HC Deb 08 July 1975 vol 895 cc469-502

Not amended (in the Standing Committee), considered.

10.0 p.m.

The Financial Secretary to the Treasury (Mr. Robert Sheldon)

I beg to move, That the Bill be now read the Third time.

As the House knows and as we debated fully in Committee, the main purpose of the Bill is to wind down the previous arrangements of the former administration and bring to an end the powers that the Conservative Government took to make payments in compensation to the three nationalised industries for price restraint.

It was clear in the lengthy discussions we had on a number of occasions in Committee that there was no quarrel between the Government and the Opposition about the necessity for bringing these particular payments to an end. This was the end of the policy on price restraint, and there was general agreement that a lengthy period of financing by deficits could only put at risk the efficiency of the nationalised industries and the morale of the management and the employees of the industries concerned.

The particular industries with which we were dealing were the electricity and gas industries and the Post Office, which provide services for the operation of the daily life of the community. We discussed—and there was general agreement here also—the fact that these industries should be allowed to operate in a commercial manner—a manner that was largely debarred by the way in which they had to forgo a large part of independence of action in an attempt to carry out the wishes of the previous Conservative Government.

There was a wide measure of agreement that it was important for the industries to be able to provide the services which they do at prices which reflect the full costs of those services. This is the only way in which the consumer will be able to make sensible decisions about the use he will make of the services. This method of operation allows the industries to know whether the services they are supplying to any particular group or area are being supplied in a competitive manner and whether they are meeting the needs of the consumer.

In addition to these general considerations, the Government are determined to phase out these subsidies because they do not fit in with our economic and social priorities for public expenditure. It is impossible to justify the subsidising of energy prices, which account for a considerable part of the total cost, when we talk about the need to encourage energy conservation.

The other aspect—namely, the subsidies to the Post Office which primarily benefit the business user—is equally indefensible. Therefore, in our attempts to bring about an improvement in the control of public expenditure, we have to dispense with the system under which the more that telephones, electricity, gas and so on were used, the more the consumer saved. This does not fit in with the priorities that we wish to establish. If the industries remain underpriced—as they were underpriced for so long—we shall have a distortion of demand and an unnecessary inflation of that demand and the consequent need for a higher level of investment just to meet that artificial demand. I mentioned energy conservation, and what I said applies elsewhere.

We have, therefore, not only these particular problems but the problems of the increasing public sector borrowing requirement which reflects the gap between the spending and the revenue.

It is right that we should bring these subsidies to an end. Our timetable for phasing out these subsidies remains that which the Chancellor set out in his Budget Statement. Our intention is to phase out the subsidies completely by April 1976. I mean by that that we expect to pay subsidies for 1975–76 but not for 1976–77. What we have said is that we expect the subsidy requirement for the present financial year to be about £100 million. We do not intend to allow the subsidies to escalate beyond that level. Equally, we shall be prepared to pay subsidies at this level only if they are fully justified as compensation for the deficits due to price restraint.

I should add that it is unrealistic to expect that there will be a sudden and dramatic turnround in the financial prospects of these industries this year as a result of the Chancellor's statement on 1st July, but we shall look very carefully at claims for compensation by the industries in 1975–76 in the light of the actual movement of their costs and revenue.

What this amounts to, in short, is that while we have no reason to revise the estimate of £100 million—certainly at this stage—we shall meet only those claims that can be fully justified. In Committee we discussed the provision in the Bill to extend by Treasury order, subject to affirmative resolution of the House, the power to pay compensation in that year. I should say, in confirmation of what I have said on so many occasions, that we continue to regard this as a prudent provision in case, for example, there should be a small residual deficit in one industry for which compensation is justified. But, in the light of the Chancellor's statement, I emphasise once again that our expectation and hope is that we shall not need to call upon this provision.

What we are concerned with in the Bill is the winding down of the policy of the previous Government. It brings about a more realistic approach to the nationalised industries and the way in which they carry out their pricing and commercial activities. As such, I am sure that the Bill will prove welcome to the House.

10.8 p.m.

Mr. Norman Lamont (Kingston-upon-Thames)

Although it is now rather late and although the Committee on the Bill had only three sittings, I think it would be agreed that we ought to have at least another look at the Bill, because it is not insignificant and deals with very large sums of money, both as regards the phasing out of the subsidies and as re- gards the extension of the borrowings, which are enlarged under the Bill.

We approve of the aims of the legislation, as we made clear in Committee. We approve of the idea of winding down the consumer subsidies to these nationalised industries. We would very much agree with the argument put forward by the Financial Secretary—that it is important that we should economise on our energy resources. Another reason is that we believe that the whole question of the finance of the nationalised industries lies at the heart of our inflationary problems, and that we shall get a better grip on those by restoring commercial disciplines to them.

Having said that, we are slightly disconcerted that the Government are not in detail actually writing into the legislation what they say they are doing. They talk with a loud voice but carry a very small stick indeed. The subsidies are meant to be phased out in 1976–77, and yet the legislation embodies the possibility of the subsidies continuing in that year. Why is that so if it is the intention to phase them out? We are also told that the subsidies this year are to be restricted to £100 million. A few weeks ago they were to be restricted to £70 million. Why cannot that figure be written into the legislation as a figure was written into the Bill's predecessor?

Our discussions in Committee were very much overshadowed by the quadrille that the Government are having with the TUC. We have been a little worried that perhaps the logic implied in this piece of legislation might fall in jeopardy. There have been reports in the Press that the subsidies to the nationalised industries and their continuation is a point of bargaining between the Government and the TUC. I hope that the Minister will say something about that. We found it disconcerting in Committee that we could learn nothing of the discussions going on between the Government and the TUC. It would make nonsense of the whole affair if our Committee proceedings were to be treated as a mere bagatelle, and that, having passed this legislation, we were to discover at a later date that the subsidies were to be continued again. I hope that the Minister will give us a firm assurance that the Government are not just putty in the hands of the trade unions and that they will not stand on their heads in that respect.

We have considerable reservations about the implications for the borrowing requirement. There is every reason to suspect that the Government have little control over it. We have seen it grow from £4,000 million to £6,000 million. Now people are talking of £9,000 million or £11,000 million. They are skyscraper figures, and no one knows what the turn-round will be at the end of the financial year. The Government have put us in a high-risk situation. There is the possibility of a withdrawal of funds. Indeed, that is not just a risk, it has become a reality in the past few weeks. If such a withdrawal continued on any scale we would find that we would have to have a massive overnight adjustment in our living standards.

The Financial Secretary has repeated what the Chancellor has said—namely, that it is the Government's intention to keep the borrowing requirement firmly under control. We are told that it will be cut by £1,000 million in 1975–76 and by £3,000 million in 1976–77. We are asked to believe that public expenditure will be cut in the period when unemployment will be at its height. That is a matter that we find difficult to believe. It is something that sounds unconvincing in the Chancellor's mouth.

Why cannot the cuts be made now? Why should the cuts always be postponed? We are told that the borrowing requirement will be cut by £1,000 million. Public expenditure is out of control, yet the Chancellor says that sometime next year it will be cut by £1,000 million. The deficit would then be not £9,000 million but £8,000 million. He tells us that the following year it will not be £12,000 million but merely £9,000 million. The slip of events is clear, and there will have to be public expenditure cuts. The sooner that fact is recognised by the Government the better.

The great fear of many is that the size of the public sector borrowing requirement is now so great that it is doubtful whether it can any longer be financed in a non-inflationary manner. Last year the Government were successful in their sales of Government securities to the non-banking sector. In that way they managed to finance the public sector deficit. However, there is every reason to think that it will not be so easy in the coming year. There are already some indications that the banks are being stuffed full of short-term Government securities and that when the demand for loans picks up, the credit base of the banks having grown, we shall be off on the merry-go-round once again with another considerable expansion of the money supply.

The figures for M1 have recently shown a disconcerting tendency to increase rather quickly. We have considerable fears that if there are not cuts in public expenditure in the near future, it will not be possible for the Government to avoid resorting to inflationary financing and the printing presses.

There has been one great change since the Committee. In our debates on several occasions we suggested to the Government that they should examine the idea of cash limits on public expenditure—in other words, that they should be fixed firmly for each year. It was implied that we were mere followers of fashion, philanderers of change and that this was some tableau that we were unveiling as a solution to our problems. It is part of the puckishness of politics in this House that the Chancellor, having had cold water poured on this idea a few days ago, came to the House and said that the Government had decided to adopt the idea of cash limits.

If that is the case, if it has not simply been dreamed up by the Government as something to be discussed in the Press, and if it is likely to stop the flow of funds out of the country, it is a conversion that we welcome. But it is difficult to believe that the Chancellor of the Exchequer can be very convincing about cash limits when at the same time he has put forward the idea that the standards of service in the public sector will be maintained. If we are to have cash limits in public expenditure, we shall be unable to maintain the same standard of service in the public sector. It makes no sense to say on the one hand, "We must have cash limits" and then to say "There will be no cuts or reductions in services."

I should like to ask the Financial Secretary one small point which has been raised already with the Secretary of State for Prices and Consumer Protection. One of the Bill's provisions is that the financial arrangements for the consultative councils on the nationalised industries should be transferred from the Treasury to the Department of Prices and Consumer Protection. Fears have been expressed directly to the Government by several of the electricity consultative councils that they may lose some of their independence. Further fears have been expressed that the councils will not be able to retain full control of staff and will not have the independence which is essential if they are to carry out their tasks. It was suggested that this provision might have been written into the legislation. I should welcome an assurance from the Minister that the councils will retain their independence, particularly in respect of staff.

With those reservations about borrowing requirements and cash limits, we welcome the general direction of the legislation. We do not intend to divide the House, but we have some fears that the Government are not intending to carry out in the deed the words which they have mouthed in recent weeks.

10.19 p.m.

Mr. John Cockcroft (Nantwich)

I wish to declare an interest because a few years ago I worked in the public enterprise division of the Treasury. At the risk of breaking the Official Secrets Act, I feel that the pioneering work of that division of the Treasury in the middle 1960s was wholly commendable. It is a tragedy that since then successive Governments have overthrown that work.

The principle was that all new investment projects should be properly appraised, that discounted cash flow calculations should be made, that nationalised industries should be given target prices, with proper returns on capital, and the whole thing run on a commercial basis.

The problem is that all Governments tend to restrain prices in every condition in order to set an "example" to the rest of the economy.

A classic example is the Carlisle and Scottish pubs nationalised by the Lloyd George coalititon. They were always told to keep down prices in the vain hope of persuading other publicans to reduce the price of beer.

I think that the main problem is the insoluble dilemma of the chairmen of the State industries. They want to manage their businesses on a day-to-day basis, undeterred by outside interests and interference. On the other hand, the Treasury—or the taxpayer—provides most of their capital and is quite determined to see the colour of its money. One will never get out of that dilemma, judging by the way things are going. One has seen over the last few years, particularly in the case of the railways, a successive writing off of capital, so that the capital which now exists is tiny compared with the amount of money poured into these nationalised industries. To that extent, whatever profits or losses are now registered are almost meaningless compared with the very large figures involved.

Another problem in recent years has been the very large sum borrowed by the nationalised industries abroad, mistakenly encouraged by the last Government, on the Eurodollar market, and so on. They have borrowed these large sums, actively encouraged by the Treasury, and now we have the interest payments on those capital loans as a millstone round our necks.

I think that too much time is spent on the economic aspects of the nationalised industries, and that too little emphasis is put on what I would describe as the libertarian arguments for reducing the power of the State in our country.

I have had an association also with another interest, and have to declare, as most hon. Members know, that I was with Guest Keen and Nettlefold for many years. Ten years ago there were 14 independent steel companies in this country. Now there is only the British Steel Corporation. Ten years ago, if a young man fell out with one of those 14 steel companies he had a good chance of getting a job with another one. Now it is almost inconceivable that he would be able to do that, because of the monolithic power of the British Steel Corporation. The computer at the enormous headquarters at Victoria would ensure that if he fell out with one part he would not get a job with another part of the BSC.

To that extent the enormous dominant power of the nationalised industries in our economy is deplorable, and ought to be reversed and reduced. While commending the specific clauses of the Bill, which I think are inevitable at this stage, I think that we should as an Opposition have a fundamental reappraisal of the position of the State industries in our economy.

10.23 p.m.

Mr. John Biffen (Oswestry)

The House at this stage of the evening becomes something of an echoing mausoleum, but that should not obscure the fact that we are giving a Third Reading to a very important piece of legislation, which has been transformed, in the context in which it has been set, by the statement last Tuesday from the Chancellor of the Exchequer, which has been referred to by my hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont).

The House would be doing a disservice to itself if it did not look for a moment at this piece of legislation, which has emerged immaculate and unscratched from a constructive Committee stage. The hon. Member for Newcastle-under-Lyme (Mr. Golding) was able to take part in our proceedings, and I welcome his presence here this evening, because I am sure that he, like myself, will feel that one will want to use this as an opportunity to investigate a little more the implications in Clause 1 and Schedule 1 for those statutory corporations under the promised regime of cash ceilings.

My hon. Friend the Member for Kingston-upon-Thames rightly wanted to know whether the very philosophy and the figures embodied in the Bill had come unscathed through the last few days of wheeling and dealing between the Treasury Bench and the TUC. It was a question which we put in Committee, and the Financial Secretary was rather coy about giving any definitive answer, doubtless because he perceived rightly that this process of consultation between the Government and the TUC was likely to last for some days. Now we understand that it is pretty well concluded, so I hope that the hon. Gentleman can reassure us that the Bill, having received such gentle treatment in Committee, will not be seriously undermined or significantly altered by any dis- cussions with the TUC over the past few days concerning the future rôle of price subsidies.

The second matter to which I refer is the very factor of cash limits. I thought that the Financial Secretary also gave some inkling that this would all bear very much on the Government's thinking. The hon. Gentleman talked about the subsidy figures having to be assessed in the light of the costs and revenues of the statutory corporations, and it is in the light of their costs that we are most anxious to know what is meant by the cash limits now being accepted by the Government.

We advocated from these benches with modesty and a certain amount of diffidence that this was a helpful development of policy and of techniques in controlling public expenditure. We were not immediately welcomed as providing a valuable contribution to the debate.

It is appropriate to recollect what the Chief Secretary told the Standing Committee considering the Finance (No. 2) Bill on 17th June. I quote what the right hon. Gentleman said, because it will be of advantage to the House to know what the Committee was told. The right hon. Gentleman's words were: There is agreement generally in the Committee that the level of price inflation is too high. But there is no simple answer by way of a more stringent control on prices. That would be self-defeating. That is why we have allowed some relexation of the Price Code. … Those words sit uneasily beside the more recent profession by the Chancellor of the Exchequer that a tightening of the Price Code is to be the statutory means whereby the Government will seek to regulate inflation. However, the Chief Secretary went on to say: If one imagines that, simply by planning public expenditure in cash limits, one could automatically cut £2,500 million to £3,500 million, one would then have, presumably, with a cash limit to make a forecast of a target rate of increase in public sector wages in all kinds of areas. In answer to speeches by my hon. Friend the Member for St. Ives (Mr. Nott) and my hon. Friend the Member for Guildford (Mr. Howell), the right hon. Gentleman went on to chide them in a good-natured way for the extraordinary enthusiasm which they had developed for the technique of cash limits. He said: I am only saying this to emphasise the difficulty of assuming that all one has to say is "cash ceilings", and it solves all one's problems. It does not do anything of the kind. …"—[Official Report, Standing Committee H, 17th June, 1975; c. 154–156.] That was all right on 17th June, but by 1st July we were being told by the Chancellor of the Exchequer: For example, we propose to fix cash limits for wage bills in the public sector so that all concerned may understand that the Government are not prepared to foot the bill for excessive settlements through subsidies or borrowing or loading excess costs on the public through increases in prices and charges.—[Official Report, 1st July 1973; Vol. 894, c. 1189.] That is a remarkable resolution on the part of the Treasury Bench of the difficulties that had seemed so evident at the time when the Finance (No. 2) Bill was in Committee and this legislation was in Committee. I welcome the Chancellor's endorsement of the technique of cash limits. The choice of the 10 per cent. may prove to be somewhat dangerously restrictive, but none the less this is a useful opportunity to learn from the Treasury Bench how the cash flow limits will be applied in respect of the corporations listed in Clause 1 and Schedule 1.

In particular, is the 10 per cent. which it is said will refer to wages to apply to the whole scatter of individual and group salaries, or is it to apply to the wages and salary bill of the negotiating unit? That is important, because if it is the latter it can contain the flexibility of certain individual figures which may go significantly above 10 per cent. If, on the other hand, it is intended to be much more rigid, the House should be told this at an early opportunity, because there is no doubt that to follow through the implications of that policy—we on the Opposition benches have not concealed this from ourselves—involves very harsh treatment of the public sector.

That is part of the arbitrary and, of its nature, unpleasant way of coming down from a high rate of inflation. Anyone who supposes that what is being proposed is not an attack upon levels of expenditure in the public sector is deceiving himself. We recognise that cash limits, par- titularly as adumbrated by the Chancellor, represent one of the most significant attempts to restrain public spending that has been seen in this country since the end of the war. That is in no sense an exaggeration. If the Chancellor is as good as his word, we shall see and live with the consequences.

Mr. Ian Gow (Eastbourne)


Mr. Biffen

My hon. Friend says "If". It will be his responsibility and the responsibility of the Conservative Party to offer the hand of friendship and sup-to the Chancellor in the execution of that policy. We know that he may have difficulties with the Tribune Group. We know that the members of that group may absent themselves this evening rather than go through the embarrassment of supporting and underpinning the Chancellor in the execution of that policy, but it will not be beyond the capacity of my hon. Friends to resist the temptation to play politics.

When all the unpleasantness that will follow from cash limits begins to be apparent, we shall stand shoulder to shoulder with the Chancellor and his colleagues, and we shall have the manifesto group there, and that will be a formidable partnership. But the execution of that policy can only be made well within the bounds of political practicability if it is made clear in this House and from within the House to the public at large just what are the difficulties and the constraints that are envisaged in such a policy.

I have the feeling that, when the policy is applied, as has already been indicated one area that is bound to be affected is the traditional standards of service of the public sector. I notice that the hon. Member for Newcastle-under-Lyme is nodding. I do not think he is dropping off to sleep. I think he is agreeing with me.

I come now to the one point of some contentiousness in the Second Reading debate of the Bill. My hon. Friend the Member for St. Ives was daring enough to suggest that the traditional range of Post Office services was becoming increasingly difficult to sustain, given the pattern of cost. I believe that that will be emphasised many times over as a consequence of the application of cash limits.

The Financial Secretary to the Treasury, when winding up the Second Reading debate, in attempting to riposte the arguments of my hon. Friend the Member for St. Ives said of the Post Office that The whole principle rests on the famous doctrine of Rowland Hill, who, when he set up the penny post, pointed out that, in order to provide the same standard of service throughout the country, it was necessary to obtain a monopoly of the post. It was fundamentally dependent on that premise."—[Official Report, 9th June, 1975; Vol. 893, c. 147.] None of us would disagree with that proposition, but we are entitled to ask whether what was good enough for Rowland Hill is necessarily relevant to the circumstances of the 1970s. I believe that that is a question which will be obtruded upon us increasingly as time passes.

I believe that the decision to move to cash limits, for example, will increasingly bring home within the Post Office a challenge whether the present comprehensiveness of that service can be sustained. I put it no higher than that, not wishing to stray into undue controversy at this stage of the evening. An empty Chamber is not the best environment for harsh controversy. However, the remarks of the Chancellor of the Exchequer in his statement on Tuesday put the legislation which the House is considering this evening into a totally new context. It is a commitment in terms of the finances of the nationalised industries the full implication of which has been neither explained to the House nor, in my judgment, assessed by the House.

I do not believe that there is, at present, the slightest understanding of what sanction is to be applied to the management of a nationalised industry if it concludes a pay settlement which falls outside the desired limits of the Government's policy. Clearly the Price Code cannot have the same sanction on a nationalised industry as it can on the private sector. I shall not dwell on what may or may not happen about the miners' settlement. Today's news does not immediately convince me that we are likely to see a settlement at £6 in the mining industry, let alone a settlement at the Jack Jones figure which, I think I am right in saying, at the flat rate would be significantly less than the £6 which would be near to 10 per cent. of the base rate.

I believe that in a whole range of statutory corporations—not only the Coal Board—the danger is always to play the ball that went before, but it could quite conceivably be the Post Office or some other nationalised industry which will come up against the application of the cash limit. We shall be anxious to know how that policy will be translated into action. We can only guess. I do not believe that uninformed speculation from the Opposition benches will be the most constructive contribution to the debate this evening, when it lies within the capacity of the Treasury Bench to say how this policy has been worked out, how these difficulties have been assessed and in what manner they have been discounted.

If the Financial Secretary is able to deal with the specific points raised in the debate, although the House may be observing not much more than the formalities in giving the Bill a Third Reading, we shall have extracted an answer of some worth.

10.41 p.m.

Mr. John Golding (Newcastle-under-Lyme)

I declare an interest as an officer of the Post Office Engineering Union. I shall not follow the comments of the hon. Member for Oswestry (Mr. Biffen), interesting as they were. I want to ask two questions. Can the Financial Secretary tell me what provision there is in the Bill for telecommunications? What provision is made for last year's deficit to be met and how will this year's deficit, if there is one, be met? Secondly, can he tell us what progress has been made in the Treasury on the question of the taxpayer rather than the Post Office—that is, the subscriber—meeting the deficit on the superannuation fund?

10.43 p.m.

Mr. Ian Gow (Eastbourne)

This debate has an air of unreality. The House is debating a measure granting to the executive unlimited and unspecified powers to borrow money and to make grants, yet there are only 12 hon. Members in the Chamber, even though the night is still young. To this sense of unreality is added yet another feature. The Government are about to put into reverse the proposals contained in the Bill. Clause 1 gives unspecified powers to grant unlimited amounts subject only to statutory order to compensate nationalised industries for the losses they have sustained through price restraint.

This brings us face to face with the supreme unreality of the price restraint policies which have been followed not only by the present Government but by the last Conservative administration. It is to the credit of the Chancellor that he is telling us that there must be a proper price mechanism in the nationalised industries. If he remains faithful to his promises, this will be the last time during his tenure of office that the House will be presented with a Statutory Corporations (Financial Provisions) Bill. I shall be relieved if this is the last such Bill presented to Parliament.

It is not only the unspecified financial provisions contained in Clause 1 which cause me concern. In Clause 3 we find that the borrowing capacity of the British Steel Corporation is increased to £2,000 million. I suppose we can draw comfort from the fact that the National Bus Company is entitled to increase its borrowing requirement to a mere £200 million. I find both figures deeply disturbing.

It would not be right to let the evening pass without offering from the Conservative side our congratulations to the Government on following a policy of reducing and then eliminating subsidies to the nationalised industries. It would not be right to allow tonight to pass without offering our congratulations to the Government on the fact that they have at last decided that the mechanism of price and the elimination of subsidy are an essential strategy for them at a time of economic stringency.

I regret the strategy contained in the Bill, and the limits it sets out are far too high, but we acknowledge that if the Chancellor of the Exchequer adheres to the strategy he has since laid down it will spell the end of the tragedy of public subsidy for inefficiency and we offer our condolences to the Government Front Bench that this is the last time the Minister will come before the House to present such a pusillanimous Bill.

10.46 p.m.

Mr John Mott (St Ives)

My hon. Friend the Member for Eastbourne (Mr. Gow) has spoken in dramatic terms, but I am sure that we on this side all share his wish that this will be the last Bill of its kind brought before the House. The Financial Secretary's few words gave us great encouragement. We assume that they were checked and agreed with the Chancellor of the Exchequer. It is difficult to believe that what the hon. Gentleman said had not passed through the necessary mechanism to clear his pregnant words with the Prime Minister and the Chancellor, who at this moment are probably busily engaged in trying to make decisions about what they are to do in 36 hours' time or whenever the deadline runs out.

We greatly welcome a number of the Financial Secretary's comments. He said that in future prices would reflect the full cost of services, that the Government were determined to phase out subsidies, that it was impossible to justify subsidising energy prices and so on.

Those words came as a great encouragement, knowing as we do that the Chancellor of the Exchequer must already have made his decision that there was no question of any deal being made with the TUC. We gathered that he is going to remain pristine pure concerning prices in nationalised industries, and the Financial Secretary gave no hint of his going hack on what he has been saying during the last 18 months in order to achieve a deal on wages. When we debate these topical matters next week or whenever the White Paper is published—I understand that the timetable has slipped a little we shall have the words of the Financial Secretary before us to assure us that all he has been saying during the passage of this Bill will not be retracted in that debate. So far so good. We welcome every one of his words.

My hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont) referred to our concern about the size of the public sector borrowing requirement and he referred to the tremendous vulnerability of this country to overseas pressures as a result of its size. Its size lies at the heart of our concern. We, of course, accept some responsibility for having set out in the wrong direction on these matters.

My hon. Friend the Member for Nantwich (Mr. Cockroft) made an interesting contribution. I never realised until now that he actually had a hand in the late 1960s in the Treasury in drawing up the admirable documents which emanated from the Treasury in those days of Socialist Government. We all share his wish to get back to target returns and the other criteria to which he referred for monitoring the efficiency of the nationalised industries. I do not agree completely with his views about overseas borrowing by nationalised industries. I see no reason why those industries should not be allowed, within strictly defined limits, to borrow abroad, but perhaps this is not the moment to debate the pros and cons of that argument.

My hon. Friend the Member for Oswestry (Mr. Biffen) sounded well in what he described as this "echoing mausoleum". He always does. He said he was delighted that the Chancellor was now genuinely thinking about cash limits. It was not many months ago that we were being charged with having no policies. Of course we had policies and we had been putting them forward for a considerable period. We felt that we needed to simplify what we were saying in order that some of the commentators might understand our points. It seems that possibly in talking about cash limits we tended to oversimplify the policy.

The Chief Secretary told us on several occasions that cash limits provided no easy option, and he more than most in these frantic, hectic few days would know that. The actual details of the cash limits policy—it is complicated and contentious—are likely to be strongly opposed by the spending Departments and their permanent secretaries. That would come as no surprise to us. If they are opposed by elements in the Treasury, that will not surprise us either.

To say that the cash limits policy will be clear and simple and that once it is laid down it will be stuck to is obvious nonsense. Take as an example local government expenditure. Unless local authorities are prevented from going to the London money market in order to avoid the cash limit, the whole policy becomes meaningless. I wonder whether the detailed thinking of the Opposition on these matters has not gone far beyond that of the Government. We have been thinking about the detailed implications of imposing cash limits for many months. We accept that it is a policy which involves very great difficulties and problems. Nevertheless we support it because we believe that in the last resort it will impose upon Ministers—and, I hope, through Ministers, spending Departments—some kind of self-discipline which is missing in a short-term system which is based on constant prices.

Although resource allocation within the economy over a five-year period presumably will still to a great extent have to take place in constant price and volume terms, nevertheless we have held the view for some time that a cash limit discipline is necessary—and it is becoming increasingly so in times of high inflation—for the immediate one-year monetary discipline within Government. However, certainly that cash discipline policy, which we have been enunciating, will not in itself mean anything very much unless it is buttressed by a whole host of other policies.

I should like to mention one such other policy. Unless there are some genuine and serious manpower ceilings within the public sector and unless cash limits are backed up by some much more stringent disciplines of a volume nature—I take as one example some much more stringent manpower disciplines within the public sector—cash disciplines will not meet the objective which we all seek.

I apologise to the House for a rather rambling discourse, but we are delighted that the Bill is now drawing to a close. As my hon. Friend the Member for Eastbourne said, we heartily hope that it is the last of such measures that will come before the House. We are greatly encouraged by the words of the Financial Secretary that subsidies are about to end in the public sector and that there is no question of the TUC demanding—or, if it does demand, actually being offered—any kind of quid pro quo so far as the public sector is concerned. It is nearly 11 o'clock and it is perhaps, late to be so encouraged, but nevertheless we are.

The Financial Secretary can say nothing to us beyond what he has already said except to confirm his opening remarks. If he does, I am sure that we shall be delighted to let the Bill go on to the statute book without a Division in the knowledge that it is the last of such measures to come before the House.

10.59 p.m.

Mr. Robert Sheldon

With the leave of the House I should like to reply. I am very happy to have satisfied the House of Commons. Perhaps it is an indication that bringing the previous Conservative Government's policy to and end leads one to consider the deep levels of frustration, bitterness and antagonism that there must have been on the Conservative benches over the policies carried out by the previous Conservative Government. Of course, I understand that it takes time for these feelings to surface properly in the present House of Commons. I am delighted that we have been the means of understanding the problems that so many hon. Members had during those traumatic years.

I am delighted to receive congratulations from Conservative Members. However, what we are doing and what the Bill is about is to complete the winding down of the previous Conservative Government's policies of restraints and their effects on the nationalised industries, and to end the serious damage done to those industries, damage from which we are still emerging today.

The hon. Member for Kingston-upon-Thames (Mr. Lamont) asked about the consultative councils and their independence. The electricity consultative councils and the gas consumer councils are financed by their industries and not by the Treasury. I am happy to give the assurance that the independence of the councils will by no means be prejudiced by the transfer of responsibility for financing to the Government. Indeed, the transfer is being made precisely to ensure that they have this necessary independence. The consumer councils of other nationalised industries are already Government-financed, as the hon. Gentleman will know.

My hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) asked me two questions, with which I am pleased to deal. Where the deficits to which he referred are due to the price restraint policy of the previous Government, they will be matched in the way I have indicated in the years 1974–75 and 1975–76.

My hon. Friend also asked an important question about the Post Office pension fund. He has rightly drawn attention to this matter in Committee and on the Floor of the House. The present position is that the deficency is still under discussion between the Government and the Post Office. The discussions are continuing. I am sorry to say that no decision has been arrived at yet. However, as my hon. Friend will know, the Government will be answerable to the House for any of the conclusions that are reached.

Mr. Golding

I rise not on the second point, as my hon. Friend might have expected, but on the first. Will he confirm that compensation payments will be paid for the telecommunications deficit as well as compensation payments for the postal deficit?

Mr. Sheldon

The compensation is paid to the Post Office for all its losses arising from the price restraint policy. These losses are set out in the figures we discussed in Committee and even before that stage.

The hon. Member for Nantwich (Mr. Cockcroft)—who is not in his place at the moment—talked about the position of the nationalised industries and the policy of interference. I do not think that anyone can remain a purist about the involvement between Government and nationalised industries, but there are areas in which the Government start encroaching upon the operations of nationalised industries at the peril of both. I believe that the previous Conservative Government overstepped the mark in what they did.

The hon. Member for Oswestry (Mr. Biffen), the hon. Member for St. Ives (Mr. Nott) and the hon. Member for Kingston-on-Thames asked me to comment on cash limits. I listened carefully to what the hon. Member for St. Ives said on Second Reading. I am sorry if he thought that I was not giving the problem of cash limits the attention which it deserved—although I am glad to see him indicating that he does not now think that. I felt that this was a valuable and useful exercise, but, like my right hon. Friend the Chief Secretary, I thought it had been overplayed by certain commentators and others—not the hon. Member for St. Ives, who presented a very moderate and reasonable attitude, to which I thought I referred. Nor does that apply to the statement of the hon. Member for Oswestry, to whom I also referred in Committee as presenting a much more balanced view of the need for cash limits.

At the end of it there are problems of many kinds, to a number of which the hon. Member for St. Ives referred. I throw out merely one for consideration. That is the problem of nationalised industries where there is so frequently a monopoly position and where the kinds of discipline that Opposition Members would wish to see present their problems in application to such monopolies in ways in which they are not presented to private industries. If private industry is not successful it closes and someone else provides the service, the goods or whatever may have been offered. Different considerations apply in the case of nationalised industries, and they present complications.

I understand the point about manpower that was made by the hon. Member for St. Ives. Perhaps I can usefully help the House by saying that, as hon. Members will know, the Government are determined to bring down the rate of domestic inflation to 10 per cent. by the end of the next pay round and to single figures by the end of 1976. That means that increases in wages and salaries during the next pay round cannot exceed 10 per cent.

The Government have made it clear that they are not prepared to foot the Bill for any excessive settlement in the nationalised industries through subsidies or borrowing, or by loading excess costs on to the public through increases in prices and charges. Additional funds will not be made available to the industries by the Government to finance excessive pay settlements. The consequence of any such settlement would be the institution of offsetting savings in the industry concerned, which would be bound to affect employment.

Mr Nott

The Minister has commented upon the difficulty of monopoly nationalised industries and has implied that they could pass on cost increases to the public. Is he suggesting that the Government are contemplating some kind of monopoly legislation which might prevent the nationalised industries from raising their prices? The Chancellor has said that he was not prepared for the consumer or the taxpayer to pay additional costs as a result, for example, of wage increases. We are interested to know the Government's thinking in this area.

Mr. Sheldon

I was trying to respond to the philosophy enunciated by the hon. Gentleman by introducing another kind of philosophy which shows some of the problems in general terms. I thought that it might be a helpful contribution to the general debate but not necessarily to the particular problems that will face us and which will have to he dealt with in due course.

Mr. Biffen

This is an important statement. If I interpret aright what the hon. Gentleman has said, and if we take the example of the National Coal Board which is designated in Schedule 1, if a pay settlement is prosecuted which is above £6 a week for men employed in the industry the consequence will be redundancy. Is that to be redundancy which the Government will require to be carried out by the board irrespective of whether it attracts union co-operation? The idea of redundancy as a sanction becomes realistic only if we know the terms in which the redundancy is to be prosecuted.

Mr. Sheldon

I understand the point that the hon. Gentleman is making, but these are matters that will need to await the Chancellor's statement in due course. My right hon. Friend will be willing and anxious to be questioned when he has made his statement. Conservative Members will know that that is the reality of the situation. I am not making a difficult forecast. I was taking a broad-brush approach. I thought that this might be useful rather than keeping silent, as perhaps would normally be done in such a situation. I hope that my remarks may have contributed a little towards producing a more useful debate.

This is a valuable Bill in so far as it has helped to unite both sides of the House in deploring what the previous Government did and in uniting a number of attitudes that have been adopted over the past few years.

Question put and agreed to.

Bill accordingly read the Third time and passed.

  1. ADJOURNMENT 12 words
  2. cc491-502
  3. CHILD MINDING 4,233 words
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