HL Deb 17 December 1987 vol 491 cc832-7

11.35 a.m.

The Minister of State, Scottish Office (Lord Sanderson of Bowden)

My Lords, I beg to move that the Bill be now read a second time.

The purpose of the Bill is to raise the statutory financial limit of the Scottish Development Agency from £700 million to £1,200 million. The financial limit is defined by Section 13 of the Scottish Development Agency Act 1975 and comprises a number of items: first, the agency's general external borrowing, mainly out of the National Loan Fund but also covering borrowing by subsidiary companies; secondly, agency and Treasury guarantees; thirdly, overseas borrowing, typically from the European Investment Bank and the European Coal and Steel Community; and lastly, the major item, which is payments from my right honourable friend the Secretary of State, consisting of grant-in-aid less administrative expenses plus public dividend capital issues.

The agency's financial limit was last raised in 1981 and at that time it was expected that the new limit would provide adequate statutory cover for the exercise of the agency's functions until 1989. However, because of a revision in the method of calculating grant-in-aid, it is now estimated that the existing limit will be reached by the end of the present financial year. Consequently, in order that the agency can continue to function on an uninterrupted basis, it is necessary to raise the limit now.

It is customary when setting financial limits to provide a statutory basis for around five years. Accordingly, the Bill proposes to raise the limit to £1,200 million. I should perhaps add that the increase in the financial limit does not set the agency's budget. That is done by a separate annual process. It merely sets the statutory framework within which the agency is financed.

It may help your Lordships if I now briefly explain the purposes of the Scottish Development Agency. The agency has the principal purposes of furthering the economic development of Scotland, improving its international competitiveness and improving its environment. To achieve those purposes it undertakes a number of functions including the provision to businesses of premises, finance, advice and counselling; bringing derelict land into use; and the redevelopment of land and property.

Looking to the future, the agency's corporate strategy for the next three years highlights major thrusts proposed in the fields of Scottish enterprise, internationalisation of Scottish business, technology and urban renewal. First, the agency rightly recognises that its client base is the whole of Scottish industry and not simply inward investors. Important though the latter are, their attraction accounts for only 4 per cent. of agency spending. The agency is now increasingly applying to the development of indigenous companies the targeted approach which has brought it success in the attraction of inward investment.

Secondly, the greatest rewards to enterprise are to be found in serving international markets, while the greatest threats to indigenous industry come from international competition and from the international diffusion of technology. By encouraging product and process development the agency will seek to assist Scottish industry to rise to this challenge. The provision of seed-corn and development finance will be needed in these activities, as will a major expansion of the agency's technology transfer capabilities.

Thirdly, the agency has developed considerable expertise in encouraging property development to achieve environmental renewal and local economic regeneration. That approach, which has paid dividends in Glasgow's merchant city, can be a blueprint for other major Scottish urban centres. This expertise will increasingly be applied to urban renewal and regeneration of Scotland's built environment. We can expect to see this happening, for example, on the banks of the Clyde in Glasgow and in run-down housing areas. Special attention will be paid to enhancing, mainly through the provision of training, access to jobs for residents of areas undergoing urban renewal in order to improve their long-term income earning prospects.

In undertaking these tasks, the agency does of course take into account the philosophy and policies of the government of the day. It will adopt a commercial approach involving both the expertise and the resources of other participants.

The Government have been able to increase the agency's budget in real terms since 1979, and this, combined with its increasing effectiveness, has meant that the results of its activities have been of even greater value than before. This Bill confirms the Government's continuing support for the agency's role in improving the Scottish economy and environment by setting the framework for continued funding over the next five years. I commend the Bill to this House.

Moved, That the Bill be now read a second time.—(Lord Sanderson of Bowden.)

Lord Carmichael of Kelvingrove

My Lords, I do not think there is anyone in the House, particularly anyone with a Scottish background, who would wish to delay this Bill unduly. Although it is a small Bill, it is an important one. As the Minister has pointed out, the Scottish Development Agency is an important part of Scottish development.

I think the fact that we had a most interesting debate yesterday initiated by the noble Lord, Lord Sefton of Garston, makes it rather less necessary to go into some of the developments with which the Scottish Development Agency has been involved. We had some excellent speeches yesterday, including a very good maiden speech from the noble Lord, Lord Goold. It was suggested by my noble friend Lord Morton of Shuna that it was a little too optimistic, but I find that most of us who cross the Border take a rather rosier view than perhaps we do when we are sitting and talking among ourselves. I think that the speech of the noble Lord had many good points. The speech of my noble friend Lord Morton of Shuna was also very pertinent and something to which we should also pay attention.

The noble Lord, Lord Polwarth, had a good deal to do with the setting up and the preliminary work of the Scottish Development Agency. He also spoke in that debate, but unfortunately I was unable to hear what he said. I read his speech very fully this morning. He is quite correct in saying that it was a combination of the Scottish Council for Development and Industry and the local authorities, besides other bodies, which ultimately flowed together towards the creation of the Scottish Development Agency. The important thing to bear in mind is that we had a Secretary of State who in my view had already prepared the blueprint for the Highlands and Islands Development Board, which led him to grasp the nettle of the lowlands and create the Scottish Development Agency. I do not think that this should be overlooked.

By and large, I believe the Bill is most helpful. I should have preferred that the capital allocation be increased. The noble Lord, Lord Sanderson, will be aware of the debate that took place in the other place and which was long and exhaustive. I believe that my colleague in the other place clearly showed that there had not been an increase in the budget since 1979. I do not wish to go into the figures at this stage. I am sure they have been gone over thoroughly in the new St. Andrew's House. I should be very surprised if they had not. However, the noble Lord still holds the view of the Minister of State in the other place that there was an increase.

I feel that the Scottish Development Agency's work in the lowlands in particular, especially in Glasgow, is visible for all to see. It has done a good job on a rather limited budget, with a small but enthusiastic staff. It had the co-operation of the local authorities and also of the private sector. It is one of the good things which is happening in Scotland, and therefore I am only too happy to give the Bill the blessing of noble Lords on this side of the House.

11.45 a.m.

Lord Mackie of Benshie

My Lords, from these Benches I too should like to welcome the Bill. One would not be human if one did not take the opportunity to niggle a little, and I believe that the Government are late converts to approval of the SDA. There is no question about the fact that in Scotland we all appreciate what the HIDB has done, and perhaps even more what has been done by the SDA, particularly in Glasgow. The concept of a public body which takes part in urban renewal and helps tourism, besides promoting private enterprise and laying the seed corn for new industry, is an excellent one.

The Government set up a joint inquiry between the Treasury and the Scottish Office to look into the mechanics of its operation, and they recommended no change either in the objectives or in the methods. I am glad to see that the Government are putting up the borrowing powers, because that will be necessary. I believe that in the effort to save taxpayers' money, which of course is very commendable, the Government should distinguish between seed corn (which this is) and tourist expenditure, for example, which brings back money as opposed to expenditure which does not show a return.

I believe that the record of the SDA and the fact that the budget this year is lower in real terms than in some other years should be looked at by the Minister, who is a very sensible and forward looking person. He should be thinking of putting up the ordinary budget, which has not moved much in the life of the SDA. In the House of Commons the Minister said, at col. 534 of Hansard, that the budget was less in some years because less was needed to meet its gross budget.

If one looks at the number of projects of urban and indeed rural renewal awaiting approval in Scotland, the ordinary budget could well have been increased. It will bring back money to the Government. That is the whole point. It will be money extraordinarily well spent and it will improve the income of Scotland and through taxation the income of the Government. I welcome the borrowing and I recommend an increase in the borrowing powers. I urge the Minister to look again at the budget in view of the good it could do both to the taxpayer and to Scotland as a whole.

Lord Polwarth

My Lords, I warmly support this Bill and I thank the noble Lord, Lord Carmichael, for his kind words about the role of the Scottish council. I fully recognise the role of his party in providing, so to speak, the paternity for the Scottish Development Agency in the person of the noble Lord, Lord Ross of Marnock, who was then Secretary of State. We should acknowledge how sorry we are that he is not fit enough to be with us on this occasion.

Lord Sanderson of Bowden

My Lords, perhaps I may say how much I appreciate the wishes of the noble Lords, Lord Carmichael and Lord Mackie of Benshie, and also of my noble friend Lord Polwarth that this Bill will eventually pass. May I say on a personal note that I was sad not to he here yesterday. I was in fact standing up all night for Scottish fishermen in Brussels, as I was the night before, and a reasonable deal was obtained for them. Their industry is doing rather well as a result, and I hope this will continue into 1988.

I wish to say how much I appreciate the words of the noble Lord, Lord Carmichael, about the optimism shown by my noble friend Lord Goold in the speech he made. I share that optimism and I am glad that things are moving in the direction that they are taking in Scotland at the present time. I shall return to that matter.

I wish to re-echo what my noble friend Lord Polwarth has said about the noble Lord, Lord Ross, and his efforts in the early days. His efforts are well and truly recognised by all those who have an interest in industry in Scotland.

Perhaps I may also say that the general tenor of developments by the agency has obviously been welcomed in the remarks of noble Lords. I wish to take up two points about the budget. The noble Lord, Lord Carmichael, said that expenditure was going down. I wish to point out to the House that when we consider the gross expenditure—and that is what anyone who is interested in the development in Scotland is talking about—then we are really talking about a positive direction. In real terms, the 1988–89 budget (that is £146.6 million), an increase of 8.1 per cent. over the 1978–79 level, is a very good story to tell. What people are interested in is reflected in the agency's success in increasing its own income which it generates itself from loan repayments, factory rents, sale of property and investment. Therefore, I reject the charge that the Government are not moving in the right direction; in other words, seeing an increase in the overall capability of expenditure in this area.

I was interested in what the noble Lord, Lord Mackie, said about conversion on the road to Damascus. Frankly this Government are very interested in seeing development and when one looks at the increases that there have been in the private sector involvement with the Scottish Development Agency, then one sees a real success story. What we are talking about in industrial investment is that for every £1 of government money, the tax payers' money, we are now seeing £13.40 of private sector money in industrial development. I could go into other figures which also show an increase, but surely it must be the ultimate goal of this House to ensure that we are indeed seeing an increased amount of overall capital and expenditure going into industry in Scotland.

I should like to say at this stage (because the figures have come out this morning) that my right honourable and learned friend has announced the results of the November figures of unemployment in Scotland. I believe this is news for congratulation and is Christmas good cheer to those of us who are very concerned about the level of unemployment in Scotland. We have seen, since the beginning of this calendar year, the largest sustained fall since the early 1970s, and almost 60,000 fewer Scots are out of work. Seasonally-adjusted figures dropped by more than 38,000 since January, and that is the lowest level for four years.

This illustrates what I believe is the fundamental purpose of the Scottish Development Agency and that is to ensure that there is an on-going programme of development in Scotland which can be primed by the state but indeed is now showing that the private sector is taking up the challenge.

Overall, the effect of the change at this time has been to make each pound of government money go very much further and that is something we are all pleased to see. As has been said in the various speeches, there has been a review, which was mentioned by the noble Lord, Lord Mackie of Benshie, and we have come out very well from that review. The Government accept entirely the whole tenor of the report.

I have little more to say other than to thank all your Lordships who have taken part in this short but important debate which is showing the way forward concerning the Scottish Development Agency. As a result of the speeches that have taken place today, I hope that noble Lords will support the Bill so that the SDA may continue to play a full part in the economic life of Scotland. I beg to move.

On Question, Bill read a second time; Committee negatived.

Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution of 3rd December), Bill read a third time, and passed.