HL Deb 10 November 1976 vol 377 cc426-41

7.32 p.m.


My Lords, I beg to move that this Bill be now read a second time. The Bill proposes increases in the limits on the selective financial assistance which may be provided under Section 8 of the Industry Act 1972, as amended by Section 22 of, and Part I of Schedule 4 to, the Industry Act 1975. Such assistance must be in the national interest and benefit the economy of the United Kingdom or a part or area of the United Kingdom. It is not limited in application to the Assisted Areas, but it has to be for the specific purposes set out in Section 7(2) of the Industry Act 1972, such as the development, modernisation or maintenance of industrial capacity.

Under Section 8(7) of the Industry Act 1972 the initial limit on Section 8 assistance was put at £150 million, with provision that this limit could be raised by order on not more than four occasions by sums not exceeding £100 million on each occasion. The maximum possible limit on assistance was thus £550 million. The Bill would introduce a new initial limit of £600 million, which could be raised by order on not more than four occasions by sums not exceeding £250 million on each occasion. The maximum possible limit would then be £1,600 million. These new limits are needed now in order that measures vital to the regeneration of industry and already in progress can be implemented and so that the Government are able to respond to the needs of industry in future. Commitments under Section 8 now total about £440 million, and at the current rate of increase commitments should exceed £550 million—the present maximum possible limit—within a few months.

Of the total of £440 million so far committed, some £250 million of assistance has been committed to individual companies, of which the largest single element is the £162.5 million commitment to Chrysler to restore the company to continuing viability. The balance of £190 million has been committed under special schemes, including £75 million under the Offshore Supplies Scheme introduced by the then Government in 1973. Eighty million pounds has been committed under the Accelerated Projects Scheme, and a further £35 million under schemes of incentives to particular sectors of industry, notably the ferrous foundry, machine tools, clothing and wool textile sectors.

Introduced in April last year as a temporary counter-cyclical measure, the Accelerated Projects Scheme has been particularly successful in inducing companies to bring forward projects that would not otherwise have taken place during the recession. The scheme was closed to applications at the end of July this year, and only a very few applications then outstanding remain to be considered. To date 110 offers of assistance totalling £81 million have been made for projects valued at nearly £600 million. These payments should benefit the balance of payments by some £450 million a year by 1980, and create or safeguard some 13,700 jobs. They will also mean substantial orders being placed with United Kingdom plant and equipment and United Kingdom construction companies, work for several thousand employees resulting in those sectors.

Apart from the industry schemes I have already mentioned, the Government introduced last summer further measures of support for the paper and board, printing machinery, textile machinery and poultry-processing sectors. These schemes are drawn up from close co-operation and joint studies between the Government and industry, usually involving also the appropriate sector working party or economic development council under NEDC. All these measures, while each has its own budgetary allocation, will extend over a period of time. Therefore, not only will commitments exceed the £550 million maximum under the original Act in the next few months, but current measures are expected to lead to commitments reaching £1,000 million by 1980. For example, a further £200 million under Section 8 is currently allocated to British Leyland, as indicated in the White Paper on Public Expenditure (Cmnd 6393). Another £200 million is likely to be committed to the Offshore Supplies Scheme. The balance will arise on existing and further Section 8 industry schemes.

The proposed increase in the limits on assistance does not mean that there will be sudden and substantial increases in public expenditure. The total of commitments include, for example, guarantees which may not be called—as in the case of Chrysler; and undertakings to make payments at future dates. Selective assistance is generally phased over a number of years as the needs of the project require. Thus, while at present commitments total £440 million, actual payments to date total only about £110 million. So, we are not pouring money into the economy. The total expenditure under the present Act is only £110 million.

Parliament has several controls over the provision of assistance. First, assistance is provided in accordance with the Government's published Criteria for Assistance to Industry Secondly, significant projects or schemes are carefully appraised and submitted for examination by the Industrial Development Advisory Board appointed under Section 9 of the Industry Act 1972 or other Advisory Boards appointed to scrutinise proposals under Industry Schemes. Thirdly, assistance exceeding £5 million on any one project must be approved by Affirmative Resolution of the House of Commons—I emphasise, anything over £5 million. Fourthly, the increasing level of total commitments will, of course, be subject to the proposed new limits, and an order of the House of Commons would be required on each of the four occasions when the limit could be raised. The Bill also provides that none of the money shall be used in assistance to or for the acquisition of banks and insurance companies. This provision results from an Opposition Amendment, which the Government are prepared to accept.

The Bill is therefore essential to enable the Government to pursue the measures, widely supported and endorsed, for strengthening industry. The present time—with the depressed level of trade and other uncertainties affecting the confidence and strength of industry—requires the highest priority to be given to the challenging tasks of modernisation of British industry and stimulating of investment and these measures are therefore critical to the economic future of this country. For this reason I commend the Bill unreservedly to your Lordships' House. My Lords, I beg to move.

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

7.39 p.m.


My Lords, it is stimulating to speak to such a packed House! I must first thank the noble Lord, Lord Winterbottom, for giving us so much information—in fact, rather more information than I had hoped for. However, the Bill for all its enormous length—a quarter of a page!—is extremely complicated. I find it complicated because it seems amazing to me that we have an Act at present which sets off with a limit of £350 million and then goes up in tranches to a further limit, but half-way through, or perhaps three-quarters of the way through—I shall have to look at Hansard to see exactly what figures were given, because so many were quoted that it was difficult to follow—we suddenly find that we have to go on to a new ball game which starts with another limit and further tranches.

It was argued in another place that the tranches already made available should be taken away, and on that basis when we were talking about £350 million—and here I am quite prepared to be corrected because the noble Lord has brought in some other figures and I was not able to adjust along the line—I was thinking that that figure should be subtracted from the future limit because it has already been spent. But it gets even more complicated when you have the question of a limit which is increased by a limit, and then further limits. It almost seems that we disappear into infinity on this basis. It uses this phrase "The total possible limit is thus £1,600 million". We had a limit of £550 million, and this means that we are increasing it by three times.

Where I get a little concerned—and I did not actually follow it in what the noble Lord said—is that in Written Answers in another place it has been said that the existing tranches can be increased. If this is the case, does that come out of the total possible total or do we have another total possible total? It is operated in a rather confusing way. I should have thought it would have been much simpler if we had started off with a limit and then had to increase the limit. The tranche was originally a £100 million tranche and it has gone up to £250 million, but if the existing tranches can be increased, where do we then stand? I may be totally "thick" on this subject, but I am confused and shall look forward to some further explanation, if the noble Lord can give it to us.

There are one or two other points I should like to raise. The noble Lord gave us quite a lot of information about what it had been spent on, and he came up with that lovely remark—and I am sorry that the noble and learned Lord the Lord Chancellor is not here, because when the noble Lord, Lord Wigoder, on another occasion talked about £13 million as a mere bagatelle he was jumped on fairly firmly on that point—" Only £160 million'. I should have thought that £1 million was quite a large figure, but inflation has come in—inflation caused of course, I am afraid, by Government policies, and that has to be admitted. We are going up threefold in a relatively short period.

What happens then? Presumably we have another Bill which increases the total possible limit yet again. Although only £160 million has been spent we are going up to a total possible of £1,600 million, which presumably means ten times the amount. But the noble Lord admitted that there are commitments within this, and commitments, I may say, which are fairly far-reaching, as we saw when he mentioned Chrysler. We on these Benches are worried about several things in this particular Bill. Aid has been given on some items, we felt, to protect certain politically sensitive lame ducks. Instead of perhaps being humanely shot they seem to have been preserved for everlasting life—or put out of season, I should say—by enormous injections of cash. I do not think that that is the right thing to do, and I hope that this matter will be looked at even more carefully in the future.

One other aspect I wish to raise was the way in which this money can be moved around. We saw this in the case of British Leyland, where the money seemed to be run round in ever diminishing circles, arid instead of any "bee" money being used, Industry Act money was siphoned around for this purpose. It seems that this can produce a lot of individual honey pots from which money can be siphoned around from one to another. So there is a bit of a smokescreen when there are different bodies allocating different sums of money to different schemes.

I should like the noble Lord to confirm that presumably any money under this Bill can be allocated to any schemes within the aircraft and shipbuilding industry as well. I should be grateful if the noble Lord could give us some guidance on that point. It is a very short Bill but it is extremely complicated. I do not think we have had all the assurances, despite the remarks made by the noble Lord, on what this money is really going to be used for in the future and why it is so very necessary, especially after the fact that he said that only £160 million has been actually spent as opposed to commitments. It seems rather strange, at a time when we have such an enormous financial burden, with the IMF here and so many other factors pressing upon us, that we should start to bring in a Bill which increases threefold the amount of money that can be spent. The noble Lord says that it is going to increase jobs. I very much hope it will, but in the past the way in which this money has been allocated has not been the best way by which to reduce unemployment and stimulate industry. We are not happy with this Bill, but we are grateful for the explanation which the noble Lord has given us and are looking forward to some further explanation from him.

7.47 p.m.


My Lords, I should like from these Benches to speak briefly on the general principles raised by this Bill. In doing so I am afraid that I am going to be a little more harsh than the noble Lord, Lord Redesdale, has been. We do not think much of it at all. Indeed, we think even less of it then of the Act of 1972 brought in by the Conservative Government of the time from which this Bill stems. Our opposition is not merely to the potentially vast sums of money involved in it but to the fact that it provides, as we see it, no satisfactory general administrative framework for the public financing of industry, no adequate system for monitoring such expenditure, no businesslike budgeting arrangements for the allocation of the money, and no procedure for determining the relative merits of claims for assistance.

We on these Benches are certainly not opposed to the allocation of public funds to industry, although in general we believe that industry is more able than Government to judge best how capital should be invested. What we deplore is the absence of any comprehensive policy concerning this kind of expenditure. As I understand it, it may in future arise from the 1972 Act, from the Industry Act 1975 setting up the National Enterprise Board, from the Industrial Common Ownership Bill which has just been passed by your Lordships' House, from Bills seeking to nationalise industries such as the aircraft and shipbuilding industries—in our view quite unnecessarily, to say the least—and from the accelerated investment project scheme, to which the noble Lord referred in his opening remarks. I must confess that I am a little unclear about this scheme, and perhaps he would he kind enough to enlighten me. My understanding was that this particular scheme had come to an end and that it might be replaced by some similar scheme designed to bring forward investment already planned by industry. Perhaps he will let us know what the position is in that regard. Now there is this Bill, and there may be other such sources from which money can be supplied to industry. They are enough to be going on with.

Having worked in industry for many years, I appreciate that it cannot be easy for the Government to plan ahead and that crises, such as those in Rolls-Royce in the last few years, suddenly arise. But even allowing for that, and for the extraordinarily difficult, though not altogether unforseeable, problems with which this Government have been confronted recently—by Chrysler and British Leyland in the car industry, for example—we feel that the time has come for some agreed national policy to be worked out in this field. I believe it is essential that the Government should consult with both sides of industry under the aegis of the National Economic Development Council about this and discuss the matter with other political Parties so that in future policies introduced and organisations set up by one Party are not immediately overthrown by another when it obtains power.

From the organisational point of view, I suggest there is a case in point now in the National Enterprise Board. When the Industry Act 1975 was being debated in this House we on these Benches made it plain—and we feel the same now—that the NEB was by no means without blemish. But only last week I noticed that the noble Lord, Lord Ryder, was reported to have felt obliged to begin a campaign to save the Board from disbandment threatened by the Conservative Party. I do not want to strike an attitude on this point at this time, but I feel keenly that at least two things are essential for the future. First, the Government of the day should not introduce measures likely to be judged by the Opposition to be so extreme that they have to be reversed immediately the Opposition become the Government. Secondly, the Opposition should deliberate very carefully indeed before committing themselves to taking destructive action when they obtain power. I firmly believe that our only industrial and economic hope as a nation is to identify common ground on which we can build together.

In the meantime, we have this Bill and, as I understand the position—I noted the doubts expressed by Lord Redesdale—we are now being asked to authorise the Government, subject only to Treasury consent and the approval of up to four draft orders by Resolution in another place, to hand out over £1,000 million more than is now permissible, and that without having any idea of the organisations to which the first tranche of this money should go, other than that, as has been said, none of it will go to banks or insurance companies. We are not even told the criteria which will guide the Government in making these allocations. Even worse, to judge from recent experience, much of it may go to companies in which industrial relations, productivity and return on capital are unsatisfactory but which have the ability to shout most loudly and are best placed to disrupt the national economy. These may be strong words but we feel strongly on this point.

The fundamental reason why sums of this magnitude may now be required is that our economy has been so badly handled that many firms which are not inefficient can no longer pay the fantastic rates of interest which are now demanded if they go to their banks to borrow money, and at the same time earn a reasonable return on their capital. Perhaps the most significant sentence in this little Bill is to be found in the Explanatory Memorandum on the financial effects of the Bill in which we read: It is not possible to make precise forecasts of the rate of future expenditure under the Bill, since the extent of financial assistance provided under section 8 "— that is, of the Industry Act 1972 will depend on the needs of industry". I can only say that until recently I worked in a large international company which has an enormous annual capital expenditure programme and I recall the immense amount of detailed planning that each year preceded and still precedes decisions on what projects money should be put into. I speculate as to the career prospects of the people engaging in all that planning if they were to go to their board of directors and say in so many words that they could not forecast expenditure for which they might later be seeking authorisation because that would depend on future needs. They would simply lose their jobs. We on these Benches regard this Bill as a symptom of a fundamental mismanagement of the economy and as a striking illustration of why agreed action is needed to put the economy right.

7.57 p.m.


My Lords, in replying to this short but useful debate I feel that I must first make a point which is relevant. The present small Bill is based on the Conservative Industry Act 1972, which was amended by the 1975 Act, and that is really the foundation of the whole thinking of the Bill. We are, I hope, passing a measure which will enable the actual allocation under the 1972 Act of money to be raised from the figures I gave to the higher figures included in the Bill.

Although Governments must carry responsibility for the situation of the day—that is what we are here for—I would not accept that the whole of the inflation we are facing has been caused by the present Government. The problems that industry faced in 1972 faced a Conservative Administration. There was then the use of the oil weapon by the Arab world against Israel and it was the world inflation that followed on the savage rise in the price of crude oil that set the inflationary wheel turning in the industrial world of the West. Although I never try to duck responsibility, the inflation that exists in the world today is due only in part to Her Majesty's Government, whether of a previous or the present period. The problems facing industry in 1972 are the same as the problems facing industry in 1976 and we believe that this measure has been a useful attempt to start the modernisation of those elements of British industry which for various reasons—historical, managerial and the rest—have not been able to build up their capital structures to a point where they can compete with the reconstructed industries of Germany and Japan.

That is by way of some opening remarks and I will now try to explain to the noble Lord, Lord Redesdale, what we are doing when we talk about the figures in this little Bill. I repeat what I said earlier; that there is an initial limit and that thereafter there are four tranches. What has really happened is that a multiplier has been applied to the initial limit and the four tranches. The reason is partly that money is not worth what it was in 1972 but also because the problems created by the disruption of the world economy are greater. I have a feeling that the noble Lord, Lord Rochester, was yearning back to the good old days of Manchester liberalism and free enterprise. Unfortunately, we either have to support industries that have been struck by the economic storm which has swept through the industrial world of the West or we have to let them go under. It is not the intention of Her Majesty's Government that industries should go under.


My Lords, may I ask the noble Lord a question? I wonder if he could amplify one of the points that he was moving away from when he was talking about the original tranches. The Minister in another place said that the existing tranches could be subsumed in the first tranche. This was the first of the £200 million tranches and the Minister said that they could be subsumed into the first one. Quite what that meant when we started to ask how much had been spent and where the new tranches took over from the old ones was not clear. I was hoping that the noble Lord, Lord Winterbottom, was going to give us some clarification. I only intervened because he had moved on to what the noble Lord, Lord Rochester, had said.


My Lords, I shall try to answer that one. Admittedly, this word "subsume" has come into my vocabulary rather late in life. I have a feeling that it really means the same as "included". Am I right? My noble friend agrees with me, I am glad to say.

May I first make it clear that we are not going to ask the British people to supply more than £1,600 million whatever happens. I shall try to explain what is happening. The Act of 1972 provided for the expenditure of £150 million and that this initial limit might be increased by the order of the Secretary of State on four occasions by not more than £100 million. So, when we started in 1972 we got a top figure for the commitment. This was not spending. We must realise that there is a big difference between commitment and spending. A Government cannot enter into commitments unless they have a legal right so to do. They may not have to use all the money that is committed, but they cannot commit themselves unless they have the legal right to do so—or, rather, they could do so, but they might be sued and there could be all sorts of ugly scenes in both Houses, so they would not do that.

Let us take Chrysler as an illustration of the point. The commitment there is very high. It is £162,500,000. In point of fact, claims to date are only £48 million and there is very good reason for believing that the figure will never be reached. If one looks at the tabulated figures of moneys committed, commitments as of 26th October were £247 million plus, but the expenditure was only £96 million plus. Roughly a third of the commitment only has been spent. That should be borne in mind if we talk of inflationary pressures. We are strengthening vital industries, giving them backing and a guarantee which they require, but we believe that, with the management that exists in these companies, the full commitment will not be required. If it were to be required, that would be a matter that noble Lords and Members of another place would wish to comment upon. Have I answered the noble Lord's question?


Not entirely, my Lords, though I am most grateful for the trouble that the noble Lord is taking. My worry is that when one has spent—and it is not a question of how much is actually spent but of what is committed, because if it is committed it is, to all intents and purposes spent, at least in my language—a total amount on, for instance, Chrysler, we must say that it must come into the original tranches and be taken up in those slices. It was said in another place that these later tranches would be taken up by the first one. All right, but the argument was then put that the money ought to have been allowed for and, instead of going on to the £1,600 million, should have been taken off and, therefore, that we would come back to the figure of £1,300 million because that money had already been spent. Really, the argument was put that, on this basis, the Bill was mis-worded, and I was hoping that we were going to get an explanation. I am sorry to labour the point, but it seems that we are starting all over again as opposed to taking into account what has been spent.


My Lords, as I understand the Bill, it is really quite simple. Because of inflation and the requirements of industry following on the world economic crisis, the amount of money required to underpin certain key elements of British industry has increased When we started on this operation we had an upper limit of spending or commitment of £550 million. We are now reaching the point when, although our expenditure is, as I showed, comparatively small, the level of our commitment is reaching what was laid down in the 1972 Act. We know that we shall need more money than this over a period of years up to, I believe, 1980, and, for that reason, we are providing the Government with powers to raise the initial limit from £150 million to £600 million, but that does not mean that there will automatically he more expenditure. Then we arc enabling the Government, by Affirmative order of the House of Commons, to raise four further tranches of £250 million. In point of fact, there has been no increase in the amount of money available to be handed out to industry; it merely means that, since we are approaching the cut-off point of the 1972 Act as originally drafted, we have to raise that cut-off point from a maximum of £550 million to a maximum of £1,600 million. I hope that I have made that clear; I have understood it myself.


My Lords, I was clearing a point of the drafting of the Bill. It does not allow for what has already been spent because it is putting up the limit again. All I am saying is that it should allow for what has been spent. The arguments were put forward in another place and that is why I did not want to labour them, but if you have spent this amount of money and you are going to go on, the amount of money that will be available will be about £1,300 million as opposed to £1,600 million. That was on the old figures, but more money has been spent so in fact more should have come off. I shall not labour this point any further because I take it that the intention is that it should be the £1,600 million. All I am saying is that it is not very satisfactorily worded in view of the amount of money that has been spent.


My Lords, I hope that the noble Lord and the House will forgive me if I rise at this juncture, because I know that there is a desire to move on to other matters, but when the noble Lord, Lord Redesdale, got up, the noble Lord, Lord Winterbottom, had just accused me—if I understood him correctly—of wishing to return to some old-fashioned Liberal free enterprise ideas of the Manchester school, or words to that effect. Perhaps the noble Lord would give me the credit of allowing that what I said was that we on these Benches do not oppose the allocation of Government money to industry. What we deplore is the absence of any comprehensive policy for dealing with this question.


My Lords, I believe that the noble Lord also said that no criteria was laid down. In point of fact, as I said in my speech, criteria are laid down. They are entitled Criteria for Assistance to Industry, and if the noble Lord wishes I shall send him a copy so that he will know what the criteria are. There is Parliamentary control. Every tranche is subject to Affirmative Resolution in another place; and it is not as if the Government are madly throwing money about to support irrelevant industries throughout the country. What they are planning to do is to support, through this very difficult period, key industries on which our future industrial strength will depend. That is the object behind it all. There are criteria. There is Parliamentary control. I believe that the Bill is not a piece of doctrinaire socialism, but is building upon a very useful Bill produced by the previous Administration which was trying to solve the problems of British industry in a way that I think we should all support. It is not just a wanton spending spree. Criteria are laid down, and Parliament has control over the spending in the future as the tranches come forward for consideration.

I should like to make one point to the noble Lord, Lord Redesdale. He asked about the position of funds related to the Aircraft and Shipbuilding Industries Bill. The funds could be directed towards those companies which may be brought into public ownership, but it is improbable that this will happen. The noble Lord, Lord Rochester, asked about the accelerated projects scheme, and I should like to say something about that. The scheme was announced in April, 1975, as a temporary counter-cyclical measure, at a time when investment intentions were falling sharply. Projects had to start by the end of September, 1976, and benefit the balance of payments—those were the criteria. The noble Lord is quite right: this scheme was closed to applications at the end of July, 1976.

Perhaps the noble Lord would like to know just what happened during that period. In all some 350 applications were received, and £80 million worth of assistance has been offered in respect of 110 projects costing £600 million. The projects are spread throughout the whole of the United Kingdom, and a parallel scheme for various industries was also undertaken at the same time. Basically it was an attempt to bring forward investment plans of various industries as a counter-cyclical measure.


My Lords, my question was directed to the future of this scheme or any scheme which might supplant it, rather than to the past, and it was on that point that I was hoping that the noble Lord might be able to enlighten me.


My Lords, I should like to ask the Minister a question and preface it with one or two remarks. Some time ago there was a conference at Chequers which produced a pamphlet, Strategy for Industry As a result of that Strategy for Industry paper. "Neddy" asked its constituent small "Neddies" if they would produce an analysis of their industries and how their individual industries could take part in the larger vision. Has the Bill, or the money which is to be provided under it, anything whatever to do with the 32 industries which have lately put up their case?


My Lords, it is difficult to say because the purpose of the Bill is so limited. It is to give wider powers of assistance to the Government under the Industry Act 1972, as amended slightly by the 1975 Act. I am certain that if the "little Neddies" produce schemes which indicate assistance of the type considered under the present 1972 Act and the amending Bill which we are discussing today, then the money should he available. But that is not what we are really talking about tonight.

On Question, Bill read 2a: Committee negatived.