Order for Second Reading read.

6.6 p.m.

Mr. Nick Budgen (Wolverhampton, South-West)

On a point of order, Mr. Speaker. May I point out that there will be about two hours available for those who are not members of either Front Bench—at most? I am trying to put the case against myself at its strongest. I am sure, Mr. Speaker, that you hope that a Member of the Welsh National Party will catch your eye, as will a Member of the SNP and a Member of the Liberal Party. But it is almost certain that nobody from the Back Benches proper will be able to catch your eye, particularly if a Privy Councillor happens to catch your eye.

These are important issues. It is true, as the Lord President said, that we do not wish the Bill to pass. This measure goes to the root of the dispute between the Tory Party and the Labour Party. The Government believe that State power should be extended, and we have a right to be heard on this important matter. The high-handed action of the Lord President is preventing us from representing our constituents in this House.

It is ridiculous to pretend that this matter is urgent. In the recently published Government White Paper on public expenditure there was no proposal for increased expenditure by the NEB in the next two or three years. This is an important partisan matter, but in terms of the practical running of the Government or of the NEB the Bill is unnecessary. A week's delay will do no harm to the Government or to the NEB, but it will allow us, on behalf of our constituents, to make proper representations in this House.

The Lord President used to be a great supporter of Back Bench rights. It used to be said that, above all, he loved this House and believed that it was vital that every Back Bencher had an opportunity to represent his constituents. His behaviour tonight is a denial of everything that he has stood for in the past.

Mr. Speaker

Order. Hon. Members must confine themselves to points of order which I can answer. I cannot answer the point of order which has just been raised.

Mr. Robert Rhodes James (Cambridge)

On a point of order, Mr. Speaker. It is clear that the House and you yourself are in a considerable difficulty. I wonder whether you would entertain a motion "That this House do now adjourn". If you were prepared to entertain that motion, I should be honoured to move it.

Hon. Members: Hear, hear.

Mr. Speaker

I am afraid that hon. Members have misunderstood the conversation that was under way at the Table. The advice that I was getting was not very encouraging to the hon. Gentleman as to my powers on this matter.

Mr. Rhodes James

Further to that point of order, Mr. Speaker. The motion for the Second Reading of the Bill has not yet been moved. I am asking whether you would entertain a motion, which I shall now move, "That this House do now adjourn".

The basis of that motion is that there are now fewer than four hours left in which to debate this extremely important Bill which affects a considerable number of hon. Members and their constituencies. I suggest that, in these circumstances, the most appropriate action for the House to take would be to move to adjourn and for the Leader of the House to find an alternative date next week or the week after. This matter could then be dealt with in a proper manner, which would enable hon. Members to deploy their arguments in full and to justify their constituents' interests in the Bill.

Mr. Speaker

Standing Order No. 1 makes it clear that no Member other than a Minister of the Crown"— and no Minister looks as though he intends to do so— may make such a motion on any day before the orders of the day or notices of motions shall have been entered upon".

Mr. William Clark (Croydon, South)

On a point of order, Mr. Speaker. I cannot understand the technicalities of this matter, and I seek your guidance. Many points of order were curtailed and the Orders of the Day were called. I understand that we are now in the technical position that only a Minister can move the Adjournment of the House. Many Opposition Members still wish to raise points of order. I am asking why it was necessary to call the Orders of the Day before those points of order were dealt with.

Mr. Speaker

Because I wanted to call them and to get on. I was not trying any quick trick on the House. That is neither my way nor my custom. I thought that I was helping the House. But we have not yet proceeded with the motion that is before the House. We have not embarked upon it.

Mr. William Clark

Further to that point of order, Mr. Speaker. You have ruled that, the Orders of the Day having been called, only a Minister of the Crown may move the Adjournment of the House. [HON. MEMBERS: "No. It is the other way round."] My hon. Friend the Member for Cambridge (Mr. Rhodes James) moved the Adjournment of the House and I thought you said that that could not be allowed because a Minister of the Crown had not called for the Adjournment of the House.

Mr. Speaker

I am sorry that I did not make the position clear. I said that no Member other than a Minister of the Crown may make such a motion on any day before the orders of the day or notices of motions shall have been entered upon". We have not entered upon the notices of motions.

Mr. Kenneth Clarke (Rushcliffe)

Further to that point of order, Mr. Speaker. It seems to me that we have entered upon the Orders of the Day. You called upon the Clerk to read the Orders of the Day, and we have now reached the stage where they have been entered upon. If that is not the case, could you indicate for the convenience of the House what steps have to be taken before the Orders of the Day are entered upon so that we know at what stage my hon. Friend the Member for Cambridge (Mr. Rhodes James) may rise to move such a motion?

Mr. Speaker

When the motion has has been made for the Bill to be read a Second time, we shall have entered upon the business. No Question has yet been proposed by the Chair on that issue.

Mr. Kenneth Clarke

Will you clarify my mind and the minds of other hon. Members on this matter? Is it the case that so soon as the Clerk of the House has risen to read the Order for the Second Reading, then, immediately before any speeches have begun, my hon. Friend the Member for Cambridge may rise to move his motion?

Mr. Speaker

No. That may happen only after I have proposed the Question from the Chair. When I have proposed the Question, "That the Bill be now read a Second time", the dilatory motion, the moving of the Adjournment, would be in order.

Mr. Rhodes James

With great respect, Mr. Speaker, it is not possible for the House to have two motions before it at the same time. The point of the procedure under Standing Order No. 1 is that after the House has entered upon the Orders of the Day and after the Clerk at the Table has read the title of the business, a motion for the Adjournment can be moved. It happens frequently in foreign affairs debates and on other occasions. It is not possible to move a motion for the Adjournment of the House immediately after you have proposed the motion that the Bill be read a Second time. The House cannot have two motions before it. I urge that the House should now be debating the motion which I ventured to propose, namely, "That this House do now adjourn".

Mr. Speaker

With every respect to the hon. Gentleman, he seems to have forgotten that when, from time to time, the motion is moved "That this House do now adjourn" before we enter on business, it is always moved by a Minister of the Crown. That is the case without exception, and that is what the hon. Gentleman has overlooked.

Mr. Alexander Fletcher (Edinburgh, North)

On a point of order, Mr. Speaker. It might help the House to consider the matter if the Lord President will elaborate a remark that he made a few moments ago. He said that it was important for the Bill to reach the statute book by Easter. If he will explain why that is the case, hon. Members might be able to consider the position more effectively.

Mr. Michael Jopling (Westmorland)

On a point of order, Mr. Speaker. I think that there is a way in which you could help the Government and the House in general on this difficult matter. It seems clear that when we reach the end of this important debate the closure will have to be moved. "Erskine May" says on page 449 that the question must be put forthwith, without amendment or debate, unless it appears to the Chair that the motion is an abuse of the rules of the House or an infringement of the rights of the minority. In view of what has been said in points of order, it seems clear that there is a great likelihood—in fact a certainty—that the rights of the minority are likely to be abused very much indeed if this debate is held straightaway. You can help the House, Mr. Speaker, by indicating that you believe that if a vote were taken or asked for at 10 o'clock it would be an abuse of the rights of the minorities in this House. If you were to give that ruling or indication now, it may be that the Lord President of the Council would have the wisdom to decide to put off this debate.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot)

Further to that point of order, Mr. Speaker. The hon. Member for Westmorland (Mr. Jopling) is perfectly right in his assessment of the position, as I understand it. I was urging that the House should embark upon the debate. I believe that is still the right course. Indeed, I think that it would have been wise if we had done that 20 minutes ago [Interruption.] I am just as much entitled to give my view to the House as hon. Members. I believe that it would have been better to have émbarked upon the debate.

At 10 o'clock you will have to decide the matter. I presume, that you would not give a hypothetical ruling at this stage. I suggest that the House should start the debate, and at 10 o'clock you will be able to make up your mind about the submission that has been made to you. I suggest that to ask you to give a hypothetical ruling at this stage would be contrary to normal procedure. I suggest that we should start the debate. When we reach 10 o'clock you, in your wisdom, will give your judgment on what is put to you at that time.

Mr. Hal Miller (Bromsgrove and Redditch)

Further to that point of order, Mr. Speaker. I wish that the Lord President would reconsider the urgency of the matter. It is now appreciated that the larger part of the NEB funds would be required for British Leyland. We were informed at Question Time earlier this week that the report of the NEB will not be available in the Library until next month. Therefore, it is not easy to understand why the debate has to be started tonight.

As my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) has pointed out, the Committee of Selection will not have met and Members will not have had enough information about British Leyland in particular, which, whatever view one takes, must account for the lion's share of the funds which are said to be required. Therefore, there seems to be every reason for postponing the debate.

Finally, on that point of order, I should wish to take part in the debate because I have an extremely strong constituency and industry interest.

Several Hon. Members rose—

Mr. Speaker

Order. I request that any hon. Members I now call submit points of order that I can answer rather than further argument against proceeding with the Bill tonight. That is not a matter for me. That is out of my hands.

Mr. Churchill (Stretford)

Further to that part of order, Mr. Speaker. Would it be possible for the Lord President to assist you and the House in its difficulties by undertaking that, in the light of the lack of time left in which to debate this important matter, the Government will not tonight move the closure at 10 o'clock and the debate will be continued on Monday and the vote taken at 7 p.m.? That would leave time for a Standing Order No. 9 debate.

Mr. Patrick Cormack (Staffordshire, South-West)

Would it not be helpful for the House to be suspended for half an hour, so that the usual channels can get to work?

Mr. Budgen

Further to the point of order raised by the Lord President, Mr. Speaker. I respectfully suggest that you, from your great store of wisdom and knowledge of our proceedings, offer some advice to the Lord President. It would seem to be a most unsatisfactory procedure to start the debate and to break it off in order to conclude it at some time in future.

In the old days, when the Lord President was true to himself, he used to demonstrate that the most important feature of a debate was that one hon. Member replied to the views of another, so that there was a genuine debate. If we start this debate today and attempt to conclude it, for instance, in 10 days' time, there will be no debate. There may be some reading of prepared statements, but the whole intimacy, the sense of giving and taking of ideas, will be gone. There will be no debate. It will, once again, be a denial of everything for which the Lord President used to stand.

Mr. Robert Kilroy-Silk (Ormskirk)

It will be within your recollection, Mr. Speaker, that on many previous occasions when frivolous and irrelevant points of order have been raised, you have risen in your place and said that you will take no further points of order and that we shall begin the serious business of the House. Every point of order tonight has been frivolous. There is a clearly organised conspiracy to filibuster these proceedings. I ask you, Mr. Speaker, to stand up and ensure that we have no more frivolous points of order but begin the serious debate in the House.

Mr. Speaker

I should tell the hon. Gentleman that I do not welcome such remarks. I do not expect the hon. Gentleman to apologise, but I do expect him to know that I shall choose the moment. Much as he might regret it, I do not need his assistance. I shall manage without it.

Mr. Peter Ros (Derbyshire, South-East)

It would be helpful, Mr. Speaker, if you could give some guidance to the House and to the Leader of the House along the lines that you would not be likely to consent to the closure being put at 10 o'clock, in view of the fact that a large number of Members will not have had an opportunity to speak in the debate. Using precedents which obviously exist for such guidance—that not enough time is likely to be available—we should then know where we stand and the Leader of the House would be less likely to delay matters even further by trying to get the debate started.

Mr. Speaker

I had that put to me earlier. Obviously, I cannot anticipate what will happen at 10 o'clock. I do not think that we can hold up a Bill by points of order which are simply delaying us.

Sir Keith Joseph (Leeds, North-East)

Will die Lord President take into account that even if points of order had not been raised, after an opening speech from the Secretary of State, the response from the Opposition and the two winding-up speeches, there would have been left only 30 minutes each for the interests of Scotland and Wales and for the views of any other parties in the House. Surely, that cannot be justified for a Bill involving public spending on this scale.

There is no suggestion of any defeat for the Government. We are only asking the Lord President to do his duty to all interests in the House, including those below the Gangway on the Government side. He should ensure that we have sufficient time in which to debate this important Bill. That would not lose any time, assuming that the Bill is given a Second Reading, before it goes to Committee.

Mr. Foot

I suggest to the House that the best way to proceed is as I suggested. If my suggestion had been adopted we should already have embarked upon the debate on this important Bill and a considerable amount of time could have been devoted to it. At 10 o'clock the question of how much time has been devoted to the Bill will have to be taken into account by you, Mr. Speaker, and, before then. it may be taken into account by the usual channels.

I suggested how we might take that into account. I believe that the proper way is by discussion in the usual channels. I urge the House to embark upon the debate which has been put down for today. In addition to those who have raised points of order, many other hon. Members have interests in this matter. Some hon. Members are very eager that the Bill should get on to the statute book. I know that some hon. Members, including the right hon. Lady the Leader of the Opposition, do not want it on the statute book at all. They are perfectly entitled to take such precautions as they can.

I suggest that the right course is to follow the procedures which have been announced upon the Order Paper. We should start upon the debate and see how matters proceed. In the meantime, I am prepared to have discussions through the usual channels, without any commitment about what we might propose at 10 o'clock.

I believe that the best suggestion was the one that I made about three-quarters of an hour ago. We can discuss these matters through the usual channels. If hon. Members insist on raising points of order for another half an hour or so, they will merely waste the time of the House of Commons.

Mr. Norman Lamont (Kingston upon Thames)

I should point out to the Lord President that although this is an extremely important Bill, it is also extremely short. The idea that there will be a prolonged Committee stage and that there is any real danger of the Government not getting the Bill before Easter is totally unreal, as the right hon. Gentleman must know. The Committee stage, by the very nature of this brief Bill, cannot be very long. Therefore, the right hon. Gentleman's fears and reasons for not having the debate on another day are totally groundless.

Mr. Peter Hordern (Horsham and Crawley)

On a point of order, Mr. Speaker. Will you advise us on how the interests of Back Benchers can be protected in this situation? The Leader of the House said that he was not prepared to give any undertaking now whether the debate would be extended. He prefers to do that through the usual channels. How can the interests of Back Benchers be properly protected?

The Bill concerns not only the total sum to be advanced to the National Enterprise Board but the interests of Scotland, Wales and England and, not least, the Treasury. As one of my hon. Friends pointed out, whereas the Bill provides that the NEB is to be authorised to spend £4,500 million, the public expenditure White Paper allows no more than about £270 million for each of the next four years. Therefore, the least that the House should expect is the pres- ence of the Chancellor of the Exchequer or the Chief Secretary, but neither of those two right hon. Gentlemen is here. As time draws on, the possibility of any of these arguments being advanced dwindles into nothing. Therefore, will you advise the House how, in your opinion the interests of Back Benchers can be protected in this situation?

Mr. Speaker

There is no means open to the House to stop the order of business on the Order Paper.

Mr. Peter Bottomley (Woolwich, West)

rose—

Mr. Speaker

Order. I believe that I have called everyone except the hon. Member for Woolwich, West (Mr. Bottomley). I shall take his point of order and then call on the Minister. [Interruption.] Order. I do not propose to stay here until 8 o'clock taking points of order because hon. Members do not want the Bill to be proceeded with. That is not my function. I cannot be expected to do that. I have been here since 2.30 p.m. as it is.

Mr. Peter Bottomley

On a point of order, Mr. Speaker. I shall try to keep to my point of order rather than go into points which might be made in the debate on the Bill, if and when it comes.

I understand that the Lord President, in his last point of order, made one suggestion and one recommendation which he put as a suggestion to the House. In his first suggestion he said that there should be discussions between the usual channels. It is quite plain that you alone, Mr. Speaker, have discretion to suspend the sitting so that those discussions can take place.

The second suggestion made by the Lord President was that the House should continue to consider the Bill. He is far more expert than I am on these matters. I do not believe that he would have put that forward as a suggestion for the House to accept if it were not in some way possible for the House not to accept it.

When you were ruling on the point of order raised by my hon. Friend the Member for Cambridge (Mr. Rhodes James) you kindly read part of Standing Order No. 1. You said that, in certain circumstances, it was not possible for any Member other than a Minister of the Crown to move the Adjournment of the House. Notwithstanding the difficulties which you expressed just now of having been here since half-past two, this seems to be a serious point. If there are circumstances in which the Chair may accept the motion for the Adjournment of the House proposed by my hon. Friend the Member for Cambridge, we need to be clear about the circumstances in which the restriction to a Minister of the Crown applies. I should be grateful if you could give us the information on that matter as well as dealing with the point made by the Lord President that he was making a suggestion on which, in one way or another, the House could find the opportunity to decide.

Mr. Speaker

If the hon. Gentleman, when he has an opportunity, will look at page 354 of "Erskine May" he will find in the last paragraph the knowledge for which he has been searching.

Mr. Bottomley

Further to that point of order, Mr. Speaker. The point that I was making related to Standing Order No. 1, of which you were kind enough to read all or part. That suggested that there certain circumstances when only a Minister of the Crown was able to move a motion for the Adjournment of the House. Is it possible that we are now in a different circumstance which is not covered by the provision that you read at that time?

Mr. Speaker

The reference in "Erskine May" to which I directed the hon. Gentleman's attention was dealing with Standing Order No.1.

Several Hon. Members rose—

Mr. Speaker

I shall take one more point of order, and then I intend to call the Minister.

Sir Keith Joseph

A number of constructive suggestions have been made. I wonder whether through you, Mr. Speaker, I may again draw to the attention of the Lord President the fact that because of the possibility that you will decide to devote the last three hours of Monday's business to a debate under Standing Order No. 9, that will leave a slot in the earlier part of the day when this debate could be continued. We would then, in effect, have a full day's debate, though spread over two days.

I think that that suggestion would meet the convenience of the House more than any attempt to rely upon the uncertain chance of the Government not trying to move the closure and your inevitably uncertain response—we cannot know what you would decide at that stage—of trying to cram important matters of principle and of finance into so short a time today.

No Opposition Member is seeking by any improper means to gainsay the Government's right to have the Bill considered. What is at stake is a matter of a couple of days if we adopt the proposal which has been put forward. That will not even delay the entering of the Bill into Committee, should it receive a Second Reading.

Mr. Foot

On a point of order, Mr. Speaker. If the House will proceed on the lines that I have suggested, I believe that the whole matter can be perfectly well accommodated. If the right hon. Member for Leeds, North-East (Sir K. Joseph) had acceded to what I suggested earlier, it could have been dealt with.

I suggest that we should start upon the debate now. I wish that it could have been done earlier. We can then have discussions through the usual channels—[HON. MEMBERS: "They have had them."]—and reach the same conclusion as I suggested to the House earlier. I believe that that is a reasonable way in which to proceed. How we proceed to continue the debate at a later stage is, I suggest, a suitable matter for discussion through the usual channels. I suggest that we can deal with that matter at 10 o'clock and in a further announcement in the House tomorrow. The whole matter can be dealt with satisfactorily. I suggest that the best course would have been for the House to have listened to me in the first place.

Several Hon. Members rose—

Mr. Speaker

Order. The House should be aware that discussions through the usual channels seem to have borne fruit.

In my own interests, I shall suspend the House for 10 minutes.

6.30 p.m.

Sitting suspended.

On resuming—

6.40 p.m.

Mr. Foot

May I suggest that the best way in which the House should proceed is to start upon the debate now but not to seek to reach a conclusion on the Second Reading at 10 o'clock. We shall make an announcement at the beginning of business tomorrow as to how we shall proceed with the Bill again at the beginning of next week.

I hope that that will satisfy the requirements of the Government in wishing to proceed with the Bill but also satisfy the requirement of the House to have time to discuss it.

Mr. Speaker

It seems that the suspension of the House was good for all.

Sir Keith Joseph

I thank the right hon. Gentleman for what he has said, and I hope that Opposition Members will regard what he has suggested as a satisfactory method of carrying on with the debate.

6.41 p.m.

The Secretary of State for Industry (Mr. Eric G. Varley)

I beg to move, That the Bill be now read a Second time. The purpose of the Bill is to raise the financial limits of the National Enterprise Board, the Scottish Development Agency and the Welsh Development Agency, and to amend the Acts governing them so that all the borrowings of their subsidiaries count against their financial limits.

My right hon. Friend the Secretary of State for Northern Ireland intends to introduce an order increasing the statutory financial limit of the Northern Ireland Development Agency. This order, too, will require that borrowings by the Agency's subsidiaries should be charged against its financial limit. Because of the arrangements for legislation relating specifically to Northern Ireland, this order will be dealt with separately.

The NEB is by any objective assessment one of the great success stories of British industry. It was a central feature of the industrial policies put forward in the Labour Party's manifestos in 1974. The legislation setting it up was carried as a matter of priority in the first Session of this Parliament. It has now been in operation for a little over three years, and it is already impossible to imagine the British industrial scene without it.

Nine months ago I asked the House to approve an increase in the financial limit of the NEB in the manner provided under section 8 of the Industry Act 1975. We had a very full debate then, covering the whole range of the NEB's activities, at the end of which the House approved an increase in the limit from £700 million to £1,000 million. Now we must now look ahead to the time when the NEB has reached that limit.

The charges that at present lie against the NEB's financial limits include issues of public dividend capital to the NEB, borrowings made and guaranteed by the NEB; and commercial borrowings by the NEB's wholly-owned subsidiaries whilst in the NEB's ownership. At 31st December last the NEB had drawn £439 million in public dividend capital; borrowed £160 million from the National Loans Fund; and guaranteed loans amounting to £5 million. At the same date its wholly-owned subsidiaries had borrowed £56 million.

The total currently charged against the NEB's limit stands at £660 million. This figure is the charge that the law requires should be made against the NEB's financial limit. But the NEB is continually entering into firm forward commitments, to its subsidiaries and associates, which will present charges against the limit in due course. The total of these commitments varies widely over time, but at 31st December it stood at £170 million, excluding provision for British Leyland and Rolls-Royce.

The total of firm commitments and actual charges now already amounts to £830 million, plus whatever is required for BL and Rolls-Royce. The latest corporate plans of these companies will not be endorsed for some time yet, but there is every reason to think that substantial investment will be required in the course of the coming months, and although some of this may be met by private sector borrowing and internally generated funds, a major part will be the responsibility of the NEB to provide.

Mr. Kilroy-Silk

Can my right hon. Friend tell me why we should tonight support an additional grant of funds to the NEB, given its very shoddy performance in the North-West and on Merseyside, its persistent refusal to support the Kirkby co-operative, the fact that it is almost totally unaccountable to Parliament and the fact that the Secretary of State consistently refuses to give it directions? It has such a total disregard for the high unemployment in the regions that it can locate the headquarters and research and development facilities of INMOS outside an intermediate area. Given all the kind of things—

Mr. Deputy Speaker(Mr. Bryant Godman Irvine)

If the hon. Gentleman is making an intervention, it should be brief.

Mr. Kilroy-Silk

May I ask my right hon. Friend to take some time to explain to his colleagues on the Labour Benches why we should support an enterprise which is becoming increasingly like a commercial bank?

Mr. Varley

If my hon. Friend had been able to contain himself for 10 minutes or so, I should have into some of the areas that he has covered. He is factually wrong on a number of the points that he has raised, but I can understand his frustration and anger at not yet having been able to make his speech. I am not sure that I can take up his points now, because so many of them are wrong.

Perhaps the best thing for my hon. Friend to do would be to try to catch the eye of the Chair and make his speech rather than make these wild assertions. I am sorry that I must say that to my hon. Friend. I am about five minutes into my speech, and he says that I have not explained everything. I object to that kind of intervention.

The NEB's present financial limit is likely to be reached within a fairly short time of the Bill's becoming law. The Bill makes provision for a total increase of £3,500 million. If the Bill is carried, the borrowing limit will include all the borrowings of the NEB's subsidiaries, and we envisage that these might amount to perhaps £1,500 million over the next five years. After taking account of that, the Bill provides for an additional £2,000 million to enable the NEB to pursue its statutory purposes of promoting the effic- iency and competitiveness of United Kingdom industry, and so generating increased employment.

We have taken account of the fact that over a period of five years the NEB's present annual public expenditure provision of £275 million would require £1,375 million. We also have regard to the desirability of no longer augmenting NEB funding of BL from funds provided under section 8 of the Industry Act 1972. and to the contingencies of many sorts which could present themselves for the NEB. I know that the hon. Member for Colne Valley (Mr. Wainwright) was very interested that we should go to the NEB for the funding of organisations such as BL rather than rely overmuch on the Industry Act 1972. We therefore concluded that it would be sensible to envisage a provision of £2,000 million for the purposes I have described. This sum, as I have said, when added to the £1,500 million for subsidiaries' borrowings, points to this increase of £3,500 million in the NEB's financial limit, for which this Bill provides.

However, as is usual, the Bill provides that this increase should be approved by the House in stages, and therefore the limit initially is set at £3,000 million, an increase of £2,000 million, with further increases subject to affirmative order within the ultimate limit of £4.500 million. These increases in the financial limits of the NEB will not of themselves add a penny to public expenditure. What they will do is to enable the NEB to continue entering into financial commitments. Fly no means all the commitments involve public expenditure. We believe that between one-third and a half of the increases that we are seeking in the NEB's limit will be drawn from private sources of finance.

Now I come to the borrowings of the NEB subsidiaries, which are specifically mentioned in the Bill. The secondary purpose of the Bill is to amend the Industry Act and the Scottish and Welsh Development Agencies Acts so that the borrowings of all their subsidiaries are charged against their financial limits.

In the case of the NEB, under section 8 of the Industry Act 1975 the charges against the NEB's financial limit include the borrowings of its wholly-owned subsidiaries and loans of any sort which are guaranteed by the NEB. There are similar provisions in the Agencies' Acts.

In March 1977 BL's auditors sought an assurance from the directors that BL's accounts could be prepared on a going-concern basis.

The directors in turn sought assurances from the NEB. In reply, with the Government's approval, the NEB drew attention to the provision in the NEB guideline that in deciding on their practice in relation to the debts of their subsidiaries the NEB shall have regard to the practice of companies in the private sector and went on to say that, in the judgment of the NEB, in the private sector, a company whose relationship with BL was the same as that of the NEB, by virtue both of the size of its shareholding and the closeness of its involvement in the affairs of BL, could not allow BL to be left in a position where it would not be able to meet its obligations. That assurance was made public when I reported it to the House, as hon. Members will recall, on 26th May 1977.

We were advised that the assurance, which covered all BL's obligations, was not a guarantee in law, and so there was no question of BL's borrowings being charged against the NEB's financial limit on that account. Nor is BL a wholly owned subsidiary of the NEB, which would also require its borrowings to be charged against the limit. But we recognise that the assurance has a degree of force which makes it difficult to distinguish, for all practical purposes, from a guarantee, and we thought it right, therefore, to take the first legislative opportunity to charge BL's borrowings against the NEB's financial limit.

Because the same principles apply to all NEB subsidiaries, it was appropriate to provide that all their borrowings should be included within the limit in future. In reaching that view we were fortified by recent views expressed by the Public Accounts Committee about financial limits.

This has meant that we have to seek a much higher limit than would otherwise have been necessary, and the Government think that it would be right to extend the provisions to which I have referred to the Scottish Development Agency and the Welsh Development Agency, because their industrial investment tasks are essentially the same as those of the NEB. Subsections (5) and (7) of clause 1 have that effect.

Mr. Hal Miller

Does that mean that creditors of BL are now in receipt of a Government guarantee? Has the principle been extended to that degree, or is the right hon. Gentleman referring only to the later borrowings of the company?

Mr. Varley

The principle has not been extended. That is why I took a great deal of care over the words that I used, and I ask the hon. Gentleman and those who have an interest in these matters—companies, suppliers and the rest—to take careful note of what I have said. I have no doubt that this matter will be gone into much more thoroughly in Committee.

Mr. Michael Grylls (Surrey, North-West)

May I ask for clarification? The Secretary of State has given a figure for the borrowings against the NEB on the present system under the 1975 Industry Act of the wholly-owned subsidiaries. Can he give us a new figure on the new accounting practice as if the Bill had received the Royal Assent today? Can he give us the figure which would be the equivalent of the £660 million which he is giving us now?

Mr. Varley

The hon. Gentleman will, I am sure, recognise, that it is extremely difficult to do so. It is difficult, even if one knows exactly what the borrowings are, to give a figure, but, as he knows, and as the House knows, these figures are changing all the time, and we cannot give an accurate estimate at this stage. It may well be that in Committee something can be done—perhaps the Committee can be given a snapshot of the situation at that time—but I am not prepared to give that figure today. I understand the hon. Gentleman's point, but I hope he will understand the relevance of what we are doing and the explanation that I have given.

I should like to come to the NEB's record. It is, of course, dominated by BL and Rolls-Royce, and really those two companies take up a great deal of the NEB's responsibility and time.

BL is the NEB's largest subsidiary, and the Government's position on future funding remains exactly as I told the House when we debated the 1978 injection of equity funds in April last.

Of the £1,000 million of public funds which the Ryder report recommended should be made available to BL between 1976 and 1981, £400 million remains to be provided. As I told the House last year, the Government are willing in principle to release sums up to this amount in total between now and 1981 if BL's performance and prospects remain in line with its corporate plan.

No one concerned with BL's future—whether part of management or the work force or simply a taxpayer—should be under any illusion that the Bill implies an additional commitment on the Government's part to convey yet more funds to BL beyond the £1,000 million. But I must make clear to the House that unless this Bill is carried the NEB will not he able to fulfil the existing commitment. Failure to carry the Bill will throw the whole future of BL into jeopardy.

The objective of the Government, the NEB and BL management continues to be to restore BL as a major commercially viable motor manufacturer. I want to make it clear to all concerned that the investment funds which an international motor manufacturer needs year by year to keep up with its competitors are on a scale well beyond what could possibly be spared out of public funds. BL will have to provide funds out of its generated profits, and certainly there will have to be borrowings from the private market. So, to survive into the 1980s, BL mast achieve a commercially acceptable level of profitability so that it can draw investment funds both from its own resources and from finance attracted from the private sector.

Mr. Hal Miller

I am sorry to interrupt the right hon. Gentleman again, but can he tell us whether BL is still required to match on a 50-50 basis, or is he referring to some level of profitability? Is the original requirement to match over the period to 1981 still in existence?

Mr. Varley

As the hon. Gentleman knows, we missed that objective some time ago owing to the troubles that we had, which we explained at the time during the toolmakers' dispute. I want to emphasise however—[interruption.] Of course I said it, and at that time it was utterly realistic to say it. There were internal difficulties in British Leyland at that time, which I need not go into now. But I assume that all hon. Members want British Leyland to be a success. I shall come in a moment or two to say exactly what success it has had over the last few weeks. I want to be as precise as I can. The original Ryder commitment was for £1,000 million of public funds, and we are ready to provide the other £400 million that remains out of that over a period to 1981, provided we are satisfied with the performance of the rest of it.

Mr. Hordern

The right hon. Gentleman will recognise that the Public Accounts Committee considered BL's borrowing and the letters of comfort. It is plain that BL will have further recourse to letters of comfort. I think the right hon. Gentleman recognises that in the last resort the Government will be expected to stand behind BL. I believe that those are the words that he used. My recollection is that that was the recommendation of the PAC. That being so, is it not clear that that constitutes an addition to the central borrowing requirement? I understand that it need not come through from direct public dividend capital in grants toward BL or the NEB, but does it not follow from the letter of comfort that if the Government are standing behind the company that should constitute part of the general borrowing requirement? If so, where is that part of the general borrowing requirement expressed in the public expenditure White Paper?

Mr. Varley

I am tempted to go into a long explanation. As the hon. Gentleman realises, that section of the NEB's responsibility to BL is a matter of much commercial sensitivity. Any words of mine in the House must be carefully weighed. At this stage I do not want to add to the words that I have used in clear and precise terms, which will be considered closely outside the House.

The PAC's views were taken into account in drafting the Bill and in my speech. I shall return to accountability and the views of the PAC. It is not the Government who are standing behind BL but the NEB. I refer the hon. Gentleman to the guidelines. The NEB will treat BL as any other major holding company would treat one of its subsidiaries. The hon. Gentleman has raised an important matter and I do not want to say or imply that we are doing something that we are not.

I have said that the funds remaining under the original Ryder proposals amount to about £400 million. Provided that in terms of the corporate plan BL makes satisfactory progress towards the target set by the BL board and approved by the NEB and the Government, we are prepared to make that money available.

Mr. Michael Edwardes, BL's chairman, put the matter of further Government funding plainly enough last February in his speech to management and employees. I agree entirely with what he said: There is no way that the Government can provide the funds we need"— those are the funds that it needs— unless it is clear we are working as a team and towards the common objective of restoring BL to health and success. To operate profitably in fiercely competitive world markets BL needs to achieve sustained production, which in turn depends very largely on the avoidance of constant unofficial disputes.

I am sure that the vast majority of the BL workforce want the company to succeed. Before Christmas we saw some encouraging signs. There was the two to one majority by which the BL work force accepted the management's pay and productivity package. That was an encouraging sign. BL's car business was turned from loss to profit in the first half of 1978. The new Rover saloons were successfully launched in Europe, with production at Solihull roughly doubling over the past 12 months. New engines were introduced into several of the company's vehicles.

As I said at Question Time on Monday, decisions about public funding for 1979 must await the NEB's report on BL's 1979 corporate plan. I expect to receive the plan shortly. When we have studied it, I shall put the Government's conclusions before the House. This debate will not deprive the House of the opportunity to study and discuss funding arrangements for BL on a later occasion. I told the House on Monday that I wanted to provide additional information so that the House would have as much information as practicable.

I must stress that the Bill is not a blank cheque for assistance to the company. The survival of the company and of the hundreds of thousands of jobs dependent upon it can be achieved only by the efforts of management and the work force. The only valid guarantee of their future is to maintain their competitiveness.

If 1978 was a turnabout year for BL—I think it was—it may equally have been a commercial turning point for Rolls-Royce. In March it received an order for its RB211 engines to power the Lockheed TriStars for Pan-Am in the face of fierce competition from American engine manufacturers, especially General Electric. That was a vital deal for the company. It ensured that Rolls-Royce retained its position as the only engine supplier for the TriStar. It broke new ground with one of the world's major airlines.

Since then, the RB211–535 engine has been chosen as the launch engine for Boeing's new 757 aircraft, which has been ordered by British Airways and Eastern Airlines. The Government have approved the launch of that engine, which will also be suitable for other aircraft in the new generation of civil airliners. The development will secure many jobs not only in Rolls-Royce's own factories but among the company's many suppliers throughout the country. It will preserve Britain's position in this high technology industry.

The company has done well in other areas. The RB211 has been chosen to power the Boeing 747s used by both Cathay Pacific and Qantas. The company's other engines continue to sell well, and the Spey deal with Romania will help to ensure the continued production of the engine over the next few years. I must make it clear that the development of the 535 engine and the further improvements to the basic design of the RB211 will involve substantial expenditure over the next few years—expenditure which is vital if the company is to remain in the big league of world aeroengine manufacturers. Let the House be in no doubt that the passage of the Bill is essential for the continued prosperity of Rolls-Royce.

Mr. Ian Lloyd (Havant and Waterloo)

Will the right hon. Gentleman inform the House whether the scale of the research and development commitment for the new mark 211 engine is at the same level of magnitude as for the original 211 engine?

Mr. Varley

Frankly, I do not know. I do not know whether the scale is the same. I assume—if this were not so I should not have had the recommendation that I received—that the scale of R & D and other resources devoted to it is adequate. I do not know whether it is on the same scale. I should think that it is not, given that perhaps there is some carry-over of transfer technology taking place from the original 211 engine to the 535. That is a, matter of interest to me. It is a matter on which I should obtain more information, and I shall write to the hon. Gentleman about it.

BL and Rolls-Royce are the NEB's major commitments. However, it has important and profitable investments in other significant companies. Ferranti is a great success story. The NEB increased its shareholding in ICL last week and is now the principal single shareholder. Substantial profits are expected for 1978 from Fairey. Then there are the small companies for which the NEB is a crucial new source of capital.

Mr. Frank Hooley (Sheffield, Heeley)

Has any directive been given to the NEB, or is it operating on any understanding, about the activities in South Africa of the companies for which it is the holding agency? It is known that British Leyland has important and expanding activities in South Africa. We know that ICL is indulging in the supply of computers to the South African police and armed forces. That supply has political implications, apart from economic ones. Has the NEB received any directives on this matter from the Government? If not, is it intended to give it any such directives?

Mr. Varley

I should have anticipated my hon. Friend's question. I know that he takes a great interest in these matters. We have had correspondence on them. British investment in South Africa is something to which the Government have given some attention recently. My right hon. Friend the Minister of State has had discussions with ICL on that very issue. We shall have to ascertain the result of the discussions with ICL. When that has been done, and if it becomes necessary, we shall make suitable arrangements to inform the House.

The NEB is an important instrument in the action in relation to the Government's industrial strategy. A notable success is the role that it is playing in computers, computer software and micro- electronics. The actions of the NEB in these sectors have helped. A major impetus has been given to the ability of the United Kingdom to compete in what promises to be a major new development between now and the end of the century.

Another area of crucial importance is the development of the NEB's regional boards. I want to see the Board's interest increase. It has a statutory responsibility to promote productive employment throughout the United Kingdom. That is its primary responsibility. But sometimes the impression is given that it has little employment interest in the regions. That is not true. There is not a region in the United Kingdom in which the NEB does not have an interest. For example, it has a stake in companies in the North-West region, which are employing more than 25,000 people.

I am sorry that I was rude to my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) but he should realise that the NEB has a stake in the North-West. There are 25,000 jobs dependent upon the NEB. It ought to do better and I agree with him on that. It has to do more in the regions. There is no limit in the NEB's total budget to the funds available for regional purposes.

Mr. Kilroy-Silk

I am grateful to my right hon. Friend for giving way, but he said that everything I had said was wrong. I hope that he will now contradict me and say that I am wrong when I say that the NEB will not help the Kirkby co-operative as a fall-back position and that the INMOS headquarters research and development facility will not be located in Bristol.

Mr. Varley

With regard to Kirkby, my hon. Friend knows that that was not a recommendation of the working party. The working party on Kirkby was set up at the request of the workers' cooperative. We agreed to it and they agreed to abide by the findings. We now know they are not doing so, and there is an application by Kirkby before the Department. We are statutorily required to consider that under the terms of the Industry Act 1972 and we shall do so. Kirkby has been closed for the past two weeks, not by any action by the Government but by industrial action. I cannot understand why the Transport and General Workers' Union, by primary or secondary picketing, should want to close that co-operative. I hope my hon. Friend is using his influence to ensure that it gets the necessary supplies. It will not serve any purpose to keep that cooperative closed.

With regard to INMOS, the headquarters has not been located in Bristol. The decision has been taken to locate the technology centre in Bristol but not the headquarters. I hope that the INMOS project will be a success. Even that must be put in perspective. About 90 per cent. of the expenditure and 90 per cent. of the jobs will be in the assisted areas. Everyone is expecting me to give the NEB some direction. At some stage one must follow the judgment of those with the responsibility.

Some Conservative Members may say that the NEB should not be in microelectronics at all. I must rely on the judgment of the Board. Provided that it acts within the statute—and it does act within it— there is no reason for me to put my judgment over that of the Board. I should have been delighted if the technology centre had been located in Manchester or somewhere else in the North-West. I could not say to the National Enterprise Board and people with greater knowledge of microelectronics than mine that their judgment was wrong.

With regard to general financial duty, on each investment that it undertakes on its own account the NEB is required to seek an adequate return within a reasonable period, not losing sight of profitability. On these investments the NEB is under a financial duty to earn a return on capital employed of 15 per cent. to 20 per cent. by end-1981, and to make steady progress towards that rate in the meantime. It is not essential that each and every investment should secure this rate, but the NEB's investments as a whole, other than in BL and Rolls-Royce, must do so.

So the NEB has clear responsibilities in relation to financial performance. The duty is an essential discipline, and one to which the Government attach great importance, since it is the only satisfactory way of appraising the NEB's success. This was of great significance in the difficult issue of the NEB's accountability to Parliament.

Mr. Michael Marshall (Arundel)

The House is grateful to the Secretary of State for giving way a number of times. The last unaudited accounts that we have were received some time ago. Will he give us the latest figures for return on capital as at 31st December on unaudited accounts?

Mr. Varley

I cannot give that information, but steady progress is being made on these investments to meet that target of 15 per cent. to 20 per cent. by the end of 1981. It is significant and I do not want to play it down. I want to give the House as much information as I can about the National Enterprise Board, its targets and its performance. It is an organisation that is well worth supporting. I hope that Conservative Members will not in subsequent speeches stick to their original hostility or pursue a vendetta against the NEB.

On the question of accountability, the Public Accounts Committee has urged that the Comptroller and Auditor General should have access to the NEB's books in order that the Committee may be advised in detail of the way in which the NEB has made its investment decisions. I know that this is a matter on which the Committee has the support of many hon. Members. The Government, for reasons which the Committee presented very fairly in its reports, has taken a different view.

There are, however, some points that I should like to make briefly. It would be wrong to imagine that the NEB is somehow escaping parliamentary control. The NEB is accountable to Parliament and there is no doubt about that. My Department has clear arrangements for monitoring the NEB's activities, for examining its plans and for authorising major new investments and financial commitments. All my Department's records are accessible to the Comptroller and Auditor General. The Public Accounts Committee has every opportunity of examining the Department and the NEB about any aspect of the NEB's affairs. I am answerable to Parliament for the NEB's overall performance, within the well-established limits and procedure of parliamentary practice, as explained by my right hon. Friend the Leader of the House on 18th December 1975.

But these matters need to be considered in the wider context of the Comptroller and Auditor General. My right hon. Friend the Minister of State, Civil Service Department, told the House on Monday that the Government had taken careful note of the views of the Expenditure Committee, the Public Accounts Committee and the Procedure Committee on this matter. In particular, the Expenditure Committee has made various recommendations concerning public audit arrangements, including the suggestion that the Exchequer and Audit Departments Acts need revision.

The Government have been considering this carefully, together with the recommendation by the PAC that the Comptroller and Auditor General should have access to the books of the National Enterprise Board and the British National Oil Corporation. I hope the House will accept that our response should be made within the framework of a considered response and a proper look at this, rather than a piecemeal response.

This would probably be done best by fresh legislation defining more directly and explicitly the responsibilities of the Comptroller and Auditor General in modern conditions. The Government have noted that the Comptroller and Auditor General has himself expressed support for this view. Accordingly, the Government have decided to put in hand a study of the Comptroller and Auditor General's present-day role and the corresponding new legislation that would be necessary, with a view to considering the introduction of a Bill in the next Parliament.

We have noted that the Public Accounts Committee will conduct a further inquiry into its own possible developments in the role of the Comptroller and Auditor General. The Government will wish to consider any further proposals which may result and will, in any event, arrange for the appropriate parliamentary Committees to have the opportunity to express views in due course on the Government's specific proposals.

Mr. Michael English (Nottingham, West)

I thank my right hon. Friend.

Mr. John Garrett (Norwich, South)

What kind of study is this? My right hon. Friend seems to have announced a major constitutional reform in the course of a debate where such an announcement would not be expected. Is this study to be a parliamentary one? Will a Com- mittee of the House carry it out? Also, what will be its relationship with the studies that have already been undertaken?

Mr. Varley

It will be held in connection with studies which have already been carried out. The Procedure Committee had a good deal to say about this. My right hon. Friend the Chief Secretary to the Treasury will be in charge of this aspect, because it spans several Departments and organisations. He will fill out the details at an appropriate time.

Mr. Hordern

The Secretary of State has made an important announcement. The powers of the Comptroller and Auditor General are very old and very important. Will he assure us that there will be no diminution of the responsibilities and powers of the Comptroller and Auditor General?

Mr. Varley

It is certainly not in our mind to have any diminution in the powers. That has not been considered by the Government at all. I can give that assurance.

Mr. Edward du Cann (Taunton)

The proposal that there should be an examination by Government of the function of the Comptroller and Auditor General and the Exchequer and Audit Department is to be welcomed. So is the rapid timetable that the Secretary of State has suggested in that regard. However, the rest of the statement is far from satisfactory. The suggestion that the Comptroller and Auditor General cannot have access to the books of the National Enterprise Board or the British National Oil Corporation is not acceptable. A Select Committee of this House has twice recommended—the first occasion 18 months ago —that a different situation should obtain, and the Secretary of State has a duty to accept that recommendation. There is no logic in the proposal that this should not be allowed.

On Monday it was agreed that the Comptroller and Auditor General should have access to the books of the national Housing Corporation, and there can be no sense in denying him the opportunity to see the books of the NEB if he is allowed full access to the books of the Scottish Development Agency. I hope the Secretary of State will reconsider this.

Mr. Varley

I stand by what I have said tonight. We shall have to see how the review takes place. I am not yet persuaded to go as far as the right hon. Member for Taunton (Mr. du Cann) has suggested, for the reasons that we have made plain on previous occasions. The Government's views have been conveyed to the PAC.

An impression has been given that, by some means or another, the Government are evading their responsibilities under the 1975 Act. That is not true. The right hon. Gentleman and some of his hon. Friends say that this is inadequate, and that is a defensible point of view. Probably it is inadequate in their eyes, but we think it is satisfactory at present and that there is adequate scrutiny by Parliament of the NEB.

At the end of the day the PAC has the power of all Select Committees and can send for persons, papers and records. It can hand those papers over to the Comptroller and Auditor General who can then decide, report and advise the Committee. I do not think that we shall persuade one another. As a Government we have gone a long way to meet the points that have been made.

Mr. Budgen rose—

Mr. Varley

No, I really must get on. I have already given way a great deal. I am not being discourteous to the hon. Member.

I move on to the Scottish Development Agency and the Welsh Development Agency. Like the NEB, they have an important role as a source of investment finance for industry. The SDA and the WDA have powers that parallel very closely those of the NEB. But, in addition, the Agencies have powers and duties to undertake environmental improvement schemes, to build factories, to clear derelict land, to engage in industrial promotion and to provide loans and advisory services to small firms. My right hon. and learned Friend the Secretary of State for Wales and my right hon. Friend the Secretary of State for Scotland have asked me to pay a special tribute today to the imaginative and effective way in which their respective Agencies