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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

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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

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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--I 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

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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.

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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.

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