Co-operative Development Agency and Industrial Development Bill

HL Deb 30 July 1984 vol 455 cc551-99

4.16 p.m.

House again in Committee on Clause 2.

Lord Grimondmoved Amendment No. 4:

Page 2. line 15, after ("movement") insert ("or interested in promoting co-operatives").

The noble Lord said: The purpose of the amendment is to widen the classes of persons for whom the Co-operative Development Agency may provide training courses. I should like to make two preliminary points. First, I wish to thank the noble Lord very much for the information that he kindly sent to me on the subject of training courses. I understand from that information —it is actually a letter written to the noble Lord, Lord Graham of Edmonton—that the phrase "training courses" is interpreted fairly widely. The other point that I wish to make is that I am not very satisfied with my own wording. I wonder whether it is not too restrictive. No doubt, if the Government are at all sympathetic to the points I make, they will produce a much better wording of their own.

If your Lordships will look at page 2, line 13 of the Bill, you will see stated the classes of people for whom the Co-operative Development Agency may provide courses under the Bill. The classes are, first, members of co-operatives; secondly, prospective members of co-operatives; and thirdly, other persons involved in the co-operative movement. It strikes me that an agency may want to offer courses to a wider selection of people than is contained in the three classes. For instance, I have experience of one or two people who are thinking of turning their businesses into cooperatives. They are certainly not members of cooperatives. They are not even prospective members of co-operatives, because they do not intend to join the co-operative, if set up, which will run their business. They might, I suppose, be considered to be persons involved in the co-operative movement, but I should have thought that that is stretching the point rather far.

Apart from that class of person, it is conceivable, I should have thought, that the Co-operative Development Agency may want to allow journalists, teachers and people in general, who are anxious to know more about the co-operatives, to take part in their courses or classes. Like the noble Lord, Lord Graham of Edmonton, and others, I attach great importance to this aspect of their work; that is to say the training they will offer and, indeed, the education. While it may well be that there are few people outside the three classes set out in Clause 2 who will benefit from these courses. I do not see why the agency should be excluded from including them, if it is so inclined. Therefore, I beg to move an amendment simply to widen the classes for whom courses may be offered.

Lord Lucas of Chilworth

The agency's functions under the 1978 Act are specifically geared to cooperative activity. The amendment which the noble Lord, Lord Grimond, has explained to us would seriously widen those functions. We should not like to see the agency operate in this way, because the amendment would enable the agency to train persons not involved in the co-operative movement; perhaps I could describe them as the "maybes". If the agency were given these powers they could, we believe, divert it very seriously from its main task of advising people directly concerned with the co-operative movement.

We accept that the agency has a role not only in generally promoting co-operatives but also in ensuring that professional and other people are properly informed about the principles and the practices of cooperatives so that they can help in developing this form of enterprise. But we feel this is a question of awareness rather than training. The agency is very conscious of the need to shed light, to evangelise, and it seeks to do this wherever and whenever it can.

The CDA itself has said that it would not want to mount formal training courses for people outside the movement. It considers that it can get its message across to the people in question by the use of promotional literature, seminars, and other advice-forming bodies. The methods are amply covered by the powers of the agency to promote and advise which are set out in Sections 2(a) and 2(e) of the 1978 Act. There are, of course, other institutions which provide training for people involved with co-operatives. The noble Lord, Lord Graham of Edmonton, mentioned particularly, when we were discussing this, the cooperative college at Loughborough; and we have heard this afternoon about the Beechwood College at Leeds.

Noble Lords will probably be interested to know that Beechwood College offers a range of courses on co-operative matters, specifically for professional people such as lawyers, accountants, architects, local authority officers and youth leaders. We would regard this activity as complementing the CDA work, and certainly we would not want the agency to have powers that in any way would duplicate that work. In other words, we feel that there is sufficient provision outside the agency to meet that which the noble Lord, Lord Grimond, seeks to provide by way of his amendment. With that explanation, I would suggest that the noble Lord might like to withdraw his amendment.

Lord Grimond

I am obliged to the Minister for his explanation of the Government's thinking. I found it good in parts and bad in other parts, and I should like to study what he has said. To begin with, it seemed to me that he was taking up a very negative attitude to the paramount importance of educating people more widely in the advantage of co-operation as a third way forward in the whole industrial world. But later he seemed to be saying that he would encourage the agency to go in for seminars and other means of propaganda. I should like to examine exactly what he has said. I appreciate that there are other means of spreading the gospel, and I appreciate also that the agency has only a limited amount of money and that because of that it may not want to take on too much work.

But I would point out that there is nothing in my amendment to compel the agency to accept such people or set up such courses. It would be purely permissive, and I should have thought that it would do no harm to widen slightly the functions of the agency. I am convinced that it is vital there should be more public awareness of the advantages of co-operatives and that professional people of all sorts should be offered training in their operation. I will study what the noble Lord the Minister has said, and possibly I might return to this at a later stage of the Bill. In the meantime, I beg leave to withdraw the amendment.

Lord Oram

Before the noble Lord withdraws the amendment, I should like to encourage him to withdraw it but I want to make this point. He has introduced this amendment specifically in relation to training, but I would suggest that the illustration he gave of the need to bring together journalists and the like is not in the realm of training but in the realm of more general advocacy of co-operatives. I would suggest that for such a purpose the original Act—the Co-operative Development Agency Act—gives the agency full power to engage in that kind of activity; indeed, Section 2(a) specifically sets that out. Although I am grateful to the noble Lord for bringing to the attention of the Committee the need to have a wider audience, so to speak, I would suggest to him that it is ill-placed in this particular clause.

Lord Grimond

I am not sure exactly what procedure allows me to do, but I have no doubt that, with the leave of the Committee, I can go on speaking. I am greatly obliged to the noble Lord, Lord Oram, who of course speaks with great authority on this matter. If I may say so, I agree wholly with him that I have been going rather wider than training; but the Minister also did so. It is difficult to draw an exact boundary between training and education and general publicity. I appreciate fully what the noble Lord has said, and I know that under the Act the agency has been able to do a considerable amount in the cause of making co-operation better known. Therefore, again, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.27 p.m.

Lord Graham of Edmontonmoved Amendment No. 5:

Page 2, line 23, after ("subsection (2)") insert ("shall be omitted and there shall be substituted the words "The Agency shall have the power to carry out any commercial activity and to charge for its services and one half of the net surplus arising from such activities shall be used to establish a co-operative development fund for the purpose of making loans to co-operatives, developing marketing schemes for co-operatives and providing grants to co-operatives towards the cost of employing key staff" ").

The noble Lord said: We now come to an amendment to which I alluded earlier when we were talking about the vexed question of how to get a quart into a pint pot. How can we do all the things that I believe the whole Committee wants the CDA to do, given the financial restraints? First of all, I should like to draw noble Lords' attention to the Bill itself. Clause 2 removes the prohibitions on the agency carrying on commercial activities and forming partnerships. When the noble Lord the Minister spoke on the Second Reading of this Bill on 29th June he said, at col. 1189: In continuing Government support we believe the agency should be encouraged to maximise its own earning powers and to seek increased support from the private sector".

Later, at col. 1190, he said: The third important provision in Clause 2 is to remove the block on the agency undertaking commercial activity and forming partnerships. The underlying objective here is to encourage the agency to become as self-sufficient as possible".

He went on to say: This will not widen the range of functions which the agency is empowered to undertake, but by being free to carry out commercial activity the agency can charge what the market will bear for its services and use any profits made from such services to support other activities".

In this amendment we are seeking to get the Minister and the CDA to look at what I would call the revolving nature of the capital that may be forthcoming. We are not concerned simply with making more money. The Minister needs to tell us—I invite him to do so—about the range of additional activities which he envisages and the amount of money which he envisages the CDA can raise by the removal of this prohibition. There is no good talking in terms of phrases; it is no good simply removing words and saying that that is a substitute for money. We want the Minister to tell us how much he and his advisers have calculated it is likely will be raised, given good management and energetic initiatives by the CDA.

Let us just take a cockshy and say that there is a genuine belief that £100,000 may be raised in additional commercial activities. This amendment seeks to put 50 per cent. of whatever is raised into a fund in order to develop co-operatives. Indeed, it refers to, developing marketing schemes for co-operatives and providing grants to co-operatives towards the cost of employing key staff".

We do not simply want to raise money for this year to keep down the cost of running the CDA. We want to raise sufficient money this year—if that is how it is to be done, although we regret the need for doing it—in order to put some aside for special purposes.

The Government have indicated that they wish to see an expansion of commercial activities. We want to develop the argument for the creation of the fund. We believe that 50 per cent. of the surplus earned from commercial activity should be developed in what we term a "co-operative development fund". The emphasis of such a fund would be upon loans and not upon grants.

The Minister may very well tell us that he has knowledge that there are many outside sources of funding waiting to be asked or waiting to be tapped, and that there will be no problem for the CDA in getting additional loans from banks and from other people anxious to invest in some way or other. We are not at all certain that that will be the case. We know that there will be many small co-operatives which will experience great difficulty in getting money. I shall in a moment come to an excellent scheme run by the Co-operative Bank which, together with other finance-providing agencies, has been responding very sensibly. However, we want to make sure that some of the money that is provided is made available for the purpose that I have just explained.

When the Minister was talking about this matter on Second Reading he alluded to agricultural co-ops and to how they had been successful in their commercial activities. He said that: MAFF runs a particular grant scheme for agricultural cooperatives, and that will amount to about £4 million in this financial year. It was designed particularly to improve marketing skills. There are 575 agricultural co-operatives, and their turnover in 1981–82, which is the last year for which I have figures available, was about £2,163 million. It was considered, because of that scale, that a different treatment was justified".—[Official Report, 29/6/84; col. 1216.].

What the Minister did not say was that the grant scheme for agricultural co-ops started in 1967, and in 1968—the first year for which comprehensive statistics were available for the United Kingdom—the turnover of agricultural co-operatives was only about £400 million. The lesson is that if the Government wish to increase the turnover of worker cooperatives—which is very firmly our aim—then the best way in which to stimulate this is with a loan and grant scheme such as we propose.

Like the Minister, we believe that there is a need to develop marketing skills, and there is a need to employ key staff within worker co-ops. We envisage them to be the two crucial functions of a co-operative development fund. There is much which can be said in support of our argument, but I invite the Minister to help the Committee, first, to understand what he and his advisers had in mind when they lifted the block on commercial activity. What kind of commercial activity do they genuinely believe, within the present ambit of the CDA, can be undertaken, bearing in mind the extension of local CDAs and the limited resources of the men and women at the headquarters of the CDA? Secondly, we also want the Minister to say something sympathetic about the creation of a fund which would be available to finance the type of activities that are mentioned in Amendment No.5.I beg to move.

Lord Bruce of Donington

I hope that on this occasion we shall be knocking at an open door so far as the noble Lord the Minister is concerned. The noble Lord indicated earlier that in removing subsection (2) or (3) of Section 3 of the 1978 Act he has opened the door for the CDA to carry on commercial activity. It may well be that this amendment is unnecessary in one sense, in that the noble Lord may be prepared to say. "Not only have we eliminated Section 3(2) and therefore the agency can undertake full commercial activity, but also, if it wishes, it can hang on to its own profits and do what it likes with them". If that is the case, then it is an extremely satisfactory position.

With his charateristic persuasiveness, and in formulating the amendment, my noble friend Lord Graham has sought to make it easier for the noble Lord the Minister to be able to assent to the generality of the proposal he has put forward. We have reason for anxiety because under later clauses of the Bill the Secretary of State may, after consultation with the agency, give directions to the agency covering certain unspecified matters, and the Act—if this particular clause is passed—will require the agency to comply with such directions.

I ask the Committee to envisage the same kind of situation that has arisen—albeit on a much larger scale—with the Gas Board. The Gas Board is a public corporation and it has made considerable profits over the years. It has then found itself directed by the Secretary of State to pay part of its profits into the Treasury in the form of a levy, which it has done for many years now to the tune of well over £600 million. Of course the present case is on a very minor scale and I do not expect that the CDA would make profits on the massive scale of the most successful nationalised gas industry, but it will make some profits. We want to be sure that having made those profits, the agency does not find that the Secretary of State issues a direction to it to hand over the money. That is the reason why a more specific and itemised power has been set out in the amendment.

I repeat: it may be that we are knocking at an open door. If that is the case, then the noble Lord can be most accommodating. In these circumstances, and in view of the correspondence that has passed between us about the desirability of commercial activity, I can see no reason why the noble Lord cannot accept the amendment, either as it is drafted at present, with an implied restriction, or possibly at a later stage, on Report, when an even more general amendment could be put down to make the point absolutely explicit.

Lord Oram

I wonder whether I may knock on the door about which we have heard, in support of the amendment that my noble friend has moved. I support the concept contained within the amendment of a co-operative development fund. After all, in Clause 2 the Government are giving an important new responsibility to the agency—a responsibility to make grants and loans—which it did not have under the original Act.

It seems to me that the amendment that my noble friend has moved would provide the machinery by which making grants and loans could most effectively be carried out. The situation in this country at the moment is that there is no central or specific fund to which groups of workers can turn for finance if they are wishing to set up their own co-operative. There are a variety of sources to which they can turn, but they are not specifically co-operative and they are not centralised. My noble friend referred to the Cooperative Bank, which is helpful in appropriate cases. There is industrial common ownership finance, and, of course, certain local authorities are able to find funds when approached. However, my point is that there is no central and specific fund. It is that which I think is desirable and it is that which my noble friend's amendment would facilitate.

I recall that I once had some discussions with representatives of the Danish co-operative movement—and in Denmark the workers' cooperative movement is very much stronger than it is in this country, particularly in the construction industry. There they have the equivalent of a co-operative development fund, and if the Minister is able to accept this amendment I think he would do well to look at the situation in Denmark, where this central fund is mainly supported from three quarters. There is state funding—and, if my noble friend's amendment is accepted, there would need to be state funding for this development fund —co-operatives can put their money into the fund; and also, which is most important, trade unions subscribe considerably to the Dar[...]sh fund.

It has always been part of my philosophy that the trade unions ought to be involved in this business of workers' co-operatives, and it seems to me that the establishment of a co-operative development fund would be the manner by which the trade unions and other organisations could find the means to support co-operative development.

Lord Lucas of Chilworth

I am sorry that the three noble Lords who have knocked on the door may find the door closed. The Government really cannot accept this amendment. In the first place, the amendment will allow the agency to carry out any commercial activity whatever. I am advised that the power to carry out commercial activities would almost certainly be regarded by the courts as being limited to activities within the functions set out in Section 2 of the 1978 Act. This Bill amends Section 3 of the 1978 Act by removing the prohibitions on the agency undertaking commercial activity and forming partnerships. But in doing that it omits Sections 3(2) and 3(3) of that Act. Section 3(2) starts by saying: The Agency shall not have power to carry on any commercial activity", and so on. Section 3(3) says: The Agency shall not have power—

1. (a) to form bodies …
2. (b) to form partnerships",

and so on. Therefore, in amending the 1978 Act the Bill gives the agency full rein to engage in those activities in which hitherto it has been prohibited from engaging.

However, the removal of those prohibitions does not mean that the agency can enter into any type of commercial activity. As I understand it, it means that it would he able to act in a commercial manner only in regard to those statutory functions which are set out in Section 2 of the 1978 Act. Section 2 sets out the 10 functions, to which noble Lords opposite have referred, and two others; namely, grants and loans, and powers to provide training courses. So we do not think that there can be any departure from this position.

The question which the noble Lord, Lord Graham, asked rather pointedly was: what kind of commercial activities will they be, and how much money might be raised? If I do not give him some kind of answer, he will probably ask me again, so I shall give him some kind of answer. In addition to training courses, which could be undertaken on a commercial basis, the agency might offer consultancy services for cooperative projects: it might be able to raise funds from the sale of a range of publications; it might go into partnership in training education establishments with other people. I do not think that I could forecast how much success it might have in those activities. Certainly the indications that it has given us are that it would like to engage in such activities. The noble Lord, Lord Graham, gave an example of £100,000. I could not say what the amount would be, and I do not think anyone could, because hitherto the agency has not had that opportunity. I do not even know whether it has made an evaluation. We certainly have not.

I repeat that part of the aim of this Bill over the next six years—and I emphasise, that the agency has the continuity of six years' funding—is to establish the agency as being self-sufficient. The amendment also seeks to lay down where profits from these commercial activities shall be directed. We consider that to be neither practical nor appropriate. We do not think that we should specify in legislation what proportion of income, from whatever source it may be derived, the agency should apply to particular activities. I referred to this during earlier discussions. We believe that the agency must have discretion in judging how best to utilise its funds.

I am not sure whether the noble Lord, Lord Bruce of Donington, was drawing a red herring when he embarked upon the case of the Gas Board and directions and levies, but I suggest that the relationship is slender in the extreme in that there is no power in this Bill or in the 1978 Act to direct the agency to pay a levy to the Government; nor, I suggest, is there any need to provide a further provision as to where its profits should be spent or used.

Finally, I should perhaps say that in encouraging the agency to become self-sufficient by removing these prohibitions as contained in the 1978 Act, it should have a better opportunity of expanding in the directions in which it wishes to go. I believe that if any of its profits, howsoever they are raised, were to be directed into particular activities, as the amendment suggests, this might—I think it would—probably seriously and significantly reduce its chances of attaining self-sufficiency. We do not believe that such direction is necessary and it is certainly not desirable.

Lord Bruce of Donington

The reason I suggested some, albeit minimal, similarity with the case of the Gas Board was because I took the noble Lord at his own word. I assumed that when he wrote to me on 11th July last he meant what he said. This is what he said to me: You asked why it was necessary to include in the Bill the power for the Secretary of State to give general or specific directions to the CDA. We regard it as an essential counterpart of the extension of the agency's functions, and then the following words are underlined: in particular, the removal of the restriction on commercial activities". Now the noble Lord tells us that this removal of the restriction on commercial activities is a complete chimera. There is, in fact, no removal, because if, under what corresponds to the objects clause in a memorandum of association of a company—which is enshrined, in so far as the agency is concerned, in Section 2 of the principal Act of 1978—his lawyers advise him that under subsection (2) of the Act itself there is no power to carry out commercial activities, then it is impossible for them to do so. Therefore, what he has ostensibly given away in his proposed amendment to Section 3(2) of the original Act he has already taken away in subsection (2). This is what makes us a little suspicious about these alleged concessions.

If I were of an argumentative frame of mind—and the noble Lord knows that I am never that—I would advise the CDA (and I would probably be repudiated by their counsel if I did advise this) that Section 2(a) of the original Act which is (a) to promote the adoption and the better understanding of co-operative principles". might be held as sufficient umbrella for them to be able to carry out commercial activities anyway. One of the finest ways of persuading people to do something and to have a better understanding of it is precisely to do it yourself.

If the noble Lord advises me that his lawyers have advised him that because of the particular construction of subsection (2) of the original Act they cannot carry out any commercial activities anyway except under the very limited residual functions set out in Clause 2, then I am bound to say that the bounteous gift that he has given us by the proposed amendment to Section 3(2) of the original Act means that he has given nothing at all. We may have to return to this matter at Report stage.

4.52 p.m.

Lord Graham of Edmonton

I echo the last words of the noble Lord, Lord Bruce of Donington. Many people will be disappointed that when a Minister has carefully explained precisely what the removal of the prohibition means, it has not meant as much as that which it has been beefed up to appear to be. The Minister began by pointing out that the wording of the amendment could mean anything because in fact it says: The Agency shall have the power to carry out any commercial activity and, as he rightly pointed out, under the 1978 Act there were already proscriptions.

That could he put right. If the original proscriptions stand, then I am simply saying that whatever they are now able to do now that that proscription has been limited, that 50 per cent. of the surplus which is created shall go into a development fund. At the next stage, if the noble Lord is serious—as he normally is—we can take account of that point. We are not arguing about complete commercialism. We are talking about within the powers that they will now have, that 50 per cent. of the profit can be retained.

The Minister then responded to my invitation to be more specific as to the kind of things he thought it could now do. He made reference to providing consultancies to local authorities. The Minister and his colleagues in Government have been pretty scathing about the activities of local councils in exercising their discretion in the use of funds, particularly under Section 137, and the like. If the future income of the CDA is to rest in part on business given to it by local councils, we already have the dilemma that local councils are under a severe restriction—not just in general; that is the reduction of the rate support grant—in particular on the kind of funds which are normally used to promote co-operatives; that is, Section 137 activities. Is the Minister really serious about finding some means of increasing the income of the CDA? We are serious that we want to put something aside for a rainy day. We want to put something aside to do the proper job of training particularly the key personnel. I intend to withdraw the amendment.

I intend to read carefully what the Minister has said. I am not being offensive, but if the Minister is really serious about the possibility of extending commercial activity under the proscriptions which already exist, I believe that we can find an amendment that will take care of that. But if the Minister is really saying that whatever money is raised none of it shall be set aside—that is, that that marginal direction, which is what will be continued on the face of the Bill, is not acceptable to him—then he has to square up to a number of other points that have been made as to the directions that can be given under other heads.

We are genuinely concerned that if more money is raised some of it ought to be put aside. We have had a good debate. The Minister has not given any hostages to fortune, but has given us enough for us to read Hansard carefully and come back at a later stage. I beg leave to withdraw the amendment.

Lord Howie of Troon

Before my noble friend withdraws the amendment, would he give the noble Lord the Minister an opportunity to reply to the remarks made by my noble friend Lord Bruce of Donington on that letter of July? From my position, which is slighly to one side of the Front Bench and the noble Lord's colleagues there, although supporting him in this matter it seemed to me that there was a distinct difference between the impression that the Minister gave to me in replying to the debate and the impression I have gathered from the letter. The Minister should be given an opportunity to clear up the cloud which hangs over my understanding of this matter before my noble friend withdraws.

Lord Lucas of Chilworth

I am grateful to the noble Lord for allowing me to intervene, although of course we are in Committee so that we can do all sorts of things that we all agree to do. Perhaps I have misled noble Lords. If I have then I of course apologise. I do not think that I said that the agency would engage with the local authorities. I do not think that the Section 137 point arises. I will look at it, as the noble Lord will, but if I did give that impression it was not my intention to do so. Perhaps I might have run other things together.

The noble Lord, Lord Bruce of Donington, raised the question of directions. I think it is his amendments that we are going to discuss shortly, Amendments Nos. 6, 7 and 8 at subsection (4) of Clause 2, where directions are allowed of a general or specific character as to the discharge of its functions rather than the finances. I do not think that that is particularly apposite to what he said.

When Clause 2 of this Bill gives the agency its functions it would allow it to act commercially, but it is Section 3(2) which stops this. As we have the Bill as it stands, it will enable the CDA to discharge any of its functions but now on a commercial basis. Hitherto, it was prohibited from so doing. The reason why the power to give directions could not be used to claw back the profits is that the Bill enables the agency to act commercially, and the Act, in enabling public money to be invested in the agency, makes the public money take the form not of loan but of grant. That is, it is a gift. Therefore of course it cannot be clawed back. It would require express provision for a clawback to overcome either of those two reasons.

I accept what the noble Lord, Lord Graham, has said. I do not think that I have fully appreciated some of the points that he has made and I do not think he, in turn, has fully appreciated some of the answers that I have given. He says that he may wish to return to this at a later stage. I shall look forward to that when we can debate it in greater detail. But I have to say in conclusion that we can see no justification whatever in directing the agency as to how its monies shall be spent. This seems to us to be a quite wrongful intrusion which would strike at the very heart of the CDA's activities.

Lord Bruce of Donington

Before the noble Lord sits down, when he was just replying he interpreted his letter of 11th July as permitting the CDA to carry out its functions in a commercial manner. Those are the precise words that he used. But that is not the wording in his letter of 1lth July. That says: in particular the removal of the restriction of commercial activities". This is something entirely different from carrying out your ordinary functions in a commercial manner. I want the noble Lord to come clean at this point. Is the CDA going to be permitted to carry out commercial activities or not?

Lord Lucas of Chilworth

Yes, but not any commercial activities.

Lord Howie of Troon

Can the Minister give us any notion of what commercial activities?

Lord Lucas of Chilworth

I think that I have described them as those that flow from the functions, as distinct from, for example, operating a ferry-boat.

Lord Graham of Edmonton

To tidy up the debate, I am sure that the Minister has tried to be helpful and to the extent that he has been helpful in effect he has now said that it is commercial activity but not any commercial activity—the very point that I latched upon. To that extent my inclusion of the word, "any", which was the peg which he used to criticise the amendment, I think could be amended at Report stage, and that that would take care of one point. As to the Minister's abhorrence of seeking to give directions to the CDA in these matters, we shall have an interesting debate on the extent to which the Minister, having said that he abhors giving directions, intends to take powers to give directions. We shall come to that again at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (The Earl of Listowel)

Before I call amendment No. 6, I have to point out to the Committee that if this amendment is carried I cannot call Amendments Nos. 7 or 8.

5.3 p.m.

Baroness Nicolmoved Amendment No 6:

Page 2, line 39, leave out subsection (4).

The noble Baroness said: In rising to move Amendment No. 6, it may be convenient to speak to Amendments Nos. 7 and 8 since the discussion will cover the same ground. Amendment No. 7: Page 2, line 43, after ("functions") insert (", but such directions shall not relate to the publication by the Agency of any recommendations relating to government policy as it affects co-operatives;"). Amendment No. 8: Page 2, line 44, at end insert ("A copy of each of the Secretary of State's directions shall be published in full in the Agency's Annual Report, together with a statement by him setting out the reasons for his directions and by the Agency stating their comments thereon as communicated to the Secretary of State.").

I am very pleased to hear the Minister's strong words about unwarranted intrusion into the affairs of the CDA because this series of amendments covers just such a situation. The aim of the three amendments is to remove, or, at least, to limit, the power of the Secretary of State to give directions to the CDA, to ensure that the CDA retains an independent voice on Government policy relating to co-operatives and also to make the Secretary of State accountable for his directions.

In the Minister's opening remarks at Second Reading, he said: The Government recognise the valuable … work done by the CDA and have therefore decided to make further funds available to enable it to continue its activities".[official Report, 29/6/84; col. 11891.] Why, then, should this apparently blameless organisation find itself suddenly subject to directions "of a general or specific character" as to the discharge of its functions? The Minister in his introduction gave no reason for the taking of that extra power and no indication that, if it were to be exercised, an explanation would be forthcoming. His assurance that it is merely a reserve power does not comfort those of us who have been observing the extensive introduction of reserve powers in other fields in this House in recent weeks.

We ask for an answer now. Why are these powers being taken and in what circumstances will they be used? If they are used, will public explanation be given of why they have been used? Can we be assured that the CDA will have an independent voice on Government policy relating to co-ops? If the answer to that last question is, yes, can we have further assurances that, if the words of that independent voice are not agreeable to the Government or if the Co-operative Development Agency is given an unacceptable direction and fails to carry it out, the ominous Clause 3 will not be invoked? There is widespread support for the activities of the CDA in your Lordships' House as has been shown by this discussion. The Minister's reply will be listened to with great care. I beg to move.

Lord Bruce of Donington

On this occasion, I sincerely hope that the noble Lord will concur in the amendment proposed by my noble friend Lady Nicol. As I understand the position of the Government—and the noble Lord must understand that, when I say that, I sometimes find it a little difficult to know what is the position of the Government from time to time because there are now so many shifting sands behind what the Government do—the principal point of philosophy of his party in so far as it has been articulated, is to remove concerns from the shackles of Government, to remove them from the control of Whitehall, to eliminate the interference of civil servants, to allow the human spirit to fructify and to expand without what the noble Lord calls the dead hand of Government hanging over them. That is the philosophy of the party opposite. If one had put into a Bill relating to, for example, the Stock Exchange—and we were discussing this some little time ago—some clause to the effect that the Secretary of State may, after consultation with the Stock Exchange, give the Stock Exchange directions of a general or specific character (for which, I might suggest, on current performance there is some prima facie justification) there would be howls of indignation from the party opposite, howls of indignation that self-regulation is a much more acceptable way, a much more British way, and so on.

Here we have the Co-operative Development Agency, not a very great and powerful organisation compared with the City institutions which support the noble Lord opposite and of which his Government very often appears to be a lackey, but a small organisation to which ordinary, and indeed fulsome, tributes have been paid by the party opposite. Here is an organisation which was set up by the Co-operative Development Agency Act 1978 in which the Secretary of State had no power to direct, had no power, did not want any power and left them quite free. This Government, ostensibly believing in freedom, now want to take some power, after consultation with the agency, to give directions of a general or of a specific character. The noble Lord has given no indication, in the response to the request put forward by my noble friend — although perhaps he may do so in the course of this reply—as to exactly what kind of directions he has in mind. I suggest to the Government that they are completely unnecessary.

The noble Lord has already said to me, in the course of his letter of llth July, that the reason he wants to retain general powers to give specific directions to the CDA is that he has released it to undertake commercial activities; but since he has now denied that it can undertake commercial activities, anyway, the justification for having any kind of power over the agency has been completely removed. This will not do. To take powers to do something or to say that an organisation whose duties have been defined in the main Act, and indeed refined by some amendments to it in the current Bill, should have to be subject to further directions is something that surely should be beneath the dignity of a Secretary of State, let alone the existing Secretary of State.

Lord Lucas of Chilworth

My Lords, that is a very interesting view, but one with which of course I could not agree. The noble Lord, Lord Bruce of Donington, would not expect me to agree. Let me say, however, that I do agree with the noble Baroness, Lady Nicol, when she says that there was widespread support in this House for the CDA. There is widespread support for it in this House, in this Government and in the country at large. Of that we can be quite sure, and it is for this reason—it is for exactly the opposite reason to the one set out by the noble Lord, Lord Bruce of Donington—that under this Bill we propose to allow the CDA (I have written down "to grow up") to throw off the shackles. The noble Lord, Lord Bruce of Donington, laughs. For the first time there are six years of continuity in the operations of the CDA; there are six years of funding; there is the opportunity of commercial activity; there is the freedom to engage in activities and to charge for them; there is the freedom to charge for the services; and there is the freedom to become self-supporting. That is quite a release.

We are talking here of three amendments. The noble Baroness, Lady Nicol, put them all together because they are similar; they are similar in that the latter two depend upon the first, Amendment No. 6. Let me emphasise again that both here and in another place the power to give directions is a reserve power. It has been inserted into this part of Clause 2 as a counterpart to the extension of the agency's functions. We believe it is necessary since without that power it might be very difficult to regulate the agency's activities if, for example, it concentrated unduly on one particular activity or on particular activities to the detriment of other functions, or if it used its new commercial powers to compete unfairly in the market place.

There is nothing novel in that power. We want free and fair competition. That is a plank of this Administration's policies and has been repeated time and again. Noble Lords opposite would think it most odd if we allowed the CDA to engage in activities to the detriment of other people or other agencies. The provisions for giving directions are not novel. They are quite commonly contained in other Acts dealing with non-departmental public bodies.

We cannot accept this amendment but I emphasise again that we see the power as a reserve power, and in the very unlikely event of its being used we have the requirement in the Bill to consult the agency fully beforehand. Provision for this consultation was expressly inserted in the other place at the request of Members of the party opposite. The Secretary of State can be questioned on the use of the power—a question which the noble Baroness particularly asked—either in Parliament or through the department.

Since Amendment No. 6 hangs with Amendment No. 7 I am obliged to speak to Amendment No. 7, which again, in our view, merely illustrates an unnecessary fear being generated about these reserve powers. We hope not to use them, but certainly could not envisage their use as being in any way an attempt to gag the agency. That is perhaps implied in the amendment itself. We welcome free discussion on all policies particularly including those affecting cooperatives. There is no wish in this Bill or in any other enactment to stifle such discussion. In fact, we have said that one of the agency's functions is to contribute to Government policy in the co-operative field by making appropriate recommendations to Government and to Government departments, whether it is in respect of those departments, the Government's policies or other matters. It might also be inferred from the amendment that we intend to direct the agency to publish recommendations on Government policy which affects co-operatives, but, as I have said, the direction is a counterbalance to the agency's new powers.

Finally, I must say that with regard to Amendment No. 8, which is a three-fold amendment, we again find ourselves in many similar difficulties. First, there is a requirement for the agency to publish in its annual report any directions issued by the Secretary of State; secondly, there is a requirement for the agency to publish the reasons given by the Secretary of State; and thirdly there is a requirement for the agency to publish its comments. If that is not interference, I am not quite sure what is.

With regard to the first requirement, it could be implied that we might wish to prevent the agency from publishing any directions. I have said before that it would not be the Government's intention to prevent the agency from publishing them if it so wished. With regard to the second requirement, this would implicitly impose on the Secretary of State a requirement to give reasons for the directions. Under Clause 2(4) there is no requirement for the Secretary of State to give such reasons, and although in practice he may do so, it would probably be unusual to impose such a condition in a statute.

With regard to the third requirement of Amendment No. 8, we believe that the agency should have discretion itself as to whether it publishes or does not publish its comments on directions that may be given. To require it to do so statutorily would remove the discretion which we have afforded the agency and would put a curb upon it; and, moreover, it would certainly be unprecedented in legislation.

With regard to the whole of Amendment No. 8, there is no suggestion that, in the unlikely event of wishing to use the power to give direction, it would be done in a clandestine manner. Any directions would obviously have to have a bearing on the agency's activities and exercising its discretion it might wish to cover the matter in its annual report. I would be very surprised if it did not do so. However, I do not think it is right to specify the content of its report in legislation; moreover, to do so would not be in line with the provisions of the 1978 Act which simply states that each year the agency should prepare a report of its operations in that year. To that extent, presumably the agency would comment upon those aspects of direction which affect their operations. Surely there could be no direction given—I cannot conceive of a direction being given—which would not have an effect upon their operations.

I have been rather a long time in going through the three, but as they hinge one upon the other, perhaps the noble Lords and the noble Baroness opposite would not have expected me to do otherwise. Certainly we cannot accept the amendment.

5.20 p.m.

Lord Howie of Troon

If I may just say a very brief word, as the noble Lord will be aware, I am in no way expert on this subject and consequently I am reluctant to impose my views on the Committee and take up time in discussing something of which I am only marginally aware. However, I do have a lay interest in the work of the CDA, as my noble friend, Lord Oram, knows very well, and I am sympathetic to the work they are trying to do.

In so far as the Bill before us is helpful, I support it, as no doubt other noble Lords do also. But once again in this debate, as in the last one, it seems to me that there is a very substantial dichotomy between what I take to be the stance of the noble Lord the Minister, and such brief references as my noble friend Lord Bruce of Donington has been able to make regarding this famous letter of the 1lth July, if that is the correct date. I was wondering whether this letter is in the public domain and whether we are all aware of it. Has it been published abroad or is it merely in the file of my noble friend? I do not blame him for that; but I was wondering if it might help us if before we came to the Report stage—I do not suppose it can be done before then—the Minister might put the letter in the Library. Alternatively, perhaps the quickest way of dealing with it would be for my noble friend to "read" the letter into Hansard, either at this stage or at some later stage.

I am not sure what would be the most suitable way of dealing with it, but certainly it would be helpful to lay Back-Benchers such as myself if, before the Report stage, we were in a position to study closely the contents of this letter and to observe the seemingly different attitudes which the Minister has shown in his replies today, so that we can decide how far these attitudes are different (if in fact they are different at all) and see how that would help us when we come to the Report stage.

Lord Bruce of Donington

With the Committee's leave, perhaps I may respond to my noble friend, and inform him that of course there is nothing private or confidential in the letters which have been exchanged between the noble Lord opposite and myself. We have a complete rapport on these matters. I think it would waste the time of the Committee if I read the entire letter, because I have already read into the record the points that are relevant to this particular matter.

The noble Lord does not seem to understand that in the succeeding Amendments Nos. 7 and 8 we did our very best to let the noble Lord off the hook. He knows quite well, and, when he reads the debate in tomorrow's Hansard, he will realise, that the arguments for the inclusion of the new subsection (4) of Clause 2 cannot possibly be justified. He has done his best: I did not feel his heart was entirely in it. But it is really quite ridiculous that an agency that has been functioning for six years under the Act of 1978, apparently to everybody's satisfaction and certainly to the satisfaction of Her Majesty's Government, should now suddenly become, because of an amendment to one of its particular terms of reference, subject to direction by the Secretary of State.

The noble Lord may argue the logic of it, but in his heart I am quite sure he knows that the Government's Bill in this respect is an example of complete inconsistency and is a complete nonsense. I accept his statement that there would be nothing clandestine about anything that the Secretary of State did. The last thing one can accuse the Secretary of State for Trade and Industry of being is clandestine. He is frank to the point of brutality, and I would expect him to be equally forthright in the future. We have no doubts on that score, and so the Government can rest quite happily in their beds because of our belief that nothing clandestine can be done. I still regret that the noble Lord cannot consult the Government's own dignity in a matter of this kind and accept my noble friend's amendment. Really, it is quite ridiculous that he should take this attitude.

Baroness Nicol

I do not propose to dwell at length on the Minister's reply. He has my sympathy, because he has a very difficult brief to execute on this particular Bill; but his answers were so full of contradictions and so unsatisfactory in total that I really must press the amendment.

5.26 p.m.

On Question, Whether the said amendment (No. 6) shall be agreed to?

Their Lordships divided: Contents, 78; Not-Contents, 97.

DIVISION NO. 1
CONTENTS
Ardwick, L.	Donnet of Balgay, L.
Attlee, E.	Elwyn-Jones, L.
Auckland, L.	Elystan-Morgan, L.
Aylestone, L.	Ennals, L.
Banks, L.	Ewart-Biggs, B.
Beaumont of Whitley, L.	Ezra, L.
Birk, B.	Gaitskell, B.
Blease, L.	Gallacher, L.
Blyton, L.	Galpern, L.
Boston of Faversham, L.	Gladwyn, L.
Bottomley, L.	Gosford, E.
Bruce of Donington, L.	Graham of Edmonton, L.
Burton of Coventry, B.	[Teller.]
Carmichael of Kelvingrove, L.	Grey, E.
Cledwyn of Penrhos, L.	Grimond, L.
Collison, L.	Hampton, L.
David, B.	Hatch of Lusby, L.
Dean of Beswick, L.	Houghton of Sowerby, L.
Diamond, L.	Howie of Troon, L.

Hughes, L.	Ponsonby of Shulbrede, L.
Jacques, L.	[Teller.]
Jeger, B.	Rhodes, L.
Jenkins of Putney L.	Rochester, L.
John-Mackie, L.	Ross of Marnock, L.
Kilmarnock, L.	Shackleton, L.
Leatherland, L.	Stallard, L.
Listowel, E.	Stedman, B.
Llewelyn-Davies of Hastoe, B.	Stewart of Alvechurch, B.
Lloyd of Kilgerran, L.	Stewart of Fulham, L.
Longford, E.	Stoddart of Swindon, L.
McCluskey, L.	Stone, L.
McIntosh of Haringey, L.	Strabolgi, L.
McNair, L.	Taylor of Blackburn, L.
Mishcon, L.	Taylor of Mansfield, L.
Molloy, L.	Tordoff, L.
Mulley, L.	Underhill, L.
Nicol, B.	Wallace of Coslany, L.
Oram, L.	Wells-Pestell, L.
Peart, L.	Wigoder, L.
Phillips, B.	Wootton of Abinger, B.

NOT-CONTENTS
Airey of Abingdon, B.	Long, V. [Teller.]
Alexander of Tunis, E.	Lucas of Chilworth, L.
Ampthill, L.	McAlpine of Moffat, L.
Avon, E.	McFadzean, L.
Bauer, L.	MacLehose of Beoch, L.
Bellwin, L.	Mancroft, L.
Beloff, L.	Margadale, L.
Belstead, L.	Marley, L.
Bessborough, E.	Marsh, L.
Bruce-Gardyne, L.	Maude of Stratford-upon-
Caithness, E.	Avon, L.
Cameron of Lochbroom, L.	Merrivale, L.
Campbell of Alloway, L.	Mersey, V.
Campbell of Croy, L.	Milverton, L.
Cockfield, L.	Monk Bretton, L.
Colwyn, L.	Mottistone, L.
Cork and Orrery, E.	Newall, L.
Cox, B.	Orkney, E.
Craigavon, V.	Penrhyn, L.
Cullen of Ashbourne, L.	Peyton of Yeovil, L.
Daventry, V.	Polwarth, L.
De La Warr, E.	Rankeillour, L.
Dilhorne, V.	Renton, L.
Eccles, V.	St. Davids, V.
Ellenborough, L.	Sandford, L.
Elles, B.	Selborne, E.
Elton, L.	Skelmersdale, L.
Energlyn, L.	Somers, L.
Faithfull, B.	Spens, L.
Ferrier, L.	Stamp, L.
Gainford, L.	Strathcarron, L.
Gardner of Parkes, B.	Strathcona and Mount Royal,
Gibson-Watt, L.	L.
Glanusk, L.	Strathspey, L.
Gridley, L.	Sudeley, L.
Hayter, L.	Swansea, L.
Henley, L.	Swinfen, L.
Holderness, L.	Swinton, E. [Teller.]
Home of the Hirsel, L.	Terrington, L.
Hornsby-Smith, B.	Teynham, L.
Hylton-Foster, B.	Thorneycroft, L.
Ilchester, E.	Trumpington, B.
Ironside, L.	Vaux of Harrowden, L.
Killearn, L.	Vickers, B.
Kilmany, L.	Vivian, L.
Kinloss, Ly.	Westbury, L.
Lane-Fox, B.	Whitelaw, V.
Lawrence, L.	Wynford, L.
Lindsey and Abington, E.	Young, B.
Lloyd of Hampstead, L.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendments Nos. 7 and 8 not moved.]

Clause 2 agreed to.

Clause 3 [Power to dissolve Agency]:

5.35 p.m.

Lord Bruce of Doningtonmoved Amendment No. 9:

Page 3, line 2, at end insert ("not being earlier than six years after the coming into force of this Act")

The noble Lord said: Under Clause 3, The Secretary of State may, by order, on such day as he may appoint—

1. (a) terminate the exercise by the Agency of its functions except for the purpose of winding up its affairs;
2. (b) vest in himself any property, rights or liabilities of the Agency; and
3. (c) dissolve the Agency".

This amendment is to insert at the end of line 2 the words, not being earlier than six years after the coming into force of this Act".

There is no need at all for me to speak on this amendment, because the noble Lord has already conceded the principle. When he consults Hansard tomorrow he will find that only a few minutes ago before the last Division he assured the Committee that the CDA had six years' finance. I quote his words. Therefore, the noble Lord envisages the continued existence and functioning of the CDA for a period of six years. All that the amendment does is to put into the statute, where I am quite sure the noble Lord would wish them to be, words that are in precise conformity with this undertaking. The amendment needs no further explanation from me and I trust that the noble Lord will have the goodness to accept it. I beg to move.

Lord Lucas of Chilworth

When we look at Hansard tomorrow, the noble Lord, Lord Bruce, may find that he did not understand me as correctly as he thinks he did. Certainly I said that the Bill provides for six years' financing and, as we have emphasised here and in the other place so very many times, that is the Government's intention. Nevertheless, it would be an imprudent Government which did not make provision for unforeseen circumstances. Therefore, it is prudent to have available the power of dissolution, no matter how unlikely it is.

The noble Lord, Lord Bruce, may say, "Oh, come along. In the light of what you have said, you are now trying to hedge. What unlikely or unforeseen circumstances can you envisage here on the last but one day in July 1984?" There are two that sprang to mind just this morning when I was looking through my notes. The private sector may want to take over the agency, or the agency itself may want to change its format, or indeed its role. For example, it might want to go to the private sector. Who would we be to deny it that? So there has to be provision. For that reason, I ask the noble Lord opposite to withdraw his amendment.

Lord Bruce of Donington

The noble Lord is now becoming hilarious. He cannot supply any reason why this power should be taken. A Government who boast of not wanting to interfere with anything at all and of wanting to leave everything to the people who run businesses are taking in this Bill a power which was not contemplated by the Co-operative Development Agency Act 1978. The noble Lord's party was then in opposition, as it shortly will be again. The noble Lord's party did not seek to include any kind of qualification in the 1978 Bill. In fact, they fell over backward in order to prove what enthusiastic supporters of cooperatives they were, how wonderful the Bill was and how, if they had had the fortune themselves to be in office, it was just the type of Bill that they would have brought forward.

Despite all of the assurances which the noble Lord has given about the Secretary of State not wanting to interfere, and despite the fact, as he will read in Hansard tomorrow, that he has said that co-operatives will have financial backing for six years, the Government have nevertheless decided to include in the Bill a residual power. The co-operative movement will understand quite easily what the Minister said about the Government perhaps wanting to privatise it. Perhaps that is getting a little nearer to the mark. It is the policy of the party opposite to allow the taxpayer to promote an enterprise and make it successful and then, after it has proved to be successful, to milk it for the private pelf of their rentier friends who can contribute nothing whatever to it except the substitution of their capital. That makes it even more important for us to insist upon our amendment and, if necessary, to put it to the vote.

Lord Graham of Edmonton

The Minister has an opportunity to do a great service to the Co-operative Development Agency, and I shall tell him why. We on this side of the Committee are, as politicians, entitled to be suspicious, but there are millions of people outside Parliament—certainly hundreds of thousands of people—who genuinely are puzzled about why the Minister has chosen to insert gratuitously into the Bill, after six successful years, the power to dissolve, literally at the drop of a hat, the CDA. The Minister has already fairly said that he cannot envisage such a circumstance arising during the next six years. However, when pressed, the Minister gave two reasons which, if not spurious are so far-fetched as not to be worthy of being taken into account.

The Minister will be unable to restore confidence so long as he holds over the heads of the CDA and its recipients the knowledge that at the whim of a political force—that is, the Government—or of a commercial force, according to the Minister—namely, the private sector seeking to control or move in—the Government will exercise their right to abolish the CDA. That kind of atmosphere is terrible for all those concerned. We are trying to build up confidence. It is not good enough for the Minister to say that one confidence-building step is to give the CDA six years of life and that another confidence-building step is to take the power to extinguish that life at any time within the next six years. That is nonsense.

All we are asking the Minister to do is to put on the face of the Bill that which I personally accept he believes: that there is work for six years to be done by the CDA and that therefore there is six years of life for it. In view of the economic climate, there will be work for the Co-operative Development Agency for at least six years. Whether or not it has sufficient funds to do that work, the work will be there for it to do. We are asking the Government to give people the confidence to go back to the CDA because the Government believe that it has six years of life ahead of it.

The Minister may say that nobody else is guaranteed six years of life and that nobody else is underwritten to that extent. We are not talking about thousands of millions of pounds, or even tens of millions of pounds, but at the most, over six years, £1½ million. Six times £200,000 is £1,200,000, plus £300,000 in reserve. Surely we are not asking for too much. At least by this amendment let the Government give to the people concerned the hope and the belief that the Government genuinely desire the CDA to continue to live.

Lord Grimond

I hope that the Minister will enlighten us about what is intended by this power. First, it was not included in the 1978 Bill. Therefore, may I ask him to tell us what has led to the Government suddenly taking the power to abolish the CDA? The Minister spoke earlier without qualification. He said that the CDA would live for six years. The Minister did not say that the Government would abolish the CDA. I know that the Minister is an exceptionally careful man, and as he did not qualify what he said I took him to mean that the CDA would have a life of six years. Now, however, we know that this is not to be the case. In other words, the CDA is on sufferance and can be abolished at any time that the Government take it into their heads to do so by Order in Council.

There are objections to this procedure. Orders in Council cannot be amended, and provide a very inadequate type of debate. To abolish what amounts to a fairly substantial statute by means of an Order in Council may have happened before, but I cannot help thinking that this is not in the mainstream of what used to be called "Conservative thinking".

If one looks at it from the point of view of the CDA, I feel sure that they will be rather perturbed by the debate. The Government say they might want to abolish the CDA because a private bidder makes an offer for it. It never occurred to me that we were debating that kind of event. Perhaps I misunderstood the Minister, but I thought that this was in his mind. If I was involved with the CDA, I should believe this to be a very curious reason being advanced for abolishing the CDA. I hope that the Minister will enlighten us about why this new power is being taken. Is it really the case that the Government believe that the CDA may be sold off, so to speak, at six months' notice?

Baroness Nicol

May I mention one other aspect of this sword which is hanging over the head of the CDA? The Minister has said that the CDA must throw off its shackles, grow up, go out into the great commercial world and get money from goodness knows where; but wherever it goes to get money, if the threat of instant disappearance is hanging over the head of the CDA it will not get that money. Unless we can assure everybody who is likely either to give a grant to the CDA or to go to it with a commercial undertaking that the CDA will exist for at least six years, they will not bother. It is ridiculous to try to go forward with this shadow hanging over the CDA. I beg the Minister to accept this amendment.

Lord Wilson of Langside

I agree with everything which my noble friend Lord Grimond has said. I shall not repeat what he said. However, I hope that the Minister will consider most sympathetically what the noble Lord, Lord Graham of Edmonton, said in this context. For the sake of brevity, I shall ask the Minister only one question. Precedents are not decisive or all-important, but can the Minister suggest to us any other situation in which Parliament has enacted a statute which has established a body, under the terms of that statute, to carry out certain duties and functions and at the same time has been asked to empower the responsible Minister to abolish it (what is the phrase?) overnight? That is not the phrase, but the one I had at the back of my mind escapes me.

This seems to be quite outrageous. Even more outrageous is the suggestion of privatisation, which I find very diverting indeed. I promised to be brief, but I wonder how we privatise a co-operative? Perhaps it would not be suitable to pursue that.

I would not have thought it would encourage the people of whom the noble Lord, Lord Graham of Edmonton, was speaking and whom he had in mind when he spoke so effectively, if I may respectfully say so. For the Government Minister presenting this matter to suggest that he is putting this provision in the Bill with the possibility in mind of privatising the co-peratives is an absurd notion.

Lord Lucas of Chilworth

The noble Lord, Lord Wilson of Langside, may feel that this is an absurd notion, it may be absurd to him this afternoon but it is an option which should never be ruled out. May I however perhaps return a little more seriously to this matter? I must emphasise that we have no plans to close down the agency. I have said this in a variety of ways on a number of occasions during the progress of this Bill. We are anxious to give it time to get on with the job in hand because we recognise—and I have admitted this to the noble Lord, Lord Graham, on a number of occasions—the importance of the job that they have to do. We want to demonstrate to all concerned that it should be regarded as permanent and our commitment to funding for six years will give the agency a far longer period of security than it has previously enjoyed.

A number of noble Lords opposite have taken some words out of my mouth, but they have been talking about the life of the agency, I have been talking about the funding of the agency. At the end of that commitment on funding, we would probably have to take another look, but we cannot possibly limit our options under this clause by circumscribing it with a time bar. I thought the noble Lord, Lord Grimond, was very unfair when he said that we take the CDA on sufferance. Nothing—I emphasise "nothing"—could be further from the truth. The CDA is not taken on sufferance. I think I understood him rightly, he asked how it was that if we did not take it on sufferance we could give it six months' notice. I think perhaps he meant six years, which we have been talking about, there is no question of six months either for funding, life or anything else as far as the CDA is concerned here. I was asked if I could give precedents for the inclusion of this power. I said that the provisions had been framed along the lines used on other Acts to wind up those bodies. They include the National Water Council which is covered by the Water Act of 1983, the National Ports Council covered by the Transport Act of 1981, the Film Levy Finance Act of 1981 and the National Film Finance Corporation Act, also of 1981. There are a number of bodies upon whom this provision is imposed, there is nothing sinister or untoward in it and there is certainly nothing from which those interested in the work of the agency should have anything to fear.

Lord Bruce of Donington

The noble Lord will expect that we shall check most carefully and in detail the precedents which he has cited and which he implied were on all fours with the powers that are being taken by the Secretary of State in this Bill. We shall check them most carefully and come back to them on the Report stage if necessary.

In the meantime, the noble Lord has of course been completely self-contradictory. He has exuded confidence in and benevolence for the CDA, he has denied that he has any sinister designs upon it. He has stated that it is funded for six years, and the words as to its duration as put forward by the noble Lord, which I recall as well as the noble Lord, Lord Grimond, will be in Hansard tomorrow. All the noble Lord has done is to arouse even more suspicion by the quite reasonable request to put the six years in the Bill itself. The noble Lord's illustration of what might be in the mind of the Government in exercising this power is I suspect conjured up at short notice from his imagination, possibly supplemented by a suggestion from the Box. There is of course, no real reason for it, I cannot think that this could be in the Government's mind, although one never knows, unless the Secretary of State, for instance, is scrabbling around for money from any source the whole time. The Chancellor of the Exchequer is doing the equivalent in privatisation, selling the silver in order to pay the wages.

Are we to assume that the finances of the country in—shall we say?—four years' time are going to be in such a parlous condition that the Secretary of State may decide to pilfer what remaining assets there are in the CDA after that time? Really, the whole thing does not add up. He cannot even give a time, he does not like six years; he has repudiated six months. What is it to be? One year? Will that be sufficient? Can he guarantee it for one year, two, three or four years? Perhaps the noble Lord could go to four and put four in the Bill. That would give some assurance. The fact is that the noble Lord is caught in this part of the Bill with a piece of officialese put in for the sake of those who want to keep the department's nose in something it distrusts. It is a perfect example in a rather less humorous form of the exercise of the technique so immortally illustated in that famous feature, "Yes, Minister".

5.57 p.m.

On Question, Whether the said amendment (No. 9) shall be agreed to?

Their Lordships divided: Contents, 79; Not-Contents, 99.

DIVISION NO. 2
CONTENTS
Ardwick, L.	Jenkins of Putney, L.
Attlee, E.	John-Mackie, L.
Avebury, L.	Kilmarnock, L.
Aylestone, L.	Listowel, E.
Banks, L.	Llewelyn-Davies of Hastoe, B.
Beaumont of Whitley, L.	Lloyd of Kilgerran, L.
Bernstein, L.	Longford, E.
Birk, B.	McCluskey, L.
Blease, L.	McIntosh of Haringey, L.
Blyton, L.	McNair, L.
Boston of Faversham, L.	Milverton, L.
Bottomley, L.	Mishcon, L.
Brooks of Tremorfa, L.	Molloy, L.
Bruce of Donington, L.	Mulley, L.
Burton of Coventry, B.	Nicol, B.
Carmichael of Kelvingrove, L.	Oram, L.
Cledwyn of Penrhos, L.	Peart, L.
Collison, L.	Phillips, B.
David, B.	Ponsonby of Shulbrede, L.
Dean of Beswick, L.	[Teller.]
Diamond, L.	Rochester, L.
Elwyn-Jones, L.	Ross of Marnock, L.
Elystan-Morgan, L.	Shackleton, L.
Ennals, L.	Stedman, B.
Ewart-Biggs, B.	Stewart of Alvechurch, B.
Ezra, L.	Stewart of Fulham, L.
Falkland, V.	Stoddart of Swindon, L.
Gaitskell, B.	[Teller.]
Galpern, L.	Stone, L.
Gladwyn, L.	Strabolgi, L.
Gosford, E.	Taylor of Blackburn, L.
Graham of Edmonton, L.	Taylor of Mansfield, L.
Grey, E.	Tordoff, L.
Grimond, L.	Underhill, L.
Hall, V.	Wallace of Coslany, L.
Hampton, L.	Wells-Pestell, L.
Hatch of Lusby, L.	Whaddon, L.
Houghton of Sowerby, L.	Wigoder, L.
Hughes, L.	Wilson of Langside, L.
Jacques, L.	Wootton of Abinger, B.
Jeger, B.

NOT-CONTENTS
Airey of Abingdon, L.	Gibson-Watt, L.
Alexander of Tunis, E.	Glanusk, L.
Auckland, L.	Gray of Contin, L.
Avon, E.	Gridley, L.
Bauer, L.	Harmar-Nicholls, L.
Bellwin, L.	Hayter, L.
Beloff, L.	Henley, L.
Belstead, L.	Holderness, L.
Bessborough, E.	Home of the Hirsel, L.
Boardman, L.	Hornsby-Smith, B.
Brabazon of Tara, L.	Hylton-Foster, B.
Brougham and Vaux, L.	Ironside, L.
Bruce-Gardyne, L.	Kilmany, L.
Caithness, E.	King of Wartnaby, L.
Cameron of Lochbroom, L.	Kinloss, Ly.
Campbell of Alloway, L.	Lane-Fox, B.
Campbell of Croy, L.	Lawrence, L.
Cockfield, L.	Lindsey and Abingdon, E.
Colwyn, L.	Lloyd of Hampstead, L.
Cork and Orrery, E.	Long, V. [Teller.]
Craigavon, V.	Lucas of Chilworth, L.
Cullen of Ashbourne, L.	McAlpine of Moffat, L.
Daventry, V.	McFadzean, L.
De La Warr, E.	MacLehose of Beoch, L.
Dilhorne, V.	Mancroft, L.
Eccles, V.	Margadale, L.
Elibank, L.	Marley, L.
Elles, B.	Maude of Stratford-upon-
Elton, L.	Avon, L.
Erroll, E.	Merrivale, L.
Faithfull, B.	Mersey, V.
Ferrier, L.	Monk Bretton, L.
Gainford, L.	Mottistone, L.
Gardner of Parkes, B.	Mountevans, L.

Newall, L.	Strathspey, L.
Orkney, E.	Sudeley, L.
Penrhyn, L.	Swinfen, L.
Peyton of Yeovil, L.	Swinton, E. [Teller.]
Polwarth, L.	Terrington, L.
Rankeillour, L.	Teynham, L.
Renton, L.	Thorneycroft, L.
Renwick, L.	Trefgarne, L.
St. Davids, V.	Trumpington, B.
Sandford, L.	Vaux of Harrowden, L.
Shannon, E.	Vickers, B.
Skelmersdale, L.	Vivian, L.
Somers, L.	Westbury, L.
Spens, L.	Whitelaw, V.
Strathcarron, L.	Wynford, L.
Strathcona and Mount Royal,	Young, B.
L.

Resolved in the negative, and amendment disagreed to accordingly.

6.8 p.m.

Lord Grimondmoved Amendment No. 10:

Page 3, line 7, at end insert ("but only after making provision for the completion of outstanding undertakings of the Agency;").

The noble Lord said: I rise to move Amendment No. 10 which stands in my name on the Marshalled List. I hope that this amendment speaks for itself. As I understand the position, the Government have funded the agency for six years but they can, under this clause, abolish it at any time if they can get an order in council through Parliament. The Government have told us very clearly that they do not intend to abolish the agency, but we are of course bound to look at what is written in the Bill, and although we take note of the Government's intentions, they are not part of this clause.

If my understanding is correct—and I believe that it is—the agency may be wound up at any time and with no period of notice laid down in the Bill. My experience is that it often takes some time to form co-operatives. The formation of one co-operative in particular that I happen to know about took more than two years. All my amendment would do is to say that if the Government are to dissolve the agency, they shall make provision for the completion of the agency's outstanding business.

I do not stand by the exact wording of my amendment, but I am sure that the Government see the point of it. They may say that it is an obvious point and that any sensible Government would so arrange. Nevertheless, as I have said, we are bound by what is in the Bill and it seems to me reasonable to write into the Bill that if the Government dissolve the agency—and I again emphasise that they have told us they have no intention of doing so—they should have regard to the work in progress. It may well be that there are people who are in negotiation with the agency about founding co-operatives who would be severely embarrassed unless provision was made for continuing that work in some other way. That is the sole purpose of my amendment. I beg to move.

Lord Wilson of Langside

I venture to say only that I hope the Minister will consider this amendment somewhat more sympathetically than he did the previous amendment. It may encourage him to do so if I say that I had a certain amount of sympathy with his reaction to the amendment proposing the abolition of subection (4). I did not share the state of mind approaching frenzy which was expressed from the Front Bench on that amendment. I had a certain amount of sympathy with the noble Lord, though I did not express it. However, I am completely defeated as to his attitude towards the subsequent amendment. I hope that on this amendment he will show a more appreciative and sympathetic understanding of the motives which lie behind it.

Lord Lucas of Chilworth

I am most grateful, again, to the noble Lord, Lord Grimond, for explaining his amendment. I make just a brief apology to the noble and learned Lord, Lord Wilson of Langside, as I inadvertently referred to him incorrectly when I addressed myself to his remarks on a previous amendment. I apologise for that.

Lord Wilson of Langside

I assure the noble Lord the Minister that I shall answer to anything.

Lord Lucas of Chilworth

The noble Lord is most generous.

There is already provision in Clause 3(1)(b) of the Bill for the Secretary of State to assume the agency's liabilities on winding up. As we see this, the amendment seeks to extend the Secretary of State's responsibilities in this matter by binding him to honour any outstanding undertakings of the agency, including those which may not give rise to legal liability.

The Secretary of State will have the power under Clause 3(4) at his discretion to apply money received on realisation of the agency's assets for purposes corresponding with the agency's functions. He would be able to use this power to meet the commitments of the agency which were not legally binding. However, it would be wrong, in the Government's view, to compel him to do this or to require him to use taxpayers' money for this purpose; that is, to include undertakings which do not give rise to a legal liability. It is for that reason that we are not able to accept the noble Lord's amendment.

Lord Grimond

Perhaps I should just explain a little further what I had in mind. I have taken the word "liability" in Clause 3(1)(b) to mean, as the Minister has said, a legal liability, probably of the monetary kind. I am not talking about that kind of liability. I am referring to a situation which is constantly arising. As I said, it takes some time to set up a co-operative. For example, the people involved, with the help of the agency, may have been to see the Treasury and received certain advice and probably negotiated with the workers and unions. All that is work in progress. It is not legal liability. It will all fall flat unless someone continues it. A great deal of time will have been wasted. People will be very reluctant to embark on this process if they feel that their time may be wasted. I should have thought that there should be an obligation on someone—it need not be the Minister—to say that if the agency is wound up, there are other organisations in this field, such as JOL or ICOM, which should make provision for continuing with the work that has been done.

I speak from practical experience. In one case of which I know it would have caused the utmost difficulty, when the Minister's long and complicated negotiations were half way through, when money was being raised and loans were being organised by banks, and so on, had the operative agency (not, in this case, the CDA) been abolished. I think that there should be some undertaking in the Bill that the Minister will have regard to these conceivable difficulties.

I do not want to press this amendment now, but I ask the Minister to look at this aspect between now and Report. I am not talking about legal liabilities or monetary liabilities. I am talking about what happens when complicated work in progress has advanced some way financially and legally and, as I say, there have possibly been discussions with the Treasury. To my mind it would be most undesirable if that should simply be allowed to fall flat.

Lord Diamond

In supporting the noble Lord, Lord Grimond, may I ask the Minister whether he includes the term "contingent liability" among the liabilities excepted under Clause 3? The situation which I understand might well arise is of an application being made upon which certain guidance is given by the agency but under which no immediate liability arises on the agency. If the agency comes to an end at that point and the applicant then proceeds to complete his part of what he understood to be a bargain, he will be placed in the very difficult situation of not being able to call upon the agency to complete its part, because, of course, at the time there was no completed bargain and no absolute liability. At the most there was a contingent liability; that is, the agency had given the applicant to understand that if certain procedures were completed, the agency would assist, and it had the liability for financial assistance or assistance in some other form. Therefore, I am asking the Minister whether the liabilities included in the earlier clause to which he referred include contingent liabilities of the kind I have described?

Lord Lucas of Chilworth

I understand what the noble Lord, Lord Grimond, means when he refers to the term "work in progress", but as we see it, the wording of the amendment—again, the noble Lord said that he perhaps did not have it quite right—as it appears on the Marshalled List is, but only after making provision for the completion of outstanding undertakings of the Agency". I am advised that "undertakings" may be construed as including those matters which may not be legally binding. It is difficult for me to conceive of what they might be. For example, the agency might have said that there will be a training programme in, say, 1988, and that it will be from 4th to 30th July. In the event of a winding-up the programme would not take place and those persons who perhaps had given leave to people to attend the course might therefore suffer financial disadvantage. That situation might be construed as being a contingent liability. If that were to he a contingent liability, I have to say that our unwillingness to accept the amendment would be in order to preclude that possibility.

If the noble Lord, Lord Diamond, is using the word in the rather narrower sense of contingent liabilities, provided they are legally binding, they are included in Clause 3(1)(b). But liabilities which may be merely prospective—perhaps an intention to do something which ultimately is not done—would not necessarily be legally binding. Therefore, as the Bill stands, the Secretary of State would not—and it is not intended that he should—have a liability in that context.

The only other suggestion I can make is something of a legal connotation in regard to the two questions which have been addressed to me. The noble Lord, Lord Grimond, says that he is of a mind to withdraw his amendment and asks whether I will take a further look at the matter which, of course, I gladly offer to do.

Lord Grimond

I am obliged to the noble Lord the Minister and as he has said he will take a further look at the matter, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.20 p.m.

Lord Graham of Edmontonmoved Amendment No. 11:

Page 3, line 14, leave out (", if not") and insert ("be").

The noble Lord said: In these debates we accept the fact that there could be circumstances (although the Minister cannot envisage them) when it is determined to exercise the powers under Clause 3. On this side of the Committee we are in the unhappy situation of having to consider the circumstances. The noble Lord, Lord Grimond, and the noble and learned Lord, Lord Wilson of Langside, have quite fairly tried to engage the Minister in a debate on what they see as the practical problems in the event of the dissolution process being set in train. In these amendments —Amendments Nos. 11 and 12—we deal with the matter a little more strongly. Amendment No. 12: Page 3, line 16, leave out ("be paid by him into the Consolidated Fund").

At the end of the day the assets will be realised. I draw to the Committee's attention the fact that Clause 3(4) states: Any sums received by the Secretary of State by virtue of subsection (1)(b) shall, if not applied by him for purposes corresponding with the functions assigned to the Agency by the 1978 Act, be paid by him into the Consolidated Fund".

In other words, the taxpayer will get his money back. The Minister will say that it is taxpayers' money that has been given out. But he has already told us that in the future the assets will not only be money from the taxpayer. They may come from a range of other sources. The money could be raised from commercial activities or by loans, or it could be given by a range of outside bodies. Hitherto, the CDA's assets could fairly be said to be wholly subscribed by the taxpayer; but if the Minister has his way—and I say good luck to him—in future the assets of the CDA will be subscribed by a lot of people, including the cooperative movement in its wider context. We simply say that it should be possible to make sure that when the moneys are dispersed they shall not go to the Consolidated Fund.

The Minister may say, "Come, come! If we are looking for a worthy home for certain sums, surely the Consolidated Fund is a good place to put the money". We say that there are literally hundreds of good co- operative homes of one kind or another. We are not making a fetish of this. But there may be unhappy circumstance and a climate of dissolution, and this proposal might ease the situation. Certainly there needs to be a careful check and scrutiny of the CDA. Even the Minister will be involved. It will not be a question of jobs for the boys or money being given back. The bona fides and the integrity of the recipients will be looked at carefully. The noble Lord, Lord Grimond, and the noble and learned Lord, Lord Wilson, have demonstrated that this matter will not be lightly dealt with. We are concerned that the cooperative ethos is sustained by whatever sums are left in the unhappy event of dissolution taking place.

I hope that the Minister will say something kind and either accept the amendment or suggest that we redress it in a way acceptable to him for the Report stage. I beg to move.

Lord Mottistone

I enjoyed that speech. I can remember very well making a similar one on a different Bill from the Benches on which the noble Lord, Lord Graham, is sitting. It is the kind of thing that one always says in Opposition: "Don't put the money into the Consolidated Fund!" It is so easy to put it that way when one is in Opposition. I did it more than once in the 1970s. But I believe that the way that the matter is dealt with in the Bill is quite sensible. When the noble Lord's party was in power, there was not the qualification that the money should be applied to a sensible purpose first. It was then intended to go straight into the Consolidated Fund.

I do not think that it is reasonable to alter subsection (4). On the whole, if there is any money left over, ultimately it ought to go back to the taxpayer. That is very sensible. I think particularly that Amendment No. 12 is unreasonable. I am sorry, but it made me laugh. I could almost hear myself saying the same words as the noble Lord, Lord Graham.

Baroness Nicol

We are not talking about money going back to the taxpayer. The noble Lord, Lord Graham, was making the point that we are hoping against hope, in view of the earlier discussions that we have had, that there will be other money coming into the CDA. A lot of that money will come from cooperative sources or from grants, from either here or abroad, for co-operative purposes. We have already said that we think that, because of the shadow hanging over the future of the CDA, it may be difficult to get some of that money coming in. It will perhaps be slightly less difficult if those sources can be assured that any of their money which is given for co-operative purposes and which is left over in the event of a dissolution will continue to be applied to co-operative purposes. It seems a perfectly straightforward and honest thing to do. If it is taxpayers' money, by all means put it in the Consolidated Fund, but if there is a balance which can be identified as grants for cooperative purposes from co-operative sources, there is no doubt about where it should go.

Lord Lucas of Chilworth

Let me start by disabusing the noble Baroness, Lady Nicol. There is no shadow hanging over the CDA, unless it is one that noble Lords opposite have manufactured and floated. There is certainly not one so far as the Government are concerned; otherwise, we certainly would not have provided in the Bill for the next six years' funding.

I understand that we are discussing together Amendments Nos. 11 and 12, No. 12 being consequential upon No. 11. The amendments are designed to ensure that any sums at all received from the agency in the event of a winding-up are used only for purposes corresponding with the agency's functions. The amendments would automatically remove the discretion of the Secretary of State in deciding to apply such sums for that purpose.

We believe that that discretion is important, and it is important that it should be retained. In the unlikely event of the agency being wound up, the Secretary of State would vest in himself not only the property and rights of the agency but also its liabilities. Those liabilities would have to be met from money provided by Parliament. In such circumstances we believe it to be only equitable that the Secretary of State should be able to ensure that, as far as possible, a corresponding payment is received into public funds.

As the Bill stands, any proceeds of a winding-up which are not applied for purposes corresponding with the agency's functions will be paid into the Consolidated Fund, as my noble friend Lord Mottistone said in refuting the amendment, and will therefore be available (in effect, I admit) to offset any of the liabilities assumed by the Secretary of State. If these amendments were adopted, the Secretary of State would have no money to pay into the Consolidated Fund to offset any of the liabilities which would be transferred to him on a winding-up. As I say, that does not seem to be equitable. I do not like saying that because it always to me has sounded the weaker part of the argument, but I have to say that we have an objection to the amendment because there is a drafting defect.

The wording is unsatisfactory since the expression, purposes corresponding with the functions assigned to the agency", while satisfactory in Clause 3(4) where the power is discretionary would not be adequately or sufficently precise as the basis for a duty as would be required by the amendment. However, the Government's principal objection to the amendment is that which I said in my earlier remarks.

Lord Graham of Edmonton

I do not intend to press the amendment at this stage of the Bill but I think that it is rather sad that the Government are not prepared to say even once that there is some merit in any of these amendments and that there is the possibility of coming not to a compromise but to a better drafting which seeks in part to meet the point that we are making. Our fear is this. Even after the liablilities have been met, contingent or otherwise, and one has fairly seen that all of the functions are exercised, there may be for instance £1 million available. We are talking about that. We are not talking about large sums of money. £1 million is a large sum of money but we are talking about it in the context of macro-economics. What we are saying is that given that there are two choices of where that £1 million should go, one is into the Consolidated Fund where it would be swallowed up like that. The other is looking for what was accepted by all parties, including the Minister, as a genuine good use and co-operative recipient of the money.

We think that goodwill would be created and avoidance of bitterness in the event of a dissolution. We are talking about dissolution, which will be a bitter pill to swallow and it will be fought. If there were some worthy causes that may not fully fall under the functions of the Bill, but where one could exercise the kind of marginal discretion about which we are talking, that would ease the pain that would be felt by a lot of people. I do not know whether, before I sit down, the Minister would like to say something helpful, If it is going to be helpful, I will sit down. If not are we wasting our time?

Lord Lucas of Chilworth

Of course I am going to be helpful. I understand exactly what the noble Lord, Lord Graham, and the noble Baroness, Lady Nicol say. I appreciate that there are some very good cooperative homes for the surplus to go to. However, if you remove the discretion of the Secretary of State, which this amendment would do, it would also remove his discretion to apply monies received from non-governmental origins for purposes corresponding with the agency's functions. I do not believe that that is the intention of noble Lords. So I say—which I believe is helpful and should be encouraging to the co-operative movement—that the Secretary of State has a discretion to apply non-governmental monies for purposes corresponding with the agency's functions. If you accept the amendment, you remove the Secretary of State's discretion.

Lord Graham of Edmonton

I recall that in another place the Minister in charge of the Bill eased the minds of the co-operative movement greatly when he said that consultation would take place with representatives of the co-operative movement in the event of a dissolution—the record will show that the Minister nods his head, at least at that statement—nothing about the future. It could very well be that what we would need to do is to explore the possibilities of full consultation with the Minister at the appropriate stage, in the event of a dissolution, as to the precise ways in which such sums of money as are available are finally dispersed. In which case, if the Minister has the discretion at that stage he may well be persuaded by powerful advocacy from the co-operative movement that there are proper homes, other than the Consolidated Fund, to which the monies could go and which would be in conformity with the functions of the agency. We have had a good debate; we may return to it later. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 12 not moved.]

Clauses 3 and 4 agreed to.

Clause 5 [New scheme of regional development grants]:

On Question, Whether Clause 5 shall stand part of the Bill?

Lord Bruce of Donington

It would perhaps be for your Lordships' convenience if I say that in speaking to Clause 5 I also propose with the leave of the Committee to speak to Amendments Nos. 13 and 14 and also to Schedule 1. In other words, instead of having four or five different debates, I should like to incorporate them into one. Amendment No. 13: Page 5, line 8, leave out paragraph (b). Amendment No. 14: Page 5, line 16, leave out from beginning to ("include") in line 22 and insert— ("(2) The Secretary of State may by order made by statutory instrument appoint a date upon which the provisions of section 4 of this Act come into force and such order may"). The purport of the amendments Nos. 13 and 14 is to exclude the operation of Part II of the Bill that relates to the operation of the Industrial Development Act 1982. This is a completely different subject from that with which the Committee have been dealing so far. The Committee will recall that in December 1983 the Government issued a White Paper, No. 9111, which gave some indication as to what was going to be their attitude towards regional development policy, and they invited consultation. Unfortunately, no debate has taken place on the White Paper or the philosphy that lies behind it. It was intimated in the White Paper that a Bill would be brought before your Lordships and that indeed after that a revised map showing a new configuration to the regions for development purposes would be laid before us.

Many people may think it was a pity that all this was not done before the present Part II of the Bill was presented to the Committee. Part II of the Bill is little more than an enabling Bill. Numerous things can be done by regulation, and in the schedule which is in substitution for the relevant parts of the Industrial Development Act 1982, new criteria are laid down.

Therefore in Committee there is little that is tangible as to what real Government intentions are, which could possibly give ground for any detailed amendment to the Bill. I am afraid one therefore has to take the broad brush to this and ask the Government what is wrong with the Industrial Development Act 1982 that this configuration of legislation, laying down new criteria is required? What is wrong with the Industrial Development Act 1982 and its continued application? Until one can get a satisfactory answer to that question, then we shall have to take issue with the Government upon it.

I do not speak for myself alone on this, nor only for those for whom I speak on this side of the House. The Institute of Chartered Accountants in Scotland also looked at this Bill. They are a most reputable body, affiliated to the Institute of Chartered Accountants in England and Wales to which I have the honour of belonging. Even with the wildest stretch of the imagination I do not think they could be regarded as being affiliated to Militant Tendency or to any other party to the immediate left of the Conservative Party. This is what they say: We think it is a pity that the skeleton provided by the Bill is so flimsy leaving, as it does, so much to be filled in by order; what can be done rapidly by order can equally speedily be undone. The existing provisions of Part II of the Industrial Development Act 1982 are considerably more robust". With that considered opinion, I would venture to agree.

The Industrial Development Act 1982 was not the last word in fulsome support for the whole concept of regional development, but at any rate it has appeared to work. The only reason one can really apprehend for bringing into operation the new provisions of this particular part of the Bill, and of Schedule 1 associated with it, is of course the saving of money. That is already alluded to in the preamble to the Bill itself. It is even more emphasised in the White Paper, Cmnd. 9111 of December 1983. Paragraph 49 states: Legislation is being introduced to change the present scheme of regional development grants to make them more cost-effective. The Government expect the combined effect of this change and those to the geographical coverage of the scheme would offer opportunities for a reduction in public expenditure". That has indeed been amplified in the preamble to the Bill where figures of £150 million to £200 million have been mentioned. There is even more to come in the Government's White Paper, Cmnd. 9297 published last week. Let us consider how these economies will be enforced. I quote from page 103 under "performance measurement" Thus for selective financial assistance schemes your Lordships will perhaps recall that these are provided for in the Industrial Development Act 1982— (which absorb 27 per cent of the department's finance and 7 per cent of its manpower), divisions have been required to set targets covering the proposed impact of the scheme (eg number of jobs to be created/safeguarded, amount of investment to be assisted)…The evaluation effort of the department on the overall benefits, including the cost effectiveness, of programme expenditure is also being strengthened. This will be co-ordinated by the Finance and Resource Management Division with a major input from the department's economists and those running selective assistance schemes". It looks as though we are going to have now not only a restriction imposed by financial limits, which have been hinted at in the explanatory memorandum, but also a detailed monitoring. I suppose that, on the performance basis, what we shall have to do now is set up a super monitor to make sure that those who are monitoring the granting of selective assistance under the Act are monitoring it correctly. Then, presumably, one will have super monitors on top of that to make sure that those who are monitoring are monitoring those who are monitoring correctly. This is control gone mad. Then one finds that paragraph 6 of the White Paper states: To strengthen management efficiency, units of the department carrying out similar tasks or ones with a regular pattern have been encouraged to introduce or develop management ratios. Regional Offices' targets and activities are being scrutinised on a comparative basis for significant variations; Regional Development Grant Offices have introduced ratios per member of staff for case loads and case processing time. The results are reviewed monthly on a comparative basis". That is frightfully impressive. What it surely adds up to is a firm resolve by this Government that would like to know the cost of everything but that know the value of nothing, to enforce progressive reductions in financial aid to the various distressed areas of the country.

I have before me the map of the assisted areas from 1979 to 1981 from which I observe quite substantial areas of the country were in development areas. Practically the whole of Scotland was a development area or a special development area. Vast sections of the north were either a distressed area or an assisted area. Certainly most of Wales was either a development or an intermediate area, and certainly Cornwall. That map was reproduced on the back of an extensive Government report on the regional development programme of the United Kingdom from 1979 to 1981. The Government had a bash at that the moment they came into office, or shortly afterwards. So we had a revised system of assisted areas on 1st August 1982 which eliminated central Wales and large parts of Scotland and of Northern England from the catergories previously there.

Since then, things have changed very considerably. If one was to judge the need for regional assistance on the same basis that it was judged even on 10th May 1979 when the Government came to office, then, after five years, the whole of this country now needs to be called an assisted area. Even the South-East now has unemployment running at 9.4 per cent., equivalent to the highest rate of unemployment in the northern region on 10th May 1979.

There can be only one reason why the Government have brought in this Bill. It is to reduce expenditure in the regional development areas. This is what they are determined upon. This is the approach that the Government adopt after all this time. I refer again to Cmnd. 9111. Paragraph 9 states: Imbalances between areas in employment opportunities should in principle be corrected by the natural adjustment of labour markets. In the first place, this should be through lower wages and unit costs than comparable work commands elsewhere. Wage flexibility, combined with a reputation for good work and a constructive attitude to productivity and industrial relations, would increase the attractiveness to industry of areas with high unemployment. Clearly labour costs are important to companies' ability to compete in world markets—particularly for companies in labour-intensive sectors". This is the Government's basic approach. In the final analysis, the Government's attitude is that all these matters are adjusted automatically by market forces. And yet from time to time, when they are considering the results of their expenditure under the Industry Act 1982, the Government boast of the creation of jobs.

I well recall asking the noble Lord, Lord Lucas of Chilworth, whether he could define this mystical quality of real jobs enunciated from time to time, with strident elocution, by the Prime Minister. The noble Lord replied that a secure and genuine job was one which was both profitable and productive—that is, profitable to the individual and profitable to the organisation which he served. He said that profit was not only in monetary terms; a job was productive because it created wealth for the country. But he said that if we had in mind the kind of job that relied on Government subsidy, whether it came from the taxpayer or from the ratepayer—the noble Lord will know that for many weeks now we have been discussing this kind of question in your Lordships' House—that could not he a genuine job.

Here we have a Bill which, on the face of it, is bent on creating jobs that are not genuine. In the Government's whole approach to this they have said that they are going to regard the number of jobs that are created as being the principal propellant or the principal consideration taken into account by the new rules proposed. Even the noble Lord will realise the slight incongruity of that argument. Here is he, boasting about this Administration spending vast amounts of the Government's money on creating jobs which, precisely because they are subsidised, cannot possibly be real. This, of course, is where the incongruity of the Government's whole argument becomes apparent and they revert once again to the pre-war philosophy that ultimately the differences in region are self-correcting.

However, they do say this. They make a modification at paragraph 11 of the White Paper. They say: labour mobility cannot be relied upon as a complete solution as it tends to be the young, the more skilled and the more enterprising who are ready to move in search of work, possibly leaving the less-favoured localities with a still more dependent population and a workforce even less able to climb out of disadvantage". That is the Government's justification, with which I concur entirely, in a continuation of the regional aid policies that have been the policy of every Government, of any political persuasion, ever since the last war.

Imagine a person in (shall we say?) South Wales, which is a distressed area—a young and mobile person. To which area would he now go to get a job? Mobility is not on. Should he go to Northern Ireland, where the percentage of unemployment is 21.3; should he go to Scotland, where it is 14.5; to Wales, where it is 14.7; to the North-East, where it is 17; to the North-West, where it is 15.1; to the West Midlands, where it is 14.79; to Yorkshire, where it is 13.6; to the East Midlands, where it is 11.6; to East Anglia, where it is 10.2; or the South-West, where it is 11.27? Where is he going to move, even after he has taken the advice of Mr. Tebbit to get on his bike? Where can he go, even though he is in an existing distressed area? So the mobility argument that lies at the basis of the Government's own philosophy is repudiated by their own Bill.

The only reason we are having this Bill before us today is so that a level of expenditure which last year amounted to some £640 million can now be reduced; this is really the only reason for it. Can anybody in their right mind imagine, with unemployment having gone up by such a very considerable percentage, and gone up for reasons that are not entirely unconnected with the Government's accession to office, that aid of this kind, which perhaps was sufficient three years ago—many would query that—is going to be sufficient? Will it be sufficient with unemployment genera11y, running at two or three times the percentage it was three or four years ago? Surely nobody can imagine that.

The noble Lord may say that we are relying on the EEC for this, that possibly we may get some aid from the European Economic Community. Indeed, the Government say so at paragraph 28 of Cmnd. 9111: The European Regional Development Fund is expected to grow in real terms, and will therefore play an increasingly important part in the development of member countries' regional policies, including our own. The Government take the expected contribution fully into account in determining expenditure on regional policy". Can the noble Lord possibly imagine, particularly after the conferences of Fontainebleau, particularly after the insistence on the control of Community expenditure, that increased funds are going to become available for the European Regional Development Fund, which is the sole fund out of which we in this country profit to a marginal extent? Quite clearly not, as he knows from the exchanges that have taken place today in this House, and particularly in view of a very pertinent observation made by the noble Lord, Lord Bruce-Gardyne, who asked who was going to control the Commission's expenditure on agricultural policy, which was automatic as a result of existing regulations. Does he think for one moment that when the Council of Ministers comes to consider the totality of European budgetary funds there will be any further money available for what is termed non-obligatory expenditure under the European Regional Development Fund? The answer is no.

The opinion of most of us who have studied this, and certainly the opinion of most independent observers, from whom, if I had the time, I could quote—the Financial Times experts and many others of organisations not affiliated in any way to my party—indeed, the universal opinion outside the closed conclave of 10 and 11 Downing Street, is that regional aid at this time, far from being reduced or even maintained, should be at least doubled. The reason this new amendment to the Industrial Development Act 1982, which at the time was the product of this Government's considered wisdom, is being abolished is that they think the framework of the new Bill will make it far easier for them to reduce their expenditure, to cut it back and to make the regional fund and the whole of the operation of the regions less effective.

Once Governments begin to think in terms of the financial parameters unmodified by other considerations, they are in trouble. The solutions to regional problems of the United Kingdom must, to begin with, be initiated by the Government. Indeed, Mr. Macmillan (as he then was) said as much within 10 months of the end of World War II, and I was present in the House when he said it. But at the same time they must demand the complete co-operation of local business communities and of local authorities, and above all they must demand their enthusiasm and their confidence. Their enthusiasm and their confidence will suffer a severe blow by this ridiculous enabling Bill and it will need far more than the eloquence of the noble Lord—let alone the eloquence of his right honourable friend the Prime Minister—to convince them that the Government really mean business when they talk about aid to the distresssed regions of the United Kingdom.

7.1 p.m.

Lord Mottistone

Does not the noble Lord, Lord Bruce of Donington, realise that the underlying cause of the dismal statistics which he spent unnecessarily long reeling out to us—25 or 26 minutes—was the spendthrift nature of the Government of the party he supports? In half of the 'sixties and half of the 'seventies they encouraged this country to become progressively less and less competitive in the world market. Does he not realise that the underlying cause of all that he refers to depends entirely upon that?

Lord Bruce-Gardyne

I must say that listening to the noble Lord, Lord Bruce, I could not help recalling the old canard about the gentleman who was detected unrolling loo paper out of the window of a train. When accosted about the reason for his conduct, he explained that it was to keep the elephants away. When it was pointed out to him that there were no elephants, he replied that it was a very successful device! In the noble Lord's case the position is perhaps somewhat the reverse because the loo paper which he so much admires has been liberally distributed, but the elephants have merely gathered in greater and greater numbers.

The noble Lord claimed that we should now be extending assisted area status to the entire United Kingdom. If one goes back to 1979 when the present Government took office, and if one analyses the trends of unemployment—and particularly unemployment in the assisted regions over the previous 20 years—I suggest that it is a little hard to show that the ratio of success to effort and endeavour was a very high one under the successive attempts to induce employment in the regions through development policy.

There was only one thing which the noble Lord said with which I had some sympathy, and that was when he quoted the comments of the Scottish Institute of Chartered Accountants about the somewhat sketchy nature of the underlying principal legislation in this Bill. I must say that I have some little sympathy with that. But for the rest I suggest to your Lordships that the noble Lord seemed to make three main complaints about this legislation.

The noble Lord's first complaint was that the legislation was designed to enhance the procedures for assessing the cost-effectiveness of policies of regional assistance. What is wrong with that? Would the noble Lord really take the monitoring of the DeLorean company as a model of the way in which the taxpayers' funds should be disbursed? I should have thought that we could take comfort in precisely the provisions that the noble Lord read out from the two command papers as evidence of the Government's determination to ensure that we get better value for the taxpayers' money which is expended in this endeavour.

As I see it, the noble Lord's second ground for complaint related essentially to the provisions for bringing back a connection between levels of support to be granted and the number of jobs to be created. The noble Lord had great fun with the proposition that they were not going to be real jobs at all. But there is a very serious point underlying this and I am not sure whether the noble Lord is aware of it.

Let me quote very briefly one or two examples. Does the noble Lord really believe that it was a good use of taxpayers' money to inject £100 million into the Sullom Voe oil terminal with no prospect of the creation of any jobs at all, or perhaps a handful of jobs at most? Yet of course under the legislation as it stood up to the introduction of this Bill, there was no means of escaping this whatever. The oil companies were making that investment as they would have made it whether or not there was assistance. But assistance from the taxpayers was automatically forthcoming. I suggest that that is a nonsense that is long overdue for reform.

Another major capital intensive project is the Moss Morran petrochemical factory—which I suspect is almost wholly superfluous to the industry's requirements—where the level of grant is likely to exceed £150 million for a handful of jobs. Does that make sense? I submit to your Lordships that this is a classic example of where there is money to be saved.

Indeed, the noble Lord's third complaint was that the Government were merely hell bent on achieving economies. These are areas where, I contend, it will be to the benefit of not only the taxpayer, but also the recipient regions for economies to be achieved, because I submit that it does not benefit commensurately the economy of the former constituency of the noble Lord, Lord Grimond, to have £100 million of taxpayers' money injected into the Sullom Voe terminal. It does not benefit the County of Fife, or the district of Fife, to have £150 million or more injected into a project which would have taken place in any case, and which would have taken place where it has taken place because it was needed for that purpose by the oil industry.

Lord John-Mackie

Bearing in mind where the noble Lord comes from, he should realise that it is the Kingdom of Fife!

Lord Bruce-Gardyne

The noble Lord is entirely correct, and I can only apologise to your Lordships for such a lamentable slip of the tongue.

I do not intend to pursue these matters further, except to say that if we look at the record, we can see that here is an area where economies can genuinely be made to the advantage of the taxpayer and, indeed, in the long run to the advantage of the regions which are said to be going to suffer from these changes. For my part, I heartily welcome them.

Lord McIntosh of Haringey

I think that the noble Lord, Lord Bruce-Gardyne, has fallen into a very elementary logical trap. He thinks that because he is attacking my noble friend Lord Bruce of Donington, he is somehow thereby defending the Government and defending the Bill. I have to tell him that nothing could be further from the truth. The virtues which he has put up for the Bill do not in fact exist and the Government are not claiming that they exist. Neither the Government nor the Civil Service is claiming that they exist.

On the face of it, it seems plausible to say that regional aid, over which the Government have control in the form of regional selective assistance, is better than the regional development grants which are mandatory and over which the Government have no control in terms of individual investment. That seems a reasonable proposition to put forward, and if that is what the noble Lord was defending, then I think that I would go along with him. But he then went on to claim that the purpose of the Bill, and its effect, would be that there would be better value for money in industrial development grants in the regions. The Government do not claim that. The Department of Industry gave evidence to the Public Accounts Committee and in the twenty-first report of that Committee on 11th June it says: DTI told us that they were unable to say whether more or fewer jobs would be created from the revised policy or what the cost would be. All of this depended on decisions which had yet to be taken about the rates of grant, the cost per job limit and the assisted area map and also upon how many firms took advantage of the changed schemes". As my noble friend has said, what we have is a framework for a Bill, a framework for a policy—a framework which may well be defensible, for I do not doubt that there are rational elements in it. We do not have a Bill which offers the advantages which the noble Lord, Lord Bruce-Gardyne, wishes to see as a result of a regional policy. Indeed, if I were the noble Lord, Lord Lucas of Chilworth, I should not be very happy about this element of support from the Back-Benches, because in effect the noble Lord is saying that over a period of 20 years or more regional policies have not been particularly effective and that attempts to continue them are misguided. Again, that is not what the Government are saying.

In their White Paper, which has already been quoted, the Government are saying that the economic arguments are extraordinarily complicated (and, needless to say, the Department of Trade and Industry does its best to make sure that they will continue to be extremely complicated) and that job targets are difficult to assess (and, needless to say, the Department of Trade and Industry, the industry department for Scotland and the Welsh Office all do their best to make sure that job targets are complicated and that no-one really gets to the truth of the matter). Nevertheless, the Government are claiming that they are now continuing with a regional industrial development policy on the basis, it appears, that the interest is social rather than purely economic. That is not what I understood the noble Lord, Lord Bruce-Gardyne, to say, and I do not think that he would be very happy about that residual argument for what will still be a considerable expenditure on regional development.

Lord Bruce-Gardyne

I am most grateful to the noble Lord for giving way. The point that I was seeking to make, perhaps not very coherently, was that, as I understand it, as a result of this Bill there will be provision by which we no longer find ourselves obliged to pay enormous sums (often running into tens of millions of pounds and sometimes running into hundreds of millions of pounds) to highly capital-intensive projects without any option or discretion and regardless of whether or not those projects would have come forward without assistance. I do not think that the noble Lord has said anything that disproves that point.

Lord McIntosh of Haringey

I am very grateful for that intervention because that is exactly the point that I was about to make next. The Government are under the illusion, which clearly in this case is shared by the noble Lord, that the only matter with which we must be concerned is immediate job creation. His examples of Sullom Voe and Moss Morran are certainly examples of capital investment where the number of people involved in the plant itself is very small. But although the capital investment involved in the creation of an energy industry, which in turn creates cheaper energy for the whole country, may not be regional industrial policy, it is certainly a rational form of industrial policy and is certainly a rational way of saying that the competitiveness of the British economy depends on a cheap and efficient energy supply and that the jobs indirectly created from that will be significant and could be taken into account in the economic assessment of the kind of capital projects which the noble Lord cited as examples.

However, the Bill does not even say that. The Bill does not even say that Sullom Voe, Moss Morran and the like will cease to receive grants. Regional development grants will continue; there will be a shift of emphasis towards regional selective assistance; but all the things which the noble Lord deplores so much will still continue in one form or another. We on this side of the Committee strongly object that the Bill is so strong in administration and so weak in economic prescription; that it is so weak in actual figures and in actual examples of what could be done with regional policy. The evidence which the Department of Trade and Industry gave and the tentativeness of the White Paper of December 1983 are clear evidence of that. The Government do not know in what direction they want to go. They certainly do not want to go in the direction of the noble Lord, Lord Bruce-Gardyne. They certainly appear not to want to agree with the much more constructive and much more forward-looking views expressed by my noble friend Lord Bruce.

Our difficulty about this clause—and this is why the only way in which we can handle it is to move that it shall not stand part of the Bill—is that it does not in any way give an indication of what is the Government's policy.

Lord Lucas of Chilworth

This evening we have had a very interesting debate on Part II of this Bill. It is quite obvious, certainly to my noble friends and myself, and I suspect to other Members of your Lordships' Committee, that the intention of Amendments Nos. 13 and 14 and the intention to oppose Clause 5 and Schedule 1 standing part of the Bill is purely to wreck this part of the Bill. They are designed to do no more than ensure that the proposed RDG provisions cannot be implemented. They are purely and simply a recipe for a maintenance of the present standpoint.

This part of the Bill represents change because change is needed. The Opposition oppose change. They opposed change during the Second Reading debate last month. When the noble Lord, Lord McIntosh, said to my noble friend Lord Bruce-Gardyne that the Government cannot recognise regional policy, that no Government have said exactly what it is that they are about, I draw to his attention my remarks during the Second Reading debate on 29th June at column 1190 of the Official Report, where I said: Successive Governments have operated a regional policy of one form or another for many years. Yet the areas of most disadvantage now are the areas which were the most disadvantaged 50 years ago. That does not mean that regional policy has been ineffective, but what it does suggest, I believe, is that the time has come to review past policies and to see whether and how change can he brought about". That is exactly what the White Paper sought to do.

Noble Lords opposite oppose change for the same reason as I suppose the ostrich keeps its head in the sand: if we all keep going and do nothing at all, perhaps matters will improve. After decades of regional policy under Administrations of the noble Lord's persuasion and, I admit, under an Administration of my persuasion, they have not continued to improve and nor do we believe they will continue to improve unless we bring about some change.

Having said that merely as an introduction, I do not regard my function this evening as embarking upon a major speech on the general philosophy behind this Bill. We have already debated that once. I regard my function as explaining to your Lordships exactly what is in the Bill before us tonight—not what we might like or hope for on another occasion, another day. We have the Bill before us, and I invite the Committee to accept that Clause 5 stands part of the Bill. Therefore, I would do the Committee an injustice if I did not explain as briefly as possible what are the purposes of this clause and, indeed, of Schedule 1.

Clause 5 introduces Schedule 1 to the Bill and it contains the new substantive provisions for regional development grants. The clause provides that orders prescribing the amount of job grant, the percentage rate of capital grant or the limit on capital grant shall, on the first occasion only, lapse 40 days after they are made. Though there are precedents for this "special" affirmative procedure, I am sure that the Committee would find it useful if I explained why we are proposing to proceed in this way.

Once, following consideration of the comments received during the consultative period, the Government have taken decisions, it will be necessary to introduce a number of statutory instruments to give effect to those decisions. There will be six instruments. These are: the commencement order, which contains the transitional provisions and is not subject to parliamentary procedure: orders for the map and qualifying activities, which are subject to negative resolution; and orders on the prescribed rate, percentage and limit, which are subject to affirmative resolution. We wish to bring all these changes into effect at the same time. We are talking about major changes, and it would be very confusing if, for example, qualifying activities and rates of grant were to be changed at different times. Indeed, the only practicable way to proceed is to introduce all changes at the same time. That is why we propose the special procedure outlined in Clause 5(3) to (5). I stress that this procedure will be used only the first time that orders are made.

It would be possible to bring all changes into effect simultaneously if we published the negative resolution orders simultaneously with draft orders on rates of grant and the cost per job ceiling, which are subject to affirmative resolution orders. If this happened, it would be necessary to provide that the first group of orders should come into force 40 or so days after they were made. This would mean publishing some weeks in advance the shape of the new assisted area map and grant rates. We do not want to do this. The other place made great play with the idea that this was because we were intending to cut back and wished to avoid a rush of investment during any period of notice. That is not true. We have not yet made final decisions on assisted area map coverage or rates of grant.

The assisted area map is now out of date and it is therefore likely that some areas will be downgraded, and we would not want to give an extra period of notice in such cases. At present, grant is payable either on expenditure defrayed or on assets provided. The White Paper makes it clear that there will be a twelve month transitional period from the coming into effect of the new scheme during which grant will be paid under the terms of the present scheme on assets provided—that is, firms will have to have their assets on site and ready for use by the end of those 12 months in order to get grant. A 40-day period of notice of the shape of the new map would allow firms in areas to be downgraded to defray expenditure—that is, to pay for assets which would only be provided years ahead, long after the expiry of the 12-month transitional period—and then receive grant on it. That would be an obvious loophole and it might be exploited by large companies whose cash resources would allow them to take advantage of it. This was one of the points underlined in the speech of my noble friend, Lord Bruce-Gardyne.

Conversely it is likely that some areas will be upgraded. I cannot prejudice the results of our consultation, but, since the map is out of date, this is likely. Advance notice of changes would encourage investors in those areas to hold off just as investors in areas which are to he downgraded will spend, for an incentive they had not expected. The relative effects of holding off and defraying expenditure will depend on the new map and rates of grant.

If Clause 5 does not stand part of the Bill, the consequences will be far worse than preventing the Government from introducing what we believe are sensible and desirable changes. Without the revised scheme, we shall obviously be left, as I believe noble Lords opposite intend, with the present scheme, and that is a scheme which does not conform to the requirements for regional aid laid down by the European Community. On the basis of assurances from this Government, particularly the commitment to exclude replacement investment, the Commission have not taken action against the present scheme. We could not, if the provisions of this Bill are lost, expect continued patience. The Commission may act and as a consequence we may have the present scheme declared unlawful. Furthermore, we should continue to deprive ourselves of monies from the European Regional Development Fund for which the present RDG scheme. not being project-based, is generally ineligible.

All this would be in addition to continuing with a scheme which is not as cost-effective as it can be and continuing to deprive the service sector of a form of incentive designed to assist it. Of course we could make the service sector eligible for the present RDG scheme. But since the sector is by and large more labour than capital intensive it would not benefit as much as from an incentive based on employment. For all these reasons I urge your Lordships to support the Question, That Clause 5 shall stand part of the Bill.

I turn to Schedule 1. Would noble Lords opposite like me to explain?

Lord Bruce of Donington

Please.

Lord Lucas of Chilworth

I shall again try to do it briefly. It contains of course the substance of the RDG provisions. New paragraph 2 in Schedule 1 puts the new RDG scheme on to a project basis. At present RDG is solely as asset-based scheme—my noble friend Lord Bruce-Gardyne made this point—and grant is simply paid in respect of individual assets provided on qualifying premises. The change to a project basis is necessary for three reasons: first, to enable the employment implications of the investment to be considered (difficult if not impossible on the basis of individual assets); secondly, to provide a basis to determine the purpose of the investment so that replacement investment and non-job creating modernisation investment by large firms can be excluded from grant; and, thirdly, to put the scheme on to a basis compatible with European Community regional policy and hence eligible for European Regional Development Fund support. This section also provides for grant to be payable both in respect of capital expenditure on assets and on jobs provided.

I explained on Second Reading the reasons why the Government want to introduce a job link into the regional development grants scheme; essentially to tackle the principal problem of the assisted areas—the lack of employment opportunities. That the Opposition seek to prevent the introduction of this provision, frankly, I think speaks volumes for their concern for the unemployed, notwithstanding what the noble Lord opposite had to say. Paragraph 2 further specifies the arrangements for project approval and the terms of that approval. Finally it defines the principal expressions used in the RDG provisions.

Paragraph 3 has three main purposes. It introduces the project test—Paragraph 3(1)(a)—which all projects must meet. The main function of this test is to ensure that replacement investment is excluded. We have never sought to pretend that it will be easy, but all this needs to be attempted.

I turn to my final point on Schedule 1. I have explained the main provisions and the reasoning which lies behind Schedule 1. The Government believe that these provisions will secure major improvements in the efficiency and cost effectiveness of the regional development grant scheme, and will, with the introduction of the employment link, we hope lead to an improvement in employment opportunities.

I am only repeating now what I said on Second Reading. Many of the arguments that noble Lords opposite have deployed have been deployed before. It is quite wrong that, having given the Bill an unopposed Second Reading, they should seek in this manner to destroy the purpose of the Bill. Therefore, I invite the Committee to accept Clause 5 as part of the Bill.

7.29 p.m.

On Question, Whether Clause 5 shall stand part of the Bill?

Their Lordships divided: Contents, 94; Not-Contents. 40.

DIVISION NO. 3
CONTENTS
Airey of Abingdon, B.	Bessborough, E.
Ampthill, L.	Boardman, L.
Auckland, L.	Boyd-Carpenter, L.
Avon, E.	Brabazon of Tara, L.
Banks, L.	Broadbridge, L.
Beloff, L.	Brougham and Vaux, L.
Belstead, L.	Bruce-Gardyne, L.

Burton of Coventry, B.	Kilmarnock L.
Caithness, E.	King of Wartnaby, L.
Cameron of Lochbroom, L.	Kinloss, Ly.
Campbell of Alloway, L.	Lane-Fox, B.
Campbell of Croy, L.	Lawrence, L.
Cathcart, E.	Lindsey and Abingdon, E.
Cockfield, L.	Long, V. [Teller.]
Colville of Culross, V.	Lucas of Chilworth, L.
Colwyn, L.	McFadzean, L.
Cork and Orrery, E.	MacLehose of Beoch, L.
Craigavon, V.	McNair, L.
De La Warr, E.	Margadale, L.
Diamond, L.	Masham of Ilton, B.
Eccles, V.	Maude of Stratford-upon-
Eden of Winton, L.	Avon, L.
Elibank, L.	Merrivale, L.
Elles, B.	Mersey, V.
Elton, L.	Monk Bretton, L.
Faithfull, B.	Mottistone, L.
Ferrier, L.	Napier and Ettrick, L.
Fortescue, E.	Orkney, E.
Galpern, L.	Penrhyn, L.
Gardner of Parkes, B.	Peyton of Yeovil, L.
Gibson-Watt, L.	Polwarth, L.
Glanusk, L.	Rankeillour, L.
Gray of Contin, L.	Renton, L.
Grey, E.	Renwick, L.
Gridley, L.	Rochester, L.
Grimond, L.	Sandford, L.
Hampton, L.	Selborne, E.
Harmar-Nicholls, L.	Skelmersdale, L.
Harris of Greenwich, L.	Stedman, B.
Hayter, L.	Swinton, E. [Teller.]
Holderness, L.	Tordoff, L.
Home of the Hirsel, L.	Trefgarne, L.
Hornsby-Smith, B.	Trumpington, B.
Hylton-Foster, B.	Vaux of Harrowden, L.
Inglewood, L.	Vickers, B.
Ironside, L.	Whaddon, L.
Kaberry of Adel, L.	Whitelaw, V.
Kilmany, L.	Wynford, L.

NOT-CONTENTS
Ardwick, L.	McCluskey, L.
Barnett, L.	McIntosh of Haringey, L.
Beswick, L.	Molloy, L.
Birk, B.	Nicol, B.
Bottomley, L.	Oram, L.
Brooks of Tremorfa, L.	Pitt of Hampstead, L.
Bruce of Donington, L.	Ponsonby of Shulbrede, L.
Carmichael of Kelvingrove, L.	Rea, L.
Cledwyn of Penrhos, L.	Rhodes, L.
Collison, L.	Ross of Marnock, L.
David, B.	Stewart of Alvechurch, B.
Elystan-Morgan, L.	Stewart of Fulham, L.
Ennals, L.	Stoddart of Swindon, L.
Gosford, E.	[Teller.]
Graham of Edmonton, L.	Stone, L.
Hatch of Lusby, L.	Strabolgi, L.
Houghton of Sowerby, L.	Taylor of Blackburn, L.
Hughes, L.	Taylor of Mansfield, L.
Jeger, B.	Underhill, L.
John-Mackie, L. [Teller.]	Wells-Pestell, L.

Resolved in the affirmative, and Clause 5 agreed to accordingly.

7.38 p.m.

Clause 6 agreed to.

Clause 7 [Commencement and transition]:

[Amendments Nos. 13 and 14 not moved.]

Lord Bruce-Gardynemoved Amendment No. 15:

Page 5, line 25, after ("day") insert ("for a period of 12 months").

The noble Lord said: I shall be brief because I realise that your Lordships wish to made progress. The purpose of this amendment is to define a period over which the transitional provisions of the Bill can operate. I should like to remind your Lordships that in the White Paper (Cmnd. 9111) paragraph 46 stated: In areas which may be excluded"— from entitlement to regional development grant— by the changes, or where the new scheme would result in a reduction in the amount of grant payable, grant would continue to be available under the terms of the present scheme on new assets provided during the subsequent twelve months".

In Committee in another place my honourable friend the Minister for Industry explained that those who made their investment within the 12-month grace period could then have a two-year period in which they could claim their RDG. This amendment is in effect designed to spell out that provision in the Bill. However, in the subsequent paragraph of the White Paper, paragraph 47, it was stated: For those projects currently in receipt of an offer of selective assistance, regional development grant will continue to be paid under the terms of the present scheme and map. These terms will also apply to projects for which an application has already been made or is made by 31 January 1984".

It is this open-ended transitional arrangement, applying exclusively to projects which have received offers of selective assistance, which causes me some concern. It is a highly selective privilege. Let us take the example of an oil company of the type to which we referred earlier on the previous group of amendments which has decided to embark at vast expense on another superfluous ethylene cracker somewhere along the east coast of Scotland. It does its sums and comes to the conclusion that it will be entitled to regional development grant amounting to, let us say, £100 million under the existing legislation, and on that basis it goes ahead with the project.

Now under the provisions of this Bill it suddenly finds that perhaps it is not entitled to £100 million; it is entitled to only £70 million because the RDG rate has been reduced for the area where the cracker is to be built: or that its entitlement is reduced to £30 million because of the employment cut-off which is also written into the Bill; or, finally, perhaps it is not entitled to any regional development grant at all because the location is no longer within a development area. Of course that makes a major transformation in its arithmetic; but it gets no open-ended transitional provisions—the open-ended transitional provisions which are justified on the grounds that a minimum package of assistance may be devised, part of which consists of selective assistance and part of which consists of regional development grants. That minimum package, which has been so tailored as to be the size of bribe which is necessary to attract the inward investment, should not subsequently be tampered with, but it is confined only to those projects which have submitted applications for selective assistance by 31st January this year.

I believe that there is only one simple and fundamental explanation for this open-ended transitional provision, and it is once again to be summed up in one word—Nissan. A week ago, when we were discussing the Finance Bill, I complained about the arrangements which had been made for an open-ended continuation of initial allowances for firms in receipt of offers of selective assistance. It was the same old story there—and, indeed, a worse one—that this was part of the bargain struck with these enterprising Japanese car manufacturers to bring them to Cleveland.

My right honourable friend the Secretary of State for Trade and Industry said in another place at column 302 of the Official Report for 6th June: Of course there is a justification for offering particularly attractive terms to bring to the country internationally mobile projects which otherwise might go to another part of the European Community".

I am not very sure about that proposition. We could have said that DeLorean was a classic example of an internationally mobile project which certainly attracted particularly attractive terms to draw it to Northern Ireland. What a big mistake that proved to be! I would not venture to suggest that the Nissan project in Cleveland is of an equally hazardous nature, but I submit to your Lordships that it must be open to question, first, whether it is likely to achieve the local sourcing which has been promised even if it goes on to the second stage of its project; secondly, whether it is likely to achieve a net increment in total employment in the motor car industry after allowing for the side-effects of its arrival on existing motor car firms and existing motor car investment, much of it by the British taxpayer; and, thirdly, whether its end products will be able to be sold on the markets of Italy and France.

I suggest that the sort of tailor-made bribery which I believe is contained in these transitional provisions is a pretty dubious way to attract what may turn out to be a fairly unfortunate investment. I know my noble friend will tell us that there are lots of other projects. The Minister for Industry in another place said that no less than 250 projects had applied for selective assistance before 31st January which would qualify for the benefit of these open-ended transitional provisions. Perhaps my noble friend could enlighten us by telling us, first, how many of those 250 applications have been accepted, and, secondly, what is their value. I wonder whether the Nissan component in the totality of sums which will benefit from these transitional provisions, these extraordinary transitional provisions, will amount to 90 per cent., to 95 per cent. or perhaps to 99 per cent. I suspect that it will be something of that order. I cannot help wondering whether the taxpayer will get a very good deal from it. I beg to move.

Lord Grimond

I rise briefly to support this amendment. Of course we must have assistance for the regions in this very over-centralised country, but I believe it is not unreasonable to set a period of 12 months, as this amendment suggests. We have had the experience of DeLorean, and it is apparent that the vetting of all projects has not always been as good as it should be and that a particular responsibility now rests on Parliament to see that open-ended commitments are not entered into.

The noble Lord, Lord Bruce-Gardyne, has drawn attention to the particular case of Nissan. It is obviously very doubtful at the best of times to introduce legislation with a particular target in view. It may well be that it will be of benefit to the North-East and to this country in general if Nissan come here, but it certainly is a matter which Parliament should examine rather closely, I think particularly as in Europe as a whole there is probably an over-capacity in the motor car industry and there must at any rate be a possibility that the money might be better spent.

For these reasons I should have thought that this amendment, which is not a drastic amendment and merely puts a time limit on the interim period, should find acceptance in the Government's eyes.

Lord Lucas of Chilworth

My noble friend Lord Bruce-Gardyne has really made quite clear the purpose of his amendment. It is to negate the assurance that the Government have given in the White Paper. As I shall invite your Lordships to reject the amendment, I think that perhaps it would be as well if I gave some explanation as to why.

Selective assistance, particularly that given under Sections 7 and 8 of the Industrial Development Act 1982, is negotiated as the minimum necessary to induce a project to proceed. There is no fixed rate of grant for these cases. Negotiations of the minimum necessary take account of all other Government assistance which may be payable towards a project. Thus, in the case of projects where assistance was negotiated before the announcement last December of the proposed changes in regional development grants which are made in this Bill, or which were formulated on the basis of existing incentives and applications in respect of which were received before 31st January 1984, it will have been assumed by the Government's negotiators that a specified amount of regional development grant would be payable, and the minimum amount of additional selective assistance will have been arrived at on the basis of that assumption.

If later this year the Government were to cut the rate of RDG we would in effect be saying, "We know that a little while ago we said £X was the minimum you needed to proceed, but we now intend to give you less". Alternatively, if the change to RDG led to more being payable, then the taxpayer would be paying more than was necessary. Either position of course is completely unacceptable. The provision in the Bill enables us to avoid these problems, particularly in relation to these types of projects. For them the grant would be frozen at the present rates.

I have to tell the Committee that the provision has been widely welcomed by industry across the board as being fair and just. Certainly my honourable friend in another place said that about 250 companies would be covered by it; but without notice I cannot say exactly how many of those 250 have been considered or in fact have had their applications accepted. Perhaps my noble friend and the noble Lord, Lord Grimond, who has an interest in this matter, will allow me to write to them, because I do not think it is particularly germane to the amendment before us.

My noble friend made some play about the Nissan project. I do not want to go into that project because, again, I do not think it is really the subject of this amendment, although it may have given rise to it. This is not simply a Nissan project provision in the Bill. The easiest way of emphasising that point is to contrast the present response with that of industry in 1979, when in fact changes were introduced without such a provision. Industry at that time was not amused at all, and there were many accusations then of the Government acting in bad faith.

So far I have addressed the issue with which the amendment was intended to deal, but I think I could probably encapsulate the rest of my remarks by saying that if the transitional period proposed in the White Paper was to start on the 1st November this year, on present rules companies could claim grant on assets provided by the 31st October 1985 and they could put in their claims up to the 31st December 1987. Actual payment of grant of course would be a little bit later than that. If, however, the amendment were adopted, it would prevent the grant being paid beyond the end of the 12 months' transitional period which is proposed in the White Paper. If companies wished to be certain of being paid, that would effectively shorten the period. Although I think such an effect was unintended, that would be the effect if the amendment were adopted. It is a result which disadvantages all companies currently eligible for RDG.

The Government cannot accept an amendment which runs contrary to commitments and which disadvantages many companies. We and the companies, whosoever they may be, have negotiated in good faith; and I suggest to the Committee that this amendment is about breaking that faith. This we cannot do, and I urge my noble friend and the noble Lord, Lord Grimond, to withdraw their amendment.

Lord Bruce-Gardyne

I must say that I still find the prospect of the Nissan company possibly drawing regional development grant 10 years from today at a rate which will have disappeared for any domestic British company four or five years before the Nissan company embarks on the second phase of its operations a fairly crazy way to proceed. However, in the light of the comments of my noble friend and the points that he makes about the drafting of this amendment, which I accept, I ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 agreed to.

Remaining clause agreed to.

Schedule 1 [New regional development grants]:

Lord Grimondmoved Amendment No. 16:

Page 8, line 2, after (" "plant",") insert (" "vessels".").

The noble Lord said: If it is convenient to your Lordships, I should like to suggest that I speak to Nos. 16 and 17 together. Amendment No. 17: Page 8, line 39, after ("capacity") insert ("or services").

They are essentially probing amendments and I think I can explain quite quickly what I have in mind. I am anxious to know whether vessels will be eligible for grant under this Bill. They probably are, but I cannot identify the place in which they appear. They are of some importance around the coast in general and particularly in that part of Britain which consists of islands. They do give employment, and there is considerable anxiety on the part of the Government over the steady decline of the merchant shipping fleet. Although the Government give assistance to certain vessels, particularly off the coast of Scotland, it would be nice to think that this Bill would assist the smaller coastal vessels.

Similarly, in Amendment No. 17, I am anxious to know whether services can be assisted under the Bill. Again, services are of increasing importance throughout the economy and I am not quite certain why they should be excluded, if indeed they are. So with those few words, I should simply like to know whether vessels and services are included, or if not why that is so and whether the Government could reconsider their position. I beg to move.

Lord Lucas of Chilworth

I do not want to appear at all frivolous, but I think that if I said to the noble Lord, Lord Grimond, yes to the question contained in his first amendment, plant includes vessels, and yes to his second question, that services are also included, I would probably satisfy him. I assure him that I would be quite happy to give all the information in a letter to him but, as he did suggest that his amendment was a probing one, then possibly the peripheral explanation as to how this comes about may not be necessary and he may possibly be happy.

Lord Grimond

I would always rate brevity in Ministers as one of their highest qualities and I am delighted to accept this. I wanted to find out whether plant included vessels or not. In view of what the Minister has said. I beg leave to withdraw Amendment No. 16.

Amendment, by leave, withdrawn.

[Amendment No. 17 not moved.]

Schedule 1 agreed to.

Remaining schedule agreed to.

House resumed: Bill reported without amendment.