Small Businesses: Workshops

HL Deb 11 February 1982 vol 427 cc326-50

7.32 p.m.

Lord Northfieldrose to ask Her Majesty's Government what progress is being made in the building of factory workshop units for small businesses, and what role they believe local authorities have to play.

The noble Lord said: My Lords, in putting my Question tonight about the state of play on building small industrial units and the role of local authorities, I speak mainly as president of the Federation of Industrial Development Authorities. This is a nonparty body of local authorities who are concerned to preserve their role in assisting industrial development in their areas. They look for partnership with private enterprise, the English Industrial Estates Corporation, pension funds and so on. These are sensible local authorities who want to help forward private investment mainly in their own areas. The noble Lord, Lord Bellwin, addressed a recent seminar of the federation. We are very grateful to him, and to the Departments of the Environment and Industry for their consideration, for their willingness to consult the federation as appropriate.

My Lords, I say right away that considerable steps have been taken by the present Government to help small business. I have here a six-page summary of the various steps the Government have taken. I take my hat off to them. This is very worthwhile progress. While urging them on, I cannot begrudge them a word of admiration for the steps taken so far.

My Lords, I come to the first half of my Question, what progress can the Government report on the building of small units in our community. I make three preliminary points. As I said in a previous debate, we have a long way to go in this matter before we get anywhere near equal to France and Germany, for example, in the number of small manufacturing units in our industry. They are three or four times ahead of us. We have such a long way yet to go in getting the right quantity of small manufacturing businesses in our society. The figure are quite appalling.

Secondly, advance provision of factories, workshop units, whatever you like to call them, is the key to getting the movement going, as I shall show in a moment in relation to my own new town. This is the right way to go about it. You get the local young or old person started; if he wants to make a start there is the place for him at a reasonable rent. He does not have to wait 18 months for it to be built, by which time he has gone off the boil or economic circumstances have changed. The workshop is there and he can rent it tomorrow and get going without undue hassle. This is the key to the whole thing.

My third preliminary point is to say that I am glad to see that the Government now do not think that private enterprise will make all this provision of small advance units. The Cooper and Lybrand report, which my noble friend Lady David mentioned in the last debate, showed the Government that there are many areas and circumstances in which pension funds and other private investors will not want to be bothered with small units; they do not want to be outside the larger centres of population, generally speaking. If they are going to invest as pension funds they want to be in fairly large groupings of such units. They do not want to bother with remote areas, the rural areas. They do not want the problems of managing these small units, where tenants arrive and depart much more frequently than in bigger units. They do not want to be bothered with the cheaper, secondhand, relatively run-down premises that a public authority can often provide at a sum for somebody to rent to start his own business.

So for all those reasons there is room for public enterprise in this matter. I am glad that the Government, after some initial hesitation, recognise this. I was in on it as chairman of the Development Commission; I was told in those early days, "Private enterprise is going to do the lot". I said to the Government, "You will soon learn that that is not so", and I am glad that Cooper and Lybrand taught them some catechism a little later on. But apart from all that, we are now in a new situation where I think the Government accept the role of public authorities and others.

May I ask what progress has been made in these two years in the number of small units to rent? What has been the result of this £30 million borrowing by the English Industrial Estates Corporation from a pension fund, and the Government's own £5 million that they put in for the building of small units in assisted areas? Are they built? Are they late? How are they going? Secondly, what is happening under the Treasury system of allowing 100 per cent. initial allowance against tax for the building of these small units under 2,500 square feet? Is this bringing forward a lot more units, and if so, how many? Thirdly, what is happening in the Development Commission?

I was proud to play a part as chairman there in starting off their building of small units. When I went there six or seven years ago they had built only six. The figures today, in terms of factories, small workshops, either built or under construction, are just about 1,000. I am immensely proud of that progress. More important than that perhaps, are local government bodies now taking up the authorisation which I fought for, that the Development Commission will go 50–50 with them in the cost of small workshops in rural areas? If they are, how is that progressing?

Can the noble Lord tell us anything about how enterprise trusts are going? I have one in my own new town where we are converting the huge Maws Tileries, the greatest tile factory in the world in the 19th century, with some money from us as a Development Corporation and money from the MSC, because we shall be using unemployed men, both to train them and to give them work in doing this building transformation. We are converting the whole of Maws Tileries into a series of workshops which we can let at very low rents to small businesses, and the demand is enormous. What is happening on that front?

Lastly, what is happening in the building of these small units by the local authorities themselves? In particular, are local authorities being allowed sufficient capital for this kind of development under the new system of the Local Government and Planning Act, 1980? In what way are they able to get ahead? Is there a satisfactory use of the 1963 Act powers to build and to lend money?

Before I move on to the second half of my Question, I thought that the House might be interested in my own experience in terms of a few figures regarding my own new town of Telford. We have a population of 103,000. That is not a very big population by any standard. But we have 200 units under 2,500 square feet either built, building or planned. Several dozen extra to the 200 are provided by private enterprise and the local authority. There is immense diversity in tenancies, ranging from metal to electronics, wood, food, designers and clothing manufacturers. All kinds of people are finding their own way of doing their own thing in these small units.

What is our experience of how satisfactory is the performance? Let me give a few figures. In the past year when employment as a whole in my town has dropped, the workshop units have increased their numbers in employment from 333 to 402. They have bucked the trend completely with the whole of the remainder of the economy in my town. Of the 78 firms who were in occupation at the beginning of 1981, we find that only 10 have collapsed. That is not a bad record—indeed, I thought that it was a pretty good record. Let us take the experience of an older scheme, of a dozen units, which we started in 1978. In 1978 those dozen units were creating 62 jobs. Today, unhappily, four of them have closed; however, five have moved to bigger premises; and as regards the eight survivors, there has been a 50 per cent. increase in the employment that they have created. Against the national trend on that scale, this is a pretty marvellous performance and I am immensely proud of it.

But what else do we do to help the whole thing keep going? We do not just provide premises. We have an industrial research and development unit which is run on a shoestring; does not cost very much. But what does it do? I helps small-scale business of all kinds. It helps in the development of small inventions. It assists small, established industry to develop its products. It thinks up ideas in regard to local gaps in products and gets local small units to take them on. In its first couple of years it has helped 50 businesses in this way, and 50 projects to get under way.

In addition, we have a business services unit with five or six accountants helping now 100 established firms in their case load, and over 200 new starters since 1980 to get going with accountancy advice and advice as to how to keep afloat. I give the example of 16 firms which were saved from near liquidation. The business services unit, with its accountants and advisers, went in, and only two firms finally failed after being near to liquidation, the remaining 14 now employing over 250 people. We have saved them and, by giving them advice, have helped them round the corner.

Finally, we have a youth employment group helping the under-25s, with MSC money, to make a start in small business on their own. That is a pretty complete picture which I have run through very rapidly, but it shows what we can do in new towns; what other new towns and other local authorities are doing throughout the country to try to assist small business.

I come to the second half of my Question. Can the noble Lord tell us whether the Government are now getting near to making up their mind on the more precise role they see for local authorities in helping small business get on its way? I go regularly to Japan. That is an example of a private enterprise economy, but one in which the full partnership between public authority and private enterprise is established beyond all question and never doubted. Japanese success is founded on a carefully built partnership between the state and the local authorities and private enterprise. So there is nothing to be afraid of, even for a Conservative Government—if I may put it that way—in seeking to establish and to confirm a good role for local authorities.

When I originally put down my Question we were waiting for the Government's answer to the Report of the committee chaired by Sir Wilfred Burns—the Burns Report of 1980—which looked into the role of local authorities and sought to give advice to the Government. Today the Government have, in fact, answered a Question for Written Answer of mine about the Burns Report and so I can now come in more clearly on what I want to ask the noble Lord. The Burns Report—and I shall later be summarising it with all the risks of being wrong in detail—ended by saying: Local authorities should be able to plan for employment as a positive activity working alongside the private sector and central Government. Their activities should be kept complementary to rather than competitive with those of central Government and those of the private sector". I absolutely agree.

But what did they say were the options if that policy were carried out? They said that many authorities are relying at the moment on the use of Section 137 of the Local Government Act, which gives them the power to use a 2p rate. I think that the noble Lord, Lord Spens, will develop that point in a moment. Some of them have private Acts of Parliament. Although it is not specifically spelt out in the Burns Report, they all have other powers which they can use, such as the 1963 Act, relating to land and premises that they can loan money on. So, generally speaking, the Burns Report says that they have mounted a system of indirect help to industry which in 1978 was less than £100 million—that, I think, was roughly the figure in the Burns Report—compared with the Government's assistance to industry at that time of well over £400 million. So it was not a very ambitious or wrongly overblown system of help to local industry that the local authorities were trying to achieve.

Burns said that if you want to get it right in future you have some options: you either leave Section 137 as it is and make sure that the authorities can use the 2p rate, or you can spell out the precise powers that they ought to have and the precise money they ought to have to go with them and the type of areas to which either the powers or the money should be confined, some having more than others, depending on their need.

In answer to a Question for Written Answer today the noble Lord has said that the outcome of the Government's consideration of the Burns Report is that, for the generality of local authorities outside the inner urban areas, as regards help to industry, they are going to take away the power, in so far as it exists, to use Section 137 and instead will substitute the power to give help to all small businesses in any way that the local authority likes, up to the product of a ½p rate. That is the outcome of their consideration. In the inner urban areas authorities will still be allowed to use the 2p rate as well as the rate, so some of the authorities will come off slightly better, if I may put it that way.

Thirdly, the Government say that they will follow the Burns recommendations about some improvements in the Local Authorities (Land) Act 1963. They can give bigger loans on land, they can allow loans to cover the cost of lease or purchase, and other points as well, all of which are helpful. But here I have to ask the noble Lord a frank question. Are these proposals going to restrict those local authorities who have been reasonably ambitious in the way in which they help local industry?

If you have a local authority that is using, say, the product of a one-penny rate under Section 137 or even a one and a half penny or a two penny rate, and in addition has a private Act of its own—and many of these Acts give local authorities powers to help local industry—and if that authority is now to have no private Act, because the Government are to cancel them all under the new proposals, and is only to have a half penny rate, does it mean that some local authorities will have to cut down the help that they can give to local industry? If so, it will be a great shame and it will he a regressive step.

I want to press the Minister on this. If, in consultations with our local authority, we find that this will damage even modest help by some of the main local authorities as compared with what they give today, will he reconsider the half penny rate and be willing to increase it to a penny rate, which I should have thought would be much more acceptable to everybody? Indeed, we are talking about sums which are so derisory in terms of local rates that we should agree that a penny rate spent in helping industry to get going in an area is hardly money wasted.

The noble Lord's officials kindly gave me a figure: this will allow, in total in the country, a £90 million expenditure, and in a district authority—in the average non-metropolitan district—it might be £165,000 a year. That is very average. I am not sure that that would compare with what some local authorities are quite properly spending at the moment. Therefore, I should be grateful if the noble Lord would expand on the Answer that he has kindly given today to my Question for Written Answer and give an assurance that the Government are open to a reconsideration if this proves unduly restrictive.

I should like to raise one final point, before I sit down. In the application of the Local Government and Planning Act, and the powers over control of capital expenditure, is the noble Lord satisfied that local authorities are getting reasonable access to all the capital they need in order to carry out these modest programmes of industrial assistance and industrial development?

It is not just the provision of advanced factories and workshop units with which we are concerned; it is those other things that we are doing in Telford and that we can do in new towns that often matter: an odd accountant to help, a business advisory service or something like that; there is the whole area of promotion of the local authority—all those other things amount to the sort of package that helps private enterprise to get going in these small units.

Therefore, I should like to be assured that the Government are not being unduly restrictive in the way in which they are using the Local Government and Planning Act to allow local authorities to spend on industry. I beg to ask my Unstarred Question, and I apologise because it has taken me quite a time to explain it to the House.

7.53 p.m.

Lord Mottistone

My Lords, we must thank the noble Lord, Lord Northfield, very much for putting down this very timely Question. This might be an opportunity to say from these Benches how much we congratulate him personally on the work that he has done over the years to push along small businesses and their development in all possible ways. He has probably done more than anyone else in either House of Parliament in this area.

In supplementing this Question, I should like to congratulate the Government on all that they have done—and the noble Lord mentioned this—to encourage the opportunities for small businesses to get going, of which the construction of small workshops is a part. I think that they have done well in laying the groundwork for the opportunities for people to start off in all sorts of ways: in relation to helping the unemployed to get going, to having factory units, and so on.

However, there is one aspect of this which worries me, and it is whether, in fact, the Government have the administrative machinery sufficiently geared up to mable their very laudable processes to work properly. About two years ago I had occasion in a speech to quote to my noble friend Lord Gowrie, who was then speaking for the Department of Employment, something that I had read in the Reader's Digest, that someone starting a business with only three employees was having to fill in 30 forms for the Inland Revenue. My noble friend Lord Gowrie was absolutely appalled; it was an affront to him. The outcome—and I do not have the details to hand—was that I received a letter from him saying it that was true and that the Inland Revenue did demand 30 forms for chaps who were starting with only two employees, and that there were all sorts of jolly good reasons for it. I am not pressing that point now, but I have a feeling that the great efforts to help the small firms are possibly being hampered by the fact that the administrative juggernaut, which the Government have created to look after the big firms and to make sure that they do not cheat or whatever, is being used without much modification, and therefore preventing the small firms from getting under way in the manner in which the Government so clearly want them to. That is one point. Therefore, I should have preferred the noble Lord in his Question to elaborate not only on what progress is being made in the building of factory workshop units, but on what progress is being made in the occupation and use of factory workshop units.

I want to take up the second point raised by the noble Lord concerning local authorities. Again, about two years ago, in a debate on unemployment—indeed, it might have been the same debate as the one to which I referred just now—I suggested to the Government that we want to get local authorities more involved and to have a sense of responsibility for employment in their areas; that they should have a feeling of being personally involved. In the same way, one would hope that the local authority felt personally involved in the promotion and encouragement of these small workshop units, and, indeed, in all other schemes of the Government for encouraging the development of small businesses.

I rather gained the impression from what the noble Lord quoted from the Written Answer to his Question that the Government were not as enthusiastic about encouraging local authorities in this sort of area as perhaps they should be. I very strongly believe that the local communities—not just the official local authorities, the county councils and the district councils —must be encouraged to have a greater sense of personal responsibility for developments within their own areas. I know that I have not given my noble friend Lord Bellwin advance notice of this, but if he can, perhaps he could widen his answer to the questions of the noble Lord, Lord Northfield, to cover those two supplementary points which I have made.

7.58 p.m.

Lord Tordoff

My Lords, I join with the noble Lord, Lord Mottistone, in congratulating the noble Lord, Lord Northfield, on tabling this Question on the Order Paper today and, indeed, for the great work that he has done in this field of a small businesses. First, perhaps I ought to declare a very indirect interest in that the company for which I work—Shell (U.K.)—is very active in the small business field, and I am indebted to some of my colleagues for some of the items to which I shall refer tonight. I suppose, again, that it will not come as any surprise that we, on the Liberal Benches, have always been keen on small businesses. There might by those cynics about to say that we are a small business ourselves, but we are changing that. However, clearly, this is not a party matter; it is something which goes across all sides of the House.

We all clearly understand now that there certainly is a demand for people to come out of jobs that they are doing at the moment and to do things for themselves. The climate has changed considerably in the last two or three years as a result of activities by this Government, and also by the last Government, particularly during the period of the Lib-Lab pact when I remember we persuaded the now Lord Lever to take on the job in that Government.

The demand is there. Many of your Lordships may have seen a series of seven programmes being produced by Yorkshire Television at the moment going out on Sundays on "Be your own boss". You may be interested to know that the National Extension College, which has some follow-up material for this, had anticipated a demand of some 15,000 inquiries over the whole of the seven programmes. My information is that after the first two programmes they had already had 13,500 inquiries. In the same way, the BBC is doing a series of five programmes, and my colleagues in my company are preparing some booklets to go along with that. The first print of that was 5,000, and after two programmes there they are being warned that they had better get on with reprinting it quickly. So I think we can agree that the demand is there.

I agree that considerable activity has been taking place over the past few years, both by the Government and by industry itself. Companies are supplying both funds and secondees, expertise in one way or another, and doing this largely through the enterprise agencies. That is greatly to be welcomed. There is, of course, room for more activity, and there is room for still more awareness of the good which can come to the economy from stimulating the small business sector.

While Members of this House and of another place are aware of it, it is not always the case that, throughout the length and breadth of the country the message has yet been sold, so we have a job to carry out there, and that is why it is good to see the subject being debated again in your Lordships' House tonight. We must not be starry-eyed about it. The fact is that a number of people in small businesses will go to the wall. Your Lordships are well aware of the problems of people going into new enterprises of this kind.

It is a common situation where an entrepreneur wants to go on his own because maybe he is fed up with working for a large company, maybe he feels a loss of identity in a larger unit, or maybe he has had an idea at the back of his mind for many years that he suddenly wants to get out and develop, or indeed sadly today it may be simply that he has been made redundant and is looking for another role in life. Whatever the cause, the likelihood is that his skills will be of a technical nature. In many cases the problems arise because of lack of skill perhaps in marketing, and certainly in terms of finance, particularly in the fields of financial planning and financial control.

This is an area where, as the noble Lord, Lord Northfield, suggested, advice may be an even more important factor than cash being put in. The classic case of bankruptcy which comes through expanding too rapidly, and the problems of cash flow, are quite simple when explained but nevertheless are not always taken on board by a man of great technical skill but really very little accountancy skills. This is the sort of area where I believe that the local authorities can be a help.

There have been considerable improvements, and we wait with interest to hear what the noble Lord the Minister has to say. Again, I confirm that the evidence is that the Budget arrangements in 1980 have helped considerably, although I am told that the majority of the help there has tended to go at the top end of the square footage, as it were; the majority of premises that have been coming out of that have been at near the 2,500 square feet, whereas there is still a great shortage down at the smaller, less than 1,500 square feet premises.

What then is the local authorities' role? There is a temptation always to think in terms of finance, and it has to be resisted to a certain extent—certainly in terms of any direct financing. It is possible that the local authority might be regarded as a lender of last resort, but then only very often for very small people and in small amounts. The market caters quite well for the majority of financing, although one might well question the situation with interest rates as they are at the moment. Nevertheless, frequently the really small man is looking for collateral and cover for hundreds of pounds rather than thousands of pounds.

Advice is a different matter, and here the local authorities can do a lot to catalyse activity. I have been given a leaflet produced by the Camden local authority, who are organising a number of seminars. I see that on 4th February particular emphasis was to be given to tax incentives, profit or loss, Camden's new financial surgery for small firms, with such important topics as the Gentle Art of Persuading Your Bank Manager, and Get a Good Accountant! This was a free programme. People were invited to apply to come along, and on that particular evening I understand that over 200 people turned up. This is part of a series. The earlier ones have had, I believe, over 100 at most of them. This is the kind of thing that with a modest amount of expenditure the local authorities can draw together, as they have done here, representatives from the banks, from enterprise agencies, from local accountants, and provide a genuine service where it matters for the small businessman.

Local authorities can also help in other ways indirectly. The whole question of local government purchasing policy is something that the Government ought to encourage to be looked at. I am not suggesting that there should be a complete distortion of their tendering system, or that a totally different set of rules should be set aside for small businessmen, but really some of the forms, as the noble Lord, Lord Mottistone, has said, are quite unintelligible to the average common sense chap. Could local authorities have a look at that and make sure that for some of these smaller tenders—and we are talking about small tenders, or small parts of larger tenders—the forms are simplified, and see whether some of the regulations that these things are wrapped around with could be overlooked for tenders of certain sizes going to companies of certain sizes. There is, indeed, a need to be flexible.

There is also a need for local authorities to pay their bills on the dot. I am not suggesting in any way that they should do anything other than normal, but if they have credit terms within a contract then the payment should be made on the due date and not afterwards. That indeed applies to industry as well, to big businesses, and I know in our particular case that is something that we have worked on steadily over the last couple of years.

In terms of the leases for some of these premises, it should be borne in mind that the timescale probably needs to be shortened. You need to be able to get in and out quickly. This seems to be a message which comes forward from a number of pieces of evidence that we have received. They should also be looking at the provision within building sites, or within converted premises, for common service areas, with perhaps a central mini-computer, word processor, telephone answering service—not a telephone answering machine, but someone who is there and who can answer the phone on behalf of a number of small units, and give the sort of personal service which a bigger firm gives automatically but which a one-man or two-man company cannot do. There are, therefore, a number of practical things local authorities can encourage. Most of them are indirect and I hope the Government will indicate that they will encourage local authorities to keep on experimenting and recognising that this is an area which is of the gravest concern to the country, particularly at this time of high unemployment. Above all, I hope the Government will tell us tonight that the provision of premises is going well and that they expect to continue to encourage local authorities to provide premises, both new and converted, for some time to come.

8.11 p.m.

Baroness Birk

My Lords, like other noble Lords, I am grateful to my noble friend Lord Northfield for initiating this debate. I, too, have seen the Written Answer to my noble friend's Question this afternoon.

I begin by welcoming the granting of general powers to local authorities to assist industry, but I am deeply unhappy with the limitation to the product of a ½p rate. I remember well the Burns Report stressing, as one of the most important of their conclusions, the need for financial incentives. But to work productively, it should be in addition to the present 2p; and by taking that out of the industrial arena, local authorities will have far less opportunity for their own flexibility.

In any case, I do not think the percentage for industrial works and enterprises should be less than 2 per cent. I fear that if it remains the way it is, it will mean a reduction on the whole for local authorities. The Minister will no doubt say the Government cannot afford more. However, we are now talking about expenditure which will be used in a productive way, hopefully to create wealth, promote industry and reduce unemployment. This is real investment, not dead-end expenditure.

The Inner Urban Areas Act 1978, which I took through this House—sitting where the Minister is sitting tonight; it is somehow more comfortable on that Bench than it is on this one—gave power to local authorities to give loans for site acquisition and building works, grants for co-op activities, site clearance, environmental work as well as for conversions for building improvements, the sort of things which obviously, if it had been possible, it would have been better to have had on a very much wider scale. In the last three years, some 250 schemes for small factory units have been funded through the urban programme. In view of the difficulties we have been going through, that has probably been a reasonable start, but of course it covers only those particular areas.

In the Written Answer, the Minister said the Government were conscious of the danger to their inner city and regional policies from directly competing activity by local authorities outside the disadvantaged areas. I should like to know what evidence there is of that. I have tried to find out if there is any and I cannot, but I am sure the noble Lord is much better informed on the subject than I am.

Lord Bellwin

My Lords, may I ask the noble Baroness to repeat the question, so that I may answer her in due course?

Baroness Birk

I was referring to the first part of the Written Answer to a Question today by my noble friend Lord Northfield, my Lords, in which the Minister said: On the other hand, they have been conscious of the danger to the Government's inner city and regional policies from directly competing activity by local authorities outside the disadvantaged areas". I was asking what evidence there was of that. Are there any examples the Minister can give, or is it a sort of hunch? If it is the latter, I hope that will be made clear in the consultation paper. There is no doubt that the Government statement will be a terrible blow to those authorities which are spending up to or near the product of a rate of 2p and, as my noble friend Lord Northfield said, it applies to areas like Tyne and Wear, which in addition at the moment have their own private Act. It is areas where there in a very high degree of unemployment, particularly in the North East and North West, which arc industrially much more active in partnership schemes with private enterprise or co-operatives. Reducing the rate creates a weak incentive for authorities which might be inclined to enter this field; the carrot is rather too small on this occasion.

It can also be bad news for private enterprise because they benefit from the resulting partnerships, in that there are a number of spheres in which it is not worthwhile for them to dip their industrial toes in the water because they usually need much bigger operations. So although private enterprise has tried where it can to provide small factory units— and that has become much more difficult during the depression—on the whole the supply tends to be limited to units of 2,000 sq. ft. upwards. While that is understandable when one thinks of the problems of private firms and the infrastructure they need—all the management problems and so on—there are those who want limited accommodation of probably only a few hundred square feet. That is where the local authority can fulfil a need, together with private enterprise, whereas private enterprise on its own cannot.

There is another advantage, namely, that by providing small premises—such as even a converted terrace house —one is helping in the revival of craftmanship, something which has been lost for so long in this country. Indeed, there are all sorts of spheres where it is almost impossible to find somebody to do a job, or at any rate to do it well. I agree with the noble Lord, Lord Tordoff, when he spoke of things other than finance being needed from local authorities. Advice about and knowledge of an area are matters of the most tremendous importance. I also agree with the noble Lord, Lord Mottistonc, in his point about participation both by local authorities and by the community. Indeed, in London in the last few months under the GLC a number of arrangements have been made with voluntary organisations and community organisations.

In an up-to-date report, the West Midlands show considerable positive industrial activity together with private enterprise. Incidentally, they refer in their report to their inner city programme, and they do not appear to think that their other industrial proposals will jeopardise the inner city development, even when it is quite close to it. Sheffield, to give another example, has done a great deal of excellent work in this sphere and in their very up-to-date report they say: Even at a time of high unemployment, there remain many pockets of skill shortage in the economy. More detailed local knowledge of the precise skills required by local firms would allow much more specific training to be carried out". Thus, the important role that can be played by local authorities in promoting employment must be emphasised all the time.

But now with the cut in the rate I believe that the Government are effectively proposing a reduction in what local authorities can do. Incidentally, will the point about the limitation of expenditure to the product of a halfpenny rate be included in the consultation paper, or have the Government made up their minds on the financial aspects, and will it be the other points that are included in the consultation paper? If there is very strong, widespread and wide-ranging opposition, will the Government be prepared to change their mind? I think we should know whether or not the matter is fixed.

Today, with Government cut-backs and the recession, current expenditure is severely restricted, and capital expenditure is also controlled by Government and has to stretch to cover social as well as industrial demands. Capital expenditure is restricted even where the local authority has the resources itself. If the receipts from interest on capital could be used for capital expenditure, instead of going into the revenue account, that would provide much more municipal opportunity. I know that the Government turned down that suggestion in relation to the last local government Act, but they should think about it again. It would compensate a little if it is impossible to budge them on the question of cutting the rate.

If the Minister says that many authorities do not spend anything like up to the product of a 2 pence rate, he is probably right. If that is so, and if provision were made for a general power to assist industry—and so set it apart, as the 2 pence rate was in Section 137—then it would concern only those areas, such as Tyne and Wear, and others, that are spending up to the product of a 2p rate, or sometimes even more because of their own local Acts, which will disappear. if the power is restricted to industrial activity and growth, I cannot see it being used other than for the right purposes.

In a mixed economy, which we have, partnership between the public sector and the private sector is vital and mutually advantageous. Indeed, many local authorities employ people seconded from the private sector to help with the organisation and the business problems and whatever arises from them. I believe that opportunities will be lost if the Government persist in the counter-productive parsimony which is laid out in the Answer—they should be doing everything they can to revitalise industry and increase employment—and areas of very high unemployment will find things very difficult.

I wish to turn to another point which has not so far been mentioned. I am concerned about the limit of 25 workers. In some areas, particulary some development areas, much bigger firms have been set up, employing many more people, and in such instances the limit could be very restrictive. Obviously, it is not restrictive for small businesses, but it could be very restrictive for the not-so-small businesses and certainly for medium-size businesses. I hope that this does not mean—though I fear that many local authorities and the local authority associations will think it does mean—that the Government are basically against local authority participation in industry and commerce and are, therefore, squeezing it hard, rather than succouring it. I hope that the Minister can satisfy me on that point. But at the moment I feel very doubtful about the result of the Question for Written Answer.

8.25 p.m.

Lord Spens

My Lords, I, too, am most grateful to the noble Lord, Lord Northfield, for raising this matter. This is a very timely moment to do so. However, before going on to the Question itself, I want to make a very brief plea to the noble Lord the Minister. This morning there was a meeting, unfortunately not very well attended, of our Small Businesses Group, and we were addressed by a banker, who gave us some very interesting figures. He said something which surprised me enormously. It was that 90 per cent. of the total value of loans made by banks for businesses were now being made for businesses with fewer than 200 employees. That is a very interesting fact.

He went on to talk about the loan guarantee scheme. He explained it to us, and said that it was of great benefit, but he remarked how expensive it was. He worked it out in the following way. His bank's base rate is 14 per cent. and they always add to that 2½ per cent. for their loans. The Government then add a 3 per cent. surcharge, and that brings the interest charge to almost 20 per cent., which is far too expensive for small businesses to become involved with. My plea to the Minister is: cannot the 3 per cent. surcharge be reduced? I appreciate that he cannot give an answer to that this evening, but will he pass on to his colleagues the view that the 3 per cent. surcharge on the loan guarantee scheme is very expensive?

I believe that the local authorities should play a vital part in the battle against unemployment by helping to stimulate the creation of more jobs within their areas. They can do this in three ways. We have heard about premises. I should like to see local authorities acting as local catalysts. I think that the noble Lord, Lord Mottistone, was on to that point and I shall develop it in a moment. As the noble Lord, Lord Tordoff, said, much can be done by bringing businesses and local authorities together.

I should like to relate an experience of mine last August. I was invited to go down to Taunton, where the Somerset County Council held a one-day seminar, the object of which was to interest local large businesses in the problems of the smaller businesses. What excited me about the seminar was that it was attended by representatives not only of large businesses and some smaller businesses, but also of other local authorities from the neighbouring counties. Wiltshire, Devonshire, and I believe even Cornwall, sent representatives.

One point that emerged from the seminar had been put by a local large businessman. He said that not until he had made some preparations for the meeting had he realised how and where his own firm made its purchases. He said that, with his business being in Devonshire, he was quite horrified to find that the nearest "local" purchases it made were from South Wales. We should put across to all larger businesses the point that they should help smaller businesses by purchasing locally to the extent that they can. It is a point which I think the local authorities are best placed to make, so I hope that local authorities are not going to be squeezed out of their roles. We have spoken about premises, but there is one aspect of premises which has not been mentioned—and premises are, I believe, almost the top priority for local authority operations. The aspect which has not been mentioned is the question of change of use of existing premises. I should like to ask the Minister what has been the effect, if he knows it, of a planning circular which was sent out at the end of, I think, December 1980, which recommended local planning authorities to relax their existing rules and regulations as much as they could to enable change of use of existing premises to be accepted when a new small business was beginning. That, I think, should also include a change of use in relation to a house, so that the new small businessman, provided that there are no problems of smells, noise, and things like that, to affect his neighbours, can in fact work from his own home. I think that would be of great help.

Now as catalysts. I believe there are very large numbers of people in the country who have a whole lot of good will and want to help in solving our unemployment problem; but they do not know how and they do not know where. I believe they have to be got at by local catalysts, and I would have thought that the local authority was the body most able to do that. So I was very disappointed indeed to see the Written Answer which the noble Lord the Minister gave, to be published today, about the product of a 2p rate being reduced to only the product of a ½p rate. On the other hand, I should like the noble Lord to interpret for me, if he can, the provisions of Section 137 of the Local Government Act 1972, because I want to know exactly what can be done under that section.

The Local Government Act has various definitions, one of which is of "principal local authorities". They, naturally, are the larger ones. Another definition is of just "local authorities", and their size goes right down. It says: 'local authority' means a county council, the Greater London Council, a district council, a London borough council or a parish or community council". It goes right the way through the whole gamut. Can any of those councils make use of Section 137; and, if so, can that use be cumulative? Can the county council take a 2p rate and the district council take a 2p rate and even the parish council take a 2p rate under that section? I do not know, and 1 should very much like the noble Lord the Minister to give me an answer to that.

I must say that I was very disappointed when I saw the Written Answer; because it was only last November, when I was introducing a debate on getting greater incentives for the expansion of businesses, that I spoke about Section 137 and suggested to the Minister then that the 2p rate should be doubled to 4p. Now, instead of it being doubled it is being quartered. That, my Lords, I think, is very disturbing, but there we are.

8.35 p.m.

The Earl of Caithness

My Lords, I, too, am most grateful to the noble Lord, Lord Northfield, for raising this very important matter this evening. It is right that I should declare an interest as a director of a property company which has carried out some small workshop developments. An adjournment debate in the other place on a similar subject was initiated by my honourable friend Mr. Heddle, the Member for Lichfield and Tamworth, on 17th November, but as so often happens time cut short that important debate.

There has been substantial progress in the building of factory workshops for small businesses throughout the country since the Government, in a moment of inspiration, altered the law relating to industrial buildings allowances in March 1980. A more pertinent question is: What has happened to the occupation of these units which many were encouraged to build by Government statements only to find that the cold, depressing hand of the Inland Revenue did not have any of the Government's inspiration? What went wrong? The answer lies principally in the definition of which small businesses qualify for the 100 per cent. industrial buildings allowances; and this was the medium through which the Government wished to encourage people and companies to invest in, and build, small units. I shall deal with that in a little more detail later.

My Lords, it is clear from the information that I have been able to obtain to date that the Government have available precious little information or any relevant data. I recently put down 17 Questions for Written Answer, and was saddened when 10 of the replies were prefaced by the lack of data, or there were no data at all, on a subject of major importance to the restructuring of part of this country's industrial base.

What has happened to the information resulting from a circular sent on 16th November last year by the Department of Industry requesting information on small business units? Replies were required by 4th December, but in one case the letter was not received until 2nd December. Of the 10 companies to whom the letter was sent, only about 50 per cent. were able to receive the benefit of the industrial buildings allowances, and some of the companies had built only a very few small workshops. Although the replies should have provided some information for the Government, I question whether they were sent to the right people, and ask what information they have obtained from individuals, partnerships and small companies who have built so many of these units.

My Lords, what role have the local authorities played in the development of small units? First, they have been able to release land from their substantial land bank, which they will have funded at public expense. They have also been able to "pump prime" a "social" situation, which in investment terms is an unacceptable project. Examples of this were given by the noble Lord, Lord Northfield, earlier. In rural areas, where two or three units are being built, they can provide useful assistance. In some instances they have been providing a covenant for the individual occupiers, thus being able to transform the development of a series of small units into a property investment for either an individual or a company, a partnership or a pension fund. This has been extremely helpful, and local authorities must be given due praise for this.

However, for this benefit which they can give they are stung by the Inland Revenue. If, for example, in order to finance a development of small units a local authority agrees to provide an overriding lease of the development in exchange for a profit rent, this is assessed as a capital project even though they need not be committing any capital towards the project at all. I was involved in such a case not five miles from here, where the local authority understood that their covenant was needed to obtain the necessary finance for the development. They wanted to give it in order to provide the small units, but could not do so owing to the detrimental effect it would have on their capital budget since they were already involved in three other schemes. In essence, we offered the local authority further revenue with no capital input, but they could not accept it. My Lords, how much more stupid can our legislation become?

There can be difficulties where local authorities wish to build units in their district but where these units could be built by the private sector. There are many instances in London and elsewhere in the country where local authorities either will not release land to private developers or are able to offer the units they build to prospective occupiers with rent and/or rates rebates paid for by the public and with which the private developer cannot compete. Much greater studies are urgently required to see how the local authorities can use their powers to be of maximum benefit in this sector and they must then be encouraged to pursue these avenues.

I turn now to the problems faced by private enterprise who have provided so many of the units—and the dark clouds appear. With regard to some of the remarks by the noble Baroness, Lady Birk, I would say that private enterprise is ready, willing and able to provide units of all sizes. My company is considering a scheme to build units of from 500 square feet upwards. Whether we do it or not will depend much on what the Government will say.

Lord Northfield

My Lords, are they in any prime locations?

The Earl of Caithness

No, my Lords. Investment in small unit workshops was, in most cases and until the change in the industrial buildings allowances regulations in March, 1980, an unacceptable form of investment. The rate of return was no match for most other forms of investment. Much of that has now changed but any small unit proposition must be considered on its merits as a property transaction. For insurance companies it has to stand very stringent analysis to show the right yield and growth potential to satisfy the actuaries; for individuals, partnerships and companies which can receive the benefit of industrial buildings allowances, and depend on this to make any scheme viable, so much depends on being able to let the units on completion.

In order to qualify for this tax relief, they must let the units to what is known as "qualifying" users. This is where the real rub comes, as I mentioned earlier. In the clash between the Government's good idea, the need to create a viable property investment, and the Inland Revenue's restrictive definition of "qualifying" user, the real sufferer is the unemployed. There is an urgent need to create employment in this country, yet the Government have given no good answers as to why so many small units up and down the country are empty and they have yet to admit that the Inland Revenue's definition of "industrial", and, hence, the "qualify ing" user is totally archaic and far too restrictive. Industry has been interpreted as being limited to manufacturing use only, but, as noble Lords know, industry has changed and continues to change and update.

Let me give you some examples of the anomolies caused by the present situation. If you are a manufacturing company which also services television and video appliances for the domestic and business sectors you qualify for the 100 per cent. industrial buildings allowances and, therefore, are an acceptable tenant. If you are a television rental company that carries out the same work, with the same potential number of employees in the same surroundings, you do not qualify. That is why one of this country's major television rental companies still requires over 40 small light industrial units. Similarly, if you are a computer manufacturer who wants a unit in which to test and programme your products, you are acceptable; but if you purchase computers and test and programme them without actually manufacturing them you do not qualify. Again an identical job being done in identical surroundings and yet when the industrial buildings allowances is of importance this company will not be offered a unit.

A business which repackages flour was declared by the Inland Revenue to be a non-qualifying user but when it was proved that the business was an agent of the manufacturer then the Inland Revenue changed their minds. My final example is the fiasco of a sports pavilion, complete with all "mod cons" and used by employees of a company in the service section of industry and which qualifies for an industrial buildings allowance although the company does not. Many people are being deprived of opportunities even in these difficult times. My noble friend has, I believe, received a copy of a brief entitled Industrial Buildings Allowances and Small Manufacturing Businesses: an Urgent Case of Legislation prepared by Mr. Grant of Grant and Partners. In that there are examples of an estate in Altrincham where 43 applicants did not qualify for 100 per cent. relief—the industrial buildings allowance —and therefore had to be rejected. My company, Regisland Limited, has built 13 units in Banbury, and of 30 applicants, only seven are qualifying users.

I will briefly state other examples. A company I know has built 95 units and only 46 have been let during the last twelve months. Another company has built 80 units and over 50 per cent. are unlet. From the examples I have just quoted there are possible job opportunities for about 250 people. The most depressing example I have is of a major organisation which has recently built 206 units of which only 60 are let and they are currently building 343 more. The longer these units remain empty, there will be a noticeably increasing air of suspicion in private enterprise about small units and as to whether the Government have any real intention of dealing with the present unsatisfactory position.

There are many more examples but perhaps most noteworthy is the evidence from those pension funds where the IBA relief cannot be claimed. The evidence I have been able to obtain indicates that on average over 70 per cent. of the units are occupied by non-qualifying users. In each case that I have investigated where the industrial buildings allowances were of importance I was informed that, in all probability, not only would all the units which are standing empty at the moment have been let months ago, but the same company would have built more small unit workshops up and down the country. I can only leave the Government to speculate on the good that this would have done to employment and the British economy. The "qualifying" user must be extended to encompass all the industries within Use Classes III, IV and X.

Lastly, I turn to the inevitable question of time. The Government introduced the encouragement for industrial buildings allowances in March, 1980 and the regulations were to run for a period of three years. It is now mid-February 1982 and the regulations expire in 13 months' time. We have received no indication from the Government at all as to what they intend to do about this matter. They have made a very brief reference to it in the Green Paper on corporation tax, but, by the time that that is considered it will be too late. In reality, we have approximately three months left for a firm decision from the Government, because if during that time we do not receive that firm commitment, the private enterprise section will not build any more small units, and the reason is simple.

Let us work back from March, 1983. We want the buildings ready at least a month before that date in order to let the first unit in order to qualify for the industrial building allowances. That brings us back to February 1983. We need seven months to build the units. That takes us to early August this year. We need a further three months to complete the purchase of the site and obtain planning permission and that brings us to May. As I said, we have barely three months left.

Is this Government, of all Governments, going to throw away what was a fine idea by the pursuance of out-dated definitions, thus strangling many employment opportunities? Judged by the number of empty units, there is employment potential for many thousands of people in small units that are already built and standing empty. I believe that, with a sensible interpretation of a "qualifying" user, this position will be greatly helped and will motivate much more development of this nature and which the country badly needs—indeed what the Government want.

Speaking on BBC Radio 4's "World this Weekend" programme on 6th January, my right honourable friend the Prime Minister spoke of how she saw much growth in the service industries where there is plenty of scope for the small, the new and the young. She dwelt on the Government's determination to help small businesses and she promised more help.

I know of one county council which has already cancelled two proposed schemes due to the difficulties and wastage of everybody's time in dealing with the Inland Revenue on the question of qualifying users; and thus failure of their existing scheme. To do nothing courts disaster; to fail to review the position now means that virtually no more units will be built. I am sorry to have taken so much time, but we need the Government to act now in order to substantiate their good idea.

8.49 p.m.

Lord Bellwin

My Lords, if the noble Lord, Lord Northfield, will allow me, I should like to respond quickly to the last comments made. I think it would be unfortuuate if the mass of things that the Government are doing to help small businesses—something to which the noble Lord, Lord Northfield, was gracious enough to pay tribute in his remarks—was to be obstructed by the points that my noble friend makes. I promise that all he has said will be read carefully. I will touch on some of those points before I finish. All that he said will be considered to see what one can do to help. I repeat that it would be unfortunate if they were to obscure all the many good things. No Government have ever done what this Government have done, and continue to do, and intend to do and will go on doing regarding small businesses.

May I say at once how very pleased I was that the noble Lord, Lord Northfield, brought forward this matter at this time. I thank him for his initiative in doing that. I have perhaps more knowledge than some when I say that I pay tribute to what he has done personally and indeed what he does for Telford. They are very fortunate to have someone like him as the chairman of their new town. One would have to congratulate him on their achievements. The record that he read out is so impressive that one could not help but feel, as he does, a certain pride that that can be done. It reflects on all of us that it is there.

I listened with much interest to what noble Lords have said. I was going to say "in this short debate". However, "short debate" should be in inverted commas! I am sure that your Lordships will want me to answer as widely as I can, so perhaps I had better speak quickly. I welcome this opportunity, and first of all we have obviously roamed much further afield than the noble Lord, Lord Northfield, originally intended, but it invariably goes like that. The topics are very important. They tend to be linked closely together.

Let me put on record at the outset that the Department of Industry, through the English Industrial Estates Corporation, the Welsh and Scottish Development Agencies, the Highland and Islands Development Board and the Development Board for Rural Wales are all active in providing workshop units. However, bearing in mind the terms of Lord Northfield's Question, I propose to concentrate on those areas of activity that are the concern of the department in which I serve.

Let me begin with the role of local authorities, both in providing small workshops and in relation to industry and commerce generally. I think it is helpful to recall that local authorities in England and Wales have for many years had powers under the Local Authorities (Land) Act 1963 to prepare sites and build industrial premises, whether for sale or rent. They are also able, under the same powers, to make loans to firms wishing to buy or rent local authority sites or premises. Similar powers are available in Scotland.

Full records of the activity of local authorities in this sphere are not available on a nationwide basis, but we do know of many local authorities actively involved in the provision of industrial sites and premises. One of the Government's major concerns is to improve the climate in which small businesses operate and to encourage their expansion.

I am very tempted at this stage to depart from my brief here, because I personally am so involved, through the inner city programme and the Urban Programme generally, that I know a great deal of what is being done by local authorities in this connection. It is frankly very encouraging to see. There are for example through the Urban Programme some 250 schemes— and I am only sorry I cannot tell the House what that represents in terms of units—being funded to the extent of some £37 million, towards helping authorities with this kind of provision. I know from the programmes that I am apprcving now for next year that this is extending all the time and will continue to do so. We have increased by 29 per cent. the amount of money going to the urban programme in this coming year.

It is not very many schemes or very many programmes of which one can say that in this day and age. It illustrates the Government's commitment to inner cities, and this part of it is a very important one. Indeed, we have asked in guidelines that we have sent out that economic regeneration be the first priority for the spending of urban funds. I am glad to tell the House the response from all the authorities concerned has been to take this up without exception.

If I turn to the broader canvas and the Burns Report which most speakers tonight have touched upon and the Written Answer that I gave to the noble Lord, Lord Northfield, I will not go into the background of the Burns Report and how it was set up; but the conclusion is that in reporting to the Secretary of State, the review group put forward five broad options for legislation to rationalise the existing muddle of powers—because it is a muddle of powers. As the noble Lord, Lord Northfield, knows, the Government have reached their provisional conclusions now on what might be a sensible package of powers in England and Wales; Scotland would have equivalent powers.

My right honourable friends have given the Burns Report very careful consideration. They have been at pains to seek the views of all the local authority associations on the very useful analysis it presents of the problem. But it is a question of balancing different legitimate interests. Thus, we recognise the understandable desire of local authorities to encourage the economic development of their areas. On the other hand, we have to ensure that the effect of national inner city and regional industrial policies is not eroded by the competing activities of local authorities outside relatively more disadvantaged areas. There is a danger that firms could be encouraged away from the inner cities and the assisted areas. This would put at risk the Government's inner city and regional policies. I am sure this is not something anybody would wish to see.

Therefore, we propose that all local authorities in England and Wales should have a new general power to assist, in any way they see fit, independent firms employing, as the Answer said, up to 25 people, subject only to an annual limitation on their expenditure of the product of a halfpenny rate. This will replace local Act powers due to expire in 1984, and the use some local authorities have made of Section 137 of the Local Government Act 1972.

These proposals—and I think this is in many ways the answer to many points which were raised earlier—will shortly be the subject of a consultation paper. That will in no way reduce the powers of local authorities to build factory workshops. Indeed, as part of the package, their Local Authority (Land) Act powers, under which they build factories, would be slightly widened, to increase from 75 per cent. to 90 per cent. the maximum loans permitted; to allow loans to cover the cost of lease or purchase of land and any work on land; and to remove the present restriction which prevents loans for development on land not sold or let by the local authority. These powers are not subject to a specific expenditure limit.

The Government have been very conscious that the present pattern of powers is illogical and confusing and that they have led many local authorities to come to this House to seek local powers, often of a far-reaching nature. The Government feel that the accretion of powers in this fashion can lead to the creation of unwarranted imbalances between local authorities. I hope that noble Lords will agree with me that the new package of proposals—whatever else one might think about certain aspects of them, which I will mention in a moment—represents a much more rational distribution of powers. Within the constraints imposed by public expenditure policy, and the need to protect the national priorities embodied in regional policy and inner city policy, local authorities will have very much wider scope, both to provide the necessary infrastructure for future private investment and to give direct help to small locally based firms where they are convinced on their own judgment that it is a worthwhile investment for the firm itself, and the locality as a whole.

If I could speak to one or two of the observations that were made on this matter of the Written Answer, I would want to stress again that the proposals arc for the rationalisation of the existing powers: they are certainly not for a reduction, although the Government have to bear in mind their obligations within the European Community. I think it has been common ground for some time that more order needed to be brought to this muddle. So far as we can judge, very few local authorities spend up to their theoretical Section 137 limit on assistance to industry alone. I understand that many authorities are reluctant to use it at all for that purpose because of doubts of its applicability. Unless they have local act powers they are confined to what they can do under the Local Authority (Land) Act 1963.

Of course, we shall pay great attention to what all the local authorities and other interests say in the consultation process, but I would say to the noble Lord, Lord Northfield—he has not had much chance to see it really, has he?—that I wonder whether he has given quite as much allowance as he might to the positive aspects of our proposals. I hope that on reflection he will study them carefully. Indeed, I am sure he will.

May I also say that we are extending the powers under the 1963 Act—something which he specifically mentioned earlier. This applies to all authorities in England and Wales and will continue to do so without monetary limits. Secondly, the new ½p power we are proposing will be solely for assistance to industry, of a type not covered by the 1963 Act.

Thirdly, in the case of the 48 designated inner area districts, where so many of the worst problems are found and which are not confined to the assisted areas, they will get the new powers as well as their powers under the Inner Urban Areas Act, and under Section 137.

Lord Northfield

My Lords, may I interrupt the noble Lord? Does he realise the importance of the Section 137 2p possibility? Take an area that gets no assistance—there are many examples of them now where there is unemployment up to 20 per cent. They have nothing to offer compared with the assisted areas and they need the power to use something equivalent to the Section 137 2p or equivalent to what the inner urban areas are getting. Yet under this Act areas like that, with so little to offer and unexpectedly high rates of unemployment, may find themselves utterly disadvantaged by what is being proposed.

Lord Bellwin

My Lords, I really do not think that is so but, as I said, the proposal is for a consultation paper and I am quite sure the noble Lord will make his observations known. I assure him also that his observations will be studied very carefully in the light of his great experience in this matter.

As to the point made by the noble Baroness, Lady Birk, and which was made also by other speakets, regarding the 2p and the ½p, I say at once that we do indeed need to have regard to the necessary limitation of public expenditure—and I certainly make no apology for that—even for very desirable activities like this, because ultimately public sector resources are made available at the expense of the private sector. We must not forget that local authorities are very much the minor partners to industry. The major share of the burden, quite rightly, is borne by the Government's regional industrial policy.

May I also remind the noble Baroness that my answer referred to the danger rather than the damage—it is precisely to avoid such damage that we are proposing the particular pattern of powers we are putting forward. But without going into cases, I am sure your Lordships will be aware of the ambitious ideas being debated in some areas and I am absolutely sure there is a need to keep a firm sense of proportion. That is what we are trying to do. The noble Baroness mentioned Tyne and Wear—an area that I know very well because I chair a partnership there, and indeed I go to all the four programme authorities there. Of course, they will retain their Section 137 and their inner urban area powers as well, so in fact they will not have any cause to complain as to that.

The noble Baroness asked: was this the final figure? Was this the end of the day? Was this it? Obviously she knows that I cannot give any categorical answers. We have produced a package of powers which we think is reasonable and which we think will enable local authorities to help without upsetting other national objectives. I say yet again that we are issuing a consultation paper and we shall study with great care all that is said on that. But, frankly, if we had not thought the ½p was right we would not have put it forward. For now, I would not want to say any more on that.

Baroness Birk

My Lords, I am sorry to interrupt the Minister; it is late and we all want to go home—but I want to get this clear. Will the figures be in the consultation paper as a vehicle for consultation or are the figures firm? I am not talking about rationalisation; I am talking about the ½p and the limiting to firms of 25p.

Lord Bellwin

My Lords, these are the proposals. They are coming forward in the form of a consultation paper, as I said. The noble Baroness surely cannot expect me to say: "This is just someone's idea". It has been thought through; it has been considered in the context of the totality of everything else; and clearly it is the intention to do that. If we were to put a consultation paper forward without paying heed to what was said, it would not be a consultation paper. That is as far as I can go on that now.

I am trying to press on as much as I can, although it is rather difficult with this very wide subject, as it has become. The noble Lord, Lord Northfield, specifically asked whether I was satisfied about the position as to capital controls for local authorities. I will not go over what is contained in the 1980 Act, much as I would love to, regarding that; but I think it would be fair to say that the authorities really do have scope now that they have never had before in deciding their own priorities. There are five service blocks that make up the aggregate of what they can spend. There are also so many other options open to them by way of tolerance at the end of the year, varying from authority to authority—a whole host of other options that were never there before.

I ought to say also that it is a fact that local authorities today—and I use the term carefully—are awash with capital receipts. There are hundreds of millions of pounds, from the sales of council houses, certainly, and other assets; and I would not give this figure if I was not aware that it is a fact. It may be an opportunity—I see that the noble Lord raises his eyebrows, because he sees an opportunity—and why not, indeed? But it is a fact, and I am sure that it is something which will come out again later.

I come to the progress by the development commission in providing small factory units. As the noble Lord said, he was chairman of the commission between 1974 and 1980, and so speaks with authority and a great deal of knowledge on the subject. It was, in fact, during his term of office that the development commission's factory building programme really got off the ground.

Factory building is one of the most important forms of assistance provided by the commission. The programme is aimed at encouraging small firms to set up or expand in those parts of rural England with the most severe economic and social problems. I should like to emphasise the word "small". We are talking about factories ranging in size from 1,000 sq. ft. to 5,000 sq. ft. It is exceptional for the commission to provide factories larger than this, though I understand that they have done so on the odd occasion. So far as jobs are concerned, we are talking in terms of a handful in the smaller units and up to about 20 or so in the larger ones. So that is the scale of the operation.

As I indicated earlier, it is only in the past five or six years that the commission's factory programme has blossomed. The noble Lord asked me for some statistics, which I am glad to give. To date, some 1,250 units—I think he talked about 1,000—comprising about 2,800,000 sq. ft. have been approved, of which 529 units comprising about 1,400,000 sq. ft. have been completed —365 in the past three years. It is very interesting to note that 413 of the completed units have been let, and many of those unlet are the subject of inquiries. It is expected that the units which have already been completed will provide about 5,500 jobs. This is not the whole story. In addition to the main factory programme, COSIRA has also developed a small workshop programme in some of the smaller rural areas of need outside the special investment areas. These range in size from about 500 sq. ft. to 1,600 sq. ft. About 50 of these have been built and let in the past three years, and others are in the pipeline. Before I leave this point, I again pay tribute to the role of the noble Lord, Lord Northfield. I should also like to pay tribute to the current chairman of the commission, Nigel Vinson, for all that he and Lord Northfield have done to help the rural communities concerned. It is also proper for me to mention that there are other noble friends and noble Lords who are directly involved in the work of the commission and COSIRA; namely, my noble friends Lord Montagu and Lord Shuttleworth, and the noble Lord, Lord Whaddon, to whom I also pay tribute.

Quite a bit was said about the activities of local enterprise trusts. I wish I were beginning this speech, because I should like to talk only about them. They also happen to be one of my duties within the department. The noble Lord, Lord Tordoff, referred to the leaflet he had from Camden, and I should like to tell him that I could produce very many more. I know he will be pleased to hear that. He talked about the programme "Be Your Own Boss". I can tell him that I opened a "Be Your Own Boss" seminar in Huddersfield. They charged for admission, yet it was so over-sold that they had to turn people away. It was very impressive indeed and it was packed out, no less, on a Saturday morning. It was a great success in Huddersfield. As the noble Lord said, wherever these seminars are held—and he mentioned one in Camden—they are invariably over-sold. Everyone wants to know about them, which is encouraging.

I almost do not know where to begin in talking about what is being done in this field. I myself have helped to start up a number of these enterprise agencies. I have spoken in places as far apart as the Hartlepools, Leeds and Calderdale, and Manchester is to come. Perhaps best known among the cognoscenti, I think it is fair to say, are St. Helens, London and Birmingham. I had better not mention any more, because I shall miss some that I ought to mention. But there are now over 40 which are very active, and there are many more on the stocks.

At a conference that we had nine months ago in London, over 100 agencies turned up to talk about this field. And what are they all doing? They are all seeking to give help, guidance and advice to those who want to set up their own small business, to those who are already in business and who need help and—what I believe is so important—to cover the after-care aspect. It is not enough just to start somebody going. Who is going to watch them in the difficult second and third years, when the initial cash that they thought would be there may not be there? Agencies of the kind I have mentioned are doing that.

Tribute must be paid to many of the large firms in the country who are making available "secondees" —men of calibre and ability who are going in to do this kind of work. This is due to the great public spiritedness of many of the larger companies like Marks and Spencer, Pilkingtons, ICI. Again I had better stop mentioning names, because many more companies are doing a fine job in this respect and I am glad to be able to mention it here tonight. The noble Lord mentioned other schemes: for instance, the innovation centres in places like Hull where the Government are also helping with funds. This is a centre where all the skills are brought together in one spot and where people can make use of them. This is an advance. If nothing else, I hope that it indicates real interest—I will not say for the first time, because then I may be making a point which I do not want to make. But it is interest of a kind which we have never had before. What it will produce at the end of the day remains to be seen, but many of us think that it will produce a great deal.

If I may turn from my brief and deal with one or two other observations which have been made, my noble friend Lord Mottistone is anxious about the local authority role and wonders whether the Government are as enthusiastic as we ought to be. Can I say to him that we are enthusiastic. I personally have discussed with many authorities making available funds to help them to regenerate the economy and help small businesses. I can assure my noble friend that we are, indeed, enthusiastic. My noble friend also asked me about the Inland Revenue forms. It is not for me to say anything about that matter. However, I understand that although a substantial package is issued to each prospective new employer, much of it consists of explanatory literature. Knowing my noble friend as I do, I am sure that he will not let it go at that. Nor should he. But that is all right.

As to the effect of the planning circular, may I say to the noble Lord, Lord Spens, that as yet it is a little early to be able to say what has come from it. If, however, I am able to obtain quickly any useful statistics I will write to the noble Lord. His final observation was that the 2p, reduced to ½p, was one-quarter of the help we were giving. As a result of what I have said, I hope he will feel that this is not so. I have to say to him in any case that the 2p is for all spending not authorised by specific Acts, whereas the ½p is for industry only. May I finally say to the noble Lord that his interpretation of Section 137 is, I think, right. However, I should like to check that—it is important that I should—and write to him.

That is all I have to say. Again may I thank the noble Lord, Lord Northfield, for raising this subject. My only complaint to him, as I have come to realise while listening to the debate, is that it has broadened out into so many areas, all of which are themselves worthy of a debate. Would that there were sufficient time.