over Scotland—as a result of Government encouragements have had major problems concerning labour relations. This is not general. There are only one or two well-known examples, but unfortunately they are quite large employers. They have had somewhat strained labour relations. I am happy to say that most of the enterprises that have come to Scotland in the past 10 to 15 years—particularly to Dundee—have had very good labour relations; in fact better than those in other parts of the United Kingdom.

I consider that another clause contains a little too much power for the Agency, and this is additional to local authorities having the power to acquire land for development. The Agency seems to have the ability to acquire such land as may be necessary to secure an adequate supply for industrial undertakings. This is praiseworthy in theory, but I ask the noble Lord to consider whether, in addition to the future legislation which we are to see concerning land tenure and the National Enterprise Board, this part of the Bill seems to use an elephant to crush a flea. I believe that adequate powers are available to industry and to the Agency under existing legislation without taking these further wider powers.

With regard to finance, I wonder whether the noble Lord in his reply could give us a fairly general idea of what we in Scotland are to enjoy for the £300 million worth of public investment, on top of all the forms of assistance and inducements already available to us. One should be fairly brief at this stage. Most of the points have been covered by previous speakers. I would not seek to argue in principle with any of the proposals in the Bill. But it it is to be administered in a spirit of good will, whereby the noble Lord, Lord Hughes, has helped, particularly in Dundee and Tayside (our own area), I give it my qualified approval. But I am afraid that I must reserve my position over the apparently very wide powers in the Bill given to the Secretary of State and to the Agency.

5.29 p.m.

Lord HOY

My Lords, I have listened to every word of this debate and I am happy to take part in it. Unlike the noble Lord, Lord Tanlaw, I shall not complain about the attendance this afternoon, because as I look round I see present 40 Members of your Lordships' House. There are 14 Scottish Peers present. This is not a bad attendance. Perhaps the noble Lord, Lord Tanlaw, does not come here too often and is unable to make an assessment of attendances. I want to do it this afternoon because only last week I was complaining about the lack of attendance and saying that there was not a single Peer present on the Back Benches opposite. If I wanted to be more particular, I could say that there was not a single Peer on the Front Benches or the Back Benches of the Liberal Party. That was an occasion when the Minister of State, my noble friend Lord Hughes, was making a very important announcement regarding Scotland and the extension of the area of the Highlands and Islands Development Board. All I shall say this afternoon is that, so far as I am concerned, there is a remarkable improvement on last week, at which I should like to express my pleasure.

My Lords, I was a little surprised at the way in which the noble Lord, Lord Campbell of Croy, opened the debate from the other side. It never does any good to take a little snivelling, procedural point and try to create it into an issue. This matter is far too big for us to be bothered with that kind of thing. What we are discussing this afternoon, whether we like it or not, has to do with what is going to happen to the economy of Scotland in the future, and in fact how it can be helped forward. Whether we like it or not, we have to take a view about whether we like or dislike the Government proposals. In all the speeches heard this afternoon—and I have heard every one of them—we have not had a single alternative to the scheme submitted by my noble friend—not one!

Lord CAMPBELL of CROY

My Lords, the noble Lord could not have listened very carefully. I referred to our scheme for a Development Fund. I was not going to take up time on this Bill in giving a 20-minute description of that.

Lord HOY

My Lords, I know the Development Fund very well indeed—and the 1972 one. I remember its results The noble Lord was then Secretary of State for Scotland, and we had the highest record of unemployment in Scotland since the 1930s. Obviously, that was not a solution to the problem.

Lord CAMPBELL of CROY

My Lords, it had not started.

Lord HOY

We had to find something else to meet the situation; because what he suggested had been a failure. The noble Lord said that it had not happened.

Lord CAMPBELL of CROY

My Lords—

Lord HOY

With respect, I have already given way. I did not interrupt the noble Lord. Perhaps he will let me finish my sentence. He was saving that what we were suggesting was not necessary; then he instanced one or two cases, including the 1972 Industry Act, as a rescue operation which he thought was necessary. All I am saying is that, whether it happened or not, what we were faced with in Scotland was an unemployment population higher than any since the 1930s. Now I will give way.

Lord CAMPBELL of CROY

My Lords, I am most grateful to the noble Lord who, over the years in another place and here, has been most courteous to me. He inadvertently misunderstood what I said. The Development Fund was a proposal of our last year in Opposition. It has never come about When the noble Lord said that not a single alternative had been put, I wanted to indicate that I had mentioned that alternative: but I had no intention of using the time on this Bili to expand on this alternative plan.

Lord HOY

My Lords, I understood that point. The noble Lord will give me credit for having been long enough in this House and in another place to understand what is being said. All I say is that whatever was suggested, when he had the power, if I exclude everything else, Scottish unemployment was at its highest level. I do not say that he personally was responsible for it. I pointed out what the result was, and that whoever succeeded him had to take other action to find a solution.

A solution is not always possible. I do not say that this is a panacea for all ills; I am not altogether convinced that this is the way it should be done; I am not certain about that. I express doubts about it to that extent. When the noble Lord said that all that this Bill does is to provide £200 million per annum, by permission of the Chancellor of the Exchequer, which might go to £300 million by permission of the Chancellor of the Exchequer, if that were a criticism, the noble Lord himself knows that no Government, of whichever Party, can make these financial provisions in any Bill without the approval of the Exchequer—whether it be this Government or a Tory Government. So in this point there is no change at all. All the expenditure comes through the Exchequer and must he approved by the Treasury. Many Members sitting on these Benches who have occupied Ministerial positions in the past, know that this procedure has not differed one whit; and not one of them will deny it. This Bill makes no change in that respect. I only hope that we will have sufficient projects to use up the money that is available to build up the internal economy in Scotland.

The noble Lord, Lord Drumalbyn, concluded by saying how this Government had brought industry to its knees, or something like that. He hoped we would give a little assistance to put them on their feet again. Again, he was for a long time a Minister at the Board of Trade. I do not remember that he was particularly successful. I do not remember; he may have been so, but certainly he did not bring it to my attention. I heard him yesterday indulging in an exercise on investment and industry in Britain. Even this Government were taking steps yesterday to rescue Ferranti. Let there be no mistake about it, Ferranti is an industry which is important in Britain as a whole, and certainly in Scotland. It has a very important part inside the Scottish economy. What the Government were saying to Ferranti was, "We offer you £15 million." It was an investment to save this firm which has made a remarkable addition to the British economy. The noble Lord suggested there might have been an alternative. But, it was pointed out, the alternative was, what?—the Official Receiver. Indeed, this is verified by the people who own Ferranti and by the Press today.

Noble Lords, on whichever side of the House they may sit, must make up their minds whether in the interests of their own political opinions they want to allow these firms to die rather than that they should be rescued by public enterprise. All I can say is that, so far as I am concerned, certainly the workers engaged in the industry will wish to have their employment continued. I want to add one other point about Ferranti. It was said in this House yesterday that they hoped that they would not take advantage of their position as a new publicly-owned company to have privileges over others. I would not want that to happen, but I want to say in the context of this debate that I do not want the new Ferranti to be treated less favourably than was the previous company.

I remember on many occasions the great trust that Governments of both sides of the House placed in this firm. Indeed, the noble Lord, Lord Drumalbyn, will remember that it was not always rewarded in the very best way. I will not put it higher than that, although I could do so if I wished. All I can say to my noble friend is that he ought to take great encouragement from what has happened this afternoon. No single noble Lord has opposed the Bill. It may be that they have their doubts about it; it may be there are some doubts about the powers of the Government contained in it; but at the end of the day noble Lords on the Benches opposite, like those on these Benches, know that without this Government aid the position would be very much worse. I can only hope that any slight doubts I may have about the method being employed will not be fruitful. I hope I shall be wrong. But I do know, without fear of contradiction, that there has been no alternative put to this proposal of my noble friend Lord Hughes, and as a consequence, speaking on behalf of all my colleagues on this side of the House, I am certain we give it our support.

5.40 p.m.

The Earl of KINTORE

My Lords, first I must make two apologies: I did not hear the end of the speech of the noble Lord, Lord Hughes, as I had to leave your Lordships' House. Had I heard all his speech, I probably would have had the answers to three queries which I have. I hope that the noble Lord will say, "You will see it in Hansard tomorrow" if, in fact, he has already covered the matters that I wish to put to him. Secondly, I had no intention of taking part in this debate, but I now have one or two questions to raise and this is the only time and place that I can get an answer to them. In the production of industrial sites from midnight tonight this is a concurrent function between the new regions and districts, and there is a certain amount of argument going on now, as you can imagine. What concerns me is the servicing of these sites, which is an expensive operation falling at the moment on the ratepayers. If the Government, through this measure, produce these sites, will they land the cost of servicing them on the ratepayers, or will it come under general supply of cash from the Government?

Drainage and water supply frequently take a considerable time to establish. There is a good deal of long-term planning involved. If you have masses of water and adequate pipe sizes, and so on, it is money for old rope, but in many cases in Scotland this is not the case, and in my region it certainly is not the case. If possible, I should like an assurance that adequate time on a long term basis will be given to those responsible for producing these services. Regarding employment, I was astonished last night—when travelling to board my train to come to your Lordships' House—to see direction and warning notices on the gas pipeline coming from the Frigg field written in French. The Scots are an educated race—I am not, but most of them arc—hut I think a French notice means that employment is going not to Scotsmen whom we know are out of work, but to Frenchmen. This suggests to me that either the Frenchmen are more adept at the job or more willing to do the job. I do not know, but seeing across the top of the hills in Scotland a notice, "Defense de Puller" was quite a shock.

I realise I should have informed the noble Lord I was going to raise these points, but originally I had no intention of mentioning them. Therefore I apologise once again. These points regarding the long-term aspects of services—and the necessity of services is obvious—should he considered favourably, and if we can get something a little more concrete than the usual refusal out of the Scottish Office to "cough up" any cash at all, we might manage to make this work. That is all I wish to say, my Lords.

6.45 p.m.

Lord MOWBRAY and STOURTON

My Lords, I shall not be very long; most of the remarks I wanted to make have been made and the noble Lord. Lord Hughes, will have more than enough to answer, I am sure. I would say to the ghost of the noble Lord, Lord Tanlaw, that considering today is the opening day of the Scottish Conservative Party Conference at Dundee I am impressed by the numbers of Scottish Peers in your Lordships' House. My noble friend is anxiously watching the clock as he has to go back to take part in the Conference tomorrow.

We have before us a Bill which at first sight has many advantages over its close relation, the Industry Bill. Despite the very kind, smooth and honeyed words putting across the good points this Bill has which we heard from the noble Lord. Lord Hughes, we still must realise its relationship to the Industry Bill which not everybody in the country welcomes as much as some Scots do this Bill. What right-minded person would not prefer, if given the choice, travelling with the Minister and the Secretary of State rather than with the Secretary of State for Industry and his Industry Bill? We at least know that the heart and feet of the noble Lord and his Secretary of State are firmly in the cities, towns and fields of Scotland, and they are not thinking about how the Old Testament prophesies will lead to the New Jerusalem! But it is right one should sound a note of caution. Public opinion needs to be warned that, despite its tartan appearance, this Bill is at heart simply a Northern edition to its big brother the Industry Bill.

As my noble friend Lord Campbell of Croy said earlier, this Bill is not necessary; there could have been other ways in which shots in the arm could have been given to industry. We are not against that; I do not know why the noble Lord, Lord Hoy, asked rhetorical questions. We have never said that we are against shots in the arm for industry, provided they are sensibly directed and provided they are given in the right way. The Bill sets up the SDA and we are not against that as such; it may well be a useful body if it can improve the prospects and quality of life for all in Scotland. We would be in behind him on that 100 per cent. But there are one or two matters which worry me: its agreement to any line of action suggested to it is not absolutely necessary. The Secretary of State can suggest general or specific purposes under Clause 4. There has to be consultation, but not agreement. I am sure the noble Lord, Lord Hughes, and his noble friend would be horrified at the idea, but there may be directions from the Government which in this period of economic gloom we might question. Under such directions, a body such as the SDA might possibly have to carry out provisions which are in the Bill of compulsorily extending the State control in industry. That is what we are frightened about on this side, that this Bill could be used for dangerous purposes.

Lord HUGHES

May I interrupt the noble Lord? I did not think that it would be necessary to say this again; I intervened when the noble Lord, Lord Drumalbyn, was speaking to point out that that is not so. There can be no compulsion in this direction. If a company wants help from the Government, it will come and ask for it. In these circumstances, there may be an acquisition of shares, but there can be no compulsion; there can be no direction by the Secretary of State because the Secretary of State cannot direct anybody to do anything which is not in the Bill.

Lord MOWBRAY and STOURTON

I accept that, my Lords, but I am still not sure whether, if you take that in conjunction with its big brother, the Industry Bill, down South, it still applies up North.

Lord HUGHES

My Lords, what the noble Lord is referring to as the "big brother" has no powers of giving direction to the Scottish Development Agency.

Lord MOWBRAY and STOURTON

I did not say that it would. I will come back to that in a moment. This Bill has vastly increased powers to extend such control in this matter. It has been dressed up to look very attractive. Both the clauses which the noble Lord mentioned, dealing with the environment and derelict land are welcome, but these matters could already have been dealt with by the Scottish Office and the local authorities under existing legislation.

Here, at any rate, we have some good and unexceptional functions for the SDA to perform. We obviously welcome the information given by the noble Lord that priority will be given to these two clauses. Similarly, everyone will recognise that the clause enabling the Secretary of State to deal financially with the air services in order to help the Highlands and Islands air communications is very welcome. But having said that, let us remember that although this Bill gives the Secretary of State vast powers, it still leaves industrial matters over a wide field in the hands of the NEB. When one compares the clauses embodying the general purposes and functions of these Bills—both happen to be Clause 2—one finds that the NEB, under the Secretary of State for Trade and Industry, have firmly kept quite an armoury of weapons in their locker for use North of the Border.

During the Committee stage in another place on 13th March, the then Minister of State, Mr. Heffer, said of the powers under the 1972 Industry Act dealing with financial assistance for industry that the Government were transferring to the Secretary of State for Scotland and, through him, to the SDA, the Section 7 powers. But they were deliberately holding back from the Secretary of State for Scotland, to keep for the Secretary of State for Trade and Industry, the Clause 8 powers which are all the general purpose powers. Against the advice of my honourable friends, the Government refused to exempt Clause 2 of the Industry Bill, and with superior numbers carried the day—a victory for Mr. Benn over Mr. Ross.

I think that is an indication that the Government are not going to let the Secretary of State for Scotland fully control the industrial field in his domain, which I think a lot of people, by the appearance of this Bill, have been misled into thinking would happen. It runs counter to the Government's own Consultative Document on the SDA, which said it would in no way be simply a Scottish arm of the NEB.

Although we possibly have too many statutory bodies in Scotland already, we agree that there is a good role for the SDA to play and the noble Lord has shown that it will be tidying up one or two smaller bodies. Another possible role for it would be to administer EEC regional funds, provided that we stay in the Community.

I wonder whether the noble Lord, Lord Hughes, can tell me—and I apologise to him for not having given advance warning of my question—whether it is expected that some members of the Agency shall also be members of the NEB; and, if so, how many, and will there be a minimum number or none? It is important that there should be the closest liaison between the NEB and the SDA. To our minds, the SDA has powers which seem very much on the wide side; for instance, there are the powers of compulsory purchase, the powers to obtain information. These powers and functions are rather vague. On page V of the Explanatory and Financial Memorandum, we see a frank admission in the first paragraph of inability to forecast the need to draw on financial resources. This shows that there is a lot of work yet to be done on this Bill before we can see how things are going to work out. Bearing in mind the wide powers of the Agency and, in particular, the power to do anything to discharge its functions, I, for one, feel that the Secretary of State's power to direct should be given only after getting "agreement with" rather than "consulting" the Agency concerned. The noble Lord, Lord Tanlaw, if I may say so, was perhaps a little naive in thinking that later this Session the House of Commons would be able to give detailed attention to the Bill, and we should therefore disregard it in Committee.

Lord TANLAW

My Lords, I thank the noble Lord for giving way. I should like to explain that I do not believe we in this House have the right to go into a detailed Committee stage on a Bill covering parts of Scotland which have proper representation in another place.

Lord MOWBRAY and STOURTON

My Lords, I do not think that is the constitutional position, but I will leave it to the Minister to answer. I think it is arguable that in this House, where we now have the time to give detailed consideration to Bills we must do so. It is highly likely, considering the state of affairs in another place, that they are having more meals to digest than they almost have time for, so they may not be able to give enough time to many things. In conclusion, the main point is that our Industry Act 1972 was essentially a rescue operation for Scotland and there were other means of injecting help where needed. This Bill carries with it the danger, despite the very many good functions which the SDA will perform, of putting the Agency in a take-over operator's position.

5.56 p.m.

Lord HUGHES

My Lords, the fact that the first Parliamentary airing of this Bill took place in your Lordships' House, and the very wide-ranging nature of the duties and powers which are being given to the Scottish Development Agency, required me to make a speech in opening which was much longer than I should have chosen to make—and probably much longer than our Welsh colleagues could have wished for, considering the patience with which they are awaiting their turn. However, I would suggest that it has probably not been a total waste of time, from their point of view, to hear about the setting up of a body which is rather like the one that they will be having in Wales.

I have been receiving a mass of notes from some of my expert colleagues, and if I were to use them all I might achieve a record that I should not wish to attain; namely, that my closing speech would be even longer than my opening speech. So I shall leave a lot of the answers to which noble Lords are entitled to be followed up by correspondence. Also, as we shall have a little time before going on to the Committee stage of the Bill, I will try to ensure that these replies reach noble Lords in ample time for them to take any necessary action by way of submitting Amendments to the Bill. However, it is essential that I take some time, though not a long time, to make general points.

First of all, I am surprised at the extent to which I have received support on considerable parts of the Bill from noble Lords opposite. I was pleased that not everyone followed the line of the noble Lord, Lord Campbell of Croy. I cannot say that I was totally surprised at his reaction—certainly not to parts of the Bill—because we must accept that in some of these matters there is a fundamental difference between the policies of the Conservative Party and those of the Labour Party. If there were not these differences we should obviously be sitting on the same side of the House and life would be very dull indeed. We should have only family quarrels, and those are best conducted in private rather than in public. But we do have these fundamental differences, and I must accept that in certain directions the noble Lord was perfectly entitled to say what he did, and indeed would have been wrong not to have said what he did. However, I think he may have gone perhaps a little further than was reasonable, because he produced an extraordinary amalgamation of inaccuracies and false assumptions in putting forward those points. So I must at least do something to dispel the general atmosphere of gloom.

I began my opening speech by referring to what happened on the Highlands and Islands Development Board Bill, and if we look up the debates on that measure I think we shall find that the noble Lord, Lord Drumalbyn, was a rather interesting exception to the general argument, because there were all the fears, all the doubts, all the arguments; when that Bill was put forward it was even suggested—not in your Lordships' House but in another place—that it was a Marxist charter for the Highlands. The interesting point is that the Act survived four years of Heath Government.

Lord CAMPBELL of CROY

My Lords, I said earlier that the whole point was that when it arrived in the other House the Government agreed to make the essential changes to Clause 6 here. That is the point. We hope that the noble Lord will do the same with this Bill.

Lord HUGHES

My Lords, I was hoping that the noble Lord would fall into that trap, because there was an Amendment to the Bill in 1968 in which Parliament put the powers back in again; and there they remain.

Lord CAMPBELL of CROY

Section 6.

Lord HUGHES

If the noble Lord wishes, I will deal with the matter at this point. The Highlands and Islands Development Act 1968 had these powers added to Section 6: to form or promote, or join with any other person in forming or promoting a company; to subscribe for or (with the consent of the company concerned) otherwise to acquire by agreement the shares or stock or any part of the shares or stock of a company; to hold any shares or stock so acquired; to dispose of the whole or any part of any holding of shares or stock so acquired I could go on reading for a while, but these—

Lord CAMPBELL of CROY

My Lords—

Lord HUGHES

My Lords, the noble Lord must not pop up every moment. These are provisions which were taken out, and which are now in and are almost identical with the powers which are being sought by the Scottish Development Agency. Another point to which the noble Lord took exception—no, I will not give way—is the wide powers given to the Scottish Development Agency. But the Highlands and Islands Development Board has such power. When the noble Lord was Secretary of State he did not attempt to do anything about it. The wording is: …to do all such things as are incidental to or conducive to the attainment of the purposes of any of their functions". The wording in this Bill gives exactly the same power. The reason for this is quite simple. These are creatures of Parliament, and unless the Board have to return to Parliament periodically for detailed powers to do this, that and the next thing, Parliament gives a wide definition of their function.

As to the Highlands and Islands Development Board Bill, if we had listened to noble Lords in Opposition when that Bill was before Parliament that body would never have come into existence. But it remains a useful tool in Scotland. One of the arguments which brought it into existence, and which have proved to be acceptable, is that it created in the Highlands a single body which could do things which hitherto had been spread over a number of Acts of Parliament and a number of different bodies. This is the justification for setting up the Scottish Development Agency.

The noble Lord, Lord Drumalbyn, asked: Could not all these things be done? I think that if I were to be as naive as noble Lords might want me to be I could say: "Yes, it is possible that they might be done." But the point is that they cannot be done in the satisfactory way that people want. And, after all, it is not for me to belittle the Government's own legislation in this matter. The Scottish Development Agency is no new idea. The advantages of having a body with executive responsibilities for developing Scotland's economy have long been argued by a large number of bodies and organisations in Scotland. I would, for instance, name the Scottish Labour Party, the Scottish Trades Union Congress, the Scottish Liberal Party, the Scottish Council for Development and Industry, the Scottish Council's Research Institute, the West Central Scotland Planning Team and the Scottish National Party, all of which have made proposals for a body of this kind. The only people who have not called for it are the Scottish Conservative Party. It may well be that their somewhat attenuated numbers in Scotland at the present time are not unrelated to the fact that they had no suggestions of this kind to put forward. The noble Lord interjects, "The Development Fund", but the Development Fund, as he explained to my noble friend Lord Hoy, arose only after they had lost seats in Scotland. So on the question of setting up the Agency, there is a very large demand in Scotland for a body of this kind.

Periodically Ministers at the Scottish Office in both Governments have had the request from people in other parts of Scotland: "It is not only in the Highlands that there are problems to be dealt with. Here is the Highlands and Islands Development Board which has done a good job for the Highlands. Give us a similar body to deal with the special problems which exist in other parts of Scotland." The Borders asked for a body of this kind. Now we are doing it, and I think we are doing something which the general body of people in Scotland will want. I hope that the noble Viscount's interjection is not a long one.

Viscount MASSEREENE and FERRARD

My Lords, the noble Lord who has just sat down has been quoting as a precedent the Highlands and Islands Development Board. Would he say that the Highlands and Islands Development Board had been a financial success? The Highlands and Islands Development Board has, in fact, wasted a great deal of the taxpayers' money. If the noble Lord would like to meet me afterwards, I can tell him of certain examples. One recent case is the Tobermory Distillery, which received a big grant from the Highlands and Islands Development Board just over two years ago and is now closing down. I could quote many other instances where taxpayers' money has been wasted by the Highlands and Islands Development Board.

Lord HUGHES

My Lords, I will not meet the noble Viscount after this debate, but I will make an offer to him. Let him send to me a list of every one of the failures of the Highlands and Islands Development Board and I will guarantee to send him back at least two successes for every failure he puts forward. I shall not convince the noble Viscount, because he does not desire to be convinced. He is probably the one person in Scotland whose views of the Highlands and Islands Development Board are exactly the same as they were in 1965. Some people never learn.

A considerable part of the speech of the noble Lord, Lord Campbell of Croy, sought to establish comparisons between the SDA and the NEB, between this Bill and the Industry Bill. There is nothing in the Bill which talks of the SDA buying itself into profitable manufacturing industry. There is nothing which mentions the National Enterprise Board, let alone makes the SDA one of its subsidiaries. The purposes for which the Agency may exercise its functions are clearly declared in Clause 2(1)(a) and (b). These are the purposes for the Agency these are the only purposes. I do not think the noble Lord does a service by making vague suggestions to the contrary. He has suggested that in practice the Agency will be dominated by the Department of Industry and by the National Enterprise Board. There is nothing in the Bill which enables the Agency to acquire holdings in companies compulsorily. I must emphasise that again. There is nothing which empowers it to have access to confidential information about private industry. The powers to acquire land compulsorily will not be exercisable simply to facilitate the development of an enterprise; Clause 9(4) of the Bill provides the necessary safeguards in this direction. The Agency's powers in relation to land requisition and information are necessary for its activities in relation to the development of land for industrial estates and are well precedented in that context. These powers will not be exercisable in connection with the Agency's running of industrial enterprise. The Bill makes that intention clear.

I might expand on what I have said about Clause 9(4). This makes it clear that the Agency can buy industrial land compulsorily only when it is needed to secure an adequate supply of industrial land in an area—I repeat, not for the purpose of helping a SDA-run business.

The noble Lord, Lord Campbell of Croy, said that local authorities have powers in respect of derelict land, and asked: Why, therefore, give them to the Agency? The answer is that although there are a number of local authorities in Scotland who have done excellent work—I am not in a position to list all of them, but Fife and the Lothians, for instance, have done an excellent job—there are many areas in Scotland where little or nothing has been done, not because the work is not there but because local authorities are either unable or unwilling to tackle the problem.

We believe that more progress must be made in this direction. Some of the authorities took the line of the noble Lord, Lord Tanlaw namely "We didn't create the mess; industry created it, and they should be compelled to clear up the mess. Why should we put the responsibility on to our ratepayers?" The Government accept that this is a national responsibility. That is why we are taking these powers to try to ensure that over Scotland as a whole derelict land is dealt with on a much better basis. I do not know whether much can be done about obtaining contributions from those who are responsible, but I can make certain that at least there are consultations with British Rail and the National Coal Board to ensure that they do not put obstacles in the way.

May I suggest that the best contribution that we can make to a fair consideration of this Bill is that at the next stage we consider it on its merits, without continually looking over our shoulder at the Industry Bill to find out whether this is a backdoor method of getting something into that Bill. There will be ample opportunity in due course to debate the Bill. Although life would be very much easier for me if your Lordships were to accept the advice of the noble Lord, Lord Tanlaw, and in due course were to move that the Bill be not committed, I doubt very much whether he will have persuaded the Front Bench opposite that this is the way they want to handle the proceedings!

On the question of Loganair, when I said that it did not matter to an operator whether the money came out of the right-hand trouser pocket or out of the left-hand trouser pocket, I may have created the impression that the money would come either from the Agency or from the Highlands and Islands Development Board. That is not the case. This Bill has been used as a vehicle for making quite certain that powers are available for giving a continuing subsidy as against the occasional one which the Highlands and Islands Development Board might give to an enterprise. I mentioned a period of five years, but it may he longer than that. We wanted to make certain that powers are available to the Secretary of State to do this. The money will come neither from the Scottish Development Agency nor from the Highlands and Islands Development Board; it will come from the Secretary of State as a Government subsidy. It may perhaps be considered a complication that it should be included in a Bill the primary purpose of which is to set up the Scottish Development Agency.

There are far too many other points to deal with tonight. I was determined not to speak for more than 20 minutes and I have already spoken for 17. Since, however, there are a number of points which deserve an answer, I shall certainly take the opportunity to write to noble Lords on all of them and will try to ensure that the answers are in their hands within the next seven days, so that they may have the maximum opportunity to interfere with the Whitsun Recess by thinking up Amendments to the Bill—or, alternatively, to consider the useful suggestion which has been put forward by the noble Lord, Lord Tanlaw!

Lord CAMPBELL of CROY

My Lords, I am grateful to the noble Lord for his reply. During his reply he made reference to this Front Bench, and I should like to say that we do not share the view of the noble Lord, Lord Tanlaw. We expect to have a full Committee stage on matters affecting the Bill. We are grateful to the noble Lord for his offer to write to us about the points. We could not, of course, expect him to deal with all of them this evening. I shall certainly take up with him the question of the Highlands and Islands Development Board, because the point which he mentioned was not the major Amendment to the Bill which we made in the other place.

Lord HUGHES

My Lords, perhaps we can have some further useful exchanges on that point. We shall have a full opportunity to discuss this Bill when we return after the Whitsun Recess, and I hope it will go to the other place in at least a form which they will recognise.

On Question, Bill read 2^a, and committed to a Committee of the Whole House.