§ 1.30 p.m.
§ Lord Lucas of Chilworth
My Lords, I beg to move that this Bill he now read a second time.
We move from the cheerful camaraderie of the last Bill to consider a very different kind of Bill, but certainly not one of any less importance.
The Bill, as your Lordships will have seen, is basically in two parts. The primary purpose of Part I is to provide further funding for the Co-operative Development Agency. The agency's initial funding under the Co-operative Development Agency Act 1978 will have been exhausted by August this year and the Government have therefore had to decide the future of the agency. The Government recognise the valuable and important work done by the CDA and have therefore decided to make further funds available to enable it to continue its activities. This requires legislation. We have also proposed certain changes to the provisions of the 1978 Act to assist the work of the agency and to encourage it to greater self-sufficiency.
In continuing Government support we believe the agency should he encouraged to maximise its own earning powers and to seek increased support from the private sector. For that reason we intend to maintain funding at the present level of £200,000 a year, which will be made available for a period of six years. Provision for this funding is being made in Clause 1 of the Bill. It raises the limit on the aggregate amount of grants which the Secretary of State may make to the agency to £3 million. The present limit is £1.5 million which, as I have said, will be reached by August this year. Noble Lords will note that on the basis of funding at £200,000 a year for six years, there is an extra £300,000 allowed. This is to give the Government flexibility in any future decisions on the funding levels and timescale.
Clause 2 extends the functions of the agency. First, it enables the agency to make grants or loans to promote the establishment or development of cooperatives. But the agency may not use grant money provided under Clause 1 or borrowed money to finance such grants or loans. The reason why we are giving the CDA grant and loan-making powers is to enable it to influence the use of any development funds that may be available for co-operatives.
Clause 2 also amalgamates the agency's existing powers to review and recommend training courses with that of an additional power to provide training 1190 courses for persons involved in the co-operative movement. Under its present powers the agency can undertake training only where this furthers its other functions. In order to provide the agency with wider powers in this respect it has now been given an explicit training function. Any training undertaken by the agency will be geared to the needs of co-operatives and will not duplicate the work of the MSC or any other Government institution.
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. This will not widen the range of functions which the agency is empowered to undertake. but by being freed 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. By removing the prohibition on forming partnerships the agency can share in profits from collaborating with others in activities such as providing training courses. Clause 2 also makes provision for the Secretary of State to give general or specific directions to the agency and it is intended as a reserve power.
Finally—in so far as Part I is concerned—in Clause 3 we are including provisions to wind up the agency by order. The 1978 Act contained no provision for this and while the Government are fully committed, as I said in my earlier remarks, to maintaining the agency for the next six years, it is the case that if at any stage the agency had to he wound up this would, as matters stand at present, require primary legislation. We have deemed it prudent to remedy this deficiency by this clause, which sets out the general arrangements for dissolution. Noble Lords will. I am sure note that termination of the agency would be subject to a consultation procedure and an affirmative resolution of each of the two Houses of Parliament.
The remaining provisions of this Bill principally concern changes to the Regional Development Grants Scheme—changes which were foreshadowed in the White Paper on regional industrial policy published last December.
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 be brought about. That review has been conducted and its results are summarised in the White Paper.
The principal problem of the assisted areas is unemployment, and it is to that problem that the revised regional policy is addressed, with the specific objective of reducing regional disparities in employment opportunities. This Government are concerned about unemployment and in a variety of ways seek to improve the economic climate which will lead to the creation of jobs; not here today, gone tomorrow jobs, but secure, long-term jobs. It is to this end that the new scheme of regional development 1191 grants has, for the most part, been designed. In future, and except normally for small firms, grant will be related to the creation of jobs either in the form of a capital grant or, where more advantageous, as a job grant. The scheme is to be extended to parts of the service sector, a sector where there is great potential for job creation. And there will be a significant reduction in the amount of regional assistance to projects which do little more than shuffle jobs from one part of the country to another. I believe that these proposals will be welcomed.
We recognise, however, that other changes may not be so welcome; in particular the exclusion from automatic regional development grant of modernisation projects which do not create jobs. Much was made in the other place of the importance of modernisation investment in the safeguarding and maintaining of existing employment and of the fact that, although new Section 3(5)(b) in Schedule 1 of the Bill permits it, the Government intention is that projects which safeguard or maintain employment but do not create new jobs will not be eligible for automatic grant except in the case of small firms.
As a further explanation, let me say that the Government in no way underestimate the importance of modernisation. Indeed, they have done more through the many technology support schemes to encourage such investment than perhaps have any previous Government. The reason for the exclusion from automatic assistance is that a judgment on whether or not a project preserves jobs is of necessity a selective one, inconsistent with an automatic and predictable scheme. But these modernisation projects are not being denied regional support. They will continue to be eligible for regional selective assistance, which in many cases at present is payable in addition to automatic assistance, since it is negotiated as the minimum necessary to induce a project to proceed. It follows that if automatic assistance is not available, the minimum necessary in terms of selective assistance alone may need to be higher.
The other major changes are the introduction of a cost-per-job limit and the introduction of a job grant. The cost-per-job limit is designed to ensure that the amount of capital grant payable towards a project is directly related to the number of jobs created by that project and is limited to a reasonable amount for each job. In the past grant has for some projects been equivalent to £200,000 for each job created. The Government consider that to be excessive. The costper-job limit will end that excess. Job grant is introduced as an alternative to capital grant and will be especially relevant in the service sector, where many activities are labour rather than capital intensive and consequently grant based on a percentage of capital expenditure may not provide a sufficient incentive. It is also part of the move away from present unjustifiable bias towards capital intensive industry.
I turn now to the individual provisions of the regional aspects of the Bill. Clause 4 of the Bill permits the designation of assisted areas by reference to wards, travel-to-work areas, defined by the Department of Employment or any other area existing for the purposes of any Act or statutory instrument. The boundaries of the areas can be frozen as at the date of
1192> the designation. Assisted areas have hitherto normally been designated by reference to employment office areas. However, the change effected by Clause 4 is needed because of the forthcoming changes in the way in which travel-to-work areas, the component parts of assisted areas, are put together.
Clause 5 provides for the new scheme of regional development grants as set out in Schedule 1 to the Bill to be substituted for the existing Part II of the Industrial Development Act 1982. The new Section 2 set out in Schedule 1 provides that grant may be paid in respect of a project of investment in the productive capacity or productive processes of an undertaking. The payment of grant in respect of a "project" is a fundamental change in approach from the old scheme. It is intended that, except where the qualifying date of a project is after a change in the scheme or the map has been announced but before the change comes into effect. the amounts of grant the project will receive cannot be reduced by any subsequent reductions in the rates of grant or cost-per-job limit or a map change. Section 5 provides that projects may on the other hand receive the benefit of a subsequent increase in the rates of grant.
The new Section 3 provides in effect that regional development grant will be paid only to projects the purpose of which is to provide or effectively "modernise" capacity. This will exclude replacement investment, in line with the Government's obligation to the European Commission to end grant for replacement investment by the end of 1984.
The new Section 4 provides that the amount of grant payable in respect of a project will be either a percentage of capital expenditure (subject to the costper-job limit if applicable) or an amount per job created, whichever is the more favourable to the applicant. The cost-per-job limit is defined in new Section 5. It is not intended to apply this limit to projects undertaken by small firms, for whom we aim to make the scheme as simple and as straightforward as possible. The new Section 5 provides for the qualifying activities, percentage of capital grant, job grant and cost-per-job limit to be set by order.
As I have mentioned the aspect of small firms on a number of occasions. it might be helpful if I say that we are viewing small firms as probably being those firms employing 200 persons or fewer. In these remarks I have sought only to outline the main changes. I have no doubt that we shall discuss these and other changes in more detail when we come to the later stages of the Bill.
Regional policy is by its nature a selective policy in that it must focus on particular areas. What we are doing is concentrating our resources and making them go further. In the same way as it is necessary to concentrate on designating the areas of most need, it is also necessary to concentrate resources on achieving objectives. We are making the policy job-related and hence more cost-effective in meeting the principal need of the regions. Those in assisted areas will gain from a better targeted policy, and everybody benefits from the increased cost-effectiveness because everybody, including those who live in assisted areas, pays a contribution towards those costs. Furthermore, the success of regional economies ultimately depends 1193 on the success of the national economy. The operation of a cost-effective regional policy will, we believe, contribute to the health of the national economy. I therefore commend this Bill to your Lordships. I beg to move that this Bill be now read a second time.
§ Moved, That the Bill be now read a second time.—(Lord Lucas of Chilworth.)
§ 1.45 p.m.
Lord Bruce of Donington
My Lords, we on this side of the House should like to thank the noble Lord for having taken us briefly through the contents and purpose of these two Bills. I hope that the House will bear with me, before I come to deal with the subject-matter of the Bills concerned, while on behalf of the official Opposition I enter a formal protest against the way in which this whole matter has been handled by the Government so far.
Regional development in the United Kingdom, as in Europe, is a matter of very great importance indeed. Even on the Government's own say so, to which I shall come later, the efforts that have been made in this direction have already met with considerable success. I would suggest to the House that a Friday afternoon is not the best occasion on which an important Bill of this kind should be discussed and the very weighty matters associated with it correctly evaluated. That is my first point.
My second point concerns the combining of two Bills into one. Although, of course, all subjects affecting the economy are interrelated, these two matters which we are invited to discuss together this afternoon are two quite separate and independent matters, each of which merits very serious consideration by the House. By holding the debate on a Friday afternoon, coupled with lumping two Bills together in one (presumably due to some ministerial manoeuvre, as it were, to nullify any legislative quota by way of the number of Bills put on a department), one can understand that one can meet the allocated quota and at the same time do what one really wants. But so far as this House is concerned, a full-dress debate could take place on separate days, and the matter could be dealt with subject by subject. We do not really believe that this is the way in which, in this respect, to treat either another place where a protest has already been entered, or this House.
I have a third point to make. A Bill of this kind, an important Bill of this nature, merits being brought to this House by the leading spokesman for the Department of Trade and Industry. According to the grey book, there are two spokesmen on behalf of the Department of Trade and Industry. One is the noble Lord, Lord Cockfield, whose interest in economic affairs is so well known if not well advertised, and the other is the noble Lord, Lord Belstead.
I am second to none in paying tribute to the abilities of the noble Lord, Lord Lucas of Chilworth, who I gather has recently, since the publication of the grey book, been appointed to act as a third party to represent the Department of Trade and Industry. I sincerely hope that such words of praise from me and the real regard that I have for him will not unduly prejudice his future promotion. With all respect to the noble Lord, who is one of the hardest worked 1194 Members of the Front Bench opposite, I do not think he would take it amiss if I thought it more appropriate, and the House thought it more appropriate, that, on a matter of this kind on which the noble Lord Lord Cockfield, is such a master in terms of economic perceptions, it would have been a good thing had the noble Lord himself been here.
I am sorry to detain the House further but I have another point which is linked with the last. We on this side of the House have already made representations through the usual channels on the growing habit on the Front Bench opposite of winding-up speeches coming from the Government Front Bench which appear to have been pre-drafted and pre-briefed with the result that whatever happens in the debate itself, whatever arguments are brought forward, we on this side of the House are often faced with a reply that consists of little more than a rendering, however skilful, of a brief pre-provided by the Ministry concerned.
On this matter, as your Lordships will know, we have a large number of questions to ask. Some of them are important questions on which we shall demand a reply, and demand a reply today not at some future time, nor by correspondence, nor by any of the other avenues which are so often used for this purpose. I sincerely hope that the words that I have felt constrained to utter before we start dealing with this Bill will be taken carefully into account by the Leader of the House.
Last night's proceedings, without touching on them in any detail, indicated that this House does not like being taken for granted. We are the official Opposition in this House together with our colleagues, and we do not like being taken for granted either. We sincerely hope therefore that some constructive effort to respond to these debates properly may be made in the future.
I turn to the first of the Bills, the Co-operative Development Agency. Your Lordships will be well aware that up until now the activities of the agency have been governed by the Co-operative Development Agency Act 1978. It is universally acknowledged—and the Minister was kind enough to underline it today—that the agency itself has carried out considerable valuable work in this country. My noble friends Lord Graham of Edmonton, Lady Nicol and Lord McIntosh of Haringey will deal in more detail with this aspect of the matter.
A glance through the Act of 1978 will give a fair idea to those of your Lordships who are not familiar with what the agency does, just what its functions cover. They are quite formidable. The functions of the agency are:to promote the adoption and the better understanding of cooperative principles…; to identify and recommend ways in which the establishment, development and evolution of co-operatives might be facilitated; to identify and recommend projects …; to appraise and evaluate projects …; to advise co-operatives, persons proposing to establish co-operatives …; to provide a forum for discussion …; to make recommendations to government departments …; to keep under review the establishment, development and evolution of co-operatives throughout the world … to undertake such studies and research as the Agency considers necessary or expedient".It is also charged with making recommendations in regard to training, and, with the new powers proposed 1195 under this Bill, will undertake, in association with others, training itself.
These are important functions. It is not wise, particularly in a period where confrontational politics are the order of the day and are lauded by the party opposite, to forget that the co-operative movement in the United Kingdom is a powerful one. Despite all the confrontational politics which afflict us at this time, the desire for co-operation in enterprises within modern society is still strong. It may perhaps stick in the gullet of some of the more extreme members of the Conservative Party to concede this principle. They are all for competition: the weakest to the wall, and the devil take the hindmost, as indeed the recent almost canonisation of Professor Hayek only more effectively underlines.
They may not find it politically expedient to denounce the co-operative movement. They may find it difficult to decry it, but of course there is a difference between whole-hearted support which any government within society ought to be extending to the co-operative movement and one that remains either effectively neutral or, in its long-term aspirations, hopes that co-operation in the sense of proper development will go away. Therefore, within this Bill one regards with some dismay the power to which the noble Lord has already referred for the Minister to be able to give directions. The new Clause 3A says:The Secretary of State may, after consultation with the Agency, give the Agency directions of a general or specific character as to the discharge of its functions: and the Agency shall comply with such directions".No real reason has been given for the insertion of this power, particularly in the light of the Government's admission that the Co-operative Development Agency Act 1978 has worked perfectly satisfactorily. Why should the Minister now require to give directions? I ask this particularly with reference to the present Minister, Mr. Tebbit, whose political utterances are not well known for containing any expressions of co-operation when dealing with the affairs of others, especially those for whom he has a theoretical or ideological dislike. We on this side of the House would probably seek to delete this clause from the Bill.
More sinister than ever is, of course. Clause 3, to which the Minister referred, which indicates:The Secretary of State may, by order, on such day as he may appoint—I know that the noble Lord has given an undertaking—although not phrased in those terms, it was phrased as an intention—that there is no intention of winding up the agency prior to the expiration of its funding term. But what is to stop him under this Bill from doing so? Nothing at all. The noble Lord has said that it is the intention that it should be funded up to the sum concerned. Within a fortnight, under the provisions of this Bill, the Secretary of State could, by order, terminate it without any redress whatever. The 1196 excuse given is that they would have to bring in legislation if the agency were to be terminated.
- (a) terminate the exercise by the Agency of its functions except for the purpose of winding up its affairs;
- (b) vest in himself any property, rights or liabilities of the Agency; and
- (c) dissolve the Agency."
The Government do not really like bringing in legislation for that kind of thing because legislation is subject to widespread debate in both Houses and is subject to amendment. The Government, with an ill-concealed arrogance. more than ever now are taking powers by order to do what they want to do without effective debate in either House. It may be that my colleagues will consider it wise to impose in Clause 3 a time limit making it absolutely impossible for it to be wound up until after the expiration of a certain period, to which my colleagues and I will give some consideration. So much for the Co-operative Development Agency, to which my noble friends behind me will also give their attention in the course of this debate.
I now pass to the proposed amendments to the Industrial Development Act 1982. I am surprised that this Bill should have been brought forward at this stage. As your Lordships will be aware—the noble Lord referred to it himself—the Government published in December 1983 a White Paper on regional industrial development (Cmnd. 9111). It is made quite clear in that that the plans for the redeployment—if I may use the term—of areas to receive regional or other assistance would not be available until the autumn. Is there therefore any reason why this Bill could not have been brought forward in the autumn, when those of us in this House interested in regional affairs would know the approximate geographical limitations which noble Lords opposite and the Government have in mind? As it is, we are once again given a skeleton Bill which needs to be illuminated by a comprehensive picture of the totality of the operation that the Government have in mind. Until we can see the new map of the proposed assisted areas, it is quite impossible for us to assess the totality, the whole picture. that the Government have in mind.
I repeat that it would have been far better if the introduction of the Bill had been postponed until after the Government's main plan had been made more fully known. It would also have been helpful if, at the same time as they published the White Paper, the Government also had had the courtesy to publish some of the evidence that they considered in arriving at their conclusions. As your Lordships are well aware, this principle is followed by Select Committees, so that reports or matters which they have considered are illuminated by a sight of some of the submissions which they have taken into account. That has not been done in this case.
I now return to the whole question of the areas. So far the assisted areas are well known, but the Government have made clear, and have already said so in the White Paper, that owing to the incidence of large scale unemployment,Unemployment is now high throughout the country not just in the Assisted Areas; there are fewer mobile investment projects and increasing competition for them".The Government can say that again. Let us consider the position in the regions when the noble Lord's Government took office in May 1979 with the position now. In 1979, excluding Northern Ireland, the highest rate of unemployment was in the North region with 1197 7.9 per cent. Now the unemployment in the North region is 17 per cent.; two and a half times as much. If one goes through the current figures for regional unemployment, one finds that the lowest figure, which is for the South-East, with 9.4 per cent., is greater than the highest figure in May 1979, which was 7.9 per cent., in the North.
Not only has the plight of these poorer regions suffered; but Government offices have now succeeded in producing a situation where practically every region is fairing worse than did the worst regions in 1979. In fact they are rapidly on the way—and the opinions of the Bank of England published this morning are not very encouraging—to creating a distressed area comprising the whole country, apart from certain secluded areas in the South-East, possibly in East Anglia, and also in the South-West. It is within this context that the contents of this Bill and the Government's expressed intentions have to be considered.
I observed that in the course of his opening remarks the noble Lord made no reference to the total savings that he expected would be made as a result of the operation of this Bill. This point was referred to in the debate in another place, but it has not been referred to here. According to the Explanatory Memorandum in regard to the original Bill it was hoped that there would be a saving of £150 million.
It is perhaps conceivable that things in the depressed areas are far worse than they were before. It is perhaps also conceivable that new distressed areas are being created. I should like to draw the attention of the noble Lord to the West Midlands in particular. In 1979 unemployment there was running at 5.1 per cent. It is now running at 14.7 per cent.; nearly three times the earlier unemployment figure in the West Midlands. So there we already have a new distressed area contained within the region. Is it really reasonable that under those conditions the total amount of relief should be reduced? This flies in the face of the advice that the Government themselves have received but which they have not published—notably by the renowned firm of accountants, Deloitte, who made a report upon this. I quote from a report in the Financial Times of the 5th of this month:Deloitte, a major firm of accountants and management consultants, has 30 offices in the UK whose clients, it states, 'are an integral part of the regional industrial structure. Therefore, directly as a firm and indirectly on behalf of our clients, we have considerable interest in regional policy'.What is their recommendation? I will read only a small portion of it:With the acute shortage of job opportunities persisting in many areas, the current requirement is for a strengthening of regional policy through the sharpening of instruments and, at minimum, maintenance of the overall level of funding.That is the minimum requirement which is recommended by a very well known accountancy firm, well skilled in these matters, well skilled in project assessment, well skilled in project evaluation and enormously experienced in the development of businesses of all kinds.
The Government have come forward with the proposal that their aid has to be linked to job creation. There can be no exception to that, except that I thought that the noble Lord was being a little less than 1198 frank with the House when he put forward the cost of individual jobs at something like £200,000 when, in the Government's own White Paper, after taking into account the operation of the multiplier factors, the cost of increasing jobs (which they put to the creation of jobs of 500,000) works out at something like £35,000 per extra job created. This is a perfectly acceptable figure—£35,000 capital investment to bring a saving at a minimum in terms of lost tax revenue, unemployment benefit of £5,000 a year, as is well known.
What is the capital price of an income of £5,000 a year, or to put it another way profits of £5,000 a year? We should know perfectly well because the City assesses its share values on the basis of anything between a 6-times to 8-times multiple of the profits per annum. This is the way that capital values are arrived at. Who is to say that a capital expenditure of £35,000 per job is not a good investment on the ordinary conventional basis adopted by the City of London? Quite clearly, every new job gained saves £5,000 a year at minimum; and by now it may well be more than that. Let us consider the implications of it. Trident, for example, is going to cost £ 10.000 million—a useless object, if ever there was one, and an inflationary one at that since the end product does not enter into consumption. Diversion of the money from expenditure on this completely useless, ineffective piece of hardware could result in investment in the creation of over 300,000 jobs. These are the kinds of priorities which the Government should consider.
In the process of its White Paper, the Government have made a number of interesting admissions. I will not weary the House with quotations, although I can do so quite easily, but they have talked about the creation of 500,000 jobs since the inception. What an admission! The whole philosophy of the party opposite is to deny that the Government can do anything to create jobs. Time after time we have heard from the party opposite that the creation of jobs is really nothing to do with them; that it is a matter for market forces. It is a question of remaining competitive, and now they themselves admit that the expenditure of money can create jobs; and the logic of that is that money should be so spent.
The Government qualify this of course and have qualified it in their White Paper, although the noble Lord this afternoon has not ventured to underline it. The White Paper talks about genuine jobs. That brings me to the first question that I have to ask the Government. A certain folklore has grown up around the words "real jobs" or "genuine jobs". What we should like to have from the Government is a definition of what they mean by "real jobs" or "genuine jobs". Just what does the term mean? Has a nurse a genuine job? Has a doctor a genuine job? Has a coalminer a genuine job? Who are the people with what are called, by the Prime Minister very often, real jobs? Or does she really, mean real jobs for people who in the main agree with her philosophy?
We know, for example, that a real job has been created recently in the head of the Government's accountancy service. It is a real job presumably, and it is not going to cost £35,000. it is going to cost £85,000. We hope the job is classified by the Prime Minister as a real job and not an ersatz job. So can we have some 1199 definition of exactly what is meant? Common sense dictates the realities, and the realities are that there are, for example. a million houses requiring substantial rebuilding in the United Kingdom. At the same time there are 240,000 "real" people who are capable of building. What is to stop the two being put together? If at this stage the Government decided to spend money on putting the construction workers on the work of building houses would those be real jobs because the Government created them or would they be some other esoterically described job, the definition of which I will leave to the noble Lord? These things we require to know because they are important.
But one thing is for certain. In Europe, as has been well proved—and I speak now from my experience as for some time president of the European Parliament's Regional Affairs and Transport Committee—the rich countries are still getting richer and the poor countries are still getting poorer. Similarly, in this country, the rich persons are getting richer, and the poor persons are getting poorer; and the poor regions are getting poorer and the richer regions are getting richer. What we want from this Government is a proper regional policy carefully thought out. This Bill at present, read in association with the White Paper that preceded it, and read particularly in conjunction with the debates that have taken place in another place, offers no hope for the development of regional policy in this country. The noble Lord the Chief Whip will possibly recall—if he was here at the time—that I had to spend some minutes in dealing with purely procedural matters for which 1 very much regret he was not present but of which he will read in due course.
§ Lord Denham
My Lords, I hope the noble Lord will forgive me. I was just inquiring whether the Clock had been set at the beginning of the noble Lord's speech.
Lord Bruce of Donington
My Lords, I, too, have ears. We on this side of the House do not like the Bill in its present form. We do not like the method of its presentation. We shall examine it in far greater detail than has been possible today, bearing in mind that it took 27½ hours in another place in Committee; and we hope that on the next occasion that it is dealt with there will be the necessary expertise, without in any way casting any reflection upon the noble Lord, to be able to deal with some of the expert evidence that we on this side of the House will be able to bring forward.
§ 2.20 p.m.
§ Lord Grimond
My Lords, I welcome the decision of the Government to continue the Co-operative Development Agency and Industrial Development Bill. Like the noble Lord. Lord Bruce of Donington, I am somewhat curious why they have taken the power to give it direction and to wind it up by order; but the Government have assured us that they are wholeheartedly behind the agency and therefore we must suppsose that there is nothing sinister in those parts of the Bill. though as the noble Lord. Lord Bruce of Donington, has said, we shall no doubt want to examine them rather carefully in Committee.
May I also ask the Government a little more about the training provisions of the Bill? Certainly some 1200 training in setting up a co-operative may be needed by those who wish to embark upon it, but I am at the moment the chairman of an organisation known as Job Ownership Limited, which attempts to promote co-operatives. We have found. first of all, that the most helpful thing the Government could do would be to reduce the appalling tangle of regulations in which anyone wanting to set up any business finds himself entwined. Secondly, most people who set cooperatives want help over such things as accountancy, the legal aspects and so forth. The CDA already do a certain amount of this but it would be helpful if the Government could explain a little more what they have in mind about training.
Thirdly, the CDA want more money. Everyone wants more money. and I do no more that put on record that. like many other institutions, they are keen to have more money. However, I would ask the Government: why is it that so much more money is forthcoming for agricultural co-operatives than for industrial and other co-operatives?
I attach the greatest importance to the furthering of the co-operative movement in all its forms. I believe that industrial organisation is in fact one of the most serious problems facing this country. I do not accept that the only alternatives are state socialism or the creation of large conglomerates in the private sector, which are now almost entirely financed by insurance companies, pension schemes. trusts and so forth. In fact they are owned by absentee owners who really have no direct concern in how the business is run. I believe in a third and very important method, and that is to involve the work force in the ownership and running of businesses. Nothing makes this plainer than the present appalling dispute in the coal-mining industry. It is quite apparent that nationalisation by itself does not stop confrontation in industry. Surely it is becoming apparent that we might at least experiment by encouraging the miners and their union to take a greater share in the running of their own industry. I would go so far as to say that we should hand over one or two mines to the miners and see what they can make of them. But in any case I believe that the encouragement of co-operatives is extremely important for the future of this country.
Another feature of this country which strikes me very much is its gross over-centralisation. We are one of the most centralised countries in the world and I believe that is largely the reason for the comparative failure of regional policy. All the money is pumped into the regions from the centre and we do not sufficiently encourage indigenous growth in the various regions. I ask for your Lordships' sufferance if I mention again Mondragon, which is a town in Northern Spain. It is the centre of some 60 or 70 co-operatives. These were set up with the idea of giving employment and of mustering vast patriotism, if you like, to the advantage of the area. A co-operative bank collects the savings and finances and guides these cooperatives, which now employ some 20,000 people.
There is nothing like that in this country. There is no system by which this can he done. Here the whole of the financing of the country is centred upon London. There is no attempt to retain local savings in the area where they are generated. There is no attempt to mobilise local patriotism to do something in their own 1201 area. If one takes the Shetlands, I have mentioned before that there are quite large sums available in the Shetlands, as one can see from the accounts in the savings banks. What happens?—they are taken south. And then what happens?—grants are sent back by London. Of course there is enormous wastage and you lose the motivation which you would get if the Shetlanders dealt with their own business.
When we come to the second part of the Bill, I must say it is no wonder the Government have been forced to do something about it because this is the system which has led to £68 million of public money being put into Sullom Voe in the Shetlands for the oil companies. The oil companies are not the most impoverished institutions in this country; and this huge sum has given very little real employment. It has simply been a subsidy to very rich companies—and we have seen what happened in Northern Ireland over De Lorean.
As the noble Lord, Lord Bruce of Donington, has said, this is really two Bills which have been spatchcocked together when they are really planned on quite different subjects. But there is a possible connection between them, which I am not at all sure the Government realise. The way to tackle regional development is through engaging local people in the regions more directly in it, and one way of doing that is by encouraging co-operatives. I am glad to say that I find I have a formidable ally in this field and that is the Scottish Trustee Savings Bank. It is prepared to see what it can do by retaining local savings in Scotland. Of course, Edinburgh is said to be an important financial centre and no doubt there is a lot of expertise in Edinburgh which could assist in this matter.
My first point is that I hope the Government will give every assistance to the savings bank in this direction to keep savings and to invest them where they are generated. I also hope that they will bring other agencies, as well as the CDA into this; for example, the Highlands and Islands Development Board and the Scottish Development Agency. They, too, should he made much more entrepreneurial and should encourage the active participation of local people in their work. There should not simply be institutions created in Westminster and sent to the highlands and islands, or wherever it may be, to try to put right the continual sucking of blood out of the regions of this country which has gone on for generations. That is the reason, in many cases, why the regions are in such poor shape; it is because they have been bled dry by London.
The next point that I want to make is that the Government could help in regional development and in co-operatives, as well as in small businesses generally, if they would allow the concession which is allowed to partnerships by which you can set off against tax the interest that is paid on borrowed money.
The Government will be well aware that the National Freight Corporation has been a great success after its management buy-out. The chairman has just said that there is an entirely new motivation in the company; one which is very much needed in British industry as a whole. If that is to be carried on, there is at present an advantage given to the people who take up the shares in the first place, because, as I understand 1202 it—I shall be corrected by the experts on the Government Front Bench if I am wrong—they can set the expense of borrowing money to buy the shares against tax. But it is only for 12 months, so that the next generation get no such advantage. There appears to be no reason for this and I believe that there are members of the Government who want to see it changed. I hope that it will be changed very soon, because at the moment it is some handicap on the creation of further management and other buy-outs of a similar sort, which ought surely to be very much encouraged.
There is another aspect, in that the Government are deeply worried about social services and their expense. If they will go as far as Italy, they will find there that co-operatives are now engaged in running the social services. They are encouraged by all parties but the main party which has encouraged co-operative social services is the Communist Party in Bologna. They are extremely successful and the clients can join the cooperative. I went to an old folks' home in Bologna, which was run partly by the old folks themselves and partly by the social workers as part of the co-operative. That removes from the central exchequer a lot of the expense, it involves local people and it does a great deal of good for the clients.
Here, again, is a field where co-operation has a great deal to offer. I am not saying that all business can be run by co-operatives, because it cannot. I am not saying that there is any golden form of co-operative. But we know that big businesses, such as the National Freight Co-operation, right down to small businesses can be run successfully. I think I am right in saying that there were 300 or 400 founded last year. This seems to me a third way.
What I would say to the Government is that, if it proves that the only alternative to nationalisation is the present form of privatisation, by which we replace nationally owned monopolies with privately owned monopolies, in which the consumer gets no better deal and of which the result is that whether the issue is a success or a failure the City seems to do extraordinarily well out of it, then people will not support this system much longer. When, possibly, a more leftish-inclined Government than would be provided by our colleagues in this House comes into office, we shall simply find that a very great many of the commercial, financial and industrial operations of this country are renationalised. The public will say, "Look at what happened under privatisation". Privatisation should mean that the workers themselves now have a bigger stake in the country, and, although it is happening very slowly, it needs to happen much faster.
§ 2.30 p.m.
§ Baroness Nicol
My Lords, before coming to the few points which I feel I can make on this Friday afternoon, I should like to endorse what my noble friend Lord Bruce of Donington has said. It really is a great shame that a subject so important as this should be taken on a Friday afternoon. Not only are we under pressure of time, as has been shown by the arrival of the Chief Whip a short time ago, who obviously is disturbed at the length of time we are taking over it, but many people who are directly affected by the Bill live in regions which make it impossible or very 1203 difficult for them to be here on a Friday. I hope that the Government will take this point on board and that for the sake of these people the subsequent stages of the Bill will be dealt with at a more sensible time.
I am going to confine my remarks to the cooperative side of this tandem. I very much welcome the Government's decision to renew the funding for the next six years, although it seems a little mean that there is to be no allowance for the effects of inflation. The funding is to remain the same over the six-year period with no allowance for inflation. With regard to the period of six years, the experience of the noble Lord, Lord Oram, who was the first chairman of the CDA between 1979 and 1982, is very relevant. He regrets that he is unable to be here today. However, he tells me that, as he looks back to his period of office, three years was a surprisingly short time for establishing the agency on a sound basis. No sooner had this been done than the board were faced with the problem of seeking a further period of life for the agency, and a great deal of effort had to be put into persuading those concerned that this was a desirable objective.
This meant that much time and energy were spent on this activity which could have been better spent on the practical promotional work for which the agency was set up. Six years is a much more reasonable working period, which will enable the chairman and the director to plan ahead with a reasonable expectation of continuity. Or will it? When we read the Bill we see that there is no guarantee, in spite of the Minister's opening remarks, that the agency will continue for six years. That is not actually written into the Bill. The Bill contains a clause which says that the minister can wind up the agency at any time. This is another reason why we shall be seeking changes to the Bill at the Committee stage. The noble Lord, Lord Oram, asked me to say to your Lordships that he hopes Clause 3 can be omitted entirely from the Bill.
We welcome wholeheartedly the power to make grants or loans. This was a great disadvantage under the old scheme. We welcome also the power to provide training courses. Training in basic business skills is one of the greatest needs for new co-operatives. I serve on the board of a local co-operative agency and have direct experience of what happens, particularly with small co-operatives. The availability of help is at present very patchy indeed. It would be of enormous value to local co-operatives.
May I say just a word about the place of cooperatives in society. The noble Lord, Lord Grimond, said a good deal about this subject. It cannot he said often enough that in a world of such great economic change as we are living in at the moment. the cooperative way of life has great potential. There are already many parts of the world where it is the only way of surviving—and not simply in Northern Spain. There the co-operative economic process is not simply a fringe activity, as it seems to be in this country, where it is associated in many people's minds with health foods, sandals and beards: it is a real economic way of life.
The fundamental difference between a co-operative and a small business, as I am sure many noble Lords know, but perhaps some do not, is that irrespective of your input in terms of work or of money, a cooperative entitles you to an equal vote in what is happening to the co- 1204 operative entitles you to an equal vote in what is happening to the co-operative; in other words, the business in which you are engaged. That is the fundamental difference between a co-operative and a small business.
Leaving that aside, the term "co-operative" can embrace enormous differences in approach about whether there are employees, the type of business done, and the size of the business. I understand from the best evidence I can obtain from a number of sources that the cost per job in co-operatives is about £1,500. Very often, that cost is non-recurring; it costs £1,500 to set up one job in a co-operative. The rate of failure of co-operatives is considerably less than the rate of failure of small businesses. The cost to the Exchequer of each unemployed person—as my noble friend Lord Bruce of Donington has said already—is of the order of £5,000, and it may be even greater. That is the cost per annum, and it is without considering the social cost of unemployment in terms of its effect on family life. I hope we shall be saying more about that aspect in a debate next week.
When one considers that the cost to the Exchequer of, for example, propping up the De Lorean car company, was £7,500 per job, then the investment in co-operatives makes very good sense indeed. There is nothing new in the co-operative idea but in recent years the local value of establishing co-operatives is being recognised. As social planning becomes a more important feature of economic planning, cooperatives are locally created and tend to remain locally based, bringing stability into the community in which they are situated. The noble Lord, Lord Grimond, mentioned this point also. In this way cooperatives benefit the whole local structure.
The point that is very often overlooked is that cooperatives also provide unique opportunities for people who are otherwise disadvantaged in the great Tory objective of standing on their own feet. People who are perhaps coloured or disabled, or who have other disabilities, can form themselves into cooperatives in order to help each other and keep themselves free of reliance upon social security benefits and other Government help. I would have thought that this in itself would commend cooperatives to the Government as a reason for making greater investment in them.
The strengthening of the CDA's powers will give new impetus to the whole co-operative scene and will allay some fears about the Government's intentions. However, the Bill would be much improved if it did not contain the seeds of its own destruction, as it does in Clause 3. I hope that as the Bill progresses we shall be able to improve that aspect of its provisions. With that qualified welcome, I hope that the Bill will proceed.
§ 2.37 p.m.
§ Lord Wilson of Langside
My Lords, I imagine that there are currently one or two areas of public concern in relation to which it might reasonably be said that the Government's approach is wholly misguided and wrong. So far as the actual provisions of this Bill are concerned. it would not be quite appropriate to say that of the Government, but certainly the presentation of this measure to this House on a Friday afternoon is 1205 wholly misguided and wrong. I and my noble friends on these Benches share the sense of outrage which has been expressed by the noble Lord, Lord Bruce of Donington, on this matter.
I shall not attempt to express a similar sense of outrage in my own words because of the time, although I had intended to do so. The only reason why I speak now is because my noble friend Lord Taylor of Gryfe is not able to be here on a Friday afternoon. His expertise, particularly in the context of Part I of this Bill, is very great indeed.
I wish that the Government Chief Whip were here because I would then express the feelings I had when I saw what went on when he entered the House and looked repeatedly at the clock, and there were the exchanges, which those of your Lordships who were here witnessed, between himself and the noble Lord, Lord Bruce of Donington. I am not invariably on the side of the noble Lord, Lord Bruce of Donington, in all matters but on this occasion I cannot over-emphasise how much I shared his feelings. I know that my noble friend Lord Taylor of Gryfe felt that, and that was why he asked me—not the best qualified person to speak on these matters—to take part in the debate. I hope that Ministers will convey to their colleagues this feeling that we have.
These matters, in particular those dealt with in Part II, are of extreme importance to Scotland and to the other regions—Teeside, Sunderland, Tyneside, the North-West, Merseyside, and so on—because they have been the areas which have born the brunt of the recession. I find it positively offensive that against that background we should not have had an opportunity for a fuller debate nearer to the middle of the week. I referred to the presentation of this measure. The noble Lord, Lord Lucas of Chilworth, will appreciate that I was not referring to his extremely able, brief, clear and helpful presentation, but to the circumstances in which it comes before us.
I share also the feeling about the mix. This Bill is a bad mix. It is a thoroughly bad mix. I do not think it is right to refer to the matters dealt with in Part I and Part II as strange bedfellows. I think it was the noble Lord, Lord Grimond, who said that the two parts have aspects in common in the context of the present consequences of the years of recession during which this Government have been in power—and before that, too, because I appreciate that it started then. It is unhelpful to lump these two matters together. Our legislative system is such that it would have been much more sensible to have had two separate measures. That would have produced more fruitful debate. Do the Government not want fruitful debate? Do the Government not appreciate that they can be assisted in reaching more sensible solutions to the problems to which the Bill is directed if we have constructive, helpful and full debates? That particularly applies in this House, where so many of your Lordships have the kind of expert experience and knowledge which could promote solutions.
Having said that, we on these Benches welcome, with the kind of reservations expressed by the noble Lord, Lord Grimond, and others, Part I of the Bill. Some members elsewhere, and some here today, expressed doubts on the Government's enthusiasm for the possibilities of fruitful development in the context 1206 of the work of the CDA. Reference was made to the Mondragon experiment. My recollection—and I speak only from recollection and may be wrong—is that we had a debate in this House a year or two ago when a number of your Lordships and I expressed doubt about the Government's enthusiasm in this context. It is not surprising, because they have this curious ideological and dogmatic faith in the benevolence and the beneficence of market forces. One might call them "marketists". There is of course, as there always has been, a place for the market in human affairs, but there are other things as well. My feeling, as I remember saying at the time—this outraged some Members opposite—was that, in their approach to co-operatives in the light of the evidence of what had happened in Mondragon, they had a problem for every solution. That is, of course, not the way to get on with things.
I have only a few remarks to make about Part II of the Bill and I shall then sit down. It would. I imagine, be foolish to suggest that the working of regional policy in the past has not thrown up problems, including problems in my own part of the country, although there, as in Wales, there has been considerable success in creating jobs. The Government do not dispute that. The Government's approach to the problem in this Bill is not wholly without wisdom. What is open to doubt in this context, as in the other, is their willingness to pursue the new approach with enthusiasm. Is it sensible, we can ask ourselves, not to test the cost-effectiveness, which is what the Government have been doing, of the policies adopted up to now?
There is room for improvement, obviously, in the administration of the regional development grant system. One can understand the Government's concern that that system has been heavily weighted towards capital expenditure with too little regard for job creation. The same kind of question arises, and must arise, because of the Government's whole approach to the handling of the Bill and the relationship between Part II and Part I. It is clear from the financial memorandum, as the noble Lord, Lord Bruce of Donington, said, that the Government aim to cut substantially the money devoted to regional aid. There is no doubt about that. We on these Benches, and elsewhere I have no doubt, believe that this is not the time for cuts in this area. It will not do to pay lip service to the need for regional policy and then to reduce the resources necessary to pursue that policy effectively.
§ 2.48 p.m.
§ Lord Graham of Edmonton
My Lords, I first wish to declare interests in this matter. I am a director of the Enfield and St. Albans Co-operative Society. I was sponsored as a Member of Parliament in another place by the co-operative movement. I continue my association with the co-operative movement and, of course, the Co-operative Party. It is a real pleasure to join once more the noble Lord, Lord Grimond who, I recall, has been in his place on every occasion when this matter has been dealt with since its inception in 1979 both in another place and here.
I also wish to associate myself with some of the dissatisfaction that has been expressed in what I consider have been five excellent speeches so far. The first excellent speech was that of the Minister himself, 1207 who gave a lucid explanation of the purposes of the Bill. I echo the words of colleagues in the House in saying that the noble Lord's speech was most helpful. When we look at the powers to dissolve, at the powers to intervene, and at financial matters, there is a great deal that we have to question. It would be churlish, however, if I did not echo the words of my noble friend Lady Nicol when she paid tribute to the fact that at least there appears to be a longer life for the development agency from 1984 on. The Minister can go a long way towards giving a categorical assurance not only that there is no intention to use the dissolution powers but that there is every indication that its life will be at least six years and beyond.
I wish to say how grateful we are that it appears to have a longer life. This has been achieved after persuading the hard-nosed businessmen—my collective view of those members of the Government who have rightly had to look at how they make public funds available—to take the decisions that appear in the Bill. They have done so in the light of a proven record based on a tiny amount of public money given to sustain co-operatives and the agency over the years.
It is right that my noble friend Lord Bruce of Donington should remind the House that there is a wider, well-established and successful co-operative movement, which, although sometimes in difficulties, will survive. Lord Bruce has paid tribute to the economic size of the co-operative movement and, in a debate of this kind, one cannot go into too much detail. However, I think one simply needs to put on the record the outstanding successful Co-operative Insurance Society, the Co-operative Bank, the Cooperative Milk Services and the like. Of course they are facing very great challenges to their ability to compete in the marketplace in future. Certainly the established co-operative movement takes a very keen interest in what one looks upon as the newly emerging and developing co-operative institutions about which we are talking at this particular time.
When one looks at the past five years in the history of co-operatives, worker co-operatives, copartnerships and the like, what it will show us is that it has been a time of burgeoning development in a range of matters. In my view, the 1980s will certainly be looked upon as the decade of the worker and the producer co-ops. Of course it is right for the House to be reminded, although we are looking forward for the next six years, of the raison d'eétre the development agency from its beginning.
For instance, I looked at a article which appeared in Your Business, on the 7th October 1983, talking about taking politics out of co-operatives. Without a political initiative—that is, without Labour and cooperative politicians (aided and abetted by politicians in other parties, let me add) having taken a keen interest in establishing the kind of mechansim that we have in the Co-operative Development Agency, we should not have had a development agency at all. So I do not think that we should too easily accept the sneering remarks about left-wing politicians, or even politicians at all, which appears in this article about the need to distance either the development agency or the co-operatives from the kind of image which some 1208 people say they have been getting in that particular way.
May I ask the Minister to take head-on the crippling nature of the funds which are available to the development agency? Would the Minister go through the following exercise? In 1978 it was seen that at 1978 prices £300,000 was needed and, in my view, it was well spent in establishing the agency. Now, six years later, the sum of money is £200,000. If at the end of a six-year life—if that is what we are talking about—with the normal rate of inflation, that £200,000 would need to be discounted by 37½ per cent. The Minister or the Box will tell him that there is a cushion. There is not merely six times £200,000 available; there is a little sum of money to play with which may be added from time to time. I wonder whether the Minister can say a little more about the willingness of the Government to make a little more money available from time to time if the CDA comes forward to them and says, "In this particular year, for these particular purposes, £200,000 is not going to be enough".
We also need to remind ourselves that in 1980 there were only 300 co-operatives of this kind. In 1984 there were 1,000. In 1980, 5,200 people found employment in them. In 1984, that figure has grown to 10,000.
I want to pay a well-deserved tribute to the chief officer, the chairman and the hoard of the development agency. The chief executive of the CDA is sitting not a thousand miles away from the Dispatch Box, listening very attentively to what undoubtedly is a most important matter to him. George Jones, the chief executive, has certainly brought a dynamism and an objectiveness into the future of the CDA which commends itself to a great many people. I notice that on the board are also Lewis Lee, who is the chief officer of the Co-operative Bank, and Bill Farrow, who is the chief officer of co-operative retail services. I am delighted to see that the board is a mix of those who have come from outside the established co-operative movement and those who at this moment, while serving the CDA, are also demonstrating that they are successful co-operative businessmen as well.
Could the Minister say something about the syndrome of secondment? The CDA exists and thrives on the basis that big companies like the Co-operative Bank, Unilever, and others, are seconding men of experience and ability in order to provide their time to the CDA. But if this was readily available at a time of recession, and if, as the Minister and the Government tell us, the economy is expanding and the bigger businesses will need these people back, how does the Minister see the CDA being able to produce and use people of that calibre, who are needed?
Also, could the Minister tell us a little more about how he sees the trading activities of the CDA being expanded? What kind of things does he envisage for the CDA? If it is a question of surveys and feasibility studies for the establishment of local CDAs, the Minister will know that there has been a time during the past six years when those kinds of services were needed. But I suspect that there will be a drying up. not only because they are already in-situ but also as more and more local authorities find that the bite is being applied by the Government in the provision of monies for that kind of work: that is, grants from central 1209 government. I should like the Minister to tell us more about what he envisages is going to be done in that field—the commercial activities of the CDA.
The CDA's annual report says, on page 20:The core sums of money needed to sustain an efficient CDA are relatively small. They should be provided by Government and, we maintain, increased".The Minister knows that the monies are not being increased, and I wonder if he could say something helpful to the CDA.
I want to say a word or two about the crucial nature of training. Mention has been made of an expanding role. I wonder whether the Minister can take on board the facilities at the co-operative college at Loughborough. As we who have had experience in co-operatives know, there is a need to instil into handfuls of people who are keen but who are ignorant about co-operative methods, who are desperate to learn and to survive, skills, managerial expertise and experience. There is a world waiting to be opened up.
I notice in the report that some initiatives have been taken by the CDA. One talks about access to the "poly" of the South Bank; one talks about seminars. I would hope the Minister could tell us he intends to ask the CDA for a much more systematised programme indicating how we are going to transform people who are ignorant about managing a co-operative into competent people who can manage their small cooperative.
In my view, there is a desperate need for dynamic, vigorous leadership from central sources, especially in the sphere of firm guidance to unhappy workers, management and agencies with responsibility to promote and encourage co-operatives. Almost daily, one comes across illustrations of the need for groups of workers to receive better service if they are to turn their disaster of work collapse into work salvation. Let me illustrate that point.
Only yesterday I was told of the dispiriting experience of the workers at a firm called Synthetic Resins Limited at Speke on Merseyside. About two years ago their firm was in serious difficulties, in which management shortcomings played a significant part. When the well known and respected firm of Scott Bader took them over they saw it as a new lease of life. I understand that Scott Bader underwrote future losses to the extent of £1 million, but that recently the shop stewards were invited to produce a rescue plan and were given £10,000 to resource their researches. Earlier this month discussions were going on with management and the unions and USDAW played a prominent part. I am now told that the workforce received a bombshell yesterday—an announcement was made that the factory would cease production in June 1985. That is but a tiny tragedy in the vast depressing saga of unemployment statistics. But many of the workers have been made redundant before—not once, but twice and more. Desolation and depression about work prospects are deeper, longer held, and more real on Merseyside than in almost any other part of Britain.
In those circumstances, I ask: what can be done, especially in the context of a co-operative enterprise? I am told that there are prospects in this as in other comparable situations. New and vigorous 1210 management perhaps would help. Marketing, and advice, especially related to seeking and securing overseas markets for a new product, would help. The precise status of this factory and its workers is not fully known to me, but when we reflect that some 120 workers are affected—a not unusual size of enterprise in this situation—there is ample incentive to harness all resources. Can the Minister simply take this on board, reflect on how he can help, and appreciate the value of co-operatives in these circumstances?
Finally, I welcome the change communicated in another place by the announcement that before anything radical takes place about the future of the CDA there will be consultation with the established co-operative movement. I can tell the Minister that that announcement was received with great satisfaction and relief by the established co-operative movement—the Co-operative Union, the CWS, the CIS, the Co-operative Bank, and many others. I am optimistic about the future not only of co-operative enterprises, but of the CDA, and of course the future of the co-operative movement.
There is a great deal to be done, and in my view the opportunities which exists within this legislation will be turned to good purpose not only by the co-operative movement but by thousands of men and women who see co-operation as their salvation.
§ 3.3 p.m.
§ Lord McIntosh of Haringey
My Lords. I am fortunate in following a number of excellent speakers on the first of these two Bills in that it relieves me of any responsibility of adding to the speeches, even if I were capable of doing so. I thought that my noble friends Lady Nicol and Lord Graham, and the noble Lord, Lord Grimond (in a very wise speech), covered this ground very adequately indeed. Therefore, this afternoon I want to concentrate on the second Bill which has been added—and it is my inclination to do so anyway because the sums of money involved have at least two and probably three noughts added on the end.
The importance of regional development and regional development grants to the economy of this country can hardly be under-estimated. The noble Lord, Lord Lucas, in his opening speech, made a very attractive case for the changes that were put forward. He presented them in terms—and very reasonable terms of improvements in the flexibility which the Government would have in making grants. For example, the areas covered by the legislation could now cover journey-to-work areas as well as local authority areas—indeed, any area that the Secretary of State chooses; that would be perfectly proper. The noble Lord pointed out that the restrictions which might have existed in previous legislations on the timing of projects had now been eased; and that, too, must be welcomed. The noble Lord talked about changes in the purposes for which grants might be made, and I shall come back to that matter in rather more detail in a moment.
The Bill also refers to the necessity for monitoring, which I believe is a valuable provision. The noble Lord made some reference to small businesses. He particularly reiterated the Bolton Committee definition of a 1211 small business as being 200 employees or fewer. That puzzled me, not because I do not understand what he means by 200 employees but because I cannot find any specific reference to small businesses anywhere, either in the clauses or in the schedules. In his reply perhaps the noble Lord would describe exactly what he means by small businesses and what this Bill is supposed to do for small businesses.
So far, so good: it sounds like a reasonable measure. It sounds as though we need not worry about it too much. But when we think about it a little more deeply we realise that there are very big questions here with which the noble Lord did not deal adequately in his opening speech. These are of two kinds. First, there is the question of what changes have been made from the 1978 legislation. That was never spelt out clearly and, of course, it is not spelt out in the Bill itself. One virtually has to carry out a line-by-line comparison in order to discover the changes. Secondly, I think that we are entitled to rather more explanation of the analysis which lies behind the proposal in the Bill that the emphasis should pass from capital grants to job-creating grants. It sounds all right in theory, but we ought to examine what it actually means in practice.
First, I want to ask a little more about the changes in legislation. The significant phrases in this legislation are "qualifying activities". "specified percentages" and "specified purposes". There are others, but those are perhaps the most important. The 1982 Act spelt out in Clause 3(2) what are "qualifying activities". I shall not detain your Lordships by reading out the list, but it sets out a long list of activities which qualify for regional development grant. I know that governments often say that to specify in legislation also means to exclude those activities which are not specified, and therefore they go for less specificity rather than more.
However, in this Bill we have gone the full circle, because "qualifying activities" are now proposed to be those which are specified by the Secretary of State. That is fair enough: that is the Secretary of State's responsibility. But then comes the doom-laden phrase "with the consent of the Treasury". This means that there is no assurance whatever that the kind of activities which were spelt out as being available for grant, and therefore spelt out to potential applicants for grant—because all these grants have to be applied for in the first instance. and people have to understand the legislation before they can take advantage of it—will be defined. There is no assurance whatever that there will be a clear definition of what are the qualifying activities: there is no assurance that it will be made obvious to potential applicants and no assurance that it will not be used as a restrictive measure rather than as a measure increasing the flexibility of legislation.
The "specified percentages" were spelt out in the 1982 Act. They are no longer spelt out. It is simply said that they may be variable. I may have a very nasty. suspicious mind, but my instinct is to think that, under those circumstances, if the Secretary of State is giving himself that freedom, he is giving himself the freedom to reduce the percentages rather than to increase them.
The most important of all—and in a minute I shall refer to why it is most important—is the phrase 1212 "specified purposes". Again, the 1982 Act was quite precise. It talked about providing a building or works on premises, and it talked about providing new machinery or plant. No such definition appears in this Bill. This Bill simply says that the specified purposes shall be (and I do not have the quote immediately to hand) what the Secretary of State wishes the specified purposes to be. The significance of that will be found in the Explanatory and Financial Memorandum. All of the increased flexibility, the improved wording of the Bill as put forward so—I shall not say plausibly—gently by the noble Lord, Lord Lucas, in his opening speech: all of these are opportunities for restriction rather than for an improvement in the conditions of grant.
What about the analysis under which these changes are made? The argument of the noble Lord, and I am quoting now from his speech, was:The principle problem of the assisted areas is unemployment".He said:It is undesirable to shuttle jobs from one part of the country to another. Therefore, there would be an exclusion from automatic assistance for modernisation projects which do not create jobs".That sounds all very well. There is not much that anybody could object to in that. It is certainly true that a problem of the assisted areas is unemployment. But surely it is the responsibility of the Government at least to try to analyse whether the unemployment is the symptom of a more serious defect in our economic policy or the cause of it, and whether the relief proposed in this legislation and the changes from the 1978 Act are not in fact an attempt to deal with the symptom in order to improve the unemployment figures which destroy the credibility of the economic policy of this Government, or whether they are really an attempt seriously to deal with the cause of unemployment?
I am surprised that a Government which so proudly proclaim their adherence to the market economy should fall so readily for the Marxist labour theory of value as to think that they are dealing in this way with the real problems of our economy. It is not just a question of the more general economic analysis. It is not just a question of whether you can create jobs by counting the number of jobs created as opposed to the effectiveness over a long term of capital. It is also a question of whether this is going to lead to grants which are going to be permanent.
The Minister referred to long-term and secure jobs. Fair enough. But the problem with grants which are given on the basis of the number of jobs is that those jobs can disappear very readily when the grant expires, and there is no inhibition among those who have applied for grants and have been given the grants against simply packing up their tents and leaving when the grant is finished.
That is a quite different situation from grants for premises and capital expenditure and plant and machinery. That plant and machinery and those premises continue to provide value for our country and for our economy even when the original grants have expired. It requires a little more rigorous analysis of the economic issues involved from the Government if we are to answer that question. Are we dealing with the symptoms of distress, of economic problems in our
1213 assisted areas, or are we really dealing with the causes? I suspect it is the former.
I have talked about this in fairly neutral terms so far, but my suspicious mind then leads me to look back at the Explanatory and Financial Memorandum and to wonder why, looking there, these measures are proposed. When we come to Part II on the financial efforts of the Bill we clearly see the reason for it.The eventual financial effect of the Bill cannot be specified at this stage.Perhaps the noble Lord, Lord Lucas, can help us a bit more on that in his closing speech, because we are entitled to more explanation than that.However the exclusion from grant of expenditure not relating to projects undertaken for the specified purposes, and the intended policy requirement for projects normally to increase jobs"—note that: it is actually stated here that the additional requirement that projects should increase jobs is a contributory factor—are together likely to lead to a significant reduction in planned expenditure on RDG…expenditure on RDG might be reduced by some £150–£200 million in a full year. This may be offset to some extent by an increase intake up of selective financial assistance under section 7 of the 1982 Act".That reduction in expenditure is the kernel of this Bill. That is what the Bill is about. It is not about any highflown conversion to job creation. It is not about any conversion to the argument which the Opposition parties have been putting all these years that the Government are guilty, above all, on their unemployment figures. There is no conversion there. What the Government propose to do with this Bill is to reduce expenditure on regional grants. They propose to do so despite the fact that, if anything—as my noble friend Lord Bruce said in his opening remarks—the original criteria for regional grants ought now to be extended to the whole country. There is no part of this country which does not have higher unemployment than the worst areas had when the Act was first introduced.
This part of the Bill, this second Bill, is presented in such a way as to conceal rather than to explain its real purpose. Its real purpose is extremely dangerous and I believe it is the duty of your Lordships to attack the reduction in expenditure and to demand that this Bill be reframed to continue the very necessary regional grants which ought to be a cornerstone of the economic policy of this Government.
§ 3.15 p.m.
§ Lord Lucas of Chilworth
My Lords, the noble Lord, Lord Bruce of Donington, spent seven minutes of his speech describing how he did not like what I might call the domestic and other arrangements with regard to our business this afternoon. He will accept that this is not within my province of responsibility, but he will also accept that it is within the province of his noble friend who forms part of the usual channels. I do not feel that his accusation was totally accurately directed when he asked me to draw my noble friend's attention to it. He suggested in a reference to yesterday's business that your Lordships House should not be taken for granted—nor indeed would we. I can certainly assure the noble Lord that I would never take him for granted.
1214 The noble Lord spoke about my noble friends Lord Cockfield and Lord Belstead. How we on the Front Bench apportion our responsibilities. I am sure he would accept, is our responsibility. Your Lordships have before you the latest recruit, unlisted in the Grey Book. I apologise. but I hope that I will not let the noble Lord, Lord Bruce, down regarding the very kind remarks that he made.
I believe that throughout the general debate we have had, with one or two notable exceptions, there has appeared to be a general suspicion of the Government's intention. I am sorry, because I would be a little inclined to say—particularly in respect of the noble Lord, Lord McIntosh of Haringey, who wound up—that I would not have thought that noble Lords had such suspicious minds. I made the position quite clear. He said—I want to dispose of this right away—that hidden behind all this was an intention to reduce expenditure. No: what there is hidden behind this measure—I will come back to the Explanatory and Financial Memorandum in a moment—is a parallel measure. I cannot accept that we are talking about two Bills. We are talking about two parts of one measure. What lies behind it is a better utilisation of those funds which are available for regional development grant and for the Co-operative Development Agency. That, I think, noble Lords should have firmly in their minds as we come to discuss the Bill in later stages.
The noble Lord, Lord Bruce of Donington, asked me to reply specifically to questions. He did not want the pat, pre-written yesterday or this morning, winding-up speech. Well, he will not get that; but, if your Lordships will forgive me, it will obviously take me a longer time to answer all these questions. I do not mind at all. I really do not mind. If my speech, therefore, is a series of disconnected jottings, it is in response to his invitation. I would apologise, therefore, for not being able to string them all together. Let us have a look at some of the points about which the noble Lord, Lord Bruce, asked me.
He asked why we have chosen this moment in time, a Friday afternoon, at that, to bring forward this legislation. The reason is—and he really knows it—a very simple one. We have to ensure that we have an effective use of taxpayers' money and we must have that before August, for that is when the money runs out. That is why we have to have this legislation. I explained that when I opened the debate; so there is no great mystery about it.
The noble Lod specifically mentioned consultation with the co-operative movement, as did other noble Lords. It was first introduced, as he suggested, in another place at the direct request of the co-operative movement. It met the Opposition's concern with regard to consultation, particularly prior to any decision to wind up the agency. I do not know how much further noble Lords would expect me to go this afternoon, or when we reach Committee stage. We have met the requirement of the Opposition in this matter, and I would doubt whether we could go very much further.
When I was opening this debate I did not say that the cost of every job was £300,000. What I said was that grant in some cases amounted to that kind of figure and that it was an excessive amount. That is why 1215 the formula is changed. Let me emphasise again that, whether we go for the capital sum or for a job grant, any applicant will derive the greater benefit and, in the case of small firms, they will be excluded from that and therefore will not have to do any of the involved calculations to determine which is the better grant to go for. The noble Lord, Lord Bruce of Donington, went to some lengths to remind your Lordships of what Deloitte Haskins and Sells themselves had had to say. Of course, they are a very well respected company of chartered accountants known to all of us, but they were among the 500-odd bodies and individuals who took up the Government's invitation for views on a wide range of issues in the White Paper, and the results of all those consultations are under consideration now. Certainly the Bill before us this afternoon does not prejudge any of those considerations.
The noble Lord also asked me why we did not publish evidence with the White Paper. I do not know whether the noble Lord was pulling my leg. He knows very well that we did publish it, in a massive, great volume—he knows it. I have a copy on the Bench beside me. and he has a copy in his office. I think perhaps he was enjoying a little pre-weekend fun. He asked—and this was really very fair, and was perhaps one of the clearest question he asked me—what did I mean by a "genuine job". What I mean, and what the Government mean, are about the same thing. We believe, within the context in which I was speaking this afternoon, that a secure and genuine job is one which is both profitable and productive; that is, profitable to the individual and profitable to the organisation which he serves—and profit is not only in monetary terms. Yes, it is productive, because it creates wealth for the country. The noble Lord spoke about nursing and, of course. that is a genuine job; he knows that, too.
But if we have in mind the kind of job that relies on Government subsidy, whether it comes from the taxpayer or the ratepayer—and noble Lords will know that we have been discussing this kind of question for many weeks now in your Lordships' House—that cannot be a genuine job.
Lord Bruce of Donington
My Lords, if the noble Lord will permit me, may I ask whether he would consider the large-scale farmer who is receiving continuous aid from the Government, amounting to thousands of pounds a year in many cases, to be someone in a genuine job!
§ Lord Lucas of Chilworth
My Lords, considering that the farming community provide a very large amount of the foodstuffs that we consume in this country, I should have thought it was a very genuine job. I should not wish to debate this afternoon the amount of subsidy. Indeed, it was the noble Lord, Lord Grimond, who raised the question of the relativity of CDA funding to agricultural grant—a subject which perhaps I might be able to come to a little later.
I want to deal with one more principal question about which noble Lord, Lord Bruce of Donington spoke; namely, the winding up of the agency. In all legislation to do with non-statutory bodies there has been provision for their winding up, for whatever 1216 reason. There is no hidden significance in this and the provision in this Bill merely brings the CDA into line with what is common practice in regard to other non-statutory bodies.
I turn to the noble Lord, Lord Grimond, whose speech, if I may say so, I found somewhat warmer than that of the noble Lord, Lord Bruce of Donington. He made a number of points. I am quite sure he will forgive me if I do not take up all of them this afternoon. But he asked me quite specifically about training. Perhaps it would be helpful if I told him that in the other place there was a lot of pressure to widen the training power, so that the agency could provide training courses not only for members of cooperatives, or prospective members, but also for any other persons who were not necessarily involved in a co-operative movement. The thinking behind this concerned the need of professional people, such as solicitors, accountants, careers officers, and others, to understand the nature of co-operatives. We felt that the agency had a role to play in this respect. I beleive that that was the noble Lord's main point.
He asked me specifically why there was more money available for agricultural co-operatives than for the industrial co-operatives the CDA. The only thing I can tell him this afternoon is that MAFF runs a particular grant scheme for agricultural co-operatives, 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.
I was grateful to the noble Baroness, Lady Nicol, because she finished her very interesting speech by giving a qualified welcome to the Bill. She asked specifically: why was the funding fixed at £200,000. Could it not be more? Several other speakers raised that point also. Perhaps I might repeat exactly what I said in opening the debate:Noble Lords will note that on the basis of funding at £200,000 a year for six years, an extra £300.000 has been allowed for in the Bill. This is to give the Government flexibility in any future decisions on the funding levels and time scales.I do not really think I can go further than that in response to the noble Baroness: nor indeed in response to the noble Lord, Lord Graham of Edmonton, who raised much the same point.
I am sorry the noble Baroness feels that she will have to seek to remove Clause 3 when we come to it. I have given an answer. If she still feels that it is inadequate I shall be very happy to discuss this with her, because she has given specific warning that this will be her intention. We of course shall resist it: I can say that.
The noble Lord, Lord Wilson of Langside, told us that he was deputising for his noble friend Lord Taylor of Gryfe. The noble Lord. Lord Taylor, told me that he would not be able to be here this afternoon; but I am sure that noble Lord, Lord Wilson, was speaking on his own behalf as well. Again, I am rather sorry that he should feel that there is some sinister motive, as other noble Lords suggested, in having the Second Reading of this important Bill on a Friday. There is nothing sinister: it is a necessity to get on with the business and has nothing with quotas of time. I have 1217 sought to explain that if noble Lords on those Benches—
§ Lord Wilson of Langside
My Lords, I am grateful to the noble Lord for giving way. If I suggested there was something sinister in it, then I misled myself as well as the Minister. What I was suggesting was that it showed a wrong sense of priorities.
§ Lord Lucas of Chilworth
My Lords, I am grateful to the noble Lord for that assurance and if I misunderstood him I am sure he will forgive me also. He asked—as did the noble Lords, Lord McIntosh, Lord Graham and Lord Bruce of Donington—where the savings are that we are talking about. The savings indicated in the Explanatory Memorandum arise primarily from the exclusion of the replacement investment grant. This is required by the European Commission, and in fact we are quite happy to comply with the Commission's ruling. This is not for the reasons which some noble Lords may suspect; but, frankly, we have belief that support for replacement investment is usually dead weight, in that that investment will be going ahead anyway, probably in the same place, even without grant, and the money could be better used elsewhere.
As the Explanatory and Financial Memorandum makes clear, if the present grant system and the map remain unaltered, we estimate that expenditure might be reduced by £150 million to £200 million in a full year. The exclusion of nonjob-creating modernisation grants, except normally in the case of small firms, will account for some £105 million of this saving, while the exclusion of replacement investment will account for about £70 million.
I was most grateful to the noble Lord, Lord Graham, because I found that his understanding of the whole of the co-operative business, which we acknowledge, gave him a rather different view of what we are trying to do. Of course, he had some reservations, but his speech this afternoon was very warm and very encouraging, particularly to the CDA. He asked a number of questions and I think that I have dealt with the one with regard to funding. He also asked me about secondments. The record of private sector secondments in the past has been excellent, as he knows, and we can see no reason why that record should not be sustained. Certainly, Ministers will continue to encourage secondments and we believe that firms will do so, also. It is part of their success. I have dealt with the dissolving of the agency. The noble Lord asked me particularly about—
§ Lord Graham of Edmonton
My Lords, I am most anxious about the question of getting to grips with the need for a relevant course of training for small groups of people. I gave an illustration not of a disaster, but of a potential disaster perhaps arising out of inexpertness in understanding what is required. I was talking about using the Co-operative College, but in other ways. Does the CDA have a proper programme for widening the number of courses and the number of people who will be trained to be sound co-operators?
§ Lord Lucas of Chilworth
My Lords, I appreciate what the noble Lord has said. I am sorry that I did not pick up the point properly before. This is something that I knew about some years ago when I was dealing in particular with small firms. My understanding is that the CDA and the MSC have put together a new package of training. The provisions in the Bill with regard to training will allow them to expand that activity for precisely the reason which the noble Lord gave. We have seen in recent years well-meaning, well principled people joining together in co-operatives, and two or three years later they have had to be abandoned because there was not the skill, the expertise or the knowledge. The CDA will be looking at this, in particular, and that is why that extension is in the Bill for giving assistance in that way. I take the noble Lord's points on board. I am sure that there are a number of points—some of which are rather more major than others—which I have not picked up. If I have failed to reply to any of the points which have been made, I can assure noble Lords that before we reach the next stage I shall respond.
Now let me turn to the speech of the noble Lord, Lord McIntosh of Haringey. He will forgive me if I say that I was just a little disappointed that he took the same kind of stance as was taken by the noble Lord, Lord Bruce of Donington. I have said before that there is nothing sinister about the Bill. It is an attempt—we shall see in the fulness of time whether it is a good or a bad attempt—to improve the way in which we deal with regional disparities. It is wrong to suggest that the Government are abandoning their real responsibilities. I do not intend to give a wide-ranging response to the point which the noble Lord, Lord Bruce of Donington, attempted to make when he discussed unemployment in more general terms, because that is not, I believe, the purpose of the Bill. We maintain that the Bill now before your Lordships will benefit those regional areas which need assistance. We prefer to give help where jobs have been created. That is the basic purpose of the Bill.
The noble Lord, Lord McIntosh of Haringey, asked a number of questions and, in accordance with my undertaking, I shall try to answer as many of them as I can. The noble Lord asked about qualifying activities. I can assure the noble Lord that the qualifying activities will be quite clearly defined by order. Any activity which currently qualifies will continue so to do. The noble Lord mentioned the consent of the Treasury. I would remind him that the consent of the Treasury is already required under the existing Act. There is, therefore, no mystery about it.
The noble Lord also asked me about the specified purposes. These are contained in the new Section 3(1) in Schedule 1, which is to be found on page 8 of the Bill. Under the Bill, grant is payable in respect of the provision either of assets, as now, or of jobs. That is set out in the new Section 2 on page 7. Grant rates will be specified by order, all the consultations and decisions having been taken. That would, we hope, take a matter of months only. Both the noble Lord, Lord McIntosh of Haringey, and the noble Lord, Lord Graham of Edmonton, asked about small firms. There is no mystery about Bolton. I believe that the noble Lord, Lord McIntosh of Haringey, asked why a number is not included in the Bill. If I said that the number was 1219 200 or 201, the noble Lord would probably ask whether it could be 150 or 300. Probably the general definition of a small firm is one which employs fewer than 200 people. We would go along with that figure.
§ Lord McIntosh of Haringey
My Lords, I was not saying that the Bill should contain a definition of a small firm. It may be entirely my own incompetence, but I cannot find in the Bill any reference to concessions to small firms, of whatever size.
§ Lord Lucas of Chilworth
My Lords, I shall attempt to find something with which to satisfy the noble Lord before he puts down a probing amendment for our Committee stage on 11 th July. I want to make only one other point. Even if the noble Lord, Lord Bruce of Donington, twits me that this is the prepared piece—yes, it is; I shall tell him that. But I have not given him the speech, and he knows that also. Most people have accepted the CDA provision in Part I of the Bill, and I am grateful to them for that. Perhaps it is the more straightforward part of the Bill but it is a no less important part for that.
The regional provisions of the Bill represent—and I have tried to illustrate this when answering questions—a sensible and practical way of tailoring regional policy to meet more effectively the challenge we now face. The Government believe that a new scheme will have a significant impact in encouraging the creation of jobs where they are needed, and it will provide a cost-effective way of helping the most disadvantaged areas of the country. As I have said, the Bill also recognises the importance of the Co-operative Development Agency. With those very few concluding remarks, I would ask your Lordships to give this Bill a Second Reading.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.
§ House adjourned at fourteen minutes before four o'clock.