§ Mr. Speaker
I understand that it would be for the convenience of the House if with this Amendment we take Amendment No. 13, in page 7, line 13, after 'year', insert:'and as soon as possible within that period'
§ Mr. Dell
That will be for the convenience of the House.
These Amendments have been tabled in response to a pledge I made in Committee to the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis), who wished to establish a code of good conduct which the Corporation should adhere to. In particular, he wanted a requirement inserted into the Bill that the annual report should be produced within two months. I was unable to make a commitment to that effect, but we have put in a commitment that the annual report will be produced within four months. By so doing, we are enabling the Corporation to set an example to British industry as to the speed with which annual reports might be produced, because the period of four months compares with nine months under the Companies Act.
We fully recognise the validity of the argument that prompt information about the Corporation's activities should be available to Parliament and to the public. Therefore, we have inserted into the Bill the unprecedented obligation to produce the annual report within this period. Perhaps it is a pity that it is unprecedented. We hope that the Corporation will be able to produce its annual report in less than four months. This accounts for Amendment No. 13, by which we insert the words' as soon as possible within that period '.
§ Mr. Hall-Davis
I would indeed be churlish if I did not acknowledge that these Amendments fulfil, to as great an extent as anyone could hope for in the circumstances, the intention of the Amendments I proposed in Committee. After the Parliamentary Secretary had expressed sympathy in Committee, I said:I wish I could feel that sympathy was always evidence of intention."—[OFFICIAL REPORT, Standing Committee E; 10th November, 1966, c. 246.]In view of the Parliamentary Secretary's reaction, I almost blush now. I thank him for introducing these Amendments.
§ Mr. Barnett
Perhaps I should start by declaring a professional interest in the preparation of accounts, although not the ones we are talking about. I am sympathetic to the idea of preparing accounts earlier. When the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis) gave reasons in Committee as to why accounts could be prepared more quickly, he said this:All that is involved is the valuation of various investments."—[OFFICIAL REPORT, Standing Committee E, 10th November, 1966; c. 243.]Especially if the investments are in small companies, this could be a lengthy and difficult process.
Perhaps it is the professional in me, but I worry a little about laying down specific timetables. It may be a great innovation, as my hon. Friend the Joint Parliamentary Secretary said, but I have one or two questions. The requirement in the Companies Act that accounts must be presented by a certain time carries a penalty. What is the penalty under the Bill if accounts are not submitted within the prescribed four months?
If the wording in the Clause is not to be meaningless, what certificate will appear on the accounts? I appreciate that generally the auditors will give the certificate they normally give with public 1231 corporation accounts, but they are not obliged to give the normal certificate under the Companies Act, 1948. Subsection (3) merely saysand a copy of any report made on the statement by the auditors.In other words, it would presumably be sufficient under that subsection if the auditors on the accounts said, "We have examined the books and accounts and the profit and loss account and balance sheet but have not got time to certify them, because we have a large number of audit clerks off with the flu". The Clause does not lay down what type of statement the auditors should affix to the report and accounts.
I should like to hear my hon. Friend's opinion as to what type of statement they would be obliged to put in and what would be the penalty if the report was not submitted in the prescribed time.
§ 7.30 p.m.
§ Mr. Biffen
I want to raise a point rather along the lines drawn by the hon. Member for Heywood and Royton (Mr. Barnett) and I would also add my own appreciation to that of my hon. Friend the Member for Morecambe and Lonsdale (Mr. Hall-Davis) of the Government's action in putting down the Amendment. The Joint Parliamentary Secretary suggested that the Corporation was giving a lead for the best in industrial practice and I accept the proposition. But would he go further and consider a provision for interim statements? That also is a growing practice that is to be encouraged.
§ Mr. Dell
The issuing of interim statements is, I agree, in accordance with the best industrial practice these days. We discussed the subject in Committee on an Amendment moved by the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis), which was resisted by the Government. We should continue to resist the idea on the ground that the type of requirement that makes desirable an interim statement in the case of private companies with private shareholders would not apply in this case, where the only shareholder is the Government and there is no question of dealings in shares on the basis of the prospective profitability of the company.
The main consideration involved here is the justifiable desire to get the annual 1232 report out earlier. I was surprised to hear my hon. Friend the Member for Heywood and Royton (Mr. Barnett) voice even the least doubt on the subject because, on Second Reading of the Companies Bill introduced in the last Parliament, he advocated that there should be such a limit in the case of private companies. There is no penalty in this Bill but, of course, Parliament and the Government would be exceedingly displeased if this requirement were not adhered to. I will write to my hon. Friend about auditors' reports.
§ Amendment agreed to.
Further Amendment made: In page 7, line 13, after 'year', insert:
'and as soon as possible within that period'.—[Mr. Dell.]
§ 7.33 p.m.
§ Mr. Albu
I beg to move, That the Bill be now read the Third time.
The origins of the Bill were a White Paper presented by my right hon. Friend the present Foreign Secretary in January, 1966. The Bill suffered a rather considerable delay while the electorate were given an opportunity to pronounce on it and that they gave it overwhelming support is shown by the majority with which the Government were returned. The Bill found its place in our legislative programme, although inevitably it was somewhat delayed.
When it finally got its Second Reading on 19th October, it had a rather ambivalent reception from the benches opposite and today it has again evoked a slightly ambivalent response. I hope that I do not do the hon. Member for Eastleigh (Mr. David Price) any political harm when I say that I make no complaint whatever about the attitude of himself or of his hon. Friends in the Standing Committee. The debates we had there were useful and constructive, although some people might say that they were a rather technocratic series of debates discussing somewhat esoteric matters concerned with company organisation and industry.
Nevertheless, the Bill represents a substantial step forward in dealing with the problems we face in trying to expand the economy to deal with the country's economic problems. We are anxious that the Bill should become law in the near future, as I am sure it will, and that the Corporation should be able to get on with its job.
1233 In Committee at any rate there seemed to be no real dispute about the need for some new institution of this sort to stimulate and foster industrial rationalisation—although I must say that there was an hour or so today when the guerillas were in the Chamber and I felt that perhaps I might be wrong in that view. Some of them certainly would not be in favour of the Government taking any action to stimulate the economy or assist economic growth.
I must say also that some of the Opposition Amendments, particularly those dealing with the powers of the Corporation and its financial resources, would have completely de-natured it. No doubt that was the intention of some hon. Members opposite. I do not think that it was the intention of the hon. Member for Eastleigh. I hope that the reassurances we have given both in Committee and here today have calmed the doubts and fears of some hon. Members opposite.
§ Mr. Albu
Perhaps not below the Gangway but I think that it is so above it. Certainly industry and the City seem much less apprehensive than hon. Members opposite and in a number of cases already close working relationships have been developed between firms and the Corporation, which is not regarded with the suspicion that some hon. Members, like the hon. Member for Oswestry (Mr. Biffen) look upon it.
The members designate of the Corporation have already been approached with a wide variety of suggestions for rationalisation schemes in particular industries and sectors of industry—and some come from some of the nation's most famous companies. I have no doubt that the Corporation, as an independent outside body devoted only to the task of improving the country's economic performance, is welcomed in industry, and that welcome is evidence that the establishment of a body serving this function is long overdue.
We have emphasised throughout the stages of this Bill, as did my right hon. Friend the Foreign Secretary when introducing the White Paper, that the Corporation will have no compulsory powers. But that does not mean that it is not to be an active and even aggressive 1234 body. It certainly is. It is not to be a bank of last resort or a home for the weak and the failures. I hope very much that its activities will hasten the extinction of weak and failing companies which are not using resources and assets in the most efficient or, if hon. Members opposite prefer it, most profitable way.
There are, of course, companies which are quite small and perhaps at the moment not very profitable or apparently weak, but which have great technical and commercial possibilities. They need just the sort of assistance the Corporation will be able to give in strengthening them so that they can make a better contribution—no doubt in association with others—to our industrial progress.
As has been explained many times, and as was made clear in the White Paper, the first priority for the Corporation is to assist in the improvement of the import-export balance of the economy. That is why we were not able to accept the Opposition's proposal that we should substitute for the wording in the Bill dealing with the functions of the Corporation the sole test of profitability, although we have made it clear that we expect that the companies the Corporation will establish will become profitable in the long term.
The sort of firms to which the Corporation will have to pay attention in the first place—firms which should be making a greater contribution to our export-import balance—will, I think, be found in the engineering industries. I regret to say that, in the engineering industries, our competitors have shown a higher rate of expansion of exports than we have. It is significant that, in comparison with those countries which have a better record than us in exports of all products—there may be all sorts of reasons for this—our competitors' rate of expansion of engineering exports has been consistently higher than ours throughout the last 10 years. Where international trade in engineering products has been expanding fastest, their performance has been better still. In these cases one will find that the average rate of growth of their exports has increased by two, three or four times while ours has increased by only 50 per cent. or even less. To deal with this situation, one of the tasks which the Corporation may well perform will be the creation of consortia for specific 1235 export jobs, assisting British firms, for instance, to co-operate against foreign rivals.
During the course of the Bill's progress, there has naturally been a good deal of discussion of the use of the Corporation for regional development. We had a good deal of this in the constituency speeches today and in Committee my hon. Friend the Member for West Lothian (Mr. Dalyell) and others took a great interest in this aspect. It has been explained over and over again that regional development is not the Corporation's first duty. That is expressed in Clause 2(1,a) as being topromote or assist the reorganisation or development of any industry or section of an industry".The Corporation will, however, always have to take account of the need to change the industrial structure of our development areas, and under Clause 2(1, b) it can be requested by the Secretary of State to set up a particular single establishment. There has been reference to the example of the Wiggins Teape paper and pulp mill at Fort William, which is a very good example.
When one considers whether one needs a Corporation of this sort or would have needed it in the past, I am reminded, as I explained in Committee, that we nearly lost the First World War because of the complete inadequacy of our chemical industry. In 1915, the Government of the day had to put up money for a reorganisation scheme for the chemical industry, with the assistance of Dr. Weitzman, who later became the President of Israel, by which a company was formed, British Dyes, which in its turn later combined with other companies to become British Dyestuffs Limited. After the First World War, the Government had to play an important rôle in the events which led up to the formation of I.C.I. in 1926. That was all in spite of the fact that aniline dyes had been invented by Perkins in this country, although development had taken place in Germany and the United States.
Since that time, Governments have had to step in time and time again to rationalise industry, or to create conditions in which it could be rationalised—cotton, textiles, aircraft and coal are examples. 1236 We are not now in a war situation, but we are engaged in a battle for our economic lives and we need to accelerate the pace of industrial change. The Government are sure that indirectly and directly, by its influence as a catalyst and by its activities in the market, I.R.C. will play an important rôle in improving the structure of British industry for the tasks which lie ahead of it.
§ Sir Harmar Nicholls
Once again the hon. Gentleman has emphasised the importance of the export of tangible things, engineering and chemical products and so on. I take it that the Corporation will also recognise the great part which the service industries will play, the hotel industry, for example. Will the Corporation be available to see that we have our fair share of the tourist trade and so on?
§ Mr. Albu
I am sure that it will, but I was drawing attention to what I consider to be the present priorities and I believe that they lie in those things which I have mentioned. But that does not prevent the Corporation from undertaking any activities which it believes will help to improve the country's balance of payments.
I am sure that, whatever views have been expressed on both sides of the House about the Corporation, we would all now wish the very distinguished members designate of the Board the best of luck in the tasks which they have ahead of them.
§ 7.44 p.m.
§ Mr. David Price
I am sorry if my mild and always friendly disposition has led the Minister of State and the Parliamentary Secretary to think that I actually approve of the I.R.C. I hope that the Minister will acknowledge that in Committee I made it quite clear that we could not stop the Bill and that it therefore seemed to be far more sensible and constructive to try to assist in making it a little better.
I must confess that, unlike good wine, the Bill has not improved with the keeping. Our basic objections remain. They have not been removed by five sittings of the Standing Committee, or by the Report stage. If anything, they have been fortified. I have not changed the views which I expressed on Second Reading, which is hardly surprising as few of the questions which I then asked have since 1237 been answered, least of all by the right hon. Gentleman the Minister of Technology who wound up the Second Reading debate and who frankly seemed more concerned with attacking my right hon. Friend the Member for Wallasey (Mr. Marples) than with answering the questions which we had put about I.R.C.
To be fair, I must acknowledge that the Minister of State and the Parliamentary Secretary were more friendly and more courteous when we were in Committee upstairs. Nevertheless, we still disagree with them. We did not quarrel with them upstairs and I have no intention of quarrelling with them now. Like Chesterton, I hate a quarrel because it interrupts an argument, and I warn the Government that our arguments about the structure of British industry will continue. Passing the Third Reading of the Bill tonight will not end the argument but simply add another factor to it.
I think that the Minister of State will agree that the basic argument revolves around the proposition that many British industries are fragmented and that better results could be obtained in foreign markets if they were concentrated into fewer firms. On Second Reading I acknowledged that there was some truth in this proposition, but I pointed out that British industries were too fragmented not in terms of the British market but only in terms of the world market. How does one, or should one, persuade companies to merge, not in terms of their own market, but in terms of the world market? That still remains the question.
I said that the answer was for Britain to join a larger market, when natural forces would then bring about the necessary structural changes. The only larger market at hand was that of the European Economic Community—"So join it", I said. The Minister of Technology never commented on that proposition. The Government answer all along has been to set up another public body, the Industrial Reorganisation Corporation, which is the subject of the Bill.
Since then, the Government have announced that they want to join the European Economic Community. Can I take it, then, that if the Government succeed in negotiating our entry into the 1238 Community, as we on this side of the House hope that they will, they will then wind up the I.R.C., a little redeployment of skilled manpower which, after all, is what the Prime Minister talks to the nation about so movingly? In the meantime, are they for instance to rewrite the definition of "monopoly" in terms of the European rather than the British market? This would be a very important move towards the intra-European company mergers which some of us would like to see.
Mr. J. T. Price
I am interested in the question which the hon. Gentleman put to the Government—will the Government wind up the Corporation if we join the European Economic Community? Surely the answer to that must be known. Italy already has two wider and more far-reaching organisations, the I.R.I. and the E.N.I., which are the great trading associations of Italy and which are largely financed by State capital, plus private capital, and which the Italians have never thought fit to wind up. Why should we wind up ours?
§ Mr. David Price
With respect to the hon. Member, of whom we are all very fond and whose interventions we enjoy, he knows as well as I do that E.N.I. cannot be compared with I.R.C., that E.N.I. is a combination partly of the oil industry, partly of the central electricity generating board and a large part of the atomic energy authority and part of what we would call Shell and B.P. The two are not comparable and the hon. Gentleman has not got hold of the basic idea that the I.R.C. is not a State trading organisation. If he had been with us on the Standing Committee he would have seen that.
I was asking what measures the Government ought to take to get us better poised for entry into Europe and whether they would rewrite the definition of "monopoly" in terms of the European rather than a British market. I would also like to know whether the Bank of England is to assist in matters of exchange control for intra-European company mergers. In my experience, this exchange control can be a severe obstacle.
By now it will be clear to the House that we regard the creation of this new Corporation as unnecessary. Furthermore, we believe that it weakens rather 1239 than strengthens the market economy, which we would prefer to see strengthened. It is equally clear that when the Government are faced with the peculiar problems of a particular industry, such as shipbuilding, they do not see the I.R.C. as a suitable instrument for rationalisation. On their own terms, I question whether they regard the I.R.C. as being really necessary.
It will be recalled that yesterday the right hon. Gentleman the Minister of Aviation told us that enabling legislation would be required to implement the Government's proposals for the airframe industry. He said:I would anticipate legislation being brought forward if, as I hope, the negotiations prove successful."—[OFFICIAL REPORT, 21st November, 1966; Vol. 736, c. 968.]It is quite irrelevant for me to go into the rights or wrongs of this proposed Measure, but the point I am making is that when the Government find it necessary in the aircraft industry to bring together the two airframe manufacturers it is not to the I.R.C. that they turn as the instrument to effect this. Instead they say that they will table separate legislation.
Similarly, in the shipbuilding industry. We know from earlier discussions that the Government had accepted in principle the Geddes proposals for the rationalisation of the shipbuilding industry, together with its proposal for the establishment of a Shipbuilding Industry Board. On 9th August the President of the Board of Trade in the course of a long statement on the shipbuilding industry said:We intend to introduce legislation this Session establishing a Shipbuilding Industry Board to promote the reorganisation of the industry."—[OFFICIAL REPORT, 9th August, 1966; Vol. 733, c. 1400–1.]He went on to announce the appointment of Mr. Swallow as chairman-elect of the Board. All of this is being done by the Government outwith the I.R.C.
On Second Reading I recounted the major steps taken within the machine tool industry, on its own initiative, to produce bigger units. I compared the present structure of the British machine tool industry with the German industry and showed that there was little structural difference. Naturally I elicited no comment 1240 from the Minister of Technology in his reply to the debate. We have ceased to expect that.
I put it to the Parliamentary Secretary, in what industry do the Government see the I.R.C. operating? In the shipbuilding industry? Clearly no. In the aircraft industry? Clearly no. In the machine tool industry? Again the answer is no, or else the Minister of Technology would have said so when I invited him to reply to my speech. Is the I.R.C. to operate in the chemical industry? Clearly no. In the motor car industry? Again no. I mentioned on Second Reading that Jaguar was going ahead with its merger without the I.R.C. Is it proposed that B.M.C. be merged with Fords? I hardly think so.
Is the I.R.C. to operate among retail stores and effect a merger between "Gussies" and Marks and Spencers? I think that they would be capable of doing that without the assistance of Sir Frank Kearton. Will it work among the banks or the stockbrokers? The Chancellor is doing that very nicely, particularly with the jobbers. We have had only one suggestion, and that came out at this late hour in the life of this Bill through Parliament, when the Minister of State mentioned the engineering industries.
I would have liked to press him a good deal more about which side of engineering. I have mentioned machine tools and motor cars. Does he see the I.R.C. operating in electrical engineering and at which end, the heavy or the light? We have as yet had not one example from the Government of where they see the I.R.C. operating in its early stages. It is not an unfair question to ask because the Government have allocated £30 million of public capital in the current fiscal year in order that the I.R.C. can get going quickly because, as the Government see it, its task is so urgent.
The Government must tell us which are the industries and firms which are so ripe for mergers and which are being held up because the I.R.C. is not there. We have heard nothing. All the evidence suggests the urgency of a tortoise. The truth is that the I.R.C. was the brain child of the former First Secretary of State, hence the no doubt Freudian references by the Minister of Technology in his Second Reading speech to "artificial insemination".
1241 When we come to the details of the Bill we find an equally unsatisfactory state of affairs. The Government's view of the functions of the I.R.C. have varied from that of a modest catalyst—this was the view expressed by Ministers upstairs—to that of the vital instrument for the implementation of "Signposts for the Sixties" which was the Minister of Technology's view.
The functions given to the I.R.C. by this Bill have been drawn far too wide for this unwanted waif of instant politics. The finances allotted to the I.R.C. are excessive for its catalytic purposes and even more excessive when one considers the other more urgent calls upon the limited capital funds at the disposal of the Government.
The Government have only the vaguest idea of how the Corporation will operate. When I raised a number of pertinent questions on Second Reading I was dismissed by the Minister of Technology as being academic—a strange charge from a Master of Arts of New College—and advised to watch "The Power Game" on television. That just about sums it up. The I.R.C. is to be another ploy in the Government's power game. I therefore ask the House to refuse this Third Reading by voting against it tonight.
§ 7.58 p.m.
§ Mr. Sheldon
The hon. Member for Eastleigh (Mr. David Price) was obviously ingenuous when he asked which mergers the Government had in mind. This is to pre-empt the rights of the I.R.C., when it is formed, to make its own decisions. One cannot expect Ministers to take on the tasks of the I.R.C. and decide which are the industries and it is for us to leave it with its options reasonably open for the decisions to be taken in the light of its investigations. For my part I am very pleased to see the Ministry of Technology so strongly represented and so interested in this Bill.
The benefits which will come from the changes of scale are largely technological and it is from this viewpoint that I look forward to improvement in British industry in the years ahead. Many merchant banks are very concerned in the promotion of mergers and much of their work has been of great benefit to industry. But they use different criteria from those 1242 which the Bill will enable the I.R.C. to use.
In particular the one big criterion which merchant banks use is the increase in financial strength as a result of the mergers. This is always of some value. First of all, it buys time for the changes which will be necessary if there are to be any benefits from the merger. This kind of change can also result in allowing extra time for the inefficient companies to continue operations, even though merged. In itself the financial strength, increased as the result of a merger, does not necessarily involve any increase in efficiency.
The second way in which merchant banks assist mergers is in the promotion of diversification of certain industries which come under the umbrella of the merged company. This diversification can be a bad kind of merger for the country's economy. It is a promotion for security and for protection from competition. If we look at our big holding companies we can see that this is one of the reasons why such mergers are promoted. It provides security in bad times. Those who have the efficiency of the economy at heart should not want to see this kind of security from the competitive forces which should be promoted within our economy.
The third thing which merchant banks look for is an increase in managerial strength. This is desirable, but one cannot be sure for how long it will continue to operate. It is all very well promoting bright middle management to a merged company, but one cannot be certain that this change will be of continuing benefit.
My fourth point concerns sales. From what I have seen, the sales of a merged company are not often more than the sum total of the sales of the individual companies. In many cases, they are considerably less. The benefit to be obtained from increased sales is perhaps in the main rather less than might have been assumed.
The big fundamental improvement which can come from a merged company concerns the change of scale and the technological changes which can be developed. This is where benefits can be immense and continuing. The one thing about merchant banks is that they pay very little regard to this point, not because they do not wish to do so, but 1243 because they are not equipped to deal with it. They bring in certain outside advice, but they themselves have no expertise in this field. This is the rôle of the Ministry of Technology—to advise the I.R.C. There is a need for a certain amount of humility in connection with the Ministry of Technology. It is a developing organisation. But because there is an organisation precisely with the job of acquiring expertise in this field it is of great benefit that it is vitally concerned in this Measure.
Throughout the debate and in Committee it has been said that profitability should be the sole test. These were the words used by the hon. Member for Horsham (Mr. Hordern) in Committee. The maximising of profit is a very important test, and we should not minimise it, but the modern manager recognises that he has other responsibilities than providing a very high level of continuing profit. He has responsibilities to employees in providing them with a continuity of work which is not wholly dependent on the profit. He has responsibilities to his customers and suppliers, and he has a responsibility to the community. The modern manager is beginning to accept these as normal and natural, and anybody who denies this denies one of the fundamental changes which has come over British industry. One may say that this is enlightened self-interest, because if they did not do these things the difficulties they would encounter would be very much greater. One can look at it another way, and that is that industry considers that it has some responsibility to the community.
Profitability is obviously extremely necessary. It is necessary to provide the funds which are ploughed back for investment. It is necessary in order to raise capital in the capital market and also to provide incentives for those who work in the management of the organisation. It is a fundamental measure of efficiency. But if profitability is the only test, the company's rate of return would be a measure of the efficiency of that company. Despite what has been said by the hon. Member for Oswestry (Mr. Biffen), this is far too simple a proposition.
The Opposition are so anxious to oppose the Bill that they are embracing the market economy to a degree which we 1244 have not seen in the last 10 years or so. But in embracing the market economy they are denying their own past. They are denying their past in reorganisation of the cotton industry where they spent £30 million of public money for private industry. They are denying their past in the mergers in the aircraft industry and in the free depreciation which they gave to certain industries to move to development areas.
It is not true that the Tories rely only on market forces. The dogma of the Left has been an accusation levelled at us. If the inviolability of the market economy is to become the dogma of the Right, this is a much greater accusation. But, even worse, I believe that it is a dogma in which hon. Members opposite do not really believe. The hon. Member for St. Ives (Mr. Nott) went to the furthest degree to which one could reasonably go. He called for regional development, that is, for public money, which, he said, would help market forces. Confusion greater than this I cannot understand.
I do not believe that there is this great divide. I think that the only divide is the Floor of the House, which divides those with responsibilities from those who oppose because they do not know any other way to conduct an Opposition. In time they will come to welcome the Corporation as they came to welcome the N.R.D.C.
Fundamentally, the success of the Corporation will depend on the success of management. The Bill lays the framework. We should wish the Corporation well.
§ 8.6 p.m.
§ Mr. Biffen
I do not wish to trespass outside the rules of order, but I want to make one or two comments on the speech of the hon. Member for Ashton-under-Lyne (Mr. Sheldon). First, it is not true that I have ever indicated that I thought that business management was solely concerned with the return on capital. I have never said that. I fully endorse the view of Mr. Harold Wincott, who covered this point in recent exchanges in the Financial Times. I respectfully ask the hon. Member to be a little more careful before attributing to me remarks which I did not make.
1245 Secondly, it is not true to say that because the Tory Party has been associated with certain operations of intervention in the past it is, therefore, inevitably committed to the kind of proposition with which we are dealing tonight. There have been a great many cases in the past—and I have no doubt that when we are on the other side of the House there will be a great many cases in the future—when there was a limited and defined rôle for State intervention to achieve certain predetermined ends. That was very much the nature of the cotton industry scheme. One can argue the niceties of this, but there is no doubt that we have always preferred to see a limited commitment undertaken whenever we have gone in for economic intervention.
Thirdly, it is all very well for the hon. Member for Ashton-under-Lyne to give a patronising lecture about those who only oppose and can think of no better way of conducting an Opposition. If there is a reasonable and tolerably coherent case to be put against the Bill, we have an obligation to put it. I will not be dissuaded by the kind of patronising talk that there has come into this Chamber in recent years the products of the new managerial class who know so much better how these things are organised and who are very anxious to give us the benefit of their superior knowledge and hope that we shall reflect in our enlightened ignorance.
May I turn to the Third Reading of the Bill. There was a reference—I suspect that it might have been to me—about guerrilla activities. The guerrillas have now certainly been led very ably by the regular field-marshal. I understand that we shall have a Division at the conclusion of this debate. That suits me.
§ Mr. Biffen
Only the hon. Member could indulge in that extraordinary third form kind of humour and ungenerous speculation. I will leave it at that.
The doubts and fears which were expressed from the introduction of this Measure, and which were expressed in the form of a vote against the Second Reading, must turn on a variety of issues, but the two which primarily concern me 1246 are accountability and the purpose of the Corporation. I should like to link my remarks in that respect to Clauses 2, 4 and 9 because they are the Clauses which most intimately touch on these subjects. Accountability undoubtedly runs to the whole heart of good-natured and constructive controversy over this issue. It was the Minister of Technology who on Second Reading, when referring to accountability, said:This is something which ought to be worked out and discussed very fully in Committee.Having studied the Bill as it has now emerged from Standing Committee, I am not at all clear how this has been resolved.
Undoubtedly, under Clause 2(4) general directives can be given and under Clause 4(1) considerable powers clearly rest in the Secretary of State concerning Exchequer loans. Most important of all, it seems to me, are the powers of Clause 4(2) concerning repayment of loans. One would not have to be unduly suspicious to wonder to what extent there may be repayments under very favourable terms and whether this will be a means of financing at much less than normal market rates for access to capital.
These matters are rightly the concern of this House, because when we talk about accountability we are not concerned only with what might be the chummy relationship between the Corporation and the Executive. We are also concerned with the extent to which the Legislature will be enabled to watch the continuing activities of the Corporation, and the Executive. We are also concerned with the extent to which the Legislature will be enabled to watch the continuing activities of the Corporation. It is on this that I am less than reassured.
Reference was made this evening to a comparison, which may or may not be valid, between the National Research and Development Corporation and the I.R.C. I imagine that there is a reasonable basis of comparability, not least in the day-today activities and the extent to which the activities of the N.R.D.C. are the subject of Parliamentary discussion.
There is surely evidence to suggest that we should be less than satisfied about the extent to which the N.R.D.C. goes off on enterprises without this House having much say about it at the time it 1247 happens. I am not concerned with a great post mortem afterwards. I am not entirely convinced that one day Mr. Duckworth of N.R.D.C. thought that he would put £5 million into I.C.T. or £2 million into Elliott Automation. I cannot believe that there was not a whisper in his ears somewhere along the line from someone who may be sitting on the Front Bench opposite. Decisions of that character, involving those sums of money, should be the subject of much greater Parliamentary discussion. I am sure that this would be for the benefit of the I.R.C. and, above all, for the benefit of this House.
It is very fashionable to be patronising about the capabilities of politicians to discuss industrial matters and to take a day-to-day interest in things of this kind. My hon. Friend the Member for Eastleigh (Mr. David Price) referred to this when he talked about the "Power Game". The actual quotation from the speech of the Minister of Technology is:I think that hon. Gentlemen opposite would be better advised to watch the 'Power Game' or the 'Plane Makers' or "—worst of all—read 'Corridors of Power' in order to get a real view of industry ".—[OFFICIAL REPORT, 19th October, 1966; Vol. 734, c. 348–9, 345.]That may be the view of the Minister of Technology, but it is a pretty Oxford Union type of downgrading of the ability of this House to take an intelligible interest in matters of great public concern involving public funds to the tune of £150 million and concerned with the structural changes which may or may not take place in British industry. If I were to be inspired by the "Power Game", the "Plane Makers" and the rest, it would leave me with a corroding scepticism about the venality of Government. Therefore, on that basis alone, I prefer not to be encouraged to do that. Much more information should be made available to us about how this money is to be used. These are large sums of money and we should be told on what they are being spent by what criteria.
I would have thought that on the basis of import saving or export boosting, practically every lame duck organisation could be supported. Above all, we must know a great deal more about the way in which the suave new mandarins of the 1248 hybrid Whitehall now developing around the Department of Economic Affairs, the Ministry of Technology and the National Economic Development Council and its proliferating offshoots are operating.
Only a few days ago, the Minister of State sent me an Answer to a Question to say that any recommendations on structural change in industry arising from the discussions of the economic development committees and communicated to the Industrial Reorganisation Corporation would be available to this House only if it were the judgment of the economic development committees that they should be so published.
§ Mr. Biffen
We can check this afterwards. If I am wrong, I will certainly fully apologise. As I recall it, however, my question was how this House would know whether a recommendation had been made. As I understood the hon. Gentleman's answer, it was that publication of any recommendation would rest entirely with the economic development committee. I am saying that this House should know. It is our constituents' money that is being used.
My second point is, to what ends will the Corporation work? The Minister of State has again talked about the greater wisdom that would be exercised by the people who would be the executives of the I.R.C. They are, of course, very few in number, and we understand that many of the senior business men will be there on a very part-time and advisory capacity. I therefore have some suspicion about whether this wealth of talent which will display this superior greater wisdom actually exists on the ground. Where is it? Is it at the moment at the offices of Warburg's? Where will it go? Where will its office be? How many people will be employed? Very little of this is known, and yet with this very inadequate straw some pretty sizeable bricks have been constructed.
Above all, I have my doubts about the extent to which, under the interpretation 1249 of Clause 2(1), the I.R.C. will conduct a regional bran tub in which various regions will be invited to have a dip, so that practically no Celtic fringe seat will be without its incipient groundnut scheme. I do not wish to sound too sarcastic about this, but these are some of the doubts which have been implanted in my mind. I have heard very little to remove them. Many of the things that we talk about concerning structural changes in industry are perfectly well catered for by the existing market mechanism, which, I acknowledge, is far from perfect.
What, then, do I think is the doctrine behind the I.R.C? I am not so cynical that I am prepared to believe that it is a great undercover nationalisation move. There may be other more effective ways for hon. Members opposite to achieve that. The Corporation flows instead from the doctrine of countervailing nonsense. We have a tax system which is designed to militate against profits, and the Government hope to neutralise this by a public fund of £150 million. I believe that the Parliamentary accountability of that public fund is uncertain and unsatisfactory. The use to which the funds will be put are arousing general scepticism and unallayed doubt, and I for one will be delighted to vote against it.
§ 8.19 p.m.
§ Mr. Barnett
I do not think that I have ever heard the hon. Member for Oswestry (Mr. Biffen) in quite such insulting form. He almost outdid some of his hon. Friends. His hon. Friend the Member for Shipley (Mr. Hirst) must have felt ashamed of the mild language which he uses from time to time when he heard his hon. Friend the Member for Oswestry.
I understand the reason for all this, because I quite appreciate that a Bill of this description touches to the quick the hon. Member for Oswestry and his disciple the right hon. Member for Wolverhampton, South-West (Mr. Powell). I have always thought of the hon. Member for Oswestry as being whiter than white when it comes to this sort of thing, much whiter than white that his right hon. Friend.
One thing which ought to be answered arose when the hon. Gentleman said that this Government, through their tax policies, have worked against profits. That is totally untrue. In the case of trading 1250 companies, Corporation Tax helps considerably. I agree at once that what it does is to militate against distribution, but that is not the same thing, and I am sure that the hon. Gentleman would accept that that is not true.
§ Mr. Biffen
It is not just a question of Corporation Tax. For example, it is the significant and actual working out of a prices and incomes policy which bears much more heavily against prices than against incomes. If the hon. Member for Heywood and Royton (Mr. Barnett) wants the merits of my case fully examined, perhaps he will look at the trend of profits since the present Government came to office.
§ Mr. Deputy Speaker (Sir Eric Fletcher)
Order. I do not think that we ought to pursue this subject on the Third Reading of this Bill.
§ Mr. Barnett
I am sure that the hon. Member for Oswestry will give us plenty to read on other occasions. He seems to be very fond of giving us plenty to read in the Financial Times and elsewhere.
The hon. Member for Eastleigh (Mr. David Price) said that he would prefer to see the market economy strengthened than have this Bill. I am not sure whether that is the case. His hon. Friend the Member for Oswestry was delighted to hear him say that and delighted to think that he was moving in his own direction. But I am far from convinced that the hon. Gentleman was doing anything more than making a debating point.
He went on to say that, if we go into Europe—and I hope that we do—probably we shall be able to wind up the I.R.C. Surely he can see that such a body as the I.R.C. will be needed even more in the event of our having a wider market. He was quite right when he said that, if and when we get into Europe, we shall look again at the question of size for the purposes of measuring a monopoly. In due course, if we are able to get into the Common Market, I hope that we shall look at it.
The Opposition tried to defeat the Bill as a whole on Second Reading, and they failed. Since then, they have shown what 1251 can only be blind political prejudice. All that they have tried to do throughout the whole of the Committee stage and the whole of Report stage today is to carry Amendments to the Bill which would hamstring every operation of the directors and the Board of the I.R.C. One has only to examine the Amendments which they have moved. For example, one would have prevented a bid, except through the board of a particular company. But all of us will learn that there are many boards which one would want to by-pass, because boards are sitting there and should not be. That is precisely the wrong way to approach the whole idea of what we want in the way of a more efficient economy and a more efficient industry.
Hon. Gentlemen opposite then wanted to reduce the finances of the I.R.C. to make it less flexible. They wanted to lay down rigid rules on interest payments; they wanted to restrict the area of operation; and, perhaps, worst of all, they tried to prevent the Corporation assisting in the buying of plant and machinery. If ever there was a time when we wanted to encourage investment in more plant and more machinery, I should have thought that it is now.
The Opposition have moved Amendments which would have restricted precisely that opportunity which would have been given to the I.R.C. and which will be given, I hope, in their operations to encourage industry to invest in new plant and to give them tangible assistance in setting up and promoting new industries. It is no good hon. Gentlemen opposite shaking their heads. That is what they were seeking to do.
One other thing which they did was to put down an Amendment saying that there should be three directors under the age of 50. I have some sympathy with that proposal, because I should not mind seeing such an Amendment made to the Companies Bill. There are a number of corporations with too many old men on the boards and too few younger men. One might even think of insisting that a proportion of a board's members should be under 40. I am not certain that one should leave it at 50, though perhaps when I am a little older I shall change my mind.
1252 I believe that the I.R.C. can be a valuable Corporation. It is not possible to know, because everything will depend upon how the personalities on the Board of the Corporation operate at any given time. What I wanted to see at the beginning and what I am glad to see that we have now, despite the attempts of the Opposition, is flexibility for the Corporation to operate. I wish the Board and its directors well, and I hope that they will prove successful in increasing the efficiency of the economy and, thereby, the state of our nation.
§ 8.25 p.m.
§ Mr. Hirst
The accountancy profession, as represented by hon. Gentlemen opposite, whom I have the pleasure of seeing for many hours in the course of Finance Bills, have distinguished themselves, if that is a term of endearment suitable to their speeches today. It has been capped by the last sentences of the speech of the hon. Member for Heywood and Royton (Mr. Barnett), when he alleged that by criticising this organisation we are holding back investment in this country. Seeing that one right hon. Gentleman is out of the country at the moment, that must be the laugh of the day. The Government must realise only too well that their whole policy is holding back investment at present. It has nothing at all to do with this organisation or the arguments about it.
I support the excellent speeches which have been made by my hon. Friends the Member for Eastleigh (Mr. David Price) and the Member for Oswestry (Mr. Biffen). They have dealt with many of the things that I had it in mind to say when thinking out the matter earlier and I will not go over that ground again.
I took a strong personal line about this Measure when it was proposed in the White Paper round about January 1966. I spoke strongly about it then. Like my hon. Friend the Member for Eastleigh, I cannot see that we have advanced down the line at all. I was not a member of the Committee which considered this Bill, but I have read the OFFICIAL REPORT of its proceedings and a great deal of the Second Reading speeches.
There should be no grumbles from right hon. and hon. Gentlemen opposite about our modest Amendments today. If I had been in charge of them, they 1253 would have been pressed even more strongly, with more Divisions and more fuss, I may be called a guerrilla; I do not mind. I was for some years a director of a subsidiary company of a very well-known issuing house, and that experience gave me some insight into the matters involved here.
I agree that there is value in publicity, and in many things that the Government do, but the fact is that unless it is going to be of a compulsory nature—and that would be terrible to imagine—this is a matter of influencing people's judgment, and this difficulty will remain for the Corporation, as it did for anyone else.
There are many prosperous, good, and uplifting companies, but they do not like the idea of losing their domestic habits, and are hard to bring to the marriage. This difficulty will not be overcome by a Government organisation and directors spending part of their time dealing with these affairs, or anything else. I hope that it will not be got over by rigging market rates, because this will get the Government into grave trouble.
I think my hon. Friend was right to say that this House should have more control over what is going on in an organisation of this character than can ever be obtained after investigation, whatever that may be, or publication of accounts, which are hard to pinprick. The House will certainly be deprived of any conceivable possibility of knowing what has been advanced in respect of any firm. There will be no audit, no knowledge of what is going on, or what is intended to be going on.
The Minister knows that I have great personal respect for him, but I do not think that he was very helpful today. I handed him the opportunity of clearing up the question of profitability in gracious and easy terms, but all that he did was to make confusion more confounded, and we were left with no idea of what the Government mean by that, and when we hear speeches from some Members of the illustrious accountancy profession, we get even more suspicious of what the Government's intentions are with regard to profitability.
I would have liked to have touched on many other subjects. I think that we are right to say that we do not think that this organisation is desirable or necessary. 1254 The market forces are there, and they can be encouraged. A great deal of propaganda can be used, and useful work done, to increase the number of marriages. I know only too well the difficulties of bringing about these marriages, but I know of no instance where finance was the difficulty. If the firm could prove that it was enterprising, and worth wihle in every respect, and had a profitable future, and possibly a reasonably profitable past, there was no difficulty. Quite often mergers took place, and I played a humble part in them, when the profit at the moment was not very great, but which it was foreseen could be through the proposed merger. Did that stop the money being available? The answer is "No".
Provided that it is a good scheme, backed with sound management, the City has always found the money, and always will, unless the Government interfere. This is what the Government like to do. Having thoroughly interfered with market forces, and with the City, and having done all that they can to bring a nasty smell into the question of profits—because all the time they are legislating against them—they propose to take the taxpayers' money to set up a monstrous bureaucratic machine to do inefficiently what can be done effectively and well by private interests.
§ 8.32 p.m.
§ Mr. Bruce-Gardyne
Like my hon. Friends, having listened to the discussions in Committee and the discussions today, I am still at a loss to know precisely what is the motivation for the Corporation. At the beginning of this Third Reading debate the Minister of State reminded us that the Government have had to step in from time to time to rationalise industries. There is plenty of evidence to show that the Government were able to do this in the past without the I.R.C. As my hon. Friend the Member for Eastleigh (Mr. David Price) said, the Government seem able to do this already.
If the Government's protestations are to be believed, the I.R.C. must be nothing more than a glorious and extremely expensive white elephant. They say that (here will be no compulsion and that there is no intention of using the £150 million of taxpayers' money as a sort of illicit battering ram in the stock market. If they are to be believed about 1255 this I do not see how the Corporation can be other than a sort of statement of intent, and we know what happens to the Government's statements of intent.
I find it a little hard to believe that even this Government will be prepared to allocate the sort of sums of money which we have been discussing this afternoon to such a nugatory purpose, and it is worth recalling—because this might perhaps have escaped the notice of hon. Gentlemen opposite—that during our discussions in Committee the Minister of State reminded us that the words in Clause 1(4) have appeared in every nationalisation Measure since the war. He thought that these words would set the fears of my hon. Friend the Member for Horsham (Mr. Hordern) at rest, but I thought that they should open the eyes of some of these worthy gentlemen who have agreed to serve on the Corporation.
I have heard it said that the Prime Minister appoints to serve on the boards of his brain children business men who do not believe in them, because he does not believe in them himself. That may be true, but it is something of an oversimplification. I cannot help feeling that the worthy gentlemen who have been gathered together to serve on this Corporation have been, to say the least, curiously naçve. At the same time, I find the choice of names to some extent reassuring. The qualifications of Sir Frank Kearton, the Chairman of the Corporation, seem to be that he has successfully frustrated one merger which I have always believed to be in the interests of his industry and—if the Government like to talk in those terms—in the interests of the country as a whole. He has now failed to bring off a reconciliation, several years later. To say the least, this is a curious qualification for the chairman of this organisation.
But what worries me most is the fact that so many of these gentlemen who are serving on the Corporation are highly responsible executives in large corporations. They are apparently prepared to devote some of their time and energies to this operation. When I raised this point in Committee it was suggested by the Minister of State and some hon. Gentlemen opposite that it was desirable that senior executives—chairmen of public companies and the like—should be 1256 engaged in activities in what might be called the public sphere, outside their own companies.
I would draw the Minister's attention to a rather interesting statement made the other day by Sir Joseph Latham, Deputy Chairman of A.E.I. on resigning the chairmanship of two "Little Neddies". He was quoted in The Times as issuing a stern warning about the dangers of too much statesmanship by industrialists. The Times said that his view was that industrial leaders may be spending too much time on official bodies and too little time behind their desks, and quote him as saying thatthe ways to improve the economy and balance of payments are greater productivity and efficiency, more exports and fewer imports. These would come from individual efforts, which are in danger of being weakened because 'key people are giving so much time to activities which are not making a direct contribution to the firms' production and profits.'One cannot say fairer than that, except to express the hope that Sir Joseph Latham's own chairman, Mike Wheeler, has taken careful note of what he said.
I do not feel that we have had any adequate reassurances from the Government about the way in which this Corporation will operate. I do not believe that it is needed. I am highly suspicious about the motivations which lie behind it, and I shall have the greatest pleasure in voting against it tonight.
§ 8.40 p.m.
§ Mr. Hordern
The Minister of State and the hon. Member for Heywood and Royton (Mr. Barnett) seemed to be highly surprised that we were prepared to oppose the Third Reading of the Bill. I hasten to assure them that we have no doubts about our opposition. If we had our way none of this money would be voted to the Corporation. The Corporation would not exist, and a very pleasant reduction of taxation would be possible. That is the right way to go about encouraging industry.
My hon. Friend the Member for Shipley (Mr. Hirst) was right in raising the point about the unsatisfactory position of the Corporation in relation to the auditing of accounts. I was surprised that the Parliamentary Secretary should say that he saw no reason for the Corporation to produce six-monthly results 1257 and reports, because it was not responsible to its shareholders. But it is responsible to the public. Why cannot the Corporation, in the same way as companies, produce proper accounts and a proper report at six-monthly intervals? The responsibility of the Corporation in this respect is greater and not smaller.
My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) rightly referred to the effects of the description by the Minister of State and his hon. Friends in Committee of the activities of the Corporation, as a form of white elephant. If we were to believe what the hon. Gentleman said, it would appear to be like that of a whited sepulchre. It will not engage in any nefarious activities at all. We have our doubts, which have been sustained throughout more by lack of information than by anything positive which the Minister of State has said.
The hon. Member for Ashton-under-Lyne (Mr. Sheldon) referred to merchant banks. I say, with all ignorance, that I do not know what is the hon. Gentleman's acquaintance with merchant banks, but my impression is that he has little experience of their practical working at first hand, because I cannot see them operating if they have all the shortcomings he has suggested. He mentioned my views about profitability and described them as "self-interest". There is a certain amount of doubt on the other side about the meaning of the word "profitability".
We do not always mean short term profitability, but medium term or even long term profitability. It is always possible to find capital for ventures on which there will be no return for many years hence. This occurs in a mining venture, for instance. Hon. Gentlemen opposite always have a subterranean feeling of guilt about "profitability", which is not evident on this side. We regard it as a great triumph that we have managed to insert the word "profitability" into the Bill.
Having done that, the difficulty is that it is still not possible to say with any certainty what precise functions the Corporation will carry out, and, if it has any, why it should carry them out. The Government have given us no evidence to show why the very wide powers in Clause 2 are necessary, save for the few and general remarks in the White Paper.
1258 It used to be a canon of taxation that, if money were to be levied from the public, it should be levied at the lowest rate compatible with the specified requirements of the Government. My hon. Friend the Member for Oswestry (Mr. Biffen) was absolutely right in pointing out the difference between the kind of State and Government intervention which the Conservative Government used to carry out for specific and limited purposes and that in the Bill, by which we are invited to raise £150 million from the public—£10 from every family—to carry out a series of wholly vague and subjective intentions. The only clue which we have as to why this money is needed is in the White Paper, where we are told, among other things, that the typical company in Britain is too small to achieve long production runs, to take advantage of scale, to do effective research and other matters.
All these points raise the same question—by what criteria are we judging this statement? How long should a production run be? It might be said that it should be as long as necessary to achieve the greatest reduction in costs. The hon. Member for Sheffield, Hooley (Mr. Hooley) expatiated on this in Committee. But what happens if the market does not want that volume of goods? This is precisely what has happened in Russia and many Communist States for many years.
There, even with a fully-controlled economy, they have produced far too much to be readily sold. They, more than any others, are now realising the importance of a proper capitalist system and a system of profits and incentives. There is no better test devised, we believe firmly, than that of profitability in the market. What is required is a larger market in which goods can flow freely from one country to another. That is why we on this side of the House are absolutely genuine in our desire and in our intention to join the E.E.C. Is it in any case true that we are not making sufficient use of the advantages of scale? That is one of the arguments put out by hon. Gentlemen opposite. Certainly the figures that we have do not bear out this contention. I understand that of the largest 100 companies outside the United States, 29 are in the United Kingdom, 19 are in Germany, 12 are in France and 1259 7 are in Italy. It does not seem from those figures that we have much to fear from competition in the E.E.C. on the size of companies alone.
Again, is it true that mergers have not been proceeding rapidly enough? We find that mergers rose from an average of 290 a year between 1954 and 1958 to 885 in 1963, so that, imperfect as the market system may be, that increase has resulted from market forces international as well as national, and there is no objective evidence to show that we are lagging behind in this respect with our competitors in other countries.
Then it is argued that perhaps there is a shortage of capital in industry. Whose fault is that? Industry can hardly be blamed for having to find an extra £700 million in taxation in the space of two years. It is true that at the moment finance is not coming forward for investment in industry in the way that it should, and that industrial investment is now beginning to fall rapidly. The reason is that nobody, companies or private individuals, sees any point in investing unless there is a reasonable prospect of a clear profit at the end of the operation.
The Prime Minister can have all the working lunches and dinners that he likes. He can go on summoning productivity conferences to his heart's content, but none of those functions will have more than a marginal effect until he learns that companies are in business to make money. The same point can be directed to the Minister of Technology who produced a neglected doctrine in Bristol recently to the effect that profitability was all right, that what matters is how one deals with it at the end. Here again he was pronouncing what is a very dubious doctrine. If profits are not handed out in sufficient scale to shareholders then capital would not be forthcoming to the companies, and that is a delusion from which the Government is suffering.
It might be thought that even if our financial system were not so heavily taxed there might still be a gap in the provision of finance. It has been referred to in Committee as the Macmillan gap, the shortage of medium-term funds. Again, this gap was discussed in the Radcliffe Report which recommended the American system of term loans and the 1260 formation of an industrial guarantee corporation for insuring risks, both of which could come from within the banking system. Both of these recommendations would be carried out if there was a proper call for them, and I have no doubt this call would arise if we were to join the Common Market.
Hon. Members opposite know full well that provision of capital in the Common Market is on a tiny scale compared with the London capital market; yet, with the sole exception of Italy, none has found it necessary to call into being such an organisation as this. Thus, if there is a gap, it is certainly not one that would put us at a disadvantage with any of our competitors in Europe. Further, even if one accepts a gap, should it be filled by this particular method—this Corporation—and to such a large amount?
In Italy the I.R.I., which is the nearest equivalent that one can find to the Corporation, is financed from the market up to 90 per cent. of its requirements. There is no suggestion in the relative Clauses of the Bill that funds should be attracted from the market, although the London market is more efficient than the Italian.
Then there is Clause 5, the so-called Exchequer investment in the Corporation, which allows £50 million to be given to the Corporation at a rate determined by the Secretary of State. The interesting point about this provision is that although local authorities are forced to go to the market when they have consumed their quota with the Public Works Loan Board, the Corporation, which is avowedly a commercial operation, will be allowed to borrow money from the Exchequer at any rate or at no rate which the Secretary of State may suggest. If the Government were so confident that the Corporation were going to be a viable concern, it would be happy to offer ordinary shares in the Corporation to the public through the Stock Exchange. I have no doubt people would be tumbling over themselves to buy shares in a Corporation which is such a viable entity. Nothing illustrates more clearly the abysmal lack of confidence the Government have in the Corporation than their refusal to allow it to be subjected to the acid test of the market.
The total sum involved is £150 million. It is astonishing that, with all the 1261 talk of scientific forecasting and planning, the Government should be entirely incapable of telling us how they expect the money to be spent. This is one of our primary objections to the Bill. When the Minister of State was pressed on this subject in Committee, he suggested that £40 million… would be required to assist in the rationalisation of the shipbuilding industry …and that other industries that might require similar sums. What other industries? As I understand it, it is not the aircraft industry, as mentioned by my hon. Friend the Member for Eastleigh (Mr. David Price). What other industries might be brought into the Corporation's ambit? Shipbuilding is being dealt with by the Shipbuilding Industry Board, so that cannot be one of them.
The Minister of State also said:In recent years, the amount of money being spent annually on mergers and subsidiary acquisitions … is in the region of £300 million."—[OFFICIAL REPORT, Standing Committee E, 10th November, 1966; c. 218–9.]He knows perfectly well that this is wholly misleading; all that happens in mergers is that the paper of one company is exchanged for another. He said today that half the mergers were composed of cash, but that, again, is just a transfer of cash from one company to another. What is happening here is that cash to the tune of £150 million is being hauled out of the economy and put at the sole discretion of the Corporation in a completely arbitrary way.
The sum of £150 million will, therefore, become available for buying up concerns or shares in companies quite arbitrarily, and simply on the say-so of the Corporation. It will be virtually impossible for the Corporation not to favour one company against its competitors, either by the provision of plant and machinery or by the provision of capital. For all these reasons it seems to us that £150 million is far too large a sum for the Corporation to have at its disposal—even supposing that the Corporation knew what it would do with the money, which seems doubtful.
It is interesting to realise that £150 million would allow Corporation Tax to be reduced from 40 per cent. to 34 per cent., and there is no doubt which course 1262 industry would prefer to be followed. It would be out of order for me to discuss these better ways of spending the money, but all that need be said is that this money is quite as likely to be a disruptive force in industry as a beneficial one.
What is more, it is seldom, if ever, the case that once the State intervenes in industry it is able to withdraw at will. One point made in the White Paper is that the Corporation will be able to turn its money over quickly, but even if it had the will to withdraw, which is questionable, it is far more probable that it will find itself propping up schemes that should have been allowed to wither away.
Further, the Minister of Technology in the Second Reading debate referred to the "creation of new enterprises" as being… a very important element in what we hope to do."—[OFFICIAL REPORT, 19th October, 1966; Vol. 734, c. 353.]What are the new elements? Clause 2 gives the Corporation power to… promote … the … development of any industry … whether in the United Kingdom or elsewhere …I make no apology whatever for reminding the Government of the East African groundnut scheme—and such a scheme is perfectly possible again under the exact words of the Bill—which in those days cost the taxpayers £35 millions; or for telling them that we shall expose mercilessly any wasting of the taxpayers' money, whether at home or abroad.
The Government have comforted themselves with the fact that they have persuaded some eminent industrialists to serve on the Corporation. May I say that the question that these industrialists have had to ask themselves is not whether the money can better be spent in reducing taxation, for example, but whether, if the money is to be spent in any case, it is not better that it should be spent in the least harmful way. Whether these industrialists are wise in taking this view is quite another question, but the Government should not delude themselves into mistaking acquiescence for enthusiasm.
We shall certainly have no inhibitions in attacking the Corporation if we think that the taxpayers' money is being wasted, as we think very likely.
1263 It is our view that the I.R.C. is yet another example of the Government mistaking the symptoms of our economic illness for the roots. One can be absolutely certain that the more serious our illness, the more committees the Government will form. The two work together in almost precise proportion and, by the Bill, the Government have shown themselves to be against competition and in favour of more and more Government interference. That is why we reject it absolutely.
§ 8.55 p.m.
§ Mr. Dell
I was disappointed at the speech of the hon. Member for Eastleigh (Mr. David Price) when he replied to my hon. Friend the Minister of State, not because it is, perhaps, unique that two former members of that great educational establishment, Imperial Chemical Industries, have faced each other across the House and in Committee, but because of the way in which the hon. Gentleman appears to have misunderstood the position. I refer not so much to the hon. Gentleman's genial attitude, but to what he said, for he told us that he still opposes the Bill and regards it as unnecessary.
I believe that the hon. Member for Eastleigh has succumbed to pressure from his back benchers. In Committee and on Second Reading he said time and again that he recognised that a catalyst was needed to promote the rationalisation of British industry. I grant that on every occasion he said that he wanted the powers to be less and less money to be available, but all the time he re-emphasised that a catalyst was necessary.
What has happened to this catalyst? What catalyst or alternative does the hon. Gentleman suggest? It is not we alone who believe that such a catalyst is necessary. In the debates since the White Paper was published it has become more and more widely recognised that such a catalyst is necessary. Indeed, the whole conception of the I.R.C.—even equipped with the £150 million to which the Opposition so much object—has received greater and greater acceptance.
The hon. Member for Eastleigh propounded the view, as he did in Committee, that all that is really wrong with Britain's economy could be put right simply by our joining the E.E.C. I do not yield 1264 to the hon. Gentleman in my support for Britain joining the Community. I hope that we succeed and enter it. However, that is certainly no miraculous solution to our economic problems. On the contrary, if we do enter the Community it will become even more necessary to ensure that British industry is rationalised and is more competitive so that we can take on the competition and opportunities which entry will give us. I cannot accept the view that entry into the Community will provide a miraculous solution to our problems. Equally, I cannot accept the idea that entry should be the reason for winding up the I.R.C. because, as my hon. Friend the Member for Heywood and Royton (Mr. Barnett) pointed out, the I.R.C. might be even more necessary than it is now.
The hon. Member for Eastleigh again took the example of the British machine tool industry and said that there was little structural difference between the position in our machine tool industry and that of Germany. I accept that, although we have time and again made clear that we do not regard structure as the only problem here. There are other problems—of management, research and development, commercial policy and vigour in finding outlets for our exports—but structure is, nevertheless, an essential part of the answer to many of our problems. The British machine tool industry recognises this. In recent months there have been considerable changes in the structure of this industry. I suggest to the hon. Member that part of the reason for this may be the changing atmosphere, the changing attitude to rationalisation schemes of this type, of which the idea of creating an Industrial Reorganisation Corporation is part.
The hon. Member for Eastleigh also asked what industries the I.R.C. is to be concerned with. We have been asked this question several times. I must agree with my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) that this is a matter for the I.R.C. in consultation with the Government. It would be wrong to give examples at this stage because that would have obvious implications outside this House. We certainly insist, and I do not think this can be denied, that structure is an important element in the problem which the economy of the country faces.
1265 The hon. Member for Oswestry (Mr. Biffen) raised a very important point, the question of the accountability of the I.R.C. to the Government and to this House. He was more concerned, of course, about accountability to this House—a very proper question. He asked how accountability will be discharged. I think he provided a large part of the answer himself. There is a return to be fixed by the Secretary of State on the loans which will be issued to the Industrial Reorganisation Corporation. In effect, there will be an agreed figure of return on Exchequer dividend capital. This will ensure that the I.R.C. has a target to reach and is accountable for reaching it.
Under the Bill it is possible for the Secretary of State, if he thinks fit, to give the Corporation general directions. Of course if he does, this will be an action by the Secretary of State with all the implications which that has. We said in Committee, and I repeat now, that, wherever possible, wherever commercial secrecy is not involved, the existence of such general directions will be revealed to the House at the earliest possible moment. We said in Committee that if for reasons of commercial secrecy it is impossible for such a general direction to be revealed at the time, it would be mentioned in the annual report and therefore would be known to Members of Parliament when the annual report was presented to Parliament.
The hon. Member for Oswestry wanted information on what the I.R.C. was doing as negotiations were proceeding, and mentioned the case of the N.R.D.C. and computers. Here I think there may be a difference between the hon. Member and the hon. Member for Eastleigh. The N.R.D.C. agreement on computers, of which I think the hon. Member approved, would not have been completed if the whole thing had to be published at the time that the negotiations were going on. We cannot operate the I.R.C., and cannot be expected to operate it, in a goldfish bowl. The I.R.C. must have a considerable degree of independence and must rely on its own judgment. The reason for appointing the sort of board which we have appointed is that these are men on whose judgment we can rely.
The hon. Member for Shipley (Mr. Hirst), who is no longer present in the 1266 Chamber, does not rely on the judgment of these gentlemen. I do not think I am doing the hon. Member a dishonour when I say that although in other ways he thought highly of him, he had no great confidence in Sir Frank Kearton, the Chairman of the I.R.C. If hon. Members had to select members of boards from those in whom the hon. Member for Shipley has confidence, we would soon be denuded of possible appointments, and they certainly would not include members of his own party.
The hon. Member for Shipley, however, was prepared to give us a point which the hon. Member for South Angus (Mr. Bruce-Gardyne) is not yet prepared to give, despite repeated assurances in Committee. The hon. Member for Shipley accepted that no compulsion was involved in the Bill and as a result the only way in which the I.R.C. could successfully operate was by persuasion. This is the way in which the Board wants to operate and exists to operate, and it would wish to operate in no other way.
Although suspicion still exists in the mind of the hon. Member for South Angus, he and his colleagues, in Committee, went through the Bill with a tooth-comb and were unable to find in it any evidence whatever of any power being given to the I.R.C. which would provide it with any coercive authority over any company in this country. Why therefore in view of this situation he continues to persist in this charge which he cannot justify, I do not know.
The hon. Gentleman also was the only hon. Member to raise this hoary old cry, which I though was abandoned almost as soon as the board of I.C.I. made it, namely, that the Corporation is really a means of back door nationalisation. The Member for Oswestry does not believe that. He knows, and I can again assure the House, that where we have proposals for public ownership we will bring them openly before the House.
§ Mr. Bruce-Gardyne
All I was reminding the House of was the phrase which the Joint Parliamentary Secretary's hon. Friend used in Committee.
§ Mr. Dell
That phrase was used in quite a different context. If the hon. 1267 Gentleman bases his charge merely on that evidence, I suggest that he waits for better evidence before making what are in fact rather serious charges, because it has from the beginning been made perfectly clear by the Government that nationalisation—public ownership—is not involved here and that the Corporation has been set up for certain specific purposes dealing with the rationalisation of industry primarily, and in certain cases with the creation of new enterprises—new enterprises of a technological character sometimes, possibly new enterprises of a regional character.
We have many times in the discussion gone over the question whether the market will suffice to produce the sort or rationalisation which the Government are looking for. I should have thought that the general opinion which certainly exists now outside the House, if not among hon. Members opposite, is that, despite the rising number of mergers and despite the activity of merchant banks and other specialists in this field, yet more needs to be done. Here I entirely agree with my hon. Friend the Member for Ashton-under-Lyne. It was interesting that the Financial Times as early as, I believe, the day after the publication of the I.R.C. White Paper, acknowledged that change was taking place too slowly under present arrangements and that some fresh stimulus was needed. In his recent book Nicholas Stacey has again accepted a place for the Corporation in this business of promoting rationalisation.
To me, it is a curious form of theology that one has to accept that the rate at which the market creates mergers and the type of mergers which the market creates is always right. Here we come to a point which the hon. Member for Horsham (Mr. Hordern) made in his winding-up speech. He returned to the question whether there is a structural problem and he used figures which had previously been used, I believe, by the hon. Member for Eastleigh showing that this country has large companies and that we have perhaps more large companies than Germany has, although the hon. Gentleman must accept that we have many fewer than the United States, which 1268 is a very serious competitor of ours in the advanced technologies.
I accept that size is not the only aspect of this problem. It is not the only aspect from the point of view that what we are concerned with here is not just size. It is the rationalisation of an industry, the rationalisation of a production process, the rationalisation of a marketing process, the concentration of R. & D. within a rationalised industry. On these points mere questions of size are irrelevant.
I come finally to a summary once more—and I hope in this House for the last time—of the main arguments for the Bill. There is an urgent need to increase the effectiveness of British industry. There is a need to increase the efficiency of overseas marketing, especially in a world with rising new industrial powers such as Japan, and especially when we have to look forward to the intense competition which we can expect to meet in more competitive markets like Europe. The expansion of exports is essential and is, indeed, the key to a self-balancing reflation. Nothing will more rapidly promote exports than improvements in export organisation which can follow from such rationalisation measures as the Corporation can bring about.
There is, moreover, an urgent need to increase market- and production-oriented research and development in the United Kingdom. There is far too little and too slow a research and development response to the demands of the market because too few companies, especially in engineering, have the resources to run an adequate research and development effort and consequently face the danger of falling behind.
These are arguments which industry increasingly recognises and as a result recognises the importance of the Bill, of the Corporation and of the need for rationalisation. I hope that the Corporation can be an example of constructive co-operation between Government and industry to achieve important ends. The Corporation is embarking on an important enterprise and although right hon. and hon. Members opposite seem unable to join with us I am sure that the great majority of the House will wish the Corporation success in that enterprise.
§ Question put, That the Bill be now read the Third time:—1270
§ The House divided: Ayes 210, Noes 119.1271
§ Bill accordingly read the Third time, and passed.