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Lord Renton of Mount Harry: My Lords, I thank the Minister for giving way. Surely, he realises that to say it will be a painful procedure is not an adequate answer to the fact referred to constantly in our report that own resources, particularly the collection of the resource based on VAT, is riddled with fraud. Everyone says that. Commissioner Liikanen agreed with that and the European Court of Auditors said it. Therefore, simply to say, as the Economic Secretary said in her answers to us, that the Government agree with the Commission that the shortcomings are there but they do not themselves provide grounds to justify a modification, that it is all too difficult and so the Government will not try, is simply not good enough for those who genuinely want to reform the European Union for its own good.

Lord McIntosh of Haringey: My Lords, I have two problems with that. First, we would be prepared to embark on a difficult and painful process if the quantum were sufficient to justify it, but now agricultural levies account for only 2 per cent. and customs duties 13 per cent. of revenue. Already we are returning to a GNP-based revenue system, even though no formal decision has been taken to do so. The second reason is that in order to start this painful process, unanimity is required and we do not have it.

I am very conscious of the time and the fact that many noble Lords, including myself, have more work to do tonight when this debate is concluded. If your Lordships will forgive me, I shall pass over the issue of stabilisation. However, stabilisation is essential in helping to solve the contribution imbalances of member states. I shall also pass over the common agricultural policy. The position of the Government on both issues is well known. However, they relate to expenditure rather than revenue and therefore, strictly speaking, they fall outside the subject of the debate.

In conclusion, there is no doubt that the Council later this week presents an opportunity for the heads of government of the 15 member states to set a path of

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stability for the finances of the Union over the next seven years. I welcome tonight's debate as an opportunity to air our views on these important issues. There is hard negotiation ahead, but the potential benefits are clear to all. The Government will go to Berlin to demand an outcome that is fair to all member states and to taxpayers and consumers.

10.17 p.m.

Lord Grenfell: My Lords, the hour is very late. I have no intention of adding to the long and excellent debate that we have had. I shall make one substantive point. I suppose that the sub-committee and the Government will continue to disagree on the subject of the abatement. I believe that it is more a matter of interpretation than anything else. We stated what we believed would be a realistic negotiating result for the United Kingdom and said that it was highly conditional. We made no apology for the fact that when we talked about what would be a realistic negotiating result we did not necessarily mean that it had to be on the table right now but that it was something that the Government should consider over the course of time. What disappointed me about the response of the Government and also the very authoritative speech of the noble Lord, Lord Williamson, was that in their very spirited defence of the British abatement no reference was made to the fact that there were others in the same position. That problem will not go away.

This has been a very good debate. I am glad that it has provoked such a lively discussion. Some noble Lords have been very severe in their condemnation of the time frame in which the inquiry took place. I can assure noble Lords that I did not set the date of the Berlin Council, but I take full responsibility, and make no apology, for my decision to seek the agreement of the sub-committee to take on this inquiry. We were tempted to go straight to what might have been considered the rather sexier subject of tax harmonisation, but I and my colleagues believed that we would be derelict in our duty if we did not examine the budget issues in the framework of Agenda 2000 expected to be settled during the German presidency, and in particular at the Berlin Council. That is why we decided to go ahead within this brief time frame.

Much as I long to comment on the many authoritative and interesting speeches made in the course of the debate, I must refrain from doing so because of the lateness of the hour. I warmly thank all who took part in the debate for their contributions. I am particularly grateful to those who wound up from the Front Benches for their interesting summations and comments.

To the credit of all noble Lords, I believe that their interest through these long hours demonstrated that there was no noticeable suffering from degressivity. I thank all noble Lords for the attention they have paid to the report. It only remains for me to thank again all noble Lords for their contributions to the debate, for making it such a lively debate, and for giving a good response to the report. I commend the report to your Lordships' House.

On Question, Motion agreed to.

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Scottish Enterprise Bill

10.20 p.m.

The Minister of State, Scottish Office (Lord Macdonald of Tradeston): My Lords, I beg to move that this Bill be now read a second time.

Section 25(2) of the Enterprise and New Towns (Scotland) Act 1990 places a financial limit upon Scottish Enterprise. The purpose of this Bill is to increase this financial limit from the present level of £3,000 million to £4,000 million. In addition it removes the provision enabling the Secretary of State to increase the limit further by statutory instrument.

The £2,000 million limit in the 1990 Act was increased to £3,000 million by The Scottish Enterprise (Aggregate Amount Outstanding) Order 1996 and was expected to take it into the millennium. This has proved not to be the case. It is now estimated that this level will be reached around June 1999.

A number of items count towards the financial limit placed on Scottish Enterprise: first, Scottish Enterprise's and its subsidiaries' general borrowings; secondly, sums issued by the Secretary of State or the Treasury in fulfilment of guarantees; and thirdly, loans guaranteed by Scottish Enterprise or their subsidiaries. Finally, the largest item comprises payment from the Secretary of State consisting of grant-in-aid less administrative expenses, plus voted loans payments.

The increase to £4,000 million will allow Scottish Enterprise to continue to operate until approximately March 2001. Thereafter the Scottish Parliament will have an opportunity to consider the future funding arrangements.

Expenditure for 1997-98 alone has achieved some significant things: the creation of 30,000 job opportunities; 17,700 projects undertaken with Scottish businesses; 5,300 new businesses started up generating £33 million of additional sales; employment opportunities for 13,500 people; and 87 inward investment projects.

My right honourable friend the Secretary of State recently provided Scottish Enterprise with strategic guidance that will ensure Scottish Enterprise is aligned to the Government's aims and objectives. But we are not resting on past achievements. We have ambitious plans for Scottish Enterprise activities. They are: to help create 100,000 new businesses in the next 10 years; to improve their survival rates; to broaden the knowledge base of the Scottish economy and address Scotland's underperformance in the growth areas of creative industries and marketable services; to promote productivity; to prioritise and promote the clustering of companies in sectors most likely to benefit from a strategy of collaboration to compete; to engage the strength of large companies in partnerships across the economy; to initiate activity to raise the level of investment in research and development to competitive levels; to sustain Scotland's attraction to inward investment and reposition where possible to knowledge-intensive industries and promote the

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potential of indigenous suppliers; and to help Scottish Trade International to create new exporters and expand new markets for Scottish goods.

Through the effort to refocus Scottish Enterprise activities, we consider that it is achievable within the current level of funding. It is a programme that goes beyond June 1999 when the current aggregate amount outstanding will be reached. The purpose of this Bill is to raise that level to enable Scottish Enterprise to continue to work to meet those objectives until the Scottish Parliament can consider afresh the funding arrangements for Scottish Enterprise.

The Bill was accepted in principle by all parties in the other place and passed without amendment. I commend the Bill to your Lordships.

Moved, That the Bill be now read a second time.--(Lord Macdonald of Tradeston.)

10.25 p.m.

Lord Nickson: My Lords, I welcome the first opportunity I have had to speak from these Benches on such a bipartisan subject. I welcome the Bill; I welcome the need for it; and I welcome very much the vote of confidence and the agenda which the Minister set out.

As the last chairman of the Scottish Development Agency and the first chairman of Scottish Enterprise, it is appropriate for me to say briefly why I believe that Scottish Enterprise is set on such a course of success.

It is too late to rehearse the background to the start of Scottish Enterprise. However, I pay tribute, with which I am sure the Minister will agree, to all who have worked for it and who have risen to the challenge over the past eight years; to all those who have served on the boards of Scottish Enterprise, the local enterprise companies, Highlands and Islands Enterprise and the local enterprise companies; and to the very dedicated, imaginative and enterprising staff who have worked for Scottish Enterprise and who are delivering that great success which Scotland has.

I am happy to be able to pay that tribute. When Scottish Enterprise was established, there were many sceptics and many who mourned the departure of the old Scottish Development Agency, as the noble Lord, Lord Gordon of Strathblane, who was on that board with me, will know. The Scottish press was extremely hostile to the demise of the Scottish Development Agency. I was cast in the role of undertaker and also in the role of midwife and eventually wet nurse to the infant Scottish Enterprise.

Achieving the right balance between Scottish Enterprise at the centre with the co-operation of all the local enterprise companies was not an easy task. But I do not believe that the past eight years have proved that we got it wrong.

The other great addition was the responsibility for training and skills which TECs in England and Wales did not have. It does not surprise me in the least that regional development agencies in England and Wales have been somewhat jealous perhaps of the success of Scottish Enterprise and are now seeking, through regional development authorities, to replicate that to some extent.

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The only other point I wish to make is that I hope that when the Scottish Parliament comes to consider future funding arrangements and refocusing--I use the Minister's words--it will endorse the great advantage which Scotland has had and will support the partnership arrangement which has been so successful in Scottish economic development. On the whole, it has been an extremely cohesive partnership involving government in the form of the Scottish Office, of whatever party, local authorities--I supported the retention of economic responsibility in the local authorities--and the private sector. I hope that the partnership and the concept of it will continue when the Scottish Parliament comes into being. I hope that Scottish Enterprise, which has flourished and which continues to deliver the benefits which have been enunciated, will have the opportunity to continue and to build on its success into the new millennium.

10.30 p.m.

Lord Monro of Langholm: My Lords, it is a great privilege to follow the noble Lord, Lord Nickson--who did so much to set the Scottish Development Agency and Scottish Enterprise on the right path--and to acknowledge what he has done for Scottish industry, banking and aspects of life in Scotland over so many years. We are lucky to have his advice in this Chamber.

The Bill represents a very large increase in the funding of Scottish Enterprise and it is somewhat disappointing that so important a measure, wherein we can discuss industry and employment in Scotland, is being debated late at night, particularly as this is probably the last occasion on which we will be able to debate those topics.

It is only right that we should ask the Government: is the money being well spent and is it producing the results we would expect from Scottish Enterprise? Its work can only succeed in parallel with good government economic policies to ensure business confidence and a willingness to invest in new industry, new enterprises and new small businesses. At present, one can hardly say that there is a good scenario for developing industry. Are the Government giving the right support to enterprise at present?

One's views tend to be coloured by what is happening in areas one knows best. I obviously know the south west of Scotland. Ministers come and Ministers go. They meet representatives of enterprise and the local authorities. They make all sorts of promises; yet, at the end of the day, the results are singularly depressing. From a random selection of local press cuttings we read, "Minister's crisis visit", "Axe hanging over tourist board jobs", "Emergency jobs meeting", "Jobs hit list". The depressing headlines go on and on: "Jobs cuts crisis alarm", "Timber firm puts back opening of new plant", "More jobs loss misery", and so on. That hardly seems to me a climate in which one would expect enterprise to have the dramatic impact which is needed and where jobs are disappearing fast.

In September last year, Mrs. Walker, the director of enterprise in Dumfries and Galloway, reported the loss of 1,000 jobs in 12 months. That was before we ran into

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the major problems of the textile industry, the developing problems of agriculture and of industry generally. The Minister may well say, "Yes, we have lots of new jobs; part-time jobs in service industries." However, that is no good to those who want full-time skilled jobs, whether men or women.

As I said, Ministers visit frequently. They include the Secretary of State; Brian Wilson when he was Minister responsible for industry; the noble Lord, Lord Macdonald; Mr. Calum MacDonald; and Mrs. Liddell. The Member of Parliament was acting a year ago as if there was light at the end of the tunnel. The tunnel has not yet been reached, far less any daylight being seen at the end of it. The situation is steadily deteriorating.

Dumfries and Galloway Council has produced many competent reports, both on rural and industrial aspects. It has explained to Ministers just how serious the situation is. We have had major problems, such as ICI selling its very modern plant to Dupont and then to UCB with a substantial loss of jobs. The Government seem incapable of resolving what would seem to be the relatively simple problem of Crichton Royal. I refer to the money that was paid to the university trust in error by the council. The trustees cannot pay it back without authority. Ministers do not seem able to resolve the matter.

A major disappointment in recent months has been the decision by the timber industry over Kronospan. That was the great hope that was supposed to bring many hundreds of jobs to a major site north of Lockerbie. To what extent does the Minister check with Scottish Enterprise and with the local enterprise companies? I know that they must be independent, that individual directors must use their own judgment and that there must be an element of entrepreneurship. But what happens when such a company takes on a greenfield site well north of Lockerbie, for which planning permission would never have been given for anything other than jobs, and apparently spends £2 million preparing the site, and the timber industry then says that because of the economic situation it is not going to use that site, and the enterprise company is left with that £2 million bill without having had a formal contract before beginning work on the site? Surely that is a dubious use of enterprise money. I repeat that there was not a strong legal contract before the work started.

I turn finally to something on which the Minister could and should be spending more money. Part of the money going to enterprise could be used on the infrastructure. From his visits to Dumfries and Galloway, the Minister knows that the road situation is very serious. However, all the current major construction work on the A.75 at the Glen, on the M.6 from Beattock up to Paddy Rickle Bridge and north of Beattock, together with the improvements to the A.7 were approved and begun under the last Conservative government. Since then, the present Government have done nothing to make any major improvements to the roads anywhere in south-west Scotland. If ever anything is crying out for action and if ever the Government could do something to help with jobs, road safety and transportation, that is it. We must create the motorway link between Carlisle and Gretna Green where there are

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between seven and eight miles of dual carriageway, the only stretch between London and almost the outskirts of Glasgow.

It is incredible that the Government have put their heads in the sand and will do nothing about developing roads in the south of Scotland--and, indeed, throughout Scotland. In view of my severe criticism, I hope that the Minister will think seriously about the developing unemployment in the south of Scotland, to which I am sure the noble Lord, Lord Steel, will refer in a moment. We do not want merely talk; we are anxious to see action and good, permanent, skilled jobs coming to an area that needs them desperately. I know that this is not easy, but I should like to see a very much more successful application of employment creation. Of course, we support the increase in the money available to Scottish Enterprise, but I want to see it better, and more effectively, spent.

10.37 p.m.

The Earl of Stair: My Lords, I welcome the opportunity to speak in this Second Reading debate on the Scottish Enterprise Bill.

I support this Bill, and believe that the best description of the purpose of the Bill is to be found on the front cover of the Scottish Enterprise Network booklet, entitled The Network Strategy, which states:

    "our purpose is to help the people of Scotland create, and sustain, jobs, prosperity and a high quality of life".

It is very easy to say that a technical Bill such as this is not a priority, when there is already a very full legislative programme, and the funding is not necessarily required at the present time. However, this should not be a Bill that will instigate great political argument and disruption. It should pass with the minimum of delay to enable Scottish Enterprise to prepare to operate under the new Parliament for the improvement of business development in Scotland.

However, I should like to bring to your Lordships' notice that Scotland's circumstances are now considerably different from nine years ago when the Enterprise and New Towns (Scotland) Act 1990 was passed. As I see it, the availability of this extra £1,000 million will boost the opportunity for Scottish Enterprise to implement national strategies, and to dispense funds to the local enterprise companies which in turn can implement the Government's policy of sustainable rural business development. This is already in process with the personal enterprise shows being run by Scottish Enterprise, in partnership with the Royal Bank of Scotland with the aim of increasing the new business birth rate. These shows are providing advice and guidance to potential small business operators all over Scotland.

This Bill will also introduce a degree of much-needed flexibility for Scottish Enterprise to be able to call on extra funds should an industrial or employment crisis develop in one of the regions of Scotland. I would like to provide an example, but first I should declare an interest in that I am a board member of Dumfries and Galloway Enterprise, one of the 13 LECs in Scotland. My example occurred last year when Dumfries and

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Galloway suffered several unconnected large job losses in the region. Scottish Enterprise was able to provide contingency funding which enabled Dumfries and Galloway Enterprise and the council to develop a 10-year plan for the economic regeneration of the region. This was launched by the noble Lord, Lord Macdonald of Tradeston, on 3rd March, in Dumfries. This joint economic strategy will provide a shared approach to the future economic development of Dumfries and Galloway.

The local enterprise companies have a major role to play in the development of business opportunity. The most often published stories concern inward investment, and the announcement of new employment. However, the local enterprise companies operate throughout the community and through the network of business shops assist in training, and advising new businesses, as well as assisting in Government schemes such as skillseekers and training for work, and to attain industry standards such as Investors in People. Through a joint arrangement with some local councils there is the administration of leader 2, European supported incentives for small business development. Other joint efforts involve, for example, office unit developments in Newton Stewart, a town in the Dumfries and Galloway region, which enable embryonic businesses to move into a small office which is equipped not only with desks and the normal furniture but also the latest in information technology. Existing industry is also helped both with expansion, diversification, innovation and the creation of jobs.

Finally, there is a community involvement with the provision and co-ordination of funding for schemes such as the small towns initiative, intended to regenerate particular identified communities.

Next year's gross expenditure allocation to Scottish Enterprise from the block grant to the Scottish Parliament has been reduced. This is to take account of some major rephasing of projects. Commitments have been made, subject to review by the Scottish Parliament, to increase the allocation for the following two years.

I trust that this Bill will pass as quickly through the stages in this House as it did in the other place to enable Scottish Enterprise to plan, particularly in the light of the expected reduction in European structural funds.

I disagree with the noble Lord, Lord Monro. The site to which he alluded cost nearer £3 million. Already there are three active interests in that site. It has been a worthwhile investment.

10.41 p.m.

Lord Steel of Aikwood: My Lords, one might not suspect it at this late hour and with such a thin attendance, but I imagine that this is quite an historic occasion. I suspect that it is the last time that this House will consider a Scottish Bill. We are looking forward to the advent of the Scottish Parliament. The 300 years during which this House has had to look after Scottish legislation is coming to an end. That is one reason for giving this Bill three cheers. The other is that, like other speakers, I welcome the increased funding which Scottish Enterprise will have.

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However, in my capacity as a candidate for the Scottish Parliament I received the other day a very glossy folder from Scottish Enterprise full of very fine and unexceptional phrases about what it hoped to do. I could not help looking at the expensive production and thinking that I would rather have had one page saying how the money had been spent and what had been achieved. I commend that approach not only to Scottish Enterprise but to other organisations as well.

When the Scottish Parliament comes to look at the work of Scottish Enterprise and all the other agencies, it will want to have a much more hands-on approach than has been possible under the existing parliamentary scrutiny. For example, the Scottish Enterprise remit does not include the need to establish or to draw up any kind of national infrastructure strategy. It does not deal with the question of having any kind of blueprint for a road network, rail or airports.

I suspect that the Scottish Parliament in its first couple of years and probably by the time the budget provision that we are making today runs out, will want to look at all the agencies that operate in the economic field, try to streamline them and make them more efficient, cost-effective and answerable to the parliament itself.

I share some of the views expressed by the noble Lord, Lord Monro. We in the south of Scotland have had a series of unfortunate disasters, totally unrelated to any expectation and to each other. I know that the Minister has been to see the effect of the closure of Viasystems. It was a successful company, built up by small local entrepreneurs and eventually taken over by larger concerns which grew from a handful of people in Galashiels and Selkirk. It became the largest single employer in Selkirk. The fact that the new American owners decided to close it down--not for any local reasons--has been a major economic disaster in the area. That, coupled with the new quarrel between the Americans and the European Union on the banana question, and the totally unjustified sanctions on what I prefer to call the "cashmere" industry, led to a serious economic situation in the Scottish Borders.

I make one plea to Ministers. I have heard him and other Ministers repeat the old truth--for it is a truth--that unemployment in the Borders even at the present time is less than in some other parts of Scotland. We had this argument 30 years ago and I am sorry to see it reappearing. I believe the noble Lord, Lord Monro, will agree that it is a tradition in the Borders that if one is unemployed, one does not hang about; one does not go into the unemployment statistics; one leaves and finds employment in central Scotland, down South or indeed overseas. That has always been the tradition. In an area like the Borders depopulation is our enemy, not unemployment. We won that argument in the late 1960s. Eventually the government recognised that they would have to consider industrial support on criteria other than unemployment. I hope therefore that we are not going to have to go back and rehearse those arguments all over again.

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I raise that matter because the SDA, to which the noble Lord, Lord Nickson, made reference and in which he was involved, was extremely active in the Borders and very effective in many ways in both large and small schemes, in helping to revive the economy. The Minister was recently in Selkirk, and one of the curious things he may have noticed there is that along the road from Viasystems is the old Ettrick mill. I remember it as a spinning mill when I was a new Member of Parliament. It had been closed for years and the local enterprise company, using partly Scottish Enterprise funds and partly European funds, refurbished the building four or five years ago. A lot of money was spent on it, yet it stands empty to this day.

I do not understand why we have not been able to attract into the south of Scotland not industrial jobs--I realise the difficulties in that area--but office employment. We are told that in the computer age offices do not have to be in city centres, yet one only needs look at Glasgow and Edinburgh to find millions of pounds being spent on great new offices by insurance companies and other agencies. That mill is a building on which substantial sums have already been spent, and nothing has been successfully achieved in having it occupied. Those are the kinds of question which in future the Scottish Parliament will want to address. It will want to look at the present rather inadequate structures--I include Scottish Enterprise in that--for making sure that economic development is balanced and tailored to the specific needs of specific parts of Scotland.

10.48 p.m.

Lord Mackay of Ardbrecknish: My Lords, I join other noble Lords in welcoming this Bill, although, if I understand it rightly, it does not provide more funds to Scottish Enterprise; it just gives them cover for the continuing funds coming from the Scottish Office as the aggregate amount is about to run out. So it is not entirely the good news story that some people might like to imagine.

However, it is important for all that because it would not be right to find Scottish Enterprise running out of legislative cover and not being able to take and use the money coming from the Scottish Office. I entirely understand the point of the Bill. It is interesting that the Bill says that the total will not exceed £4,000 million, then takes out the provision in the Enterprise and New Towns (Scotland) Act 1990 for further increases, which will be necessary after 2001, to be by secondary legislation. I presume that early in the new millennium, the Scottish Parliament will have to consider similar primary legislation, to up the amount to £5,000 million or whatever. Will the Minister confirm that that is so?

If I understand the amendment to the 1990 Act, I am intrigued by the removal of the words

    "with the consent of the Treasury".

Was that cosmetic or will future increases not require the consent of the Treasury? At this time of night, I will not go into some of the great debates about whether or not the words "with the consent of the Treasury" were necessary. Some of us take the view that not a penny is

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spent, not a hair falls from anybody's head, without the consent of the Treasury. Are there any serious reasons for omitting those words, which are found in all sorts of legislation, from the Bill?

I wonder also about Highlands and Islands Enterprise. I suspect that its cover is of a different nature, but is its position secure or will it require similar legislation shortly?

The noble Lord, Lord Steel of Aikwood, is not keeping a careful eye on the Order Paper. This is not by any means the only piece of Scottish legislation before your Lordships. I suspect that this Bill will make its way onto the statute book a good deal quicker than the other two. Buried in two United Kingdom or basically English measures are major items of Scottish legislation. One of them reforms the Scottish health service, runs to a number of clauses and is an important piece of Scottish legislation. The other is less bulky and is to do with the Water Industry Bill that is before the House. I do not mean a pounds, shillings and pence water bill but legislation. There are still some pieces of Scottish legislation wending their way through the House.

As to the health service legislation, I would have preferred a separate Scottish measure, rather than have something buried in an English Bill.

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