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Industrial Development (Financial Assistance) Bill

THESE NOTES REFER TO THE INDUSTRIAL DEVELOPMENT (FINANCIAL ASSISTANCE) BILL      AS INTRODUCED IN THE HOUSE OF COMMONS ON 18TH NOVEMBER 2002 [BILL 5]       INDUSTRIAL DEVELOPMENT (FINANCIAL ASSISTANCE) BILL            EXPLANATORY NOTES INTRODUCTION 1.     These explanatory notes relate to the Industrial Development (Financial Assistance) Bill as introduced in the House of Commons on 18 November 2002. They have been prepared by the Department of Trade and Industry in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament. 2.     The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given. SUMMARY AND BACKGROUND 3.     The Industrial Development (Financial Assistance) Bill amends section 8(5) of the Industrial Development Act 1982. Section 8 contains the principal power of Ministers to give financial assistance to industry outside areas which have been granted Assisted Area status. Assistance may be given provided that: it will benefit the UK economy or any part or area of the UK; it is in the national interest; and assistance cannot appropriately be provided in any other way. The purposes for which assistance may be granted are set out in section 7(2) of the Act. They include: the promotion of the modernisation or efficiency of an industry; creating, expanding or sustaining productive capacity in an industry;      [Bill 5-EN]     53/2 promoting the reconstruction, reorganisation or conversion of an industry; encouraging the growth of an industry; and arrangements for ensuring an orderly contraction of an industry. Financial assistance may take the form of investment, loans, grants or guarantees. Examples of uses of section 8 are the urban post office network reinvention programme, the UK Coal Operating Aid Scheme, and support to small businesses through measures such as the Small Firms Loan Guarantee Scheme and Regional Venture Capital Funds. 4.     There is a financial ceiling on the exercise of the section 8 power. Section 8(5) contains a limit of £1,900 million on the amount of assistance which can be granted, and this may be increased by order made with the consent of the Treasury on not more than four occasions by a sum not exceeding £200 million. The ceiling has now been raised three times and a fourth order to raise the ceiling from its current level of £2,500 million to £2,700 million is likely to be needed in early 2003. The purpose of the Industrial Development (Financial Assistance) Bill is to amend section 8(5) by substituting higher figures of £3,700 million as the initial ceiling and £600 million as the maximum amount by which the ceiling can be raised by each order. The other provisions of section 8 remain unaltered. 5.     The Bill extends to the United Kingdom as the power in section 8 is used to set up UK wide schemes of financial assistance for industry. The devolved administrations may use section 8 as the statutory authority for their own activities and their expenditure counts towards the financial ceiling. THE BILL COMMENTARY ON CLAUSES Clause 1: Increase in limit on selective financial assistance 6.     This clause replaces subsection (5) of section 8 of the Industrial Development Act 1982. The clause retains the structure of tranches in the existing legislation but replaces the numerical ceilings with new, higher ones. The initial ceiling on financial assistance will be increased from £1,900 million to £3,700 million and the subsequent four tranches from up to £200 million to up to £600 million each. FINANCIAL EFFECTS OF THE BILL AND EFFECTS OF THE BILL ON PUBLIC SERVICE MANPOWER 7.     The Bill will not entail changes to public service manpower. It will allow additional public expenditure by providing the statutory authority for continuing expenditure for measures which have already been announced and taken into account in expenditure forecasts, and will enable new measures to be introduced. Any new measures would have to be compatible with the EC state aid rules and, where required by those rules, would be duly notified to and approved by the European Commission. REGULATORY APPRAISAL 8.     The Bill does not have a regulatory impact on business, charities or voluntary organisations. EUROPEAN CONVENTION ON HUMAN RIGHTS 9.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement, before second reading, about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). Patricia Hewitt, Secretary of State, Department of Trade and Industry, has made the following statement:      In my view the provisions of the Industrial Development (Financial Assistance) Bill are compatible with the Convention rights. COMMENCEMENT 10.     The Bill comes into force on Royal Assent.