I beg to move, That the Bill be now read a Second time.
The establishment of the Highlands and Islands Development Board by the Government in 1965 is now almost universally acknowledged to have been an unique and imaginative attempt to tackle the tough problems of the Highlands. The measure of the problem is the high rate of emigration from the area, the serious lack of job opportunities, especially for people leaving school and college, and the high and continuing level of unemployment. In my own constituency the level of unemployment during the last two years has averaged out at between 8½ per cent. and 10½ per cent. In these circumstances there can be no room for complacency.
The Highlands and Islands Development Board is the Government's principal instrument for the economic regeneration of the Highlands, and it is right that this House should review periodically and regularly the effectiveness of the Board's efforts. Last summer the Scottish Grand Committee examined at some length the work of the first 18 months of the Board's life, and found a record of substantial achievement.
The strategy of the Board is now becoming clear. It is, on the one hand, to seek and encourage the development of large scale industries at a number of nodal growth points throughout the area—Invergordon, Wick, Thurso, and Fort William. From the nucleus of industry created there it is hoped and expected that satellite industries, both manufacturing and service, will radiate out, bringing increased prosperity to a wide area of the Highlands. For this policy at this time there is in the air a trace of the sweet smell of success. But no less important, though less spectacular quantitatively, is the other arm of the Board's strategy of regeneration. This is to attempt to underpin the economy of the Highlands and Islands by strengthening the traditional industries, agriculture, forestry, fishing, and tourism, and the smaller industries, the small scale industries, particularly craft industries. In each of these fields the Board has had some remarkable successes following the initiatives which it has taken. At random I would merely mention the fisheries training scheme, the calf marketing scheme for the Uists, and the provision of a number of factories providing jobs for upwards of 30 people in such intractable and difficult areas as the Island of Barra.
It is now, however, time to examine the effectiveness of the Board's powers, the powers given to it under the parent Act of 1965, and to consider whether they are suitable and adequate for the enormous task which confronts the Board. It is my purpose in introducing this Bill, as I said to the House on 20th December, to enlarge and strengthen the Board in three material respects. Hon. Members will recall that I sought to strengthen the powers of the Board by clarifying the doubt which has arisen about the Board's capacity to form and promote companies on its own under Section 6 of the parent Act, and further to enable the Board, under Section 6 of that Act, to acquire a shareholding participation in companies in the Highlands. I further sought the leave of the House to introduce a Bill to enable the Board to participate in a company in return for a loan. Hon. Members will notice that the Bill goes less far than the intentions which were then spelled out. It is my hope, however, that the deficiencies of the Bill as it stands may be made good at a later stage. I should perhaps explain to the House that the difficulty has arisen through the wording of the Long Title. After my experience, I am in no doubt of the need for expertise in Parliamentary draftsmanship.
I anticipated that this point might be made. My intention is that there should be no restriction on the type of shareholding in which the Highlands and Islands Development Board could participate. If the Bill does not go as far as it ought in its present form, it is open to the House to enlarge the scope of the Bill at Committee stage or at a later stage.
The effect of this Bill is to go no further than to clarify the powers of the Board. Those who participated in the debates on the parent Bill will recall that the Conservative Opposition of that day opposed extremely vigorously Section 6, which I seek to amend, on the grounds that the powers which it conferred upon the Highlands and Islands Development Board were too wide. The reverse has proved to be the case. Far from being too wide, the powers of the Board were not sufficiently, nor sufficiently specifically, spelled out. It is my objective to clarify this obscurity, and not greatly to enlarge the powers of the Board beyond what I believe to have been the intention of the Government and of the House in agreeing to the parent Measure.
Naturally, the view of the Board has been a paramount consideration of mine. In my work as an hon. Member representing a Highlands constituency, I have had the opportunity of seeing how the Board has utilised its powers. Nothing that I have seen of the Board's work has led me to believe that the clarification of its powers in this respect would be anything but welcome.
The reason for granting to the Board the particular powers which I would seek to give it is that there is a considerable advantage to be gained to the Highlands from enabling the Board to take an active and direct interest in the development of companies, rather than merely fulfilling the rôle of a moneylender.
The Board has operated most successfully under the Section 8 powers its grants and loans scheme, and has given assistance to a large number of companies operating in the seven crofting counties. The effect has been to help to stabilise the economy of the Highlands, but the Board has experienced some difficulties arising from that rather limited technique of assistance. There is a wide-ranging variety of companies operating in the Highlands, and different techniques of assistance are suitable to different types of firms.
A further point is that the equity element of a company's capital structure provides stability as well as reserves upon which the company can draw. Too high an element of loan capital can weaken it, making it harder to overcome a period of difficult trading. The under-capitalisation of companies has been a prominent feature of commercial operations in the Highlands, and a number of instances have come to my attention of companies falling on evil days because they have not been able to raise the capital necessary within the area. The Bill, I believe, will do much to remedy this situation.
Furthermore, companies would be more likely to find it easier to raise capital on the capital market if there were evidence of participation in the company by the Board, which would show public confidence in the operations of the company and in the helpful supervisory power that participation in the company would give to the Board.
The most effective means of obtaining control over the operation of a company is through the medium of equity participation. It is not sought to extend the control of the Board over the operation of a company against the wishes of the company. Clause 1, subsection (1)(a), provides that, where the shares concerned are already issued, the Board must obtain the consent of the company before purchasing them. Thus, the Board could not, by a process of acquiring small blocks of shares in a company, acquire effective control without the agreement of the directors. In the Highlands the majority of companies are private, and in the case of private companies it will already be provided in the articles of association that the directors may decline to register a transfer of shares. Therefore, the words in the Bill "(with the consent of the company concerned)" would be effective in the acquisition of shares in public companies. In other words, this goes no further than Section 6 of the 1965 Act; there is no power here of compulsory acquisition. This point I emphasise strongly, as it is open to misrepresentation.
A further argument in support of enabling equity participation to be entered upon by the Board is that, although it may not wish to have complete control over the affairs of a company, it is reasonable that it should have a voice in its management policy, especially when they have provided a major source of the company's finance. In some cases the Board is supplying risk capital, taxpayers' money, on loan, and it is therefore proper that the public should share in the rewards of the Board's enterprise.
It will be clear to hon. Members that, under Clauses 1 and 2, as under the parent Act, the approval of the Secretary of State for Scotland and the Treasury will be required. There can be no question of the Board being directly involved in major schemes of investment without such approval. My understanding is that the present limits operating upon the Board's granting of loans will be operative with regard to its powers under Clause 2, which amends Section 8 of the 1965 Act. The use of these powers would provide the Board with considerable assistance in a number of different spheres of activity. The experience of the Board has already shown that, in the important task of providing new manufacturing industry in the Highlands, its job would be greatly assisted by the extension of its powers.
It is widely recognised in the Highlands that, in the past, there has been too great a dependence upon the service industries. The difficulty has been to establish manufacturing industries on a sound footing. No one would consider it to be a healthy situation when half of Scotland is dependent to the extent of 90 per cent. upon service industries.
Whatever views one may have of other Government Measures which are beyond the scope of the Bill and probably beyond the scope of discussion today, this is clearly a most unhealthy situation. I make no great claims for my Bill to be more than assisting in a small way, but it is my intention in a small but important way to seek to strengthen the industrial sector of the Highland economy.
I advance this view in the knowledge of the experience of the Board in more than one instance. To take a specific case which has come to my notice, because of the apparent limitations on the Board's power, it was forced to give assistance by means of a large capital loan to a company whose existence was crucial to the community in which it was located. The result was seriously to distort the capital structure of the company, although it has been remedied to some extent by the making of a special grant. If the Board had had the power to participate by means of an equity shareholding, it could have put the company on a much sounder foundation. I am not at liberty to disclose the name of the company. Obviously these commercial matters are best kept private.
There is also a scheme under consideration at present which would offer jobs to several hundred people in an extremely intractable area for which the Board has responsibility. I believe that it depends upon the Board having this power to bring about the successful conclusion of the proposal. Here again, I do not want to be more specific, but I assure hon. Members that I make the claim on good authority.
I believe that the Bill embodies a useful extension of the powers of the Highlands and Islands Development Board. If the Board is to be able to tackle its formidable task effectively across the broad range of industrial activities which it seeks to foster, it must be armed with adequate and suitable powers. As I have said, there was criticism that the powers were too wide sweeping. In practice, however, this has not been found to be so. The power to participate in an equity shareholding of a company is an appropriate one which could be used to great effect in the vitally important job of liberating the untapped resources of the Highlands, and it would assist the Board's work in securing and enlarging the prosperity of the whole region.
Mr. Speaker, it is interesting that you should call me immediately after the hon. Member for Caithness and Sutherland (Mr. Maclennan). The hon. Gentleman represents the constituency which is the furthest north on the Scottish mainland, whereas I represent the one which is furthest south. My home is slightly south of Newcastle-upon-Tyne in latitude, but it is still possible to see the Highlands from parts of the area. I refer, of course, to the Mull of Kintyre. That shows the enormous territory which is covered by the Highlands and Islands Development Board.
It is interesting to note that, in the southern Highlands of Galloway, we have problems which are just as bad as those in the Highlands proper. We have a high rate of unemployment, and the problems of depopulation in the Machars of Wigtownshire are worse, if anything, than in the Highlands. We are green with envy at the amount of money which has been spent by the Scottish Office over many years on developing the Highlands. It runs at slightly over £120 per head per year, whereas in the south it is very much less. It is apparent from the Board's report that it has managed to encourage some 14 different manufacturing industries in Shetland and 10 in the Isle of Lewis, while in the South I can think of only two which have come to Galloway since the, Labour Government have been in power.
The powers of the Board which the hon. Gentleman seeks to extend militate against other parts of Scotland. Previously, the part of the country of which I speak was a development area. Now it has to compete against the priority being given to the Highlands and Islands Development Board. If I may give the House one example, a small manufacturing business has just started up in my constituency. It is quite unable to get help from the Board of Trade because it is in what is known as temporary premises. However, as I understand it, it could get loan or grant assistance from the Board if it was in the Highlands, as the Board thought fit.
It appears that there are other ways in which the present Government have hindered development. Taking the same example, which is a family business running a small factory, it is very unlikely that, as it prospers, it will want to form a company. Corporation Tax and other Government measures make it less desirable to form companies than was the case hitherto. As a result, it will probably develop as a partnership.
The main object of the Bill is to buttress industries which are liable to fade out or go bankrupt. Certainly there is power in Clause 1 for the Board to subscribe for shares to a new company. I would have thought that that was explicit in the Bill. However, there seems to be no power to help a business which is more likely to develop as a partnership, and I wondered if it occurred to the hon. Gentleman when he drafted his Bill that it might be desirable to give the Board power to take an interest in a partnership of the sort that I have mentioned. We on this side of the House believe that it is very much better for private enterprise to develop areas where it can operate profitably. There are limits. Where it cannot make a profit, private enterprise cannot operate.
If one considers Aviemore, it is interesting to see that the two big hotels owned by the Rank Company and the Fraser Company have invested at least £1 million of private capital in the Highlands, with good results for the surrounding district. If this had to be done by the Board, it would have meant the expenditure of public funds to a greater extent than the £1 million which it is intended to spend on hotels over the next five years. It is the Government's duty to create the conditions in which private enterprise can flourish.
The chair lifts provide an excellent example. The first chair lift at Aviemore was put up by a consortium of hotel keepers and other business interests in the district. It is difficult for a chair lift to make a profit when one realises how short the ski-ing season is. Although it is used in the summer, it is hardly likely to be used to any great extent then.
Is it the hon. Gentleman's intention that the Board should take shares in companies such as that, and is it his intention that the Board should create conditions in the Highlands to attract other industries? The chair lift company is limited by guarantee, and it may be that it is outside the provisions of this Bill, but I understand that the Board has already made this company a considerable loan? Why is it necessary for the Board to take shares, when it has power to grant loans?
There are many other ways in which Socialist policy has militated against the development of the Highlands. Mr. John Rollo, a distinguished member of the Highlands and Islands Board, said about
three years ago that the Highland Board had suffered
A body blow, the second time in five months that the Board have had their feet kicked from under them.
The second time to which he was referring was not the Transport Bill but to the development area status, and similar remarks were made recently by the Reverend J. I. Andrews of the Presbytery of Wigtown and Stranraer. Speaking about the S.E.T., he said: "From a rural Presbytery the members should take note of the legislation's effects"—local people were realising the iniquity of a measure designed to move—
I am obliged to you, Mr. Speaker. I merely point out that 76 per cent. of the people in the Highlands are employed in service industries, and I wonder whether it is the hon. Gentleman's intention that the Board should take shares in some of these service industries, such as garages and transport undertakings, which are liable to be badly hit by other legislation which the Government have introduced.
I know that hon. Gentlemen opposite have strong feelings about landowners. They want to kill them off, in the same way as we on this side wish to kill the Transport Bill, but if one looks at some of the things done by private enterprise and by landowners in the Highlands, one realises that they have helped the area to a considerable extent. The Isle of Colonsay is likely to be sold in the near future because of heavy taxation measures introduced by the Government, and in particular the more recent ones. Is it suggested that the Board should go in there and help in a place where the landowners have kept the community going for so many years?
There are other examples of public enterprise having failed. When the National Coal Board came into existence, it refused to take over the Brora colliery. It was a Conservative Member, Sir David Robertson, who took over the business and kept it going.
With regard to Broro colliery, is the hon. Gentleman aware that the Highlands and Islands Development Board has provided a large sum of money to enable the life of the colliery to be extended by enabling it to drive bores to determine whether there are new seams there?
I am interested in that. Is it the hon. Gentleman's intention to ensure that where the National Coal Board fails to take over an enterprise, the Highlands Board will go in and put right what public industry has failed to do?
Another matter which worries me is the reorganisation of the Egg Board, and the position of the poultry industry in the Orkneys. I am glad that the right hon. Member for Orkney and Shetland (Mr. Grimond) is here. If the Government surrender to the pressure of the intensive livestock producers in other parts of the country, and the Egg Board is no longer able to carry on in its present capacity, this may create considerable problems for what is at the moment a flourishing industry in a remote part of the world. Is it proposed that the Highlands Board should be able to step in and take shares in a co-operative packing station in the Orkneys where public enterprise is not able to carry on?
I give a rather tepid welcome to the Bill. I think that the power to take shares in industrial ventures is covered by the Industrial Expansion Bill which we discussed recently, although its name is misleading, and it should perhaps be called something like the proliferation of nationalisation Bill. I think that a simple Amendment to that Measure would give the Highlands Board the power which is sought here. On the other hand, it may be that these powers will be suitable for certain social developments. I shall therefore not oppose the Bill, in the hope that it will bring some needed help to the Highlands.
The general tenor of the speech of the hon. Member for Galloway (Mr. Brewis) is typical of the attitude of hon. Gentlemen opposite to the Highlands and Islands Development Board. Until he said at the end of his speech that he gave the Bill a tepid welcome, I was at a loss to understand whether he was supporting it or not. The attitude of hon. Gentlemen opposite ever since the first Bill was introduced has been rather schizophrenic. At heart they really do not like the Board, but politically they have found it expedient to support it. This is really the cleft stick in which they have found themselves. I can understand their political difficulties. I can understand why, for political reasons, they give things a tepid welcome.
This is a good Bill, and I congratulate my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) on introducing it. It is an important Bill. It will add important powers to the armoury of powers possessed by the Board, and will enable it to tackle its job in a much more flexible way than it has been able to do in the past, particularly in regard to industrial development.
In its first annual report, which I consider to be one of the best reports that I have seen on the Highlands, and in which it set out its general strategy, the Board made some interesting comments. After dealing with agriculture, forestry and tourism, it said:
Manufacturing industry is the third main prop and we increasingly regard it as the must urgent of all relative to the immediate need to stem a substantial proportion of the emigration of talented sons and daughters from the Highlands and Islands.
It went on to say that
industrialists…do not flood in voluntarily, or even through general publicity drives.
Then it said:
Without it, the region will continue to lack an f real possibility of a substantial enough rise; in numbers to give credibility to High-lard regeneration.
This sets out the position of the Highlands and the importance of developing industry. Later the Report sets out the Board's overall strategy for the development of industry, namely, to encourage
the growth of industrial enterprise wherever a developer shows a personal and specific desire to settle or expand his enterprise; we will pursue, however, a more methodical programme of building small industrial growth points in scale with the possibilities of the West and islands.
Later it says, in respect of larger-scale operations, that
we will do our utmost to generate major growth points".
It sets out the importance of industry in the Highlands. We should do all we can to strengthen the powers of the Board to enable it to tackle this desperately important problem.
When the original Bill relating to the Highlands and Islands Development Board was introduced we thought that the Board had these powers. We thought that they were intra vires—a good legal phrase—and it was not until the Board had been set up and, as one of its first actions, had become interested in the Cairngorms development that the argument arose whether or not it had those powers.
At that time the Cairngorms Winter Sports Development Board was in a difficult position. Vast developments were required. Because of the hotel developments that were going on there certain other developments were required, in the Cairngorms, and the old Development Board did not have the necessary capital to carry them out. The Highlands and Islands Development Board went into assist—first, to provide an additional tow. Then a new company was formed—the Cairngorm Sports Development Ltd.—and the question arose whether the Highlands Board could invest in the company in equity.
A legal argument developed on the question whether this was intra vires or ultra vires, and the general view was that it was ultra vires. As a result, the Highlands Board took £25,000 worth of debenture shares in the new company, that being the only way in which it could then assist the company. The Chairman of the Board went on to the board of directors. Thus, at that early stage—1966, at the beginning of the life of the Board—the whole question arose of the powers of the Board to invest in companies.
This was important because, as my hon. Friend has said, one of the weaknesses in the Highlands has always been that no capital has been invested there to bring about the necessary development. What capital there was in the Highlands sought areas other than the Highlands, which were much more profitable as a field of investment. There has always been a shortage of capital.
Many companies in the Highlands failed for two main reasons: first, lack of capital and, secondly, lack of managerial skills and marketing techniques. The Government have done something to help in the provision of managerial skills through the Scottish Council (Development and Industry), and now these powers have been passed to the Highlands Board. I do not know what progress has been made, but the Board must now undertake the task of providing this necessary element if industry is to develop properly in the area.
The House has recently passed the Industrial Expansion Bill, which gives the Government the right to take up equity shares in industrial developments where certain plans were made. I see no reason why this power should not be given to the Board. It is the planning authority for the Highlands. It has been given responsibility for fostering industrial development. In those circumstances, it should have the powers which the Government have sought for themselves in other areas, where the Government are responsible for the kind of industrial development and expansion which was visualised in the Industrial Expansion Bill.
I have always thought that when the Government invest money in private industry, since the taxpayers have to stand any losses it is only right and equitable that they should share in any profits. I could never understand the opposition to this view. I could never see that this was wrong. For these reasons I welcome the Bill and I congratulate my hon. Friend on having introduced it—and, in doing so, having displayed his knowledge of the needs of the area and the work being done by the Board, as well as the difficulties that it has met. I trust that the House will give the Bill a Second Reading.
I must apologise if I have to go before the debate ends, as I have an appointment in Scotland in the late afternoon.
Under the Bill no firm in the Highlands will be forced to accept the Development Board as a shareholder; it will be open to the firm to say whether or not it wants the Board to take equity shares. But the Board may insist that if it is to give assistance at all it should be in the form of some sort of equity holding. If the Board wants these powers I would not oppose it, but at some stage we should be told a little about the way in which the Board expects to exercise them.
The Board itself is short of business and managerial skills. It has no prominent businessmen on it and, as far as I know, no call on business ability. How will it play the part of an equity shareholder? Let us suppose that it takes an equity shareholding; would it attempt to influence the policy of a company? This problem has already arisen in the case of the Government's shareholding in the British Petroleum Company. There the Government directors have been largely sleeping directors.
In my view, this is a mistaken policy. If the Government go into business as equity shareholders and, if, as a result, they appoint directors to a company, they must take some responsibility for the running of that company.
This raises difficult and important questions. First, one of the rôles that the Government must play is an arbiter between such a company and different sections of the economy. To my mind, the main rôle of the Government should be to stand back from the economy and do the overall planning. This is much more difficult if the Government are directly involved in certain companies. This, too, may be a dilemma for the Board.
Secondly, the Government are not elected or selected for their business ability; nor is the House; nor are civil servants recruited for these purposes; and nor, as it is at present, is the Board. This raises the question whether the Government or we in this House or the members of the Board are suitable people to intervene directly in the affairs of companies.
It may be said that there is another reason for equity shareholding, that the taxpayer, if he puts up funds, is entitled to some share of the profits. That is perfectly reasonable, but any company which thinks that it will make big profits in the Highlands in this way will not accept an equity shareholding. I fear that, as has happened before, the Government or Board could be left with some extremely risky and unprofitable shareholdings. This is the danger of nationalisation—whether one favours it or not—that the Government are always left with the unprofitable industries.
Also, it is by no means proved that Government participation leads to big profits. Just the opposite. The steel industry, the most recently nationalised, is already in the red. Therefore, I am not clear that the taxpayer will gain from this Bill. Of course, it will not deal with many problems in the Highlands and will not touch the most important? The future of the egg industry in Orkney is causing concern, but no one would claim that the Bill will deal with that kind of problem.
This is not necessarily a criticism, but we should be clear that the major problem is that the Board is pulling against the tide of general Government policy. For instance, the increase in costs under the Transport Bill and the Selective Employment Tax are against any policy of Highland development. As these matters have already been mentioned, I feel entitled to mention them again—
It is necessary to encourage industry in the Highlands—although I am not clear that the Bill will lead to any great flow of new industries; but that is a matter of opinion—but it is also important to encourage existing industries. Some people may deplore the amount of employment in service industries in the Highlands, but nevertheless it is there and there is no alternative. I do not hold the old-fashioned view that service industries are more disreputable than manufacturing. It is noticeable that, although the Government complain about the amount of employment in services, the biggest service industry, the Civil Service, both local and national, has risen by leaps and bounds and is the main growth industry in the Highlands.
We should not pretend that the Bill will touch the main difficulties which the Board faces. But if the Board requires these powers, I can see no grounds for sinister objections to this as nationalisation by the back door, because any firm can refuse this assistance, and if they ask for it, it cannot be argued that the Board should be deprived of enforcing certain conditions. I should like far more explanation of how the Board will help industry and how it will operate.
As I said, up to now, we have not begun to grapple with the problems posed by this piecemeal entry of the Government into private industry. This policy will not bear examination, from any point of view, but, since we are embarking on this course in different Acts and in different parts of the country, I do not oppose giving the Board these powers if it wants them.
I join my right hon. Friend the Member for Edinburgh, East (Mr. Willis), who was the Minister in charge when the Highlands and Islands Development (Scotland) Act was piloted through Committee and did a very good job—a job, made no easier by our close examination of the Bill almost line by line—in congratulating my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) on his enterprise in introducing the Bill and his powers of perception and shrewd interpretation in noting the loopholes which Government draftsmen left in a Government Bill even after very close and long examination by the Committee and a good many changes by Ministers. That takes some doing, so he need not be modest about one little slip in drafting, which can easily be remedied.
No one has so far disputed my hon. Friend's view that the Board should clearly know what its powers are—completely and adequately—so that it will not lack confidence and certainty in promoting measures which we all want in the Highlands to assist existing businesses and create new ones, as well as to reorganise and regroup smaller business units into bigger, viable entities for marketing and other purposes.
No hon. Member openly opposes these aims. Since the original Act was passed, hon. Members opposite, despite all the flaws which they originally found in it, have often come forward asking that their constituencies should be brought within the area of the Board's powers and of the Development Act. Presumably, that means all the wide existing powers of the Board, in every respect, industrial and otherwise. Therefore, there can be no serious objection by hon. Members opposite—unless they are completely split on this issue, as I do not think they are. Every Highland Member opposite and every Member for areas bordering the Highlands wants the introduction of a considerable amount of suitable industry. I do not want to be unfair to them, but they have all pleaded that the whole of that wider area, the Highlands and well beyond, come under the Act. Their ambition, therefore, must be to come under the Board in all its activities and powers.
My hon. Friend the Member for Caithness and Sutherland said that the Act and the creation of the Board is one of the proudest achievements of this Government, and he is right. This was talked about for many years by the Liberal and Labour Parties, and by the Conservative Party, though, by them, much more belatedly and diffidently. Now, the job has been done by the Labour Government; the Board has been created and, in the short time that it has been in operation, it has had considerable success in many fields. Many businesses in the Highlands owe their continued existence, others their expansion, to the intervention and assistance of the Board.
The hon. Member for Galloway (Mr. Brewis) paid tribute, although a little obliquely, to the Board by saying that it had done so well that assisted businesses in the Highlands are now threatening those in the Lowlands, or, at least, some in the border areas, including his constituency. His case, therefore, was for extending powers of the Highlands and Islands Board's kind under some similar agency, to the borders. That is what he was asking for indirectly when he spoke of the over-success of the Highlands Development Board's work in what he regards at the moment as creating too favourable conditions in opposition to his area. That is a wonderful advertisement for the Board's success and desirability.
The right hon. Member for Orkney and Shetland (Mr. Grimond) would like to know how the Board will operate in this field, given these extended powers, and how far it will go with this proposed extension of powers, although he did not quite oppose their being given. But that is ultimately a matter for Parliament and for the Secretary of State. There might otherwise have been one or two major blunders lacking overall scrutiny; but I do not think that the Board at its worst would get as far as that stage, since it would bring the Board itself tumbling down. No Government would allow any such public agency to go too far in the direction of major financial mismanagement.
It would not be such a bad thing, at times, if there was not, even now, so much reference back by the Board to the Secretary of State. Although my right hon. Friend must be responsible in the end, within the control of Parliament, perhaps a few rather incautiously worded statements made by some people in senior Government authority have in the past caused the Board to become a bit discouraged. After all, merely the loss of a few thousand £s placed in an unsuccessful venture or two scarcely justify the wild critical statements made by some people that it might have resulted in the Board losing confidence had it paid too much heed. The Board must act with the supervision of the Secretary of State, so that ultimately Parliament is responsible. I suggest that that answers any criticisms on possible irresponsibility. But it must have freedom to experiment, too.
In many respects the Development Act was a model one and I have no doubt that other areas, in England as well as in Scotland, would like similar legislation operating on their behalf. Some have said so publicly already. It will be remembered by hon. Members who served on the Scottish Committee how closely the Bill was scrutinised. I recall making over 50 speeches when it was going through Committee and the House. Those speeches provoked almost as many others; and when one realises that each of those had to be answered by the Minister, one can see that the legislation was thoroughly debated and examined. It is, therefore, remarkable that my hon. Friend the Member for Caithness and Sutherland has not only been able to pick at the drafting of this part of it, but has been able successfully to fill the cavity with this Bill.
My hon. Friend enunciated three priorities in relation to the Bill, which he said were of vital importance. The first was the financing of companies by the Board by the issue of risk-bearing equities. This is particularly important in Highlands and Island areas, where there is a great shortage of risk capital. The second aim was the creation of new businesses in areas where they are badly needed. The third was the reorganisation and regrouping of inadequately equipped and smaller firms which are anxious to co-operate in being reorganised and re-equipped to their advantage in operation and trading.
We all want to see an extension of manufacturing industry in the Highlands and that is what my hon. Friend is trying particularly to assist businesses to create. Throughout the Highlands and Islands, too many people are dependent on seasonal, part-time and outdoor employment, particularly in the service industries. Like other hon. Members, I have no wish to criticise the service industries, particularly since one Government after another have in the past placed the emphasis on these industries—a good example is the emphasis they have placed on tourism—almost to the exclusion of manufacturing industry. That is why it must be admitted that it is foolish and harmful to penalise the tourist industry through the Selective Employment Tax and—
Would the hon. Gentleman accept that according to the right hon. Member for Edinburgh, East, the idea which stimulated the hon. Member for Caithness and Sutherland (Mr. Maclennan) to introduce the Bill arose from the difficulty that was experienced in assisting a service industry, not a manufacturing industry, in my constituency?
I accept that in many respects the service industries in the Highlands and Islands are as important in their own way as manufacturing industries. After all, at present they provide far more employment. However, we want to see a diversification of industry and not what we have at present—an almost total dependence on seasonal, casual employment, resulting in high levels of unemployment, without full social security cover and, often, no unemployment benefit.
The agency which all political parties have accepted now, and which is working successfully in our Highlands and Islands region is the Highlands and Islands Development Board. That is the view of virtually everyone in those areas. Nobody any more wants to destroy or even seriously modify the original legislation. Equally, nobody appears today to be wholly opposed to this Bill. I suggest, therefore, that there is no reason why me cannot have unanimity on this occasion. I accept that hon. Members may have misgivings about the Bill. Despite that, I hope that the official attitude of hon. Gentlemen opposite will be that the Bill is entitled to their complete blessing.
We are desperately anxious to find employment for our people in the Highlands and Islands, not only at the growth points but throughout the area. Let me mention that, officially, in the view of the Government, Stornoway, in the Western Isles, has been scheduled as a growth point. One of the dangers of the growth point theory is that it can attract growth away from outlying places. Therefore, minor growth points in outlying areas must be created. It is vital, therefore, that any responsible public agency operating in this region has sufficient power to assist small businesses which have the enterprise and courage—perhaps, in cases, they have no alternative but to have enterprise and courage—to stay in outlying areas. It must, moreover, help them to modernise and grow. We should support the Bill if only because it could help the Board to achieve that result.
With its continuing contact with an answerability to Parliament, I cannot think of a better agency than a Board of this nature which is able, with a sense of responsibility, to assist freely and adequately those with enterprise and promise, but who seek financial help. This is particularly important for existing industries which need only additional finance, and particularly at times when they are unable to raise money in the market on their own.
I remember arguing in Committee on the original legislation about the importance—at that time it was desperately needed in my constituency—of tide-over capital for firms which would otherwise fade out, resulting in a serious loss of jobs and development. We have now gone past that stage. The Board has powers. But, had the Board been in operation at that time, one firm of which I can think—and, no doubt, others have been in the same position—might have been saved before the point of no return was reached.
It is important that the Board be able not only to attract, sustain and encourage industries, but that quick assistance be available in a practical form for local firms in trouble, and in most cases the practical help that is needed is finance. Power to engage in such help by investment through equity interests is vital and firms require help of such a character to come from a dependable source. As I pointed out, the Secretary of State must always ultimately supervise these matters when they are on a larger scale. Ultimately he is responsible to Parliament and he must, therefore, ensure that the schemes are sensible, are run well and that public money is properly handled.
Now that Conservative Members opposite have now accepted the Board and its legislative basis, the Act, and admit that they wish to see the Act's advantages extended to their own constituencies, I hope that they will go further today than saying that they will reluctantly not oppose the Bill and, despite some of their misgivings, will give the Measure their positive, helpful blessing, rather than their muted blessing with faint praise.
Their constituents, like mine, are desperately anxious to see the creation of suitable manufacturing industries throughout the area we are discussing. It is vital that these new industries are created, particularly in an area like mine which, year after year, has had winter and spring unemployment running at between 27 per cent. and 29 per cent. or more. They want good insurable continuing jobs in manufacturing industry under a factory roof to enable them to get away from their dependence almost wholly on service industry and on seasonal and casual employment, which means heavy seasonal unemployment. I therefore welcome the Bill.
When the hon. Member for Caithness and Sutherland (Mr. Maclennan) first announced his intention to introduce a Bill of this kind, I was suspicious of what he proposed to do.
I am always suspicious of anything which at first sight appears to smack of Clause Four. From what was said originally I feared that the Bill would be more concerned with Clause Four than with the cause of the Highlands and Islands. Now, however, the hon. Gentleman has comforted me a great deal by his remarks, and I have also been comforted by reading the Bill, which we saw for the first time only a couple of days ago. The hon. Gentleman made it clear that the Bill does not confer any compulsory powers of acquisition on the Board, and I welcome this. It would have been contrary to the Board's rôle had compulsory powers of that kind been given to it.
I congratulate the hon. Member on presenting his Bill so clearly, but he did not convince me of the need for these new powers. Yesterday, I again studied the first annual report of the Highlands and Islands Development Board. It was a very good report. Certain parts could be questioned, but so can parts of any report. I welcomed, in particular, the Chairman's opening declaration of faith. But I could not detect any demand by the Board for these additional powers—if, indeed, they are additional to those already in the principal Act.
Nor have I been able this morning to discover from the hon. Gentleman any precise demonstration of the need for these powers. He referred to one company—and I understand that he must be circumspect in his reference to commercial enterprises—in which the provision of a loan has led to a distortion of capital structure but that had been redressed in the end by the provision of a grant. If that was so, I fail to see why these powers should be necessary in such a case.
We should note a point of risk in the principle of the Bill. While the voluntary principle is retained in Clause 1, there could be a certain element of compulsion. According to my reading of tae parent Act, the Board could lay down as a condition of grant aid or loan aid its acquisition of part of the equity holding in the company. Such "voluntory" action by the Board would smack a little of the old, traditional, voluntary nature of some aspects of life in the Army—" You, you and you."
Section 8(2) of the principal Act empowers the Board on making a grant or loan to
…impose such conditions as they think fit.…
That is a big power, and could—I do not say that it would—lead to the suggestion that a loan or grant would best be obtained if the Board were invited to acquire some part of the equity holding. That may be unlikely, but the House should consider the unlikely as well as the likely consequences of legislation.
The hon. Gentleman said that it would be helpful to the Board to have these additional powers, but he did not say that it had requested them. He said that the powers would not be unwelcome to the Board. I can well understand that, but no one has yet demonstrated to me the need for them. The Board already have very extensive powers, and when we debated the original Bill, many of us on this side expressed doubts about their extent. I am gratified that the Board has not invoked them all, as I am sure that to do so would be contrary to the public interest. The Board has interpreted the Act with benevolence. I hope that it continues to do so, and that these larger powers will not be used.
It is worth reminding ourselves of some of the powers contained in the parent Act. The Board already has power to acquire land compulsorily, to hold and manage land so acquired, and to
…dispose of or otherwise deal with such land.
Section 5 says that the Board may
…erect buildings or other structures and carry out works or other operations on land…
By Section 6, the Board may
…acquire by agreement and carry on or set up and carry on, directly or through an agent, or themselves carry on as agent, any business or undertaking which in the opinion
of the Board will contribute to the economic or social development of the Highlands and Islands…
Should any doubt remain of the extent of its powers, we have the splendidly all-embracing Clause 9(1)(d), which gives the Board power
…to do all such things as are incidental to, or conducive to the attainment of the purposes of, any of their functions.
Does not the hon. Gentleman appreciate that the Bill's method of giving financial assistance for the purposes outlined by my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) is an additional means whereby the Board may well find it unnecessary to use the powers given to it in the principal Act? That being so, I should have thought that the hon. Member would welcome the Bill because of the flexibility it gives to the Board.
Equally, the extra powers could lead to developments that might be unlikely, but developments which the House should note.
Certain other questions of basic principle, and some practical questions too, are involved in the Bill. Referring to the most obvious practical question, I remind the House of what both the hon. Member for Caithness and Sutherland and the right hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond) said: that if the Board were to acquire some part of an equity shareholding it would have a responsibility for the day-to-day management of the firm concerned. The one follows almost inevitably from the other.
A further question is whether the Board has the competence or the staff to take on such a responsibility. I remember very well calling attention in the Scottish Grand Committee to the enormous responsibilities carried by the Board, and the vast amount of work with which it had to cope. The first annual report demonstrated the point impressively and showed that all that work was being done with an executive staff of 18 people. I asked how we could expect the Board to take on some of the larger responsibilities for business management which some hon. Members wanted it to shoulder. I repeat that question today. If the Board is to have a managerial rôle within commerce and industry, has it the skill, the competence and the staff to carry out such heavy responsibilities?
I turn now to some questions of principle. If the Board is to have a co-ownership rôle in a firm, there might be a consequent questioning of the Board's impartiality if approached by a competitor firm. However fair and just and honest the members of the Board are, and, I am sure, will always be, they could no longer appear to be impartial if they had a co-ownership rôle of that kind. We shall need substantial reassurance on that point because, above all things, if the Board is to fulfil its objectives, which we all support, it must be seen to be impartial by all who may wish to approach it for aid. That impartiality would be weakened by the Bill.
There is a second consideration of principle. If the Board acquired a shareholding of this kind, it is at least likely that it would be a shareholding in a shaky or risky business, otherwise those running it would be unlikely to seek partnership by the Board in the equity shareholding. I suggest that there would be a natural pressure on the Board to continue to keep that firm in being and to fall back on the taxpayer to prop up what might be a commercial failure.
There is a wide difference between providing a loan or grant, with such conditions attached as the Board may determine—that power is given in the Act—and setting up the Board as co-owners of a business with the resources of the taxpayer behind it.
I am obliged to my hon. Friend for making that point.
There is a further point of principle. In Section 11 the Board is given very wide powers to obtain information. If the Board were to secure a shareholding in a company, it would naturally and rightly want to make that company a success. In the course of trying to make the company a success, it might require much more information about marketing, business conditions and experience among competitors than the firm could provide. In that case the Board would have power under Section 11 to require competitor firms to provide confidential commercial information. That would put the Board in a position of commercial privilege which certainly should not be extended to the acquisition of information to benefit a firm in which the Board has a direct day-to-day financial stake.
While we all applaud the intent of the Bill, which is to help the Highlands to develop further manufacturing employment, I seriously question some of the practical issues which arise from the Bill and some of the matters of principle on which we should carefully reflect before giving the Bill a Second Reading.
If the Government are seriously determined to help the Highlands, there are other measures which they can take. I suggest a three-point programme. First, they should free the Highlands, and Scotland generally, from the increase in petrol duty and vehicle licence duty. Secondly, the Government should withdraw the Transport Bill. Thirdly, and most important of all, they should free the Highlands from the wretched Selective Employment Tax which takes out of the Highlands much more each year than the Highlands Board can put in.
I congratulate the hon. Member for Caithness and Sutherland (Mr. Maclennan) on introducing the Bill, and, indeed, on his good fortune in being allotted the time in which to do it. That is a fortuitous circumstance with which I am sure he is pleased.
In common with my right hon. Friend the Member for Orkney and Shetland (Mr. Grimond), who unfortunately has had to leave, and a number of other hon. Members who have spoken, I have doubts about the basic difference which the Bill will make and I wonder why it has been felt necessary to introduce it at this time. As was said by the hon. Member for Perth and East Perthshire (Mr. MacArthur), we have had the Bill in our hands only since Wednesday. Generally speaking, this is a practice of which the Government itself is guilty. I regret the fact that we continually have to debate fairly detailed Bills at very short notice.
Looking at the Bill in the short time available, I am afraid that I have not viewed it with much enthusiasm, and I suspect that the more time I had, the loss my enthusiasm would be. As has been said, there is no evidence of any pressure from any source for this change. The Bill has come like a bolt from the blue or snow in April—which is sudden, can be pleasant but is quite unexpected. II. is puzzling to note that the Bill does not appear against any background demand. There has been no great pressure for it.
I am not at all sure that it is the Government's job to try to run industry. I know that in extreme cases that is necessary and even inevitable. We have referred to Section 6 of the principal Act, which the Bill is intended to improve, and I recollect that I voted for Section 6 in Committee because I recognised that in extreme cases it would be necessary for the Board to undertake the development of industry. As reported in column 574, I gave two reasons:
The first would be to step in where private industry has failed but where it is nevertheless clearly undesirable, from the point of view of the development of an area in which the particular project is sited, that the project should die…Secondly…in order to step into areas where private enterprise has not trod or is unwilling to tread."—[OFFICIAL REPORT, Scottish Standing Committee, 6th May, 1965; c. 574–5.]
I recognise that the Board requires that kind of power, but I am uncertain whether it is desirable to extend it in the Bill. I am not here opposing the Bill. I am prepared to be convinced about it, but I am still far from being convinced. It disturbs me that we spent 17 Committee sessions on the previous Bill and a long time on Clause 6. We argued about it fiercely. Now we are told, two-and-a-half years later, that Section 6 has had no effect at all and that its intention is obscure. The hon. Member told us that because of some defect, either in Parliamentary drafting or in the Government's interpretation of their own intentions, what is written in the Act is useless.
That is virtually what the hon. Member for Caithness and Sutherland said: unless we have this Amendment, Section 6 as it stands is not effective, or is not as effective as was intended. It seems strange that a Section of such importance should be introduced only for us to find a few years later that it is ineffective.
I am not sure about the Board's direct participation in management, which would be the result of the Board taking equity shares. That would mean that the Board would have a voting power in the company and would play some part in the management of the company and the direction of its affairs. I am not sure that the Board has the necessary expertise to do that, nor am I sure that it has the resources to man or actively to participate in a whole series of companies, if it were done on any scale. The hon. Member for Perth and East Perthshire spoke of the danger that the Board might be suspected of favouring a company in which it had taken shares against a competitor. Let us face it: that is the kind of risk with which the Board is faced almost everywhere. The right hon. Member for Edinburgh, East (Mr. Willis) was right: if a loan of £70,000 were made to the company instead of taking shares, it should still be interested in how that company progressed and would try to make sure that it was successful.
This is an important point which cannot be dismissed simply by saying that the Board is interested whether it has lent £70,000 or obtains £70,000 worth of equity shares. There is a very distinct possible difference in its view. So long as the company is solvent the Board will get the £70,000 back if it is a loan, but if it has to get a return on the equity shares it is very much in the Board's interest to push the project for an hotel or a garage against all the others. Then there is a different type of interest.
I agree. This goes beyond the point made by the right hon. Member for Edinburgh, East, but it is an extension of the same argument. We have to face this difficulty. The right hon. Member for Argyll (Mr. Noble) mentioned the case of a garage. The situation exists in which the Board might lend money for a garage. If just down the road there is another garage which does not require to go to the Board for assistance, the "buzz" goes about locally—we all know this happens—and there is a feeling of partiality having been exerted although none was intended. I very much agree with the right hon. Member that this is an implicit risk. I think it could be exacerbated by any such change as is at present proposed.
I agree very much that Clause 1 as it stands simply means that such shareholding would be taken only with agreement. I reiterate the point made by my right hon. Friend the Member for Orkney and Shetland that where a company is likely to make a large profit it is unlikely to wish its equity to be taken up in this way. Therefore, there is a real danger of the Board being saddled with unprofitable industry. This is one of the risks with which public ownership is faced. Often it ends by holding up the unprofitable babies.
I am rather more concerned about Clause 2. I should be very pleased to be corrected, but it seems that the intention is that if a company approaches the Board for a grant or loan the Board can insist either that as a condition of giving the grant or loan the indebtedness is discharged in terms of the issue of shares, or alternatively, that in return for the assistance shares shall be given to the Board. The Clause says:
the Board on giving such assistance may impose such conditions as they think fit.
So far as I see, this is not subject to the approval of the Secretary of State or to the Treasury in the way that the provision in Clause 1 is subject.
This is an hypothesis, but it would appear that the Board is empowered, without reference to the Secretary of State or the Treasury, virtually to make a condition of assistance that it shall obtain equity shareholding in a company. This is somewhat disturbing. It is rather different from saying "by agreement" because there will be pressure. Companies will say that they want assistance and the Board, having admitted that the grounds for the request are valid, may put in a condition that the company gives it some equity shareholding. It may be forced to do this without necessarily wanting to do so, or without the agreement mentioned in Clause 1.
Surely these conditions would be fully understood. There is a complete understanding of all these things and the Bill helps to make it clear. Before any transaction was undertaken, any firm entering the agreement would know exactly what was required.
It would appear that any company asking for a grant or a loan might be faced with a request from the Board for an equity shareholding.
When the hon. Member for Caithness and Sutherland introduced his Bill under the Ten Minutes Rule, he said that Parliament must consider whether the tools given to the Board to do its job were adequate. The intention of the Bill, which he said is a limited, modest intention but an important one, is to sharpen the tools and to make the Board better able to do its job. I do not think that the limitations on the Board are legal; they are financial. It is rather like an army with a great many guns but very few shells. The reason why the Board is not able to do more is not that it has not plenty of power—it has loads of power—but that, rightly or wrongly, the amount of money given to it has been limited. Service industries are referred to as if they were in some way wicked. I think this is foolish. It is particularly ironical that this should be said at the same time that it appeared that one of the reasons which provided the idea for this Bill was that a particular service industry could not be as promptly and as effectively assisted as was intended. That seemed ironical and paradoxical.
I do not oppose the Bill. I am worried and concerned about certain aspects of it. I am far from sure that it will make a big difference which the hon. Member for Caithness and Sutherland claims. I imagine that we shall have plenty of opportunity to pursue this matter in detail in Committee. Certainly it was very worth while to have a discussion of this sort of thing, although I still hold that the main problems facing the Highlands are related to the other policies the Government are pursuing, which are operating against the intention of the Board. Reference has been made to Selective Employment Tax, the Transport Bill and so on. Mr. Speaker would not allow me to continue on that line.
We are all glad to have the chance today to discuss the Highlands, and for that reason we are glad that the hon. Member for Caithness and Sutherland (Mr. Maclennan) has introduced the Bill. We all want there to be more employment in the Highlands, particularly in manufacturing industry, but I share the doubts of the hon. Member for Inverness (Mr. Russell Johnston) about whether the Bill will be of any practical advantage. I want to be convinced that it will, that the extra powers sought will help the Highlands, and I should like to know how frequently, in the hon. Gentleman's estimation, they will be required.
He spoke about satellite industries and it occurred to me, as it did to my hon. Friend the Member for Galloway (Mr. Brewis), that many of these small industries would not be companies, so that it would be difficult for the Highlands Board to participate in them as a shareholder. The same is true of the traditional industries, which we all agree to be important, but which, we also agree, are 90 per cent. service industries. The penalties which the Government have imposed on service industries are far more detrimental than any advantage which the Bill is likely to bring.
I should like the Minister of State to tell us why this system of shareholding will be more advantageous to the companies or taxpayers than the present system of grants or loans. I agree with the right hon. Member for Orkney and Shetland (Mr. Grimond) that the Board night invest in companies which were not doing particularly well, that it might bolster up companies which were losing money, with consequent unfair competition for the hotels, garages and so on which did not have the financial advantage of a shareholding owned by the Board.
Had the Bill contained any form of compulsory intervention by the Board, I should have opposed it, but although it provides for only voluntary participation, I share the doubts of the hon. Member for Inverness that Clause 2 might turn that voluntary participation into com pulsory participation, because a company would have to decide to accept a shareholding by the Board, or receive no loan or grant. Doubts have been expressed about the business capability of the Board and whether it ought not to be strengthened by the membership of industrialists, or whether there should be an advisory committee, as under the Industrial Reorganisation Corporation, to vet industries and firms wanting Government support, an advisory committee which could give professionally expert advice. Perhaps the hon. Member for Caithness and Sutherland will highlight more emphatically why the present powers of loan and grant need to be extended. If the hon. Gentleman can convince me that it would be advantageous for the Board to be a voluntary shareholder, I should be much happier.
I am sure that he will agree that by far the most satisfactory method of getting an expansion of manufacturing and service industry in the Highlands is to have a buoyant and expanding national economy. In this respect the Government have not always got their priorities right, in that the extension of development areas well down into England has reduced the opportunity of attracting industries into the far North, because the incentives are relatively the same wherever a company is. The major plus in Ross-shire is the geographical and physical features of Invergordon and not the great advantage of the Government's development area policy.
I hope that the Minister of State will try to allay some of our fears, because we should not want to oppose any Bill which would promote industry and manufacturing opportunities in the Highlands. However, at the moment I am somewhat unconvinced that the Bill will have any effect, dramatic or otherwise, on the Highlands. I hope that the Minister will explain more fully his view of how the Government can participate through the Highlands Board.
It is difficult to say much new about the Bill, but it is a rather curious way to introduce action of this sort. While I am only too glad to congratulate the hon. Member for Caithness and Sutherland (Mr. Maclennan) on his perspicacity, I find it a little difficult to bracket with him his right hon. Friend the Member for Edinburgh, East (Mr. Willis) who was Minister of State when the Act went through and who told us today that as early as 1966 he discovered this apparent gap in the Board's powers. It seems a little odd that the Government should have waited for two years without doing anything—and perhaps this action is due even now only to the initiative of the hon. Member for Caithness and Sutherland.
It would be helpful to know whether the Board has asked for and believes that it needs this power and for what sort of purpose it is thought likely to be useful. I agreed with almost every word said by the right hon. Member for Orkney and Shetland (Mr. Grimond). There was a touch of practical realism in everything he said about this problem. I find it difficult to think of the sort of conditions in which this equity participation is likely to be to the benefit of both the industrialist who wants to develop in the Highlands and the Board. I can think of examples in which it could help one or the other, but I find it difficult to think of examples in which it would help both.
As the hon. Member for the Western Isles (Mr. Malcolm MacMillan) said, everyone in the Highlands is entirely enthusiastic about trying to redress the balance between service and manufacturing industries. As a taxpayer as well as a Member of Parliament, I find it difficult to be certain that in schemes of this sort the interests of the taxpayer will be adequately safeguard. Although it is said that these schemes will be approved only if they are passed by the Secretary of State and the Treasury, one knows only too well how often, unfortunately, even in its first two years, the Highlands Board has picked a dud, has been quite unable to spot a dud which was clear to everyone else.
The Board does not have the managerial skill or the expertise. I hope that it will build them up, but it does not possess them at the moment. Without meaning any disrespect to my friends and former colleagues at the Scottish Office, I do not think that there is any of this kind of expertise at the Scottish Office. I am tempted to support the idea of my hon. Friend the Member for Dumfries (Mr. Monro) that there should be a sort of small I.C.F.C. which could vet proposals for the Highlands independently and give sound commercial advice. If the Board decided to ignore that advice, at least it would clearly know that it was taking that considerable extra risk, which it still might accept if it thought that to do so was socially necessary.
The right hon. Gentleman must know that in a number of cases already where it has been a question of requiring expert knowledge of a particular firm the Board has engaged that knowledge. It does the same as other bodies and pays for the knowledge.
I believe that the Board will prove very useful to the Highlands, and therefore I do not want to over-stress the number of cases where there have been quite outstanding failures of judgment—let us put it no higher. The expertise will build up, but we must, as taxpayers and people responsible for Government money, make as certain as we can that if we are giving taxpayers' money to the Board for purposes like this, it is competent to handle it.
I thought that the hon. Member for Caithness and Sutherland was modest and moderate in what he said when introducing the Bill. But I should not like it to pass unnoticed that whilst it is true that the Conservative Party opposed pretty fiercely many of the things in Clause 6 on the Committee stage, of the Act it is also true that none of those powers has been used by the Board so far. I am not saying that we were right or that the Government were right, but I think that the success of the Board will be in direct relationship to the care with which it uses the very Draconian powers that it has. Our opposition and questioning about them was right and proper, because it made people realise that if one gives enormous powers to a board it must be very responsible in the way it uses them—if it has to use them at all—or it will run into trouble. Therefore, I do not regret having asked a great many questions about the powers, and I am not surprised that they have not been used.
I think that it is true that companies have failed because they could not raise capital easily today. But it is equally true that the advantage to a company of equity capital is in almost direct proportion to its likelihood of not being a financial success, because if it is a financial success a loan is no problem to pay back. It is a prior charge and must be repaid. If the company is a doubtful proposition it is much better for its money to be in equity form because if it is not paying a dividend it is not paying the Board, shareholders or anybody else anything. Therefore, although I can see Clause 6 being an advantage, I am not certain that it would be much advantage to the taxpayer, in so far as he is a shareholder through the money that goes out through the Board.
The hon. Gentleman was correct in saying that equity holdings would give the Board a voice in a company's management. That could be useful, but I do not believe that as the Board is at present constituted it has the necessary expertise to use that management wisely, unless it uses its other power of finding put how a successful company of that type is being run and applying the same methods to the company in which it has a shareholding. Everybody would find that distasteful and improper, and I am certain that the Board would not intentionally want to do so.
If the Bill is needed by the Board, which we do not yet clearly know, if it will help to bring more manufacturing industry into the Highlands, and if one or two things which have been stated categorically turn out to be so on investigation in Committee, I do not see that the Bill can do any harm. But I cannot see that it will do a great deal of good yet either. I am very much aware that if the debate had been on Highlands generally it would have been very much wider. There would have been a great deal that all of us would want to say about the Highlands and Islands on which so far we have been very well disciplined. No doubt that will be possible at a later stage.
Like the right hon. Member for Orkney and Shetland who has left, I have to catch an aeroplane to the Highlands this evening. I hope that it will not be thought a discourtesy if I leave in a few minutes.
I fully appreciate the difficulties of various hon. Members on a Friday, particularly when they have engagements in Scotland, and I understand the closing remark of the right hon. Member for Argyll (Mr. Noble).
Like my right hon. and hon. Friends, I congratulate my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) on his initiative, and I hope that his Bill will make progress. The right hon. Member for Argyll asked if the Highlands and Islands Development Board had ever asked us for this clarification of Section 6 and for the Bill. It has asked on several occasions, and in public. It has made it clear that it is anxious to use section 6 as it was originally intended. It is true that the Section has not so far been employed to the extent we should like, but my feeling, which I am sure is shared by many people in the Highlands, is that the Board has had a very hard time in getting started and it has been almost friendless at times when it should have had the friendship of those from whom it should command a great deal of respect and support at times of trial. I shall return to the justification of the Bill shortly, but first I should like to comment on a number of points made. I should like to make it absolutely clear that the Government welcome the Bill.
Is the hon. Gentleman telling us that the Board propose to acquire businesses, set up businesses and carry on businesses now with the powers of the Bill? I think that that is what he has just said. I hope that if that is so, he will comment on some of the questions of principle we raised earlier in the debate.
Absolutely. I was not going to hesitate to do that. I know, Mr. Speaker, that you will allow me to answer all the points made in the debate, and I shall not stray into any other matters into which other hon. Members were tempted to stray before you rightly brought them to order.
The Bill clarifies the intention of Section 6 of the Highlands and Islands Development (Scotland) Act, 1965 to extend the facilities which the Board has for the development of industry. None of us on this side of the House regard service industries as wicked. I make it absolutely clear that we should like to see service industries in the Highlands developing, but we must accept that one thing that has not developed under private enterprise and without the intervention of the Board is manufacturing industry.
My right hon. Friend the Member for Edinburgh, East (Mr. Willis) whom I succeeded as Minister of State, made clear, by quoting an extract from the Board's first annual report, the strategy of the Board, which has been adhered to throughout the past year. I hope that in May or June we may be able to debate the Board's second annual report. Then it will be seen that it has had to work very hard not just within Section 8 but within other Sections, and on a grander scale working with Government Departments, for what we hope will be a significant development in the north. It is one which the Board could not sustain but which has been helped by it, which has in some cases been initiated by it, and which could lead to a great many manufacturing jobs in the Highlands.
I do not accept the statement of the hon. Member for Dumfries (Mr. Monro) that Invergordon by its very nature is of such geographical advantage that without the intervention of the Government and the Board developments would take place there anyway. When the hon. Member for Galloway (Mr. Brewis) talked about people being green with envy in regard to position of Galloway vis-à-vis the Highlands, I think that he was more rightly illustrating that without intervention of some kind we shall not get the development we require in the peripheral areas of Scotland. Let us be fair. For 13 years the Tory party was in power, and the Opposition claim that the economy was well run then and that private enterprise can do the job anyway in these areas. The fact is that in the peripheral areas, including Galloway, Dumfries, the north-east, certainly the Highlands, and possibly even parts of Tayside, it is patent that without Government intervention, but just leaving it to private enterprise, these developments would not occur, and in the 13 years of right hon. and hon. Gentlemen opposite they did not occur.
The right hon. Gentleman is confusing the point. I am not saying that these things did not take place. They did, but, significantly, they were public-private enterprises and not left entirely to private enterprise. As the right hon. Gentleman would be the first to admit, the pulp mill would not otherwise have been established at Fort William. That is the point I am trying to make.
The right hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond), I thought, in a most confused speech, which was at best muddleheaded and at worst poisonous, a real mixture of arsenic and old lace, managed to get everything the wrong way round. For example, he said that he did not want Government directors. Why? Because they are sleeping partners and he instanced B.P. On the other hand, he did not want intervention by the Government if there were to be directors of the kind who are not sleeping partners but at the same time not interventionists—rather like Mahomet's coffin, suspended between heaven and earth.
Of course, if there are directors from the Board on a company at the initiative of the Highlands Board and it has some equity holding then, if that happens, the consequence, a possible but not an inevitable consequence, is that the directors concerned will be there to look after the interests of the investment in the company, and wider issues of the welfare of the Highlands. Therefore, if there is intervention, which has its drawbacks and its advantages, we have really got to maximise the advantages and minimise the drawbacks.
The right hon. Gentleman criticised this mechanism by saying that if a company is making a profit the Board would not be invited to have an equity holding. He is absolutely right, if the company is making profits and running a very good business. But what we are talking about is the enterprise where, even with good talented businessmen, there may not be capital. As my right hon. Friend the Member for Edinburgh, East said in his excellent speech, there is distortion of the capital structure of the company as the result of grants and loans solely. Hence the reason for the Bill, even for those businesses with some substantial capital investment, in some cases, to make sure that they can develop. It will, by definition, be very risk capital. I accept that, and that brings me back to a point made by the right hon. Gentleman the Member for Argyll.
He talked about duds. We can, I have no doubt, debate this elsewhere on the Second Annual Report of the Board. There have been duds, but they are a tiny minority of the very substantial number of firms which today would he out of business if the Board had not helped. There have been businesses which became defunct and others which are now in difficulties because the Board has not the powers we are seeking today. I cannot breach confidences, but it is within the knowledge of certain Members of the House which specific companies are concerned.
After all, remember that by Section 8 of the 1965 Act, which this Bill seeks to substantiate, we shall be conferring power comparable to that which the Board of Trade achieved by the Industrial Development Act, 1966. So that it is not necessarily fair to criticise my right hon. Friend the Member for Edinburgh, East for his initiative with the 1965 Act, which he piloted through the Scottish Committee. By it we were doing in Scotland something not only unique in the United Kingdom but in the world. We were doing it within the Highlands and Islands in advance of the Government's general legislation which did not come until a year thence. I think we have done reasonably well by the 1965 Act.
I think the hon. Gentleman's normal impartiality has been overcome slightly by his normal effusiveness. The basic point which my right hon. Friend was making was that experience of Government participation through directors—as in B.P.—in industry is that they were almost semi-retired rather than active, expert people. One asks whether the Board will get the kind of people needed to serve businesses in which it may or may not take an interest.
I am not quite certain whether the hon. Gentleman is entitled to interpret his right hon. Friend's remarks without the right hon. Gentleman's being here, if I may say so with respect, but if he is right, that his right hon. Friend meant that directors ought to be activist directors, I would accept that, in certain circumstances, we would have activist directors as distinct from sleeping ones. There are businessmen of good will who are willing to come in and help with work of this kind in the Highlands and Islands.
I go on to the point about management services. If hon. Gentlemen opposite will look at the First Annual Report, they will see a section there under "Membership, staffing and finance and on page 7, paragraph 36, it says of management services, that they are
To advise the Board in the setting up, and be responsible for the operations of a management and accountancy advisory service in the Highlands and Islands; to advise on management and accountancy assets of Board projects; to assist the Board in the preparation of their longer term plans; and to provide ' after care ' services to the firms which receive financial assistance from the Board.
This Board was established in November, 1965. This is its First Annual Report, to the end of December, 1966. It was as early as that stage seeking to build up its management services. We shall be able to debate a comparable section in the Second Annual Report when it comes in a few weeks or next month, and I hope we shall be able to go into this matter of expertise at the hands of the Board.
Of course, it has made mistakes. When the right hon. Gentleman the Member for Argyll was in office one of the biggest mistakes in the Department was the scandal of Cadco, where hundreds of thousands of pounds of public money were lost largely because of the lack of expertise and judgment at that time. In the Scottish Office, we have, of course, learned from Cadco. Since the right hon. Gentleman left we have been able to revise the procedures for the new towns. Through the Board's mechanisms and, indeed, even our own revised mechanisms of accountancy and judgment and so on, we shall not as far as it is humanly possible to ensure it, have another Cadco.
So I take note of the right hon. Gentleman's criticism of his former colleagues in the Scottish Office, that is his Civil Service colleagues, and their lack of expertise. We have to improve on that, and in specific cases we are seeking to improve wherever we can in this matter of making sure that Government intervention is advised and well advised, but we are not intervening to help obviously prosperous business which will succeed in making profits. We have to intervene to help the marginal business which is struggling hard in this matter of making a living and making a go of it. Of course, we shall be assisting with risk capital in the business. I accept that, but, as I say, that is the essence of the whole exercise itself. As I said, the Board is quickly able to put its expert, qualified staff, including professional accountants, there to help. I should like us to dwell on this when we have our further debate at a later time.
The hon. Gentleman the Member for Inverness (Mr. Russell Johnston) made a number of points which I think I ought to comment upon. First of all, we believe that Section 6 is not ineffective, but it is defective in this regard. Hence the Bill. We are confident of what the Board intends to do in this regard once this legislation is on the Statute Book. The Government firmly believe, although they cannot make all their knowledge public, that with the extended power we shall do better than we have done for the Highlands and Islands. We have spent a great deal more money than we intended. When my right hon. Friend the former Minister of State introduced the Bill and debated it in Committee, he did not then believe that the amount of money we have made available in subvention to the Bill would be as substantial as it has been. We have done well in financing this. There is no implication that Section 6, if so amended by my hon. Friend, will mean that there will be net extra H.I.D.B. expenditure as a result of the new powers.
Without notice I cannot give the precise figure. We may have a debate in the mid-summer, and it would be better for the figure to be given then rather than that I should make a guess now.
The argument on partiality is a peculiar one. After all, if there are grants and loans, are not these partial? Could not the same argument be applied? Without grants and loans, a great deal of the work of the Board would be negative. The hon. Gentleman would not argue that we should withdraw grants and loans on the grounds that they are partial. But they are just as partial. We have had complaints that a grant should not have been made in a given case. We know the Highlands and how, as the hon. Member for Inverness said, these things get round. There have been complaints, and we must accept that there will be charges of partiality. We must, therefore, rely on the Board being impartial as regards persons and partial only as regards public interests.
Would the Minister not agree that there is a difference in degree here? He is right in saying that the same basic argument applies, but surely there is some difference in degree between an enterprise that has received a loan and an enterprise in which the Board has taken a direct, known and public stake?
This is arguable, and one would have to know of the specific instance in order to answer this. Many references have been made to chair lifts with which I do not entirely agree. The hon. Member for Inverness would, I am sure, agree with me that all the references made to the chair lift development were not accurate. I remember working very hard to persuade the then owners to become a limited company so that the Government could help them through the Transport Holding Company. It was only later when the change was made that they were able to get assistance of the kind that they needed. They had then, however, formed a limited company.
They had to, so that we could extend to them assistance available under other Acts as well as under the Highlands and Islands Development Act. I accept there might be an argument, but it would have to be an argument addressed to a particular instance. No doubt it will be claimed that this is so, but I do not see how to avoid it, except by relying in the last analysis upon the personnel of the Board, and on the intermediate machinery which they are building up as the referee, so to speak, of first instance.
I do not accept the rather scathing comment made by the right hon. Member for Orkney and Shetland about the Board members. There are prominent businessmen among them. We are all sorry about the death of Mr. Logan. It was a substantial blow to the Board and to the Highlands, as well as to his family and to his business. The appointment of Mr. Logan proved that we were intent on choosing certain businessmen of distinction to serve on the Board. We have Mr. Rollo who has been Deputy Chairman of the Board. I regard him as a good businessman and a prominent businessman. He may not be a tycoon, but at least his interest in the Highlands is genuine and he has worked very hard, albeit on a smaller scale, for individual industries, not only since the Board has been in existence and he a member of it, but long before the Board was established. I would defend Mr. Rollo. He is a good example of a businessman working on the Board. It may be that we should have more businessmen on the Board, but I would not like it to go out from this House that we do not have prominent businessmen.
The second point made by the right hon. Gentleman was that the Board does not call upon business ability. That is not true. The Board has made errors, but so has every successful businessman. It is, in my opinion, unfair to keep knocking the Board when they have a very difficult task to perform in the glare of a not always sympathetic public limelight.
The hon. Member for Galloway gave the impression that this amending Bill was for first-aid measures only. I hope that I have disposed of any belief that we regard this simply as first-aid. We accept that one of the main efforts of the Board in using Section 6 will be to stimulate industry with particular emphasis on manufacturing industry, and not simply to rescue by first-aid measures companies already in difficulties in the Highlands. This is not a social ambulance Bill. My hon. Friend is seeking to add an industrial generation Bill to the already substantive Act.
The hon. Gentleman spoke of the Government wanting to kill the landowners. I do not see the relevance of this comment on the Bill, but I can think of nothing more pejorative. I feel sure he was joking when he said this. Of course we recognise that a large number of landowners are now co-operating more favourably with the Government, particularly since the existence of the Highlands and Islands Development Board, than they have done before. The Government have a basic hard antipathy to some landlords who will not cooperate, who want to retain their feudal privileges, and believe that they are still living in the eighteenth century. We want to see them change their view, but we do not want to kill them, any more than we want to kill the Transport Bill with its rural bus grants, its shipping services and the control of all bus services under one umbrella.
A point was made by both the hon. Member for Perth and East Perthshire (Mr. MacArthur) and by the hon. Member for Inverness (Mr. Russell Johnston) on the question of what would be called incipient compulsion. It is true that within the Bill, read with the original Section, there is absolutely no question of compulsory purchase of shares. Both hon. Members will agree that that is the literal truth. Their argument is that the purchase or the taking of shares could be a condition, with other conditions, of help by the Board. I must confess that may be true. It depends again on the circumstances that may arise. It may be that the Board feels that, without this, the capital structure of the company would not be sound and that, with the best will in the world, the company would be in difficulty in servicing loans and in repaying debts. The Board is entitled to take that view; it does at the present time; but unfortunately it cannot take the additional step, which is to help in the basic restructuring of the company.
I come back to the directors. It does not follow in every case that with our shares we would have a director. It does not follow in every case that our shares would be conditional on granting loans and on other things. It depends on the precise circumstances.
Hon. Members have to realise that it would not be fair for the Board to be placed in the position of giving second-class help to an industry instead of first-class help, thus transforming a possible chance of success into a lesser chance by virtue of not being able to say that the company must agree on a re-structuring, with equity shares, at the same time as it has grants or loans. Of course, any industry is free to say no. In that case, it will not want anything from the Board. Alternatively, it may prefer to seek grants or loans from another source.
I return to the point that we have to rely upon the skill of the Board in building up its accountancy services to give it the best advice. If that advice suggests that there should be an equity shareholding, I do not see why the Board should not offer it to the firm applying. It would not be the case in every application, but it could be in one or two or even a dozen. It would be wrong to seek to fudge or obscure that. It could be possible. In any case, the Board would not want to see a firm doing something reluctantly, because that might damage the purpose for which the transaction was being concluded.
I very much welcome the initiative that my hon. Friend has taken. Obviously he will have a rough time with the critics on the Benches opposite in getting it through the House. As hon. Members know, there are two ways of hindering a Bill. The first is to vote it down. The second is the way of killing it with the kindness of many words and amendments. I hope that we shall have the good will of hon. Gentlemen opposite, although their speeches today were not as helpful as they might have been. As I say, my hon. Friend will have a tough time, but everyone on this side of the House and I am sure everyone in the Highlands will wish him all success.
With the leave of the House, I am conscious of the fact that the Minister of State has already extensively covered the ground and answered most of the substantial points which have been made, so I shall not repeat them at length. However, there are one or two points which I want to make clear.
A number of hon. Gentlemen opposite have asked about Clause 2 and to what extent the acquisition of shares would be voluntary. They wondered if the Board would not impose a condition upon a firm seeking financial assistance. Under the parent Act as it stands at the moment, if a firm seeks a grant or a loan, the Board is empowered to impose such conditions as it thinks fit. In my view, Clause 2 goes no further in that respect.
Much play has been made, particularly by hon. Members on the Liberal bench, with the alleged lack of business expertise of Members of the Board. However true, the charge is irrelevant. It would not be necessary for the Board to participate directly in the supervision of a business. The holding of equity shares would simply empower the Board under the articles of association of the company to nominate directors, men of such established and known business expertise as recommend themselves to the Board.
The right hon. Member for Orkney and Shetland (Mr. Grimond) made the completely unsubstantiated charge that the Board could not call upon such services. It has not, of course, because it has not had the power to. In my view, however, the Board would be perfectly capable of calling on such business expertise, and it has already done so in a number of other areas of activity. One of the most notable contributions of the Board has been its "Operation Counter-drift", which has located businessmen throughout the country who are anxious and willing to come to the Highlands to live and give their services and so benefit Highland industry. According to a recent count, no fewer than 6,000 people have come forward. I do not say that the nominees to directorships of companies would necessarily be drawn from that list, but the point should be made that it is not a shortage of managerial skill at the Board's disposal which would put a scheme of this kind in jeopardy.
A number of hon. Gentlemen opposite have argued that an element of risk is involved, and that is true. It is because of that that I commend the Bill to the House. It is precisely in the sort of situation where normal methods of financing companies are not available, for whatever reasons, that one would look for this abnormal method of financing business enterprise. It is recognised that conditions in the Highlands are totally different from those prevailing in other parts of the country, and those conditions demand extraordinary measures. However, these measures do not go far beyond those already embodied in the Industrial Expansion Bill of this year and the Industrial Development Act of 1966. The principle is not a new one.
The right hon. Member for Argyll (Mr. Noble) made the point that the powers available to the Board under Section 6 have not been used. That is a valid argument. One of the reasons why they have not been used is the very obscurity about their existence. It is my hope that these powers will be used in accordance with this Bill when, as I hope, it becomes law, and that the two Acts will be read together.
The right hon. Gentleman also said that the Board could call upon expert bodies such as the I.C.F.C. to give it advice in matters of this kind. That is perfectly true. It is quite open to the Board, and there is a lot to be said for the idea. However, I do not go along with the right hon. Gentleman's view that, because the Board runs the risk from time to time of backing a dud, it should not enter into the risky sphere of manufacturing industry.
In his customary sweetly reasonable way, the right hon. Gentleman the Member for Orkney and Shetland attempted to suggest that I and some of my right hon. and hon. Friends were critical in some way of the rôle of service industries in the Highlands. Nothing could be further from the truth. Anybody who knows anything about the problems of the Highlands knows that the Highlands are dependent on service industries. I do not think t can seriously be argued that the present situation is desirable. The disadvantages of the service industries are abundantly clear. To mention but one, many of the industries are largely seasonal in their employment opportunities. This is particularly true of the hotel and catering trade, but the same disadvantage is to be found in the distributive trades. It is this imbalance in the Highland economy which has been one of its basic weaknesses for many years, and I think that the Bill will make a small but important contribution towards rectifying this imbalance.
I do not think that it is necessary for me to add to what my hon. Friend the Minister of State said about the imparti ality of the Board in its operations. I agree with the hon. Member for Inverness (Mr. Russell Johnston) that inevitably there will be charges of this kind. There always are when public money is made available. When grants are provided, there are always charges that they are being unfairly or inequitably distributed. This is an inevitable charge, but I do not, from that, consider there to be any criticism of the Act as it stands.
The hon. Member for Inverness also said that the limitations on the Board were not limitations of power, but of finance. This allegation is not only unsubstantiated, but is incapable of substantiation. Targets for spending put forward by the Government—I speak without authority, but these figures have been published—have been surpassed in each year of the Board's operations, and so far as I know no request by the Board for money has been refused.
The other day the hon. Gentleman asked a Question about land reclamation. The main reason why land has not been reclaimed on a large scale is that money is not available for this purpose.
The hon. Gentleman is speculating. There are technical difficulties in reclaiming land. There is the question of the acquisition of property, and so on. There are many obstacles which have nothing to do with finance. I understand that the Board is looking favourably at schemes for land reclamation. I know of two in my constituency which are being carefully considered, and I think that the hon. Gentleman's remark is wide of the target.
The right hon. Member for Orkney and Shetland said that the experience of the Government in business was bad, and he instanced B.P. I think that the right hon. Gentleman gave an incomplete picture. In Scotland we have an example of extremely successful participation in industry by the Government. I am, of course, referring to Fairfields shipyard, which in some respects is a model of participation by private and public enterprise.
In so far as the criticisms of hon. Gentlemen opposite are based on their prejudice against public enterprise in the Highlands, I think that they are wide of the mark, because it has become abundantly clear that private enterprise on its own will not step in and provide the necessary manufacturing industries there. We have many years' experience of this. The major successes in the Highlands have been at least partially assisted with public money.
The right hon. Member for Orkney and Shetland also said that the Board would in some way be called on to act as an arbiter between companies if it had the power provided in the Bill. I acknowledge that this is true to some extent, but this rôle can well be safeguarded by the appointment by the Board of independent nominees. I do not agree with the remarks made about the Board lacking managerial ability and skill. I think that my hon. Friend the Minister of State has shown how the Board is building itself up in this respect, but there is nothing in the Bill which will necessarily demand the appointment of one of the Board's own staff to the company concerned.
This has been a very useful debate, and it has covered a lot of ground. It has helped to pinpoint the areas of controversy which may lead to further argument at a later stage. A number of hon. Members, and particularly the hon. Member for Perth and East Perthshire (Mr. MacArthur), asked why the Bill was necessary. I think that my hon. Friend the Minister of State answered more authoritatively than I can the question which he was asked by the right hon. Member for Orkney and Shetland. The Board wishes to have these powers, and I find this a persuasive argument in favour of the Bill. I have come to believe that the Board is the greatest hope that we have for the regeneration of the long neglected and industrially most seriously handicapped area of Scotland, the Highlands.