HL Deb 12 May 1980 vol 409 cc33-61

4.10 p.m.

Report stage resumed.


My Lords, your Lordships will recall that when we were discussing this particular clause, Clause 1, in Committee, I urged upon the Government that they should not close the door on the possibility of their having to extend public ownership into certain areas of manufacturing industry. I said that I thought it would be unwise if they were to deny themselves that power. It will be within the recollection of the House that I urged on the noble Viscount to retain the flexibility, afforded them by the existing Industry Act 1975, of being able to give the board directions in certain specific ways if they thought the board was going to do something the Government did not want it to do. We were talking of the Committee stage and, as your Lordships will recall, the remarks that I made were in the context of the Government's own projections of the future as put out in the White Paper and in the Budget Statement. These were bad enough; and what I said on that occasion was that the Government would be unwise, in view even of their own projected developments in the next four years (whether they were forecasts or whether they were assumptions), to deny themselves that power and have to come back for legislation.

At that time we were talking within the context of the Government's own statement. But we are now talking in a different circumstance because, since the Committee stage, the Select Committee of another place dealing with Treasury and Civil Service matters has had an opportunity not only of examining the forecasts (or assumptions) to which I then referred but of producing an opinion which states authoritatively that the position is likely to be much worse than that which was thought to exist at the time we were holding the Committee stage on this particular clause of the Bill. If I may, I will refer your Lordships to the findings of this all-party Select Committee in another place, a Select Committee comprising a majority from the Government's own party. It says this: The prospects for manufacturing industry arc particularly depressing. It was stated in evidence to the Committee that manufacturing output was estimated to decline by 4½ per cent. in 1980, which, with an average fall of J per cent. a year over the next three years, would imply that manufacturing production might be over 6 per cent. lower in 1983 than in 1979 ". Are the Government still saying that, in the light of the blight that they themselves originally forecast as settling over the industrial life of this country, they want to forfeit their right, if need be, to invest public money either in saving industries or in promoting new ones? Only two days ago, it was announced that in that free enterprise country, the USA, the US Government were advancing 750 million dollars to save Chrysler. There is not the slightest disinclination by the American Administration when things are going badly to put in public money. Are the Government saying that they wish to tie their hands behind their backs in this particular respect? In the light of all these developments, and in the light of the far worse projections by the Select Committee in another place, and within the context of the American action to which I have referred, are they saying that they are still going to let the weakest go to the wall and the devil take the hindmost— all for the sake of maintaining in its pristine purity the ideological piety of Sir Keith Joseph? Are they still saying that in no circumstances would they be prepared to take the same action as was taken by the Heath Government in relation to Rolls-Royce?

If they are saying this, then they are revealing that they arc quite insensitive to what happens to the industrial structure of this country. I should have thought that prudence would have dictated to the Government that in all the circumstances it would be wise to retain the power contained in Section 2 (2) (c) and/or for that matter Section 2 (2) (b) of the Industry Act 1975.

There is a further question to be taken into account. It will be recalled that the Government paper, the Budget Statement, the White Paper that followed, assumed that unemployment would rise to 1–8 million in 1981–82 and then remain at that level until 1983–84. If I could refer the noble Viscount to the Second Report of the Select Committee from another place, he will find this verdict on that assumption: Our advisers estimated that registered unemployed could lie between 2–2 million and 2–5 million by 1983. Higher unemployment means higher expenditure on social security benefits and whether this is financed through higher national insurance contributions or through general taxation, the scope for tax reductions in future years will be significantly tower … ". So that it is not only a question of industrial activity; it is a question of unemployment. What is noteworthy is that the Select Committee of another place, composed as it is of all parties, went some way towards the conclusions reached by Mr. Wynne Godley which appeared only a month earlier and which were immediately denounced as fantastically pessimistic by the Government spokesman of that time.

Far be it from us on these Benches to add to the doom and gloom that these figures portend, but, certainly, if the noble Viscount, on the basis of his own figures, was not prepared to retain that degree of flexibility, surely the substantial worsening of the prospects which was come to in the opinion of the Select Committee in another place ought to give the Government, and the Minister himself, cause for reflection. That is the reason why we have once again on Report suggested to the Government that they would be well advised, without prejudice to their powers under the Industry Act 1975, to leave the original section of the Industry Act as it stood.

There is no virtue in being inflexible when the fires are gathering all the time; when the storms are blowing with ever-increasing intensity; and when the horizons, wherever one looks in the economic and industrial field, grow progressively darker. Surely, it would be far better for the Government to maintain this degree of flexibility. It does nothing to take away their powers. In certain circumstances flexibility might be an advantage, a lifeline for them— and not only a lifeline for them, but for the benefit of the country as a whole.

4.20 p.m.


My Lords, at the Committee stage the noble Viscount agreed that this clause was the philosophical core of the whole Bill. My noble friends Lord Lee and Lord Bruce have made the central issues so far as that core is concerned. I want to confine myself simply to one complementary point: that which I mentioned in particular during the Committee stage. This will take away from the NEB and the agencies mentioned the function of promoting industrial reorganisation.

At the Committee stage, we had a discussion about this. I raise it again simply because I do not believe that the noble Viscount answered the arguments from this side with any degree of satisfaction. The noble Viscount professed not to be dogmatic. He claimed that he was not acting with regard to this Bill on the principle of dogma. I am sure he has read the Hansard of the Committee stage and he will see why some of us on this side are dubious about that claim. At the Committe stage, on 28th April, in column 1048 of Hansard, the noble Viscount had this to say: We believe that the health of the private sector of industry, which has in the past created the wealth for this and other nations to a greater extent than the public sector, has been debilitated". That, I suggest, is his starting point in dogma. If it had not been, if he had been making a reasoned argument, then surely he would have gone on from that assertion to show that the nationalised industries had been less efficient, had provided less wealth than those of private industry and that was why he was introducing this Bill: in order to promote the industrial health of this country through private enterprise rather than through public enterprise. He did not do so.

I should like to hear him argue that case, for example, in the coal industry. Would he like to tell us this afternoon that the coal industry was better organised and produced more wealth for the country under private ownership than it has done under public ownership? What we are really arguing about is whether in the declining industrial age in which this country is living the Government should have the means of intervention in order to stimulate a new industrial age and halt the decline that we all have to accept as characteristic of our age; or whether this can best be done, as the noble Lord has been arguing, through the aegis of the market place. Later in the same Committee stage the noble Viscount had this to say: I said the market system would cause reorganisation "— that was at column 1051 of Hansard.

I pointed out to the noble Viscount in that Committee stage that he had some historical precedent to go on. He has not answered— nor has anyone from the Government answered— why they believe that the system which they are now employing through this Bill and other Acts will be any more successful than was the almost identical system used between the years 1970 and 1972. We know that during those years, because of lack of investment in British industry, because of declining investment in British industry, because of the loss of investment to overseas companies— which again I mentioned at the Committee stage— the then Conservative Government had to reverse their policies in order to escape from complete collapse.

This has not been answered and it is not enough for the noble Viscount to say that the £ 1,000 million which I mentioned had been lost within two months of the removal of exchange controls, had not been completely lost. I did not use the word "completely". I am suggesting that this Bill, for the removal of the power of the Government to use the NEB to revitalise industry, combined with such measures as the removal of exchange control, will have the same effect in this country today as occurred in the years 1970 to 1972. I should like the noble Viscount to answer that question, as nobody that I have challenged from the Government Front Bench has done so.

In removing these powers of industrial reorganisation from the NEB, may I ask the noble Viscount another question— a very pertinent and timely question— taken from a matter which he referred to in public only last week. That is the question of research and development which is an essential part of industrial reorganisation. I understand that the Government are resisting increasing State aid towards research and development in industry. Indeed, according to the OECD, Britain is the only major industrial country where research and development has decreased in absolute terms over the past 10 years. I am sure that the noble Viscount has read the Finniston Report, which shows that of the money spent in research and development in industry in this country 90 per cent. is accounted for by 100 companies. Over 50 per cent. is accounted for by no more than 10 firms. These 10 firms are exclusively within the aerospace, electronics and chemicals industries. Yet only last week the Minister himself was at least suggesting in his words that this Government are resisting the need for increased State aid.

When we come to a crucial organisation for the future industrial development of this country, the micro-electronics industrial support programme, we find, as I understand it, that that has actually been cut. Please correct me if I am wrong. This programme has been cut from £ 70 million to £ 55 million over a five-year period. So I would say to the Minister: What is there that activates the Government in producing this Bill and depriving themselves of the organisation of the National Enterprise Board, with its power to stimulate private as well as public industry in this country, to lead the way in research and development, to assist in the stimulation of new industrial ventures in this country, and to participate in the reorganisation of industry? What is it that activates the Government, other than dogma?

4.31 p.m.


My Lords, I hope the noble Viscount will think again about some of the things which are implied in this clause. I have an interest in it, and particularly regarding subsection (2), where he deals with the Scottish Development Agency Act. As he knows, I was Secretary of State at the time when that Act was passed. It is interesting nowadays, when there is a problem with any industry in Scotland, how the Secretary of State rushes to the press and says, "It's all right: we are going to get the Scottish Development Agency on to the scene and see what they can do". They were not all that helpful when it came to the passing of the Act and the creation of the agency, and indeed it looked at one time as though they were going to get rid of it. There were times when they spoke in this way about the NEB and the Welsh Development Agency as well, and then they probably suddenly realised that they had better have some tools in their locker if they were even to keep up a pretence of dealing with the rising tide of unemployment.

The tide is rising; it is rising very heavily in Scotland. Over the whole of Scotland it is more than 8 per cent., and when you take particular areas it really is a desperate plight. These particular areas are in the old industrial areas of Glasgow and the West of Scotland— not just the Clyde Banks and not the places where you expect to get a great rise in unemployment with the decline of shipbuilding and other heavy industry, but a place like Kilmarnock, which I had the privilege of representing for 33 years.

We have seen all the forces at work there— an American coming in to Glenfield and Kennedy which had been there for over 100 years, milking it and walking out. It was the efforts and the new powers of the Scottish Office, with the help of the Scottish Development Agency, that, by intervention there and by maximum state aid, saved something of it. We have another firm there at the present time which is building up, and it is a credit to our development area policies that they have been able to do it, but it was intervention. If the Government had stood on the sidelines, Glenfield and Kennedy would have gone. There is another one called Massey-Ferguson. It is a well known name, even in racing these days; there is a Massey-Ferguson cup. I should like to tell your Lordships, in case you do not realise it, that there is not a single combine tractor now built in the whole of Britain. They used to be built in Kilmarnock, but they decided to reorganise. There was no difficulty about their re-organising. And where do they concentrate combine harvester production?— in France; and in what part of France?— a non-development area. It makes nonsense of all the Common Market proclamations about strong areas helping the weak. It has nothing to do with bad workmanship or strikes in the factory, or anything else: just a decision by a private company to reorganise to the detriment of an area that was once one of the most popular areas in Scotland.

At the present time— and let us give credit where it is due— with a certain amount of help and know-how from Massey-Ferguson, there is a company which, with the help of the Scottish Agency and the Scottish Office, is struggling for survival, not creating tractors but using their engineering skills that are endemic to Kilmarnock and trying to create a new industry. What I am concerned about is: What will be the effect of this Bill, and in particular Clause 1? It is all very well for the Minister to get up and say, "Ah, but have you read paragraph (a)? "which refers to, … the provision, maintenance or safeguarding of employment". Of course I have read it, but I have also seen the activities of the Scottish Office and their message to industry is obviously: "Sink if you cannot swim. We are not going to give a great deal of help." In fact the complaint is that we tried to help too may people. It is far easier to maintain industry than it is to be able to provide industry. Firm after firm in Scotland is going out at the present time.

What is the outlook for the building industry and the housing projects the Government have got ahead of us? As to the capital cuts, are they going to help private industry by getting the Scottish Development Agency, the NEB and the Welsh Development Agency to sell off what private interests they may have? I can tell you that private industry is more concerned about the contracts that have been put out by public industry. Go and ask Babcock and Wilcox how much they are dependent on the energy industry. Ask some of the other construction agencies and find out how much they are depending, waiting for development. They see no bright news in respect of this, and I am afraid that there is a little bit of whistling in the very dark days so far as paragraph (a) is concerned.

However, when we look at the negative aspect of paragraph (b) it may be possible to help, with the agreement of another industry, by the Government taking a share in it. In fact some people think— and I am one of them— that if we are on to something that may be profitable the Government should have a direct share in it. There is nothing wrong in that. We are not saying they must, but that they have the right to do it; it is the best way the workers can see a measure of control over their own destiny and get an immediate return for the country on what has been put in. But here comes paragraph (b) , permitting the private sector to come in: … by the disposal of securities and other property … ". They will only be able to dispose of those securities if it is a profitable industry. That is where the dogma lies, on that Front Bench; and it is going to be no help to Scotland at all.

Then we have paragraph (c) which deals with "reorganisation". I have heard a lot since I came into this House about small industry. In many ways, one of the curses of Scotland is small industry. There are family businesses in which it is easier just to let the thing go rather than to invest. "It will do my lifetime"— that is the sort of outlook which you get in some of the smaller businesses. Is it not worth while having an agency coming in there and trying to get some reorganisation going and a bit of security for the workers as well as the lifetime of security for the present owners? It really does not say very much for the Government, with all their problems, that they have to pass a Bill like this which is so negative. They do not have very much confidence in their own ability properly to use the tools under the old Industry Act, most of which were theirs, by the way. We could only help Rolls-Royce and all these other people by using the Industry Act 1972; the development agencies for Wales and Scotland were logical additional steps that were acclaimed and welcomed in Scotland.

Now let us not have anything about mandates. The Government have no mandate in Scotland to do anything at all, and if they did not believe me the last time, I hope they will notice the results of the local elections; and if they try to explain that away, I hope they looked at the opinion poll in the Glasgow Herald for today, where the Tories are down again, and we see a one point jump ahead for the Nationalists. The Tories create nationalism by their ill-treatment of Scotland. I sincerely hope the Government— I despair of it— if they had any sense, at the present time with the present unemployment and the employment situation in Scotland, will be strengthening the Scottish Development Agency, not weakening it as they do in this particular clause. I hope my noble friend will press this amendment to a Division.

4.43 p.m.


My Lords, we debated at Second Reading Clause 1 and its purpose as the key to this Industry Bill and at length on more than one occasion at Committee stage. Much as I should like to accept the challenge to do it again, in the interests of time I am not going to answer in almost precisely similar terms noble Lords who have raised points which have been raised and answered many times before, here and in the other place.

In a nutshell, we do not see the NEB or the particular functions of the agencies in relation to general reorganisation; we do not see these bodies as panaceas to deal right across the board. The noble Lord, Lord Bruce, suggested that things had changed since the Committee stage, in that there were various bodies estimating even lower industrial activity situations, and that this might mean that the Government should retain powers via the NEB to take what action they might consider necessary.

I am not going to discuss the general economy and the terrible situation it was in when we took over, nor the length of time that it will take before we begin to get forward movement. But the idea that chosen panacea agencies can cover all the ills that have been created is one that we still reject. In so far as particular company situations are concerned— and the noble Lord, Lord Bruce, mentioned Chrysler in the US— in this Bill we are not, nor have we any such intention, revising any further the powers under Section 7 in the assisted areas and Section 8 nationally to give assistance when it is likely to benefit the economy of the United Kingdom or any part thereof. We retain those powers. Short of Government powers, which on the whole we do not favour in either specific or general situations, there are examples which are constantly occurring, and will occur more in the atmosphere created for private finance where consortia will, I hope, decide that in certain areas help should be given. Noble Lords have barely mentioned the changes in the tax and control policies which played such a part in debilitating industry in the past.

The NEB, in its annual report, clearly accepts the role given to it and obviously considers it to be an important and big one. It states that the Government have accepted the need for a continuing NEB; and that is true and answers a part of the noble Lord, Lord Lee's, suggestions. The broad purposes for which the NEB was set up and which were stated in the Industry Act 1975 remain unchanged; but its functions are to change. Public ownership for the sake of public ownership is no longer a function, and instead the NEB is to have the function of disposing of assets in order to increase the private sector involvement wherever possible. The notion that the NEB could be a major instrument of industrial reorganisation and rationalisation has also gone. It goes on to accept the need to concentrate its efforts in huge areas where they are very badly needed.

The noble Lord, Lord Lee, suggested that it had no flexibility in carrying out its new function of, wherever possible, returning companies to private ownership. What we expect the NEB to do, in the words of my right honourable friend the Secretary of State, is to sell its shareholdings as soon as it is commercially practicable, having regard to the interests of the company and the taxpayer, together with such other special considerations, for example, United Kingdom defence interests, as the Government may identify. The flexibility was indeed shown in terms of the overall economics which faced the Chancellor of the Exchequer when he lowered the priority for the early contribution from the NEB to the need to deliver cash and the £ 100 million target in the financial year was removed. Sales will continue, and continue on a sound and practical basis, as and when that is in the interests of the country, the shareholders and the company concerned.

The noble Lord, Lord Cledwyn of Penrhos, raised the problems of Wales again. I really think I must decline his invitation to a further Welsh debate— we have had one— or even to a full debate on regional policy, at least under this clause, because we are talking of Clause 1 which does not affect it. I have indeed written to him setting out in full the position in relation to the £ 48 million extra, and out of courtesy but not in relation to this clause at all, the £ 48 million in question will be largely spent by the Welsh Development Agency, although a small amount will go to the Cwmbran Development Corporation. It will provide 1½ million square feet of advance factory space and 500 acres of identified sites, together with the reclamation of 300 acres for industrial use.


Would the noble Viscount please answer the latter part of my question, namely, whether the £ 48 million is intended to be directed to those areas which are affected by steel closures in Wales, and not to the rest of the development area which is to lose £ 35 million a year from 1982 onwards?


My Lords, in the main the purpose of this will be to relieve the effects of the steel closures. The regional policy changes have been discussed previously and I am more than prepared to debate them at any time in the future because, as I mentioned last time, I was happy to discover a fairly large amount of waste in the previous regional policy.' I believe we have an overall effective regional policy, in which— to say that Wales gets the largest share is wrong— Wales constitutes the biggest percentage of assisted areas of any of the main areas of need in England, Scotland and Wales.

The noble Lord, Lord Cledwyn of Penrhos, quoted me as saying that the Welsh agency powers would not be altered. I never said that in relation to Clause 1 and the powers of general reorganisation. His concern has always been in relation to regional policy, and I said it in relation both to regional policy and to other functions which the agencies have but which the NEB does not have.

May I quickly answer the question in relation to INMOS, which the noble Lord, Lord Lee, raised? The Government regret the delay in taking the decisions both on the second tranche of £ 25 million for the company and on the location, which is a very important question. But I do not believe that the Government or the NEB could responsibly have refused to discuss, consider and negotiate in relation to certain offers and proposals which have been raised. I believe these to be potentially sufficient in the interests of all concerned, including all whose primary concern is the acceleration of technology in this country, for those discussions to proceed, and to proceed as fast as possible. So I assure the noble Lord— I cannot give him a date— that we are very conscious of the need to come to decisions at the earliest possible moment.

The noble Lord raised the question of Rolls-Royce once more, and of British Leyland. He will no doubt, having looked at the NEB's annual report, have seen that the board believe that they have no conceivable part to play in relation to either of those two huge companies, although on the second one the Government have still not yet taken their decision. In a nutshell, it all comes to this question of whether, if you have an industry whose profitability has been depleted very badly over the years by ill-tretament— by more than one Government and more than one party— by controls and by disincentives until its profit is at a low level, it is then

sensible to pick upon certain chosen agencies and expect them to put it all right.

With no disrespect to the previous board, let alone to this board, even in relation to those tasks which the NEB has taken on in the past— and we believe there is a need to concentrate on a narrower front— your Lordships will have seen in the annual report that after leaving out £ 17.2 million of special once-only costs the results are, on an historical account basis for the year 1979, 4.8 per cent. return on capital historical. I am not criticising. I am merely saying that it is no good noble Lords thinking that chosen agencies are the way to put right all that has gone wrong.

I hope that I can ask noble Lords opposite to consider whether all this stems from the ill-treatment of the wealth-creating section of industry, both private and public, by disincentive at a personal level, which affects both sectors, and by control and intervention, and whether it is a more sensible and more humble approach to limit the amount that you expect of any one centrally appointed agency and to get it to concentrate on essential functions. I just hope that the reason behind that question will go home.

Noble Lords opposite have placed emphasis on the immense problems in the economy and the appalling industrial situation that we have. I do not accept that a decline of industry is a characteristic of our age. In the main, it is a self-inflicted wound and it will take time for industry to recover from the many self-inflicted wounds of past years. It will not be done by giving huge, wide-ranging reorganisation powers to selected Government-appointed agencies.

4.55 p.m.

Their Lordships divided: Contents, 61; Not-Contents, 92.

Ardwick, L. Boston of Faversham, L. Collison, L.
Aylestone, L. Brockway, L. Cooper of Stockton Heath, L.
Birk, B. Bruce of Donington, L. Crowther-Hunt, L.
Blease, L. Chitnis, L. David, B. [Teller.]
Blyton, L. Cledwyn of Penrhos, L. Davies of Penrhys, L.
Donaldson of Kingsbridge, L. Janner, L. Ross of Marnock, L.
Elwyn-Jones, L. Kaldor, L. Shinwell, L.
Fisher of Rednal, B. Kilbracken, L. Snow, L.
Gaitskell, B. Leatherland, L. Stedman, B.
Galpern, L. Lee of Newton, L. Stewart of Alvechurch, B.
Gordon-Walker, L. Listowel, E. Stone, L.
Goronwy-Roberts. L. Llewelyn-Davies of Hastoe, B. Strauss, L.
Gosford, E. Lloyd of Hampstcad, L. Taylor of Mansfield, L.
Greenwood of Rossendale, L. McCarthy, L. Underhill, L.
Gregson, L. Maelor, L. Wallace of Coslany, L.
Hale, L. Northfield, L. Wedderburn of Charlton, L.
Hatch of Lusby, L. Oram, L. Wells-Pestell, L. [Teller.]
Henderson, L. Paget of Northampton, L. Whaddon, L.
Houghton of Sowerby, L. Peart, L. Wynne-Jones, L.
Hughes, L. Phillips, B.
Jacques, L. Plant, L.
Alexander of Tunis, E. Gainford, L. Netherthorpe, L.
Ampthill, L. Glenkinglas, L. Nugent of Guildford, L.
Armstrong, L. Gowrie, E. Onslow, E.
Avon, E. Gridley, L. Orkney, E.
Bellwin, L. Grimston of Westbury, L. Pender, L.
Belstead, L. Hailsham of Saint Marylebone, L. (L. Chancellor.) Piercy, L.
Bessborough, E. Porritt, L.
Boothby, L. Halsbury, E. Redmayne, L.
Bridgeman, V. Henley, L. Reigate, L.
Caccia, L. Holderness, L. Robbins, L.
Cairns, E. Hood, V. Romney, E.
Chesham, L. Hornsby-Smith, B. St. Davids, V.
Cholmondeley, M. Hylton-Foster, B. Sandys, L. [Teller.]
Clitheroe, L. Inchyra, L. Shannon, E.
Colville of Culross, V. Keyes, L. Sharpies, B.
Craigavon, V. Kimberley, E. Simon of Glaisdale, L.
Craigton, L. Kinloss, Ly. Soames, L. (L. President.)
Cullen of Ashbourne, L. Long, V. Somers, L.
Daventry, V. Lothian, M. Strathcarron, L.
Davidson, V. Lucas of Chilworth, L. Strathspey, L.
de Clifford, L. Lyell, L. Swinton, E.
De Freyne, L. McFadzean, L. Torphichen, L.
Denham, L. [Teller.] Mackay of Clashfern, L. Trefgarne, L.
Derwent, L. Macleod of Borve, B. Trenchard, V.
Drumalbyn, L. Mancroft, L. Trumpington, B.
Ebbisham, L. Mansfield, E. Vaux of Harrowden, L.
Ellenborough, L. Margadale, L. Vickers, B.
Elliot of Harwood, B. Marley, L. Vivian, L.
Emmet of Amberley, B. Merrivale, L. Westbury, L.
Exeter, M. Morris, L. Willoughby de Broke, L.
Fortescue, E. Mowbray and Stourton, L. Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

5.4 p.m.

Clause 2 [Transfer of property to Secretary of State]:

Lord BRUCE of DONINGTON moved Amendment No. 3:

Leave out Clause 2.

The noble Lord said: My Lords, this is another matter which was discussed by the Committee at some length. It deals with the right of the Secretary of State to direct that certain enterprises are handed over either to himself or to his nominee from the National Enterprise Board.

The reason that I have renewed the discussion on this matter today arises from a report that appeared in The Times on 6th May last from which, with the permission of the House, I will read a short extract. It says: Uncertainty over the future relationship between the National Enterprise Board and British Leyland is expected to be resolved shortly, with the Department of Industry taking over responsibility for monitoring BL's performance ". It continues: Although Sir Keith Joseph, Secretary of State for Industry, has not yet decided how to resolve the continuing uncertainty, he is widely expected to use the powers contained in the Industry Bill now before Parliament and scheduled to be enacted at the end of this month. Under the new Act he can formally transfer BL from the NEB to the Department of Industry ".

I will not disguise from the House the fact that I am completely appalled by this terrible prospect. Sir Keith Joseph himself has assured us, repetitively, over the years that politicians are not the people to interfere in industry— indeed, that it is not their function and that this whole business is far better left to private enterprise individuals, with wide experience in industry and commerce and capable of being enthused by the perpetual motivation induced by lower direct taxation and all the benefits which are supposed to flow therefrom. I repeat: I am appalled at the prospect of the Department of Industry taking over BL from the NEB.

The noble Viscount has been good enough to quote from the annual report and accounts of the National Enterprise Board for 1979, which unfortunately were not to hand at the Committee stage. So perhaps it would be better if I were to illustrate the kind of difficulty in which we on this side of the House find ourselves when we read of the observations of the NEB, some of which were referred to by my noble friend Lord Lee of Newton and by other noble Lords on this side of the House in regard to INMOS. I quote from the chairman's statement: At the time of writing, three months after our decisions, we await a decision by Government both as to the consent for our investment and as to the company's application for an industrial development certificate. This is a worrying delay to a project where success depends on bringing satisfactory products to the market at the right time in the face of strong foreign competition ".

Are we now supposed to consent to a situation in which the same kind of delays in the making of decisions are to be in Sir Keith Joseph's hands vis-à-vis the future of British Leyland? Are they going to be paralysed by the kind of indecision to which the noble Viscount himself alluded somewhat obliquely by way of excuse? If so, the transfer of British Leyland to the tender mercies of Sir Keith Joseph will be a national disaster.

With the indulgence of the House, I should like to quote from a further section of the NEB report which has some bearing on this subject. Sir Arthur Knight, who, I believe, stands very well in Government circles, said: In all that we do there are inherent tensions. We must act commercially but in situations which the private sector alone is unwilling to tackle. Our criteria for investment are therefore special and we are in constant danger of being regarded as 'a soft touch'. There can be nothing in our attitudes or behaviour which diverges from the best commercial practice. A second source of tension arises from the fact that we are spending public money. Pressures may be exerted which can easily lead to uncommercial behaviour or, at best, to delays which can be competitively damaging".

It is quite clear on any reading of the chairman's statement— or those parts of it that I have read— that he is referring to the Department of Industry. There can be no doubt whatsoever of that. Therefore do we wish the same type of tensions on top of their existing troubles to be transmitted further down the line to British Leyland? It is said— and I believe it to be true— that Sir Arthur Knight does not feel that the board at the moment can play any useful part in relation to BL. That may well be so; that may well be because Sir Arthur Knight has complete confidence in the existing management of British Leyland. Can the Government therefore indicate what kind of policies they intend to carry out if they use this clause to transfer British Leyland to the Minister? Have they any clue what they are going to do about it? Have they any clue what directions they are going to get? Of course it may well be that the report in The Times, which is usually very well informed on these subjects, is incorrect, and that the Government do not intend to use the powers under this Bill to transfer British Leyland direct to Sir Keith Joseph. If the noble Viscount can give us that assurance we may take a very different view of the whole matter. I therefore invite him to say whether The Times report has the substance of accuracy in it, or whether it is not the intention of the Government to do anything of the kind. I beg to move.

5.13 p.m.


My Lords, we explored very fully the purposes of Clause 2, both technical and substance, at the Committee stage and I resist the amendment for the same reasons as we adumbrated at Committee stage. The noble Lord, Lord Bruce of Donington, has raised two issues which I suppose by a thread could be attached to Clause 2 of the Bill and I think it necessary for me briefly to comment on them.

I have already made reference to INMOS in speaking to the last amendment and I have said that the Government recognises that the delay in these two important decisions is unfortunate and will be kept to a minimum; and I have also said, in relation to almost the only critical quotation from the NEB report of the Government, that I do not believe cither Government or NEB could responsibly have refused to encourage discussions in relation to the possible future and whether it would be a beneficial future for INMOS and for micro-chip technology.

In relation to British Leyland, the noble Lord, Lord Bruce, did not quote the important reference in the NEB report to Rolls-Royce and British Leyland. This says: The Government has decided to relieve the NEB of responsibility for Rolls-Royce and at the time of writing is still considering whether to take similar action in regard to BL. My board and I made it plain on our appointment that we welcomed the opportunity to serve an NEB which would no longer be involved in either of these major companies. The magnitude of BL, its problems and its financial requirements, means that the Government must inevitably be closely involved in its major decisions, thus leaving for the NEB only a relatively minor intermediary role. We would gain nothing of substance by having this illusory responsibility ". On previous occasions I have argued the case, which I support vigorously from my own industrial background, regarding putting a board of eminent gentlemen on top of a board of eminent gentlemen in the case of either Rolls-Royce or British Leyland and before you get a Government which cannot divorce itself from its responsibilities in relation to the shareholder and in relation to overall finance provided by the Government. This in no way contradicts the oft repeated remarks by my right honourable friend the Secretary of State that we have no intention of intervening in the management; but we are dealing with Government money, Government finance in huge operations, and to have an intermediary board in my opinion is not a sensible thing.

In the case of Rolls-Royce the arguments have been concluded and the decision taken. In the case of British Leyland we arc still considering that matter and will be discussing it further with British Ley-land, but I believe that certainly some of the same arguments (not quite all) apply to British Leyland as apply to Rolls-Royce. There is no question of either my right honourable friend, myself or the civil servants in the Department of Industry managing either of these two great companies. I resent the references made by the noble Lord, Lord Bruce, to my right honourable friend the Secretary of State. It is not his current role to manage these industries; and he is clearer of that and of the limitations of Ministers and civil servants in managing industry than noble Lords opposite seem to be.

In regard to the second quotation made by the noble Lord, Lord Bruce, from the NEB report, in my opinion the majority of that quotation refers to the relationship of NEB and subsidiaries or potential subsidiaries. The tensions that Sir Arthur Knight speaks of and of its being a "soft touch" are a soft touch for companies, and his emphasis that it must act really commercially in order to avoid the soft touch is one that I would entirely echo and I so indicated as the noble Lord was speaking. In the main he is speaking there of tensions in the market place. He makes some recommendations in his report where he believes (not surprisingly) that in a wide area the Government should consider things slightly differently; but in the main he and his eminent board are clearly content with their very major roles in which we wish them well. I wish to resist this amendment.

5.19 p.m.

On Question, Whether the said amendment (No. 3) shall be agreed to?

Their Lordships divided: Contents, 63; Not-Contents, 87.

Ardwick, L. Bruce of Donington, L. David, B. [Teller.]
Aylestone, L. Byers, L. Davies of Penrhys, L.
Bernstein, L. Chitnis, L. Donaldson of Kingsbridge, L.
Birk, B. Cledwyn of Penrhos, L. Elwyn-Jones, L.
Blyton, L. Collison, L. Fisher of Rednal, B.
Boston of Faversham, L. Cooper of Stockton Heat Gaitskell, B.
Brockway, L. Crowther-Hunt, L. Gordon-Walker, L.
Goronwy-Roberts, L. Leatherland, L. Shinwell, L.
Gosford, E. Lee of Newton, L. Snow, L.
Greenwood of Rossendale, L. Llewelyn-Davies of Hastoe, B. Stedman, B.
Gregson, L. Lloyd of Hampstead, L. Stewart of Alvechurch, B.
Hale, L. Lloyd of Kilgerran, L. Stone, L.
Hatch of Lusby, L. McCarthy, L. Strauss, L.
Henderson, L. Maelor, L. Taylor of Mansfield, L.
Houghton of Sowerby, L. Northfieid, L. Underhill, L.
Hughes, L. Oram, L. Wallace of Coslany, L. [Teller.]
Jacques, L. Peart, L. Walston, L.
Janner, L. Phillips, B. Wedderburn of Charlton, L.
Kaldor, L. Robson of Kiddington, B. Wells-Pestell, L.
Kilbracken, L. Rochester, L. Whaddon, L.
Kilmarnock, L. Ross of Marnock, L. Wynne-Jones, L.
Alexander of Tunis, E. Gainford, L. Merrivale, L.
Allen of Abbeydale, L. Galloway, E. Morris, L.
Ampthill, L. Glenkinglas, L. Mowbray and Stourton, L.
Armstrong, L. Govvrie, E. Netherthorpe, L.
Avon, E. Gridley, L. Nugent of Guildford, L.
Barnby, L. Grimston of Westbury, L. Onslow, E.
Bellwin, L. Hailsham of Saint Marylebone, L. (L. Chancellor.) Orkney, E.
Belstead, L. Redmayne, L.
Bessborough, E. Halsbury, E. Reigate, L.
Boothby, L. Harmar-Nicholls, L. Robbins, L.
Bridgeman, V. Henley, L. Romney, E.
Caccia, L. Holderness, L. St. Davids, V.
Charteris of Amisfield, L. Hood, V. Sandys, L. [Teller.]
Chesham, L. Hylton-Foster, B. Sharpies, B.
Clitheroe, L. Inchyra, L. Simon of Glaisdale, L.
Craigavon, V. Killearn, L. Soames, L. (I. President.)
Cullen of Ashbourne, L. Kimberley, E. Strathcarron, L.
Daventry, V. Kinloss, Ly. Strathspey, L.
Davidson, V. Lauderdale, E. Swinton, E.
de Clifford, L. Long, V. Torphichen, L.
De Freyne, L. Lothian, M. Trefgarne, L.
Denham, L. [Teller.] Lyell, L. Trenchard, V.
Derwent, L. McFadzean, L. Trumpington, B.
Ebbisham, L. Mackay of Clashfern, L. Vaux of Harrowden, L.
Ellenborough, L. Macleod of Borve, B. Vickers, B.
Elliot of Harwood, B. Mancroft, L. Vivian, L.
Emmet of Amberley, B. Mansfield, E. Westbury, L.
Exeter, M. Margadale, L. Willoughby de Broke, L.
Forester, L. Marley, L. Young, B.
Fortescue, E.

Moved accordingly and, on Question, Motion agreed to.

5.27 p.m.

Viscount TRENCHARD moved Amendment No. 4: Page 12, line 5, at end insert— ("(3A) Where, apart from this subsection, the amount of a grant under Part I of the Industry Act 1972 towards expenditure falling within subsection (3B) below would be less than 20 per cent. of the expenditure, the amount shall instead be 20 per cent. of the expenditure. (3B) The expenditure falling within this subsection is expenditure incurred—

  1. (a) in providing an asset as part of, or on or for use in, qualifying premises in a relevant special development area in such circumstances that, by reason of Article 5 (1) and (4) (d) or Article 5A (2) and (5) (b) of the Assisted Areas Order 1979, any grant under Part I of the Industry Act 1972 towards the expenditure is to be made at 54 the rate appropriate to a development area which is not a special development area, or
  2. (b) in providing a building or works at any time as part of or on qualifying premises in a relevant development area in such circumstances that, by reason of Article 5 (2) and (4) (d) of that order, no grant may be made under Part I of that Act towards any expenditure incurred in providing machinery or plant at that time for use in those premises.
(3C) In subsection (3B) above—
  1. (a) "relevant special development area" means an area which became a special development area on the coming into operation of the Assisted Areas Order 1977, the Assisted Areas Order 1979 or the Assisted Areas (Amendment) Order 1979, and
  2. (b) "relevant development area" means an area which became a development area on the coming into operation of the Assisted Areas Order 1977, the Assisted Areas (No. 2) Order 1977 or the Assisted Areas Order 1979.").

The noble Viscount said: My Lords, I move this amendment which I believe to be entirely a technical amendment, — and I hope the noble Lord will not accuse me of calling things technical which are not technical. We discovered, following the changes in the regional policy which were brought in last July and some of which are consolidated in this Bill, that an unanticipated effect of those changes and of the transitional arrangements was taking place. This amendment relates solely to the situation of companies which have negotiated Section 7 aid, which your Lordships will remember is provided to support a project and is not automatic aid on capital like the regional development grant. Companies which have negotiated assistance to a project under Section 7 and whose project is located in an area that has been upgraded will inadvertently get for part of that project, as I shall explain, less than they anticipated. What was intended was to prevent companies in areas that were upgraded from getting a windfall extra regional development grant, over and above that which they anticipated getting at the time when they applied for aid and when aid was negotiated with them to enable the project to go ahead. Thus it is a technical amendment to reverse the unanticipated effect of the transitional provisions in the Assisted Areas Order 1979 and the Assisted Areas (Amendment) Order 1979 which, combined with the effects of the Regional Development Grants (Variation of Prescribed Percentages) Order 1979, would result, as I have said, in some companies in upgraded areas suffering an unintended shortfall of regional aid as a whole on a project.

The amendment has nothing to do with the intended reduction in both RDGs on assets provided after 1st August 1980, nor the consequence of a reduction in the total support for a project under Section 7 and RDGs in either downgraded areas or unchanged areas after the transition period. The companies affected are those who accepted offers of selective assistance of £ 20, 000 or more before the orders came into operation. The transitional provisions allow such companies the option of retaining the selective assistance, as negotiated, and receiving the RDGs during the period of the assisted project as if the areas had not been upgraded, or repaying selective assistance so far received and foregoing future assistance under the offer and receiving the new rate of RDG.

As I have said, the intention was to avoid companies who retained their selective assistance from receiving a windfall increase in grant more than had been used as a background figure in the negotiation leading up to the Section 7 grant. What has happened is that because the transition period ends on 1st August and because at that time in development areas the grant goes down from 20 per cent. to 15 per cent. for the residue of any project on assets not provided until after that date— because of that situation, a company under either of the options offered it to avoid a windfall will, in fact, be disadvantaged.

Perhaps I may give an example. In order to make the figures as simple as possible let us suppose that a company negotiated a Section 7 assistance of 10 per cent. of the project as grant and that that company was located in a development area which was upgraded with immediate effect in July last to a special development area. At the time the project was negotiated and the 10 per cent. was awarded, the company was working on the assumption of receiving 20 per cent. RDG. The combined legislation in the orders that I have mentioned was designed to avoid it receiving a windfall extra 2 per cent. and still getting the 10 per cent. which has been negotiated, possibly quite recently, on a different basis. But, in effect, because of the reduction in grant in development areas from 22 per cent. to 15 per cent. on 1st August 1980, the choice before it was either to forego the whole of the 10 per cent. Section 7 grant— in which case the project would only have received 20 per cent. support— or to retain that, but after 1st August 1980 to receive only 15 per cent. RDG on any remaining expenditure in relation to that project, which at times was quite a large amount,

Therefore, on that residue of expenditure it would get 10 per cent. and 15 per cent.; that is, 25 per cent., and not the expected 30 per cent. which it had originally done, the negotiation in order to achieve. This is all related to areas where, because of the greater need of the area— and there are areas where the need has become greater— it had been upgraded and where it was neither intended, nor would any company accept, that in an area that was upgraded as regards a project just negotiated it should, in fact, receive less than it had anticipated. Therefore, a rather complicated amendment is before your Lordships which is designed to remedy those effects.

There are 52 projects in the new upgraded special development and development areas which are affected by these transitional provisions with an expected loss of aid estimated at £ 480, 000. The amendment reverses this effect and provides that applicants in the new special development and development areas who opt to retain their selective assistance should continue to receive the 20 per cent. rate of grant during the period of their assisted projects. I must repeat once again that this is quite a separate case from those who have asked us to avoid the effect of part of a project receiving less than anticipated after the 12-months transition period, in both downgraded areas and in areas retaining existing development area status where the rate of grant falls after the transition period. These effects were intended and declared in what we believe was the fairest administratively practical way of bringing about the necessary savings and the concentration of aid on the areas of greatest need. I beg to move.


My Lords whenever a Minister appears either at the penitent form or the Dispatch Box to tell us in either technical or untechnical language that they have found a need, because of their own shortcomings, to move amendments to their own Bill, my heart goes out to them. I have no more to say.

Clause 19 [Planning agreements and disclosure of information]:

Lord BRUCE of DONINGTON moved Amendment No. 5:

Leave out Clause 19.

The noble Lord said: My Lords, Clause 19 of the Bill which has come from Committee has the effect, among other things, of nullifying the effect of Section 21 planning agreements and it is that to which I specifically desire to refer. In the course of the debate in Committee the noble Lord was good enough to point out that the power under that particular section had rarely been invoked and he did mention some observations said to have been made by Sir Harold Wilson after he ceased to be Prime Minister. I must inform the noble Lord that, although I am a very considerable admirer of Sir Harold Wilson and agree thoroughly with the policies that he pursued as Prime Minister, I do not necessarily associate myself with the remarks that he made when he no longer occupied that exalted office.

The reason that I am calling the whole matter of planning agreements into question is one again connected with a very informative article that appeared in The Times on 1st May. It is by Mr. Peter Hill, who is the industrial editor of The Times, and it is quite clear from its whole content that it could have been written only with substantial, unofficial conversations with spokesmen or other officials of his department. That is quite authorised and there is nothing improper about it in any way. It is what he says that concerns us. He says: Plans for expanding the level of public sector purchasing by Government departments, agencies and the nationalized industries, which could benefit the private sector by hundreds of millions of pounds, are being prepared by the Department of Industry. First results of the detailed work now underway in Whitehall should emerge by the autumn. The plan is being supported by Mrs. Thatcher, the Prime Minister and by Sir Keith Joseph, Secretary of State for Industry, against the background of continued gloomy forecasts by the private sector based on high interest rates and the strength of sterling". The article continues: The Department of Industry has been charged with taking the lead in formulating policy on increased public sector purchasing and identifying opportunities ".

I read this with a slightly raised eyebrow because of course "planning" in any form is a dirty word to the Conservative Party. As is well known, we have endeavoured to point out to the Conservative Party that one of the advantages inherent in any nationalised industry is that it enables a planned demand to be made upon private industry for the supplying to publicly-owned industries of a very considerable amount of their requirements. Indeed, the use of the nationalised industries for the purpose of stimulating demand for the supply of goods and services from the private sector has for long been regarded on this side of the House as one of the advantages of having industries in public ownership. It enables the Government to use them in some ways as a sensitive instrument to stimulate demand where demand is required in the private sector.

As I say, if this be true— and I have no reason to doubt it from such an illustrious source as The Times — then we welcome the conversion of the Government to this point of view. But quite clearly, if they are going to do it, they must go the whole hog— or at least they would deem it wise to go the whole hog— because quite clearly they cannot formulate plans until they know the extent to which the private sector is able to supply some of the demands of the publicly-owned industries. They cannot know the capability of various sections in the private sector unless they get a good deal of information by it, and, in protection of the taxpayers' money— I emphasise once again the term, "taxpayers money"— I should have thought that it would have been prudent for the Government to make it a condition, for the organisation of their own plans, to conclude some planning agreements with some of the private companies involved; otherwise, perish the thought, they would be subject to political pressure from all sections of private industry that suddenly apprehended that their own turnovers could be increased if only they could influence the Minister to say that the publicly-owned industries should buy from them.

Quite clearly, they would not like public funds to be used in that way. Therefore, if it is to be planned on one side, surely it should be planned on the other. It should not be left to the caprice of private industry, where the public sector is to be required "to take part in the plans" that they have at present in mind. Therefore, it is to elicit some information from the Government as to how seriously we are to take this expressed intention of the Government that we move this amendment; in addition to which there are, of course, other matters in connection with the information that was required under the other sections, which are referred to in Clause 19, on which we require further elucidation. I beg to move.

5.45 p.m.


My Lords, in our view planning agreements do not have a part to play in the kind of way in which we believe the Government can steadily— not all at once, with any magic wand— improve the climate and conditions for the efficiency of British industry. They really were a dead letter from the start. There have been only two planning agreements; one with a company which was being rescued by the Government and the other with a nationalised industry. Both agreements have lapsed and will not be renewed. Therefore, we believe that this power which is certainly fundamentally inconsistent with the Government's approach to their relations with industry, should be removed.

The noble Lord, Lord Bruce of Donington, has mentioned public purchasing, which is a large and very interesting subject which I should love to have the opportunity to debate more fully in public. There have been no conversions of policy. I think that our predecessors underwent a development of policy. My right honourable friend the Prime Minister has announced in the House of Commons the basis of our attitude towards public purchasing. I have asked my advisers in the box for a note as to the date of that announcement; if I do not get it, I shall let the noble Lord, Lord Bruce, have it. But about a month ago the Prime Minister made very clear the policy on public purchasing, and it is in that regard that the Department of Industry is following up her policy exactly as enunciated and as agreed in consultations before she made that statement.

It is not a policy of "Buy British anywhere at any time". It is not a policy— and I know that the noble Lord did not quite say this— of "Throw hundreds of millions here and there", or as the article in The Times suggested. It is a policy of Government customers and potential suppliers getting much more closely together at a much earlier stage so as to give British industry every opportunity to be competitive when the time for quoting comes along. I am afraid that I cannot give the noble Lord that date; my advisers do not have it with them in the box; but I shall send the noble Lord, and anyone else who wishes it, a copy of Hansard of that date. However, there are no secrets about it. Responsible journalists are good at writing newsworthy articles. There are no mysteries here at all. There will be a steady evolvement of trying to make sure that wherever possible the combined needs of public authorities to get real value for taxpayers' money and the most frequent success of British suppliers in tendering, will be achieved. It is those two needs that must be put together. Therefore, leaving public purchasing on one side, I should like to resist the amendment on planning agreements for the reason that I previously outlined.

On Question, amendment negatived.


My Lords, I beg to move that the House do adjourn for about 10 minutes until six o'clock, in view of the fact that we have now concluded the Report stage ahead of schedule.

[The Sitting was suspended from 5.50 p.m. until 6 p.m.]