HL Deb 01 April 1976 vol 369 cc1308-17

4.14 p.m.

The PARLIAMENTARY UNDERSECRETARY of STATE, NORTHERN IRELAND OFFICE (Lord Donaldson of Kingsbridge) rose to move, That the draft Industries Development (Northern Ireland) Order 1976, laid before the House on 22nd March, be approved. The noble Lord said: My Lords, the order before the House establishes the Northern Ireland Development Agency in place of the Northern Ireland Finance Corporation, and extends the powers of the Department of Commerce to provide selective financial assistance to industry under Section 1 of the Industries Development Act 1966. It also enables interest relief grants to be given as an alternative to loans under Section 9 of the Industrial Investment (General Assistance) Act (Northern Ireland) 1966 towards schemes for rehousing or modernisation, and enables the transfer of publicly owned securities to the Department of Commerce.

The Northern Ireland Finance Corporation was established in 1972 with a statutory life of three years. Its life has since been extended by two years, and would, but for the provisions of this order, cease on 31st March 1977. The Corporation was established at a time when many reputable and well-based companies in Northern Ireland were feeling the effects of three years of civil disturbance, and were suffering serious liquidity problems. Because of the local situation, normal banking sources were reluctant to make money available, yet many of these companies had good long-term business prospects, and they already enjoyed an important place in the economic life of Northern Ireland. The job of the Corporation was to provide assistance to such companies to help them over this period of difficulty and put them back on to a viable footing.

The Corporation has done useful and important work, but it is now clear that a different and more fundamental approach to Northern Ireland's economic problems is called for. What is needed is a coherent and comprehensive strategy to tackle the underlying problems of industry, rather than ad hoc measures introduced to deal only with specific situations. The achievements of the Department of Commerce in attracting new investment, and creating new job opportunities in the past 20 years have been notable, but they have not managed to keep pace with the needs of the community. It is also clear that the provision of new job opportunities cannot, in itself, be an answer to the problem though it is a very important factor. It is equally vital to ensure that industry in Northern Ireland, whether local or external in origin, is equipped and geared, both in production and management, to compete in local and world markets. Only strong competitive industry can provide the long-term security of employment which Northern Ireland desperately needs. The task of attracting new investment will remain the prime concern of the Department of Commerce, but that of reconstructing industry and maintaining its strength will be the responsibility of the Development Agency.

In pursuing this role, the Agency will have the powers to become involved in almost every aspect of running a business. It will have the power to establish and own companies as its subsidiaries; it will be able to participate in joint ventures, it will have a role in acquiring and disposing of licences and patents, and it will have a major function in relation to the marketing needs of Northern Ireland industry. It will also have a part to play in the formulation and promulgation of the Government's general plans for the Northern Ireland economy, or any section of it.

In particular, the Agency will have a role in relation to those parts of Northern Ireland where the problem of unemployment has been most intractable. It will be a priority to devote attention to the needs of these areas, and to decide upon and take appropriate steps—including the establishment of State industry—to deal with their problems. The successful operation of the Agency overall will depend to a large extent on its ability to win the confidence and respect of management and unions in Northern Ireland. In this it will be given a good start with a membership which represents all business interests—management, unions and professions—and has a strong local flavour.

Since the overall objective of the Agency will be to improve the structure and efficiency of Northern Ireland industry, it follows that it will be expec- ted to invest only where it can see a good prospect that this result will be achieved. There will be no question, therefore, of the Agency becoming involved on its own initiative in providing financial assistance to companies whose future survival is in doubt, or which are unlikely to hold out a reasonable prospect of continued profitable operation. The primary responsibility for assistance in these cases will be taken over by the Department of Commerce, and it will exercise the powers provided under Article 7 of the order to direct the Agency as to the amount and form of the assistance to be provided, and the terms and conditions which will attach to it. Such directions will follow consultation with the Agency, and any expenditure arising in respect of them will be recoverable from the Department. This arrangement corresponds to that which will apply in similar circumstances between the Department of Industry and the National Enterprise Board.

In taking decisions about new investment, or joint ventures, the Agency will be expected to give close attention to the likely commercial outcome of a project. It should be satisfied in all cases that a viable operation is likely to result, but this does not mean that it should be unduly conservative in its approach to investment decisions. It will not be expected to lose money, taking its operations as a whole; but neither is it required to seek, as a private investor would, the highest return on its investment in all cases. The Government have to take into account wider considerations for reasons of regional employment or industrial policy and these may lead to a decision to invest where the return is low, or may take a long time to materialise.

With regard to the actual provisions of the order, Part II deals with the establishment, powers and functions of the Development Agency, the giving of directions to it, its financial limit and other ancillary provisions. Part III extends the Department of Commerce's powers to provide selective financial assistance to industry under Section 1 of the Industries Development Act (Northern Ireland) 1966 and under Section 9 of the Industrial Investment (General Assistance) Act (Northern Ireland) 1966, and ensures the same facilities relating to a secured rate of grant where Northern Ireland interests arc covered by planning agreements, as would be the case in Great Britain. Article 18 in Part IV of the legislation removes doubts which have arisen about the ability of the Department to accept publicly owned securities which other Departments or publicly owned bodies may wish to transfer to it. The order concludes with three Schedules dealing with staffing and financial matters of the Agency, and the staff of the Northern Ireland Finance Corporation.

The task ahead of the Agency is a sobering one. All too recently we have heard of further setbacks to the economy of Northern Ireland in terms of lost jobs, and it is of crucial importance that new employment should be found as soon as possible in order to prevent the further dissipation of valuable skills and demoralisation which results from prolonged periods of unemployment. The Agency's first priority must be to direct its energy towards the creation of new job opportunities. This it may do through the establishment of State enterprises, or joint ventures, or by encouraging the development of existing local industry. I know that I speak for all noble Lords in wishing the Agency every success with the task with which it is being entrusted. It is faced with a great challenge which will call for determination, courage and imagination if the goals which we seek are to be achieved. My Lords, I beg to move.

Moved, That the draft Industries Development (Northern Ireland) Order 1976, laid before the House on 22nd March, be approved.—(Lord Donaldson of Kingsbridge.)

4.23 p.m.

Lord BELSTEAD

My Lords, this order will complete the task, set in train by the Industry Act of last year, of legislating for Government intervention in the work of industry and commerce within the United Kingdom. I am afraid to say that contrary to what the noble Lord hoped in his concluding remarks, this is a policy which I do not support, although in all fairness I must recognise that it is not a totally new concept for Northern Ireland. Also, in all fairness, I must make the point that the arrangements for Government assistance to industry and commerce in Northern Ireland have been of a different nature from those which are set out in this order.

The noble Lord referred to the establishment of the Northern Ireland Finance Corporation. The solution which the Cairncross Committee reached to try to put right the appalling problems of social unrest and economic disruption in Northern Ireland was to establish the Northern Ireland Finance Corporation with powers to assist firms with liquidity problems, but they had to be firms which had prospects of long-term solvency and development. I should like to extend my congratulations to the Northern Ireland Finance Corporation for all that they have done over the four-year period of their existence, under two different chairmen, to assist industry and promote jobs.

My point is this. The functions of the Agency under this order are much wider than those of the Northern Ireland Finance Corporation. Certainly I agree with the noble Lord that Northern Ireland needs an Agency which will support investment, encourage development and thereby promote jobs; but in effect this was what the NIFC did. Although after its initial period of existence I have no doubt that the Corporation needed to re-examine its functions, it is hard to see, except on grounds of political belief, why this Agency should have the power, conceived in the Industry Act 1975, to take over and to establish for an indefinite period a financial interest in any industrial or commercial undertaking. Broadly speaking, this was the objective which the noble Lord again repeated when he introduced this order.

Because I have reservations about an Agency of this kind, I should like to ask the noble Lord for some assurances and to put some questions to him. First, I trust that the Agency will be expected to assess with the very greatest care the consequences of the decisions which it is going to take. The purposes for which the Agency's functions are drafted under Article 4 are very widely phrased. If this had been a Bill, certainly I should have wished to put down an Amendment to phrase more precisely the objectives of the Agency.

In case the noble Lord may think that I am saying this simply on political grounds, may I draw your Lordships' attention to the fact that yesterday in The Times there was a report that the Northern Ireland Comptroller and Auditor-General is investigating the grant of £2.9 million of public funds which has come from the Northern Ireland Department of Commerce and the NIFC to a firm called Regna International, a Norwegian company which was set up in Londonderry to produce electronic cash registers. Even under the existing legislation, quite clearly there were problems with this firm which could not be discerned, and eventually it was not possible to overcome them. Therefore, may I ask the noble Lord whether the Northern Ireland Development Agency is to be given guidelines in the same way as the Secretary of State for Scotland has given guidelines to the Scottish Development Agency.

Towards the end of his remarks I was relieved to hear the noble Lord, Lord Donaldson of Kingsbridge, say a few words about the commercial considerations with which this new Agency will have to operate. I trust that those commercial considerations, which are not written into the articles of the order, will be incorporated within guidelines, as has been done in the case of Scotland. If sound commercial decisions are to be taken, it will be necessary for the Agency to be capable of giving financial assistance quickly and to be able to do so after evaluating expertly the quality of the business which is in need of assistance. To do this, under Article 3 one needs to have on the Agency members who hold the confidence of industry and commerce. I was very glad to hear the noble Lord say that the representation will have a very strong local flavour, but may I ask him whether there will be any consultations before the appointments are made?

I referred to the drafting of the purposes for which the Agency is to exercise its functions. I believe that these purposes are too wide and too indeterminate. Obviously the development of the economy and the promotion of industrial efficiency lead to job promotion, but I hope that the Agency will distinguish between its commercial operations and decisions which are taken entirely on social grounds. When the noble Lord replies, I shall be very disturbed if he says that the Agency will take commercial decisions on other than commercial grounds. Job promotion is absolutely vital to Northern Ireland. May I say how sad I was to see that there is going to be a loss of jobs in the Province under the recent Defence Review. But the Province has a system of grants from the Northern Ireland Department of Commerce, to which the noble Lord Lord referred; it has successful direct labour organisations and it has an excellent system of industrial training. I trust that all those operations will continue, but if so I am still not entirely sure what the relationship is going to be between the new Development Agency and those organisations which I have just mentioned.

I also asked the Government to give an assurance that the Agency will have close practical links with small businesses, which I think was a matter to which the noble Lord did not specifically refer. We all know the tremendously important part played by the small business in Northern Ireland. Of course there is a continuing need to attract investment from outside the Province, but I think the home-based enterprises are of prime importance and I wonder whether the Agency will have a department or an appointment within it especially to deal with smaller concerns.

Article 4(2)(e) gives the Agency the function of promoting industrial democracy. A year ago the Northern Ireland Office published its discussion paper Worker Participation, which was entirely within the context of the situation at Harland and Wolff. In The Times, published this morning, I see it is reported that the Government have now reached agreement with the work force at the shipyard and will shortly be making a statement about the establishment of worker directors and participation in decision-making at four levels within Harland and Wolff. Obviously the noble Lord is not going to say anything about that this afternoon, but I should like to ask him how the Northern Ireland Office intends the Agency to pursue its policy under Article 4(2)(e). For instance, when we know whet the Harland and Wolff solution is, will it expect the Agency to use the Harland and Wolff solution as a prototype? Will the Agency perhaps be setting up a joint committee with the Northern Ireland CBI and the Northern Ireland Congress of Trade Unions and the Northern Ireland Chamber of Commerce and Trade, to study the different options which there are for industrial democracy, if and when the Agency wishes to introduce it into any undertakings. This is a function of the Agency under this order and it would be interesting to know how it is intended that the function is to be discharged.

I should also like to know what is to be the relationship between the Agency and the National Enterprise Board in London. After all, the functions of the Board are going to be exercised throughout the United Kingdom. To what extent will the Agency be a free agent? The Order which set up the NIFC in 1972 clearly set out that the Corporation was to give assistance to industry, depending upon the solvency prospects of the undertakings to be assisted, upon the capability of management which was to receive assistance and upon the suitability of the organisation of the undertaking concerned. My complaint is that the Agency's purposes for intervening are drawn far wider than that.

In addition, this order alters the purposes for which assistance may be given under the Industries Development Act 1966 and those purposes do not include an estimate of solvency, nor the capability of management or the suitability of the organisation. Therefore, I am apprehensive about the role of the Agency. As between the two sides of the House we invariably agree on Northern Ireland affairs, may I say that in friendliness and with no rancour; but it would be foolish of me to say that I am not apprehensive, because I am. None the less, given sensible guidelines—and I hope that the noble Lord may be able to reply to me on that point—I agree with the noble Lord that the Agency will work, and if it has a reasonable representation of Northern Ireland business interests and is allowed to get on with the job in Northern Ireland I expect it could work very well. On those grounds, and on those grounds only, I wish the members of the Agency well in the task they will be undertaking.

4.35 p.m.

Lord DONALDSON of KINGS-BRIDGE

My Lords, I am grateful for the modified welcome which the noble Lord has given this order. I should like to deal first with his major worry, which is the political one; namely, the ques- tion of wider functions. In adopting these, the regulations we are speaking about follow the National Enterprise Board. This has been discussed—I was going to say ad nauseam, but to the greatest length in Parliament and I think the noble Lord will probably not wish me to rehearse the arguments. This is as near as anything a photocopy of the National Enterprise Board in relation to the Province. I made notes of various points raised by the noble Lord and I will go through them as I have put them down. The new body will be a totally free agent in relation to the National Enterprise Board but will of course indulge in the closest liaison. There is no question of its taking orders from the NEB.

The noble Lord asked about small businesses. We have not said much about small businesses here because, as the noble Lord knows, we have an admirable organisation called LEDU, Local Enterprise Development Unit, which has been set up for that very purpose. It has been working for four years and in that time has created over 3,000 jobs in small industries in the rural towns and villages. There seems to be no particular reason to create a formal overlap there. The noble Lord asked about consultations in connection with appointing members of the board of this body. The answer is that there has been wide consultation with Northern Ireland, including in particular the Northern Ireland Economic Council, on all aspects of the Development Agency, including the representation to be given to the different interests, and the representation is rather greater in trade union and local business representation than it was in the case of the Finance Corporation. When it comes to names, of course, that must be the business of the Minister concerned.

With regard to the question of commercial considerations, under Article 7 the Department is given power to direct the Agency to assist companies and to provide the money for that assistance. This will occur only where the assistance of the company goes beyond the stage of normal commerce. I think that answers the noble Lord's worry fairly clearly. The Agency is confined to commercial assistance; that is to say, assistance which will stand up to commercial standards, except in cases where there are particular social or other reasons, when the decision whether or not such help can be given will be made by the Department of Commerce and not by the Agency, so it would then be only an agent for the Government, if the Government wanted that. The noble Lord asked whether there would be guidelines. The answer is that there will be, in the way he suggested. He referred to the Regna case, but I do not think I want to go into that. In enterprises of this kind things will occasionally go wrong and this is one where they quite clearly did, but I do not think it would be helpful to have a post-mortem.

I think that covers the points raised by the noble Lord. I am perfectly happy that this will be a more effective edition of what we already have and of which the noble Lord approved in the NIFC. I think this will be rather more broadly based and it will be directed commercially fairly rigidly without any "lame duck" approach, if I may quote an expression used by one of the noble Lord's colleagues some years ago. It will certainly not try to assist lame ducks, but, on the other hand, in the peculiarities of Northern Ireland, with something like 30 per cent. unemployed in certain places, the Government, as opposed to the Agency, may decide in certain cases that something which is not strictly commercial will be done for social reasons. If they do, it will be a decision of the Government and not of the Agency.

On Question, Motion agreed to.