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Lord Sainsbury of Turville: My Lords, there have to be clear rules on regional selective assistance. Those clear rules must be that if one receives regional selective assistance, one pays it back if one closes the relevant factory. It is for the government to make money available for retraining and other activities, but that should be seen as a separate exercise from the payment back of regional selective assistance. If we said, "You can have RSA and if you close the plant and go, you can keep the grant", that would send precisely the wrong signals.
On the carry-forward of losses in relation to the German tax system, the situation is no different from the British approach to carrying forward tax losses. The difference in this case is that the plant in Germany has already made those losses, which is what makes closing it down particularly unattractive. That is a wrinkle in this case but it does not, so far as I understand the situation, involve differentiating between the British and German tax systems.
We must be clear about the fact that the decision is a body-blow to people in the company. Equally, however, we must be clear about the reasons why the decision was taken. It was due not to the failure of the plant or the workforce, which has performed extremely well, but to particular factors. There was a very rapid decline in this relatively high-tech sector, which meant that the company, in the face of rapidly mounting losses, had to cut back.
Lord Palmer: My Lords, I understand the point made by the noble Lord, Lord Monro, and the Minister about the RSA--the situation is rather like the question about the chicken and the egg. Will the Minister explain how the money will be repaid? Has he made it abundantly clear that it has got to be repaid?
Lord Sainsbury of Turville: My Lords, there is no particular complexity about the matter. A cash payment was made to the company and the company will have to pay it back. I do not know whether discussions have yet taken place about the relevant time-frame.
Baroness Carnegy of Lour: My Lords, in view of the terms of the Scotland Act, it is excellent that the Department of Trade and Industry is still able to help Scotland, as it is currently doing. There is great anxiety in Scotland about the possibility that the industrial situation there is somewhat different from that in the UK as a whole. The noble Lord, Lord Newby, asked
In their discussions with people in Scotland, have the Minister or his right honourable friend heard any whisper from Motorola about whether doubts about the future level of personal taxation in Scotland affected its decision? The anxiety is that doubts about the tax that employees may have to pay, and what they would expect in their salaries, may have affected the decision.
There is pressure from some people in the coalition in the Scottish Executive to put up the basic rate of tax. The pressure from Westminster is apparently growing somewhat in favour of altering the Barnett formula so that Scotland receives less money from Westminster. That would also possibly mean tax going up in Scotland. The Minister will not want to comment on what the Scottish Executive might do, but has he heard any whisper that doubts in that regard in Motorola have had anything to do with the fact that it is in relation to the plant in Scotland, as opposed to anywhere else, that the closure decision has been taken?
Lord Sainsbury of Turville: My Lords, Motorola has been absolutely clear about its reasons and has discussed at great length with the Scottish Executive and with the UK Government why it is making that decision. As I said, it is faced with an extremely difficult situation in one specific part of its business. It is extremely noteworthy that it has confirmed that it is going ahead with the higher value-added investments which it is making in the Scottish economy. Clearly, if the company had doubts about the economic climate in Scotland, it would not be making those investments.
It is those investments which are most important in this situation. The Scottish Executive are seeking to ensure that there is more of an upgrade in the design areas--the sales and marketing areas--of those industries which are more value-added. They are seeking also to make arrangements to train people to go into that higher value-added sector. But the fact that Motorola is continuing to make those very important long-term investments indicates to me that it is continuing with its position of being a long-term and very good investor in Scotland.
Lord Borrie: My Lords, perhaps I may revert to the matter raised by the noble Lord, Lord Monro, and, indeed, earlier by the principal spokesmen from both the opposition parties; namely, that one of the reasons for closing the Bathgate plant rather than a less successful plant in Germany was the fact that losses had been made in Germany and they can be carried forward. Therefore, there are good commercial financial reasons why one plant rather than another should be chosen for closure.
The Minister has very fairly said that our tax laws relating to carried forward losses are rather similar. My question is slightly different but on the same point. When it is determined that selective assistance be given on a regional basis and when other forms of assistance
Lord Sainsbury of Turville: My Lords, one must have a reasonable approach to those issues. When one is trying to attract mobile investment to come to this country, to ask those concerned to tell us about the financial arrangements of all their plants around the world and what their tax losses are so that we can judge, in a down-turn, which particular plant decisions would be made is, frankly, unrealistic as a way of approaching the situation. It is quite unrealistic also in relation to forecasting the position in five or 10 years when those businesses are faced with decisions about having to close plants. That is not a realistic way forward.
It is a bitter blow to the people involved in the company. When a decision is made on those grounds, I believe that anyone working in the plant concerned, which has been highly successful, would be extremely bitter about it. But I doubt that it is a sensible approach to try to forecast the future tax-loss position of different plants.
Lord Roberts of Conwy: My Lords, whatever the extent of devolution of industrial policy, it is, nevertheless, a fact, as the noble Lord said, that the Secretary of State for Trade and Industry, the Chancellor of the Exchequer and, indeed, the Prime Minister himself were all involved. That is perfectly understandable in view of the severity and painfulness of that major closure. Nevertheless, can the noble Lord give some indication of the helpful lines which I am sure the Prime Minister and his colleagues pursued with the company?
Lord Sainsbury of Turville: My Lords, the Prime Minister became involved because, in the final analysis, it appeared to be a rather close decision and he was keen to see whether his personal intervention could change it. A plant had to be closed and it was a question of which plant should be closed. It was also a matter of seeing whether anything could be done in relation to tax or assistance which would weigh in the balance of that decision. In the event, it was not possible to do so, but it was wholly right and proper that, at the very highest level of government, an attempt should have been made to see whether there was any way that we could put factors into the balance which would redress the balance in favour of the Scottish plant, which, as I say, was accepted to be more efficient and more profitable than the German plant.
Secondly, the Minister will be aware that there has been a fair amount of speculation that the terms of the £22.5 billion auction of 3G licences is being renegotiated. Will the Minister comment on that, with particular reference to some of the noises off from the European Commission on those lines?
Lord Sainsbury of Turville: My Lords, the situation on 3G, as I said, is that it is going ahead and clearly it is going ahead faster rather than slower, given the very heavy prices which have been paid in the auction. Companies make commercial decisions, which they are perfectly entitled to make. However, other companies make other decisions and then do not get the licences. In those circumstances, it is extremely difficult for government to turn round and say that they will change the rules and undertake the matter on a different basis. Leaving aside any other considerations, one would come under legal attack if one started to roll back on that situation. However, I do not believe that that is a major consideration in this decision. As I said, it is due to the fact that there has been a very sharp decline which has caught many companies unawares and which has forced them to cut back their forecasts for the future.
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