FURTHER COMPENSATION IN RESPECT OF FINANCIAL YEARS 1974–75

HC Deb 21 January 1974 vol 867 cc1339-73

10.28 p.m.

Mr. Joel Barnett (Heywood and Royton)

I beg to move Amendment No. 1, in page 2, line 39, leave out 'financial loss' and insert 'loss of revenue'.

Mr. Speaker

With this amendment, it will be convenient to take the following amendments: No. 3, in page 3, line 11, leave out subsection (4).

No. 4, in page 3, line 20, leave out 'prospective deficit' and insert 'loss of revenue'.

Mr. Barnett

I am sure that every hon. Member is aware of the vital importance of the Bill. I have no doubt that all hon. Members have read the whole of the report in Committee and are aware of the inadequate replies which were given by Ministers. The amendment is identical to an amendment which was moved in Committee, to which we received an inadequate answer. I hope that we shall get a better answer tonight. Above all, the amendment was tabled so as to get the promised progress report from the Minister about the Chancellor of the Exchequer's discussions with the electricity boards on the price increases, about which he told us he was to have negotiations. The Minister promised us a progress report on Report or on Third Reading. I thought that it might be a good idea if the House had the progress report on Report so that when we reached Third Reading we should have a better idea of what the Government are about regarding electricity price increases.

The Minister of State, who spoke to us on this issue after the Chancellor of the Exchequer had spoken in the House on 17th December, said that price increases in, for example, the electricity industry would be allowed only in line with the code—that is, increases would be allowed but no more than the deficit in 1972–73. In other words, the Chancellor of the Exchequer would not allow increases in electricity prices beyond what was allowed for in the code. We are therefore entitled to know, and I hope that the Minister of State will tell us, what this will mean in the coming year in respect of gas and electricity prices. I do not know whether the negotiations have finished, but I hope that the hon. Gentleman will be able to tell us something about them. We should like to know whether the Chancellor intends to bind himself by a code which is becoming more out of date daily and, if there is to be a change, whether the policy will be tougher.

We are told that stage 4 could well be and should be, not tougher than stage 1, but certainly tougher than stage 3. Many commentators have said that we may need again to have a freeze. I am not sure whether that is what the Chancellor has in mind, but I should not have thought that it was possible because to impose a price freeze for any period at a time of price increases such as the present would be absurd. The number of applications which the Department of Trade and Industry is receiving for exemption from the three-day working policy would be as nothing compared with the applications which would be received for exemption from a freeze. I assume therefore that we shall not have a freeze. If we had a freeze, how could the Chancellor of the Exchequer push ahead with what he said on 17th December about gas and electricity prices?

The amendment seeks to change the method of compensation—the subsidy. Instead of the deficit financing method, it proposes that payment should be made on a loss-of-revenue basis. No one will dispute what the Minister of State said in Committee—that there is a need to return to commercial targets at the earliest possible moment. However, the hon. Gentleman said that that could not be done "until circumstances permit". I do not know what circumstances he had in mind, but, given the present prospect about inflation, I should not have imagined that the circumstances were likely to permit of a relaxation of measures to restrain inflation.

I therefore wonder what the Minister of State had in mind when he talked about circumstances permitting us to return to commercial targets and fiscal discipline of a kind which we would all wish to see operating. In addition, I hope that the Minister will say what the Chancellor meant on 17th December when he talked about arranging help for the neediest households to meet increased gas and electricity prices. I shall be interested to learn how the Chancellor of the Exchequer proposes to protect the neediest householders from gas and electricity price increases.

The idea of deficit financing must be recognised as something which we should all like to see removed. My suggestion would mean a return to a commercial target and the target could be on the basis of a fixed percentage of capital employed. The prices could then be fixed accordingly, with any enforced reduction under the policy being met by subsidy, and that would be the amount of the subsidy. That would be the revenue forgone and there would still be some fiscal discipline.

The burden of the Minister of State's argument was put as follows in Committee. He said, We will still have great difficulty in deciding precisely what is the amount of revenue forgone."—[OFFICIAL RFPORT, Standing Committee F, 11th December 1973 ; c. 68.]

But I submit that it is nothing like as difficult as forecasting a loss, as is intended in Clause 2. Forecasting a loss in a nationalised industry is not very difficult, and in fact is comparatively easy—but forecasting the size of the loss, which is what Clause 2 has in mind, is more difficult.

I hope that the Minister of State will think again about this matter. Indeed I hope he will be able to accept the amendment. Above all, he should be in a position to tell us a great deal more about the progress being made in the negotiations mentioned by the Chancellor of the Exchequer on 17th December—negotiations which will have such serious repercussions for so many households—if he is to substitute tax increases for price increases on the lines he has indicated.

Mr. J. Bruce-Gardyne (South Angus)

The hon. Member for Heywood and Roy-ton (Mr. Joel Barnett) contemplated the possibility of stage 4—if that is the next number we move to—being a freeze, and said that the flood of applications for price increases under a freeze would make the flood of calls to the Department of Trade and Industry about the present energy restrictions pale into insignificance. However, he overlooked the possibility that perhaps we should be looking forward to the non-statutory corporations (financial provisions) Bill. If we can subsidise statutory corporations for their contribution to a prices and incomes restraint policy, presumably we can contemplate at a future date the taxpayer subsidising prices in the private sector to enable it to cope with a freeze.

Mr. John Biffen (Oswestry)

Bread, for example?

Mr. Bruce-Gardyne

My hon. Friend mentions bread, and that is an obvious candidate. I do not think that that in itself is an overwhelming objection to that next phase on the perilous path on which we are engaged.

I am delighted that we have with us today the new Chief Secretary. I congratulate him on his new position. It seems to me peculiarly apposite that he should be with us in these discussions, because I am sure he will forgive me if I describe him as a poacher turned gamekeeper. He replaces a gamekeeper who has now turned poacher. Although I have some regret at the absence from these discussions of the right hon. Gentleman the new Minister for Energy, I shall be referring to him and shall find the inter-relationship between him and the Chief Secretary most interesting and constructive in terms of these discussions.

I confess that my attitude towards the amendment is somewhat schizophrenic. In Committee, I drew attention to the comments of a former chairman of one of the regional electricity boards who had ponted out very fairly that the technique of deficit subsidisation as proposed in the Bill, certainly in the past and to a limited extent in the future, represented a technique of giving the largest prize to those who ran the fattest deficits—in other words, a bonus for incompetence. That is a proposition which my hon. Friend the Chief Secretary, in his previous incarnation, was prepared to concede to me in correspondence.

In Committee, my hon. Friend the Minister of State pointed out very fairly that, quite apart from the complications of the computation of revenue forgone suggested by the amendment, a decision to compensate the statutory corporations in the Bill on the basis of revenue forgone would mean in practice treating them preferentially to the private sector.

That is established clearly when one considers the situation of the Giro. The Giro is currently forgoing revenue. It is even doing so because of its inability as a result of tariff increases recommended by Cooper Brothers as a precondition for the continued survival of Giro two years ago. In the interests of this bizarre policy it has had to forgo increases in tariffs which we were assured would take place as a precondition for the artificial resuscitation of the Giro.

If we said that the Giro was to be compensated for revenue forgone, we should say that the Giro would get this compensation based on a computation of what the tariff increases which should have occurred would have brought in revenue. At the same time the joint stock banks which are in direct competition with the Giro would have to submit their requests for price increases to Sir Arthur Cockfield and his merry men and, as we see at present, have them rejected not because they were unjustified on the basis of the price code approved, for better or worse, by this House, but simply on the basis that there was a comma out of place and the revenue which the joint stock bank was required to forgo as a result of the juggling with words of Sir Arthur Cockfield and his friends would not be compensated, yet the Giro would be in direct competition.

For that reason, I cannot find that the amendment provides a satisfactory answer to the dilemma on the horns of which my right hon. and hon. Friends have so elegantly hoist themselves.

However, before leaving this amendment, I suggest that we should devote a few minutes to a piece of evidence which has come to us since the Committee stage of the Bill, and then I want to say a word or two about the very important point which the hon. Member for Hey-wood and Royton raised about the precise meaning of the statement on 17th December by my right hon. Friend the Chancellor of the Exchequer.

The new evidence to which I refer is the First Report from the Select Committee on Nationalised Industries. I am thinking particularly of paragraphs 56–72 and 108, which relate the consequence of the policy of price restraint on the finances and management of the nationalised industries in all its full horrific detail. A number of points relating to this report are relevant to the argument about the way in which we should try to regulate the compensation for the deficits of the statutory corporations under the Bill for the future.

My right hon. Friend the then Chief Secretary, now the Minister for Energy, said in paragraph 67 that there was … still within the industries as firm a control over costs and as clear an incentive to maintain control over investment and to apply the financial criteria as there had been before —before, that is, the introduction of price restraint. One is tempted to recall the riposte of the Duke of Wellington to the crossing sweeper in response to that comment. Clearly the Select Committee was not entirely prepared to agree with my right hon. Friend—

Mr. John Golding (Newcastle-under-Lyme)

The hon. Gentleman would add to his case by quoting what the Chief Secretary said immediately after that: However, this could not be expected to last indefinitely. Those words qualified what he had said about the performance of the nationalised industries. The Committee said that it welcomed the fact that the Treasury recognised the dangers of price restraint.

Mr. Bruce-Gardyne

I entirely agree, but it is a recognition which does not seem to have impressed itself to the extent of a change of view.

However, there is a more important point, more directly germane to our debate. My right hon. Friend in Committee tried to reassure us about one significant aspect of price restraint. He said that there was no evidence to date that it had had a distorting effect on the pattern of investment in the statutory corporations under consideration, particularly the electricity boards, in the sense of artificially stimulating demand and thereby generating the need for investment in the boards over and above what would otherwise have occurred.

In paragraph 64, the Committee said: … the Department of Trade and Industry would be seriously in error if it were to allow investment decision making to be based on the present artificially low prices. I can only assume that the Committee felt it necessary to utter a warning because it could already see that that was beginning to happen.

In paragraph 65, my hon. Friend the Chief Secretary—as I said, his change of rôle is particularly apposite in the context of this debate—then Minister for Industry said: If prices were too low, it created a demand on resources and for increased investment. Yes, indeed.

Apart from the graphic picture in the report of the holocaust which has been created in the name of price restraint in the entire management and finances of the public sector, there is considerable reason for disquiet about the extent to which already the investment programmes are being distorted by artificially generated demand created by price restraint.

10.45 p.m.

I now turn to the subject of the remarks of my right hon. Friend the Chancellor of the Exchequer on 17th December. The hon. Member for Heywood and Royton did not quote them and I shall not do so extensively, but there was one crucial sentence to which the House must give its consideration. My right hon. Friend said: At a time of the most acute energy shortage and in our present financial difficulties, it is anomalous—to say the least—that we are subsidising coal and electricity prices at a mounting rate".—[OFFICIAL REPORT, 17th December 1973; Vol. 866, c. 962.] He did not say that it was anomalous—to say the least—that the electricity boards were not taking advantage of the extent to which the present rules and regulations might permit them to increase their prices ; he said that it was anomalous—to say the least—that that degree of subsidy of scarce energy resources should be taking place.

It was logical for the House to assume, and I think that many of us did at the time, that my right hon. Friend was making the clear and welcome pronouncement that, in view of the energy crisis, special exemptions from the full rigours of the code would have to be applied to the electricity boards. But, as the hon. Gentleman has reminded us, in Committee my hon. Friend the Minister of State went out of his way to explain that, on the contrary, the price code applied to the electricity boards as if there were not an energy crisis and no shortage of supplies whatever. In other words, he virtually denuded my right hon. Friend's statement of 17th December of all specific meaning.

I hope that tonight my hon. Friend will be able to give us a measure of reassurance on this point. I press him again, as I pressed him in Committee—what precisely is the meaning of the Chancellor's statement for the sort of three-stage deflator that is applied to the prices of the electricity boards and other statutory corporations? May I explain to my hon. Friend exactly what I have in mind when I talk about a three-stage deflator?

First, the code says that the electricity boards, among others of the nationalised industry boards, shall not be treated pari passu as companies in the private sector that are in a loss-making situation. Is that unchanged as a result of the Chancellor's statement? The boards go to Sir Arthur Cockfield and his pals with their submission, which has to take account of the fact that they are not to be treated as are loss-making private companies. Are we to take it that Sir Arthur Cockfield will be strictly bound by the provisions of allowable costs and the rest as laid down in the code, as he has been in the past?

Then we have stage three—and perhaps that is an inapposite phrase—the third section of the pressure that is applied to the nationalised industries when Sir Arthur Cockfield says, "Yes, you are entitled to this increase of X per cent. under this wonderful code" and then my right hon. Friend the Minister for Energy, gamekeeper turned poacher, says "Ah, that is too much ; we could not have that and you must be content with £X minus 5, or £X divided by two". The result would be yet a third deflater. From which, if any, of these three successive phases—unfortunately, I cannot think of another word—of price restraint on the electricity boards does my right hon. Friend's statement of 17th December offer exemption?

If my hon. Friend is unable to go further than he was going in Committee, I put it to him that all my right hon. Friend was saying on 17th December was that electricity boards may have a case, as may have the National Coal Board, for an increase in prices under our existing rules and that he was just reminding them they have such as a case, and, if they have, was going to encourage them to go ahead and press it. If that is all it means, it seems to me that part of my right hon. Friend's statement on 17th December is denuded of substance.

A further conclusion one must draw from the unhappy dilemma we are facing tonight is, it seems, this: in all sincerity I do not see that it makes a twopenny damn of difference whether we try to compensate the statutory corporations on a basis of deficit subsidisation or on a basis of deficit targets or on a basis of revenue forgone, as the amendment suggests. Therefore, in the unlikely event that the hon. Member can muster his scattered forces to press it to a Division, I cannot support the amendment ; nor, in all fairness, can I vote against it, because the proposition either way is meaningless.

There is another conclusion we should draw. My right hon. Friend now the Minister for Energy, in his evidence to the Select Committee on Nationalised Industries, said it was largely crying for the moon to expect Ministers not to intervene in pricing policies, with all the consequences we have seen. I am sure we must recognise the fatal temptations to which we expose civil servants and, indeed, Ministers, of whatever party, as long as we further extend the frontiers and fail to restrict the frontiers of the public sector economy.

Mr. John Golding (Newcastle-under-Lyme)

The hon. Member for South Angus (Mr. Bruce-Gardyne) has raised two important points, that of the damage which the Government's pricing policy for nationalised industries is doing to those industries and that of the effect on the investment programmes to which the policy this amendment seeks to amend is leading.

When we debated the Bill on Second Reading I assumed that the most deleterious effect of the counter-inflation policy on the Post Office would come from the uneconomic pricing policy, but it is now apparent that the worst damage, of necessity, will come from the massive cuts in investment announced by the Chancellor of the Exchequer. It is my view that those cuts have been forced upon the Chancellor because of the pricing policies which have been pursued in the nationalised industries for the last two or three years. Had rational pricing policies been pursued there would have been no need for the cut to have been inflicted upon the Post Office.

Before describing the financial consequences of the cuts let me record that since the Standing Committee reported, the Select Committee on Nationalised Industries has issued a report on Investment Procedures—HC 65. I do not apologise for quoting extensively from the report, because the report directly comments upon the Bill. The comments are directed mainly, not to matters which we shall discuss on the next amendment, but to the pricing policies with which the Bill is concerned.

Paragraph 71 of the report says: 71. The crux of the matter is, of course, prices and incomes policy and Your Committee are well aware of the importance which successive governments have paid to it. Nevertheless, they feel obliged to point out that, if there were real benefits to be gained from the introduction of financial targets, there are real costs to be borne if they are abandoned, albeit temporarily. Similarly, having encouraged the industries to pursue rational, well thought out investment policies, the Government must recognise the dangers of allowing these policies to fall into abeyance. The short run exigencies of a combination of inflation and unemployment clearly have to be dealt with, but it is to be hoped that this can be done without too much consequent damage to the long term prospects of a very significant section of the economy. 72. Your Committee are concerned about the role of the nationalised industries within the counter-inflation policy. The effect of this has been to abrogate the previous financial policy and to leave the industries in a poor financial position, even in deficit. The arrangements for Stage 3 of the Price and Pay Code, may actually worsen the position of individual industries, depending on what price increases are acceptable to Ministers. Your Committee note the terms of the Statutory Corporations (Financial Provisions) Bill now before the House. One of the purposes of this is to compensate certain nationalised industries for the effects of price restraint on their finances and, in particular, deficits incurred as a result of it. Your Committee also note that the Bill will provide some alleviation to the industries concerned. Nevertheless, Your Committee see the Bill as a short-term measure. They do not consider that planning in the medium or the long-term can be effective in the context of a situation of permanent price restraint coupled with occasional Government measures for compensation payments. The Committee takes up the point again in paragraph 110: Your Committee's concern is not however confined to the general criticism that the system of control embodied in the 1961 and 1967 White Papers has been eroded. At the same time as this has been happening, Governments have pursued policies which (however necessary they may have been in the national interest—which is not a matter for Your Committee to consider) have by common consent tended to compound the problems facing the nationalised industries. This applies particularly to the restraints placed on the industries, pricing policies (whether 'voluntary' or statutory), which have necessitated the abandonment of financial targets for the industries and which have almost certainly led in many cases to the distortion of demand and in consequence to the danger of badly based investment decisions. It is true that under the provisions of the Statutory Corporations (Financial Provisions) Bill the adverse financial effects of the policy of price restraint are now to be mitigated both retrospectively and for the next two years in respect of some major industries which have incurred deficits, but this does not alter Your Committee's conclusion that the imposition of the policy is bound to have had a distorting effect on investment decisions. Your Committee believe that the effects of this on the general morale of the industries are already discernible, and that if the present situation persists they may become very serious. 11.0 p.m.

I turn next to paragraph 111, and I make no apology for quoting further at some length from this report, because it was the result of an all-party investigation and very careful consideration. The Select Committee said: Both the Ministers who appeared before the Sub-Committee recognised that the present position was unsatisfactory, but Treasury officials were hopeful about the prospects of an eventual return to a system of long-term objectives, even if this had to be preceded by a period when a system of short-term arrangements with each industry would operate. In the debate on the Second Reading of the Statutory Corporations (Financial Provisions) Bill, the Chief Secretary to the Treasury stated that it was the Government's 'settled intention to restore the industries to normal profitability …' and 'to return as soon as possible to somewhere near the previous system of long-term financial objectives, supplemented by corporate planning of the kind the industries are currently introducing'. Your Committee believe that the Government should make an early statement setting out the steps which they propose to take to restore the industries to profitability. In Your Committee's view the process of returning to viability may be prolonged and difficult, and in any case they are far from convinced in the light of events over the last five or six years that the system of control developed in the 1960s will prove adequate to deal with the problems thrown up in the late 1970s. It was obviously of great concern to the Select Committee that the Government's pricing policies would have an impact on investment planning. It is obvious also that the policy enshrined in the clause we now seek to amend would have a distorting effect on investment in the Post Office.

It is essential that there be long-term planning in the nationalised industries. In the summary of recommendations, the Select Committee said—this is recommendation (3)— The Treasury and sponsoring Departments should take steps to ensure that corporate planning is used effectively throughout the nationalised sector", and in recommendation (6) it said that— All industries should have long term plans on which current policies are based and sponsoring Departments should encourage such developments and take the lead in promoting long term techniques. Further, in recommendation (7), the Select Committee said that— The nationalised industries should be encouraged by sponsoring Departments to take technological forecasting more seriously". It recommended also—a matter of great interest to me—that there be a long-term planning embracing telephony, data transmission and the distribution of radio and television signals, and that this should be drawn up as soon as possible.

Those were the views and recommendations of the Select Committee on Nationalised Industries before the Chancellor announced his cuts. The Committee had studied just the pricing policies for the nationalised industries. It saw that those policies as they then existed would make it more and more difficult for the nationalised industries to plan, and more and more difficult for them to follow rational investment policies. It should be remembered that, in talking of nationalised industry investment decisions, we are talking in terms of thousands of millions of pounds.

That was the situation before the Chancellor's statement. My concern changed at the time of that statement, because included in it was the announcement of a 20 per cent. cut in the investment programmes of the nationalised industries in the coming year. By any standards, that is a savage cut. Any business faced with such a cut in investment in the next financial period would be as shattered as I believe the Post Office management was when it heard of that decision.

I do not believe that these cuts would have been necessary if the demand in the economy had been cut by rational pricing policies in the nationalised industries. The cuts would not have come if the Government had permitted the nationalised industries to raise their investment funds from the consumer rather than having to go to the taxpayer via the Exchequer, or to Europe, thereby damaging the balance of payments.

It is necessary to spell out to the Minister of State the significance of the cuts to the Post Office. I am glad that the Minister for Posts and Telecommunications is here. I need not spell out the significance of the cuts to him because I was able to congratulate him on the occasion of the Post Office (Borrowing) Bill 12 months ago on being the last of the big spenders. At that time the right hon. Gentleman showed a full appreciation of the needs of the telecommunications service. I put that on record now because we must be clear, as the Post Office staff is, that the enemy of the Post Office is and always has been the Treasury.

I declare my interest in my connection with the Post Office Engineering Union. It is a matter of regret for many in that union, having gone into the public corporation on the promise that Treasury control would be reduced, that the brake that was constantly being put on by the Treasury would be less effective, that that has not come to pass. The cuts which have been imposed by the Treasury upon the nationalised industries, including the Post Office, which are consequent on financial and economic policies, have led to the most disruptive and disturbing cuts ever in investment in the Post Office.

It may be that the cuts and their timing will have had harmful consequences which the Government may well not have foreseen fully. There may be consequences for economic growth, for the quality and cost of telecommunication services, for manufacturing industry, for employment, for management and staff of the telecommunications business, for the Post Office and, what is relevant and important to the Bill, for the future cost of the provision of telephone services.

In the view of the Post Office Engineering Union and, I should think, of staff generally, the size and timing of the cuts are such that they will bring so much harm that the Government would be justified in reconsidering their decision. Certainly the Government would be justified in rethinking in toto their failures towards the Post Office and all the nationalised industries. If they cannot reconsider pricing policy and the size of the cuts imposed upon the Post Office, the least they can do is to reconsider the timing and the rephasing for reasons which I hope to enumerate later.

I emphasise that telecommunications is now an essential strand in the nation's social fabric. It is a vital part of the economic infrastructure. It performs an essential service not only to manufacturing industry but to the financial sector, including banking and insurance, upon which we depend so much for overseas earnings. The demand for telecommunication services has in consequence been high. International experience shows that there will be no sign of slowing down for many years despite the artificially low tariffs. Even if those tariffs are raised to economic levels, international studies have shown that telecommunications will become increasingly important not only for industry and commerce but for dramatically reducing the cost of Government administration. Telex facsimile and data transmission are all recent developments which will bring about a revolution in industry, commerce and administration in the expected telecommunications explosion. It should also be borne in mind that telecommunications may become increasingly important as an alternative to road transport. It is a low energy user. It is pollution-free, and will not use scarce materials.

11.15 p.m.

But the importance of the rapid development of telecommunications in industry, business and commerce is in the growing use that there will be of automated processes and the reliance of data transmissions on automation. For many industries in the 1980s efficient communications will be as important as energy is now. If the Government adopt this type of policy towards telecommunications in the 1970s we shall face in the 1980s a communications crisis in this country equivalent to the present energy crisis. It is important to recognise the dependence that there will be in industry and commerce on the development of telecommunications.

I have talked futuristically, but it is clear that at present Britain's telephone service, particularly the vital international telephone service, is still far from adequate, despite substantial increases in staff productivity, improved managerial performance and heavy capital expenditure. Some potential subscribers are waiting far too long for service. Sometimes they and others are forced to share a service against their wishes.

The quality of service from older exchanges sometimes leaves much to be desired, and congestion is a problem along many routes. Increasingly, businesses and professions ask for additional services which cannot generally be offered by the Post Office, although they are becoming available abroad. It was because it was aware of the need to improve the quality and range of services that the Post Office took the decision to invest in TXE4 development, a decision supported by my union and backed by the Government.

The Post Office telecommunications business, although proud of its recent progress, is well aware of its own shortcomings, the causes of which are to be found in the past. The deficiencies had their origin not only in the failure of the all-electronic telephone exchange in Highgate Wood, which was to replace the obsolescent Strowger exchange, but also in the capital starvation of the 1940s and 1950s and the way in which managerial initiative was stifled before the reorganisation in 1969.

Supported by successive Governments, since 1969 the Post Office Board has prepared an exciting, imaginative programme which, although it could not go far enough in attempting to achieve eventual technical integration through co-ordination, was nevertheless recognised to represent a big advance.

When presenting the Post Office (Borrowing) Bill a year ago, the Minister described the achievements expected in the next few years, achievements which, incidentally, assumed a growth rate of staff productivity of 5 per cent. The Post Office had in addition prepared a 10-year corporate plan which we understood, with certain reservations about the need for an integrated network, would have solved many of our problems.

If the cuts are made, both the plans announced by the right hon. Gentleman and the Corporation will be worthless. One cannot possibly devise plans which take into account such heavy cuts at such short notice.

While the union does not know how the Post Office will apply the cuts, it appreciates the difficulties that the board must be having in arriving at criteria by which to apply the cuts. Almost certainly at some point services for business, professional, commercial and administrative interests will suffer. As we are as a nation regretting some of the investment decisions taken in the energy industry—

Mr. Deputy Speaker (Mr. E. L. Mallalieu)

I am sorry to interrupt the hon. Member. The amendment is about financial loss and compensation therefor. The hon. Member is discussing a very wide field of investment. Will he limit what he has to say to what is in the amendment?

Mr. Golding

Unfortunately perhaps I was following the hon. Member for South Angus (Mr. Bruce-Gardyne)—

Mr. Deputy Speaker

But at much greater length.

Mr. Golding

As I understand it, the question of length has never been a matter for the Chair. If one is tedious or repetitious—

Mr. Deputy Speaker

Perhaps I should have referred to the width over which the hon. Member has spread.

Mr. Golding

If you withdraw "length" and replace it with "breadth", that is a matter for you, Mr. Deputy Speaker.

Mr. David Crouch (Canterbury)

The hon. Gentleman cannot tell the Chair what to do.

Mr. Golding

If the hon. Member for Canterbury (Mr. Crouch) wishes to make comments from a sedentary position, breaking the rules of the House in so doing—

Mr. Crouch

I had not thought of interrupting the hon. Member, because I have always thought the Chair should rule when a Member is out of order. I was extremely bored having heard the whole of this speech in Committee. The way in which this House acts sometimes makes the public ridicule our behaviour.

Mr. Golding

If the hon. Member had listened, he would have heard me say that the consequences of these cuts have come to light very recently indeed. Had the policies that we are seeking to amend not been followed, there would have been no necessity for the cuts. If one is following that line of reasoning the least one is permitted to do is to point out to the Government the consequences of the cut which has followed the pricing policy. If I had lengthened my speech by saying, "But had this policy not existed the policy of the Government would have been different," I submit that at no time would you have doubted whether I was in order, Mr. Deputy Speaker.

Mr. Deputy Speaker

Provided it was in moderate length. What the hon. Gentleman is saying does not seem to be directly connected with the amendment.

Mr. Golding

Perhaps I shall have to rephrase what are very serious arguments in another way.

If compensation is based on loss of revenue, the consequences to which I have referred need not follow. The cuts follow directly from the policy enshrined in the Bill—

Mr. Deputy Speaker

Perhaps they do, but we are discussing the question of compensation for loss.

Mr. Golding

Perhaps I shall have to go back to the beginning to illustrate the argument, but, given the Government's pricing policies, we are considering what the level of compensation should be. Why is it necessary to pay the compensation? For what is the compensation required? What is its purpose? Why do we want the computation to be made in the manner that we suggest in the amendment? Many answers could be given to that question, but the one which I give is that we need the money in the nationalised industries in order to finance their investment programmes. We want to avoid cuts being made of the sort now being imposed. We want them to be in a position to invest without having to borrow money from Europe. The Post Office wants to borrow money in order to do certain things.

It is reasonable to talk about the damage to the telephone service and to telecommunications which will occur if investment policies are pursued which are inferior to those which would be pursued were sound financial policies to be adopted. It is important to state what the investment is required for. We have previously neglected investment in the energy industry. The policies enshrined in the Bill exclude the energy industry to a large extent because of the realisation that not only must energy be used properly but investment must take place.

Overseas countries pursuing rational policies are investing heavily in their telecommunication services. This is not the British Government's policy. The Government's decision to cut back will bear very heavily on the private equipment manufacturing companies because it will have an impact on the future costs of equipment for the Post Office. It is reasonable to point this out because the bulk of their orders come from the Post Office. Without strong home support they may do even worse in the export markets than they have been doing.

11.30 p.m.

In the past I have been very critical of the way in which the private sector has failed to provide exchange equipment at the right time at competitive prices. We recognise that this has resulted in heavy pressure being put on the industry by the Minister of Posts and Telecommunications, and in pressure being put on the Post Office to expand its capacity quickly to meet the demand of the telecommunications business. To be able to do this the Post Office has recruited and invested heavily on the basis of Post Office plans which existed before the announcements of the cuts.

I make no reference to the problems of the companies, but it is reasonable to point out that this pricing policy, which has led to the investment policy will, in turn, increase the cost to the Post Office, to the extent that next year and the year after it will bring about disruption in the manufacturing industry.

Any increase in costs will be disappointing to the Post Office. All in the telecommunications industry are proud of the rise in productivity that has taken place in recent years. We believe that in the long term this policy must lead if not to a fall in productivity then to a rise in costs. The policy as contained in this clause is self-defeating. There are bound to be heavy additional costs for the telecommunications business, arising from these expenditure cuts. I repeat: these cuts follow directly from the pricing policy of the Government.

The equipment which will be cancelled next year will have to be installed at a later date, at increased cost, and the waste is bound to undermine morale among those who work in the telecommunications business.

This, and the other provisions in the Bill, will have one other effect. This Bill and the policy of cuts that it enshrines—and here the Select Committee was quite precise about the general position—will make it impossible for the present forward-looking mood that prevails amongst both management and Post Office staff to continue. It is impossible to have a clause that permits only the losses to be paid and to expect managers, faced at the same time with investment cuts, to run the business in a mood of optimism, because they are faced with a situation in which all their plans have to be scrapped and, at the same time, they are told by the Government, "Whatever money you lose will be made good." But what we shall—

Mr. Deputy Speaker

Order. It is a long time since I asked the hon. Member to confine himself to the amendment, which is about the basis of compensation, but he persists in talking about losses and why they are made.

Mr. Golding

With respect, Mr. Deputy Speaker, I am now absolutely on the amendment.

Mr. Deputy Speaker

I hope that the hon. Member will remain so.

Mr. Golding

The amendment is to leave out "financial loss" and insert "loss of revenue". It is absolutely in order to talk about the difference facing management in a situation in which the Government say, "We will make up any losses you make" and one in which they say, "We will not compensate you for loss of revenue". That is a quite different situation. One can understand the Government's point of view but it is a situation which, I understand, was debated in Committee and which is germane to the argument.

I speak feelingly because I think that the policy contained in the clause and the implications of that policy will lead to loss of morale throughout the nationalised industries to which it appertains. The Government are saying—I explain it to you, Mr. Deputy Speaker, because I obviously have not made myself plain—that they are prepared absolutely to meet a loss or deficit ; if the Post Office makes a loss and that loss is recorded, they will make up that loss. It is a blank cheque. Losses will be paid for which arise from the pricing policies of the Government.

The Government are not saying to the nationalised industries that, if they increase their turnover and that turnover with economic policies would lead to an increased surplus, they will get that surplus. All they are saying is that they will meet any book losses. That is a very different situation, which will bring about despair in the Post Office and the other nationalised industries.

I conclude—[HON. MEMBERS: "Hear, hear."] I do not apologise for these arguments. It is most regrettable that in the Commons a serious argument affecting an industry of this nature cannot be made in this way. It would have been much easier for me tonight to have filibustered, as I did in Committee—speaking not seriously, but within the rules of order—and I am tempted to do it later to show what a mockery the rules sometimes bring us to in this House. I do not apologise, because I have been making what I believe to be a serious contribution affecting the livelihood of many thousands of people.

Mr. Deputy Speaker

Order. Instead of defending himself, will the hon. Member finish up on the amendment?

Mr. Golding

I shall conclude, Mr. Deputy Speaker, by saying that I think these amendments are important and that the arguments on them should be listened to very seriously indeed.

Mr. Arthur Palmer (Bristol, Central)

I intend to speak fairly briefly on one or two points which arise on the amendment and which certainly affect the one nationalised industry with which I am familiar, the electricity supply industry. I spoke on the Second Reading of the Bill and, I suppose as a punishment, I was duly appointed to the Standing Committee. But I did not serve my term there because I had to go away to act as Chairman of the Energy Sub-Committee of the Select Committee on Science and Technology, which was regarded as a legitimate reason for absence. Therefore, I missed the contributions made in the Standing Committee on these points, including the most detailed contributions made by my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding).

While I was in the Chair of the Energy Sub-Committee some interesting evidence was given by Mr. Arthur Hawkins, the Chairman of the Central Electricity Generating Board. He was questioned on the reasons for extra investment in electricity supply—investment which, some months earlier, in evidence to the Select Committee on Science and Technology, he said would not be so necessary because loads were not rising fast enough. When he was questioned whether the restraint on prices had contributed to this surge forward in electricity demand, he said—and I am speaking from memory—that he felt it had a bearing on the situation.

Therefore, it is absurd for Ministers to argue, as they appear to be arguing, that at a time when prices generally are rising, the price of electricity can be artificially restrained, without the demand rising proportionately, thus influencing the need for extra investment which at present interest rates may be very expensive indeed. It is a charge which the Government must take seriously.

I wish to make a further point about the electricity supply industry relating to the amendment, namely whether we should compensate for the loss as measured, which is a premium to the inefficient—a point reasonably made by the hon. Member for South Angus (Mr. Bruce-Gardyne)—or whether we should accept the measured actual loss of revenue. My feelings on this matter are divided. In terms of electricity supply I do not think it will make a great deal of difference, if only because of the fact that at present we have an emergency which is distorting demand over the 24-hour period and where the normal will be hard to define.

Electricity supply—one of the principal industries affected by the amendment—is in a special position because it cannot pick and choose its markets. It is under a statutory obligation to supply every consumer who demands a supply. It cannot escape by saying, "This is not the kind of market in which we wish to operate. We do not want this particular consumer if we can avoid having him." The consumer must be accommodated. When there is an artificial restraint on prices, one is saying to the electricity supply industry, "You must go on connecting because that is your statutory obligation, but you must also carry the financial loss that is incurred." Hence the greater the activity, the greater the loss.

11.45 p.m.

A further objection to the policy whether it be taken on one form of measurement of loss to the industry or another, at a time when all other prices are rising, of artificially restraining the price of electricity—apparently the Government are prepared to subsidise the price of electricity but they shrink from subsidising the price if food—is that it encourages waste.

From the general point of view of the national interest, energy prices should not be held down for if this country is to embark seriously upon a policy of conserving energy resources, we may have to let energy prices rise to make sure that energy is better utilised.

Knowing the experience of my hon. Friend the Member for Newcastle-under Lyme, I do not stray too far down this path, but I have great difficulty in understanding why it should be argued that it is necessarily in the national interest artificially to hold down the price of energy. Considerable savings could be achieved by industrial, commercial and domestic users if they looked at the efficiency of their utilisation. If that were done it would bring about a reduction in their bills equal to anything which might be achieved from an artificial Government subsidy.

Reference has been made to the evidence given before the Select Committee on Nationalised Industries, especially that given by the present Minister for Energy who at the time was Chief Secretary to the Treasury. He made some remarkable confessions in his evidence. He said, for example: Ministers have been interfering a great deal too much in the last two or three years —it is difficult to believe that he was one of the Ministers doing I he interfering— I should have thought this would almost go without saying. The justification is that higher priority must supervene, namely, the need to seek to control inflation. I have taken a great interest in these matters over the years and I have never believed, except in the case of major matters affecting the national interest, that it was legitimate or normal for Ministers to interfere in the day-to-day running of nationalised industries and in their pricing policies. Therefore it is remarkable for a responsible Minister in what passes for a responsible administration to say to a Select Committee, "We are under a kind of compulsion. We cannot help doing it. It is wrong to do. Nevertheless we do it, and we do not know how to stop doing it."

If this is to be the practice, Parliament should give some new guidelines to the nationalised industries. We should have to depart from the statutory provision that Ministers should intervene formally only when there is some over-riding issue affecting the national interest. There would have to be defined areas in which the Minister was allowed to intervene even on day-to-day questions.

The more this policy is examined, by whatever method one compensates, the more absurd and ridiculous it appears to be. If at the end of the day there were any satisfactory proof that the policy was restraining inflation, at least there might be something to be said for it. But inflation still marches on apace and at the same time the proper administration of the nationalised industries, the morale of the staff and everything to do with the comparability of the efficiency of one industry with another are suffering.

Therefore, if my hon. Friend presses the amendment to a division—

Mr. Joel Barnett indicated dissent.

Mr. Palmer

He is shaking his head, so presumably he does not think that he should take it that far, but I would certainly have voted for it even though I think that the important question is not so much the alternative methods of measuring the loss to the nationalised industries as to ask once again why the policy should be operated at all.

Mr. Joel Barnett

We are not arguing whether the prices should be allowed to rise to the unsubsidised level, because that is not what the Government suggest. They are suggesting that they should rise to the maximum allowed by the code. We are arguing only about how any deficit should be financed.

Mr. Palmer

I am obliged for that correction. But I am doubtful about the policy in general. Until 1972, under administrations of Government, my industry had never once gone into the red. In 1972, we were driven into a loss situation, and were only just about clear in 1973. I shudder to think what the loss will be in the coming year in electricity supply under the present Government and its own peculiar brand of interventionism.

The Minister of State, Treasury (Mr. John Nott)

Every hon. Member who served on the Committee on the Bill will agree that we have discussed it exhaustively. Both on Second Reading and in Committee, neither my right hon. Friend the previous Chief Secretary nor I sought to disguise our concern about the effects of open-ended deficit financing on the morale, efficiency and management of the nationalised industries. I recognise, as have my right hon. and hon. Friends, that if a policy of price restraint were to continue indefinitely, the pattern of demand between one industry and another and investment in the nationalised industries would be distorted.

I made it clear in Committee however that I did not believe that any such distortion had so far occurred. I must emphasise again that the capital expenditure programmes of the electricity industry are set out in Cmnd. 5519, the public expenditure White Paper, as indeed are the capital expenditure programmes of the Post Office. I repeat, without any qualification, that these capital expenditure programmes have not so far been increased on account of price restraint and consequent inflated demand.

The point that I have made all along is that there is a serious potential risk that this will happen. Certainly I do not deny—I have not denied in Committee and I do not deny it tonight—that there is a medium-term danger of the distortion of demand between one industry and another if the policy of price restraint as we have recently had it continues for an indefinite period. There is no argument between us about that. In the medium term, I repeat, I would not dissent from the argument that my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) is advancing.

Mr. Joel Barnett

Is the Minister of State saying that price restraint should not continue beyond the medium term? If so, would he give us his idea of medium term?

Mr. Nott

On Second Reading I dealt with the whole subject of the distortion of demand in the fuel industries and said: I must emphasise that consumer demand for fuels is relatively price-inelastic in the short term. The reason is clear enough: people become committed to one form of heating or lighting and they do not readily alter their consumption patterns if relative prices vary."—[OFFICIAL REPORT, 21st November 1973 ; Vol. 864, c. 1447.] I am saying only that the public expenditure White Paper sets out the capital expenditure programmes of the fuel industries and I deny that in the immediate situation that we now face there has been any distortion of the investment programmes of the industries.

Mr. Bruce-Gardyne

I put it to my hon. Friend that he must not cite the public expenditure White Papers in this context as evidence to support his argument, because it has always been the proposition of successive Treasury Ministers that public expenditure White Papers simply extrapolate the consequences of existing policies and make no assumptions about adjustments in policies which might be necessitated by present circumstances. It does not strengthen his case to cite public expenditure White Papers.

Mr. Nott

I repeat, in the short term, consumer demand for fuels is relatively price-inelastic, and I cannot go beyond that. I accept that in the medium term my hon. Friend's fears may well be justified. Clearly, over a period distortion of demand for a commodity occurrs, if a policy of price restraint continues indefinitely—

Mr. Palmer

The hon. Member is overlooking an important factor. Again I take the electricity supply industry as the best example. Investment policies are made not for next year, but for seven or ten years ahead. The evidence of what will be required seven or ten years ahead is what is used this year ; that is the starting point. Therefore, if this year's consumptions are distorted and adjustments are made all the way ahead, in ten years there will be a completely false picture.

Mr. Nott

The hon. Member is not making an unfair point. I am merely saying that the figures published in the public expenditure White Paper show the investment necessary to meet the demand that we expected last summer on the basis of the normal price levels to which we expect electricity and the Post Office and other tariffs and charges to return in due course. Certainly in compiling the public expenditure White Paper and deciding what future investment programmes of the nationalised industries should be we have to bear in mind existing price restraint in those industries. On Second Reading and in Committee I emphasised that the Government were genuinely seeking a way in which to return to some sort of long-term targets for these industries, because that is naturally what both sides of the House would wish.

12 midnight.

The immediate problem is to find a suitable régime in 1974–75, because that is the limit to which the Bill takes us. None of us likes the consequences of the Bill, but that does not mean that the policy of price restraint was not necessary in the world-wide inflationary conditions from which we have been suffering. We cannot consider the public sector in isolation, nor can we treat the nationalised industries as being any other than a crucial element in the economy generally.

The Select Committee was obviously not concerned with considering the wider issues of the prices and incomes policy. It was concerned, and very rightly so, with the problems of management, morale, and efficiency in the nationalised industries. We as a Government are concerned with the economy as a whole, and with the attitudes of management and workers. I do not believe that the CBI, for instance—I hope I shall not provoke my hon. Friend the Member for South Angus, but I must say this—would have been able to persuade its members to agree to its price restraint initiative if the prices of the nationalised industries had not been restrained. Nor, likewise, do I believe that we should have secured the acquiescence of the trade unions to the standstill in stage 2 if the prices of the nationalised industries had not been restrained.

I understand what the Select Committee is saying. Within the context in which it was considering the issue, I think its judgments were to a very large extent correct, but I must not be drawn at this stage into giving the Government's reply to the Select Committee's Report. That will come in due course. I want to say a little more about the report in a moment.

At Second Reading and in Standing Committee I asked that the Standing Committee should put forward its ideas for the 1974–75 financial year, and the hon. Member for Heywood and Roy ton (Mr. Joel Barnett) joined in the spirit of that offer. He criticised the approach I outlined at one stage of a target deficit for 1974–75. That was one of the suggestions I made as being a possibility when I wound up the Second Reading debate. Then he put forward in Committee what I would describe as a variation of the compensation-for-revenue-forgone formula. On that occasion he had in mind, I think, that an industry would receive what it calculated to be the difference between the revenue it would have earned if it had been treated under the price code like a private sector undertaking and the revenue accruing from a price increase it was actually permitted to make. As I promised to do, I have examined this idea, and I wish quickly to refer to it in a moment.

Before doing so, let me quickly comment on the admendment itself. As my hon. Friend the Member for South Angus said, the amendment would single out nationalised industries for more favourable treatment than the private sector. This Bill proposes to compensate nationalised industries for a substantial disadvantage which they have compared with the private sector under the code. Thus in this way the Bill seeks to enable them to meet their statutory obligations. To go further and to compensate the industries for all their losses of revenue would put them in a preferential position over the private sector, because private sector firms are also suffering from loss of profit because of price restraint. Members of the Opposition are not suggesting that the private sector should be compensated on that account.

Mr. Joel Barnett

Would not the Minister of State accept that the nationalised industries are dealt with more severely under the code than private industry?

Mr. Nott

Yes, I would not deny that the price code has borne more heavily on the nationalised industries than on the private sector. It has done so by preventing them from eliminating their losses and meeting their statutory obligation to break even, taking one year with another. That in no way nullifies what I have said—that if we were to compensate the nationalised industries for revenue forgone we would be putting them in a preferential position over the private sector.

In any case, the main argument against the amendment, as I said in Committee, is that to calculate what the figure would be of revenue forgone is an almost impossible task. I will not say that it is impossible, but it is virtually impossible, because the costs of the nationalised industries run into hundreds, nay thousands of millions, of pounds and each and every one of those costs will have been affected in one way or another by price restraint generally.

In theory I can see that the hon. Gentleman's ideas have attractions. I do not deny the attraction of the theory of compensation by revenue forgone, but in practice it would place the Government in the position of having more or less to accept any figure given them by the industry itself. Of course I accept that it is the same sort of criticism writ large as the hon. Gentleman made of my idea for a target deficit.

The hon. Member for Heywood and Royton referred to a modest young accountant—no doubt he was not referring to himself—being able to have a field day and produce a pretty considerable safety margin for the nationalised industry for which he worked. It is also true to say that he would have the field day of all field days when it came to presenting to the Government what his own industry's estimate of revenue forgone had been in the circumstances which have been prevailing.

Moreover, in a period of one year—we are talking here of one financial year, 1974–75—random factors such as the weather can far outweigh any influence which management can bring to bear. This difficulty faces any short-term objective, but it is nevertheless a perfectly valid point for me to make as regards the problem of the Government's agreeing the estimates of the nationalised industries.

Mr. Golding

I take the point, but can the Minister of State tell me what effect this would have on the loss of revenue to the telecommunications services in 1974–75?

Mr. Nott

I endeavoured to follow the hon. Gentleman's speech. I am reluctant to be drawn into it too much because, as Mr. Deputy Speaker said, much of it was out of order. Let me try to deal briefly with one or two of the hon. Gentleman's points.

Mr. Golding

That is a rather cheap way of seeking to get out of answering a specific question I addressed to the hon. Gentleman. He referred to the greater importance of the weather and talked about the difficulty of forecasting revenues. I asked him a specific question. On his speech—not mine—what would he estimate the impact of changes of weather to be on telecommunications in 1974–75?

Mr. Nott

I am sorry, but I did not say that the weather was a crucial element in making a one-year objective impossible. I merely gave that as an example of matters clearly affecting the gas industry, the electricity industry, and so on. The point is still valid that the hon. Gentleman, with his great knowledge of the Post Office, would not at any stage suggest that it is possible to draw up a long-term management and efficiency arrangement for the Post Office for what we are concerned with here, which is a period of one year—1974–75.

If the hon. Gentleman or his treasurer friend in the Post Office were to present to the Government a figure of the revenue forgone by the Post Office as a result of price restraint, that figure would be almost impossible for anyone to check. That is the point I was making.

My hon. Friend the Member for South Angus and the hon. Members for Newcastle-under-Lyme (Mr. Golding) and for Bristol, Central (Mr. Palmer) referred to the Report of the Select Committee on Nationalised Industries on the capital investment procedures of these industries It is an excellent report. As the House knows, the Government will in due course publish their answer to it, and they are at the moment examining the report.

The Select Committee drew attention to the problems caused by price restraint for the nationalised industries, but it did not, I think, make any specific recommendations on the subject. What Ministers have genuinely been seeking to do on this Bill is to draw in all the suggestions we can find from all sources as to how we can return to long-term targets and how we can devise a new incentive system. The action we now have in train on prices, which was announced by the Chancellor of the Exchequer, seems to be entirely in line with the Select Committee's thinking. It remains our intention to restore the relationship between the central Government and the nationalised industries to a more normal footing as soon as conditions permit.

This gives me the opportunity to say that, since the Bill was brought in, circumstances have altered dramatically. Not only has the present fuel crises rendered many of the earlier figures somewhat doubtful but the measures forecast by the Chancellor on 17th December include action to increase public sector prices within the limits of stage 3. As the Chancellor said, it is no longer appropriate to subsidise the nationalised fuel undertakings on a large and growing scale at a time when energy is in short supply and world fuel prices are rising.

The hon. Member for Heywood and Royton said that I promised in Standing Committee that I should take this opportunity to give the House a progress report on the negotiations with the nationalised industries which followed immediately upon the Chancellor's announcement. I regret that the early Report stage which we are now having means that I cannot tonight report to the House, much as I should like to, any firm progress. The discussions are continuing along the lines indicated by the Chancellor, and all the nationalised fuel undertakings are being brought fully into consultation. But it will still be some weeks before we are in a position to make a final statement on the matter. On the question of nationalised industry prices, however, I can confirm once again that we have no intention of amending the code.

My hon. Friend the Member for South Angus asked several questions, and I think that I can best summarise in this way the answer which he requires. The code provides for price increases not less than is needed for the recovery of allowable costs and not more than is required to contain the deficits of the nationalised industries at the level of 1972–73.

12.15 a.m.

In the normal course the industry will obviously apply for the maximum increase which it will be entitled to. But there is provision in the code for the responsible Minister to intervene to cut back that increase to the lower limit of allowable costs as established by the Price Commission. Within those two limits, what I described in Committee as the parameters of the code, there is considerable scope for ministerial manoeuvre.

My right hon. Friend's statement implied quite clearly that Ministers would now tend to take a somewhat less restrictive attitude towards price applications than they have taken in the last few months and my right hon. Friend's statement has been followed by discussions with the industries. The parameters I referred to in Committee enable the price increase to be within the parameters of the code, and so, I repeat, there is no intention of amending the code in that respect. However within stage 3 quite substantial increases are possible.

My hon. Friend asked me three specific questions. Is the private sector pari passu with the private sector? The answer, as I have already said, is that the nationalised industries and the private sector are not pari passu under the code. He asked whether the industry had still to go to the Price Commission and be guided by the code? The answer is "Yes" and the application must be within the code. He referred to ministerial intervention. I have already explained that my right hon. Friend's announcement, in my own words, indicates that Ministers will in the future indulge in a self-denying ordinance in connection with their right under the code to bring price increases back to allowable costs.

Mr. Joel Barnett

Will the Minister tell us, accepting as we do that the negotiations have not ended and that the price increase is not known, but within the parameters he has explained under the code, what is the maximum price increase which would be allowed?

Mr. Nott

It is not possible for me to give the actual figures. By reference to the code the hon. Member will see that we are taking as a maximum the 1972–73 deficits. The minimum is allowable costs.

Mr. Bruce-Gardyne

I am grateful for that further information. May I paraphrase what my hon. Friend has said? Up to now Ministers have intervened after the Price Commission has adjudicated to tell the nationalised industries concerned, but primarily the electricity boards, that they cannot have the increase to which the Price Commission says they are entitled. Now the fixing between the Ministers and the boards will take place before going to the Price Commission.

Mr. Nott

I confess to having stumbled a little on this point on Second Reading. However, I have no information to add to our somewhat lengthy discussion on the matter in Committee. I made clear then and I do so again that the minimum is allowable costs and that the maximum is adjustment up to the 1972–73 deficit. I have throughout repeated that to my hon. Friend.

There is one small point which the hon. Member for Heywood and Royton raised. It related to the help for the neediest households. I told him in Committee that we would give consideration to this. My right hon. Friend the Chancellor undertook to do so in his statement on 17th December as soon as the extent of any price increase was known. We cannot make any decision on what the degree of help should be until the decision is made about the level and extent of the price increase, as I mentioned in Committee.

I hope that the hon. Member for New-castle-under-Lyme will forgive me if I am not drawn too much into his questions. My right hon. Friend the Minister for Posts and Telecommunications listened with great care to everything the hon. Gentleman said about capital investment in the Post Office. I, too, listened with great care. The hon. Member repeated many of the points he made in Committee and many of those points were answered by my hon. Friend the Under-Secretary of State for Trade and Industry.

I could not follow the hon. Gentleman's assertion, when he was talking about investment cut-backs in the Post Office, that price restraint must lead to cut-backs in investment. That is the opposite of the argument that the hon. Member for Bristol, Central and every other hon. Member was adducing. Other things being equal, it must be right that price restraint leads to an increase in capital investment and not a cut-back. At Question Time my hon. Friend the Chief Secretary to the Treasury, in answer to the hon. Member for New-castle-under-Lyme, said: Yes, I am aware that it creates problems within the Post Office. My right hon. Friend the Minister of Posts and Telecommunications is discussing this matter with industries concerned."—[OFFICIAL REPORT, 17th January 1974 ; Vol. 867, c. 905.] That is the present position. The hon. Gentleman has made his point and it has been heard by my hon. Friend. I hope that I may leave the matter there.

In rejecting the amendment I do not do so in any captious spirit. The Opposition, on this occasion, are genuinely attempting to be loyal, if I may put it in that way. They say, not unreasonably, that so far the Government have not provided any firm proposals for 1974–75—that this is what the Opposition would like to see. I understand that.

Since the Bill made its first appearance before the House, we have announced our intention to discuss price levels with the industries. That must be the first step towards a long-term arrangement of the sort which we all wish to see. In the meantime we are continuing our discussions with the industries. I can undertake that as soon as those discussions on prices come to a conclusion a statement will be made to the House.

Mr. Joel Barnett

With the leave of the House, Mr. Deputy Speaker, may I reply? Points have been made by the hon. Member for South Angus (Mr. Bruce-Gardyne) and the Minister about statutory corporations having preference over private companies. That is an argument which I find difficulty to accept, bearing in mind that statutory corporations are permanently at the disposal, as it were, of Governments of whatever colour. I find it hard to accept that statutory corporations somehow have a preference over private industry.

The point was made by my hon. Friend the Member for Bristol, Central (Mr. Palmer) and the Minister about distortions created by price restraint. I find it a little difficult to understand the Minister's argument. My hon. Friend made it clear that he wanted to see us get back, given the present energy crisis, to non-price restraint. The Minister told his hon. Friend the Member for South Angus that it would have been impossible to obtain the co-operation of the CBI and the TUC in any kind of voluntary incomes restraint if the Chancellor had not done something about price restraint, for example, in the gas and electricity industries.

The Minister now tells us that the Chancellor has decided, given the current state of affairs, to allow substantial—I assume they are substantial, otherwise they would hardly be worth talking about—increases in gas and electricity prices. If it were relevant before that it would be difficult for the CBI and the TUC to go along with prices and incomes policies, how much worse will the position be in 1974 when levels of inflation are almost certainly to be considerably in excess of what they were in 1973?

Some of the gloomy forecasts may not come true, but I doubt whether anyone will be so optimistic as to assume that price inflation in 1974 will not be substantially in excess of the 1973 level. The Minister says, despite what he had previously argued about the need for restraint so as to get co-operation for a prices and incomes policy, that because of different circumstances he can allow substantially increased prices. It is a somewhat confused argument and not one which I can accept.

I do not disagree with the Minister that these are complicated calculations, as are his own. But they apply, as he said, only in the short term. The advantage of my proposition is that there would then at least not need to be further monies provided for capital investment, as happens now, when the industries are simply financed to make good the deficit and are then obviously short of funds for new investment, and the Government must find them.

However, in view of the hour, and as we have had a pretty good debate on the matter now and in Committee, and have a long way to go yet, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.