HC Deb 28 November 1972 vol 847 cc212-4
2. Mr. Walter Johnson

asked the Chancellor of the Exchequer what plans the Government have for making good the deficits that will be incurred by nationalised industries which were about to raise charges but may not do so as a result of the freeze.

5. Mr. Bruce-Gardyne

asked the Chancellor of the Exchequer what is his latest estimate of the cumulative cost to public funds of subsidies paid to the nationalised industries to compensate them for participation in price restraint and of the cost of such subsidies during the current financial year; and if he will make a statement.

The Chief Secretary to the Treasury (Mr. Patrick Jenkin)

As I said in answer to my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne), on 24th October, we are in discussion with several of the boards about the amounts of financial assistance that will be required.—[Vol. 843, c. 214.]

Mr. Johnson

Does not the hon. Gentleman realise that the coal, gas, electricity, transport and dock industries will go into serious deficit as a result of the CBI 5 per cent. norm plus the freeze? In those circumstances, would he not agree that the Government should make good those deficits by subsidies and also take into account the position which will arise in those industries as a result of their not being able to put up their charges sufficiently to meet their costs over a period of 18 months?

Mr. Jenkin

I am sure that the hon. Gentleman is remembering the figure which my right hon. Friend the Prime Minister gave on 31st October in the debate on the Address, when he said that deficits in the current year will be about £240 million. In the answer that I have just given. I have indicated that we are in discussion with these industries. Perhaps I might also mention the Post Office; the Bill to deal with the situation in this regard was given a Second Reading a few days ago.

Mr. Bruce-Gardyne

My hon. Friend referred to the Prime Minister's statement. Did he not also say that the current deficit on the nationalised industries' profitability targets was running at £500 million a year? How will this be financed—by allowing interest rates to rise, out of higher taxation or by other means which will stimulate inflation? Surely the only way which is compatible with restraint of inflation is allowing interest rates to rise.

Mr. Jenkin

As I am sure my hon. Friend recognises, it would be wrong for any Treasury Minister to anticipate the future level of interest rates. As for the figure of £500 million, my hon. Friend is right. My right hon. Friend the Prime Minister said that this was the figure the industries should be earning on their capital if there has been no price restraint and no freeze. But the levels of compensation are still under discussion and it would be premature for me to try to take the matter further at this stage.

Mr. Bagier

Is not the Government's philosophy wrong? Will the Minister start thinking in terms not of deficit but of just how much the public purse should pay towards services industries existing at all?

Mr. Jenkin

No one regards this as a particularly happy situation. It is one of the prices which must be paid for putting the stabilisation of inflation at the top of our priorities. We believe that the contribution which the boards of the nationalised industries have agreed to make over the last 15 months and more has played a part in keeping down the level of price inflation below what it would otherwise have been. I am sure that they are right and we are grateful to them for going along with this. But we must now deal with the position both in respect of the past and in respect of the effects of the freeze.

Mr. Ridley

How much was included in this year's Estimates for subsidies to meet the revenue losses of the nationalised industries? Does my hon. Friend think that this is a right charge to lay against the taxpaper in view of the Conservative Party's general attitude to subsidies for industry?

Mr. Jenkin

If my hon. Friend would care to table a Question I could give him details of the amount that will be neces- sary to go into the Estimates for this year, some of which will go into the Supplementary Estimates. On the second part of my hon. Friends Question, I can only say that we regard the reduction of the level of inflation as of top priority and we believe that stabilisation of the prices and charges of the nationalised industries has a contribution to make in this regard.

Mr. Joel Barnett

Will the Chief Secretary now say what is the Government's attitude to subsidies?

Mr. Jenkin

I have nothing to add to what I have already said.