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Clause 4

Volume 978: debated on Wednesday 6 February 1980

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Financial Limits

I beg to move amendment No. 10, in page 3, line 44 leave out from 'and' to '(which' in page 4, line 1.

With this we may take amendment No. 11, in page 4, line 4, leave out 'and Welsh Development Agencies' and insert Development Agency'.

These amendments go to the central part of the Bill at a particularly timely moment. The objective of the Bill is to amend the Welsh Development Agency Act in such a way as to eliminate the availability of an additional £150 million by order of the Secretary of State with the Treasury's consent. I accept that similar provisions are being made in respect of the National Enterprise Board, through the Industry Act amendment, and the Scottish Development Agency, through the Scottish Development Agency Act amendment, which come forward in the same clause.

The argument in relation to the Welsh Development Agency is particularly timely because of the crisis—I choose my word carefully—that is now facing industry in Wales. It is such a crisis that we had the unprecedented development on Monday night of the annual Welsh debate being subject to a three-line Whip. That was quite right in view of the cataclysmic effect on employment in Wales of developments in industry.

Steel closures in Wales are precipitating the direct loss of around 15,000 jobs. Associated with those steel closures is the possible loss of up to 22 of the 36 or 37 coal mines at present operating in Wales. That will involve the loss of another 15,000 jobs. Together with this loss of 30,000 jobs in coal and steel, inevitably there will be associated job losses in engineering, transport and the other service industries. Around 50,000 jobs will be lost in Wales, which will increase the unemployment level from the present

near-100,000 figure to around 150,000. It is salutary to remember that the unemployment level in Wales in 1928, at the beginning of the depression, was 154,000. In other words, we are now seeing the development of chronic unemployment in Wales on a parallel to the tragedy that we experienced in the years between the two world wars.

In such circumstances, I do not think that any hon. Member would disagree that there is a need for intervention. If there is no intervention, and if there is no positive stimulus to try to encourage job opportunities in Wales, not only will industries collapse; whole communities that are dependent upon them will collapse—communities in the valleys of North and North-East Wales, communities around Shotton steelworks and in the Wrexham coalfield area. It will spread to my county of Gwynedd and to Dyfed, which are to a large extent dependent upon those industries. In the absence of those industries and the focus on the coal and steel areas for attracting new jobs, it will be virtually impossible to attract new jobs to Gwynedd and Dyfed because of the focus on the eastern parts of Wales.

There is a real crisis in employment—a crisis, to be fair, that the Secretary of State has recognised. In the context of Shotton, there has been an allocation of an additional £15 million to help to develop job opportunities in that area. That money is desperately needed. Much more than £15 million is needed if we are to create the jobs that are needed in Shotton and Clwyd.

But if we consider not only the closures at Shotton and Clwyd but the closures in Glamorgan, Gwent and South-East Dyfed, we are talking about a much larger figure. I acknowledge that the Welsh Office has taken an initiative in this direction by adding £48 million to the budget of the Welsh Development Agency to help such areas.

If there is logic in adding £15 million to WDA's expenditure because of the closures in Shotton, and if there is a need to add £48 million because of the crisis in the coal and steel industries in Glamorgan and Gwent, it is crazy to cut away the £150 million expenditure provision that was provided under section 18 of the Welsh Development Agency Act 1975. Whatever the merits or demerits of that £150 million provision in the original Act, and whatever the merits or demerits of upping the figures, as was done in the Industry Act 1979, there can now be no argument that, given the crisis that we face in Wales, we need every provision at our disposal in order to respond to it.

We do not know the size of the domino effect that we will suffer in Wales. We know that when manufacturing industries close, not only the direct industries, or even the spin-off industries, such as engineering or transport, will suffer. Shops, pubs, hotels—everything in the economy—will be in danger.

Such uncertainty, which is disturbing a tremendous number of people in Wales, was the background to the massive demonstration in Cardiff a fortnight ago. In such circumstances, it is criminal to take away the extra provision that has already been statutorily provided by the Welsh Development Agency Act.

Whatever the arguments in relation to the NEB and to the Scottish Development Agency—I accept that there may be similar arguments in those directions—in the case of Wales, given the crisis that we are facing, we should not cut that provision.

11.15 pm

The hon. Member for Caernarvon (Mr. Wigley) made a good case, though I am sure that he would be the first to admit that even if the amendment were accepted and the Secretary of State retained the power to increase the borrowing limits of the WDA, it would not make the slightest difference in present circumstances.

However, in view of the atmosphere in Wales, it is a pity that the impression should be given that the clause is creating obstacles to the raising of the limits should the necessity arise.

Even my hon. Friend the Under-Secretary of State for Industry, who led in Committee with such superlative skill—I have never served on a Committee that was better led by a junior Minister—failed to convince me on this matter, and I abstained in the Division. Perhaps my right hon. Friend the Secretary of State for Wales will be more convincing. I shall wait and see.

I congratulate the hon. Member for Caernarvon (Mr. Wigley) on tabling the amendment. It may appear invidious to single out Wales from Scotland and the development areas of England, but we have a valid case.

I was delighted to hear the hon. Gentleman say that in the Welsh affairs debate on Monday "we" were on a three-line Whip. I am not sure whether he was referring to Plaid Cymru or to the Labour Party, but I am glad that he is identifying himself with the Labour Party, because that reflects the policies being pursued by the Government.

Some of us gave the House some facts and figures in Monday's debate and I should like to draw attention to the startling fact that in 1975 there were 15 per cent. fewer men in employment in Wales than in 1965. The position has worsened since then, and the figure must be nearing 20 per cent. That is a measure of the seriousness of the situation facing Wales even before the developments that are likely to occur over the next year or two.

There are reasons for such figures. They are connected with our historical development and the fact that the coal, slate and steel industries went where the deposits were. Now that that sort of mineral-deposit location of industry no longer has the same force, the original trends to the South-East are reasserting themselves and have reached such desperate proportions in Wales that some of us feel that in many ways, not directly concerned with industry, serious consequences are resulting.

For example, it is well known that the Welsh figures for children leaving school with qualifications, whether GCE, CSE or whatever, are appreciably worse than those in any other area. There have been arguments whether the education system in Wales is as good as that elsewhere, but some of us who have studied the matter seriously feel that perhaps a long period of emigration of some of our most talented young people is resulting in Wales being left with an inherently lower native talent. That may appear fanciful, but some of us think that there are grounds for believing that it may be so.

The Secretary of State for Wales has announced substantial increases in assistance as a crisis measure, and I am grateful for them, but that is not the same as having built in, as a part of permanent Government policy, a recognition of the desperately serious position in Wales, which is relatively worse than in any other part of the United Kingdom.

I hope that the House will agree that in debates about a particular part of the United Kingdom there is some danger in concentrating on the problems of that area. We put forward proposals that may be superficially advantageous to that area but may disadvantage, and even damage, other areas.

The Secretary of State for Industry frequently speaks of the damage done to the taxpayer generally. I want to speak of the effect of regional policies on those areas that border upon Wales, such as the once prosperous areas of Wolverhampton and the Black Country. Wolverhampton is now properly described as a depressed area and, as my right hon. Friend has often said, it has been severely damaged by regional policies, of which the Welsh Development Agency is a significant part.

I am bound to disagree with the way in which my hon. Friend the Member for Flint, West (Sir A. Meyer) puts his argument. In the short term it may be to the advantage of the people of Wales if the borrowing limits of the Welsh Development Agency are made more generous. What is to their short-term advantage is almost certainly to the long term disadvantage of stricken areas such as Wolverhampton. Therefore, on this occasion I am pleased to support the more stringent measures put forward by my right hon. Friend.

The hon. Member for Caernarvon (Mr. Wigley) and the hon. Member for Wrexham (Mr. Ellis) spoke about the serious situation that we face as a result of steel and coal closures in South Wales. I would not accept all the figures and all the estimates they referred to, nor would I necessarily draw the same conclusions as those of the hon. Member for Wrexham.

I would be the last to underestimate the serious impact of these developments in South Wales, and I did not seek to do so in the debate on Monday. However, we are not debating the immediate financial provisions to meet the situation or, indeed, what money will be made available from year to year under the Government's unfolding expenditure plans.

The proper place to reach that decision is when the time comes to discuss the financial Estimates. We are debating the control exercised by the House of Commons. That is the central point. The hon. Gentleman spoke of uncertainty and my hon. Friend spoke of the atmosphere in Wales and of not placing unnecessary obstacles in the way of dealing with the situation.

I am not seeking, nor are the Government seeking, to place obstacles. The statements that I have made about Shotton and about the financial provision for closures at Llanwern and Port Talbot indicate the determination of the Government to take effective action to deal with the problems. We accept that the Government are obliged to deal with the social consequences of change and must seek to rebuild the industrial infrastructure in the area.

I fully appreciate the points made by my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) and understand the need not to weaken the areas that were once strong in the heartland of Britain. But he must face the fact that the speed of change that now confronts Wales is dramatic. It imposes social obligations on the Government. It is easy to talk of mobility, and perhaps we should have greater mobility, but the people of this country do not live in tents. Social communities are of real value and deserve investment. When major industries are closed, it is no solution to expect the population to move. The Goverment have an obligation to provide infrastructure and to encourage industry to develop.

I am sure that the Minister does not seek to exaggerate my case. I accept that people do not live in tents and that any Government must accept their social obligations. I say that that must be carefully balanced against the long-term damage, for the best motives, to the once-prosperous areas.

:Does the Minister agree that the dangers to the Midlands, the heartland of British industry, were detected long ago by Joseph Chamberlain? He attributed that danger not to assistance to Wales, which has gone on for generations, but to the growing importation of manufactured goods. Will the Secretary of State for Wales refute the argument of the Secretary of State for Industry that the reason for decline in the Midlands is the immigration of people from the New Commonwealth?

I shall not be diverted at this time of night on the effect of import controls or immigration. We are dealing with a specific and limited issue—the financial limits on the Welsh Development Agency. I shall confine my remarks to Wales.

In Committee the point was made that the WDA has spent only half its present limit of £250 million after four years. The latest calculations show that that is an overestimate. By the end of this financial year the agency will have spent little more than £107 million. The £48 million that I anounced on Monday will count against the WDA's financial limit and have an impact on the timing. If there is any anxiety about the effect of the financial limit, the Government will take decisions year by year, taking into account the finances of the country and the needs of an area. All that we seek to do is to ensure that the House has effective control.

When the limit runs out we shall, if necessary, introduce primary legislation to extend the life of the WDA. My commitment to the work of the WDA is known. I have made it clear by my actions that I support it in the good work that it is doing. It is right to ask the House for approval, by primary legislation, when further funds are required rather than to rush through an order with inadequate debate,

Is the Secretary of State aware that the Industry Act 1979 changed the borrowing limit for the Welsh and Scottish Development Agencies? The external borrowing of the subsidiaries now counts against the borrowing limit. The right hon. Gentleman talks about introducing primary legislation when, by increasing the amount of private sector money invested in joint ventures, both agencies may have to refuse money until primary legislation is passed in an already congested timetable.

11.30 pm

:As the WDA has made perfectly clear, it sees its primary role as preparation of the infrastructure and its advance factory building programme. Although it sees a role for itself in investment, that is largely confined to the smaller businesses. I do not believe that there will be a situation in which there will be large investments of the kind that would have the effect described by the hon. Gentleman. The WDA does not see itself, and the Government do not see it, having large subsidiaries that are likely to add to the agency's borrowing in that way. Therefore, I do not think that it is a serious point.

May I ask the right hon. Gentleman to look at the Official Report of the Committee proceedings? There he will find that his hon. Friend the Under-Secretary of State for Industry said, on this point:

"The Government intend that private sector investment should be given substantial encouragement. We look to see a substantial degree of partnership between the private sector and the Welsh Development Agency."
The rest of what the hon. Gentleman said confirmed that. He said:
"The total amount of money that will become available will therefore be much greater than it would be without a partnership bringing in private sector investment."—[Official Report, Standing Committee E. 13 December 1979; c 662.]
Does not that confirm my point and negate what the right hon. Gentleman said?

It does not at all, because the hon. Gentleman has misunderstood the kind of partnership that we envisage. We certainly do not envisage an investment partnership in which the agency has substantial subsidiary companies. What we believe we can do is to bring private sector money into the ownership of factories. The WDA will be able to sell off and dispose of factories and turn over its assets in this way. What the Government seek to do is to relieve the public sector of the burdens being placed on it in a factory building programme by turning over the agency's assets and making private sector resources available in the factory building programme and in the acquisition of industrial sites.

A great deal of preparatory work is being done. Whatever general points were made in Committee in connection with the NEB and the Scottish Development Agency, I am dealing with an amendment concerning the Welsh Development Agency's policy. I have described the kind of investment from the private sector that the agency is energetically seeking. I am sure that the House, particularly my hon. Friends, will be glad that we are seeking to ease the burden on the taxpayer and the public sector by seeking finance of this kind.

I say particularly to my hon. Friend the Member for Flint, West (Sir A. Meyer) that this is in no way a matter that weakens the Government's determination to give any necessary support to the Agency for the kind of measures that we have announced at Shotton or in South Wales or for the other work that it is doing, but we believe that if substantial additional funds are required in the future it is right that they should be properly and fully considered by the House.

This has been a brief but important debate. I understand that the Secretary of State bases his argument on two matters. First, he would prefer that any additional funds for the WDA should come through primary legislation as opposed to being provided by order, but if a crisis develops and we need additional funds immediately we shall come up against the problem of the tremendous pressure on the legislative programme. If legislative provision were found possible and were put to the House, it would—in the same way as the right hon. Gentleman has described under the procedure for an order—be taken late at night, and perhaps with less attention than the major Bills receive.

Section 18 of the 1975 Welsh Development Agency Act provides that the order for extending by £150 million the funds for the WDA
"shall not be made unless a draft of it has been approved by resolution of the House of Commons."
So there is provision for democratic control. The reality is that many important and far-reaching decisions are taken in this Chamber after 10 o'clock. The likelihood of a Bill to amend the WDA Act being taken at any other time is reasonably remote. I do not believe that that is a genuine argument against the provision of this £150 million.

The right hon. Gentleman's other argument is that adequate finances are already available to the WDA to meet foreseeable needs and that these, together with the funds available from the private sector, should be enough. I do not think that that stands up to any analytical test. If, as I postulate—I accept that the right hon. Gentleman may not agree with all the figures—we are talking of potential unemployment of 150,000, and given that there are now 90,000 unemployed and that there were 100,000 in a cyclical situation under the last Government, and given also that there is considerable unemployment in the pipeline—I think that 150,000 is highly likely—to bring that figure down to 50,000 will mean creating 100,000 additional jobs.

Let us assume that only half of those are in manufacturing industries and that the investment is at a cost of £10,000 per job. It means that we are talking about £500 million. If only half of that were forthcoming from the private sector, it would mean that another £250 million would be needed now, over and above what has been invested by the WDA, in addition to the infrastructure work that it is required to undertake in terms of providing sites, land clearance and so on.

Given all those circumstances, the likelihood—indeed, the certainty—is that in the lifetime of this Parliament we shall need more than the provision of the 1979 Act, which amended the 1975 Act—that is, £250 million. I put it to the right hon. Gentleman that as an act of commitment, as a symbol to the people of Wales, the Government should accept that it is not unreasonable to leave the £150 million provision in the original Act, so that it can be drawn upon immediately it is needed and so that the people of Wales can see that the Government are serious about giving the WDA the elbow room that it needs and providing the resources that it needs to counteract the unemployment situation.

I rise to speak, if only briefly, because I feel disturbed about what the Secretary of State for Wales said. I concede that the right hon. Gentleman comes fresh to this debate. There was no Welsh Minister on the Committee that considered the Bill. Although the other Celtic fringe was well represented on the Committee, perhaps the Welsh dimension was better represented on the Opposition Benches.

However, the right hon. Gentleman cannot get away from the fact that his hon. Friend the Under-Secretary of State for Industry made a number of comments on this matter and that the House deserves some explanation of the dichotomy of views.

The hon. Member for Flint, West (Sir A. Meyer) made a powerful speech on this subject in Committee. He demanded a number of assurances from his hon. Friend about the financial limits that we are debating. I shall do no more than quote the hon. Gentleman's peroration:
"Despite reassurances from the Welsh Office that the Welsh Development Agency will not need anything like these financial limits, I can foresee the situation getting out of hand at such a rate that these limits will rapidly reveal themselves as inadequate. So I need some reassurance on that matter."
Galloping to the rescue of the Government's majority in Committee came the Under-Secretary of State for Industry, and it was in that context that the hon. Gentleman gave the reassurance that I quoted. It is important that the Secretary of State should realise what was said on his behalf in that Committee, because it differs markedly from what he has told the House this evening. The Under-Secretary of State said:
"The Government intend that private sector investment should be given substantial encouragement…The total amount of money that will become available will therefore be much greater than it would be without a partnership bringing in private sector investment."—[Official Report, Standing Committee E, 13 December 1979; c. 650–62.]
That may have placated the hon. Member for Flint, West—I do not know—but it has certainly not placated me. If we are to believe that the only mechanism by which the WDA and the SDA, and the NEB as well, are to be funded is by attracting private sector investment in partnership, it will need primary legislation, perhaps taking months to go through all the procedures of the House, in order to increase the borrowing limits so that that private sector investment can even be used legally within the context of the Bill.

I hope that overnight the Secretary of State for Wales will consult his colleagues in the Department of Industry in order that we may get a coherent and sensible view from the Government about what sort of predicament will face the people of Wales and Scotland if the demand for resources is what all the indicators in the economy suggest it will be.

I have already consulted my hon. Friend. He reminds me that the remarks that have been quoted were made in the context of the discussion about Shotton and the need for effective measures there. The fact is that he was thinking exactly as I was thinking and, indeed, telling the House just now: that we were talking about the potential for private sector investment in the very attractive industrial sites there. We see considerable attractions for private investment there. We are taking energetic measures to initiate a programme to that end, and we shall do so.

On the pure investment side—shareholdings in companies—it is not the intention of the agency or the Government to have a programme on a scale that is likely to distort the figures about which we are talking in this part of the Bill. The present investment budget being allocated in the coming year is about £3 million or £4 million, out of its total expenditure. We are not dealing with sums of money that will distort the figures about which I have been talking.

The hon. Member for Caernarvon (Mr. Wigley) talked about a cost of £10,000 per job. Whether or not one accepts such a figure, it certainly will not come from the WDA. That is a combination of the various forms of assistance that are available to the Government under the Industry Act, under selective financial assistance, and so on, and would certainly not be a cost per job in terms of the contribution made through the WDA.

If we are dealing with the scale of the package, the WDA will have spent a little more than £107 million by the end of this financial year. The additional provision that I have announced for Shotton and for South Wales covers a period of two years. I do not anticipate any such violent upsurge that we could not deal with it by legislation. Although the hon. Member for Hamilton (Mr. Robertson) tells us that this matter can be dealt with briefly and quickly by order late at night, I think that there are many hon. Members who feel that it is wrong that we should vote large sums of public money in so casual a way, and that is the Government's view. We intend to give the House, whenever it is possible—and it is clearly possible in this case—ample time to consider and debate these issues. That is a responsible and proper way to deal with the matter.

Perhaps the hon. Member for Flint, West (Sir A. Meyer), who obviously wishes to intervene, might make the case even better than I can. Perhaps I may correct the Secretary of State, before he gets into even more trouble on this subject, by telling him that the discussion in the Committee had nothing whatsoever to do with Shotton. The hon. Member for Flint, West had been talking specifically, as reported at column 650, about the WDA's borrowing limits. His hon. Friend the Minister, who was busy giving him references just now, will see, if he turns to column 662, from which I was quoting, that the hon. Member was referring to the WDA's borrowing limits and that the discussion at that stage had nothing whatsoever to do with Shotton.

Division No. 159]


[11.46 pm

Adams, AllenEvans, John (Newton)Powell, Raymond (Ogmore)
Alton, DavidGolding, JohnPrescott, John
Bennett, Andrew (Stockport N)Haynes, FrankRoberts, Ernest (Hackney North)
Booth, Rt Hon AlbertHogg. Norman (E Dunbartonshire)Robertson, George
Brown, Ron (Edinburgh, Leith)Holland, Stuart (L'beth, Vauxhall)Rooker, J. W.
Campbell-Savours, DaleHome Robertson, JohnRowlands, Ted
Cant, R. B.Janner, Hon GrevilleSilkin, Rt Hon John (Deptford)
Concannon, Rt Hon J. D.Johnston, Russell (Inverness)Smith, Cyril (Rochdale)
Craigen, J. M. (Glasgow, Maryhill)Jones, Rt Hon Alec (Rhondda)Smith, Rt Hon J. (North Lanarkshire)
Crowther, J. S.Lambie, DavidSpearing, Nigel
Cryer, BobLamond, JamesSteel, Rt Hon David
Cunliffe, LawrenceMcCartney, HughStott, Roger
Cunningham, Dr John (Whitehaven)MacKenzie, Rt Hon GregorTinn, James
Davidson, ArthurMaclennan, RobertTorney, Tom
Davis, Terry (B'rm'ham, Stechford)McNamara, KevinWelsh, Michael
Dixon, DonaldMcWilliam, JohnWrigglesworth, Ian
Dormand, JackMarks, Kenneth
Dunnett, JackMaxton, JohnTELLERS FOR THE AYES:
Dunwoody, Mrs. GwynethMorton, GeorgeMr. Dafydd Wigley and
Ellis, Tom (Wrexham)Parry, Robert Mr. Gordon Wilson.
English, MichaelPenhaligon, David

while I admit that I am still as agnostic as ever I was over the necessity for removing these powers of the Secretary of State, I am impressed by the celerity with which my right hon. Friend has responded to the emergency. However, I am satisfied that the existing powers provide the means to do what he seeks and I do not see the need to remove them.

11.45 pm

I am surprised that the hon. Member for Hamilton has not bothered to read the Hansardthat he has just drawn to my attention. He told me that he was referring to colum 662. My hon. Friend the Under-Secretary went on in the next sentence to give us the example of the Deeside estate:

"which is coming on stream for the building of new factories, we expect that there will be substantial partnership between the public and the private sector."—[Official Report, Standing Committee E, 13 December 1979; c. 662.]
The hon. Member for Hamilton may not know—he is unfamiliar with Wales—that the Deeside industrial estate is at Shotton. That is what we are talking about, and that is what I was talking about. The hon. Member is wrong and I am right. Before he misleads the House, he should read what was said in Committee. There is nothing else that needs to be said.

Question put, That the amendment be made:—

The House divided: Ayes 58, Noes 247.


Aitken, JonathanGorst, JohnPatten, Christopher (Bath)
Alexander, RichardGow, IanPatten, John (Oxford)
Alison, MichaelGower, Sir RaymondPawsey, James
Ancram, MichaelGreenway, HarryPercival, Sir Ian
Arnold, TomGrieve, PercyPink, R. Bonner
Aspinwall, JackGriffiths, Peter (Portsmouth N)Pollock, Alexander
Atkins, Rt Hon H. (Spelthorne)Grist, IanPrice, David (Eastleigh)
Baker, Kenneth (St. Marylebone)Grylls, MichaelProctor, K. Harvey
Baker, Nicholas (North Dorset)Gummer, John SelwynRathbone, Tim
Beaumont-Dark, AnthonyHamilton, Hon Archie (Eps'm&Ew'll)Rees, Peter (Dover and Deal)
Bendall, VivianHamilton, Michael (Salisbury)Renton, Tim
Benyon, Thomas (Abingdon)Hampson, Dr KeithRhodes James, Robert
Benyon, W. (Buckingham)Haselhurst, AlanRhys Williams, Sir Brandon
Berry, Hon AnthonyHavers, Rt Hon Sir MichaelRidley, Hon Nicholas
Best, KeithHawksley, WarrenRifkind, Malcolm
Biffen, Rt Hon JohnHeddle, JohnRoberts, Wyn (Conway)
Biggs-Davison, JohnHenderson, BarryRose, Wm. (Londonderry)
Blackburn, JohnHeseltine, Rt Hon MichaelRossi, Hugh
Blaker, PeterHicks, RobertRost, Peter
Bonsor, Sir NicholasHill, JamesRoyle, Sir Anthony
Bottomley, Peter (Woolwich West)Hogg, Hon Douglas (Grantham)Sainsbury, Hon Timothy
Bowden, AndrewHolland, Philip (Carlton)St. John-Stevas, Rt Hon Norman
Boyson, Dr RhodesHooson, TomShaw, Giles (Pudsey)
Bradford, Rev. R.Hordern, PeterShaw, Michael (Scarborough)
Bright, GrahamHowell, Ralph (North Norfolk)Shelton, William (Streatham)
Brinton, TimHunt, David (Wirral)Shepherd, Colin (Hereford)
Brittan, LeonHunt, John (Ravensbourne)Shepherd, Richard (Aldridge-Br'hills)
Brocklebank-Fowler, ChristopherHurd, Hon DouglasShersby, Michael
Brooke, Hon PeterJenkin, Rt Hon PatrickSilvester, Fred
Brotherton, MichaelJohnson Smith, GeoffreySims, Roger
Brown, Michael (Brigg & Sc'thorpe)Jopling, Rt Hon MichaelSpeller, Tony
Browne, John (Winchester)Joseph, Rt Hon Sir KeithSpence John
Bruce-Gardyne, JohnKaberry, Sir Donald Spicer, Michael (S Worcestershire)
Bryan, Sir PaulKershaw, AnthonySproat, Iain
Buck, AntonyKing, Rt Hon TomSquire, Robin
Budgen, NickLang, IanStainton, Keith,
Bulmer, EsmondLawson, NigelStanbrook, Ivor
Butcher, JohnLee, JohnStanley, John
Butler, Hon AdamLe Merchant, SpencerSteen, Anthony
Cadbury, JocelynLester, Jim (Beeston)Stevens, Martin
Carlisle, John (Luton West)Lloyd, Ian (Havant & Waterloo)Stewart, Ian (Hitchin)
Carlisle, Kenneth (Lincoln)Lloyd, Peter (Fareham)Stewart, John (East Renfrewshire)
Carlisle, Rt Hon Mark (Runcorn)Loveridge, JohnStradling Thomas, J.
Chalker, Mrs. LyndaLuce, RichardTaylor, Robert (Croydon NW)
Channon, PaulLyell, NicholasTebbit, Norman
Clark, Hon Alan (Plymouth, Sutton)Macfarlane, NeilTemple-Morris, Peter
Clark, Sir William (Croydon South)MacKay, John (Argyll)Thompson, Donald
Clarke, Kenneth (Rushcliffe)McNair-Wilson, Michael (Newbury)Thorne, Neil (Ilfored South)
Cockeram, EricMcNair-Wilson, Patrick (New Forest)Thornton, Malcolm
Colvin, MichaelMcQuarrie, AlbertTownend, John (Bridlington)
Cope, JohnMajor, JohnTownsend, Cyril D. (Bexleyheath)
Corrie, JohnMarland, PaulTrippier, David
Costain, A. P.Marlow, AntonyTrotter, Neville
Cranborne, ViscountMarshall, Michael (Arundel)van Straubenzee, W. R.
Critchley, JulianMarten, Neil (Banbury)Viggers, Peter
Crouch, DavidMather, CarolWaddington, David
Dickens, GeoffreyMawby, RayWakeham, John
Dorrell, StephenMawhinney, Dr BrianWaldegrove, Hon William
Douglas-Hamilton, Lord JamesMaxwell-Hyslop, RobinWalker, Rt Hon Peter (Worcester)
Dover, DenshoreMayhew, PatrickWalker, Bill (Perth & E Perthshire)
Dunn, Robert (Dartford)Mellor, DavidWall, Patrick
Durant, TonyMiller, Hal (Bromsgrove & Redditch)Waller, Gary
Eden, Rt Hon Sir JohnMills, Iain (Meriden)Walters, Dennis
Edwards, Rt Hon N. (Pembroke)Miscampbell, NormanWard, John
Eggar, TimothyMitchell, David (Basingstoke)Warren, Kenneth
Emery, PeterMoate, RogerWatson, John
Eyre, ReginaldMolyneaux, JamesWells, John (Maidstone)
Fairbairn, NicholasMonro, HectorWells, Bowen (Hert'rd &Stev'nage)
Fairgrieve, RussellMontgomery, FergusWheeler, John
Faith, Mrs SheilaMorgan, GeraintWhitelaw, Rt Hon William
Farr, JohnMorris, Michael (Northampton, Sth)Whitney, Raymond
Fenner, Mrs PeggyMorrison, Hon Peter (City of Chester)Wickenden, Keith
Finsberg, GeoffreyMudd, DavidWiggin, Jerry
Fisher, Sir NigelMurphy, ChristopherWilliams, Delwyn (Montgomery)
Fletcher, Alexander (Edinburgh N)Myles, DavidWinterton, Nicholas
Fletcher-Cooke, CharlesNeale, GerrardWolfson, Mark
Forman, NigelNeedham, RichardYoung, Sir George (Acton)
Fox, MarcusNelson, AnthonyYounger, Rt Hon George
Fraser, Rt Hon H. (Stafford & St)Neubert, Michael
Fraser, Peter (South Angus)Normanton, Tom
Gardiner George (Reigate)Nott, Rt Hon JohnTELLERS FOR THE NOES:
Garel-Jones, TristanPage, Rt Hon Sir R. GrahamMr. John MacGregor and Mr. Tony Newton.
Gilmour, Rt Hon Sir IanPage, Richard (SW Hertfordshire)
Goodhart, PhilipParris, Matthew

Question accordingly negatived.

I beg to move amendment No. 12, in page 4, line 6, at end insert—

  • '(2) After section 8(2) of the Industry Act 1975, there shall be inserted—
  • "(2A) The Secretary of State may by order provide for the limit specified in subsection (2) above to be reduced or further reduced to such amount not less than £750 million as may be specified in the order.
  • (2B) Notwithstanding section 38(2) below, an order under subsection (2A) above may not be revoked or varied by a later order except in connection with the making of a further reduction in the limit specified in subsection (2) above.
  • (2C) No order shall be made under subsection (2A) above unless a draft of it has been approved by resolution of the House of Commons."
  • (3) Subject to subsection (4) below, the Secretary of State shall by order specify an amount as the financial limit for the purposes of section (Finance for companies transferred to Secretary of State), and may by order increase or further increase the amount so specified.
  • (4) The aggregate of the amounts for the time being specified under subsection (3) above and in section 8(2) of the Industry Act 1975 shall not exceed £3,000 million.
  • (5) The power to make orders under subsection (3) above shall be exercisable by statutory instrument, and no such order shall be made unless a draft of it has been laid before and approved by resolution of the House of Commons.
  • (6) Subject to subsection (7) below, the aggregate of—
  • (a) any sums paid by the Secretary of State under this Act in respect of the acquisition of shares in any company which before or immediately after the acquisition was a company to which section (Finance for companies transferred to Secretary of State) applied,
  • (b) the amounts outstanding, otherwise than by way of interest, in respect of the general external borrowing of companies to which that section applies, and
  • (c) any sums paid by the Secretary of State to meet guarantees given under subsection (2)(c) of that section, to the extent that they have not been repaid,
  • shall not exceed the amount which is for the time being the financial limit for the purposes of that section.
  • (7) The sums paid by the Secretary of State under this Act in respect of the acquisition from the National Enterprise Board of shares in any company shall be treated for the purposes of subsection (6) above as reduced by an amount equal to so much of the debt of the Board assumed under paragraph 6(1) of Schedule 2 to the Industry Act 1975 on their acquisition of securities of the company as was immediately before section (Finance for companies transferred to Secretary of State) applied to the company treated by virtue of paragraph 5(2) of that Schedule as part of the Board's public dividend capital.
  • (8) For the purposes of subsection (6)(b) above, the general external borrowing of a company is the aggregate of—
  • (a) sums borrowed by the company otherwise than from any subsidiary of the company, and
  • (b) sums borrowed by such a subsidiary otherwise than from the company or another such subsidiary.'.
  • :With this it will be convenient to take new clause 1—Finance for companies transferred to Secretary of State—and Government amendment No. 32.

    The new clause and the associated amendment to clause 4, although complex and substantial, are essentially technical adjuncts to clause 2, which was fully debated on Second Reading and in Committee.

    In Committee on 11 December, before clause 2 was discussed, I explained why the additions were necessary. When the Bill was introduced, I thought that the powers available under the Industry Act 1972—and for Rolls-Royce in particular under the Rolls-Royce (Purchase) Act 1971—and the Civil Aviation Act 1949would enable me to provide finance to companies transferred to my ownership from the NEB. However, on further consideration and advice I decided to seek new powers not simply to provide the necessary finance but to enable it to be done within an appropriate framework of parliamentary accountability and control.

    As the House knows, it is the Government's intention that Rolls-Royce should be transferred from the NEB after the Bill becomes law. The possibility cannot be ruled out that British Leyland will be dealt with in the same way; no decision or commitment of any sort has yet been made. It needs most careful consideration. I do not expect to make a further statement on the matter for some time. The transfer of either or both of those companies will have important implications for the NEB's statutory financial limit, and those implications are dealt with in the associated amendment to clause 4.

    The House may find it helpful if I say something about the Government's intentions in relation to the exercise of these new powers. Apart from British Leyland and Rolls-Royce, which I have already dealt with, it is not our intention that my Department should require other shareholdings from the NEB simply in order to reduce the size of its investment portfolio. That would be quite inconsistent with the Government's policy that the NEB should promote the private ownership of its holdings, as clause 1 provides.

    12 midnight

    The amendment provides that where any company is moved under the procedure laid down in the new clause from the NEB to the Secretary of State, an equivalent movement of borrowing limits shall be made, provided that the—

    :On a point of order, Mr. Deputy Speaker. Some of us cannot hear the Secretary of State.

    —aggregate of the borrowing powers of the Secretary of State, as laid down in the amendment to clause 4, and of the NEB as reduced by any power under the amendment to clause 4 shall not exceed the total of £3,000 million laid down in the Bill.

    The House will remember that the Bill removes the power to increase by order the £3,000 million to £4,500 million which had been given to the then Government by the Industry Act 1979. It is not possible to estimate how much will be needed, but we take the view—as my right hon. Friend the Secretary of State for Wales has already explained—that if there is a need to ask for more financing power it is proper for the Government openly to explain to the House what they want, rather than to use, late at night or at any other time, powers under an order.

    It is difficult to foresee what the aggregate borrowing requirement would be, taking into account the uncertainties connected with both Rolls-Royce and British Leyland. These borrowing powers do not in themselves convey any particular implication for public spending. The borrowing powers include, under the arrangements made by the previous Administration, the private sector borrowing of the companies in the ownership of the NEB or transferred from the NEB to the Secretary of State, as well as any public money invested in them.

    Amendment No. 32 is consequential to the new clause and to the amendment to clause 4.

    As the Secretary of State said, it is a complex series of amendments which are simple in intent. However, they are extremely important, because both clause 4 and the amendments that have suddenly appeared from the recesses of the Department of Industry since the Bill was introduced in November show that a number of realities have caught up with the Government.

    The discussion that we are having this evening on the new clause and the amendment to clause 4 could variously be described as the chickens coming home to roost, or even the cookies beginning to crumble. Round the edges we are beginning to see the ideologies starting to fray against the realities of British industrial life.

    The existing clause 4, for no good or clear reason, sought to impose a new inflexibility on the arrangements that exist between the funding of the NEB and the Government.

    The hon. Member for Flint, West (Sir A. Meyer), in the previous debate, said that although he was in support of the Government's view he could see no good reason for seeking to abolish a power that merely gave the Government the opportunity of providing more finance, with all the bother, hassle and cost of primary legislation to do so.

    Almost side by side with the power in clause 2—that the Secretary of State should have no obligation to tell Parliament when he has issued a direction to transfer assets from the NEB to the Department of Industry—we have the Government holding up their hands in horror at the suggestion that they might introduce an order late at night to increase the borrowing limits of the NEB and of the agencies. The Bill—and this clause specifically—is the result of the dogmatic obsession of the Government with reducing the NEB's role within the economy.

    Close examination of the new phenomenon on the Notice Paper tonight will increase the fears of those who had grave doubts about Government intervention and interference and giving excess powers to the Secretary of State and to civil servants. It is interesting that the hon. Member for Knutsford (Mr. Bruce-Gardyne), who found this a matter of such urgency that he could not vote with the Government on 6 November, has not been present this evening, when the Government are seeking to increase their powers. But those who had genuine reservations about Government intervention are likely to find their fears increased by what the Government are proposing now.

    The new clause and the amendment are necessary because the Bill was produced in haste at the dictates of the dogma of its architects. There can be no other explanation for our being confronted with a new money resolution, two major new clauses and a 50-line amendment to a clause of only five lines. That is evidence that the legislation was ill thought out. Anyone who thinks that that is far fetched has only to wait until we come to the Government amendments to clause 6 to realise that the Government made a mistake of judgment and of reality yet again. This legislation is ill thought out and ill considered.

    I turn now to the effect of the amendment on the clause. The Opposition believe—and Conservative Members believe, although not so publicly—that the removal of the power to increase by order the borrowing limits of the NEB and of the agencies is a shameful, irresponsible and short-sighted approach to the problems that will confront the economy of the areas covered by those bodies. The removal of that power will save not a penny of public money. It will impose on the Government the inflexibility of having to introduce new primary legislation if the need should arise for these borrowing limits to be increased.

    I should like to remind the House of part of the debate on the Industry Bill which took place on 8 February 1979. This is almost the anniversary date of the debate in the Industry Bill Committee in which the Under-Secretary of State for Industry, the Under-Secretary of State for Scotland and the Secretary of State for Scotland played a vociferous part. The right hon. Member for Ayr (Mr. Younger), who is now Secretary of State for Scotland, said:
    "The happy noise I should like to make is to say that the ongoing activities of the SDA will receive great encouragement and asssistance from the future Conservative Government and be all the better for the fact that that Government will be able to produce the money as and when it is required for viable projects which are needed in the cause of producing jobs in Scotland."—[Official Report, Standing Committee B, 8 February 1979; c. 132.]
    The unemployment figure in Scotland last month went over the 200,000 mark. It is escalating and increasing every day. The present Secretary of State for Scotland said a year ago that the SDA would be in a position to get the money as and when it required it. He was participating in that Committee in an exercise that changed the definition of the total borrowing limit of the NEB, the SDA and the Welsh Development Agency. The definition was changed in that Bill to encompass the borrowing of the subsidiary companies of the NEB, the SDA and the WDA.

    No longer, for public accounting procedures, was the expenditure of these bodies simply to be counted against the borrowing limit. The external borrowings from the private sector of subsidiary companies were now to be counted against the borrowing limit. When the Government say that the base-line figures of the Industry Act 1979 are to be encompassed in the Bill, it means that they will not be increased other than through primary legislation in this House. If, however, the agencies and the NEB are able to get an increased amount of private sector finance in partnership with their own pump-priming operations and their own catalytic investments, to which the Secretary of State refers, there could easily come a stage, if that were successful, where they would be unable to take on board any more private sector money unless primary legislation was passed through the House.

    To hon. Members who do not come from Scotland and who have not seen the Scottish press today, let me say that the new Conservative Government-appointed chairman of the Scottish Development Agency has announced that a new scheme is to be embarked upon by the agency. At his own instigation, perhaps, the chairman has said that the agency will compile a list of companies willing to come into partnership with the agency in the case of problem companies, companies with weak management, and those with short-term liquidity problems.

    What the chairman of the Scottish Development Agency possibly does not know, but what the old board of the National Enterprise Board saw only too clearly, was that if that sort of policy, as we must hope, was successful—the Conservative Government are encouraging it all along the line—there could easily come a time when the necessity for primary legislation in a congested timetable, conceivably near the end of a Session, could mean that there would be no prospect even of taking on board voluntary funds from the private sector. I do not believe that the Government have recognised this practical problem, which could create serious problems for the National Enterprise Board and the development agencies.

    No public money will be saved as a result of the clause. Not a penny of public funds will be saved if the Government eliminate the ability to increase the borrowing limit by order. The Government have to tackle the increase in the borrowing limit anyway. The initiative is entirely in their hands. But the Government are removing a flexibility that, on their current form, they may need to invoke in the not-too-distant future.

    I shall save the House from the quotations that I had intended to give. They formed an important part of our preceding debate.

    A dangerous precedent has been established by the Government. They seem to think that they can now embark on a procedure of primary legislation for practical instances in industry where money is needed simply to involve the private sector in these quasi-public sector companies.

    12.15 am

    I turn more specifically to the amendment under discussion. As the Secretary of State said, it provides a number of limits. It provides a lower borrowing limit for the National Enterprise Board of £750 million below which the Government cannot go. At the same time, it provides an upper limit of an aggregate of £3,000 million for the total requirements of the Department of Industry for whatever investments it takes unto itself and for the NEB. The Secretary of State said that the amendment and new clause 1, which should, quite properly, have been an adjunct to clause 2, will not be used with the intentions put forward by the Opposition in the debate on clause 2, because the Government do not intend to acquire other investments from the NEB. He said that this would be wholly inconsistent with their policy.

    It may be wholly inconsistent with the Secretary of State's philosophy, and it may indeed be inconsistent with the present Government's approach, but if one looks at the track record of the last Conservative Administration one realises that it will not be long before the economic climate outside the House forces this Government to look differently at whatever powers are available to them. The Secretary of State should not forget that, especially as he was part of that last Administration which produced the 1972 Industry Act, which formed the basis for the 1975 Act introduced by my right hon. Friend the Member for Bristol, South-East (Mr. Benn). The powers to take equity from industry were Conservative-inspired. They came from the 1972 Act.

    I accept that the Secretary of State is an honourable man. He believes passionately in the philosophy that is motivating the Government at present. But the Selsdon men who came to power in 1970 were also inspired by this same belief in monetarism. They were inspired by the same belief that the free market would be able to rescue us from our economic plight. But by 1972 they were delving back into intervention in order to save the country from the crippling effect of their original policy. The Secretary of State for Industry might believe completely and totally that there will not be a change in direction, but Conservatives should search their hearts and think whether these powers could be used by the present Secretary of State or some future Secretary of State. Once this is in the cold, hard tablets of the statute book, these powers are open to anybody to use.

    Any pretence that the aggregate borrowing limit of £3,000 million is any protection at all from the nationalisers or public owners who simply want to interfere in industry is really a smokescreen. The £3,000 million is only an aggregate financial limit on borrowing loans and guarantees. There is nothing in the Bill to suggest that if the Government were able to take subsidiary companies of the NEB that did not require loans or guarantees there would be any limit at all.

    Admittedly, £3,000 million allows only one British Leyland or one Rolls-Royce to be taken into Government hands, but if one assumes that the Government will back off, as one expects, from taking British Leyland out of the hands of the NEB—and I am sure that the new board would resist this violently—that fact is that £3,000 million will enable them to take into public ownership a substantial number of companies and still be within the aggregate. So long as they require little or no funding from the public purse, there is no limit. That power is provided in the amendment, and I wonder whether the Government have sufficiently thought it out.

    It is not simply the ability of the Government to get over the immediate problems that they have found in the original drafting of the Bill that is at stake in the amendments. We shall return again and again to the ill-considered way in which many of these features have been built into the Bill.

    Parliamentary accountability is being weakened. Powers are being given to the Secretary of State for Industry at all levels—powers that the Government may seriously and sincerely believe will never be used. On the one hand we have heard

    Division No. 160]


    [12.23 am

    Adams, AllenHaynes, FrankPrescott, John
    Bennett, Andrew (Stockport N)Holland, Stuart (L'beth, Vauxhall)Roberts, Ernest (Hackney North)
    Brown, Ron (Edinburgh, Leith)Janner, Hon GrevilleRobertson, George
    Campbell-Savours, DaleLambie, DavidRooker, J. W.
    Cant, R. B.Lamond, JamesSilkin, Rt Hon John (Deptford)
    Cryer, BobMacKenzie, Rt Hon GregorSpearing, Nigel
    Cunningham, Dr John (Whitehaven)Maclennan, RobertWrigglesworth, Ian
    Davis, Terry (B'rm'ham, Stechford)McMillan, Tom (Glasgow, Central)
    Dixon, DonaldMcWilliam, JohnTELLERS FOR THE AYES:
    Dormand, JackPenhaligon, DavidMr. John Evans and
    English, MichaelPowell, Raymond (Ogmore) Mr. Tom Ellis.
    Golding, John


    Alexander, RichardBest, KeithBrooke, Hon Peter
    Alison, MichaelBiffen, Rt Hon JohnBrotherton, Michael
    Ancram, MichaelBiggs-Davison, JohnBrown, Michael (Brigg & Sc'thorpe)
    Arnold, TomBlackburn, JohnBrowne, John (Winchester)
    Aspinwall, JackBlaker, PeterBruce-Gardyne, John
    Atkins, Rt Hon H. (Spelthorne)Bonsor, Sir NicholasBryan, Sir Paul
    Atkins, Robert (Preston North)Bowden, AndrewBuck, Antony
    Baker, Kenneth (St. Marylebone)Boyson, Dr RhodesBudgen, Nick
    Beaumont-Dark, AnthonyBradford, Rev. R.Bulmer, Esmond
    Bendall, VivianBright, GrahamButcher, John
    Benyon, Thomas (Abingdon)Brinton, TimButler, Hon Adam
    Benyon, W. (Buckingham)Brittan, LeonCadbury, Jocelyn
    Berry, Hon AnthonyBrocklebank-Fowler, ChristopherCarlisle, John (Luton West)

    the Government proclaim their belief in the need for primary legislation, and yet in an earlier debate they proclaimed a similar belief in secondary legislation, asserting that the tabling of orders and documents in the Library would be a sufficient way of informing the House.

    The clause and the amendments that have suddenly appeared on the Notice Paper to change it are significant signs that the real world has caught up with the Government. I quote from a recent book:

    "It is the flatearthers that are staring in the face the astronauts."

    The Government are incapable of deciding whether they are seeing a vision or whether they really must undertake a change in their whole philosophy.

    I hope that the House will look upon the Government's proposals with the gravest distrust.

    Amendment agreed to.