HC Deb 16 December 1999 vol 341 cc461-94

[Relevant documents: First Report from the Scottish Affairs Committee, Session 1998–99, Inward/Outward Investment in Scotland, HC 84, as it relates to the Estimate, and the response of the Government and the Scottish Executive thereto, HC 119 of Session 1999–2000; Departments of the Secretary of State for Scotland and the Forestry Commission Departmental Report 1999, Cm.4215.]

Motion made, and Question proposed,

That a sum, not exceeding £5,810,419,000, be granted to Her Majesty out of the Consolidated Fund, on account, for or towards defraying the charge for the year ending on 31st March 2001 for expenditure by the Scotland Office on administrative costs and operational costs; electoral publicity; the Parliamentary Boundary Commission for Scotland; other devolution costs, including the panel to oversee the cross-party electoral expenditure agreement and on a grant to the Scottish Consolidated Fund.—[Mrs. Anne McGuire.] 4.55 pm
Mr. David Marshall (Glasgow, Shettleston)

This is a unique debate. The report of the Select Committee on Scottish Affairs on inward-outward investment in Scotland, which was printed on 24 June, exactly seven days before the Scottish Parliament came into operation, is the first report by a departmental Select Committee on one of the devolved areas of the United Kingdom to be debated on the Floor of the House.

The debate is also unique because it enables us to consider not only the response to our report by the UK Government, but the response of the Scottish Executive, both of which documents were ordered to be printed only yesterday and have been available only since 11 am today.

There is one more unique feature, inasmuch as we can also consider, and make references to, the memorandum of understanding and supplementary agreements between the United Kingdom Government, Scottish Ministers and the Cabinet of the National Assembly for Wales, which was presented to Parliament by the Lord Chancellor in October, and the subsequent concordat between the Scottish Executive and the Department of Trade and Industry. Those are extremely important documents for the future of inward investment.

As a member of the Liaison Committee, I am grateful to my colleagues on the Committee for recommending the estimate for debate today. I am grateful also to all the members of the Select Committee on Scottish Affairs representing all four parties, and to the Committee staff for all the hard work that went into the conduct of the inquiry and the compilation of the report. I thank our three specialist advisers, Professors Neil Hood and Stephen Young of Strathclyde university and Mr. Alf Young of The Herald.

Thanks are also due to all those who gave oral evidence to the Committee, and to all the individuals and organisations who submitted written memorandums or who participated in our informal visits in Scotland, Northern Ireland, the Republic of Ireland and the United States.

Our report is published in three volumes. Its recommendations were agreed by all four parties represented on the Committee.

I know that many of my hon. Friends and colleagues on the Opposition Benches want to participate in the debate, which is restricted to two hours. I shall therefore be as brief as possible, but a number of points must be made.

I am pleased that my right hon. Friend the Secretary of State has chosen to respond to the debate. As it progresses, I am confident that it will demonstrate the wisdom of the House in maintaining Select Committees such as ours to consider the vital aspects of reserved powers as they relate to matters such as those that we are discussing today, especially the roles of the Department of Trade and Industry and the Foreign and Commonwealth Office, as well as scrutinising the work of the Scotland Office. I am sure that my right hon. Friend welcomes that, just as he welcomes appearing before the Select Committee—at least, I think that he does.

The Committee's inquiry was a follow-up to a previous Committee inquiry in 1979–80 Session, when my right hon. Friend the Member for Glasgow, Anniesland (Mr. Dewar), now Scotland's First Minister, was its Chairman. This time, however, we added outward investment to the terms of reference. The Committee considered it important to revisit the report of almost 20 years to see what, if anything, had changed and what progress, if any, had been made. It carried out that inquiry simultaneously with its inquiry into tourism. We were all impressed by the number of similarities between the two.

Although the majority of our 10 conclusions and recommendations relate to matters now devolved to the Scottish Parliament, there are important policy areas that are reserved to the UK Government, such as international relations and trading agreements, which have a vital influence on the operation of agencies such as Locate in Scotland and Scottish Trade International. I referred earlier to the roles of the DTI and the Foreign and Commonwealth Office, which are paramount in respect of both those bodies.

Despite devolution, many of the factors affecting the climate for inward investment are reserved—for example, designation of assisted areas, taxation, employment legislation, air transport liberalisation and, most important, the promotion of the UK as a whole to foreign investors.

Earlier, I referred to the memorandum of understanding and the concordats. It would have been useful for the Committee to have had those during the course of its inquiries, but it was not to be. None the less, our report is relevant. The memorandum and concordats set out common UK guidelines and consultation arrangements in respect of co-ordination of European policy issues, on financial assistance to industry, international relations and statistics.

The concordat on financial assistance to industry provides for consultation between the interested parties in each particular case before offers are made to large mobile investments where there is an interest in more than one part of the UK, where it is proposed to breach agreed financial limits, and where relocation from one part of the UK to another is involved. No doubt, other hon. Members will have something to say on some of those points.

The arrangements will be overseen by representatives of the UK Government and devolved Administrations, and will facilitate the exchange of information on financial assistance between both Administrations. Hopefully, those concordats create a level playing field. They will be essential in resolving any conflict that may arise in future, especially in view of the increased competition between the regional development agencies in England and their Scottish and Welsh counterparts.

The Committee was impressed by the professionalism of Locate in Scotland and the high regard in which it was held by everyone, including its competitors. Regardless of the future of Scottish Enterprise, I hope that Locate in Scotland will continue and that it will be adequately funded. That is essential to meet the ever-increasing worldwide competition for whatever inward investment projects there are to be won.

I welcome the general tenor of the Government's response to our report and their agreement with most of our findings. I especially welcome the apparent good will and co-operation between the Secretary of State's office and that of the Scottish Executive, and the desire to work together for the benefit of Scotland. [Interruption.] The hon. Member for Beaconsfield (Mr. Grieve) may laugh, but he should not believe everything that he reads in the press. The good will is there and the report proves that, particularly the responses from the Government and the Scottish Executive.

That bodes well for the Chancellor's most welcome announcement about the establishment of joint action committees and for the Select Committee's desire to work closely with the Scottish Parliament's social inclusion committee on our inquiry into poverty in Scotland.

I also welcome the Scottish Executive's response. They do not agree with some of the Committee's findings, but they accept and welcome others. In general, they accept that our report was on the right lines and appear to be moving towards making the changes that we suggested. It is always interesting to note the way in which movement is described, which in this case would appear to suggest that it was always intended, regardless of any Select Committee inquiry.

I am deeply disappointed at the Scottish Executive's response on transport issues in paragraph 5. All the evidence given to us highlighted the need for the completion of the last six miles of the M74 in Glasgow, much of it in my constituency. For economic, environmental and social reasons, that should have been the number 1 priority in the roads programme in Scotland. It would protect many existing jobs, open up many hundreds, if not more than a thousand, acres of derelict land for development, and create the potential for several thousand new jobs, as well as removing a malignant eyesore on the surface of Glasgow. It would relieve pressure on the Kingston bridge and reduce congestion and pollution in the city centre, resulting in huge environmental improvements. It would also reduce road accidents, especially for children and old people, especially, again, in my constituency due to the high volumes of through traffic which really should not be there and would not be there if the M74 were completed.

The Scottish Executive has suggested that the local authorities should take the project forward themselves, but that inevitably means road tolls, which would defeat the whole purpose, would add substantial cost to industry and would definitely not be an incentive to inward investment.

Equally, the UK Government need to ensure that the north of England above Birmingham, Scotland and Northern Ireland benefit from good rail and road connections to their major markets, especially in respect of perishable products and products with a short shelf life. We should not forget that the A75 from Gretna to Stranraer is Northern Ireland's main link with Europe.

We are familiar with recent reports, which highlighted the north-south and east-west divides in unemployment, poverty and health. Unfortunately, for reasons that other Labour Members understand only too well, my constituency is at the top of the list, closely followed by most of the other Glasgow constituencies. It is therefore incredible that the Glasgow development agency, the Glasgow Alliance—I confess to being a board member—and Glasgow city council did not make submissions to the Select Committee, despite being told about our inquiry. That is unacceptable, given that Glasgow lost the equivalent of Ravenscraig almost every year for almost 20 years until 1997, and that inward investment to Glasgow almost never meant manufacturing jobs but instead service sector jobs. Those bodies should have made an input into the inquiry, and must accept the blame for not getting their act together and doing so. I make no apology for publicly criticising them. I hope that they will learn from their mistake and do their utmost on behalf of the city.

Since 1997, Labour's record in attracting inward investment to Scotland has been outstanding. From May 1997 to date, inward investment has amounted to more than £2 billion and an estimated 30,000 jobs. That success is due to economic growth and the stable economy that the Government established, and to Labour ending the Tory years of boom and bust and 18 wasted years for Scotland. It is also due to the partnership between the United Kingdom Government, the Scottish Executive and various agencies, and to devolving decision making to local levels. Devolution will enable Scotland to continue attracting record rates of investment. The nationalists would put all that at risk by divorcing Scotland from the rest of the United Kingdom.

Mr. Dominic Grieve (Beaconsfield)

I do not belittle the success of the past two years—although not of the past year—in attracting inward investment to Scotland. In the past year, inward investment has decreased. Statistics clearly show that the years 1991 to 1997 constituted a record period of investment and exponential growth. That happened under a Conservative Government.

Mr. Marshall

if the hon. Gentleman knew anything about Scotland, he would hesitate to point out any possible deficiencies in a period of two years when, for 18 years, the people of Scotland suffered at the hands of his Government.

The nationalists would put the success of the past two and a half years at risk by divorcing Scotland from the rest of the United Kingdom and cutting off Scottish business men from their biggest single market. Divorce can be costly.

The report acknowledged the need to attract high-tech, highly skilled research and development and added-value jobs, but we also appreciate the need to attract any sort of job. A job is a job, especially for someone who is desperate to get one, as most unemployed people in Scotland are. I warmly welcome the Government's measures such as the new deal, priority for education and training, the national minimum wage and investment in people. They will help to equip the people of Scotland to maintain and improve its attractiveness as a major destination for inward investment, thus helping to ensure and contribute to its future prosperity. If our Select Committee inquiry and report have also helped, even in a small way, they will have been worth while.

5.9 pm

Mr. Michael Moore (Tweeddale, Ettrick and Lauderdale)

It is a great pleasure to follow the hon. Member for Glasgow, Shettleston (Mr. Marshall), on whose Select Committee I served for the first two and a half years of the Parliament. The inquiry was especially important, and I was pleased to sign up to the report at its conclusion.

Economic development in Scotland, as well as in the whole of the United Kingdom, has always been a key point of political debate and, as the exchanges across the Floor of the House have shown, inward investment is a key aspect of that debate. In its inquiry, the Committee sought to strip away some of the myths that have undoubtedly grown up around sensitive issues such as inward investment and tried to get to the core of the arguments: whether inward investment is a good thing; whether Scotland has become over-dependent on it; and whether we can expect to sustain the quality and nature of the investment that we enjoy. A number of those themes were usefully explored and I want to highlight in particular the fact that the nature of investment and the types of future direct foreign investment that we may hope to attract to Scotland will change. The assembly operations that have been a feature of inward investment over the past 20 years will decline in significance over the next 10 or 20 years and, notwithstanding the comment of the hon. Member for Shettleston that a job is a job, the nature and availability of some of those jobs will certainly change.

The location of the investment in Scotland has also caused great concern and great argument. We have different perspectives because we represent different parts of the country, but I agree with the hon. Gentleman that, at times, it has seemed as though the inward investment that we have enjoyed has been focused on particular areas. Although Glasgow may have been badly neglected, those of us who represent rural parts of Scotland feel that that is the case for our areas as well.

The world economy is changing, we are losing some of our old industries and Scotland's economic shape is different from that at the beginning of the 1980s, when a previous Select Committee considered this issue. One of the most encouraging aspects of our inquiry was the fact that many of the lessons and warning signals that we were told about were actively being tackled by Locate in Scotland. Like many other members of the Committee, I pay tribute to the hard work that it does around the world and the extremely high success rate that it has achieved over many years. The highlight in that respect is the Project Alba development and the idea that Scotland can be at the forefront of the very industries—

Mr. Grieve

I am most grateful to the hon. Gentleman for giving way. He congratulated Locate in Scotland and I heartily endorse that but, in view of the comments made by the hon. Member for Glasgow, Shettleston (Mr. Marshall), does he agree with the statistics provided by it showing that the highest level of planned investment ever recorded in Scotland—£3.1216 billion£was made in 1996-97?

Mr. Moore

I have no desire at all to enter into a sterile party political debate; I want to focus on these different and dynamic types of inward investment. I spent the first few minutes of my speech explaining that the nature of inward investment in Scotland is changing and one year's statistics are irrelevant two years down the line. I repeat the invitation made by the hon. Member for Shettleston: the hon. Member for Beaconsfield (Mr. Grieve) should visit Scotland and see these places for himself.

The Committee's report referred to the first-class support that exists, but I want to focus briefly on a couple of themes before discussing an issue that is of particular concern to me and to my constituents—it lies at the heart of some of the remaining problems that we have with inward investment. I have touched briefly on the idea that the rural parts of Scotland have traditionally lost out, although I acknowledge the efforts of then Scottish Office and, in particular, the Minister of State, Scotland Office to respond to the difficulties in the Borders over the past 18 months to two years. A rural unit was established in Locate in Scotland, but my concern is that, because it has only a couple of people, it will be hard pressed to tackle the issues seriously unless it comes under the new Scottish Executive arrangements. It must be able to attract significant and realistic resources for the next few years.

When we spoke to the professionals in the United Kingdom, when we were in the United States and when we met Locate in Scotland officials, we were told time and again that it would not matter what we did to point people in a particular direction. Ultimately, companies would decide for themselves where they would go, and would be influenced by the existing criteria and what was available to people in the part of the world that was involved. Such companies would have a number of requirements, but transport links and the transport infrastructure in a given area would rank high in their list of priorities. Those of us who represent the more rural parts of Scotland are very conscious of the fact that that immediately disadvantages us.

Mr. Martin O'Neill (Ochil)

Is it not the case that an area that is not close to one of the new towns will also be denied access to potential investment? Part of the "cluster syndrome" is geographical, in that it focuses on new towns. My constituency includes Clackmannanshire, which is surrounded by about three new towns, and which is also a black hole down which a good deal of investment seems to disappear. The investment goes elsewhere, and I think that the Borders suffers from the same problem.

Mr. Moore

The hon. Gentleman has made a valid point. There are a number of reasons why inward investors are attracted to particular areas, including tax regimes and the available incentives. There is also the question of numbers, to which I shall return in due course. Like the hon. Member for Shettleston, I am glad that the Secretary of State will respond to the debate. I urge him to use his influence, and his co-ordinating and championing roles, to ensure that transport links within Scotland, and between Scotland and the rest of the United Kingdom, are not neglected, and are developed further.

The main point that I want to make relates to the sad case of Viasystems. I refer hon. Members to paragraph 47 of the report, which gives a brief resume of some of the difficulties faced by my constituencies in the light of that case. The loss of 1,000 jobs from the Viasystems site has been the worst single industrial disaster in the Borders in 30 years. As paragraph 47 of the report makes clear, the issues at stake with those job losses lie at the heart of the debate on whether inward investment has been good for Scotland, and whether competition between different parts of the United Kingdom has always been handled in the most positive and constructive manner.

Viasystems was the final incarnation of the idea of a company that was indigenous, in the Borders, and built up from scratch over 30 years. When it was taken over by what I can only politely describe as a bunch of unscrupulous American corporate financiers, it was clear that they intended to close down the sites on the Borders, and to move both jobs and contracts to other parts of the United Kingdom.

At an early stage, what concerned us most was the fact that Viasystems had also taken on ownership of International Systems Ltd. in north Tyneside, just across the border. It had received a Government grant of £12 million. The project to build the facility and recruit people to do jobs was incomplete at the time when Viasystems was acquired, which allowed it to make serious strategic decisions about the way in which it would organise its business in future. Viasystems was provided with a state-of-the-art facility in an area that was increasingly concentrating its resources and was very capital intensive, while just up the road there was older equipment, and no hope of competing in terms of the economies of scale.

It was with some nervousness that those of us in the Borders learned of the strategic vision presented to the backers in the United States. We learned that Viasystems wanted to control the world market in printed circuit boards. We may all have our views about people who set out to dominate the world. It often ends in tears, and many of them have been shed in my part of the world.

Early in 1998, Viasystems announced a series of poor results. It clearly overestimated its ability to acquire and integrate new facilities successfully. It was not helped by a world downturn. We were concerned. My hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood) accompanied me to meetings to discuss the poor results and the threat of redundancies, talk of which was beginning.

Information began to trickle out from management, unions and employees not only that wholesale redundancies were in prospect, but that, early in 1998, several contracts were already being passed to north Tyneside. Expertise was being shipped out, at a cost to people trained to do highly technical and specialist work that had previously been done in the Borders.

On 19 May 1998, I wrote to the Minister of State, the hon. Member for Cunninghame, North (Mr. Wilson). I commented in the letter:

There can be little doubt that business is being diverted from plants such as Selkirk and Galashiels to maximise the efficiency of the new site. Early on, we were giving warnings and alerting Government to the fact that there was a serious problem.

Later that summer, we had further bad news. We had already lost 200 or 300 jobs and we began to hear rumours that the sites might be closed in their entirety. With my hon. Friend the Member for Roxburgh and Berwickshire, I led a delegation to St. Louis, Missouri, the location of Viasystems worldwide headquarters. We had assistance from unions, the local enterprise company and the local council. We went there in the hope of finding out what Viasystems had in store for us. Our anxiety was simply that, with the facility in north Tyneside, it was going to be able to close our local factories.

Before we went, we had a meeting with Lord MacDonald of Tradeston, the Minister with responsibility for trade and industry at the Scotland Office. I have subsequently been able to get hold of the Scotland Office minutes for that meeting, which confirms my recollection of the occurrence.

I do wish to refer to the civil servant who was talking at the time by name—I pay tribute to the civil servants,

who tried hard to work with us to find a solution—but he said at the meeting:

The factory was still being kitted out and built up to full production levels"— this was in August 1998—

but, again, the payment of grant would be dependent on both the company's ability to prove that products within the North of England were not simply being substituted for those previously produced in the Scottish Borders, nor were redundancies taking place in Scotland at the same time as government grant was being paid out in England. There had to be a clear definition that these were new lines of work, and it would be the DTI's responsibility to check carefully that this was the case. The Scottish Office would be liaising closely with the DTI to ensure that this condition was fully met. At that point, we felt that we had at least some support and that there was at least some hope of ensuring that the corporation would not abuse the inward investment rules to ensure advantage for one part of the country over another. Sadly, as many hon. Members will be aware, our trip to St. Louis was not successful and, ultimately, the decision was taken to close those factories.

At that point, I began to call for a public inquiry, so that we could learn some lessons from what had been a devastating time in the Borders, the scars of which are still evident to anyone who visits the area. On different occasions, I requested public inquiries. The right hon. Member for Glasgow, Anniesland (Mr. Dewar), now Scottish First Minister, rebuffed those and said that nothing had been revealed at internal inquiries.

I wrote to the Secretary of State for Trade and Industry requesting that he carry out an inquiry and make the findings public. I got a response from the then Minister for Small Firms, Trade and Industry, the hon. Member for North Swindon (Mr. Wills). He said:

I can assure you that the grant offered by DTI for the plant in the North East stands independently of any transfers of work from existing facilities in the UK". That immediately contradicts the assurance that we had been given only months before at the Scottish Office meeting.

In the same letter, the then Trade and Industry Minister commented:

Our monitoring of the project will ensure that the new jobs are created in accordance with the offer and that we do not pay for work simply transferred from the Borders. I tell the Secretary of State and other hon. Members that no one in the Borders believes that that investigation has been done, and no one accepts that the jobs in the north Tyneside plant have been created other than at the expense of the Borders.

Most recently, we started to believe that we had hit our head against a brick wall for the final time. On 7 April 1999, the right hon. Member for Anniesland wrote to me and said:

payment of that grant by DTI has been carefully monitored to ensure that it is not being used to assist the transfer of work from the Borders to Newcastle. He again rejected the call for a public inquiry.

There has, however, been a further piece of correspondence—and perhaps devolution has taken its toll. Ultimately, we have had a letter from the Scottish Executive's Minister for Enterprise and Lifelong Learning—the hon. Member for Central Fife (Mr. McLeish)—who recently wrote:

I can confirm there is no condition attached to the grant precluding workers from any particular area taking jobs created on the Viasystems (Tyneside) site. Equally, the monitoring of the grant does not require a check on the previous employment of any of the workers. All that correspondence, and all the notes of meetings that we have obtained, point to one fact: whatever has happened in the Scottish Office—now the Scottish Executive and the Scotland Office—the DTI is not signed up to the internal inquiries. Indeed, decisions being taken by the Scottish Executive seem to show that they are washing their hands of the entire process. I very much regret that.

The matter has left in the public mind an impression of complete mess and a feeling of utter disappointment. The public inquiry that I have called for, and that has been supported by other hon. Members, is needed now more than ever. I am not simply hoping that we shall be able to return to the previous position—no one believes that that is possible—but it would be helpful if Ministers would admit that mistakes have been made, and perhaps even apologise to those who have lost their jobs. Most importantly, we want to learn lessons for the future.

It would be unfortunate if I were not to highlight the fact that there have been some positive responses—many positive responses—from the Scotland Office and the Scottish Executive. A working party has examined the devastation associated with Viasystems and with the many other hundreds of jobs that have been lost in textiles and farming. There has also been additional funding for Scottish Borders Enterprise and relaxation of capital constraints for the local council. However, the process is slow, and many people in the area are extremely unhappy and worried that, eventually, those measures will replace the many thousands of jobs that were lost.

The report is good and constructive, and it offers the House a valuable insight into the changing market for inward investment into the United Kingdom generally. More than anything else, however, it highlights the fact that there are still many lessons to be learned about inward investment into Scotland and into the United Kingdom generally.

Several hon Members

. rose

Mr. Deputy Speaker (Mr. Michael Lord)

Order. Many hon. Members are seeking to catch my eye, and, unless the remaining speeches are reasonably brief, many people will be very disappointed.

5.28 pm
Mrs. Maria Fyfe (Glasgow, Maryhill)

I shall certainly attempt to be brief, Mr. Deputy Speaker—please make throat-cutting motions at me if I am not.

Just as I know that there are other planets circling other suns millions of miles away, although I have never seen one, I know that there are inward-investing firms creating thousands of jobs in Scotland, although I have never seen one in Maryhill. I never expected the Tories to care; and, now, things are beginning to be a bit better. I am hoping that things will be a lot better, and hope to hear some constructive comments at the end of the debate from my right hon. Friend the Secretary of State.

Although the report's recommendations are probably very sensible for Scotland generally, I honestly cannot say that they seem very relevant to much of my constituency or to other deprived areas around Glasgow. Glasgow has far too few substantial factories employing hundreds and owned by indigenous companies or inward investors. The biggest employers in my constituency are the public services. Scotland has a huge range of manufacturing jobs. They do not require exceptional skills or qualifications and can be sited anywhere, so I ask myself why those jobs are not coming to Glasgow.

The Government have been successful in dealing with sudden job losses caused by factory closures in many parts of Scotland. In one or two cases, they have been so successful that the area has ended up with more jobs than it had to start with. The problem for Glasgow is that it lost thousands of jobs years and even decades ago. We need a task force to attract manufacturing jobs back in. I should like the Secretary of State to discuss that proposal with the Scottish Executive. I agree with my right hon. Friend the Chancellor's view that jobs are the main way out of poverty. There are just not enough jobs in Glasgow. I want more private sector jobs in my constituency and in the city as a whole. I do not accept that that cannot be done.

Today, we heard the splendid news that Scotland's dole queue fell last month to a 23-year low. The number of unemployed is down by 25,000 compared with a year ago. Glasgow's unemployment figures have fallen from 15 per cent. in 1996–97 to 13.5 per cent. in 1997–98, but the city's unemployment rate, currently 6.8 per cent., is still double that of Scotland as a whole. Unemployment in my constituency stood at 10.1 per cent. in April this year. That is an improvement on 1997, when it was 13.6 per cent, but it is still too high.

A lot of the jobs that have come to Glasgow are in call centres. They are low paid because employers know that people are desperate for work. If it were not for Labour's national minimum wage policy, a lot of people who are in work would be far worse off than they are.

The in phrase now is "drive to move up the value chain". Many of my constituents would like to be on the first rung of that chain. As my hon. Friend the Member for Glasgow, Shettleston (Mr. Marshall) has pointed out, the three-volume report devotes only half a page to Glasgow, dealing with the contribution from the regeneration fund on micro-enterprises. That fund has only £3 million to spend on Castlemilk, Drumchapel, the east end, north Glasgow, Gorbals, Govan, Greater Easterhouse and Greater Pollok. That sum should be looked at afresh.

The Federation of Small Businesses recently proposed the creation of a Scottish enterprise development bank to overcome the problem of the conservative attitudes of the major banks' lending policies. Perhaps we could consider that. As my hon. Friend the Member for Shettleston has said, the Glasgow agencies failed to respond to the request to offer evidence to the Committee. I have not had time to find out why. Perhaps they all thought that someone else was doing it. I would have liked to hear their views on shipbuilding. Glasgow Members have lost count of the number of times that Govan or Yarrows have had to look for support to win a necessary contract. The world needs ships and they are being built elsewhere. We hear reasons why the contracts go out of the country. Sometimes there are allegations that other Governments are less punctilious than ours about competition rules, although our Government say that that is not the case.

Somehow our city, which led the way in shipbuilding, is not getting its share of the world market. There is a history of under-investment to explain the loss of the trade in earlier years, but now I am told that our yards are as high-tech as any in the world, so I wonder whether my right hon. Friend would consider commissioning a study of what our yards need to do to get back a decent share of the world trade in shipbuilding.

The Minister of State, Scotland Office, responded to an earlier plea of mine by creating a new addition to regional selective assistance of £3,000 per head for every new job taken up by a person living in a deprived area. When I last asked what had resulted from that very progressive initiative, which I greatly welcomed, I learned that some money had indeed been paid out, but none in Glasgow. I wonder whether employers are aware of it and are still saying no to investment in our poorer areas. If they are, we need to know what the employers are saying and then consider how to respond. This is information that we do not appear to have.

One critical point in the report is that RSA focuses on the number of jobs created, rather than the quality, and does nothing to create high-quality jobs. There are some high-quality jobs in my constituency in the science park, but they are held in the main by people who live outside Glasgow and pay their council taxes outside Glasgow.

Too many constituents in Maryhill and Glasgow generally have left school with few or no qualifications. Hardly anyone attends further education and higher education is rare for school leavers. There are problems in getting jobs that are appropriate for people who lack qualifications.

Today's newspapers carry a story about the Scottish Parliament's Enterprise and Lifelong Learning Committee criticising confusion, overlap and duplication among the hundreds of agencies involved in support for enterprise, and the call for them to work together. This is already happening in Glasgow, with all the relevant agencies formed into an alliance. However, unemployment is twice the Scottish average. We have to take a fresh look at how to tackle that. Glasgow's job-creating efforts are not working as successfully as I would like. I would like a detailed examination of why so few manufacturing companies looking for a suitable site end up in Glasgow. I know that they like greenfield sites, but we have plenty of attractions to offer. I wonder why it is not happening.

The problem in Maryhill and constituencies like it is one of poverty that jobs can overcome. Just now, there is a lot of prosperity in our country and the shop windows are full of goodies, but too many of my constituents have no hope of enjoying much festive fare. Many good moves have been made by this Government in a short space of time—the working families tax credit, higher child benefit and the national minimum wage, to name only a few. However, we need jobs. I hope that we will get on with it and make a concentrated effort where needs are greatest.

It is a long time since Maryhill had a boom, and too many of my constituents are bust. Let us have an end to boom and bust. It is time for action for Glasgow.

5.37 pm
Mr. James Gray (North Wiltshire)

It is a pleasure to follow the hon. Member for Glasgow, Maryhill (Mrs. Fyfe)—not least because I spent a large amount of my childhood in my parents' car outside Mr. and Mrs. Moreland's butcher's shop in Maryhill road-— hope that is still there—which sold the best beef in Britain.

May I apologise to the House, and to you, Mr. Deputy Speaker, for the fact that I will not be able to stay for the winding-up speeches, as I have been called away on other business?

I wanted to take part in the debate because inward investment in Scotland is very important to me. The last thing that my father said to me before he died was, "Do not neglect the Kirk, nor forget Scotland." I fear that I may have done the former—not least because I attend the Church of England, for my sins, in North Wiltshire—but I have not done the second. Once a Scot, always a Scot, I believe. Despite the fact that I represent an English constituency, the interests of Scotland—and of my mother and relations, who live in the constituency of the hon. Member for Stirling (Mrs. McGuire)—are always at the forefront of my mind, despite my strong English credentials when I speak on English matters.

Some of my right hon. and hon. Friends and I are concerned about a number of aspects of inward investment in Scotland. The statistics produced by the Locate in Scotland annual review show that projects came to a peak in 1993–94, at 97 a year, and the figure is now down to 78. Planned investment, which peaked in 1996–97 at £3.1 billion, is now down to only £761 million. Planned jobs, having peaked around the time of the general election, have declined considerably. Those statistics are worrying.

Although I am not a member of the Select Committee, I thought that I might reflect on why those problems have occurred. There are three possible reasons. The first is the devolutionary muddle, as I see it. I have made no secret of the fact that, unlike the rest of my party, I am wholeheartedly opposed to the devolutionary settlement that the Government have imposed on my home country. The second reason is tax and regulation, and the third is transport.

Mr. Alasdair Morgan (Galloway and Upper Nithsdale)

Is not the downturn in the south-east Asian economy the most significant factor in the decrease in inward investment in the past couple of years?

Mr. Gray

The hon. Gentleman may be right. I was not proposing an encyclopaedic tour of all the reasons for the decrease; there may be many.

Inward investment has declined considerably this year compared with the previous two and with its peak under the previous Government. One gets tired of constantly hearing about boom and bust. The hon. Member for Maryhill mentioned it. The truth is that the statistics demonstrate that inward investment in Scotland was much better under the so-called boom-and-bust Conservative Government. Let us lay that ghost to rest.

I want to discuss the devolution muddle, as I would describe it. It is peculiar that a Select Committee of the House produced the report but the response came partly from the Government and partly from the Scottish Executive. Will the Secretary of State carry back the messages of this debate to the Scottish Executive and, more importantly, will that Executive listen to him? If press reports are anything to judge by, one is not entirely certain that it listens all that carefully to him.

As an observer of these matters, I find it hard to work out what the Secretary of State's job is and what the purpose of the Select Committee and indeed the Grand Committee can be post devolution. It is all a bit of a muddle, and I hope that he may clear some of it up.

What happens when there is a policy dispute between the Scottish Executive and the UK Government? Labour Members may say that there is no problem because that is all dealt with clearly in the concordats and memorandums, but what happens when a company is being courted by both England and Scotland and the UK Government want the investment to go to England? Who would get the investment?

Labour Members may say that we have gone through all the great mechanism of the concordats precisely to sort that out. That may work—possibly—while there is a Labour Government in Edinburgh and a Labour Government in Westminster. I concede that there is likely to be a Labour Government or a Lib-Lab pact in Scotland—the Liberals may have some other view on that—for some time, although I think back happily to the time when my cousin was the Conservative Member for Glasgow, Govan, so let us not laugh too much about the Scottish Conservative revival. [Interruption.]Let us assume that there will be a Labour Government in Scotland for some time. [Interruption.]

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. This is absurd. The hon. Gentleman should be heard.

Mr. Gray

Thank you very much, Mr. Deputy Speaker.

What happens when there is a Labour Government in Edinburgh and a Conservative Government in Westminster, as will inevitably occur sooner or later? [Interruption.] Their febrile and fragile laughter suggests that Government Members may foresee that occasion coming sooner than some of the commentators would have us believe. What will happen to the concordats and memorandums then? If Government Members are saying that that will never happen, what has happened to their view of democracy? They are saying in their arrogant, new Labour way that there will never again be a Conservative Government because new Labour will run the world for ever and ever. The electorate will ensure that that arrogant approach comes back to haunt them.

Conservative Members do not believe that the concordats will prove to be sufficiently robust to withstand a fundamental disagreement between the two Governments.

I have concerns about inward investment in Scotland because of what the Government have done with taxes and regulations on business. Without any question, tax on business has greatly increased. The British Chambers of Commerce have calculated that costs for business will be increased by £30 billion by regulations introduced in this Parliament. Statistics from the Organisation for Economic Co-operation and Development, available from the Library, demonstrate that the annual increase in UK productivity has declined since the general election, from 2.2 per cent. between 1992 and 1997 to an average rise this year of 0.7 per cent. I mentioned the Scottish figures earlier, but those that I have just mentioned show that the UK figures have also fallen.

The worrying fall in productivity, together with the rise in regulation, leads to loss of competitiveness. Indeed, in the world competitiveness league, Britain has fallen from fourth under the Conservatives to eighth under Labour. The Government must say why Britain is becoming less competitive and why Scotland, in particular, is suffering. British industry now produces 40 per cent. less per man hour than US firms and about 20 per cent. less than the French and the Germans.

Mr. Tim Loughton (East Worthing and Shoreham)

Does my hon. Friend agree that Scotland will suffer especially from the unparalleled rises in road fuel duty charges, given its greater distances? Does he also agree that some heavy goods industries in cities in Scotland will suffer disproportionately from the Government's proposed energy tax?

Mr. Gray

My hon. Friend is right. His point about the climate change levy—or energy tax, as it should be called—is pertinent. It is interesting that the Government appear to be listening to their Back Benchers and backing off slightly, but the energy tax will still cost the steel industry—which especially affects Scotland—£20 million a year.

The president of the CBI, Clive Thompson, has said that the increase in taxation introduced by the Labour Government has amounted to much more than the sums that they give back, which are "trivial by comparison". How much worse that will be when the energy tax arrives. Bill Midgley, the president of the north-east chambers of commerce, has said:

It was disappointing that there was no mention of moves to reduce the amount of bureaucracy which is stifling business competitiveness. Tax and regulation are going up, but competitiveness is going down. [Interruption.] Labour Members are chattering, but they should listen to what Scottish Energy has said of the energy tax:

The Chancellor is doing what he does best—playing the three card trick. We are still concerned about the burden on the manufacturing industry because only energy intensive users are eligible for the discount quoted. In other words, Scotland will be especially heavily hit by the energy tax.

My hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) mentioned transport issues, which are already affecting inward investment in Scotland. The Government's response to the Committee's report has been disappointing. Fuel duties remain, despite the Chancellor's brave attempt to pretend that he will do away with them. According to the Red Book attached to the pre-Budget report, fuel duties will increase next year. Scotland is vastly more affected than anywhere else in the UK by that disproportionate increase in petrol and diesel.

Mr. John Swinney (North Tayside)

The hon. Gentleman is pursuing an interesting line of argument. Were those arguments valid when the Conservative Government applied the fuel duty escalator many more times than even this disreputable Labour Government have done?

Mr. Gray

The hon. Gentleman makes an interesting point. He was not here at the time but, if he had been, he would have remembered that the Conservative Government introduced the fuel duty escalator at 3 per cent., straightforwardly to raise revenue. The then Chancellor said that he needed to raise more revenue for schools, hospitals and other things, so he would introduce a fuel duty escalator. This Government have put it up to 7 per cent. and, in the last Budget, the Chancellor said that it would continue indefinitely, although it is a bizarre escalator that never stops. The Government may be backing off it now, but the figures in the Red Book show a 4.6 per cent. increase in fuel duty year on year from now onwards.

The Secretary of State for Scotland (Dr. John Reid)

I know that the hon. Gentleman would not want inadvertently to mislead the House. The Conservatives brought in the escalator at 2 per cent. and they immediately raised it to 3 per cent. They then raised it to 5 per cent. and, in a Green Paper just before the last election, they pledged that they would keep the fuel duty escalator. My right hon. Friend the Chancellor of the Exchequer has made it clear that he will not keep the fuel duty escalator. To complete the facts, of the 85p in the pound that is charged in fuel duty, 79p was imposed by the previous Conservative Government.

Mr. Gray

I am grateful to the Secretary of State for his clarification of the fact that we brought in the escalator at 2 per cent. However, he repeats a worryingly misleading remark that the Chancellor of the Exchequer made in the pre-Budget statement. The Chancellor suggested that, somehow or other, he was ending the escalator. He is not; he is continuing it. All that he said was that he would hypothecate the extra and would use it for transport.

There has been an interesting development in Labour party thinking. The Secretary of State for Scotland appears to be saying that the price of petrol will rise only by the rate of inflation—

Dr. Reid


Mr. Gray

Will the Secretary of State hold on for a moment? My understanding of what the Secretary of State said is that the Chancellor has committed himself to increasing the price of petrol only by the rate of inflation year on year and that the increase will no longer be automatically higher than the rate of inflation. If that is what he is saying, how does he explain the figures in the table at the back of the Red Book that show a 4.6 per cent. increase in fuel duty income year on year, both for next year and the year after that?

Dr. Reid

I can help the hon. Gentleman, who obviously supported a mechanism when the previous Government were in office that he did not understand. The difference with an automatic fuel duty escalator is that it rises automatically one year after another; it does not rise because of a year-on-year choice. My right hon. Friend the Chancellor of the Exchequer has now abolished the duty. Moreover, he has said that, should there be, in any given year, any increase over inflation, that will be ring-fenced and put into transport. I hope that that helps the hon. Gentleman to understand the policy that he apparently supported without understanding for six years.

Mr. Gray

I shall not rise to the Secretary of State's amusingly patronising manner. If he is suggesting that

petrol prices will not increase by more than the rate of inflation and that all the increase will be used for transport, which is not otherwise being provided for by the Government, I challenge him to return to the House after the next Budget when, without question, he will find that the price of petrol has gone up by far more than the rate of inflation. People in Scotland will thus pay disproportionately more because of the distances involved in travelling in Scotland.

I am surprised to hear the Secretary of State justify the huge increases in petrol prices. In Scotland, petrol now costs £3.50, £3.60 and £3.70 a gallon, and I remember the days when my father used to fill up his car for 10 bob. A price of £3.50 a gallon is extraordinary and it bears down disproportionately on Scotland.

I have a final point about transport. The Secretary of State says that all the money will be hypothecated. The important things about hypothecation are that it is permanent and that it provides additional money. We heard how little investment there has been in the transport infrastructure in Scotland, and the Select Committee went to some length to say how poor it was. Several hon. Members have said that they regret the fact that the response has not been better on that front. I therefore challenge the Secretary of State to commit the Government, without any deviation, to ring-fence all the extra revenue that may be raised through any increase in petrol duty next year for transport infrastructure in Scotland. Will he also specify what he will do after next year's Budget that he would not otherwise have done? In doing that, he will have to say that he will not provide the infrastructure that the Select Committee has called for.

Inward investment in Scotland has declined because of the devolution muddle that I talked about and because of the significant increase in taxes and regulation that the Government have introduced nationally since they came to power two and a half years ago. Most significantly, the Government's muddle over transport—they have had four Transport Ministers, and the Secretary of State was one of them—and their failure to invest in the transport infrastructure of Scotland are having a worrying effect on inward investment.

5.54 pm
Mr. John McFall (Dumbarton)

I am delighted to be able to speak in the debate and particularly to commend my hon. Friend the Member for Glasgow, Shettleston (Mr. Marshall) and his Committee for a worthwhile and substantial report.

I have been keen to focus on certain issues over the years and they have been mentioned in the report. The first is inward investment and after care. The line between inward investment and investment by indigenous companies is becoming increasingly blurred. For example, 60 per cent. of all inward investment is reinvestment by existing companies. The need to focus on that is very important.

Secondly, there is the issue of added value. Scotland used to be called a branch economy for inward investing companies—hopefully no more. The focus must be on research and development and on local sourcing. If we get that right—so far, too little attention has been paid to the matter—we will create many thousands more jobs in Scotland.

We must also consider the links between universities and industry. 1 recall the invention in the 1960s of flat-panel technology at Dundee university. The benefits of the technology were not produced or sourced there, with the result that more than 40,000 jobs are scattered around the world that should be in Scotland. Scottish Enterprise and the higher education institutions have looked at developing links between universities and the world of business and industry, but we have yet to move from analysis to action.

The report mentions one-stop shops. Some years ago, I recall making inquiries about Glasgow in that regard and discovering that people wanting to set up a business could make about 80 separate lines of inquiry. There is therefore an awful long way to go before a one-stop shop can be established.

I was delighted that the report suggested that Scottish Trade International and Locate in Scotland should merge. Another factor in that discussion is Highlands and Islands Enterprise. The hon. Member for Argyll and Bute (Mrs. Michie) is making faces at me, but there is a need for a strategic competence covering the whole of Scotland. That could be achieved by combining Scottish Enterprise and Highlands and Islands Enterprise, while still retaining the distinctive elements of the latter organisation.

Finally, there is the question of the duplication of services on offer from local enterprise companies, local authorities, enterprise trusts and other local bodies. We must get that right if we are to focus on economic development at local level. My hon. Friend the Member for Glasgow, Maryhill (Mrs. Fyfe) is right to say that there is no evidence of inward investment in many areas in Scotland. It is very important that we get that happening at local level.

As for the present—and future—economic environment, we are on the verge of the knowledge economy. Through the internet, technologies for computers, telecommunications and broadcasting technologies are starting to converge. The result is that our lives and life styles are going to change enormously.

For example, British Telecom has declared that it wants to source as much of its services as possible on the internet. In one year, that will save the company £70 million, and other companies are clearly going to follow suit. That will have implications for jobs, our town centres and for the way in which we do our business. We have not got around to thinking about that in Scotland yet, but e-commerce will affect how business is done.

I visited Lindendale university in St. Louis recently. It has a student population of 8,000, and its president, Denis Spellman, told me that the university would have to change enormously as a result of the knowledge economy and e-commerce. The report contains echoes of that prediction. In paragraph 114, it states:

It is not enough to have excellent universities unless their output can be harnessed for the wider benefit of Scotland. This is not a uniquely Scottish problem; we heard in Virginia of the problems of bringing together to their mutual benefit a university culture whose roots are in the middle ages and whose time-scale is based on university terms and a technological one which thinks in web-hours and in which 'instant gratification is too slow'". The way in which business develops therefore has enormous implications for our universities.

One area on which the report did not focus, but on which we should focus more, is the need to develop our local economy and to promote and develop small businesses. In America, the success of the Clinton presidency was based on the development of 8 million jobs in small businesses during his first term. At the Glasgow chamber of commerce dinner a few weeks ago, Peter Sutherland, the ex-commissioner, mentioned that, every year in America, 900,000 businesses are set up. At the end of the year, 800,000 go out of business, but that means that 100,000 new businesses are set up every year. Scotland has not had a culture of starting new businesses, giving people confidence to develop their businesses and go through the pain barrier, and helping them develop. We need to do that. Yes, there are good ideas in Scotland but how do we harness them into developing businesses and keep them going? That is the big secret. In the 21st century, the economy will depend on the development of small businesses. It can be called entrepreneurship and it is important that schools and universities focus on it.

A few weeks ago I read a book by Charles Handy called "The New Alchemists", in which he looks at entrepreneurs. Oswald Boateng, Charles Dunstane of the Car Warehouse company and Richard Branson left school without qualifications but with ideas. Somebody nurtured and encouraged them to develop their ideas. We need to do that in Scotland. In the 21st century, we will do that through our information and communications technology. We should widen the curriculum and ensure that we are ready to take advantage of future opportunities.

As my hon. Friend the Member for Shettleston said, we need infrastructure. I agree that the M74 is an important link because I want Scottish goods to get to our most important European market—England. It is important, too, if we are to get the benefits of the Single European Act, which Baroness Thatcher signed us up for in 1985, by putting our goods into Europe. We are not doing that sufficiently well now.

I draw to the Secretary of State's attention a local issue. Last year. the J & B Whisky plant in my constituency was closed. To date, the Government have provided good help. Diageo, the company that closed it, West Dumbarton council, Dumbartonshire Enterprise and I are working very closely together to see if we can find a novel solution to replace the lost jobs. It was a body blow to lose 500 jobs and a company that had existed for 30 years. We need to do something to replace those jobs. My right hon. Friend the Secretary of State has been of assistance in the past and I know that he will continue to assist us. I assure him that I shall be knocking on his door.

Finally on the economy in the 21st century, one writer drew an analogy between "fleas and elephants". I was reminded of that comment a few weeks ago when I met Governor Gray Davies of California. He said that, in the first six months of this year, venture capital investment was $$14 billion in California. Obviously, we could never get near that figure. In terms of that analogy, I think that we are a flea and it is important for the Scottish economy to get on the back of a good elephant. That is the way to prosper.

Inward investment is important—never let us forget it. In Scotland, we have 600 overseas companies prospering themselves and the population, of which 50 per cent. come from north America, 40 per cent. from Europe and 10 per cent. from the far east. We must maintain that focus while having a complementary approach of developing and enhancing small businesses at local level. That way, we shall sustain our future.

It is important to take the lessons of the report to heart and to start implementing them now. I look forward, with my colleagues and the Scottish Executive, to the implementation of those policies so that we have a more prosperous and, most importantly, socially inclusive Scotland in the 21st century.

6.4 pm

Mr. John Swinney (North Tayside)

It is a privilege to follow the hon. Member for Dumbarton (Mr. McFall) who has just delivered a speech which demonstrates why he was such a successful Minister at the Northern Ireland Office. I warmly compliment him on his term in office there, and wish him well in his work on behalf of his constituents in Dumbarton.

The hon. Gentleman spoke about after care for businesses, and that applies across the board. In too many cases, while there is almost an overdose of support for starting up businesses—which has its own problems—there is a poverty of support when it comes to after care. That is of fundamental importance to the issues with which we are wrestling.

I compliment the hon. Member for Glasgow, Shettleston (Mr. Marshall) on the report of the Select Committee on Scottish Affairs, of which he is Chairman. It is a valuable report, assisted by the hon. Gentleman's experience of chairing other Select Committees. He brought to bear his considerable experience of transport issues in his contribution to the earlier debate. Perhaps I will leave that where it ended—in the debate.

The report is thoughtful and dispassionate. I could accuse the hon. Gentleman of being thoughtful in his contribution, but 1 could not accuse him of being dispassionate. He expressed his views, including his views about other parties, very firmly. I shall come on to some of those points in a moment.

The report makes many good, common-sense points, a number of which have been responded to positively by the Scottish Executive and the Secretary of State for Scotland. I specifically welcome what the Committee said about transport infrastructure. Considering the poverty of investment that our transport infrastructure has suffered in the past, and the dearth of investment in road and rail, it is no surprise that there is debate on both sides of the House about which project is the most important.

I welcome the Committee's comments on encouraging a movement up the value chain of successful investments and projects. The hon. Member for Glasgow, Maryhill (Mrs. Fyfe) made the serious point that some people are still trying to get near the value chain before they can move up it.

I also welcome the Committee's comments on the importance of measuring the success of assisted projects. All too often, debate is not enhanced by clear information about which projects have been successful and which have not. The hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) raised a number of points about the difficulties that require scrutiny and answers. I hope that the Scottish Parliament may be able to consider some of those points.

The hon. Member for Shettleston said that this was an unusual debate. It is unusual—it is a hybrid debate between one era and another. The Select Committee started its report pre—devolution and reported on the verge

of devolution taking legal effect. The Secretary of State's office and the Scottish Executive both responded to the report. Those two responses illustrate what has happened over the past few months. A vast number of areas of policy have passed from this House to the Scottish Parliament where they are being dealt with by Ministers.

I would like to make some additional comments about three areas of the report. The first is about the relationship between Scottish Trade International and Locate in Scotland. The Committee recommended that the Scottish Parliament should consider merging Locate in Scotland and the STI, and suggested that more resources were required for the work of Locate in Scotland in the United States.

I have always been concerned about the balance of resources allocated to inward investment and exporting. It has taken some time for the allocation of resources to export support to catch up with the support allocated to inward investment and exporting. The two are largely in the same ball park area within the Scottish budget. However, it is important that effective support is given to exporting, which has always struck me as the poor relation of that aspect of our approach to economic development. A huge challenge faces us on exporting. Too few of our companies do it. The report mentions that a substantial number of small and medium-sized enterprises export, but there are not enough of them.

Mr. Douglas Alexander (Paisley, South)

Can the hon. Gentleman enlighten us on how a reduction from the significant diplomatic presence that the British state provides for Scottish exporters to the limited number of commercial embassies that the hon. Gentleman's party suggested at a previous Scottish election would in any way benefit those exporters?

Mr. Swinney

I wondered how long it would take before the first pathetic Labour intervention on my speech—[Interruption.] If the hon. Member for Cumbernauld and Kilsyth (Mrs. McKenna) will listen to what I have to say, I shall answer the points raised in the Select Committee's report. We are here to discuss that thoughtful report, which was agreed by all parties.

The report suggests a merger of Locate in Scotland and the STI. During the general election campaign, the Scottish National party argued for the closer integration of those two bodies and the Scottish tourist board. We argued for a single agency that would draw together all the external presence of those three bodies to ensure that we had a strong overseas presence to promote Scottish interests in exporting, inward investment and tourism.

Mr. Alexander

Will the hon. Gentleman give way?

Mr. Swinney

Will the hon. Gentleman let me finish making my point? The response of the Scottish Executive to the report makes it clear that they do not agree with the Select Committee's recommendation for merger, but it adds that there is room for greater co-operation and synergy between them. Surprise, surprise, the response continues to tell us that:

In a pilot exercise in the United States, the operations of LiS, STI and other parts of Scottish Enterprise are being more closely integrated to pursue more effectively the full range of relevant economic development opportunities available. That was the argument that my party pursued at the election. If the hon. Member for Paisley, South (Mr. Alexander) wants to hark back to the 1999 election campaign, he should hark back on the facts, not his invention.

Mr. Alexander

Will the hon. Gentleman give way?

Mr. Swinney

No, I have dealt with the hon. Gentleman's point and have nothing more to say on the matter. We need a realistic explanation of how the representation of Scotland can be advanced. It is a disgrace that Labour Members ridicule the arguments that we made at the election but now the Scottish Executive have submitted an endorsement of the SNP's policy at that election.

Mr. Alexander


Mr. Swinney

The hon. Member for Paisley, South can keep bobbing up and down trying to make the same point, but I am going to move on.

The second point on which I wish to touch is concordats, to which the hon. Member for Shettleston and the report referred. I thought of intervening on the hon. Member for North Wiltshire (Mr. Gray) when he lambasted the concordats for failing to deliver harmony between the Scottish Executive and the United Kingdom Government. I restrained myself because I could not remember whether the Conservative group in the Scottish Parliament had voted to endorse the concordats. I am fairly sure that it did, but I did not want to intervene only to find that I had the facts wrong. I am certain, none the less, that the hon. Gentleman's point was absolutely futile.

Mr. Grieve

The hon. Gentleman is well aware that the concordats are not legally binding documents, but agreements between the Executive in Scotland and the Westminster Government. For a party in opposition—although not the hon. Gentleman's as he does not believe in the Union—an endorsement of the concordats is an endorsement of the best agreement that can be reached between the two Executives at any given moment. I do not see how the hon. Gentleman's criticism of my hon. Friend the Member for North Wiltshire (Mr. Gray) can possibly be valid. [Interruption.]

Mr. Swinney

If the hon. Member for Greenock and Inverclyde (Dr. Godman) would like to explain what all that meant, I shall happily take his intervention. I do not quite follow the argument of the hon. Member for Beaconsfield (Mr. Grieve).

Paragraph C7 of the concordat on financial assistance to industry states:

There will be mutual consultation, between the interested parties in each particular case, in adequate detail and to a reasonable timescale, before making offers (formal or indicative) of financial assistance to cases within the following categories". I imagine that that is intended to cover the issues raised by the hon. Member for Tweeddale, Ettrick and Lauderdale in relation to Viasystems. In that respect, it may be a fair point to argue.

My concern relates to evidence that was before the Select Committee. The hon. Members for North Wiltshire and for Tweeddale, Ettrick and Lauderdale dealt with competition between different parts of the United Kingdom—an inward investment project coming to Scotland, versus one that was going to the north of England, perhaps, or the midlands. Paragraph 110 of the Select Committee report, entitled "Learning from the competition", records the evidence of—I assume—Mrs. Ray Macfarlane, the managing director, operations, of Scottish Enterprise. The report notes:

As previously stated, the Republic of Ireland has always been Scotland's 'arch enemy' in terms of inward investment. Mrs. Macfarlane hoped that as Scottish Enterprise went further down the line of looking for `tailored' `bespoke' projects which specifically suited the Scottish economy, the difficulty of putting `clear, blue water' between the two would recede. This remains to be seen. While Locate in Scotland and perhaps a regional development agency for a part of England are duly submitting their respective bids to the Joint Ministerial Committee for adjudication, and while the bids are being discussed in Committee, the global market is applying pressure to the inward investor for the contract. What we should fear is not other parts of the United Kingdom, but the global competition. The market is now a global market, and there is a danger that, while we are negotiating in Committee, the projects are haemorrhaging away to other parts of the European Union. That point remains unanswered, and I look forward to the answers at the end of the debate.

A related issue between the Scottish Parliament and Westminster is regional selective assistance. There is an inconsistency between the map being reserved, and responsibility for decisions about allocations resting with Holyrood. We shall no doubt return to the matter in due course.

The Select Committee recommends that Scottish Enterprise should provide a central service to advise indigenous firms seeking advice or assistance. The hon. Member for Maryhill referred to the report of the Enterprise and Lifelong Learning Committee of the Scottish Parliament, which reported yesterday. I had the privilege to be in the Chair of that Committee.

At the beginning of my speech, I probably should have declared an interest as a Member of the Scottish Parliament. I apologise for not doing so.

At the Enterprise and Lifelong Learning Committee, I was pleased that we secured unanimity among all four parties on a thorough and robust report based on evidence taken over recent months on the issue of access by businesses to business support and advice in Scotland. I am sorry that the hon. Member for Maryhill is not present. She spoke about the Glasgow economy and the difficulty that some organisations experience in accessing business help.

An enormous number of organisations in the market provide business support advice. The report of the Enterprise and Lifelong Learning Committee refers to the range of organisations that are active in the Glasgow market offering such support. I am told that, if one turned on Radio Clyde and listened to the advertisements at any time of the day, one could find the telephone numbers of numerous organisations to contact for advice about business start-up.

That diversity must be tackled. There are far too many providers of such services, often competing for the same clients, and in many cases using the same sources of public money to provide those services. The losers in the process are the people who need the support to assist their business development. I am pleased by the extent of agreement that has been reached among the participants from the four political parties in that Committee in the Scottish Parliament, and by the positive response to the report that was published yesterday by the Minister for Enterprise and Lifelong Learning, the hon. Member for Central Fife (Mr. McLeish).

What is important is that we spark a debate on how to deliver services to meet the demands of those who most wish to make a contribution to the developing Scottish economy. We have started that process and I look forward to further debate and discussion on the subject. Business support and economic development are fundamental to the health of the Scottish economy.

The Select Committee's report heartily advances and develops the debate on a number of key aspects and subjects. We need to sustain an active presence in the area of inward investment to guarantee our stake in the global inward investment market. We must ensure that Scottish companies can deliver a strong presence on export markets and broaden the number of companies involved in the process.

Most of all, we must have a cohesive and effective economic development strategy that delivers for the Scottish people and creates the right economic climate. Any climate that has interest rates at the height that they are now, with the damage that that causes to the Scottish business sector, is something on which the Government should reflect quickly.

6.21 pm
Mr. Russell Brown (Dumfries)

I congratulate my hon. Friend the Member for Glasgow, Shettleston (Mr. Marshall) and the Select Committee on their report. I am pleased that I am now a member of that Committee and I look forward to some enjoyable sessions.

Much of the report is relevant to my rural constituency in Dumfries and Galloway. Like the constituency of the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore), mine has seen many manufacturing job losses in the past couple of years. However, between 1987 and 1997, it also saw a loss of some 2,500 manufacturing jobs.

When a rural area such as ours depends heavily on major companies such as Du Pont, Nestlé and Elopak, it is only natural that, when they feel the pinch as a result of what is happening in other corners of the globe and have to make cuts, we feel it hard.

I am interested in the report's comments on clustering, which is important. Between 27 and 28 per cent. of Galloway is forested, so forestry is clearly one example of what we can do in our locality. In the past two years, the local enterprise company endeavoured to clear and prepare a site for an Austrian company. Some £3 million was invested in that, only for us to discover in February this year that the company no longer intended to come to the Lockerbie area.

However, I am pleased to say that another local firm has decided to take part of that site. I am looking forward to tomorrow when we are likely to hear of a £5 million investment on that site with the potential to create some 100 jobs during a three-year period. Initially, there will

be forestry and sawmill work, which I gather will be developed into manufacturing. However, I will have more details about that tomorrow. I am delighted about that.

Let me dare to talk about the clustering of education. Dumfries is abuzz at the moment with the potential development of the Crichton site, providing campuses for Glasgow and Paisley universities and Dumfries and Galloway and Bell colleges. I look forward to the day when we can retain local young people by providing higher education opportunities on that site. We need to harness their academic ability and keep the locality vibrant.

My hon. Friend the Member for Shettleston mentioned transport, and I note that the hon. Member for Galloway and Upper Nithsdale (Mr. Morgan) is in the Chamber. The A75 is not just any old road; it is an important avenue for economic development in our area. The alternative road that leads to a ferry port is the A55 in north Wales, which has received six times as much investment. It is not surprising that people in south-west Scotland feel somewhat disfranchised. If we are to move forward and have genuine inward investment, we must ensure that the infrastructure is right.

Inward investment does not offer all the answers because my constituency is rural and our challenge is to create an outward-looking and prosperous local economy. We want proper indigenous investment as well as a small amount of inward investment. We want to make that part of Scotland a model for rural development.

6.26 pm
Mrs. Rosemary McKenna (Cumbernauld and Kilsyth)

I also welcome the Select Committee's report. I was briefly a Committee member but I left before the inquiry began. I shall be brief because many of my colleagues want to speak and there is not much time.

I am keen to take part in the debate because I was a member of Scottish Enterprise from 1994 to 1997. I was involved in the discussions that led to its creation. Locate in Scotland is part of Scottish Enterprise. It is an important organisation, which has grown from strength to strength. I point out to the hon. Members for North Wiltshire (Mr. Gray) and for North Tayside (Mr. Swinney) that we are successful in attracting inward investment not only because of Locate in Scotland but because Scotland is very good at partnership working—that is demonstrated by the fact that we set up Locate in Scotland. The support of embassies throughout the world is crucial to attracting inward investment to Scotland. The increase in inward investment in the years to which the hon. Member for North Wiltshire referred was due to the creation of the single market and the work of Locate in Scotland. It is important to put that on record. Since 1997, there has been a substantial increase in inward investment of £2 billion, which has created 30,000 jobs in Scotland. The matter is complex.

I shall briefly consider the summary of the report's conclusions. Transport is vital. Anyone who is familiar with the route from Glasgow to the north of Scotland knows that the A80 through Cumbernauld is the biggest bottleneck in Scotland. Sorting that out is crucial to the development of good infrastructure. I agree with my hon. Friend the Member for Glasgow, Shettleston (Mr. Marshall) that we need the M74, but I believe that we need the M80 far more.

I do not understand the reason for the lack of investment in public transport between areas where there are jobs and areas of high unemployment, such as the constituency of my hon. Friend the Member for Shettleston. The transport links between those areas are poor, and we should examine that. More funds should be made available, but we must be careful because funds are also important to encouraging and developing indigenous industries. I would be more circumspect, and not simply demand more money for Locate in Scotland. The matter is more complex than that.

We want to be involved in the debate about the future of Locate in Scotland and Scottish Trade International. That leads us to the future of Scottish Enterprise. The Minister for Enterprise and Lifelong Learning in the Scottish Parliament—my hon. Friend the Member for Central Fife (Mr. McLeish)—has begun that important debate, which must be reasoned and based on knowledge and information.

Scottish Enterprise is a dynamic organisation that is always ready to move forward, as its chairman, Sir Ian Wood, showed when he gave evidence to the Committee; he agrees with the recommendation to link Locate in Scotland and the STI, although a lot of other issues have to be looked at. We have to move forward continually and my constituency of Cumbernauld and Kilsyth has been successful in attracting inward investment. Significant companies—from not only Japan, but Germany, France, Korea and the United States of America—have located there and recently a successful investment was made in a call centre by Morgan Stanley Dean Witter, creating sound financial sector jobs. That is a good example of how we can move forward.

Our jobcentre staff have shown tremendous commitment. They embraced the new deal from the beginning and took it forward, so much so that we have reduced youth unemployment in my constituency by 72 per cent. The overall reduction is 40 per cent., and we have to take that example to the rest of Scotland and use the information that it provides to take us forward. I agree with my hon. Friends the Members for Glasgow, Maryhill (Mrs. Fyfe) and for Shettleston: we need to use the skill and knowledge that has developed in successful areas to help the areas of Scotland where there is deep poverty. That is how to tackle social exclusion.

As my hon. Friend the Member for Dumbarton (Mr. McFall) said, we must recognise that the world economy is changing. For example, in the words of Alf Young in the 10 December edition of The Herald,

the new economy based on new technologies and high-value services traded on the Internet, is coming at us like a Caribbean typhoon. We have to accommodate all those changes and I believe that Scottish Enterprise has the will to take us forward. It is the right organisation to do so and will be very much involved in the debate, which is about what is best for the people of Scotland and sharing information in Scotland and in the rest of the United Kingdom. We should not follow a hysterical nationalist agenda.

6.32 pm
Mr. Douglas Alexander (Paisley, South)

With some trepidation, I rise to speak: I am not a member the august Scottish Affairs Committee, but I have been emboldened by the characteristically generous remarks of the hon. Member for North Tayside (Mr. Swinney). I pay tribute to my hon. Friend the Member for Glasgow, Shettleston (Mr. Marshall), who is unfortunately not in his place, because I know that he has done a great deal of work on the Committee's report. I agree with its authors that this is a timely point at which to consider the whole issue of inward investment, given that it was prepared at such a critical juncture for our constitutional future.

The challenge for Members in all parts of the House at this point is to ensure that the new constitutional architecture is able to work to the advantage of the Scottish economy as a whole by successfully securing continued inward investment. I want to give the House a sense of the significance of inward investment to my constituency of Paisley, South: it is central to the Renfrewshire economy, of which my constituency is a part. From a Renfrewshire work force of 121,000, inward investors employ upwards of 13,000 people and 50 per cent. of all manufacturing jobs in Renfrewshire come from inward investors. I am proud to note that four significant inward investments have been made in Renfrewshire over the past few months, creating more than 1,000 new jobs.

Over recent years, Renfrewshire has attracted a range of major direct foreign investment, first in electronics and now in the developing call centre and internet sectors, which were discussed by my hon. Friend the Member for Dumbarton (Mr. McFall). They contribute to Renfrewshire's £5.4 billion of exports, which in turn make up more than 30 per cent. of Scotland's total manufactured exports. The importance of inward investment in not unique to the Renfrewshire economy. As the authors of the Select Committee report confirmed, inward investment is absolutely crucial to the manufacturing base of modern Scotland. The massive job losses suffered in manufacturing areas such as west central Scotland—of which Paisley, South is part—resulted in large measure from the two recessions in as many decades created by the previous Conservative Government. They have increased Scotland's reliance on inward investment over the past two decades.

As the report makes clear, the importance of foreign direct investment in the Scottish economy can hardly be overstated. There are now nearly 600 overseas-owned concerns in Scotland, providing some 80,000 jobs. Scottish Office evidence given to the Select Committee showed that emphasis was placed on the role of inward investment in helping to restructure Scotland's economy in the context of new, lighter manufacturing activities based on modern technology and scientific developments. For more than 20 years, the electronics industry—Compaq and IBM are close to my constituency—has been the single most important industrial sector for manufacturing inward investment in Scotland.

The keys to our success in Scotland, in terms of electronics inward investment, are now well established. The rapid growth of the market for electronic products, allied to the presence of a critical mass of related electronics companies in west central Scotland—and, indeed, in parts of Fife—combined with high-skill labour markets, have produced attractive locations for inward investment by electronics firms.

In the face of evidence of the strength of our electronics sector, it is easy to lose sight of the fact that foreign investment now transcends electronics, and extends to a number of parts of the Scottish economy. Foreign companies are investing in sectors as diverse as food and drink, chemicals and petroleum products. As with the rest of the economy, the case for the centrality of inward investment in the Scottish economy is comprehensively made by the report.

One of the merits of the report is the effectiveness with which it counters the idea advanced by critics of inward investment that a crude choice can be made between an economy that supports inward investment, and an economy that encourages the growth of indigenous enterprises. That was brought home to me by evidence presented to the Committee by Renfrewshire council, which said that inward investors in my area were playing a key role as suppliers to incoming investors. I feel that such a relationship can be mutually beneficial, and can benefit every part of the economy.

Mrs. Ray Michie (Argyll and Bute)

The hon. Gentleman lauds the benefits of inward investment, and I endorse that. We have heard a good deal about the 30,000 jobs created by it, and I am grateful to the hon. Gentleman for telling us how many jobs have been created in his constituency. Can he explain why those jobs, and that inward investment, have not got to Maryhill or Argyll?

Mr. Alexander

I will answer that by echoing what has been said by others. We must recognise that, despite regional selective assistance and the efforts made by organisations such as Locate in Scotland, at a certain level, inward investment decisions are essentially commercial decisions, determined by the management of private companies. This is radically different from the regional assistance that was offered in the 1960s and 1970s. Nevertheless, I believe that inward investment makes a significant contribution. If the hon. Lady visited Compaq in Renfrewshire and saw the travel-to-work area there, the crude myth that, if a factory is located in a certain place, that is the only part of Scotland that benefits would probably be exploded.

I feel that the central challenge presented by the report is this: how, with the new constitutional architecture, can not just the Westminster Parliament but the Parliament in Holyrood best improve on the success of inward investment that has already been achieved? I think that two key drivers dictate that success, not just in Scotland but throughout the United Kingdom. One is economic stability, and the other is political stability. The Government have a proud record of achieving economic stability in their first two years in office: inflation is on target, public borrowing is under control, and unemployment is falling again. I was thankful to see the figures for Scotland yesterday.

In such a transient international marketplace, the case for economic stability almost goes without saying, but I also want to emphasise the significance of political stability. If we were to compromise economic stability with constitutional instability of the type offered by the

Opposition. I fear that a heavy price would be paid, not only by employees but by companies throughout Scotland.

Mr. Swinney

Which party does the hon. Gentleman mean?

Mr. Alexander

I mean either a party that sought to renegotiate the terms of the treaty of Rome, or a party that sought to renegotiate the terms of the Act of Union. Both pose a significant and profound threat to the people of Scotland.

In recent elections that the hon. Member for North Tayside is keen not to discuss, we defeated the party that stood for the status quo. I feel that the threat posed to inward investment by a party of separation is profound and real. It is only by an effective and dynamic partnership of both Parliaments that we can move forward. I commend that approach to the House.

6.40 pm
Mr. Dominic Grieve (Beaconsfield)

It has been a pleasure to listen to the debate. I apologise if my remarks are brief. It seems to me and, I dare say, to the Secretary of State, that greater benefit is to be derived from listening than from standing up and pontificating. The interesting speech of the hon. Member for Paisley, South (Mr. Alexander) reinforced my view that it was worth waiting for.

The report is interesting. Some of the areas of interest lie not in the recommendations, but, as often happens in such reports, in reading the body of the text. There are occasions when Select Committees make many pithy comments, but do not wish to embarrass the Government too much, so they do not embody the comments in recommendations and call for a response.

I was somewhat sorry to see how brief the response from the Westminster Government was on some of the issues. It was confined to the narrow recommendation on transport and wholly avoided some of the comments, particularly those in paragraph 58 concerning taxation.

Several issues in the report need to be looked: taxation, transport infrastructure, on which we have important responsibilities, and the whole area of concordats, on which I do not wish to dwell at too much length this evening, although I will make one or two comments in view of the remarks by the hon. Member for North Tayside (Mr. Swinney).

The Conservative party—I make it clear to the Secretary of State because, sometimes, it does not yet seem to have got into his head or those of other Labour Members—wants the devolved structure to work. We want the concordats to work. We want Scotland to prosper under devolution. Therefore, the remarks that I shall make are all designed to ensure that that comes about.

We are concerned that, in relation to taxation, the Committee seems to be letting the Government off the hook in its report. Scotland's problems are not unique. The point is made in the report that Scotland is a peripheral area within the European Union. For that matter, the United Kingdom is a peripheral area within the European Union, except possibly for some small slither of the south-east. Therefore, if we want the country to prosper, we will have to make it uniquely attractive for inward investment and to ensure that companies wish to locate here because of the advantages that we can offer.

Over the past few years, the evidence has been overwhelming: we have been able to do that largely because of an extremely good tax regime. The City of London provides a unique financial sector, which—1 say to the hon. Member for North Tayside—is of inestimable benefit to Scotland, as it is to England. Companies wish to locate because there is a stable financial framework.

Attracting inward investment is a challenge. The Government cannot escape the taxation issues that are raised in the report. Paragraph 58 spells it out clearly. It goes into the whole issue of how the Republic of Ireland, for example, has succeeded in making itself attractive to inward investment by lowering corporation tax to derisory levels. It also goes into the way in which other countries such as the Netherlands have facilitated inward investment.

The Government's record on the matter is extremely poor. The rise in overall taxation has taken place under the present Government. It has been commented on again and again, and it is directly affecting business.

Early in the debate, we looked at the some of the statistical evidence. I regret one part of the contribution of the hon. Member for Glasgow, Shettleston (Mr. Marshall). There is a Kafkaesque delusion about what happened during the 18 years of so-called Conservative misrule. The statistics from Locate in Scotland—

Ms Rachel Squire (Dunfermline, West)

Will the hon. Gentleman give way?

Mr. Grieve

No. I do not have enough time. I apologise, but I simply do not. I know that the Secretary of State and the hon. Lady will understand that.

The evidence from Locate in Scotland's own statistics is that the surge in investment in the early 1990s was massive and simply cannot be wished away. Moreover, it undoubtedly continued in the first two years of the Government. There is also some evidence that it has diminished. It was suggested in the debate that the south-east Asia crisis is one reason for that decline. Although I do not disagree with that, it is also worth considering whether the fiscal climate that we are creating is attractive to business. Opposition Members question very much whether it is.

The point was made very forcefully by my hon. Friend the Member for North Wiltshire (Mr. Gray) that the situation on fuel taxation and the fuel escalator has been getting completely out of hand. I am perfectly prepared to accept what the Secretary of State has to say: environmental reasons, among others, made the fuel escalator seem attractive—a point that has been reinforced by Ministers time and again to the Environmental Audit Committee, of which I am a member. However, the evidence has been overwhelming that the escalator has not been producing the desired results, and that it has been having a highly negative effect on business, particularly business located in remote rural areas. Therefore, it should be a particular concern when we consider the economy in Scotland.

The best way of achieving inward investment is not by all sorts of magical wand-waving and quasi-autonomous non-governmental organisations. Although those may be able to help, ultimately, if the fiscal and financial climate is not good for inward investment, it will not happen. If the climate is good, inward investment will pour in to most areas, apart from the most deprived.

I tell the hon. Member for Glasgow, Maryhill (Mrs. Fyfe) that I understand the force of the points that she made. I know her constituency a little, and appreciate that it has been wholly bypassed by the benefits that have come to many other parts of the United Kingdom. That problem undoubtedly needs to be dealt with.

The report contains an excellent section on a changing world, and paragraphs 19 to 21 go into great detail about the complete change in the world economic climate. One of the points that was made is that it is simply not possible to continue examining economic issues in an old-fashioned way—although, after listening to one or two speeches in this debate, it seems that we are still using blinkered vision that deals far more with the 1960s than with current-day problems.

The old dividing lines are undoubtedly now blurred, and Scotland—just as much as the rest of the United Kingdom—has to live in a different world. That is why I return to the point on tax that I made to the Secretary of State. If indeed we are over-regulating and putting £30 billion of extra burdens on United Kingdom industry and business, it is not surprising that the inward investment level may be slackening. One does not have to go to south-east Asia to discover the causes of that.

I shall now deal—I am sorry to have to do it so briefly; I should have liked to go into it in greater detail—with the general matter of the concordats. I tell the hon. Member for North Tayside that the question on the concordats is not whether they are the best thing on offer, but whether, in view of the voluntary nature of the concordats—they cannot be sold as anything else—their best chance of long-term success, facilitating inward investment and not being messed around by the hon. Member for North Tayside and his colleagues, should they ever have the opportunity, is in rapidly establishing them as constitutional convention. The concordats undoubtedly seem to be fairly well drafted, although it is a great pity that we did not have a chance to see them earlier.

If the concordats are established as convention, there will be a framework in which we are able to operate, and a framework in which a future Conservative Government may well find relations easy with a Scottish Executive who are not necessarily of the same political complexion. The Secretary of State, as a Unionist, should be wishing for such a framework. In those circumstances, therefore, it is a legitimate matter for us to wish to consider.

We are also bound to express anxieties that there remains an enormous lack of clarity about how the relations work in practice. Picking simply one point—which is slightly peripheral to the issue—as an example, it is slightly unclear whether the Secretary of State for Scotland was ever informed by the Prime Minister that an offer on beef had been made by the French Prime Minister. Although the Secretary of State would have been right to turn down the offer, I do not know whether he was told of it. If that is the level of co-operation, there is legitimate cause for anxiety.

It is time for me to bring my remarks to a close. [HON. MEMBERS: "Hear, hear."] Another time, I shall be far less liberal in giving way to Labour Members and allowing them more time to speak.

I reserve my final remarks for the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore), who said that education needed to continue north of the border. I heartily agree. I have visited businesses elsewhere and, if he would like to recommend some in his constituency for me to visit, I should be only too happy to take up his offer.

I very much hope that devolution continues to succeed, but it will require scrutiny and, above all, a proper fiscal climate for inward investment.

6.50 pm
The Secretary of State for Scotland (Dr. John Reid)

Because of the time constraints and the fact that some speeches have been cut short to allow time for others to contribute, I shall not take interventions. I apologise in advance for that and for the fact that I may not cover everyone.

I am tempted to respond immediately to the point on beef. I should like to correct the hon. Member for Beaconsfield (Mr. Grieve) on the facts of the case, as I have had to correct his colleagues. No formal offer was made during tripartite discussions. The idea of a herd-based scheme was discussed at the margins with a number of people, including the Scottish Executive's Minister for Rural Affairs, who was aware that the issue was coming up. Had it been put into effect, it would have had no implications in Scotland, because it would have meant abandoning the law and science and everybody in Europe who was supporting us on the date-based scheme and changing to a narrow certified scheme that could have applied only in Northern Ireland. Had it applied to Scotland with a narrow definition of grass-fed cattle, it could have applied to less than 1 per cent. of Scottish cattle. That is why I am so disgusted that the only allies that the French seem to have in Europe on the issue are the Scottish nationalists. I would have been insulted if the Prime Minister had even considered making any formal approaches to any of us to abandon our correct position.

Now that I have put that right, I shall turn to the report, on which I congratulate my hon. Friend the Member for Glasgow, Shettleston (Mr. Marshall). A tremendous amount of work went into it and he was central in steering it through the Committee. Inward investment and good export performance are important issues. They are both essential to the health of the Scottish economy, although we should never forget how dependent we are on the indigenous growth of our own industries, small and large.

The debate is a useful opportunity to set out the basis of the Government's view. My hon. Friend the Member for Paisley, South (Mr. Alexander) had it in one. In this post-devolution era, the people of Scotland are interested in successful output and delivery—not endless discussion on the process of devolution, but how it makes day-to-day life better. Central to that is the concept of partnership. The policies of the Government here on fiscal and economic matters, international relations and the key elements of economic infrastructure, such as energy supply, telecommunications and transport links, are crucial to providing the right climate for business investment and success. We need to work in partnership with the Scottish Executive, who are responsible for promoting economic development and trade and providing assistance to business and industry. Both bodies need to work in partnership with the agencies involved in encouraging inward investment and the export trade.

The results of that partnership approach have been impressive and we abandon it at our peril. That is where my party, both in the Scottish Executive and in the Westminster Government, parts company with the Scottish National party. The illusion that, in place of that partnership, we can throw a ring fence around our economy, that a fortress Scotland policy will protect us from the real world, that conflict instead of co-operation will provide cohesion and that grudge and grievance are an adequate analysis of the world economy—

Mr. Alasdair Morgan


Dr. Reid

Absolutely. That analysis is wrong on every count, but they are all the policies of the Scottish National party. The idea that continual constitutional instability will be the basis for economic stability is a cruel illusion that will not be bought by the people of Scotland.

Mr. Swinney

Will the Secretary of State give way?

Dr. Reid

I am sorry, but I will not give way to the hon. Gentleman. He understands why. He is being selective in his interventions. I notice that he was wise enough not to involve himself in the compact disc recorded by some of his colleagues. Presumably, either he chose not to take part, or he was disqualified on the basis that he could sing.

Since we were elected in May 1997, the Government's sound management of public finances and our fiscal and economic policies have produced the very conditions of economic stability that the hon. Member for Beaconsfield described as essential. From May 1997 to date, inward investment in Scotland has amounted to more than £2 billion and an estimated 30,000 jobs. By any standards, that is an impressive performance.

Figures published by the Invest in Britain Bureau show that, although it accounts for less than 9 per cent. of the UK population, Scotland has consistently over the past few years secured between 12 and 20 per cent. of all inward investment projects attracted to the UK, and between 17 and 25 per cent. of the new jobs associated with such projects.

In the five years to March 1999, Locate in Scotland recorded 436 inward investment projects, involving planned investment of no less than £7 billion associated with the expected creation or safeguarding of nearly 68,000 jobs. That is the record of success of the co-operation that would be put in peril by the continual instability that the Scottish National party represents as the way forward.

In 1998-99, Locate in Scotland and its partners helped to attract to Scotland a total of 9,041 planned new jobs. So far this financial year, 1999-2000, inward investors have already—in only nine months—announced plans to create a total of 8,849 new jobs in Scotland. So Locate in Scotland, far from declining—as the hon. Member for Beaconsfield (Mr. Grieve) suggested—is well on its way to beating its performance last year.

It is not just the statistics that are encouraging. The range of companies and their activities demonstrate a robust portfolio. Project sizes have ranged from 25 to 1,500 jobs in both the central belt and in rural areas.

Of course, it is not all one way. My hon. Friend the Member for Glasgow, Maryhill (Mrs. Fyfe) mentioned how some areas have missed out, and I am the first to accept that. That is why the measures brought in by this Government on child benefit, the working families tax credit and the new deal are so important, as is the work carried out by the Scottish Executive on social exclusion and poverty.

The hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) mentioned a case from his area. I accept that companies will sometimes relocate—they have done from my constituency, including Cummings and Caterpillar. However, I assure the hon. Gentleman that companies are closely monitored. If they go elsewhere in the UK, they are monitored by the DTI to ensure that the money provided by this Government is not used merely to assist the geographical movement of similar jobs.

We have had a short but significant debate. I pay tribute to the work force in Scotland who, along with our infrastructure, education system and environment, are one of our greatest means of attracting people to Scotland.

We now move to another stage of the devolution settlement—not only the concordats, but the joint action committees. We have established co-operation and partnership in practice, and we are aiming to deliver. We now move from the joint action committee on poverty to that on the knowledge economy. That subject is vital, as is the fact that we are working in partnership. That partnership approach will ultimately be backed by, and to the benefit of, the people of Scotland.

It being Seven o'clock, MR. DEPUTY SPEAKER proceeded to put forthwith the deferred Questions which he was directed by paragraphs (4) and (5) of Standing Order No. 54 (Consideration of estimates) to put at that hour.