HL Deb 21 October 1999 vol 605 cc1355-76

6.50 p.m.

Lord Hogg of Cumbernauld rose to ask Her Majesty's Government what is their assessment of the contribution of the city of Aberdeen and north-east Scotland to the economy of the United Kingdom.

The noble Lord said: My Lords, I sought this brief debate and tabled the Unstarred Question on the Order Paper because I believe that Aberdeen and north-east Scotland are making a hugely important contribution to the economy of the United Kingdom. The city of Aberdeen is without doubt a major contributor to our present prosperity. I wish to be assured that the Government are aware of that contribution to our national wealth and that they are actively pursuing policies that will underpin the position of Aberdeen and guarantee, so far as any government can give such a guarantee, that it will continue as a generator of wealth.

Aberdeen has historically been a place where business has flourished. It has always been a successful port and in times past its traditional industries prospered. They, and most notably the fishing industry, continue to have an important place in the local economy. Today, with a population of over 200,000, Aberdeen has the highest gross domestic product in the United Kingdom.

The oil industry and Aberdeen's position as the European oil capital testify to the success of the city. Securing the oil industry for Aberdeen can in large measure be attributed to a Member of the House. I refer to my noble friend Lord Kirkhill. It was he who, as Lord Provost of the city and later as a Scottish Office Minister, helped to create a business environment which the oil industry found attractive over competitor locations. He deserves credit and recognition for that. I am delighted to see him in his place this evening.

At its peak in 1991 the oil industry employed some 54,000 people. Today that figure is reduced to around 40,000 and predictions recently made by Aberdeen and Aberdeenshire councils project a further reduction of around 10,000 between now and 2011. The councils' report says that the future depends on field development, the servicing and support of international oil provinces and the framework set by the Government. The energy industry is robust, and I am confident that it will prove so in the future, but I hope we will hear tonight from the Government how they view the future of the oil industry in Scotland.

Aberdeen and north-east Scotland is the foremost region in Northern Europe and has a leading position in business, commerce, science and technology. Its universities and related institutions sit well with the excellence achieved by the business community. Its public authorities match that excellence and the high quality of its local government is widely appreciated.

I should like at this point to make some observations about the economic infrastructure. Aberdeen is well served by the aviation industry. Although there have been recent concerns about the provision of air services it does appear that these will continue at a level that meets the needs of the business community. Links with London, continental Europe and the British mainland are frequent and reliable. Aberdeen airport itself is a first-class facility. BAA Scotland runs a very efficient organisation at Dyce in support of air movements associated with the oil industry as well as the passenger airlines. I believe that it is in the interests of Aberdeen and the economy as a whole that a more liberal regulatory regime on later landing times is developed to allow even greater use and access to the airport. It is a price worth paying and one which an important industrial centre like Aberdeen should be prepared to pay.

There is not time to deal with everything, despite the Chief Whip's generosity, but I would make a plea for an improved rail service between Aberdeen, Edinburgh and Glasgow. Express trains covering the same routes as commuter trains stop at every station, or so it seems, and that is not necessary. It certainly seems like that if you attempt to go up on the night sleeper. Schedules are simply too slow and it is time to do something about it. There is also a clear need for a cross-city link.

Perhaps the most important plea I can make tonight is for the early construction of the road known as the western peripheral route. Recently when clearing papers belonging to my late father I found proposals for this route being considered by Aberdeen Town Council, of which he was a member, in 1945. If there was case then, there is surely a case now. It is time to build it. The present trunk road network is totally inadequate. Dual carriageways and motorways link from south of the city to the south of Europe. Yet the network comes to a dead-end at the city boundary. The entrance to Aberdeen from the south is by way of the 16th century ancient monument of Bridge of Dee. Its seven foot width restriction makes mockery of the trunk road objective of providing a continuous, quality network. Before rejoining dual carriageways to the north and west of Aberdeen the trunk roads through the city use residential streets and are fragmented by some 16 sets of traffic signals and pedestrian crossings.

The European Union has designated the Trans-European Road Network connecting Aberdeen from the south to the west. Yet the UK and Scottish Governments have failed to recognise the importance of the western peripheral route as contributing to this continent-wide network. Aberdeen is too important to the Scottish and UK economies for this route to be delayed any longer. A commitment to its construction must be made now.

Even in the midst of prosperity there are small pockets of poverty. In recent times bids for funding and support such as is required for the upgrading of the Tillydrone area have been rejected. This has led to a perception in the city that central Scotland decision-makers misunderstand the needs of Aberdeen City Council. It leads to the claim that Aberdeen generates wealth that is spent elsewhere in the UK while the needs of Aberdeen are not met. These perceptions are divisive and they must not gain currency. But that means that the Government in Edinburgh must match its promise of inclusiveness and see to it that Aberdeen City Council receives the financial assistance it requires to tackle poverty and social exclusion.

I have sought in this debate to identify some of the important priorities of a city that has great economic and social importance to the United Kingdom. I hope that I have not overstated the case for Aberdeen, unlike an old Aberdeen councillor when I was a young man. Addressing the council on tourism, he made this observation: Aberdeen is famous throughout the world— and beyond".

He exaggerated just a little! I shall be satisfied if the Government have heard our case and I look forward to hearing the contributions of noble Lords and my noble friend's response at the conclusion of the debate.

6.58 p.m.

The Earl of Caithness

My Lords, although I was brought up in Aberdeenshire and used to know Aberdeen very well, I should like to take your Lordships on a trip up to the true north-east of Scotland; that is, to Caithness. The noble Lord, Lord Hogg of Cumbernauld, to whom we a re all grateful for introducing the debate, mentioned communications, so let us start in London.

The drive from London to Edinburgh takes about eight hours. The journey by train takes about four hours. The next stage of the journey is from Edinburgh to Inverness. That is probably about the same by train or by car: four hours. The next leg of the journey up to north-east Scotland takes about four hours by train and about two hours by car. There is a huge contrast. It highlights the disadvantage that Caithness suffers through lack of a decent train service.

What does that mean? It means that people do not use the railway, and therefore there is less investment. It also means that freight companies do not use the railway. Although we might be only two hours from Inverness and your Lordships might think that we have certain advantages, if one looks at petrol prices, one soon realises that Caithness is not contributing in the way that it could to the economy of the United Kingdom because the price of petrol is some 15 to 20 per cent higher than it is in London. The situation is exacerbated entirely by the Government's policies on fuel pricing.

Caithness is very much a farming county. However, the Government's policy is not to help farmers at all. As a result, farming is suffering enormously, as we found out at Question Time today, when reference was made to the diabolical policy on beef on the bone which is frustrating farmers. Another point that needs to be borne in mind—which is true of a large part of the farming in Aberdeenshire—is the total lack of flexibility in the North in terms of crops. It is not like the balmy South, where one can grow various crops. Farmers are very restricted in what they can grow.

Another issue that is causing great concern in the North-East as a whole is the Scottish Parliament's proposals for land reform. Investment is drying up in all kinds of areas and that is beginning to take its toll. The environment in the North-East is beautiful. The Flow Country is almost a world heritage site, and I hope that it becomes one. But it does not generate income. It does not make a great contribution to the economy. Further help is badly needed, as are fewer policies that will be detrimental in the future.

The government policies that I supported when we were in power have also led to problems. I argued against them at the time. The centralisation of the Highland council at Inverness is draining good people away from the North-East to Inverness. It is an inevitable consequence of centralisation. It would be far better if the present Government sought to undo the folly of their predecessors in centralising in Inverness. To put the Highland council back into Wick and the local areas would provide people with new opportunities and would stop the drift of unemployment.

Unemployment is a long-term problem in Caithness. The figure for the long-term unemployed is the second worst in the Highland area. The problem is exacerbated by government policies. There are very good areas, such as Dounreay, where the figures have risen again to what they were before the threat of closure. Areas in Thurso are thriving. But with the road link, despite the high petrol prices, and with the Highland council based at Inverness, it is inevitable that people go to Inverness to shop rather than shop in the high street. That reduces the contribution that Caithness can make to the economy. The county has great potential. It merely needs better government policies. At present, the Government are aiding the millennium clearances, and that is bad for the whole of the North-East.

7.3 p.m.

The Earl of Kintore

My Lords, I congratulate the noble Lord, Lord Hogg of Cumbernauld, on initiating this debate. I shall take the short speech option.

King Robert the Bruce gave my family land and a castle in north-east Scotland in 1308. Apart from military service, particularly at Bannockburn in 1314—a home win, where we commanded the cavalry—and the 9th Earl being in Australia for five years from 1895, we have been there ever since.

The North-East has many good things. It has good farming. Thirty per cent of the food production in Scotland, worth £117 million in 1997, takes place in the area. It now has the Scottish wing of the Food Standards Agency. Seventy per cent of the UK fish catch is landed in the North-East. Aberdeen has a modern and efficient harbour, the second busiest after Dover in terms of ship movements. We can also grow good timber, and we have our own breed of cattle black Aberdeen Angus, which, rather like Scottish hereditary Peers, are carefully bred from long and well-proven blood lines. Once the current problems are resolved, they (the pedigree cattle, that is) will continue to be exported all over the world.

We have good scenery, but rather lose out to the A9, the road that runs from Perth to Inverness. I understand that, in the tourist trade, the A9 is called the Aberdeen bypass. As the noble Lord said, Aberdeen certainly needs a bypass, but rather closer than the A9. Difficult decisions over the western peripheral route will have to be taken soon before economic activity grinds to a halt.

We have almost full employment which in itself causes problems, particularly for firms wishing to expand. We are possibly the victims of our own success. Although a considerable amount of money has been generated in, and has left, the area, the infrastructure has been rather left behind. There is now a serious shortage of industrial land. A 1997 review stated that in the area in close proximity to Aberdeen there was only 4.3 years' supply left.

The two most important contributors to the UK economy in the North-East are Scotch whisky and North Sea oil. In 1998, the Scotch whisky industry employed about 1,350 people in the area, many in remote rural and economically disadvantaged communities. One in 10 agricultural jobs in Scotland relies on the success of the industry, which draws heavily on Scottish farmers for about 80 per cent of its malting barley needs, much of the barley grown in the North-East. The distilleries are a great magnet for tourists, who will leave the A9 to be among the million visitors to 40 distilleries, some in north-east Scotland. The industry generates £2 billion of exports each year and pays considerable duties to the UK Exchequer.

As regards North Sea oil and gas, the right honourable Stephen Byers, Secretary of State for Trade and Industry, writing the foreword to a task force report in September this year, stated: There can be no doubt about the significant part which the oil and gas sector plays in the UK economy. Over the years it has provided £89 billion pounds in revenue to the nation, significant employment, with some 30,000 jobs offshore and over 300,000 direct and indirect jobs onshore: and in 1998 it was responsible for some 17% of UK industrial investment". Need I say more?

7.9 p.m.

Lord Sewel

My Lords, I ought to start by declaring an interest as a professor and Vice-Principal of the University of Aberdeen. That will give some background as to why I shall mention that institution, at least to some extent, in my comments. I also congratulate my noble friend Lord Hogg of Cumbernauld on giving the House the opportunity to debate this Unstarred Question. It is phrased somewhat like an examination question. I only hope it does not produce the answer of one undergraduate when asked to give an assessment of the contribution of D.H. Lawrence to English literature. The candidate wrote on the examination paper: "Nae much". That cannot be said about the contribution of Aberdeen and north-east Scotland to the economy of the United Kingdom.

It is important, in debates such as this, that we voice local interests, but we must also beware of being parochial. I do not believe there is a risk of that happening in this debate because the themes and issues on which we touch have a resonance that goes beyond north-east Scotland, beyond rural Scotland and applies to the whole of the United Kingdom. In northeast Scotland we are well placed to contribute to many debates that affect rural society throughout the United Kingdom.

Other speakers in the debate will touch on the many areas in which Aberdeen and north-east Scotland make an important and dynamic contribution to our economy. Although it is important to recognise the contribution of oil and gas and the increasing contribution made by the knowledge economy in north-east Scotland, we cannot forget the traditional role of north-east Scotland as an agricultural area and recognise that primarily, outside the major conurbation of Aberdeen, it is a rural area.

I am moved to make at least one comment on the somewhat idiosyncratic contribution of the noble Earl, Lord Caithness, to the debate. His criticism that the Government do not care about agriculture is simply beyond belief. The figures do not stack up in any way to support that assertion. First, one simple figure is that £400 million per year, year on year, of public money is used to support Scottish agriculture. That is at least one measure of the Government's contribution to an important industry.

Secondly, in all the past three years, in recognition of the problems that the livestock industry has been facing in the hills of rural Scotland, the Government have found additional money to give extra support to that particularly vulnerable sector of the industry. So it is a total nonsense to suggest that the Government do not care for agriculture. They do, and they put their money where their mouth is, absolutely and completely.

However, it is true that the rural economy is changing; rural society is changing. The rural economy in north-east Scotland is a success. The figures indicate that we have a rural economy based in Aberdeenshire which has increasing population levels, good jobs, high wages and low unemployment. The issue of outward rural migration throughout much of the north-east and rural Scotland generally has been turned round. Rural Scotland is an attractive and dynamic place with an attractive, dynamic economy.

That success is based increasingly on diversity. It is based on individual enterprise and flair, responding to market opportunities, often through adding value to the high quality of the primary products which we produce.

However, we must recognise that the primary sectors are undergoing difficulties. With the best will in the world, because of world trends. it is hard to see those difficulties disappearing in the short term. But that should not be a cause for despair; it should be a spur to find solution, to accept the challenge. The opportunity exists for north-east Scotland to lead the way and develop approaches to rural development that can be of relevance not only to the north-east, not only to Scotland but throughout the United Kingdom.

It is my belief that that approach should have a number of elements to it: first, a move away from dependence on commodity production and commodity prices, a move towards recognising the importance of demonstrating quality and adding value, being close to the market and providing customers with what they want. Above all, we must have an approach and a sensitivity which emphasises and rewards flair and individual enterprise.

Essentially, there is a need for a change of culture, to an extent, which recognises that the dependency culture of a subsidy-driven agriculture regime that we have through the CAP is thwarting individual enterprise and individual adjustment to difficult circumstances.

I believe that we must—and I try to do this—provide a framework that will encourage local people and local communities to accept responsibility for their own development. That often sounds a simple, easy and attractive option. It is not. Accepting responsibility is often difficult and, I am afraid, causes local conflicts. In the end, I am convinced that a bottom-up approach to rural development stands a much greater chance of bringing about sustainable rural development than any of the heavy handed, top-down approaches we have seen in the past. It is a means by which local communities can be energised and helped to solve their own difficulties and problems.

I do not underestimate the difficulties inherent in that approach, but there are real and distinctive opportunities to make a breakthrough in north-east Scotland and set the pace for the rest of the United Kingdom.

Within Aberdeen there is a concentration of rural-related research institutes which is quite unique. We have what is now referred to as the MLURI, but I still refer to it as the Macaulay Land-Use Research Institute, the Rowett Research Institute and the Scottish Agricultural College. Within my own university of Aberdeen, there has been considerable investment in providing a rural research infrastructure, through our own departments of agriculture and forestry, but perhaps most significantly, with the setting up of the Arkleton Rural Research Institute. Individually, those institutes and departments are at the forefront of advancing a new rural agenda. The challenge must be to harness the intellectual imagination and practical common sense that resides in the individual institutions, thereby providing a framework that will bring benefits not only for north-east Scotland but for rural Britain generally.

In that context, government have a role to play. I have been enormously heartened by the decision to establish the Scottish food standards agency in Aberdeen. That is a beginning. I believe government can go further, it can encourage, support and enable. I look forward to a further flourishing of rural Scotland coming from the north-east.

7.18 p.m.

Lord Glenarthur

My Lords, I confess that I was to some extent tempted to follow the noble Lord, Lord Hogg of Cumbernauld, on his theme of aviation. That is particularly because of my own association with helicopter activities in that part of 'the world. It is worth pointing out that they very much led the way in terms of organisation, safety and the conduct of such activities. I mean not only in terms of offshore North Sea activities, but also helicopter activities throughout the world.

I was also rather tempted to talk about rail, but as I am catching the 9.30 sleeper to Aberdeen, that might be tempting fate. Therefore, I shall develop a totally different theme. In a sense, in part it follows on from what the noble Lord, Lord Sewel, said about the role of the University of Aberdeen. The noble Lord referred to certain aspects of that university, and no doubt the noble Lord, Lord Wilson of Tillyorn, will say rather more about it in a moment.

I should like to refer to the Robert Gordon University, which is another major example of the role of further education and how it operates in that part of the world. I refer not only to the benefits it offers to the north-east of Scotland, but to those that it offers to the UK as a whole, and internationally. The Robert Gordon University complements the more conventional academic nature of the University of Aberdeen (if I may so describe it). The noble Lord, Lord Sewel, shakes his head, but I have not got to the point. The noble Lord described many other aspects of that university which complement what I shall describe as the important elements of the Robert Gordon University.

I declare a very minor interest as a patron of the university's development appeal. I quote the university's annual report: The Robert Gordon University enters the new millennium providing almost 10,000 full and part-time students with more than 300 courses covering a broad spectrum of subjects in the arts, management, engineering, pharmacy, health and the sciences, and is well equipped to respond to the challenges of the future. The national and international standing of our graduates and our staff bear testimony to the success of our vocational approach to higher education and the ongoing synergy between the University and industry, commerce and other organisations in the private and public sector". That says it all. It is a neat summary of what the Robert Gordon University does and how it is perceived locally, nationally and across the world.

But the university has other notable achievements to its name. It has the lowest level of graduate unemployment among Scottish universities. Only 2.1 per cent are still unemployed six months after graduation. Its links with industry are extensive. That is reflected in at least three distinct ways. It has the highest income from private industry and public corporations relative to the number of full-time staff, and in return it offers the most extensive portfolio of business and management courses in the North of Scotland. More than that, it uses industry professionals, experts in their field, to help to design the courses, many of which are accredited by professional bodies.

There is also a practical link in the all-important matter of survival training for the oil, gas and marine industry by RGIT Ltd, a wholly-owned subsidiary of RGU. Any of us who have worked in the offshore industry, including myself as a helicopter pilot, know how essential is that training and how well it has been pioneered by RGIT Ltd. Among those areas of its work closer to the public sector, it is worth pointing out that the Robert Gordon University's School of Nursing and Midwifery is the largest in the North of Scotland. The School of Pharmacy is the oldest in the United Kingdom; indeed, it is home to the only World Health Organisation collaborative centre for training in drug management and pharmacy practice. Having spent many years working in the health service, I for one know how vital that is.

These achievements deserve to be placed on the record—indeed, trumpeted—for the Robert Gordon University contributes massively to Aberdeen's record and status as both a seat of learning and substantial industrial capital of the north-east of Scotland. It contributes not only to our national UK economy, but on a wider international scale.

7.23 p.m.

Lord Hughes of Woodside

My Lords, I join those who have congratulated my noble friend Lord Hogg of Cumbernauld on introducing this debate. He and I share a love of the city of Aberdeen. He is a native-born Aberdonian whose father was a very distinguished councillor and respected Lord Provost of that city. He has an advantage over me in that respect. I am a newcomer having arrived in Aberdeen at about the age of four. I have spent most of my life in Aberdeen. I had the privilege of representing part of the city in the other place for 27 years. I can just about claim that I am now a real Aberdonian. I frequently refer to myself as an Aberdeen nationalist. I see my noble friend Lord Kirkhill shaking his head about my being accepted as a true Aberdonian. We shall sort that out outside the Chamber.

I extend my congratulations to both Aberdeen City Council in its bid for the Scottish Food Standards Agency to be located in the city and the Scottish Executive on accepting that bid and proceeding with it. I believe that to be a vote of confidence in the institutions of the city of Aberdeen. Over its history the city has had to face many different challenges. It has been at the forefront of the challenges posed by the rural economy and its hinterland, and so forth. But none of the challenges over the years can match those presented by the advent of the North Sea oil industry. My noble friend referred to that earlier and the part played by my noble friend Lord Kirkhill.

But it is characteristic of the city that all sections of society faced up to the challenge. The local authority, the chamber of commerce, the oil industry and the Scottish Office all worked together to enhance the prosperity of the city. Prosperity can be measured in many ways, but it is within my living memory that unemployment levels in the city were double the Scottish average, which in turn was double the UK average. Therefore, Aberdeen once had an unemployment rate four times the national average. Today, unemployment levels are so low that they are the envy of almost every other part of the UK.

Having said that, we should be careful not to wallow in self-congratulation about how well everything is going in the city of Aberdeen. Time does not stand still and new challenges are thrown up all the time. One of the present challenges is to ensure that general prosperity, which is very high in the city of Aberdeen, reaches out to all levels of society. It has been estimated by the city council that it needs to spend £1 billion over the next 30 years on the housing stock to catch up on repairs and upgrade dwellings. That is a lot of money.

My noble friend Lord Hogg said that there were pockets of deprivation in the city, as there are. There are elements of quite severe unemployment. Aberdeen has a very serious drug misuse problem, and addiction brings great tragedy and heartache to many families. I accept that the scale and number of the problems faced by the city do not match those in the central belt, but for individual families the tragedies are just as great. It is not just a question of numbers. The impact of bad housing, high unemployment and social deprivation has a debilitating effect on all people. In general I understand the view of the Government. I believe that money must be spent where the greatest problems arise. However, it is necessary for Aberdeen, despite its prosperity, to get its fair share of help.

There is a feeling in Aberdeen, which I hope does not sound as if we complain all the time, that others believe that the city can get on with its own problems. Aberdeen is willing to tackle its problems, but to do so a conundrum must be solved. Government, whether based in Westminster, Whitehall, the Scottish Office in Edinburgh or the Scottish Executive in Holyrood, must find a way to ensure that if Aberdeen and other parts of the North-East are to improve their prospects the purse strings are loosened. On the one hand, in general the Scottish Executive and government say that they cannot give much more money because of huge problems elsewhere. On the other hand, they say that those concerned cannot spend more than they are told to spend. In those circumstances, a double bind is imposed on those who want to make progress.

I hope that when my noble friend comes to reply she will accept that the people of Aberdeen remain optimistic about the future, that they believe the challenges have been faced, and that they still have an innovative spirit. But they need encouragement from elsewhere in the form of recognition of the problems and the provision of a little help. But, above all, those in the North-East who have the expertise must be allowed to use it in the full knowledge that it will benefit everyone in Aberdeen and north-east Scotland.

7.30 p.m.

Lord Wilson of Tillyorn

My Lords, like other noble Lords, I am grateful to the noble Lord, Lord Hogg of Cumbernauld, for this chance to sing the praises of Aberdeen and the North-East and to make sure that others recognise what is happening there. I should like to draw on two examples to reinforce what other noble Lords have said. I shall take one example from the city of Aberdeen, and another from Aberdeenshire.

One should always be careful with statistics, but there is that marvellous historic statistic which anyone involved with the universities of Aberdeen always likes: that Aberdeen city had two universities when the whole of England had only two. The rest of the UK seems to have caught up; but it is very nice indeed that Aberdeen city again has two universities. The noble Lord, Lord Glenarthur, spoke about Robert Gordon University. I should like to speak about Aberdeen University. I believe that the two universities play a major role in Aberdeen, the North-East and the United Kingdom.

It is a great pleasure to find that of those noble Lords who have spoken in the debate, we have one vice-principal of the University of Aberdeen; we have two honorary graduates from the University of Aberdeen; and I must declare an interest as Chancellor of the University of Aberdeen. Without overdoing statistics, and before moving to what I believe is the real contribution of the universities, perhaps I may mention two statistics. Apart from local government employment, Aberdeen University is the second largest employer in Aberdeen after Shell, so it is a major player in the economy. It is also a major contributor to the overall economy with a financial impact of something like £189 million to £193 million a year.

However, I believe that the real significance is in what the noble Lord, Lord Sewel, called the knowledge based economy. It is the engine effect of universities in creating the environment for a knowledge based economy. Quite apart from its teaching ability—I believe that Aberdeen University and Robert Gordon University have an excellent record—the role is most significant in the forefront of research.

I suggest that Aberdeen University has a significant role to play in that research field. I take three examples. Magnetic resonance imaging is at the forefront of medical technology. It was developed at the University of Aberdeen. A huge amount of related work is undertaken at the Institute of Medical Sciences. Particularly interesting recently has been the fascinating work undertaken by Professor Docherty on juvenile diabetes. Other work has been done on obesity and Alzheimer's disease. A great many world class elements of medical research are being undertaken. My third example is the Centre for Organic Agriculture, sponsored by MAFF and Tesco. Over the past few months it has started to do research on large-scale organic farming.

I suggest that that role of the universities in conjunction with the research institutes contributes to the atmosphere in Aberdeen to which the noble Lord, Lord Sewel, referred. It has made Aberdeen the right place to set up the Scottish food standards agency. I hope that it will make it the right place to set up in future the rural affairs agency too. I believe that the staff of the University of Aberdeen, including the noble Lord, Lord Sewel, the vice-principal, under the leadership of the principal of the university, Professor Duncan Rice, deserve great credit for the way in which they are building up the role of Aberdeen University.

That shows that geography is not a deterrent to excellence or to playing a major role of significance in the whole of the United Kingdom. Indeed, it; should be a spur to being outward looking, to seeing beyond the region into a wider world—in the United Kingdom and Europe—and to being world class.

In another sector of city life—financial affairs—Aberdeen Asset Managers has demonstrated the same: that one can be a major player based in Aberdeen. Fifteen years ago, that organisation had one office in Aberdeen with six staff; it now has offices spread around the world and has funds under management of some £16 billion. Geography is no deterrent.

Perhaps I may use the springboard of the speech of the noble Lord, Lord Sewel. He spoke of the dynamic atmosphere in rural affairs in Aberdeenshire. I take one small example which has resonance beyond Aberdeenshire. I refer to an organisation called the Birse Community Trust. I declare a sort of interest in that I am an elector in that parish and therefore automatically a member of the trust, quite apart from wishing to support it. That trust has been set up recently through the determination of some local people, with the support of three major estates. It has done a number of things. First, it has resolved a dispute over the enjoyment of property which has been going on for several hundreds of years. It made a fortune for swordsmiths in the 16th century, and another for lawyers in the 18th and 19th centuries, and practically ruined two estates. It has resolved that legal dispute.

It has created a situation in which there is now management of the most easterly part of the Caledonian Forest. It has created a situation in which quite unique water-powered wood-turning mills are now being looked after. Above all, it has shown how a community can get together to do all those things, and then work on other community projects. It is an example of something of importance and significance well beyond the boundaries of Aberdeenshire.

In conclusion, in responding to the debate I hope that the Minister will recognise that much is happening in Aberdeen and Aberdeenshire and the North-East; that what is happening deserves attention and support when support is needed; and perhaps, above all, that it deserves positive acknowledgement and encouragement.

7.37 p.m.

Lord Cocks of Hartcliffe

My Lords, first, I must apologise to the noble Lord, Lord Hogg, and to the House for not being present at the start of the debate. I was informed by a normally reliable source that proceedings were to be adjourned until 7.15. However, I do not wish to hide behind anyone else and I accept full responsibility. I express my regret to the House. As I wish to speak on a fairly narrow point, perhaps I may be allowed to proceed.

Several people have asked me why an Englishman is speaking in what is manifestly a Scottish debate. However, although we now have devolution we still have a responsibility to help each other; and I want to draw attention to a matter which is an example of the vigilance of which we must be more and more careful in the future.

When I think of Aberdeen, I think of granite. I call to mind trade union conferences I have attended there. My main impression has been the windswept streets driven with rain. Nevertheless, the water made the granite appear particularly beautiful. I understand that granite is still produced in quantity near Aberdeen, at Kemnay. It is a marvellous example of Scottish and British building stone which is responsible for the prosperity of a number of areas.

I have taken a particular interest in this matter because of the scheme to refurbish the House of Commons car park. The House may recall that I have inquired about the project from time to time. The latest estimate of the cost is £2.44 million and in the other place on 26th May 1999, at col. 398 of Hansard, it was described as being a "cosmetic" exercise. I go along with that.

I tabled a Question for Written Answer, asking the Chairman of Committees to given an undertaking that the granite used in the refurbishment of Old Palace Yard will be British. The Answer, given on 3rd December 1998 at col. WA53 by the Chairman of Committees, was, "No".

Furthermore, on 16th December 1998 (col. WA163) I asked whether the granite setts, laid in the small area at Chancellor's Gate to illustrate what they would look like, were of British origin. The Chairman of Committees replied that they were of French origin.

The project is supposed to be part of the World Squares. I should have thought that if we were going to have a world-class heritage site, we ought to try to ensure that it is an example of British workmanship at its best and a tribute to this country.

The problem is not confined to the Houses of Parliament. I have found references in the press to the British Museum. This may seem fairly mundane to your Lordships. You see, it is all right to talk in high-flown phrases and generalities, but this is what is happening on the ground. The Times of 27th September reported: English Heritage has demanded an inquiry into the apparent blunder, which involves inferior French limestone replacing English material during the redevelopment of one of the nation's most important Grade I listed buildings.". The Evening Standard of 27th September 1999 recalls: Easton Masonry, the company hired for the multi-million pound restoration work, used inferior French limestone and then allegedly billed the museum for the substantially higher cost of Portland Stone.". Portland stone, as your Lordships will know, is one of the best examples of our indigenous building materials.

The final quotation I shall weary your Lordships with is from the Independent of 4th October when Norman Foster, who has a big hand in the project, stated: The switch to French limestone is perfectly legal … On any publicly funded building you have to comply with EU directives. It was the phrase "comply with EU directives" that attracted my attention. At present, this country is involved in a severe and serious dispute with the French which is undermining the entire confidence on which our community is built. I give this as an example because unless we are vigilant about such issues our indigenous industries will suffer and areas like Aberdeen will suffer like everybody else.

I thank your Lordships for your indulgence and apologise once again for missing a substantial part of the debate.

7.44 p.m.

Lord Kirkhill

My Lords, I take the opportunity to rise in the gap. First, I congratulate my noble friend Lord Hogg of Cumbernauld on initiating the debate. Secondly, I apologise to my noble friend and to the House for my failure as a former Lord Provost of the City of Aberdeen to put my name forward to speak in the debate. However, I can plead in mitigation that I expected to be in Bosnia tonight on the business of the House. A missed aeroplane connection proved to be a problem and I was physically unable to reach the office to submit my name at the appropriate time.

This has been an interesting debate for those of us who live in and experience the joys of Aberdeen in its various manifestations. I am out of touch with the economic reality of the city, not least because it was a quarter of a century ago when I was Lord Provost. I moved from being Lord Provost one day to being a Minister of State at the Scottish Office almost the next. Once you become a Minister you become totally out of touch! Other noble Lords here who have been Ministers will agree with that.

As a matter of historical interest, I can tell the House that when I found myself in the Scottish Office in 1975 it had not yet been decided in the higher echelons of Civil Service minds whether or not significant onshore development would take place in Aberdeen or in Invergordon. The subsequent difficulties with the road patterns in the area reflect that measure of indecision. Nevertheless, Ministers have to take responsibility for that.

I revert. Twenty-five years ago, just as I assumed the office of Lord Provost, the Economist published an article, the heading of which was "Cosy Corner". The writers had been up to Aberdeen because BP had made a public announcement of its Forties Field oil discoveries. It was then cosy corner. I believe that we could pay a tribute to the then town planning department of Aberdeen Council, because it moved quickly and made available the industrial space necessary to attract the onshore oil development. Noble Lords should keep in mind that in the early days, Dundee had significant claims to big onshore development. For example, Dundee had a superior deep-water facility at its harbour. Dundee overall, with one or two exceptions, was a day's less sailing for supply ships from its harbour to most of the then oil discoveries. Many in Aberdeen had to work hard to persuade the oil companies that Aberdeen would be the preferable location for their significant onshore developments and much of that is attributable to the persistence, imagination and vision of the then officials in the town planning department. I want to pay that retrospective compliment to them tonight.

7.47 p.m.

The Earl of Mar and Kellie

My Lords, I, too, apologise for being absent when the debate started. It is commendably ingenious of the noble Lord, Lord Hogg of Cumbernauld, to come up with a way of drawing attention to his home area and in doing so reminding the House that it has a substantial legislative interest in Scotland post devolution.

My connection with north-east Scotland is limited to having family living in Hatton and having served briefly in Aberdeen with the Royal Navy Auxiliary Service. As a volunteer director of Clackmannanshire Enterprise, I look with envy at the strength of the north-east's economy in comparison with that of Clackmannanshire. Historically, the north-east included the earldom of Mar. It is galling that my Erskine family were separated from the lands of Mar by this Parliament as part of the 1716 Attainder passed on the sixth Earl. So be it.

This is a land of rich coastal plane, mountain and marine environments. Its economy revolves around oil and gas, fishing and forestry, farming and whisky, manufacturing, tourism, education and two prisons among others. Certainly, its east coast location has always granted it a favourable sunny climate, enabling programmable work. Its connections with Scandinavia have blessed its people with a culture of hard work. The problems of farming at this time are primarily of market surplus rather than production difficulties.

However, it cannot all be sweetness and light. Workers who became accustomed to high wage rates are now finding it difficult to get out of bed merely for average wages. In an area of relative affluence, it has to be more difficult for the poor to live out their lives. Sonic citizens are so depressed by their failure to share in the prosperity that they descend into the downward spiral of drink and drugs. Enabling all the people to participate in the economy will remain a major task for government at all levels.

There is also a potential problem in the housing stock. General affluence has led to the construction of larger homes. If the economy declines—and I do not of course wish that should—there will be a surplus of above-average houses. With regard to price, the market will resolve the problem by depressing the price. However, although that would make larger properties a bargain, the houses may well be too expensive to run.

Aberdeen has generally good communications with central Scotland, despite being 130 miles north of the Forth. The A90 has been rebuilt as a dual carriageway and there are direct train services to London and south-west England, among other places. Scotrail is in the process of introducing Turbostar Class 170 trains on the Aberdeen to Edinburgh services. Air services are wide-ranging and international, despite the bizarre early evening closure regime at Dyce.

Shipping serves the North Sea oil and gas fields, and will probably serve the developing west coast exploration areas. Despite the efforts of my noble friend Lord Thurso to develop Scrabster in this connection, I suspect he will be thwarted by the A9 north of the Dornoch Firth. The noble Earl, Lord Caithness, managed to bring Caithness into north-east Scotland, which was ingenious because I would regard it as belonging to the far north; but perhaps that is a problem of definition.

However, I should to draw attention to the Shetland Islands. Almost all lines of communication go through Aberdeen and so the Shetland Islands must be considered to be part of Aberdeen's hinterland. I would remind your Lordships that many parts of Shetland are further east than Aberdeen. I am concerned about the reduction of the RAF station at Saxavord on the island of Unst. Clearly this will be a major blow to the remote and fragile economy of Unst and will leave an excess of facilities in the Baltasound area. I believe that the Government should be considering measures to mitigate the effects of this. The provision of a bridge to replace the ferry over to Yell would allow Unst to hold its population, while enabling people to travel to work on the Shetland mainland.

So, to conclude, the north-east of Scotland has an enviable economic circumstance which its people will do well to protect and enhance. This Parliament must recognise that it has a big part to play in Scotland, and indeed not just in the successful North-East.

7.53 p.m.

The Earl of Courtown

My Lords, this has been a fascinating and far-reaching debate, and I heartily congratulate the noble Lord, Lord Hogg of Cumbernauld, on introducing the subject. This is a terribly important area of the United Kingdom and, in particular, of Scotland.

Aberdeen, as the noble Lord, Lord Hogg, said, is a prosperous and cosmopolitan city and for many reasons, both past and present, has links with Europe and much further afield. It is worth mentioning, as the noble Lord, Lord Hughes of Woodside, said, that Aberdeen's unemployment rate is well below the averages for other parts of Scotland and the United Kingdom. However, of course there are sectors where there is cause for concern. Other noble Lords have mentioned agriculture, but some points are worth highlighting, notwithstanding what the noble Lord, Lord Sewel, said about the speech of my noble friend Lord Caithness.

There is great concern over excessive regulation in the agricultural industry. There is also the question of net farm incomes in Scotland—and of course this goes further than the north-east area—because in the year 1996–97 farm incomes averaged £20,564 per farm. In the year 1998–99 the figure was £416 per farm. Pig farming has suffered particularly, with the largest pig unit in Aberdeenshire going out of business with debts of £10 million.

There are also difficulties in the commercial fishing industry. Positioned as they are in this area, industries are particularly dependent on transport and the infrastructure. Fuel costs are significant, and they have been increasing. The 11.16 per cent increase in diesel duty and the increase in vehicle excise duty are damaging the road haulage sector. Taxes amounting to 84 per cent of pump prices are now the highest of all European Union members. As has been mentioned in the Scottish Parliament, the introduction of road tolls could further increase these costs.

Turning now to the oil industry, as other noble Lords have mentioned, this has contributed greatly to the economy of this area and will continue to do so. However, as the noble Lord, Lord Hogg of Cumbernauld, said, one must be aware of the forecast that 10,000 jobs will be lost over the next 10 years. The mood in the industry has improved as the oil price has now increased to over 20 dollars per barrel. That has created more optimism, but there is no room for complacency. I look forward greatly to hearing what the noble Baroness has to say in reply. I hope she will tell us what actions are planned by Edinburgh and Westminster to sustain this popular area of Scotland.

7.56 p.m.

Baroness Ramsay of Cartvale

My Lords, I wish to start by thanking my noble friend Lord Hogg of Cumbernauld for tabling this Question on a subject which I know is near to his heart and in which he has much expertise. I should also like to congratulate those noble Lords who have participated in this debate—an excellent, lively and informative debate—about the contribution to the United Kingdom economy which is made by Aberdeen and the north-east of Scotland.

Aberdeen is often referred to as the off-shore capital of Europe. That description is well merited: the granite city. I think that my noble friend Lord Cocks of Hartcliffe is to be congratulated on reminding us of the link between granite and the beautiful city of Aberdeen. It has played a vitally important role in the development of the United Kingdom Continental Shelf as an important oil producing area—if not in the paving of Chancellor's Gate for the carpark. I should also like to join my noble friend Lord Hogg in paying tribute to my noble friend Lord Kirkhill for his major contribution to this success and I am pleased that he managed to be in his place for this debate.

On many occasions in the past those who believe that they can foretell the future have predicted the decline of United Kingdom oil and gas production, but in fact the amount of oil and gas which will be produced in United Kingdom waters this year is expected to be the highest ever. There can be no doubt about the significant part that the oil and gas sector plays in the United Kingdom economy. Over the years it has provided £89 billion in revenue to the nation, as was noted by the noble Earl, Lord Kintore. It has provided significant employment opportunities, with some 30,000 jobs offshore and over 300,000 direct and indirect jobs onshore. In 1998 the oil and gas industry was responsible for some 17 per cent of United Kingdom industrial investment.

The north-east of Scotland has played a major part in that success, and both the region and the United Kingdom as a whole have benefited from the resultant economic activity. In 1996, gross domestic product per head in north-east Scotland was over £14,000, over a third more than for the UK as a whole. The total GDP that year in north-east Scotland accounted for 13 per cent of the Scottish total. In fact, as my noble friend said, Aberdeen had the second highest GDP per head of all the areas of the UK, only London having higher.

However, as some noble Lords mentioned, towards the end of last year the industry faced a tremendous challenge with the dramatic fall in oil price to 10 dollars per barrel from previous levels of over 20 dollars. At the same time, the increasing maturity of the UK Continental Shelf in terms of oil and gas production posed other challenges to the industry.

The UK still has substantial reserves of oil and gas. However, many existing large fields are well into decline, and new discoveries are becoming fewer and smaller. The cost of developing new fields and producing oil from them is higher than for many other oil producing areas around the world. Although the price of oil has now recovered to well over 20 dollars per barrel, the need for the UK industry to reduce its costs is as strong as ever because of the need to compete for investment against lower cost areas elsewhere. Indeed, noble Lords who have said that complacency was not something to be followed are correct.

In recognition of the urgent need to reduce the cost base of UK oil activity, the Government announced the oil and gas industry task force last November. The task force, whose report was published last month, developed several important initiatives. Those consist of specific projects which will improve industry collaboration with the service sector, stimulate the development and use of new technology, and address the skills needed by the industry.

My noble friend Lord Hogg noted that employment in the oil industry is projected to reduce gradually over the next 12 years. I should not wish to seem unduly pessimistic given that historically such projections have nearly always proved to be conservative—with a small "c". Indeed, the task force believes that the initiatives it is putting in place should help support 100,000 more jobs in the UK than would have been the case if no action had been taken.

The Government and the industry both believe that the UK Continental Shelf, despite its maturity, can improve its international competitiveness and can continue to make a substantial contribution to the UK economy in the future. I fully expect Aberdeen to continue to play a significant role in that business.

I have spoken of the oil and gas industry at some length, but let us not forget other sectors which make a contribution to the UK economy from the north-east of Scotland and which I am pleased that various noble Lords have raised this evening. I noted what the noble Earl, Lord Mar and Kellie, said about Shetland. Although Caithness is up for inclusion in the North-East, I do not really know what to say about Shetland. I spent a delightful holiday in Shetland this summer, and I note and am aware of the concern about the RAF station at Unst.

My noble friend Lord Hogg made some observations on the economic infrastructure of the area, putting in a particular plea for the western peripheral route. My noble friend will understand that that is a matter for the Scottish executive. However, I understand that the proposal for this route is the responsibility of Aberdeen City and Aberdeenshire councils and that at this stage the route is unlikely to be designated a trunk road. I further understand that the councils concerned have set the case for the road in the context of their draft local transport strategies submitted to the Scottish executive.

My noble friend was also concerned that Aberdeen City Council receives the financial assistance it requires to tackle poverty and social exclusion. My noble friend Lord Hughes has spoken movingly tonight of some of the problems in Aberdeen. I accept much of what he said about the people of Aberdeen and their spirit in tackling those problems. Again, I know that my noble friends appreciate that those matters fall to the Scottish executive to consider.

However, New Housing Partnership resources totalling almost £2 million have been earmarked to progress Aberdeen City Council's housing transfer proposals. It is expected that those proposals will yield substantial new investment to tackle disrepair throughout the housing stock, including areas which are in urgent need of investment like Tillydrone.

I turn now to other sectors. Many high quality and internationally renowned food and drink companies are located in this area, including Baxters of Speyside and several distilleries, whose products I know many noble Lords greatly appreciate and are familiar with. In 1997 there were 12,400 people in the North-East employed in such varied sectors of the food industry as the processing and preserving of fish, the manufacture of food and beverages and the production and preserving of meat.

Furthermore, as recently announced—my noble friends Lord Hughes and Lord Sewel, the noble Earl, Lord Kintore, and the noble Lord, Lord Wilson of Tillyorn, have all mentioned this point—the Scottish arm of the proposed new food standards agency will be located in Aberdeen. The agency's Scottish executive will comprise up to 45 staff.

Whisky is what many people across the globe associate most readily with Scotland. It is Scotland's second largest and most profitable export industry after electronics, and the UK's fifth largest profitable export industry after chemicals, metal goods, textiles and office equipment. I do not believe I need explain to this House the statistics which show that that industry is indeed a very important one, both to the area, and to the economy of the United Kingdom.

I turn now to the farming and livestock industry. In 1998 there were 12,300 people engaged in agriculture in the North-East, accounting for 2 per cent of the UK agricultural workforce. The contribution made to the economy by that sector is equally valuable, with the 1998 gross agricultural output in the North-East being estimated at over £390 million or 2.4 per cent of the UK figure. Although the farming industry is facing a number of difficulties as a result of such fact ors as the strong pound and continuing oversupply, as noted by the noble Earl, Lord Mar and Kellie, it continues to make a valuable contribution both to employment and to the UK economy.

I take issue very strongly with the noble Earl, Lord Caithness, on his statement that this Government's farming policy is not to help, as indeed did my noble friend Lord Sewel, who speaks from his extensive and recent experience. The noble Earl and the noble Earl, Lord Courtown, also raised the issue of rural petrol prices. Both the Competition Commission and the OFT have investigated rural petrol prices, and have concluded that higher prices in rural areas are determined by lack of competition, and, to a lesser extent, by transport costs. The fuel escalator is a response to the need to reduce carbon emissions. The issue of land reform, which the noble Earl raised, is of course a matter for the Scottish Parliament.

I agree with one thing which the noble Earl said: it is a beautiful countryside. I passed through it this summer.

The North-East also makes an unrivalled contribution to the UK fishing industry: 3,040 people are directly involved in the catching of fish, which is about 17 per cent of the total UK employment in the fish industry sector. A further 4,200 people are employed in fish processing in the North-East—about 21 per cent of the GB total. By any yardstick, it is clear that the fishing industry makes a significant contribution to the North-East's economy.

I cannot conclude without saying that the Government recognise the vital economic and cultural contribution made by universities and colleges to north-east Scotland. The noble Lords, Lord Glenarthur and Lord Wilson of Tillyorn, and my noble friend Lord Sewel dealt with that adequately and widely. In fact, as was pointed out, there is quite an impressive roll call of University of Aberdeen luminaries participating in the debate.

The contribution of the universities and colleges of north-east Scotland to economic development is substantial and wide ranging. They are creators of revenue, generators of external income from services, economic regenerators, producers of skilled recruits, and centres of leading-edge research. The influence of universities and colleges in the North-East spreads throughout the UK, Europe and the world by virtue of the education, research and consultancy which is provided.

I am speaking under a tight time constraint. I hope that I have answered all the points raised. However, I shall study Hansard closely and if I have missed anything on which I could comment usefully, I shall write to those noble Lords concerned.

I conclude by assuring my noble friend Lord Hogg and the whole House that Her Majesty's Government recognise the contribution which Aberdeen and north-east Scotland make to the economy of the UK. Indeed, one of the first engagements of my right honourable friend John Reid as Secretary of State for Scotland was to go to Aberdeen to visit local businesses. By working with the oil and gas industries and other sectors such as food and drink, farming and fishing, the Government intend to do all that they can to ensure that that important contribution is maintained into the future.

House adjourned at eleven minutes past eight o'clock.

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