HC Deb 15 March 1967 vol 743 cc420-8
The Minister of Power (Mr. Richard Marsh)

With your permission, Mr. Speaker, I should like to make a statement.

The new National Steel Corporation will be the biggest manufacturing complex in the U.K. and one of the biggest in the world. The success of steel nationalisation is essential therefore to the nation's economic well-being. This in turn depends on the extent to which the Corporation can keep and strengthen managerial talent throughout the industry. In a mixed economy the public sector of the steel industry must be able to develop and hold a fair proportion of the best managerial talent and, although it would not be appropriate for it to try to match the highest levels of salaries paid in the private sector, the ceiling provided by the Board salaries must be at a level which will not depress the salary structure lower down in the industry.

In the light of these considerations, the Government have decided that the annual salary range normally applicable to members of the National Steel Corporation should be:

Deputy Chairmen £20–24,000
Full-time Members £15–19.000
Part-time Members £1,000

The salary range proposed for deputy chairmen and full-time members of the Corporation is broadly in line with the salaries now earned by the chairmen and managing directors, respectively, of the major steel companies, which are much smaller organisations than the Corporation. They are below the higher levels of salary in other fields of industry. Nevertheless, in view of the Government's incomes policy, these salary ranges will be cut by 12½ per cent. for a period of two years from the date of establishment of the Corporation.

Mr. Barber

Is the right hon. Gentleman aware that, contrary to the undertaking given by the Leader of the House, he has made what undoubtedly is a very important statement, bearing, as it does, not only upon the National Steel Corporation, but upon incomes policy and upon those who sit on the boards of other nationalised industries?

I would like to put to the Minister a number of questions briefly. First, will he tell us something about the salary of the Chairman? Secondly, were these the salary levels which were recommended to him by the Organising Committee, which was specifically set up, among other things, to advise him on this point? If these were not the Organising Committee's recommendations, what were the recommendations of that Committee?

Thirdly, while congratulating the right hon. Gentleman on over-riding the majority of his supporters and agreeing to Beeching-scale salaries, may I ask him what effect this decision will have on the salary structure of other nationalised industries, which was one of the factors mentioned by the right hon. Gentleman himself specifically at Question Time on 21st February? In other words, does he agree that they will now have to be jacked up?

Finally, if a new company were setting up in the private sector, presumably the remuneration of those in charge of the company would not be limited for a period of two years. If that is so, why is the right hon. Gentleman insisting on this special limitation on the National Steel Corporation, which the right hon. Gentleman has repeatedly said, time and time again, should be run on strictly commercial lines like any other enterprise in the private sector?

Mr. Marsh

Lord Melchett, at his own request, will serve as Chairman for the next two years on his present personal salary of £16,000 a year, which is the salary he is now paid as Chairman of the Organising Committee, but substantially less than that which he earned before his present appointment. I would link that, if I may, with the last point which the right hon. Gentleman asked, on the limitation of these salaries, their abatement, because of the incomes policy.

The purpose of this exercise is to ensure that there is, within the industry, a ceiling at a sufficient level to enable salaries underneath to be equated with their opposite numbers in private industry. Therefore, although I think that it is important to get this ceiling, the important factor about the ceiling is the substantive figure rather than the actual take-home figure. This is one of the reasons why Lord Melchett took the line that he did not particularly want his own salary changed. The right hon. Gentleman also raised the question of the Organising Committee's recommendations to me. These are, of course, confidential. The position of the other nationalised industries was raised. These are not in question at the moment, although steel is in a special position here—

Mr. Orme


Mr. Marsh

Oh, yes, even if my hon. Friend does not recognise this. Steel is in a special position for two reasons, that it is not a monopoly industry—people can go elsewhere—and that it is a manufacturing industry. That is why these scales have to bear some relationship to those paid in manufacturing industry. However, in terms of the incomes policy, these are not increases; they are not in excess of such salaries already being received.

Mr. O'Malley

Since, with the setting up of the National Steel Corporation, there will be a substantial reduction in the number of directors in the steel industry, what kind of saving does my right hon. Friend envisage as a result of this new structure, with salaries at the present level? Will there be any existing contract of employment which will continue, under the guarantee which the Government have given, by which any new member will be getting more than the salaries which my right hon. Friend has announced?

Mr. Marsh

Yes. As in the case of all nationalisation Measures, there is, of course, personal protection for those people at present in the industry and some of those salaries are, in fact, in excess of some of these that I have announced. My hon. Friend also talked about the number of directors, which is an important point to bear in mind. Under the new Corporation, the number of full-time functional directors will be about six, compared with a total at present in the industry of about 200.

Mr. J. H. Osborn

While welcoming the nature of the right hon. Gentleman's statement as a move in the right direction, may I assure him that all those with the interests of the industry at heart will accept this as a bold gesture in the right direction? What consideration will he give to other emoluments, such as pensions, expenses and other factors?

Mr. Marsh

The question of expenses, as with all nationalised industries, is merely the repayment of expenses necessarily incurred in the course of the job. The pension schemes will be the same as in the nationalised industries.

Mr. Strauss

Is my right hon. Friend aware that anyone who has any experience, as I have had, of setting up a steel corporation and fixing the salaries, must be convinced that it is essential, if we are to have a successful nationalised steel industry, to get the very best and outstanding men in industry on the board and to pay whatever salaries are necessary, that the alternative of getting retired people from the Armed Services or the Civil Service, excellent though they may be, is not good enough, and that he has done exactly the right thing to make the Corporation a great success, of which he and the country can be proud?

Mr. Marsh

I am grateful to my right hon. Friend. Not surprisingly, I agree with his comments. It has to be remembered that this will be a functional board. Its members will have specific line responsibilities. As such, these jobs must be filled with the best people we can get, and it is my intention—I am sure that it would be the intention of all my hon. Friends who believe in public ownership—that the National Steel Corporation must be in the market for any talent that it wants, at the prices which attract it.

Mr. Boyd-Carpenter

Does the right hon. Gentleman regard this statement as being, in the words of the Leader of the House, as "of secondary importance"? Does he now recall with regret, in view of his powerful arguments for the salaries, the criticisms which his right hon. Friends made some years ago of the salary arrangements made for Lord Beeching? Does he think that, in the light of these arguments, he can hold the salaries of the other nationalised industries at their present relatively low level? Fourth, is he not aware that most people outside will regard the technique of fixing a large salary and then temporarily knocking 12½ per cent. off it as so much eye-wash?

Mr. Marsh

I do not know whether the right hon. Gentleman would regard a 12½ per cent. cut in his salary as eye-wash—

Mr. Boyd-Carpenter

Not if it were one that I was not receiving in the job.

Mr. Marsh

No, the right hon. Gentleman does not understand the position. These people are getting these levels of salaries now. These are not people from nationalised industries—that is the point. The important thing about abating the salaries is to fix the substantive scale, which provides the ceiling within which the management and middle management is contained. On the right hon. Gentleman's other point, I should not have thought that this question was controversial. It seems to me that any statement, the logic of which is so crystal clear, would be clearly acceptable on both sides.

Mr. Mikardo

Does my right hon. Friend expect an enthusiastic welcome for his statement from the pottery workers, whom we will this evening legislate to prevent from getting a few shillings a week increase?

Mr. Marsh

I should like to deal with this point in general rather than in the particular. The whole question of the incomes policy is very important and controversial—

Mr. Orme

You have made nonsense of it.

Mr. Marsh

My hon. Friend may think so. I should be grateful to deal with this point, because the incomes policy is important. These are not increases in salaries. This is a new scale for a new job for people who have not been employed in that job before. Second, these are not increases, in some cases, to the people who are taking the jobs, because they are already receiving salaries at this level. Third, these are by no means high salaries compared with existing salaries in the rest of industry.

Therefore, there can be no argument—this has nothing to do with the incomes policy at all, because it does not involve increases in pay. I put the simple and important proposition to my hon. Friends that the alternative is to try to run this nationalised industry, with all its implications for the economy, with the people whom we can get, who would not be the people we necessarily wanted.

Several Hon. Members


Mr. Mikardo

On a point of order. Is there any way in which one can secure that the Minister answers the question put to him instead of a quite different one? I asked one susceptible to a "Yes" or "No" answer, whether he expected an enthusiastic welcome—

Mr. Speaker

Order. That is a singularly naïve point of order from an experienced Parliamentarian.

Mr. Patrick Jenkin

May I probe this 12½ per cent. nonsense? Is the right hon. Gentleman aware that he has emphasised the importance of an adequate salary structure and has acknowledged that this is one of the principal reasons why he has fixed the level which he has? He then announced that there would be a two-year moratorium, during which the salaries will be l2½ per cent. below that level. Is this reduction, therefore, to apply to all new appointments of regional directors or managaing directors to the new companies? Does he envisage that, during these two years, these senior officials down the line might receive more than the members of the Corporation? Does he realise that this would be a bit of a nonsense?

Mr. Marsh

These salaries apply purely to the members of the Corporation itself, the Chairman, the Deputy Chairmen, and the functional directors. The rest of the salaries are, of course, fixed by the Corporation. As regards the abatement, those people with whom I have discussed it so far, who are being considered for appointments in the light of the various implications which we face, see no difficulty about this. They recognise the implications and are perfectly happy, in a publicly-spirited way, to accept them.

Mr. Dickens

Is my right hon. Friend aware that whilst we recognise the obvious difficulties in dealing with salary structures in a mixed economy, he has set a grave and dangerous precedent in seeming to replace a rational salary structure in the public sector with an irrational salary structure from the private sector? Is he also aware that his statement is bound to cause widespread resentment amongst board members in all the existing public corporations and senior officials throughout the Government service?

Mr. Marsh

It has never been in doubt that however one dealt with the subject it provided difficulties. It is easy to list all the difficulties, but the problem is finding some of the answers. On the rational structure in the publicly-owned industries—if it is referred to as such—and the irrational structure in the private sector, the fact is that the Corporation, unlike the gas, electricity and coal industries, will not have a monopoly. There will be a private sector of over 200 steel companies, and there is also a large engineering sector. If one sets out to produce the best people there is no alternative to this approach even with all the problems.

Mr. John Hall

Whilst I congratulate the Minister on what the whole House would agree is a courageous approach to the problem, would he expand a little on the effect of his statement on the other nationalised industries? Is it because the steel industry is not a monopoly that he had to pay the market rate for the job? Does that mean that the Government are using a monopoly position in other State enterprises to depress salary standards?

Mr. Marsh

There is no single salary scale in the nationalised industries. There is already more than one salary range. This is just another for a different industry. The nationalised industries are looked at together from time to time, but my statement deals purely with the one industry, not for increasing anybody's salaries but producing a new salary scale for new people for a new job.

Mr. Richard

Can my right hon. Friend give an assurance that the future efficiency of the industry was the main factor in his mind in arriving at his decision? Can he also give the House au unqualified assurance that, having tested the market to see who was available for these jobs, his decision was based solely on the fact that it is necessary to secure the men who are hest fitted to run the industry in his view?

Mr. Marsh

Yes, certainly. The importance of the future efficiency of the industry to the economy as a whole should not be under-estimated. It is the biggest manufacturing complex in Britain, bar none. It has an investment of £1,400 million and an annual turnover of £1,000 million. It must be efficient, and when one is trying to ensure greater efficiency than was perhaps always the case in the past one looks for the best managers one can get. In my view, it would be lunacy to lose people one wants for an industry like this in an effort to save a small amount of money.

Mr. Biffen

As commercial salaries are to be paid to the executives, does the Minister expect to see the organisation earn commercial profits? When he talks about the difference between the Corporation and the other nationalised industries is he not being a little disingenuous? Do not the airlines and the railways compete with other forms of transportation, and do not gas, electricity and coal compete with other forms of energy? Will he look at this again?

Mr. Marsh

One is bound to look at this as a commercially viable unit, taking profit into account, I agree. The main purpose of nationalising the industry was that many of us felt that it had been badly run in the past. I would expect to see from the Corporation eventually rather better results commercially than there have been recently.

Mr. Hugh D. Brown

While I recognise my right hon. Friend's dilemma, would he publish in detail, and resist the blandishments of the directors' lobby on the opposite side of the House, the savings that will be made by the reduction in the salaries or in the numbers paid in the new Corporation? Would he also consider referring the grossly exaggerated level of remuneration that now seems to be paid in the private sector either to the D.E.A. for a period of permanent freeze or to my right hon. Friend the Minister of Social Security for the relief of hardship?

Mr. Marsh

The question of referring general salaries to somebody else is not a point for me. It would be almost impossible to publish the savings in terms of personnel, because I do not know how many people the Corporation will finish up with. One would expect big savings in manpower at every level as a result of public ownership. We shall have a board of half a dozen or so functional directors, a deputy-chairman and chair- man, and there will be many fewer national directors than in the past.

Mr. Peyton

Does the Minister not think that it is unwise as well as unfair to seek to distinguish between executives in, say, the gas or electricity industries, which he specifically mentioned, on the grounds that they have nowhere else to go? That seems wrong. Will he consider giving the 12½ per cent. temporary deductions to a suitable canine charity?

Mr. Marsh

I think that we are all getting rather bored with the last point. On the question of people having nowhere else to go, I was seeking to make the point that nationalising a manufacturing industry is a different exercise from nationalising a service industry. Of course one does not differentiate—[Interruption.] That is true; there is a whole range of difference—between the salary structures on that basis. This is not a question of increasing salaries. Hon. Members talked as if there were one nationalised industry scale. That is not true. There is a number, and this is one more for this industry.

Mr. Orme

If as my right hon. Friend says, this does not make a nonsense of the incomes policy, why is the 12½ per cent. reduction recommended? Did that extraordinary recommendation come from Mr. Aubrey Jones and his merry men, or from where? Why must he pay salaries in line with what is now being earned by private monopoly inside the steel industry, and why can he not employ technocrats at reasonable salaries to run the industry instead of the inflated salaries of the present owners?

Mr. Marsh

My hon. Friend misunderstands the point. These people will be technocrats. They are not people coming in with their heart in the right place a couple of times a week to make the odd comment about the steel industry. They will be specific, functional, qualified directors for a straight functional job. I do not understand where the incomes policy comes into this. There is nothing in the incomes policy about fixing a rate for a new job. The rates to be paid are not higher than the existing salaries of the people concerned, but lower.