§ 11.15 a.m.
§ Mr. Edmund Dell (Birkenhead)
I beg to move,That this House urges Her Majesty's Government to establish a state holding company empowered both to take over existing public investments in private industry, and to establish in the development areas and elsewhere, new industrial and commercial enterprises under complete public ownership where appropriate or in co-operation with private capital.I draw attention today to the present policy of the Government in the use of the publicly-owned industries to stimulate employment and investment. I invite the Government to go one step further in their retreat from their ancient dogmas and to set up a State holding company for for purpose of creating employment and stimulating investment. May I say to the Minister for Industry that I hope for a positive response.
In the 13 months since his right hon. Friend made his famous "lame ducks" speech, there has been a marked change in Government attitudes. Can hon. Gentlemen opposite be sure that the Government are not even now searching for an instrument of intervention in industry not too different from the I.R.C. which they abolished?
Even if they are not, I would be surprised—and this might worry hon. Members opposite almost as much—if the Civil Service has not a neat ready-packaged proposal to place before Ministers at what it judges to be the right psychological moment, when it thinks that the psychological retreat has gone far enough.
In the first flush of laissez-faire enthusiasm the Government destroyed the I.R.C., abolished investment grants and repealed the Industrial Expansion Act. None of these facts led the Secretary of State for Wales modestly to decline the invitation to open the aluminium smelter at Anglesey which received aid under the Industrial Expansion Act and could not have been built without investment grants.
Since those great days the Government have increased public expenditure, nationalised Rolls-Royce, reprieved Giro, brought forward investment programmes of nationalised industries, and entered 1688 into commitments costing millions of pounds on the Upper Clyde and on Merseyside. They have granted a £3 million facility to the 50 per cent. publiciy owned Cammell Laird.
I understand that in the current O.E.C.D. negotiations the Government are opposing the abolition, by 1974, of all shipbuilding subsidies. They have, formally or informally, invited their friends in industry to go slow on rationalisation proposals involving large-scale redundancies. They have placed £70 million worth of naval orders for employment purposes.
The reason for this change in policy is the high level of unemployment. It has been shown once again that laissez-faire, whatever its intellectual attractions, is not possible in a modern democratic society, where people want not an abrasive society but an amenable society.
The Government have shown that they are neither sufficiently heroic nor sufficiently stupid to go ahead with their original policies. They have abandoned or virtually abandoned the policy which I described at the time as a policy of ineffectual threat. They have been right to change, but because they were not prepared for such a change in policy, they have handled each individual crisis in a ham-fisted way. But they were right to change because Governments have social responsibilities as well as economic responsibilities. It would be inconsistent for them to be prepared to grant social welfare benefit to the unemployed and redundant, and yet to refuse even to consider action to preserve or to create employment.
Nevertheless, the Government's lame-duck policy is responsible for only a small proportion of the current massive unemployment. Nor did it even seriously threaten such figures as those with which we are faced at the moment. The responsibility for those figures lies with the Government's general management of the economy.
In its way, the most significant and symbolic action of the Government is the £70 million worth of naval orders. This brings out their fear that ordinary Keynesian management techniques are no longer enough. In the old days Socialists argued that the capitalist system could keep going only on wasteful military expenditure. Then came Keynes and it was 1689 believed that the necessary demand could be created by useful forms of public expenditure. Now the Government beg leave to have doubts.
The right hon. Member for Wolverhampton, South-West (Mr. Powell), in a speech on 23rd November more impressive for its analysis than for its prescription, said:… we are in a new period when the rate of obsolescence, of technological change, of increase in productivity, has, at any rate for a time, outstripped the rate at which we are producing new needs, new demands and new methods of fulfilling them."—[OFFICIAL REPORT, 23rd November, 1971; Vol. 826, c. 1205.]Echoing this view, the Secretary of State for Employment said:… we may be entering a period when the old principles of demand management based on Keynes and the rest may no longer be operating as Governments here of all parties, and Governments in many countries, have come to expect them, with justice, to work hitherto."—[OFFICIAL REPORT, 23rd November, 1971; 826, c. 1259.]May I first issue a warning that the post-war political consensus in so far as it has existed has depended fundamentally on the belief that Governments can control the level of unemployment. I am sure that in demand management techniques—which may include the use of the exchange rate—lie and will continue to lie the greatest single instrument in the hands of Government for the control of unemployment.
Nevertheless, we must face up to certain clear facts and anxieties about the present position. One fact is the slow rate of economic growth, which in this country has been slow for many years. Despite all the regional policies of Governments and even those of the Labour Government, which were most effective and should have been allowed to continue, the development areas continue to lag and are now in a state of crisis.
The mounting anxiety is over what will happen to unemployment at the upturn of the present cycle. According to the recent National Institute Review, employment prospects are deeply depressing. Sir Frank Figgures, the Director-General of N.E.D.C., is reported in the Financial Times of 26th November of this year as saying: 1690There is therefore a danger this time that after demand has expanded sufficiently fast to make use of our existing capital stock, the stock may not be adequate to employ fully the labour force out of work.Industrialists tell me, as I am sure they tell other hon. Members, that there are many more redundancies in the pipeline and that they do not anticipate, whatever the expansion of demand, that they will recruit their labour force to anything like the previous numbers. This is confirmed by the Financial Times Monthly Survey published on 6th December which showed that still more companies are saying that they plan to reduce their labour force than plan to increase it over the next 12 months.
Undoubtedly many different things will have to be done to deal with this situation, including a return to effective regional policies and incentives. No one instrument can carry the whole burden of the problem, and the proposal I am making could not have a large short-term effect. Nevertheless, it is in the light of these facts and anxieties that there is a need to inject a new factor into the Keynsian equation—the factor of public enterprise through a State holding company.
The Government have already brought forward some investment projects for existing nationalised industries and may well intend to bring more forward. Maybe they are searching for such projects to bring forward. Indeed, in logic, instead of hiving off they should be hiving on. We need not less ancillary activities for the nationalised industries but more. Many nationalised industries in their search for higher productivity have greatly reduced their labour forces. If they had not operated within a straightjacket and been able to develop more ancillary activities they might have been able to do more to absorb their own redundancies. In getting nationalised industries to bring forward investment projects, the Government, although they have decided not to halt their stupid Transport Holding Company Bill, have at least done something.
What about private industry? Governments can persuade nationalised industries to advance their programmes, but how, other than by dinners at Chequers, can the Government exercise 1691 the necessary controls over private industry? Because private industry is lagging, the Government may have to persuade the nationalised industries to do even more than they otherwise would, with the inevitable consequences for their financial results. In addition to dinners at Chequers the Government can use investment incentives. The Government have introduced a less effective set of incentives because they are more interested in reducing the level of company taxation than in the incentive effect of their incentives. In any case, even the best investment incentives have limited influence at the bottom of the cycle because they depend on industry's reaction to them and that depends on the economic climate. In other words, they are most effective at the upturn of the cycle when they are least needed.
It is possible to give a special boost to incentives. The Government have introduced 80 per cent. first-year depreciation outside the development areas. The Labour Government added 5 per cent. to the level of investment grants in development areas as well as the rest of the country in 1967–68. I have several times proposed to the Government during the last year that they should supplement free depreciation in development areas by a 10 per cent. investment grant. The 80 per cent. first year depreciation, while it has reduced even further the development area differential has been totally ineffective in the country as a whole. It is probably true that the fact that the tax allowance system is profit-related makes it ineffective as a way of bringing forward investment. The 5 per cent. on investment grants in 1967–68 certainly had an effect, possibly a significant one, but it was at considerable cost.
I interject at this point a relevant word about Northern Ireland. There is a deeply tragic situation there and part of the tragedy is the level of unemployment. It is higher than in the United Kingdom as a whole and would be higher still but for the Labour Government's work in creating great new facilities at Harland and Wolff. To meet this situation the Northern Ireland Government, with financial assistance from the United Kingdom Government, have retained investment grants and taken power to acquire equity in private industry.
1692 When I asked the Secretary of State for Trade and Industry why this was done in Northern Ireland but not in Great Britain he said that the situation there is very serious. Of course it is, but it is increasingly serious here too, particularly in the development areas. If there are no objections in principle to this in Northern Ireland then there are no objections here either. The Northern Ireland Government are setting up a finance corporation. While we do not know the details, we do know that it will have £50 million of public finance and will offer help over the next three years to undertakings which have reasonable long-term prospects but are faced now with particular needs. This corporation has objectives not too dissimilar from the original objectives of the Italian State holding company I.R.I.—to save threatened industry. This crisis in Northern Ireland, is not just the current crisis of violence but the long-term crisis of unemployment, is overcoming dogma.
Fortunately the situation in Great Britain is very different but, particularly in the development areas, the crisis of unemployment is approaching Northern Ireland proportions. The unemployment situation here is now sufficiently serious to justify the Government in taking this further step away from dogma which I recommend in this Motion. I also believe that a State holding company would have a function to perform as a supplement to Keynsian demand management techniques and more general regional policies in circumstances quite other than the depths of crisis faced in Italy in the 1930s or in Northern Ireland or Britain today.
Let me say a word about the State holding company as I see it. It would have the job of seeking out economically viable employment-creating investment opportunities being neglected by private enterprise. The Government obviously believe that such opportunities exist or they would not be exhorting industrialists to invest more and offering a higher level of investment incentives, encouraging them to do so. The State holding company could act either alone or in co-operation with private industry. It would have access to public or private finance. It would be entitled to all the development area incentives available to private industry. It would act through 1693 subsidiaries which would manage particular projects.
It could be selective in its approach, and although I prefer general pressures wherever possible selectivity is sometimes necessary, as it is necessary for example at the moment in the machine tool industry which is in a state of crisis. The Government have had on their desk for 10 months now the report of Sir Richard Way's Committee and done nothing about it. When I asked the Secretary of State for Trade and Industry what he proposed to do about it some time ago I had the impression that he did not know the report existed.
To assist the State holding company in starting up it would have the base provided by existing public investment in private industry which would give it access to management resources and probably also to some investment projects in which it could assist. Incidentally, this would enable it to exercise, in relation to existing public investment in private industry the type of supervisory function exercised by the Industrial Reorganisation Corporation, which the Government, who now hold the stock, are not capable of exercising and which, unfortunately, the Shipbuilding Industry Board did not exercise with regard to its investments.
The State holding company would have functions in the area of industrial structure, but without the emphasis on mergers characteristic of the I.R.C. in its early stages. It could assist Governments which found it necessary to resist, in particular instances, the take-over activities of multi-national companies. It could advise Governments which felt it necessary from time to time to assist lame ducks, a subject to which I shall refer later.
But its main influence would be through the force of competition. Some people think that the idea of competition smacks of laissez-faire. In fact, an effective competition policy requires a detail and sophistication of intervention by the Government, or their agencies, that should satisfy the most interventionist enthusiasms. It also happens to be beneficial to consumers and to industrial efficiency generally.
I understand that the Government are to reform competition law. I hope that before they introduce their Bill they will publish a White Paper. After all, they 1694 should consult Parliament as well as the C.B.I. and the T.U.C. It is important to get competition law right. From Press reports it appears that what they intend to do on prices resembles what was done in the Commission for Industry and Manpower Bill. That, too, was opposed by the C.B.I.
Nevertheless, important as competition law is, it is less important in preserving and promoting competition than two other factors. The first is new technology, new products, such as synthetic fibres to compete with rayon, and the other is new investment. New investment is a continuing process and Governments have often helped by investment incentives and, indeed, directly, as in the case of this country's aircraft and aero-engine industries, or by the way in which they have maintained a British computer capability in competition with I.B.M.
The principle of fostering competition through Government intervention needs to be taken further to help raise the level of investment, but I would expect that a State holding company would normally operate outside the field of the so-called advanced technologies, in areas of industry where the cost would be a great deal less than, for example, in the aircraft industry, and where a boost to the level of investment would serve commercial rather than prestige purposes.
After all, this country's key economic question is, what can one do to help break out of the vicious circle of slow growth and low investment? Whatever effect investment incentives may have—the effect has frequently been judged to be small, and I have already commented on it—one motive for investment is the preservation of market share. But at the moment investment is too low. Even where we do not have the restrictive practices of restrictive agreements, we have the restrictive practices of investment inertia. One firm does not invest because its competitors do not. Market share is not imperilled by British competitors. Then demand is increased, and the imports flood in.
The State holding company, with its right to create new commercial and industrial enterprises, could be a new factor in this situation. It would not aim to monopolise any industry. It would not be the largest factor in most industries. In many it would not operate at all. 1695 But it could destroy the inertia. It could needle the complacent. It could provoke investment, not just at the top of the cycle, but at the bottom, too.
If we wish to break out of the vicious circle of slow growth and low investment, greater risks have to be taken in investment policy than are taken now. But why should industrialists take greater risks? Because they are given dinner at Chequers? Their shareholders would not like that for a reason. They may take greater risks if competition, or the threat of competition, forces them to do so.
There is one important question that I must not burke, and I shall not, and that is the effect of this proposal, if implemented, on private industry and the morale of private industry. After all, we run a mixed economy, and the success of economic policy depends on the success of private industry. Much of private industry is suspicious of the methods and motives of a Labour Government, and the present level of investment shows that they do not think much of this Government, either. Industry in this country, by and large, does not like Government intervention, particularly selective intervention, unless they are the beneficiaries of the selectivity. In no other country would private industry have been so suspicious of the I.R.C. when it was created. Now apparently even Lord Beeching regrets its demise.
I am not one of those who complain overmuch about the management capacity of British industry. The problems which they have had to cope with since the war would have taxed the capacity of any management and by and large, Governments have not been a great help.
But the faults are not only on the side of Government. There has sometimes been, on the part of industry, too slow a response to opportunity. The Prime Minister has just held an exhortatory session with leaders of British industry. He has spoken in good old post-war exhortatory style. He has spoken of opportunities in the E.E.C. But if the leaders of industry do not respond, is there nothing that he may do? Is there nothing that he can do?
If a Government believe in market forces, and only market forces, 1696 that is one thing. They will resign themselves to failure if market forces do not provide. But if they start to implore and exhort firms to help break out of the vicious circle by going beyond their honest judgment of the market, then there does come the question, what do the Government do if nothing results from their prayers and exhortations? I say that there must be an instrument of action in these circumstances, and I believe that industry will grow to accept it, and live with it, just as it did with the I.R.C.
No doubt it will be said that all I am proposing is a safe harbour for lame ducks. That is not an argument the Government can now use. In any case, I repeat, a Government have to attend to social objectives as well as to economic ones. And, at any rate, if we propose to harbour some lame ducks, let there at least be on them some pressure for higher efficiency, such as the State holding company could provide, rather than give them the money and then stand back until, in a new crisis, they come back for more.
The Government destroyed the I.R.C. I believe that they should have developed it in the direction that I am now proposing. I am giving the Government another chance. If they refuse me, they will have a further chance on 11th February when my hon. Friend the Member for Stockton-on-Tees (Mr. William Rodgers) introduces his Bill. But if the Government do not do what I am proposing in this Motion, I am sure that the next Labour Government must.
§ 11.38 p.m.
§ Mr. Kenneth Baker (St. Marylebone)
I should like to thank the right hon. Member for Birkenhead (Mr. Dell) for tabling this Motion for debate on a Friday. Very often during our debates on a Friday we cease to become party politicians and become cross-bench social scientists. To have a good straightforward debate on an issue in which the parties are divided, and on which the policies of the Labour Party and of the Government are different, is a very welrome departure.
When the right hon. Gentleman was speaking, I was almost overwhelmed by waves of nostalgia because the arguments he used, almost the very phrases he used, were those which I recall his using in the last Parliament during the debates on the 1697 I.R.C. and the Industrial Expansion Bill. They may or may not be good arguments, but they are very old, and certainly old-fashioned.
The right hon. Gentleman's proposal to set up a State holding company is clearly, and will be seen from this side of the House as, a major instrument of Socialist policy. Therefore he cannot expect me to welcome the advance of the frontiers of Socialism even if the advance is conducted under banners which bear the headings "The right to work" and "The need to invest".
The right hon. Gentleman failed to show that State enterprises have in the past, and certainly in the long term, created job opportunities, a point that is fundamental to the basis of his argument. I understood him to say that while there might be no dramatic change in the short term, a State holding company as an instrument of intervention would create jobs in the longer term.
If one examines the record of State enterprises in Britain in recent years one gets a good idea of the fallacy of this argument. Consider, for example, what happened in the decade 1960 to 1970. There was a run-down of jobs in the ationalised industries corresponding closely to the run-down of jobs in private industries. In 1960 about 2 million people were employed in the nationalised industries. By 1970 the figure had dropped to 1.7 million.
I accept that there has been big structural changes in coal and rail. Nevertheless, the drop in employment in these industries has been dramatic. During this decade employment in British Railways dropped from 514,000 to 273,000, and in London Transport from 76,000 to 60,000. Even in those industries where hon. Gentlemen opposite, and many of my hon. Friends, would have expected there to be an increase in employment—in, for example, the gas industry—there has in fact been a drop. Over the decade employment in gas has dropped from 124,000 to 116,000.
§ Mr. Baker
I will give way to the hon. Gentleman shortly.
1698 In the electricity industry, an essential industry of the twentieth century, one would have expected a considerable rise in employment, bearing in mind that the production of electrical energy has risen astronomically. In the event, however, there has been a drop in employment over the decade from 193,000 to 188,000.
The shake-out of employment in the nationalised industries, which the right hon. Gentleman the Leader of the Oposition urged on them in 1966 when he was Prime Minister, is still continuing. The Post Office has recently announced plans for a run-down of 25,000 over the next seven years and the British Steel Corporation has announced redundancies in the last few months of 21,000. In other words, there is not sufficient evidence to show that a new State corporation would necessarily guarantee the permanent creation of jobs.
§ Mr. Heffer
Do the hon. Gentleman's figures of employment in the gas industry relate to the numbers actually employed by the nationalised gas industry? He is right to say that there has been a reduction in the number of workers employed by this nationalised industry, but he must bear in mind that outside private industry has been brought in to do many of the jobs that used to be done by employees of the nationalised industry. This has been a bone of contention for some time.
§ Mr. Baker
The hon. Gentleman makes a fair point, but if one looks at the whole of the nationalised industries one finds that the trend which I have described applies to all of them. I think I am right in saying that the lack of job opportunities, created under the Gas Council is relatively marginal.
By increasing the interventionist powers of the State one would not necessarily increase employment because ultimately State enterprises are subject to the same laws as private enterprises, such as changes in market conditions and market demand.
I will give an example of this. One of the great tragedies of Upper Clyde is that in the John Brown yard we have a yard that is capable of making the best ships of their sort in the world. The yards has the best platers and welders, but market conditions have changed and the demand for that type of ship has slumped dramatically and is unlikely to be revived. 1699 This sort of problem has affected industry generally, both publicly and privately owned.
The right hon. Member for Birkenhead should accept that in the I.R.C. we had an example of an instrument that had virtually all the powers which he is asking his proposed State holding company to possess. The I.R.C., coupled with the Industrial Expansion Act, gave the Labour Government the powers which the Motion seeks to introduce. In the event, however, the I.R.C. did not create many jobs. Indeed, I doubt whether it created any.
In the mergers it brought about, and particularly in the big one between G.E.C. and A.E.C., there was a considerable rundown in employment after the merger. G.E.C.'s Annual Report for 1969 showed a total of 228,000 employees. By 1970 the figure had dropped to 206,000 and by 1971, 195,000. The same can be said of the Kent-Cambridge merger. There was a big drop in the numbers employed by the new combination. There was only a slight increase in employment between 1969 and 1970 as a result of the British Leyland-B.M.C. combine, but I suspect that when we get the figures for 1971 we shall see a drop in the total work force.
I am attempting to make this point not in a controversial way but simply to show that there is no guarantee that a State holding company or the nationalised industries automatically create job opportunities.
§ Mr. Dell
There were three respects in which the I.R.C. was very different from what I propose. First, it could not hold equity on a long-term basis. Secondly, it could not create new, entirely publicly owned enterprises. Thirdly, it was clear from the beginning that it would concentrate on mergers and that other things could be done only at the request of the Secretary of State. It is true that the I.R.C. was moving in the direction that I am proposing, but new legislation would have been necessary to enable it to do what the Motion requests.
§ Mr. Baker
I was saying that the I.R.C., coupled with the Industrial Expansion Act, did give the Labour Government powers of intervention of the 1700 sort that are being pressed today, and I do not think the right hon. Gentleman will dispute that. The whole argumentation for the Industrial Expansion Act was similar to the arguments adduced by him today.
Bearing in mind that the Labour Government had these powers, it is interesting to note that in the last nine or 12 months of the term of office of hon. Gentlemen opposite, they had great difficulty in finding opportunities in which the I.R.C. could operate. In the first six months of 1970 it went in for only one project, and only one or two in the second half of 1969. In other words, there did not appear to the I.R.C. or to the Labour Government to be those sort of opportunities for the State to invest in economic activity.
Moving away from the I.R.C., the right hon. Member for Birkenhead said that his proposed State holding company would be interventionist and clever; it would seek out growth points and growth industries and detect them where private industry failed to do so. He will expect me to have a degree of dubiety about that. I suggest that it would be unlikely that a State organisation would be able to detect trends and opportunities for growth which private industry somehow overlooked.
If such a State holding company did not go for growth activities it might, for example, create a factory employing, say 500 men this year making something for which there was not much demand, so that it would be employing 450 people the following year, 400 the year after that and so on. To be successful, it would have to select some winners, and it would be unlikely to do so.
There is not much evidence to show that in the six years of Labour Government hon. Gentlemen opposite selected many winners, although they had power to do so. I suspect that if there were a State holding company of this sort, there would be a tendency to establish factories making almost anything—for example, making clogs when the demand had fallen away. One must jump forward in this, as in any other industry and see the demand for the type of shoes that will be required in the next two or three years. Is a State holding company likely to be in a position to decide this better than the boot and shoe industry?
§ Mr. Anthony Wedgwood Benn (Bristol, South-East)
The machine tool industry, to which my right hon. Friend the Member for Birkenhead (Mr. Dell) referred, is an indication of the confidence that industry has in future investment, despite all the optimistic noises being made by the Government about expansion being round the corner. In fact, private industry is not prepared to invest in future prospects. It is not a question of finding winners but of backing winners that are already reasonably well established.
§ Mr. Baker
I shall be making some suggestion, which I hope the Government will consider, not in support of the establishment of a State holding company but in favour of some degree of intervention which I think could encourage private industry rather more.
The right hon. Gentleman may concede to me the point on unemployment, and the fact that State industries do not necessarily create job opportunities, but he would probably say that on investment he is on surer ground, because a State holding company, given a fund of £100 million, £200 million or £500 million could be sure of spending it. But the question then has to be asked: would it be effective investment? And I must point out that by "effective" I do not necessarily mean profitable. Would the investment have the social and economic effects the right hon. Gentleman would seek? Would it be a better use of the investment moneys that the State has to put them through a State holding company, or as the present Government are doing, to encourage the nationalised industries and the local authorities to bring forward their spending programmes? I believe that the right hon. Gentleman's case remains unproven.
One of the tragedies of our present economic difficulties, and this goes for the whole of Western Europe and America as well, is that the more one invests in capital equipment the more one endangers the long-term employment prospects of many people. The right hon. Gentleman referred to technological change, and others call it the unemployment of progress. It is with us now. This means that we shall have to rethink a great deal of our basic attitude to how as a society we shall handle this situation. I do not believe that the answer is, as the right hon. Gentleman 1702 states, to set up another State holding company to try to hold back these waves. It would not do so. One has to rethink one's whole attitude to the length of the working life, the working week, and so one. This is not defeatism, and I should now like to move to the more positive aspects of some of my proposals.
I do not think that a State holding company established on the lines the right hon. Gentleman would like would really be able to beat the cyclical trends. If business is not confident—and I now talk of business in the broadest sense; public and private—about this year or next, there is little that the State can do to inject new economic activity. We should recognise that what will make business men build a new factory or buy new machinery is a good level of market demand at the moment, and a continuing level next year.
In my own business experience I have never found any form of investment incentive crucial to making an investment decision. My experience in medium-sized industry has been that the crucial investment decision is taken on the answer to the question whether there is a good buoyant market now and whether it will continue to be good and buoyant next year. If the answer is, "yes," one goes ahead. The lack of confidence in the whole of our Western world at the moment cannot be attributed to this Government, but is due to the currency crisis and the feeling that because of technological change unemployment is catching up with us. I believe therefore the Government's basic strategy of reflating the economy is correct.
I am very glad that the Government are reviewing their regional policy, as was announced by the Under-Secretary of State for Trade and Industry on Tuesday night. The first thing that this review should do is to define the problems of the development areas in terms of job creation. Too often in the past successive Governments, over a period of 39, 40 or 50 years, have suggested that we have problems in the development areas, that the development areas are running down, but there has not been a clear enough definition of the exact problem. At this time we should define it as job creation.
What can one do about it? I am not in favour of fine tuning the various incentives. I do not believe that the 1703 regional employment premium, the investment grant, and so on, are fundamental to the problem. The right hon. Member for Manchester, Cheetham (Mr. Harold Lever) made the interesting suggestion last night of a Development Bank for the regions different from a State holding company: he would provide the money, possibly at a low rate of interest, and then say to the entrepreneurs, to use his own words: "Right—get on with it." I am not very much in favour of that suggestion, but it is worthy of further examination.
I hope that the Government will try to select in each development area one or two physical growth points. It is a Herculean task to try to reflate the whole of Scotland, or the whole of the North, or the whole of Wales, which has been the policy of successive Governments. It might be very much better to select one or two areas that have certain natural advantages and concentrate at that point an enormous effort in terms of public and private resources. If that were done, there would be a howl from all the other parts of the development areas which did not benefit, but I still think that this may be a better policy.
My final point on development area policy concerns the actual incentives for business men to take people off the dole queues. I have never believed that the regional employment premium did this. I was concerned with a company with a factory in Scotland. We soldiered on with this factory, employing quite a lot of people, for three years. All the Government incentives for capital investment that existed in the middle 'sixties were not of great importance to us: we wanted help with the payroll. The training grants at that time were £3 10s. for women and £5 for a man. Those grants were doubled in 1967, and this was a help. That incentive was on the right lines.
The regional employment premium is not on the right lines, because it goes to everyone who is employed in the regions. I suggest that we want a new job bonus which encourages factories and businesses in the development areas to take people off the dole queue. If a factory in Scotland, say, had such a bonus, that might be in the way of a training grant of perhaps £15 or £20 a week which would be extended for six months, we should be 1704 giving real payroll help to firms in the development areas. I have only suggested these areas of which the Government could, perhaps, take account in their review.
I do not believe that the right hon. Gentleman's proposal, however well intended, would be effective in stemming the rise in unemployment and in creating more economic activity. His State holding company would tend to go for areas of activity which are not full of growth, and it would tend to become a sort of battery house for lame ducks. I therefore hope that the House will not accept the Motion.
§ 11.58 a.m.
§ Mr. Robert Sheldon (Ashton-under-Lyne)
We heard with interest what one might call the counter-attack of the hon. Member for St. Marylebone (Mr. Kenneth Baker) on some of his own colleagues and their laisser faire policies. We are glad to welcome anyone who realises the inadequacy of the treatment of industry, particularly in the development areas, by the present Government, and I am sure that the Government themselves have no longer the confidence with which they previously sought to deal with many of these problems.
The hon. Member's main criticism of the very valuable Motion moved by my right hon. Friend the Member for Birkenhead (Mr. Dell) was what he described as the difficulty the suggested body would have in backing winners. Obviously, any body will have difficulty in backing winners all the time. I would, however, suggest another term of reference in relation to such a body, which is not so much that we could guarantee that it would be successful in creating new industries in the commercial or even the economic sense, as rather that we could give it a different kind of remit—the remit of providing jobs. This direct approach, which has not so far been taken, is one to which we must turn our minds. We have to go directly not to the problem of producing jobs as an indirect effect of a large number of various kinds of incentive but to the problem itself. I will discuss this a little later.
The problem of the regions has largely grown up in its present form since the war. As a result of the intractability of 1705 this problem, the amount of spending on it has increased year by year, under the Labour Government in particular, who took some of the most imaginative of the measures for dealing with it. As a rough estimate, in the last three years we have been spending in excess of something over £500 million in dealing with regional problems. These levels can be argued about, because it depends upon which way we define incentives on regional problems. Whatever is the precise figure, the scale of spending is enormous.
In dealing with the present high rate of unemployment, it is wrong to make the assumption which is made far too often in the House that the old method of dealing with demand management—first developed by Keynes—is a bit out of date at present. I do not believe that. There have been some changes, but the remedies available are still those which need to be used. The difficulty is that when the present Government came into power they took a very restrictive view of the economic future, and this frightened the people of this country into reducing their expenditure and producing large increases in saving, as a result producing the consequential high levels of unemployment. This was a process which was started by the previous Labour Government, following July, 1966. We had to reverse the whole trend of private consumption and the long process was started. It was carried on superbly by the present Government who frightened the British people about their future economic prospects and the unemployment results from that.
Clearly this is a mood that has to be changed, and it will take a long time to change. But if we run our economy at a high enough demand, eventually we shall reduce the levels of unemployment, but clearly this will need a higher level of demand than we have seen recently. Whereas a growth in the level of demand of 4 per cent. or 5 per cent. may have been enough to reduce unemployment in normal times, a rate even beyond that which the Government foresee will be required to convince the people that the difficulties of unemployment, against which they are hedging at present, are not difficulties that they may need to face. So it means a creation of confidence, not only in industry but in the British people. It will take the Government a long time 1706 to show their good intentions over a sufficiently long period to solve the problem.
The Government have to face this task. It is no use talking about the fundamental change that has come. The change that has come has been due entirely to this Government and, at a certain period, to the previous Government, who had to operate in the way they did because they considered the defence of the pound to be rather more important than it currently is.
So in terms of economic history, this is a short-term problem which can be solved. It is interesting to note that we always hear questions of Ludditism, of over-capitalisation and of investment in high productive plant leading to unemployment at a time of economic misfortune. But this pessimism is temporary and the Government, in trying to latch on to this, are trying to cover up their particular deficiencies.
When we examine the way in which we have tried to overcome the difficulties of the regions, we see that two of the main attempts were the differentials in investment grants and the regional employment premium. I fully supported, and still support, the idea of investment grants. They are of value to the manufacturer, who knows the cost of his plant and the way that it is reduced, and the way in which we specify the expenditure for plant and machinery that leads to greater productivity—as opposed to the way in which even office furniture qualifies for investment allowances. There is a need for modernisation, supported by investment grants, the development of greater efficiency and, possibly most important of all in some respects, the creation of skills which comes about when we introduce modern machinery, giving it to operatives to learn and to develop their particular talents. These are the advantages.
But there were disadvantages, and we must accept that. There was, first, a greater incidence of the bringing into operation of large capital-intensive projects which had very few jobs attached to them. There were a number of investments which would have been made in any case. There was a kind of blanket endorsement of actions like this. It was very difficult to define and select and there were anomalies. It was even very difficult to refine and justify the basis of one's refinement. For the reasons I have 1707 given, we cannot place upon this instrument the main burden of what we need to do to get jobs into the regions.
Nor is the R.E.P. sufficient. This is the way in which we devalue the currency of the regions that need jobs. It is a useful and theoretical exercise, but in practice it has never had the result that so many of my hon. Friends have claimed.
A great advantagfe that we enjoy is that we are a united country. The attitudes of those in one part of the country operate in much the same way in another. It is interesting that our regional problem is nothing like as big as that of some other countries. Our levels of education, in Scotland and Wales in particular, are amongst the highest in the country. It should be a relatively simple task to attract industry to these areas.
Our difficulty is that we have areas where we have insufficient skills of the right kind, and insufficient jobs. If we create jobs before skills, the firms will not move; if we create skills before jobs, there is nowhere for people to use those skills. There needs to be much greater integration between skills and jobs, and a harmonisation of the two, with industry and the Government acting rather more closely together than they act at present.
One of the main arguments against R.E.P. was that industry was never sufficiently sure of the permanence of the incentive. In so far as the Government have announced their withdrawal of it, industry has been proved right. With this kind of incentive, where there is a difficulty in assuring industry of its permanence, what matters is that ultimately the difficulty can be resolved only by an inter-party agreement about the continuance of long-term incentives. Without the firmest guarantee, industry will never be sufficiently confident about their continuance. It may be that, by playing about with constant changes in incentives and other methods of persuading industry to do that which it would not otherwise do, we have beaten industry rather too hard, and that it will not be prepared to pay as much attention to incentives in future as we sometimes hoped it paid in the past. Because of that and the difficulty of making incentives work in a situation in which it is absolutely essential that 1708 certain changes come about, we are now forced to move rather more directly upon the central problem itself.
The test of the success of any Government policy has to be the cost of viable jobs created. When we consider the hundreds of millions of pounds spent over the last few years and the unemployment figures for the regions, we find it extremely difficult to assess roughly, let alone to measure with accuracy, whether we have had any success.
We have spent vast sums. We cannot prove, or even form a judgment which can be defended, that the policy has had any success. Therefore, we need to find a way of measuring the cost of each job created which is likely to be viable once the factory is set up. The figures I have are those which are the easiest to obtain. I ask the forgiveness of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) for not including Merseyside, but I do not have those figures available.
In Scotland, Wales and Northern England together there were 130,000 unemployed in 1966 and in October, 1971, there were more than 265,000 unemployed. If we felt that we could create another 100,000 jobs, at a total cost of, say, £1,000 million, or £10,000 per job created, would any hon. Member think that that total sum was too great for the solution of such a task? We have spent sums not all that much less, yet we do not know whether we have had any success.
Therefore, the problem is not the money. It is how to use large sums of money which we are perfectly willing to spend as a direct solution to one of the most intractable problems Britain has faced in the post-war years. Looking at it in this way, the House might come to accept that it should be prepared to countenance solutions which might be a little untidy at the corners but which at least offer the possibility of measuring directly the number of jobs created and the cost of creating them.
If we carried on our present policies, doubled or trebled, we should not be able to say whether we had succeeded. The problem about incentives is their limited value. If a man does not want to eat one can spend far too much on persuading him to do so. The argument that one hopes to get some spin-off-benefit from money spent in other directions 1709 is as wrong in relation to regional policy as it is wrong in relation to Concorde. We need to avoid these devious attempts at influencing. We must decide that it is cheaper, though it may not be wholly satisfactory, for the Government to initiate direct the task of expanding viable job opportunities and to give the job of doing that to an organisation.
I do not believe that we can be sure in all cases that firms will be successful, let alone more successful than ordinary industry. They may be considerably less successful than ordinary industry. An organisation given the task of creating jobs like this could be judged on its merits. It would not be paying for investment to firms which would be investing in any case. It could evaluate projects, with the main intention, not necessarily of making the largest profit, but of providing the largest number of viable jobs at the lowest cost. There would be superb opportunities for snipers in the House and elsewhere, but there comes a time when even political difficulties of this kind must be faced because of the size of the problems.
An even greater problem is that when such firms are created there will be difficulties with competitors or near competitors. We shall always have the difficulty of setting up a firm or a publicly-owned company that produces, not necessarily the same products as other firms in a development area, but products of a similar nature or of a nature which might be held to impinge upon another company's production.
We hope that such matters will be taken into account by an organisation charged with this task, but inevitably there would be difficulties. In this respect we cannot have a wholly satisfactory solution. However, there comes a time when we must take chances, knowing full well the disadvantages of the present system. The board's criterion should be the creation of as many jobs as possible at the lowest possible cost. I see the board's work, not as producing companies which will be subsidised year after year, but as providing the capital for companies to start, to equate that capital with the cost per job created, and then if the board's judgment were good, a large proportion of such publicly-owned companies succeeding and serving the community—locally and nationally.
1710 Throughout the last year or so—the particularly high levels of unemployment have shown it even more—there has been a greater undertaking of the new scale of importance of regional policy. There are people in the regions who feel more deprived now than they have ever felt. There is greater danger to the idea that we are one nation than there has been for many years. I suppose that it is mainly that we have lived too long with the problem of regional development areas not being successful for people to be confident that a solution is on the way. There is not likely to be a solution if we continue present policies. New methods will be required if we are to convince them that we are serious in our attempt to end the discrimination which has existed for far too long.
§ 12.18 p.m.
§ Sir Anthony Meyer (Flint, West)
My hon. Friend the Member for St. Marylebone (Mr. Kenneth Baker) began his penetrating and brilliant speech with the plea that we should bring a little party politics into the debate. I am sorry if I disappoint my hon. Friend; because I agree, as in the upshot everyone who has spoken so far has agreed, with the hon. Member for Ashton-under-Lyne (Mr. Sheldon) that what needs to be done in the present situation is to concentrate our gaze very closely on the creation of new jobs.
The House is deeply grateful to the right hon. Member for Birkenhead (Mr. Dell) for having brought this issue so sharply into focus. I am embarrassed further, in that one of the objections which I shall advance to the course of action suggested by the right hon. Gentleman has already been disputed by my hon. Friend the Member for St. Marylebone. My hon. Friend touched briefly on what may well be the visionary longterm solution. When he talked about the need to think in terms of a shorter working week and a shorter working life he made a remark which I suspect those who read the bound edition of his speeches in 20 years time will regard as the really valuable contribution to this debate, in that probably alone amongst everything that has been said in this place for a long time, it bears some relation to the increasing nausea with which a larger and larger section of our people regard the whole concept of industrial 1711 civilisation. Perhaps rather than thinking in terms of how to create more work, we ought to be thinking in terms of how to create less work for more people. However, that is in the long term and we ought to concentrate on more immediate issues.
At the risk of shocking my hon. Friend, may I say that in principle I have no objection whatever to the use of increased activity in the public sector in order to reduce unemployment. It is perfectly true that here is a field in which the Government can act directly, and comparatively—I stress "comparatively"—rapidly on the level of employment. As an example, there was the decision announced by the Minister of Posts and Telecommunications the other day not to close down Post Office Giro. I do not know whether that decision was reached primarily on the grounds of maintaining employment in Bootle, but the straight result of that decision is that 3,500 people in Bootle who would otherwise be out of work are not now out of work.
This is where we come to what I think is the snag, although my hon. Friend the Member for St. Marylebone will probably disagree with me. It is easy for the Government to act directly on unemployment by decisions taken in the public sector, but it is also disproportionately hard in this sector for the Government to undo what they have done should the need to undo it arise. Suppose that in a year's time, for example, Giro is still not paying its way. Will the Government then, assuming that in a few years time there are in the Bootle area other jobs beginning to come along, be prepared to say, "All right, the thing is not working. Now we will close it down and let all the Giro workers go off and be sucked up by other jobs coming along in the area"? I have a feeling that they will not. There would be a terrible howl from hon. Members, not only on the other side of the House, if the Government did that.
As it seems to me, the people who work in the public sector expect a higher degree of job security than those who work in the private sector. They expect it public opinion concedes it to them and we in this House are so organised that we are ready to press forward for them to have a higher degree of job security than others.
1712 Furthermore, there is the other point which, as a Conservative, I am bound to make, that any extension of the public sector is an extension of that part of the economy which is not compelled by harsh economic facts to seek primarily to make a profit. It is usually required by the Government to aim at a profit, but that, as we know from bitter experience is quite another matter. I am sure that the right hon. Member for Birkenhead and many others on the benches opposite will admit that the nation cannot afford an indefinite expansion of that part of the economy which is not compelled to seek a profit.
If we, as it were, by using the public sector in order to create employment, lock workers into the public sector in jobs where in a year's time the work may very well be unproductive, the result could be that quite soon—perhaps sooner than we expect—we shall be starving the profitable industries of tomorrow, bearing in mind that the profitable industries of tomorrow may in many cases be labour-intensive service industries. We may be starving those industries of the labour which they will need in order to expand.
For these reasons I have some reservations about the suggestions which the right hon. Gentleman put forward. But, having said that, I want to go on to make some points which he may find congenial. The first and obvious one is that we are condemned, like it or not, to operate a mixed economy. The second and obvious one is that as a nation we cannot survive solely on the proceeds of those industries which are at present manifestly profitable. The most manifestly profitable industries at the moment are things like whisky, the Beatles, Carnaby Street and so on. But the success of these, apart from whisky, I am glad to say, is altogether too fragile and too dependent on the whims of fashion.
We must, therefore, begin to start making money out of "some of"—I stress "some of"—the science-based industries of tomorrow. The fact that so far we have lost money on pretty well all of them does not in itself constitute an argument against supporting them. It constitutes an argument against dispersing the support which the Government have given to them. This is an interesting subject which I do not want to pursue.
1713 Quite apart from these great technological industries where Government involvement is absolutely indispensable, there are quite small and sometimes very small opportunities for creating durable employment in potentially profitable enterprises in circumstances where private enterprise is sluggish to take advantage. It is not just a question of private enterprise overlooking the potential advantages. It is very often either because the period of waiting before the profits can come back is longer than private enterprise can normally contemplate, or else it may be because the possibility of making a profit is dependent on a variety of decisions which private enterprise is unable itself sufficiently to influence.
I will give an example, as a Welsh Member. There are hotels in fairly remote rural districts in Wales which limp along. These hotels could, I believe, be modernised and enlarged and become profitable on a number of conditions: first of all, if the access routes to them were improved; secondly, if other enterprises complementary in nature were to start up in the vicinity; thirdly, perhaps, if another complex of hotels and complementary enterprises were to be started up within, say, a day's walking distance or half-a-day's pony trekking distance. In other words, a complex of tourist facilities could grow up but at no point in this virtuous cycle is there a clear opening for private enterprise as we normally consider it.
It seems to me that in this kind of situation a public instrument at quite a small cost could get going something which could create a large number of jobs both in running these facilities when they exist and in the construction work required to put them up. The trouble at the moment is that the Government have only the heaviest and bluntest of instruments by using the public sector in order to create jobs. If I have a reservation about the suggestions put forward by the right hon. Member for Birkenhead, it is that his instrument is rather heavy and blunt and, like my hon. Friend the Member for St. Marylebone, I rather prefer the approach which was outlined in yesterday's debate by the right hon. Member for Manchester, Cheetham (Mr. Harold Lever). I thought that his was a slightly more flexible approach.
1714 However, subject to the qualifications which I have mentioned, I believe that there may be scope for some kind of State instrument specifically designed for the creation of new jobs. In saying that, I bear in mind that unemployment is a problem which will probably be with us for a lot longer than we like to imagine and that, therefore, one is justified in thinking in terms of creating a permanent instrument to deal with it. This is not merely a panic reaction to a politically explosive issue.
Therefore, although I should feel unable to support him in the Lobby if the right hon. Member for Birkenhead divided the House on the issue, I feel considerable sympathy, subject to the qualifications I have stated, for the general approach which he outlined.
§ 12.31 p.m.
§ Mr. Dick Douglas (Clackmannan and East Stirlingshire)
I hope that the hon. Member for Flint, West (Sir A. Meyer) will forgive me if I do not take up the arguments which he advanced, and I apologise, too, to my right hon. Friend the Member for Birkenhead (Mr. Dell) because, while he has painted a broad canvas in arguing the case for setting up a State holding company, presumably on a United Kingdom basis, I shall use his Motion to argue the case for a separate Scottish State holding company. In the course of presenting that case, I shall take up some of the points raised by the hon. Member for St. Marylebone (Mr. Kenneth Baker), who rightly pointed out that, if we had separate regional organisations, there would be an element of competition between regions trying, as it were, to get in, trying—to mix the metaphor a little—to get their hands to the pork barrel.
It is always good, as you know well, Madam Deputy Speaker, to begin a sermon with a good Scottish Presbyterian text. On this occasion, I take my quotation from the Scottish Economic Bulletin:The essence of the Scottish problem is to obtain sufficient investment in productive capacity to make full use of the country's labour resources. With the decline of traditional industries, the flow of labour must, therefore, be redeployed. Scotland needs a higher level of investment in relation to the gross domestic product than does the United Kingdom as a whole, if full employment is to be achieved and maintained. But investment in each industry is more likely to be 1715 governed by the prevailing economic clime in the United Kingdom as a whole than by local conditions …That statement, taken from the Government's own publication, indicates both the nature of the problem of investment in Scotland and the difficulties, due to leads and lags in the United Kingdom situation, of producing a solution which is in harmony with market forces. Obviously, intervention by the Government is required to raise the flow of investment funds to Scotland.
It is generally accepted—this point was made by the hon. Member for St. Marylebone—that investment in the private sector, particularly manufacturing investment, is of a much more cyclical nature than is public sector investment. It is noticeable, in current terms, that the Government have sought to instil a great deal more confidence in investment generally by asking the public sector to bring forward investment plans. However, as an aside, I must point out that we have had little or no statement about how the advancing of plans for investment by the public corporations will affect the targets laid down by the Government requiring a certain level of financial performance or investment performance by the public corporations.
The current high levels of unemployment in Scotland may be attributed partly to the lack of expansion in the United Kingdom economy as a whole, partially due to cyclical shifts in demand but probably, and much more importantly, the consequence of structural changes, not, I suggest, of long-term duration but short-period structural changes brought about by changes in the investment policy of major firms.
I do not put too much stress on the statistics which I shall now give, but I suggest that these figures may be symptomatic of long-term secular trends, not only in the Scottish economy but in the United Kingdom economy as a whole. I am happy to see in his place on the Government Front Bench the Under-Secretary of State for Development at the Scottish Office.
Over the 10 years 1960–69, average unemployment in manufacturing industry in Scotland was 23,300. The average for the first eight months of 1971 was 32,000. 1716 In August, 1971, the figure was 41,800. In terms of percentage of total Scottish unemployment, in 1969 manufacturing industry accounted for 26 per cent. In 1971, the proportion had risen to 31 per cent. Moreover, these figures cover categories III to XIX of the Scottish Industrial Classification, which includes what one would normally call the growth sectors of both the United Kingdom and Scottish economies.
In mid-June, 1961, the total of wholly unemployed males 50 years of age and over was 13,425. The mid-July figure in 1971 for the same age-group was 24,479, an increase of 82 per cent. For the same age-group, those who had been unemployed for 52 weeks or more in 1961 numbered 5,559, and in 1971 the number had risen to 8,999, an increase of 62 per cent.
As I said, I do not place too much reliance on those figures, but I do suggest that merely to wait around till the United Kingdom economy becomes relatively overheated in the hope that we may find employment in the so-called growth industries for some of the individuals now unemployed, particularly in the later age-group, is quite mistaken. We may well have to move to new ideas. My right hon. Friend the Member for Sowerby (Mr. Houghton), winding up the debate from our side last night, clearly demonstrated the forward-looking attitude to that problem on these benches. We must have new ideas on the age level for retirement and on the reduction of working hours.
If one argues—this, also, was a point made by the hon. Member for St. Marylebone—that the basis of investment decisions is related to future market prospects, what conditions these market prospects today? I submit that it is not a narrow national market or a narrow domestic market but, rather, a matter of global strategy. Here is a relatively simple current example of what I mean. In Lloyd's List of 7th December there was an announcement that A. and P. Appledore International, Limited is to give technical assistance in the construction of a new shipyard. I should be happy if that new shipyard were to be in the United Kingdom, but one finds that it is to be built in Mipo Bay near Ulsan in Korea. The company is seeking loans 1717 from European firms and banks totalling 50 million dollars to help finance the yard.
Presumably, those investing their capital in this concern will have some idea of the expected rate of return. In passing, I can only say that, for their sake, I hope that it will be a higher rate of return than that currently being offered by United Kingdom shipyards. But what about the labour to be employed, and the sort of return which the workers can expect? I quote here from the report in Lloyd's List:This question of labour was borne out yesterday by a spokesman for A. & P. Appledore, who told me that there was an ample supply of labour in Korea. 'It is relatively cheap and has got fairly high productivity'.That example gives an indication of a global firm's view. The rewards to capital have to be maximised internationally, but the rewards to labour have not to be treated in the same way. There is nothing to suggest that the new yard is at the best site or has other locational advantages.
With regard to the nation State, there is little that can be done to prohibit such investment. Capital is internationalised, but labour organisations and the nation States are a long way behind in combating the power of the large, multi-national companies. New techniques must be devised in international collective bargaining, and new organisations must be created by the State for investment purposes.
The suggestion of a State holding company is another element of what might loosely be called countervailing power against the multi-national companies. Nowhere would it be more appropriate to create such an organisation than in Scotland. I am not suggesting that we do not have a United Kingdom holding company or such companies for other regions, but there are more forcible arguments for the setting up of an industrial holding company in Scotland than anywhere else in the United Kingdom, even Northern Ireland.
The Minister knows that every one of the regional plans or sub-regional plans submitted to the Scottish Office under Governments of different political complexions—plans like the Grangemouth-Falkirk 1718 plan and the Tayside plan, to name but two—has suggested the creation of some form of industrial development board for the area, with access to considerable funds. The Trades Union Congress has suggested such a mechanism for the Clydeside, which would have taken on board Upper Clyde Shipbuilders, and the Scottish T.U.C. has on many occations raised a similar point.
Apart from my being a Scot, why can I argue more cogently for the creation of such an organisation? First, I submit the need to create a mechanism to decentralise the investment decisions even within the United Kingdom. Second, there is the fact of Scottish expertise in gathering funds. The early development of joint stock banking in Britain took place in Scotland. While banking in England was initially related to lending to the Government, banking in Scotland has been traditionally based on its desire to lend to industry and commerce. The 196 largest British investment trusts in 1969 had portfolios valued at £5,134.7 million. Of that sum, £1,705.1 millionone-third—was held by investment trusts based in Scotland. The concept of such trusts originated in Scotland in the 1870s, and in the 1970s we are seeing the growth of merchant banking in Scotland. Therefore, there is considerable evidence of the Scottish ability to manipulate and gather finance. What seems to be lacking is the direct link-up with Scottish industry and commerce.
I understand that the Government are committed to the reform of local government in Scotland next year. We expect an announcement, before the recess, of the boundaries and other decisions relating to this important development. We are likely to have eight regions, each charged with the responsibility to assist the development of industry in its area. I have consistently taken the view that if we have under 10 regions the chief officials of the organisations will come together to discuss matters of mutual concern. In the short run they will have to come together to discuss attracting and promoting industry.
It would be natural to charge a consortium of the members and officials heading such regions with the responsibility of operating a Scottish industrial development holding company, subvented by 1719 Government funds and with the ability, if necessary, to attract savings from the general public. I fully realise that considerable complications would have to be overcome, because such a project would interfere with the flow of funds to the private sector and with the Government's monetary and investment policy. I should certainly wish to involve the Scottish Business School in such a development. The Government should consider the possibility of requesting it to examine the feasibility of setting up an industrial holding company, either on its own or in concert with the Government's own Scottish Economic Advisory Section.
Much has been made of the great possibilities of expansion in the Scottish economy to be derived from the exploitation of North Sea oil. I have urged that every opportunity should be taken to ensure that we miss nothing from this development. That would be a fitting task for such a holding company. The Government could well use some of the revenues derived from the oil companies to establish a Scottish State holding company, which we could charge with the task of setting up a solid base of petroleum technology in the United Kingdom. It is absurd that Scots are willing to travel the world over to persuade overseas experts to come to Scotland to exploit our resources of manpower and to show us how to use our own capital, when we could be going about that job ourselves.
I am grateful to the House for listening to me very attentively, and to my right hon. Friend the Member for Birkenhead for moving the Motion. I know that I have not entirely put a case that is suitable to the Motion. I have argued a particular concern for Scotland, and I hope that the Minister will take up my suggestion.
§ 12.47 p.m.
§ Mr. Anthony Fell (Yarmouth)
The reason why the House listened with attention and interest to the hon. Member for Clackmannan and East Stirlingshire (Mr. Douglas) is that what he said was well-reasoned, clearly-presented and well-thought-out. I say that in no spirit of pomposity, but because I really was most interested. The hon. Gentleman talked about banks, and I am sure that he will congratulate himself on the fact that the 1720 only bank that has managed to make nice fat losses, the Giro, was not an export from Scotland to England.
Like other hon. Members, I am grateful to the right hon. Member for Birkenhead (Mr. Dell) for giving us an opportunity to discuss the very important subject he has raised. I hope that he will forgive me if I do not speak in great detail about the heart of his Motion, the formation of a Government holding company. I do not want to argue with him about that, but I do not agree with him at all.
I want to talk about unemployment, which the right hon. Gentleman mentioned, but first I should like to comment on a point made by the hon. Member for Ashton-under-Lyne (Mr. Sheldon) in his very thoughtful speech. We often hear such speeches on Fridays, which is why I felt that I was lucky to be present today. But the hon. Gentleman missed the point a bit when he talked about the setting up of great funds, starting companies, providing the capital to start them, and so on. The real point is that they will start only if there is demand. It is no use setting up a company unless there is a demand. I do not want to do the right hon. Gentleman a disservice in saying this, for I am sure that he realises it, although he was not quite explicit about it, but there must be demand, and as my hon. Friend the Member for St. Marylebone (Mr. Kenneth Baker) said, private industry will see the demand far sooner than any Government corporation will.
We have been talking today about ways in which the Government might help in the unemployment situation. That is basically why the right hon. Gentleman raised this question. Great Yarmouth and towns like it throughout the United Kingdom are in a special position. They have not a cat in hell's chance of getting really sympathetic consideration from any Government for their little local problems, for the weight of publicity—of newspaper concentration and through the media—is not on Great Yarmouth or the other little industrial towns of Britain but on the enormous places where there is terrible trouble.
So what is to be done about towns like Great Yarmouth? We depend on the success of the economy. Of course, we live partly on our own success but 1721 we can only be an offshoot of the whole economy. Our employment situation is good when the economy is good, and it is bad when the economy is bad. There is little one can do to alter that. From 1953 onwards, the employment situation in Great Yarmouth, which had a history of unemployment, like many other places—soup kitchens, and so on—became better and better right up to about 1968–69. Then it began to tail off and it has gone on tailing off ever since, because the general economy has slipped, and with that slip, of course, Great Yarmouth has got into great difficulties.
I have suggested that no one cares about Great Yarmouth, and that is true. Of course we all know what the unemployment position is in Glasgow—the whole world knows it. We know the unemployment position in Belfast—the whole world knows it. We know the employment position in Coventry—the whole world knows it. No one knows what the unemployment situation is in Great Yarmouth, nor cares. I will tell the House what it is. It is 6 per cent., which is very high. The figure for men is worse—at 8.2 per cent.
How are we to be helped? That is what I want to know. How can the Government help us? The Member for Yarmouth goes to the Secretary of State for Trade and Industry, but how can he expect the Secretary of State, who is besieged by the several Members for Glasgow, by all the Members for Scotland, by the Members for Northern Ireland, by the Members from the North-East and elsewhere, to give help to little Yarmouth, about which no one really cares?
I will tell the House how my right hon. Friend can help. Of course he can give help by bringing about the resuscitation of the economy of Britain. That is not easy. The right hon. Gentleman told us that he has part of the answer, and maybe he has and maybe he has not. What I am certain of is that it does not help Great Yarmouth, whose people are not jealous of people elsewhere, or do their tempers a lot of good, to see millions and millions of pounds being spent on resuscitating dinosaurs.
I cannot think that the people of Great Yarmouth are particularly impressed when they see U.C.S. being resuscitated, because they fear that the story will be 1722 just the same as it was before, however many millions of pounds may be pumped into it, with the best will in the world, to save people's jobs. I cannot think that the people of Great Yarmouth were particularly impressed by that story. But they were enormously impressed by the collapse of Rolls-Royce, a company which deservedly at one stage had the greatest engineering reputation in the world. But a change came about Rolls-Royce. It was no longer the people of Rolls-Royce but a vast company that had vast sums by way of Government contracts pumped into it through the years—another dinosaur. Of course no one wanted to see it fail, but at the same time it was a company that was hardly likely to make really good use of the millions being poured into it.
Nor does it help the people on the perimeter to see money being poured into other dinosaurs—one has already been mentioned so I see no harm in my doing so—such as B.S.A. possibly? There are other cases which we all know about but which I will not mention because it does no public good to spread despondency when the country is in the state of lack of confidence in itself and in its industry.
It would be quite wrong of me to say that I do not believe the Government have any job to do, or that it is not a very important job, in trying to revive the economy. Of course there is an enormously important job to do. Let us look at Great Yarmouth and see what really happens. I refer to it so much because it is my constituency and I know something about it. It is no different from many hundreds of other towns throughout Great Britain. If private enterprise in this country had had less guts and less vitality and less gumption than it possesses, it would have succumbed during the years of Labour rule, for such an impost of taxation was put upon the shoulders of private industry that it is a miracle it survived.
Now when the Government get up and say, "We must help great company X because of unemployment", I say that we must help successful private enterprise. I do not want it to be given money. I do not want the Government to dole out money to private enterprise. I want them to take the impositions off the shoulders of private enterprise so that it can more 1723 easily get on with the job and more easily plough back some of the profits it makes, and in doing so be more successful in the future.
It is true that the situation in industry is more troubled than we sometimes care to acknowledge. There is more wrong with British industry than we care to stand up and admit. Lord Beeching said only last night on the radio, when he was being interviewed about his company and a take-over bid in which he had been involved, that he could not assess the cost of the take-over bid, but he thought that perhaps the time and the worry of senior executives and the concentration on the actual take-over bid, over a period of a year or longer had cost the company more than the actual cost of buying the firm.
That is what I understood Lord Beeching to say. Perhaps he did not mean it like that; perhaps it was an exaggeration, but I can see what he means. I have not lived for ten years watching Governments concentrating on getting into Europe without realising what this has cost the British nation.
I would like to make another general point on the responsibility of the Government towards industry. It seems to me that we must examine carefully the whole situation that has arisen over the last 20 years, with company after company looking around—once they get beyond a certain public company size—to see whom they can gobble up next. That is what Lord Beeching was talking about last night—the enormous cost incurred by the directors and himself in making this take-over.
I am horrified at the future dinosaurs being created in British industry by enormous companies taking over other enormous companies and seemingly spending all their time, not in producing the best goods and satisfying their customers in the best way, but in seeing what financial wangle they can get up to next to make their empires bigger. If we could consult Cardinal Wolsey, he could tell us a number of things about building enormous empires—and bringing about the fall of Europe.
Finally I would refer to the point made by my hon. Friend the Member for St. Marylebone, who made the interesting suggestion that the Government should 1724 concentrate on the central areas of trade instead of worrying about little places like Yarmouth, which they cannot do by the very nature of things since Governments have too many other worries. It might be of advantage for the Government to examine a city like Norwich where there are, so far as I know, no dinosaurs but successful, thriving private enterprise industry. If the Government made a study of some of these great towns in Britain they might find ways, as a general policy, of assisting those areas, not through pouring money into them but in a general way through taking the imposts off their shoulders. This is a basic way in which Government can help.
I am not saying that Governments should never help an employment situation which has been brought about in a way such as happened with U.C.S. and Giro. Obviously Governments cannot face thousands of people with almost imminent disaster in their lives. This I have to accept, but I accept it most reluctantly because it cannot be the way to help the business of the nation. It cannot be the way in which the economy will survive and thrive. It cannot help my little town and the hundreds of towns like mine to get back to the situation in which labour is wanted, instead of one in which people are looking round desperately to see whether they must put off a few more people next week. I am most most grateful to the right hon. Member for Birkenhead for raising this matter today.
§ 1.8 p.m.
§ Mr. Eric S. Heffer (Liverpool, Walton)
We should all be grateful to my right hon. Friend the Member for Birkenhead (Mr. Dell) for raising this very important Motion because it deals with the fundamental issues facing us both in a political and an economic sense. I agree with him when he says that the Government have retreated from their earlier position, despite the statements made by the Prime Minister on television the other night when he endeavoured to give the impression that the quiet but total revolution was continuing as apparently it had been continuing since the first days of the Government 18 months ago.
I feel sorry for hon. Members opposite, and especially for the Under-Secretary of State. They must be in a state of schizophrenia, on the edge of a mental and 1725 nervous breakdown. They have argued that there must be a complete and utter return to the days of laissez-faire capitalism; they say that we do not need Government intervention, but the fact remains that they have been forced increasingly to intervene by the sheer necessity of the situation and the facts of life on which they try to turn their backs.
Although in theory the Government have rejected the Macmillan middle way, in practice they have come back to where they were before, albeit with their position slightly modified. My own side could be accused of having, over the years rejected the Gaitskell philosophy of a mixed economy. But we came back to it, not because we had to but because we decided to do so.
There is a lesson to be learned here and it is that Governments in a modern industrial society have to intervene in economic terms in the running of the economy. My right hon. Friend made that absolutely clear in his brilliant speech. There has been a retreat by the Government from their previous position. This Motion is a first step in the direction I should like to see us move in, and I would support it if it ever came to a vote or if there was a Bill embodying it before the House. I would, however, regard it only as a first step, because it raises a fundamental question.
My right hon. Friend said that the problem of the confidence of private enterprises would inevitably arise, and this is always a problem in a mixed economy. If the frontiers of public ownership are extended, whether on the basis of all-out nationalisation or creeping public ownership in the way suggested here, private enterprise investment could suffer because of the uncertainty which would be created. We cannot avoid this. Hon. Gentlemen opposite of course say, "Do not do it". As private enterprise has totally failed to solve our problems we must do it and go much further than is here proposed.
My area has a very high level of unemployment, and I remember well the discussions which took place in my party on Liverpool and Merseyside before the 1964 election. We were assured, it was part of the Labour Party's manifesto, that when we had a Labour Government we would introduce new public industries 1726 into the development areas because the old "carrot and stick" methods, while partially successful, did not create the full employment required. What happened was that the Labour Government continued the financial carrots, the investment grants which I support, and the R.E.P. about which I was never entirely enthusiastic because I did not think it would necessarily be used correctly. There is a case for it but it needs to be used much more selectively because some firms in my constituency who have received the financial benefits of R.E.P. have not put one extra worker on as a result. Some of the money could have been used to develop new industries—I would argue publicly-owned industries—in the development areas. I am not saying that the tax should not be used in a selective sense.
We said that we would introduce new publicly-owned industries, but what we did was to build factories for private enterprise companies. We did not develop the publicly-owned industries as we had promised. Why not? Because we were not bold enough, we were not prepared to face up to the criticism of hon. Gentlemen opposite. I hope that the next Labour Government will be bold enough and will produce publicly-owned industries in the development areas and will carry through a policy of public ownership, not because it is a doctrinaire matter, not because it is something in which we believe and hon. Gentlemen opposite do not, but because public ownership is vital to the needs of this country.
§ Mr. Heffer
The hon. Gentleman is anticipating some of my later remarks. We will need to be much bolder because we will be faced immediately, on taking office, as we were in 1964 and 1945, with a so-called crisis of confidence, with a flight of capital. [Holy. MEMBERS: "Hear, hear."] I understand this well and it is about time that we all understood it and took the necessary measures to deal with this. That is how patriotic people really are, because as soon as there is a Labour Government out goes the 1727 capital. The patriots do not want a Labour Government to make the country successful.
Next time we will deal with the situation, and if we are to do this we will need to control the financial and economic levers of the country. That means we will have to control the City, bring under public ownership the banks, the insurance companies, the finance houses—[HON. MEMBERS: "The building societies?"]—Of course. I am not afraid of it, I do not run away from this, because it is vital. If we are ever to change society in a thoroughly democratic direction, to improve real equality of opportunity to eliminate the class basis of the society which hon. Gentlemen opposite support and represent, we will have to own and control the basic financial and economic levers. While I am in favour of what my right hon. Friend has said and support it, it is a first step and a Labour Government will have to go much further to deal with the issues which will face them.
§ Mr. Heffer
I will give way in a moment. We will have to deal with the fundamental issues. The Under-Secretary has a fundamental philosophy. He came to Liverpool and suggested that the Mersey Docks and Harbour Board should be taken out of semi-public control and put into private enterprise. He suggested that U.C.S. should be "butchered" and put into the hands of private enterprise companies of the old type.
§ Mr. Ridley
The hon. Gentleman was worried about the flight of capital in the event of a Labour Government taking over. If I remember correctly, it was largely foreign capital which left the country on the last occasion. Is he proposing measures to stop foreigners taking their capital away from this country if a Labour Government were ever elected?
§ Mr. Heffer
If it were entirely foreign capital it would give rise to an interesting situation, but the hon. Gentleman knows that it was not entirely foreign capital that was fleeing the country. To suggest that it was is to try once more to put a smokescreen around what happened, and 1728 what will always happen when a Labour Government are elected to office.
We know what happened when the Labour Government were in power. Some damned silly rumour in the City created such problems for the Labour Government that there was a financial crisis nearly every other week. I hope that we have learned a lesson from what happened then. At one stage things were so bad that even the suggestion that the Prime Minister was going to be ill, or that he was to leave the country, or that he might retire from the House of Commons for a week was interpreted by the City—[Laughter.]—It is no laughing matter. The City of London and the speculators caused more problems and more economic difficulties in one afternoon than all the unofficial strikers ever caused during the Labour Government's term of office. Hon. Gentlemen opposite find this very funny. They will not find it funny when the next Labour Government take office.
§ Mr. Heffer
The hon. Gentleman always considers a statement of facts to be a travesty of the truth. I have related the facts of that period, and I hope that we shall have learned a lesson from what happened then.
I hope that the Labour Party has got the full measure of the real forces that are ranged against us whenever the people of Britain democratically elect a Labour Government to carry out the programmes set out in their election manifesto.
§ Mr. Dell
Perhaps my hon. Friend would care to tell hon. Gentlemen opposite that they ought to read the recent book on multi-national companies written by the hon. Member for the Cities of London and Westminster (Mr. Tugendhat), in which he discusses the operation of multi-national companies in acting in their own commercial interests, but against the interests of the pound.
§ Mr. Heffer
I am getting somewhat diverted from my basic argument. What has been said does not necessarily contradict my basic argument, but merely ilustrates some of the basic factors involved.
What ought we to do about public ownership? I have said that I support 1729 my right hon. Friend's proposal for a State holding company. For many years I have argued that public ownership ought to operate in more diverse forms. We should make use of the experience of Italy in relation to the I.R.I. I should like to see some other industries taken over by the State, and also the creation of some new industries.
Public ownership could be encouraged in two further ways. Many local authorities, particularly those in the larger conurbations, could produce their own houses by making use of the latest technological developments. They could not only produce the houses, but could also erect them. There are all sorts of ways in which public ownership could be developed. Co-operative associations could be given more opportunities to develop than they have at present.
I now come to the question of competition. Should we, or should we not, eliminate competition? I do not think that we should eliminate it, even between publicly owned industries because, for a local authority, publicly owned shoe company to be in competition with a nationalised or co-operative shoe company which can produce a cheaper and better product is helpful to the consumer and to society as a whole.
My criticism of competition stems from the kind of competition that takes place under the private enterprise system. In the private sector, profits are not automatically ploughed back to provide more investment, to provide better social services, or for the benefit of the nation as a whole. I do not expect hon. Gentlemen opposite to accept what I am saying, but I am expressing my philosophy, just as they express theirs. Their philosophy has been at work for a long time. A mixed economy philosophy has been in operation for a long time, too. But neither has solved the country's basic problems, and it is therefore time that the philosophy in which I and many others believe was put into operation, because I believe that it would provide the answer to our problems.
The Motion refers tothe contribution that public ownership can make to improving the levels of employment and investment.I submit that public-ownership would help the development areas, too. I do not 1730 think that we shall make much progress with the Under-Secretary of State for Trade and Industry. Thank goodness he does not have Cabinet responsibility. If things were left to him, the Government would not intervene even in the way that they are doing now. The hon. Gentleman's philosophy is one of total laissez-faire. It is about the same as that of his right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell). But I hope that at least the message of today's debate will be passed on to those right hon. Gentlemen who are members of the Cabinet. I hope that they will be prepared, even within the context of our mixed economy, to go beyond what they have done so far and accept my right hon. Friend's proposal.
If there is to be full employment, and if there is to be greater investment, there must be a greater degree of public ownership. Hon. Gentlemen opposite have shown already that they are unable to control investment in the private sector. There is nothing that they or the Prime Minister can do about the lack of investment. The Government have appealed in vain to private investors to invest more. The sheer reality of the situation has forced the Government to bring forward plans for the public sector in order to try to solve the unemployment problems in the development areas and elsewhere. Logically, therefore, they should be prepared to go a step further, jettison their doctrinaire views, and accept the concept of a State holding company.
The Government are having to bolster Cammell Laird, U.C.S. and Rolls-Royce. The list is getting longer and longer. The Government had to nationalise Rolls-Royce to save the company.
§ Mr. Heffer
Following that argument to its logical conclusion, there is very little private enterprise at all in this country. A whole series of private 1731 capitalists went to the Conservatives before 1964, and to us after that date, with their begging bowls held out for extra money. They said they wanted it for capital investment so that they could compete in world markets.
§ Mr. Heffer
The answer is simple. Instead of just handing money to them, why not let the Government take control of, or at any rate have a holding in, those industries? If hon. Gentlemen opposite accept the logic of this argument they should be able to accept the Motion.
When I speak of developing and expanding public ownership, which I regard as the ultimate answer to our problems, I recognise that inherent in this concept are certain difficulties. The greatest danger lies in an extension of the bureaucratic structure, as we see in countries like the Soviet Union and East Germany, where there is a fully nationalised and publicly-owned economic system. We must learn from their mistakes.
As we develop and increase public ownership we will have to introduce, in most industries for the first time, means of democratic management by which workers can play a part in the decision-making process to avoid a bureaucratic structure being erected. I do not expect hon. Gentlemen opposite to accept this.
§ Mr. Heffer
The hon. Gentleman must be the exception that proves the rule. We seem to be making progress.
Whether or not hon. Gentlemen opposite accept this philosophy, it is bound to happen in the end. With that in mind, I thank my right hon. Friend the Member for Birkenhead for initiating a debate which has enabled us to discuss some of the fundamental issues that face this country, particularly about the ownership and control of industry.
§ 1.33 p.m.
§ Mr. Cecil Parkinson (Enfield, West)
I enjoyed the speech of the hon. Member for Liverpool, Walton (Mr. Heffer), although I was disturbed by two features of it. I will come to them shortly.
We see the hon. Gentleman making progress in his party. Whenever the 1732 Labour Party needs somebody who can not be blamed for its record, it quickly transports the hon. Gentleman on to the Front Bench, so many of the activities of the party has he disowned.
Throughout his speech the implication was that it was someone else's fault, and usually the fault of the City. For a moment I thought that the gnomes of Zurich would pop up from behind the benches opposite where they have been laid and not spoken of for quite a while.
I was not in the House when the Labour Party came to power. I was working for a firm of accountants in that terrible City which the hon. Member for Walton dislikes so much. I had nine partners, five of whom voted for the Labour Party, which came to power with the good will of many people in this country.
I assure the hon. Gentleman that the loss of confidence did not occur as a result of the arrival in office of the Labour Party. That occurred, as the then Prime Minister has admitted, 15 days later, when the world and the British public started to see the party's actions. In other words, it was not the party's arrival but its activities which caused the loss of confidence. The hon. Member for Walton should reflect on that greatly.
§ Mr. Parkinson
It has been admitted by the Leader of the Opposition. When Prime Minister, he flew to American and told them what a grand country we were. He was anxious to let them know how strong and rich we were. "Please do not take any notice of the speeches I have been making at home. They are for home consumption. We are basically a rich, sound nation" he said, in effect.
The Leader of the Opposition has made it clear that the "confidence factor", as it has been called, came into question after the Labour Party came to power rather than on its arrival. In fact, hon. Gentlemen opposite became the Government with the good will of many people, but by their actions squandered that good will. I implore the hon. Member for Walton please to continue making the sort of speech he made today. That will ensure that the Labour Party does 1733 not get its hands on the levers of power for a very long time to come.
The hon. Member for Ashton-under-Lyne (Mr. Sheldon) spoke of a crisis of confidence, the present economic crisis, as he called it, and the terrible state of the economy. I do not want to bore the House, but after the hon. Gentleman's remarks I obtained a copy of the Bank of England Quarterly Review, from which I will give a few facts to show the hon. Gentleman that things are not as bad as he seems to think they are.
First, our currency, the £, is riding at a record high. Second, our reserves are at a record level. Third, we are, according to the Quarterly Review, poised for a rate of growth of at least double that achieved by the Labour Government during their term of office. Fourth, company profitability, with the disappointing exception of I.C.I., has been moving ahead. Companies are beginning to generate the cash they need to finance their investment. Fifth, the banks are now anxious lenders. Instead of being reluctant lenders, they want to lend people money. In other words, people who have a good proposition can now find the finance for it. Sixth, interest rates are lower. Seventh, prices are steadying. Eighth, there is likely to be a 6 per cent. increase in productivity. Ninth, wages and the wage inflation show signs of abating.
Whichever way one looks at it, one can say—and I urge the hon. Member for Ashton-under-Lyne to agree—that these are signs that not too much is wrong with the economy. To talk about an economic crisis is to do what he deplores as much as anyone else, which is to damage the confidence factor, the very factor or missing link which the Government are seeking to improve.
I sympathised with the hon. Member for Ashton-under-Lyne as I listened to him talk in a rather puzzled way about the vast sums that have been spent in the regions, about the inability to measure the effect that they have had, about the inability to know whether the money had produced the jobs for which everyone hoped and about the fact that it had not transported to the regions the prosperity which we all want to achieve.
To my astonishment, the hon. Gentleman went on to speak about investment 1734 grants. If ever there was expenditure of which it is simply not possible to track the effectiveness, it is expenditure by way of investment grants. About £578 million was spent in the year to 31st March, 1970. The only thing one had to do to get the money was to prove that one had spent it. There was no machinery—it would have been virtually impossible to devise machinery—for measuring the effectiveness of the expenditure.
As I said in the debates on the Industrial Expansion Act, no Government have the right to pour out £578 million to people simply on the production of a chit showing that they incurred expenditure, without having any way of knowing whether it was producing any good; and there is no evidence to prove that investment increased during the time that investment grants were being paid.
It is interesting to note from the Survey of Investment Intentions that, given the choice, 60 per cent. of the people making 60 per cent. of the investment, prefer free depreciation.
§ Mr. Dell
When the hon. Gentleman checks I think he will find that he has reproduced the figures incorrectly from a parliamentary answer that I was given.
My second point is that the comparison was made, not against the 40 per cent. grant which was operating in the development areas but against a 20 per cent. grant. In other words, people said that they preferred free depreciation to a 20 per cent. grant, but the actual comparison which this Government have created is free depreciation against a 40 per cent. grant, and it will be found that there is a very different attitude to that.
§ Mr. Parkinson
If I was wrong, I apologise, but I do not think that I was. I think the right hon. Gentleman was wrong.
As one who at that time specialised in raising finance, and helping to raise finance, and advising people on how to raise finance for businesses, I found that investment grants were not really a significant factor—welcome but not decisive. So often when hon. Members opposite talk of investment grant one gets the 1735 impression that they see it as a source of risk capital. I never saw it like that and we do no good doling out large sums of money to people setting up risky ventures. When we finally get employment on the move again I do not want to see people finding their way into risky activity, but so often hon. Members opposite seem to regard investment grant as a source of risk capital rather than as a help to serious investment.
§ Mr. Kenneth Baker
While agreeing with my hon. Friend that free depreciation is infinitely to be preferred to investment grant, I believe that investment grants were much less effective than my hon. Friend said. For instance, under the former Government investment in service industries rose but that investment did not qualify for grant, whereas investment in manufacture, which qualified for investment grant, remained sluggish.
§ Mr. Parkinson
I do not think that one can speak about the need for investment grants and at the same time complain that large sums of money have been spent on them. This was a classic example of expenditure of which little is known except that it was becoming increasingly large.
The right hon. Member for Birkenhead (Mr. Dell) said quite firmly that the Government were the cause of the present unemployment situation. A week ago yesterday I watched the television programme "This Week" produced, I believe, by John Morgan, in which he went to Coventry, interviewed people out of work and talked to economists about unemployment. It was a very interesting programme. He asked people out of work: "Why do you think you are out of work?" A variety of reasons were given, but it was clear that he was speaking to a group of very puzzled people. One person said: "It is the Government's action." Another person, interestingly enough, said: "It is the trade unions—they are so unreasonable." Another person said, and no one contradicted him: "We all know that just up the road ten of us were doing eight men's jobs. I do not think that helped very much." He was right.
But what struck me as a mistake in the programme was that although the 1736 economists were interviewed, and put forward totally diverse and opposing views about the situation, at no time did John Morgan ask individual employers: "Why did you lay off 150 people?" Or: "Why did you close your factory? This is an area where an immense amount of research still needs to be done. We must ask the people who have actually done this just why they did it." Of one thing we can be sure, and that is that it was not actuated by malevolence. People do not sack other people just out of spite.
There are a variety of reasons for the situation, and I agree that the causes of unemployment are diffuse and not sufficiently understood at the moment. We have to get used to the fact that very few people will end their working days with the company with which they started. The idea of being with the company man and boy doing the same sort of job is dead.
The hon. Gentleman the Member for Ashton-under-Lyne said that new machines produced skilled workers, but I believe that the very opposite is the case. Complicated, expensive machines in the printing industry, for instance, are making old skills quite redundant. Little skill is needed, and men can be trained to work them in a very short time. As I say, from the programme I have mentioned I got the impression of very puzzled people. It is perfectly obvious to me that no one really understands the causes of the situation, and it does no good to use unemployment as a stick with which to beat us.
§ Mr. Benn
The hon. Gentleman has raised this point, but would he not also admit that there are practically no cases in private industry of men laid off being given by the management the facts on which that lay-off has been decided upon? I could quote dozens of cases of men being told that there are to be major redundancies but being given no information about the cause. The men have no understanding of the situation because management declines to give the information. This is a major factor causing dissatisfaction today.
§ Mr. Parkinson
I accept that industrial communications are not as good as they should be, and I hope that we shall move much more in that direction. But the last report of the I.R.C. made a very interesting point. It said that it was 1737 no longer true, except in a few cases, to say that British management gets the labour relations it deserves. It also said that the cause of many difficulties is an unreasoning and often unthinking attitude amongst a number of trade unions, which has held back the breakthrough to more employment and greater prosperity. Although the report said that there are management problems—and no one pretends that managements are perfect—the I.R.C. came down very firmly in the opposite direction in that report.
The speech made by my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) in a recent unemployment debate has been referred to. My right hon. Friend said that we had grown to accept that it is almost a law of nature—he did not quite say that, but I am trying to summarise his view—that jobs will arise at the same rate as they disappeared; that there is some divine law that says that that will happen. He said that there was a period when that did happen, but that now it no longer happens. Perhaps the period when it did happen was the exception and not the rule.
I suggest that there is a very delicate balance between the decline of old jobs and the creation of new jobs. Under the Labour Government, conditions were created, for various reasons—defending the £, or whatever it might have been—which made it extremely difficult for companies to trade. Those conditions hastened the decline of old business because in a tight situation firms which are slightly less efficient, getting a little towards the end of their days, whose products are slightly less in demand, start to go out of business the more quickly. At the same time, for the individual man wanting to start a new venture there is the difficulty of finding the money to do so. I speak with great feeling about this because I have wasted days trying to raise money for worth-while ventures during those six years. It was extremely difficult.
We do not understand that balance, but I believe that the Labour Government did nothing that helped to maintain the balance. It could well be that, when we research this matter more closely, we shall find that the delicate balance was very much upset by their activities.
1738 Finally, I come to the question of why I have no sympathy with the Motion. First, I point out to the right hon. Member for Birkenhead—I am sorry that he is not present—that his right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) said yesterday that the present problem is not a shortage of capacity but an excess of capacity and a shortage of demand. The Motion talks about increasing capacity. It does not propose a short-term measure and has very little relevance to today's situation. In better times there will be no need for that type of organisation.
The right hon. Gentleman's ambitions for a new holding company, that it would interpret trends and find the resources to set up industries to take advantage of the trends which it foresaw, and that it would be a leader in bringing new products to the market, would not be realised. From where will the people come who will do this for such a company? People with that rare gift are not normally interested in channelling it into national holding companies. If they interpret trends well and find products and projects which are capable and deserving of finance, they have no trouble in finding the finance. I cannot see from where people interested in lending such talents to a national holding company will come. At present such people are not finding it difficult to obtain finance. I do not see the existence of personnel who would be interested in it. I do not see that the need for such finance exists, because in normal times, not the abnormal times of the past six years, that sort of finance for that sort of person is not difficult to come by.
The third reason why I find the Motion totally unworthy of support is the record of the existing nationalised industries.
§ Mr. Parkinson
I quote a headline from the Financial Times of 6th December:The State sector seriously off-target. Slow growth, unprecedented cost inflation, and now a year of price restraint … Colin Jones looks into the rapidly deteriorating finances of nationalised industry.Next week we shall be lopping £350 million off the capital of the steel industry. Has that £350 million, in terms of jobs producer, been money well spent? I 1739 should like an answer from the right hon. Member.
Over and over again we see this position. Three of them will make losses; all of them are off target. We are being told that an extension of this principle is the answer to our problems.
In his opening remarks, the hon. Member for Walton said that he welcomed the Motion and the debate because what was outlined was the first step towards Socialism. But what is outlined is a totally irrelevant extension of a principle which simply has not worked and has not produced additional jobs or security for those in industry. I cannot support the Motion.
§ 1.54 p.m.
§ Mr. David Clark (Colne Valley)
I join in congratulating my right hon. Friend the Member for Birkenhead (Mr. Dell) on introducing the Motion.
I am almost at complete variance for the hon. Member for Enfield, West (Mr. Parkinson). He will not be surprised at that. I shall not develop many of the points he raised, but I wish to take up one or two of them. He said that the reserves were the highest ever, that sterling was the highest for many years, that the balance of payments was very strong, and that company profitability was coming along nicely. He painted a picture that although things were not exactly booming they were going on nicely.
That was in direct contrast to the feeling I meet in my constituency. People are beginning to say to me, including workers who are on short time and those who have been made redundant, "If this is what they call Heaven, we should prefer to be in a state of balance of payments deficit." I hear that sort of remark on many occasions. Sometimes we look at the statistical points and forget that, coming down to brass tacks, it is the human beings and the quality of life for the ordinary people of Britain that we are here to try to represent, certainly on this side of the House. I shall not develop that point further.
Introducing the Motion so admirably, my right hon. Friend painted a fairly broad canvas. He was probably right to do so. Various hon. Members have followed his broad pattern or have tried 1740 to paint in some of the detailed scenery of this particular canvas. It is only right so to do. I want to try to apply the model suggested today to a particular industry of great interest to me.
My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) was so apt when talking about Keynes. He said that there was so much bunkum today suggesting that Keynes is dead and is working no more. The basic problem is that we have forgotten what the Keynesian model was and what Keynes said. We have forgotten a very important part of the main economic theory, the points of psychology and confidence. I shall return to that point later.
I represent an area of West Yorkshire which is not mentioned very much in the House during debates about unemployment. Hon. Members who represent parts of West Yorkshire have very decidedly thought that they should not intervene in such debates because, in comparison with other regions, our unemployment rate is lower. In my constituency, although unemployment is far too high, it is only 3.4 per cent. and obviously it is less than the national average. It is worth mentioning that in June, 1970, that unemployment figure was not 3.4 per cent. but 1.1 per cent. It has trebled during the lifetime of the present Administration.
There are serious implications behind this figure of 3.4 per cent. It is not a very accurate figure because in this particular area there is a very high incidence of female unemployment. This has been traditionally so in the wool and textile industry. When the women become redundant, they do not bother to register. They know that there is no point in doing so because they will not get a job. In my area for a decade or more we have been exporting our unemployment. We have had depopulation at a progressive rate. The worrying fact about my region of West Yorkshire, and West Yorkshire in general, is that we are very dependent upon the traditional wool textile industry.
My constituency is divided into two employment areas. In one area, 45 per cent. of the working population work in the wool textile industry; in the other area the figure is 25 per cent. In all, about 20,000 workers are employed in the wool textile industry in this area. 1741 Between 1965 and 1970 the labour force in the wool textile industry was reduced by more than 18 per cent. in the Huddersfield area. Even more worrying, last year alone it was reduced by 8 per cent. The Huddersfield woollen industry is in much better shape than is the industry in other areas. In Dewsbury and Batley there has been a reduction in the labour force of about 30 per cent. in the last five years. In 1960 there were 152,000 workers in the industry nation-wide. In 1970 that figure had fallen to about 96,000.
This industry, far from being a dead industry, is trying to rationalise itself, despite all the difficulties. It still exports more woollen textiles than any other country, including Japan.
General concern has been expressed on both sides about the way in which regional policies have operated. I am convinced that the Labour Government's regional policies were much more acceptable and satisfactory than those now operating; but I am the first to admit that we should not stop searching for alternative methods of giving aid. Our regional planning machinery is much too arbitrary. Although we must accept that unemployment figures are the main criteria, they are not the only criteria.
In the past we have fallen into a trap. We should have much better monitoring services about the progression of industries. Far too often our regional employment machinery shuts the stable door after the horse has bolted. It is right to look for new horses, but it would have been better to have ensured that the door was locked so that the horse could not bolt.
In the Dinnington employment exchange area of South Yorkshire the male unemployment rate was 0.5 per cent. in 1961. This is an intermediate area. The figure for 1971 is 10.5 per cent. It is the tenth worst unemployment rate in Britain. Our whole mechanism has broken down. In the 1960s we should have considered the possibility of giving intermediate status or development aid to that area instead of leaving it until 1969 before taking action.
The situation in South Yorkshire is not all that different from that developing in the woollen industry in West Yorkshire. Fortunately, we have completely 1742 different conditions from those operating in the Lancashire cotton textile industry. Our competition comes from different sources and our problems are different. With the contraction of the industry many mills have closed. They are closing at an accelerating rate. Only in the last week or so two closed in my constituency. Throughout Yorkshire one or two mills are closing each week. This level of unemployment, caused mainly by closures in the textile industry, is permanent unemployment. Mills are like mines: when a mill is closed, as when a mine is closed, the jobs are gone for ever.
The Government are exacerbating the situation in the wool textile areas by a series of actions, one of which is their refusal to implement Section 8 of the Trade Descriptions Act and insisting on origin markings for woollen textiles. There is also the Government's refusal to ake any action to reduce the import tariff on textile machinery. Almost all weaving machinery must be imported.
Lastly, the Government's doctrinaire insistence on introducing in May of this year legislation to stop dole pay for the first six days of suspension will lead inevitably to more closures. This industry has always worked in a cyclical pattern. The workers have accepted this weakness of the industry philosophically. It has been traditional to work three days a week for fairly long periods. When pressure builds up the workers perhaps work overtime. Already, as a result of the May legislation, factories in Sheffield, for instance, have made people unemployed. It has become impractical to have people working short time if they are unable to draw dole money at the same time.
The traditional methods used by the Government in times of full employment do not help the woollen textile industry. The cuts in purchase tax knocked 1p in the pound off the price of cloth, which was not passed on to the consumer and which will not help the industry.
I want to apply my right hon. Friend's suggestion for a State holding company to the woollen textile industry. This industry can compete and can be efficient.. The little N.E.D.C. estimated in its economic forecast for 1972 that by 1972 there will be a favourable trade balance in wool textiles of £127 million each year. 1743 The Government are making the industry's difficulties even more acute.
In 1969 our German competitors increased their investment in the wool textile industry by 42 per cent. In Britain between 1963 and 1967 there was negative investment. The Atkins report, which was commissioned by the industry itself, recommended action which would pull the industry up by its boot-laces. This was before the Tory Government came to power to make things different. It was decided to rationalise and get new equipment. The difficulty is that almost all of the new equipment has to be brought in from abroad. It is a sad fact that although Britain is the originator of the textile machine, there is not a single British manufacturer of automated wool looms. Our looms have to come from Germany, Belgium, Holland, Switzerland or Italy. Yet at the end of the war in this country the Dobcross loom was the finest in the world, but because of the lack of management initiative—I do not think anybody denies this—it has now been lost. In the 1960s it was impossible to raise the necessary capital.
We need this State holding company to go into industries such as wool textiles and to do so competitively. There must be a partnership. I am not advocating nationalisation, but there are many mill owners who would be prepared to go into partnership and get State investment so that they can modernise and compete against our main competitors. In France 54 per cent. of the looms are automated; in Germany 58 per cent. and in this country 37 per cent. Unless we can increase that figure, when we go into the Common Market we shall be going like lambs to the slaughter.
Perhaps the greatest value of all in having a State holding company entering the wool textile industry and having mixed ownership is that it would increase the confidence of the people in the woollen trade. This is absolutely vital to this Keynesian theory. We are suffering from a lack of confidence, and not only the confidence of management to invest but the confidence of the workers who want to work. I meet many wool workers and they no longer have any confidence in the industry. They think the industry may be finished. They see the action 1744 of the present Government and they believe that these are the nails in the coffin.
The great tragedy is that if one goes round the wool industry one finds men of incredible skill there, but one does not see many young people because they have no confidence in the industry—an industry which has a positive balance of about £150 million each year and which has a great future if only we can get more automation and sell our products especially in the tariff-protected countries of Europe. We are advocating something which would prevent an area getting into the depressed state that so many other parts of the country are in.
We would not be unfair even to our competitors. I see in the Press that the Japanese wool spinners have asked their Government for money. The Japanese Government have been asked by the Minister of International Trade and Industry to give his Department £30 million in order that it can buy 1,000 looms for the wool companies of Japan. We in the textile industry in this country, in Lancashire as well as in Yorkshire, have not had the help we should have. I believe that this idea of a State holding company would be so well applied and so well received by the people in the wool textile area that it would help greatly to prevent the area becoming depressed.
§ 2.14 p.m.
§ Mr. John Prescott (Kingston upon Hull, East)
The debate has emphasised one of the fundamental differences between the two parties, one party believing fundamentally in the private sector's contribution to economic development, and the other party seeing the public sector playing the greater rôle.
I congratulate my right hon. Friend the Member for Birkenhead (Mr. Dell) on giving us this opportunity to debate this Motion. It brings out this cardinal point about the contribution of the public sector in improving the level of employment, investment and economic activity, and the desirability of the extension of public ownership by some form of State holding company or in whatever manner one chooses to do it.
We are talking about the extension of public ownership. We have heard a lot from some hon. Members opposite—I think it was the hon. Member for 1745 Enfield, West (Mr. Parkinson) who said that one could not prove that one or the other was the more desirable procedure—to the effect that if we went along this road of Socialism and greater intervention by the public sector in the economy, it would be disastrous and that we must rely on the private sector.
There are many ways in which one could illustrate this fundamental difference between the two parties. I choose to illustrate it in the manner best known to me, and I shall talk of the industry of which I am best informed. That industry provides a number of unique examples from which we can learn something. There was and still is a State holding company, although Parliament is now discussing breaking it up. I refer to the Transport Holding Company. My party is committed to owning and controlling the means of production. That is what we are here for, and this is what the Motion tends to be about. It is not only necessary for us to prove that public ownership is essential because it is the most efficient way of governing our economy, but it strengthens the argument if one can show that the private sector has patently failed to produce that level of economic activity which will give the level of full employment that we require—and I do not necessarily mean 21 per cent. which some people regard as representing full employment—and that the public sector is required to intervene in the economy to bring about the required level of economic activity.
The facts leave no doubt that the Government have had to do something about the high level of unemployment which now approaches 1 million. They are panicking in the sense of turning to the public industries and saying, "Give us some sort of public investment programmes to bring down this level of unemployment." They are turning to the old weapon of using public industries as a means of intervening in the economy when the private sector has failed to produce the level of investment and of economic activity which will reduce the high unemployment that we have at present.
I represent a part of the constituency of Hull and I am very interested in the development of the shipping and port industries. 1746 I come from the shipping industry in which I spent 10 years, and I therefore have a particular interest in it. Unemployment in my constituency is well over 9,000 and at a level of 5.3 per cent. which is a high figure for a constituency such as Hull. Shipping has played a large part in the development of Hull and I have chosen that industry to illustrate the failure of the private sector compared with the job that the public sector has been doing, in some cases in direct competition with it, despite some of the disabilities placed on it by various Governments.
The private sector has failed because it has not produced the required level of economic activity. It has reduced the potential of job opportunities in my constituency for seamen, dockers and shipyard workers and it has failed ro invest adequately. When shipping falls down, it creates a secondary effect in adding to the balance of payments difficulties. If we have to employ foreign shipping instead of British shipping we have to pay in another currency which creates a double balance of payments problem, quite apart from the effect on economic activity and employment.
The state of affairs in the shipping industry is an appropriate example to illustrate the argument. The Transport Holding Company is in process of being dismantled by the Government. What is happening to Pickfords will come readily to hon. Members' minds as an example of the Government's "payola" system, giving sweetmeats to their friends in the City for services rendered.
In the Transport Holding Company, there have been two shipping companies, Associated Humber Lines and Atlantic Steam Navigation, both publicly owned shipping companies. In 1968, the Labour Government took them into the National Freight Corporation. Now, the Tory Government are dismantling one of them, Associated Humber Lines, and selling the other, Atlantic Steam Navigation, a very profitable enterprise, to their friends in the private shipping world.
I have on a number of occasions tried to raise these matters in an Adjournment debate—hon. Members know how difficult that is—so I take this opportunity to present the case now, as it is closely relevant to the rôle of the public sector about which my right hon. Friend the 1747 Member for Birkenhead speaks in his Motion.
There is now going on a monumental squandering of public assets, the wealth of the nation, through the giving over of these companies to private interests at what I regard as knock-down prices. Moreover, it is being done irrespective of the potential and development of the shipping companies. The Government are in a frenzy to return to their friends in the City the financial plums which they so much desire.
These vents are causing considerable concern to seamen and others connected with shipping. We are concerned lest other profitable sectors of British shipping may become candidates for selling off in the near future. I have in mind here such enterprises as the British Rail Sea-link service, and I fear that that may become a candidate for sale.
Neither the public generally nor, I suspect, a good many hon. Members fully realise the size of the public sector in British shipping. The State is one of the largest owners of vessels in various ways, through British Rail and a number of other interests. When all the tonnage is taken together, the Government are the owners of enough to put them within the top six large shipping interests in this country, which, by the very nature of things, makes them one of the largest shipowners in the world.
The State owns over 500,000 tons of shipping of all types—container vessels, ferries, cargo ships and now hovercraft, In addition, there is the fleet auxiliary service, which also is a form of shipping service under the State. The concentration of the State sector is to be found largely in coastal shipping trading between this country and the Continent and in our coastal waters. The largest owner is British Rail, with over 60 vessels. MacBrayne, the Scottish ferry service company, has over 16 vessels. The Transport Holding Company has 13 vessels, and 11 on charter. The Central Electricity Generating Board has over 31 ships at present. The British Steel Corporation is now talking of building and running its own vessels up to 100,000 tons, because it would be considerably cheaper for it to operate in that way. This is another example of a substantial interest in our economy turning its eyes to the 1748 shipping sector so as to meet its individual needs. A number of the State interests are turning to shipping not as one of their main activities but for the purposes of their operations.
Let us consider for a moment the contribution which British coastal shipping has made during the past 10 years. Trade over the short sea routes is valuable for a number of reasons, for the jobs it creates for seamen and those who work in the docks and in ship repairing, as well as for the economic activity which it creates in the port areas and the multiplied effects of that in the rest of the economy, quite apart from the contribution to the balance of payments to which I referred a few minutes ago.
The traffic with Europe, East and West, is increasing tremendously, and now accounts for 45 per cent. of our exports in value and 40 per cent. of imports. A considerable proportion of this is carried in what we call British bottoms, that is, British ships as opposed to foreign-owned vessels.
What has worried the maritime unions for some time, however, is that the proportion of cargo from this country going in British vessels is only about 50 per cent. by value and 40 per cent. by tonnage, the rest going in foreign ships. This has been a cause of concern in terms of jobs, apart from the economic cost to the country in terms of the balance of payments.
§ Mr. A. P. Costain (Folkestone and Hythe)
When British Rail failed to run a service from Southampton to Le Havre and certain other places, private enterprise came in, developed the service, made it pay, and increased the amount of traffic. British Rail, apparently, could not. How does the hon. Gentleman explain that?
§ Mr. Prescott
I think that the hon. Gentleman must have been reading my notes, because I was just about to come to that. British Rail failed in Southampton—that is true—and, despite the protests of the National Union of Seamen and other maritime unions at the time, foreign ship owners came in and developed the Southampton service. But the hon. Gentleman should know that the position has entirely changed now. British Rail has become an aggressive shipping 1749 concern. The change has come about because of what the Labour Government did. Instead of there being separate British Rail shipping sectors, one controlled by the Southern Region, another in the North-East controlled by that region, and so on, British Rail's shipping interests were put under a separate shipping board which was given the task of harmonising all British Rail's shipping interests. There has since been a tremendous amount of growth and activity by British Rail.
The point I was coming to will illustrate how aggressive the public sector has been, and how powerful a developing and innovating force it has become in comparison with the private sector. This may well be true in other industries, but I illustrate it with some facts in regard to shipping.
The Labour Government set up the Rochdale inquiry into the shipping industry because of their concern about what was happening at that time. They galvanised British Rail, as I said, putting its shipping interests into a separate division. The result has been the introduction of such innovations as the freightliner system, the first we ever had in this country—that was never started by private enterprise—and the development of the hovercraft, which also the private sector failed to take up. The private sector missed its opportunities in coastal shipping just as it did in the deep-sea sector.
These facts have been confirmed and commented on by a number of writers on the shipping industry. Dr. Sturmey, for example, wondered why British shipping's share of trade had declined so drastically, and, after looking at most of the reasons given by the ship owners and various academics, he came to the conclusion that the real reason was what he called internal restraints on management—a fancy term for what I should rather call lousy management. The dead hand of earlier supremacy had stultified enterprise and initiative, bringing the industry to its present state. That view of Dr. Sturmey's has been confirmed by others. The Rochdale inquiry and ather inquiries into the shipping industry have come to the same conclusion.
Here are some facts about the public sector to show the innovating rôle which it has played. The Rochdale Committee 1750 of Inquiry into shipping found that in roll-on, roll-off services the private sector controlled 40 per cent. of the square footage out of the country and the public sector 60 per cent., while in containerisation and unit load vessels the private sector controlled 35 per cent. and the public sector 65 per cent. Those are two major innovations in the introduction of which the public sector played a big part and held a major share. The private sector squealed that the competition was unfair, even though the public sector had to borrow at considerably higher interest rates.
Both the Report of the Rochdale Committee and that of the National Economic Development Council into short sea shipping emphatically rejected those arguments. The picture is of an aggressive innovating public sector in the shipping industry, and an expanding one, compared with a private sector which I would describe as a pirate sector, because it has been exploiting the public sector quietly and plundering public assets. For example, Stephenson Clark, the shipping company, was given the right to manage the shipping side of the Gas Council and Electricity Council. Those State bodies gave a major competitor the right to control and manage their affairs. At that time the transport of coal around our coasts was beginning to decline, for many reasons.
In 1961 Stephenson Clark had 31 ships and managed 54 State-owned ships. Despite the decline in trade, by 1971 it had increased the number of its own ships to 42 while the number of State sector ships that it managed had fallen to 21. Not only had it managed to increase its own share against the declining trade, but it was given a commission for selling the State sector ships, and whilst receiving the Commission it sold the State ships to itself. That is an interesting improvisation on the Tory slogan, "You've never had it so good." That was certainly true of that shipping company, but for the public a different version is more appropriate: "You've never been done so good."
§ Mr. Prescott
It may be incredible, but it is the fact. I am trying to illustrate the difference between the public sector and the private sector in one of our major industries.
Now the Government propose to take away the subsidies from MacBrayne, the Scottish ferries, and give them to the private sector western ferries. That is another example of their giving things to their friends and enhacing the development of the private sector while running down the public sector.
In the Transport Holding Company, The Atlantic Steamship Navigation Co. and Associated Humber Lines were combined. In 1961, Atlantic Steam had 15 ships, and this year the figure had increased to 19—eight of its own and 11 on charter. It was the principal innovator of our roll-on, roll-off services. It is an aggressive and profitable company, with profits for the year 1970 of over £800,000. It was in competition with British Rail, so much so that Rochdale thought that that was silly and that they should be put together, using the same investment resources as one group.
Associated Humber Lines has been forced to the wall by the Government's philosophy; the Government have decided to break the company up. In 1961, it had 10 ships, and by this year the number had been reduced to five. It was different from Atlantic Steam, which is a wholly-owned public company, as it had 9 per cent. of the Ellerman and Wilson Line, another private company, which gave that company the right to a seat on the board. It is interesting for a State enterprise to have a representative of a major competitor sitting on the board. I cannot say whether that influenced what happened; I just want to relate one or two facts. Ellerman and Wilson's office is inside its private competitor's big office. The dockers in Hull who unload the Wilson ships unload the Associated Humber Line ships, and they are allocated to the Wilson dock labour pool.
The routes which Associated Humber Line had from Goole to Holland were sold to another private company and the route to Copenhagen was sold in 1965 to Wilson's, one of its competitors. Again, the State sector withdrew from its activities. Mr. Bryan, general manager of the company, described it as a flourishing 1752 and expanding service. Associated Humber Lines was the agent for Wilson operating the service. The Hull-Antwerp route was given to Kettlewell Agents. Other private shipping companies are expanding at a fantastic rate, doubling the number of their ships.
It has been said that Associated Humber Lines was making a loss. It is true that it made a loss for three years, because it had gone through a particularly heavy cost period and because its ships were wrongly designed. It tried to lengthen them instead of developing them as roll-on, roll-off systems. But both companies taken together were profitable over a period. The company to which it has been sold, which is now Southern Ferries, said in a statement reported in the Financial Times on 7th December:With Great Britain likely to join the Common Market, the prospect for the shipping business over the next few years is one of sustained growth.Plans to step up the Continental marketing efforts are now well under way. The vast market is still virtually untapped, and in our view it will prove a major growth area for us over the next years.Two public sector companies on a profitable route which could have been developed, one of which was already making a considerable profit, have been sent to the wall. When they were offered for sale British Rail was not allowed to bid. When I asked the Minister for Transport Industries whether it would be allowed to buy the company, he said that the arrangements for the sale were a commercial matter for the National Freight Corporation, which was aware that the sale to the private sector would coincide with Government policy. Yet it would have been a logical extension of British Rail's services.
After considering the problem for a long time, Rochdale, who would hardly be called a Socialist, said, at paragraphs 277 and 278 of the Report:In these circumstances we strongly recommend that the fleets of British Railways and of the National Freight Corporation should be organised as a single unit with its own independent board responsible direct to a Minister.We recognise that any widening of the powers of the nationalised undertakings to operate shipping services would be a controversial issue, but we believe that, if the publicly owned services are to be efficiently run, there must be the opportunity to reduce operations which are no longer in demand 1753 and to open up new services which promise a profit.Despite all the Committee's researches into the industry the Government ignored it and went ahead with their dogma to sell.
I believe that the State sector should consist of one entity. My right hon. Friend the Member for Birkenhead talked about a holding company. In whatever way it is done, it should be concentrated into one special shipping sector—a national shipping line. This is necessary to arrest the declining share that Britain has in coastal shipping. It is necessary to make an increased contribution to the balance of payments; it is necessary to increase job potential for British seamen, and to increase the work in British shipyards. We are finding this at Clydebank and elsewhere. The trouble over Associated Humber Lines could have been avoided if the Government had allowed British Rail to take over.
The Government's policies are making unemployment in Hull worse. There are increasing problems in Hull's shipyards. We used to have regular ship-repairing orders for those yards. Hull has a large small-ship repair sector. It is facing increasing redundancies, especially because of the decisions that have been taken recently but also because the decision of the Government to run down the public sector.
We have had an announcement from the British Waterways Board that it is to be disbanded. The Humber area will be affected because it is a potential area for the commercial development of the canal system. There was the British Waterways Board's innovation of the push-tug. Private shipping companies would not innovate in terms of the container system, but the British Waterways Board has done so. One foreign shipowner has seen the potential of this. He has ordered containers from the Hull yards. Yet the British Waterways Board is not allowed to put money into the company to guarantee its financial viability.
The Minister has had a letter from a constituent of mine which I hope he will study. The present situation is causing great concern in my area, and something 1754 positive needs to be done to increase economic activity there.
In the question of ship-repairing facilities the British Transport Docks Board faces a problem. There is the question of the financial criteria in connection with the development of regional economic activity. Is it the criterion of strict national profit that is to determine economic activity? I was interested in what was said by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) about the extent to which we should go on giving money. That is an extension of the argument that we are trying to make the intervention system work. It is a refinement of the argument, but I am not convinced that it will work because of the criterion that operates in connection with our nationalised undertakings. Even under the Labour Government the financial criterion was that the undertaking should be profitable over a short period. That has forced the British Transport Docks Board to make decisions to concentrate on large projects, in terms of investment, and to cut out small things like ship-repairing facilities in Hull.
What is to be done about the unemployed? In my area there are 9,322, and taking in the number of self-employed, the figure is probably over 13,000. The private sector in my area has failed to meet the demand. We require investment for economic growth. As a trade union official who has come into contact with a great deal of Hull management, I am of the opinion that Hull is cursed with nineteenth century managers, lacking vision, ability and drive. But even if they had those qualities it would not be sufficient to solve Hull's problems.
The hon. Member for Enfield, West was not present when I was developing my argument about the public and the private sectors, but if he came to Hull with all his accountants he would not be able to solve the problems, because they are fundamental to all the regions.
The policies that my party pursued were very expensive, but even they did not produce the goods. It is necessary to grasp the nettle and to face some of the awkward questions that will have to be answered if we are to say, "Take control of this means of production."
The Humberside problem is common to all the regions. We cannot develop Humberside, Severnside, or Scotland as 1755 regional entities without massive amounts of capital, and some direction. We cannot offer incentives and hope that businesses will go to the areas, and even if businesses do go there there will be no guarantee of co-ordinated economic growth. What is required is the direction of industry and skills, planning on a degree far greater than private enterprise can undertake, and resources far greater than private enterprise can put forward on an individual broken-up basis. It requires State intervention. There will have to be greater intervention in the industry, and not merely to control these things; it means fundamental control, so that we can determine the level of economic activity, investment and growth.
We have to ask, "Do we nationalise insurance companies?" The insurance companies and the financial sector determine so many things. This is a fundamental economic fact that we must face. The job can be done only by the public sector.
I thank my right hon. Friend the Member for Birkenhead for raising this matter today. Only the public sector can solve our problems. It has not solved the shipping problem, but it has proved that it is much more efficient and effective and can do a better job than the private sector.
§ 2.46 p.m.
§ Mr. Anthony Wedgwood Benn (Bristol, South-East)
I join with others in congratulating my right hon. Friend the Member for Birkenhead (Mr. Dell) on bringing this debate up for us. We have often debated these issues, on various Bills introduced by the previous Government and repealed by the present Government, and we have debated many of these issues in Motions of censure, often in a heated atmosphere. The atmosphere of today's debate has been a much more favourable one in which to deal with the difficult problems to which the House should give its attention. Since we all learn by experience, and those who have had any responsibilities have made mistakes in the course of gaining that experience, an atmosphere like this is perhaps the most favourable for looking back and seeing how far we have succeeded and how far we have failed.
During the last Government when we debated Labour policies in this field we 1756 were subject to almost continuous criticisms from the party opposite, claiming that our policies were not effective or were not doing what they were supposed to be doing. It was claimed that we were interfering unnecessarily in the private sector. But in the last 18 months we have had the new experience of much greater and much more intractable unemployment problems confronting us. It is not without significance that those who have spoken today have come from areas of high unemployment.
When the hon. Member for Enfield, West (Mr. Parkinson) read the list of achievements of the present Government one would have supposed that everything was for the best in the best of all possible worlds, whereas we are discussing these problems against a background of the highest unemployment that we have had since the war—unemployment for which remedies are apparently the hardest to find.
Taking the background of unemployment as that against which we are having this debate, we must analyse a number of factors which contribute to it. The Government clearly saw a measure of higher unemployment as a factor in fighting inflation. That has not been very effective, but there is no doubt that that was one of the motives which led the Government to pursue the policies that they did pursue in the early months of office.
Secondly, there is the new shake-out in industry which these policies helped to develop and which had begun earlier, in 1966, with the policies of the previous Labour Government. The shake-out problems are extremely serious because they come in parallel with the problems associated with technical change, which has greatly affected the development areas. It would be impossible to talk about the problems of the development areas without focusing attention on the special industries which are concentrated there and which—in the case of coal, transport, and now engineering—are running down. My hon. Friend the Member for Colne Valley (Mr. David Clark) also mentioned the problems of the wool textile industry.
In my listing of the factors which have contributed to the unemployment problem, there is no doubt in my mind that the Government's policies, which were 1757 thought up and finalised during the preelection conference at Selsdon Park and vigorously advocated by junior Ministers and to some extent by the Secretary of State for Trade and Industry himself—the so-called "lame duck" philosophy—have played a very large part in shaking confidence not just of industry but of the people working in it.
This is because if the country has a Government who are in a sense trying to escape from the responsibility for maintaining full employment, undoubtedly many other factors are set in motion which it is difficult to reverse. I have often heard hon. Members with City experience—which I have not had—talking about the delicate fabric of confidence. The hon. Member for Enfield, West talked about what happened in the first 18 days after the 1964 election. But business confidence survived much longer under the 1964 Labour Government. It did not, in fact, get its big knock until July, 1966, as compared with the swift decline of business confidence under the present Government.
But confidence is not only something which influences those responsible in high positions for industrial investment. It affects every man's attitude to his work and the price paid by the Government for the lack of confidence they have created in terms of loss of confidence includes factors like the loss of confidence productivity and the rise in savings. This lack of confidence has gone very deep and the main responsibility rests upon the Government.
§ Mr. Parkinson
I was not talking about loss of business confidence after those 17 days but about the fact that, after the Government's activities during those 17 days, international confidence was lost and from then on the Government were defending the pound and were forced to abandon many of the things they wanted to do. It was not business confidence that I was talking about.
§ Mr. Benn
If the hon. Gentleman thinks that these problems of defending the pound and of the balance of payments were created by Ministerial speeches in the first 12 days after Labour came to power, he is over-simplifying an infinitely complicated problem and one for which his own colleagues have to carry a great share of responsibility.
1758 Let us examine the Government's record in intervention. They have dismantled—and this is what a parliamentary majority enables one to do—the entire apparatus which we had developed during the period 1964–1970. They have dismantled and removed the investment grants and the regional employment premium; they have totally eliminated the Industrial Reorganisation Corporation; they have repealed the Industrial Expansion Act; at the end of this month, the Shipbuilding Industry Board, with all its industrial experience and unspent resources, goes into a little cupboard in the Department of Trade and Industry. The Government have achieved by the use of their parliamentary majority the things they said they would do. What has happened as a result?
In part, the disengagement from industry has contributed something—I think that it is a major contribution—to the collapse of confidence. But having done that, the Government have been driven back into intervention in industry in a far less selective way than we ourselves did. I take one example. The commitment to maintain the Rolls-Royce RB 211 engine throughout the whole of the Lockheed Tristar's life is a commitment which has no limit of expenditure upon it and it puts the engine on exactly the same basis as the Concorde was put when it was started by the last Conservative Government in 1962.
Rightly or wrongly—I am not arguing the merits—at any rate the interventions which we tried to organise was carried out in such a way that the House knew what the ground rules were and they never involved an unlimited commitment to anything. The Rolls-Royce guarantee is a most formidable guarantee for any Government to give and it takes the Government back into an unlimited commitment to the aircraft.
The U.C.S. story begins with the Government's obvious intention, as evidenced in the famous Ridley Report, to end the U.C.S. experiment. What has happened? The Government have written off all the debts of U.C.S. and they are proposing to give all the assets of U.C.S. to a new private company. The Government are picking up the social costs of unemployment on Clydeside and they propose to pay £10 million to £15 million of public 1759 money into a private company which will be attracting, perhaps, £1 million of private capital. Is any hon. Member opposite trying to persuade me that that is not a far bigger commitment to Govan Shipbuilders, or whatever it is to be called, than the one made available in an organised way under the Shipbuilding Industry Board?
No doubt my hon. Friends will remind me that the Govan company does not meet the requirements of the Clydeside workers to maintain employment in all four yards, but it appears that the feasibility study will at any rate bring in Scotstoun. But even with the closure of one or two of the yards, which the Government want to do and which the workers, with my support, are trying to resist, the commitment in public money will turn out to be greater than that made available through the Shipbuilding Industry Board by the Labour Government. To call the £1 million notional shareholding, around which the Government are to attach this investment of public funds and the writing off of public debt, private enterprise is to stretch the Oxford English Dictionary to a degree which goes beyond what is reasonable.
Let us also take the example of Giro. It is to be kept, and I think that that decision is right. The proposal for a Giro is not new. It was started on the continent in the nineteenth century and advocated consistently here from the 1920s onwards. It represents a very efficient way of transferring money. But the Government's decision to keep it going can only have reflected one of two considerations—either acceptance of the intrinsic merits of Giro, of which there is no doubt in terms of modem means of transferring money, or employment reasons in Bootle—or both. Of course, there was a miscalculation about the profitability of Giro in the early years, but nothing compared with the miscalculations made by private industry in recent years, nor indeed, with predictions for many projects which all Governments have supported. But the significant thing is that the Government have confirmed the wisdom of going ahead with Giro, and I think they were right. But do not let us be told after this that disengagement and the philosophy of immediate 1760 profitability must be the criterion by which to judge the basis of Government investment.
§ Mr. Benn
Let the hon. Gentleman look at any industry in which there has been a miscalculation; let him look at English Electric computers which had to be acquired by I.C.T. under I.C.L. arrangements and in the process covered up the enormous loss impending there. I am not arguing the merits of Giro, but I am saying that the Government have entirely altered their view towards their rôle in the private sector. A few months ago the Secretary of State for Trade and Industry spoke about cutting motor tariffs to deal with the wage situation at home and two days ago we found him reimposing textile tariffs to deal with a domestic situation which fully justified that decision.
The Government, after 18 months in power, have stumbled back into intervention—or salvage, or whatever they like to call it—without a philosophy to guide them or any effective instrument to help them in their task.
§ Mr. Kenneth Baker
Dealing with Giro, the right hon. Gentleman was emphasising the point made by several colleagues this afternoon, that when the State through a holding company or nationalised industry undertakes an investment like Giro which does not pay off in a reasonable time and seems unlikely to pay off in a reasonable time, it is exceedingly difficult for the State to disengage. One of the arguments we 1761 have made is that once one gets into this particular pool it is almost impossible to get out again. Would the right hon. Gentleman not agree that there is a danger that this particular investment may be out of historical phase? If Giro had been invented in the 1890s or the early part of this century it could perhaps have been as successful as the Post Office Savings Bank, but having come into being in 1969 when the transfer of money is so sophisticated it is unlikely that it can establish successful operations.
§ Mr. Benn
If the hon. Gentleman believes this he should be arguing with his right hon. Friends that Giro should not be continued. But I am satisfied that in the decision the Government made about Giro they looked at its long-term value, nationally and internationally, and this influenced them more than the employment considerations in Bootle which I know would not influence them very much bcause it has not done so in other sectors.
But will Governments, when engaged in something, be disinclined to let economic factors take their course? We have many examples where this has happened as, for example, in the mining industry, where there was a run-down under public ownership. Where there is a rundown required it is part of our argument that public enterprise handles this run-down with more humanity. Take the example of the Beagle Aircraft Company, acquired by the Government in the belief it would be a success. When that proved not to be possible, the Beagle Aircraft Company, though publicly owned, was allowed to go into liquidation.
The fact is that Government are capable of taking a realistic long-term view of the prospects, even in industries in which they have intervened. I would not accept that this argument, raised by the hon. Member for Flint, West (Sir A. Meyer) really carries much weight. What we have to do today is to try to develop some workable relationship between Government and industry—I shall come to public enterprise in a moment—which makes sense. I am increasingly bored with an ideological argument about one part of this argument which is not ideological at all. It is not my belief that these instruments, developed for this purpose 1762 under the previous Government, advanced the cause of Socialism at all. They were much less effective, much less vigorously pursued even by the Japanese Ministry of Trade and Industry, or by the Germans or the Americans. It is an essential, practical necessity if we want a mixed economy to work. I find the arguments produced against this on ideological grounds as incredible.
I shall not congratulate the Government on apparently having moved to the Left, because it does not constitute a move to the Left at all. What we are coming on to, and this is a different question, is whether there is a case for a conscious extension of public enterprise, different from the motivation which led to the I.R.C. and the Industrial Expansion Act. I have no doubt that the proposal of my right hon. Friend the Member for Birkenhead for the State holding company, which has been made before and was accepted by the Labour Party conference at Brighton recently, is a sensible proposal.
I say this because I am certain that whatever measures may be taken to reflate the economy generally there will be major areas of unemployment which resist general reflation and do not benefit at all. My hon. Friend the Member for East Stirlingshire (Mr. Douglas) argued that he would like to see this idea of a State holding company applied in a Scottish context too. I agree. One of the great deficiencies about much of our thinking here has been to think that everything can be done centrally. I should like to see these powers exercised not only nationally but on a regional basis.
The idea of the development bank, referred to by my right hon. Friend the Member for Manchester, Cheatham (Mr. Harold Lever) last night, which we were discussing in the old Ministry of Technology, the idea of a Clydeside Development Authority which the T.U.C. brought forward when looking at the problem of Upper Clyde, the idea of the regional industry boards under the old Industrial Expansion Act—all these marry in with the proposals that my right hon. Friend has put forward. If Government are to drawn into contact with industry there are clearly sectors of this relationship which are best handled by outright ownership and control rather than by operating 1763 on the margins by trying to bribe businessmen to do things by incentives which are not very effective.
I am impressed by the arguments of those who have had City experience and who say that these incentives are not as effective as Ministers had in mind when they were introduced. If this is the case, and it was a conclusion that our own studies did not altogether contradict, and we are faced with an intractable problem, then as the hon. Member for Flint, West (Sir A. Meyer) said, he would not be averse to the idea of public agencies doing the work, and this is a practical way of looking at it and something which we ought to consider more fully.
Since the hon. Member for the Cities of London and Westminster (Mr. Tugendhat) is here, may I say that I am sure he recognises—I have his book beside me to remind me of this that the multinationals operate across the British economy in a way that makes it essential for Government to have some sort of direct power to control the decisions they make which could be adverse to the interests of a national economy or the people who live in a country. He has studied this carefully and he used to come to see me in an old capacity. He will be aware that decisions taken by the multi-nationals, particularly immediately after devaluation, were decisions favourable to their own worldwide interests which were flatly contradictory to the interests of the British economy.
One reason, not the only one, why we need some Government instrument is that when dealing with these companies we cannot assume that they will operate on the same criteria as those applying to British companies. If we get to the next Motion before 4 o'clock we shall have another appeal for intervention by the hon. Gentleman, this time on a European basis.
I turn to the extent to which public enterprise ought to play a larger part in developing employment. Hiving off of public enterprise functions as part of the philosophy of this Government is really a damaging course to pursue, because here there is existing management with the capacity for development. If the Government insist for ideological reasons in hiving-off the activities of public enterprises 1764 than we are weakening an agency that has the capacity to expand and extend its work, creating employment in the process.
If we look at the rôle for the extension of public enterprise more generally there is no doubt that in those industries which cannot by any stretch of the imagination be described as private enterprise, notably shipbuilding or the aircraft industry, or maybe even the pharmaceutical industry, where there is a market almost entirely conditioned by the size of public sector purchasing, we are in an area requiring a great deal more active, positive thinking.
I agree with what was said by my hon. Friends this afternoon in urging that the case for public ownership should be looked at again with those objects in mind. We are looking at the extension of public ownership, and I am certain that it will recommend itself, not only on the practical ground of dealing with unemployment in the regions, and elsewhere, but also as a way of extending the general control of the Government over the economy—a very useful power to have, as we have seen from the Chancellor's deliberate use of the speed-up of investment by nationalised industries as a way of dealing with the collapse of investment.
§ Mr. Benn
What I said, if the hon. Gentleman heard me, was that we, as a political party, were looking at the extension of public enterprise. May I warn the hon. Gentleman and his hon. Friends that the old appeal against public enterprise warning the public against it will be a lot less credible, the Government having nationalised Rolls-Royce. Anyone who thinks that he will get votes at a General Election by telling the electorate that if they vote Labour the aircraft industry, or the shipbuilding industry, or whatever it may be, will be nationalised will find it a great deal more difficult to make that view credible, because the public recognise not only 1765 that public enterprise is more efficient—and we have been given the example of the shipping industry—than large sections of private enterprise, but that where there are human problems to be dealt with in the run-down of industries, nationalised industries handle them with a great deal more dignity than does private industry.
§ Sir A. Meyer
Would the right hon. Gentleman accept that even those on this side of the House who are prepared, on pragmatic grounds, to accept that there is a rôle for public enterprise in creating employment adhere firmly to the view that hiving off is thoroughly desirable, and that where public enterprise has a rôle to play is in preparing projects which can be handed over to private enterprise at a profit to the State?
§ Mr. Benn
I hope that the right hon. Member for Wolverhampton, South-West (Mr. Powell) does not read that intervention. If it really were the hon. Gentleman's view that the rôle of public enterprise is to do all the work in starting new products and then when it has been softened up and made profitable, the concern is handed over to private shareholders, that would be a novel view of the case for public enterprise. But it is one which I should find interesting to quote at an election if I were charged with urging the extension of the public enterprise, I should say that I was following the hon. Member for Flint, West who says that that is the way to do things—when everything has been made easy, the concern is handed over to the private sector.
§ Mr. Heffer
I think that to some extent my right hon. Friend did not answer the question asked by the hon. Member for Yarmouth (Mr. Fell) about insurance, the banks, and so on. It should be on the record that the Labour Party at its conference this year discussed the public ownership of the banks, insurance companies, and so on. The issue was discussed at considerable length, and in a good atmosphere. As a result, the conference passed a resolution, and during my speech this afternoon I had in mind the decision made by the Labour Party conference. I want that clearly on the record.
§ Mr. Benn
I am glad that my hon. Friend intervened to say that. I was 1766 speaking about the work of the executive on the policy of public ownership which will be put before the conference this coming year as a result of which the resolution to which my hon. Friend referred was passed. We are working on the programme that will be put before the conference during the coming year. My hon. Friend is right.
Hon. Gentlemen opposite should not underestimate the effect on public thinking of having had in power a Government who for 18 months have shown themselves to be principally interested in the profits of their friends and not interested at all in ordinary people. If in due course they get a surprise from the electorate on this subject, then hon. Gentlemen opposite who have spoken today will have played a notable part in the political education that is coming about as a result of the change in the thinking of the public on this issue.
We have talked about public enterprise and the rôle of the State in relation to industry. Undoubtedly there are certain decisions which must be taken by the community as a whole, by the Government, in respect of major investment matters affecting the nationalised industries. In addition to that, there is undoubtedly a case for the greater devolution of management decisions in this area than was achieved by the last Labour Government.
The case for this lies in terms of the need for greater freedom for the nationalised industries, in terms of the devolution of authority to the regions, and, similarly, in devolving responsibility in a State holding company of the kind proposed by my right hon. Friend the Member for Birkenhead.
I go further and say that we would totally underestimate the potential development of public enterprise if we did not, as my hon. Friend the Member for Walton said, give a far greater rôle to workers in industry so that they may play a larger part in the decisions of the firms for which they work.
The arguments about industrial democracy, workers self-management, participation, involvement or whatever one likes to call it have gone on for a long time. The action in the last 18 months or so, which was begun under the Labour Government, has shown that 1767 these arguments have acquired a new and different force and character.
When I talk to groups of workers who come to discuss problems of redundancy, or when I visit them, I find among groups of shop stewards senior management people who have come with these shop stewards to present a case for an alternative management or Government decision. We should make a great mistake today if we thought that the argument about unemployment was an argument only about ownership—about who should own what in the public or private sector. We are actually talking about the people who work in industry.
It is my conviction that the rôle of people in the public sector can by definition be greater than it is in the private sector. But this is not self-evident and requires a change on the part of management. There is a serious danger in our society that we may reduce the rôle of people in society, not by scientific influences and men in white coats but by dehumanising people in huge organisations so that they do not have the opportunity of developing their potential to the full.
I supporting the Motion, and in again thanking my right hon. Friend for introducing the debate, I hope that we will have in mind that we are discussing not only economic and financial matters but essentially the ways and means by which we can best mobilise the ability of the people, and in doing so allow the economy to grow in a way that really meets our deepest human needs.
§ 3.19 p.m.
§ The Minister for Industry (Sir John Eden)
I agree with the right hon. Member for Bristol, South-East (Mr. Benn) that his right hon. Friend the Member for Birkenhead (Mr. Dell) is to be congratulated on having introduced a debate of such quality and sustained interest. I regret that I missed one or two speeches, but for the rest I followed the debate closely, as have the many hon. Members here who will wish to echo these remarks.
It is a fascinating and important subject which we have been discussing and I have no doubt that this will not be the last time that the House will turn its attention to these issues. The debate 1768 has been hinged on the primary objectives underlying the Motion, which, in the words of the right hon. Member for Birkenhead, is designed to seek an answer to the problem of high unemployment which persists today. It might therefore be appropriate before considering some of the solutions which have been discussed, if I were briefly and more or less in summary form to remind hon. Members of the Government's efforts and initiatives towards bringing to an end the present high level of unemployment.
First, as hon. Members will know, there have been substantial personal, company and indirect tax remissions. In the context of our debate, one important remission is the 5 per cent. corporation tax reduction. It is important because it increases the after-tax yield on basic investment, and it is that for which companies and those who take these investment decisions are primarily looking. Again, plant and machinery now attract a first-year allowance of 80 per cent., and in the development areas there is free depreciation for the service sector.
I was grateful to my hon. Friend the Member for Flint, West (Sir A. Meyer) for drawing our attention to the service sector. It is all too often overlooked in our consideration of regional matters and also in regard to the opportunity it can provide for meeting some of the existing unemployment problems. My hon. Friend pointed out the specific help that might be given for certain sectors, such as the tourist industry, but he will know that the regional tourist boards, though now in existence, have not yet got fully under way. They are still in their early stages. But the sort of scheme my hon. Friend put forward would seem to be wholly appropriate for their consideration.
One matter which has not been sufficiently recognised, or to which sufficient credit has not yet been given, is that firms investing in the development areas can now carry back their tax allowances against their profits in the previous three years, thereby obtaining a refund of corporation tax paid if their current profits are insufficient to cover the allowances due. The significance of this provision, which is not yet fully recognised even by the companies themselves, is that 1769 they do not have to be profitable in this year in order to benefit.
The Government do not have any doctrinaire resistance to recognising and welcoming the contribution which the public sector as a whole can make to meeting unemployment difficulties and assisting in the stimulation of investment. Unlike the hon. Member for Kingston upon Hull, East (Mr. Prescott) I do not see this at all as a battle between the private and the public sectors: that would be altogether too sterile an approach. The problem we face, and this has been well considered by most speakers today, is how to secure the most effective deployment of our country's resources, not just for short-term needs but in order to achieve a soundly based structure for our economy in the future.
The right hon. Member for Bristol, South-East took us to task in one or two respects for certain of our recent decisions, such as those in connection with Rolls-Royce and U.C.S. He claimed that in the latter case, certainly, the commitment would probably be greater than it would have been had earlier action been taken along more orthodox Socialist lines. This may very well be the case, and I would not dispute that matter with him. But I wish to emphasise that the decisions taken are more likely to lead to a more secure basis for future development and growth.
There is a world of difference between decisions of that kind, action related to specific cases, and the sort of proposition which was paraded before the House just now by the right hon. Gentleman, and earlier by some of his hon. Friends, notably the hon. Member for Liverpool, Walton (Mr. Heffer), where they have got as a firm plank of their party's policy the advancement of the public sector, the annexation of further sectors of private industry and private enterprise.
This is a totally different approach, and that is why the hon. Member for Kingston upon Hull, East was right to say that there is a great distinction between the two parties on that aspect of it. But there is no great distinction between the two parties in our joint determination to use whatever weapons and methods we believe right to cure the problems of high unemployment and achieve a sound basis for economic growth.
§ Sir J. Eden
I associate those with my reference to the particular methods. When I said "no difference", I was talking about objectives. I think that the right hon. Gentleman will understand that.
The methods we have so far been employing have certainly been yielding good results, and increasingly good results. We have seen already how consumer spending has been moving and how retail sales in October rose quite sharply. We have seen also that passenger car sales are currently very high indeed. They could well reach an all-time peak of 1.3 million by the end of this year.
But we have not stopped there, as the House knows. In order to bring forward further spending on the capital goods side, we have been ready to accelerate expenditure by the nationalised industries and we have done this to a sum amounting to £100 million for 1972–73 and 1973–74. Apart from the new Ince Power Station, the Gas and Electricity Boards will be spending about £30 million on distribution and transmission and the National Coal Board about £7 million on capital works. British Rail is bringing forward plans to replace rolling stock on London commuter lines and London Transport is doing the same for its Northern Line. In effect this means that the capital goods industry will be receiving orders and employment, and investment will be generated at an earlier stage than could otherwise have been expected.
As the hon. Member for Ashton-under-Lyne (Mr. Sheldon) frankly admitted, what we are dealing with here are not short-term matters even in the nature or the scale of our present problems, and they are extremely intractable. They do, not lend themselves to easy formulae for their solution. As the House knows, we have never claimed, for example, that the regional measures we are using are a complete answer. That is why we are now studying the alternative options which may be open to us.
Hon. Members opposite, particularly the right hon. Member for Birkenhead, 1771 have proposed another solution as an answer to all these matters. It was not a solution for which the Labour Government went; they went in for different weapons and instruments. This new idea—or new idea in this form—is for the establishment of a State holding company.
In any consideration of what such a company might mean, were it or something like it to be established, it is worth studying the experience of other countries which have tried something similar. The right hon. Member for Birkenhead will be familiar with a P.E.P. Report recently published by Professor David Coombes on "State Enterprise, Business or Politics?" In this book Professor Coombes has examined how far State enterprises can be expected to behave as business concerns and what incidental arrangements are required. He has also examined some of the other European examples already in existence.
The Swedish case seems to be fairly close to some of the ideas advanced by the right hon. Member for Birkenhead. In Sweden there are 50 different State companies. Each has an independent legal entity subject to the Companies Act and in each company the State owns all or a majority of the shares. These companies cover a very wide range of activities such as wines and spirits, tobaccos, hotels, atomic energy research and development and ship building.
In 1969 a Swedish Royal Commission recommended the creation of a new State holding company, which I believe was established on 1st January last year, as a basis for reorganising relationships between Government and State-owned enterprises. The objective was to simplify Ministerial responsibility for most of the State's commercial interests. The Royal Commission listed the main functions of ownership for State-owned undertakings as: specifying the objectives, appointing the boards of directors, ensuring adequate financial resources, reviewing policy, and taking corrective measures when objectives are not fulfilled.
As David Coombes indicatedthe principal aim of the establishment of the holding company is clearly to place the functions for ownership for State-owned enterprises in the hands of a commercial rather than a political body.1772 Andthe general duty of the company is stated … as being to seek to expand so long as it is able to pay its way.So, even in considering what I understood the right hon. Gentleman and his hon. Friends to be proposing, that is the important proviso: the concept of viability at any rate is not lost in the arrangements which are being introduced in Sweden.
The right hon. Gentleman and others turned to the examples we have from Italy, where there is the State holding company called I.R.I., which had two responsibilities in the post-war period. The provision of employment and the holding down of prices in those sectors—for instance, steel and cement—on which other sectors depended. There is also E.N.I. Both I.R.I. and E.N.I. assist in implementing regional policy by directing some of their new investments to the South.Growth has led"—as is clear from David Coombes's book—to internal problems and it is maintained that both bodies have become bureaucratic in their own procedures and organisation. The pyramidical structure of I.R.I., for example, means that decisions in relation to operating concerns have to pass through at least two levels of approval—the holding company and the Institute itself. The intervention of the second-tier holding companies is often said to be wasteful and unnecessary, but it is clearly a consequence of a greater scale of operation from the centre.From this very brief review of examples from abroad it is evident that each State holding company serves different purposes depending on the needs and the history of the company concerned.
§ Mr. Dell
I am grateful to the hon. Member for giving way. I know that it is difficult when one is supplied with information from books which perhaps one has not oneself read, but it would be fair to Professor Coombes if the Minister, before leaving his book, informed the House that Professor Coombes is in favour of establishing a State holding company in this country.
§ Sir J. Eden
Yes. I am trying to find the appropriate reference in the book. I was at that moment referring to the examples from other countries, and I think it is as well that one should have 1773 clearly in mind what has been the experience of institutions of the kind which the right hon. Gentleman was propagating.
Professor Coombes says in his book that:there could be great gains for the efficiency and effectiveness of Government if state enterprise in this country could be treated as a business.He says that:to treat existing nationalised industries in that way, if it was to be at all meaningful, would require fundamental changes in policy.His whole book considers the implications for existing State industries of a change of that kind.
We in this country have not only State industries but a fairly extensive range of investments of public money in private companies. A complete list was given to the House on 16th June. I will pick one or two names at random from the list: Beagle Aircraft Ltd., B.N.D.C. Ltd., International Computer (Holdings) Ltd., George Kent Ltd., Ransome Hoffmann Pollard Ltd., and so on. One sees at once that they cover a pretty considerable range.
Most of those holdings, I agree, were acquired by the I.R.C., but they are, in our view, clearly companies which can best be developed in the commercial and industrial environment of the private sector. There would be a grave danger in grouping them all together under some single structure of ownership, and one of the greatest dangers would be the danger of rigidity, of inflexibility, a point to which my hon. Friend the Member for Yarmouth (Mr. Fell) referred. There is the difficulty of having to react quickly and commercially to the needs of a competitive market.
The activities envisaged in the Motion must inevitably tie down that type of flexibility of movement and it would seem to imply a brake on the company's ability to respond as quickly as is required. A blanket State holding company covering such a wide range of companies would be unlikely to improve either their efficiency or their performance.
It is not only to Professor Coombes to whom I am enduringly grateful. I am grateful to other sources to which one can turn for views on this very interesting subject. Hon. Members do not have to 1774 go any further than a Committee of the House. There is the Trade and Industry Sub-Committee of the Expenditure Committee which, as hon. Members will know, has been giving considerable attention to this whole subject, and has questioned the need for some form of para-governmental agency to establish and promote new commercial enterprises under complete public ownership or in co-operation with private capital.
This has been the subject of much of the evidence taken by the Trade and Industry Sub-Committee, not least that received from the T.U.C. and the C.B.I. The T.U.C. put forward proposals somewhat similar to those in the right hon. Gentleman's Motion. It said:The establishment of a single large public agency or a series of such agencies, with sufficient flexibility and control over its funds, [could] effectively achieve the required pattern of investment which the private sector has failed to achieve—and it went on to recommend that,A single agency on the lines of the Italian I.R.I. should be established with wide terms of reference for the promotion of industrial, technological and regional development. It would have the power to provide loan capital and to purchase private company equity so as to acquire either a minority or a controlling share. It would also be empowered, subject to parliamentary approval in a particular case, to set up new public enterprises. The day-to-day operations of the agency would not be subject to parliamentary control, but a larger degree of accountability would be necessary than is imposed on I.R.I.The C.B.I did not go as far as that. It suggested that the I.R.C. had been too close to the Government and had the drawback that it relied solely on Government money. But it said that there might be a rôle for a mixed-finance corporation funded both by the Government and by the institutions. This, in the view of the C.B.I, would be the lender of last resort and would respond to the need to fill gaps in the normal capital market when profitability and return were insufficient to attract purely private risk capital. I think that that was the thought in the mind of my hon. Friend the Member for St. Marylebone (Mr. Kenneth Baker) when he spoke of a development bank.
The Trade and Industry Sub-Committee has received other views, as is evident from the published minutes, from a number of industrialists and members of leading finance houses, including the I.C.F.C. and the F.C.I. I understand that 1775 the Sub-Committee's Report will be available in a few months—I am not sure precisely when. Clearly, it will be an important document, and the Government will study it with great interest.
We have taken a wide range of measures already to deal with the immediate unemployment and regional problems. We shall press on with our efforts as vigorously as we possible can so as to ensure that the twin problems of unemployment and investment are met. We shall add to them by further development, whether in the regional or national context, as we feel necessary. However, I share the apprehension felt by my hon. Friends about the solutions proposed in the Motion, and, in particular, the interpretations placed on them by the right hon. Member for Bristol, South-East and his hon. Friend the Member for Walton. If the Motion is pressed, I shall urge my right hon. and hon. Friends to vote against it.
§ Mr. Dell
Although that was not a particularly forthcoming reply, I shall answer the debate quickly so as not to deny the hon. Member for the Cities of London and Westminster (Mr. Tugendhat) an opportunity to develop his case for further intervention and better incentives.
I am grateful to my right hon. and hon. Friends for their support in the debate. The Minister for Industry has done the House the courtesy of being present throughout most of the day, and I hope that he noted the concern which many of his hon. Friends expressed about the future prospect for unemployment in this country, even though they were not able to go along with the proposition in the Motion. The hon. Gentlemen who went furthest with us was the hon. Member for Flint, West (Sir A. Myer), who expressed his sympathy for the idea, though with reservations.
The question of the relative efficiency of investment incentives was raised. I will not discuss that now, but one point I cannot allow the hon. Member for St. Marylebone (Mr. Kenneth Baker) to get away with is his suggestion that the fact that investment in the service industries has increased when they were no longer beneficiaries of investment incentives shows that investment grants were ineffective. If that sort of argument is to be used, I can only remind the hon. 1776 Gentleman that immediately tax allowances were introduced, investment in the services fell.
The hon. Gentleman asked how a State holding company would find new projects, which is an important question. I suggest that in its early stages there would be three clear sources. The first is the companies in which there are existing public investments; second, in co-operation with nationalised industries, which I am sure have ideas that they would be willing to develop in co-operation with a State holding company; third, in co-operation with private industry. In any case, the Government must think that there are opportunities which are being neglected. That is the reason for their current attempts to persuade industrialists to invest more.
Reference was made to the proposal of a development bank made yesterday by my right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever), and some hon. Members ask whether that was a better idea than the State holding company, or how one would fit in with the other. My right hon. Friend and I always work together very well, as long as we both get our own way. He can have his development bank and the further incentives deriving from it, as long as I can have the State holding company and the direct action on employment and investment that would follow from it.
The Minister said that existing methods were yielding results. They may yield some results, but it is clear from current forecasts that the level of unemployment as far ahead as can be seen will be unsatisfactory unless the Government do a great deal more than they have done. My proposal should be one important element.
The Minister also said that the State holding company was not an idea that we advocated when we were in office, but it was a direction in which the Industrial Reorganisation Corporation was moving and I believe that had we been returned to office we should have developed the idea of the I.R.C. in that direction.
The hon. Gentleman said that he was sure that this was not the last time the idea would come before the House, and that is true. It will be pressed on the Government many times in the next year. 1777 It is an important element in the programme of the Labour Party. I am sure that when the State holding company is introduced it will be a valuable contributor to the economic success of this country.
§ Question put and negatived.