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Lord Steel of Aikwood: My Lords, I did say that this was the last Scottish Bill. I accept that there is other Scottish legislation.

Lord Mackay of Ardbrecknish: My Lords, I understand the noble Lord's meaning but I could not resist the temptation to point out that two pieces of Scottish legislation are going through the House in a rather unsatisfactory manner--an amazing manner, given that the Scottish Parliament will shortly have responsibility for such matters.

Scottish Enterprise and Highlands and Islands Enterprise have been successful in many ways over the past nine years but on 1st June, the situation will change out of all recognition with the coming of a Scottish Parliament. I wonder whether that Parliament should not consider early on the way those bodies operate.

The case for local enterprise companies was that it was a good idea to involve local business and commerce--in the jargon of these days, to give them ownership of the economic development and training in their area. I know it is late at night but this is important. Would the Minister like to share the Government's thoughts as to the future of the current framework?

Sometimes there are real problems with LECs because if the business men who join those boards are thrusting, developing and increasing employment, they will often be the very people who are applying for aid to the body on which they sit, Scottish Enterprise or HIE. Political opportunists often exploit the position of those people in such a way that, if I were such a thrusting person, I would not want to join any of those bodies.

If I did apply to them for anything, opportunist politicians would start to attack me. The current Government, Members of Parliament and so on have not

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been immune from opportunist attacks on such business men. Sometimes it seems to me they would almost prefer the unsuccessful to be on these bodies rather than the successful. I should have thought that it is the successful we all want. I hope that the Conservative Party Opposition will not join in such attacks on the kind of people I mention who are the very people we need on those bodies.

It seems to me that the Scottish Parliament will want--as the noble Lord, Lord Steel of Aikwood, rightly said--a much more hands-on approach in this matter. I do not think it will take the same rather arm's length approach to Scottish Enterprise and HIE as we have taken at Westminster. I was never an industry Minister but I have sat in the same room as them. One of the problems was that it seemed to Ministers that all the good news was dished out by Scottish Enterprise or the Scottish Development Agency and all the bad news had to be dealt with by government Ministers. I think there is a certain amount of truth in that and I believe it still happens. The noble Lord, Lord Macdonald of Tradeston, has to deal with some of the problems of closures in Scotland which I shall deal with in a minute. However, I wager that if it is a matter of great success stories, Scottish Enterprise and Highlands and Islands Enterprise will boast of that.

I do not think that that process will be sustainable in the Scottish Parliament. I suspect there will be major changes in the way these bodies work and the relationship they have with government. I believe that Edinburgh and even Glasgow will be rather small towns--if I can call them that--for such big players to remain in isolation from each other, and it would not be for one to start interfering to a far greater extent than has been the case at Westminster. I believe that we shall see some major changes and I believe they will come about sooner if the Scottish economy continues the economic decline that we have seen in the past 18 months, with unemployment rising inexorably after many years of continuing decline in the unemployment figures month after month. We now see them increasing and we now see a litany of closures.

My noble friend Lord Monro and the noble Lord, Lord Steel of Aikwood, have drawn particular attention to the problems in the Borders. Undoubtedly if the banana war is not settled soon the cashmere and woollen industry across the south of Scotland will be even more damaged than it has been in the past year. I see that the banana war has stretched as far as Tunnoch's caramel wafers. At least there is some logic in equating bananas with caramel wafers in that they are both foods. I have never been able to see the logic of equating bananas with cashmere. However, joking aside, this is an extremely serious business of which I know that the Government are well aware. I am sure we wish them well in their efforts to try to make sure that this business does not deteriorate any further. We have problems with Bishopton Royal Ordinance Factory and Volvo. As the noble Lord, Lord Macdonald, knows better than most, we have problems at Kvaerner which, like all shipyards, is dependent on the next order.

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As regards the money that Scottish Enterprise will receive for the future, it is important that it considers ways to help indigenous industry. It has always been a complaint that Scottish Enterprise and HIE have been too quick to help incoming industry and not quick enough to help indigenous industry to grow. That is something it ought to consider. I do not want to go on any longer. I think we all wish Scottish Enterprise well. While it certainly provides meat to table good questions to the Government to see Scottish unemployment rising, it certainly does not give any joy to those of us who raise the matter because we know from our term in government how difficult it is when one is faced with the closure of enterprises, especially in small communities where that enterprise forms a major source of employment, and how difficult it often is to replace it. The Government have our sympathy and support in these matters, as does Scottish Enterprise.

10.59 p.m.

Lord Macdonald of Tradeston: My Lords, I am grateful to all noble Lords who have participated in the debate. As noble Lords will be aware, this Bill has a narrow compass. Its purpose is to increase the aggregate amount that Scottish Enterprise may receive under the terms of the Enterprise New Towns (Scotland) Act 1990. It does not influence the level of grant in aid that Scottish Enterprise will receive. That remains a matter for the Secretary of State in his allocation of the Scottish block as determined by the Barnett formula. Funding over the £4,000 million limit will be a matter for the Scottish Parliament in due course. I can confirm that when the money runs out in 2001, or whenever, it will be for the Scottish Parliament to decide.

It is of course vital that Scottish Enterprise continues to receive funding. As I indicated earlier, the Secretary of State has issued Scottish Enterprise with detailed strategic guidance. He has asked Scottish Enterprise to develop a strategy which will encourage innovation, promote enterprise and lifelong learning and secure a modern and inclusive economy. That will help us to achieve a competitive drive which will enhance the knowledge base of Scottish businesses on which their commercial successes will increasingly depend in the coming century. Scottish Enterprise clearly has a central role to play in this development.

Perhaps I may now turn to some of the specific issues that have been raised. I join the noble Lord, Lord Nickson, in congratulating the very many people who have given of their talents and very freely of their time over the years, from SDA days, through the troubled birth of Scottish Enterprise and its LEC network. I remember the hostility of which the noble Lord speaks. With his leadership, Scottish Enterprise managed to survive and grow and prosper. It is only right that I, too, join the noble Lord, Lord Monro, in congratulating the noble Lord, Lord Nickson, on the crucial part that he played in those early days.

The noble Lord raised a point worth noting. There will soon be eight regional development agencies in England and we will perhaps face the kind of

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competition of which we have had forewarning through the activity of the Welsh and Irish development agencies. I am sure that if we are faced with eight muscular regional development agencies in England, Scottish Enterprise and Highlands and Islands Enterprise will have to be on their mettle. All of us in Scottish public life should try to make sure that Scottish Enterprise is able to compete as strongly as possible in the years ahead, particularly to protect our splendid record of inward investment which has led to 80,000 people being employed by foreign-owned companies in the manufacturing sector alone.

Questions were asked about the leadership of Scottish Enterprise. It has been said that it was good at the start, but it should be business led. The noble Lord, Lord Mackay, expressed concerns about the leadership and how it would develop in the years ahead. Perhaps I may say very firmly that whatever reservations some might have had in the early years, the Government are committed not only to the idea of partnership--yes, we have brought people into local companies from local authority and trade union backgrounds--but have made it quite clear that that partnership should be led by business interests. Therefore, I was dismayed to note that there were some in Scotland who felt that the best course forward was to abolish the board of Scottish Enterprise and to replace a lot of the local interests, again by political interests. That would be taking out of the enterprise networks the very people with experience of enterprise.

The noble Lord, Lord Monro, asked if we felt that the money was well spent. I will not rehearse again the achievements of Scottish Enterprise, but our belief is that it is the best way forward and, if we can keep the business leadership there, we can begin to build on some of the policies contained in the latest strategy. I believe those policies point Scotland towards a future in a very different century which will be based on a knowledge-driven economy. If one looks at the DTI White Paper on competitiveness, it is interesting how many of the ideas about industry clusters or knowledge-driven economies have been worked upon for some years now in Scotland. Because of the efforts of Scottish Enterprise, Scotland is well ahead in fashioning the theories and shaping the direction which will take us into that next century.

During that transition, there will be difficult periods. I sympathise deeply with the problems of the Dumfries and Galloway economy, which were described by the noble Lord, Lord Monro, and I am grateful to the noble Earl, Lord Stair, with his close involvement through his membership of Dumfries and Galloway Enterprise, for recognising the positive things that have been going on. He mentioned the personal enterprise shows we have set up to try to encourage people to start their own companies. He is aware of the extra money that has been given to Dumfries and Galloway--£2.4 million for the delivery of the local action plan in 1999-2000. I, too, am aware of the positive prospects for the Kronospan-Lockerbie site.

It is also worth remembering that the new technologies will favour the rural areas of Scotland--rural areas where employment has increased quite

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markedly in the past decade--and we believe that in setting up our rural inward investment unit we will be able to recreate in the south of Scotland the success that we have already had in the Highlands. Some of those successes were predicated on the new technologies--the ISDN lines being brought into the Highlands--but one can see in towns like Dingwall, Nairn and Alness call centres being developed along them. There is also a good deal of optimism that call centres can be brought into the Border towns and to the towns of Dumfries and Galloway. So I would not be quite as pessimistic as the noble Lord, Lord Monro, on these matters.

In areas such as tourism, which the noble Lord mentioned in passing, we gave an extra £1 million to the Scottish Tourist Board. Its chairman, the noble Lord, Lord Gordon, is aware that that money was used to help tourist boards in the shakier areas to survive long enough so that they could be properly funded through the Scottish Parliament, which would give the core funding through the Scottish Tourist Board.

Other areas are important in looking at the budget as we go forward. While the £425 million looks as though it is a reduction, we have allowed another £25 million to be rolled over so that there is a real increase next year in terms of its funding. In addition, we should be aware that a great deal of money is going into programmes that are closely involved in the training activities in which Scottish Enterprise has such an interest. For instance, £300 million has been committed to the New Deal over the next five years and the local enterprise companies will have an important role in that.

The noble Lord, Lord Steel, said that he believed that there would be a more hands-on approach from the Scottish Parliament. In anticipation of the debates that might lie ahead, we tried to ensure that government, the Scottish Office and Scottish Enterprise were as closely aligned as possible. That has been a useful and positive exercise over the past year. We have also tried to involve business much more in the deliberations of government and Scottish Enterprise than has been the case in the past. We have started the Scottish Business Forum which will allow the bigger companies in Scotland to inform government thinking. That has been judged to be a successful exercise.

At the moment, I am on the point of producing a pathfinder document with the 13 major sectors of business and industry in Scotland which will lay down their priorities for the MSPs who gather in Edinburgh. Politicians will become more involved in the activities of the enterprise networks, and properly so. That is one of the reasons for having a devolved parliament. A strong committee structure will help in that involvement. The related point is that we shall see much more involvement on the part of business as well. I hope that what we have done in the past year in trying to encourage more business activity in Scottish affairs will be continued.

In response to a point made by the noble Lord, Lord Mackay of Arbrecknish, yes, I believe that the LECs work. We are fully in support of the current framework. As I said, we believe that they should be business-led. I recommend the continuance of that structure to the Scottish Parliament.

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The noble Lord mentioned Glasgow and Edinburgh and rightly mentioned the economic difficulties in some areas. It is worth remembering that last Friday Edinburgh announced that it would be creating 40,000 new jobs. Companies that I visit in Edinburgh are already working in a very tight labour market. Unemployment there is 3.5 per cent. on the claimant count. Even in Glasgow, where unemployment has fallen, 20,000 new jobs are being looked for in call centres, retail and so on.

I repeat that the claimant count is not the perfect measure. But at 5.5 per cent. in Scotland, it has remained steady in the six months since August. It is the lowest it has been since 1977. Youth unemployment, which was such a scourge under previous administrations, is at its lowest for a generation. So, while there are difficulties, we continue to create jobs. The statistics that we have from Scottish employers indicate that 34,000 extra jobs were created in the Scottish economy during the past year. So the situation is not entirely bleak. We must be careful that we do not talk Scotland down. If we hit business and consumer confidence, we shall hit jobs.

The noble Lord, Lord Mackay, referred to Treasury consent. All ministerial functions under the 1990 Act are exercised by the Secretary of State. Section 55 of the Scotland Act provides that devolved functions, whether previously exercised only with the consent of another Minister of the Crown, will in future be exercised solely by Scottish Ministers. Section 126, dealing with interpretation, clarifies that the term "Minister of the Crown" includes the Treasury. The end result will be that references to Treasury consent to the exercise of functions by the Scottish Secretary under the Enterprise and New Towns (Scotland) Act will fall.

I commend the Bill to the House and ask your Lordships to give it a Second Reading.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

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