HC Deb 09 June 1975 vol 893 cc46-161

Order for Second Reading read.

4.22 p.m.

The Chief Secretary to the Treasury (Mr. Joel Barnett)

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

The main part of the Bill is a very short-term extension of the Conservative Government's Bill which introduced payments for price restraint for certain nationalised industries. There are three main reasons why we believe that these payments should be phased out quickly. First, it is essential to reduce the level of public expenditure, for with very limited financial resources, every pound spent on subsidies is a pound less for vital investment. We are determined to make room for that investment. Second, to prevent the wasteful use of scarce resources. It is, for example, crazy, at a time when we urgently need to conserve energy, to subsidise the price of energy—not least electricity which is generated at the margin almost entirely from imported oil. Third, to reduce the borrowing requirement, and encourage the industries to greater efficiency in order that they will be able to finance more of their own massive investment programmes.

The Bill has five separate and distinct purposes. Apart from extending the powers under present legislation to compensate the gas and electricity industries and the Post Office for deficits which they incur because of price restraint, it increases the borrowing limit of the British Steel Corporation and of the National Bus Company. It makes some amendments to the borrowing powers of a number of the public corporations and it provides for the Government to take over from the industries concerned the financing of the Electricity Consultative Councils and the Gas Consumers' Councils. I propose to deal with each of the clauses briefly and then go on to discuss the implications for the public sector borrowing requirement and public sector wages.

Clauses 1 and 2, together with Schedule I, deal with compensation for price restraint. They extend for a further period of time, and with some changes in the methods of payment, the powers in Clause 2 of the Statutory Corporations (Financial Provisions) Act which the Conservative Government enacted in February 1974. The industries covered are exactly the same. The period is the financial years 1974–75 and 1975–76, and there is provision, subject to Affirmative Resolution of the House, to extend it to 1976–77.

The first of these two years was intended to be covered by the previous Act. The 1974 Act set a limit of £500 million on compensation for the two years 1973–74 and 1974–75. My predecessor, introducing the Second Reading debate on 21st November 1973, estimated that the deficit for 1973–74 would be in the range of £175 million to £200 million. He thought it might even be more. He was right. It was £355 million, leaving only £145 million for 1974–75. However, on the latest information from the industries, the total deficits for 1974–75 look like being of the order of £650 million, and this is despite the very big price increases which we endorsed in 1974.

We shall not know the exact figure of compensation until the audited accounts are ready and until we have decided whether or not to pay compensation for the whole of the deficits. But in the meantime, the breakdown in round figures is £255 million for the electricity industry in England and Wales, £23 million for the Scottish electricity boards, about £40 million for the gas industries and about £330 million for the Post Office. The total is in line with the estimates in the Public Expenditure White Paper and at the time of the Budget. As the residual amount still available under the 1974 Act is, of course, inadequate to meet these 1974–75 sums, we are seeking fresh parliamentary approval to deal with them.

Turning now to 1975–76, I would point out that the Financial Memorandum states that the total subsidies for that year will depend on, among other things, changes in the industries' costs, prices and revenues during the year. At the time of the Budget we estimated, on the basis of the latest information from the industries, that the total would be £100 million. Of this, £70 million was for the Post Office and the rest for the energy industries.

It is hoped that the gas industry, subject to a price increase in the autumn, will break even this year and so will not need a subsidy. The electricity industry in England and Wales put their deficits at up to £30 million or so this financial year and the two Scottish boards hope to break even. It is, of course, far too early to forecast reliably what the results will be, but we hope that these industries will remain on target in phasing out their deficits.

I turn now to the Post Office. It has—subsequently to its forecast of £70 million—reviewed its financial prospects for the year, and I regret to have to tell the House that this has revealed a substantial deterioration, mainly due to higher inflation. My right hon. Friend, the Secretary of State for Industry is having discussions with the Post Office and the trade unions to see what urgent steps might be taken to remedy this situation. Obviously the Post Office, along with the trade unions, is looking for further sensible economies. But I would be misleading the House if I did not make it clear that any such economies which may be achieved will not be enough to cover the revised deficit, and further tariff increases this year cannot be ruled out. I should also make it clear that the Government will look very critically at any claim for compensation above a level of £70 million. As my right hon. Friend, the Secretary of State for Industry, has already indicated, he will be reporting on the situation to the House when the discussions are completed.

The Chancellor said in his Budget Statement that these price restraint subsidies were likely to have been phased out completely by April 1976. It remains our firm intention to keep to this timetable so that subsidies in 1976–77 will not be necessary.

Mr. David Howell (Guildford)

The Chief Secretary was talking about £100 million for the possible deficit for 1975–76. I think he indicated that his right hon. Friend had mentioned that figure, but his right hon. Friend also mentioned a figure of £70 million for 1975–76. Are we to take it that the £70 million has grown to £100 million? What has happened?

Mr. Barnett

The £70 million was in 1974 survey prices. It is £100 million in current price terms.

Mr. John Stanley (Tonbridge and Malling)

Would the hon. Gentleman tell us what is the current revised estimate of the deficit of the Post Office in the financial year 1975–76?

Mr. Barnett

It is too early to say precisely what the estimate will be, but, as I have indicated, every effort will be made—and discussions are going on between the industry and the workers in the industry to ensure that efforts are made—to reduce whatever the deficit might be. Certainly, concerning subsidies, as I have indicated, it is our firm intention to ensure that there will be no subsidies in 1976–77. We have provided, as a contingency, for the powers to be extended to cover that year 1976–77, should it prove necessary, but it is a provision which I very much hope we shall not have to use.

Before turning to the next part of the Bill I would like to comment briefly on one point on the criteria for payment. The maximum sum for which an industry is eligible is the amount of its deficit on revenue account. I want, however, to make it quite clear that the amount of the subsidy could be less.

Each industry has made its estimates of its likely deficits and the Departments sponsoring them will monitor those estimates and demand explanations of any variations from them. If these variations are not for acceptable reasons, the subsidy will be corespondingly reduced. We are not, for example, prepared to finance unacceptably high wage settlements. I will say more about that in a moment.

I turn now to Clause 3, which provides for an increase in the borrowing limit of the British Steel Corporation from £1,250 million to £2,000 million. That would be a large increase at any time. But, when we have a borrowing requirement of £9,000 million, it is important that those employed in the industry should understand that it is not enough simply to say the funds are needed for investment. Given the obvious limitations on the amount that we should or could borrow, £750 million allocated here means that much less somewhere else. Consequently, the industry has to show good reason why it should have a priority call on these scarce financial resources. It will not simply have to satisfy the Government that it needs the funds. It will have to show why it should have a higher priority than those in other industries to whom I shall inevitably have to say no.

It is against this background that I want to turn to the case for Clause 3. The present limit has in fact lasted for a year longer than our predecessors expected when they introduced it in 1972. However, £900 million is outstanding against it, and, for reasons that I shall give, I believe that it is right to make an increase now to fund the corporation's increasing cash requirements and to leave a margin of safety for contingencies and monthly fluctuations in working balances.

An important factor in this timing has been that the corporation is currently able to finance a smaller proportion of its requirements from its own resources than either it or the Government would wish. In 1973–74, it found 75 per cent. from its own resources and it made a profit of £56 million even though, in line with the policies of the previous administration, it held its prices substantially below justifiable levels at a time when demand for steel was strong and it had an opportunity to earn more.

In 1974–75, the corporation expects to show a profit of a similar amount. This has been achieved in spite of disappointing production during 1974 which was partly due to disruption caused by the three-day week and partly due to difficulties with raw material supplies and labour disputes. However, its capital requirements in 1974–75 were substantially higher and its own contribution towards financing fell to an estimated 35 per cent. in the year.

In recommending this increase of £750 million, I must make it clear that the corporation's financing requirement is likely to increase sharply in 1975–76 and to continue at a high level for some time. Although at constant prices its capital expenditure this year and next is likely to be in line with the figures in the Public Expenditure White Paper, the corporation is faced with sharp increases in plant costs, and it now estimates that the out-turn figure for this year may be more than £500 million.

Mr. Michael Marshall (Arundel)

The right hon. Gentleman said that these increased costs reflected the rising costs of purchasing plant. Can he say how much of that increase came during the 15 months before the announcement about the review of the investment programme?

Mr. Barnett

There is no real increase here. I am talking about an increase brought about by increasing costs of plant due to inflation expected in 1975–76. The £500 million is the higher out-turn over the previous figure given.

The corporation also has to finance the increasing value of stocks, and a proposal for a counter-cyclical stock building scheme is under consideration. Coinciding with this, its ability for self-financing has been sharply reduced in the short-term by one of the worst recessions in international steel demand since the war.

Taking all these factors into account, it is estimated that the corporation could require external financing of up to £550 million if it were to break even in 1975–76, and more if it were forced into a substantial deficit by present trading conditions. The increase proposed is, therefore, a short-term measure, and the House will have a later opportunity to consider, very probably in the next parliamentary session, what further adjustment of the limit is required.

The proposed limit will enable the corporation to continue its major programme of modernisation and expansion, which is essential to meet United Kingdom demand, to compete in the world steel market with increased exports, and to provide an assured long-term future for its work force.

I must, however, emphasise that in carrying out this programme we look to the corporation to be fully viable. There must be no doubt about this. We look to it to be viable and also to provide a return on the public funds, including public dividend capital which will continue to be invested in it.

Mr. Tim Renton (Mid-Sussex)

I am interested to hear the right hon. Gentleman say that. I understand that, for the first time, the British Steel Corporation is considering what might be described as a stabilisation fund under which it will stockpile steel products rather than, as before, exporting them at lower prices in order to keep plant working at 100 per cent. levels. Is that what the right hon. Gentleman meant? Can he say what is the total sum of money likely to be involved in this, and is it being done in conjunction with and in consultation with steel plants in the EEC?

Mr. Barnett

It may be that the hon. Gentleman was not present during Question Time. If he had been, he would have heard my right hon. Friend the Secretary of State for Industry refer to this very point. The matter is under consideration. I am not saying that it will necessarily be done. We are discussing these matters with the corporation now.

Dr. Jeremy Bray (Motherwell and Wishaw)

In view of the enormous financing requirement of the British Steel Corporation and the need for a more adequate self-financing ratio, can my right hon. Friend say what is the Government's policy towards the revaluation of the corporation's assets? At present, the corporation is depreciating its assets at historic costs, which grossly underprovides for full depreciation. It is to be hoped that there will be an early revaluation.

Mr. Barnett

Such matters as depreciation and inflation accounting will fall for discussion when we have the Sandi-lands Committee's Report. All these matters will be considered.

The Bill also provides, in Clause 4, for an increase in the borrowing limit of the National Bus Company from £130 million to £200 million. The current limit was set in the Transport Act, 1968 which brought the company into existence. Its fleet now totals some 20,000 vehicles, and the company's subsidiaries operate about one-third of the stage carriage services in England and Wales.

Substantial investment, which will in part have to be financed by borrowing, is required for replacement of vehicles and improvement of garages and bus stations. The cost of these has increased steeply over the last six years, and an increase in the company's borrowing limit, of which almost £100 million is accounted for by the company's commencing capital debt, is clearly justified. The extension proposed should, on present estimates, be sufficient to cover the company's borrowing for the next five years.

Clause 5(1) is a tidying-up measure. Its object is to bring the foreign borrowing powers of all statutory corporations into line with one another. In future, borrowing in foreign currency will in all cases simply need the consent of the Secretary of State and the approval of the Treasury. The simplification of the borrowing powers of the statutory corporations listed at Schedule 2 of the Bill will have no effect upon the ability of the Government to control the terms upon which they borrow in foreign currency.

Clause 6, with Schedule 3, provides for the transfer of financial responsibility for the Electricity Consultative Councils and Gas Consumers' Councils from their respective industries, which currently provide their funds, to the Secretary of State for Prices and Consumer Protection or, in the case of the Scottish Electricity Consultative Councils, to the Secretary of State for Scotland.

The clause will bring the councils into line with the other statutory nationalised industry consumer councils for transport, coal and the Post Office, which are already financed by the Government. It will increase the independence of their respective industries and so enhance the invaluable work they have done over the years on behalf of gas and electricity consumers.

A paramount concern has been to ensure that the Bill has no adverse effect on the pay and conditions of service of the staff, chairman or members. In this connection, we have received assurances from the officers' present pension funds that no action will be taken to alter their pension arrangements without the fullest consultations.

I turn now to the broader effect of the Bill on the public sector borrowing requirement and public sector wages, with particular reference to the industries named in the Bill. We have catered in our estimates for borrowing by the National Bus Company and for the relatively small new expenditure on consumer councils. So far, we are on target in our objective of phasing out the price restraint subsidies to the gas and electricity industries, so these provisions add nothing to the estimates of the borrowing requirement.

It will, however, have been clear from what I have said that the situation of the Post Office and the British Steel Corporation could lead to an increase. In the case of the Post Office, this would be so if its deficit in the year were more than £70 million, irrespective of whether any such addition was financed by subsidy or by borrowing by the Post Office. This underlines the importance of the current efforts to bring the Post Office's deficit under control. The British Steel Corporation will certainly borrow more than the £420 million estimated in the Financial Statement and Budget Report. I have said that the total could be up to £550 million and more if it is in substantial deficit this year.

To a considerable extent, this is a situation to which we shall always be liable if nationalised industries are forced into deficit, as were the gas and electricity industries and the Post Office, or are not allowed to earn anything like adequate surpluses as in the case of the BSC. They start off with a high borrowing requirement and, if anything goes wrong, that is compounded. For example, as I have said, the BSC wishes to build up stocks as a counter-cyclical measure. There may well be good sense in that, and we are looking at it now. But if it were to go ahead the Government would have to advance the money for it because the BSC does not have the reserves to deal with it from its own resources.

This brings me to the central problem, which is vividly exposed in two parts of the Bill—namely, that as a country we cannot go on finding finance for subsidies and at the same time have the resources that we desperately need for new investment. We have done that for far too long. It has been the perfect example of trying to have one's cake and eat it. We have eaten too much, in both public and private consumption. Inevitably, the result has been less cake, or, rather, less investment.

A large borrowing requirement used for investment in viable industries would be of much less concern to the Government and—much more important—of less concern to our creditors than a large borrowing requirement used for consumption. That is why, as I have said, we have to phase out the price restraint subsidies as quickly as possible. Indeed, it is essential that the nationalised industries not only return to break even but earn a surplus in order to finance a higher proportion of their capital requirements from their own resources and to build up reserves to cushion themselves in lean years.

I hope, therefore, that, when these industries get out of deficit, there will be discussions with them on the setting of new financial targets which will give them clear guidance as to their financial objectives and a strong incentive to contribute to their own financing needs.

Mr. Tom King (Bridgwater)

The right hon. Gentleman is putting the main emphasis of his criticism on price restraint. Will he comment on the position of the Post Office, from which it seems clear that the freedom to raise prices, with the consequent drop in traffic on the postal side, may itself be partly responsible for increasing the deficit?

Mr. Barnett

I am coming to precisely that point. I am glad that the hon. Gentleman is so perceptive as to know the problem.

All that being said, the fact remains—and I have no wish to conceal it—that the financing of the steel industry in 1975–6 and possibly the Post Office will add to the estimated borrowing requirement. This does not necessarily mean that the borrowing requirement as a whole will turn out higher, because, given the magnitude of the figures—total receipts and payments of £98,000 million and a whole host of different items—the outturn could well show offsetting reductions.

One way of offsetting that increase could be smaller wage settlements in the public sector. Certainly it must be recognised that continuing high settlements must have serious consequences for the nationalised industries. It must affect demand for their products and services, and therefore affect their investment and employment, for there is no bottomless purse with which to pay for high wage settlements.

Because we cannot both have our cake and eat it, we must put the resources into new investment. That is why, even if we could, we are not prepared to continue subsidies for the industries covered by this Bill. In the case of others, such as British Railways, which receive subsidies for social reasons, they will continue to do so, but the levels of subsidy will have to be kept under the strictest control.

It cannot be emphasised enough that, if we are to improve the total wealth of the nation and the wellbeing of the workers in these industries, limited resources cannot be used to subsidise overmanning and inefficient use of labour. It must be clear, whether for industries referred to in this Bill or not—and it is particularly true for labour-intensive industries—that high wage settlements must mean either big price increases or cuts in costs, or both.

I hope that the reduction in costs can be made by increasing productivity. But the improvement in productivity would have to be real, and there can be no question of simply paying for a high wage settlement and living in hopes of increased productivity. We have done that for too long.

The alternative of large price increases can be self-defeating in some industries. We are seeing signs of it in the postal services, where large price increases result in falling sales, making it even more difficult for the industry to pay its way, and in the longer term it must affect employment prospects. In short, it is crucial that workers in the public sector, as well as those in the private sector, see that their own financial prospects are bound up with the financial prospects of the industries for which they work.

I hope that this Bill will be the last of its kind. It will be in the best interests of the workers, their industries, and the country, that it be the last of its kind. In that hope, I commend it to the House.

4.48 p.m.

Mr. John Nott (St. Ives)

In the spirit of generosity which must mark our return from referendum politics, I congratulate the Leader of the House on showing all his customary imagination and verve in having chosen, as the first broadcast Bill in the House, something entitled the Statutory Corporations (Financial Provisions) Bill—hardly an exciting title. One hopes that if ever there is another such Bill—and we dearly hope that there will not be—we may change the title, for it does not really express what the Bill is about at all.

If the British public, having been inflicted with several weeks of television entertainment from the political stars and male prima donnas of the House of Commons, do not rush to their radios to hear more about the Statutory Corporations (Financial Provisions) Bill, it will be because of the title and not because of the very important contents which it embodies.

Dr. Bray

On a point of order, Mr. Deputy Speaker. To put the hon. Member for St. Ives (Mr. Nott) out of his misery, would you explain that the present proceedings are not even being recorded for broadcast?

Mr. Deputy Speaker (Mr. George Thomas)

The hon. Gentleman has taken me by surprise. We are all disappointed that we shall not be heard, but we shall listen to the hon. Member for St. Ives (Mr. Nott).

Mr. Nott

Of course, the media and the trade unions run the country, but I had understood, although I may have been wrongly informed—I do not want to dwell on the point—that this debate would be part of the edited broadcast of the House. The debate is being recorded, but whether it will actually be broadcast is not for me to say.

Now that the referendum is behind us and the Labour Party's internal conflicts are resolved, Parliament can get down to some of the very real problems that face the country. In my view, the Bill will be of more importance to the income, employment and general welfare of the British people over the next year or two than the Common Market, about which I trust we have learned a little during the past three weeks.

I do not believe that the House would wish to debate today what happened in the past. [Interruption.] If we are interested in what happened in the past, it is because it might teach us something about the future. But there is little point in jobbing backwards.

We would all agree that so confused and unsatisfactory is the present relation. ship between the public corporations and Ministers that we should now go back to first principles and start again. I hope that the Government will take the view that I am making a relatively non-partisan speech. In putting forward a few ideas—I do not put them any higher than that—I must make clear which areas I shall tackle, otherwise the hon. Member for Newcastle-under-Lyme (Mr. Golding) will leap to his feet and refer to the Post Office. Therefore, I want to set out what I shall and what I shall not deal with in the debate.

Although I believe that many, if not most, of the problems of the public corporations derive directly from their ownership by the State and that the Government's financial problems are greatly enhanced by the present size of the public sector, I shall leave it to my hon. Friends, if they so wish, to advance the arguments for denationalisation and the folly of extending the public sector further. My concern today will be with the efficiency of the existing corporations contained within the Bill and perhaps with the railways, which are outside the Bill. For the sake of time, I do not intend to deal with the wider arguments for and against nationalisation or the present Government's policies in this area.

Secondly, the Government have designated the Bill as a Treasury Bill. I do not want to deal with the problems of particular industries except in so far as they demonstrate some of the problems of financing these industries, ministerial control and investment procedures.

Thirdly, I do not want to get involved in argument about whether the nationalised industries are more or less efficient than the private sector and to what extent this is the fault of the politicians or the fault of management. I leave that matter aside. There is plenty of statistical material which points both ways. The figures can be made to prove anything. The British public—the consumer—would need a great deal of convincing that the public corporations are more efficient than private firms. However, I leave the matter there.

We can look at certain public corporations in isolation and judge them for what they are. In this connection I have seen the motion on the Order Paper in the names of the hon. Member for Motherwell and Wishaw (Dr. Bray) and some of his hon. Friends, criticising some of the management and some of the procedures of the British Steel Corporation.

Fourthly, I am sure that the Government will agree that it is not possible to treat the public corporations as some kind of homogeneous entity. Most of them are very different from each other. This is an extremely diverse sector, and the solutions that may well apply to one probably do not apply to others. One could perhaps divide them into three groups, although I noticed that in an Adjournment debate just before the Whit-sun Recess the hon. Member for Bristol, North-East (Mr. Palmer), who takes a great interest in nationalised industries, divided the nationalised industries into two groups.

For my purposes, I should like to divide these industries into three groups. First, there are those corporations like the National Bus Company which are in open if not always fair, competition with private firms. Secondly, there are those potentially profitable public utilities like gas and electricity which, while competing with each other and also with coal and oil, are nevertheless, in the short term at least, monopoly enterprises. Finally, there are those corporations like the railways which, rightly or wrongly, seem to have been given a licence to opt out of the disciplines and rigours which are applied to most other public sector enterprises and to all private firms because they are said to be an essential service. I believe that is a very odd notion.

Clearly the arguments against the subsidisation of public corporations are too well known to be rehearsed by me, but I shall list them briefly. Demand in the medium term is artificially increased, leading to a misapplication of resources. Consumer spending is increased at a time when it needs to be reduced. Energy consumption will be encouraged in the fuel industries, where it needs to be discouraged. The knowledge that the public purse—and I am glad that the Chief Secretary referred to this very important point—is always open will encourage a continuous and pernicious effect on wage bargaining, as exemplified by the recent comments of Mr. Weighell.

I turn now to a few thoughts about a new financial régime for the industries. As I know how difficult it is for Treasury Ministers and Ministers generally when they are in office to get anything specific and positive organised on the question of targets and a new financial régime for these industries, I shall attempt to perform a constructive rôle in this regard and make a few points about targets. First, the financial targets set out in Table I of the 1967 White Paper are inappropriate now to an era of high inflation and high interest rates.

The price restraints introduced by the Conservative administration did no more than destroy what I believe is now an outmoded instrument of control. For instance, if we deal with the Gas Corporation with its large capital requirement to exploit the North Sea, or indeed any other of the major nationalised industries which is funding old debts at higher interest rates, the old targets could have been achieved whilst making a heavy loss. This is because the old targets which we were using were expressed as a gross return, without taking interest into account, on net assets taken at historic cost.

I believe that if one looks back to the original financial obligations of the nationalised industries, as set out in their separate statutes, one will probably find something which is of greater relevance to modern conditions than the financial targets which were subsequently introduced after the 1961 and 1967 White Papers.

I take the Gas Corporation as an example. Its obligation was to meet the total outgoings properly chargeable to revenue and to make such allocations to reserves as the corporation considered adequate. That was a very simple and specific set of criteria contained in the original statute which set up the Gas Corporation.

I shall now explain why I believe that is probably a cleaner and simpler target, although not one that I am totally satisfied with, than the kind of targets expressed, without taking interest into account, on historic net assets. A new target of a sort is embodied in the Price Code. Under paragraph 98 of the order, the nationalised industries may achieve a surplus of 2 per cent. on turnover or 10 per cent. on net assets. Clearly, this is hardly adequate as the basis of a new regime, because it takes no account of the varying potential profit from one industry to another and it incorporates differences of treatment in accounting practice between the industries, particularly with regard to depreciation.

It would seem that in an era of high inflation and high interest rates any target involving a return on existing net or gross assets is largely meaningless unless there is to be an almost continual process of asset revaluation. This brings in the whole question of the Sandilands Committee. I cannot see that it is realistic or practical to contemplate a target which depends for its efficiency on an almost continual process of revaluation in the whole of this huge sector.

The target was expressed, disregarding interest. Interest was not in, but if we were to bring it in, I do not think that it would be sensible to relate the interest rate to the National Loans Fund rate. It would be more sensible to limit it more nearly, to to what these corporations would have to pay, on the Government's credit rating. which I fear is declining but which is nevertheless still high in the domestic market, but to what these industries would have to pay, assuming that they were profitable, if they were borrowing in their own name.

Over the years—I do not mean this as to the immediate future—we should look again at the question whether we should go only for the orderliness of the gilt-edged market. It was this reason which led the Radcliffe Committee to suggest that the nationalised industries should borrow via the predecessor of the National Loans Fund. In my view the committee may have placed too high a priority on a neat, orderly, gilt-edged market against, perhaps, the advantages in the medium-term of allowing some of these industries to come back into the market for their funds. This is a question that we should consider for the future.

For instance, I cannot see that it is reasonable for the National Bus Company to be borrowing from the National Loans Fund at Government interest rates if it is in open competition with other bus enterprises. If we are to have competitive public corporations, we must put them on a fair and proper basis of competition with private sector firms. The present borrowing arrangements clearly must mean that the National Bus Company is not competing on a fair basis with private firms.

However, whichever way we look at it, I think we are driven back to one basic principle in the 1961 and 1967 White Papers; namely, that financial targets are secondary matters desirable for monitoring efficiency, but only on the basis that they differ in different industries, and only then after proper principles have been applied to the control of investment and the determination of prices. The White Papers made it very clear that targets should reflect sound investment and pricing policy and not vice versa.

This brings me to the question of how we are to determine prices, if we say that pricing policy should be decided prior to targets being decided. We cannot do better than look at the 1961 White Paper's recommendation, which was that in the last resort pricing must be based on marginal costs, or; in layman's language, we must fix public corporation prices so that each extra unit of output is related to the resources necessary to produce it, or, if it is not a monopolistic system, the price which a competitive market will bear.

I am well aware that that leads one into all sorts of difficulties about peak load, the trade cycle, cross and social subsidisation and about whether to take short-run or long-run marginal cost as the basis for the pricing of products. I nevertheless believe that we shall not do better than long-run marginal cost as the basis on which the prices of the nationalised industries are set.

I am sorry to have burdened the House with that. I hope that I have not been too boring or too technical, but these are matters that we must discuss. Very little flows out of any Government in this area. When the Chief Secretary was in opposition and I was a Minister at the Treasury he made a number of suggestions to which I listened with great interest. It was very interesting to have the Opposition's views on the matter. I therefore hope that the right hon. Gentleman will not think that I am being unduly unhelpful in this debate.

I do not know whether the organisation in Whitehall for dealing with the nationalised industries is properly arranged. I have an impression—I put it no higher, because things might have changed—that the Treasury-Department of Industry relationship is unsatisfactory with regard to the control and monitoring of the nationalised industries. I do not think that the Treasury's rôle should be one of detailed comment on each major investment project. I do not believe that that is right. I think that the Treasury should set capital investment and subsidy limits at the beginning of a period or even perhaps have a bi-annual look at the subsidy and capital investment limits and then let the departmental responsibility flow from there.

The responsibility is not ultimately that of the Treasury. The Treasury is in charge of the money. I do not think that we want to continue with a process whereby Cabinet committees continually meet, re-meet and meet again to discuss in large interdepartmental meetings whether a small investment project is justified for a particular nationalised industry. That does not seem to me to be the right way of conducting these matters within the Government.

At Question Time today, the Secretary of State for Industry made a very arrogant remark to my hon. Friend the Member for Derbyshire, South-East (Mr. Rost). He said "The hon. Gentleman does not know how government works." My hon. Friend may not know how government works, but he has a better hunch about how it should work than the Secretary of State. Perhaps the Secretary of State should sometimes examine existing procedures rather than assume that they are for all time proper and right.

Another feature requiring attention is the wholly unjustified statutory protection given to industries in the public sector against outside competition. There is no reason why private companies should not engage in electrical generation. There is no reason why the Post Office should continue to have a monopoly of letter delivery. It would be much more efficient if the milk, the newspapers and the mail were all delivered on a contractual basis in rural areas; it would save a great deal of money.

I do not believe that the monopoly position of the statutory corporations is justified in the way that it has been upheld since the beginning of time. I believe that the Post Office letter delivery monopoly dates from the end of the seventeenth century. That is no reason why it should continue.

Sir Geoffrey Howe (Surrey, East)

From the time of Oliver Cromwell.

Mr. Nott

I believe that the monopoly of the Post Office in the delivery of the letter mail dates from 1697, so my right hon. and learned Friend or I have our dates wrong.

Again, why should the Post Office have the monopoly in the installation of telephones? The gas and electricity industries do not have the monopoly in the installation of appliances. Why cannot the private sector apply to exploit a new coalfield? The licence for the exploitation of a new coalfield is issued by the National Coal Board.

The existence of these monopolies within the public sector does not increase its efficiency. It would be a great help, certainly for pricing policy, if we had much less of this kind of statutory monopoly within the public sector.

Again there is the matter of the whole relationship of the labour force to the management in the public corporations. I wish the Secretary of State for Industry were here. Why should we not have a number of the mining areas broken down into workers' co-operatives? I would be perfectly happy to see some of the public sector run on the basis of competing workers' co-operatives. Why is it that the whole basis of co-operation amongst workers has to be kept in the private sector? The idea of setting up workers' co-operatives in the public sector is very interesting. Let them compete with one another. It would help efficiency, and would make employees very much happier at the same time.

I now come to the specific clauses in the Bill. First, however, I must make clear to the Chief Secretary that we are not seeking to deny to public corporations the finance necessary to meet the Chancellor's objectives of a phasing-out of price restraint subsidies. Neither do we wish to deny them the necessary public expenditure which is not financed out of revenue. But the Bill raises new issues of principle and of public expenditure control.

The White Paper in January forecast price restraint subsidies of £250 million in 1975–76. That was a substantial improvement on the current year, which is about £650 million, and we welcome it. Even more did we welcome the Chancellor's Budget statement, not two months ago, that subsidies for price restraint would come down from £550 million in 1974–75 to £70 million this year and were likely to be phased out completely by April 1976. Apart from juggling around with current prices, the Chief Secretary confirmed that that is the present position.

However, that is not what we find in the Bill. Not two months later, in spite of what the Chancellor said in his Budget Statement, we find no figure whatsoever. All we are told is that the total subsidy in respect of 1975–76 will depend upon, among other things, changes in the industries' costs, prices and revenues during the year". This is about six weeks after the Chancellor himself predicted a figure of £70 million.

Why is the Bill open-ended if the Chief Secretary is right in saying that the Chancellor's figures are still relevant? Even in 1976–77, a year beyond the date at which the Chancellor said they would be phased out completely, the Treasury will retain order-making powers to bring forward unspecified amounts for price restraint. The legislation goes far beyond the legislative powers which we sought when we were in office. It is, in fact, contrary to the Chancellor's own expressed objectives. Perhaps the Minister of State, Treasury will say more about that when he winds up.

In the Bill which we brought forward—and the Chief Secretary will remember that we were not particularly proud of our Bill—we set a figure of £500 million as the top limit. There is no top limit in this Bill, and we do not find it acceptable on that basis.

However, we have to look behind the figures for price restraint, because they tell us relatively little. What we have to look at is the true financial position of these industries. What counts is the amount which they are forced to borrow. In Table 12 of the Financial Statement it appears that in the current year the public corporations will finance more of their capital expenditure out of revenue than in the year before. Apparently the borrowing requirement of the public corporations will be rather less than it is in the current year. If this materialises it will be a reversal of the trend, and one that we welcome.

Looking at the position over a period of years, we find that the self-financing ratio of the nationalised industries has greatly worsened. In 1971 the figure was about 42 per cent. This is the amount by which the nationalised industries were financing their capital expenditure out of revenue. That is approximately double the figure for 1974–75. Apparently less than £700 million was provided from internal resources towards the capital expenditure of nearly £3 billion in 1974–75. I am again referring to Table 12 of the Financial Statement. A figure of £700 million out of externally-generated resources is by no measure an adequate amount of capital expenditure to be financed out of revenue. Indeed, the Chief Secretary made that point.

What we need to know—and perhaps the Minister of State will take this point on board—is the formula which Departments use to decide how much of capital expenditure is financed out of revenue. It is no use our fiddling around with amounts like £70 million of price restraint if as much as £700 million can be moving around the borrowing requirement because a particular industry is financing less of its capital expenditure out of revenue. We get nowhere unless we have a specific and published figure which will tell us exactly what we want to know namely, the movement of overall borrowing requirements of these industries. In this respect Table 12 is a great help to us.

It appears that the Treasury is imposing some cash limits on the nationalised industries, and in some cases this is leading to a fall, in real terms, in the increase in capital expenditure. The Government are having to meet rising real incomes in the public sector. Capital expenditure is being cut back, as the Chief Secretary said, in order to finance escalating money incomes in the nationalised industries. It is not good enough just to talk about a cash limit overall. What we have to think about is a cash limit on the revenue accounts of the nationalised industries.

Perhaps I may quickly suggest some guidelines. First, as we have repeatedly demanded, there must be a cash limit beyond which no public corporation can come to the Government for one single extra penny. That in the last resort is a matter of political will. That does not apply to a subsidy for price restraint. It applies also to any money received from, the National Loans Fund or borrowed under a Treasury guarantee in the Eurodollar market or anywhere else.

Secondly, each industry must have a fixed formula which requires it to finance a specific percentage of capital expenditure out of revenue. That formula should be published and may not be varied, so that we know exactly how much capital expenditure is going to be financed out of revenue. Publishing it will help to strengthen that discipline within the system.

Third, in order to set the cash limit, the Treasury will have to take a view on the permitted increase in the total salary bill in the coming year. By all means, let the unions bargain with the management about the distribution of the increase, but the cash limit itself is a matter for the Government. It is not a matter for the trade unions. The actual cash limit which is imposed upon the nationalised industries is a matter for the House of Commons. It is not a matter for tripartite discussions. If it is decided to raise it in the NEDC, that is one thing, but the overall cash limit is a matter for the Government and the House of Commons. It is certainly not a matter for bargaining. It must be set in accordance with the overall needs of the economy at any one point of time. If a corporation goes beyond its cash resources, it can finance the increased salary bill only by raising its prices. In the case of the Steel Corporation at the present time, it could not raise its prices. Therefore, the only answer in that case is redundancies. It follows as night follows day.

It is no use the Chief Secretary's saying "We are considering a stockholding scheme for the British Steel Corporation." We must have a figure and stick to it.

I accept that there is a particular problem of recession in the steel industry which may be unique in its size since the war, but it is avoiding the issue if the Government provide more working capital for the holding of unlimited stocks. It is not an answer to the problem.

In the case of a monopoly supplier the price increase must be subject to regulation by the Monopolies Commission or some other price regulation body, ideally outside the Government. The utility industries are not monopoly suppliers in the long term, because, for example, gas competes with electricity, coal and oil, but over three to five years they are monopoly suppliers, and we must have an outside agency which can say "You are making use of your monopoly position. You cannot go beyond a certain point."

My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) has persistently mentioned these principles in debates in the House, although unfortunately the commentators are fixed upon an idea that one does not have a policy for pay and prices unless it is in the form of the policy we had in 1972. That is an over-simplification, a naive way of looking at the problem.

The only alternative to the kind of cash discipline I have been talking about is a statutory pay policy. We know that the sanctions in such a policy do not work. We cannot put 100,000 railway workers in gaol.

Mr. John Biffen (Oswestry)

Hear, hear.

Mr. Nott

I note that I have total agreement from my hon. Friend.

The only sanction we can exercise is by controlling the purse strings, which are in the Government's hands.

If we return to a statutory pay norm, backed up by legal powers, we shall have to have a statutory prices norm as well. Could there be anything more damaging to the economy than to have imposed upon the country a stringent price norm which would make the Government's £10 billion or £12 billion borrowing requirement, or whatever it may be now, look like peanuts? We should be back to subsidising the nationalised industries to an unlimited extent. Therefore, we cannot think of a statutory prices policy at present.

Moreover, a more stringent prices policy would bankrupt the whole private sector. The private sector could not survive present rates of inflation with a more stringent statutory prices policy.

We oppose the Bill, but not because of anything to do with the Government's nationalisation plans, which lie outside this measure. The Chief Secretary spoke bravely, but we do not see his words translated into Government action. There is still no real determination to impose cash limits on the public corporations so that the total wages bill does not continue to be financed by endless printing of money. The Chancellor is already backing away from his brave words about price restraint. There are no limits in the Bill, which is open-ended. For those reasons we intend to divide the House at the end of the debate.

5.25 p.m.

Dr. Jeremy Bray (Motherwell and Wishaw)

The House cannot but take very seriously the warning given by my right hon. Friend the Chief Secretary to the Treasury about the need for efficiency and the need to prove the profitability of any proposed new investment. But I would have found his warnings even more convincing if I did not believe that within two years he would be writing to his right hon. Friends asking them to increase the investment programmes of the nationalised industries for which they were responsible, to do so with maximum efficiency, but at all costs to do so quickly.

However dire may be the warnings from Treasury Ministers, until the rules by which they seek to control nationalised industry investment and pricing are related to the general state of the economy, and those rules are clearly understood to adapt to the changing state of the economy, they will ring very hollow within the nationalised industries, where people know that no sooner will they have got round to implementing them than the advice will have been changed.

Likewise, when the hon. Member for St. Ives (Mr. Nott) said that he felt the need for tighter cash control on the corporations, again one could not but be impressed by what he said. But I think that he would be the first to admit that he did not begin to explore the complexities of the problem as they arise in practice. I shall later make suggestions about how those complexities might be tackled.

The hon. Gentleman's point about the valuation of assets is important, in terms not so much of a corporation's overall performance but of the relative profitability of different operations within a corporation. It is for this reason that the practice of annual revaluation has been regarded as good accounting practice in some firms—for example, the firm for which I worked, Philips, where for 30 years there has been an annual valuation of assets, and has been found to be a viable basis of operation. It is a far more realistic way of taking account of inflation than expecting companies to produce a return on assets which follows the short-term or even the longer-term interest rates in the open markets.

Mr. Richard Wainwright (Colne Valley)

Hear, hear.

Dr. Bray

I am delighted to hear that the hon. Member for Colne Valley (Mr. Wainwright) agrees. I hope that the hon. Gentleman will speak on this matter, drawing on his own accounting experience.

The corporation about which I should like to speak in detail is the British Steel Corporation, which makes heavy calls upon public finance in the Bill, and which faces severe problems not unrelated to its financial performance in the past year and in the current year.

The overall background is familiar to hon. Members—new processes replacing old, with the inevitable result that there will have to be plant closures, redeployment of men and the introduction of new industries into the areas affected. The problems have been greatly exacerbated by the acute recession in the industry, not only in this country but in Europe and world-wide.

No one who is used to working with the steel industry, steel workers as well as steel managers, will fail to acknowledge the realism with which the situation is understood by workers as much as by managers. We in the House are unfair to our constituents if we are not completely honest with them about the acute difficulties which they face. They see them on the shop floor, and feel let down when they see people skating around them and producing easy solutions.

The pattern of events has now reached the stage where the Government's closure review has covered England and Wales and the results have been announced. The results for Scotland will shortly be announced. No sooner had the specific plans for particular works been announced than the recession led the BSC to break its commitments on the timetable of closures in England and Wales. This happened within weeks of its having reached agreement on England and Wales, and led it to anticipate talks on the Scottish situation. The corporation claimed that this was merely the short-term closure of works. It said that it was going to close works in the short term for two years and thereafter perhaps in the longer term, but a closure is a closure is a closure for a worker who is sacked. Nowhere is that more obvious than in Ebbw Vale, in Lanarkshire, in Shelton or Shotton. There are communities throughout the country which are completely dependent on steel. They have been through this experience so often in the past that they know what is coming to them if certain policies are allowed to continue.

The twisting of words—that is what it has been when talking about short-term and long-term closures—is behaviour which inevitably invites accusations of bad faith. However, no sooner had these problems been raised by the steel trade unions and by Members in the House than the BSC abandoned its proposals for redundancies of 20,000 or 50,000 of which the chairman had spoken.

Overnight those proposals were abandoned. But were they abandoned? A statement was made jointly between the BSC and the unions that there would be no closures in the short term and no compulsory redundancies. However, the chairman of the corporation concluded with the elegant phrase that there was more than one way of skinning the cat. Quite who the cat was he did not say.

The BSC and the TUC Steel Committee, in a joint statement of 19th May, make the position reasonably clear. For example, when referring to overtime it says simply and straightforwardly: All unnecessary overtime will be eliminated. That is a common sense agreement which I am sure the unions had no difficulty in accepting. However, on 30th May the BSC explained to the unions that overtime is to be defined in terms of hours. It said: Overtime is here defined as any hours in excess of 40 hours and any shift which carries premium time. Therefore, 42 hour rates should be reduced to a 40 hour week. Anyone who has dealt with shift cycles In process industries will realise that that statement means that shift rates of pay will be eliminated by the overtime ban. That is not what was agreed by the unions. That is not what is said in the BSC-union agreement of 19th May.

The BSC is now saying that the guaranteed week applies not to the earnings of the shift workers as they had been working previously but merely to day work rates without the overtime premium, without the 42-hour week. That has resulted in a reduction of earnings of one-third on the guaranteed week. In a works where the workers are on the guaranteed week for two weeks, and full earnings for one week there will be an overall reduction of 22 per cent. The workers are having imposed upon them not the status quo but a reduction of earnings. For the average production steel worker, that means a reduction of his income to a level below that which he would be receiving on social security benefits.

The workers are driven to seek better pay. In the works which are threatened with closure there will be many workers who will seek to get out first to find a job in a trade. The tradition in the steel industry is that when the building industry goes into recession bricklayers, plumbers, plasterers and joiners find work in the steel industry. Those men will now leave—perhaps that is fair enough—but what will happen after that? There will then be affected the harder core of men who are dependent throughout their lifetime on the steel industry. They will be living below social security rates.

The BSC and the steel unions agreed that redundancy payments should be made for voluntary redundancies. It was agreed that that should apply where both the BSC and the unions agreed that the manning was surplus to requirements. That was the clear statement that emerged from the meeting of 19th May. But now the BSC is saying that redundancy payments will be made only if it is mutually agreed that overmanning existed at full output level. For example, if there are four furnaces in a works and a certain manning level is required for them, and if only one furnace is operating, as in the case of the Lanarkshire Works in my constituency, the BSC will not pay redundancy payments for any worker who leaves below the level required to operate four furnaces. That is a twisting of the statement which was agreed between the BSC and the unions. That is why the unions hold the corporation in such low regard at present.

In the works threatened with closure there is already migration. For example, 40 men left the Lanarkshire works last week. There has been a migration of 3 per cent. of the labour force in one week, which means that within six months the manning in those works will be reduced to a level at which the works can no longer operate. The workers who depend completely on the works will not leave, but the works will cease to be viable in the longer term.

In this situation it has been a matter of great concern to me that the steel workers and the responsible branch officers have not always been able to find the support to which I think they are entitled. In the difficult situation that they face they have not always been able to find support from the union hierarchy. There was no report back to the trade union branches from the joint BSC-union meeting on 19th May other than the published statement, until a meeting which is now going on in my constituency.

In the Scottish office of the Iron and Steel Trades' Confederation there is only one telephone, which is constantly engaged. It is unfortunate that divisional organiser Arthur Bell has been off ill at this time. The men have an uneasy feeling in the works threatened with closure, which are the works needing union help most of all, they are not getting the support which they should have.

I have the greatest respect for Bill Sirs, the new General Secretary of the Iron and Steel Trades' Confederation. I wish him every success in his job. He has a major task as regards the organisation of his union and the service which it provides for its members, as well as in the modernisation of a wage structure which at present allows members to have their wages arbitrarily reduced by approximately 20 per cent. in circumstances which were never anticipated by the men.

The reaction to the present situation is that the men take whatever action is open to them. In the Clydebridge Works in the constituency of my hon. Friend the Under-Secretary of State for Industry—Rutherglen—the men have blacked any slabs from Ravenscraig. In the Lanarkshire works in my constituency ingots have been blacked from Glengarnock.

The BSC is losing control of the flow of work within the corporation itself. In my view, the works committee has put forward reasonably clear claims as regards the Lanarkshire works. It has submitted a claim for two furnaces and 10-shift manning and pay at the appropriate level compared with the one furnace 5-shift manning which the BSC is seeking.

It is disturbing that little action is to be seen in terms of the provision of alternative employment. For years we have talked about the development of major industrial sites in Scotland—for example, Cambuslang and the Etna and Range Road sites at Motherwell. Not a stone has been turned on any of those sites. They have been in the ownership of the BSC since vesting. There has been no provision for the redevelopment of resources to help in the creating of alternative employment. Activities within the BSC should be expanding but in the case of the sites that I have mentioned—I am fully aware, Mr. Deputy Speaker, that you are looking at the clock.

Mr. Deputy Speaker

The hon. Gentleman has a guilty conscience. I was just looking anywhere.

Dr. Bray

I am grateful for that assurance, but I assure the House that my usual brevity has been overcome by the knowledge that the House is not over-full at present.

In the case of subsidiary activities other than steelmaking which should be expanded to provide alternative employment, it is well known that there are acute management problems. Redpath Dorman Long has embarked on the construction of oil drilling equipment in partnership with ENI and I understand that the losses on platforms are running at about £l5 million. I also gather than ENI is disenchanted with the partnership and is trying to pull out of it. This is a serious reflection on the management which the British Steel Corporation has been able to put into its diversified activities. I hope that the corporation in its wider social responsibilities and also financially will see that its management problems here are put right forthwith.

Mr. Michael Marshall

The hon. Gentleman seems to be unfairly attacking the BSC for failing to take up its social responsibilities in associated industries. Does he not wish to pay tribute to the corporation for the work it has done in, for example, building up the existing stainless steel effort in the South Wales area, site clearance in Hartlepool, and so on? I hope that he will touch on some of those matters. Finally, does he accept the overall investment strategy of the BSC? He seems to be concentrating on the short-term problems on which he feels strongly from a constituency point of view.

Dr. Bray

I pay tribute to the BSC for what it has done, but the effort has been totally inadequate in scale and is regarded by the workers as a cynical piece of window dressing. There is an entirely different scale of activity when we compare what the BSC has done with the activities undertaken by the Dutch State Mines in Limburg in South Holland. As regards the long-term investment programme of the BSC, I accept the need to introduce large-scale BOS steel-making backed by electric arcs. I will send the hon. Gentleman a note which I have written on this subject and which I have discussed with Ministers. I should like to have his support since it envisages a phased investment programme with a proper discharge of BSC's social responsibilities.

I cannot help feeling that these problems of closure of works and the redevelopment of employment to take up the workers made redundant in communities which are totally dependent on steel are marginal to the economic success of BSC in the sense with which we are concerned in this Bill. We must ask how good BSC is in making steel and in selling it. The Press has built up the image of the BSC's chairman as a white knight ruthlessly seeking efficiency frustrated only by pettifogging complaints by trade unionists, Ministers and employees threatened with redundancy.

I shall not weary the House with a catalogue of mistakes and disasters which have occurred in the BSC in the last couple of years. This encompasses blast furnaces needing relining simultaneously on the same site, a burnt-out mill motor, a spilled furnace, broken cranes, grandiose and impracticable planning sys- tems, the shortfall of output below design capacity, defects of investment and pricing strategy, and industrial relations problems—the latter the only set of problems which BSC has been prepared to admit. There has been a total lack of realism by the BSC chairman in dealing publicly with problems which anybody who has been in large-scale industry knows exist and appreciates are inevitable. It is difficult to compare performance between one industry and another in these respects. Certainly it appears that the BSC has not yet had time in its eight years of existence to develop proper operating standards and management structures to deal with the difficult plant which it is now operating.

On this wider perspective it cannot be said that the chairman of the BSC or anybody else in the corporation is being frustrated by Government policy. I have attempted to outline the problems which the BSC should be tackling instead of making such heavy weather of its closure programme.

Action is certainly required to complete the closure review as quickly as possible. One accepts that the BSC should operate in the spirit of the Government's policy and of trade union objectives involving no closures without the provision of alternative employment. We need to get on with the creation of new jobs and to share work between works until the required phasing has been met.

The corporation and the Government need to phase closures to fit in with alternative employment and to improve union lines of communication. I appreciate that this aspect is not a BSC responsibility, although the corporation can play its part in establishing trade union representation in planning committees at the works, divisional and corporate level. There should be proper training of management within BSC and a truce in the war with the Government. I very much regret the atmosphere which has built up between the corporation and the Secretary of State for Industry. I speak as a long-standing friend of Sir Monty Finniston. whom indeed I introduced to Dick Marsh in the first place when we were nationalising steel, but I certainly do not regard the blame as lying in the court of the Secretary of State. Undoubtedly, Sir Monty has given great service to the corporation. He has designed a strategy with which the corporation will be occupied for many years to come. I would ask him to think carefully whether his own objectives, let alone those of the country as a whole, are best served by remaining in a state of armed opposition to the Government and by using all the implements available in the media.

Mr. David Howell

The hon. Gentleman has embarked on a critique of BSC. but has left us a little unclear about his view of major policy. Earlier today the Secretary of State for Industry was asked whether he was in favour of day-to-day intervention by Ministers in the work of the nationalised industries, and replied that the community—by which no doubt he meant himself—was in favour of day-to-day intervention. Is the hon. Gentleman in agreement with that view, or is he saying that Sir Monty should go, or is he saying that Sir Monty, as chairman, should be left to employ his skills to maintain the industry in the best interests of the country and the work people?

Dr. Bray

I do not think that Sir Monty should go. If he wishes to go, that is a matter for him, but I do not think that he should be asked to go. I believe that Ministers should have power to give specific directives not just general directives where there is always an argument from the lawyers. We are giving power to the Secretaries of State for Scotland and Wales to give specific directives in the legislation introducing the Scottish and Welsh Development Agencies. I believe that this is an omission in the main nationalisation statutes.

This leads to a point on which I wish to conclude. In the relations between the nationalised industries and Departments—between chairmen of nationalised industries and Ministers—it is necessary to provide institutionally for a much fuller exchange than takes place at present. We have a staff college for the Armed Services, but there is no parallel in the public sector of industry. I suggest that we need a staff college for the nationalised industries to train a cadre of managers and governmental officials who properly understand each other and know how to co-operate in depth. We must have formulae, but the formulae for profitability, pricing, investment and re- turn on assets are an inadequate guide to the more detailed exchange which must take place in the changing economic circumstances and industrial problems of industries as they evolve. There is a good precedent for the staff college. The National Coal Board staff college has fulfilled a valuable rôle in the development of new systems within the NCB as well as in the training of people in the operation of those systems.

But to return to the immediate short-term problems, if the BSC does not tackle closure and redeployment in a spirit of constructive co-operation with the Government and the unions, the effects will be industrially and politically catastrophic.

5.51 p.m.

Mr. John Biffen (Oswestry)

The hon. Member for Motherwell and Wishaw (Dr. Bray) speaks with an engaging charm and bears all the attributes of what I suppose one must now call a moderate in politics, but the argument that he has been elaborating about the British Steel Corporation has excited some anxiety on the part of those around me. I know that my hon. Friends the Members for Arundel (Mr. Marshall) and Shoreham (Mr. Luce) feel somewhat exercised by the line of argument adopted by the hon. Gentleman. Indeed, I shall in due course make one or two comments on what he has observed.

Surely, we are all engaging in great innocence if we suppose that suddenly and recently some kind of aggressive intervention has been developed by the Secretary of State for Industry which contrasts with what used to happen in those halcyon days of Conservative rule between 1970 and 1974. As I listened to the debate, my mind went to the comments of my former hon. Friend, Mr. Jock BruceGardyne—who, I hope, will soon be back with us—on the Second Reading of the Statutory Corporations (Financial Provisions) Bill on 21st November 1973, when he said: what on earth has my right hon. Friend the Secretary of State for Trade and Industry been discussing week in and week out with Dr. Finniston? Is he asking the House to believe that Dr. Finniston thinks that he is not subject to Government control in respect of his prices?"—[Official Report, 21st November 1973; Vol. 864, c. 1348.] The House knows from its own experience over the years that, however much we would wish to have an arm's-length relationship between politicians and management in nationalised industries, the ideal has been remarkably difficult to essay in reality.

Today we return to the vexed question of how to induce commercial behavour in the nationalised industries—this vital sector of our national economy—and how they can be compensated on those occasions and in those directions where they are obliged to behave in a non-commercial fashion.

I offer the warmest personal congratulations to my hon. Friend the Member for St. Ives (Mr. Nott) on the way that he addressed himself to this subject. At least we got away from the sterile argument about whether we were in favour of public ownership. We may have strong views about what public ownership means and the problems implicit in it, but at least we fractured the historic mould in which so many of these debates have been cast in the past. I am grateful to my hon. Friend on that account.

Clearly the House has had so many opportunities to consider the general principles governing the relationship between politicians and nationalised industries that it has got a veritable library of White Papers on which to draw. Some of the original wisdoms still remain the best to guide us, even in circumstances which, as the hon. Member for Motherwell and Wishaw said, are somewhat affected by a high and rising rate of inflation. I think that the comment in the White Paper Command 1337 of 1961— Again, if the prices of the goods and services which the nationalised industries provide are uneconomically low, demand for them (and for investment to produce more of them) may be artificially stimulated. has been vindicated by our own somewhat unhappy experience over recent years.

Again, I think that there is plenty of evidence to suggest the correctness of the view of the authors of the White Paper, Command 3437 of 1967, when they said: Clear financial objectives will continue to be necessary so that the industries know what is expected of them by the Government. Thus they serve both as an incentive to management and as one of the standards by which success or failure over a period of years may be judged. The alternative would be an indefensible lack of control over the return achieved on a very substantial public investment. We are in the somewhat unhappy business today of having a successor piece of legislation to the Statutory Corporations (Financial Provisions) Act 1973 because of a long and persistent and, to my mind, misguided period of price control in the nationalised industries.

If we look in a spirit of constructive charity at the background to all this, we can at least say that the fault lay not initially with us in this House. The poisoned authoriship of the policy of depressed nationalised industry prices lies squarely with the CBI and its mistaken and ill-fated initiative of price restraint in 1972.

Mr. Richard Wainwright

Hear, hear.

Mr. Biffen

I am glad to have the endorsement of the hon. Member for Colne Valley (Mr. Wainwright), because, within two days of the CBI making that announcement, his hon. Friend the Member for Cornwall, North (Mr. Pardoe) said: It would be extremely churlish for anyone in opposition or in Government not to welcome the measures announced yesterday."—[Official Report, 20th July 1971; Vol. 821, c. 1308.] The point is that we all tread the road to Damascus in one way or another, and it is a stony path. I do not hold it too harshly against the hon. Gentleman, but perhaps an increasing sense of scepticism should enter into all our judgements when we are presented with an overwhelming fashionable endorsement of one view or another by the moguls who inhabit the corridors of Tothill Street.

Mr. Richard Wainwright

I am sure that the hon. Gentleman wants to be fair. Will he identify the hon. Member whom he claims as being on the road to Damascus?

Mr. Biffen

I was hoping that the hon. Gentleman himself was on the road to Damascus. I am sorry if he wishes to remain firmly unconverted and unreconstructed and perhaps the one residual relic of Whiggery within the modern Liberal Party. I hoped that the hon. Gentleman felt that the remarks made by the hon. Member for Cornwall, North seemed singularly inappropriate in the light of the experience that we have all suffered since. Be that as it may, it is not of overriding and overwhelming concern.

The debate this afternoon has been much happier than the previous one. I agree with my hon. Friend the Member for St. Ives about the importance of trying to get some kind of cash limit disciplines into the relationship between the Government and nationalised industries because herein lies a much more constructive line of approach which can possibly avoid some of the confrontations within those industries to which we have become accustomed in the past. I felt, as my hon. Friend was speaking, that he had some support, at least in principle, from the hon. Member for Motherwell and Wishaw and, indeed, from the hon. Member for Colne Valley. Let me therefore say straightaway to my hon. Friend the Member for St. Ives that these views, radical though they are, bear the reasonable stamp of consensus.

Mr. Richard Wainwright

National unity.

Mr. Biffen

Indeed. This is the real national unity. This is the unity concocted inside this House of Commons and not hatched up in the talking shop of the NEDC office with the knights and the would-be knights.

We know what we should like to see emerge from this legislation, but I still feel unhappy about it because of the points that were elaborated by my hon. Friend. There is a keen anxiety that there should be an early and speedy attempt to put the finances and revenues of the gas, electricity and Post Office industries on bases whereby they not merely break even but earn a target return on capital employed.

I think that my hon. Friend the Member for St. Ives—I hope that he does not mind these constant and flattering references to him, but this is the least I can do on so happy an occasion—is right in saying that in any analysis of what is a target return on capital employed one has to take account of the inflationary circumstances which did not apply at the time of the White Paper originally elaborating the criteria for the target return on capital employed in the nationalised industries.

The House must be under no misapprehension about what this means, particularly for the Post Office. I know that my hon. Friend the Member for Ton-bridge and Mailing (Mr. Stanley) has made a special study of the shambles of the finances of the Post Office, and I am sure that if he is called in the debate he will be able to give the House an authoritative discourse, which I should not for a moment attempt to trailer. I believe that it will prove increasingly impossible to carry out so labour-intensive a pattern of postal distribution as we now have without pricing the service wholly without the range of a large number of people. In those circumstances, I think the House would be well advised to consider just what fundamental changes ought to take place in the distribution of mail again, as my hon. Friend the Member for St. Ives said, taking it alongside and in the context of other goods and services which involve a regular and daily distribution.

Mr. John Golding (Newcastle-under-Lyme)

Is the hon. Gentleman aware that his hon. Friend and I are members of a Select Committee inquiring into this problem? The House is therefore engaged in doing the very thing which he is urging.

Mr. Biffen

I am delighted to hear that, and delighted also that the hon. Gentleman, with his trade union experience in the Post Office—although in the Post Office Engineering Union and not in the Post Office Workers' Union—is on the Committee. Without wishing to be flattering in a fulsome fashion, may I say that I believe his membership of the Committee will give authority to whatever recommendations it makes?

I turn back for a moment to the importance of trying to simulate for the nationalised industries as far as possible the conditions which operate in the rest of the economy which is more open to the workings of a market economy. That brings me again to the points raised by the hon. Member for Motherwell and Wishaw, when he was so anxiously concerned about employment in the steel industry. What I think is of paramount importance is that the nationalised industries should not have thrust upon them some special rôle of providing jobs during a period of economic adjustment which may involve a temporary rise in unemployment.

The Financial Secretary made a speech which implied that there was already overmanning in a number of public sector industries referred to in the Bill. If there is to be some attempt to produce additional employment it could take the form of a straightforward labour subsidy which is to be paid alike to the private and public sectors through, perhaps, provisions which will be introduced into the Employment Bill. That I could understand. I should not favour such a labour subsidy, but at least I could understand it as being an approach which did not seek to discriminate between the public and private sectors. What would be unfair is if the nationalised industries were expected to carry out a policy of job preservation which was not expected or required of the private sector.

When this subject was last debated we did not have a frontal clash across the Floor of the House. There was a diversionary move by the Liberal Party which resulted in a Division. I was a reluctant supporter of the previous Bill. The debate was acrimonious, without any Labour-Tory vote. Today the debate is bland, but there will be a vote. The reason for the acrimony in 1973 was partly the presence of the Secretary of State for Industry, who was particularly vigorous in championing a number of advantages which he thought could flow from the subsidy implicit in the provisions of a Bill such as this. He mentioned two which he thought were being neglected by my right hon. Friends who introduced the preceding legislation, namely, provisions for industrial democracy, and import substitution.

It is clear that there is growing concern over the development of industrial democracy within the nationalised industries. I was particularly interested to note the speech of my right hon. Friend the Member for Lowestoft (Mr. Prior) on this matter two or three days ago and even more the remarks of my hon. Friend the Member for St. Ives about the possibility of some kind of workers' control or workers' co-operative in these industries. I welcome those remarks of my hon. Friend. It seems that he is one of that growing band of Tory red shirts who will be fighting for the thesis of worker participation as the alternative to the declining and somewhat discredited forms of managerial capitalism which are espoused by the CBI. I am sorry that my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) thinks that this is a little too lurid an interpretation of what is happening, but I think that the House would be unwise to scoff too quickly and too easily at some of the attempts to develop worker participation, or worker control, or whatever form of words one likes, in industries which have become immensely centralised and somewhat bureaucratic in their structure.

I do not believe that it is felt on either side of the House that the Morrison form of nationalisation has necessarily provided the most appropriate answers, particularly in labour relations.

If there is even a fraction of validity in the case presented by the hon. Member for Motherwell and Wishaw, it is ironic that it happens in the corporation which has deliberately had a major trade union figure at its top. This implies that there are problems related to size as well as merely to having distinguished former union leaders at top board level, so I hope that my hon. Friend the Member for St. Ives will not be intimidated by any of his friends about the fact that he is sporting the Tory red shirt in this respect.

I confess that my comments are not closely related, or flow consequentially, but there was one other point in the Chief Secretary's speech which left me a little anxious. I hope that some of my hon. Friends will probe this further. I refer to the prospect of manufacturing steel for stock during bad times. This practice is becoming a fashion. I do not wish to open wounds which I hope are fast healing. We have got used to butter mountains and wine lagoons, and I fancy that there is now a fashion for steel mountains when demand is depressed.

Heaven knows, the announcement about the textiles industry the other day suggested that we might have a textile mountain to help us during a period of depressed demand. Not so long ago, the machine tool makers thought it would not be a bad idea to have a machine tool mountain during depressed demand. All these goods would be mothballed until demand had recovered.

This could be an immensely costly excursion into Alice-in-Wonderland economics. It would hardly be undertaken by any of these enterprises if they thought that they were financing it from their own resources. It is only the knowledge that they can come to us which attracts them to the arguments.

Mr. Roy Hughes (Newport)

Does the hon. Gentleman not agree that it would be more illogical if, when the economy picked up again, there were a shortage of steel and the BSC could not supply requirements, thus inviting vast imports of the type from which the industry is suffering now? The steel industry is subject to violent fluctuations, and this could be a remedial measure.

Mr. Biffen

I take the hon. Member's point. I still believe that it would be a costly way of trying to deal with fluctuations in that industry. Practically no aspect of economic activity does not have a cycle of one kind or another. The search for stability and the plateau in the world of economics is an illusion. The fact that it is practised in the common agricultural policy should not make it attractive to the hon. Member, above all people, in other aspects of our commercial and industrial life.

I find the Bill's philosophy unacceptable. However one considers the matter, the public sector borrowing requirement will be intensified by these provisions—adding to a borrowing requirement which is already dangerously high. One of the more frightening statistics revealed in the past few days is that the Consolidated Fund figure of expenditure on supply services for the first two months of this year is running at 44 per cent. above that for the corresponding period 12 months ago. That is a terrifying insight into what may be happening in public spending.

In the political situation within the Government which has developed since last Thursday, there now exists a quartet of powerful men—the Prime Minister, the Chancellor of the Exchequer, the Foreign Secretary and the Home Secretary—who have all, for various reasons, been identified with the referendum vote. Their authority is substantially enhanced at the moment, and they are a powerful com- bination—the Prime Minister, his Chancellor and the two other men around the Cabinet table who, in their time, have held the post of Chancellor.

If they cannot use that authority now, and speedily, there will be growing disillusion. It will be concluded that, once again, faced with the problems of inflation and mounting public expenditure, the Government have chosen to avert their eyes rather than face the immediate and undoubted unpopularity which would flow from doing something about public spending. If they are to do something about it, an early and tangible gesture has to be made. Such a gesture would be for them to use their authority to see that this Bill gets a decent burial once it has been sent to Committee.

6.17 p.m.

Mr. John Golding (Newcastle-under-Lyme)

I have listened to this debate with interest, particularly the speech of my hon. Friend the Member for Mother-well and Wishaw (Dr. Bray). I was shocked only at one point in his speech—the point at which, thinking to have seen you, Mr. Deputy Speaker, look at the clock, he halted in his stride. I chided him later, saying that even if you had taken a calendar from your pocket, he should not have been perturbed. That is the attitude that I have taken to this type of Bill since the first was introduced. The issues are enormous and the sums of public money involved are immense. It is a reflection upon the attitude of the House towards the control of public money that there should be so few hon. Members here for this debate.

I agreed with my parliamentary neighbour the hon. Member for Oswestry (Mr. Biffen) when he said that the conflict between the British Steel Corporation and the Government is not new. The report of the inquiry by the Select Committee on Nationalised Industries into the steel industry during the last Tory administration drew attention to the strained relationship which exists. It appears to have been with us for a long time. It is not just a consequence of the personalities of the Secretary of State for Industry and the present Chairman of the BSC.

The present issue raises important questions of policy. Sir Monty Finniston tried to frustrate the Government's longterm strategy, settled after review, by day-to-day management methods. Then one faces a great dilemma—whether to support the Government who have ultimate responsibility for long-term strategy or the chairman, who has day-to-day responsibility. I sided strongly with the Secretary of State. He was right to insist that the Government's long-term strategy should receive priority.

Certainly those of my constituents who work at Shelton steelworks, which have been reprieved by the inquiry believe that the Secretary of State for Industry acted quite correctly when he stood up against the chairman of the steel board and insisted that political policies be followed.

This episode illustrates the importance of this House's defining more closely than it has so far the nature of the relationship between the chairmen of nationalised industries, the Secretaries of State and Parliament itself. One of the lessons of the past few weeks that I have learned is that the method of control is far less well defined than we thought it was. It appears that the power to give general directives does not carry with it that authority which previously we thought it did.

I turn from steel, as you might expect, Mr. Deputy Speaker, to the subject of the Post Office. I declare my interest as an assistant secretary of the Post Office Engineering Union.

May I say, in his absence, that the hon. Member for St. Ives (Mr. Nott) displayed in his speech an inordinate amount of cheek. He began by saying that he would not delve into the past, but shortly he became involved in a discussion with one of his hon. Friends on the Conservative Front Bench on the question whether it was Oliver Cromwell or Charles II who introduced the monopoly into the letter service.

One point in the hon. Gentleman's contribution with which I particularly disagree was his opposition to the tripartite talks, which my right hon. Friend the Chief Secretary mentioned, that are now taking place between the Post Office, the Government and the unions over the question of the rising Post Office deficit. I should have thought that it was imperative, faced with a deteriorating financial situation, that there be such tripartite discussions. Of course, the ultimate deci- sion about the amount of State money that will be put into the Post Office must rest with the Government. It is obviously sensible for the Government to discuss with the unions and the Post Office methods by which this deficit can be reduced. It would be an absurdity for Governments merely to send messages to the chairmen of nationalised industries who, in their turn, would pass them on to rank and file trade unionists without discussion having taken place beforehand. The hon. Member for St. Ives must rethink his position. He is confusing, as Tory administrations have often confused, ultimate responsibility to take decisions and the other responsibility to consult with those affected before such decisions are taken.

I would cross swords with the hon. Gentleman, were he present, on the question of the monopolies enjoyed by certain nationalised industries at present. It is a nonsense to talk in terms of the abolition of some of the monopolies. I do not want to discuss the question of the letter monopoly because, as I intimated in a previous intervention, a Committee of the House is at present sitting to inquire into the future of the letter service, and it would be improper of me, as a member of that committee, to enter into controversy on that point.

I make the general point that the reason we have monopoly at all in the nationalised industries and in the public service is because responsibilities are placed upon those services to handle everyone's business. For example, responsibility is placed on the telephone service to provide a facility for those who live in the Western Isles, the Orkneys, or the more inaccessible parts of the United Kingdom. It has generally been the policy of Governments to provide those services at pretty well a uniform tariff.

The justification for a State monopoly is that were that State monopoly not to exist, private enterprise would come from outside, take over the profitable parts of the business and leave the unprofitable parts to the State service to undertake. I would be sympathetic to the breaking of a State monopoly were people coming from private enterprise to say "We want to take off the State the unprofitable part of the service which it now performs; we should like to leave the Post Office with the provision of telephone and telex facilities in the City of London, but not carry the financial burden of having to provide that service in scattered, isolated rural communities".

I should be happy to listen to the arguments under those circumstances. However, this is never the case. What happens is that the private entrepreneurs want to take the profitable business. From the point of view of the taxpayer, that is completely unacceptable. Were we to have that sort of situation, year by year we should be having to ask the House for further moneys to compensate the State services for running unprofitable businesses.

It is time that the Conservative Party abandoned the proposals that it puts forward from time to time for hiving off. I was interested to see the hon. Member for Bridgwater (Mr. King) on the Conservative Front Bench. Had he spoken in this debate this afternoon I should have liked to ask him why it was that when his master, Chris Chataway, was Minister for Posts and Telecommunications under the last Tory administration, despite all the statements that have been made about hiving off in telecommunications, he abandoned the policy on which the Conservative Party had fought. I think he abandoned it because he realised that we cannot run big State corporations of this sort, which provide a national service, without monopolies.

I agree with the hon. Member for St. Ives that we need to rethink the setting of financial targets in the nationalised industries.

I was impressed by the speech of my right hon. Friend the Chief Secretary. I should certainly have no difficulty in giving him my full support in Committee if the Committee of Selection were to decide that I was to serve on the Committee. Of course, had he not popped out for a minute or two I should have chastised him for his omissions rather than for some of the things he said. When talking about wages he stressed the need for increased productivity in the nationalised industries, which are at present running at a deficit. If he had been feeling a little more generous at the end of his contribution, he could have mentioned that certainly the Post Office Engineering Union for many years has kept strictly to policies of encouraging productivity bargaining. The latest calculation that I have heard is that at least 50,000 jobs have been saved—there are 50,000 fewer Post Office engineers employed than there would have been—because of manpower saving schemes introduced on the initiative of the Government.

The Minister could also have paid tribute to the Union of Post Office Workers, which decided at its conference two or three weeks ago, at last to abandon opposition to mechanisation. Certainly the unions have been quite forward looking. The Chief Secretary could also have mentioned the fact that at the conference of the Post Office Engineering Union last week the delegates gave strong support to the social contract. There is that awareness that there is a need to be reasonable about wages in the public sector, particularly within the Post Office.

I turn quickly to the Budget Statement of 15th April. I want to ask my hon. Friend the Minister of State to comment on progress in regard to two matters. In the Budget Statement it was revealed by my right hon. Friend the Chancellor that two studies on the investment programmes of the nationalised industries are being made. The first is designed to give them a reasonable degree of assurance about the stability of their long-term investment, so long as it satisfies a stringent economic and financial scrutiny in the course of the annual investment reviews. That is an important statement about an important subject. What progress has been made in connection with this inquiry? The Chancellor also said, The second concerns the industries' relations with their suppliers in manufacturing industry. I shall turn to that matter later.

The Chancellor went on to say, The measures we are now taking to restore economic pricing policies are an essential feature in bringing commercial criteria to bear on the industries' investment programmes. And I believe that these policies and the return to financial viability will do much to improve morale throughout the whole field of public enterprise and to help ensure its efficient use of resources."—[Official Report, 15th April 1975; Vol. 890, c. 291.] That statement, which is very much approved of by staff in the Post Office, is also absolutely consistent with the policy of the Labour Party as laid down at the annual conference.

However, unlike the hon. Member for Oswestry (Mr. Biffen), I do not blame the CBI for the situation we are in. I believe we must put the blame fairly and squarely upon the leaders of our parties. In 1970 it was promised that there would be a reduction in the increase of prices, "at a stroke", and nationalised industry prices were mentioned specifically in that context. Until two years ago, whenever I advocated economic pricing in the nationalised industries, leaders of the party to which I belong always resisted the idea because of the electoral consequence of pursuing such a policy.

If hon. Members want to read an early account of difficulties in this field, I recommend Reginald Bevin's book "The Greasy Pole", in which he describes the difficulty of a Postmaster-General wanting to levy reasonable postal charges but being prevented from doing so because of the possible electoral consequence to his party. Therefore, I blame the leaders of both parties for the situation that the nationalised industries have been in.

From the point of view of the Post Office, the deficit since 1972–73, the first year of deficit, has grown progressively worse. It is well known that it arose because the Government decided to hold down prices in the Post Office, as in other nationalised industries, far more stringently than prices outside the public sector. I believe that the Government must follow a rational pricing policy. For the sake of brevity I shall not go into this matter in detail. However, in Committee we ought to debate the failure of the 1967 White Paper and its proposals for pursuing a policy of marginal price setting. That has not proved to be adequate in any way.

I do not believe this compensation procedure to be at all good. It affects the morale of staff. When the people I represent read of a substantial deficit on telecommunications, and that that deficit will become even greater, their morale is affected. Workers like to work in an industry which they believe is flourishing and efficient. Unfortunately, the yardstick of efficiency in our capitalist society is profit and not service. If a loss is made, even though the business is inherently efficient and even though the staff are making substantial contributions to increasing productivity, the general morale of the workers suffers.

The public's view of public ownership and nationalised industries is, in turn, governed by the announcement of losses. When deficits are announced it is often wrongly assumed by the public that nationalised industries just cannot pay. Deficit financing is harmful to the very concept of public ownership and harmful to the expansion of public ownership. It is also harmful because one fails to get the normal financial disciplines working, and one gets a misallocation of resources. This was dealt with at great length by a Select Committee on which I sat—the Select Committee on Nationalised Industries—in an enquiry into investment procedures last Session. For the benefit of my right hon. Friend the Chief Secretary, I want to put on record the view of the Post Office Engineering Union on this matter. It has set this out in a recently published document, "Telecommunications Today and Tomorrow". The union says, The Post Office Telecommunications business has a record of increasing efficiency and rising labour productivity which is equal to the best in British industry. But the business can only operate to maximum efficiency if it is permitted to set its prices at economic levels which permit a satisfactory rate of return. We accept that in other areas of the public sector there may well be social grounds for restraining prices and then off-setting the industry's subsequent deficit by Government subsidy: but we can see no rational grounds for such general subsidies for telecommunications. Persistent underpricing of the service, apart from resulting in a net subsidy of all taxpayers to telephone users, may generate an artificially high level of demand and may generally lead to a misallocation of national resources. So the main union involved in Post Office telecommunications is utterly opposed to this system of compensation payments which can lead to the misallocation of national resources.

It quite clearly affects the ability to invest. I think it is a matter of regret that the self-financing of investment within the Post Office dropped from 56.6 per cent. in 1970–71 to 39.1 per cent. in 1972–73. The higher the level of self-financing the better.

Again referring to the publication, "Telecommunications Today and Tomorrow", the point of view put there is that it would be unreasonable to expect that any Government will take no interest in telecommunications investment policy. The current telecommunications investment plan calling for some £700 million capital spending in the financial year 1974–75 is the highest in the public sector and clearly an economic factor of no mean significance. There is a recognition that however important the provision of efficient telecommunication services may be Governments may well from time to time have to decide, in the national interest, to revise expenditures.

The document goes on to say—this has the support of the Public Expenditure Committee which reported in August 1974, and certainly has the support of the Committee on Nationalised Industries in its report on investment policy—that it is imperative to avoid the breaks and discontinuities in telecommunications investment which have occurred in the past…". One of the major reasons for inefficiency—in so far as it exists—in the nationalised industries is that there has been stop-go in relation to investment. No management can manage if from month to month and from year to year the amounts available for investment are altered. It is imperative for us to get from the Government a statement that this stop-go investment policy will come to an end as quickly as possible.

I conclude by asking the Government what progress they have made in the inquiry into the relations between the nationalised industries and the suppliers of equipment to them. I believe this to be a subject of great importance, because all nationalised industries are now spending many hundreds of millions of pounds purchasing equipment from private industry. It is my view that for years the private manufacturers of telecommunications equipment—Plessey, GEC-AEI and Standard—have failed both the Post Office and the nation. The prices that they have charged the Post Office for equipment have been too high. More important, the failure to meet delivery dates has been an absolute disgrace.

I am told by workers in telecommunications that the situation concerning delivery dates is getting worse. I do not know whether this is true or not, but it is my impression that the long-standing delay in the provision of telephone services, due to the failure of the private equipment manufacturers, has shown no signs of ending. I ask the Government to let us know tonight what progress is being made on this subject.

I shall give the Treasury Ministers every support tonight, and in Committee—if I am on the Committee—to ensure that this Bill is carried into law.

6.45 p.m.

Mr. Richard Wainwright (Colne Valley)

The Liberal Members intend to vote against this Bill tonight, just as the Liberal Party alone voted against the Conservative equivalent of the greater part of this Bill in November 1973. Our reasons for persisting in voting against Bills of this sort do not derive very much from anything that has been said in this debate, with the honourable exception, so far as we are concerned, of the impressive speeches from the hon. Members for Motherwell and Wishaw (Dr. Bray) and Newcastle-under-Lyme (Mr. Golding).

I am gratified that the admirable demolition job of the hon. Member for Newcastle-under-Lyme has spared me the need to have a go at the most extraordinary performance from the Opposition Front Bench. The hon. Member for St. Ives (Mr. Nott) actually proposed from the Opposition Front Bench that the delivery of mail could be contracted out, along with the delivery of milk and the copy of the Sun. It is an extraordinary index of the rapid demoralisation of the Conservative Opposition that from their Front Bench official spokesman there has been the proposition that precious, irreplaceable items of mail should be handled in this way. It might be, for instance, a proposal of marriage sent from the other side of the world, or an invitation to be the Liberal candidate in a Walsall by-election. It would be extraordinary if these items were treated in the same way as an easily replaceable carton of milk or an extremely easily replaceable copy of the Sun. So much for that absurd piece of phantasmagoria, which has been demolished.

Dr. Bray

I hope it will not upset the hon. Gentleman to hear that the mail already travels on buses in parts of the Highlands.

Mr. Wainwright

The hon. Member for Motherwell and Wishaw will have his joke. He knows perfectly well that even if the mail travels on buses it is under the strict authority of the Post Office, governed by very important Acts of Parliament.

One additional reason, further to those which were adduced by my hon. Friend in the debate of November 1973, for voting against this Bill—particularly in regard to the important Clauses 1 and 2—is that it is based on an entirely impossible proposition, namely, that the measure of loss sustained by any industry, due to compliance with the price restraint policy, can ever be accurately measured. This is impossible, and it is quite wrong, in my view, for this House to be giving its assent to measures which are based upon a piece of Treasury humbug.

The Chief Secretary, in opening the debate, lamented the fact that the audited accounts for these particular nationalised bodies are not yet available. I hope that he was not intending to imply to the House that any auditor of a nationalised industry would ever dream of signing a certificate naming a particular sum as that which has been lost by compliance with price restraint policies, because this is immeasurable. Anybody is entitled to make an estimate—and some estimates are more intelligent and more thoroughly contrived than others—but the suggestion that there can be any accurate measurement of the sums we are discussing this evening is entirely out of court. This has been proved again and again by the wide discrepancies between the budgeted estimates of various nationalised industries and the actual outturn.

I was astonished and somewhat dismayed at the tone of easy and rather bland complacency in many of the speeches to which we listened this afternoon. It seems to me that behind the great problems posed by this Bill there lurks the even more alarming problem of what is to happen if, even when freed from price restraint by the admirable policies of the Chancellor of the Exchequer, some of these nationalised industries continue to return appalling losses.

It seems to have been assumed too easily that the enlightened reversal by the Chancellor of the Exchequer of Tory Socialism and his willingness to trust to the forces of the market—a policy which was long overdue—will ensure that the nationalised industries affected by this Bill will therefore be able to break even or even to make a reasonable return on their assets. I hope that the Minister of State will dwell upon this alarming prospect that freedom from price restraint may not enable some of our nationalised industries to break even at all. In saying that, I have in mind especially the Post Office.

This Bill moves in an area in which all is uncertain and in which any attempt written into the Bill to give certainty to the figures is sheer hypocrisy. As with the Conservative Bill, a large proportion of this measure deals with provision for losses which have been incurred already. It is a well-known dilemma agonising most hon. Members to know whether to refuse to take action to deal with a situation, however regrettable, which has occurred already. But, like its Tory predecessor, this Bill also provides for future losses, and we on the Liberal bench feel entirely free to express our strong opposition to that.

These two measures—the Tory measure and now this one, which in my view has been presented to us more honestly than was its predecessor—are both examples of the way in which the country has been consistently misgoverned by a conspiracy of the two main parties during the greater part of the period since the end of the last war. The conspiracy has been assisted at some periods by the CBI, which makes matters far worse than they would be otherwise. At other periods, the conspiracy has been assisted by the TUC. Somehow, in the interests of the great mass of the electors, that conspiracy has to be broken. There was a time when I had hoped, being an optimist, that the frustrated and voiceless centre moderates might turn with faith and hope to the hon. Member for Oswestry (Mr. Biffen), who so often in the most independent way has challenged the fashionable nostrums of the two-party conspiracy. But, in view of some of the hon. Gentleman's remarks earlier in the debate, I feel that I must draw attention to the fact that he was not such a reluctant supporter of the Conservative Government's Bill as he seemed to imply just now. During the Second Reading debate on the Conservative Bill he gave the impression that he would not be supporting it. He told the House frankly that he wished to see the Chinese exhibition at the Royal Academy, and he apologised in advance to his Chief Whip for the fact that I was not able to anticipate the political behaviour of the Liberal Party".—[Official Report, 21st November 1973; Vol. 864, c. 1416.]

Mr. Biffen

There is nothing unusual about that.

Mr. Wainwright

In other words, the hon. Gentleman had not expected a Division on that occasion, with the implication that he was apologising to his Chief Whip for not being in the Division Lobby. But, even though only 79 Conservative Members voted for their own Government's Bill, I regret to say that the hon. Member for Oswestry was among them, when it was known that there would be only eight hon. Members voting against the Bill. It seemed not to show reluctance for the hon. Member for Oswestry quite gratuitously to have added his vote to those already far in excess of the number needed to carry the Second Reading.

Mr. Biffen

The hon. Member for Colne Valley (Mr. Wainwright) has a copy of the Hansard report of that debate. Perhaps he would care to quote the opening sentence of my speech, in which I made it clear that I regarded participation in the Second Reading debate as a ticket whereby one could be appointed to the Standing Committee and have some fun.

Mr. Wainwright

I may be wrong, but it had never occurred to me before that voting in the Division Lobby was a necessary qualification for being selected to serve on a Standing Committee. However, I must leave that, because there are other much more important matters to be discussed.

In commendation of the Government's approach, I feel bound to say that they have been more honest with the House and much more encouraging than were the Conservative Government when they presented their Bill. Although, in this House, we are only too often accustomed to hearing that Governments are repentant, that the rot will stop if only we will go with them a little further, and that they will pull themselves together, there was nevertheless a genuine tone in the speech of the Chief Secretary when he said that the Chancellor of the Exchequer intends to persist in his admirable policy and return to the forces of the market with these nationalised industries, and that he means to wipe out the losses caused by price restraint as soon as possible, although he did not refer to the other possible losses in the nationalised industries.

When the Conservative Government introduced their Bill there was first, an attempt to keep the figures in the Bill absurdly low—and they have proved in the event to be hopelessly low for dealing with the situation that they were intended to cope with—simply so that the Bill could be carried within the Conservative Party. There was also an attempt to suggest that this was only a very temporary aberration and that as soon as possible the Government would return to a different approach. We still wait, no longer hopefully, to hear what this alternative Conservative approach may be.

In the meantime, by the present Government's intention to persist for a time—we hope only a limited time—with their policy of subsidising an artificial price restraint, the ordinary taxpayer, especially those millions of people who, to my astonishment and horror, are still called upon to pay income tax on tiny incomes, will foot the bill provided for in this legislation. Hard-working people in low-paid jobs will pay through their taxes for the uneconomic delivery of football pool coupons to perfectly well-to-do people and for the monstrous products of the advertising industry using the post at uneconomic rates to the nation and thus as an industry profiting enormously from subsidies provided by the taxpayer. This is fundamentally unjust, and, in a time of horrendous economic problems, entirely unjustifiable.

7.0 p.m.

Mr. Roy Hughes (Newport)

I support the hon. Member for Colne Valley (Mr. Wainwright) in his ridiculing of the attacks by the Conservative Opposition on the postal service. That service still has much to commend it. There is a tendency these days to criticise such organisations, even those with as great a record of service as this one has. It seems to be the spirit of the age to attack the postal service, but that attack is cheap. In my constituency is the headquarters of the postal service for the county of Gwent. By and large, it is doing a very good job.

Clause 3 of the Bill proposes to increase the limit of borrowing by the British Steel Corporation to a sum not exceeding £2,000 million, which is in substitution for the previous figure of £1,250 million. These huge sums are an indication of the great responsibility that the Government have for the steel industry.

Bringing the British Steel Corporation into being aroused a 20-year controversy. I always favoured its creation, but even the most fervent supporters of public ownership must admit that the BSC has not exactly been a success story. That does not mean that people like myself wish to return the industry to private hands. Bearing in mind the massive financial provisions in Clause 3, there is, however, need for a great deal more public accountability by the Corporation. For some time there has been the need also for a full-scale debate on steel, although I appreciate that it has been blotted out by the Common Market and referendum debates.

The steel industry loomed large in the referendum campaign. My right hon. Friend the Prime Minister made numerous references to it in his speeches in this House, in Glasgow, in Cardiff and elsewhere. He made certain promises, which we now expect to be carried out. He said that immediately after the referendum there would be negotiations in order to reassert Government control over the British steel industry.

In particular, the Prime Minister referred to a private steel project in my constituency. The relationship between the public and private sectors of the steel industry is relevant to Clause 3, particularly in the context in which the hon. Member for St. Ives (Mr. Nott) referred to the question of monopoly. I supported this private steel project particularly because it was to bring 800 jobs to Newport, which was very necessary after the BSC had closed the tube works there with the loss of almost 1,500 jobs.

The industrial development certificate for the new project was received last April, but recently there has been a minor hitch. It was reported to me on Friday lunchtime—I am sure that hon. Members will note the time—when two referendum results had been declared, that, in respect of the steel fabrication work on the site, the BSC had either refused to supply or could not supply the steel required, and that consequently the contract had been given to a Swiss-based firm on a 12-months' fixed price basis. I was told that the steel would he coming via Luxembourg and that, in addition, the firm would be bringing in its own labour, which would be Italian.

We have no racial prejudice in Newport, but we do have about 200 men unemployed who normally engage in such work. I have written to the firm in question and asked for its comments. We have fought hard to bring this project to Newport and we feel rather annoyed that our local labour is to be bypassed for this part of the work. But perhaps such questions would be better directed to my right hon. Friend the Secretary of State for Industry than to Treasury Ministers, since it may not be their responsibility.

The Explanatory Memorandum to the Bill refers to compensating certain nationalised industries for their losses due to price restraint. How does the BSC fit in there? As I pointed out earlier, the British steel industry is subject to violent fluctuations. My right hon. Friend the Chief Secretary spoke of the need for finance to provide for the stocks which, apparently, the corporation is now to build up. I would certainly rather see stocks built up than people made unemployed.

Not long ago, the corporation complained about not being allowed to put its prices up. It indicated that our steel prices were below those of our European competitors. But now the country is flooded with imports of foreign steel, and the corporation is making huge losses which, in turn, threaten the livelihood of many thousands of people in this publicly-owned industry.

I wrote to Sir Monty Finniston, the chairman of the corporation, about this. In his reply, he speaks of the difficulties with which the corporation is faced. He blames the imports in particular on the three-day working week—and we all know who brought that about. In his letter to me dated 5th June 1975 he said: The Corporation is doing all it can to meet this situation and I understand that the European Commission intend to enforce the Community's steel pricing rules even more strictly than before, which should be of considerable help in combating import penetration of the United Kingdom market by steel sold at prices below those permitted by the rules. There is no doubt that the operative expression there is "dumping". Steel is being dumped in this country at below what would be considered normal market prices. I find it difficult to reconcile the arguments of the Chairman of the British Steel Corporation when on the one hand he is talking about the difficulties brought about by the three-day week and on the other hand he is talking about the difficulties due to dumping.

As Clause 3 shows, there is certainly a need for huge investment in this industry. Investment in new plant and equipment involves cutting manpower, with all the problems that such an action creates in various communities throughout the country.

I feel bound to refer to what I call the flights of fancy of Sir Monty Finniston. A few weeks ago he was talking about the Utopia of reducing the labour force from 220,000 to 50,000. This spread alarm and despondency throughout the industry. On that occasion, like my hon. Friend the Member for Newcastle under Lyme (Mr. Golding), I supported the Secretary of State for Industry, who acted with very great restraint in the difficult situation which confronted him.

The Iron and Steel Act 1967 provided that the British Steel Corporation should show concern for the welfare of its employees. It also provided for the corporation to engage in any industry or commercial activity outside the steel industry. If Sir Monty Finniston is so anxious to reduce the labour force, why cannot the British Steel Corporation diversify into other industries, as the Act provides? By doing that, it will show some commercial enterprise, a quality of which it has not shown much up to now.

Communities throughout the country have a right to refuse to be made redundant, especially when there is little alternative work available, as is certainly the case at present in an area like Ebbw Vale. There is a lot of skill in that area, as well as in Shotton in North Wales, which could be properly utilised for the benefit of the nation.

I shall certainly not oppose the Bill, but I do not have much confidence in the British Steel Corporation. This lack of confidence was manifested at a conference I attended of the Welsh Regional Council of the Labour Party on 9th May at Llandudno. There was a call at the conference for a further take-over of private steel in this country. Ironically the statement called for the take-over to be made not by the British Steel Corporation but rather by the National Enterprise Board.

Although I do not wish to oppose the Bill tonight, I make the point that the story of the British Steel Corporation is not a happy one. Its industrial relations have been tragic for a publicly-owned concern. There has been considerable demoralisation in all ranks throughout the industry, a failure of overall strategy, and much more besides.

In my view, major changes are needed at Grosvenor Place. A start could be made with the removal of the chairman, because he has had very limited experience of the steel industry outside head office at Grosvenor Place. A new, less bureaucratic structure is needed for the steel industry. There should be more accountability to the House of Commons. Moreover, perhaps there could be some form of regional structure for the industry. In Wales and in Scotland there could be some measure of accountability to the proposed new assemblies. Something radical needs to be done in respect of our publicly-owned steel sector. There must be more worker participation. Under the present management there has been failure both in efficiency and in accountability.

Mr. Nott

If there were to be a reorganisation of the steel industry with perhaps more of a regional structure, would the hon. Gentleman agree that it might be wise to let the regional groupings price their products separately and competitively with one another, or would he think that the pricing structure should be bureaucratically and centrally organised?

Mr. Frank Hooley (Sheffield, Heeley)

Since last Thursday?

Mr. Hughes

As my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) has indicated, there are additional complications following the referendum last Thursday. I envisage an organisation with a much smaller staff than the 1,500 who at present are housed at Grosvenor Place. In my view, there are 1,500 people trying to make many thousands more redundant. I should prefer a much looser organisation, much smaller at the centre, with units of control at the regions, which possibly could have some element of commercial enterprise left to them.

7.18 p.m.

Mr. Michael Marshall (Arundel)

I am very glad to have the opportunity of following the hon. Member for Newport (Mr. Hughes) because I, too, wish to address my remarks largely to Clause 3 and in particular to the problems of the steel industry.

It is a salutary fact that we have not had, since the General Election of last year, an opportunity to debate the steel industry. I am sure that hon. Members on both sides will join me when I say that we feel frustrated that this should be so. I say with no disrespect to the Minister of State, Treasury, who I believe will wind up the debate, that it is part of our frustration that when we discuss great industries like the steel industry we have to look at them in a financial context, whereas many of us would wish to hear the views of Ministers from the Department of Industry. I regret that none of them is present at the moment and, therefore, many of the remarks made by hon. Members on both sides of the House will not be answered or at least will not even be hoisted in by Ministers responsible in that Department.

So far we have had a generally constructive debate, especially about steel. I wish to address my remarks to one or two of the points raised by Labour Members.

The hon. Member for Newport said—I think fairly—that the history of the British Steel Corporation had not been exactly a success story, and he went on to make the point about opportunities for private investment. He saw a place for such investment in his own constituency which would help to meet the unemployment created by the corporation's closures.

Those are sentiments with which I wholly agree. In the same constructive spirit, I suggest to the hon. Member that part of BSC's problem and part of the reason for its failure is one that I shall develop later.

The hon. Member spoke, finally, about the concept of a more decentralised organisation. He should recognise that one of the difficulties about the nationalisation of manufacturing industry—this is another aspect to which I shall return—is that inevitably terrible teething troubles have to be gone through in trying to decide on the ideal structure. In the case of the British Steel Corporation we had, following the McKinsey Report, the decentralisation of the industry. When that was found to have failed, it was followed by a massive centralisation of the industry. Now, as the hon. Gentleman rightly implied, there is pressure for decentralisation once again.

There is a fear that in the process of these changes the management and the workers are pawns in the game with a political element, which makes this a very difficult pattern to establish successfully.

Mr. Hooley

Does not the hon. Gentleman agree that rationalisation, break-up, re-amalgamation and changes in organisation occur frequently in big private groupings, too?

Mr. Marshall

Yes, I accept that. The difficulty that one comes up against—this is why I referred specifically to manufacturing industry—is that at least in the market there is a far greater element of flexibility, which provides opportunities for bringing companies together successfully. Here we are caught up, as the hon. Gentleman will recognise, with many of the social obligations which have been written into the British Steel Corporation's charter and which do not allow of quite the ease of shaping or reshaping of the great private corporations. This is why I do not agree with the Government's intention to proceed with the nationalisation of the aerospace and shipbuilding industries, for there we shall see these problems all over again. Some hon. Members opposite recognise the stony path which lies ahead of them. Many of them who have constituency interests will have to traverse this ground again and again.

This is why tonight I want to try to touch on one or two suggestions, which I hope will have all-party agreement, for trying to get us away from some of the more stale patterns to a more effective industry. I speak on this subject as a Member who came into political life because of the nationalisation of steel. I was in the industry for 16 years. It was for me a traumatic experience to see what happened on its nationalisation. However, there comes a time—I have accepted it—when we cannot for ever knock the industry backwards and forwards. I accept that it is nationalised and I want to make a success of it. However, I stress that both sides, should try to be more flexible in their thinking on the subject.

The hon. Member for Newport said that everything should not be in private ownership. Would he not accept that there could be a BP-type solution? The fact that people like Sir Monty Finniston may have mentioned this should not be the signal for the battle cry to be taken up to rally round the nationalisation concept.

The failures of the corporation are frequently spoken about. In the last few years it has undoubtedly had to face the operation of clapped-out plant. Many of us know that that clapped-out plant dates back many years. During the whole period when the argument was taking place as to whether the industry would be nationalised we saw the way in which investment ran down. From 1951 to the early 1960s was the one period in postwar years during which nationalisation was not a burning issue, and that was the one period when investment began to move again. However, the political argument built up again, and we have had another decade in which investment has run down.

Mr Roy Hughes

Does not the hon. Gentleman agree that the difference between us is that, whereas he is calling for less public accountability, I called for more public accountability?

Mr. Marshall

I am not sure that that necessarily follows. I am saying that there is much to be said for a BP-type solution. I am calling for less accountability in the sense that I want to get away from interference in day-to-day management.

Although I believe that the hon. Member for Newport was generally constructive, he, too, fell into the trap into which other hon. Members opposite have fallen. I believe that hon. Members opposite are unfair in trying to use the chairman of the corporation as a scapegoat.

The hon. Gentleman was also unfair on the question of diversification. I do not believe that there is any company in the country, whether it be publicly or privately owned, which is involved in the business of diversification—in career counselling, in trying to provide opportunities for people made redundant within their corporate organisations—that can beat the record of the British Steel Corporation.

I shall not take up the points made by the hon. Member for Motherwell and Wishaw (Dr. Bray) in this regard. It is taking the argument out of context to imply that the corporation should do a vast amount which it is very difficult for any major organisation to do outside its own sphere. Any dispassionate comparison of the BSC with other organisations will show that it has a good record in this respect. Examples are preparing an industrial site in Hartlepool and getting together with a stainless steel exhaust manufacturer in South Wales. Those are practical examples of major efforts made by a nationalised corporation. It would be wrong for hon. Members opposite in presenting arguments for constituency reasons to ignore the fact that the corporation has made these substantial efforts.

For me the most telling observation made in this debate came from my hon. Friend the Member for Oswestry (Mr. Biffen). He said that it is right to put this argument in the context of difficulties between the chairmen of nationalised corporations, Ministers, and Member of the House going back over many years. My hon. Friend quoted the First Report of the Select Committee on Nationalised Industries, Session 1967–68. I quote parts of paragraphs 874 and 875 of that report, relating to the relationship between Ministers and the chairmen of nationalised industries: … this lack of clarity about purposes and responsibilities has revealed itself in a lack of understanding and in some cases, a breakdown of mutual confidence between Boards and Ministries. … Lying still deeper than this lack of clarity, this confusion of responsibilities and this breakdown of confidence remains a failure to understand and to work towards the fulfilment of the basic purposes of Ministerial control in respect of the industries. Those basic observations made in 196768 are certainly true today. My hon. Friend the Member for Oswestry was right: we cannot for ever use this as a short-term argument. The time has come to look at the fundamental basis on which the House and Ministers, particularly those at the Department of Industry, and nationalised industries' chairmen can at least understand the framework upon which their decisions about investment, social responsibility and other matters can be examined logically.

That was where once more the hon. Member for Motherwell and Wishaw fell into the trap of putting too much emphasis upon the interests, activities and enthusiasms of Members of the House. I say that to the hon. Member with the greatest respect for his knowledge and experience of the industry and for his deep compassion and feeling for it, but the arguments he advanced today put out of their place many arguments which are best left to the trade union movement. The hon. Member was doing what I think the Secretary of State has tended to do; namely, to outflank the trade unions in their own field in their relationship with the British Steel Corporation. I am sure that hon. Members opposite are confident that the trade union movement can fight for its corner. Hon. Members in all quarters of the House with constituency interests are pushed into positions in which they have to take too much upon themselves, and I felt that the hon. Gentleman himself was falling into that trap.

Dr. Bray

It seems to me that the hon. Gentleman is missing the root of the problem of the relationship between nationalised industry corporations and the Government, and that is that they are much too big fish to be regarded merely as atoms in the dust of the whole economy. They are enormous whales in a small swimming bath. Having such an enormous impact upon the economy, the relationship between the nationalised industry and the Minister responsible cannot possibly, in technical or economic terms, be an arm's-length relationship.

Mr. Marshall

I shall come to my proposals to improve the arm's-length relationship. The hon. Gentleman is apparently advocating that we should never create nationalised industries on this scale and of such scope. However, I am trying to move on to what I hope is common ground in improving the dis- astrous relationship which exists today. One must recognise that the British Steel Corporation and the trade unions have already reached agreement in a remarkable way on the question of redundancies, certainly in the first five years of the corporation's life. The problems arising from 40,000 redundancies were handled with skill on both sides, and a similar number of redundancies were planned for the successive seven years under the £3,000 million investment programme. One must recognise that the political element reopened that issue, and the whole problem has been compounded by the downturn in trade, with the haggling and negotiating as between the Chairman of the British Steel Corporation and the Secretary of State for Industry.

In the first few years of the corporation's existence, the trade unions and management of BSC were able to make effective arrangements which offered a great deal of scope for re-employment of many of the employees in the corporation. The hon. Member for Motherwell and Wishaw was right when he spoke about the defects and the rundown of plant from which much of the industry suffers today. I have already agreed that much of the investment hiatus cannot easily be put right tonight, but the Government must make up their minds on certain aspects of the investment programme.

Hon. Members will today have seen the Ministers from the Department of Industry coming to the Dispatch Box and hiding behind the skirts of the British Steel Corporation, saying "We are not sitting upon any proposals. We have done all we can." Yet every hon. Member knows that unless and until the Government make up their mind whether or not Port Talbot is to be a 6 million-ton plant and whether Shotton is to continue, we shall have this problem of the investment hiatus over a large part of the British Steel Corporation.

It is no good Ministers trying to imply that there is no actual increase in real costs. The British Steel Corporation's calculations show that the £3,000 million investment programme is now £4,500 million, and so the cost will creep up unless the Government grasp this nettle.

I come to one or two constructive points on what should be done to help in this situation. First, if the Government are indeed to help they must grasp the economic nettle, particularly in the matter of the total investment programme. They must also recognise that the British Steel Corporation has been working at a profit and that, in fact, that profit came as a result of EEC membership. It was EEC membership with freedom on pricing policy which allowed the BSC to move into profitability. Now it is running into massive deficits, the causes of which can be tackled by the Government. This is part of the grasping of the economic nettle.

There is the matter of industrial disputes. It is no surprise to anybody that there are industrial disputes in every major plant of the British Steel Corporation. All of this has to be considered by hon. Members speaking up for their constituency interests; and, with the closure review, the whole idea that the plant closure is a starting point for negotiations, the Government must state loudly and clearly their intentions if they are to ease and, indeed, end many of those problems.

The British Steel Corporation has missed the market. It is very sad for those of us who want to see an effective industry to recognise that had the corporation been able to get its investment programme going earlier, it could have capitalised on the major market boom. Instead, it has had to allow the doors open to steel imports. Many people are now signed up on long-term contracts with EEC membership and we shall not see much of that import business stopped.

All of this comes back to the problem of the relationship between Governments and the nationalised corporations, and I do not exclude my own Government from this. When my party came into office in 1970, our own process of deciding what to do with the BSC occupied valuable time. By the time that the 1972 programme was announced and was then brought to a halt by the closure review, we had dramatically missed the great market opportunities which lay open to us. The present Government have shown no intention of facing up to the vital necessity of playing a constructive part in redeployment and retraining.

It is easy to say that the BSC should do this, that or the other. We hear so little about what the Government are doing. If we are talking about redundancies in a modernised industry and adopt a constructive approach, the Government should at least appear to have ideas on the subject, and the present Government seem to be short of such ideas.

Mr. Ted Leadbitter (Hartlepool)

I am aware of the hon. Gentleman's association with Hartlepool. Surely it is self-evident that the representations that have been made over the years, and particularly during the past 12 months, to the Government have been appreciated and taken into account. It is certainly evident to me. The hon. Gentleman is mistaken in saying that the present Government have not done anything in the situation in which the British Steel Corporation finds itself.

Mr. Marshall

The hon. Gentleman states that view, but I think the Government could have done more. There has been a lot of talk of what the BSC ought to do, but, recognising the problems which the country faces, this is a massive issue and there is very little new thinking by the Government.

I conclude with some constructive ideas. I have spoken earlier of the BP solution and the increase in steel exports. I believe there is still scope for the BSC to increase its exports. In terms of the crucial problem of the relationship between Ministers, the corporation and, indeed, this House—this triangular relationship—it is no purely partisan point to say that this is a problem of the first magnitude.

On 23rd May there was an Adjournment debate on nationalised industries when the hon. Member for Bristol, North-East (Mr. Palmer) raised a number of pertinent points on this subject. He referred to what he described as the bizarre case of the defiant steel man. He said: Here my right hon. Friend the Secretary of State for Industry achieved the remarkable feat of appearing on both sides of the fence at the same time. He added: … this situation should not be allowed to continue. He said: … the … balance between day-to-day responsibility of the board and the reserve power of the Minister to give a direction in the national interest was not in evidence."—[Official Report, 23rd May 1975; Vol. 892, c. 1823–4.] Those observations reflect the worries which many of us feel.

I wish to suggest one or two points which might be put forward in considering the role of the House in this matter. First, should we not at least recognise that we have a Select Committee on Nationalised Industries that looks at the annual reports of the corporation and will consider the industry's problems on a year-to-year basis, providing a convenient time to question the chairman and senior officials of the corporation? Why should not the Secretary of State carry out an independent but simultaneous operation, seeking to put himself on an annual general meeting relationship with the corporation? That would give a convenient focal point and a much more commercially-oriented approach. It would be worth trying.

Secondly, should we not seek opportunities for the costing of the corporation to give greater cognisance to both its social and commercial activities, as my hon. Friend the Member for Guildford (Mr. Howell) described? That differentiation would make sense. I agree about the revaluation of assets, which the hon. Member for Motherwell and Wishaw suggested. There are ways in which the corporation's viability might be improved and the financial criteria made more recognisable to both sides of the House.

I believe that in allowing the corporation and trade unions to get on with their own activities to a far greater degree the House and Ministers will provide the industry with opportunities for greater success.

The Minister of State spoke in the Adjournment debate on 23rd May of an arm's-length but not hands-off relationship. What I have tried to argue is in accordance with that general spirit. We need an assurance from the Government, if the money provided under the Bill is not to be simply more money down the drain.

7.42 p.m.

Mr. Frank Hooley (Sheffield, Heeley)

I congratulate the hon. Member for Arundel (Mr. Marshall) on a thoughtful and helpful speech, although he was unfair to my right hon. Friend the Chancellor of the Exchequer when he talked about lagging in terms of training facilities, and the problem of redundancies. The first public expenditure proposal in my right hon. Friend's Budget speech was for an extra £20 million to be made available to the Manpower Services Commission to deal with the problem of training and retraining. This Government created the commission. They have done a great deal in developing training centres, skillcentres, and so on. In fairness, the hon. Gentleman should admit that the Government and my right hon. Friend have not lagged so far behind in this matter as he suggested. However, the hon. Gentleman made a useful contribution with some of his other points.

My concern is also about Clause 3—the extension of the British Steel Corporation's borrowing power from £1,250 million to a maximum of £2,000 million. We must deal with the whole question of the steel industry in the context of our membership of the European Communities, now that we have been told that we must stay inside the Common Market.

On 8th April the European Commission made a somewhat gloomy report about steel production in the Common Market. The report envisages that Community steel mills will run at only 75 per cent. of capacity in the current year, taking into account an estimated 11 million-tonne increase in productive capacity, against an 85 per cent. utility in 1974. Total production is expected to fall by 9.3 million tonnes. Export markets are not thought to be good. In fact, the report suggests that exports may be 4 million tonnes down this year, and says that stocks overseas are a factor working against overseas sales. A run-down in stocks within the Community of 2 million tonnes is also forecast, which will not help the general market.

The only bright areas identified by the Commission are in steel pipes, marine construction and mechanical and electrical engineering, in respect of which it says that demand could be relatively buoyant. Obviously, the demand generated by the exploration for and exploitation of North Sea oil will be very important for steel use.

In the face of this gloomy situation, which one cannot seriously challenge in the light of what is known in this country and in Western Europe generally, it is important that in the context of the Bill the House should examine the powers which the Coal and Steel Community possesses, under the Treaty of Paris, to deal with the situation. Article 57 gives the Commission powers to act in co-operation with the Governments concerned to regularise or influence general consumption, particularly that of the public services". The Commission also has power of intervention in regard to prices and commercial policy as provided for in this Treaty. Perhaps more significant than Article 57, which the Commission has contemplated using, are the powers in Article 58, which go somewhat beyond co-operation with Governments and give the Commission powers to impose quotas on the steel industries. It is important to quote at least part of the article, because it would have some impact on the productive capacity of British steel firms and steel plant if it were applied. More significantly, there has been pressure from the French steel industry to invoke Article 58 and introduce a system of production quotas in the present situation.

Article 58.1 states that In the event of a decline in demand, if the High Authority considers that the Community is confronted with a period of manifest crisis"— that is the operative technical phrase— and that the means of action provided for in Article 57 are not sufficient to deal with this, it shall, after consulting the Consultative Committee and with the assent of the Council, establish a system of production quotas, accompanied to the necessary extent by the measures provided for in Article 74. If the High Authority fails to act, a Member State may bring the matter before the Council, which may, acting unanimously, require the High Authority to establish a system of quotas. So far the Commission has been reluctant to move in that direction—possibly, it has been suggested, because of the referendum debate going on in the United Kingdom, and possibly because to introduce a system of production quotas would be taken ill in other parts of the world. The fact remains that the power exists. Article 58 is in force. As members of the Community, we must subscribe to it and accept it. The House should be aware of the possible consequences.

The introduction of a system of production quotas might well have an impact on the BSC's investment programme. If the productive capacity of certain plant is set below levels envisaged by the corporation, the chances of expanding the capacity of that plant in the future may be jeopardised or called into question.

I bear in mind the ambitious and, to my mind, necessary expansion of stainless steel production capacity in Sheffield. There is a scheme, which will ultimately cost about £60 million, to restore capacity for the manufacture of stainless steel in this country to something like a reasonable level. The decline in the British capacity to supply the home stainless steel market over the past 10 or 15 years has been appalling. The consequence is that we have been importing from all over the world a product which we could very well produce ourselves. If some form of quota were introduced it might imperil or call into question the excellent and ambitious plans of the BSC for expanding productive capacity of stainless steel in Sheffield and elsewhere.

The investment programme is not only concerned with the plant already under the corporation's control or envisaged to be constructed by the corporation; there is the question of an extension of acquisition in the present private sector of the steel industry—namely, on extension of the acquisition that has occurred already to some extent. That is an area in which difficulties may arise.

It is reasonable to mention that a good deal of rationalisation of the private sector has taken place—certainly in Sheffield—over the past five or six years. We have had the Johnson Firth Brown and Dunford-Elliott amalgamations and, most recently, the creation of Edgar Allen Balfour by the merging of two important private companies in Sheffield.

The point which we may have to bear in mind is the need or desirability of the corporation expanding its control or interest into what is the present private sector, and the problems that may arise. This is not a purely theoretical consideration. In June 1974 the corporation acquired a controlling shareholding interest in Sheffield Rolling Mills, an organisation which had been partly hived off to the private sector in 1969. The corporation bought back that capacity into its holding.

Earlier this year the corporation expressed a strong interest in acquiring a controlling shareholding in Johnson Firth Brown, following the collapse of the Jessel financial empire. As required under Article 66 of the Treaty of Paris, the corporation formally approached the European Coal and Steel Community for permission to make that acquisition in an important steel engineering company. The Commission did not refuse permission but gave agreement subject to certain conditions, namely, that the Johnson Firth Brown set-up should divest itself of certain important subsidiary companies in Glasgow and Manchester. That would have had serious repercussions on employment in those areas. In those circumstances the corporation thought it could not go forward with the acquisition of a holding in Johnson Firth Brown.

The question which the House must consider when dealing with the borrowing powers and the use of the moneys provided by the Bill is whether similar problems will arise in future, and how the House and the Government will be prepared to deal with the problem vis-à-vis the European Community.

Another problem which has arisen and caused serious difficulty has been the repeal of Section 15 of the Iron and Steel Act 1967. That measure gave the Government a degree of control over capacity in the private sector. When we consider an industry as far ranging and important as the steel industry it is clear that attention must be paid to investment programmes and investment intentions in the private sector as well as the public sector. It is clear that there should be some co-ordination. Unfortunately, by the repeal of Section 15, as a result of accession to the Common Market, the Government have lost power over investment and development in the private sector.

The House needs to examine what is required to restore that power, or at least to make certain that in this vital industry there is effective co-ordination of the investment programme in the public sector as well as the private sector. In their White Paper on the Common Market the Government suggested that that might require some revision of the treaties. If we are to approve borrowing powers up to £2,000 million we should know whether that money can in future be used effectively to extend the interests of the corporation or to create other publicly-owned companies, perhaps independent of the BSC, in the steel industry.

Apart from investment the other great issue in steel is manpower. In some ways it is a much more difficult and sensitive issue. It has a bearing on the livelihoods of many thousands of men and their families. It is probably reasonable that there should be some decline in total manpower in the steel industry and in the British Steel Corporation over the next few years. This is not a problem which need startle or terrify the House. After all, the rundown of manpower in other public corporations, such as rail, coal, gas and electricity, has been infinitely greater and more drastic than anything envisaged within the steel industry. In some of those other industries it has been accomplished with good sense and with the full cooperation of the unions concerned.

The co-operation and sensitivity of the trade unions involved in steel must be taken fully into account. I could not approve of the rather high-handed tactics—if, indeed, they were merely tactics—of the chairman of the corporation earlier this year. He seemed to think that at this most awkward time, in terms of unemployment, he could announce, off the cuff, that 20,000 men would be got rid of within a few months. Unless the corporation changes its attitude and techniques it seems that what could be essentially a rational process, spread over a period, will result in frustration, anger and bad relations, when it is of paramount concern that relations should be good.

The most tragic failure of the steel industry in the past 15 years has been that every time we have had an economic upturn the industry has been incapable of fulfilling the requirements of the rest of our industry. Whenever there has been an economic upturn the steel industry's capacity to supply steel pipes, plates and billets, for example, has been insufficient to meet reasonable demands. The fundamental problem of capacity, in terms of manpower, plant and investment, should be considered and should figure high in the Government's economic thinking.

8.0 p.m.

Mr. John Stanley (Tonbridge and Malling)

I should like to confine my remarks to the provisions in the Bill on Post Office finance. The justification for doing this is that I calculate that the Post Office will obtain the major share of the money that is to be provided under the Bill. I am sorry that no Minister from the Department of Industry is present, because two nationalised industries are being dealt with in this debate for which that Department is responsible. I also regret their absence in view of the fact that the debate on Post Office finances on 2nd December, when the topic was last debated, was so unsatisfactory. However, no doubt the Financial Secretary to the Treasury will be able to help the House by answering the questions which were left unanswered on that occasion.

Let me return to the debate on 2nd December when the House debated the Post Office compensation order. On that occasion the House approved a compensation payment to the Post Office of £123 million as compensation for price restraint in the financial year 1973–74—compensation justified in respect of the Statutory Corporations (Financial Provisions) Act 1974, which states that compensation was on account of compliance with the national policy relating to limitation of prices …". In my remarks on that earlier occasion I said that from an analysis of the Post Office's 1973–74 accounts the great bulk of the £123 million that was being sought had nothing whatever to do with trading losses incurred by the Post Office and was in no way attributable to a national policy of price restraint. The sum involved—£98 million out of £123 million—arose solely on account of an extraordinary provision charged to revenue to meet the deficit in the Post Office Pension Fund.

I should like to explain briefly the background to that deficit. It arises solely out of the way in which the Post Office Pension Fund was reconstituted following the Post Office Act 1969. The then Labour Government appear to have been ill-advised in deciding to meet the liabilities of the pension fund solely and wholly out of the issue of gilt-edged stock. With the growing inflation we have seen in the 1970s, predictably there has been a mounting actuarial deficit in that fund. When the last public assessment of that deficit was made by an actuary on 30th September 1972, the actuarial deficit in the fund was at that point assessed to be no less than £1,100 million. Since that date, in every year there have been huge extraordinary charges to revenue to meet deficits in the Post Office Pension Fund. On 2nd December I asked a question to which I was given no answer and I hope that an answer will be forthcoming today. I asked whether it was legitimate under the provisions of the Statutory Corporations (Financial Provisions) Act 1974 to seek compensation which in large amounts was represented not by trading losses but by an extraordinary charge to revenue to meet a deficit in the pension fund.

I raise the same question today because it is of great importance, and I know that the hon. Member for Newcastle-under-Lyme (Mr. Golding) will agree with me. It relates to whether the substantial funds which are being put into the Post Office Pension Fund legitimately come within this legislation. If there is a question mark on this matter, it is important that it should be obliterated by a ministerial answer.

I raise the matter again today because it is clear that in regard to 1974–75 and onwards the greater part of the money which has been provided under this Bill is being claimed by the Post Office, and that in turn the greater part of the money which the Post Office will obtain under the Bill is to meet the continuing deficit in the Post Office Pension Fund.

Let me give the figures. The Chief Secretary said in his opening remarks today that in the financial year 1974–75 compensation of £650 million will be paid. He said that of that sum £330 million, just over half, will be for the Post Office. In the following financial year 1975–76, the Chief Secretary said, he estimates at the moment that there will be the need for a further £100 million of compensation for statutory price restraint. Of that £100 million he said that £70 million would be directed to the Post Office. In those two financial years it would appear that large sums will arise on account of the deficit in the Post Office Pension Fund. If we take the last three years, the position is that in 1973–74 of the £123 million compensation payment which has already been authorised by the House, £98 million was represented by the extraordinary charge to revenue of the deficit in the Post Office Pension Fund. In the following year 1974–75, of the £330 million compensation which is envisaged to be paid to the Post Office under this Bill, there will be £100 million which is estimated to be the deficit on the pension fund as shown in the Written Answer of 19th February 1975 in c. 426. If we take the next year, 1975–76, we see that £70 million of compensation is due to go to the Post Office in that year. We do not know what the deficit will be in the Post Office Pension Fund in that year, but given a deficit of £100 million in each of the three preceding financial years, 1972–73, 1973–74 and 1974–75, it would be reasonable to assume that the deficit in respect of the pension fund in 1975–76 will again be not less than £100 million.

I should like to make three points about the fund, to which I hope that we shall have a clear answer in the interests of beneficiaries. First, I hope we shall be told whether it is proper for Parliament to apply substantial sums to the pension fund through legislation solely concerned with compensation for a national policy of limitation of prices. Secondly, is it not time that the Post Office Pension Fund was put on a sound financial footing? I do not believe it is right or prudent year after year to go on making extraordinary charges to revenue.

Mr. Golding

Will the hon. Gentleman make clear that the pensions of Post Office staff will not be put at risk in any way?

Mr. Stanley

I do not believe there is any evidence that pensions are at risk. I am pointing out that I have had no answer on the legal situation for a period of five to six months. I hope that the Financial Secretary in reply will be able to say that it is legitimate and proper that the present legislation should be used to make extraordinary provisions in respect of Post Office pension funds. If that information is given to the House, there can be no danger. However, if it should prove to be otherwise, any Government would make certain that the deficit was made up in another way. I do not believe there is any great point of substance between us, but we should know whether this charge should properly be made under the present legislation. That is the matter on which I am seeking an answer.

My third point about the fund is that there is a substantial public case for the Government to institute an inquiry, the results of which should be made public, into the handling of the Post Office Pension Fund since 1969. The cash cost of the accumulated deficit is already over £300 million to the period 1974–75. In addition, there is no evidence that the present deficit has been successfully eliminated. Sir William Ryland, the Post Office Chairman, was reported by the Sunday Telegraph on 17th March to have said that it would cost a further £800 million to put the Post Office Pension Fund on a sound financial basis. That figure would appear to be right. If we add the £800 million to the £300 million already paid out in cash we get a figure of £1,100 million, which was the actuarial deficit estimated on 30th September 1972.

I suggest that, in view of figures of this magnitude, there is a strong case for a Government inquiry into why a deficit of this size has emerged. I do not know whether there has been major mismanagement or misjudgment. But there is a strong case for finding out why a deficit of this order should have accumulated over the last five or six years.

Taking a parallel, if a deficit of 1 per cent. of the £1.1 billion which has accumulated in the public sector had occurred in the private sector, the people responsible would definitely be held to account. Therefore, there is no case for Parliament turning a blind eye to the fact that a monumental financial deficit has occurred in the handling of this pension fund. In the interests of other nationalised industry pension funds, I believe that an explanation should be given to this House and to the public at large for this deficit having occurred.

I turn now to the present budgeting position of the Post Office. I appreciate that the Post Office is a labour-intensive industry and, therefore, is particularly vulnerable to inflation. But the Chief Secretary in his opening remarks has not helped the situation by not indicating the Government's assessment of the deficit facing the Post Office in the current financial year 1975–76. By not giving that figure, the right hon. Gentleman has considerably circumscribed the debate. I believe that there are grounds for doubting whether the system of financial forecasting by the Post Office is sufficiently good, given the importance of the service that it provides and the magnitude of the sums of which it is disposing.

The budgeting for the previous financial year seemed to be more or less en target. In the debate on 3rd December the Financial Secretary, estimating the deficit for 1974–75, said that it was currently expected to be a little over £300 million. When the hon. Gentleman was asked to quantify this point in Hansard on 19th February, he gave the breakdown of the figures, which came to £304 million. Today we have been told by the Chief Secretary that the deficit for the financial year 1974–75 will be £330 million.

It is clear, however, that in the budgeting for the current financial year 1975–76 there has been a serious failure on the part of the Post Office to quantify the commercial repercussions on its own business of the combination of inflation and of the market impact of the recent price rises which it has secured.

The figures are remarkable in the way that they have escalated over the last six months. The Post Office made its detailed submission, as it is statutorily obliged to do, for its proposed increases to the Post Office Users National Council in January last year. In that submission it estimated that if the POUNC and the Government agreed to the price increases—and the increases were essentially agreed—the deficit in 1975–76 would be reduced to only £50 million.

Today the Chief Secretary said that the Government's estimate of the deficit for 1975–76 was £70 million, but in his remarks he made it clear that the real deficit was substantially larger than that. For example, in The Times of 28th April it was reported that the actual deficit for 1975–76 may be as much as £300 million again. If there is any credence and substance in that report, it means that the forecast Post Office deficit for 1975–76 will have gone up six times in the space of six months. If so, the management of the Post Office has a major question to answer as to why its budgeting and forecasting have not proved more accurate than would seem to be the case for the current financial year.

The time has come to pose some fundamental questions about the Post Office. We should be asking whether, if the Post Office is given complete price freedom, as is the welcome policy of the Government, it can be profitable or whether some parts are inherently unprofitable? If some parts are inherently unprofitable, is it desirable that the postal services perhaps should be treated organisationally wholly separately from the telecommunications services? If parts are inherently unprofitable, is it right to begin to loosen some of the statutory monopolies of the Post Office Corporation? Can the existing level of postal services be justified if they require continual subsidisation from one year to another? Can the Post Office's considerable consumption of capital resources be justified against the Government's huge overspending in the public sector? These are fundamental questions which must be posed.

I believe that the time has now come for the Government to come forward with a White Paper setting out the forward strategy of the Post Office, quantifying the various options and alternatives, the costs of those alternatives, and the types and levels of services implicit in them. I hope that such a White Paper will be forthcoming after the Government have completed their review of Post Office finances.

I hope that this will be the last occasion on which a Government of any political complexion come to the House with legislation which seeks hundreds of millions of pounds for the Post Office Corporation without at the same time producing an up-to-date financial assessment of the corporation's position and a clear background to the future course and options open to that important nationalised industry.

8.18 p.m.

Mr. Ted Leadbitter (Hartlepool)

I expect that in making his last comments the hon. Member for Tonbridge and Malling (Mr. Stanley) was attempting to be sincere. I hope that he will not be disturbed when I suggest that no previous Government have asked the House for extra borrowing powers on the Second Reading of a Bill in the manner that he suggested. I suggest that he pursues the latter part of his argument upstairs in Standing Committee, where the Bill can be scrutinised line by line. If I felt as he does I should certainly be posing pertinent questions to the Minister and demanding answers.

I believe that on Second Reading one has to consider the extent to which one's contribution—I do not minimise the hon. Gentleman's contribution; his speech was thoughtful and well prepared—may breach confidence when dealing in a general way with pension funds. I do not deviate from the hon. Gentleman's concern. I believe that he expressed a genuine view, which he wants the House to consider. Unfortunately, the House is not master of what is read and heard outside. There could be unnecessary concern and representations made relating to what the hon. Gentleman said about a particular pension fund.

I want to come straight to the point that worries me—the steel industry, particularly in my constituency. I propose to keep faith with what I said to the hon. Gentleman. It would serve no useful purpose to go into too much detail about the finances and investment policies of the steel corporation, but it is pertinent to say that the steel industry is the largest manufacturing industry in this country, not in terms of employing people, but in terms of manufactures, in terms of its effect on the car, shipbuilding and construction industries, and in terms of its valuable contribution to exports. It is because of that situation that the state of affairs in the industry worries me considerably.

It was said earlier that we have never found ourselves in the situation in which, when there has been an upturn in the demand for steel throughout the world our industry has had the capacity to meet it. I do not think that any hon. Member on either side of the House can argue against that fact. It is not sufficient to say that someone is to be blamed for that situation, because if we are talking about the largest manufacturing industry in the United Kingdom we have to realise that the managerial problems are complex and that technological developments and research requirements, when placed against present levels of production con- siderations, are beyond human calculation and determination to achieve the kind of precision that is needed to meet future demands for steel. But that does not mean that because there is imperfection in dealing with managerial, technological and research problems we should be condemnatory about the rôle that we have to play in a democracy in order to protect the people who work in that industry.

The hon. Member for Arundel (Mr. Marshall), who made an excellent speech—and on many occasions I have listened to his well-prepared speeches—made a slight error when he suggested that the Government should do more, bearing in mind that at Question Time today my right hon. Friend the Secretary of State for Industry was being maligned because he was interfering too much in industry. On one day the House cannot claim to be right in both instances, so if I accept the hon. Gentleman's concluding thoughts I draw the conclusion that he concedes that in the largest manufacturing industry in the United Kingdom it is imperative that there should be a rôle for the Government, for the trade union movement and for the management of the steel corporation.

The number of jobs is of paramount importance. This affects not only those in the industry itself but those in the ancillary and supply services. The numbers employed affect project planning in local authorities from the point of view of schools, roads and housing. Therefore, the magnitude of the problem demands that Parliament and the Government have a rôle to perform. I accept that the hon. Member for Arundel, who at Question Time, following the general euphoria of the aftermath of the referendum, had some sport with my right hon. Friend the Secretary of State for Industry, is now conceding that the Government should do more.

Mr. Michael Marshall

I appreciate what the hon. Gentleman is saying, but I was urging the Government to look at the whole question of redeployment and retraining in the widest sense. There is not enough thinking on this subject. I was not talking purely about steel. My earlier questions were related to what I see as the Government's failure to grasp the nettle of investment decisions and closures. I do not think that these things are related.

Mr. Leadbitter

One of the things about a democracy is that we can discuss our ideas with friendly impartiality but with conviction, and I remind the hon. Gentleman that the first Chairman of the British Steel Corporation, in a speech to the New York Chamber of Commerce, said that one of his greatest problems was that of intervention by the Government, and the Government of that day was not a Labour Government.

I believe that there are areas in which we are in agreement. There is no problem when we are arguing about extra borrowing powers that we give to a corporation such as the British Steel Corporation, but what I am trying to say is that the House should not find itself in the situation that because one party is on one side of the House at one moment of time and on the other side on another occasion we should play ducks and drakes with the industry as if it were separate from us in some way and is suffering merely because the Government of the day happen to have been carrying out an investigation or examination in order to measure the borrowing requirements of an industry which has endemic problems.

The steel industry is of such a size and complexity that it will never be able to reach the ideal in terms of having the capacity to meet future world demand, because that cannot be done. We do not have a crystal ball to gaze into, but one of the errors that we have made is to reduce the capacity of the industry in such a way that it has been criminal in the sense that the things about which the hon. Gentleman is concerned and the things to which I have referred have fallen by the wayside and we have not obtained a maximisation of the benefits that we would have had if common sense rather than friction had prevailed.

During the referendum a report was put about concerning Redcar which, as far as I am aware, had no signature to it, but it has caused some concern in the area in which I live. I am glad that my right hon. Friend the Member for Middlesbrough (Mr. Bottomley) has come into the Chamber because he and I and all our colleagues from Teesside are con- cerned about this. We have enjoyed a great deal of co-operation with the Government. Indeed, we had some interesting meetings with Ministers of the previous Conservative Government and with the Chairman of the British Steel Corporation.

The Redcar steel complex is part of our national interest and it should not be tampered with by anyone. My right hon. Friend the Member for Middlesbrough and I fully agree on this point. We do not feel that the development of this complex, which it is estimated will eventually produce a third of our steel capacity, should be tampered with.

A question of honour is involved in the argument. Under the previous Government, there was a two-year examination of the investment programme for the industry which caused the BSC a good deal of heartache, but one thing which emerged was that one of the major steel production centres would be in Redcar. My colleagues and I have heard no evidence from the trade unions, the councils or anyone else in the area to suggest that this development will be diminished, but because I have said this is a matter of honour and of investment calculation, I hope that the Government will be able to say tonight that this development will go on.

Just north of the River Tees is Hartlepool, which I am proud to represent. I raise this matter because I believe that the House will have considerable sympathy with my efforts and those of other hon. Members on both sides to present the problem reasonably and without acrimony. Because of the inability to meet future world demand, the number of closures is sometimes excessive. Since 1972–73, Hartlepool has been under the shadow of closure, which would affect the jobs of more than 4,000 men. In my constituency, now and in the past, unemployment has probably been higher for longer than anywhere else in the United Kingdom. With many redundancies likely in the near future, throwing more than 2,000 people out of work in steel works and other organisations. I want my contribution to the argument about the corporation's borrowing powers to be answered with some recognition that what is at stake is not just steel production but the livelihood of thousands of men and the well-being of their families —probably 10,000 souls—with about 2,000 or 3,000 more liable to be affected in the ancillary industries.

On 12th May, a director of the Teesside and Workington Group of the BSC, Mr. Saul, said that places like Hartlepool would be affected by what he called a recession. This is the problem that I have been discussing—making decisions in the face of a recession which cannot be pulled back in time when steel demand rises. If a closure is likely in Hartlepool, where, so far, our argument has changed the corporation's mind four times—the closure was postponed from 1974 to 1975, to 1976, to 1977, and now there is a further breathing space until 1978—when one considers the numbers employed in this industry in a constituency of only 100,000 people, one can see the economic effect that this would have.

For a director of a BSC group to talk of places like Hartlepool being cut down because of a recession makes me want to say, "Take care". I shall not argue the matter now, but I do ask him for God's sake to listen to men like me and to the trade unionists concerned, who approach the argument fairly and objectively.

For example, a colleague of mine in Hartlepool, Mr. J. B. Close, at the recent conference of the group I have mentioned, told the director that it was nonsense to talk about putting steel plants in mothballs. He was talking about a situation he knew. Another member, Mr. Tindall, of Hartlepool, said that the chairman, Sir Monty Finniston had given an undertaking that he would not use the recession to bring forward closures and redundancies. Another member, Mr. Linighan, said that the group was really saying that Hartlepool could no longer have its steel plant. Finally, Mr. P. Hynes, who is the secretary of the "Campaign to Save the Steel Plant Group", said that consultation on plate mill strategy was nothing more than a charade.

In the Second Reading debate let us talk about matters in general, although they affect people in particular. Let us recognise that if men who have worked all their lives in the steel industry talk like this—and they are used to consultation—there must be something wrong with the relationships between the steel corporation and the trade union movement at that level. For example, seven years ago the chairman of the corporation said that he wanted 180.000 people to produce 37 million tons of steel. He calculated those figures as a scientist and industrialist. Seven years later he was found to be wrong. Only the other week he said that he wanted 50,000 people in the industry to produce 37 million tons of steel. Is it so difficult for us to imagine that seven years from now we shall say "We are sorry, Sir Monty, but again you must be wrong"?

The Government are struggling hard to deal with an extremely difficult problem. Discussions are taking place day in and day out in order to find answers. More fundamentally, the House has to reassert itself, use its natural instinct and suggest that when we make the larger decisions on closures and investment we must bear in mind the lessons of the past, and what I have said to the chairman on previous occasions, namely, that the only consistent thing about the British Steel Corporation, because of its size and complexity, is its inconsistency, in terms of making judgments that have not produced the right answers. The solution can be found not because the chairman and his technical officers claim they know it, but only if the House of Commons, the Government, the British Steel Corporation and the trade union movement work together so that they can eradicate as far as is humanly possible some of the dangers of previous judgments which affect men, their work and their families.

8.40 p.m.

Mr. Tim Renton (Mid-Sussex)

The hon. Member for Hartlepool (Mr. Leadbitter) has just referred to the inconsistency of the British Steel Corporation in reaching the right judgments that led to the best answers. The point I should like to make to him is that that inconsistency has been due very often—more often than not in the past—to decisions taken by politicians, rather than to the commercial judgment of the British Steel Corporation if it had been left to itself.

I will develop that point during my remarks, but first I should like to say that when the hon. Member for Hartlepool referred to the remarks made by my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) in regard to the Post Office Pension Fund, he should have borne in mind that my hon. Friend was calling for an inquiry into this pension fund in order that the fund should be put into proper financial shape. Surely the fact that that concern exists on the Opposition side of the House should give great comfort to members of that pension fund. It should give them far more comfort that we wish to see the fund put into proper shape than their knowledge that it is now in deficit and is financially non-viable. This information is, of course, available to every one of them through the Post Office accounts.

Professor Galbraith commented not long ago that in this country we already put most of our social energies into shoring up the weak sectors of our economy. What I fear is that it is not just our social energies but a very large part of our financial resources which are going into shoring up those weak sectors. In this Second Reading debate it is to that point that I want to direct my remarks. I feel that just as bad currency drives out good, so the weak sectors in an economy can undermine the strong. Unless we can get financial disciplines right in the nationalised industries and get the interface between politicians, the Civil Service and the management of those nationalised industries right, our chances of strengthening the whole of British industry are poor indeed. Surely in the potentially exciting years which lie ahead of us following the massive decision to stay within the EEC, the prime task of this House must be to help to create an economy in which both nationalised industries and private enterprise are successful.

In listening to the Chief Secretary open the debate, I was encouraged when I heard him comment that £1 spent on subsidies is £1 less available for vital investment. That refers equally to food subsidies and council house rents. But in the case of nationalised industries not only is £1 spent on subsidies El less available for vital investment; it is also true that by not charging economic prices and if the nationalised industries run more or less permanently at a loss due to Government interference, virtually all incentive within those industries to enforce cost control to try to run an economic business disappears. Inevitably an attitude develops of "What the hell! Why try to make minor cost improve- ments? The Government will bail us out. The Government will pay in the end in any event."

There is the further fact that if one subsidises prices one rapidly gets into a position in which one cannot raise them to the customer sufficiently because the rise needed to return to the proper economic level is simply too great. We have already seen this to a degree in, for example, off-peak electricity prices. It is this symptom of not being able to make up past deficiencies that the Post Office is going through at present. If we had all become accustomed to a rise in the cost of stamps of ½p a year, this would not be so. What the Post Office is suffering from is a massive rise of 2½p.

There should be as little distortion of market demand and forces as possible in the nationalised industries as in other industries. If there is market distortion, this leads to incorrect investment decisions. A classic case of this has been the non-economic price of coal. This has led in the steel industry to a failure, because coal was available so cheaply, to develop away from blast furnaces towards an increased study of powder metallurgy that far higher prices for coal would have brought about.

The theme running through this debate, and certainly in the speeches from Opposition Members, has been that the Morrisonian principle of interference in the nationalised industries only when national interest demands it is now far more honoured in the breach than in the observance. With all due humility, having been a Member for only 15 months, and of the Select Committee on Nationalised Industries for three or four months, I am horrified not only by the degree of interference by Ministers and by Members of Parliament but also by the degree of judgment and decision making required of us in matters on which quite simply we do not have sufficient technical competence. There are obvious exceptions to this: in the case of the steel industry, my hon. Friend the Member for Arundel (Mr. Marshall) and the hon. Gentleman the Member for Motherwell and Wishaw (Dr. Bray). Time and again we must all have been aware, for example in the case of nuclear reactors and in regard to energy questions, that matters conic up through Ministers to this House on which we simply do not have enough knowledge to take the decisions required of us.

I had great sympathy with the Chairman of British Rail when he said recently that a large part of British Rail's trouble resulted from incorrect decisions, primarily taken by politicians.

The ability of all of us—I am just as much to blame as anyone else—to ask Parliamentary Questions concerning the nationalised industries leads to a very great distraction for the management of those industries who have to find replies to those Questions. It is not unlike having an annual general meeting five days a week. The only difference is that here there is a warning two weeks in advance of the questions that the shareholders are going to ask.

Against this background I think that a great many changes are needed. I should like to see a cadre of civil servants developing with far more technical knowledge and far more technical competence than, with all respect, we see at the moment in the Department of Industry. It would be necessary for these civil servants to go out into industry for long spells in order to find out within an industry how that industry works, obtaining thereby a great degree of knowledge which can be used subsequently.

In the longer run we shall have to see in this country a divorce between the executive in the public sector, which is bound to grow, and the legislature. I do not pretend to have any magic answer to this, but at a time when the nationalised industries are consuming more and more of the investment in this country we should study the American and French models. It is true that in France the permanent civil authority possesses far more authority to produce more logically considered policies and to ensure a greater consistent life for those policies, free of party political prejudice, than is the case in the United Kingdom.

Tied in with this, ideally, the nationalised industries should be able to produce investment plans for periods up to 10 years that would be more or less immutable. Those investment plans would, of course, anticipate price increases, inflation, and increases in labour costs. I realise the great difficulty of expecting any Government to bind themselves to decisions taken a few years before—particularly those taken by their predecessors—but we have to face the fact that there is nothing worse than saying to a nationalised industry, in the middle of an investment programme, either "We now expect you to change that investment programme because our political objectives are different from those of our predecessors" or "Because money is short, we authorise you to spend 75 per cent. of your next year's capital budget and we will let you know about the balance in due course." This leads to a mess in the ordering of capital equipment and creates uncertainty throughout management.

The total losses of the nationalised industries in the year just ended will greatly exceed £1 billion. We are told that British Rail's losses in the year ahead are likely to exceed £340 million and that British Rail may soon find itself in the situation where its wages bill alone is as high as its total income. However, when the general secretary of the NUR says that the argument that British Rail cannot afford more wages is irrelevant, he is only telling the historic truth. The ultimate financial sanction of going bust, of being driven out of business, does not exist in the nationalised industries. There has always been endless recourse to the Treasury.

Given the argument that a nationalised industry might go to the wall, the Treasury has always given in to such financial pressures. If some means of changing this is not found, there will be no end to the size and sort of bill that we are debating today.

Over the weekend, the Under-Secretary of State for the Environment said: When the customer does not pay the full costs of the services, we must monitor performance to ensure that there is a continuing search for economies, and a proper social return on the subsidies we pay. That is bosh, because a proper social return on the subsidies we pay is a meaningless phrase. No one can quantify what is a proper social return. The result is that the nationalised industries have always suffered from an incompatibility of objectives. They have been told first that they have to provide a social service and that, in this, Government interference is inevitable. But then they have been told that they must make a reasonable return on their capital. The two are incompatible.

At a time when public resources are so short, I suggest that a reasonable return, whatever the definition of that is, must be the predominant aim and that the social service must be properly costed out by the Ministry which requests it and paid over on a monthly basis to the nationalised industry in question so that it can run itself as much as possible as a market company.

I should like to sec the discipline imposed on the nationalised industries of the Government, through the Treasury, allocating a certain global sum to the totality of the nationalised industries grouped together of possibly £1 billion a year on a five-year rolling programme. In saying that, I come back to an idea which has been mooted before. This total would be allocated out by a holding board for the nationalised industries. On it, naturally, sponsoring Ministers and their permanent secretaries would be represented. But the bulk of the small holding board would be made up of industrialists. They would allocate funds within the conflicting claims based in some instances on commercial return and in some on social need. But the underlying discipline would be that in no event would more money be available from the Treasury than the global sum initially allocated. If one nationalised industry needed more, it would have to be at the expense of another.

I should not like to see this holding company become just another tier of civil servants. I should prefer, to use Lord Rothschild's word, a "membrane" which would scrutinise the major investment plans of the nationalised industries, allocate resources and evaluate the results while the respective managements got on with their regular executive tasks.

It would be the job of this holding company to argue with the Treasury about the level of subsidy for social objectives and how this was to be fed into the nationalised industries with least disturbance to the pursuit of commercial objectives. I submit that this membrane could act as a buttress between the managements of the nationalised industries and politicians and civil servants.

My hon. Friend the Member for St. Ives (Mr. Nott) said that he felt that the measurement of return of assets, particularly in the days when inflation accounting is with us, needs looking at. I hope that the Minister of State will take on board the fact that, in my judgment, the whole principle of test discount rates is wrong in the nationalised industries, which are, in effect, conglomerates active in many sectors. The test discount rate is effective for a single investment project, but not as a means of measuring return in a very large industry which has many different activities.

The reason is simple. When the returns start to come in, under the test discount rate in a nationalised industry, the profit available instead of being reinvested in projects which will yield a comparable return necessary to achieve the rate originally required, is absorbed in much less fruitful and rewarding projects—perhaps in the replacement of old assets that need replacing but that could never achieve the sort of rate promised in the first place on the individual project.

The whole question of a proper financial criterion for the nationalised industries needs to be examined, and in this connection I quote the remarks made by the Minister of State in an Adjournment debate last month. He said: Nobody dealing with nationalised industries will want to revert to a situation in which the rate of return on these assets is not in accord with the best principles of their efficient use."—[Official Report, 23rd May 1975; Vol. 892, c. 1829.] Unfortunately, after that Delphic utterance, the Minister did not develop the theme, but I hope that, in reply tonight, he will tell us what he feels to be the appropriate measurement of adequate return in the nationalised industries.

This is of particular concern at the moment because in the case of the National Enterprise Board—that new animal to be unleashed upon us—the Prime Minister has said that it will be subject to the sanctions of Treasury approval, and we all know, since it is one of the reasons for this debate, that those sanctions have failed in the past. Why should Treasury approval work in the case of the NEB when it has conspicuously failed in the past?

Something needs to be brought forward to replace the failed nostrums of yester-year. I hope that tonight we shall hear what it is to be. I welcomed the Chief Secretary's statement that this ought to be the last Bill of its kind, but I fear that, unless the Government put more teeth into their argument as to what are to be the restraints on wage demands in the nationalised industries and what are to be the new financial criteria, his optimism will be unjustified and in another year or two, under the present Government, we shall be debating another such deplorable Bill as this one.

9.0 p.m.

Mr. David Howell (Guildford)

I think the House will agree that the debate has been marked by some excellent speeches from both sides of the House, delivered with great authority and familiarity with some of the industries with which the Bill is concerned. I pick out in particular the speeches by my hon. Friend the Member for Arundel (Mr. Marshall) on the steel industry, and my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) on the devastating situation which he exposed in the Post Office Corporation, and the authoritative speech by the hon. Member for Newcastle-under-Lyme (Mr. Golding), from his considerable experience in his trade union. My hon. Friend the Member for Mid-Sussex (Mr. Renton) touched with accuracy on some very important aspects of the need now confronting us to come to grips with what has been accurately described not as the hard core of the British industry and the British economy but as the soft centre of the British economy.

No one pretends—certainly not my hon. Friend the Member for St. Ives (Mr. Nott), who opened on behalf of the Opposition, nor I—that there are simple answers to the problems that we have been discussing, and particularly to the question of the relationship between Ministers and the chairmen and managements of nationalised industries in terms of working out price strategies, wages strategies, investment strategies, and so on. It would be impudent to put such a view forward.

There are too many errors of commission by Ministers of successive Governments, even to begin to claim that we can now lay down simple answers or point the finger across the House and say that this should be done. We are still struggling to define what a nationalised industry is.

Never since the time of the Morrisonian concept, when the guidelines were first laid down, have we had a clear idea whether a nationalised industry should be treated as a business or as a social service. Mr. Sydney Weighell states as a principle that the railwaymen are entitled to a given percentage, the going rate—the just wage, as it were—in the railways. I do not agree with him. In my view, that is the road to disaster and even more lack of control than we have in the railways at present. That is a point of view which is widely held—in other words, that the wages that should be paid, and, furthermore, the labour costs incurred in a certain nationalised industry, as we call it perhaps wrongly, should bear no relation to the finances of that particular institution or industry, but should be decided by other determinants—in this case the going rate, which appears to be about a 30 per cent. increase on the previous year.

Do not let any of us pretend that we have a common view about what a nationalised industry is. Obviously there are sharply divergent views, not merely between the different industries—they are all very different animals, as my hon. Friend the Member for St. Ives said—but about what the whole sector of nationalised industry really is.

I make it clear that we are not seeking to divide the House tonight because we have a simple solution. I put the matter a different way. I should like to put into context our reasons for dividing the House tonight. In doing so I should like to go a little—I shall try not to be too controversial—into recent economic history. It would not be too fanciful to depict the past year or 18 months of Labour economic policy, at any rate as expounded by Treasury Ministers and by the Chancellor, in two phases. This afternoon the Chief Secretary made a speech which was full of very strong words and warnings about the dangers of regarding Government as a bottomless purse. He said a great many sensible things. Some of them might have been drafted in the Conservative Central Office. However, last year he did not talk quite so much about the danger of the bottomless purse.

I should like to divide Labour economic policy into two phases. Phase 1 was last year when, far from being constantly reminded that there was no more in the kitty, we were being told by the Chancellor almost from the start of the Labour administration that the circle could be squared, that it did not matter if the figures did not add up, because there were the rich to be soaked, and they would fill the gap. We were told last autumn that Britain alone, by reasons and means to be later revealed, could escape the levels of unemployment which the world recession was bringing to other countries, such as France and Germany. We were told that we could do this by maintaining generous levels and degrees of reflation and high public spending. That was the position last year, which led to more difficulties, which I shall come to later.

Above all, the rule of the day of the first period of Labour economic policy was to let public spending rip—and, by heaven, rip it did, as we all know by now to our cost. Indeed, it may be—perhaps I am being too optimistic—that it has reached its crazy crescendo with the development that my hon. Friend the Member for Oswestry (Mr. Biffen) pointed out—the 44 per cent. increase in April and May in supply public spending, which is a staggering figure and one which I hope marks an apogee in the enormous growth of public spending that has been going on up to now. That is phase 1.

We are now into phase 2, when Ministers are rising one after another—the Chief Secretary today, and the Secretary of State for the Environment and the Chancellor twice a week—saying "There is no more in the kitty. We must now cut spending". The soaking of the rich which was supposed to square the circle turns out to be a soaking of everybody on the most enormous scale, disguised by the fact that the income tax thresholds are not indexed, so we have possibly the most enormous increase in money taxation in this country's fiscal history.

So the order of the day changes from "Spend" to "Cut spending"; from "Soak the rich" to "Soak everybody".

Now we see almost bloodcurdling comments in the newspapers. I quote one item by Mr. Peter Jay in The Times.

Mr. Jay reports that the Chancellor intends to stick through thick and thin to the relatively restrictive monetary policy set out in the Budget. Excessive pay settlements, if they occur, will automatically interact with that restraint on monetary demand… This is the new tough talk and this is the end of phase 2—and we are hearing plenty of it.

The most favourable interpretation that we can put upon the Bill is that it is a hangover from phase 1 and that it does not belong to—indeed, it does not even fit in with—the harsh and stern words of the Chief Secretary but belongs to the "Spend everything" régime which was prevalent last year. We must conclude that, because obviously it is extraordinary that what amounts to a no-limit subsidy Bill can be brought forward against a terrifying background of spiralling public spending and the hideous developments in the rates of inflation and the rates of rise of average earnings that we now experience.

That is the only construction that we can put on it, and that is one reason why we think that it is totally unacceptable that in this new phase, when realism is coming out of the mouth of the Chief Secretary on the question of public spending, we should be asked to approve a Bill which provides no checks on the additional sums that are to be wheeled out for the various purposes which I shall come to later.

I suppose that it would all be acceptable if it all ended here—if it really were the case, as the Chancellor has said, that it will end at the conclusion of the 1975–76 financial year, and that that will be the end of compensation for price restraint and of payments under Clause 1 of the Bill. It might be just acceptable if that were so.

The trouble is that most hon. Members and most members of the public must by now have the feeling that we are running very fast to stay where we are, that enormous price increases in nationalised industries—in gas, in electricity, in the cost of sending a letter and making a telephone call—are the order of the day. Price increases and the swollen bills come popping through the letter box, but the losses that these are supposed to make up for do not shrink very much.

Much of the comment today has pointed to that central uncomfortable fact, because the theory is that the combined deficit for price compensation for 1975–76 is to be £100 million. To start with, the Chancellor said that it was £70 million, but the Chief Secretary told me on 9th May— It is impossible at this stage to say by how much it may vary from the current price equivalent".—[OFFICIAL REPORT, 9th May, 1975; Vol. 891, c. 537.] The Chief Secretary then revealed to me that the current price equivalent was about £100 million, which he went on to say was equivalent to £70 million at 1974 survey prices.

That £100 million is already on the escalator, and that is just covering the price component for gas, electricity and the Post Office Corporation. The combined current deficit of all nationalised industries in 1975–76 might be anything from £700 million to £1,500 million. We do not know. Anyway, there is going to be a very substantial current deficit, and this is before we get on to the question of borrowing at subsidised credit rates. For the nationalised industries with which we are here concerned—gas, electricity and the Post Office Corporation—the Chief Secretary tells us that the deficit is £100 million, but many of us have bitter experience of these estimates, and we shall believe it when we see it.

We have already heard hints that the Post Office Corporation, despite its high expectation of more revenue from higher prices, has misjudged the market and may fail to get anything like the revenue which it hopes. The £70 million deficit for the Post Office may become £100 million, or even £300 million, as one newspaper has suggested.

We are this evening a month or six weeks away from the Budget and we are already way out into the area where all these figures are swelling before our eyes. That is why, no doubt, the Chief Secretary is reluctant to put any figure on the amounts which Parliament is supposed to be voting. In theory, all that has changed. The Chancellor of the Exchequer has made ferocious speeches and has said that the losses are going to be ended in 1976. But first there is the small but very central point of what ending the losses really means, as my hon. Friend the Member for St. Ives and the hon. Member for Colne Valley (Mr. Wainwright) have said. If one is not clear how much investment is supposed to be financed by internal revenue sources, how do we know what the revenue deficit is going to be? It is an absolutely meaningless concept to talk about a revenue deficit when we do not know what idea the Government have about the level of revenue which should be generated by the nationalised industries.

That is a side issue in a sense, but it just happens to be that the concept is meaningless and makes it impossible to define what the revenue deficits are going to be, except by referring to the generalities in the Explanatory and Financial Memorandum to the Bill—and this takes the 1975 prize for generalities—which says that the total for 1975–76 will depend on, among other things, changes in the industries' costs, prices… and so on. That is evidently as far as the Revenue feels it can go.

Suppose we take the Bill at its face value and imagine that there are revenue deficits which can be identified and that the Chancellor's aim is to kill off the current loss in 1976. If that is so, the innocent might ask: why is the period allowed to be extended by Treasury order to include 1976 and 1977? Why is it that, without any effective parliamentary intervention, we are to be taken for another ride into next year on the same tiger as has already grown teeth which we were told did not exist a few weeks ago? Surely Parliament should be able to supervise and check this terrifying process.

The previous Bill brought forward by my party when in government was certainly not perfect. [Laughter.] I thought that would produce squeals, roars and grunts from certain hon. Members opposite. At least it had in it a clear cash limit. The hon. Member for Colne Valley said what a dreadful thing it was that the cash limit was exceeded, and that it was too low. I think it was important that there should be a cash limit in order that Parliament should have a chance to put its oar in when that cash limit was exceeded. At least we have the chance now, but if the Bill goes through unamended we shall not have it again. The sums, unspecified here, that will have to be pumped out will not be subject to further Bills. They will be churned out without adequate parliamentary control. That is a substantial reason for voting against the Bill.

Mr. Richard Wainwright

Does not the hon. Gentleman think it scandalous for the House to be deceived into passing a Bill by the inclusion of a figure which was unrealistic even at the time?

Mr. Howell

With due respect to the hon. Gentleman, whose skills I appreciate, he is being a bit naive. There is no deception in merely announcing that one intends to seek from Parliament the voting of X hundreds of millions of pounds. That seems a frank and honest approach, much more honest than using a vague formula and apologising when the sums turn out to be far larger than was imagined. I would rather have a specific sum, so that when it runs out Parliament has a chance to have another say on the matter, than have generalities in the Bill, with Parliament allowed no further adequate control over what is to be voted, spent and turned away from other national priorities to blow on this kind of operation.

We believe that as a start there should be predetermined cash limits on all public programmes, certainly on the major public industries and their deficits which will be financed. I mean not only the revenue deficit, in the sense of covering current costs, but the amount of subsidies needed over and above that amount of investment financed by internal revenue sources. We believe that that is the starting point, and that the deficits should be calculated after far more realistic allowances in calculating the return on assets for a contribution to investment from internal sources. That is certainly necessary.

We believe that cash limits are the right approach first because they are the hard reality. The Chief Secretary recognises this. He now has increasingly to deal in the harsh realities of cash. The Chancellor has recognised that this is the way our thinking should be going, that we should get away from the humbug of offsetting the effects of inflation and of wage increases on public sector programmes, and begin to think in cash terms and to show that money really matters. Cash limits are the reality which breaks through the clouds of generalities surrounding the social contract approach to what the level of wages should be in the railway industry or any other industry.

The second reason is that cash limits make the nation face hard choices. We can debate them now in a way that we would not when there was always an implication that there was more in the kitty or that the rich could be soaked. Now we know that there is no more, we can debate whether we want to pay the electricity workers more and pensioners less, whether we want more for the miners and less for school equipment and hospital services. We can debate the fact that more for the railwaymen over and above anything the industry can afford will mean less for widows and welfare services. It is very healthy that the nation should be debating these choices in hard and realistic terms not pretending that there is always a bottomless purse, a magic fruit tree on which Government money grows and can always be produced.

The third reason why we believe that cash limits are the right approach is that they are much more flexible, in that one gets away from the tangle of statutory prices and incomes controls, a return to which I would never favour. Cash limits allow firm control by the Government to be combined with relative flexibility as to who gets what kind of wage or salary increase within a nationalised industry.

Fourthly, and perhaps most important, they let management know where it stands. They let management know that if it decides, for purposes which it is entitled to have, that it will give in to an excessive wage demand there is no question of returning to the taxpayer, to the Exchequer. Because the cash limits are laid down, management will have to look elsewhere, and a number of interesting and important developments will begin. If management wants to pay everybody more, that must mean that "everybody" must be fewer. One method is to recoup by wastage and redundancy and by cutting down on services and jobs. That is the unpleasant way, but the inevitable way if cash is firmly limited.

The alternative is to finance wage increases through higher prices. In that direction we have seen some interesting developments. For example, the Post Office has discovered that the passing on of higher prices is not working any more. It is beginning to realise that recouping through higher prices may be running into the often forgotten area of consumer resistance. People are voting by means of their pockets and by not sending 7p letters. It seems that some business men are finding other means of transmitting information instead of using the postal services. There is evidence that they are using magazines and other forms of communication. The hope that higher costs in admittedly a labour-intensive industry could be recouped by higher prices is not working out. One reason for having the Bill before us is that that avenue has been cut off.

We are having to consider these matters again. As the Chief Secretary has said, the Government are having to discuss the question of the substantially higher deficit that will be incurred by the Post Office—much higher than either the Chancellor or himself hoped or feared at Budget time seven weeks ago. The easy formula by which it can be said "Do not worry about wage increases; they can always be recouped by piling higher prices on the consumer" has had a question mark put over it, to put the matter no higher.

There are other areas where the monopoly force is stronger. One area that is very much in mind is that of commuters facing higher passenger charges by British Rail. That situation is not, strictly speaking, covered by the Bill, but it is an example of where there is, to all intents and purposes, a monopoly. It is a monopoly where the consumer has no immediate means of escape. I believe that most people would feel themselves trapped in that situation.

There is no doubt that where public utilities are using or abusing their monopoly positions to recoup the costs of excessive wage increases by putting up prices they must expect the Government to be ferocious in their use of anti-monopoly powers. That is familiar language to the Treasury Bench. It is the language that the Chancellor is now using. He is arguing that if the railwaymen or other nationalised industries persist in seeking settlements far beyond anything that the industries concerned can pay he will be forced to make cuts in public expenditure and cuts in welfare expenditure. If I may put it in personal terms, that is Healey Mark II.

We are complaining that the Bill is Healey Mark I. It comes from the era when public spending did not matter very much. That is why there is no check in the Bill. There is no check on the process which we believe must be halted—namely, the fiesta of increasing public spending. The financing of higher wages in the public sector leads to higher public spending, which in turn leads to more and more inflation. That is the process which many of our friends outside the country are watching with horror. They are wondering at what point there will be something more than words, when some effort will be made by the Government to cut into the process that I have described and to slow it down. At root that is our objection to the Bill.

We can be quite blunt about our attitude. If we supported the Bill we would be voting unspecified sums. Anything that is voted under this vague Bill will be sucked up by higher wage demands like water into sand. That is our fear. We feel that it is a fear that is perfectly justified. We see no serious attempt to halt the process of higher wage demands involving more public expenditure, thereby piling more on to the consumer where the consumer pays the price.

There is something ludicrous about Minister after Minister warning us on television of something that by now is almost beyond the obvious. We are told that if we go on with a 25 per cent. inflation rate or wage increase of 29 or 30 per cent., we shall be on the road to suicide. There is something absurd in seeing those words reported or hearing interviewers solemnly asking Ministers whether they really meant that while the Government remain paralysed in taking any action. It is all words and no action. "What speech shall I make on Sunday to stir things up in the Labour Party? How far can I go?"—that is the kind of approach we are getting, but it lacks action to back it up. We need something very much more definite, and we certainly do not see it in the Bill.

We are not against efficient public industries, despite their inherent ambiguity. We do not intend to go over the whole argument that is raging about whether we should rush into any enlargement of the present nationalised sectors. In face of our present situation, the absurdity of any such move is apparent. We believe that the time has now come, if not for an elaborate scheme of control—and it would be difficult to devise a comprehensive scheme of control—for a re-statement of how the nationalised industries should be controlled so that we may prevent these enormous sums having to be generated, with Parliament constantly being asked to vote, on vague grounds, gigantic sums which are taken from other people and interests that need them more.

First, we must look upon the nationalised industries less as "nationalised" industries and more as State enterprises. We must for all time get rid of all aspects of Morrisonian social concepts while retaining some of the basic criteria to which my hon. Friend the Member for Oswestry referred. We have to have a crisper and more realistic definition of the criteria required by the Government in terms of the revenue generated and also of the contribution made from internal sources and return on assets. We must again try to define social costs in those industries where there is a heavy social requirement. I refer for example to railways. Ever since Sir Toby Low, now Lord Aldington, brought out his report which gave a clear definition of social costs, the House has struggled to be fair in this respect. We welcome that attitude, and in turn we must reach the correct cash limits—but we must then stick to them.

I also think that we must encourage far greater worker participation and worker involvement in these grossly over-centralised institutions. That is the case against a further extension of nationalisation—namely, that, far from bringing industry to the people, it takes industry away from the people and centralises it in the most damaging way. Therefore, in the existing nationalised industries enormous efforts are required—and this is the area in which the Secretary of State for Industry should have made more effort—to think out more effective means of worker participation. Finally, we must appoint good management and then back it or sack it, but we should not then niggle about small matters and make management's life impossible.

Mr. Golding

Should it not be put on record that the present Secretary of State for Industry is doing a great deal in terms of worker participation in the nationalised industries? The hon. Gentleman must not give a false impression in that regard.

Mr. Howell

I should like to hear from the right hon. Gentleman the Secre-of State for Industry more about that aspect and less about plans for taking over industries in which there is already effective worker participation and in relation to which nationalisation will only make things worse. If the hon. Gentleman wants to put that on record he is entitled to do so.

I emphasise that the Bill has no cash limits, and that is why we shall oppose it tonight. There is a rattle in the Bill—not merely of stable doors being closed but of their being dismantled altogether. We believe that the Bill is being brought forward with a cavalier attitude in view of the present situation in regard to public spending, and it is a Bill which in the present situation we cannot afford. That is why we shall vote against it.

9.30 p.m.

The Minister of State, Treasury (Mr. Robert Sheldon)

During the debate, which was serious and valuable, there were a number of references to the steel industry. I understand why those references were made, particularly by my hon. Friends the Members for Newport (Mr. Hughes), Sheffield. Heeley (Mr. Hooley), Motherwell and Wishaw (Dr. Bray) and Hartlepool (Mr. Leadbitter) and the hon. Member for Arundel (Mr. Marshall). If time permits, I will speak briefly on this matter, although it does not form the main part of the Bill. I listened to all contributions with interest, and I will ensure that the representations that have been made are brought to the attention of my right hon. Friend the Secretary of State for Industry.

The debate has been valuable. There was a certain amount of cross-party as well as inter-party agreement on both sides.

I should like to start by taking to task the hon. Member for St. Ives (Mr. Nott), who made a constructive speech to which the House listened with great interest. I think that the opening speakers from both sides set the tone of the debate. However, I must take issue with the hon. Gentleman about the statutory protection given to the nationalised industries against competition. The boundaries which are set at any time do not remain irrevocable. The hon. Gentleman failed to take account of the real reason why those boundaries were set and why in so many, although not all, cases they are still relevant.

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.

Many of our nationalised industries have similar responsibilities. Therefore, they need to obtain monopoly rights to prevent the creaming off of the profitable services. Many nationalised industries have to supply goods and services to all. Private industry has the enormous advantage of being able to cut out those services and undertakings which it does not wish to provide.

Mr. Nicholas Ridley (Cirencester and Tewkesbury) rose

Mr. Sheldon

I know what the hon. Gentleman wishes to raise and I shall be happy to give way to him, but perhaps I may finish what I have to say on this point. I have read his pamphlet with interest, and shall be glad to take up the point that he may wish to make.

Private industries have the advantage of being able to excise those services or production undertakings that they do not wish to provide. They are, therefore, judged on standards of their own making. That is a big advantage. Where that can be done, it is right that it be done in that way.

Mr. Ridley rose

Mr. Sheldon

I will give way to the hon. Gentleman in a moment. Unfortunately, nationalised industries do not have that kind of advantage. They are frequently judged on how they perform in areas from which they would happily withdraw but from which, in order to provide the service that the community requires, the community does not allow them to withdraw.

Mr. Ridley

Will the hon. Gentleman provide coal in my constituency as cheaply as he provides it in his own constituency?

Mr. Sheldon

The hon. Gentleman fails to understand the situation. This does not apply in every case. There are variations. There is the requirement to provide coal in his constituency and in my constituency. Certain industries will not provide a particular service because it does not pay. That is the difference, and this point can be seen in many areas of welfare provision with which we are concerned. The nationalised industries do not have the advantages open to private industry. Although here and there we try to approximate to some of the disciplines which, quite rightly, can be thrust upon them, to draw the complete parallel is frequently impossible.

I should like to turn to what I consider to be the essential problems facing the Government in their relations with the nationalised industries. We can all draw our own parallels and divisions as to the way in which nationalised industries can be split up. I noticed with interest the division drawn by the hon. Member for St. Ives. We can look at the nationalised industries in three categories: first, public utilities; secondly, services, and, thirdly, quasi-monopolies. But, in whatever way we split them up, public corporations were originally envisaged as bodies with Ministers having general oversight and boards having managerial control.

As time went on, we rapidly came to the understanding that this view of the nationalised industries and each industry was rather too simple. The way in which the relationship of Ministers to nationalised industries could be compared to the relationship of a holding company with its subsidiaries was also seen as too simple. The idea that a Minister has the option of finding himself with a successful board of a nationalised industry or of sacking it is a difficult one, and the hon. Member for Oswestry (Mr. Biffen) was right when he pointed out the difficult relationship that exists because of the way in which nationalised industries operate at present. I see great danger in making use of nationalised industries for wider Government policies. They have been used in this way, and they will continue to be so used, but there are certain guidelines within which the Government will need to operate.

My hon. Friend the Member for Newcastle under Lyme (Mr. Golding) rightly pointed out the important rôle of the nationalised industries in their investment procedures and the rôle which they can play in the success of those industries which supply them with the products they require. In more recent times we have seen problems concerned with the policies of the nationalised industries and the location problems of those industries, and under the Conservative Government in particular we saw the problem that resulted when the Government moved into the area of price control.

When we survey these problems, and the way in which the Government interact with nationalised industries, we have to try to obtain a proper balance between the two. All Governments since 1951 have reinterpreted and redefined the relationship between Government and industry, but I draw attention to the White Paper of 1967 which was referred to by the hon. Member for Oswestry and others as providing a particularly definitive statement and one to which we shall have to return, if only to modify it from time to time in the light of experience.

The 1967 White Paper, Command 3437, said that subject to taking account of social costs the Government's policy was to treat the nationalised industries as commercial bodies. They were to have financial targets, and the underlying concept behind the control of nationalised industries' investment by the rate of return was that the most efficient distribution of goods and services in the economy as a whole could be secured only if investments were made where the return to the economy was greatest. The White Paper noted that if an industry had to act against its own commercial interests the Government would accept responsibility and where necessary would make a special payment or an adjustment to the financial objective.

That was an important attempt to clarify the aims and responsibilities of the industries and so to strike the sort of balance on the relationship to which I have referred. The policy in the White Paper was endorsed by the Select Committee on Nationalised Industries in its 1968 report on ministerial control of the nationalised industries.

Unfortunately, since then there has been a retreat from these objectives because since about 1970 the prices of most of the industries have been restrained, as part of the successive counter-inflation policies, and a number of industries, in particular gas, electricity and the Post Office, have been forced into deficits for which they have had to be subsidised. That was the important change that came about. It was not that the Government were making use of nationalised industries for purposes which included the future of those industries. They were doing it for their own pricing policies and thereby souring the relationship between themselves and the nationalised industries. Now it is this Government's policy to phase out those subsidies. While there is always a risk of set-backs because of continuing cost increases, we hope to have done so by the next financial year 1976–77. Once these industries are back into surplus, it will be possible to discuss with them the setting of the new financial targets. The fact that they will be restored will be very good both for the morale and for the efficiency of the industries concerned.

I turn now to the way in which these subsidies will be phased out. There has been the problem with subsidies incurred by the previous Government, common to all kinds of subsidy, whereby the more one uses expensive services such as the telephones, electricity and gas, the more one saves and the more the rest of the community has to pay for the advantages of those who gain that benefit. The way that we have been using public expenditure in order to subsidise this kind of consumer has been clearly wrong but understandable in the short time that we have operated it.

The priority in public expenditure must go to those areas where investment is required, as well, of course, as to the social services. There could be no sense in, for example, subsidising £300 million for the Post Office which would mainly help the business user when at the same time there are those in need whose needs are not being met just because of that kind of mistaken expenditure. If the industries are to be underpriced, we shall see a gross inflation, a distortion of demand and, therefore, a need for artificial investment to meet it. Particularly when energy conservation is so necessary, we shall go to the absurd extent of subsidising electricity which is produced at the margin from oil imports.

Finally, of course, there is the public sector borrowing requirement, which needs to be reduced. When there is a gap between the spending and the revenue of the nationalised industries, it is right that those industries should contribute more—we believe substantially more—to the investment programme. At present, the investment programme of the Post Office is £800 million and that of the electricity industry £700 million. The hon. Member for St. Ives was right to draw attention to the fact that these ratios will need to be looked at, although obviously the time is not suitable now for a close examination of the kind which eventually will have to be made.

Mr. Nott

The point that I was trying to make is that unless the House knows what the ratios are, we do not know the extent of subsidisation of the nationalised industries generally. I hope that the Minister of State will try to deal with that point.

Mr. Sheldon

I certainly give an undertaking that information about the official requirements of the nationalised industries, the disciplines which will be obtained following the ending of the price subsidies, will certainly be in a form which will enable the House to see for itself precisely what their performance is. I will come to that in a moment, but perhaps I might now say something about the problem of the Post Office pension fund which was raised by the hon. Member for Tonbridge and Mailing (Mr. Stanley).

In the summer of 1974, the Post Office referred to the Government an actuarial valuation of the Post Office Staff Superannuation Fund as at 30th September 1972, which revealed a large deficiency, some of it in respect of service before October 1969, when the Post Office was a Government Department. The Post Office has asked the Government to review the funding arrangements so as to help in making payments into the fund to eliminate the deficiency.

However, the circumstances surrounding the deficiency are complex and we are still discussing with the Post Office the best way to deal with it. In the meantime, the Post Office has been making payments into the fund in respect of the deficiency at the level recommended by the independent actuary. These payments, together with the fact that current contributions at the normal level are quite sufficient to pay current pensions, mean that the pensions of Post Office staff are not at risk.

In normal circumstances deficiency payments into pension funds are met out of the revenue of the body concerned. This is common practice in both the public and private sectors. As an example, a previous deficiency in the Post Office fund, revealed by a valuation in 1965, gave rise to annual payments by the Post Office into the fund which, in turn, were reflected in tariff increases. It would therefore have been expected that the Post Office, in the absence of outside help, would finance the payments it had made as the result of the latest valuation by raising its tariffs. However, it was prevented from doing so by price restraint and for this reason it was thought right to pay compensation to the Post Office in respect of 1972–73 and 1973–74, which took account of these payments. In similar circumstances it is to be expected that compensation in payments for 1974–75 and later years will also take account of whatever payments are made in these years. I hope that answers the question.

Mr. Stanley

Will the Minister also comment on the suggestion which I made that in view of the enormous actuarial deficit which built up to a total of £1.1 million by 30th September 1972, it would be wholly appropriate to set up an inquiry—the results of which should be published—into the question why the funding of the Post Office pensions fund was so badly mismanaged in the late 1960s and early 1970s?

Mr. Sheldon

We are very much aware of the performance of the previous Government. [Interruption.] This is where it all started. The policy of price restraint was responsible for many of our current ills, including the public sector borrowing requirement, which went out of hand at roughly the same time. I shall gladly go further into this matter. If there are any other details which I can pass on to the hon. Gentleman, I shall be glad to do so.

I want to turn to the important point made by the hon. Member for Guildford (Mr. Howell) who said, in his massive criticism of the Bill—a criticism which went well beyond all that ordinary antagonism ought to provide—that there will be no adequate control by this House if we pass this legislation. I am trying to moderate my language in this age of moderate people, but I find that absolute nonsense.

Each of these four industries is subject to an Affirmative Resolution of this House in respect of payments each year. Therefore, in respect of the subsidies for 1974–75 we can have four Affirmative Resolutions, the same for 1975–76 and, if it were to continue, the same for 1976–77. A further Affirmative Resolution has to come before the House if we intend to operate for 1976–77. I should have thought that that was such a circuit of parliamentary control that it must satisfy even the keenest person on these matters.

I should like to turn to the points made about the payments from the Consolidated Fund and the rather extreme language that has been used about the way in which public expenditure is getting out of hand.

An article published in The Times Business News on 7th June referred to a total of £1,100 million issued in payments from the Consolidated Fund. Perhaps I can help the House by listing some of those figures and explaining some of the circumstances. Of that £1,100 million, £85 million concerns food subsidies, £175 million concerns defence, £200 million concerns trade, industry and employment, £275 million concerns health, and £370 million is in respect of the rate support grant.

I assure the House that it is extraordinarily difficult to predict the way in which the public sector borrowing requirement will continue by looking at these particular forms of payment. It is even harder to predict the course of the public sector borrowing requirement from such figures than it is to draw conclusions from the monthly trade figures. The variations, reasons and explanations are much more complex than even the trade figures. Anyone who tries to interpret the trade figures month by month knows the problem. These are matters of close understanding and interest. However, I certainly would not consider that the conclusions that have been drawn in the way they have, here and outside, are as valid as perhaps the uninformed observer may consider.

Perhaps I may turn to the central criticism of the Opposition. In a disarming manner the hon. Member for Guildford (Mr. Howell) accepted that the previous Conservative Government were not perfect and that this was a Bill that had something to do—I do not think the hon. Gentleman denied its affinity—with the actions of that Government. He was talking about his great solution—that of limitations by cash. I do not mind hon. Members of the Opposition voting against the Bill if they wish, but they must understand what the Bill is about. The Bill is about the winding down of the price restraint policy of the Conservative Government. We are ending their policy, and we are having to pay for it, and they seem prepared to vote against that.

At a time of considerable accusations of humbug, I should have thought that that was as near humbug as anything could be. We all understand the reason for this. It is because they are ashamed of the part they played and they have people behind them who are prepared to attack them for the part they played.

Mr. Richard Wainwright

Will the Minister explain the grounds for his apparent confidence that winding down price restraint will inevitably enable the nationalised industries to move into surplus? Nothing has been said today to indicate that there is any evidence for that.

Mr. Sheldon

I shall be coming to that and showing how we intend to move from that policy into a policy of target setting.

Although we note and welcome the various apologies made by the hon. Member for St. Ives about the previous Conservative Government and those of the hon. Member for Oswestry, who also chipped in his apologies on behalf of that Government, they went ill with the kind of accusations made about what we are doing in the Bill. As I have said, what we have done is to wind down the legacy we inherited from the previous Government. There are long time lags here. This is something not easily understood. From the time when a nationalised industry understands the need to increase prices, from the need for increases to the decision to increase prices, from the decision to the obtaining of approval of the price increase from the Price Commission and from the obtaining of that approval to the revenue actually coming in, is more often than not almost a year.

It may be said that this is one of the defects of the nationalised industries. Indeed, there are those who will willingly say that. However, that is the kind of time lag which occurs. That is why we have been late in finally bringing this price restraint and price subsidies scheme to a close.

However, this is only the start of the matter, because once one ends the subsidies one must then return to the discipline of targets. One of the worst things about price subsidies was that they destroyed the discipline of the nationalised industries. The hon. Member for St. Ives talked about self-financing ratios. Of course we shall consider the self-financing ratios. These are obviously part of it. But it was the previous Conservative Government who destroyed them. When they went to price subsidies they took away the surpluses the nationalised industries received, and those industries were not able to finance their own investment. The previous Government actually destroyed the capacity of the nationalised industries to do that.

The hon. Gentleman asks us what we are doing about self-financing. We are putting right the errors made by the previous Government. We shall be returning to self-financing ratios of a much better type than we have at the moment. We know that price restraint damaged this. When we come to the formulation of targets in the light of inflation, and read what the Sandilands Committee on Inflation Accounting has to say, these targets will obviously have to be seen in the context of these solutions. These targets will be published, and we are fully determined that once they are published the industries themselves will be fully accountable in the way that I have indicated.

Many of my hon. Friends mentioned their interest in the steel industry. The issues covered in the Government's closure review are particularly distinct from those involved in the present steel recession. The BSC has to plan for demand during the peaks as well as the troughs in the economic cycle, and the rate of permanent plant closure is geared to meeting demand and boom as well as providing time for adjustment in any areas where the retention of steelmaking can, unfortunately, not be justified in the longer term.

The BSC has given an assurance that any plant temporarily shut down because of present market conditions and not rescheduled for permanent closure will be kept in such a condition that it can be reopened when demand picks up.

The corporation has reduced its manpower substantially in the 1970s and the Government are fully aware of the need for it to develop its output per man. We understand that the corporation will be carrying out this development in a socially acceptable fashion.

I am sorry for the brevity of those comments, but time prevents my going very much further than that into the corporation's problems. I shall, however, refer many of the problems to my right hon. Friend the Secretary of State for Industry, who I am sure will take into account what has been said in this debate.

I am not saying that the problems of the nationalised industries—problems that we have seen practically magnified in recent months—began with the previous Government, but the relationship between Government and industry was made immeasurably worse by the previous Government's ill-considered policies and, as part of the various phases of pay and price policies since 1970, the prices that were charged by the nationalised industries were restrained. As a result of this, the gas industry, the electricity industry and the Post Office were forced into deficits, which had to be subsidised.

The nationalised industries were singled out from all the other industries for this treatment precisely because they were under the control of the Government and could be treated in this way. This was to the disadvantage of the nationalised industries and the commercial criteria which in the long term must underlie their successful operation.

In this Bill we are providing the road back, so that those criteria may operate

in the interests of the nationalised industries and their customers and the public at large.

Question put, That the Bill be now read a Second time:

The House divided: Ayes 295, Noes 263.

Division No. 219.] AYES [10.0 p.m.
Abse, Leo Dunwoody, Mrs Gwyneth Jones, Dan (Burnley)
Allaun, Frank Eadie, Alex Judd, Frank
Anderson, Donald Edelman, Maurice Kaufman, Gerald
Archer, Peter Edge, Geoff Kelley, Richard
Armstrong, Ernest Edwards, Robert (Wolv SE) Kerr, Russell
Ashton, Joe Ellis, John (Brigg & Scun) Kilroy-Silk, Robert
Atkins, Ronald (Preston N) Ellis, Tom (Wrexham) Kinnock, Nell
Atkinson, Norman English, Michael Lambie, David
Bagier, Gordon A. T. Ennals, David Lamborn, Harry
Barnett, Guy (Greenwich) Evans, Fred (Caerphilly) Lamond, James
Barnett, Rt Hon Joel (Heywood) Evans, Gwynfor (Carmarthen) Leadbitter, Ted
Bates, Alf Evans, Ioan (Aberdare) Lee, John
Bean, R. E. Evans, John (Newton) Lestor, Miss Joan (Eton & Slough)
Benn, Rt Hon Anthony Wedgwood Ewing, Harry (Stirling) Lever, Rt Hon Harold
Bennett, Andrew (Stockport N) Faulds, Andrew Lewis, Arthur (Newham N)
Bidwell, Sydney Fernyhough, Rt Hon E. Lewis, Ron (Carlisle)
Bishop, E. S. Flannery, Martin Lipton, Marcus
Blenkinsop, Arthur Fletcher, Raymond (likeston) Litterick, Tom
Boardman, H. Fletcher, Ted (Darlington) Lomas, Kenneth
Booth, Albert Foot, Rt Hon Michael Loyden, Eddie
Boothroyd, Miss Betty Ford, Ben Luard, Evan
Bottomley, Rt Hon Arthur Forrester, John Lyon, Alexander (York)
Boyden, James (Bishop Auck) Fowler, Gerald (The Wrekin) Lyons, Edward (Bradford W)
Bradley, Tom Fraser, John (Lambeth, N'w'd) Mabon, Dr J. Dickson
Bray, Dr Jeremy Freeson, Reginald McCartney, Hugh
Brown, Hugh D. (Provan) Garrett, John (Norwich S) McElhone, Frank
Brown, Robert C. (Newcastle W) Garrett, W. E. (Wallsend) MacFarquhar, Roderick
Buchan, Norman George, Bruce McGuire, Michael (Ince)
Butler, Mrs Joyce (Wood Green) Gilbert, Dr John Mackenzie, Gregor
Callaghan, Rt Hon J (Cardiff SE) Ginsburg, David Mackintosh, John P.
Callaghan, Jim (Middleton & P) Golding, John Maclennan, Robert
Campbell, Ian Gould, Bryan McMillan, Tom (Glasgow C)
Canavan, Dennis Gourlay, Harry McNamara, Kevin
Cant, R. B. Graham, Ted Madden, Max
Carmichael, Neil Grant, George (Morpeth) Magee, Bryan
Carter, Ray Grant, John (Islington C) Mahon, Simon
Carter-Jones, Lewis Grocott, Bruce Mallalieu, J. P. W.
Cartwright, John Hamilton, James (Bothwell) Marks, Kenneth
Castle, Rt Hon Barbara Hamilton, W. W. (Central File) Marquand, David
Clemitson, Ivor Harper, Joseph Marshall, Dr Edmund (Goole)
Cocks, Michael (Bristol S) Harrison, Walter (Wakefield) Marshall, Jim (Leicester S)
Cohen, Stanley Hart, Rt Hon Judith Mason, Rt Hon Roy
Concannon, J. D. Hattersley, Rt Hon Roy Maynard, Miss Joan
Conlan, Bernard Hatton, Frank Meacher, Michael
Cook, Robin F. (Edin C) Hayman, Mrs Helene Mellish, Rt Hon Robert
Corbett, Robin Heffer, Eric S. Mendelson, John
Cox, Thomas (Tooting) Hooley, Frank Mikardo, Ian
Craigen, J. M. (Maryhill) Horam, John Millan, Bruce
Crawshaw, Richard Howell, Denis (B'ham, Sm H) Miller, Dr M. S. (E Kilbride)
Cronin, John Hoyle, Doug (Nelson) Miller, Mrs Millie (Ilford N)
Crosland, Rt Hon Anthony Huckfield, Les Mitchell, R. C. (Soton, Itchen)
Cryer, Bob Hughes, Rt Hon C. (Anglesey) Molloy, William
Cunningham, G. (Islington S) Hughes, Mark (Durham) Morris, Alfred (Wythenshawe)
Cunningham, Dr J. (Whiteh) Hughes, Robert (Aberdeen, N) Morris, Rt Hon J. (Aberavon)
Dalyell, Tam Hughes, Roy (Newport) Moyle, Roland
Davidson, Arthur Hunter, Adam Mulley, Rt Hon Frederick
Davies, Bryan (Enfield N) Irvine, Rt Hon Sir A. (Edge Hill) Murray, Rt Hon Ronald King
Davies, Denzil (Llanelli) Irving, Rt Hon S. (Dartford) Newens, Stanley
Davies, Ifor (Gower) Jackson, Colin (Brighouse) Noble, Mike
Davis, Clinton (Hackney C) Jackson, Miss Margaret (Lincoln) Oakes, Gordon
Deakins, Eric Janner, Greville Ogden, Eric
de Freitas, Rt Hon Sir Geoffrey Jay, Rt Hon Douglas O'Halloran, Michael
Delargy, Hugh Jeger, Mrs Lena O'Malley, Rt Hon Brian
Dell, Rt Hon Edmund Jenkins, Hugh (Putney) Orbach, Maurice
Dempsey, James Jenkins, Rt Hon Roy (Stechford) Ovenden, John
Doig, Peter John, Brynmor Owen, Dr David
Douglas-Mann, Bruce Johnson, James (Hull West) Padley, Walter
Duffy, A. E. P. Johnson, Walter (Derby S) Palmer, Arthur
Dunn, James A. Jones, Alec (Rhondda) Park, George
Dunnett, Jack Jones, Barry (East Flint) Parry, Robert
Pavitt, Laurie Silverman, Julius Ward, Michael
Perry, Ernest Skinner, Dennis Watkins, David
Phipps, Dr Colin Small, William Watkinson, John
Prescott, John Smith, John (N Lanarkshire) Watt, Hamish
Price, C. (Lewisham W) Spearing, Nigel Weetch, Ken
Price, William (Rugby) Spriggs, Leslie Weitzman, David
Radice, Giles Stallard, A. W. Wellbeloved, James
Richardson, Miss Jo Stewart, Rt Hon M. (Fulham) White, Frank R. (Bury)
Roberts, Albert (Normanton) Stott, Roger White, James (Pollok)
Roberts, Gwilym (Cannock) Strang, Gavin Whitehead, Phillip
Robertson, John (Paisley) Strauss, Rt Hon G. R. Whitlock, William
Rodgers, George (Chorley) Summerskill, Hon Dr Shirley Willey, Rt Hon Frederick
Rodgers, William (Stockton) Swain, Thomas Williams, Alan (Swansea W)
Rooker, J. W. Taylor, Mrs Ann (Bolton W) Williams, Alan Lee (Hornch'ch)
Roper, John Thomas, Jeffrey (Abertillery) Williams, Rt Hon Shirley (Hertford)
Rose, Paul B. Thomas, Mike (Newcastle E) Williams, W. T. (Warrington)
Ross, Rt Hon W. (Kilmarnock) Thomas, Ron (Bristol NW) Wilson, Alexander (Hamilton)
Rowlands, Ted Thompson, George Wilson, Gordon (Dundee E)
Ryman, John Thorne, Stan (Preston South) Wilson, Rt Hon H. (Huyton)
Sandelson, Neville Tierney, Sydney Wilson, William (Coventry SE)
Sedgemore, Brian Tomlinson, John Wise, Mrs Audrey
Selby, Harry Tomney, Frank Woodall, Alec
Shaw, Arnold (Ilford South) Torney, Tom Woof, Robert
Sheldon, Robert (Ashton-u-Lyne) Tuck, Raphael Wrigglesworth, Ian
Shore, Rt Hon Peter Urwin, T. W. Young, David (Bolton E)
Short, Rt Hon E. (Newcastle C) Varley, Rt Hon Eric G.
Short, Mrs Renée (Wolv NE) Wainwright, Edwin (Dearne V) TELLERS FOR THE AYES:
Silkin, Rt Hon John (Deptford) Walden, Brian (B'ham, L'dyw'd) Mr. J.D. Dormand and
Silkin, Rt Hon S. C. (Dulwich) Walker, Harold (Doncaster) Mr. David Stoddart.
Sillars, James Walker, Terry (Kingswood)
Adley, Robert du Cann, Rt Hon Edward Heseltine, Michael
Aitken, Jonathan Durant, Tony Hicks, Robert
Alison, Michael Dykes, Hugh Higgins, Terence L.
Amery, Rt Hon Julian Eden, Rt Hon Sir John Holland, Philip
Arnold, Tom Edwards, Nicholas (Pembroke) Hooson, Emlyn
Atkins, Rt Hon H. (Spelthorne) Elliott, Sir William Hordern, Peter
Awdry, Daniel Eyre, Reginald Howe, Rt Hon Sir Geoffrey
Baker, Kenneth Fairbairn, Nicholas Howell, David (Guildford)
Banks, Robert Fairgrieve, Russell Howell, Ralph (North Norfolk)
Beith, A. J. Farr, John Hunt, John
Bell, Ronald Fell, Anthony Hurd, Douglas
Bennett, Sir Frederic (Torbay) Finsberg, Geoffrey Hutchison, Michael Clark
Bennett, Dr Reginald (Fareham) Fisher, Sir Nigel Irvine, Bryant Godman (Rye)
Benyon, W. L. Fletcher, Alex (Edinburgh N) Irving, Charles (Cheltenham)
Berry, Hon Anthony Fletcher-Cooke, Charles James, David
Biffen, John Fookes, Miss Janet Jenkin, Rt Hon P (Wanst'd&W'df'd)
Biggs-Davison, John Fowler, Norman (Sutton C'f'd) Jessel, Toby
Blaker, Peter Fox, Marcus Johnson Smith, G. (E Grinstead)
Body, Richard Fraser, Rt Hon H. (Stafford & St) Jones, Arthur (Daventry)
Boscawen, Hon Robert Freud, Clement Jopling, Michael
Bowden, A. (Brighton, Kemptown) Fry, Peter Joseph, Rt Hon Sir Keith
Boyson, Dr Rhodes (Brent) Gardiner, George (Reigate) Kaberry, Sir Donald
Braine, Sir Bernard Gardner, Edward (S Fylde) Kellett-Bowman, Mrs Elaine
Brittan, Leon Gilmour, Rt Hon Ian (Chesham) Kershaw, Anthony
Brotherton, Michael Glyn, Dr Alan Kimball, Marcus
Brown, Sir Edward (Bath) Godber, Rt Hon Joseph King, Evelyn (South Dorset)
Bryan, Sir Paul Goodhart, Philip King, Tom (Bridgwater)
Buchanan-Smith, Alick Goodhew, Victor Kitson, Sir Timothy
Buck, Antony Goodlad, Alastair Knight, Mrs Jill
Budgen, Nick Gorst, John Knox, David
Bulmer, Esmond Gow, Ian (Eastbourne) Lamont, Norman
Burden, F. A. Gower, Sir Raymond (Barry) Lane, David
Carlisle, Mark Grant, Anthony (Harrow C) Langford-Holt, Sir John
Carr, Rt Hon Robert Gray, Hamish Latham, Michael (Melton)
Chalker, Mrs Lynda Grieve, Percy Lawrence, Ivan
Channon, Paul Griffiths, Eldon Lawson, Nigel
Churchill, W. S. Grimond, Rt Hon J. Le Merchant, Spencer
Clark, Alan (Plymouth, Sutton) Grist, Ian Lewis, Kenneth (Rutland)
Clark, William (Croydon S) Grylls, Michael Lloyd, Ian
Clarke, Kenneth (Rushcliffe) Hall, Sir John Loveridge, John
Clegg, Walter Hall-Davis, A. G. F. Luce, Richard
Cockcroft, John Hamilton, Michael (Salisbury) McAdden, Sir Stephen
Cooke, Robert (Bristol W) Hampson, Dr Keith McCrindle, Robert
Cope, John Hannam, John Macfarlane, Neil
Cordle, John H. Harrison, Col Sir Harwood (Eye) MacGregor, John
Costain, A. P. Harvie Anderson, Rt Hon Miss Macmillan, Rt Hon M. (Farnham)
Crouch, David Hastings, Stephen McNair-Wilson, M. (Newbury)
Crowder, F. P. Havers, Sir Michael McNair-Wilson, P. (New Forest)
Dean, Paul (N Somerset) Hawkins, Paul Madel, David
Dodsworth, Geoffrey Hayhoe, Barney Marshall, Michael (Arundel)
Drayson, Burnaby Heath, Rt Hon Edward Marten, Neil
Mates, Michael Price, David (Eastleigh) Stainton, Keith
Mather, Carol Prior, Rt Hon James Stanbrook, Ivor
Maude, Angus Pym, Rt Hon Francis Stanley, John
Maudling, Rt Hon Reginald Raison, Timothy Steen, Anthony (Wavertree)
Mawby, Ray Rathbone, Tim Stewart, Ian (Hitchin)
Maxwell-Hyslop, Robin Rawlinson, Rt Hon Sir Peter Stokes, John
Mayhew, Patrick Rees, Peter (Dover & Deal) Stradling Thomas, J.
Meyer, Sir Anthony Rees-Davies, W. R. Tapsell, Peter
Miller, Hal (Bromsgrove) Renton, Rt Hon Sir D. (Hunts) Taylor, H. (Croydon NW)
Mills, Peter Renton, Tim (Mid-Sussex) Taylor, Teddy (Cathcart)
Miscampbell, Norman Rhys Williams, Sir Brandon Tebbit, Norman
Mitchell, David (Basingstoke) Ridley, Hon Nicholas Temple-Morris, Peter
Moate, Roger Ridsdale, Julian Thatcher, Rt Hon Margaret
Molyneaux, James Rifkind, Malcoim Thomas, Rt Hon P. (Hendon S)
Monro, Hector Rippon, Rt Hon Geoffrey Thorpe, Rt Hon Jeremy (N Devon)
Montgomery, Fergus Roberts, Michael (Cardiff NW) Townsend, Cyril D.
Moore, John (Croydon C) Roberts, Wyn (Conway) Trotter, Neville
Morgan, Geraint Rodgers, Sir John (Sevenoaks) Tugendhat, Christopher
Morgan-Giles, Rear-Admiral Ross, Stephen (Isle of Wight) van Straubenzee, W. R.
Morrison, Charles (Devizes) Rossi, Hugh (Hornsey) Vaughan, Dr Gerard
Morrison, Hon Peter (Chester) Rost, Peter (SE Derbyshire) Viggers, Peter
Mudd, David Royle, Sir Anthony Wainwright, Richard (Coine V)
Neave, Airey Sainsbury, Tim Wakeham,John
Nelson, Anthony St. John-Stevas, Norman Walker, Rt Hon P. (Worcester)
Neubert, Michael Scott, Nicholas Walker-Smith, Rt Hon Sir Derek
Newton, Tony Shaw, Giles (Pudsey) Wall, Patrick
Normanton, Tom Shelton, William (Streatham) Walters, Dennis
Nott, John Shepherd, Colin Weatherill, Bernard
Onslow, Cranley Shersby, Michael Wells, John
Oppenheim, Mrs Sally Silvester, Fred Whitelaw, Rt Hon William
Osborn, John Sims, Roger Wiggin, Jerry
Page, Rt Hon R. Graham (Crosby) Sinclair, Sir George Winterton, Nicholas
Pattle, Geoffrey Skeet, T. H. H. Wood, Rt Hon Richard
Penhaligon, David Smith, Cyril (Rochdale) Young, Sir G. (Ealing, Acton)
Percival, Ian Smith, Dudley (Warwick) TELLERS FOR THE NOES
Peyton, Rt Hon John Speed, Keith Mr. Adam Butler and
Pink, R. Bonner Spicer, Michael (S Worcester) Mr. Cecil Parkinson.
Powell, Rt Hon J. Enoch Sproat, Iain

Question accordingly agreed.

Bill read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).