§ 10.55 p.m.
§ The Economic Secretary to the Treasury (Mr. Edward du Cann)
I beg to move,That the Exchequer Advances (Limit) Order 1962, dated 2nd July, 1962, a copy of which was laid before this House on 5th July, be approved.This is the second Exchequer Advances (Limit) Order, which the House has been asked to approve. I take it that the House would wish to have a short explanation of the matter.
This Order is the instrument for enabling the Exchequer to lend to a number of nationalised industries under Section 42 of the Finance Act, 1956, for a further year. The Order is necessary because of the provisions of Section 78 of the Finance Act, 1960. This Section provides first that Exchequer advances to the nationalised industries concerned should not exceed £2,050 million in all up to the end of August, 1961. It also provides that advances in each of the two succeeding years ending in August, 1962, and 1963, respectively, may be made only if the Treasury makes an Order under Section 42 of the Finance Act, 1956, fixing a maximum amount for the total advances to be made under Section 42 up to the end of each of these two years, and this Order is approved by a Resolution of the House of Commons.
In July, 1961, the House approved an Order increasing the total amount which the Treasury might lend to the nationalised industries concerned up to the end of August, 1962, from the figure of £2,050 million, prescribed in Section 78 of the Finance Act, 1960, to £2,450 million. The present Order, which covers the period from September, 1962, to August, 1963, increases the limit to £2,930 million, that is, an increase of £480 million. For the avoidance of doubt I should perhaps emphasise that the figure of £2,930 million referred to is a limit on the total advances that may be made under Section 42 of the Finance Act, 1956.
There is no suggestion that the Treasury should lend this astronomical sum to the nationalised industries during 1425 the forthcoming twelve months. The limit of £2,930 million is, in short, the cumulative total that may be advanced from the advent of Exchequer lending to the nationalised industries concerned in 1956, to the end of August, 1963.
I turn now to the purposes for which the sanction is required. The Order applies to lending by the Treasury to seven nationalised industries: they are the Electricity Council, the South of Scotland Electricity Board, the North of Scotland Hydro-Electric Board, the Gas Council, B.O.A.C, B.E.A. and the British Transport Commission.
In the exceptional case of the British Transport Commission the Order makes provision for the Treasury to lend to that body only until the end of December, 1962. Thereafter, Exchequer lending to the successor bodies of the British Transport Commission will, under the terms of the Transport Bill now before the House, be under Clause 20 of that Bill. The new undertakings will not be covered by the provisions of Section 42 of the 1956 Finance Act. Both their borrowing and the Exchequer's lending to them will be governed by Clauses 19 and 20 of the Transport Bill.
In the case of the remaining six bodies, the Order provides for Exchequer lending to them for the twelve months from September, 1962, to August 1963. The Order increases the Treasury's lending powers by £480 million. This figure reflects the borrowing estimates for the nationalised industries concerned in the financial year 1962–63 as set out in the White Paper on Government Expenditure Below the Line, Cmnd. 1680, presented to Parliament in April of this year. The new limit also includes an allowance for lending to these bodies in the period April to August, 1963, that is to say, the early months of the financial year 1963–64.
The actual lending in the coming twelve months is expected to be rather more than £480 million—in fact, £510 million—but we shall need to provide for an increase of only £480 million because we shall probably start the next next twelve-month period with a margin in hand by virtue of the fact that advances to the nationalised industries up to the end of the current twelve-month period may well be some £30 million less than the present limit.
1426 The House may be interested to know how the lending figure of £510 million has been built up. Lending to the Electricity Council accounts for almost exactly half of it; the figure is £255 million. This is £53 million greater than in the current period and reflects the need for increasing capital expenditure on both the production and distribution of electricity. Next in order of importance comes the British Transport Commission. We expect to lend the Commission up to £110 million between September and the end of December, 1962, some of it to finance capital expenditure, some to meet normal interest and repayment obligations, and the remainder to meet the Commission's terminal liabilities under the Transport Bill. Lending to the successor bodies will, as I explained, be under that Bill.
The other five boards concerned, the Gas Council, the Scottish electricity boards and the two Airways Corporations, account for the balance of the lending. The Gas Council expects to draw up to £30 million. Some of this will be needed to finance the import and processing of methane gas on the lines explained by my right hon. Friend the Minister of Power in November last year. The two Scottish boards expect to draw £55 million between them, much the same amount as in the present year. B.E.A. expects to draw £22 million. B.O.A.C. expects to need £51 million, which is about £19 million more than in the current period. This is chiefly due to the Corporation's need to make payments in the coming months for its new fleet of VC 10s.
I do not think that there is anything else I need say by way of explaining the Order and commending it to the House, except, perhaps, to remind right hon. and hon. Members that the Order does not in any way affect the borrowing powers of the nationalised industries concerned. It certainly does not increase their borrowing powers. All it does is to renew and to extend the Treasury's powers to lend to these industries. In a word, it is a procedural and not a policy-making Order. I should like to stress this.
The House approved the policy of lending to the nationalised industries for a further three years when it enacted Section 78 of the Finance Act, 1960, 1427 which, as hon. Members will remember, extended the Exchequer's power to lend to these seven nationalised industries up to the end of August, 1963. The procedure for making annual Orders under this Section is simply the way of ensuring that the House is kept aware of and approves the rate at which we are lending to the nationalised industries concerned. I would remind any hon. Members who have doubts about the case for continuing the policy about Exchequer financing of the nationalised industries that this is a matter which they will have the opportunity to go into thoroughly next year when the present powers for lending to the nationalised industries expire.
With that explanation, I invite the House to approve the Order.
§ 11.4 p.m.
§ Mr. Gerald Nabarro (Kidderminster)
I have the very happy and pleasant duty this evening to be the first on this side of the House to congratulate my hon. Friend upon his recent appointment as Economic Secretary to the Treasury. I hope that he will reign for the remainder of the lifetime of this Parliament, and I know that his eminent career in the City and his astute knowledge of all economic and financial affairs will stand him in excellent stead in dealing with the difficult matters which fall within his Ministerial responsibility.
This evening he has commenced with an extraordinarily difficult Order. He pointed out that it was procedural in character and not policy-making, and therefore I should be out of order if I discussed any of the programmes or the policies of the seven nationalised industries to which my hon. Friend referred. But I should like to address a few comments to the House on an Order which brings within its scope an increase in spending of no less than £880 million.
Once it goes through the House this evening, as I have no doubt it will, we shall have no opportunity of controlling or amending in any way. We are virtually voting this very large sum of money for the capital expenditure programmes of seven nationalised industries until August, 1963, and it rather underlines the criticisms which I made to the Committee on the Finance Bill when 1428 my right hon. Friend the Prime Minister was Chancellor of the Exchequer in May, 1956, as to the inadvisability of financing nationalised industries by Exchequer loan, for the House is inevitably called on to vote one huge global sum to seven nationalised industries and thereafter keep its peace, for it has no further means whatever of scrutinising or dealing in any detail with the capital sums for any of the individual industries concerned.
In 1956 three of my hon. Friends joined me in protesting strongly to the then Chancellor of the Exchequer at four o'clock in the morning. My hon. Friends were, first, my hon. Friend the Member for Yeovil (Mr. Peyton), now the Parliamentary Secretary to the Ministry of Power, one of the sponsors of the Order before the House. A second was Lord Sandwich, sadly no longer with us, and the third was Mr. Angus Maude, shortly to return to us.
§ Mr. Nabarro
Shortly to return to us. I am the sole survivor to speak this evening on this Order. My hon. Friend rightly reminded us that next year when the Finance Bill comes along we shall have an opportunity once again of examining this system of financing nationalised industries, which manifestly is unsatisfactory in its present form. I will not attempt to deal with alternative systems, and I rise this evening really to make two specific points to my hon. Friend, which I hope he will deal with and respond to in some detail.
The actual sum to be spent during the next twelve months on capital account for these seven industries is of the order of £508 million. This is the biggest sum that we have spent on these seven industries in any single year. A study of the Financial Statement for the relevant years will show for example since we commenced this system of Exchequer financing that in 1956–57 the actual expenditure was £284 million; in 1957–58 it was £295 million; in 1958–59 it was £352 million; in 1959–60 it was £424 million; in 1960–61 it was £449 million; in 1961–62 it was £489 million; and in 1962–63 it is to be £508 million.
Though it would be possible for me to adjust all those figures in respect of 1429 rising costs, or conversely, to express the falling value of money, I make the simple point that this year's allocation or tranche on capital account for these seven industries represents by far the largest sum that this House has ever voted. It represents something of the order of 75 per cent. more than in 1956–57, after adjustments for changed money values. Is that increase justified in the case of these seven nationalised industries?
I am not allowed to discuss their individual programmes, but I ask hon. Members to take two of them—the South of Scotland Electricity Board and the North of Scotland Hydro-Electric Board. They are to spend between them a sum of £55 million. It is because the House is dissatisfied with the conduct of those industries that they are at present being examined by a Select Committee in Scotland called the Mackenzie Committee, to determine whether the application of these capital sums is fully justified. Yet we, this evening, are being asked to vote a larger sum of money for these two boards than ever before in their history.
I therefore ask my hon. Friend, as a Treasury Minister, whether this very large sum of money provided for in the year 1962–63 represents a deliberate loosening of the purse strings. Is it a policy of injecting greater purchasing power into the economy by increasing deliberately the capital expenditure programmes of these seven industries? It seems to me that it might be, because it comes in a progression of items which I should be out of order in going into in detail now but which I mention because they seem to be related to each other.
First, there was the increase in National Assistance Board rates; secondly, the increase in certain forms of public service retirement pensions; thirdly, the relaxation of hire-purchase restrictions and now, fourthly, a very large increase in the capital expenditure of these seven nationalised boards for the forthcoming year. I hope that the Economic Secretary will respond to that point.
Is this a deliberate loosening of the purse strings, as part of Treasury policy to inject more purchasing power into the economy, and reflate—to use the 1430 economists' term—by exciting or promoting a larger demand for capital goods and equipment by these seven industries?
§ Mr. Houghton
Sensible, I hope. Does the hon. Member seriously suggest that there is any connection between an increase in the National Assistance scales and the provision of increased capital expenditure for the nationalised industries? Does not he realise that the increase in the National Assistance scales was based on an increase in the cost of living, which was bearing harshly on the poorest people? Is that really anything to do with capital expenditure for the Hydro-Electric Board in Scotland?
§ Mr. Nabarro
Yes. I cannot deal with the National Assistance Board in detail, but I used the term—and I shall content myself by repeating it—that this is one of a progression of items in a policy of loosening the purse strings. Four such items have come before us in a matter of weeks. I believe that there is a connection between them.
My second point is in connection with deficit financing. These seven industries exclude the National Coal Board, but several of them are running at a heavy loss at present. For example, to quote from the Daily Mail of 19th July:Air Losses Pile Up. Amery walks into jobs and cash crisis. Mr. Julian Amery, the new Minister of Aviation, warned the Commons of ' a serious situation '. And while he was speaking, British Overseas Airways forecast a £15,000,000 loss for the second year running.Is any of this capital sum to which the Economic Secretary referred to be devoted to deficit financing, or is it truly on account of new capital equipment?
B.E.A. is not in quite such a serious position as B.O.A.C. in the matter of trading losses, but it has also been known to earn a deficit, and the deficit of the British Transport Commission is popularly stated to be about £50 million for the last year. I should like the Economic Secretary to endeavour to relate that figure to the sum of £110 million which he mentioned this evening, and say how those two figures can be adjusted to each 1431 other—the one in respect of losses on the part of the Commission and the other in respect of its capital expenditure programme.
That is enough for this evening, because I do not wish to keep the House at this late hour. I should like to conclude, however, by pointing out to my right hon. Friend the Leader of the House, whom I am delighted to see in his place, that these sums of money are much too large and momentous to be discussed late at night or in the early hours of the morning. The history of this battle to try to bring the nationalised industries within proper Parliamentary accountability goes back to 1956. Then the debate concluded at four o'clock in the morning. In 1958 the debate was switched and came to a conclusion between two and three o'clock in the morning. In 1960 it was deliberately thrust to the end of the queue so that all my hon. Friends and myself had to debate the matter after midnight and it came to a conclusion at three o'clock in the morning. This is the fourth incident where these vitally important matters are brought to the House at a late hour of the night.
I am the culprit in this matter of Statutory Instruments for nationalised industries. I am glad to see present my hon Friend the Member for Shipley (Mr. Hirst), one of the original hon. Members with me in threatening the Government that a large body of us would vote against them. I am glad to see present my hon. Friend the Member for Yeovil, another miscreant who threatened to vote with us unless we had this Statutory Instrument procedure. To present it very late to the House when the House is thinly attended, when I see on the benches opposite only four hon. Members of the Opposition—[An HON. MEMBER: "And no Liberals."]—and no Liberals, and not the Chancellor of the Exchequer present with us when discussing the sacred cow of the Labour Party, nationalisation—
§ Mr. Thomas Fraser (Hamilton)
We are not discussing nationalisation under this Order. The hon. Member for Kidderminster (Mr. Nabarro) has got it wrong. He himself repeated what the Economic Secretary said, that we are not allowed to discuss policy matters under this Order.
§ Mr. Nabarro
We are discussing the accumulated sum of £2,930 million for the financing of the nationalised industries. A mere thimbleful of moneys of that order is of no consequence to those hon. Members opposite who espouse the cause of nationalisation. The hon. Member for Hamilton (Mr. T. Fraser), as usual, is a long way off target.
§ Mr. James McInnes (Glasgow, Central)
On a point of order. Am I correct in assuming that the Exchequer Advances (Limit) Order before us now is in accordance with the provisions of the 1960 Act and does not in any way affect the financial policy of the nationalised undertakings? Is it therefore in order for the hon. Member for Kidderminster (Mr. Nabarro) to discuss the policy of these nationalised boards?
§ Mr. Deputy-Speaker (Sir Robert Grimston)
As I understand it, the hon. Member for Kidderminster (Mr. Nabarro) has not been discussing policy and has not been out of order so far.
§ Mr. Nabarro
I am deeply grateful to you, Mr. Deputy-Speaker, for your protection, as always. I commend to the hon. Member for Glasgow, Central (Mr. McInnes) Motion No. 129 on the Order Paper of the House, standing in the name of the right hon. Member for Easington (Mr. Shinwell) and others, subscribing to the plea that public ownership should be increased and signed by sixty-one members of the Labour Party. Perhaps he will add his name to it to show his interest in these matters.
I am led astray, Mr. Deputy-Speaker, and I apologise. I was endeavouring to address my comments to the Leader of the House. These are very large sums of money. On the next Finance Bill my hon. Friends and I will have an opportunity of altering the method of financing on capital account these seven immensely costly industries. I believe that the present method of financing them as enshrined in this Order is highly inflationary. I appeal to my right hon. Friend that when this matter comes up for discussion in the Finance Bill the Whips Office and the Patronage Secretary should not be allowed to manipulate the business in such a fashion as to put it on the Floor of the House in the early hours of the morning, thereby frustrating 1433 the legitimate desire of so many of my hon. Friends and myself to examine these important matters with the meticulous care that they surely deserve.
With these few comments, I hope that my hon. Friend will now reply to my questions.
§ 11.20 p.m.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
I should like to join in the congratulations to my hon. Friend the Economic Secretary on his first appearance at the Dispatch Box. His promotion represents a great loss to hon. Members on the Government back benches—
§ Mr. Ridley
—but I am sure that that loss will be made up by the gain we have secured by having him on the Front Bench.
As he has said, this is a purely procedural Order which follows from the Finance Act, 1960. That Act dealt with the principle on which advances are made to the nationalised industries. It seems to me that there is little that we can say tonight on the very large question of the policy of the nationalised industries and the investment policy which we pursue. In fact, we have already admitted that it is out of order even to discuss the matter, and to that, I think, my hon. Friend the Member for Kidderminster (Mr. Nabarro) agreed. As I understand the view of my hon. Friend the Member for Kidderminster, he believes that the nationalised industries should raise their money in the market. Were that to happen, as I understand it, we should have no opportunity for a debate under any circumstances.
§ Mr. Nabarro
My hon. Friend must not put words into my mouth. It would have been grossly out of order for me to have referred to any alternative method of financing, as he well knows. I do not subscribe to the Liberal policy of raising entirely these large sums of money on the open market.
§ Mr. Ridley
I am sorry to hear that my hon. Friend does not subscribe to that. Now I am confused about what he does want.
1434 It has been brought to my attention that my hon. Friend and others who, in 1956 and 1960, first raised this point about the accountability of the nationalised industries to Parliament, took the line that this procedure of having an Order every year would make the nationalised industries more accountable. I cannot see why this should be so. It seems to me to be out of order to discuss the policy and investment of the nationalised industries in a debate on this Order. I cannot see how the procedure we have gone through increases their accountability in any way.
We have—I think that we are pleased that it is so—three days set aside for discussing the nationalised industries in detail. We are to have a debate on Friday, and that would seem to be the moment when we should discuss whether investments have been wisely made or whether the right sort of investments are made. If there have been losses and mistakes, that is the time to voice our criticisms. I do not think that this improvement, as it is called, in our procedure is an improvement at all.
My hon. Friend referred to the increased capital borrowing in connection with the Order as being an inflationary move. I cannot see what is inflationary about it. About £508 million will be invested in the nationalised industries which is not entirely covered by the Government borrowing; it is largely accounted for by taxpayers' money above the line. So it would seem to be deflationary and not inflationary.
§ Mr. Nabarro
My hon. Friend has referred to Friday as being a nationalised industry day. Friday is not a nationalised industry day at all. The debate on that day will be a Government Motion on the Iron and Steel Board. That has nothing whatever to do with nationalisation. It is not a nationalised industry. The nationalised industry day is, of course, a Supply day.
§ Mr. Ridley
All I wish to say is that this does not seam to me to have been a very fruitful debate. I think that there is an important subject to discuss before August of next year, when we are to decide how to finance the capital requirements of the nationalised industries in future. I look forward to taking part in the debates, as I am sure does my hon. Friend the Member for Kidderminster. I do not think that we shall gain anything by insisting on having an annual Order rather than a more workman-like and long-term arrangement. I hope that the Order will be dealt with speedily.
§ 11.25 p.m.
§ Mr. Robert Carr (Mitcham)
The wise allocation of our capital investment is one of the most important matters for the country at the moment. Like many others, I am concerned about the way in which capital has been applied in the nationalised industries in the past. It is, for example, a fact that to produce a 1 per cent. increase in productivity in the nationalised industries it has required twice the investment required to produce a comparable increase in private industry.
The Estimates Committee, among others, in recent years has drawn attention to somewhat lax methods of Treasury control in the expenditure of money, for example in airports and other things associated with the nationalised industries. While agreeing to the passage of the Order tonight, I join with my hon. Friend the Member for Kidderminster (Mr. Nabarro) in impressing upon my right hon. and hon. Friends on the Front Bench that, when the method of financing the nationalised industries comes up for discussion next year, we shall expect a most serious discussion and a different method from that we have had in the past. It would be wrong to pass the Order tonight without giving that warning to the Government.
§ 11.26 p.m.
§ Mr. du Cann
With permission, I will address myself very shortly to some of the points which have been raised. I hope, Mr. Deputy-Speaker, you will allow me to say how very much I appreciate the most kind things which my 1436 hon. Friends the Members for Kidderminster (Mr. Nabarro) and Cirencester and Tewkesbury (Mr. Ridley) have said about me. I am most grateful to them. I remember very well the earlier debates to which my hon. Friend the Member for Kidderminster referred, because I played some tiny and perhaps ineffective part in them. They certainly made a great impression upon me, not least because one of them at any rate took place immediately after my election to the House, when we were dealing with one of the Electricity Bills in Committee, as my hon. Friend the Member for Kidderminster may remember. Together we were able to effect, we thought, some improvements to that Bill.
We will pay strict attention to the points which have been raised tonight, particularly the point raised by my hon. Friend the Member for Mitcham (Mr. R. Carr). In reply to my hon. Friend the Member for Kidderminster, I want to say four things. First, I think that it is worth recording that the total borrowing by these nationalised industries at 30th June, 1962, the latest date for which I have been able to obtain information, is £3,763 million. That compares with their total borrowing power of £4,650 million already authorised by Parliament. In seeking approval of this Order we are well within the possible limit of total borrowing. That is not to say in any way, however, that the advances of these huge sums are matters which should be lightly considered or lightly dealt with. They are very serious matters indeed and require to be taken seriously.
Secondly, I was asked a particular question about reflation. It is obvious —my hon. Friend the Member for Kidderminster will know this as well as I do from our respective business experience—that it is not the way in any business to plan one's operations, particularly very large business, on a year-to-year basis. In general, investment programmes and the like are settled for further ahead than that, perhaps on a two-year or a three-year basis. That is part of the matter which we are discussing tonight. Certainly the increase in this figure is no part of a policy of reflation.
1437 I was asked particularly about deficit financing. In general, it is true to say that this money is not required for deficit financing. Certainly in the case of the British Transport Commission, which perhaps springs immediately to mind, none of this money is for deficit purposes. As the House will know very well, that is provided from the B.T.C. deficit Vote. On the other hand, there is an exception, and that is the possible case of B.O.A.C.—a matter specifically raised by my hon. Friend the Member far Kidderminster—where a sum of money may be needed to finance losses. I may say that I have never believed in losses—one can never survive on them— and we hope to see a better future for the Air Corporation.
The rise in capital expenditure of the nationalised industries is due to increasing investment by them. In the particular case of electricity, about which I was asked, the rise is due to a rising demand for electricity, a thing that I believe we are all happy to see, since it must in part follow that it is an example of the rising standard of life of our people.
It seems to me that we have been making good progress in establishing a new financial framework for the nationalised industries and I hope that that progress will continue and, perhaps, be accelerated. It is very important that we should consider these matters most seriously. These are large sums of money, even when related to the turnover and the size of the industries concerned. We shall certainly bear prominently in mind the points made in this debate by my three hon. Friends, but perhaps I might add again that this is a procedural and not a policy-making Order, and we look forward to fuller debates on these subjects in the days to come.
§ Question put and agreed to.
That the Exchequer Advances (Limit) Order 1962, dated 2nd July, 1962, a copy of which was laid before this House on 5th July, be approved.