Sixth Standing Committee on Statutory Instruments, &c.


Tuesday 22 July 1986



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The Committee consisted of the following Members:

Chairman: Mr. Donald Coleman

Best, Mr. Keith (Ynys Môn)

Clwyd, Mrs. Ann (Cynon Valley)

Davies, Mr. Ron (Caerphilly)

Durant, Mr. Tony (Reading, West)

Gower, Sir Raymond (Vale of Glamorgan)

Grist, Mr. Ian (Cardiff, Central)

Harvey, Mr. Robert (Clwyd, South-West)

Howells, Mr. Geraint (Ceredigion and Pembroke, North)

Hubbard-Miles, Mr. Peter (Bridgend)

Hughes, Mr. Roy (Newport, East)

Jones, Mr. Gwilym (Cardiff, North)

Marek, Dr. John (Wrexham)

Meyer, Sir Anthony (Clwyd, North-West)

Powell, Mr. Ray (Ogmore)

Raffan, Mr. Keith (Delyn)

Roberts, Mr. Wyn (The Parliamentary Under-Secretary of State for Wales)

Terlezki, Mr. Stefan (Cardiff, West)

Wardell, Mr. Gareth (Gower)

Mr. A. H. Doherty, Committee Clerk

3 Sixth Standing Committee on Statutory Instruments, &c. Tuesday 22 July 1986

[Mr. DONALD COLEMAN in the Chair]


10.30 am

The Parliamentary Under-Secretary of State for Wales (Mr. Wyn Roberts): I beg to move, That the Committee has considered the draft Development Board for Rural Wales (Extinguishment of Liabilities) Order 1986. I shall endeavour to put the order in its proper context. As Committee members will know, the Development Board for Rural Wales was established by the Development of Rural Wales Act 1976 for the purpose of "promoting the economic and social well-being of the people in the area of Wales for which it is responsible." Sections 3 and 5 of the 1976 Act also make the board responsible in relation to any new town in its area for the discharge, in accordance with the new towns code, of those functions normally undertaken by a new town development corporation. In practice, the provision is intended to refer specifically to Newtown in Powys. Newtown, Powys, was designated a new town in December 1967 under the New Towns Act 1965. The Mid-Wales Development Corporation was set up to run it. The corporation's main source of finance was long-term fixed interest borrowing from the national loans fund. When the Development Board for Rural Wales took over the Newtown responsibilities of the Mid-Wales Development Corporation, it also took over responsibility for a debt to the national loans fund of some £14.2 million. Since then, industrial, commercial and community-related development within Newtown, and housing throughout the whole of the board's area, have been funded from the national loans fund and from income received from the sale of land, factories, houses and property rents. It was envisaged that the board's income would be sufficient to service its borrowing. However, the level of receipts, in common with new towns elsewhere, has not been sufficient for the board to repay outstanding debts without fresh borrowing. Having recognised the position in which the board and other new towns found themselves, it has been necessary to take remedial action. In November 1982, the then Minister for Housing and Construction explained that legislation would be needed to deal with the problem. As an interim measure, the Finance Act 1983 4 introduced a power to suspend repayments on some new town debt until 30 September this year. In August 1983, an order was laid which suspended £8·36 million of the debt which the board had accrued. The amount of debt suspended on that occasion was not, in common with new towns elsewhere, sufficient to make the board viable. Therefore, we included in the New Towns and Urban Development Corporations Act 1985 a clause amending the 1976 Act to empower my right hon. Friend the Secretary of State, with the agreement of the Treasury, to effect a once and for all restructuring of the board's new town debts and thus make the board viable. The draft order which is before us gives effect to that financial reconstruction. A similar order extinguishing some new town debt in England was approved by the House last Friday. We have determined the full extent of the Development Board for Rural Wales' debt to be about £58 million. Of that, we propose writing off some £35 million. That figure has been agreed by all parties concerned—my right hon. Friend the Secretary of State, the Treasury and the board. I am satisfied that the board will be able to service and repay the remaining debt from its income. The decision to write off such a substantial sum was not taken lightly. We had to be satisfied that the board would be able to service the maximum debt possible from its income while ensuring that the problem would not recur in future. The order, under the powers in the 1985 Act, provides a longterm solution that will give the board a realistic debt structure that it can service, repaying its debts in due course. It is important to ensure that the problem does not recur. As well as writing off the debt in the schedule attached to the order, I propose that non-housing activity in Newtown will be financed in future by grant-in-aid rather than loan. That will put factory building in Newtown on the same financial basis as elsewhere in mid-Wales. I am pleased to introduce that change which is long overdue. It provides a more realistic framework for financing the board's activities, given the needs of mid-Wales and the important role played by the board. It ensures that the problem of unserviceable debt will not recur. There is some urgency about securing the order before the House rises for the recess. The power to effect the reconstruction of a new town's finances by statutory instrument expires on 30th September 1986. If the order is not approved, Newtown will continue to have an unserviceable burden of debt. I am sure that the Committee wishes to alleviate the problem as far as it is sensible and reasonable to do so and I commend the order to the Committee.

10.36 pm

Mr. Roy Hughes (Newport, East): Opposition Members broadly support the order. It treats Newtown in Powys in a way similar to other new towns in the United Kingdom. The debt was incurred for 5 industrial and commercial assets and it is now justified to write off some of those debts. The principle for the future is self-funding and for new towns to stand on their own feet. The position regarding housing will remain virtually unchanged because it is already self-funding, although the figures tend to be on paper only because of housing subsidies. The Government should ensure that the Development Board for Rural Wales is well funded in future. During the fifteen years of its existence Newtown has been a success story and the population has grown from 5,000 to 10,000. Before that there were a few years of planning but new factories are now being attracted to the area with Laura Ashley as a focal point. I remember the early days. The late Mr. Jim Griffiths, who was a stalwart fighter for Wales, was our first Secretary of State. He believed passionately in the concept of a new town for mid-Wales. Mr. Griffiths wanted a far bigger entity than that which emerged. He was frustrated particularly by Liberal opposition. [Hon. Members: "Where are they?"] Montgomery was held by the Liberals at that time. Lord Hooson felt that a possible mass exodus from Birmingham would upset community life and Welsh values and culture and when Lord Cledwyn became Secretary of State he put through a much modified measure. Whatever the merits or demerits of Mr. Griffiths' plan, we all recognise that rural decline is longstanding. The shedding of jobs in agriculture, fishing, mining and quarrying have taken their toll. Likewise, the attraction of jobs and better services in towns and cities have proved irresistible, especially to young people. Unfortunately, faced with that difficult situation, we have a Government who believe in the panacea of market forces. They refuse to recognise the need for a rural or a regional policy; Opposition Members believe in both. When the Labour party takes office after the general election it will ensure that adequate resources are available to bring about a recovery in our rural areas.

The Chairman: Before I call another hon. Member to speak, I draw attention to the fact that the order is very narrow and is restricted to the new town of Newtown.

10.42 am

Mr. Gareth Wardell (Gower): I shall not delay the Committee as a result of that stricture, Mr. Coleman. I am pleased that the Minister said that the decision was not taken lightly. That remark always pleases me. My difficulty is in understanding what the reference numbers refer to. I can think only good of the fact that the Government are anxious to wipe out £35 million of debt, but none the less I am deeply perturbed that it is not possible to know from the documents before us to what the sums borrowed refer as it seems that the numbers are internal reference numbers. If a similar order or 6 instrument were laid before a Committee in future it would greatly assist hon. Members to know what they are being asked to approve. Without such information hon. Members are making a decision knowing that the reference numbers do not refer to any document in their possession or on the Table. I hope that the Government will in future explain to Committees, before writing off debts of this magnitude, to what the measures refer so that hon. Members can make sensible decisions.

10.44 am

Sir Raymond Gower (Vale of Glamorgan): Following what the hon. Member for Gower (Mr. Wardell) said, can my hon. Friend explain how the considerable debt arose? Was it inevitable because of the method of funding that was originally adopted? If we pass the order without having more accurate information, we shall not be doing our duty.

10.45 am

Dr. John Marek (Wrexham): Can the Parliamentary Under-Secretary of State assure us that the liabilities to be extinguished are merely those pertaining to Newtown as a new town in Powys and that they are no more than those approved by the House in respect of England? I ask that because the Development Board for Rural Wales is far more than a new town development authority. It covers a wide area stretching from Cardigan town in the south to Merioneth and the whole of central Wales. As I understand it, there is no extinguishment of liabilities here for any activities that the board might have undertaken in Cardigan or Aberystwyth and elsewhere. We want an absolute assurance from the Minister that this order is exactly on a par with that for England. I am perturbed about the reference numbers in the order because I have no idea what they mean. It is bad to legislate in the dark. I do not want to take up the Committee's time and so I shall refer only to reference No. 39. The amount borrowed was £300,000 of which only about £30 has been repaid and £21,000 in interest has accrued. By way of example, could the Minister explain that to the Committee?

10.47 am

Mr. Wyn Roberts: I shall seek to deal with all the points. First, I want to tell the hon. Member for Wrexham (Dr. Marek) and the hon. Member for Gower (Mr. Wardell) that these loans are unhypothecated for any particular use. It has been necessary to identify a set of loans that relate to past housing expenditure and those loans are not written off. If we look at the past accounts of the board the loans obtained from the national loans fund have not been specific to particular projects. We have had to assemble the loans that we beleive relate to industrial and commercial development and exclude loans which relate to past housing expenditure. 7 I believe that I have dealt with the hon. Member for Gower's point by saying that it is not possible to break down the industrial loans into their component parts. The hon. Member for Newport, East (Mr. Hughes) referred to housing loans being self-financing because of housing subsidy payments. The position is that in common with all public sector housing authorities, including local authorities, the DBRW receives housing subsidy payments which, with rental income, is sufficient to meet the loan payments on housing construction. Loans relating to factories and commercial premises have been written off and future expenditure on these will be funded by a grant-in-aid. The hon. Member for Newport, East surprised me—I have good reason not to be controversial this morning—when he accused the Government of not having a regional or rural policy. I think that some of my hon. Friends would dispute that. As recently as last March, we introduced the rural enterprise initiative which included the new rural grant scheme "Drive" which is worth £2 million over two years.

Sir Raymond Gower: I am sorry to interrupt my hon. Friend but did he really mean what he said? Is it true that the records of the board are so inadequate that he must assume, imagine or calculate which loans deal with industrial and commercial ventures? Are there not adequate records to tell him definitely?

Mr. Roberts: It would be possible to break down the loans into their component parts but it would be a lengthy process. Sums borrowed by the board were loaned on the basis of an agreed annual budget and on the short-fall between its income and outgoings at the time of the transaction. In the past the board produced an all-embracing plan and was funded by grant-in-aid and from the national loans fund. We have sought to eliminate the burden of unserviceable debt and this is the best method that my right hon. Friend, the Treasury and the board have found. It 8 is similar to the method applied for the extinguishment of debt for the new towns in England.

10.51 am

Mr. Ron Davies (Caerphilly): I am grateful for the Minister's generous explanation. We are much happier to know that figures refer to unhypothecated loans. I shall rephrase the question posed by my hon. Friend the Member for Gower (Mr. Wardell), who rightly said that the reference numbers in the order mean nothing. I think that my hon. Friend was really asking whether the Minister would make them clear, perhaps by placing in the Library a schedule of works or projects to which they referred. That information would give members of the Committee a better idea of the sort of schemes funded by the unhypothecated total sums.

Mr. Wyn Roberts: As I have alread said, that would be an extremely difficult and lengthy process. I shall look into it but I make no promises.

Dr. Marek: Can the Minister say whether the instrument is exactly on a par with that relating to England? The Minister said that "similar" liabilities were to be extinguished in a "similar" manner. Will the order apply only to Newtown or are there other liabilities outside Newtown or extra to those extinguished in the statutory instrument affecting England?

Mr. Roberts: With regard to the area outside Newtown, the only other activity covered was key worker housing, which has been funded outside Newtown by loan from the national loans funds. None of the loans written off relates to industrial and commercial activity outside Newtown, only to key worker housing.

Question put and agreed to.

Resolved, That the Committee has considered the draft Development Board for Rural Wales (Extinguishment of Liabilities) Order 1986.

Committee rose at eleven minutes to Eleven o'clock.



Coleman, Mr. Donald (Chairman)

Best, Mr.

Clwyd, Mrs.

Davies, Mr. Ron

Durant, Mr.

Gower, Sir Raymond

Grist, Mr.

Hubbard-Miles, Mr.

Hughes, Mr. Roy

Jones, Mr. Gwilym

Marek, Dr.

Meyer, Sir Anthony

Raffan, Mr.

Roberts, Mr. Wyn

Terlezki, Mr.

Wardell, Mr. Gareth