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ADVISORY COMMITTEE IN RESPECT OF s. 2(2)(b) SCHEMES

Part of Orders of the Day — SCOTTISH DEVELOPMENT AGENCY (No. 2) BILL [Lords] – in the House of Commons at 12:00 am on 21st October 1975.

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Photo of Mr Teddy Taylor Mr Teddy Taylor , Glasgow Cathcart 12:00 am, 21st October 1975

We believe that the debates which we have had on this matter have been worth while. In the previous discussion we achieved a great deal, including some remarkable conversions. I was delighted to see the hon. Member for East Kilbride (Dr. Miller), who had voted against us on the last occasion, decide to vote for us. That was very encouraging. Therefore, we shall try to do the same thing on this occasion and persuade the Government to support us on new Clause 2 in the same way as we supported them on new Clause 1.

New Clauses Nos. 2, and 5 and Amendment No. 15 are important. It is important that the Bill be amended to ensure that there is a fair deal for private industry in Scotland, especially bearing in mind the unemployment figures which were revealed today and which unfortunately indicate male unemployment in Scotland has increased at the rate of approximately 1,000 a week over the past month. At present we have eight fully unemployed Scots for every vacancy. This is obviously a serious and deteriorating situation.

Another factor which causes great concern is that investment is not going ahead. We want to ensure that private industry in Scotland is given a degree of safeguard and confidence.

5. 30 p.m.

The Minister will know from the approaches which have been made by the Confederation of British Industry, and other bodies, that Scottish industry is worried about certain aspects of the Bill—particularly about Clause 2(2)(b), which empowers the Agency to engage in Indus- trial undertakings on its own or in co-operation with others.

It is desperately important for us to ensure that these nationalising powers—powers to set up State firms, or firms in which there is a State partnership)—follow certain basic rules which are fair to the private sector of industry. Without the clause there will be no guarantee that the taxpayers' money will be used wisely or that the full story of the taxpayers' involvement in industry will ever emerge, or emerge fully. There is great concern that nationalised or semi-State-controlled companies should engage in fair competition and use the State money wisely and prudently.

The clause does not provide that companies or partnerships in which there is State participation should immediately be profitable or should immediately move towards a profitable position. It provides that if the Government are to put public money into an industry or a firm they should state clearly, at the beginning, the financial objectives of the undertaking. Without this there is no measure of the success of the enterprise and no way of assessing the accuracy of the predictions of the officials of the Agency.

If the Agency decides, for example, to put £1,000, £100,000 or £1 million into an industrial venture, there should be a statement, at the outset, of what it is hoped that the firm will achieve by way of profitability or return on capital. The new clause provides that the Agency shall be obliged to provide the management of the undertaking with a written statement of the financial objectives of that undertaking, and in drawing up the statement, the Agency shall have regard to the desirability, in its commercial activities, of obtaining a reasonable return on capital employed. We also want to ensure, the objectives having been stated, that there is some indication whether the objective has been achieved. Therefore, the clause also says that there should be a statement on the extent to which each undertaking has achieved, exceeded or fallen short of the financial objective and that this shall be included in the Annual Report of the Agency". We have had very unfortunate examples of State involvement in business, particularly by means of nationalisation and its great ability to waste a great deal of taxpayers' money, to lose millions of pounds and, unfortunately, to ensure that there is no greater job security than exists in the private sector.

We want to ensure that if the Government decide, through the Agency, to finance an industrial operation, they set out the aim at the beginning. Unless we ensure this, those who are engaged in the management of the enterprise will have no guideline to which to work, no specific aim, and nothing against which their success can be measured.

In view of the great number of people employed in the State sector of industry, it is desperately important that we have a real and effective measure of whether the aims are being achieved.

If the Government argue against the clause, they should tell us what would be lost if the clause were to be accepted; in what way it would frustrate the endeavours of the Agency; in what way it would hold up the Agency's work; and in what way it would frustrate the endeavours of management.

The clause would not frustrate the Agency in any way. I can see no objection to it, unless the Government are anxious to cover up much of the Agency's activity and to ensure that skeletons remain in cupboards and are never found out.

Next, we ask the House to agree to new Clause 5, in which we propose an advisory committee whose members will have experience of business, commerce and banking, who shall have the task of reporting to the Secretary of State on the viability of each scheme in which the Agency proposes to exercise its powers under section 2(2)(b)". Before the Government commit any public money, we want to ensure that there is a body which is, so far as possible, independent, charged with the responsibility of examining schemes, assessing their viability and reporting to the Agency. The clause also provides that the Agency shall be obliged to provide the Committee with such information as it requires". particularly at a time when Government expenditure is being reduced so substantially, it should be seen that money is being used wisely and that schemes are viable.

So far, we have had only one indication of an appointment to the Agency. Sir William Gray has been appointed chairman. Sir William, who is a leading public figure in Scotland and who has contributed a great deal to our country, does not, so far as I am aware, possess direct experience of industry and commerce. His experience to date has been as Lord Provost of Glasgow, which has had many financial problems.

Irrespective of the public figures who will be appointed to the board of the Agency, it is important that we have independent views expressed about the viability of each project in which the State wishes to have a shareholding. Here again, nothing would be lost if the clause were accepted. We believe that a great deal would be gained.

Our third proposition is contained in Amendment No. 15, whose purpose is to secure that Notwithstanding the general limit imposed by this subsection,"— that is, the £200 million which is to be available over an unspecified period the Agency shall not be authorised to spend more than £50 million on nationalisation schemes until a report has been submitted to Parliament on the record and achievements of the Agency in this regard, and the report has been approved by both Houses of Parliament. If the Government are to spend a great deal of money on nationalisation schemes in Scotland by promoting firms in which there is a substantial State shareholding, it is important, after the expenditure of £50 million, that we have an indication whether an operation is likely to be successful. All our experience has been to the effect that when the State gets involved in business enterprises it loses a great deal of money.

The Government take the view, as they said in debates in Committee, that this will not happen in the case of the Agency. The Government want the Agency to be involved in profitable businesses which are contributing to the nation. We suggest that after spending £50 million on this purpose—if the Government spend that amount—the House should be enabled to review the situation, to pause for breath and reflection, and to judge if further moves should be made in this direction.

We hope that when replying to the debate the Minister of State will take the opportunity of giving us some idea of what cash is to be made available to the Agency. It will not be good enough for him to say that there is to be a £200 million limit and that it will be up to the Agency; government does not work like that. We hope, further, that the Minister of State will be able to give us an idea of the proportion of the cash to be made available which will be spent on nationalisation schemes.

I need not remind the House of the serious economic problems now facing Scotland. The Minister will know that although some people have welcomed the Agency in differing degrees the CBI and other bodies have expressed considerable concern about certain aspects of it. The Confederation is concerned, in particular, about State involvement in industry, first because in every other case it has meant a higher burden of taxation on the private sector. It also means a smaller private sector to bear the burden of taxation—