POWER OF ELECTRICITY COUNCIL TO BORROW FOREIGN CURRENCY BY ISSUE OF SECURITIES (Hansard, 13 June 1968)

§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
I beg to move Amendment No. 6, in page 2, line 14, after'currency' insert 'not exceeding ten times the Council's average annual earnings of foreign currency over the three years immediately prior to the borrowing'.

§ The Deputy Chairman (Mr. Sydney Irving)
With this Amendment we can discuss Amendment No. 13, in Clause 4, page 3, line 35, after' currency', insert 'not exceeding ten times the Council's average annual earnings of foreign currency over the three years immediately prior to the borrowing'.

§ Mr. Ridley
I make clear that we intend this Amendment to apply to all the borrowings of foreign currency under the Bill. We have not put down Amendments referring to the North and South of Scotland Hydro-Electricity Boards, but it is our intention to apply the same criteria there. We apply this criterion to the earnings of the nationalised industries concerned in foreign exchange as some sort of control of the amount of borrowing undertaken under this Clause. The capital of nationalised industries is capital provided by the State. The fact that the separate stock issues were withdrawn 13 years ago and all consolidated in Treasury issues proves that this is the verity of the matter.
The present Government have not changed that position. In the White Paper, Cmnd. 3437, they said: 510 Alternative public sector borrowing arrangements will be kept under review, but nothing would be gained by going back to separate stock issues for the nationalised industries. These would involve serious problems of market management and would not create any additional savings. I believe that to be so. One can go so far as to say that capital of State industries is a fairly meaningless concept. It is money spent by the State on assets which will last longer than others. The idea that we are operating normal commercial concerns and can draw a meaningful distinction between capital and revenue makes very little sense in relation to nationalised industries.
The Government have from time to time tried to pretend that capital is of a different nature and we have had talk about below the line, national loan funds, and Government investing. The result of this wrong thinking has been a complete run-away in capital expenditure by nationalised industries. The Government's whole capital investment, as they call it, has trebled in the last four years. This colossal increase is due, in small part, to the different terms accorded to capital expenditure from those accorded to revenue expenditure. What has obviously encouraged the Government to allow these two nationalised industries to borrow in the foreign currency market is the fact that B.O.A.C. has borrowed some dollars to build hotels in America, and it seems to the Government to be a convenient way of raising some foreign cash.
I do not want to discuss the B.O.A.C. matter. It would be out of order to do so. We on this side are against B.O.A.C. running hotels, because that is not the purpose for which the Corporation was set up. However, that is another matter. The question here is: should the Corporation or, indeed, any other nationalised industry be allowed to borrow money; and, if so, on what criteria and how much?
511 The second thing which is obviously in the Government's mind is their orders to private industry to borrow abroad for the maximum amount of investment abroad. The Government obviously think that this can be to some extent reproduced in the nationalised industries by requiring them to borrow abroad for some of their investment. I do not believe that investment in this sense is the same in a public industry as it is in a private concern. Therefore, we are left with the argument that this is some way of saving foreign exchange.
Therefore, looking at this from a foreign exchange—a balance of payments —point of view, the immediate short term result, when the nationalised industry gets its foreign exchange, will be a profit to the balance of payments: it will receive money which will come across the exchanges and put us into credit. In the long term, it clearly will not be so. The nationalised industry will presumably invest this money in plant and facilities in Britain and it will have to pay interest across the exchanges every year. It will, in addition, at some time have to repay the principal, or it may repay the principal year to year, or it may have to renew the principal. Long term, this will be adverse to the balance of payments.
The confusion here is between borrowing abroad for investment abroad and borrowing abroad for investment at home. It is much easier to make out a case for borrowing abroad for investment abroad than it ever could be for borrowing abroad for investment at home. Although the B.O.A.C. case may be justifiable, it quite clearly is less justifiable in the case of the Gas Council and the Electricity Council, which will not be making profitable investments abroad. If I were wrong on this, I would retract this argument; but I am certain that nobody will say that the intention is for the Gas Council and the Electricity Council to start building power stations or gas works in foreign countries as a means of earning foreign exchange.
Indeed, the bodies concerned are practically not earners of foreign exchange at present. The only source of foreign exchange from the operations of the bodies concerned will be payments under the Channel link to the Electricity Coun- 512 cil for electricity sold for France, though I would concede that there may be indirect exports due to other bodies benefiting from these activities.
We have the peculiar position that the Government seek powers for these industries to borrow abroad for investment, presumably at home, which in the long term is counter to the balance of payments and which apparently has no economic justification. This is an additional way in which the Government can borrow foreign exchange. I come back to where I started: it appears that the Government, dressed up as the Electricity Council or the Gas Council, will now try to borrow more money from abroad.
7.15 p.m.
This is not something that we on this side smile upon. If the Government want to borrow more money from abroad, it would probably be more advisable for them to do it themselves and not to pretend that it is one of these nationalised industries doing it.

§ Mr. Palmer
I hope that the hon. Gentleman has not overlooked the fact that professor Sir Ronald Edwards, the Chairman of the Electricity Council, has advocated this course quite independently on his own account for quite a period. It is wrong for the hon. Gentleman to suppose that the incentive necessarily comes from Government.

§ Mr. Ridley
I do not know whose idea this first was. I am merely commenting on the proposal which is being made by the Government. If Sir Ronald has advocated this for some time and it has not been adopted till now, it may well be that there are very good reasons why it has not been adopted earlier. I am trying to enumerate argumemts against this proposal. I would not be so dogmatic as to say that this is utterly and completely wrong. I am simply pointing out the disadvantages in the proposal put forward by the Government. I must conclude that it amounts to a further means for the Government to borrow money abroad, which is not a thing that I would say that they should not do. However, on the whole, it seems to have very little to do with the power industries, which may well be why the Chief Secretary is to answer this debate, because this is a financial matter and it 513 has nothing to do with the power industries.
We believe that the justification for borrowing abroad would be there only if this money were to be invested abroad and were to produce foreign earnings. The Amendment would link the amount of borrowing to the amount of foreign earnings. As we cannot predict what future foreign earnings will be, we have had to link it to past foreign earnings. The principle is right, although we have had great difficulty in framing an Amendment which would make sense in this respect. The principle is right that the point of this borrowing in relation to a nationalised industry should be only to allow it to maximise its earnings of foreign exchange. As clearly neither the Gas Council nor the Electricity Council will benefit from this, it amounts to a disapproval of the proposition.
I hops that the Chief Secretary will tell us what the earnings of the Gas Council and the Electricity Council have been, either pluses or minuses. I am sure that he will tell us what the effects of these investments would be on our balance of payments. We also want to know how much borrowing he envisages there will be, whether there are distinct proposal;; or whether it is just a reserve power, and how much he believes will be borrowed at any specific time.
Subject to the right hon. Gentleman's answers to these questions, I must say that the proposal seems at first sight to be a concealed method by which the Government can borrow further foreign exchange and does not seem to be remotely connected to the ability of the Councils concerned to earn foreign exchange. That is what we would like to see them doing.

§ Sir G. Nabarro
When I first read the Bill I was shocked to see that a Socialist Government, responsible for the nationalisation of the coal, gas and electricity industries, should be suggesting that these industries would, in future, in part measure, be financed with foreign money. Surely one of the arguments for nationalisation was that the Government should have absolute control over the policies and activities of these industries. Now for the first time nationalised industries are to be made subject to a degree of control in the event of loans being negotiated from oversea.
514 It cannot mean anything else. I do not accept that there is any analogy between these industries and the minute foreign borrowings of B.O.A.C. or a corporation of that kind to create assets abroad. As my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said, we would quarrel with the principle that B.O.A.C. should be allowed to run hotels, anyway, but under this Government I suppose it could be given a writ to run anything. If that happens, I suppose that they must raise a certain amount of money abroad, but the industries we are discussing now—gas and electricity—are concerned entirely with indigenous products. They export nothing and import nothing, so far as I am aware—

§ Mr. Lubbock
Yes, they do.

§ Sir G. Nabarro
The hon. Gentleman should not get touchy yet. They import nothing save only raw materials they propose to convert to more sophisticated products, as in the case of methane from North Africa. I expect that that will stop quite shortly—

§ Mr. Lubbock
No.

§ Sir G. Nabarro
When the contract expires. I wish that the hon. Gentleman would let me make my speech without sitting behind me yapping. I will give way if he wishes now, in order to quiet him.

Mr. Lnbbock
I do not know what the hon. Gentleman means by "shortly". The importation of natural gas from Algeria will continue throughout the period during which the Bill will be in effect when it becomes an Act.

§ Sir G. Nabarro
I repeat "shortly" —that is, relatively a very short term compared with the North Sea gas element in the Bill, which is the major consideration so far as the gas industry is concerned.
Borrowing money abroad is an entirely novel departure. No money could be borrowed abroad without a Treasury guarantee. I am glad that the Chief Secretary immediately nods assent. Therefore, it is really the British Government borrowing abroad. The right hon. Gentleman nods dissent now. It is the British Government borrowing abroad. If a nationalised corporation negotiates 515 a debt in the form of a loan in a foreign country, whatever the terms, no money would be available without a guarantee from the British Government. That is manifest, because the British Government own the assets in these industries. Therefore, it amounts to a British Government loan being negotiated abroad.
The fault with a system of this kind is that it abrogates absolutely my principles and conception of what proper capital formation should rest on in the case of entirely indigenous industries that are not concerned, in their normal course of business, with importing or exporting, save only the exception I quoted a moment or two ago. All sound capital formation should rest on savings, but today it does not, because the British people have not enough confidence in the present Government to furnish a sufficient flow of savings to add in the aggregation to the capital formation needed for public corporations and similar ventures.
I do not believe that the measures proposed in the Bill are desirable or necessary. I do not believe that they will ever be used. Perhaps Sir Ronald Edwards recommended them. He is leaving his post shortly. I shall not comment on many of his recommendations; I have no high regard for them. Before the hon. Member for Bristol, Central (Mr. Palmer) cackles, for we are old adversaries in this field, I remind him that more than 10 years ago Sir Edwin Herbert, in the Herbert Report on the electricity generation industry, strongly recommended that the Electricity Council should raised a substantial part of its capital on the open money market here in Britain. The Tory Government never implemented that recommendation, nor have the Labour Government. Neither could implement it, because the money could not be raised in sufficient sums without a Treasury guarantee or, in effect, an underwriting by the British Government.
I do not believe that we are ever likely to use the provisions in Clauses (2), (3) and (4). For that reason, as a simple expedient to ventilate my objections to these arrangements, I am supporting the Amendment.
516 Are we so bankrupt that we are incapable of finding our own capital for our own nationally-owned industries within our own country without going begging cap in hand to a foreigner to put part of those industries in pawn? That is what it amounts to. It is morally defeatist to do so because these are British industries. It is financially improvident to do so because, as my hon. Friend the Member for Cirencester and Tewkesbury said, it represents throughout the term of the loan, both in respect of repayment and the interest, a drain on our balance of payments. In my judgment it is economically unsound.
For all those reasons, I object to the proposals. I consider them unnecessary and hope that they will never be used. I believe that this view is held by the whole of my party.

§ Mr. Palmer
The hon. Member for Worcestershire, South (Sir G. Nabarro) used to make speeches in the past as he does now. I have rather a better memory of his speeches than he appears to have. I can remember when he often used to argue that the nationalised industries should be the subject to the disciplines of the market. He suggested in those days that they should raise capital on the market if they could. He did not always think that they could, but he felt that they should do so ideally.
Therefore, I was rather startled to hear him making the speech he has just made. I am surprised even more that the Conservative Party should be arguing in this way. Right hon. and hon. Members opposite have often advocated that the nationalised industries should be publicly-owned commercial undertakings. If that is so, surely they should be able to raise loans from time to time, if they are in a strong enough commercial position, on their own credit? True, that credit is Government-guaranteed, for they are publicly-owned industries, but if it suits them from their financial point of view, perhaps to tide them over a temporary difficulty, such as paying interest on loans for investment not yet remunerative why should they not do so?
The hon. Gentleman has been expounding a curious economic nationalism. I cannot understand the suggestion that because an undertaking happens to be publicly-owned it should not raise money 517 on its credit and that of the Government in a favourable market even if the market is overseas. It is a commercial transaction like so many others and should be seen as such.
There is bound to be a limit on such borrowing, but, as I argued on Second Reading, if the Electricity Council could have raised some money abroad a year or so ago, this would have helped it to pay the interest on its long-term capital which is not yet remunerative because it was forced by the National Plan to look perhaps too far ahead. In that case it is possible that electricity prices need not have been raised as they were.
When I referred to what Sir Ronald Edwards said, I was speaking from my memory of his speech or lecture. As I recall it, he was advocating overseas borrowing from a limited point of view in a commercial context not as an alternative to major Treasury lending.

§ Mr. Ridley
Since the hon. Gentleman has admitted that the Electricity Council over-invested, is it not rather a miracle that it did not manage to borrow any more money in order to over-invest that as well? Surely this is why nationalised industries are not commercial undertakings.

§ Mr. Palmer
I have been frank enough to say that the fault has been largely that of the Government in that they encouraged the electricity industry to invest too far ahead on the assumption that productivity levels in the country would be higher than they have turned out to be. The electricity industry was obliged, so to speak, to over-estimate on its load forecasting and its advance arrangements for new plant. That plant at the moment is not entirely remunerative but it will be. The load will catch it up.
I am not a financial expert. I am merely an engineer. But, unlike other experts, financial experts are often as wrong as right. I look at this proposal from ordinary common logic which is rarely wrong. The Electricity Council was anxious to borrow abroad to tide it over a temporary difficulty. It would have been sound common logic if the Government earlier on had given it permission to do what it wanted to do.
The arguments put forward by the hon. Member for Cirencester and Tewkesbury 518 (Mr. Ridley) and by the hon. Member for Worcestershire, South were a little forced, I thought. I am doubtful whether they really believe in them. It seems to me that they are simply looking around for something to say on this matter because they feel that they must say something on this part of the Bill.
I suspect that if, some years ago, Conservative Ministers had been approached by the Electricity Council with this kind of request, they would have acceded to it in the way that my right hon. Friend has sensibly acceded to it. The request has not come from the Treasury and probably the Treasury is still doubtful about it though my right hon. Friend's presence reassures me. But because the Treasury may be doubtful does not necessarily mean that the proposal is a bad one. I believe that the initiative has come from the industries concerned and I am glad the Government have acceded to it.

§ Mrs. Thatcher
Did I clearly understand the hon. Gentleman to say that it would have been a good thing if the electricity industry had borrowed overseas a year ago?

§ Mrs. Thatcher
Then supposing the industry had borrowed one thousand million Eurodollars a year ago, it would have to repay in principle 17 per cent, more than what it borrowed, which would have been a good argument for not borrowing it a year ago.

§ Mr. Palmer
These are problems which arise from devaluation and from the general financial position of the country and I do not think that they would bear more heavily on the electricity industry than on industry generally. The hon. Lady has put a much broader argument. I am keeping the case to the narrower one of the interest of electricity supply and of gas if necessary. If the nationalised industries are to be efficient, they must have reasonable freedom in matters of this kind. I am genuinely puzzled that the Opposition, who so often talk about financial judgment and running the nationalised industries on commercial lines, should be opposed to this reasonable proposal.

§ Mr. Lubbock
The speech of the hon. Member for Bristol, Central (Mr. Palmer) 519 was full of sound common sense. I agree that we should try to make the nationalised industries behave more and more as commercial enterprises. I thought that was the view of the Opposition as well until I listened to the speech of the hon. Member for Finchley (Mrs. Thatcher) on Second Reading and to the speeches of the hon. Members for Worcestershire, South (Sir G. Nabarro) and Cirencester and Tewkesbury (Mr. Ridley) this evening. They seemed to take an opposite attitude.
I am unable to follow their reasoning. In any case it is inconsistent because the hon. Lady said on Second Reading that the Minister should not introduce this power in the Bill, enabling foreign currency to be borrowed, because at the same time he was encouraging investment by foreign companies in the North Sea and part of the earnings from those operations would go overseas. She is saying, in effect, that the whole of the prospecting industry in the North Sea should be nationalised so that none of the profits from the operations go overseas. That is the logic of her contention.

§ Mrs. Thatcher
Will the hon. Gentleman quote me directly on this point? The main reason that one should be wary about letting nationalised industries borrow in overseas currency—that is the only thing we are talking about—is that they have no money to repay in the coin in which they have borrowed. If they borrow dollars, they have none coming in with which to repay what they have borrowed. Perhaps the Chief Secretary to the Treasury will tell us whether the Exchange Control Department of the Bank of England would give permission to an ordinary commercial enterprise with no overseas currency earnings to borrow in overseas currency for investment in this country, because that is the only acid comparison with what the hon. Gentleman is saying.

§ Mr. Lubbock
That was a long and intellectual argument and I am happy to be generous and quote the hon. Lady's Second Reading speech. She said, referring to the Minister's argument: That is already partly modified by the fact that a lot of the capital which has gone into developing North Sea gas has been foreign, and that foreign capital has to be serviced, which means a lot of money going out annu- 520 ally."—[OFFICIAL REPORT, 22nd May, 1968; Vol. 765, c. 564.] So she is suggesting that no foreign operators should be allowed into the North Sea and that the operations should be undertaken entirely by nationalised industries. I do not agree with her.

§ Mrs. Thatcher
The hon. Gentleman is not on the right point.

§ Mr. Lubbock
I do no believe in nationalisation. I am much happier for there to be a number of different companies prospecting in the North Sea, some of which, admittedly, are in public ownership, and I have supported that case in arguments about it before. The quicker the resources are developed and the more agents prospecting in the North Sea the better it will be for our economy.
I dislike the chauvinistic argument of the hon. Member for Worcestershire, South about participation of foreign investors in the operations of nationalised industries. I cannot see anything wrong with such participation. It is not, as he put it, going begging cap in hand to the foreigners, putting part of those industries in pawn. Local authorities borrow from overseas financiers and I do not think he says that, because they have access to this money, they have pawned the town hall of South Worcestershire, if there is one. There probably is not one. It is probably too insignificant a place to have one. [Interruption.] That is his contention. He has put forward a chauvinistic argument and I am entitled to reply to him in my own way. Because local authorities have access to sources of foreign currency does not mean that they are going begging cap in hand to foreigners, putting part of their assets in pawn. I had thought better of the hon. Gentleman. I have often listened with great pleasure and approval to his speeches in energy industry debates. But he has sunk pretty low on this occasion.

§ Sir G. Nabarro
Since I am such a low creature I had better explain to the hon. Gentleman that, of course, there is not a town hall in South Worcestershire. Only boroughs have town halls. South Worcestershire is an administrative centre. But I remind him that Evesham is where Parliament began. We are talking about the gas and electricity industries. Gaz de France and Electricité de France are nationalised corporations. But we would 521 not see a Frenchman borrowing sterling to pay for capital investment in France— not on your life. General de Gaulle is too fly for that.

§ Mr. Lubbock
I am not sure that the nationalised industries in France do not have equivalent powers to those given to our gas and electricity industries in this Bill.

§ Sir G. Nabarro
But I am sure.

§ Mr. Lubbock
Perhaps the Chief Secretary to the Treasury can enlighten us. I shall be delighted to have a conversation with the hon. Member for Worcestershire, South afterwards about it. As I said on Second Reading, I am glad that we do not have to debate the borrowing powers of Gaz de France and Electricite de France or of E.N.I, and I.R.I. The hon. Gentleman said that he imagined the theory was that the Government should have absolute control over the policies and activities of these industries and that that was the whole point of nationalisation. To me it is not. There could be nothing less likely to lead to a profitable and healthy operation of these industries than to have detailed interference on a day-to-day basis by Ministers. I am not criticising these Ministers, but I do not think that a Minister of the Crown is the right person to operate these industries.
Following on the argument of the hon. Member for Bristol, Central, if we want these industries to behave more like ordinary public companies, we have to allow them a degree of commercial freedom which might include the ability to borrow overseas. If a public company has this power, I cannot see why the gas and electricity industries should not have it, too. There is a precedent for it. B.E.A. and B.O.A.C.—

§ Mrs. Thatcher
They make foreign exchange earnings.

§ Mr. Lubbock
—can already raise loans overseas, as the hon. Member for Finchley knows. What has not been made clear to the hon. Member for Cirencester and Tewkesbury, who implied that he did not know where these proposals originated, is that they came as a direct request from the industries concerned. If he had read the Memorandum on the Gas and Electricity Bill, which was submitted to us at the time the Bill was presented, he would have found in paragraph 9 522 … it is the desire of the industry concerned … Indeed, the Parliamentary Secretary made it clear on Second Reading that the two industries had made this request to him. It was not an idea which originated with the Government. The hon. Gentleman also pointed out—and this is relevant to the discussion—that it may happen on occasion that opportunities arise of borrowing more advantageously overseas than from the National Loans Fund. If, therefore, a lower rate of interest is being paid on borrowings from overseas, it means that the gas and electricity industries will be able to make a larger profit. Thus, the consumer of gas and electricity in this country will derive some benefit.
The only argument remaining with which we have to deal is that, because the gas and electricity industries do not engage in operations overseas, as do B.O.A.C. and B..E.A., they are in a substantially different position. B.E.A. and B.O.A.C. might wish to develop hotels in foreign countries as a means of attracting more passengers. Although there may be arguments whether it is legitimate for airlines to enter into these operations, they have been approved by Parliament. Therefore, it might be convenient for them to borrow foreign currency for the purpose of constructing these hotels.
Is it beyond the bounds of possibility that, during the period covered by the Bill, capital expenditure will need to be undertaken overseas by the gas industry? The Gas Council has an investment in a company called British Methane, Ltd., which operates ships bringing liquified natural gas from Algeria. Is it beyond the bounds of possibility that British Methane, Ltd., might wish to develop terminal facilities in Algeria for use in association with these ships and that it might be able to do it more efficiently than our Algerian partners?
The Parliamentary Secretary on Second Reading said that there were no concrete plans for the use of foreign money, but, if we are looking at the position of the industry over five years, we must envisage possibilities of the kind that I have mentioned. If, as the hon. Member for Worcestershire, South says, the powers will never be used, why are we bothering to argue about the Clauses? However, if there is a chance that it 523 might be extremely convenient for the gas industry to have this power legitimately for operations directly relevant to the importation of natural gas, it would be sensible for the House to allow these Clauses to go through.

§ The Chief Secretary to the Treasury (Mr. John Diamond)
I think that we must welcome these Amendments in the sense that they are probing Amendments and give one an opportunity for explaining new development, because new development is certainly taking place and it is right that the Government should explain it and seek the approval of the House. If the Amendments are not probing Amendments they will not get my approval, because they will result in the amount borrowed abroad being reduced to zero, which is not a very—

§ Mrs. Thatcher
They were meant to do that.

§ Mr. Diamond
If they were meant to do that they were meant to be wrecking Amendments.
I now turn to the more constructive side, namely why these powers are introduced and why we hope the House, including the Conservative Party, will come up to date and have regard to what is happening in the world around, and perhaps even go so far as to forget their economic nationalism and permit nationalised industries to be as commercial in their outlook as they would wish them to be and as the Government would wish them to be.
Broadly, the situation is that in recent years an entirely new market has developed—a getting together of those with capital available—which is fortunately to the advantage of this country, and particularly to the advantage of the City where the expertise is unexcelled anywhere in Europe. A market has developed as a result of which foreign savings can be tapped as well as domestic savings. That is sensible. Those who say they are in favour of savings should add, "wherever they come from".
What has happened in the commercial world, as the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) knows full well, is that advantage has 524 been taken from time to time by a number of organisations of borrowing in this internationally created finance market, sometimes called the international bond market and sometimes more narrowly referred to as the Euro-bond market. What is proposed, and what the Amendments seek to deny completely, is that nationalised industries should have power to borrow in this market under conditions which seem to the Minister sensible having regard to the needs of the industry, and which seem to the Treasury right and proper having regard to the economic and financial position of the country. That seems a sensible thing to encourage.
To answer the hon. Member for Worcestershire, South (Sir G. Nabarro), it is something upon which other Governments look favourably. I do not know whether he or the distinguished President to whom he referred was the more fly, but it is a fact that the French railways, electricity and telecommunications industries have made an issue of Euro-bonds. Each issue was for under £10 million, each stock carried a maturity of around 15 years and carried a yield redemption of rather over 6½ per cent,—

§ Mr. Diamond
—and each stock was guaranteed by the French Government.

§ Sir G. Nabarro
The right hon. Gentleman knows perfectly well that these were issued in utterly different circumstances. They were issued within the Common Market to overcome the exchange control manipulations and difficulties that there might be, for example, between the Deutsche-mark, on the one hand, and the French franc, on the other. There is an economic and financial wall round the Common Market today. We are entirely separate from it. Our exchange control assures us of that. Therefore, there is no analogy in what the right hon. Gentleman is now quoting for Euro-bonds.

§ Mr. Diamond
I will not embarrass the hon. Gentleman by inviting him to consider what he said first and what he is saying now. That is his own affair. I am concerned to tell the House the facts of the situation and to make it clear that there has been a development of this kind of market which is widely 525 used for commercial purposes and by foreign Governments and foreign nationalised industries for borrowing for domestic purposes of their own. It is against that background that we concern ourselves with these proposals.
As my hon. Friend the Member for Bristol, Central (Mr. Palmer) and the hon. Member for Orpington (Mr. Lubbock) said, these proposals stem from the initiative of the industries concerned. There is no question of the Government having approached these industries and said, "We insist on your borrowing on the Euro-dollar market". The initiative came from them, and the question which we have to ask is, as a market of this kind has developed and is developing, and as nationalised industries need funds from time to time for their investment, and as they have asked about the possibility of borrowing on the Euro-dollar market because there are times when it might conceivably be more economical to do so—and surely we are all in favour of nationalised industries being as economical as they can be in their activities—is it right for us to refuse this power? I should have thought that there was no argument for refusing it. The power cannot be acted on except in consultation with my right hon. Friend the Minister and the Treasury.

§ Mr. Palmer
This is a return to the old tradition for the electricity supply industry, because before, when it was a regulated utility, it did from time to time borrow abroad.

§ Mr. Diamond
I am saying that it is a sensible and natural development that nationalised industries should, on the terms and conditions laid down, and with the consultation to which I have referred, exercise the right to borrow abroad, but before they can exercise that right the House must afford it. What we are considering is the affording of the right.
My right hon. Friend has made it clear that there are no specific proposals before the House. There are no proposals which the Government have in mind. As the Bill is intended in any event to give these institutions the power to borrow, the opportunity is being taken to give them power to borrow abroad. In the same way, when local authorities who ask for this power bring legislation before 526 the House, the opportunity will be taken on those occasions to give them that additional facility, again in consultation with the Treasury to make sure that, in a sense, the borrowing does not act against the general interest.
I turn, now, to deal with the arguments which have been addressed to me about why these powers should not be granted. The hon. Member for Cirencester and Tewkesbury says that there will be a short-term advantage to the balance of payments, but a long-term disadvantage. He knows that the situation which his Government left to this Government was one in which this country had to a large extent borrowed short and lent long. All that happens if someone borrows long is that more stability is created, and there is more balance in the borrowings and lendings than previously. Instead of having to match long lendings with short borrowings, one can to some extent match long lendings with long borrowings, and that is what any sensible financier seeks to do. It is not what the previous Government achieved. It is not what they sought to do, but that is the sensible way to plan borrowings and lendings. As the hon. Gentleman said, it is of short-term advantage to the balance of payments, and of long term advantage, also, in the sense that there is greater balance in the borrowings and lendings in the financial situation with regard to overseas borrowings and lendings.
The hon. Gentleman went on to say that there was no economic advantage. That is not so. The borrowing power will not be used unless there is an economic advantage in the sense that the nationalised industry, after paying the going rate for borrowing on the Eurodollar market, and after paying the costs of borrowing—which do not apply to borrowing from the Government—will be borrowing at a slightly cheaper rate than borrowing from the National Loans Fund. When such circumstances, if ever, arise, there will be an economic advantage if the nationalised industry avails itself of that opportunity.
I was asked whether there were any distinct proposals. We have none in mind. These are reserve powers which are being taken on this occasion.
I have answered the point raised by the hon. Member for Worcestershire, South 527 about what France does. He thought that the Government's philosophy was to have control over the policies of nationalised industries. There is no diminution of control over the policies of nationalised industries by giving them the power to borrow. This power to borrow on terms which are satisfactory to the Minister, and in consultation with the Treasury, does not affect their investment.
I dissent totally from the attitude of the hon. Gentleman who regards this as begging cap in hand from a foreigner. I hope that even he may be brought up to date and realise what is going on in the world, and will wish our nationalised industries to conduct themselves with good sense and with good commercial modern practice.
Having regard to the fact that these are sensible powers, that they are used by commerce and by nationalised industries abroad, that this is a growing market, that there might be some economic advantage, and that there is certainly a balance of payments advantage, and, finally, that the Amendments are wholly wrecking, I hope that they will not be pursued.

§ Mrs. Thatcher
The right hon. Gentleman used the phrase, "these powers are used by commerce". He deliberately did not answer the specific point which I put to him. Will he please answer it now? If a commercial enterprise which had no foreign exchange earnings applied for a loan in foreign currency to invest here, would he authorise that loan?

§ Mr. Diamond
I thank the hon. Lady for reminding me of the fact that I omitted to answer her. I apologise for any discourtesy. It was certainly not intended. I am grateful for the opportunity of bringing her, as well as her colleagues, up to date.
There is no reason why an appropriate borrowing by a commercial firm on the Euro-dollar market for investment domestically should be refused exchange control on the ground that it has no foreign income. The investment would be subject to control, but it would be approved if it were a proper investment, and it would not be a condition of the approval that there had to be correspond- 528 ing foreign income. I have not compared that with the B.O.A.C. or B.E.A. who have foreign income, because it is an irrelevant issue, not because it does not add strength to my case. It is not a requirement that there should be foreign income.

§ Mrs. Thatcher
It may not be a requirement, but how many times has it happened recently? Obviously the right hon. Gentleman cannot give an example, otherwise he would have done so. Perhaps I shall put down a Question asking how many times applications have been made under those circumstances, and how many times they have been granted. I suspect that the right hon. Gentleman is using a kind of double negative. There is no reason why they should be refused, but somehow or other they are not very often granted.
We are in great trouble with dollar loans already, and the right hon. Gentleman knows that. A fortnight ago he had 1,500 million dollars outstanding to the I.M.F., repayable by 1970. He had other short-term loans outstanding. He could not repay that loan because he did not have the dollar currency. With 1,500 million dollars already outstanding, he had to trot off to the I.M.F. for another 1,500 million dollars. He is already in difficulty. By 1971 he has got to repay 3,000 million dollars and he has not a dollar to do it. He has not a hope of repaying that money, and just at this time he proposes to give enormous powers to borrow more and more dollars.
8.0 p.m.
The right hon. Gentleman used a false equation. He said, "Yes, if you borrow long perhaps it balances long lending." I do not know of any equivalent long lending by the Government of this country which would balance the liability which they have to the I.M.F., and he knows that there is not any. He is in difficulty, and as long as he goes on borrowing and borrowing and borrowing with no hope of repayment so long will this country be in financial and economic difficulty. I very much deprecate his attitude. This is the way banks have gone bust, and this is the way this Government will make this country go bust.

§ Sir G. Nabarro
May I ask the right hon. Gentleman one question before we 529 part with this Amendment? He inferred —I believe he actually said—that the House of Commons would be fully apprised of any approvals given by the Treasury to borrow abroad. In what form would the House be apprised of those approvals?

§ Mr. Diamond
I did not say anything about it.

§ Sir G. Nabarro
Then I must press the right hon. Gentleman. Are we to be bereft of any information as to approvals given to these Boards to borrow abroad? Are we to have no knowledge of it? Is there no official publication which would give Members of the House of Commons particulars of sanctions given by the Treasury to these nationalised boards to go abroad and borrow?
I wish the right hon. Gentleman would perhaps reconsider what he said earlier and reconsider his last reply, that the House of Commons is not to be informed. Well, in what form then may the House of Commons be informed?

§ Mr. Diamond
I am listening very carefully to the hon. Gentleman—

§ Sir G. Nabarro
I realise that.

§ Mr. Diamond
—and I would hope to afford any information which is appropriate and reasonable. I was only pointing out that with regard to this topic I did not say that it would or that it would not. I made no reference to this topic. Now I am listening to what the hon. Gentleman has to say.

§ Sir G. Nabarro
Is the right hon. Gentleman suggesting that if members of the Opposition, for example, require information of approvals given by the Treasury to these boards to borrow abroad they can obtain that information only by Parliamentary Question?

§ Mr. Diamond
The hon. Gentleman seems so concerned to put words into my mouth. I did not say anything on the issue at all. If he is asking now what are the methods, then I am bound to say that I am not fully informed at the moment, but I am most anxious that information should be given, and certainly there would be the method of the Parliamentary Question, because any approval given by the Treasury or by a Minister is approval given by a Minister responsible to the House of Commons, and of course there 530 would be an answer to a Parliamentary Question.
I imagine—but I am not absolutely sure about this—that these matters would be included in the annual reports of the nationalised industries concerned. Certainly it is the case that Treasury guarantees are notified to the House wherever liability—I think I am right in saying this, but I am speaking off the cuff— wherever liability is entered into which is not shown in the form of a Vote and would not necessarily go before the House otherwise, but is entered into in the form of a guarantee. It is the practice for a note to be laid by the Treasury. Therefore, whenever any of these loans took the form of a Treasury guarantee—and this, it is anticipated, would almost be universally the case—in every single case, the fact of the Treasury guarantee would be before the House. Let me assure the hon. Gentleman that there is nothing here which one would want to hide. One would be anxious to give the House full information about it.

§ Sir G. Nabarro
The right hon. Gentleman has given me exactly the answer I was seeking. He has just used the term "practice of the Treasury". It is the statutory requirement upon the Treasury that I am suggesting. For example, with the Scottish Electricity Boards statutory requirements in regard to all Treasury guaranteed loans to the Boards is dictated in Section 14(5) of the Act of 1943 thus: The Treasury shall, so long as any such guarantees "— that is, guarantees in relation to loans— are in force, lay before both Houses of Parliament in every year within one month after the thirty-first day of March a statement of the guarantees (if any) given during the year ended on that date, and an account of the sums (if any) which during the year ended on that date have been either issued out of the Consolidated Fund under this section or paid in or towards repayment of any money so issued. That is the statutory requirement with the Scottish Electricity Boards for Treasury approvals in relation to loans.
Why is there no similar undertaking now being given by the Treasury of a statutory requirement in relation to loans by English electricity boards or English gas boards in Clause 2 of this Bill in relation to borrowing abroad? Perhaps the right hon. Gentleman would now consider why there is this inequality, this 531 incongruity, between the Scottish Boards' statutory requirements and the lack of such statutory requirements here in England.
I am coming back to the Amendment, Sir Beresford. That was only a passing reference to the Act. The right hon. Gentleman said that it would no doubt be the practice of the Treasury to furnish Members of Parliament with full information of the habits of the Treasury. It should be a statutory requirement in Clause 4 of the Bill, as there is for the Scottish boards. I should be out of order in arguing about that now and I will deal with it when we reach Clause 4. As there is this requirement in relation to the Scottish Boards will the right hon. Gentleman now undertake to introduce in another place similar requirements for the English boards, so that Members of Parliament may year by year be fully apprised of and acquainted in retrospection with all loan approvals—that is, for loans overseas—under this Clause, and which have been given during the year before by the Treasury?

§ Mr. Diamond
We are all grateful to you, Sir Beresford, for allowing this discussion—

§ The Temporary Chairman (Sir Beresford Craddock)
I do not like to interrupt the right hon. Gentleman, but we are getting a wee bit wide, and so perhaps we can get back to the Amendment.

§ Mr. Diamond
I hope that in the circumstances you will permit me, although the discussion has gone a bit wide, to reply to the question raised by the hon. Gentleman, Sir Beresford.
In reply to the hon. Gentleman, the Government would not propose to introduce such legislation, as it is totally unnecessary. The legislation already exists. I have previously explained to the hon. Gentleman what I knew to be the practice because I have practised it. I am now informed and happy to tell the hon. Gentleman—and I am grateful to him for having asked me about it so that one may clear it up now—that guarantees by the Treasury have by Statute to be notified to Parliament for all loans to nationalised industries, which would include borrowing abroad. I have the Gas Act, 1948—which I have very 532 good reason to remember—and Section 45(3) reads: Immediately after a guarantee is given under this section, the Treasury shall lay a statement of the guarantee before each House of Parliament. I am grateful for the opportunity to be able to allay the anxieties of the hon. Gentleman. One is always anxious to allay the hon. Gentleman's anxieties. Perhaps now, therefore, the hon. Gentleman who moved the Amendment would feel the matter to have been adequately discussed and seek leave to withdraw it.

§ The Temporary Chairman
The next Amendment is No. 7, with which we shall be able to consider Amendment No. 9, in page 2, line 18, leave out' securities' and insert' stock or bonds', No. 14, in Clause 4, page 3, line 36, leave out'or other securities', No. 16, in line 39, leave out' securities' and insert' stock or bonds'.

§ Mr. Ridley
I beg to move, Amendment No. 7, in page 2, line 15, to leave out'or other securities'.
This group of Amendments is proposed to delete the word "securities" whenever it occurs and to confine the foreign borrowings of these nationalised industries to stocks or bonds. I admit there may be some explanation for the use of the word "securities" which has not occurred to any of my hon. Friends and I, but we understand that it can mean any form of capital share at all. We are reinforced in this by the definition of the word "securities" given in the Gas Act, 1948: Securities', in relation to a body corporate means any shares, stock, debentures and debenture stock of the body corporate. That is in relation to a body corporate and therefore to a privately-owned concern, not a nationalised industry. Clearly, this wording means anything, through the whole spectrum of the different types of share—equity, debenture, preference or loan. So we have here the curious proposal that shares which could conceivably be ownership shares or debenture shares could be sold by the Electricity Council or the Gas Council to foreign owners. It is a little galling for Conservatives who have resisted the nationalisation of gas and electricity to find that it is now proposed by a Socialist 533 Government to "flog it to the wogs". If that is really the meaning of this Clause I do feel that we are owed at least an explanation.
Equity would easily be created by selling shares which gave the right to vote the directors and the policy of the concern; and under this Clause it would be perfectly possible for the Government to create enough equity shares to constitute control, and to sell them to persons abroad in exchange for foreign currency. It may be they could use it to create debenture shares and could sell abroad to foreign persons debenture shares which gave foreign persons the ownership of gas works, power stations and assets of these councils in this country. Quite simply, we do not see the point of doing that. There is a great deal to be said for selling equity or debenture shares but at least they should be sold to the British people. If that is to be done, if industries are to be denationalised, let us have first crack of the whip and let our investors have the first opportunity to buy these concerns. But I cannot believe that that is what the Government mean.
I can only assume that the two debates —this and the last one—should perhaps have been taken together; because clearly the Government are using nationalised industries as a stalking horse for borrowing more. My hon. Friend the Member for Finchley (Mrs. Thatcher) is absolutely right. We have borrowed enough during the currency of this Government and £3,000 million should do. To approach foreign investors to borrow more through these boards may well have necessitated that these conditions be put in, providing that some share of ownership goes with the loans. It may be that the gnomes of Zurich say, "We will give you a little more money but we would like to have charge of the assets or a share of the ownership ". That may well lie behind it. We do not know.
We believe that the Government should be more careful than to put into Bills words which could be interpreted in that way. But I had better not let my fancy run too far until the Chief Secretary has told us what "securities" means in. this context, and perhaps we can then consider the matter again.

§ Mr. Diamond
Fortunately, I know the hon. Gentleman's international views far too well to be put off by his refer- 534 ences to wogs and the gnomes of Zurich. Of course he was right to ask for an explanation of the words used here and I will be only too glad to give it to him. As I explained in a previous debate, and in view of what he has said may I repeat, the Government have no specific proposals in mind, nor are the Government taking the initiative in this matter. The initiative stems entirely from the nationalised industries. It follows, therefore, as there is no specific proposal, that one cannot define in a narrow way what form the borrowing might take. One has to define it in a broad way lest a proposal should emerge which it would be the desire of the nationalised industry to undertake, which would seem right to my right hon. Friend the Minister and would have the approval of the Treasury and yet would be impossible of achievement because of a too narrow definition having been used in the empowering section. It is proposed, therefore, to use words which are admittedly somewhat broad.
8.15 p.m.
I can assure the hon. Gentleman that we have no intention of issuing debentures carrying charges on these stocks. We have no intention of issuing equity shares. The hon. Gentleman knows that the capital of certain of the nationalised industries has been remodelled somewhat, but there is certainly no intention of doing any of those things. It is merely a question of the need to use a broad definition when powers are being sought and when a specific proposal is not in mind. If it was a specific proposal one could deal with the matter more narrowly. The definition which the hon. Gentleman quoted from the Gas Act does not apply to the current Bill so what he envisaged there has no authorities in that particular Act.
I recognise that the term is a broad one, but I am advised that there are methods for unsecured borrowing, non-participating borrowing, which nevertheless might not be covered by words such as "stocks" and "bonds" only. There is, for example, a promissory note, which would not be covered by such a term. In order not to deny the opportunities of the kind of borrowing which a nationalised industry would wish to undertake and which would be approved by my right hon. Friend and the Treasury, it 535 has been thought wise to define the matter somewhat broadly.

§ Mr. Ridley
I must say we are a little surprised that such a large sledgehammer has to be taken to crack the nut of a promissory note; but in view of the right hon. Gentleman's kind response to what I have said and in view of his well-known predilection against selling equity shares in public enterprise, we can all, I suppose, let the matter rest there. I beg leave to ask leave to withdraw the Amendment.

§ Mrs. Thatcher
I beg to move Amendment No. 10, in page 2, line 25, to leave out from' 1957' to end of line 28.

§ The Temporary Chairman
Amendment No. 17 can be taken with this Amendment.

§ Mrs. Thatcher
This is a small probing Amendment seeking to delete the latter part of subsection (2). I wonder if the Chief Secretary can tell us if this section means what I believe it is intended to mean? I should have thought it was intended as a kind of bridging section, because while one loan is being raised with which to repay another the limit will be temporarily exceeded while the second loan is being raised. What bothers me is this: if these powers had been in existence and operated a year ago, and exercised in terms of raising a dollar loan, how would that equivalent have entered into the borrowing limit? Presumably, it would have entered into that limit as its sterling equivalent at the time the borrowing was made so that when the loan came to be repaid it would have required 17 per cent, more in its sterling equivalent to repay it. That would not have made this subsection merely a bridging subsection. It would have taken its powers right over the limit permitted by Parliament. Is that correct?

§ Mr. Diamond
The hon. Lady is quite right to say that the purpose of these words is to provide a bridging operation for that limited amount and that limited period and it is an essential provision to protect the first lender. Otherwise, there might be claimed to be an invalidity at the point of repayment because the borrowing power would have been exceeded. Fortunately, we do not have to 536 consider the somewhat theoretical and academic situation which the hon. Lady described and which I would have to consider carefully to see to what extent it was affected by these words. Suffice it to say that she is right on this occasion, as on most others.

§ Mrs. Thatcher
Can the right hon. Gentleman say how, when a loan is borrowed in foreign currency, it is calculated in terms of sterling for the purposes of the borrowing limit? If a loan is borrowed in foreign currency the amount borrowed enters into the total limit and presumably it does so as its sterling equivalent at the time of borrowing.

§ Mrs. Thatcher
Then, my other conclusions must follow, but on this occasion I am happy to ask leave to withdraw the Amendment.