§ Order for Second Reading read.
§ 4.21 p.m.
§ The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. John Davies)
I beg to move, That the Bill be now read a Second time.
The Bill relates to decisions announced by my right hon. Friend the Chancellor of the Exchequer on 27th October last and amplified by me in my statement on 30th of that month. The principal proposals are, first, to repeal the Industrial Reorganisation Corporation Act, 1966 and, as a result, to wind up the Corporation. Second, to terminate those powers which, under Sections 1 to 7 of the Industrial Expansion Act, 1968, entitle the Government to involve themselves in industrial investment schemes on diverse counts.
The Industrial Reorganisation Corporation was first mooted in a White Paper laid before the House in January, 1966, Cmnd. 2889. The White Paper gave as its reasons for instituting a new kind of organisation, the Industrial Reorganisation Corporation, an apparent lack of ability in British industry to move towards that necessary degree of concentration and rationalisation which seemed, in the terms of the White Paper, to be appropriate in order to do two principal things: first, to face the exigencies of foreign competition; second, to take full advantage of the pace of technological change. The White Paper maintained that production units in this country were too small to undertake these tasks in general, and it postulated the thought that where mergers had taken place, where there had been reorganisation, this had tended to lie more in the field of diversified activities rather than in any thought of concentration.
The White Paper referred also to the activities of merchant banks. It recognised that merchant banks played a vital part in carrying through mergers on behalf of their clients in a wide range of industries, but it suggested that this activity, wide as it was, was not sufficient 348 to ensure the filling of the gap to which it made reference because the merchant banks were seen, not as initiative-takers, but as people who followed tip the initiative taken by their clients and others. It identified what it said was a gap in the institutional framework, and it proposed to constitute this Industrial Reorganisation Corporation to fill that gap. It stated that thereby it was confident of securinga lasting improvement in the structure and competitive strength of British industry.Those were, of course, bold words and did, perhaps, credit the new organisation with capacities which in fact might reasonably be seen as being more widely shared. Indeed, I think the I.R.C. itself recognised that the major regrouping activities within British industry were due to factors arising from the market, rather than from its endeavours. Moreover, I think it is necessary to say that the context within which this organisation was created was by no means one in which the merger activity was seen to be excessively sluggish. On the contrary, throughout the 'sixties there had been a growing momentum of merger movements, and it should be seen, therefore, that the organisation was only extending that momentum not creating it.
The White Paper to which I have been, referring was extensively debated in the House, and subsequently, at the end of 1966, the Bill to give effect to its proposals was also thoroughly debated. We on this side of the House remained unconvinced of the need for such an organisation. We were, moreover, critical of the powers which it was proposed to give to it. They were exceedingly extensive, and allowed a wide range of activities to be undertaken, over and above those of structural reorganisation. We objected to the principle of the whole organisation being borne as a charge on public finance, and we objected even more to the extent of the public finance involved, amounting as it did in the original proposal to a ceiling of —150 million.
Industry itself watched this development and remained, I think I might say, frigidly watchful of it. It was not deliberately against, but it was suspicious, and this suspicion was undoubtedly heightened by the real want of consultation which preceded the institution of the I.R.C. 349 Since the passing of the Act and the creation of the I.R.C., it has remained consistently in the public eye. It has been very active in a number of ways, and it has undoubtedly given rise to great thought and interest in a variety of different occupations and activities in which it has been engaged. It recruited a high calibre board, drawn largely from industry, and it was able, equally, to find a dynamic and zestful executive, led by a purposeful management. I believe that those factors led to the suspicions and apprehensions which had existed at the outset being somewhat allayed in the early years of its performance, but there is no doubt that some concern about a number of activities in which the I.R.C. engaged was voiced by various people, by interested parties and, in particular, by hon. Members in the House. There was concern at the I.R.C.'s own operations in the market when it was in support of one of the parties to a contested bid.
The upshot of all that was that we remained dubious of the justification for such a body, particularly one drawing so heavily on public funds. Accordingly, in the formulation of the party's policies in anticipation of the General Election we embodied in our manifesto a statement of an intention not specifically to bring the I.R.C. to an end, but drastically to modify its constitution. This occasioned us, when we came to power, in undertaking a major review of its whole work and purpose.
We saw that review surrounded by three principal factors. The first, it seems to us, was that the problem in mid-1970 was more one of digesting the spate of national mergers which had taken place in the 'sixties rather than seeking specifically to engineer new ones. The right hon. Member for Grimsby (Mr. Crosland)——
§ Mr. Dick Douglas (Clackmannan and East Stirlingshire)
In relation to mergers, would the right hon. Gentleman clearly identify what he means by a "spate" of mergers? What we were concerned about in market operations in the 1960s was a spate of conglomerate mergers. The I.R.C. went specifically for horizontal or vertical mergers. Would the right hon. Gentleman distinguish clearly between the two, please?
§ Mr. Davies
There was no doubt that horizontal mergers took place, of course, 350 but many vertical mergers were engineered through the market process—far more than by the I.R.C., indeed. I would draw the hon. Member's attention to the quotation which I was about to make from the right hon. Member for Grimsby, who, speaking in early 1969 as President of the Board of Trade, told Manchester Chamber of Commerce:There seems to me a danger that mergers may become too much of a fashion. There have been signs recently of merger fever.It seems clear, too, that the I.R.C. itself may have been thinking along these selfsame lines. In its last, most recent Report, the emphasis was undoubtedly shifting away from reorganisation and development and heading far more towards stimulation and selective investment. This also seemed to show a shift of opinion which we certainly shared.
Second, it seemed irrational to us that, during a period of sustained credit squeeze such as had taken place, there should be an organisation funded from public funds which seemed capable of evading, in selective cases, the credit squeeze in question.
Third, we put a great deal of emphasis in our policy, and do still, on the need to contain the ever-increasing scale of public expenditure. Not only did we very seriously doubt the wisdom of moving on towards the ceiling of —150 million which had initially been provided in this case, but we saw that to continue would fatally involve us in allocating great sums for subsequent years, rising to about —40 million per annum. This was wholly not in conformity with our endeavour to contain public expenditure.
§ Mr. Tam Dalyell (West Lothian)
Could the right hon. Gentleman give an example of his seconds point—namely, the evasion of the credit squeeze in certain instances?
§ Mr. Davies
I think that there were several cases, but I should have thought that one or two of the terms of loan to some of the subjects off the I.R.C.'s activity were on terms—[interruption.] I would quote British Leyland, which was probably on terms which were not obtainable straightforwardly in the market at the time. I doubt whether, in the terms of the then credit squeeze, it would have been practicable or reasonable for the company in question to have obtained 351 that kind of money on that kind of rate. There are other illustrations.
To my mind, this casts no particular criticism on the I.R.C. or the company. They were doing what the I.R.C. was set up to do, but it seemed a strange paradox in the state of the money market as it then was.
§ Mr. Dalyell
As the representative of British Leyland at Bathgate, which is one of their plants directly affected, may I ask whether the right hon. Gentleman would care to comment on what would have been the effect on, for example, the Bathgate plant, if something of a rescue operation had not been conducted at that point in time? It is all very well having hindsight.
§ Mr. Davies
This is entirely a different point. I am simply saying that it seemed irrational in a period of intense money squeeze, applied broadly across the whole field of industry, that there should be available from public funds access to concessional terms or advantageous terms not readily available within those conditions in the market.
In the light of those considerations, it seemed to us that the case for continuance was very doubtful and that, even if the Labour Party had remained in power, it would itself have been led to make some major reappraisal of the purpose and future of I.R.C. Where this would have led them is a matter entirely for conjecture, but in view of the widely-drawn nature of the I.R.C.'s statutes, it was more than possible that reappraisal might have led them down the road of greater and greater selective intervention in industry at the Government's own option and desire.
It seemed clear, too, that, in making such a reappraisal with an open mind on the subject of the continuance of the I.R.C., but not based upon extensive use of public money, it would be wise to consider the likelihood, first, of its being able to continue in some sense as an advisory body, with no benefit whatever of capital help. But all those with whom consultations were held were of the opinion that this was not a feasible alternative, that shorn of financial backing the I.R.C. would not be effective within the field of work which had been identified for it.
352 So we sought, then, to see whether it was practicable to find private finance itself to take over in some sense the weight of the financial load of this organisation—but we were unsuccessful. The conclusion of all that was that drastic modification was clearly inadequate and impossible and that dissolution was the only satisfactory course, to which, therefore, we came.
I would turn now to the second part of this proposition, which concerns the Industrial Expansion Act, Sections 1 to 7. In this case, I would make a sharp contrast between our attitude towards this part of the Industrial Expansion Act and our attitude towards the Industrial Reorganisation Corporation. I sought to show that, in relation to the I.R.C., we reached a balanced judgment, having taken fully into account all the factors—its possible future, how it might alternatively be organised or financed—and concluded that it could not be.
With regard to the Industrial Expansion Act, we did not need so deep a reappraisal. It was a piece of legislation which had been greeted widely by uncompromising condemnation, both on this side of the House and in industry. It had a kind of euphemistic purpose, as described in the White Paper:… to provide direct assistance to projects designed to promote efficiency, to support technological advance, or to create, expand or sustain productive capacity.The right hon. Member for Bristol, South-East (Mr. Benn), who was then Minister of Technology, said in the debate on 1st February 1968:I shall go a little wider in putting the Bill in its context and relate the work that will be done under it to the central economic problems facing Britain." —[OFFICIAL REPORT, 1st February 1968; Vol. 757, c. 1577.]This was rather grandiloquent phrasing to characterise what has proved to be a pretty hollow shell of a piece of legislation.
It may be that the Act was to some degree the outcome of the very restraint which had been exercised by the I.R.C. in its earlier period, and this had provoked a feeling that something more intense and direct had to be provided on the Statute Book. But the Industrial Expansion Act proved to be something very like a damp squib. It covered 353 operations in the field of the two aluminium smelters schemes and of the computers merger scheme, but both of these were in the final stage of negotiation before the Act was passed. It had no new project attaching to it or any development when we came to power. We could only conclude, therefore, that the rather noble objectives which had been stated for it had either been abandoned or had proved impracticable. Our experience of it justified our opposition to the Bill on the score of its being irrelevant to the requirements of the economy and being undoubtedly very unsettling to industry, which had greeted the Bill with implacable hostility. I had some personal experience of that in another capacity.
§ Mr. Arthur Palmer (Bristol, Central)
Would the right hon. Gentleman try to explain why the House should not do things which are necessary simply because industry is hostile? In the view of the right hon. Gentleman, does industry determine public policy?
§ Mr. Davies
The point 1 was making was that industry was very hostile and it was curious that industry's hostility to the Act was rather borne out by the fact that the Act proved futile. In this particular case at least, industry was right. Parliament is the proper place for decisions of the country to be made. Industry has its right to be consulted, too. Industry was consulted. It gave a very firm opinion which proved to be correct in the event. That opinion was warmly held on this side of the House too.
One essential objection common to both measures was the freedom which they gave to dispense public money upon a selective and discriminatory basis without submitting to the full discipline of Parliament. By no means do I say that never again will a case arise which would not have qualified for treatment under one or two of those enactments. It may well be that at some future date we shall be faced with a similar problem. When we are, we should submit ourselves to the full discipline of Parliament and not be prepared to have the means at our disposal of acting virtually in the ignorance of Parliament, only submitting ourselves to it subsequently and not previously.
§ Mr. Anthony Wedgwood Benn (Bristol, South-East)
Would the right hon. Gentleman comment on the relationship between the provision of those Acts and the provision of launching aid, where there is absolutely no provision for parliamentary supervision, and recognise that this is an advance in this direction and not a reduction of parliamentary authority?
§ Mr. Davies
Even in the case of launching aid, there is a real and necessary compliance with the requirements of Parliament that a substantial matter should come before it and be declared openly. This is not the case necessarily within the framework of these activities. In the case of the Industrial Expansion Act it would have been so, but not in the case of the I.R.C. As the right hon. Gentleman knows, there are activities which the I.R.C. quite properly carried on with his knowledge, when he was the Minister of Technology, but without the knowledge of the House.
I come now to the provisions of the Bill. Clause 1 provides, first, for the repeal of the I.R.C. Act of 1966. Second, it provides for the transfer of the Corporation's assets and liabilities to the Government. Third, it provides for the dissolution of the Corporation. The first two items, the repeal of the Act and the transfer of the assets and liabilities, would take place on a day to be appointed by Order. The dissolution of the Corporation would follow one month later. The delay between the two dates is required so that the Corporation may comply with certain requirements which the Bill will lay on it, such as preparing final reports and accounts up to the appointed day.
It has already been made clear, but I repeat that the Government will honour all financial and other obligations entered into by the I.R.C. and not discharged when the assets and liabilities are transferred. The Bill also provides for outstanding financial obligations to be met from monies voted by Parliament. The extent of such further requirements of money clearly depends to a large degree on the date of transfer, but presently it is assumed that about —20 million will be needed to meet these outstanding obligations.
The assets in question consist principally of investments, of loans of a fixed 355 interest and normal kind, loans of a convertible kind and equity participations. All these assets will be transferred to my Department, save only those of Rolls-Royce and Lucas, which will go to the Department of my right hon. Friend the Minister for Aviation Supply, in the light of the nature of the investments and their greater application to that Department.
Investments will be recovered in accordance with agreements undertaken by the I.R.C. or as opportunity offers. Provision is not made in the Bill for specific management arrangements for the portfolio, though I assure the House that I shall have recourse to expert professional advice in the management of those assets.
The liabilities of the Corporation arise from issues from the Consolidated Fund and the National Loans Fund. As the assets are recovered, the funds in question will be repaid to the Consolidated Fund.
The rights attaching to the I.R.C. and similarly transferred arise mainly from agreements reached with firms. They comprise, on the one hand, the conversion of loans to equity, and on the other hand, nomination of directors to company boards. On the question of the conversion, again I shall have expert advice as to the best course to take. On the board appointments problem, appointments which have been made in relationship with the I.R.C. will be subject to individual consideration in the light of all the circumstances of each case, involving the size of the investment, the nature of the security and the original objectives which the I.R.C. may have had in making such an investment. Generally speaking, the first concern of the Government will be that of safeguarding public funds and their earliest recovery. But due consideration will be given, as I said on the 30th October, to the industrial circumstances of each case, as entered into by the I.R.C.
The Bill includes certain safeguards in respect of pensions for members and employees. Moreover, I am planning to take within the Bill powers to deal with redundancy payments, though as I informed the House on 30th October, I do not expect there to be any terminal redundancy payments.
§ Mr. Benn
Before the right hon. Gentleman leaves the subject of the size of the business which he is proposing to dispose of, could he give us the figure —I believe it is about £120 million—and could he divide it between loans, equity and other holdings, and give us some idea of the totality that he is discussing?
§ Mr. Davies
The breakdown I could give separately, but it is rather confusing. There are a number of different headings under which the various investments are made. The figure of £120 million is not far from the mark. There are recoveries taking place constantly, as the right hon. Gentleman will know, and there are commitments being exercised. But broadly speaking, I estimate the size of the business to lie between £120 million and £130 million.
§ Mr. Edmund Dell (Birkenhead)
Before the right hon. Gentleman leaves the subject of the I.R.C., and in view of what he has said about the need for parliamentary control, can he say why Clause I makes no provision whatever for parliamentary control over the disposal of the assets?
§ Mr. Davies
The disposal of the assets is largely consequent upon the various industrial considerations which led the I.R.C. to invest in them. I have tried to give a guide to the policy which will be followed. It will be to safeguard public money and to achieve the earliest realisation compatible with the whole industrial background of the investment being taken. Clearly, there will be means whereby Parliament can inform itself and be satisfied of the way in which matters are conducted.
Clause 2 will terminate the power to make industrial investment schemes under Sections 1 to 7 of the Industrial Expansion Act, 1968. The Bill provides for meeting commitments under existing schemes. The total sums committed to date are of the order of £80 million, of which about £49 million has already been advanced. There are payments scheduled over the next few years, and therefore it is prudent to provide in the Bill for power both to vary and to revoke any of the undertakings. Such changes would come before the House. It is provided specifically that no scheme can be varied within these arrangements to increase the aggregate expenditure over the total of 357 that originally committed. Therefore, in practice, the remaining £20 million of the statutory ceiling of £100 million voted for the purposes of the Act will not in fact be required.
There has been a suggestion that the contents of the Bill are provoked by discriminatory, doctrinaire policies. That is not the case. It is true that both the provisions that the Bill seeks to revoke are ones which ill accord with the purposes of economic policy outlined by various members of the Government. We adhere strongly to those purposes. They will result in a very much more self-reliant economy and a very much tauter economy. In the end, they will provide evidence of the prosperity which will ensue from their prosecution.
§ 4.53 p.m.
§ Mr. Anthony Wedgwood Benn (Bristol, South-East)
The right hon. Gentleman has introduced a miserable Bill in a speech utterly lacking in conviction. I have heard him speak at N.E.D.C. meetings, on television and in the House. I have never heard him deliver a speech in which he chose always to address himself in the third person— "We were dubious", "Some concern was voiced", and so on. But certainly on I.R.C., no one who knows anything about the right hon. Gentleman could believe that the recommendation that he was putting forward was his own. He warmed to his attack on the Industrial Expansion Act because, at the time, he was looking for a constituency and made a fight on behalf of the C.B.I. The truth is that the Industrial Expansion Act allowed Rolls-Royce to get the order to which I referred in our recent debate. It was the fact that an Act of this kind was on the Statute Book which allowed us to give it support.
The sole object of the right hon. Gentleman's Bill and his speech introducing it is to destroy two positive instruments, the I.R.C. and the Industrial Expansion Act, through which Government and industry have been co-operating in one form or another over the past four or five years.
I had to draw the figures out of the right hon. Gentleman. He was about to make a theoretical speech without referring to the total sums involved. The Bill deals with nearly £170 million of public money. This is a major piece of 358 policy, and it might have been presented in a different way.
Even if one shared the right hon. Gentleman's philosophy, which obviously we on this side do not, there was no need for this Bill to be introduced. The Industrial Expansion Act could have remained on the Statute Book. I shall be surprised if the right hon. Gentleman himself, at some stage or another, for one reason or another, will not want to provide support for an industrial project. If he decides to do it in the old way, it will probably be by launching aid, which requires no reference to be made to the House. Contrary to what the right hon. Gentleman said, launching aid does not have to be approved in the House. It is given under another Act of Parliament at the discretion of the Minister, and his only accountability is part of his total accountability. There is no provision for launching aid on individual projects to be approved by Parliament.
If it is launching aid, there is less accountability. If he does what has been done in the past by both parties and as was done by a Conservative Government in the case of the Wiggins Teape pulp mill at Fort William, what happens is this. The Minister gives an assurance to the firm and, in some cases, may provide the money. When the money is being spent, he produces a Bill and brings it forward.
There was no cause to repeal the Industrial Expansion Act. Many Acts are reserve in character. As for the I.R.C. in the passage in which he dealt with its change of emphasis he welcomed it. Then he told us that he tried to sell off I.R.C. to others or get other money to take it on, as if he saw a continuing function for I.R.C. But in neither case did he choose to comment on a single project on which these two Measures had been used. He discussed our White Paper of 1966, which we have all read. He spoke about his manifesto of 1970, which we have all read. But he found it more convenient to omit all the experience of the use of these two instruments in the intervening period.
Neither I.R.C. nor the Industrial Expansion Act contained any compulsory powers. Therefore there were no grounds for anxiety on the score that they were instruments of selective intervention which frightened industry. This Bill is purely 359 destructive. He spoke about the dubiety of the methods that we adopted. But this is an ideological Bill presented by a Minister who, judging from his demeanour when he was speaking, may not be altogether convinced by the argument that he was advancing.
There is an important principle involved in the Bill. It is that this method, which was adopted by the previous Government, rested solely upon consent and upon twin principles of public accountability which are now to be thrown overboard. I have referred already to the first principle. It was that, where there was to be an intervention in industry by a Minister by means of giving support for a project, it should be subject to specific parliamentary acceptance and accountability. I do not imagine that the right hon. Gentleman has had time, but if he had read the long debates when the Industrial Expansion Bill was considered in Committee, he would have discovered that the provision for tabling an Order with the full details, as happened with the I.C.L. merger, was the first time that any real ground rules were laid down giving Parliament any say. Moreover, Parliament was in a position to say no and the investment would not have gone forward.
The second principle of accountability was that, where public money was put into a firm, it was considered right that the Government and the taxpayer should get a return from their investment and that in certain circumstances there should be a Government director on the board, as there was in I.C.L. and other companies to which I shall refer.
Despite the right hon. Gentleman's words about industrial doubts, these methods won wide acceptance in industry and, in his speech, he was quite unable to find that, in the working out of these arrangements, any of the doubts that he expressed when he was at the C.B.I. or that his right hon. Friends expressed in the House on the Industrial Expansion Bill ever turned out to have any justification——
§ Mr. Benn
He gave one poor example. He said that British Leyland got money on more favourable terms.
360 The point is that none of the schemes under the Industrial Expansion Act which he chose for special disapproval are to be altered. The smelters are going ahead. The Q.E.2 would have been a rusting hulk on Clydeside at a time when the Queen was scheduled to launch it if the Industrial Expansion Act had not been used to allow the Q.E.2 to be completed He made no reference to that.
§ Mr. Davies
Will the right hon. Gentleman confirm or otherwise that both the smelters and the Q.E.2 were a long way down the road of negotiation before this Act was on the Statute Book?
§ Mr. Benn
Of course, because the Bill was prepared two years before it was introduced. I began work on the Bill in September, 1966, before even the I.R.C. Act had passed into law. The right hon. Gentleman says, why should some type of investment escape from the general restriction on investment? The whole object of this was that where investment in the national interest would be adversely affected by the general squeeze it could be proceeded with. Did the right hon. Gentleman want the Q.E.2 to be scrapped because of the general squeeze? Did he want the smelters not to go ahead because of the general squeeze? Did he want British Leyland to collapse because of the general squeeze? The right hon. Gentleman has not even followed the argument. He is not answering the argument. The truth is that the I.C.L. merger, which was an Industrial Expansion Act scheme, is not to be affected only in the sense that the right hon. Gentleman says that he will try to sell the shares, but I will come back to that later.
That I.R.C. work is to go on. I.R.C. had always intended to rotate its investments. One hon. Gentleman who participated in these debates said that this was creeping nationalisation, but we made it clear that we regarded these as public funds that did their business by rotating in and out of industry. The existing work of I.R.C. will not be affected, except that new work will simply be stopped. Here is a Minister presenting a total, 100 per cent., 180 degree change of direction without citing a single example from 5 years' experience of industrial policy, and then denying that this change is motivated by ideological considerations. 361 I should like to go a little further than the right hon. Gentleman in my tribute to the members of the I.R.C. The convention of the House is that people who have been engaged public work even under another Government are recognised as having given a public service. Lord Kearton, Sir Joseph Lockwood, Charles Villiers, Lord Stokes and Les Cannon, whose death we all regret, and the small staff of 30 who pioneered the technique of industrial relations which has been copied abroad, merit a genuine tribute. They operated freely in the I.R.C. within a broad framework of policy. As the responsible Minister, I was accountable to the House for the policy which they were free to negotiate within that broad framework. It was exactly the right balance between policy, for which Cabinets are held responsible, and negotiation and execution where business men and trade union leaders who have a sense of public service, as these men did, ought properly to operate. It is a great tragedy that an instrument in this area which has been studied all over the world and copied in other countries should have been thrown away for political reasons by him and his right hon. Friends.
The right hon. Gentleman made a mockery of me for saying, in introducing my Industrial Expansion Bill, that I wanted to set it in a proper framework. He mocked me for what he called my grandiloquence by suggesting that this had nothing to do with Britain's economic performance. In politics we are all engaged in statistic exchanges on the hustings—our 5 years against their 5 years and how we did in this and that area—but the right hon. Gentleman knows as well as I do that for 140 years this country has been progressively falling behind its major competitors. We were overtaken by the Americans in the 1880s, by the Germans in the 1960s, by the French now, the Japanese in the 1970s, and the Italians are nudging forward. This is not a matter which can be dealt with by broad framework policies originating from the Treasury. Everyone knows what the Treasury does when there is inflation. Like the old-fashioned medieval surgeon who pulls out a hacksaw and cuts off a leg, the Treasury introduces deflationary measures.
This country has suffered from the weakness of management and industrial 362 structure, as is self-evident to anybody who studies this matter. It is not just a question of mergers. Anybody can merge if it is in the financial interests of the companies involved. We wanted minds brought to bear on the problem of strengthening the British competitive position abroad. For a Minister who lectures us time and again on competition, the right hon. Gentleman shows precious little concern for the competive strength of Britain visà-vis its foreign competitors. In all the areas in which the I.R.C. worked there was a distinct, deliberate and conscious partnership by Government with firms that were facing foreign competition.
The House is engaged in long debates upon the Industrial Relations Bill. Since in these debates many criticisms are made of the trade unions, let me say frankly to the House what I know was the view of the I.R.C. at the time when I worked with it. The view of the I.R.C. was that poor management in many areas of British industry, handicapped by a weak industrial structure, was one of the major problems facing the country. It was not lack of scientific research. We are the brainbox of the world, measured by the number of Nobel prizes for science per million population. We are not lazy as a nation. We work longer hours than most people and have fewer public holidays. It is not industrial disputes stretching back to the 1840s which have caused our relative decline. It is that the industrial structure of Britain and the management underlying it have not been as good as they have been abroad. This is the problem to which the I.R.C. directed its attention, and it is a poor showing for a Minister, after five years of an attempt to tackle this problem, to brush it aside without seriously considering any of the practical examples, to which I shall now turn.
In the motor industry in the autumn of 1966 Rootes had got into financial difficulties and Chrysler wished to acquire Rootes. It seemed that we were to be the only country which would have the three American giants in our territory—Ford, General Motors and now Chrysler. This posed for anyone examining Britain's competitive position visà-vis foreign competition, a serious problem.
The rôle of I.R.C. in tying Chrysler down to certain conditions about access for Rootes to the Chrysler worldwide 363 marketing organisation, safeguarding the employment at Lynwood which, like Bathgate, was a matter of concern to us, was an important, though unusual, one for I.R.C. But, more important than that, if Leyland and British Motors had not been brought together first in export co-operation, which I.R.C. worked on, and then in the merger in which I.R.C., the Ministry, and ourselves worked, there is little doubt that there would have been a major tragedy for the British-owned motor industry.
It is no good coming along like a minicomputer and saying that because the terms were more favourable than were obtained by another firm in the open market, that support by the I.R.C. should have been ruled out. Tens of thousands of jobs were involved in the motor industry and big export earnings, and it was absolutely right for the British Government, acting with the help and guidance of the I.R.C., to make it possible for this merger to come about.
It is easy to laugh because British Leyland are in difficulties today, but there are formidable problems with 70 factories, thousands of piece rates and new models to be introduced at a time of domestic pressure when the squeeze is still on. If the right hon. Gentleman had been there at that time I do not think that he would have taken any alternative view of the need to bring about a merger between Leyland and British Motors. We have talked about Rolls-Royce, and I will not go over it again, except to say that the right hon. Gentleman might have made reference to the extent to which the Industrial Expansion Act gave support at a critical time when needed for that big order, which he himself is now funding to an even greater extent than I did.
The right hon. Gentleman did not mention General Electric/A.E.I./English Electric, but he knows that, faced with the huge combines of Siemens and Philips, those firms were too small to compete. Nobody thinks that size is the answer. Size, good management and good quality of work and good export marketing would have been no good without the role of the I.R.C. in bringing about a new British electrical engineering firm that could stand up to competition.
The right hon. Gentleman made no mention of I.C.L. He must know that if 364 in 1965 that original £5 million had not been available to I.C.T. it would have gone under. He may not know that, because my Department was ready in 1967 to offer about £25 million for computer leasing, that offer released money for computer leasing from private funds. I had no interest in providing money that would come from elsewhere.
It is no good the right hon. Gentleman saying that the banks and the merchant banks are always there. The British system of providing money for high technology is defective, Many banks, if not all, lack proper technical engineering assessments, and they used to rely upon our word that a scheme was effective and that we would fund it. That was the case for the Industrial Expansion Act and for I.R.C.
As to the complicated conclusions reached which brought I.C.T., English Electric and Plessey together, involving I.R.C. resources and the Industrial Expansion Act procedure which was being legislated as this went through, this was the right course of action. Facing I.B.M., how can the right hon. Gentleman talk about the maintenance of competition between penny-piece British computer firms when these giants loom from the other side of the ocean? He should have referred to this before he dismissed the instrument that made possible the success of the British computer industry.
On nuclear reorganisation, the right hon. Gentleman recently introduced an Atomic Energy Bill in which the role of the I.R.C. in reorganising the nuclear industry was a key role. This rôle lies behind what was my Bill and is now his Bill. He made no reference to the I.R.C. in that.
As the right hon. Gentleman knows, the Skefco case aroused a great deal of anxiety. He may not know why we took the line we did, but when we analysed Skefco's reputation in other countries of buying up their ballbearing industry, as happened with the Italian industry, we found that the exports from that company in Italy ceased and were absorbed into the Skefco global planning. We took the view—and I am talking collectively here—when we had Ransome and Marles and Pollard and Hoffman that a British ballbearing industry was in our national interest——
§ Mr. J. Bruce-Gardyne (South Angus)
I am interested that the right hon. Gentleman should come to I.R.C.'s frustration of the Skefco bid. Is it not a fact that the I.R.C. made no attempt whatsoever to take on any of Skefco's operations in Italy, that it was proved that Skefco had been totally misinformed on what had happened in Italy and that no attempt was made to correct these false impressions once they were exposed by Skefco?
§ Mr. Benn
I cannot speak on that. It was the nature of the business that I.R.C. operated in this area. We were faced with the possibility that our ball-bearing industry, which is important, was to be effectively acquired from abroad, and it seemed right to take the line which I did to build up the British ballbearing industry. I am not trying to push my responsibility on to others. I am simply saying that I think this was right, I stand by it, and the instruments were there for bringing it about.
Take some of the other cases where judgment has to stand the test. There was the Reed Paper Group de-inking process which was supported by the I.R.C. and was a big import saving operation.
I want to come to the rôle of the I.R.C. in dealing with international companies, because there is misunderstanding about the international company and its relations with the nation's stake. Charles Wilson in the United States is alleged to have said, "What is good for General Motors is good for the United States". I do not know whether he said it any more than Lord Thomson said, "Television is a licence to print money", but it is part of the mythology of the big company. If that is true of the United States—and I am not sure that it is—it is certainly not true that the interests of international companies are necessarily always or even regularly synonymous with the nation's stake. I have cited the example of Chrysler and the need to use the I.R.C. to see that Chrysler did not keep Rootes' products out of its worldwide marketing organisation. I might have referred also to Philips and Pye, where there was a desire to take over a British industry and where there were certain consequentials to be acknowledged. We have debated the Skefco case and I have put my view.
366 The fact is that no one should know better than the right hon. Gentleman, with his experience of the oil industry, that international companies, by varying the amounts of money they pay internally for their royalties, profits and components, and by organising themselves in different ways, can make a profit or loss in any country and make a balance of payments surplus or deficit in any country. One well-known international company, which I do not propose to name, was revealed by the I.R.C. to have been running a deficit in this country. It is no good Ministers at big dinners in the City, and it is no use industrialists in white tie and tails lecturing their workers and telling them to work harder if an international company can maintain a balance of payments deficit which helps to keep the squeeze on to the damage of those workers and to the British economy itself. In dealing with international companies on the balance of payments side, I took this point up with them.
I want now to deal with one or two other aspects which the right hon. Gentleman ignored. One is, of course, that the I.R.C. and the Industrial Expansion Act were both instruments of regional policy. They were not only instruments of national policy, but of regional policy, not principally, but importantly. I give three examples from Scotland. There were the Donside mill, Wier's and the pump industry, and Nuclear Enterprise in Edinburgh. These were notable examples of the I.R.C.'s work in Scotland. A more complex example is the Leyland-National Bus Company deal in Cumberland, made possible in part by I.R.C. support for Leyland and by other measures, which gave us an integrated bus manufacturing capacity in Britain, which was what Leyland wanted and provided employment in a part of the country where unemployment was serious.
I warn the right hon. Gentleman that if, in addition to abandoning investment grants, phasing out the regional employment premium and easing up on industrial development certificates for the South and the Midlands, the Government wind up an instrument which is capable of regional use, the long-term consequences for the regions could be serious. I spent a lot of time visiting factories where closures were in mind or serious problems had arisen and could ask the I.R.C. to help 367 to see whether it was possible to make arrangements that would bring this productive capacity back into use which was of great value.
§ Mr. Robert Redmond (Bolton, West)
The right hon. Gentleman refers to the I.R.C. assisting with regional policy. I think I am right in saying that the I.R.C. had something to do with the G.E.C.A.E.I. merger. If so, why did the I.R.C. let G.E.C. close down the Napier factory on Merseyside, thus creating unemployment in a development area, and take the work to the south of England?
§ Mr. Benn
The fact that mergers were followed by some redundancies in certain cases led some people to conclude that the one was the consequence of the other. I was regularly asked that question. I visited the Netherton Road and Napier factories when they were closing. But without the mergers, these shaky companies would have faced far more serious redundancies than if the mergers had not occurred.
§ Mr. Benn
Perhaps there were more—perhaps 10,000. I do not remember the exact figure. But I remember that, a year later, unemployment was lower in Woolwich than it had been. I discussed the situation with Sir Arnold Weinstock, and I pay tribute to him for what he did. There were discussions between him, G.E.C. and the I.R.C. on the reasons for the closure, which was to follow rationalisation. The fact is that the same thing would have occurred if the matter had been left to pure market forces.
I do not pretend that weak firms will avoid closure if they join bigger units, but it would be wrong to suppose that the I.R.C. or the firms which co-operated with it operated without regard to regional factors. I mention this because it was an aspect of my work and it was a great comfort to me to be able to invite 368 the I.R.C. to look at the problems of redundancy which occurred and consider whether it was possible for it to help, as it so often did.
§ Mr. Hamling
Does not my right hon. Friend agree that the philosophy of the Government of not intervening in market forces will lead directly to the sort of situation the hon. Member for Bolton, West (Mr. Redmond) fears?
§ Mr. Benn
That is my fear—and not only mine. I have seen some of the consequences of the Government washing their hands of concern for the human consequences of technical change.
The other point is that the I.R.C. was copied by other countries. The French I.D.I. was based on it and came into existence about six months ago. The Italians are about to copy it. Signor Colonna, Industrial Commissioner of the E.E.C. Commission, had the benefit of conferences on the work of the I.R.C. in Brussels and London, and he has now recommended the European Investment Bank to earmark funds for exactly this sort of purpose.
The right hon. Gentleman is always saying that we have to align our policies of levies on agriculture, imports and on value added tax in order to bring us closer to Europe. Yet he is abandoning the thing that we pioneered and which our European partners are copying. If that is not sheer ideology, I do not know what it is. There is no justification for it.
There are two other aspects which bear on some of the other matters we are discussing in the House. One is that the I.R.C. provided some sort of instrument, in addition to restructuring and selective investment, for supervising managements, and one of the reasons there was industrial opposition was that many of the managements in industry, the boards of directors which run a self-perpetuating hierarchy, greatly resented the I.R.C.'s interest in what they were doing. But the shareholders have long ago, like the appendix in the human frame, given up performing their function. Anyone who has listened to the I.R.C.'s directors speaking of their task will know that one of the things they saw as of greatest importance in looking ahead was management vetting and supervision, which they thought necessary in order to follow up the mergers they had promoted, and more generally in industry. 369 There is no accountability really for anybody in many of the boards of directors which run our major companies. I believe that it was not ideological but practical scope that was offered to us for constructive public supervision, not only through our investment but in the discharge of responsibility by management in some of the firms which one could see were getting into difficulties. That activity was right. Yet it is to be entirely liquidated.
That is in marked contrast with the policy of the Government to clamp new curbs upon the trade unions. It would be out of order to spill over into another debate, but the I.R.C. had developed relations with the trade union movement which are now to die with it. I have made reference to Sir Leslie Cannon and have paid tribute to him. He saw to it, in all the cases of the kind just referred to, where there were consequences of mergers, that the T.U.C. was brought in, with the Confederation of Shipbuilding and Engineering Unions and the shop stewards. That was my policy too. I have referred to my visits to places where it was hurting. They were very difficult and unpleasant meetings because the men said what they thought about what was happening and we were engaged in trying to help.
In many ways, the most serious condemnation of the Government is that they have abandoned the relationship with the trade union movement on everything except industrial disputes, as if the only relationship which the trade unions could have with the Government is when there is a strike. We took a totally different view, both through the I.R.C. and directly by going round to talk to the executive of the major trade unions and at their conferences.
The real way ahead to improve relations in industry, we believed, was to allow the trade unions and their members to take a growing part in the development of industrial policy. All this is to stop. I shall never forget hearing that the men at Palmer's Yard in Jarrow, who were allowed to go into unemployment, heard the news from the Press five minutes after they had left the management. There was no consultation with the Government about that. It was a symbol of the way the Government tackled this sort of thing.
§ Mr. Arthur Blenkinsop (South Shields)
The Secretary of State refused to join with the trade unions in a positive investigation of alternative methods of development on Tyneside.
§ Mr. Benn
I recall that. There were occasions when I, as Minister, could not help, but I never allowed people to hear from newspapers the results of the requests they had made to me.
I turn now to the future, because we are talking about £120 million to £130 million of assets of the I.R.C. and £49 million under the Industrial Expansion Act. Despite what the right hon. Gentleman said about parliamentary accountability, there will be none, effectively, for the disposition of these funds. We do not know whether the Government are to give prior rights to existing shareholders or whether they are to go on the open market. We do not know the way the shares are to be valued. We shall press the right hon. Gentleman on these matters in Committee. We do not even know the Government's policy now on relations with industry. Is it to be that all investment by the Government is to end? Apparently not, in view of the Rolls-Royce case and the fact that the Shipbuilding Industry Board is to be continued. What are the right hon. Gentleman's criteria for high technology problems, regional interests and national interests? How are the Government's relations with industry to develop? We have had no answer but at some stage the right hon. Gentleman will have to put away his scythe and stop cutting down the harvest we left to him, and tell us where we are to expect his own ideas to grow from.
The philosophy of the Government is really 100 years out of date—not just ten or 15 years. Whenever I hear the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) acclaiming Marshall's works on free buyers and sellers negotiating in free competition, it seems less and less relevant to the real world in which we live. It is totally lacking in imagination. There is no attempt to relate it, grandiloquently or not, to the broader nature of the problem. No lessons are learned from abroad. There is nothing but the balance sheet to guide them and it has no relation to the reality of modern industry. Nor has it any real human 371 concern—in contrast to modern management's increasing recognition of its real assets—for the people who work in the firms they manage.
Britain is not a company and the right hon. Gentleman is not a managing director. Nor is he an official receiver whose job it is to dispose of public assets. He is not here to give money away either by hiving off nationalised industries or disposing of valuable investments for less than their true value, while at the same time imposing tight controls on people. This Bill exactly reflects the Government. I say that it is negative, unimaginative, secretive in form, unfair and will not work, and I hope that the House will reject it.
§ 5.26 p.m.
§ Mr. Christopher Tugendhat (Cities of London and Westminster)
I am grateful to you, Mr. Deputy Speaker, for calling me to make my maiden speech, because this is an important subject. However, I may be biased in my view because I wrote about it for many years as a journalist of the Financial Times. As the right hon. Member for Bristol, South-East (Mr. Benn) said in his peroration, we are dealing with a matter of major economic interest now and in the future. But before I deal with that, I should like to follow the traditions of the House and say a few words about my constituency.
The Cities of London and Westminster really speak for themselves and need little said about them. They have been at the centre of the country's political, cultural and commercial life for over 1,000 years. They were very old before this Parliament was even born. They are, in my opinion, two of the most distinguished cities in the world. I have every confidence that their future will be as distinguished as their past. There is only one aspect of their future about which I have any doubt, and that, I must confess, is in relation to their parliamentary representation.
Famous as they are, they have had very famous representatives in this House. Charles James Fox was a Member for Westminster; so was John Stuart Mill. Arthur James Balfour was Member for London. Alfred Duff Cooper was one of the Members for the Westminster constituency before the war. Speaker 372 Hylton-Foster also came from the Cities of London and Westminster, and then came my own immediate predecessor, John Smith.
Unfortunately, John Smith did not spend very long here. He is a man of remarkable charm and wit and I know that during his time in this place he impressed his personality, character and enormous ability on hon. Members on both sides. He is one of the nicest people I know and I feel that I shall have a difficult job to follow him. He set standards which are quite legendary. I chose this debate in which to make my maiden speech because I felt it appropriate in that it is also an area in which John Smith was extremely interested.
Before speaking of why I am in favour of winding up the I.R.C., I wish to pay tribute to the Corporation, and I hope the right hon. Member for Bristol, South-East will consider that I have done so in as munificent a fashion as he did. The White Paper which set up the I.R.C. said that it was designed… to help the country to make effective use of its resources of skill, management and capital.That was a desirable aim, we all agree, and we also agreed with many of its aspirations. However, where we disagree is not with the aim but with the manner in which it was carried out. There are both political and technical objections to what the I.R.C. was doing, and I will deal with the political objections first.
Its powers were far too wide and vague. It is the job of Government to promote and foster the national interest and of Parliament to decide it. To use a fashionable term, the national interest is not something which can easily be hived off. Yet in setting up the I.R.C. the Labour Government were hiving off the national interest. They gave it a budget or reserve of £150 million and carte blanche to go through industry with, as someone once said, a shot gun in one hand and a Bible in the other.
It cajoled, bullied, persuaded and merged. It used its money to promote mergers which would not otherwise have taken place, sometimes giving loans where it thought the recipients were desirable and sometimes intervening in contested takeover bids, which meant that it was buying off one set of shareholders at the 373 expense of another; a remarkable use of public funds.
An example of this was the bid of George Kent for Cambridge Instruments, The I.R.C. intervened to help Kent against Rank, which meant the Corporation buying off one set of shareholders at the expense of another. I do not think any of us will deny that there are occasions when there is need for the government to intervene. where we differ from hon. gentlemen opposite is that we regard it as an unfortunate last resort, whereas they sometimes regard it as something good in itself. Suffice to say that we agree that there is sometimes a need for Government intervention, and the present Government demonstrated this by their intervention over Rolls-Royce.
However, when the Government wish to intervene and use public money to bring about certain developments in industry,I consider it to be of the utmost importance that these decisions are arrived at openly and are debated on the Floor of the House. This is a crucial point.
In the case of the I.R.C. almost had to work in secret. This brought about results the reasons for which were never revealed, perhaps necessarily, though this is not the way that public money should be spent. I confess— this is no doubt because I am a new hon. Member and unfamiliar with the ways of the House— to have been a trifle surprised at the Opposition's case on this point because I have the honour to be a member of the Standing Committee upstairs which is dealing with the Coal Bill. Labour hon. Members on that Committee are making it clear that they believe that before any of the National Coal Board's subsidiary interests are hived off, the matter should be debated on the Floor of the House, which I regard as a reasonable attitude for them to be taking. I am surprised that they do not take the same view about the Government's responsibility for spending public money in this case.
These are, in my view, the political objections. I come to the technical objections. The characteristic approach of the I.R.C. was the merger. Indeed, 374 it is for the merger that it will be remembered. It was especially interested in the very big merger, a few examples of which are Leyland and B.M.C., G.E.C. and A.E.I.-English Electric. These were some of the big set pieces, but over a dozen were listed in its last Annual Report.
One gets the impression that the I.R.C. looked about the world, saw the great success of some of the large companies in the United States and elsewhere, was dazzled by what it regarded as the benefits of size and thought that, size being synonomous with success, it was necessary for it to create similar very large organisations in this country.
In fact, one need only to look at the Fortune of the 500 largest companies outside the United States to see that this country does not do too badly. The I.R.C. forgot that mergers themselves create difficulties which are often much greater than any advantages that result. The advantages of a large company— of economy of scale and so on— are obvious, are grand and are easily seen. This applies to many British companies which are, perhaps, the second in the world in their fields, or in some cases the first.
However, problems are created which are tremendously complex and numerous but from which many somewhat smaller companies do not suffer. Indeed, some of these problems tend to hold down the very large organisations in the way that Gulliver was held down by the many tiny strings of the Lilliputians. Though they were much smaller, they were able to out-manœuvre Gulliver, primarily because he faced a multiplicity of problems.
I will not burden the House with statistics, except to give two which show the way in which in many cases the problems of mergers are very much greater than the advantages. There is an American expert called Mr. Forest Wallace who estimates that a moderate amount of integration between companies requires something like 10,000 major, non-routine decisions. When the Pennsylvania Railway merged with the New York Central Railroad, so that the two integrated their equipment and maintenance functions, the critical path programme contained more than 400 steps.
These are extraordinarily complex matters involving the laying off of men, 375 the closing down of factories and the re-organisation of the whole chain of communication. They also involve the changing of county procedures and alterations in company structures. So difficult and complex are they that the result often means the merged organisation being less successful as one entity than the sum of the parts.
I do not ask hon. Members to take what I say as a matter of faith. There are striking examples of mergers in recent years, not only abroad but in this country, which demonstrate the truth of my remarks. Perhaps the most obvious example is the one I mentioned, the merger between the Pennsylvania Railway and the New York Central Railroad. It was designed to achieve economies of scale. In the event, it led to bankruptcy within a matter of months.
In Italy the largest chemical company in Europe, Montecatini Edison, avoided bankruptcy by the skin of its teeth and is always at the bottom of the list giving the rate of return not only compared with other firms in the chemical industry but compared with other industries.
In this country we have B.M.C., which was formed in 1952 between Austin and Morris. That merger brought together the two greatest names in the British motor industry. The right hon. Member for Bristol, South-East pointed to the merger between Leyland and B.M.C. The two companies were less successful than they had been apart, and a striking fact is that the smaller Leyland company emerged to take over the larger one. It is regrettable—this is not said with any disrespect for the management of the company—that the performance of Leyland since that time has not compared favourably with the past, and this is worrying.
I admit that the scale of industry is getting larger, both nationally and internationally, and that in all industries there is a minimum size beneath which it is impossible for companies to compete by mounting the necessary research programmes, launch new projects and so on. Be that as it may, there are no short cuts to achieving success and a position from which one can compete satisfactorily on the world stage. When one looks at the most successful large companies—be they American, such as I.B.M. or General 376 Motors; or British, such as B.P.; or Continental companies— one sees that they are all the result of organic and gradual growth.
They are not things which have been thrown together like shot-gun marriages. Merging is a complex and difficult business. Mergers are not things that an organisation notches up like Jesse James notched up killings on his six-shooter. It is not a suitable occupation for an organisation simply to secure points and lay them out in its annual report. There are no short cuts. One has to move gradually and the only way to do that is to create a competitive environment in which companies can compete, become efficient and hold their own across the world. I know that hon. and right hon. Gentlemen opposite are often very doubtful of this philosophy.
I would like to draw their attention to one example of a high technology industry, the sort of thing about which we are always talking in relation to the American challenge and the need to withstand it. It concerns the German chemical industry. Hon. Members will remember that there used to be a great firm called I. G. Farben which dominated the German chemical industry and was widely held to be one of the industrial wonders of the world and to have played a large rôle in the industrial strength of Nazi Germany.
After the war the Allies destroyed the I.G. Farben and it was believed that when it was destroyed and broken down into its component parts, the German chemical industry would not be able to compete with other countries again. The I.G. Farben was the kind of trust which the I.R.C. was endeavouring to create in so many industries. We see now that there are three German chemical companies operating, not one, and while the German market is very much the same size as ours, from year to year they lead the table for the rate of return on assets, for the most efficient operators, for their invasion of the American market.
No other firms are more successful at withstanding the American invasion in their home market. We see that a competitive environment, with companies which are not too large to be unmanageable, where they have to fight for markets at home and abroad, is the most successful. Many other examples could be 377 brought to mind. I take that one because it is the kind of capital-intensive high-technology industry with which the right hon. Member for Bristol, South-East was so concerned when he was in Government. The I.R.C. was a brave experiment, its aspirations were good but the manner in which it operated was one which in the long run was likely to lead to far more pain than benefit.
§ The CLERK AT THE TABLE informed the House of the unavoidable absence of Mr. SPEAKER.
§ Whereupon Miss HARVIE ANDERSON, The DEPUTY CHAIRMAN OF WAYS AND MEANS took the Chair as DEPUTY SPEAKER, pursuant to the Standing Order.
§ 5.43 p.m.
§ Mr. Austen Albu (Edmonton)
It is a great pleasure to congratulate the hon. Member for Cities of London and West-minister (Mr. Tugendhat) on his maiden speech. Not surprisingly, because he comes from a very distinguished stable— in which opinions are fairly broad and generous and political opinions very wide — he spoke with much distinction. In the modern tradition he spoke in a fairly controversial manner but none of us minds that, indeed we are quite used to it. Since the hon. Member comes from the City I suppose we might have expected it on this Bill. I could not help feeling that to some extent he was putting up Aunt Sallys to knock them down. I also had the feeling, and this may be due to the manner in which he spoke, that he could very well have argued the opposite case in just as distinguished a manner.
What the Government are doing is disastrous. We have not had such a doctrinaire set of Ministers for years. I do not know whether this applies to the right hon. Gentleman but it certainly applies to his colleagues. It is not a return to Conservative traditions that they appear to want but to those of Cobdenite Liberalism. I cannot believe that that is really the case but that is the impression they give. Their views are based not only on bad economics but as my right hon. Friend the Member for Bristol, South-East (Mr. Benn) said, on a completely false reading of history.
The industrial revolution which made us the workshop of the world took place 378 at the end of the 18th century and the first half of the 19th century, not in a period of laissez faire and free trade but in a mercantilist era of considerable Government intervention. It was only later as we adopted what appear to be modern Conservative principles that our decline began. Our relative position became worse from that time and from the middle of the 19th century, certainly the last quarter of the 19th century until modern times, the story has been one of government taking far too little action and generally far too late.
At the turn of the century the country wavered between complacency and hysteria in the face of growing foreign competition especially from Germany and America. Anyone who looks up the writings of the time, who reads the debates in the House of Commons at the time, or who reads the reports made by consuls overseas or the Reports of Select Committees and so forth, as well as the books written at the time, will find that what I say is true. Report after report came out, warning after warning was given about the inadequacy of British business methods but the traditions of laissez faire prevented anything from being done. I am surprised that Conservative policy should be to adopt the present attitude in view of the attitudes they adopted at that time.
The causes of our relative decline can no doubt be based to a certain extent on social attitudes but there are three factors by which they were demonstrated and have to some extent been demonstrated ever since. The first factor was a lack of any tariff protection for British industry in the face of growing competition from our competitors who were protected by tariffs. Secondly, there was a lack of any financial arrangements for industry which would encourage innovation, rationalisation or good management, compared with our competitors, particularly Germany. Thirdly, there was a lack, until incredibly late in our history, of any adequate system of public education and especially of any adequate system of technical education.
For some time tariff protection and the question of public education were treated as alternatives, so much so that the Liberal party produced a pamphlet entitled "Brains or Tariffs". I think it 379 was Chamberlain who made a violent attack on Rosebery for advocating more and better technical education but he said that this was no alternative to tariff protection, as if the two were somehow incompatible alternatives and the nation could only have one or the other, the two being unnecessary at the same time.
The lack of tariffs meant that we had no bargaining weapons but eventually the tariff reform movement became muddled up with the wave of imperialist fervour and with the illusions of creating a Zollverein— a great Empire free trade area which was about as completely out of date as that monument of British imperialism, New Delhi, which came into existence at about the same time. Imperial preference was established in 1932 but no one believes that that system had anything much to do with the structural changes which belatedly took place in British industry in the second part of the 1930's.
As to education and training, we resisted this longer than anything else. It was not until the 1950's— and here I give some credit to the party opposite who were in Government at the time— that we began to get a better system of technical education, higher education and university education— a system in any way comparable with that of our competitors who for years had trained their businessmen in this way.
At the beginning of this century and up to 15 or 20 years ago hardly any businessman in England had had any education other than a secondary education. We were enormously behind our competitors simply because of the lack of Government intervention to assist industry by education. The last Conservative Government made enormous improvements in the technical education system and they also introduced the Industrial Training Act. This is something else about which we must take care. It looks as if there is to be a further attack on the Industrial Training Boards and that sooner or later they will follow into the limbo of the movements for the improvement of industrial efficiency which the present Government have started. It would be a tragedy if that were to happen. They have hardly had time to get going and there is no doubt that before they were introduced 380 the standard of much of our industrial training was deplorable.
As a sort of cumulation of this and some other things, such as previous Governments rationalisation of the cotton industry, the aircraft industry and so on, the last Government set up the corporation to deal with the third problem. This is not only a question of mergers and not only a question of financing industrial expansion. It is also a question of dealing with the problem of the failure of institutional shareholders to promote rationalisation and more efficient management. The setting up of the Corporation was only one of several methods the last Government introduced to improve the performance of British industry.
The Corporation had a very good record in its short life, certainly in the engineering industry, where it was very badly needed. It had more difficulty in textiles, which is a traditionally backward and conservative industry, though I understand that it recently had success— this does not appear in the last report, but has happened since— in assisting the formation of an independent group in the household textile industry. This was very necessary in view of the excessive vertical integration in the industry. I believe that the company which is being set up is very active in Europe.
The hon. Member for Cities of London and Westminster made a great attack on the fashion for mergers. But mergers are not the sole purpose of the Corporation, which made that very clear in its last report. Nevertheless, the hon. Gentleman will not deny that there were some parts of British industry, such as the heavy electrical engineering industry, where mergers were necessary because their scale was quite inadequate.
But rationalisation can take the form of hiving off, breaking up, moving groups from one firm to another to bring about a more rational managerial structure. Having dealt with some of the large merger schemes that were belatedly brought about, the Corporation was turning to this other form of rationalisation to produce a rather better company structure and rather better management for particular industries.
One of the Corporation's best features was its scheme of twice-yearly follow-up visits where there was no I.R.C.-nominated director on the board, for the 381 purpose of monitoring the performance of companies and management. This job is not performed in this country by the banks or insurance companies. Many people, including the hon. Gentleman, I am sure, have many times criticised the inadequacy of the control by the institutional shareholders of the companies in which they very often have large investments.
The quality of the I.R.C.s staff has been mentioned. Perhaps it is exemplified by the fact that I understand that most of them— and there is only a small number of them— have been offered very fine jobs in the City or in industry once the Corporation has been broken up.
That the work they have been doing needs to be done has been recognised by the Secretary of State. I should like to read out what he has said, because it underlines what my right hon. Friend said about the obvious doubts the Secretary of State has about abolishing the I.R.C. before it has really got going. Speaking at the annual dinner of the Industrial and Commercial Finance Corporation on 5th November 1970, the right hon. Gentleman said:The disappearance of the I.R.C. is one of the factors which poses new problems to the City of London …I would like to ask you tonight whether the City of London has sufficiently modernised its structure and its facilities to meet the present-day needs of industry. Is it fully ready to meet the increased responsibilities which will devolve upon it following the disengagement by Government from intervention in industry?Is it? Perhaps the hon. Member who represents the City can answer. Does he believe that it is? The right hon. Gentleman went on:I believe you should look more closely at what is now going on in Europe. There are many institutions, for instance in France and Germany, which have now acquired most if not all the skills and expertise which you in the City of London have developed, but they have in sonic cases gone further, not just by learning each other's languages. They are prepared to acquire technical expertise to enable them to assess and advise on proposals for new investments put to them by industry … The danger as I see it is that the traditionalists amongst you will look upon these more enterprising institutions as not quite proper, and the powerful effect this kind of collective atmosphere of disapproval can have in a closed community like that of the Square Mile can be damaging to the long-term interests not only of the City itself but to industry and to the country.382 The comparison the Secretary of State was making was with the attitude of similar institutions in our competitor countries, particularly Germany and France, which have been overtaking us rapidly. It is no good our satisfying ourselves that we are not doing too badly now and that we have a fairly good balance of payments, thanks to the policies of the previous Government. In the past the problem has always been that we have been satisfied with our position and have not observed that other people were overtaking us. It is to the trend, the movement, the direction in which expansion is taking place, that we must draw attention.
It looks as though the Government are destroying the I.R.C. before the results of its activities can be assessed, and knowing, as the right hon. Gentleman admitted, that existing free market institutions are quite inadequate to carry out the task which it was set up to perform, and which he apparently admits is absolutely necessary.
What could be more tragic? There are signs at last of an improvement in British management and a growth in productivity in British manufacturing industry. Most of us have had the experience in the past few years of meeting people from overseas, particularly Americans, who say that maybe in a short time we shall have some of the most professional management in the world and that maybe at last the measures of successive Governments over the past 10–15 years are beginning to have their effect.
It is not possible, and nobody can believe that it is, to effect the improvement required in British industry, British management and British attitudes by macro-economic methods alone. Yet those are exactly what the Government are to rely on. They are to withdraw from micro-economic intervention and rely on short-term monetary methods to bring about the change in efficiency, the rationalisation, improved innovation, and better training that we need. The right hon. Gentleman's speech seems to make it absolutely clear that that is the case. The Government of which he has become a member are content to rely on short-term monetary policy at the expense of the long-term improvement of the British economy, which for so many years has 383 been badly needed and to which we at last thought we had put our hands.
§ 5.57 p.m.
§ Sir Brandon Rhys Williams (Kensington, South)
We have spent a number of hours in recent weeks, and are likely to spend many more in coming weeks, debating the relationship between workers and management. It is all too rare for us to have a serious debate on the relationship between management and capital.
I have often said— but having heard the contribution of my hon. Friend the Member for Cities of London and Westminster (Mr. Tugendhat) I begin to think that I may not be entirely right— that the reason why our debates on management are so relatively thin is that all too few Members have practical management experience or sufficiently extensive knowledge of the actual problems of modern management to feel themselves capable of making a really valuable contribution. All hon. Members who heard my hon. Friend's maiden speech will feel that here we have someone who has not only the power to express himself convincingly but a very wide store of knowledge of the industry and commerce both of this country and other countries. We look forward to his contributions to our debates, which will certainly be enlightening and, I do not doubt, controversial. He has made a very interesting start.
I hope that the House will turn its attention increasingly to the problem of the relationship between management and capital, and that in particular we shall try to escape from the rather arid and doctrinaire approach which has been taken not only in debates since the war but in the whole evolution of the concept of the way in which our political institutions should intervene in the management of industry and commerce.
I think that we all feel that the Bill, when it becomes law, will leave gaps in the relationship between management and capital. There will certainly be a gap in the financial system in this country. Every industrialist must agree that the financial background of industry today leaves much to be desired; and there will also be gaps in the supervision of management.
I should like to spend a few moments considering the various solutions which have been tried to rectify the deficiencies 384 in the relationship between capital and management. The overt systems of political intervention obviously come first. Nationalisation was talked of for many years. It was tried for many years, and now it has very few friends. Many people have said that nationalisation is bound to fail for doctrinaire reasons. They feel that political intervention in the management of industry is bound sooner or later to lead to the taking of wrong decisions. My own view is that there are far more practical reasons why nationalisation has not proved a very great success. Very large organisations, whether owned by the Treasury or by remote and uninterested shareholders, can be highly efficient if they are well managed; they can be very inefficient if they are badly managed; and who the ultimate shareholders may be is virtually irrelevant.
§ Mr. Ted Leadbitter (The Hartlepools)
The hon. Gentleman said that nationalisation had very few friends. That sounds very nice in the House, unless it is challenged. What nationalised areas of the economy are lacking, we are told, is friendship. If the Secretary of State carries on in his present way, would he de-nationalise in order to gain some friends?
§ Sir B. Rhys Williams
If the hon. Gentleman will allow me to pursue my way, he will see that I am giving him an answer, though possibly not the answer he expects.
When I listen to debates on nationalisation and de-nationalisation both inside and outside the House, I feel a great sense of emptiness, because it is so rare to hear speakers in this rather highfalutin' dispute get down to the brass tacks of what management is about, to the relations between the white-collar and blue-collar workers, to the real problems of organising large work forces and organising large volumes of capital, of planning investment, and so on.
I should like to put one humble theory to the House, that it is not the question of who owns the shares that ultimately decides whether an industry is efficient but the adoption of the pyramid organisation of management. It is nearly always fatal, whether a company is privately-owned or publicly-owned. In the large publicly-owned institutions it has almost invariably been the practice to adopt the 385 pyramid system in obedience to conventional Civil Service practice.
In an organisation that is expanding very fast a large number of young people who are hoping for promotion may well get it as time goes by, if they deserve it, because new opportunities are being created all the time. So the manager starting at the bottom and hoping to attain something in the course of his life may succeed in doing so simply because as he works his way up the pyramid it increases in size. But if an organisation depends on the hope of promotion as its incentive to self-improvement, the taking of risks and hard work in its managerial grades high and low, it must be able to offer it. The organisation must be able genuinely to offer promotion to the man who deserves it.
§ Mr. Arthur Palmer (Bristol, Central)
I think I can claim to have a fair knowledge of the electricity supply industry which has been nationalised for about 20 years. Is the hon. Gentleman aware that the number of independent management positions within that industry today in which there is a vast amount of individual initiative and power of control is greater than in pre-nationalisation days?
§ Sir B. Rhys Williams
It is not necessarily giving people satisfactory promotion if one creates more jobs which are not germane to the main function. But in view of the hon. Gentleman's much greater knowledge of that particular industry, I would prefer to generalise on the point, but on another occasion I would be happy to learn from him on questions of detail.
§ Mr. Eddie Griffiths (Sheffield, Brightside)rose——
§ Sir B. Rhys Williams
Perhaps I could be allowed to complete my point. Nationalised industry tends to copy private enterprise in holding out to its management, particularly young management, the concept that by hard work they can better themselves. Then the sickening truth dawns on the aspiring manager who thinks that hard work will get him to the top. He finds he has to wait for vacancies which in a pyramid structure may never arise. Therefore one finds a number of men in their forties who realise that no matter how hard they 386 work they cannot get any further. When the organisation reaches its maximum size, managerial efficiency inevitably tends to falter. The managers throughout the organisation lose their keenness because they realise that there is no incentive to work and to take risks.
I am putting forward a suggestion based entirely on personal observation of the motivational failure in management which I believe is more likely to be the cause of inefficiency in a large organisation than the fact that the Treasury may have acquired shares. I hope that the hon. Member for Sheffield, Brightside may feel that I have made his point for him. If not, I will give way.
§ Mr. Eddie Griffiths
My experience in the steel industry, having worked both for a private steel company and also in the British Steel Corporation, is the opposite to what the hon. Gentleman said. Up-and-coming young managers with ability are now flourishing under the British Steel Corporation and I could give chapter and verse of individual cases. However, in the private steel companies the higher strata of directors and upper management were riddled with nepotism. A prolific director may have five sons in the business, all directors by the time they are 28 or 30. Therefore, in such a situation there is not much chance for the independent man with ability.
§ Sir B. Rhys Williams
The difference between us is not as great as it appears. A junior manager may see no hope of advancement and therefore inefficiency results; but when an organisational change is brought about and the situation is rectified, there again begins to be a spark of life in the management. if that is happening in the steel industry today I am glad to hear it, but in general it must be said that the Civil Service tradition is still followed, with promotion and assessment over a period of years. This idea has crept into the nationalised industries and it has been the hand of death.
If we are to escape from an arid dingdong between nationalisation and denationalisation, where else can we go?
§ Mr. Leadbitter
What do propositions about nationalisation and private enterprise have to do with the I.R.C? I 387 had understood that the I.R.C. was working in accordance with its terms of reference in complete harmony with the private sector. I was wondering what was the hon. Gentleman's point in connection with the Bill.
§ Sir B. Rhys Williams
The hon. Gentleman is simply asking me to get on with my speech, which I shall now try to do.
The Labour Government recognised, although they perhaps did not act upon this openly, that nationalisation on the pre-war pattern would not be acceptable to the public and was not likely to produce results. Therefore they devised other schemes, involving the I.R.C. and the Industrial Expansion Act. These measures were described by hostile elements as "nationalisation by the backdoor", though I myself did not so describe them. I think there was good and ingenuity in these schemes but they were still highly controversial in operation. Many people felt, and I believe rightly, that the use of public money in large amounts to coerce changes in the private sector could not always be unattended by controversy. What is at the back of public doubt about both the Industrial Expansion Act and the operations of the I.R.C. was the question in the public mind whether politicians were the right people to take decisions about industry.
§ Mr. Alburose—
§ Sir B. Rhys Williams
I think that it would be in the interests of the House if I were allowed to make my point. [Interruption.] Hon. Gentlemen who are protesting opposite have not appreciated the extent to which I am making their own case for them. I have felt doubt about a number of the activities of the I.R.C., although I had the highest respect for its personnel. Personal friends of mine joined the Corporation, people I admire and who I felt had a great future in industry. I know how much they felt they would be able to do in the Corporation. I pay particular tribute to Charles Villiers, who is a man of outstanding capacity and with extensive experience in the private sector and in the City before he accepted this post.
§ Sir B. Rhys Williams
I do not know his political views. He was appointed by the Labour Party. It seems to me that the evolution of our political system by British genius over the hundreds of years which have gone into the creation of the House of Commons has not produced an organ ideally suited to detailed day-to-day intervention in the workings of private companies. Nor am I particularly satisfied with the performance of any Government since the war in regulating the country's finances.
I listen with admiration to the glibness and facility of hon. Members in dealing with industrial matters. I am sometimes amazed at the speed with which they master facts. I have not gained very rapidly such knowledge as I have of industry. Perhaps I should mention that I spent 14 years in I.C.I. and about eight years in consultancy. The longer one works in industry and in consultancy, the more humble one becomes when trying to decide the circumstances in any particular industry.
One reads what is said in the newspapers about a particular company in which one may have an interest and it is rare that one reads the whole story or indeed an accurate one. If the newspapers are accurate in their information, they are often out of date. But although the specialist financial Press in particular may be impeccably accurate and unquestionably correct, anybody who has worked with management and who knows a factory, has handled its products and met the firm's customers, knows that the ideal solution to a firm's problems will not be found simply by reading published data. Although much can be done by airing the circumstances of a company, even more can be done by confidential inside work. I am unashamedly on the side of people who say that direct political intervention in private industry is not likely to produce results.
I differ also from those people who feel that there are automatic solutions; that if politicians cease to interfere in an industry it will right itself like a ship coming out of a storm. I have never been one who follows laissez-faire doctrines and I distrust people who use the word "competition" as though it is some form of abracadabra. They think that once competition is introduced, any situation will automatically come right. 389 I can see hon. Members opposite pointing their fingers. But there is nobody on these benches who does not agree with me. Everybody knows that where there is competition there is likely also to be efficiency, but that the question we must concern ourselves with is "Why?" We should not be content just to use the word "competition". I would rather ask the question, "After competition, what?" When a firm finds it is facing competition, what happens then? What do the managers get down to that possibly they are not doing already? How do we encourage firms to follow such a course without introducing a blast of competition, a flood of imports, or whatever it may be?
In consultancy one learns to look at particular things in a firm and sometimes one comes to the view that a firm of a certain size is not doing something that other firms of a similar size or situation are doing. Therefore, one asks if they have taken such a matter into consideration. Sometimes the firm says, "Yes, we have and we have chucked it out." Sometimes they say, "We will have another look at the matter." Sometimes they smack their heads and say, "Splendid idea, why have we not thought of it before?" It is not competition that makes them more efficient, but the readiness to take the sort of decisions which are needed. I believe that one can induce such a readiness without introducing destructive forces. But how is this to be done? Is it to be done by leaving industry entirely to itself? I prefer to explore the organic alternatives to the I.R.C. and the direct intervention of government funds.
First, I should like to make one or two suggestions in regard to the financial background against which industry is working. For many years, possibly since 1931 and possibly indeed since the 1880s, we have been living in a financial climate in which there has been a tendency towards too great consumption in relation to the volume of investment. Or, possibly too much of our investment potential has gone abroad and there has been too little modernisation of our own industries. We have allowed ourselves to divert too much of our creative effort into the production of goods for consumption. Insufficient has gone into modernisation and invest- 390 ment. Is this a matter we can leave to the City or to financial pundits to put right? I am not against Government action, but such action must not be hamhanded.
There are two things I should like to recommend. If the Government are to produce a suitable financial background against which industry can operate efficiently, there must be continuity of policy. In taking long-range investment decisions, one of the most cramping obstacles is uncertainty about Government intentions. This uncertainty has related to the course of interest rates, exchange rates, quotas, tariffs and many other factors. While the Government are constantly preoccupied with these things it is impossible for a business man to take a realistic long-term view about what his industry demands. I urge on both Front Benches to settle before anything else the achievement of continuity of policy in financial matters.
The Government have a responsibility to act to increase the flow of funds for investment. But it must be done in such a way that there will be no inflationary results. I would like to put one particular recommendation. 1 believe that companies ought to put much more into pension schemes than they are doing at the moment. The reason that the treatment of our pensioners as a whole is so shoddy is that most pension schemes are far too short of funds. The only way to rectify the situation is to put more money into pension schemes. Some firms put in as much as 20 or 25 per cent. But many put no more than the minimum required under the Boyd-Carpenter Act, i.e., about 4½ per cent. That is plainly insufficient provision for the future for pensions. I believe that the Government would do well to insist that all firms put not less than 10 per cent. on top of wages into the provision of pension schemes.
What would happen if they did? There would be an enormous extra access of money to the capital market in the private sector because schemes contracted out of the State scheme would have a great increase in funds. These funds would go into the hands of trustees who would in turn place them in the capital market. Firms which had contracted in would also produce for the Treasury large sums 391 of fresh real capital which the Government could use in financing public sector investment.
So much for the financial background. I do not favour dribs and drabs or even large sums of, say, £150 million being put into the hands of experimental bodies. This is not the time for experimenting in the economy with new faces and people. I should like to see existing institutions strengthened and corrected.
§ Mr. Raymond Gower (Barry)
I agree with what my hon. Friend has said about pension funds. But does my hon. Friend also agree that it is highly desirable that positive steps should be taken to make these schemes completely interchangeable or transferable?
§ Sir B. Rhys Williams
My hon. Friend could not have said anything more dear to my own interests. This morning I secured a Ten-Minute Rule space to introduce a Bill for the protection of pension rights, for which I hope to win the approval of the House three weeks from today.
How can one intervene in the general organisation of management, so that it will tend to be self-rectifying when problems of inefficiency have to be tackled, without the necessity for the introduction of cruel or artificial competition? Some people feel that all that is required is to make it bigger; that when an organisation the size of I.C.I. or the Electricity industry reaches proportions where there is no rival in the whole market it is getting near to being on the scale of modern life. Unfortunately, if we study the effectiveness of the use of capital in small and large companies, almost invariably we find that the small companies use capital more effectively than large ones. Large firms tend to be set up more like the Civil Service and are therefore less efficient in the industrial context.
I do not therefore place much emphasis on changing the scale of our industrial enterprises. We cannot hope for too much from tiny enterprises; but a medium-sized organisation employing 500 or 1,000 people can sometimes be more human, inventive and flexible than the vast structures with international prestige, complicated rule books for management and workers, and so on. The pace at which mergers were taking place a few 392 years ago left me with a sense of anxiety. Many people in the City are now beginning to question whether hectic mergers are likely to lead to efficiency. I am glad that these questions are being asked.
We still return to the problem of the supervision of management. On the Continent, because of many factors—some accidental, others the result of deliberate national policy—the supervision of management has evolved on a different basis.
We should certainly consider the German system, because the German economy is not too inefficient. In Germany, company law specifies that the supervision of management must be carried out by a board which shall not itself be executive. What a great thing it would be in this country if boards of directors were able to be more independent when criticising their own operations. All too often, since the war, there has been a trend away from the appointment of outside experts, to company boards, towards the promotion of people who have given their working lives to the service of the company. It is difficult to find fault with it in principle, but it has led to situations where boards of directors have ceased to be responsible for supervision and have ceased to feel that their loyalties belong primarily to the shareholders. Instead, directors' meetings have become simply regular meetings of heads of departments.
Some companies have attempted to cure this deficiency by recruiting outside directors. But, from my limited knowledge, the outside director tends to be a messenger boy to a particular sector or market. If the chairman wants a legal opinion or wants to know what the bankers are likely to be thinking, it suits him to have, for £500, £1,000 or £2,000 a year, a man who regularly attends board meetings and speaks only when spoken to. A man appointed as an outside director on that basis will not exercise a supervisory function.
I believe that the Government would be doing something constructive if they changed our company law to make it easier for shareholders to insist on the adoption of the German system of a supervisory board. Suspicion is often expressed in this country about the German Aufsichtsrat. All German firms 393 of a certain size must have worker representation on the board. Some hon. Members present will remember that we discussed this point a few nights ago in Committee on another Bill. I have no sense of hostility to the concept of worker representation on the board, but it must be in a supervisory rôle, not executive. If workers want to take part in the executive management of their company, the right way is to get to the board through promotion, not by changes in company law. But I am well disposed towards worker participation in the supervision of management. I hope that more study will be given to that concept in this country.
I hope that I may have led some hon. Members to the feeling that direct political intervention in industry or in finance is unlikely to lead to satisfactory results either in the short or long term. That does not mean that political action of an indirect kind is not required.
I hope that my right hon. and hon. Friends on the Front Bench will give serious consideration to the early introduction of a major new Measure of company law reform. I hope that they will give active study to the audit system in this country, which many people feel is in a highly unsatisfactory state. I hope that they will also look at the possibility of extending the audit system to include reports to shareholders on matters other than the sheer arithmetic of the business. I hope that they will take a long look at the rôle of the shareholder, and particularly the ways in which he can express himself at meetings and in his other relationships with the board.
I hope that my right hon. and hon. Friends will also look at the rôle of the professional institutions. I speak not only of accountants, but of other consultants, the qualified engineers, the chemists, and all the other members of organisations ancillary to management who can do more than they are now doing to induce efficiency.
I particularly ask my right hon. and hon. Friends to consider the rôle of the institutional shareholder, the banks, the merchant banks, the big pension funds, the unit trusts, and all the other bodies which, in effect, have now taken over from the private shareholder but have not taken over his responsibilities. We want a new Companies Bill which will put the 394 relationship between capital and management on a new and living basis.
§ 6.29 p.m.
§ Mr. William Hamling (Woolwich, West)
My right hon. Friend the Member for Birkenhead (Mr. Dell) has told me that I must not be rude to the hon. Member for Kensington, South (Sir B. Rhys Williams). I shall try not to be rude.
The context of the hon. Gentleman's speech, that political intervention in industry and trade is not desirable, takes me back many years—even before my hon. Friend the Member for West Lothian (Mr. Dalyell) was born—when we used to talk about capitalism. I intend to prove not only how far the hon. Gentleman has missed the mark, but how far the Government have missed the mark.
When we talk about intervention, we are not talking about intervention in trade and industry. This debate is not about management and capital. This debate is about the economic life of the nation. It is about people who work in industry. I know that there is no industry in South Kensington, and very little in the Cities of London and Westminster. There is a lot of parasitism, but very little industry. This is not where one finds steelworkers, as my hon. Friend who has left the Chamber, worn out by this long non-intervention in industry and trade, knows from bitter experience.
The coalminers who have been made redundant in their thousands are not concerned with these academic third-rate lectures on management. They are concerned with the realities of industry, and the reality of capitalism which does not give a damn about humanity, but thinks only in terms of profitability, balance sheets, and narrow industrial accountants' efficiency. What we are concerned with in this debate is people, the economic life of the nation, flesh and blood; not statistics, not balance sheets, but people.
It is all right for the Under-Secretary of State to giggle when people talk about A.E.I., but the fact is that 10,000 people in my borough went unemployed. I defended the Government's policy then, because I said that it was right that we should shift industry to Durham, to Scotland, to Yorkshire and to Lancashire where there was unemployment. That is what we mean by economic intervention. We are talking about people. We 395 are talking about areas such as South Wales—[Interruption.] The hon. Gentleman knows damned well that the situation is now quite different.
§ Mr. Hamling
The hon. Gentleman was talking about management and about capital. He never once mentioned humanity. He never once mentioned the question of the location of industry. He never once talked about the philosophy behind industry. He talked only in accountants' terms, and in management consultants' terms.
§ The Under-Secretary of State for Trade and Industry (Mr. Nicholas Ridley)
Is not the hon. Gentleman choosing a rather unfortunate analogy in talking about the coalminer whose pit has been closed? He may have heard that the coal mines had been nationalised and were not operating under a capitalist system at all. Might not the truth be that industrial change and innovation are always painful, whether in a capitalist or a State-owned industry?
§ Mr. Hamling
The hon. Gentleman has made a smart debating point worthy of the Cambridge or Oxford Union, but it is only a smart debating point, and I shall tell him why. I know the hon. Gentleman's industrial experience. I know his industrial background. Certainly there has been redundancy in a nationalised industry. My hon. Friend the Member for Chester-le-Street (Mr. Pentland) could go to the Tea Room with the hon. Gentleman and tell him the reality of the difference between the concern shown for people by private ownership and capitalism and that shown by a nationalised industry. I have been down a pit in my hon. Friend's constituency.
§ Mr. Hamling
I am responding to interventions from a seated position.
I know that under the Labour Government there was intervention to protect the lives of industrial workers. What is the philosophy of the Bill? Perhaps I may now come back to the Bill, which we seem to have forgotten. We heard in a two-sentence peroration what the Bill is all about. We had a long speech from the Secretary of State saying what the Bill was going to do. We did not know why, until the last two sentences. What is the philosophy of the Bill? It is that we shall not intervene, that we shall allow industry to be competitive. But when we say that, we are not talking about allowing industry to be competitive. What we are saying is that we shall allow the lives of the people of this country to be determined entirely by industrial and economic competition. There is no question of human welfare, and that was our indictment of the Government about 30 years ago.
I am old enough to remember some of the economic discussions of 35 and 40 years ago. I took part in them. I come from Lancashire, although I represent a London seat—[Interruption.] I hope that the hon. Gentleman who said that will get up and identify himself, if he has the courage to do so. Apparently he has not, so I shall tell him something about unemployment in Lancashire.
§ Mr. Peter Rost (Derbyshire, South-East)
Perhaps the hon. Gentleman would tell us something about the I.R.C.
§ Mr. Hamling
That is a very smart intervention. I am telling the hon. Gentleman the economic philosophy behind what the right hon. Gentleman was saying. The hon. Gentleman can go upstairs and read the last two sentences of the Minister's speech in order to remind himself what this is all about. The Government's philosophy is to have a policy of non-intervention. They have a policy of letting the weak go to the wall, and 397 of rewarding success. That is what it means. They have a policy of abandoning the failures. When we talk about abandoning failures, we are not talking about pieces of machinery. We are talking about people. We are talking about firms in which men and women have invested, not just five bob or so many pounds, but their lives, and the future of their families. That is what we are talking about in the Bill. Let us have no more smart debating tactics and no more Smart-Alec interventions.
I mentioned A.E.I. in which 10,000 families were affected by the closure. The hon. Member for the Cities of London and Westminster talked as though mergers took place only as a result of the I.R.C. What was significant about the I.R.C. and about the Labour Government's policy in relation to mergers was that for the first time we began to ask questions about the welfare of the people concerned. I was very much concerned with that. My right hon. Friend talked about consulting the trade unions. We consulted not only the trade unions in Woolwich but the chamber of commerce and the borough council. We had a town meeting about it, at which all these human questions were discussed. We set up a special staff to find work for the men and women displaced, and of course we had the redundancy payments scheme. No doubt that was, as it were, rewarding failure, but we were dealing with people, and that is the difference between the two sides of the House.
There were mergers long before the I.R.C., and there will be mergers under the present Government—and what human guarantees will there be then? Will the trade unions be consulted? We know how little they have been consulted recently. We have learned recently how little the Opposition were consulted, so God knows what will happen to the poor souls who will be faced with mergers in future under this Government.
Let us put the Bill in its right perspective. What worries me is the blind working out of economic forces which take no note of human frailty and weakness, which in the long run might bring economic and financial success and perhaps human welfare—and how many people will have died and starved in the meantime——
§ Mr. Hamling
It is all right the hon. Member being damned clever about this. We are talking about people who are unemployed, and in my family I have had experience of it. I am not talking theory in this. I am talking about the philosophy of this Government. Let the hon. Gentleman look at what his right hon. Friend has said, that they do not intend to intervene, that their economic philosophy is that, if firms are going bankrupt, they will go bankrupt—which will mean that men walk out of the front door unemployed.
§ Mr. Hamling
A damned smart debating point that is. That is brilliant—[HON. MEMBERS: "Answer."] Shut up and I will answer it——
§ Mr. Deputy Speaker (Sir Robert Grant-Ferris)
Order. We must remember that we are not in Committee. This is a Second Reading debate and we should carry it out with the utmost dignity.
§ Mr. Hamling
Maybe, but I am replying to an intervention, and I hope that I may be allowed to reply to one intervention without five others at the same time from seated Members.
The hon. Member must remember the economic context in which we are working. Let him remember the balance of payments surplus which we left his Front Bench, as against the economic problems which we faced.
§ Mr. Hamling
I am replying to the intervention of the hon. Member for Derbyshire, South-East (Mr. Rost). If the hon. Gentleman does not like it, he can get out: he does not have to listen.
§ Mr. James Hamilton (Bothwell)
The hon. Gentleman's question was a fair one and perhaps it should be answered by my hon. Friend. It is true that, under a Labour Government, many firms went bankrupt, but one can surely not blame 399 the Government's intervention or non-intervention for that. In many instances, surely one should blame bad management.
§ Mr. Hamling
My hon. Friend can no doubt get together with the hon. Gentleman and they can sort this out between them. I was just replying briefly to the intervention.
The Labour Government provided an enormous amount of financial assistance to firms to prevent them from going bankrupt, and a redundancy payments scheme which was the best that we have ever had in history. I am not sure whether that sort of economic intervention is welcomed by the Conservative Party. They believe in competition and in letting the weak go to the wall.
§ Mr. Norman Pentland (Chester-le-Street)
I agree entirely with the tone of my hon. Friend's speech to this point, but would he not also agree that the present Government are now advancing a philosophy of non-intervention, yet they intend to intervene to lop off the most profitable parts of the nationalised industries—the coal industry and the breweries—where thousands of men are employed, which will come back to management and men by discouraging the men in the industry which is left to the nationalised boards?
§ Mr. Hamling
Certainly, their intervention in wages illustrates the same point. That is a good intervention which I hope the Minister will deal with. If he does not believe in intervention there, why have interventions in wages?
The Bill is part of the reality of the Government's economic policy. They intend to free industry from Government intervention and to provide that the Government shall not intervene in the economic life of the nation, which shall be left to competition. This philosophy entirely omits the human element.
We saw this philosophy in operation 40 years ago. I was brought up in student debating societies debating the Conservative doctrine of non-intervention and we saw the results in Lancashire, Scotland and Wales. Do we want to go back to that kind of economic philosophy? Is that what the Government intend—to let bankruptcy take its course, to let the unemployment figures creep up?
400 Of course they are trying to conceal the reality of this policy. One significant thing is the attendance today as against the attendance yesterday. Today we are dealing with the reality of the Government's policies; yesterday we were dealing with a political myth, the Industrial Relations Bill. This is the reality: unemployment for the regions, more bankruptcies, a greater disparity of life between the various parts of the country. A policy of non-intervention will mean that the South-East, where I live, will prosper at the expense of South Wales, as the hon. Member for Barry (Mr. Gower) knows only too well.
§ Mr. Gower
Why does the hon. Gentleman distort this picture so tremendously? He knows that successive Governments of all parties have devoted a great deal of attention to evening out the harshness of failure in industry by instituting training schemes, by improving facilities for giving people benefits in unemployment and so on. Does he not accept that inefficiency in industry, in this country or any other, can help neither his party nor ours?
§ Mr. Hamling
I certainly take the hon. Gentleman's point, that successive Governments have intervened, but the present Government are different.
§ Mr. Hamling
It is no good the hon. Gentleman shaking his head. We are continually told that the present Government are different, that they are no longer a Butskellite Government, that we are getting away from a Government occupying the centre of the political spectrum, that the Government are abrasive and harsh, that we shall have the economic realities now, not the soft interventionist policies of previous Governments, whether Conservative or Labour.
The Secretary of State is a poor man's Powellite. He has not the guts to go all the way with the right hon. Member for Wolverhampton, South-West (Mr. Powell), but he is going part of the way, and eventually he will be forced, by the inevitability of his party's progression, to go all the way. The hon. Gentleman has been in Parliament a long time. Let him look at the political credentials of some of the bright characters who came in on the Government side at the last 401 election, the non-interventionists who believe in the harshness of the economic realities which the hon. Gentleman remembers when he was young and knows very well in his native South Wales. That is what the debate is about.
The Government's philosophy was contained in the last two sentences of the right hon. Gentleman's speech. Quite different from the days of Butler, Harold Macmillan and Heathcote Amory, these are the days of the realities of economics and of facing the facts. What facts? Not human facts but statistical facts.
Do the Government intend to let economic forces work regardless of the human consequences? Will they let the weakest firms go to the wall? Is their philosophy, "Make them lean and keep them keen"? What will the Government do about more bankruptcies, redundancies and unemployment? Will they assist the regions and maintain the regional policies about which the hon. Member for Barry has been talking? Will they assist industry or let it stand alone? We have not been told. The Bill provides only some of the answers.
In my part of the world we have increasing unemployment. From the figures given by one employment exchange in Erith, unemployment is already several times greater than it was a couple of years ago. It is rising. That is in the prosperous South-East. What will happen in Durham, South Wales, Scotland and Northern Ireland? I wonder what the hon. Member for Belfast, East (Mr. McMaster) will say in eighteen months time about the Government.
Do the Government want all industrial success to go to the South-East? Do they want it to polarise in the wealthy areas? Do they want to help the successful but not the unsuccessful? That is where the logic of the Government's philosophy will lead.
I said earlier that I came from Lancashire. I went to university because of unemployment. I could not get a job when I was 16. At that time there were over 100,000 unemployed in Liverpool. I stayed on at school until I was 18. I tried unsuccessfully to get a job again at that age, and I went to the university. All the time I was at university, the eldest boy in a working-class home, my father was on a means test. These are 402 the realities of this subject to people in the provinces. They are not statistics. They are not economic lectures but economic realities.
I left university in 1935, the eldest son in a poor family, and I had hopes of helping my family, who had helped me. Right hon. and hon. Gentlemen opposite know that I am not a bitter person or given to hatreds, and that I like life and enjoy it. I have had a happy life. I thought that I could make a contribution, but my mother died only three months after I left university. She had been worn out by bringing up a large family in poverty. We do not forget these things.
I ask the right hon. Gentleman to look again at the philosophy embodied in his peroration and to ask himself, honestly and sincerely, how different is this from the policies of despair which sacrificed thousands and thousands of lives in Lancashire, Yorkshire, Scotland, Northern Ireland, Wales and Durham 40 years ago. We on this side of the House say that this is what the right hon. Gentleman will be going back to if he is not careful. We regard the Bill as one instalment in the road back to ruin.
§ 6.55 p.m.
§ Mr. John Hannam (Exeter)
I am grateful indeed to have the opportunity of making a humble contribution to the debate on the Industry Bill.
As is the custom with maiden speeches. I shall endeavour to be brief and uncontroversial, but I crave the forgiveness of the House if I fail to tread that delicate path of uncontroversiality constantly throughout my speech. The rôle of Government in industry is a subject of such deep importance to me that I must declare a stand on one side or the other of the principles involved.
I have the honour of representing a West country constituency, the City of Exeter. It is not an industrial centre in terms of heavy manufacturing industry, but it is the true centre of the West region, with rapidly developing light industrial estates, sub-contracting out to the heavier Plymouth and North Devon manufacturing areas.
Since Roman days, Exeter has occupied a special place in British history, and today, with its beautiful cathedral, the River Exe, and its fine university—sitting 403 probably in one of the most impressive modern campuses in the country—we see the final stage being undertaken of the rebuilding of the city centre, which was so appallingly blasted in the Baedaker bombings of the war. I need not extol the virtues of this fine city, for so many hon. Members have felt unable to pass by or through my constituency without a pause of a few hours, usually spent in that well-known parking lay-by, the Exeter by-pass. Perhaps sadly, they will learn of the advent of the M5 motorway, which by 1975 will deprive them of such a haven of rest.
Exeter has been served by a long line of worthy Parliamentary representatives. Indeed, my immediate predecessor, a young lady from a talented political family, occupied a position in the previous Government. I have no doubt that her natural disappointment at being deprived of her seat was mollified slightly by the knowledge that the family flag would continue to fly so vigorously in the other place.
I am proud to serve such a fine constituency in the west region, which returned my namesake and ancestor for the constituency of Poole and Weymouth in the sixteenth century, although I fear that the absence of any record of his parliamentary activities probably accounts for the complete absence of further family politicians during the ensuing 300 years.
In taking part in the debate, I wish to represent the views of many people in my constituency and in the West Country. I am conscious in the House of the weight carried in industrial debates of this nature by contributions from Members representing industrial areas. Yet many problems facing the country manifest themselves most acutely in the regions, where we have higher-than-average unemployment and lower-than-average wage levels and growth. They are the keynotes of the present-day state of affairs.
In the South-West there has existed growing concern at the economic prospects for the region. In the public media and in major economic pronouncements, the emphasis is always laid on the major industrial companies. Yet I believe that it is only when British economic policy is directed at giving full and free rein to the 80 per cent. of 404 our industrial sector which is comprised of the smaller companies and businesses of around 500 to 1,000 employees that we shall see the vast backbone of the country developed, and the national growth which will bring us in line with our rivals in Europe and throughout the world.
I can fully understand the economic theorists leaping at the opportunity of having such toys as the Industrial Reorganisation Corporation with which to play around. A sum of £150 million and a free hand to pick and choose amongst the vast network of British industry—certainly a juicy prospect for the economic gourmet, and without a doubt one would have some degree of success in the financial manipulations engaged in.
Yet, in the wide perspective of overall economic policy, of what significance can such an interventionist body be? We have ploughed along, getting deeper and deeper into the mire of stagnation and "stop-go". Surely the lesson to be learned is that it is the very extravagance of such Government forays into the normal market which produces the escalation of Government spending which in itself is the main contributor to the shortage of continual investment which our industries need so desperately.
I recall making another maiden speech in proposing a motion at a party conference three years ago on trade and industry. At that time, I felt that there was a limited rôle for such a body as the I.R.C. to play in assisting and encouraging the restructuring of industry. But, at that time, there was not the evidence before us of the complete failure of such interventionist policies as that before us now, with the pile-up of company bankruptcies and liquidations due to the over-spending of the nation's assets by Governments.
So it is in the broad analysis of urgent and essential cut-backs in Government spending that I support the Bill. At a time when our hard-pressed old-age pensioners are desperately hoping for an increase in pensions and when our social services, housing and regional problems are at an acute crisis stage, such outlets for taxpayers' expenditure as this Corporation cannot be seriously supported. 405 The record of the I.R.C. is not all failure. Some of the 50 or more projects involving nearly 150 companies have produced successful mergers or avoided financial breakdowns. But I warrant that those very companies which have been bailed out by the I.R.C. are now in many instances back in the same situation as the many thousands of other businesses in the country.
We have as fine a market mechanism in the British financing sector as can be achieved anywhere in the world by any alternative means. What is needed for a good, long, stable period of time is sensible direction of our economic policies to allow the British worker, his management and his investors to balance their joint contributions towards the clear objectives of higher productivity, higher profits and, therefore, higher wages for all.
I suppose that, of all the I.R.C. ventures, the G.E.C.-A.E.I. takeover and the emergence of Sir Arnold Weinstock as the electrical manufacturing industry's catalyst-man was the most exciting. Yet, since then, profit per employee has dropped sharply and the return on capital has declined by over 4 per cent. In fact, of the biggest I.R.C. mergers, 10 have shown drops in capital return since 1967. Looking at the state of British industry in 1971, it is obvious that many of the so-called mergers that have taken place during the last few years in reality have been company liquidations.
The need now in British industry is for stability and growth backed by strong investment and liquidity. We do not need a further spate of mergers and takeovers. Therefore, I can see the I.R.C. continuing only as a kind of Government merchant bank. But how can one contemplate the amount of finance needed for that kind of operation, except in terms of £1,050 million rather than the £150 million that was allocated in 1966?
In some countries where the depth of merchant and investment banking is far less than in Britain, various different forms of restructuring banking organisations have been and are being tried. But they are very different from the I.R.C., and they contain large proportions of private capital. In this country, with such agencies as I.C.F.C. or the Finance Corporation for Industry, the means for 406 assisting in mergers or expansion schemes already operate most successfully and in an indiscriminatory fashion.
That leads me to my final objection which I have to this form of government intervention. It is that it is bound to be discriminatory. It has to be. Its funds are not the bottomless well that finances statutory grant schemes. As more money is poured into selected projects, so other less fortunate claimants face a diminishing money supply.
I return finally to my own region, where there is great support for the end to such discriminatory policies as S.E.T., selective grant systems and bodies like the I.R.C. I am sure that we shall experience a rebirth of confidence throughout industry and commerce in the regions when our whole economy is given the chance to expand under the more attractive but possibly less engaging policies of this Government.
§ 7.5 p.m.
§ Mr. Ted Leadbitter (The Hartlepools)
This is the second occasion on which I have had the honour and privilege to follow a maiden speaker. On the previous occasion, I sought to do what was best in accordance with the accepted courtesies of the House and, as a result, I was as nervous as when I made my own maiden speech.
It is proper that I should congratulate the hon. Member for Exeter (Mr. John Hannam) on making an exceptionally well-balanced speech in which he brought out several points of importance without becoming too controversial and succeeded in demonstrating that he has the mark of an exceptionally forceful and forthright debater. I hope that his constituents will receive a good report of the hon. Gentleman's initiation and acceptance in this House, the finest place in the democracies of the world.
I hope that what I have said to the hon. Gentleman in all sincerity will in no way be diminished if I go on to refer to his predecessor. Mrs. Gwyneth Dun-woody served this House exceptionally well. If the hon. Gentleman continues her diligent work, he will serve his constituency to the full and gain that satisfaction which comes to us all when we have done a good job. As a junior Minister, moreover, Mrs. Dunwoody took 407 a great interest in the regional development areas, especially those of the Northern region.
Having said that, I must now turn to more controversial matters and indicate to the hon. Member for Exeter the varied opinions and emotions likely to be expressed in this House. However, the hon. Gentleman must appreciate that, while we have controversy in this Chamber, that does not mean that we sulk when we get outside it. I will refer with some pertinence to our new Secretary of State presently. But, before I do that, and having wished the hon. Member for Exeter the best of good fortune, I must refer to the hon. Member for Kensington, South (Sir B. Rhys Williams), who detained us for almost half an hour with the most rambling, woolly speech that I have heard for many years. It was punctuated with antiquated, doctrinaire nonsense. Hon. Members listening to him were kept above the level of boredom only by the anticipation that he would make at least some reference to the Bill. Unfortunately, he did not. I am sure that the Secretary of State would have been interested to learn that, in his absence from the Chamber, one of his hon. Friends on the back benches had said something useful about the Bill.
No backbencher can find any justification for the Bill. The Secretary of State has not received from industry or any other source information about finance or about results to persuade him to introduce the Bill. Nor could he have had information to persuade him to get rid of the pertinent parts of the Industrial Expansion Act. Nor can the Opposition charge him with helping his party's friends who filled the Conservative coffers before the election. It is an embarrassing situation. Is the Bill before the House purely because of a political obsession that anything that the Labour Government did to improve industry has to be wiped away? Is it a corollary of the Prime Minister's wishing to create the image of being a strong man that this completely independent body which is accepted by industrialists should have to go by the board?
§ Mr. Eddie Griffiths
I remind my hon. Friend that one notable absentee from the Government side of the House is 408 the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn), who is usually in his place when industry is being debated. He is a big industrialist in Sheffield and he could have told us at first hand how Osborn's of Sheffield, with which he is closely associated, received £750,000 from the I.R.C.
§ Mr. Leadbitter
My hon. Friend in his second intervention in the debate has put his finger on the pulse of this problem. The policies propounded by Ministers show a lack of consistency. The philosophy of non-intervention conflicts with the philosophy of intervention only in disputes with trade unionists. My hon. Friend the Member for Sheffield, Brightside (Mr. Eddie Griffiths) has mentioned another contradiction which betrays a lack of good faith by the Government.
Will the Secretary of State tell us what representations were made to him by industrialists. He must not be afraid to do so. After all, he is the child of the C.B.I.—not particularly successful at that, but nevertheless he was in the club. Upon what criteria did the Secretary of State decide upon this policy of bringing the I.R.C. and the pertinent parts of the Industrial Expansion Act to an end? On what financial argument did he come to this conclusion? I have read the reports of the I.R.C., of which there are three. One of the financial obligations of the I.R.C. was to invest on commercial terms which at the end of the day would not cost the country a penny piece. The reports show that £130 million has already been invested, and that no "soft" money is provided. Money is never used to help industry unless it is shown to be needed.
The Secretary of State must not try to get away with it by persuading those who are naïve, or who have not had time to examine what he says, with the necessary care, that the I.R.C. was politically motivated. The first chairman, the then Sir Frank Kearton, the second chairman, Sir Joseph Lockwood, were businessmen, as were the members of the board, and the trade union representative, Les Cannon, has already been mentioned. The industrial judgment and actions of these men were completely free.
If the House has been led to believe that the Opposition are convinced that there is a finality about any solution to 409 our economic problems and that because we set up the I.R.C. and the Industrial Expansion Act those measures must remain for ever, let me dissuade them. We have no objection to continuous scrutiny by the legislature and the executive of these measures and their relevance in changing circumstances. There may be a need to change the rôle of the I.R.C. so that it is up to date and able to deal with changing conditions. We want no finality. We need resilience in dealing with our economic affairs. Good arguments can always be advanced for reviewing and reforming, but here the Secretary of State just shrugs it off, and we have to listen to the hon. Member for Kensington, South saying that the greatest difficulties in the management of industry are caused by the changing financial policies of Governments.
Every time a member of the Government opens his mouth there is trouble. From the moment when the Prime Minister mounted the step of 10 Downing Street and talked about "one nation" we have had disintegration and division nationally which, unless it stops, will cause chaos. From the moment he received the adoration of those lovely ladies in the conference hall at Blackpool in reply to his speech about lame ducks, the Secretary of State has not done a single thing to bring credit to the country. He and his colleagues must rid themselves of political prejudice and realise that the days of laissez faire and of the entrepreneur are gone. They must realise that in a highly competitive world the national interest is best served by the full use of the country's resources. Where laissez faire and private enterprise fall short, as they did in the development areas, Government interest and encouragement can persuade industry to redeploy its activities so that material and money can be put to the best national use. Unless the right hon. Gentleman comes round to thinking along these lines, as sure as his name is what it is, he will leave office with any ambitions he ever had completely unfulfilled.
The White Paper of January, 1966, made clear the terms of reference of the I.R.C. It was emphasised that there was need for more concentration and rationalisation to promote the greater efficiency of British industry, and that the changes hitherto had not matched the 410 economic requirements. Excluding the substantial balance of payments surplus that the Government inherited, we have had two visible balance of payments surpluses this century. Before that, our only visible balance of payments surplus was in 1822. As the momentum of world activity gathered speed there was a crying need for this country to give guidance on marketing. A large part of our industrial activity was geared to the domestic market, the soft market. We had not got round to boosting exports.
Last year I was the Chairman of a Sub-Committee of the Estimates Committee which dealt with exports, and one figure from the report which I gave to the House will tell the tale. In that year this country earned £10,000 million in foreign earnings, and that is more per head of the population than was earned by any other country in the world, including America. The I.R.C. and the Industrial Expansion Acts existed then and that result was influenced also by many measures brought in by the Labour Government. Hon. and right hon. Gentlemen opposite cannot say that the actions of the Labour Government were not successful.
One thing is certain. If there had not been a Labour Government in 1964– and the policies of the Conservatives had been pursued, we would merely have had a further projection of the £800 million deficit which the Conservative Government left behind in 1964.
§ Mr. Anthony Fell(Yarmouth)indicated dissent.
§ Mr. Leadbitter
The hon. Member for Yarmouth (Mr. Fell) and I got to know each other quite well in the 1964–66 Parliament. He has been away for a while. I had hoped that he had mended his ways. He must respond to a reasonable statement even if it comes from this side of the House. He must recognise the truth. The fact is that the Conservative Government left the country in a mess in 1964. The present Government have inherited a surplus but, through stupidity, lack of policy and inability to think out the proper rôle of government, we are getting to a situation where that surplus will be dissipated, and the day will come when we shall have to take over and do the job all over again. 411 The I.R.C. had two principal objectives. They were… promoting or assisting the reorganisation or development of an industry and establishing or developing, or promoting the establishment or development of, any industrial enterprise. …The first job was to gain the confidence of industry, and it succeeded in doing so. It had a remarkably small staff, and in the three years requests were made to it which brought it into practically every facet of every main economic activity of the country. There was the G.E.C.-A.E.I. merger; there was the work in textiles, mechanics, steel, nuclear power—indeed, over a very wide range of industrial activity. I am proud to say—I had a fight about it—that my constituency has the only nuclear power station in the world which is in the middle of a population. It was produced by the British Nuclear Design Company. The other big nuclear power enterprise is the Nuclear Power Group. Both these enterprises were created under Ministerial guidance and advice from my right hon. Friend as Minister of Technology and with the support of the I.R.C. The Secretary of State must know the long list of achievements by the I.R.C.
I have now dealt with the objectives and the functional tasks of the I.R.C., its independence and its lack of veto from the Government. I want to conclude my speech by dealing with the development areas. I come from an area which has had such a long history of neglect that it appalls me that, even now, a Conservative Government can be so indifferent. One would have thought that, for political reasons, if nothing else, they would like to make some gains in the northern area, where they have failed to make any mark except at the mouth of the Tyne.
Under the Labour Government, the Northern Region was enjoying Government aid to the extent of £300 million. It had as much as £50 million a year for road construction where no motorways were ever built under the Conservative Government. Another £163 million was produced for industrial attraction. A further £43 million was produced for reconstruction work. We had the regional employment premium. Sir John Hunter knows of that aid. He got some good buys out of the Labour Government. I 412 do not think that he will stretch friendship with the Conservative Party too far. Even if his political philosophy is not ours, he knows that the Labour Government played the game with the Tyne, with Palmer's Yard and the rest. But all the Secretary of State can do is sit in his office in a great big ivory tower looking nice and indifferent.
We have already lost a lot of that aid. Since the present Government took office, inquiries for industrial development in the Northern Region have fallen off. Under the Labour Government, the Hartlepools, which is the most beautiful part of the United Kingdom, succeeded in getting some 30 new industries and extensions to existing ones, with 4,000 new jobs. Everything was going fine until this crowd came along. We have not had an inquiry for months.
We still have unemployment there. I still have to fight for the unemployed and I will continue to do so. The Secretary of State must wake up because, somehow or other, he must learn. When I was a young parliamentary prospective candidate, I was once told, "Do not fight for new industries because we have a lot of unemployment and you will get elected." I replied, "What kind of foreign language is that?" If the Secretary of State would stop his nonsense and get some industries into my area and the Northern Region generally, would give us our aid back, I would be as grateful to him as to a Labour Minister. I do not care where aid comes from, as long as it comes from right thinking.
Now, apart from losing that aid, we are losing the excellent offices of the I.R.C. We are also losing a pertinent part of our assistance under the provisions of the Industrial Expansion Act. If it was possible to get 116,000 new jobs in the Northern Region in the six years of Labour Government, with the level of aid they provided, with the I.R.C. and with the Industrial Expansion Act, was it not likely that, with the continuance of such help, we would have got the 281,000 jobs we need by 1981 to make the region viable? If it was likely, why change it? The corollary of that is to remove the aid, the investment grants, the I.R.C. and the Industrial Expansion Act. Does the right hon. Gentleman really believe that, voluntarily, industrialists will go into the Northern Region? If he thinks that, how does he arrive at such a conclusion? 413 It did not happen when the present Prime Minister was Secretary of State for Industry, Trade and Regional Development. The only new thing which happened then in my region was that he came to Durham Cathedral to play the organ. He got a free lunch out of my council. I resented it. The ratepayers had to pay for it.
Those last remarks have been flippant, but this is a very serious question. My hon. Friend the Member for Woolwich, West (Mr. Hamling) talked about people. Some of us can mix practice and theory to substantiate the truth of an argument. My hon. Friend talked about practice in the most heart-warming way I have heard for a long time in this House and of how it affects people. I have put other arguments complementary to his.
Can the Secretary of State honestly say to my people, to the people in Wales, on Merseyside, in Northern Ireland and Scotland, that a withdrawal of all this aid, help and advice will bring the same levels of new industrial development as we have enjoyed in the last six years, or that it will bring more, or that, as I believe, it will bring less? On what grounds will he arrive at his answer? He must not forget that the answer given tonight, if we get one at all, will be remembered every day he is in office.
For the right hon. Gentleman, the halcyon days of the Tory Party conference are over. As my hon. Friend said, the right hon. Gentleman must face realities. There is no need to withdraw the I.R.C. and the Industrial Expansion Act. I have charged him with questions which are important and I hope that, for once, he has the guts to get away from generalities and to be specific.
§ 7.36 p.m.
§ Mr. Tom Boardman (Leicester, South-West)
It is a unique experience for me to be able to start with one note of agreement with the hon. Member for Hartlepools (Mr. Leadbitter). He paid tribute to my hon. Friend, the Member for Exeter (Mr. John Hannam) for his maiden speech, and I endorse everything he said about it and add my congratulations. But from that moment onwards I could find no common ground with the hon. Gentleman. I wondered whether he and the hon. Member for Woolwich, West 414 (Mr. Hamling) were talking about the Bill we are debating.
I have heard the heat and passion and emotion engendered by both hon. Members from time to time. It is something they turn on on practically every occasion. I have the history of the hon. Member for Woolwich, West engrained on my mind and memory and have witnessed the thumping and emotive appeal so eloquently made by the hon. Member for Hartlepools. But the relevance of their speeches to the Bill escapes me.
The hon. Member for Woolwich, West talked about death resulting from the Bill. The hon. Member for Hartlepools devoted the last 15 minutes of what must have been a speech lasting 1¼ hours—perhaps it was not that long, but it felt like it—talking about a motorway in some part of the country which I should know but do not. I can see no connection between that and the Bill.
At times I also wondered whether the right hon. Member for Bristol, South-East (Mr. Benn) was talking the same language as he talked when the I.R.C. and the Industrial Expansion Act were introduced by the Labour Government. The motive seems to have changed. He started with his usual attack upon managements. If managements paid any weight to his words—and fortunately they know him by now fairly well—they would suffer an inferiority complex, because he never fails to have a go at them. He knows, as we all know, that there are bad managements, indifferent managements, good and very good managements in this country, but that by and large our managements are better than in any other country in the world. It is time that hon. Gentlemen opposite stopped knocking management and began praising it, because it comes ill from them constantly to attack it in this way.
§ Mr. Benn
I am sure that the hon. Gentleman wishes to be fair. I was saying that the problems of competitiveness were the problems of management and that the I.R.C. had identified poor management as one of the major barriers in the areas where it was operating. Considering what the hon. Gentleman regularly says about the trade unions, he should not be worried when we point out that there is bad management in 415 certain areas, though my hon. Friends and I regularly pay tribute to good management.
§ Mr. Boardman
I do not wish to misrepresent the right hon. Gentleman and I hope that he accepts that the average management in Britain is unequalled anywhere in the world.
§ Mr. Lawson
Everyone agrees that this country has been towards the bottom of the industrial league for half a century. We have been dropping behind one country after another. The onus for taking decisions and guiding industrial policy at present rests with the Conservatives. Considering the history of this matter, how can the hon. Gentleman say that we have had efficient management?
§ Mr. Boardman
The hon. Gentleman is wrong in saying that we have been dropping behind for the last 50 years. He is also wrong to put the blame for the recent decline solely on management. There is good, bad and indifferent management. We have our fair share of good and very good management. We should be proud of that body of people and encourage the bad and poor to come up to the standard of the best. However, I did not intend to get involved in a management exercise and I will leave the matter there.
The right hon. Member for Bristol, South-East then prayed in aid in support of the Act which we are repealing some peculiar instances. He said that one motive was to keep the Rootes Company British. He referred to the number of Ford factories in this country and then said that about Rootes.
§ Mr. Boardman
I seem to recollect him saying that one of the objectives was to prevent the loss of the whole of the Rootes Company to America.
§ Mr. Boardman
The right hon. Gentleman went on to refer to British Leyland as something of a success story. While recognising the difficulties that that company has been having, one must praise it for the way it has been tackling them. I endorse what my hon. Friend the Member for Cities of London and Westminster (Mr. Tugendhat) said in his excellent maiden speech. I do not think that the injection of money into British Leyland can be put forward as a strong justification for the I.R.C.
Nor can one say that the G.E.C.-A.E.I.-English Electric merger was a great success story. One might ask whether Sir Arnold Weinstock would not have done better without the I.R.C. being in the field. The right hon. Gentleman then quoted the case of Skefco, a rather unusual one to mention in justification of the I.R.C. When challenged on this point by my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) he ran for cover and said that he could not speak for the I.R.C., and the matter was left there.
The right hon. Gentleman then moved to the other motive which, in his view, would justify the existence of the I.R.C. I refer to the support that it had given to regional policy. Indeed, the hon. Member for Woolwich, West made some play about this. Are they aware that when the original Acts were introduced they were never said to be weapons for regional policy? Nowhere at that time was it said that those Measures would give authority for public funds to be used for this purpose. At the time they were said to be designed to make for greater industrial efficiency, but they were certainly not put forward primarily as weapons for the development of regional policy.
It is wrong now for hon. Gentlemen opposite to say that it does not matter whether or not the I.R.C. has increased industrial efficiency—the right hon. Gentleman did not say this, but one must consider the argument as a whole—because regional policy is a justification for the Acts being retained. Aid for the regions is certainly the responsibility of the Government, but it is not our purpose tonight to discuss aid generally or the variations that might be made in the giving of aid.
It is clear that the appropriate method for giving aid to the regions is not through 417 Acts intended to provide funds for the promotion of mergers and to increase industrial efficiency. If aid is necessary to the regions—it is, and it is being given —let it be allocated and approved in the right way.
§ Mr. Douglas
The hon. Gentleman is confusing two issues. First, there is an element of aid which might be called comprehensive. Secondly, if he examines industry in the regions he will find that a great deal of restructuring is necessary. How can that take place without financial aid being given to the firms and industries concerned?
§ Mr. Boardman
I must not digress into the whole question of regional policy. I would soon be called to order if I did. Hon. Gentlemen opposite cannot have it both ways. They cannot argue, on the one hand, that it has or has not been a success in promoting industrial efficiency, and then go on to argue, on the other, that in any case the I.R.C. has done something for the regions. In fact, what it has done for the regions is questionable because, as my hon. Friend the Member for Bolton, West (Mr. Redmond) said in an intervention, the regional aid given by one I.R.C. subvention resulted in much unemployment in the Liverpool area.
The right hon. Member for Bristol, South-East went on to suggest that I.R.C. investment could be justified because it secured the proper vetting of management. It is important to see that those who provide the capital for industry take an active interest in how it is looked after. This is a rôle undertaken by those who put new capital into any industry. The comparison the right hon. Gentleman the Member for Bristol, South-East was making was between the inactivity of existing shareholders and the interest which a new investor, be it the I.R.C. or anyone else, takes before putting money in. The comparison that should be made is between the interest taken by the I.R.C. in putting new money into a venture and the interest that would be taken by a merchant bank or anyone else subscribing new capital to a venture. They would make sure, as would the I.R.C., that the management was good.
The lack of interest displayed by many present shareholders in a company is a different subject. I hope that it is some- 418 thing that will be pursued by my hon. Friend and that he will consider how to create further interest. To put forward, as a justification for the retention of the I.R.C., the suggestion that it provides machinery for vetting management just does not stand up. The private investor or the merchant bank putting up new capital, will have a greater incentive to vet management than the person putting up public funds. In saying that I would not dream of casting doubts upon those engaged in the I.R.C. or of making any criticisms of them. As has been said, they were men of integrity, quality and ability and I make no criticism of them. It is the system that I criticise.
The right hon. Gentleman put forward as a further justification for the retention of the I.R.C. the suggestion that it provided a link between the T.U.C. and the Government—again I paraphrase. What a devious route. To ensure that government can have some form of contact with the T.U.C. have we to set up a great corporation, put £150 million into it, allow it to invest that money into enterprises which are failures—because it is only if they fail that this form of consultation arises over the question of redundancy and relief? Such a circuitous route is said to be for the purpose of ensuring that the Government have a closer link with the T.U.C.
§ Mr. Bennindicated dissent.
§ Mr. Boardman
The right hon. Gentleman shakes his head but I find it difficult to follow how he could claim such a link as the justification for the I.R.C. The right hon. Gentleman said that competition is not the answer in the modern world. I am sure that the Under-Secretary to whom that remark was addressed will relish the opportunity of replying to it. Competition may be imperfect, no one thinks otherwise, but no better way has yet been found.
§ Mr. Douglasrose——
§ Mr. Boardman
I am sure that the hon. Gentleman will not produce a solution by the short intervention he wishes to make. If he has an alternative which will work I would suggest that he puts it forward to his Front Bench and they will no doubt launch it. If competition is not the complete answer, subsidising failure obviously is not. The record of 419 the I.R.C. has been pointed very much in the direction of subsidising failures.
§ Mr. Boardman
One of the purposes was to enable companies—[Interruption.] —the right hon. Gentleman and hon. Gentlemen opposite, when they touched upon the Bill at all, suggested that it was necessary and right that in certain circumstances, where private capital could not be found and where a business would otherwise go down, the Government should have some means of coming to the rescue.
§ Mr. Boardman
This is the inference. I will come to the question of Rolls-Royce. The I.R.C. is not the vehicle by which such operations should be launched. As I understand the argument from the Opposition it is that we should have this Corporation so that various lame ducks and so on which arise could be supported and propped up.
§ Mr. Ray Carter (Birmingham, Northfield)
Would the hon. Gentleman not agree that quite apart from the economic issues involved over the I.R.C. there are social implications? He mentioned British Leyland earlier, which went £8 million in the red. There is a factory in my constituency belonging to that firm, which employs 25,000 people. Is the hon. Gentleman saying that the Conservative Government, given that same situation, would do absolutely nothing in terms of Government aid?
§ Mr. Boardman
Of course there are social implications in these matters and of course they are recognised on this side of the House as deeply as they are opposite. We do not need emotive speeches such as we had from the hon. Member for Woolwich, West and the hon. Member for The Hartlepools. We need no reminding of our social obligations and the fact that business is made up of human beings who count. They count just as much on this side of the House as on the other.
The tool which must be used to reach a decision about rescuing an industry is not the subject of this debate. My argument is that there are operations when the Government cannot stand aside and 420 do nothing. Rolls-Royce was a case in point. If those cases do arise they should be dealt with before this House, and not done through the delegation of large funds to a separate body such as the I.R.C. Let this House decide whether there is a case for public funds to be used to be used in a rescue operation.
The other purpose of the I.R.C. was procuring marriages. I have never felt happy that marriages, in the industrial sense or perhaps the human sense, should be brought about by an offer of a large dowry. I do not believe that they will necessarily be the happiest marriages. There was that influence to bring together two companies by the promise of funds to sweeten their bridal bed, and marriages were secured in that way. But however successful that may be in getting Companies A and B into the same bed, what about poor old Company C? It is the discriminatory effect of this type of aid that is so objectionable. Neither Company A nor Company B may be very efficient, but they may become efficient when put together. But they are being put together out of funds supplied by Company C and set up in competition with it. That form of selectivity and discrimination is wrong.
What will not happen without I.R.C. that could happen with it? There may be companies unable to raise capital in the market that would have been able to go to I.R.C. for it. But should companies that cannot raise capital in the market be able to raise it out of public funds? Why cannot they raise it? Is it because they are not viable? If so, should the public subsidise such companies? Should we in this House subsidise businesses that are not viable, are inefficient, or have inadequate management?
§ Mr. Boardman
Some mergers may not take place that would have occurred if the dowry had been available to get the two partners together. If so, are the country or the companies concerned necessarily worse off? Mergers that make industrial sense and are necessary will come about in due course. Whilst they might come about quicker sometimes if there is the dowry, putting them together against their real inclination will lead to 421 many mis-marriages and financial bad judgment.
There is plenty of scope in the City. After all, we are the leading financial city in the world. The City has the institutions and men with the skills, and we have the resources in this country to fulfil this rôle. It is not one that should be fulfilled by Government.
The passion generated by hon. Members opposite would have been more appropriate if the Government were introducing a Bill proposing that £150 million of public money should be made available. I could perhaps then have understood the emotive sounds from Labour Members. They would have said, "You are taxing the worker and the widow to provide cash to feed the inefficient in industry". But we are doing quite the reverse. We are saying that public funds will not be provided. Yet we have the same emotive sounds from Labour Members.
There will be some who like cheap money to prop them up. They will mourn the passing of the I.R.C., but I believe that the vast majority, and those who pay the bill, will, like me, welcome it.
§ 8.4 p.m.
§ Mr. Arthur Palmer (Bristol, Central)
The hon. Member for Leicester, South-West (Mr. Tom Boardman) was a little too sensitive about managers in British industry. It is true that there are good managers and bad. One would not know anything about the bad managers unless one had met the good managers. Managers are responsible for the running of industry. They often wish to he. It is their career, and therefore they must take the responsibility.
Napoleon had some experience of management, military management at any rate, though he ended up with a rather small institution: It was he who said that there were no bad troops, only bad officers. That is a fact of life if one takes on responsibility. The hon. Gentleman must not get quite so sensitive if occasionally we on this side say that British management could be improved. He said that perhaps we were not paying enough attention to the Bill. I should like to deal with that criticism and to say why I think it is a bad Bill.
422 My hon. Friend the Member for The Hartlepools (Mr. Leadbitter) who, as usual, made an eloquent speech, was a little unfair on the hon. Member for Kensington, South (Sir B. Rhys Williams). It is true that the hon. Gentleman's speech was obscure. I had some difficulty in understanding it, but there were one or two flashes of illumination, and when the light came I made a note. The hon. Gentleman said that it would be a good thing for British industry if there were greater continuity of public industrial policy, presumably between Administrations. He thought that so much uncertainty and change was generally bad for industry. That is precisely why I think that the Bill is bad. It breaks the continuity of political-industrial development.
I am sad about the Bill, because it marks the end, I hope temporarily, of an era. It was an era when there was a genuine attempt by Government, industry —both public and private, trade unions, management, and hon. Members on both sides of the House, often working through Select Committees such as the Select Committee on Nationalised Industries and the Select Committee on Science and Technology, to understand each other rather better and to introduce practical policies for improving the efficiency of British industry.
To me the I.R.C., with all its imperfections, was a symbol of that new era, which started in 1964. I am not anxious to make any party point about it though that is the era which is now under criticism. It is a great loss to the country that it has apparently temporarily come to an end.
My interest in industry is that of someone with some experience of management, but primarily as an engineer. Engineers are not always regarded by accountants as very good managers. I am also a Socialist with a Socialist's philosophy of industry. I should hardly have thought that the I.R.C. was a very powerful instrument of socialisation, though it was often represented as such by Conservative Members, particularly at their party conferences.
When we discussed the Atomic Energy Bill recently and I complained about the failure of my right hon. Friend the Member for Bristol, South-East (Mr. Benn) to carry through a fundamental 423 and necessary reorganisation of the whole nuclear reactor industry, he said in his defence, I think reasonably, that the Ministry of Technology, working through instruments like the I.R.C. and the Industrial Expansion Act, tried to do everything by consent. That was broadly true of the I.R.C. It has not been alleged in the debate that the I.R.C. imposed its will. I have read through the three Reports it issued in its short life. The 1970 Report talks of the relationship of trust built up with the private industrial sector over the previous 2½ years. Therefore, it seems to me that the whole work and interest of the Corporation in industrial questions was sensible, cautious, and on the whole, as far as I can judge, necessary.
The hon. Member for Leicester, South-West seemed to say that the record of the I.R.C., in spite of the great ability of those running it, to which he paid tribute, was one of failure. Studying some of the mergers, amalgamations and rationalisations it brought about, as far as it is possible for anyone outside to study them, I believe that quite a number were a considerable success, and they probably would not have come about at all but for the I.R.C.'s initiative.
§ Mr. Tom Boardman
What I should perhaps more accurately have said is that I would not call it a great success story upon which a merchant bank or similar body would go to town.
§ Mr. Palmer
But surely it is a criticism made not only by those who take my political point of view but by many others that the merchant banking system in this country is not perfect and does not always provide at every stage the capital for necessary expansion or mergers of enterprises which time proves was necessary, or for a change which time proves was necessary, and that there is a gap in our financial arrangements. The I.R.C. was surely trying to fill that gap.
Anyway, the I.R.C. is now to stop and we must all ask, "Why does it have to come to an end?" No doubt the Minister who is to reply will try to answer that question. His right hon. Friend the Secretary of State gave no convincing answer this afternoon, except that the Conservative Party did not particularly like the I.R.C.
424 The I.R.C. is to come to an end almost entirely because right hon. and hon. Members opposite have a theory about what should be the nature of industry, because they have a certain special view of industry. My hon. Friend the Member for Edmonton (Mr. Albu) said that it was not classical benevolent Conservatism of the type that we once knew. I think that he said that its origins went back to cobdenite liberalism. I do not think that its ancestry is as long or respectable. I think that we are dealing with what I hope will be a passing phase. It is a kind of new, not very pleasant——
§ Mr. Palmer
Yes, reaction if you wish. It is the economic wind of the radical right that is being wafted across the Atlantic. One can find people in the Republican party who talk like this. This theory is based on a radical anti-state view of society which it is thought will succeed here where in their view social democracy and its interventionist policies have failed.
If this view of society is injected into industry, it does not appear to matter whether or not it fits the facts. The facts must be bent to fit the theory. This is a novel approach when one remembers that the strength of the Conservative Party in this country has been—and this is perhaps why they have been so difficult to defeat—in the pragmatic and empirical approach. The new theory is absolute and anything that is untidy and spoils the ideal picture must go. Therefore, out goes the National Board for Prices and Incomes. One could look ahead, if that were in order, and I know that it is not, to see what the result will be in practice. We can see a little of it in the terms of reference of the Wilberforce Inquiry. However, I move away from that matter very quickly.
Anything done by a nationalised industry which is not a part of its fundamental task as defined according to the theory must go. In the electricity supply industry I understand that it is talked about doing away with things that have been done since the foundation of the industry long before it was nationalised. This is where the application of hard, rigid, theory leads. Today the victim is the I.R.C. which has, so far as I know, committed no crime, and the indictment against it 425 has contained nothing. The I.R.C. has done some good admittedly say the theorists, but the point is that it was brought in by a Labour Government; it is a social democratic institution, and therefore must be scrapped.
During the last Parliament I was Chairman of the Select Committee on Science and Technology which carried out two investigations into the reorganisation of the Nuclear Reactor industry. We heard evidence from Mr. Charles Villiers and he and others from the I.R.C. answered a number of penetrating questions. This gave the House an accountability and a look at that particular reorganisation through the medium of the I.R.C. I have never known that to take place before.
I thought that the work of reorganising the nuclear reactor industry was given to I.R.C. mistakenly and I have challenged that reference. I thought there was a powerful case for the Minister to act independently. Nobody is suggesting that the I.R.C. was necessarily the right instrument, and I thought that it tended to lean too much towards the private companies involved in the reorganisation and did not pay sufficient attention to the great contribution which the Atomic Energy Commission made. However, no one could doubt the quality of the technical work done by the Corporation, certainly not the big electrical manufacturing companies involved. Therefore, I ask the Government to say exactly what the I.R.C. did wrong.
I would ask the Government what is to happen now. What new radical solution for the often low productivity and poor management of part of industry have the Government to offer? The hon. Member for Leicester, South-West took refuge in the phrase "competition" and when challenged said that there was nothing better—and that is all he said. I have never been taken in by this glib gospel about competition and market forces. There must, of course, be competition in life, and indeed there is competition among hon. Members in this House for the opportunity to speak. Nobody is speaking against competition in the practical human sense. But when people talk about competition and market forces, I often wonder whether they know what they are saying.
426 I came into politics in the late 1930's. Then, presumably, market forces were working about as freely as they have ever worked in my time. What sort of economic system were they producing then? If competition of that kind is the best the world can offer, all I can say is that people are easily satisfied. All postwar experience in British industry shows that British private industry, when left to itself, does not change fast enough under the influence of market forces, as my right hon. Friend said when he opened the debate. It does not change fast enough to remain internationally competitive.
Although we may discard these instruments of State intervention other countries will not if they are much more up to date, and we shall have to compete with them. Consider our difficulty in this matter is to be left to the play of market forces, working within the confines of this island, overborne by the winds of international competition, but not adjusted according to the methods of our competitors. I realise that the efficiency of British industry did not rise fast enough under the Labour Government, but in the future it may well be worse.
In view of the new vacuum that will be left with the passing of such legislation as this, it makes me feel—though it may be the effects of the all-night sitting—mournful about the future. When in the Labour Party we have discussed industrial policies, to provide a measure of continuity, we have argued that there is a great deal to be said for a mixed economy and that we should not move too fast in the direction of socialisation unless unavoidable. However, if that theory of the mixed economy is to have any reality in British political life, we must have some kind of response from the other party. if the Conservative Party, for doctrinaire reasons, is prepared to throw out the instruments which we have brought in —no party remains in power for ever in a free society, and we shall inevitably come back to power—then we shall perhaps need to look at our own more radical ways of dealing with the reorganisation of British industry. We shall have to look not simply at intervention but at extending perhaps the whole area of State ownership.
It has practical attractions as I shall show by quoting what was said by the 427 Chancellor of the Exchequer on 14th December last when I asked him to give the comparative figures for the increase of output per man-year in the nationalised industries and for the private sector of industry in the period 1963 to 1969. The answer, in summary, was this:… output per man-year in manufacturing industries—which are predominantly in the private sector—showed a 25 per cent. increase between 1963 and 1969. Output per man-year for mining and quarrying, and for the gas, electricity and water industries—which are mainly public corporations—showed a 31 per cent. increase over the same period."—[OFFICIAL REPORT, 14th December, 1970; Vol. 808, c. 252.]Clearly figures of this kind can be qualified, and one must examine them carefully in their context. I will not attempt to do so now, but there is plenty of evidence to show that, far from private industry being the highly efficient sector which hon. Gentlemen think, the argument is the other way round. Therefore, as I have said, if there is no continuity of policy in regard to a mixed economy, we on this side of the House shall be inclined to look once again at the need for extending the whole scope of public ownership.
§ 8.25 p.m.
§ Mr. Peter Rost (Derbyshire, South-East)
It puzzles me that so many hon. Members opposite have been sniping at my right hon. Friend the Secretary of State for Trade and Industry. This applies particularly to the hon. Member for The Hartlepools (Mr. Leadbitter), who unfortunately has sneaked out of the Chamber, and who was particularly abusive and insulting. I would have thought that hon. Gentlemen would have been pleased that we now have a Minister of Trade and Industry who knows something about trade and industry, and not one who talks about the "white heat" of technology but lacks any effective policies to do anything other than land the nation with the highest unemployment for many years, stagnation, and a serious general decline in economic activity.
I am also puzzled that over the past few years there seems to have been a remarkable turn-about in the opinions and views of hon. Members opposite about takeovers and mergers. Some years ago the thought of a large merger or takeover produced screams of outrage from the Labour Party. Accusa- 428 tions were made that another monopoly was being created and that capitalism was at work again. I wonder whether some hon. Members have been attending business schools and have started to find out something about the world of business mergers and takeovers and have become converted, so that the I.R.C. has swung round in order to create artificial mergers, monopolies, controversial takeovers and backdoor nationalisation.
It seems odd that when private enterprise arranges a merger or takeover it is regarded as in some way sinful or against the public interest—probably because it makes economic sense. Yet when the Government prod and interfere or bribe their way with public funds to arrange a merger or takeover, it is regarded as a good thing, although it is probably creating a monopolistic and uneconomic enterprise.
I want to explain why I regard the decision to abolish the I.R.C. as correct. First, it is not the Government's function to operate in this sphere. Like other hon. Members, I do not wish to be critical of the staff of the I.R.C. They have obviously got high qualifications and have done what the Government asked them to do. But, looking at the individual mergers and takeovers, a number of them require questions to be answered.
As some hon. Members have stated, the G.E.C.—English Electric merger would certainly have taken place without any prodding from a Government agency.
I also believe that the money which was pumped into the Austin Morris—British Leyland merger has, to some extent, allowed feather bedding to continue in that industry than produce a more radical commercial and economic reorganisation of management and production which would have provided more efficient industry more quickly. I think that the facts establish that the industry is still in this phase of reorganisation. If it had not had substantial Government funds it might have had to reach this stage of reorganisation more rapidly on its own.
The George Kent takeover, in which the I.R.C. played a most extraordinary rôle by intervening between two rival bidders, caused a great deal of resentment. That is an example which justifies the type of accusation which we are now 429 entitled to make that the I.R.C.s decisions are, to some extent, arbitrary and sometimes unfair and discriminatory.
The second major reason that the Bill is right is that the I.R.C. is applying wasted resources. I am not referring now to the £300,000 a year which it costs to run the organisation, but primarily to the capital which has been employed in financing mergers and takeovers—about £120 million. I believe that this capital could have been more efficiently and effectively used in the private sector through the natural market mechanism by providing more risk capital and incentive for industry to achieve its own reorganisation through mergers and takeovers. I am not convinced that the I.R.C.s interference in mergers and takeovers has played any major rôle in providing more efficient management. In fact, examples illustrating the opposite effect have been justifiably quoted.
The third major reason against the continuance of the I.R.C. is its unfairness. It has obviously got to pick and choose which mergers and takeovers it should promote, and which it should not—in other words, which companies should get the subsidies and which should not. This discrimination and interference in the private sector must have an adverse effect on the natural functions of the market mechanism.
I want to make one or two suggestions, which I hope my hon. Friend will consider, concerning the disposal of the assets which will be taken over when the I.R.C. is abolished. I believe that we have to think carefully about how these assets are disposed of, bearing in mind that the Government are obviously most anxious to lighten the load and not maintain the portfolio of investment which they inherited. It would be a mistake—in fact. I should oppose it most strongly if these assets were to be disposed of simply to the highest bidder as quickly as possible, because I believe that there are important considerations here, apart from disposing of the assets as quickly as possible and obtaining the highest price for them.
§ Mr. Edmund Dell (Birkenhead)
The hon. Gentleman says that he would oppose most strongly the disposal of the assets in accordance with principles which he dislikes. How will he oppose such disposal? The Bill gives no parliamen- 430 tary control over the disposal of the assets.
§ Mr. Rost
The assets ought not necessarily to be disposed of to the highest bidder or to the first bidder, and I hope that this can be debated in Committee. What I meant by my statement was that I was hoping to express my argument in more detail in Committee.
I believe that we ought to consider spreading the ownership of these assets as widely as possible throughout the nation, rather than allow them to fall into the hands of the highest bidder at the earliest opportunity. I hope that we can allow a wide cross-section of the public to take shares in these assets. This is a practical proposal which has been applied with considerable success in Germany, particularly where sectors of nationalised industries have been sold off. I am thinking of Volkswagen and Lufthansa, where the investments have been disposed of at less than their real worth by allocating small holdings of £10 to £20 per family. This has provided a strong incentive for individuals, and particularly low-income families, to subscribe for their allocation of shares in what were formerly nationalised industries. I suggest that the disposal of the I.R.C.'s investments might provide a pilot scheme for that type of disposal, rather than selling the assets in larger lumps to more substantial institutional investors.
§ Mr. Neil Kinnock (Bedwellty)
I am intrigued by the hon. Gentleman's suggestion to import from Germany a system for the disposal of these assets. What kind of salary bracket has the hon. Gentleman in mind for the people who will purchase these shares? Does he link this with another aspect of the Government's policy and envisage that people will buy these assets out of their Family Income Supplement?
§ Mr. Rost
I take that interjection in good faith. I do not wish to rule myself out of order, or to be ruled out of order, by going into detail, but I believe that the disposal of these investments, and, in due course, those of other nationalised sectors, can be achieved by means of a save-as-you-earn scheme which will allow families on the lowest incomes to subscribe, on an instalment basis, for the 431 allocation of formerly nationalised assets. I shall be glad to develop this on another more suitable occasion.
To summarise what I have been trying to say, I believe that there is no rôle today in a free enterprise economy under this Government for the I.R.C. If there are individual cases in which special help is justified, these ought to be discussed and debated on the Floor of the House. I believe that the State's function ought not to be delegated to an independent agency like the I.R.C., where there is no proper parliamentary scrutiny or control. So the question of parliamentary accountability is fundamental to this whole issue——
§ Notice taken that 40 Members were not present;
§ House counted, and, 40 Members being present—
§ 8.41 p.m.
§ Mr. Rost
If I may be forgiven for repeating my summary, I believe that the Bill is right in its major proposal to abolish I.R.C., first, because of the question of parliamentary accountability, and second, because there has been no evidence that I.R.C. has been of any major assistance to regional development, or that it has provided the function of a watchdog for companies, as has been suggested by hon. Members opposite. Nor can it be said that it has helped employment.
On all grounds, there is no justification for its continuation, provided that we establish an economic climate—which our policies are now designed to do—of greater competition and free enterprise through taxation reform primarily, in which there will be greater profitability and cash flow, where capital investment will once again produce an adequate return.
In this sort of economic climate, one of expansion and higher productivity, one which we will expect this Government to achieve once their policies have taken effect, there is absolutely no reason why the existing machinery, operating in the City, through the merchant banks and other institutions, and the free market operation should not be perfectly capable an dfar more adequate to function in the 432 way that I.R.C. was designed to do but is no longer required to do.
§ 8.43 p.m.
§ Mr. Tam Dalyell (West Lothian)
When others wish to speak, at this time of night, speeches should be short.
I listened with great interest, like the Secretary of State, to the speech of the hon. Member for the Cities of London and Westminster (Mr. Tugendhat). As he said, an issue arises from the way in which certain medium-sized firms suddenly become big firms, with resultant management problems. I agree that there is, regardless of party doctrine, a genuine issue of mergers and size and the whole issue of optimum size. I suspect that it varies from company to company and that there is no overall rule or panacea.
But it may be worth setting up some kind of a study in the Department, if it is not already underway, of how management behave when it moves from being a medium-sized management, like Rolls-Royce, to a huge one, such as Rolls-Royce and Bristol-Siddeley. In the modern world this seems to be something which is relevant to examine. Perhaps at some convenient time we could have a statement from the hon. Gentleman—not tonight—whether he wishes to pursue this subject.
I speak against a background of increasing unemployment in Scotland. We have had the unemployment at "Golden Wonder", Broxburn, and at N.C.R., and now Lovell's, the paper works in my constituency, is closing down. Indeed, ultra-modern industry is having lay-offs. The Under-Secretary of State for Trade and Industry recently visited S.G.S. in Falkirk, who are at the real frontiers of electronic knowledge. When this firm, with good management, comes to the conclusion, on the semi-conductor side, that it has to have fairly serious redundancy, then there are real problems.
It is against the background of those problems that I wish to raise the issue of Leyland, vital to employment in Central Scotland. I represent 5,500 who work at British Leyland. With my hon. Friend the Member for Birmingham, Northfield (Mr. Carter), who represents 25,000, perhaps we could best use our time by asking not sniping but direct questions. I refer the Secretary of State to the speech of the hon. Member for 433 Derbyshire, South-East (Mr. Rost). He said that in the matter of Leyland and Austin-Morris there had been featherbedding. This was the charge which the hon. Gentleman put forward to the House. Then he said that if they had not had Government funds, these firms would have reached a better state on their own account. That is a fair paraphrase of what the hon. Gentleman said.
§ Mr. Dalyell
Really? How? In that case, I ask the Secretary of State to clear up this matter. Does he accept the suggestion that there was feather-bedding of Austin-Morris and Leyland by the I.R.C.? Does he agree with his hon. Friend the Member for Derbyshire, South-East? Perhaps the Secretary of State would like to answer those questions now.
§ Mr. John Davies
I mentioned the question of British Leyland earlier in the course of the debate. I suppose I can respond to that. The point I was making, and which is correctly made, is that the I.R.C. constituted a body of finance available to concerns which otherwise, in the state of the credit squeeze, would not have had access to that same body of finance. That was the point I made and which my hon. Friend probably emphasised. It is undeniably true. It is not true to say that the I.R.C. acted improperly. That was far from my suggestion. Firms had access during a period of credit squeeze to a source which was not available to an equivalent concern in the market.
§ Mr. Carter
Far from agreeing with the hon. Member for Derbyshire, South-East, the Secretary of State seems to have contradicted him. Is the right hon. Gentleman aware that had the I.R.C. not supported British Leyland when they were in difficulties, they would not have fallen into the hands of a British company? They would probably have gone bankrupt, or, failing that, they would have fallen into the hands of a European car company. It would not have been an American company, because all three 434 major American car manufacturers had a hold in this country. It is almost a certainty that we would have lost the last remaining area of capacity in British hands.
§ Mr. Dalyell
Perhaps the Secretary of State would like to answer my hon. Friend's question. Is it not a fact that, at that critical moment, had there not been Government action, Austin-Morris would have been taken over by Mercedes-Benz? Is that contradicted, in the light of what we know now? Would the Secretary of State care to answer that?
Apparently not, in which case he puts himself in a very weak position.
The worry of many of us about the abolition and dismantling of the I.R.C. is that, because of the nature of their industries, certain firms must have a smooth flow of investment. If there is a jagged input of investment, they get into great difficulty. In terms of modern technology, we are talking not about the next three or six months but about a rolling plan. When the rolling plan is interrupted by shortage of investment funds, a firm is in real difficulty.
I make no charge of wickedness or even of evil intent against right hon. and hon. Gentlemen opposite. It is a charge of naivety about the way that a modern technological situation works. I say this in no impertinent way, and certainly I intend no insult, but I cannot understand how men of the experience of the Secretary of State are able to act in this way when they must know far beter than I the reality of modern industry, especially of an industry like Leylands.
I gave a voluntary undertaking that I would sit down as quickly as possible, but perhaps the Secretary of State will agree to comment on the rather sharp remarks that I have made.
§ 8.52 p.m.
§ Mr. Charles Simeons (Luton)
The very fair question has been asked: why change the system? Different systems are needed for different times and, whatever points we may disagree about in this House, there are a number of basic matters about which we agree. We agree about the end. What we disagree about is how we are to get there. That, surely, is what the argument is about today.
The I.R.C.'s function was to perform two tasks in the then existing climate 435 It acted as a company marriage broker, and it provided company finance. It was a case of outsiders using other people's money in ways in which, very properly, they thought fit. However, the background must be different when people are personally involved and are using their own money.
Among the marriages which took place, without doubt there were some in which the bride was carried into the nuptial chamber screaming that she would prefer not to join. While I cannot say that it is a typical example, my hon. Friend the Member for Derbyshire, South-East (Mr. Rost) referred to the firm of George Kent in my own constituency. That firm was in danger of being a bride. Suddenly, it was given a large sum of money and became the bridegroom. Looking at the profit record of the prospective bridegroom since that date and at what has happened to the bride, for whatever reasons, one sees an example which cannot go by unnoticed.
The I.R.C. has assisted a number of companies which should not have been helped had people with their own money been putting a stake in them.
The circumstances that I refer to are those that my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams) mentioned and which the hon. Member for The Hartlepools (Mr. Leadbitter) doubted. That was the change in financial conditions during this period. I do not know what my hon. Friend had in mind, but I suspect that it was probably the change in taxation. In case any hon. Member doubts the feasibility of that argument, let me mention three or four of the factors which changed.
The 1965 Finance Act revolutionised our financial thinking. I heard one High Court judge, an expert in taxation, say in public at the time that the only Section of it about whose meaning he was in no doubt was that by which holders of the George Cross received their emoluments untaxed. No one could pretend that the 1965 Finance Act did not have a profound effect upon our whole financial thinking. Then there was the switch from investment allowances, which are a recognition of profit earned, to investment grants. If we consider these and the incentives to go into the regions we find that, far from reducing unemploy- 436 ment, the companies which settled there were capital intensive industries, very low in labour use—which was exactly opposed to what was needed.
The Redundancy Payments Act, 1965, in its general intent was highly commendable, but then we had the selective employment tax which ensured that people became redundant. In addition, we had the 1966 Measures which were highly restrictive. We need look no further than my constituency to see that the motor industry is producing about half the number of vehicles it could produce, and that the number now produced is well down on the figure for 1964. So these financial measures have proved to be wholly restrictive.
The hon. Member for The Hartlepools cast doubt on the viability of our financial state then and now. I remind him that in 1964 we had a dollar portfolio of £1,100 million which seems now to have disappeared completely. Today our accumulated debts are over £1,600 million. There has been a fundamental change.
The Bill is an indication that the Government are changing the direction. We have committed ourselves to reducing taxation, and once people become aware that they will retain more of their earnings than before they will have much more incentive to invest. It is easier to raise cash from the market because it is known that there will be profits which can be retained to a greater degree than before. The Bill is saying that the method which was applicable in a period of rising taxation and restriction of output is no longer applicable now that we have changed course. We are now able to raise large funds from the market which will flow in much more freely than before. But the Secretary of State can hang out a safety net, and he will be accountable to the House. The Bill should be seen in the light of this complete change in climate.
§ 8.58 p.m.
§ Mr. Dick Douglas (Clackmannan and East Stirlingshire)
I am grateful for the opportunity to intervene. I should like to follow the hon. Member for Luton (Mr. Simeons), but I wish to put one or two brief points to the Minister who will reply to the debate.
Where is the market mechanism so gorgeously set up ready to interfere to 437 give to companies this capital which, particularly in areas like Scotland, they require? In total terms the I.R.C. gave to companies in Scotland nearly £10 million, and that figure does not take into account the other organisations which have been mentioned, such as Leylands and Rootes, to say nothing of Rolls-Royce. The Minister responsible for this shabby little Bill knows in his heart of hearts, because of his interest in industry, that there is no City of London mechanism available to provide the rôle that the I.R.C. was specifically designed to provide. He knows this because in a speech at the dinner of the I.C.F.C. he put this to the City. I challenge him to tell us what deliberations he has had with the City since then to get an organisation of similar intent to provide the merchant banking and consultative rôle which he is now denying the country.
The I.R.C. was not a perfect organisation. I agree with the Minister that at the beginning industry was suspicious of its rôle and function, but when industry knew that it could go to this organisation and discuss confidentially the possibility of mergers to get industry restructured, then industry began to trust and use the I.R.C. I can speak with particular emphasis about what has happened in my constituency. There has been a merger between Weir's Pumps and Harland Engineering which cost this country nothing. Hon. Members opposite talk in terms of competition, and comparison has been made between the structure of industry in this country and in Germany. Even with restructuring, there are still 296 pump companies in this country whose total turnover is less than that of their German competitors.
The country needs an organisation like the I.R.C. to provide for the restructuring of industry. We have had restructuring of industry in Scotland and, if time were available, I could describe it in graphic terms. We know that restructuring of industry causes pain, and it is no good right hon. and hon. Gentlemen opposite coming to Scotland and saying that there is a high level of unemployment. To have 96,000 was inexcusable and wasteful, but we now have 150,000 unemployed in Scotland. There are 11 people looking for every job that is available. These measures were designed to assist these people.
438 Scotland is away from the London capital market. I am casting no aspersions on the nature of the Scottish capital market, but Scotland above all needs this type of organisation, and I indict the Secretary of State for bringing in this petty, squalid, unnecessary Measure.
§ 9.2 p.m.
§ Mr. Edmund Dell (Birkenhead)
It is my first duty to congratulate the two hon. Members opposite who have today made their maiden speeches. I must warn them that I have only on one previous occasion congratulated a maiden speaker, and he lost his seat at the next election. Both hon. Members made eloquent and persuasive speeches. We had no need to wait for the hon. Member for the Cities of London and Westminster (Mr. Tugendhat) to make his maiden speech for us to know his views. I noticed that he referred to one of his predecessors, Charles James Fox. Fox is in our memories for many reasons, one among them that he once bitterly opposed and demonstrated in this House against a tyrannical Tory majority.
This is a totally negative Bill, abolishing the I.R.C. and Sections 1 to 7 of the Industrial Expansion Act. We have heard half-hearted support for it for a simple reason—that there has been no systematic or consistent philosophy on the part of the Government. Sections 1 to 7 of the Act provide Parliament with an opportunity of considering proposals for industrial investment schemes in which the Government are involved. It is a device, an enabling power. The Government can use it or not as they like. They need not repeal it for it not to be used. But they are repealing it, despite the fact that, again and again in the debate, virtually every hon. Member opposite who has spoken has admitted that there are occasions on which it is necessary for the Government to intervene in industry. Despite the fact that here is a parliamentary device giving Parliamentary control over such interventions and without excessive delay, the Government are repealing Sections 1 to 7.
We have frequently been told that it is the view of hon. Members opposite that, if there is to be Government intervention in industry, which is sometimes necessary, it should be done not through an agency like the I.R.C. but directly by the Government. Sections 1 to 7 of the 439 Act provide a means of so doing. Yet they are repealing them. What we have not heard from hon. Members opposite is the criteria which they would feel appropriate for these acts of Government intervention. They admit that they are sometimes necessary. When are they necessary? Are they necessary for social reasons, or for reasons of industrial structure or for reasons of regional policy? I hope that we shall be told. I suspect that there will be one criterion which is not a suitable criterion but one that will be admitted only too easily by the Government—the criterion of what is politically popular.
I take one example of something that could be done and may need to be done under Sections 1 to 7. The Act was worded so that it could not intervene in the shipbuilding industry until the final date—the end of 1971—for the life of the Shipbuilding Industry Board, but after that date it can do. We were to have a debate—I hope that we shall still have it —tonight on the question of extending the life of the Board. On the other hand, we have an important piece of legislation beforehand and, under the rules of the House, who knows that we may not reach it.
Therefore, it is of interest that we should be told what are the Government's intentions in respect of the shipbuilding industry, because if they do not use the Industrial Expansion Act—and they cannot do so if they repeal these Sections—they will have to introduce other legislation to do things which they could perfectly well have done under the Act. They are repealing what is simply an enabling power. Evidently, the Government cannot trust themselves with this enabling power. Evidently, they suspect that they will be tempted into sin if they allow it to remain on the statute book.
With great eloquence, the Secretary of State told us that there was no ideology in this. I do not believe him. But there is a great deal of history in the matter. As Director-General of the C.B.I., the Secretary of State took a view of the Act which has proved to be wrong on all counts. Because he and the C.B.I. took that view, he refused to consult the then Government about the Bill, as it was then. He refused to help us to 440 improve it. He was the original non-co-operator with the Labour Government, the original non-consultor. There are criticisms sometimes of the T.U.C. for refusing to consult the Government about the Industrial Relations Bill, but that Bill seriously damages trade unions in general. The Industrial Expansion Act assisted industry, and industry has co-operated. We should not have had the two important schemes we have had under the Act without that co-operation. But the right hon. Gentleman, as Director-General of the C.B.I., refused to co-operate with the Labour Government on this piece of legislation.
The Government have been similarly doctrinaire about the I.R.C. The hon. Member for Kensington, South (Sir B. Rhys Williams) admitted that the abolition of the I.R.C. will leave a gap in Government-industry relations. I agree, and it is a larger gap than he believes.
Like industry, we had reason to expect that if a Conservative Government were returned, the I.R.C., though possibly modified, would continue to exist. After all, that was promised in "A Better Tomorrow". It informed us that a Conservative Government would drastically modify the Act but that, rather than abolish the I.R.C., it would be modified. We were led to expect that from what was said in debates on the subject by hon. Gentlemen opposite when they were in opposition.
Indeed, the present Secretary of State for Social Services was said by the present Under-Secretary of State for Trade and Industry, the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), to have told the House in a debate on this subject some time ago that an I.R.C. facilitating market mechanisms might be useful. We were, therefore, entitled to believe that the Corporation would continue to exist.
The Government have gone directly contrary not only to the belief which everybody was entitled to have but, as my right hon. Friend the Member for Bristol, South-East pointed out, equally contrary to the gathering experience in Britain and abroad that such organisations are useful if we are to have the right industrial structure for international competitiveness.
They are also breaking with their own argument on another subject, and this I 441 regard as particularly serious. Hon. Gentlemen opposite have referred many times to the importance of Parliamentary scrutiny. I intervened in the speech of the hon. Member for Derbyshire, South-East (Mr. Rost) when he said that he would oppose certain possible ways for the disposal of the assets of the I.R.C. I pointed out that there would be no means by which he could do so because the Bill gives no Parliamentary control over what the Secretary of State intends to do.
This is a significant fact, because my right hon. Friend the Member for Bristol, South-East was attacked over the Industrial Expansion Act when he was trying to increase Parliamentary control. Now hon. Gentlemen opposite introduce a Measure to repeal the I.R.C. without giving a thought to Parliamentary control. This shows the real importance they attach to the arugment they used to advance on this subject.
Governments must sometimes act to create and support industries which are dominated by foreign competition, and sometimes by subsidised foreign competition. There are many ways in which subsidies can be given, including military purchasing on an enormous scale and space agencies. If we are to have competitive industries, this will be achieved only with the assistance of the Government.
One example I have given is the shipbuilding industry, and there it was necessary for the Government to take action. I believe that it will be necessary for the present Government to take further action to support this industry; that is, if we are to have a shipbuilding industry. Other examples have been given, including computers, the motor car industry and aluminium smelters.
It was in the creation of an aluminium smelter that the largest single act of Government intervention occurred under Labour, outside the aircraft industry. Considering what a non-interventionist, disengagement Government we have at this time, it is interesting to recall the reaction of hon. Gentlemen opposite to the aluminium smelter project when they were in Opposition. They did not criticise it, attack it or vote against it when it came before the House. They supported it. I am not speaking of the Under-Secretary. I remember that famous occasion when I 442 introduced the Orders to the House and he opposed them. We know his views well. Others of his hon. Friends did not oppose it. They welcomed it, they supported it—this discriminatory act.
The hon. Member for Exeter (Mr. John Hannam) dislikes Government discrimination, so does the hon. Member for Derbyshire, South-East. This was an act of deliberate Government discrimination, to create an aluminium smelter industry. The right hon. Member for Moray and Nairn (Mr. Gordon Campbell), now the Secretary of State for Scotland, was overjoyed that the site for British Aluminium was Invergordon in Scotland. The only regret he had was that it was done by a Labour Government. The right hon. Member for Argyll (Mr. Noble), now Minister for Trade—and may I say how much we regret to hear that he is ill and hope that he makes a rapid recovery—congratulated my right hon. Friend the Member for Grimsby (Mr. Crosland) then President of the Board of Trade, on the success of the negotiations.
These were fine sentiments from members of a non-interventionist, disengagement Opposition who now constitute the Government. Their philosophy of disengagement, the philosophy upon which this Bill is based, should in all honesty have led them to vote against the aluminium smelter project. But they did not have the political courage. They supported the smelters because they were politically popular. This, I suspect, will be the real criterion for Government intervention in industry, particularly as elections draw near. What is popular will be done, without any of the safeguards which we deliberately built into Government intervention in industry through agencies like the I.R.C. That will be the criterion, and I await the comments of the Under-Secretary. Perhaps he can provide us with other criteria which the Government will operate in respect of their exceptions.
Let me put a question to him. If Anglesey Aluminium or British Aluminium want to expand their smelters to 120,000 tons, what will be the attitude of the Government? Will they co-operate and introduce special legislation, the Industrial Expansion Act having been repealed?
I pass to the fundamental problem of size, whether it is necessary in industry, 443 to what extent, whether we should have an agency to promote industries of greater size so that we may have economy of scale, and all the other arguments. What hon. Members opposite seem to have forgotten is that we have a major and recent authority on the subject in the person of the Secretary of State. I quote from The Times of 23rd January, 1971 when at a special meeting of Dutch industrialists the right hon. Gentleman said:We need and wish for size and yet we fear it. We must find, in Continental terms, the appropriate measures to guarantee us against abuse whilst encouraging the development of concerns able to face the demands that modern technology and the hungry market pose. How often have I been told by men I know, and whose judgment I respect. that the next plant they should build will of necessity, be of such a scale as to make its outlets profitless if seen in a purely national context.This is what the right hon. Gentleman said. The hon. Member for Cities of London and Westminster made some criticism of this sort of argument being too easily used, and I agree with him; indeed, it is too easily used. But although the phrase "industrial logic" has frequently been overdone, the fact remains that size is often necessary to achieve the necessary economies of scale.
§ Mr. Tugendhat
The right hon. Gentleman may be misunderstanding one thing. There is a distinction between the size of a company and the size of a plant. One may well be sceptical of very large size beyond a certain point in a company while believing that companies should build very large plants.
§ Mr. Dell
I entirely agree with the hon. Gentleman. If he studies the debates in which I took part on the Industrial Reorganisation Act, he will see that that was precisely a point of disagreement between the two sides, with Conservative hon. Members referring to Fortune's 500 largest non-American companies and my hon. Friends emphasising the importance of economies of scale in production and size of plants. I entirely accept the hon. Gentleman's point. That is a fundamental aspect of the matter.
The argument of industrial logic has been too easily used sometimes in recent years, but it is increasingly necessary to achieve economies of scale in marketing 444 and research and development. The Secretary of State, in his speech in Holland, gave various examples where he thought it necessary that economies of scale should be achieved. He also said on 30th October, when announcing his intention to introduce the Bill:The Government take, and will continue to take, an active interest in the reorganisation and restructuring of industry. They will be in close consultation with industry. They will seek, in their own way, to assist industry to do what industry wishes. They will not seek to force down the throat of industry measures that industry does not want."—[OFFICIAL. REPORT, 30th October, 1970; Vol. 805, c. 568.]What the right hon. Gentleman did not tell us today is how that job of encouraging is to be done. I think that I know his answer. He would probably say, as some of his hon. Friends have said, "Let us have a competitive economy with adequate incentives and market forces will do the rest."
I have never had the Government's impressive verbal faith in market forces. Market forces, particularly without financial disclosure, are blind, and the right hon. Gentleman evidently does not intend to do very much about financial disclosure in the near future. I have never thought that knowledge added to market forces was a loss. On the contrary, I believe that a thorough investigation of a problem by an organisation like the I.R.C. is a positive asset—the facilitation of market forces, as the Secretary of State for the Social Services once called it.
Even the Government do not have a wholehearted reliance on market forces. The hon. Member for Cities of London and Westminster attacked the I.R.C. as being a hiving-off of the national interest. It was only the strong tradition of the House that maiden speeches are not interrupted that prevented my leaping to my feet at that moment. He was making that statement in support of a Government who are hiving-off the determination of the national interest to the Wilberforce Committee, and yet he criticises the I.R.C. on the ground that we should not hive-off the national interest to an agency.
Another example of poor faith in market forces is the system of investment incentives that the Government have introduced. A system of investment incentives is intended to distort market forces. It diverts resources towards capital-intensive industries in the form 445 in which the Government have introduced the system, presumably because they intend it to do so. So the Government have, like us, some doubts about the efficacy of market forces. All that they have done in the case of investment incentives is to introduce a less effective system, as we can see from the recent forecasts of industry's investment intentions. They try to do the job, but they make sure that they do it in the least effective way.
Another part of the right hon. Gentleman's answer to the question of what is to be done to encourage size in the right circumstances was "a competition policy", though this came from his hon. Friends and not from him. That is why we were waiting with such interest to hear his statement on his competition policy. It is quite clear that the right hon. Gentleman has not the faintest idea what to do. He is to have no legislation until the next Session at the earliest, because he is waiting for ideas to occur to him.
This is rather like the introduction of value-added tax which we heard about at the General Election. The Tories said, "We cannot say definitely about it until we have consulted the Civil Service." We were given before the election very clear assurances on what the right hon. Gentleman would do on competition policy, all of which have been broken. There was to be a registrar of monopolies and mergers. There is no registrar. There was to be frequent resort to the Monopolies Commission. There has been no resort, except in the case of one merger. The right hon. Gentleman's competition policy is not standing up very well today. In any case, vital as a competition policy is, it is not enough. We also need more information, an agency like the I.R.C., and ultimate powers of control.
An important aspect of the debate has been the relationship between the two Acts which are being repealed—the Industrial Reorganisation Corporation Act and the Industrial Expansion Act—and development area policy. We had a series of instruments which were actively used—industrial development certificates, the investment grant differential, the investment grant system—which has been abolished—and the regional employment premium, which is being phased out. Hon. 446 Members opposite complained about the capital intensiveness of our incentives. Regional employment premium was intended to counter-balance that, and the Government system is no less capital-intensive.
We also had rapidly-expanding expenditure under the Local Employment Act, and action could be taken under the Industrial Expansion Act and by the I.R.C. The Government have eliminated these methods. They have cut aid to the development areas. The Chancellor of the Exchequer told us on 27th October that at any rate the differential in the investment incentive had not been cut. That is not true. It has been cut by a substantial amount. The whole effectiveness of development area policy has been undermined and now, in addition, these two instruments of specific help to the development areas are going.
My hon. Friend the Member for Bristol, Central and the hon. Member for Kensington, South emphasised the need for continuity in industrial policy. This legislation certainly does not provide continuity. Under this system, with these major changes, what is happening is that under the Labour Government there was massive assistance to get industry into the development areas, whereas the Conservative Government have completely undermined the understanding under which industry has gone there. This undoubtedly will make it far more difficult in the future to develop the sort of development area policy we need if we are at last to answer the problem of poverty and growing unemployment which the Government have increased in the development areas. The fact is that the development areas have been abandoned by the Government, and this Bill shows that quite clearly.
The Bill is called an "Industry" Bill. Apparently the total policy of the Government towards industry is to be expressed in this negative Bill, which abolishes the I.R.C. and repeals Sections of the Industrial Expansion Act. The Government should at any rate have had the courtesy of calling it the Disengagement from Industry Bill. The sheer negativeness of the Bill is a symptom of the complete disarray and incompetence of their industrial policy. They have no effective competition policy, no effective investment incentive policys nor have they 447 any criteria for when to intervene and when not to intervene. It is complacency supplemented by bungling. It is not an Industry Bill. It is an Abdication of Responsibility Bill, and as such we shall vote against it.
§ 9.29 p.m.
§ The Under-Secretary of State for Trade and Indastry (Mr. Nicholas Ridley)
On the day that the Industrial Reorganisation Corporation and the Industrial Expansion Act begin to meet the end of their days, it is pleasant indeed to be able to replace them with my hon. Friends the Member for the Cities of London and Westminster (Mr. Tugendhat) and the Member for Exeter (Mr. John Hannam). Both made excellent speeches his afternoon.
My hon. Friend the Member for the Cities of London and Westminster was clear, experienced and powerful, and every hon. Member who has read his writings will now know that hearing him is no less a pleasure. We look forward to hearing him a great deal in the near future. My hon. Friend the Member for Exeter put the interests of his constituents high in what he said and he follows an honourable tradition in that political shuttlecock of a city. He again gave very sound views, with an eloquence and clarity that delighted the House.
What has to be proved by the Opposition is that the Industrial Expansion Act and the I.R.C. have achieved even a tithe of the high expectations set out for them when they were brought in. They were conceived in the white heat of the technological revolution. They were nurtured on large quantities of public money. They were supposed to bring about a sort of second industrial revolution. But few will say—even few in this House—that they have had the reinvigorating effect on British industry which was expected of them. Indeed nobody has claimed very much for either. In saying goodbye to them today, however, we should emphasise that no criticism whatever is made of the men who ran them. Indeed, the reverse. These men tried with skill, enthusiasm and imagination to do their jobs. It was the job descriptions that were wrong, not the men. Indeed, it is possible to say that the job descriptions hardly existed at all.
Before coming to that matter, I shall attempt to answer one or two factual 448 points, particularly those put to me by the right hon. Member for Bristol, South-East (Mr. Penn). The total investments and commitments of I.R.C. at present are £122 million of which £87 million went into loans; £22 million into loans convertible into equity; and £13 million went straight into equity. One thing the right hon. Gentleman said that I must rebut is that we have not in the Department of Trade and Industry close relations with the T.U.C. and the relevant trade unions. My right hon. Friend has had discussions and has outlined further programmes for more discussions with all the main unions concerned in the work of the Department.
I should also like to rebut entirely one other thing said by the right hon. Gentleman. In fact, the unions from Belfast, at my invitation, have been to see all the four contenders for the shipyard to satisfy themselves about their intentions. I think he will recognise that this is something that has not happened before, and I hope that in future he will not make the sort of wild charges he made this afternoon about our intentions to consult the trade unions.
There was one other thing he said that I am sure he will think was not wise. He said we needed an industrial reorganisaton corporation with £150 million of public money to keep a watchful eye on those multi-national companies overseas, which indeed present problems and which the House might like to discuss on some other occasion; but I cannot see what rôle the I.R.C. could have in these complicated problems of taxation and policing of international companies, when clearly this is a matter for Government and not for the As I said, the job description was wrong.
There were same amusing suggestions from the right hon. Member for Manchester, Cheetham (Mr. Harold Lever) about what the I.R.C. was to do when it was brought in. It was:to lead in the modernisation of industry, to promote the export competitiveness of private firms and import substitution by private enterprise.The right hon. Gentleman then described it in this way:Only good can result from this flow to and fro, using the Corporation as a conduit pipe." —[OFFICIAL REPORT, 1st February, 1967; Vol. 740, c. 660–1.]449 On the Second Reading the right hon. Gentleman referred tothe moral authority and impartiality of the kind of institution we are bringing into being.These strange claims for the Corporation seem rather odd now.
§ Mr. Douglasrose——
§ Mr. Ridley
I will give way to the hon. Gentleman when I have finished this part of my speech.
There was then the odd claim of the right hon. Member for Bristol, South-East that a task of the Corporation was to start new enterprises. On Second Reading the right hon. Gentleman said:In practice, the creation of new enterprises may well be—I will not say the most important, but a very important element in what we hope to do."—[OFFICIAL REPORT, 19th October, 1966; Vol. 734, c. 291–353.]
§ Mr. Douglas
I am grateful to the hon. Gentleman for giving way. I am interested in his job description. Will the hon. Gentleman refer to the job description which the I.R.C. gave itself in its first annual report, particularly paragraph 3? Will the hon. Gentleman refer to that and not, for debating purposes, be so amorphous?
§ Mr. Ridley
If the hon. Gentleman reads all the reports of the I.R.C. he will find that the job description changes from year to year. That is the point which I want to make.
§ Mr. Benn
Before the hon. Gentleman leaves those characteristically entertaining quotations from my right hon. Friend the Member for Manchester, Cheetham, may I ask him to remind the House that when my right hon. Friend made those remarks he was a Government backbencher, not a Minister, and was giving his own colourful interpretation of a Bill for which he claimed no paternity?
§ Mr. Ridley
I thought that I was paying due tribute to the eloquence of the right hon. Gentleman, even when on the back benches. The right hon. Gentleman has always been the best interpreter of the Labour Party's policy, whether on the back or the Front Benches.
So we come to this important function of "restructuring" industry. This the I.R.C. undoubtedly undertook.
Let us look at the proportion of industrial mergers which had anything to do with the I.R.C. The reported figures vary slightly, but during 1967 to 1970 the 450 total number of mergers and acquisitions amounted to between 2,500 and 3,000. The total financial consideration involved in these transactions is reported to be in the region of £5,000 million.
In this period the I.R.C. was involved in 20 to 25 mergers per annum, about 100 all told, which is 4 per cent. of the total. The money spent by the I.R.C. amounted to about £100 million, and not all was spent on merger activity. The total financial consideration in the mergers promoted by the I.R.C. was very much larger. Nevertheless, this shows what a tiny proportion of mergers activity was promoted by the Corporation.
For anybody to claim that either to continue or to withdraw the Corporation will make a great difference to the volume of merger activity in the light of those figures, the fact that merger activity was popular and was welcomed by the Government of the day and that the I.R.C. was, as it were, a new broom in the field, is grossly exaggerating the importance of the Corporation.
The question which now arises—many hon. Members have asked it, particularly the hon. Member for Edmonton (Mr. Albu) and my hon. Friend the Member for Derbyshire, South-East (Mr. Rost)—is: what will happen? Will the City now undertake this task?
On my figures, the City has undertaken 96 per cent. of mergers in the last five years, in any case. There is no reason to believe that the City will not go on financing and arranging mergers of this sort. All that we are here arguing about is the fact that the City judged that during this period this 4 per cent. of mergers were perhaps ill-founded and it was not prepared to put its money into them, so the corporation had to do it instead.
What matters in relation to this 4 per cent. is the results, as my hon. Friend the Member for the Cities of London and Westminster said. Perhaps the City was right. Perhaps the mergers which we are considering are not going to be as successful as the Corporation hoped. The only test is whether in the fullness of time, the market was right to be shy of putting its money in, or whether the corporation was right to be bold, and these marginal questions cannot yet be answered. 451 Several companies which have been formed as a result of mergers arranged by the Corporation are already in poor shape. I do not want to put too much strength in this, but the value of the equity investments which the Corporation has made have fallen. The corporation purchased these investments for almost exactly £20 million. The current market quotation of those shares is between £16 million and £17 million. I immediately acknowledge that equity values have gone down during this period, but there is no great evidence to show that the market was wrong in deciding not to touch these investments, while the Corporation was right to put public money into them.
§ Mr. Ridley
I made the point that the whole equity market had gone down, but the right hon. Gentleman is getting rather close to my thinking on this. Some privately fostered mergers were wrong, so perhaps the right hon. Gentleman will admit that some publicly fostered ones were wrong, too. The point is that it is difficult to be sure of a judgment in a matter like this, and who is the right hon. Gentleman, and who am I, to be certain that one person's judgment is better than anybody else's?
There has been running through the debate a serious dilemma in the minds of hon. Gentlemen opposite. It was very well expressed by the hon. Member for Edmonton (Mr. Albu) when he said during the Committee stage of the Bill:We have to keep a nice balance between ensuring that the Corporation has proper targets of profitability and performance and that it is not inhibited from undertaking structural changes in British industry which would not be undertaken if the market forces were left to operate on their own."-[OFFICIAL REPORT, Standing Committee E, 10th November, 1966; c. 237.]What does that mean? The hon. Member for Woolwich, West (Mr. Hamling) and the hon. Member for The Hartlepools (Mr. Leadbitter) said that it meant that we must take into account 452 the social effects of industrial events, the regional effects of industrial investment, mergers and activities, and the balance of payments position. The right hon. Gentleman made much of the importance of increasing exports and saving imports. These things are important, but they are not the paramount consideration in deciding whether a merger should take place.
The policies which apply to the social effects of industrial change, regional policies, and balance of payments policies, are not matters which should be considered in relation to industrial investments and mergers, they are the subject of separate legislation, and some Gentlemen opposite have, as I see it, been stretching the rules of order in raising these matters on the debate today, because they are not even mentioned in either of the Measures that we are seeking to repeal. Hon. Gentlemen opposite have to decide whether the motive of these two Measures was to increase the industrial efficiency of the country, or to promote other policies, such as social and regional policies, and this is where they have got into trouble over their whole approach to this matter.
There is one other point that I should like to make to reinforce what my right hon. Friend said in opening the debate this afternoon. Over and over again in 1966 the Government stressed that the corporation should turn its money over quickly. The right hon. Gentleman came back to this today. The then Minister, the present Lord George-Brown, said:As to how long the money will last, this will turn upon the success of the Corporation in picking the right exercises and its success, and in putting its money in, getting things started, turning it over and being able to start again. If the Corporation can do that really well, the money will last for a very long time."—[OFFICIAL REPORT, 25th January, 1966; Vol. 723, c. 58.]Yet in four years, the Corporation has turned over only a small proportion of its capital, and it is evident that it could not continue simply by turning over the funds it has within its existing statutory ceiling of £150 million.
The continuation of the Corporation's activities at something like the same level as in the past would have required a raising of the limit to provide for up to a further £40 million per annum in the years ahead. Indeed, the Labour Government were intending to increase 453 the ceiling by a substantial amount. So one of the reasons why the Government concluded that it should not proceed with the I.R.C. was the fact that it had not been able to turn over its money quickly enough, due to the fact that its investments had not enabled it to do so, and that it would require more money.
I should now like to turn to the question of altering management, which has played a central part in this debate. My right hon. Friend said that the I.R.C. changed towards the latter half of its life to trying to make board changes in a few cases—some, indeed most, in connection with particular mergers, and some not. Of course, one agrees that there is a large amount of management that can be improved, but I would also like to stress the truth of what my hon. Friend the Member for Leicester, South-West said, that most management is well up to the mark in this country.
Surely the point at issue is what is the right way to effect changes in management, where it is thought that bad management exists. Both the right hon. Gentleman and the hon. Member for Edmonton wanted the I.R.C. to undertake this rôle. It was part of their policy that it should go to a company in the private sector and say, "We do not think that you are doing very well and we will change your managers".
Suppose that this is wrong. Suppose they remove a manager who is very good and put in one who is very bad. What will the shareholders say to this? Indeed, what right would there be for the Government representatives, in the form of the I.R.C., to intervene, to change the management in companies belonging to private shareholders without being requested to do so in the first case, or any contact being made with them? Where is the responsibility for taking action of this sort to lie?
I agree that it would be helpful to find ways to evolve organic solutions to this problem, ways to connect the shareholders more closely with the management of companies. But these problems have been studied often and deep and long, and no ready and easy solution has been found. But the main disadvantage is that the I.R.C. has managed to investigate only a very small number of managements and what we need is to 454 work across the whole field in every sort of area, and not confine ourselves to arbitrary projects singled out by certain people.
To sum up, and to answer the hon. Member for Bristol, Central (Mr. Palmer), the terms of reference of the I.R.C. were hopelessly confused and vague. We were not sure whether they were to achieve social or balance of payments or regional objectives, whether restructuring or management change was the most important thing. In its four years, the Corporation has assisted 100 mergers and changed a few managements. It then turned to selective investment and to a form of rescue operations. These new fields were more and more unwelcome to us, and it was clearly drifting, looking for new work, and needed to be examined closely. The truth is that the Industrial Reorganisation Corporation has not revitalised British management.
On the Industrial Expansion Act, it is curious that only three schemes were ever made under that Act. Despite the extravagant claims made for it, the Labour Government never found any excuse for using it, apart from the two smelters and the computers scheme. If it was so necessary and if, as the right hon. Gentleman said, it had a great rôle to play in the Government's economic policy, why was it that none of the candidates could be found to be used under the general enabling powers of the Act? The fact that not even the Labour Party could find any uses for the Industrial Expansion Act, after those projects which were already prepared, shows that they did not really believe in its efficacy and that they are not sorry to see it go at present.
The hon. Member for Woolwich, West touched on the question of rescue operations and talked about the human problems in such matters. The next question is what safeguards there are against the support of lame ducks. It is a perfectly fair question, and one to which the Government are more interested in finding an answer than even the Opposition. We do not intend to use the industrial schemes to finance lame ducks. The House may be interested to know that those words were used by the right hon. Gentleman the Member for Bristol, South-East in the debate on 1st February, 1968, on the Industrial Expansion Bill. To those who have detected the same attitude in my 455 right hon. Friend, I should be interested to hear them ponder how it is that the right hon. Gentleman can use the identical words of my right hon. Friend about this and not be barracked in the way in which my right hon. Friend was. It is an exactly similar situation—[Interruption.] We do not intend to use the industrial schemes to finance lame ducks. Perhaps we can now have no more on that one from the hon. Gentleman opposite.
§ Mr. Dalyell
Mention has been made during the debate of Leylands. My hon. Friend and I would not accept that Ley-lands is a lame duck. If there is difficulty in it getting credit in situations which have been fully discussed in the debate, what will the Government do about that?
§ Mr. Ridley
The hon. Gentleman knows full well that after the Schemes are dispensed with, we shall have no powers to advance special sums of money of the sort he is suggesting. If we want to inject money into any particular firm or industry, we shall take full political responsibility for doing so, take it on our own shoulders, and make what arrangements seem appropriate for the payment of the money. It is a very different thing to consider the full political responsibility than to talk about political accountability. The right hon. Gentleman went on and on about political accountability. We strongly criticise the I.R.C. pattern because it absolves the Government from political responsibility for their acts. The I.R.C. Act allowed the I.R.C. to do as it wished, to discriminate and to change from one emphasis to another, and the Government did not have to justify it at all. The Industrial Expansion Act was all right because it forced the Government to make an order in each case, coming before the House, to justify what it was doing.
It is curious that when the right hon. Gentleman gave money to Rolls-Royce he did not do so under the Industrial Expansion Act, but under the Civil Aviation Act 1949, which absolved him from the need to come to the House and to be accountable for what he had done. All his brave words about accountability do not seem to ring true.
The Government is accountable to Parliament for everything they do, by Parliamentary Question, Adjournment Debates, Supply Days, or Votes of 456 Censure. It is possible for the Opposition to make the Government answer for any action which the Government take. We intend to take full political responsibility for our actions and the full burden of everything which we do upon our own responsibility.
Then there is this matter of money. In all £105 million has been spent by the I.R.C., and £50 million has been spent under the Industrial Expansion Act, making £155 million expended to date. As my hon. Friends the Members for Exeter and Derbyshire, South-East said, this is a sizeable distortion of the capital market. Inherent in a policy whereby these agencies receive money is the preemption of these resources for other firms who would have had them for making investments. Money of this order cannot be taken out of the system without denying it to other potential investments, because it is money raised on preferential terms from the capital market. I doubt whether the Government or the I.R.C. have the wisdom to know how best to use this money, so I agree with my hon. Friends that it is better to leave the money in the system and to develop the capital market in such a way that there will be money available for firms who wish to borrow, irrespective of the preference or otherwise that they receive from the Government.
The ending of these two Acts fits into a positive policy of the Government. We do not believe that we have any superior knowledge over what mergers are or are not in the national interest. We shall leave it to the market, subject to the monopoly considerations—an area where the past Government's policy was in conflict with their own monopoly policy. Regional policy, social policy and trade policy must be considered on their merits and separate from industrial efficiency.
We also wish to encourage the development of an effective capital market where capital is available to firms on their merits. We recognise that liquidity is tight in the economy. But that is what the former Chancellor of the Exchequer was about: the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) was trying to achieve a reduction in company liquidity through his reduction of the money supply. It is necessary to squeeze company liquidity if wage inflation is to be brought under control. It 457 is discriminatory if not inflationary to make privileged exceptions. We will help investment most if we can get wage inflation under control.
Our policy is to reduce corporation taxation which will increase the funds available to industry for further investment, and we will get much sounder investment if we concentrate on the market
§ rather than making diversions of our scarce capital resources.
§ Therefore I ask the House to give these two Acts the finishing touch by giving this Bill a Second Reading.
§ Question put, That the Bill be now read a Second time:—
§ The House divided: Ayes 315, Noes 272.461
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).