INDUSTRIAL REORGANISATION CORPORATION

HC Deb 25 January 1966 vol 723 cc55-62

The First Secretary of State and Secretary of State for Economic Affairs (Mr. George Brown)

Last week the Government announced a new system of incentives to stimulate investment in the sectors of industry and parts of the country where it is most needed. To complement these measures, we are now setting up an Industrial Reorganisation Corporation to help British industry to adapt its structure and its organisation so that it can meet international competition more effectively.

The structure of many industries has undergone substantial changes in recent years. But in some sectors British industry still cannot match the scale of operations of highly integrated groups abroad. The Corporation's task will be to search for opportunities to promote rationalisation schemes which can yield substantial benefits to the national economy, especially in terms of increased exports and more rapid technological advance.

The Corporation will work in close co-operation with industry and existing financial institutions and will make full use of the facilities offered by the market. It will not act as a general holding company, but it will be able to provide finance from its own resources to promote sound rationalisation schemes—by making loans or taking an equity interest in new groupings. It will also be able to provide capital for new projects or expansions of special importance to the national economy.

The Government propose that the Corporation should be given the right in the first instance to draw, as needed, up to £150 million from the Exchequer.

These proposals are set out in a White Paper which I have laid before the House today and the necessary legislation will be introduced as soon as possible.

I am pleased to be able to tell the House that Sir Frank Kearton has accepted the Government's invitation to become Chairman of the new Corporation.

Mr. Barber

We shall, naturally, wish to study the White Paper carefully. I should like to put three questions to the right hon. Gentleman. How does the proposal to provide capital for new projects of special importance to the national economy fit in with the work of the National Research and Development Corporation?

Secondly, the right hon. Gentleman said in his statement that the new Corporation will have power to take an equity interest in industry. Will the Corporation have power to acquire a majority equity interest in any particular industry or company? If so, is that not in reality an extension of nationalisation?

Thirdly, the right hon. Gentleman said that the Corporation will also be able to provide capital for new projects or expansions of special importance to the national economy Does this mean that the Corporation will have power to take a majority equity holding? If so, what is the difference between this proposal and the establishment of a new nationalised industry?

Is not the right hon. Gentleman aware that what he has said today, and, perhaps, more significant, what has been leaked to the Press over the past few days, confirms our suspicion that the purpose behind this proposal is not so much to improve industrial efficiency as to extend the field of public ownership?

Mr. Brown

The right hon. Gentleman has a bit of an obsession with this. He said this in connection with Fairfield's—when there was no question of a majority holding, but only a 50–50 holding—and was then soundly ticked off by his right hon. Friend the former Secretary of State for Scotland. I think that he will find himself in trouble about this again.

On the question of leaks, I have nothing to do with that. I can only repeat, as I have said to the right hon. Gentleman before, that if I consult and people do not respect the confidence which I place in them, that is a matter for him to take up with others outside the House, but not with me.

I am delighted that the right hon. Gentleman has said that he will study the White Paper before he pronounces judgment upon it. That was at least an improvement on the behaviour of his right hon. Friend the Leader of the Opposition on the National Plan. I thought, however, that he went very near to giving away what he said at the beginning.

The three questions asked by the right hon. Gentleman were really only two. As to capital provided by the Corporation and N.R.D.C., obviously they will work closely together, and the sort of things that one helps along the Corporation will be able to help bring to fruition.

On the question of the equity interest and majority holding, if and when and in such circumstances as seem right this is done and the Corporation operates by way of taking an equity interest, how much of the equity is taken will depend upon the circumstances in any particular case. Obviously, I cannot give a blanket answer to a blanket question which in that form does not really help. What I can make plain—and I hope that this will be the answer to the obsession that is troubling the right hon. Gentleman—is that the Corporation will not be empowered to acquire anything compulsorily.

Mr. William Clark

How long does the right hon. Gentleman think that the £150 million will last? Is the right hon. Gentleman, who dodged the question of the amount of equity, prepared to say that the spirit behind the White Paper is not to take a majority holding in any one company or venture? If he were to say this, it would, as I am sure he would agree, allay the fears of many industrialists.

Mr. Brown

I simply cannot say that there will never be a case in which the taking of a majority holding would not be the right thing to do. On the other hand, the more that the Corporation can use its funds, withdraw them and turn them over again, the better job it will be able to do. Its purpose is not to acquire majority holdings and to hang on to them—that I can say—but it would be ridiculous to say that there will never be an occasion when a majority holding is not the right thing to take.

As to how long the money will last, this will turn upon the success of the Corporation in picking the right exercises and its success, and in putting its money in, getting things started, turning it over and being able to start again. If the Corporation can do that really well, the money will last for a very long time.

Mr. George Y. Mackie

Does the right hon. Gentleman intend that when he has achieved his objective the Government's share should be sold to the public and to the employees, as was done in the case of Volkswagen? Secondly, can the right hon. Gentleman give an example of what he regards as a project of special importance to the national economy?

When the right hon. Gentleman says that the proposal is designed to help industry to meet international competition more effectively will he bear in mind that the only way in which it will really meet international competition is by being able to compete, and that 10 per cent. is not a very great help in this respect?

Mr. Brown

I do not think that the question of the 10 per cent. arises on this point. I do, however, accept the hon. Gentleman's last point in general. We want British industry to compete with industry overseas. One of the things which stops British industry competing at the moment is that we have far too many companies which are not of a size to have the facilities, the resources, the services to stand up to competition by these highly integrated corporations overseas.

Therefore, what my colleagues and I visualise this Corporation would do, perhaps above everything else, would be to reorganise or help to reorganise British industry so that we are in a position to compete with them, and on even terms. I cannot give examples. It would be invidious to do so, and in any case it would lead to misunderstandings. I think that the hon. Gentleman will understand that.

On the first question he raised, about the selling of shares—to anybody he likes to mention, employees, the public—I repeat that the exercise is not primarily one of holding on to an equity interest. There may be an occasion when that would be the right thing to do, but the exercise primarily is in taking an interest, by way of providing loans, by way of providing grants, by way of equity interest—whatever it may be; taking an interest in seeing that things happen—mergers, rationalisation, reorganisation—and then the Corporation getting its money out and being able to use it again. That may not always be the right thing to do.

I do not want to be forced—and I do not think that the hon. Gentleman would be a party to this—into saying that where things succeed as a result of using public money the public must get out, but that when things do not go too well public money must stay in to bale out private industry.

Mr. Hugh Jenkins

Is my right hon. Friend aware that there are those of us on this side of the House who would view with equanimity the situation which might arise as a result of the operation and if the extent of public participation in industry were enlarged? Will he give an assurance that when the Corporation explores the various possibilities the emphasis will be on the acquisition of equity or on providing loans and not upon the policy of free public doles or grants which was operated by the previous Administration?

Mr. Brown

Well, I am quite clear that that would be the view of some of my hon. Friends. I can only repeat—I want to make this absolutely plain—that it is not the purpose, a main purpose, of this exercise to nationalise by the back door. The purpose of this exercise, which industry well understands—the willingness of Sir Frank Kearton to take the chair shows that industry well understands—is to provide an agency that can get things done in British industry, things for which there is a great need and which so far nobody has been able to help, and which will, with the investment grants we announced the other day, help to put British industry in a position to compete. That is the purpose. That is the real purpose. That is what I hope it will do.

Mr. Hugh Jenkins

On a point of order. Will my right hon. Friend reply to my second point which was—

Hon. Members

No.

Mr. Speaker

It is not a point of order.

Mr. Doughty

Will the right hon. Gentleman answer two questions? One is, why cannot this affair be left to private industry, as in the case of sound industries they have always found the money required? Is it the intention of the Government to bolster up industries which are financially inefficient with Government money? If so, it is a very bad business.

Secondly, will the Corporation have power to build factories and start businesses with Government money and go into competition with private industry?

Mr. Brown

On the first point, if the markets of the wholly private enterprise sector of our economy had been able to do these things they would have been done. What is only too clear, not only to Socialists like me, but to many people in this country, is that a good many things of this kind which ought to have been done have not been done because private markets would not find the resources for them. Therefore, we are filling the gap.

On the second point, whether it will go in for building factories and start up in competition, I would not have thought so, or intend it should. Its business is to get things started, and I would expect that in all cases it would be operating with private enterprise. I do not want to put too many restrictions on what it does so that the job cannot get done. What I want is to bring about that reorganisation of industry—rationalisation, mergers and improvements in British industry—which is necessary. That is what, I am pretty sure, it will concentrate on.

Mr. Carol Johnson

As this proposal will obviously involve legislation, can my right hon. Friend say how soon the Bill will be introduced and when he thinks this new agency will come into existence? Secondly, can we be assured that when created it will have a considerable degree of independence in its operations?

Can my right hon. Friend tell us a little more about the constitution of the board of directors? He has mentioned who is to be the chairman. Can he tell us how many other members there will be and on what basis they will be chosen?

Is it not quite clear from what my right hon. Friend has said that these proposals do not visualise large-scale nationalisation but a fruitful opportunity of a creative partnership between the State and industry which is so necessary in this country?

Mr. Brown

I can agree with the last part of my hon. Friend's question. I would hope that, on reflection, when they have read the White Paper, it will be seen this way by the Opposition, too. I would make it clear that this is a great, fruitful partnership, in a mixed economy, between private enterprise and the Government, in which public resources can stand behind some things which are highly desirable and which it cannot be expected the market alone could do.

On the question of the composition of the board, I do not want to go any further today than I have gone, and I hope my hon. Friend will forgive me. The chairman has been selected. I am quite certain that he will commend himself throughout industry and the City and the trade union section, and, indeed, the community as a whole, as a very great industrial leader with a very great record, and I want to sit down with him and discuss with him who the other people should be. We obviously want other industrialists. We want other people who know about the whole area of the board's business. We want different kinds of interests to be represented on the board.

On the question of when legislation will come in, I am afraid that, since I am not responsible for the legislative programme of the House, I can only say, and deeply mean it, "As soon as possible".

Sir Ian Orr-Ewing

Can the right hon. Gentleman tell us what sort of Ministerial control there will be? Will this come under his Department, or will it come under the Board of Trade? Is he aware that many of us here feel that if he had really wanted to help small-sized and medium-sized firms the Government would have introduced a different Budget to extend the investment grants so that they applied to research and development, which is, after all, the seedbed which enables the small firm to grow into a medium-sized one and a medium-sized one into a big?

Mr. Brown

I am sure that if hon. and right hon. Gentlemen opposite had really wanted these things they would have done them in a different way, but they did not do them either through their Budget or the two measures we have announced.

On the question of the relationship of the Corporation with the Government, the Secretary of State for Economic Affairs is the Minister responsible for the Corporation, but, in practice, in its day to day life, it will live much more closely with those Ministers who have sponsoring arrangements with parts of industry. It will work very closely with my right hon. Friends the Minister of Technology and, of course, the President of the Board of Trade in those parts of industry with which he is concerned. That is where its work will normally lie. But the Secretary of State for Economic Affairs is the member of the Government responsible for the Corporation.

Several Hon. Members rose—

Mr. Speaker

I am sorry, but we must move on.