HC Deb 09 July 1969 vol 786 cc1476-83
Mr. Patrick McNair-Wilson

I beg to move Amendment No. 25, in page 4, line 32, leave out '1973' and insert '1972'.

Mr. Speaker

I suggest that we take at the same time Amendment No. 26, in page 4, leave out lines 37 and 38, and Amendment No. 27, in line 41, at end insert: 'not exceeding any period greater than five years' which are linked on the question of timing.

Mr. McNair-Wilson

Clause 6 deals with the duration of certain powers which the Minister will have. Briefly, those powers are, first, to provide the level of public dividend capital; secondly, to direct the notional capitalisation of reserves; and, thirdly, to set specific financial duties for the Corporation. These powers would normally lapse at the end of the first financial year to end after 1973. By these Amendments, we seek to shorten that time by inserting "1972".

As the Clause is drafted, at the end of the financial year after 1973, the Minister may, by order, have the provisions extended permanently or for a specified time. We are strongly opposed to having a permanent feature of this type built into the Bill. We are far from happy that there should be an extended period for this exercise without the most careful vetting.

I find it hard to discover any common ground about the concept of p.d.c. It is well known that in this concept the eventual return will be determined by the Minister. That means that the Minister acts as the principal shareholder, board of directors, and everybody else.

Those people whose money is involved in p.d.c. should realise that a variable return may mean that on certain occasions there is no return at all. We regard this concept as somewhat dangerous. It was brought into the Bill because the Government and their supporters have spent much time moaning about the fact that the Corporation is labouring under a heavy capital debt. I ask the Minister: who put that debt on the British steel industry? Why are the incumbents of the Corporation labouring under this debt? The answer is that it was first put there by the nationalisation of steel by a Labour Government—

Mr. Speaker

Order. This is not a Third Reading debate. The hon. Member must link what he has to say with the Amendment that he is moving.

Mr. McNair-Wilson

I shall be guided by you, Mr. Speaker. I was merely pointing out that the concept of p.d.c. was to remove the incidence of capital debt on the Corporation. We believe that this experiment, as it is described, should be carefully watched.

These Amendments seek to shorten the time of this experiment by approximately one year. I hope that the Minister realises that the Amendments are intended to be helpful, and that it is not a question of dragging the plant up by the roots to inspect it over a shorter period. Because it is an experiment we want an opportunity to look at it over a shorter period than is provided for in the Bill. We are converting a large part of the capital debt of the Corporation into public dividend capital. The performance of the Corporation during the years to the end of 1973 may be unhappy and difficult. We have already had one problem in relation to the views expressed by the N.B.P.I. which could affect the return on this dividend capital. We are merely giving the Minister an opportunity of examining the situation rather more quickly than he would do under the Bill as it stands.

Mr. Hall-Davis

I shall be brief. I want to put only one point and to ask only one question. My objection to the Clause is that it gives the impression of giving full opportunity for a continuing scrutiny of this arrangement but when one reads it closely one sees that it is not what it seems. I know that many Clauses are not what they seem on first reading, but this Clause disguises the fact that, in effect, there will be only one guaranteed opportunity for review according to the provisions of the Bill—the review at the date specified in subsection (1).

It is right that the implication of the Clause should be made clear. I should like to know whether I am right in assuming that if the Minister acts under subsection (2)(a) he or his successor will not have power to revoke the Order. In other words, is an Order that the provision shall continue in force permanently subject to a change of mind on the part of a Minister if he finds that there has been a dreadful mistake and the system is not working properly, or is it a permanent Order which would require legislation to overturn or withdraw? This is important, because we are dealing with a new departure and we are providing only one guaranteed opportunity for review. The Minister seems to be committing himself to not being able to change his mind. In our view this is too limiting a factor.

Mr. Mason

We are dealing with three small Amendments grouped together. Amendment No. 25, if accepted—and it is not my intention to accept it—would cut back the experiment with p.d.c. by one year. It does not seem to make sense. I do not see the aim of the exercise. There is a precedent for the creation of public dividend capital in the B.O.A.C. There the first experimental period was for five years. We suggest the same period in the Bill.

9.45 p.m.

Secondly, I think that five years is really the minimum for the test. We have talked a lot about a cyclical industry, and one of the reasons why we agreed that p.d.c. should be established for the British Steel Corporation is that it is subject to fluctuating returns and would need a span of time before we could look back and check whether p.d.c. had worked fully. So I do not think it makes sense to cut back the time.

Thirdly, when p.d.c. came in it was considered that the Corporation should be given time to make up its losses and earn profits to pay minimum dividends and tax, on p.d.c. and I would not have thought it sensible to cut back from five years to four.

If Amendment 26 were accepted it would allow me to keep p.d.c. in being permanently only if I agreed to go through the substantive legislative process—that is what I think the hon. Member is referring to—instead of by order. Of course, even that order would still necessitate Parliamentary debate and consent. I think it is likely that for the British Steel Corporation and this industry, because of its nature, we may wish to keep this system of financing in being. It is right, therefore, that there should be in the Bill provision for us to do so, via an Order.

Amendment 27 is a further restriction designed to end p.d.c. after five years.

Mr. Scott-Hopkins

I understood the right hon. Gentleman to say that Amendment 26 would make him come to the House for substantive legislation. I do not think it is so. I think the effect of the Amendment would be merely that he would have to come back under Clause 6(2)(b) at the expiration of the Corporation's financial year or as might be specified in the Order. I do not think the right hon. Gentleman is quite correct in his argument.

Mr. Mason

Well, I gather that Amendment 26 would take out Clause 6(2)(a) which gives the Minister by Order the right to continue the powers in force permanently after the time they would otherwise expire.

Mr. Scott-Hopkins

If the Amendment were accepted the Clause would read: The Minister may be order (made by statutory instrument) direct that the said sections"— that is, Sections 2(1), and 4 and 5— shall continue m force after that time until the expiration of such of the Corporation's financial years as may be specified in the order …

Mr. Mason

Yes, but even if I were impressed by the hon. Gentleman's argument I still would not be agreeable to accepting the Amendment—

Mr. Scott-Hopkins

Why not?

Mr. Mason

Because I said I might wish to keep this system of financing in being. I am also suggesting that if I wanted to do it by Order I might instead have to go through the substantive legislative process to do so.

Mr. Scott-Hopkins

Keep on coming back?

Mr. Mason

Yes, I shall be coming on—

Mr. Speaker

Order. We are at the Report stage, and it is a little more formal than Committee.

Mr. Mason

The hon. Gentleman would stop me from establishing p.d.c. as a permanency. I am very surprised. I would have thought, as I said initially, that, as this industry is one which, by its nature, is one of fluctuating returns, but viable in itself, p.d.c. would have been right for it. I think the experiment will succeed. I do not think that the Corporation should be lethargic, and, so to speak, lie back on a couch, but that Board and manpower alike will work and will succeed. I shall expect to get from public dividend capital at least what I would have got from fixed interest capital, and as the B.O.A.C. precedent has succeeded, I see no reason why this experiment should not, too.

Mr. John Peyton (Yeovil)

The right hon. Gentleman has furnished the House with as unsatisfactory an answer as one can expect on the basis of experience in Committee. The experiment, and it can be no more than an experiment, of public dividend capital is a hazardous and rash one from the point of view of the nation. I entirely appreciate that the right hon. Gentleman looks upon this more as a matter of party interest and dogma than from the point of view of the nation.

When he said, "I may wish to keep this system of financing in being either for a period or for ever, and I wish to do so by Order", I regard this as pushing the tactics of dictatorship a little too far. The Bill gives him much too wide discretion.

While it is no Dart of my purpose tonight to criticise the selection, I nevertheless regret that we have not been able to deal in detail with other Clauses, particularly those referred to in this Clause, that is to say, Clauses 2(1), 4 and 5.

The Minister is introducing what I regard as a fraudulent device—public dividend capital—which he hopes will give him a return greater than he could get from a fixed interest loan to a nationalised industry. This is not saying much, because nationalised industries have made a habit of regularly writing off whacking great losses of capital at the national expense. What the Minister means is that this undisguised loss to the taxpayer will be clothed, so far as words can do so, in a garment of respectability, and so we have this queer hybrid animal, public dividend capital.

The Explanatory and Financial Memorandum, under the heading of Clause 5, says of the Minister that: He may, by order, express the financial duty in a form other than as a rate of return on net assets but any such order would have to be approved by both Houses of Parliament. Will the Minister be good enough to give one of his less cursory answers and say exactly what is meant by that?

Mr. Speaker

Order. We are not discussing the Financial Memorandum. We are not discussing the Amendment which the hon. Gentleman regrets has not been selected. The Amendments we are discussing propose certain time checks, and the hon. Gentleman must relate his remarks to those.

Mr. Peyton

I have already expressed my regret that we are not discussing those matters, and I would not wish to do so more strongly than I have done. I am saying that this is a rash and undesirable experiment which should not be continued indefinitely. I am endeavouring to say why it is undesirable, and, therefore, why it should not be continued indefinitely, and I hope that I am not being disrespectful to the Chair in saying that.

I am asking the Minister to go to some length to explain to the House what he means by this. What kind of return over this period is to be expected from public dividend capital? If it is not to be a return on net assets, what does he mean? Can the Minister be a little more specific, or is he saying that he will have to go through the tiresome procedure of having to come to the House to say that a nationalised industry is to be given a nice, respectable way of swallowing up capital rather than that it should be written off in the future?

One of the reasons for the Amendment is that we, as representatives of the taxpayer who has been called upon to buy this industry, are entitled to have certain procedures observed. The Minister should have to go through this tiresome performance—and he has virtually said that it would be tiresome for him. If the experiment does not look like working he would not be able to get away with a by merely coming to the House for an order. He would have to come to the House and go through the full process of an Act of Parliament to continue an experiment which had been proved unsatisfactory.

We all know that the Minister finds Parliamentary debate and discussion rather tiresome. He has his views about how one can dress up with words thoroughly unsatisfactory and unrespectable proceedings. He does not like to have to deal with them in detail or at any length. One can only admire his discretion. He plainly does not wish—ne has not the talent of the Chief Secretary—to go to the lengths of justifying what cannot be justified.

We are concerned that the Minister, on behalf of the Government, should have the impudence to ask for powers to perpetuate, not merely a rash experiment, but an experiment which if indulged on by a privately-owned industry would land its directors in an uncomfortable situation in the Old Bailey. I am not saying that that would be an improper place for the Minister and his colleagues to find themselves. I am merely suggesting that the House of Commons would be most unwise to agree, without any resistance at all, to give its fiat to such a monstrous, naked proposal; a proposal built upon the twin pillars of total incompetence and a measure of fraud.

Mr. Eldon Griffiths (Bury St. Edmunds)

I wish to support the remarks of my hon. Friend the Member for Yeovil (Mr. Peyton). I would not have intervened if the Minister had given to my hon. Friend the Member for Morecambe and Lonsdale (Mr. Hall-Davis) a straight answer to a straight question.

I find particularly objectionable subsection (2)(a), under which the Minister may by Order continue in force permanently the public dividend capital. That is an extraordinary large power. I am sure that my hon. Friend was right to ask whether it was the Minister's intention under that subsection to continue the provision in force permanently and, if so, what "permanently" means.

The Minister in a very short and I thought cursory speech, brushed the question aside. He surely owes the House an explanation which so far he has not given. We all know that it is an experiment and should be as short an experiment as possible. I must strike a petty attitude on this matter and hope that a Conservative Government will not be inhibited by any legislation in going as far as 1973. I hope that we shall be able to get rid of it in 1972 or earlier. I would prefer the Amendment to read 1971) or 1971 rather than 1973—

Mr. Speaker

Order. The hon. Gentleman cannot speak to an Amendment which is not on the Notice Paper.

Mr. Griffiths

Mr. Speaker, I am supporting the date 1972 but wishing that it had been earlier.

The Minister tells us that this is an experiment, and though I have some regard for his achievements in office, I remember an occasion some years ago when he jumped, fully dressed, off the end of a pier into a vast quantity of water. I suggest that he is doing something similar here. He has a completely unknown body of water called public dividend capital, and he is leaping in—

It being Ten o'clock, the debate stood adjourned.

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