HC Deb 09 July 1969 vol 786 cc1451-73

The operation of section 24 of the principal Act shall be amended so that in addition to the provisions therein the Corporation shall in its annual statement of accounts present details of the rate of return both on the total net assets of the Corporation and on the net assets of each of its principal regional or product groupings as is for the relevant period determined under subsection (1) of section 5 of this Act; and also the Corporation shall publish each financial year not later than nine months after the commencement thereof, in relation to the first half of the financial year, an unaudited statement of total sales, costs, profits, tax liabilities together with a summary of working capital and utilised borrowing powers.—[Mr. Stainton]

Brought up, and read the First time.

8.7 p.m.

Mr. Keith Stainton (Sudbury and Woodbridge)

I beg to move, That the Clause be read a Second time.

This Clause was drafted originally as an additional subsection to Clause 5, but, on the advice of the Table Office, it was thought better to make it a new Clause. However, it should be read in conjunction with Clause 5, which spells out the Corporation's financial duty. It should also be seen in the context of Clause 2, which is the provision for the switch from fixed interest capital to public dividend capital, expunging £700 million of commencing capital debt, leaving £134 million, and creating £700 million of public dividend capital, upon which the discipline, in terms of payment to the Treasury and hence back to the public out of the Corporation's profits is quite different from that which automatically arises in connection with the discipline of a fixed loan. This is an important starting point to be remembered.

The second starting point is the inadequacy, for public control, of the dividend machinery in Clause 2, although "machinery" is a most elevated expression. It certainly is not a policy criterion. Therefore, we come to Clause 5, under which the Corporation's financial duty is the only discipline in terms of this £700 million of public dividend capital. But the Clause fails to impose any realistic discipline. The specification of a rate of return on net assets … as for the time being defined for the purposes of this subsection by the Minister …", if put in colloquial terms, represents the result of a "private huddle". There is no question of Parliamentary sanction in the short term or almost equally certainly in the medium term.

In Committee we attempted to grapple with the situation by proposing that the Minister should proceed to stipulate performance on return on net assets by way of order, subject to Parliamentary procedure. But, in the coma of non-co-operation which seemed to obsess the Government in Committee, that was rejected without good reason. However, on Report, we are precluded from repetition. Hence we find ourselves trying to tackle this problem from the other end. Getting hold of the tail of a problem does not always commend itself as a solution, but if we can get hold of the tiger by this new Clause, we shall have made a distinct advance.

The new Clause tackles the problem by seeking to amend Section 24 of the Iron and Steel Act, 1967, which parades under the rubric of Accounts of the Corporation and audit thereof", by imposing on the Corporation an obligation to report as part of its ordinary financial accounting-reporting procedure the rate of return which it is achieving on its net assets. It goes on to enlarge on this duty and requires the Corporation to report not only on the total return but on the principal regional or product groupings—that is, the principal activities of the Corporation.

A very generous interpretation of Clause 5 might permit the Minister even to specify separate rates of return on separate parts of the activity. I should like to know from the Minister whether that is in his mind. But it is not an interpretation which would be mandatory on the Minister. Hence the new Clause. As Clause 5 stands, the Minister could satisfy the requirements of the Bill by stipulating a single rate of return for any period.

We do not want a long argument about what constitutes the net assets. May we rest this part of the discussion on the net assets shown in the last Annual Report and Accounts of the Corporation? I refer to the consolidated balance sheet in Appendix A on page 78 of that document. The net assets as reported there are £1,059 million. This is a vast figure by any reckoning. If the Minister can get away with it by simply stipulating one single rate of return on net assets, we arrive at the ludicrous position that a mere 1 per cent. difference in the stipulation of performance—the return on net assets—could be worth £10½ million per annum, or 1 of 1 per cent. could be worth £1 million per annum. One rate of return would be an unduly blunt and imperfect instrument.

I think that I am entitled to call in aid the provisions of the Companies Act, 1967, which spells out in fairly considerable detail the obligation on any public company or limited company to report the turnover of different activities of the company and the profits thereon if there are different essential elements in those activities.

A second reason why we should aim to differentiate the reporting on the return on net assets and get away from the concept of one figure only derives from the second Report on Organisation, Cmnd. 163 dated 11th March, 1969, made by the Corporation. There are some extremely disturbing passages in that Report. First, the Corporation refers to its experience with its present type of organisation. We are not talking about a row of beans. We are talking about a sum—net assets, let alone gross assets—well in excess of £1,000 million. This is the largest industrial enterprise in this country, possibly in Europe.

The Corporation says: In the eighteen months that have elapsed since then"— that is, vesting day— however, the Corporation has had the opportunity to study closely the major problems confronting it … It has also had time to examine the way in which problems of comparable size and complexity are handled by steel industries in other countries, and by industry generally in this country and abroad. That is a curious comment in view of all the high enthusiasm for the nationalisation of steel and the precision with which this was represented from the benches opposite. Apparently, they knew precisely what they were doing and they got it absolutely right. Here we have the Corporation telling us, in the light of experience, that it has thought again, and its thoughts emerge briefly as follows: As a result of its experience in operating the present system of multiple-product Groups it has become clear to the Corporation that this system by its nature impedes rationalisation and the optimum ultilisation of the Corporation's assets. This was written only 18 months after vesting day. Then we come to the volte face: Practical experience gained by the Corporation"— I like the bit about "practical experience"; presumably theretofore experience was utterly impractical— since vesting day has led it to believe that the disadvantages of a product grouping, which were envisaged in the Corporation's first Report on Organisation"— in other words, when it started it nailed its colours to this particular mast— would be outweighed by the advantages in promoting rationalisation and the optimum use of production facilities to which that report also drew attention". So that we are now about to reorganise internally the physical allocation and control of the activities of the Corporation.

That is the basis of the second very important point that I want to elicit in support of the new Clause. It requires a reporting by the Corporation not merely against the one figure of internal net assets but in terms of performance against net assets in the principal regional or product groupings. The reason for this wording is that the Corporation is in a transitional stage, and one understands that the regions may become product groupings. This does not preempt the situation; it leaves it open to that or any other intermediate form of organisation for which the Corporation might finally settle.

That is the case that I present in support of the first 4¾ lines of the new Clause. There remain 3½ lines which, in effect, require the Corporation to publish an intermediate profit statement each year. This has been designed to make the task as little arduous as possible. The Clause provides that not later than nine months after the commencement"— of the financial year. The Corporation shall report— in relation to the first part of the financial year, an unaudited statement of total sales, costs, profits, tax liabilities, together with a summary of working capital and utilised borrowing powers". 8.30 p.m.

The most obvious argument in support of the second part of the Clause is to be found in the General Undertaking of the Stock Exchange. I am sure that the Minister is familiar with the document—Memoranda of Guidance and Requirements of the Federation of Stock Exchanges, commonly known as the Yellow Book. This General Undertaking specifies criteria for all companies in the public sector quoted on the stock exchanges of this country. The criteria are much more harsh than I have specified for the Corporation.

The second reason that I adduce in support of this interim statement is that people in the country—not just hon. Members on this side of the House—are deeply disquieted about the course taken by the steel industry since nationalisation. I call in evidence of that statement the increase in the borrowing powers allowed to the Corporation since the nationalisation Act came into being in 1967. The Corporation started with authorised borrowing powers of £300 million. This was under an enactment made in March, 1967. Last summer, by Order, that £300 million was increased to £400 million—an increase of 33⅓ per cent. The Bill seeks to increase the borrowing powers immediately from £400 million to £500 million—a further increase of 25 per cent.—with reserve power for the Minister further to increase the £500 million to £650 million—another tranche and another 30 per cent., admittedly by Order, but in all representing an increase on the original limit of borrowing powers of no less than 116 per cent.

I would not go so far as to say that the situation is out of hand, but when one aligns this position with the obvious financial difficulties—I do not say crisis—which are now clearly being encountered by the Corporation, a mere reading of its Annual Report and Accounts and a simple extension of some of the trends on the back of an envelope will give one all the answers, let alone the rumours that British emissaries of the Corporation have tried to raise money in Germany and Switzerland in anticipation of the Bill's going through Parliament and receiving the Royal Assent. This is an important second reason why the public should be equipped with a regular interim report of the Corporation's profits, working capital and the utilisation of borrowing powers.

It is on those very strong grounds that I move the Second Reading of the new Clause.

Mr. Patrick McNair-Wilson (New Forest)

I support the new Clause and congratulate my hon. Friend the Member for Sudbury and Woodbridge (Mr. Stain-ton) on the most able way he moved it. It is of vital importance in building some common sense into this Bill.

This Bill is the predictable result of the nationalising of the steel industry. That industry is now returning to Parliament for more money and is treading the well-trodden path which has been taken by many nationalised industries in the past, and I have the feeling that this is not the last time that we shall see a Minister of Power coming back to this House to get more money to shore up a nationalised industry. My hon. Friend the Member for Sudbury and Woodbridge spoke about financial difficulties, and, of course, he is quite right, but this will come as no surprise to any of my hon. Friends on this side of the House, because this is exactly what we said would happen when the original Act of 1967 came into being.

However, the feature of this Bill, and. indeed, of all the debates upon it, is the total lack of clarity of any of the figures which have been given by the Government during our discussions. The Minister will remember only too well the storm which, when he was sitting in his place during Second Reading, broke about his head because the figures which we were given were conflicting and confusing. This new Clause would at least give the public an opportunity of seeing in some detail exactly what is the financial situation of the British Steel Corporation.

Apart from the fact that it asks for more money this Bill endeavours to dress up a nationalised industry as a commercial enterprise. We all know perfectly well that that is absolute rubbish, but at least this new Clause, if accepted, would enable the people to see what the true facts of the matter are. Therefore, I hope that the Minister, who is, clearly, in a very concilliatory mood tonight—I have seen him smiling—will accept the Clause as being a wholly sensible and right Clause to have in a Bill which deals with so much public money. I have never made any secret, personally, of my dislike of Ministers posturing as captains of industry.

I find the sight unhappy, and, indeed, dangerous. This Clause, if it were accepted by a Minister, would at least allow this captain of industry to have some of the disciplines which go with a normal commercial undertaking. It is not unreasonable that the British Steel Corporation, which is, after all, as has been pointed out by my hon. Friend, one of the most important industries in Britain, when it asks the House of Commons, the country, for money, should make perfectly clear exactly where it stands financially. After all, a great deal of the ordinary taxpayers' money is wrapped up in this industry, and I should have thought it quite reasonable that he should have a clear picture of the Corporation's situation. This Clause, if accepted, would at least build in something like discipline. It cannot be the true discipline of the commercial market because no nationalised industry ever operates in that way, but at least it would provide evidence of what the situation is.

It would do more than that. My hon. Friend pointed out the size of the borrowings which are required by the Corporation. An eventual sum of £650 million would be possible under this Bill, with the approval of Parliament: £650 million of taxpayers' money. At least this Clause would enable us to be given some indication as to where and why the money is required. During all the debates we have had on the Bill so far not one shred of evidence has been given in any detail whatsoever as to why this money is required or how it is to be spent.

Then there is the other element in this new Clause. It deals with he facts and figures relating to the possibility of the new product groups. This is something for which we have to wait and see; we do not know where the headquarters of the groups will be, we do not know what exactly their constitution will be. But we do know, after this very brief period of nationalisation, that the regional concept of geographical areas has proved to be a failure. I remember so well the arguments in 1963, when the then British steel industry was taken to the Restrictive Practices Court and accused of being monopolistic. It is quite clear, when these product groups come into being, that we shall be moving into the area of total monopoly in the British steel industry, with each product group an unchallenged monopoly on its own.

Therefore, in the new Clause we have sought to ask that the Corporation and the new product groups should at least declare their hand, so that comment may be made on their success or otherwise. Having attacked the steel industry as a monopoly when it was in private hands, and having set up a new structure which is now a failure, we are setting up a new State monopoly, and we should have an opportunity of judging its performance. I am sure that the new Clause will commend itself to all hon. Members. It is reasonable, sensible and essential. It makes sure that we, as the stewards of public money, are insisting that the steel industry should make its position crystal clear about the money which it is receiving from the taxpayer and the assets which it controls.

Mr. A. G. F. Hall-Davis (Morecambe and Lonsdale)

I also begin by paying tribute to the closely reasoned argument with which my hon. Friend moved the new Clause. As I listened to him marshalling arguments, it came to my attention that not a single Government Amendment appears on the Notice Paper. The Minister is a modest man, and it must have crossed his mind that it would be extraordinary if, in the preparation of the Bill, he and his colleagues had been perfect in their conception and drafting on a matter of such importance. If he had been totally right in every word of the Bill, I suspect that he would have achieved something which few Ministers in any party have done. Perhaps this will prompt him to look particularly hard at the constructive proposal embodied in the new Clause.

Like my hon. Friend the Member for Sudbury and Woodbridge (Mr. Stainton), I was a member of the Standing Committee which considered the Companies Bill, 1967. We sat often enough for the deliberations upon the contents of that Bill to have been imprinted with a reasonable degree of clarity upon our minds. One of the major considerations in the Bill revolved round the question of fuller disclosure, and it was generally accepted that for large enterprises the time had come to move towards a fuller disclosure of information to the shareholders, the general public, the financial press and those who comment on these matters.

Since that Bill became law, people are much clearer about the type of information which should be disclosed. One class of information for which we should constantly be seeking, so that it can be identified and produced, is information which will enable the efficiency and the trends in efficiency in underlying constituent parts of an organisation to be assessed.

My hon. Friend has put the case so convincingly that I cannot believe that there will be no response from the Minister. I shall not speak at length, but I would draw attention to the recently published Reports of the Monopolies Commission on the Rank Organisation and the De La Rue Company, and on Unilever and Allied Breweries.

8.45 p.m.

The Monopolies Commission felt it appropriate to add some general observations on mergers in an appendix to their comments. The appendix suggests that information for disclosure by companies has some relevance to the new Clause. One of the Commission's comments which I should like to quote is set out on page 62 of the Report: We have in mind here that the classes"— that is to say classes of a business— might be prescribed by the Board of Trade, broadly on the basis of the Standard Industrial Classification Orders, though in our opinion it would be desirable that there should be some further breakdown of the Orders in this context …". In referring to the Companies Act, 1967, the Commission say that the directors' report must contain the turnover and profit (or loss) figures for each class of activity which in their opinion differs substantially from other activities. The Commission suggested that this provision had been variously interpreted by companies, a comment which I find rather interesting.

The Monopolies Commission then stated: We further suggest that for each prescribed class of business the profit on capital employed should also be shown either in the directors' report or in the form of notes to the annual accounts …". This is what is being asked for in the new Clause in connection with the affairs of the separate divisions which we are given to understand will be created by the Steel Corporation.

Since my small involvement in the proceedings leading up to the Companies Act, one of the criteria I have applied to all Bills dealing with public corporations and bodies in the public sector is that they should set the pace in conforming not only to the letter of the Companies Act but to its spirit. On one or two occasions in relation to the making of information and reports available within a specified period Ministers have responded to my promptings on this matter.

My hon. Friend the Member for Sudbury and Woodbridge pointed to the requirement asked for by the Stock Exchange in their General Undertaking provisions to be observed by every company seeking a quotation or wishing to make an issue in the private sector. The Minister must consider carefully whether he has any reason to reject this requirement in an enterprise in the public sector since he has laid considerable emphasis on his wish to align the British Steel Corporation so far as possible with firms in the private sector to try to make it a commercial undertaking with the same advantages as other commercial undertakings and free from any disadvantages.

I suggest that his protestations will carry more conviction if he will accept the new Clause for which there are such good precedents, both from the Monopolies Commission and from experience from the Stock Exchange and in the Companies Act, 1967, which was introduced and passed by the Government of which he is a member.

Mr. Rafton Pounder (Belfast, South)

Like my hon. Friends on this side of the House who have spoken in support of the new Clause I join in congratulating my hon. Friend the Member for Sudbury and Woodbridge (Mr. Stainton) on the clarity with which he stated his case. I am sure that every hon. Member on this side approaches the new Clause in no sense of seeking to hamstring the British Steel Corporation.

In Committee, the argument was advanced repeatedly that what we were seeking to do was to make the British Steel Corporation commercially viable. That was commonly agreed on both sides. However, if one is to accept the argument of commercial viability, one must also accept the requirement that ordinary commercial practices should apply to the Corporation.

My hon. Friend said that financial discipline was of the first importance. There can be no doubt about the importance of establishing ordinary commercial practices in a nationalised industry. Throughout the course of this Bill thus far, the B.S.C. has been extremely generous in providing memoranda, statistical information, financial data and so forth. I do not think that it can be argued that the Corporation has been backward in providing information or that it would not be equally helpful in providing additional information were it the wish of the House that it should do so.

I would go further than my hon. Friend does in his new Clause. Surely it is of importance that one should want to see profit forecasts set against actual performance. That is of the utmost importance in ordinary commercial undertakings. It should be of equal importance in a nationalised undertaking.

No one with any experience of budgetary control can reasonably expect such forecasts to be 100 per cent. accurate. Having spent a short period of my life in such work, I know that a 5 per cent. margin of error is normally accepted. I would very much like to see these half-yearly statements of account examined against the budgetary forecasts which presumably will have been made about six months before the beginning of the financial period in question.

I am not certain that my hon. Friend is not being too generous in inserting the words "unaudited statement". I cannot see why it should not be an audited statement. I imagine that, in common with other large organisations, there is a continuous audit process within the Corporation. Such organisations would employ a professional firm of accountants for what is called a balance sheet audit. That is probably being done, anyway. I would not have thought that excessive work would be involved in producing the figures which are the subject matter of the new Clause.

When my hon. Friends were making their points, I could not help trying to imagine the kind of arguments which the Minister will seek to employ in trying to knock down my hon. Friend's Clause. It could be argued that it seeks materially to alter the Bill. However, that is not the case. In fact, I do not see any logical ground on which the Clause can be resisted. It is merely a requirement for additional information which I am surprised is not already embodied in the Bill. It is not asking for anything which would not be required of a commercial undertaking engaged in any other field of activity. In view of the fact that the B.S.C. has been so helpful and generous in providing statistical data, I would have thought that it would be only too pleased to accede to the request embodied in the Clause.

I hope that this Clause commends itself to the Government.

Mr. David Lane (Cambridge)

The new Clause deals with an important matter, and I am glad to support it. I hope that in the harmonious climate that has now descended on the House the Minister will turn over a new leaf, and agree at last to make a change in his original Bill. Whether or not he does so, he is provided with a further opportunity to tell us a little more about the Government's thinking on the rate of return. Too often in our debates so far the Government have been coy, if not evasive. Too often, when we have asked major questions, we have had mini-answers. We need more clarity and certainty, and that is what the new Clause would provide.

We are still in the dark about the Government's intentions on the rate of return. I reread this afternoon what the Parliamentary Secretary said in Committee in answer to our Amendment seeking to tighten up Clause 5 by making it obligatory on the Government to set a target, but the Bill remains highly unsatisfactory in this respect. It is necessary to tighten it further before it leaves the House.

I particularly commend the idea contained in the Clause of a separate breakdown between the different parts of the whole business. The exact manner of definition does not matter so much, but the principle is important. This breakdown would be of great help in enabling us to judge relative efficiency and to tell whether different parts of the nationalised sector are taking an unfair advantage of their dominant position.

The second half of the Clause calls for half yearly results. I do not know when the Minister will finally leave his present office, but I am sure that, when he does, he will want to be remembered not only as the "Laughing Cavalier of Millbank", but as a bold innovator. He has already written into the Bill a provision that a target rate of return may he, and we hope will be, laid down by the Government: let him go further, and agree to our suggestion that at least this nationalised industry shall publish a half-yearly statement of results.

Many of the largest companies in the private sector publish their results quarterly without difficulty, and this obligation has proved to be a stimulus to management and a service to the public. The chairman of the Corporation has repeatedly said that he wants to lead the industry as a commercial concern comparable with the large competitive con- cerns either in this industry or in other industries at home and abroad. Here as my hon. Friends have said, is an opportunity to make sure that the Corporation acts in the same way as do those other concerns.

Whatever may be our disagreements in the House about the method of running our national economy, I think that we all agree in welcoming the fact that year by year it is becoming a more open economy. There is more disclosure, and most of us want still more disclosure in both the private and the public sectors. But in the context of this debate I must ask whether the Government are serious in wanting the public interest to be safeguarded, and in wanting those interested in the industry to be well informed about its plans and performance. Are they serious in wanting the Corporation to be fully subjected to commercial disciplines in the way that other businesses are? If they are serious in all this, let them accept the Clause, or something like it.

Mr. James Scott-Hopkins (Derbyshire, West)

My hon. Friends have left me with little to say, but to me the extraordinary thing is that this is called the Report stage, yet there has not been one intervention from any hon. Member opposite. We have the pleasure of the company of the hon. Member for Sheffield. Brightside (Mr. Eddie Griffiths), but he is about the only back bencher present on the opposite side, apart from the Minister's P.P.S. It is a sad fact that the House of Commons should be debating an extremely important Bill involving a vast amount of money with so little, if any, attendance of hon. Members opposite.

While my hon. Friends have been speaking I have been trying to think of what the Minister would say in reply. Knowing him a little, as I do, I am sure that he will refuse to accept this Clause, but I wondered why he would do so. He will smile, I know, and I am certain that he will charm the House, as he always does. I thought that he might say that the Clause is unnecessary, as he already has adequate powers under Section 6 of the so-called principal Act of 1967 to require the Corporation to change the form of its various returns. I thought he would not use that argument because, if so, there would be no point in having Section 24 of the Act. The drafting of the Bill in Clauses 4 and 5 obviates the necessity for him to hide behind Section 6.

9.0 p.m.

I asked myself why the right hon. Gentleman should want to resist this new Clause. It seemed that the reason was that we were asking him to do something which either he or the Corporation would decide is a bad thing and against the public interest. I cannot see why that should be. My hon. Friends have clearly demonstrated that it would be in the public interest for the Corporation's accounts to be published in the pattern suggested in the Clause and that the accounts should be separated and refer to the new product groups which it intends to bring in. I can see no reason why the right hon. Gentleman should say that this would not be in the public interest. Every large enterprise today publishes its accounts in as much detail as possible. That is of great assistance to management and everyone concerned, including the shareholders. In this case we constitute the shareholders.

Mr. Stainton

I point out that the British Steel Corporation Report, in Appendix B, goes some way towards meeting the demands we are making, but the critical point about the new Clause in terms of reporting of assets is found in lines 4 and 5 relating to the stipulation about performance under Section 5 of the Act.

Mr. Scott-Hopkins

I was coming to that point. Under Sections 4 and 5 the Minister can give directions to the Corporation. We ask that the accounts should thereby be submitted. It occurred to me that the right hon. Gentleman would not like this to happen. This perhaps would be why the Corporation might object to this course being followed. I am certain the right hon. Gentleman will use some other method of getting round this point.

The right hon. Gentleman and the Parliamentary Secretary have shown tremendous coyness all through proceedings in Committee about coming forward with facts and figures as to the Minister's real intentions and the criterion by which he will judge and study standards. I believe that even at this moment the right hon. Gentleman does not know. As my hon. Friend the Member for New Forest (Mr. Patrick McNair-Wilson) said, the last thing the Minister would claim to be is a captain of industry. He does not even look the part. I think the Minister is wandering in a country he does not understand, that he is slightly frightened of it and, in his usual charming fashion, he will laugh us through his objections to this new Clause.

That will be a great mistake for the new Clause should command great respect not only from the right hon. Gentleman but from all in this House and from the whole industry. There can be no substance in the right hon. Gentleman's refusal to accept the Clause. This is something to which he should give way, something which would improve the working of the Corporation and help the right hon. Gentleman and his successors in guiding the Corporation. I hope that he will accede to my hon. Friend's request and accept the new Clause.

Mr. Eddie Griffiths (Sheffield, Brightside)

As I have been invited by the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) to contribute to the debate, and as I worked in the steel industry for 16 years and represent a steel division, I shall do so.

In Committee and on Report, hon. Members opposite, instead of being objective and presenting their arguments in an adult fashion, turn into a mutual admiration society for the wonderful contributions they have made. Despite my liking for most hon. Members opposite, I find their contributions to these debates—I served on the Standing Committee which considered this Bill—like verbal diarrhœa. Their contributions are more in the nature of a party political broadcast than of an objective appraisal of the Corporation's problems.

I see merit in Clause. If my right hon. Friend cannot accept the whole of it, I hope that he will accept some elements of it. Because the individual companies making up the Corporation still exist, we have had a yardstick by which to measure the success or otherwise of each company. When the companies are dissolved, what yardstick will those interested in the industry have other than an overall picture of profit and loss? How shall we be able to measure whether the investment which will take place is going to the right place? How are we to judge whether the decision to site the ore terminals will be on a political or an economic basis?

I hope that my right hon. Friend will be able to indicate the form in which the accounts of the Corporation will be presented once the companies have disappeared. The Corporation must be a profitable concern. There is a limit to the extent to which the nation can subsidise the various industries which are losing money. If the Corporation is to be profitable, we must ensure that the investment will not bolster up some development area but will be made in plants which are already making a profit. Although we have heard about the siting of some plants, we have heard little on the question of putting investment where individual works are already showing a substantial profit. My right hon. Friend should insist that future accounts contain a league table of profitable works and product divisions.

Before I finish, I should refer briefly to the disappearance of the regional groupings. It is said—I think that it is in the Bill—that the interests of Wales, of Scotland and of other regions will be safeguarded. I should like my right hon. Friend to tell us how this is to be done. It is rumoured that the setting-up of the product divisions—

Mr. Deputy Speaker (Mr. Harry Gourlay)

Order. The hon. Gentleman may make incidental reference to the product divisions, but he must not argue the principle.

Mr. Griffiths

I shall leave it there, Mr. Deputy Speaker.

Whatever his view of the new Clause, I hope that my right hon. Friend will tell us in what form future accounts of the B.S.C. will be published, so that not only those of us who are interested in the industry but the nation also may see exactly where the money is being invested and what sort of return is coming from individual works and products.

The Minister of Power (Mr. Roy Mason)

I admire the wiles and ingenuity of the gaggle of accountants which seems to have assembled on the Bill, and remarkably well have they drafted the new Clause in order once more to have what has been very much a Second Reading debate on the steel industry.

The purpose of the Clause seems to crystallise as three main points. In fairness to some hon. Members who spoke, I should say that they mentioned the new Clause or certain aspects of it in Committee, although others wandered a little wider, especially the hon. Member for New Forest (Mr. Patrick McNair-Wilson), but that is understandable since we became accustomed to his forceful expressions of view in Committee.

The three points are as follows. First, the determination by the Minister of separate financial objectives for the Corporation's regional or product groupings. That seems to be one of the main planks. Second, the publication of financial objectives in the accounts. Third, the publication of detailed half-yearly statements of the financial position and results of the Corporation.

I take, first, the financial objectives of regional or product groupings. The reference to regional or product groupings is impossibly vague and legally meaningless. This must be recognised by those who drafted the Clause. The Corporation has announced that it is changing from a largely regional subordinate organisation to one based on products, but even if this difficulty were removed the reference to product groupings would be legally meaningless. What type of product? What description? No product divisions have yet been clearly established, and no consent has been given. Therefore, even that would be difficult to spell out and put into the Bill. It would, I suggest, be legally meaningless.

More important, however, is that the only relevant statutory body here is the Corporation itself. The Minister of the day would not wish to be under a statutory duty to determine the rate of return earned by the subordinate organisations of the Corporation. It is not even certain whether each of these will be intended by the Corporation to break even or whether the Corporation itself will be concerned with its central result or the results of different activities.

My concern is with the central result, and to a lesser extent with the results of different activities. I should not wish to take these powers, let alone be under an obligation to determine separate financial objectives for different subordinate bodies in the Corporation's organisation.

If one point behind the Clause is that, with only a central financial objective, the Corporation may be in a position to subsidise one activity from another—

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

The right hon. Gentleman has the wrong end of the stick. The new Clause provides that the Corporation shall publish the achieved rates of return, not that he shall lay down what rates of return are to be sought.

9.15 p.m.

Mr. Mason

I hope that I shall deal with that.

As I was saying, one point behind the Amendment may be that with only a central financial objective the Corporation may be in a position to subsidise one activity from another. I believe that the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) raised this point on Second Reading. The Corporation published detailed turnover and profit and loss accounts and balance sheets for its different activities at Appendix B at the end of its 1967–68 accounts. One hon. Member suggested that I would raise that as part of my reply, and rightly so, for it is a fact. Further, Section 25 of the 1967 Act, requiring details of turnover, estimated profit and estimated capital employed for different activities, is expected to be brought into effect soon. That should help considerably. This publication should be a sufficient safeguard against cross-subsidisation of diversified activities.

The second point concerns the publication of financial objectives in the accounts. The Clause appears to require publication only of the financial objective prescribed by the Minister in the accounts, not, apparently, a statement of progress towards achieving it. On the former point, I have already undertaken in Committee that the financial objective of the B.S.C., like those of other nationalised industries, will be announced to Parliament quite soon. I assure the House that the Corporation will also be expected to publish details in these accounts. The provision in the Clause is therefore unnecessary. Since I cannot agree to a duty to prescribe financial objectives for the subordinate groupings, the question of publication in the accounts does not arise for those.

The question of half-yearly statements was mentioned, and I hope that I can be helpful on this. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) raised in Committee the problem that we are gearing the Corporation to a September year. But I am having discussions with the Corporation on the possibility of a March year to bring it into line with the other nationalised industries and what is done by Government. I hope that my discussions are fruitful in this respect. But we have to have the September provision in the Bill in the meantime. Since the Corporation is expected to change to a March year, I would not wish to impose on it a statutory obligation to provide much more by the way of half-yearly accounts than other nationalised industries or the relatively brief information published by companies generally. But the Corporation has already expressed its readiness to produce half-yearly statements similar to those required by the Stock Exchange in accordance with the undertaking given by companies having Stock Exchange quotations. It is my intention to approach the Corporation with a view to its publishing this information.

I think that I have covered the main points, and I have tried to be helpful. I have not suggested to the House that we should accept the Clause, but in view of the half-yearly statement, which goes some way to meet hon. Members opposite, and the point I made about Section 25 of the 1967 Act being brought into effect soon, which will give us much more information, I hope that the House will accept what I have said.

Sir John Eden (Bournemouth, West)

My hon. Friends will be grateful to the Minister for the spirit in which he answered the debate and for some of the things he said. They made out an extremely strong case for the Clause, as he recognised. As he also recognises, the main purpose behind our tabling it was to ensure that in as many respects as possible the Corporation would accord with accepted commercial practice.

My hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) twitted Government back-benchers, fairly, for the fact that so few of them are present and that up till then not one of them had taken part in the debate, as a result of which the hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths) intervened. He then said that we on this side were becoming like a mutual admiration society. I was rather sorry for the hon. Gentleman because he cut a rather lonely figure. He seemed to have no one mutually to admire. But he need not worry about it, and nor do we, because he went on to make a first-class speech in support of new Clause 1. He does not need anyone mutually to admire. He can pat himself on the back for his contribution and for the powerful support he gave our arguments.

Mr. Eddie Griffiths

Has the hon. Gentleman not heard of the well known adage that it is quality that counts and not quantity?

Sir J. Eden

Quality is better even when it comes in abundance than when it comes singly, and, as he has so fairly recognised, from the position in which he sits at the moment he is able to view quality in superabundance.

The hon. Gentleman asked some pertinent questions—most notably, what form will the accounts take? It is this underlying anxiety which has filled us on this side. We have not been told exactly how the Corporation is to proceed from here. Understandably, we are not clear as to what will be the nature of the organisation of its subsequent groupings. As my hon. Friend the Member for New Forest (Mr. Patrick McNair-Wilson) so forcefully declared, this is bound to become an increasingly strong monopoly in individual product groups and we want to be as certain as we can that it is fairly costed out all the way through and that the public at large are aware of what is taking place.

My hon. Friend the Member for Morecambe and Lonsdale (Mr. Hall-Davis) put it very fairly when he said that we want to be in touch with the trends, that this must provide us with a measure of efficiency and that we should, as a result of the forward disclosure in the Corporation's accounts, be aware of the underlying trends of efficiency in the constituent parts.

My hon. Friend the Member for Sudbury and Woodbridge (Mr. Stainton) made it clear that new Clause 1 refers back to Clause 5 and the power which the Minister has there to fix the target for the Corporation, and, as the right hon. Gentleman recognised, this is the critical part of new Clause 1. We want to be quite certain here that the powers which the Minister has, not only under this Bill but also under Sections 6 and 24 of the 1967 Act, will be used by him to require the disclosure of information such as will enable people outside the Corporation to assess the performances of clearly defined units of operation and to judge those performances against the targets set by the Minister.

The right hon. Gentleman had comparatively little to say about Section 17 of the Companies Act, which was the point my hon. Friends brought forward in support of their case because it is in that Act that we find the most justification for bringing into the new Clause I the requirement for disclosure under a number of different headings. The right hon. Gentleman went a long way to meet us on the question of certain of the Stock Exchange "Yellow Book" criteria of the publication of interim statements. This will carry us considerably further than we had expected to be the case when we put down new Clause 1.

Mr. Scott-Hopkins

Will my hon. Friend make clear what the Minister said? Did he say that he would insist on the Corporation publishing half-yearly returns starting from the moment after lie has managed to get it to change to annual returns starting at the same time as the Treasury's financial year, or is he to hope that it will?

Sir J. Eden

The Minister will have heard my hon. Friend's question and may wish to intervene in my speech to supplement what I am about to say, but it was certainly my understanding that he would require the Corporation to do this, that is, as soon as he has got the Corporation on to an accounting year basis similar to that of other sectors, he will require it to publish an interim statement.

One of the things which has been worrying us is the powers of other Sections of the principal Act which give discretionary power to the Minister. We were seeking by the new Clause to impose statutory obligations on the Corporation to produce this information. If the Minister can assure us that the way in which he proposes to exercise the powers which he has described is no less effective than that, we shall be very much relieved. If I take that to be his intention, in view of his assurances given on the publication of an interim statement generally, I am sure that my hon. Friends would not wish to press the new Clause.

Mr. Stainton

It is my understanding that, as the hon. Member who proposed the new Clause, I may say a few words to conclude the debate.

Mr. Speaker

The hon. Member has the right to say a few words.

Mr. Stainton

The essential difference between the Minister and myself and my colleagues is concerned with the expression in the new Clause, "principal regional or product groupings". I made it clear that I was endeavouring to pin down the Minister, not simply to one figure in one return of net assets, but to differentiate between principal activities.

I was disconcerted by the Minister's lack of response on this point. He disposed of it simply in legal terms. I cannot but refer to Section 17 of the Companies Act which finds it perfectly adequate to talk about a business carrying on businesses of two or more classes. If that imposes the test of the courts, regional product groupings would go a long way further.

Be that as it may, on the whole the Government have come a long way in their assurances, and I beg to ask leave to withdraw the new Clause.

Motion and Clause, by leave, withdrawn.

Mr. Speaker

I remind the House that we have a fair amount of work ahead of us on this Bill and the next. Speeches so far have been commendably brief.

Forward to