§ 2.51 p.m.
§ The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trenchard)
My Lords, I beg to move that this Bill be read a second time. It has three main purposes, one of which your Lordships will probably regard as being the most important. It changes the powers and policy of the National Enterprise Board, the Scottish Development Agency and the Welsh Development Agency in line with that changed policy; it allows the English Industrial Estates Corporation to operate in a new and, we believe, more commercial way; it tidies up the orders and the use of the Secretary of State's discretion in relation to regional policy; and, fourthly, it deals with a number of miscellaneous but important points that I shall mention in a moment.
In relation to the NEB and the SDA and the WDA, I think I cannot do better than quote first a sentence regarding Clause 1 in the Explanatory Memorandum. The Billprovides that the NEB shall cease to have the function of extending public ownership and provides that the NEB and the Agencies shall cease to have the function of promoting industrial reorganisation and industrial democracy".The tasks left to the NEB I shall return to in a minute, but they are in the Government's opinion extremely important ones.
487 The Bill, in relation to the English Industrial Estates Corporation, makes provision for the disposal of property by the corporation and for the use of private finance by the corporation in its factory building programme. In relation to regional policy, it gives statutory recognition to the changes in the regional development grants scheme. The Bill also permits the provision of Government guarantees in foreign currencies under Section 8 of the Industry Act 1972; repeals the planning agreement and compulsory information powers of the industry Act 1975; and provides authority for the Government's advisory services to small firms.
The Bill makes an important contribution to the policies on which the Government are embarked; to the policy of returning, to a market-orientated economy; to the policy of cutting down public expenditure; and to the policy of maximising the private sector. It goes hand in hand with our policies to lower taxes, have fewer controls, and have more incentives and less interference. We cease to rely for the future on some superhuman central wisdom, and instead we are going to concentrate progressively on encouraging and giving free vent to all the brains and all the skills in the nation.
At the present time the profitability of British industry—British industry has been debilitated over many years—is the lowest of any of the industrial countries with whom we have to compete. Therefore, we must proceed at a realistic pace. I do not think I need to emphasise this. I expect that noble Lords will have done the sums with our balance of payments for 1979 and will perhaps have mentally taken away the actual value of North Sea oil and gas in the year concerned and looked at what remains—which is a deficit of £10,000 million. So we have to move by stages.
The NEB first has a task in future to build up and dispose of the many companies which it now has the custody of or has shares in. This will inevitably take time. I want to stress that the Government's view of the task of the NEB and its new membership is that it is a very difficult, very important and very formidable one, and this new task of gradually privatising, is a main task of the NEB in the future.
488 When we made announcements last year in relation to the policy of the NEB I mentioned a figure of £100 million from disposals this year. My right honourable friend the Chancellor of the Exchequer has asked me to say that the Government's disposals programme is well on course—this is our general disposals programme—and the target of £1,000 million announced in the Budget will be realised. The details of that programme are a matter for him, but I can inform this House that there is no longer the same pressing need for the NEB to realise £100 million from disposals in the current financial year. The NEB did in fact sell its shareholding in ICL for £38 million shortly before Christmas. Although this is a matter for the NEB to decide, having regard to the interests of the company and the taxpayer, I expect that there will be further disposals before too long.
Despite the reduction in the NEB's scope, to which I have referred, the NEB will continue to serve a useful purpose in a number of areas. These are identified in the draft guidelines which are in the Library and which were in fact printed last December. The NEB, as I have said, first has a major task to look after the 60 or so companies in which it has shareholdings at the present time. It will have a catalytic function in relation to companies engaged in advanced technology in cases where private sources of finance (while the profitability of British industry remains at its uniquely low level) have been unwilling in those circumstances to provide finance for the high risks which underlie advanced technology ventures. The NEB may in certain cases therefore undertake a pump-priming role on a temporary basis. The NEB already has a number of investments of this sort, as your Lordships know, chiefly in the fields of computers and micro-electronics. The Government look to the NEB to maximise the involvement of the private sector in these companies as soon as practicable. The NEB will in addition continue to undertake an investment role in the development of companies in the assisted areas and of small firms in areas of high unemployment. The House will be aware that the NEB has branches in the North-West and North-East of England at the present.
There may be exceptional occasions when the Government invite the NEB to 489 undertake temporary support of a company in a situation which they regard as in the national interest. The days of the NEB's wide-ranging merchant banking operations are over, but the tasks I have outlined are very considerable and will require all the talents of the new and highly talented board which the NEB now has under Sir Arthur Knight.
In the interests of time, I will miss some small points in going through the Bill; I can return to them in my reply to the debate, should I be asked to do so. Clause 2 empowers the NEB and the agencies to transfer securities and other property to the Secretary of State and empowers him to direct them to do so. Noble Lords will remember the case of Rolls-Royce, a wholly-owned subsidiary of the NEB which will be transferred to the Secretary of State following the enactment of this Bill. As I have previously explained to the House, it was the Government view that two high-powered sets of industrialists, industrial executive directors and managers, one on top of the other, and the Government's inevitable involvement on top of that, was not a sensible organisational position. No decision has yet been taken in respect of the NEB's other major subsidiary, British Leyland, but although there are many differences between the two, it is possible that it too will be transferred to the Secretary of State.
Clause 3 provides powers for the Secretary of State to have the necessary finance for companies which are transferred from the NEB to his accountability, and he will of course remain accountable to Parliament. Clause 4 enables the NEB and the agencies to reduce their public dividend capital when necessary; that is, when they dispose of a shareholding or transfer it to the Secretary of State. There is no existing statutory authority to reduce public dividend capital, the source of finance which underlies the share investments of the NEB and agencies. The provisions of Clause 4 are therefore necessary because, if no power were available, these corporations would be left with a capital liability for which they no longer possessed the asset equivalents.
Clause 5 returns again to financial limits and provides the overall limits for the Secretary of State and the NEB. 490 Where at present the NEB's statutory financial limits stand at £3,000 million and those of the Scottish Development Agency at £500 million and the Welsh Development Agency at £250 million, the previous 1979 Act allowed by order for these to be increased to £4,500 million, £800 million and £400 million. Clause 5 removes that power to increase those limits and at the same time it fixes a combined limit for the NEB and the Secretary of State of £3,000 million, the present level.
Clause 6 reduces the freedom of the NEB and agencies to make share acquisitions without the Secretary of State's consent. For the NEB, the maximum of £10 million established in Section 10 of the 1975 Act will be reduced to £5 million, and for the Scottish and Welsh Development Agencies, from £2 million to £1 million. This reflects the Government's desire for tighter financial control of the investment activities of the NEB and agencies.
Clause 7 deals with the number of directors allowed on the NEB and reduces it from 16 to 12. It also abolishes the statutory necessity for a register of members' financial interests. This is regarded as unnecessary in view of the responsibility imposed on the Secretary of State under Schedule 1 to the 1975 Act to satisfy himself as to the financial interests of members and to ensure there is no clash.
Clause 8 abolishes the Secretary of State's power to act through the NEB by asking them to use his powers to grant selective financial assistance under either Section 7 or Section 8 of the Industry Act; these powers have never been used because in fact there are alternative and normal routes for the application of monies under Sections 7 and 8 which can be utilised, and of course the applications can be backed by a recommendation of the NEB.
Clause 9 is a technical point regarding a power which has never been used in relation to overseas. I therefore come to that part of the Bill dealing with the second main subject, the English Industrial Estates Corporation, Clauses 10 to 13. The Bill does for the English Industrial Estates Corporation what the previous Government did for the equivalent organi 491 sations in Wales and Scotland in 1975. In 1975, when the Labour Government created the Welsh and Scottish Development Agencies, they transferred to those organisations the duties and responsibilities of the Welsh and Scottish Industrial Estates Corporations. In doing so, however, they considerably widened the factory-building powers of the two organisations in a variety of ways. Nothing, however, was done to bring the English Industrial Estates Corporation powers up to date in the same way, and that is what we are now doing and at the same time trying to ensure that the corporation shall act in a more commercial way, save public money and, we believe, do a better job. I am prepared to go into more detail about these provisions at the end of the debate, should I be requested to do so.
The Government basically do not accept that what should be a supplement towards investment in the assisted areas should have become a total substitute or a near total substitute, and therefore we very much want to see whether we can encourage private investment in at least some parts of the assisted areas in relation to the building of Government factories. My honourable friend the Parliamentary Under-Secretary of State announced last Friday that the Legal & General Company had agreed to invest, at a cost of £5 million, in 300,000 square feet of factory and ancillary space in the northern assisted areas. Other institutions are showing an interest. We have no illusions that one can totally substitute for the use of Government funds, but we believe that we can substitute to a high degree and therefore can as necessary fund an extensive programme on a cheaper scale from the point of view of the Exchequer.
Clause 10 of the Bill deals with many matters in relation to the corporation. It gives it the power to dispose of assets and to acquire land directly, rather than through the Secretary of State (which has been resulting in double conveyancing). The clause allows the corporation to act anywhere in the United Kingdom; but in no sense is that a proposal of major significance. The purpose of the EIEC will be to continue in the assisted areas, but we see no reason why it should not have the same powers as the Scottish and Welsh Development Agencies. The clause deals with the Secretary of State's 492 powers to direct, and to ensure, that the corporation carries out the agreed policy. It removes finally any doubt about Crown status in the corporation's standing. The Scottish and Welsh Development Agencies do not have that status. Clause 10 also deals with the differences that this makes to the Estates Corporation's activities in acquiring planning consent and the transition from the way that it has dealt with planning in the past to the way that it will now deal with it. We do not believe that this will result in the corporation encountering planning delays. There is very considerable demand from all local authorities for advance Government factories. Should there be any delay, the Secretary of State still has a power to acquire land.
Clause 11 allows the membership of the corporation to be increased. For the duties that it is now to carry out it will need wider skills, and steps are being taken to ensure that the board is composed in a way compatible with the functions now required. I pass very quickly to Clause 14, which deals with regional policy and, as I have said, makes no changes to the policy announced and debated in this House previously. In addition to tidying up those matters it also tidies up the two removals from the eligibility for regional development grants made by the previous Administration in relation to mining and construction. Again, there is no alteration in those two steps, nor in the rate of grant published for the development areas, which we have already debated in this House.
Clause 15 amends Section 8 of the 1972 Industry Act to deal with liabilities denominated in foreign currency, and I shall deal with this in my wind-up speech, if noble Lords wish me to do so. This power is primarily required in relation to the possibility of developing new sources of scarce raw materials. In relation to Clause 16, as the Small Firms Counselling Service (which was also debated in this House quite recently) is expanded, we find that we have no adequate powers for any scale of financing of general advice to small business.
Clause 17 refers to the removal of the planning agreement powers on which the Government in the past put high stock. In fact, only twice have planning agreements been concluded between the previous 493 Administration and companies: once in the case of a nationalised industry, and once in the case of a private company. I do not believe that these agreements serve any purpose—certainly not in the policies upon which this Government are engaged.
Clause 18 deals with the same question of the register of financial interests, but this time in the case of the board members of British Shipbuilders, and it removes the necessity for publishing their financial interests. Once more the Secretary of State has to ensure that there is no clash of interests. My Lords, I am sorry to have taken rather long in introducing the Bill. I beg to move that the Bill be now read a second time.
§ Moved, That the Bill be now read 2a—(Viscount Trenchard.)
§ 3.15 p.m.
§ Lord LEE of NEWTON
My Lords, the House will be grateful to the noble Viscount for taking us through the detailed provisions of the Bill. On Wednesday of last week we had a very comprehensive debate on economic and industrial matters, and the House did not, I think, very much like that which it saw. The fact that we had that debate then is probably the reason why noble Lords do not consider that this Bill, which in part covers some of those details, is quite so damaging to the economy as I consider it is. Since our debate last Wednesday we have learnt that inflation has continued its rise and has now reached 18.4 per cent. There has been a further deterioration in the balance of payments, and we have reports of still heavier unemployment. Today, I see in the Press that the Engineering Employers' Federation report that they expect 18 months of severe depression in their industry, while the Charterhouse Group predicts a 4 per cent. fall in industrial production this year and a rise of over half a million in the number of unemployed. That is the economic and industrial situation which we have seen develop since our debate last Wednesday.
It is against that background that Clause 5 of the Bill reduces the financial powers of the National Enterprise Board and of the Scottish and Welsh Development Agencies. When we consider the news from Wales in particular that proposal 494 will not be exactly glad tidings to them; and we know of the problems of Scotland in the same direction.
The noble Viscount introduced into his explanation of the Bill an atmosphere which was rather different from that introduced by the Secretary of State in his outline in another place. There is common consent that the industries of the nation are in a serious and deteriorating position, and it is under such circumstances that one would expect that a responsible Government would have been applying themselves, and indeed would have been inviting Parliament to join them in that application, to producing legislation calculated to improve the nation's industrial and economic prospects. They waste their own, and indeed Parliament's, time with this miserable Bill, which is simply a blind swipe at the National Enterprise Board and the Scottish and Welsh Development Agencies in order to ensure that the private sector can expand and that the public sector shall contract.
Indeed, during his explanation of the Bill at Second Reading in another place, the Secretary of State concluded his description of its main provisions with the words:Thus the Bill gives effect to our manifesto undertakings, and in particular contributes to our policy of reducing public expenditure and reducing the size of the public sector".—[Official Report, Commons, 6/11/79; col. 240.];by which statement, I assume, he refers to the fact that the Government are forcing the NEB to "flog" some of the assets which it has built up so laboriously, and are continuing their erosion of the public sector in order that they can obtain further contributions towards reducing the public sector borrowing requirement.
Indeed, the Secretary of State rounded off that statement with the astounding remark:There should be no need for public sector investment finance in manufacturing industry provided that savings and enterprise are sensibly treated".—[col. 240.]I wonder where he lives! Where has he been all this time, while the begging bowls have been out in Whitehall and while in so many ways public finance has assisted private enterprise to stay in being in a great many of our industries? He himself decreed a while ago that £20 million should be invested by the NEB 495 in titanium. The Secretary of State really gets rather schizophrenic at times, I think, from some of the utterances we hear from him. When saying that there would be no need for this kind of thing if we had the right kind of atmosphere, he did not deem it opportune to inform us whether the sensible treatment he was talking about included a 17 per cent. minimum lending rate and a squeeze on credit facilities, which private enterprise, in many of its aspects, is now suffering from in a very big way. I think that the reason why he makes such statements is to mislead the nation into believing that the decline of our industries is in some unexplained way a product of the policies of the last Labour Government.
The fact is, as we learned last Wednesday (those of us who needed to be taught about it), that the decline has been going on for a hundred years under Governments, some of which had high taxation, some low taxation, some high interest rates and some low interest rates. It did not make the slightest difference to the fact that industry in this country continued its decline. For over 40 years now Governments of both parties have helped to stem the decline by regional development grant schemes, which have certainly aided many regions, including Scotland and Wales, and have prevented them from becoming derelict areas. It is rather peculiar that, at the time when they are further reducing the position in the development areas, we hear that we are going to have enterprise zones, where there will be assistance given to industries, well outside development areas. Perhaps they have been looking politically as well as industrially at the effects of this kind of thing. I do not know; we shall see. Perhaps the noble Viscount will tell us when he comes to reply.
In this Bill the Government are giving statutory recognition to the reduction in the regional development grants scheme on the pretext that the net has been cast too wide. In fact, as we all know, it is simply to reduce expenditure on them. Clause 1 of the Bill prevents the National Enterprise Board and the Scottish and Welsh Development Agencies from promoting any industrial reorganisation or industrial democracy in concerns in which they have an interest. I would have thought that this emasculates half the 496 reason for its existence. They have not the power to reorganise, and the Government do not think we need any kind of improvements in industrial relationships. Really, it is quite fantastic that in this day and age, in the middle of a great steel strike brought about largely by the policies of the Secretary of State, we should be having to interest ourselves in further reducing the scope of important instruments like the one we are discussing, to improve industrial relationships in the firms in which it has an interest.
Again, Clause 1 forces the NEB and the agencies to sell assets to the private sector, and it stops the facility contained in the Industry Act 1975 of extending public ownership into profitable areas of manufacturing industry. There could be a political issue between us, I suppose, on that. I wonder how many noble Lords opposite would support the Secretary of State in a statement he made in answer to an interruption on Second Reading. Mr. Park, a Labour Member of the House, said:On clause 1, where it provides that the NEB shall cease to have the function of extending public ownership, I want to be clear about what the Secretary of State is saying. Is he saying that if no private capital is available, either at home or abroad, for a particular company or industry which by general agreement is essential in the national interest, the Secretary of State, notwithstanding that, is content to see that company or industry go to the wall rather than allow the NEB to intervene?".—[Official Report, Commons, 6/11/79, col. 247.]Sir Keith Joseph replied:On the first part of the hon. Gentleman's question"—that is the one I have just read out—in the unlikely hypothesis he postulates, the answer is 'Yes'".Of course, this is sheer, blind obstinacy. If indeed it is the case that the Secretary of State and, I take it, the Tory Government are determined that industry and firms of that type should go to the wall rather than receive public money and assistance, how can they possibly try to convince the nation that they are interested in preventing the decline in British industry or the massive increases in unemployment that we are now seeing? It seems to me, then, that in this Bill there is no real argument that it is going to improve in any way the industrial base of this nation. It is merely, "Our manifesto told the nation that we were going to reduce the 497 public sector and increase the private one"—irrespective, of course, of the damage they do in the process.
My Lords, not satisfied with reducing the functions and the powers of the NEB and the agencies, Clause 2 increases the power of intervention of this non-interventionist Government and Secretary of State for Industry. As I mentioned, I think he is a bit schizophrenic at times. Here we are, I repeat, with a steel strike which is bringing the nation's manufacturing industries practically to their knees, being allowed to continue on the grounds that there must be no intervention, while the Secretary of State is here taking powers of intervention which no Labour Government would have ever taken. Where are we to go on all this kind of thing? If there was something of an improvement to be seen on the skyline, then I could understand some of this; but there is no noble Lord opposite, including the Minister, who will tell us that he can see any lightening of the gloom, industrially or economically, at the time that we are being asked to accept the kind of thing set out in this Bill. This comes after our non-interventionist Government have forced huge increases in the price of gas which the industry neither wanted nor desired; and here they even take powers to direct that nationalised industries such as gas, instead of looking at the economics of gas production, have got to make a huge contribution to the public sector borrowing requirement.
Noble Lords may have gathered that I am not particularly keen about the contents of this Bill. But I am not alone in that. Noble Lords who have read the report of the debate in another place will have seen that there was opposition there, too, from the Conservative Benches. In fact, it would appear that the super-hawks are dissatisfied with the performance of the hawks. Prior to the election, of course, they had been promised that the NEB would be abolished. They are not happy that an emasculated NEB is to be permitted temporarily to exist. A number of Conservative Members made this very clear during the debate. They have a point. After all, no less an authority than the present Secretary of State for the Environment told the House of Commons in February 1975—and we 498 were discussing the Industry Bill 1975 then:I tell the House on behalf of the Conservative Party that we shall repeal this Bill.Really, the Secretary of State is going all pink, it seems, and the super-hawks are entitled to have their say. Why have they not done it? The noble Viscount may want to let me know when he comes to reply.
Is it, for instance, a combination of reasons such as a memory of the shocking mess they made in abolishing the Industrial Reorganisation Corporation or the Prices and Incomes Board and the subsequent two years' embarrassment of trying to create substitutes for them under other names? You never know. We may see the thing drifting backwards in the way that Mr. Heath did with both the organisations that I have mentioned. Or is it that, in contradiction of the statement that there should be no need for public sector investment in manufacturing industry, they are relying on such investment in much of the highly technological industries which the NEB has developed and in which private risk capital is not available? This again is such an irony within this Bill. We have been told that room is to be made for more private investment—not that we in this party have ever wanted to see it decline; but the fact is that we have lamented that it has declined. But the remarkable fact in this Bill is that the one type of industry which the NEB has and which is not "up for grabs" is the highly technological sector. What a remarkable situation!
I admired the way in which the noble Viscount—I do not know whether he has played football—side-stepped that beautifully. Can there be a reasonable explanation? Why is it that, while we are all agreed (and, indeed, the nation knows) that many of our older industries are in decline—and it looks as if they are going to continue to decline and that without North Sea oil our balance of payments position is unthinkable—some private industry is doing very well in the field of the highly technological industrial innovation? But the NEB has concentrated in large measure upon, and has put its resources into, this type of work. It is the future, if there is a future, for our industrial base. Yet this Government, of all Governments, say: "Hands off! You 499 cannot be trusted to be allowed to take over the highly technological developments for which the NEB is responsible and upon which the nation is going to rely more and more heavily as time goes on". Perhaps the noble Viscount will give us the explanation when he comes to reply. Why should it be that there is any danger of private capital not wanting to take up the type of work that I have been describing; whereas those firms like Ferranti, Fairey Aviation and so on, which the NEB rescued from private enterprise's failures, apparently are "up for grabs"?
I ask this question of the noble Viscount. He mentioned in the course of his speech that originally the Government had intended to force the NEB to contribute £100 million in this financial year. We have had reports in the Press that this threat has been lifted. I listened to the noble Viscount's speech as closely as I could. I do not know whether he went all the way. Did he say that the Government are not now expecting the NEB to contribute £100 million during the present financial year?
§ Viscount TRENCHARD
My Lords, I can answer that very quickly. As I said, my right honourable friend the Chancellor of the Exchequer is no longer requesting the NEB to make a contribution in this financial year of £100 million.
§ Lord LEE of NEWTON
My Lords, I am grateful to the noble Viscount. "There is more joy in Heaven" over one act of repentance and so on. We, on this side of the House, condemn this Bill because, at a time of acute economic and industrial problems, it restricts the ability of the NEB and of the agencies to continue the good work they have been doing in assisting in the strengthening of this vital section of British industry. Perhaps the noble Viscount will tell me whether I am wrong in believing that the NEB made a profit last year of something like 11 per cent. or more.
The Bill is based on ideological considerations which have no relevance whatever to the nation's problems. The claim that public money should not be necessary in manufacturing industry, provided that savings and enterprise are sensibly treated, is made to look absurd. I have been 500 contending that, by the NEB being asked to keep the technologically-based industries that they have produced, this is one of the contradictions which the nation must really look at.
My Lords, I think that after nine months of this Government there will be an awakening to the fact that they are completely irrelevant to the problems which this nation faces once it is understood that they will emasculate public organisations like the NEB which nobody can say has failed and which I contend we can prove is successful. They emasculate it deliberately for no better reason than to expand a private base which they will not trust, anyway, with the technologically-based industries of this nation.