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5.46 pm
Mr. Desmond Swayne (New Forest, West): It is a great pleasure to follow the hon. Member for Ayr (Ms Osborne), who is a member of the Committee on which I have the privilege to serve and who represents the town of my school days.
Before I deal with the subject of the Bill, will you first indulge me, Mr. Deputy Speaker, by allowing me to get a point of frustration and irritation off my chest? It is not the fact that I am unable to put in a bid for Scottish Enterprise money for New Forest, West, but the fact that, as is my custom, I rose early, swam quarter of a mile in the Serpentine and cycled to the Palace of Westminster. As a consequence of the business that must necessarily take place before the Chamber sits, I went straight into a series of meetings. Since business in the Chamber began, I have been in my place. At 5.46 pm, I rise to speak, feeling faint because I have scarcely had a moment to eat a banana and a mouthful of soup. The new arrangements for Thursday are inhumane and barbaric.
Mr. Deputy Speaker (Mr. Michael J. Martin):
Order. I am sorry to hear that the hon. Gentleman is feeling faint and has not had a decent meal. However, I have had a decent meal and I wish to hear what he has to say on Scottish Enterprise, not on the arrangements of the House.
Mr. Swayne:
In that case, hon. Members may welcome the fact that this is the last programmed Scottish Bill before the Scottish Parliament takes over Scottish business.
If one were to be partisan and make party political points, one might draw attention to the fact that the budget for training and Scottish Enterprise was cut by some £67 million in the comprehensive spending review. Were someone to make such a point, Labour Members would no doubt respond by saying that the previous
Secretary of State cut the budget. However, Conservative Members would say that he did so only with the agreement of the chairman of Scottish Enterprise and that, within a year, the value of the cut had been more than restored. I wish to move on from such sterile ground in this age of new politics and consensus and to question the fundamental basis of the Bill.
The hon. Member for Glasgow, Shettleston (Mr. Marshall) made some pertinent points about the balance of investment between the need to secure more indigenous investment and the acquisition of more capital investment from overseas. I wish to go further and raise questions about the fundamental assumptions underpinning the Bill.
My first point relates to the expensive pursuit of overseas capital. The balance of payments must, of necessity, balance. The number of potatoes sold at the prices charged must be equal to the number of potatoes bought at the prices paid. Any imbalance in the balance of trade in the current account must be made up for by an equal and opposite imbalance under another item in the current account, or by an equal and opposite imbalance in the overall capital account.
Both the British and the Scottish economies are familiar with that fundamental concept. For a long period during the 19th century, and during this one, the Scottish economy and that of the whole United Kingdom ran a huge surplus on current account, made up of a deficit on the balance of trade masked by a huge surplus on invisible earnings. Strangely, even at the height of the industrial revolution, when Glasgow was the workshop of the world, we ran a deficit on our balance of trade.
The statistics of the 19th century are not entirely clear, and the evidence is not always obvious. At the beginning of the 19th century, our collection of statistics was not as sophisticated as it is now. However, it is questionable whether the United Kingdom ever ran a balance of trade surplus during that century. As a result, our current account surplus was made up of a huge surplus on invisibles, largely because of the shipping industry. The balance of trade was affected by the fact that the motor of our economic development--the cotton industry--relied almost wholly on an imported raw product.
Of necessity, the huge surplus on the current account led to an equal and opposite outflow on the capital account. Britain had to export capital to make its trading partners able to afford to continue to trade with us. On the back of that fact, British capital ended up building railways throughout the rest of Europe and in north America. A lasting legacy is that we retain the lead in the world, including the United States, as the largest per capita owners of overseas capital.
If there is a persistent balance of payments deficit, it must equally be met by a capital inflow. One cannot go on buying from a shop--
Mr. Deputy Speaker:
Order. The hon. Gentleman is losing me, perhaps because I am not as well-versed as he in the economics of the 19th century. We must home in on the Second Reading of the Bill, which is about
Mr. Swayne:
One of the principal functions of Scottish Enterprise and its partnership with Locate in Scotland will be to attract inward investment. The point that I seek to make, Mr. Deputy Speaker, is that one cannot go on buying from a shop without having some source of income. I have pointed out the necessity of equal and opposite matching outward capital flows where a country runs a persistent current account surplus, or inward capital flows where a country runs a persistent balance of payments deficit. Capital inflow is an automatic consequence of the state of the current and capital accounts of the balance of payments. My question concerns the wisdom of making the expensive pursuit of foreign investment a priority. Obviously, it is a matter of balance. There is a measure of automation in the process, yet we seem to be investing a great deal to short-circuit and do the work that the logic of economic theory would ordinarily do for us.
Mr. Alasdair Morgan:
Is the hon. Gentleman saying that, if Locate in Scotland did not pursue its activities, for example, all that inward investment would still come to Scotland and would not be attracted to Ireland by, say, the Irish Industrial Development Agency?
Mr. Swayne:
I am making a case for having a balance. Obviously, one must have a view as to the type of investment that one wants. After all, one would not want merely to attract screwdriver plants; one must have a qualitative attitude to the sort of investment that comes in. The hon. Gentleman is right in identifying the fact that economic logic requires a certain amount of inward investment.
Mrs. Fyfe:
The hon. Gentleman talks as though depressed areas can easily pick and choose where investment comes from. Industry disappeared from the area that I represent decades ago. Maryhill was at the heart of the industrial revolution and all that industry has gone. Frankly, if an investor from Mars were offering jobs in Maryhill, I would take up the offer.
Mr. Swayne:
I hope that the hon. Lady will be successful in that bid for inward investment. I was talking not so much of the ability to pick and choose as of the logic of economic theory, which would require inward investment.
Another aspect of the work of Scottish Enterprise is that of the funds that it maintains to provide venture or seedcorn capital for business start-ups that would otherwise not be able to secure such funds. By its very nature, that is a risky business and it leads to a significant element of loss. Arguably, that is of necessity so. Indeed, if the figures for Scottish Enterprise did not show such losses, it could be argued that it was not doing its job properly by providing for industries that would otherwise not be able to secure such capital and so would never start up. There has to be a balance, but I am not wholly persuaded by the argument.
However, I do not want to go into that. I want to question why Scottish Enterprise finds itself in that position at all. Many years ago, there were agencies for
providing such capital. It is all very well for us to complain that the banks do not fulfil that role, but it was never their role to provide venture capital. In the great age of Glasgow--the industrial revolution--the main source of capital for risky enterprises was from within an entrepreneur's own family. Why has that source of capital almost completely disappeared throughout the realm? One cannot blame it on new Labour even if, in this age of consensus and new politics, one were minded to do so. That situation arose not only in this century but in the past century--
Mr. Dominic Grieve (Beaconsfield):
Is not the answer simple? It is due to the failure of wealth to cascade down the generations.
Mr. Swayne:
My hon. Friend has a pertinent point. As the state has taken on a series of activities, it has displaced--
Mr. Deputy Speaker:
Order. I am interested in what the hon. Gentleman has to say, in particular about the history of my native city, Glasgow, but he must be more specific. He must deal with the Bill, not wander through the economic problems of the United Kingdom.
Mr. Swayne:
Thank you for your guidance, Mr. Deputy Speaker. You will be relieved to hear that I am drawing to my peroration. The point that I am seeking to make is that we are about to provide an agency that already spends a great deal of public money with an additional £1 billion. I am questioning the necessity of that process.
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