Clause 34.—(EXCHEQUER ADVANCES TO NATIONALISED INDUSTRIES AND UNDERTAKINGS.)

HC Deb 12 June 1956 vol 554 cc492-533

Motion made, and Question proposed. That the Clause stand part of the Bill.

Mr. J. Grimond

It is, I think, regrettable that we should be discussing this Clause, which is of great importance, at a little after 4 o'clock in the morning. This is a Clause which alters the whole method of financing the nationalised industries, which are almost vital to our economy—yet this is the time we choose to consider it. That being so, I may say that I do not intend to deploy the whole of the case that could be made out.

At various times, and especially during our debates on the Budget and the Finance Bill, a good many questions have been put to the Chancellor, and I take it that we shall, this morning, learn a great deal more of the reasons for this change and the way it has been effected. As I understand, the reason for the change is that the Chancellor feels that he will be able to time the approaches to the market of the nationalised industries better than they have been timed of late.

I cannot understand why those industries could not themselves have arranged to approach the market at more convenient times, when interest rates were lower, just as any ordinary commercial firm does. Is it now intended that these industries will only go into the market at very long intervals indeed, and that, in between times, their long-term capital requirements will be met by these advances from the Treasury which will, presumably, in turn be met by Treasury bills? If so, that would seem to be of itself inflationary.

Secondly, as I understand, there is to be no difference in the advances of the banks for temporary needs, working capital and so on. At what rates is money to be advanced to these industries, and on what terms? I have often thought it was illogical to finance them entirely on fixed interest rates under a Government guarantee. It was suggested by the Chancellor in his Budget speech that the time was coming when some of these industries would have to go to the market, stand on their own legs, and raise money without the guarantee. I think we might be told a little more about when that happy day may be. So far as electricity and vas are concerned, it may not be so far off.

With regard to those nationalised industries, like the railways, which would have difficulty in raising money on the market, there is a strong case for an investment board to advise the Treasury on their needs and the best method of meeting them, and to relate those needs both as between one industry and another and between the amount of capital needed for the oil industry in the private sector and the coal industry in the public.

I have great doubt whether Parliament or the Treasury is the set-up to give effective consideration to this sort of commercial undertaking. Parliament considers matters often when it is too late to take effective action in regard to long-term plans. Parliament is a gathering of amateurs elected for other purposes. I have doubt about its ability to decide how much money is necessary. Specialised boards of people chosen for their knowledge of this sort of operation would fulfil a useful function.

I think we might ask how much information Parliament or the public are to get when advances are made. It was suggested in a previous debate that no more advances should be made to any nationalised industry without a positive order from Parliament. I do not know whether the Treasury will be in a position to pay out to these industries a definite sum of money, or whether any further check is considered necessary.

Mr. Nabarro

Perhaps the hon. Member will let me correct him. The proposition was only made in regard to the National Coal Board, which has always been financed in the way in which it is proposed in this Clause that the other nationalised industries should be financed.

Mr. Grimond

As the other nationalised industries are to be put on the same basis will it be a suggestion that they should be made subject to an affirmative Resolution of the House before they get any money? I do not think that at this time one can enter into the financial background of the nationalised industries, but I hope that the Chancellor will tell us more about the terms on which they are to get money, why the proposed change has been necessary, and what greater control over these industries he feels that he, the House of Commons, and the public will get through this change of procedure.

Viscount Hinchingbrooke

Like the hon. Member for Orkney and Shetland (Mr. Grimond) I apologise for introducing this theme at this early hour of the morning, when, the doctors tell us, life is at its lowest ebb. It remains to be seen whether the topic will stimulate sufficient excitement to keep our hearts beating for another half hour or so. We must acknowledge that there is incorporated in this Clause a certain limitation to its operation for which we should all be grateful, a limitation of the amount and of the time to be allowed.

The time factor certainly is within the range of my right hon. Friend the Chancellor's promise in his Budget statement that he would think again about the operation of the nationalised industries and their requirements from the point of view of going to the market within that time. Certainly, there is no fear that very large sums of money will be taken within that time, because the figure is mentioned in the Clause. Both those things are covered, but this raises the whole question of the position of the nationalised industries' capital requirements being taken up by the taxpayer.

Two major errors of policy are incorporated in the Clause. They are, first, that the Clause invites the same treatment for all the other nationalised industries as is now given for coal; that is to say, making the taxpayers pay for their capital requirements. Secondly, it brings the nationalised industries more and more under the aegis of the State and it establishes a procedure which it is going to be extremely difficult to reverse.

I know that my right hon. Friend has the highest hope of reversing it. I very much hope that he will be in his present office for the two years, and very much more, so that he can redeem his promises, but if there was a change of Chancellor and a new Chancellor operating on a different line from that of my right hon. Friend was to have recourse to this Clause—or Section as it would be then—we might see a distinct change, a most undesirable change, in the processes involved.

Let me take the first complaint, the example of coal. It is made quite clear in page 23 of the Financial Statement, and no one could possibly contest the view, that coal requirements are met by the taxpayer and met in full today. The net sum to be borrowed or met from surplus is £803 million. We subtract from that the £350 million that the Chancellor is for the first time putting below the line under his new policy, and we are left with £453 million, which is less than the surplus above the line. That means in effect that the taxpayer is providing for long-term investment in local authority housing, in new towns, in Post Office capital expenditure, in town and country planning compensation and in coal to the tune of £70 million.

It is my view, and I think that of some of my hon. Friends that this sort of expenditure ought to be provided for out of the genuine savings of the community at large. I tried in the debates on the Finance Bill, two years ago, to suggest that the State was having recourse to the taxpayer for £170 million or £180 million for long-term capital investments in the sort of assets which the State provides. That was not at all public building or schools or anything of that kind, but a whole variety of investments which ought to be provided for out of the savings of the nation, and many of them out of the stock market and the City of London.

What prospects are there of reducing the floating debt or of reducing taxation while this policy continues? I should very much like to know my right hon. Friend's answer to that question. Now we have the new item of £350 million which is to go below the line. I really am very suspicious indeed of the whole trend of this policy.

I know that my right hon. Friend said in his Budget speech: My purpose will be that this sum for the nationalised industries, with other borrowing by the Government— there is significance in that phrase— should be successfully absorbed by the public during the year—that is, draw in real savings and not depend on inflationary finance."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 865.] I do not see what hope there is of achieving this, because the sum involved is, as I have said, £803 million this year below the line, and last year there was a net increase in the funded and un-funded debt of £350 million, less than half the sum required this year, that is, after taking into account reductions in Treasury bills and Ways and Means advances. Even if the funding operation were twice as great as is envisaged, what shall we have achieved at the end of it?

4.15 a.m.

I come now to the second major objection to this proposal and the second major error of policy, as I conceive it to be. I should be very grateful if my right hon. Friend could, even at this very late hour, give us some explanation of it. It seems to me that either the Departments of State are now to begin to hold the stocks of the nationalised industries, in which case the Ministry of Transport and Civil Aviation will begin to own the railways and the air corporations and the Ministry of Fuel and Power will begin to own the gas and electricity stocks and the Scottish Office will begin to own the stocks of the Scottish Hydro-Electricity Board, or else the Treasury will issue British Government stock representing the capital requirements of the nationalised industries, in which case no one, no investor, will henceforward know into which nationalised industry his investments have gone.

Mr. H. Wilson

The noble Lord has just referred to transport and civil aviation and to the Scottish Hydro-Electricity Boards. Does he not feel that even at this late hour we ought not to debate this question without the Ministers responsible being here? The Minister of Fuel and Power, to his credit, is here for this debate. It is quite wrong, however, to attempt to debate this matter in the absence of the Minister of Transport and Civil Aviation, and ought he not to be sent for?

Viscount Hinchingbrooke

No. I noticed the presence of the Minister of Fuel and Power, and I thought it lent a new state of excellence to our proceedings. Therefore, I am grateful to him for coming in. However, I think that the right hon. Gentleman the Member for Huyton (Mr. H. Wilson) ought to admit that we have a sufficiently important hierarchy on the Treasury Bench at the moment to listen to the debate and even to satisfy him. He was complaining earlier that practically nobody was there.

Those are the two alternatives. Either the Departments of State are themselves to become holders of the assets of these various corporations, or else the Treasury is to issue Government stock, and in that case investors in the nationalised industries, and the nationalised industries themselves, will see their stock aggregated into unidentifiable Government loans, which means we shall be drawing further and further away from direct contact between the public and the nationalised industries.

Either of those two alternatives will, first, make a further divorce between the public and the industries which they are supposed to own; secondly, establish an almost irreversible procedure; and, thirdly, render such ideas as are incorporated in the Herbert Report for separate borrowing by the electricity area boards almost impossible of attainment. Fourthly, and most importantly from the point of view of my hon. and right hon. Friends on these benches, they seem to us to inhibit and frustrate the implementation of Conservative policy.

The right hon. Gentleman the Member for Lewisham, South (Mr. H. Morrison) invented the technique for these nationalised boards. His idea was that they should become separate autonomous entities within the State, supervised by Parliament at intervals of time; but that they should go—with the exception of coal, which was nationalised rather hurriedly and before the technique was developed—to the market for their capital requirements.

They were all to be separate bodies, and were to stimulate each other by producing the best report that they could, and to pay their way, taking one year with another. All this he called socialisation. He always resented the term "nationalisation," and there was something in that idea because these industries were never brought under the aegis of the State.

What is the new philosophy today? In default of careful thinking and preparation, and because the Treasury is so busy with day-to-day matters, or because something goes wrong with the market and the corporations cannot borrow sufficiently, or in time, we are somehow being drawn towards an undesirable political policy. I would ask, even at this hour, for a definition of what this policy is, because it seems to me to be so violently in contrast with the declared policy of the Government in other directions.

For example, local authorities have wisely been pushed on to the market and are no longer under the umbrella of the State for their money needs. What is the difference between local authorities and the nationalised industries? Why, also, cannot we push the nationalised industries on to the open market and make them competitive? Why not adopt the recommendations of the Herbert Report so that these industries achieve a measure of independence and accept a certain sense of competition?

I ventured to say during the Budget debate that there was sufficient money available for all forms of investment. I tried to explain that fixed investment requirements stood at about £2,000 million, leaving about £1,000 million savings mostly in the hands of the workers, one is glad to note. But instead of these savings being organised and canalised into the right channels by the Treasury, they have all been drawn into the purposes of the central Government. They should have been made available to the market through unit trust schemes in the City of London so that the nationalised industries could have had their demands immediately met.

It really does grieve me very deeply to have to say, at this stage in the life of our second Conservative Government after the war, that we have not achieved the thinking and the preparation necessary to do these things. I finish here and respectfully hope that my right hon. Friend will be able, even now, to justify to the Committee the lines upon which he is moving.

Mr. Albu

This is an early hour of the morning to have the second stage of the great revolt by hon. Members opposite on the nationalised industries. I was rather surprised at the line taken by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), which seemed to me to deal very little with the Clause. A large part of his speech was an attack on the budgetary policy of his right hon. Friend.

Whether finance for the nationalised industries is raised from the Budget surplus, or is raised by means of loan, is a matter for the Treasury to decide. As far as the Clause is concerned, it could be done either way. Therefore, the attack made by the noble Lord was on the policy, in a situation which the Chancellor of the Exchequer himself admits is inflationary, of increasing his Budget surplus and providing for a number of things, to which the noble Lord referred as public activities, out of that Budget surplus. The noble Lord knows, I think, that we on this side are in favour of such a policy. Obviously, the details from year to year vary according to the state of the economy.

The noble Lord, it seems to me, has not made up his mind whether the Conservative Party should accept the nationalised industries as nationalised industries. At the end of his speech he spoke of them being in healthy competition and going to the market and raising money under normal market conditions. First, some of them are not, and never have been, industries in competition. The electricity industry has always been a statutory monopoly locally and, now, in area boards.

Mr. Nabarro

Of course it has not been.

Mr. Albu

I cannot remember any time in my lifetime in which in any one area there were two electricity authorities operating.

Mr. Nabarro

The hon. Member has obviously neglected to read the details of the Herbert Committee's Report, which in the appropriate paragraphs relates this very point and brings out clearly that it is desirable for the area boards to go to the market for their capital and that the gas boards in competition with them should do the same as many other of the industries of a much higher level of efficiency.

Mr. Albu

I was referring to the fact that, as far as I know, the electricity industry has always been run by local statutory monopolies.

Mr. H. Wilson

I must point this out to the Government Front Bench. We on this side have shown great restraint this morning in not intervening in many of the debates which have emanated from hon. Members opposite. If the hon. Member for Kidderminster (Mr. Nabarro), the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) Or anyone else wants to turn the debate into a discussion on the merits or efficiency of the natinalised industries, we are quite prepared to do it. In fact, I wonder at the restraint of one or two of my hon. Friends—indeed, of myself—in not wanting to speak for half an hour. [An HON. MEMBER: "Where are your hon. Friends?"] They are not far away; they could come back quickly.

If the Government want to make progress with the Bill tonight, they might restrain their own back benchers. Personally, I feel. with the noble Lord and with the hon. Member for Kidderminster, that this is an important Clause. We might take different views about it, but it is extremely important. If hon. Members opposite want to turn this into a general debate on nationalisation, I am afraid the Chancellor will not get the Clause before 3.30 this afternoon.

The Chairman

The debate should not be turned into a debate on nationalisation. That is beyond the Clause.

Mr. Albu

I am not sure whether you were in the Chair, Sir Charles, but when the noble Lord was speaking he covered a wide range of matters, dealing not only with the Clause but with economic policy and the whole organisation and management of the nationalised industries, whether they should be broken up into separate units and matters of that sort.

These are all matters on which we on this side of the Committee feel very strongly indeed, and which we should be very prepared to debate on a suitable occasion, but I naturally bow to your Ruling, Sir Charles, that the Clause deals merely with the methods by which the nationalised industries should be financed.

4.30 a.m.

The suggestion that the nationalised industries should be asked to go to the market has been made, particularly from the Liberal benches, for a long time. If I might say so, some of us enjoyed the reversal of smiles on the faces of some hon. Members opposite when the Chancellor came to this passage in his Budget speech; it really was a tonic to see it, because it was quite obvious that many of them were expecting exactly the opposite conclusion to his remarks.

I have never been quite able to understand how this was to be related to the keen enthusiasm of the hon. Member for Kidderminster for having the Minister of Fuel and Power, in particular, and any other Ministers concerned with nationalised industries on the mat of the House of Commons almost every other week. He would soon lose his reputation as Minister slayer. The idea that one can continually discuss in detail the actual investment policy of every nationalised industry and criticise it, which he seems to want to do, does not seem to me to tie in with his suggestion that what ought to happen is that the Ministers should have no responsibility for the investment programmes, but they should be entirely determined by the market.

I can understand the point of view of the hon. Member for Orkney and Shetland (Mr. Grimond). But, of course, if this were to be accepted we should be faced with a very different situation in these industries. We should be faced, first, of course, with a very substantial rise in the price of coal, and it may be that that is what the hon. Member for Kidderminster would like.

Mr. Nabarro

Why a rise?

Mr. Albu

What would happen is that it would not be possible to do this unless the boards were running on a free market basis, and I imagine that a very large number of coal pits would have to close down, the profitable ones would be able to continue, and the price would rise commensurately until a balance was struck between the price at which they should raise their capital and the profit they could earn in particular pits.

Mr. Angus Maude (Ealing, South)

Who is starting a general debate on the nationalised industries now?

Mr. Albu

The hon. Gentleman will be able to make his speech for as long as he likes when I have sat down.

Mr. Maude

I was simply asking who was starting a general debate on the conduct of the nationalised industries.

Mr. Albu

The noble Lord started a general debate on the conduct of the nationalised industries. In any case, I do not know whether the hon. Gentleman heard the hon. Member for Orkney and Shetland open the debate, because the whole tenor of his argument was that the boards should be forced to go to the market to raise their capital at the market rate.

Mr. Grimond

I am sorry to interrupt. It is rather difficult, at this hour, to remember what one has said, but I hope I said it would be those boards which had a chance of raising capital at the moment, which I think are probably only electricity and gas, as the Chancellor mentioned himself that he hoped they will eventually go to the market, and we should be told how soon that will be. I admit that the Coal Board and the railways cannot at the moment, and as far as they are concerned I suggest that possibly some sort of investment board to keep an eye on their general requirements would be more effective than continual interference by this House.

Mr. Albu

With that part of the hon. Gentleman's remarks I have some sympathy. I do not think it is possible for this House to investigate the investment policy of each separate board, because it is exactly the question of the relationship between the investment policy of industries, whether nationalised or private, which really is the concern of the House when it discusses general economic matters. The great criticism we have made during the course of some of the debates on this Bill and on Government policy in the last year or so is that no estimate was made of the total investment to be expected from the combined nationalised and private industries of the country, as a result of which we had this indiscriminate expansion and eventually a very quick clamping down.

I agree with the hon. Member that what we need is a far greater surveillance of the whole investment policy to ensure that it is in balance. One of the best ways by which the Government can maintain the general investment of the country in balance is by control of the investment policy of the nationalised industries. The Opposition welcome the closer bringing under direct Government control of the investment policy of the nationalised industries by the Clause, though we realise that it is not much more than a technical change, because the Treasury has always had complete control over the investment policies of industry, even if it has not had control over the exact timing and placing of loans.

The noble Lord said he welcomed the fact that the Clause contained a subsection which imposed a time limit of two years. The Opposition see no reason for this at all. We should prefer it left open. We are made suspicious by the introduction of a time limit. We begin to wonder what the intention of the Conservative Party is about some of these industries. We do not desire to see the industries removed from the overall economic control of the Government of the day. We rather welcome the strengthening of the present control.

I could not understand that portion of the noble Lord's speech in which he dealt with the more general budgetary situation. He referred to a surplus of £1,000 million of savings, which, as I understood, was not being used at all. If this is the situation, I cannot understand why we are now in what is generally considered to be an inflationary situation. If there are £1,000 million of unused savings ready to be put into the nationalised industries, there is something peculiar in Government statistics or Government policy. I do not understand it. Perhaps at some other time the noble Lord will explain exactly what he meant.

There is a value in this debate because it shows those on this side of the Committee who take a serious interest in these industries and in the planning of the national economy to what length some hon. Members opposite will go in their hatred of the principle of nationalisation and their determination to ensure that at any rate the rather profitable sections of the industries, as some of them would be if run in the way some hon. Members opposite would like, are returned to the ordinary shareholders.

I take it that what is intended is that there should be equity shares as well as fixed-interest shares and that we should have a return to the normal situation in ordinary joint stock companies. That is something which the Opposition would certainly oppose to the bitter end.

Mr. Maude

There are two points I should like to put to the Committee. It seemed to me that the hon. Member for Edmonton (Mr. Albu) overlooked one and was wrong about the other.

At the time that he was pleased to be witty, as he thought, at the expense of my hon. Friend the Member for Kidderminster (Mr. Nabarro), he said that it did not seem to him to be consistent with a desire for the financing of the nationalised industries through the market to be seeking at the same time a greater measure of Parliamentary control over the investment of those industries. He seems to have overlooked the point that it is precisely because of the absence of the financial discipline of the market that some of us think it desirable that Parliament should have control over the investment policies of the nationalised industries.

He also went much too far at the end of his speech in leaping, at this stage—because the matter is not under discussion at the moment—to the question whether or not de-nationalisation, accompanied by the issue of equity shares to shareholders, should or should not take place. That is not a point which we are discussing now. What we are discussing is a comparatively minor deviation, in the case of those nationalised industries other than the coal industry, from the present system by which those industries raise their capital in the market with a Treasury guarantee. It is quite clear that from that point policy could change in one of two directions—either in the direction of forcing those industries into the market without a Treasury guarantee, or of bringing them much more closely under the control of the Treasury through direct Government financing. It is upon this question that we feel that some further information is desirable before we can completely make up our minds about the wisdom of the policy enshrined in the Clause.

My noble Friend the hon. Member for Dorset, South (Viscount Hinchingbrooke) mentioned the recommendations of the Herbert Committee, which are extremely important. It will be remembered that that Committee, whose terms of reference were limited to the electricity supply industry, said that it thought that that industry should be subjected to the discipline of raising its capital in the open market. That is to say, upon the merits of that industry alone the Committee thought that a case could be made out for making it go into the open market without a Treasury guarantee.

The Herbert Committee went on to qualify that statement by saying that it was not making this recommendation whole-heartedly only because it felt that it would be inequitable and unwise to push the electricity supply industry into the market without a Treasury guarantee while it was unable, at the same time, to push into the market the gas boards and the coal industry, which in some senses were directly competitive with the electricity supply industry, but probably could not keep their heads above water financially if they were pushed into the market.

That does not detract from the fact that in the case of this one extremely important industry the Herbert Com- mittee thought that a case could be made out for market financing without Treasury guarantee. In my view, it should be the aim and object of Her Majesty's Government to try to create a situation in which all the nationalised industries are able to raise their finance in this way. There are a number of reasons why that is desirable, all of which I certainly do not propose to go into now, but the main and obvious reason is that the present situation has the virtues of no system at all, because it is not a system.

Mr. Nabarro

Flabby.

Mr. Maude

Unfortunately, in the case of at least one of these industries, and probably more, economic laws have almost totally ceased to operate, and unless economic laws can be made to operate again it is very difficult to see how the industries can ever become economically efficient. I should have thought that, ultimately, one of two things was bound to happen—either the discipline of pure market financing must be introduced, or these industries must be brought nearer the condition of the Post Office, in which direct Government control over finance in almost every detail of its economic work is made much more complete. It is quite possible that the step which my right hon. Friend is taking in the Clause is a move in one of those two directions.

We should like to know exactly which direction, and particularly whether it will make easier a movement in the direction of free market financing. Until we know more, it is inevitable that I and some of my hon. Friends should feel apprehensive about it. We are apprehensive about the whole course of the financing of the nationalised industries and, indeed, about their whole future, since they are basic to the whole prosperity of our economy. There is a great deal of apprehension in the country about that situation and we should like some reassurance about the future policy of the Government in that respect.

4.45 a.m.

Mr. C. Howell

It used to be a popular opening remark to say, "Unaccustomed as I am to public speaking …" but this morning it seems popular to begin one's remarks by apologising even for speaking, because it is now a quarter to five. I make no such apology. For upwards of 35 years I was an employee in an industry which is now nationalised. I have spent a considerable amount of my life on duty at this time in the morning, so it is nothing unusual for me to be up at this hour.

The hon. Member for Ealing, South (Mr. Maude) is the only speaker from the Government back benches who has kept to the subject of the Clause. One becomes used to the fact that any opportunity is used by Government backbenchers to snipe, and I was not surprised when the noble Lord the Member for Dorset. South (Viscount Hinchingbrooke) took the opportunity to snipe at the nationalised industries. The financial provisions of the Clause would not have been necessary had the millions of pounds held by the Government and earned by the nationalised industries and their predecessors been used originally to buy them out.

First, the noble Lord said that the whole of the finances of the nationalised industries came from the public, and that is true. Then he wanted to compel the Chancellor to make the nationalised industries go into the market to raise money. I do not know which way the noble Lord wishes to go. I do not know which race he is in. He is running up the straight, but he does not know whether he is getting to the winning post—

Mr. Nabarro

The hon. Gentleman is round the bend.

Mr. Howell

I am delighted that the hon. Member is so quick with his alleged wit at this time in the morning. If he is called to speak, I hope that he will punctuate his speech with more of it.

The noble Lord complained that the public have to pay and then he went on to object to the Clause, which, I presume, the Chancellor is presenting to enable him to raise the money so that the nationalised industries may have it at a lesser rate of interest than the right hon. Gentleman is compelling the banks to charge in this inflationary period. If the right hon. Gentleman does not do that, it will mean that the public will have to pay. I hope the noble Lord will make up his mind whether he is objecting to the public paying more or to the Chancellor missing the opportunity to make them pay more. If the nationalised industries are forced into the market, it means that they will have to pay more every time the Bank Rate goes up, and and I imagine that it has not finished going up yet.

It would appear to me that the Chancellor of the Exchequer has seen what he is doing in this respect, and it may have been that his Newcastle speech was behind this particular Clause. I can understand that there are no philanthropists in the open market, and certainly none on the Government side of the Committee, who are prepared to lend money for less than they can sell it anywhere else. They will go anywhere for the biggest penny, and we have seen an example of it in industry this week, where they were prepared to sell out British interests to fill their own pockets—and that is what would happen here. If the nationalised industries had to go into the open market there would be no cheap money for them. They would have to pay the highest possible premium for their money, which means, again, that the public have to pay for it.

For that reason I support this Clause, because I assume it is the Chancellor's intention to enable these nationalised industries to get the necessary money at a reasonable rate, which they cannot get in the open market today. It is a very easy way for the noble Lord to get what he wants. I do not think that either he or his Government would have the courage to attempt to denationalise these industries.

From a financial point of view, he must know that the railways could not raise any money in the open market before nationalisation. If one denationalised them, they would never be able to raise any money again. If this goes through, and the Chancellor can raise the money for the nationalised industries, he may be able to follow a policy which many hon. Members on this side of the Committee support: that there should be a different rate of interest for different things.

My view is that if a nationalised industry or a local authority wishes to borrow money for necessary purposes, it should not be compelled to pay the same rate of interest as people who borrow money to build public houses, cinemas, petrol stations, or other places of vast profit. I think that that is a policy which this country would substantiate, and which would certainly commend itself to the majority of the people for whom the noble Lord has at times some feeling—the ratepayers.

If the Chancellor now intends to lend to the nationalised industries money at a lower rate than it is possible for them to obtain it on the open market, he will get as much support from hon. Members on this side of the Committee, and from people in the country, as his hon. Friend the Member for Tonbridge (Mr. Hornby) had at Tonbridge during last week—and probably very much more.

The amount of money which can be got by 1958 is very small. Hon. Members opposite who have been taking some interest in the nationalised industries will know their proposals on a long-term policy. Surely no one is suggesting that that should come within the £700 million for 1958. We have been told time and time again that the most money invested in new works and industry is that invested in the nationalised industries. Right hon. Members on the Government Front Bench have been boasting of that. Now it would appear that the back benchers want to take away the only jewel the Government have had in their policies for the last few years—that investment is rising. Take that investment from the nationalised industries and we would have a very sorry picture. If the hon. Member for Ealing, South, who seemed to have some doubts about what we were talking about, will read the OFFICIAL REPORT, he will find that what we have had has been a sniping debate on the nationalised industries and not a debate on Clause 34 of the Finance Bill.

Mr. Nabarro

My hon. Friend the Member for Ealing, South (Mr. Maude) expressed some apprehension about Government policy on the finances of the nationalised industries. I am afraid that I am a great deal more downright than he is in that connection. I am extremely suspicious of where this financial policy is likely to lead us.

It seems to me that the drift of Conservative policy—[HON. MEMBERS: "Drift?"] Yes, drift—in this vital matter of financing the nationalised industries during the last year or two has steadily been towards the concentration of additional financial strength in the hands of the Treasury, presided over by bureaucratic means, instead of submitting, as should be the case, to commercial considerations of the open money market. The Minister of Fuel and Power, on innumerable occasions—both the present Minister and the previous Minister—has said that it is the purpose of the Conservative Administration to turn these nationalised boards into commercial concerns. In fact, not one of the nationalised boards mentioned in Clause 34 can ever be a commercial concern so long as it is able to secure moneys on artificially cheap terms from the Treasury and thereby gain not only an advantage over other nationalised boards—that is only one facet of the problem—but gain a thoroughly unfair advantage over private enterprise competitors with that State board.

Mr. H. Wilson

rose—

Mr. Nabarro

Before I give way to the right hon. Member for Huyton (Mr. H. Wilson), I think we ought to put the finances in terms of sterling into the right perspective in this Clause and realise how much money is being dealt with for each of these industries.

Approximately, per annum, the electricity industry will have £200 million; gas, £60 million; transport, £80 million; airways, £20 million; and the balance of £400 million per annum, approximately £40 million is for the Scottish electricity undertakings. If I can derive a modicum of comfort from this Clause—all the comfort there is to be derived—it is that the Chancellor places a time limit on this form of financial operation of only 21 months, which hon. Members opposite seek to remove. I think that that is perhaps the only modestly satisfactory aspect of the Clause.

Mr. Wilson

I wonder whether the hon. Member will address himself to this point? Both he and the hon. Member for Ealing, South (Mr. Maude) have advocated putting the nationalised industries' finances against the test of what they can achieve in the market in competition with private enterprise. That, presumably, would normally imply free competition and free enterprise and not monopolies. He will be aware that the big private monopolies can borrow quite easily in the market because they are free to charge whatever price they wish for their products and can, therefore, pay a reason- able return on capital. Is not the implication of all that the hon. Member is saying that the nationalised industries must be free to charge whatever price they wish, and that there should be no opposition by the Minister of Fuel and Power—or the hon. Member himself when he becomes Minister of Fuel and Power—to the freedom of the nationalised industries charging the market price for their products as monopolies?

5.0 a.m.

Mr. Nabarro

I am grateful to the right hon. Gentleman. I am sure that his brain must be befuddled by the early hour.

Let me go through the nationalised industries which are referred to in Clause 34. Take the Central Electricity Authority. That Authority has complete power in itself, and absolute autonomy today, to charge exactly what it pleases for all its services. It is not subject to any sort of Ministerial control at all. If I am wrong, I plead with my right hon. Friend the Minister of Fuel and Power to contradict me. I have asked him time and time again, in debate, to explain various points in connection with the charges. He invariably replies, "I have no power in the matter. The Authority fixes its own charges and tariffs."

The gas boards fix their own tariffs—and so one may go through the whole gamut. [An HON. MEMBER: "The rail-ways."] There is a special procedure for the railways, and we all know the machinery of that procedure—but perhaps I may be permitted to pursue my argument for a few moments without interruption.

When I gave way to the right hon. Gentleman I was making the point-and I put it in every seriousness to the Chancellor—that this is a question of approximately £400 million a year of capital investment. Of that capital investment, 50 per cent.—about £200 million a year—is in respect of the electricity industry. If the whole of that £200 million per annum were legitimately for the purpose of generating, distributing and selling electrical current I would view it with a great deal more favour, but it is not.

Large sums of money which will come under this Clause are in respect of working capital for area electricity boards are for the purpose of purely commercial operations—selling refrigerators, selling television sets, selling radio sets; competing within the field of electrical contracting and electrical work with private enterprise. But the private enterprise firms, who are competitors of the State boards, have to find their money on the open money market and upon competitive terms.

Why, therefore, should we give a State board the unfair advantage of being able to borrow within the terms of this Clause? I quote subsection (4): Any advances which a Minister makes under this section shall be repaid to him at such times and by such methods, and interest thereon shall be paid to him at such rates and at such times, as he may, with the approval of the Treasury, direct. Unless the Chancellor of the Exchequer contradicts me later, that connotes to me the highly-subsidised finance for State boards that we have grown accustomed to in the last few years, all of which are so grossly unfair to private enterprise traders. It is another form of direct Treasury subsidy to these nationalised industries in respect of their commercial undertakings.

Mr. Albu

But can the hon. Gentleman give an estimate of the amounts which will be used for the purposes he is now describing out of the capital to be raised?

Mr. Nabarro

If the hon. Member will read the last annual Report of the Electricity Authority he will find that its commercial operations are on a very considerable scale. Its retail sales alone amount to nearly £50 million per annum. It is difficult to ascertain how often appliance and equipment stocks are turned over and, therefore, how much capital is directly involved, but I should say that it is possibly £25 million to £30 million within the whole field of State electricity as an aggregate of the capital involved in retail sales and contracting.

Whatever the amount, I am here concerned with principles. If the amount were only £5 per annum I see no reason at all why the Conservative Party should support a philosophy that really belongs on the benches opposite, namely, the subsidising of State boards and State industries to cut the throat of private enterprise commercial concerns-because that is just what it means in this particular context.

I pass now to another aspect of this proposition. It is well known, from a number of speeches I have made in this Chamber, that I am profoundly dissatisfied with the matter of accountability to Parliament of these State industries. I am not alone in that. Many hon. Members opposite are equally concerned. The effect of this Clause is to place further outside the review of Parliament at regular intervals the operation of these boards. Once the Clause goes through the Treasury may, in effect, grant large sums within the global limit, at intervals, to these boards without any control by Parliament.

Reference was made earlier to my suggestion that there should be an annual scrutiny. All that Parliament has been able to do during the last few years is to view these vast accretions of industrial strength in the form of nationalised industries in long retrospect. It has never been able to look forward in considering what their operations will be in the ensuing years, by judging the suitability or otherwise of their capital investment programmes.

This Clause will put the capital investment programmes of the nationalised industries further from Parliamentary control. They will be more difficult to scrutinise and comment upon, which is a matter which should not divide either side of the Committee. Whereas it is undesirable that there should be detailed control over the day to day operations of these industries, we ought to have once a year, in the House, the opportunity to debate the capital investment programme of each nationalised industry for the ensuing year.

I want to say a few words about the Herbert Committee. It is important in this context. The Herbert Committee's inquiry was the first full scale inquiry into the affairs of a nationalised board. No one would suggest that the committee was weighted politically on either the Socialist or the Conservative side. It was a strong Committee. I can claim, with due modesty, to be the only Member of Parliament to give oral evidence before it. After being grilled for an afternoon I was impressed by the qualification of every member of the Committee to investigate the affairs of a complex industry. The Committee arrived at a unanimous and unequivocal conclusion on the question of capital finances.

The Committee published its Report just before the Budget. Hon. Members have referred shortly to what the Committee said, but where we are discussing a sum running to £400 million a year, and £700 million under this Clause, we ought to bear in mind the words used in the Report. They are instructive. The Committee said: The second objection "— that is, the objection to raising money on the open money market, is that it might prove impracticable to raise the sum of capital required annually to finance the present programme of the Electricity Boards. This again does not appear to us to be an insuperable objection. Whether the required sums could be raised or not could only be determined by experience. If they could be raised, then the fact of raising them would be evidence of the economic justifiability of the expenditure concerned. If they could not be raised, the economic basis of the expenditure would have to be reviewed and the industry might be obliged to change its policies, or to defer its development programmes. If, in order to avoid this situation, the industry were impelled to find more efficient ways of achieving its objects, the result would be wholly beneficial. An hon. Gentleman opposite seems to be muttering more than usual.

Mr. Gordon Walker

That is what the hon. Gentleman is doing.

Mr. Nabarro

I was not aware that my voice lacked resonance even at this time in the morning. The exact words of the Herbert Committee's short recommendation are: The efficient use of capital would be encouraged if the Boards had to compete for capital funds on the market without the support of the Treasury guarantee, but this course could only be followed if it were also applied to other nationalised industries. That surely means, in this context, the nationalised industry directly in competition with electricity, namely, the gas industry.

Those are the findings of a completely independent Committee of Inquiry that deliberated the whole of the affairs of this industry for several months. Those views are amply confirmed by the Economist which wrote on 18th May last, in terms, I thought, that were a little sterner than they need have been, that the Tory rebels would best be serving the national interest if they pursued as a single objective accountability to the money market for all the capital sums required by the nationalised industries, for—and I add these words myself—once money market accountability is established and there is proper financial discipline imposed on these boards by their having to go to the money market and submit to it, then there will be little need for Parliamentary accountability.

Thus, the objective of my right hon. Friend the Minister of Fuel and Power which he so constantly reiterates, that he wishes to turn these boards into commercial concerns, might be achieved always so long as they submit to the same rigorous financial disciplinary codes that private enterprise is accustomed to, in the form of the open money market.

I claim that the Chancellor is, in this Clause, going in exactly the opposite direction and that the course being pursued will in the ultimate, prove harmful to our economy, inflationary, and damaging to the structure of these nationalised industries.

Mr. H. Wilson

Having heard the Tory rebels, as the hon. Gentleman the Member for Kidderminster (Mr. Nabarro) has just described himself and his hon. Friends, quoting the Economist, I would paraphrase the advice of the Economist and say that the national interest would have been far better pursued if they had gone to bed an hour earlier.

We have not had very much in the way of constructive proposals from them during the last hour. I must remind them, because there does not seem to be anyone on the benches opposite capable of reminding them, that they have been keeping the Chancellor out of bed for a very long time now, and when all is said that can be said about him he is the best Chancellor we have, as the Lord Privy Seal would be the first to admit.

I do not say that he is the best we could have. I know that a number of hon. Members opposite have been trying to prove all night that they could do the job better than he can, but I am not at all certain that it is in the best interests of the nation that at so critical a time in our economic affairs, when one slip of the tongue by the Chancellor can cost us millions of dollars, and frequently does, he should be kept out of bed for the whole of the night for the sake of the kind of debate we have had since ten o'clock last night.

Again, I must remind hon. Gentlemen opposite that there are two sides to this Committee and that for the greater part of the night we have been kept up discussing either Amendments from the opposite side or subjects raised by hon. Gentlemen opposite in debates on the various Clauses.

Since such a wide subject has been raised by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) in a very agreeable speech, even though we do not find ourselves in agreement with it, we on our side would be justified in keeping the debate going for quite a long time yet if only to reply to points which have been made, quite apart from the reply of the Chancellor. It may reassure hon. Gentlemen opposite if I say that I do not intend to detain the Committee on this occasion for more than an hour. [HON. MEMBERS: "Hear, hear."] Yes, provided I am not interrupted too much.

5.15 a.m.

I have already referred to the restraint we have shown. [HON. MEMBERS: "What about the hon. Member for Cheetham?"] My hon. Friend the Member for Cheetham (Mr. L. M. Lever), we hope, is safely tucked up in bed. But I cannot guarantee that. At any moment now I may find I am wrong. However, we shall look after our own rebels at this time in the morning, and we can do so with far greater proficiency than the Tory Patronage Secretary can look after his.

I was referring to the restraint we have shown in the debate. We have resisted a very strong temptation, that might have been felt by less altruistic people, in that we have done everything we could to facilitate the Government Chief Whip's plot to have this debate, involving this split in the Tory Party, occur in the middle of the night, or the very early hours of the morning, when the Press are not very active, rather than in the afternoon. No doubt, could such a split have occurred among us, the debate would have been timed for the afternoon.

Mr. Nabarro

There is the 8 a.m. news.

Mr. Wilson

The hon. Member is muttering something?

Mr. Nabarro

What I said sotto voce was that we have the 8 o'clock wireless news.

The Deputy-Chairman

Order. We have the Clause, too, and, perhaps, we could come to it.

Mr. Wilson

I hope to come to the Clause, Sir Rhys, and to have dealt with it exhaustively by the time we reach the 8 o'clock news.

The hon. Gentleman the Member for Kidderminster has been extremely eloquent, and very cogent in the way he has put his arguments.

Mr. Gordon Walker

Not elegant.

Mr. Wilson

I said "eloquent." I think he will realise that far more eloquent than any words of his will be his vote. If he really meant what he said he would vote against the Clause.

Mr. Mitchison

If he meant any of it.

Mr. Wilson

Perhaps we may see the hon. Member vote against the Government. If not, he will have been wasting the time of the Committee, and very much of it, staging this mock rebellion, this demonstration against the Government. The hon. Gentleman seems to be muttering something about a little mild criticism. If he turns to HANSARD when it is available he will then find his words went much further than that.

For all that he said, I am disappointed in him, because he did not answer the question I put to him. Perhaps, I may remind him of the question. Perhaps the hon. Member for Ealing, South (Mr. Maude) may care to answer it, because he, jointly with the hon. Member for Kidderminster, raised the matter of subjecting the nationalised industries to the rigours of the market. This was the question I tried to put. Perhaps I did not put it sufficiently clearly for the hon. Member for Kidderminster. I put it again.

Both he and the hon. Member for Ealing, South suggest that we shall not see the nationalised industries subject to what they both, I think, called the economic laws until they have to go to the market for their capital and there is competition on equal terms with private enterprise. That is, I think, the argument put to us by both hon. Gentlemen. I tried to suggest that that argument presupposes a competitive system. Once we get into an age of monopolies we have a very different situation.

I have no doubt that the hon. Gentlemen would say that monopolies such as I.C.I. and Unilever and others are able to go to the market, able to raise capital, even in this time of the credit squeeze, with reasonable success, even if, perhaps, at rather high rates of interest. They are able to do that because of the financial strength of the undertaking and because of their acceptable dividend rate. But of course, none of us can form any opinion or measure the economic efficiency of these great monopolies. They are free to charge whatever prices they like. The private monopolies are able to charge whatever prices they like and that fixes the amount of their profits, distributed and undistributed; and, ultimately; their dividends.

I would suggest to the hon. Member for Ealing, South, who may accept it more readily than the hon. Member for Kidderminster, that the implication of what has been said is that these public monopolies should be free, not only in law, but also in fact, to charge whatever prices they think the market will bear. When I put that to the hon. Member for Kidderminster he replied that I must be fuddled because of the lateness of the hour. I would tell him that I am very refreshed. I have had an excellent meal of bacon and egg, and I hope that he will be able to have something similar very soon. I assure him I was in no way fuddled.

Mr. Nabarro

I thank the right hon. Gentleman for giving way, and if he will let me clear this point up for all time, I shall not interrupt his speech again.

There are seven nationalised industries mentioned in Clause 34. Six of them have absolute autonomy in the matter of fixing their prices and tariffs. The only one with any Ministerial control is the British Transport Commission so far as the railways are concerned. The others. have absolute autonomy in fixing charges.

Mr. Wilson

Of course, and the British Transport Commission has time and time again been prevented by this Government from charging the rates which they think are right. That happened in 1952, and we lost a Minister of Transport because of the intervention of the former Prime Minister. In the case of the railways, there is not that freedom which must be inferred if the remarks of the hon. Member for Kidderminster about recourse to the commercial market are to have any meaning at all.

The coal industry is not referred to in the Clause, but it has been referred to during our discussion. There are seven authorities listed in this Clause, but coal is not one of them; but coal, which is in the hands of the Treasury so far as borrowing is concerned, will affect the conditions under which these other industries will be borrowing. It is wrong to say that the coal industry can raise its charges whenever it wants to do so. Of course, technically and legally it can, but ever since 1942, when the mines came under statutory control, there has been this voluntary agreement.

During the war the private coal owners would not have increased their prices without the consent of the then Minister of Fuel and Power, who is now the Home Secretary. It is well known that the National Coal Board could not increase its prices today without the good will and permission of the Government. In fact, we are all very well aware of the extent to which the deficit that the Coal Board has accumulated was due to the fact that the Government prevented it from increasing coal prices before the last Election.

That argument, therefore, about subjecting the nationalised industries to economic laws falls to the ground. Let us, therefore, consider the other arguments which have been put forward. The speech of the noble Lord was extremely persuasive. It was marred a little by the use of the word "taxpayer." He kept talking as though the system which exists before the Bill comes into operation in some way involves the taxpayer. Of course, there is in the ultimate a contingent liability assumed by the taxpayer—that must be the case whenever there is any borrowing under Treasury guarantee; but what has been going on so far as borrowing is concerned all this time has been borrowing under Treasury guarantee, first, from the joint stock banks for short periods, and then borrowing with the help of Treasury guarantee on the market.

When the noble Lord looks at what he said, he will feel that the exact words he used might have been improved.

Viscount Hinchingbrooke

As far as coal is concerned, the taxpayer has been providing capital for coal throughout and so far there has been an over-all balance below the line. In the other nationalised industries there is about to begin the policy of putting them below the line. We have to see whether taxation is raised to balance that.

Mr. Wilson

I thought that on the frequent occasions when he mentioned the word "taxpayer," the noble Lord was referring to the other nationalised industries and was drawing a distinction from coal and was talking about gas and electricity. If I have misinterpreted him, I apologise.

The noble Lord drew a distinction using words which had been given currency by my right hon. Friend the Member for Lewisham, South (Mr. H. Morrison), between "socialisation" and "nationalisation." As the noble Lord put it, my right hon. Friend suggested that what happened in 1946, 1947 and 1948 was socialisation because the boards that were set up were given a statutory duty to manage their own affairs and to balance their accounts taking one year with another. The noble Lord is right; it is only now that we are getting real nationalisation so far as some of these industries are concerned. Coal, of course, has in this sense been under national control so far as its borrowing is concerned.

If this were the night when the House of Commons were being asked to approve the nationalisation of these great industries for the first time. we would feel justified in having a considerably longer and more far-reaching debate, but I will not play with the words which were used by the noble Lord. He and other hon. Members have raised the question of whether Parliament should have closer control over what the nationalised industries are doing.. There are some hon. Members opposite who feel that it is a good thing for the Treasury—and, therefore, ultimately Parliament—to have closer control over what the nationalised industries are doing. It is an arguable question.

If we were debating nationalised industries in general, and not just the question of their borrowing, we could have a productive and interesting debate on the accountability of these industries to Parliament. Perhaps we will be having that debate shortly when we discuss the nationalised industries. I do not propose to go into that wide question this morning, although hon. Gentlemen opposite have touched upon it.

Certainly, those hon. Members who in the past have complained that the nationalised industries were not sufficiently accountable to Parliament and to Ministers—for example, the hon. Member for Kidderminster, who seems now to have disappeared—

Mr. Nabarro

No, I have not.

Mr. Wilson

I beg his pardon. Obviously, he is copying what the Chancellor was doing four or five hours ago and has moved to another bench. We are not accustomed to seeing him in that position.

The hon. Gentleman—if we can fix him at one point for a few minutes—was complaining a few minutes ago that the nationalised industries were borrowing this money, not only, to take the electricity industry, for the generation and distribution of electric current, but also for engaging in what he called commercial activities, competing with the private enterprise market in, for instance, the sale or the hiring out of refrigerators, cookers and other electrical equipment. Of course, if he complains about their doing that—and we recall Questions from him on that subject—perhaps he should welcome the fact that these activities will come more closely under the control of the Chancellor. That ought to be the logic of what he has suggested.

5.30 a.m.

The Chancellor himself said during the Budget debate, in one of his more colourful passages, something about the piper calling the tune. I cannot remember the exact words, but perhaps the Chancellor will remind us. He said something about pressing the fee into his hand so that he will have even more control over the tune. Surely the hon. Gentleman should admit that, since the Chancellor is taking these additional powers, he will have a tighter control over these operations of the nationalised industries, and, therefore, I should have thought he would welcome what the Chancellor is doing.

We ourselves welcome this Clause. I think I have made that clear in earlier debates. We welcome this proposal. Our only doubt about it is on the very point which provides the only crumb of solace for the hon. Member for Kidderminster.

Mr. Nabarro

Modicum.

Mr. Wilson

"Modicum of comfort" was the term. That is the reference to the temporary nature of these powers. Whereas the hon. Member for Kidderminster is cheered—if cheered is the word to describe the mood he has been in this morning—by the fact that these powers are likely to end in 21 months time, we for our part regret that the Chancellor is limiting himself in that way and would welcome it if he would extend it for a considerably longer period.

Our chief worry is, in fact, that the Chancellor may use this control too tightly; that he will control even more tightly than he has been doing the investment programmes of these nationalised industries. Every time we have had an economic crisis in the past 15 months or so, one Chancellor or another has come along and announced a series of measures of varying degrees of value, but common to all of them, or nearly all of them, has been a further cut or threat of cut in the investment programmes of the nationalised industries. We had it from the Lord Privy Seal last July, we had it again in the autumn Budget, we had it again in the statement of the present Chancellor in February, and now, of course, in the Budget he has said he is to take powers to give him a still tighter grip on the financial borrowing of the nationalised industries.

As I have said on many occasions—and I do not intend to pursue this point very far tonight—we feel that the Government's doctrinaire refusal to introduce controls in the private sector—I should be out of order to pursue that and I will not do so—goes ill with this tight grip on the nationalised sector. In other words, whereas hon. Members opposite are complaining about the control over the private sector and saying there should be a tighter control over the nationalised industries, we think it should be entirely the other way round. I am not going to go into these questions of capital investment in the private sector, all this inessential building, all this inessential expenditure. What is certain is that essential building and essential expenditure within the public sector is being held up, deferred and delayed as a result of the Government's activities.

What we fear is that the tighter grip on the public sector which the Chancellor is taking by means of the Clause may be used for that purpose. If we felt that the Chancellor would deal with privately-owned monopolies as toughly as he intends to deal with public monopolies, we should feel a great deal easier in our minds.

I have only one last point to put to the Chancellor. Hon. Gentlemen opposite will realise—I say this in no party sense, because I think many of them will agree with this—that the nationalised industries have before them a vast programme of investment expenditure, whatever assumption one might make about the methods of raising the money. There is the coal industry's plan. I am not concerned with whether or not hon. Gentlemen opposite agree with the details of the plan. The coal industry has been spending, and will have to spend, hundreds of millions of pounds. We believe that that is because of a whole generation in which capital expenditure was not undertaken. I think that many hon. Members opposite, in their heart of hearts, know that to be true. Private enterprise did not develop the coal mines between the two wars.

Mr. Philip Bell (Bolton, East)

That is the party point that the right hon. Member said that he was not going to make.

Mr. Wilson

I am surprised that the hon. and learned Member should say that is a party point. I am merely quoting the Reid Report. The Reid Committee was appointed by the present Home Secretary, and there was not a single Socialist on it. It is not a party point to say that the private owners entirely failed to develop our coal mines. I should have thought that was an incontestable statement of fact. It is agreed by everybody. If one looks at what the Chancellor himself used to write about these things before the war, he was very frank and fair about it. It was not the—

Mr. H. Macmillan

It is a party point that the right hon. Gentleman is making. It is no good pretending that it is not.

Mr. Wilson

If it was not the fault of the coal owners who owned the enterprises, I do not know whose fault the Chancellor thinks it was.

Mr. Macmillan

I have no objection to the right hon. Gentleman making a party point, but it was rather objectionable to make one and then say that he was not going to make one.

The Chairman

I think we shall get on better if we deal with Exchequer advances and not the coal owners.

Mr. Wilson

Very well, Sir Charles. If the right hon. Gentleman thought that was a party point, I will take it, but I am very surprised that he would not agree that it was a statement of fact, in view of what he said about it before the war.

Coming to the present and to the borrowing that has to be undertaken under the Clause, a vast, essential expenditure is required which for one reason or another was not carried out before the war. We may have different explanations why it was not done, and I should be interested to hear what the Chancellor's explanation is. But it was not done, and we now have to spend hundreds of millions of pounds which perhaps ought to have been raised and spent in the days when it would have been easier to raise the money.

We have the same problem with the railways. We also have it with the electricity industry, which has had to be doubled in size since the war to meet what has so far at any rate been an expanding economy. We also have the gas industry which, for the first time, is being regarded as a national industry and not a series of little units. Therefore, the amount of borrowing to be undertaken is truly prodigious.

Probably the Chancellor's motive—I hope he will tell us this—in introducing the Clause is not so much that he wants to get a tighter grip on the capital investment programmes of the nationalised industries. He is doing this because it is impossible for him to manage the capital market, to "rig the market" in the best sense of the word. I am not using the term in any other sense. The phrase "rigging the market" is frequently used. The Treasury has to do it every day of its life, and is probably doing it now. To do this, the Chancellor cannot allow these large items of capital expenditure to be carried out in what he would regard as an unplanned way from the point of view of raising the capital.

That, I believe, is the main motive. We support him in it and, as I have said, we certainly do not intend to divide against the Clause, whatever hon. Members below the Gangway may decide to do. But I hope that the Chancellor can tell us—without giving away too many Treasury secrets in relation to policy, market borrowing and market rates—a little more about what he has in mind as to the exact operation of the Clause upon the markets, and particularly the relevance of this borrowing to the funding policy which he referred to in his Budget speech.

Mr. H. Macmillan

I do not intend to engage in a general debate upon the nationalised industries. Subject to your Ruling, Sir Charles—and without intending any discourtesy to right hon. and hon. Members who have addressed the Committee—I propose to make a brief intervention upon the subject of the Clause.

My hon. Friend the Member for Dorset, South (Viscount Hinchingbrooke) made a very interesting speech, in which he raised some wide topics, but he tended to over-rate the significance of the above-the-line and the below-the-line calculations as they have been made in recent years. It is not really the precise way in which these figures are put into the Budget statement that matters; what matters, from the broad, economic point of view, is whether the total amount of savings, from whatever source—Budget surplus, private savings or the internal savings of various businesses—is sufficient to finance the total amount of investment. If investment is going on at a higher rate than the total amount of compulsory or voluntary savings justifies, nothing can prevent an inflationary situation; but if the total amount of savings is sufficient to finance the investment of the year, the economy will be in balance. I think that hon. Members have tended to over-rate the importance of the above-the-line and the below-the-line balances for the year.

The Clause, which has given rise to a very interesting discussion, is very much more limited than most hon. Members who have spoken have regarded it. It makes only a technical change in the method of borrowing. It is, to use the agreeable phrase of the right hon. Member for Huyton (Mr. H. Wilson) "in the best sense of the word, 'rigging the market'." I have not much experience of either the good or the bad sense of rigging the market, but it is true to say that this is a purely technical change, which I venture to recommend to the Committee for purely technical reasons.

So far as I can see, it has no effect whatever upon the control of the Minister or the Treasury over the capital schemes of the various nationalised industries. Under our present procedure, at each relevant period those are brought up for the approval of the Minister by the boards of the industries, and are then approved, in consultation with the Treasury. This change will have no effect whatever upon that procedure.

Mr. Grimond

The right hon. Gentleman said that if we pressed money into the musician's hands we had rather more control over the tune.

Mr. Macmillan

To some extent I agree that it brings to the closer knowledge of the Chancellor the detailed working of the plans as they are moving, but it makes no technical change in the present position. It certainly makes no change in the interest rates, whether those are varied in this way or upon Government guarantee in the market.

5.45 a.m.

The real reason for the change is a simple one, and I may venture to repeat it, though I set it out in great detail in my Budget speech. At present the nationalised industries, other than the Coal Board, which is financed in the way I am proposing that the others should he financed, raise their capital either by temporary borrowing from the banks or by stock issues in the market, with Government guarantee. I propose that for the next two years—and that limitation, I am glad to see, has the approval of my hon. Friends—the nationalised industries shall cease to borrow on the stock market and have their capital requirements met by finances from the Exchequer.

There will be a gradual repayment of bank advances outstanding as these new arrangements start, and afterwards—and this is of considerable importance—the industries will look to the banks only for their normal short-term needs. They will not run up large-scale advances from the banks. In 1955-56 stocks were issued by these boards to a total of £387 million, of which the Central Electricity Authority issued £200 million and the Gas Council £100 million. These stock issues, in so far as they are not taken up, or not fully taken up, by the market subscribers are, in one way or another, supported by the Exchequer until they are partially or completely absorbed by the market. In recent months support of this nature from the Exchequer has had to be substantial and prolonged.

Further large issues by some of the nationalised industries would, as the right hon. Gentleman said—and I think everyone admits, whatever be the system—be necessary in the near future. I anticipate that about £300 million to £350 million, depending on the extent to which the issues had to anticipate future requirements as well as to refund bank advances, would probably have been required in 1956, had we not made this proposal. They would have been made in the way they have been made up to now.

There are two great disadvantages in that arrangement, particularly in the present circumstances. The first is that, by and large, official support can only be given to these stock issues by borrowing the necessary funds on Treasury Bills. That is the only way in which we can give support to those issues when they are not fully taken up in the market, and the continual issuing of Treasury bills adds to the liquidity of the banking system, and so often to the difficulties of operating monetary control. That is the first difficulty in the present circumstances.

The second is that frequent issues of the stock of these boards, which are made by Statute under Treasury guarantee, and therefore involve Government credit, have to be made at inconvenient times; not when it would suit the market, but at the particular time when a particular industry has reached the limit of its borrowing powers from the joint stock banks. The fact that they are going on at a time necessary to them, but not suitable for the broad management of Government credit and Government funding, prejudices the general Government programme of borrowing and refinancing and funding.

I ask the Committee to accept the view that since the Exchequer has in present circumstances to bear the burden of providing at least the bulk of the capital finances of these industries, it is better, in the wider interests of the management of Government credit and funding Government debt, that the Exchequer should be in control of the whole operation.

Mr. Nabarro

What my right hon. Friend has said depresses me, though I recognise that there is a very sound and well-based economic argument for it. It depresses me, because it seems to suggest that for all time we have got to go on with this system, and shall never be able to make progress towards these industries going to the market.

Mr. Macmillan

My hon. Friend is not easily depressed, but what depresses me is that, after all this time, he has not read the Clause, which is not for all time. It is for two years. If he would read the Clause before he spends such a great time in criticising the Government on it, it would be better. It is for two years and not for all time. It is to meet the present conditions of the market and to assist those who have the responsibility of managing the market, in the broad sense, to get rid of this system, which impinges upon these particular borrowings in a way that is not suitable under present conditions.

There are, therefore, two purposes: first, because at present the monetary control is made more difficult because of the method by which we have to support these borrowings, and, second, because the timing of them is inconvenient in the situation in which we are to-day, but from which we may hope to escape. And that answers both the right hon. Gentleman and my hon. Friends below the Gangway as to why we have given the two-year limit.

Mr. Gordon Walker

Does the two-year limit mean that at the end we will either go on with what we are to have now or go back to what we used to have?

Mr. Macmillan

It means that at the end of two years we shall see what the situation is and make a decision appropriate in those conditions.

Mr. H. Wilson

We shall be doing that.

Mr. Macmillan

It seems to me a very sensible thing to do. I thought the party opposite were very hopeful people—but not as hopeful as that. They will make a mess of it, and then there will be another mess to clear up. So far they have run away from every situation which they have got into.

Mr. Wilson

Perhaps the Chancellor will recall that we took over responsibility for the economic situation in 1945, when this country was in the most disastrous and bankrupt condition that it has ever faced.

Mr. Macmillan

I do not know about 1945. I thought we had just, after considerable efforts, won a great war—the whole nation, the Coalition Government. [Interruption.] All right; if the party opposite want to stir this up, they can. I do not want to. I was trying to answer the party point put by the right hon. Gentleman, who claimed that he would continue to deal with this matter in a particular way. I am putting a proposal to the Committee which leaves it open to the Committee, or to Parliament, after two years, to make an appropriate decision, either from technical considerations, or from doctrinaire considerations.

Of course, we should like to move in the direction of the Herbert Committee's Report. It would be a good thing if these industries could borrow from the market on their own credit, but I do not think that is practical. We have to face facts as they are, and the necessity for meeting the needs for capital investment in these industries at present by going to the market. Therefore, the only thing to do is for us, as a Government, to undertake the capital requirements of these industries for the next two years.

For the next two years they will not borrow on the stock market, but will have their requirements advanced from the Exchequer. They will gradually repay the bank advances outstanding when the new arrangements come into effect. As I have said—it is an important point—they will only look to the joint stock banking system for normal overdraft requirements on a short-term basis.

The Economic Secretary promised the hon. Member for Orkney and Shetland (Mr. Grimond) further information about the terms on which the Exchequer loans will be made available. The detailed arrangements, including the terms of repayment, have in fact been discussed with the boards of the seven nationalised undertakings. A great deal of progress has been made, but discussions are still continuing and, therefore, I can only give him, I regret, an interim report. The rate of interest on the Exchequer advances will correspond broadly to those appropriate to Government credit for a comparable period of years. The rate for similar Exchequer advances is at present 5 per cent. for loans of over 15 years.

It has not been Exchequer practice to make maturity loans and no exception will be made in the case of the nationalised industries. The loans will be repayable either on the basis of equated annuities, or by equal instalments of principal throughout the life of the advances. The choice is left to the borrower, who will have to opt for one method or the other. The period of advances appropriate in each case is still under discussion.

The main consideration which has to be taken into account is the life of the assets being created, and they vary, of course. Then we have to consider the period over which the assets will be written off, if that is shorter than the life of the advance. But account will be taken of other factors, such as the period for which the authority has been in the habit of borrowing on the stock market. It seems likely that periods of between twenty-five and forty years will be fixed in most cases. A shorter period may, however, be appropriate for the two Airways Corporations, whose assets have a relatively short life.

A detailed programme of advances for the first few months of the new arrangement is being worked out. It will take account of the likely needs of the boards for new capital and also of the state of their overdrafts. It is probable that Exchequer advances of new capital will be made at regular intervals.

I think there was one further question that the hon. Member asked. It was, will Parliament be informed when advances are made to the boards? The answer is that the advances are to be published, when made, in the weekly Exchequer returns. That is done in the case of the National Coal Board now. The entries will be made available in new entries below the line. I think that gives the answer to the rather technical points raised, some of which we have not settled, and it will indicate the line of thought in the discussions which are going on between the Treasury and the boards.

As I said before, while I can understand that it should be convenient to hang on the peg of this Clause a general discussion on the finances of nationalised industries, I would ask the Committee to believe—what is the absolute truth—that the reasons why I have introduced this Clause are the two financial reasons which I gave. A heavy burden lies upon those whose duty it is to manage our affairs in this field. We have very big funding operations and quite a lot of data to deal with. I think it is only fair, although it has been an additional burden, I fear, upon the Committee and upon the Government, to include this Clause. I thought it fair to those who have to carry this burden to make it easier for them. I am quite certain that this system, at any rate for the next two years. will make that task easier for them.

Mr. H. Wilson

I am sure that the whole Committee is grateful to the right hon. Gentleman for the answer he has given. He has confirmed the view that I put forward, that his motive for this policy was a purely technical and financial one and not related to any desire to get control over the investment programmes of the nationalised industries.

With the hon. Member for Orkney and Shetland (Mr. Grimond), I asked the right hon. Gentleman to give some account of how he thought the policy would work in the market, and we are grateful for the very full account which the Chancellor has given in reply. I only want to make it clear that when I used the phrase, "rigging the market" and said, "in the best sense," I meant the best sense in which the Treasury do it—rigging the market for the purposes of fixing the rate of interest for funding operations. The bad sense of the term is when private traders rig the market for high prices and high profits. I only want to assure the right hon. Gentleman that I did not have any sinister meaning in mind when I used that phrase.

6.0 a.m.

The answer of the right hon. Gentleman, although it has been made at an unusual hour, will be studied, I think, with great interest, not only by hon. Members who have not spent the night with us, but by many who have and who would like to study it at greater leisure. It will also be studied with great interest in the City and the markets generally. So far as this side of the Committee is concerned, I do not think that we can carry the debate any further with profit to ourselves or the problem which we are discussing. I can assure the Chancellor that we do feel that he has made an important statement during the course of the last half hour. I think one would be right in assuming that it was a considered statement, carefully prepared and phrased, and not just an extempore reply to the debate.

As I say, we will study what he has said. We may want to come back to this matter either in the debate on the nationalised industries or in the debate on the economic situation, because it obviously has a very close bearing on both subjects. After a very long and, at times, weary night of debate, I think that it is right to pay a tribute to the Chancellor for that particular reply. I am almost reaching the conclusion, although at this time of day it is difficult to reach conclusions, that this debate has been worth while, and we shall want to study very carefully what has been said.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Mr. Macmillan

I beg to move, That the Chairman do report Progress and ask leave to sit again.

We have made very good progress, and I think it would be a pity to embark now on the question of the Premium Bonds. Perhaps we might leave that subject over until Monday afternoon.

Mr. H. Wilson

All things considered, I think that the Chancellor is probably right. We are disappointed that the "chocolate soldier" from Kidderminster was not prepared to back his eloquence in the Lobby. The noble Lord, the Member for Dorset, South (Viscount Hinchingbrooke) showed a little more courage in at least shouting "No" once, but it is a very disappointing conclusion to what looked like being a rather promising and healthy Tory split.

All I now want to do is to endorse what the right hon. Gentleman has said. I think that we have made remarkable progress since 3.30 yesterday afternoon. We have dealt with 23 Clauses in that period. I know that before he goes to bed the Patronage Secretary will undertake the research which I invited him to make earlier and so find whether there is any comparable case in the whole history of financial legislation of getting through 23 Clauses in a single sitting. If so, I will withdraw what I said earlier.

I think the Chancellor can be very satisfied with the co-operation which we have shown. He knows that had it not been for the pertinacious work of some of his hon. Friends—and I do not mean only in the last debate—we might have got as far as ordering Clause 34 to stand part of the Bill before midnight.

Question put and agreed to.

Committee report Progress; to sit again this day.