HC Deb 12 July 1976 vol 915 cc290-319
Mr. Nelson

I beg to move Amendment No. 1, in page 2, line 3, leave out from million' to end of line 5.

The object is to prevent the Secretary of State from raising the borrowing limit of the corporation to £4,000 million without introducing a Bill. We believe that there are good reasons for this, substantiated in Committee by the inadequacy of the information presented for the initial increase in borrowing to £3,000 million, and embodied in the Minister's own reasoning for introducing an Order procedure to allow a further tranche of borrowing at a further stage of up to £4,000 million. The sum of £1,000 million, or 8 per cent. of this year's public sector borrowing requirement, should not go through on the nod by the Order procedure, which requires only the approval of the House of Commons and which requires no supporting information, report or prospectus.

In Committee we discussed at length the possibility of bringing forward a prospectus along the lines of those produced by commercial bodies which seek substantially to increase borrowing powers. We increasingly believe that, as these amounts are growing larger and larger—and under the present Government the public sector is growing out of all proportion to the ability of the people to afford it—it is appropriate that an adequate prospectus be required, to set out detailed information. That would ensure that there was some justification for the form of finance made available.

The Minister is happy to allow an increase in the borrowing powers to £3,000 million but that is as far as it should go. Should there be the necessity for raising it by another £1 billion there should be the same parliamentary scrutiny and sanction as we have accorded to the initial increase, which amounts to 50 per cent. If an Act is necessary to raise the borrowing power from £2 billion to £3 billion, an Act should be necessary to raise it from £3 billion to £4 billion.

The BSC has an inadequate method of scrutinising and sanctioning such an increase. Both the sums of £3 billion and £4 billion are out of date. The Financial Times, to which I have referred, said that there had been a substantial increase in the cost of the modernisation programme and that, taking account of inflation over recent years, it might now cost between £5 billion and £7 billion. That is substan- tially more than that acknowledged by the Minister on Second Reading or by Sir Monty Finniston in his letter dated 21st May to my hon. Friend the Member for Arundel (Mr. Marshall) in which he said: Over the four-year period from April 1976 to March 1980 we foresee an increase of about £3,000 million in our total borrowings counting against the borrowing limit. Over that period some £4,000 million would be required for the ongoing massive capital investment programme and other investments (again on our best assumptions about inflation) and little short of £1,000 million for increased working capital; but nearly £2,000 million of this should come from self-generated funds in the form of retained profits, depreciation and development grants. That is the latest estimate of the cost of the BSC's development programme. The substantially altered cash flow projections, which the former chairman of the corporation set out in his letter, means that the BSC will reach both the £3 billion limit and the £4 billion limit earlier than 1978 and 1980 respectively. That is a matter for concern. The cost of the investment programme has substantially increased—perhaps more than doubled in the space of a few years—and on top of that there is the prospect of the borrowing powers being made substantially nearer those thought likely by the BSC. The Secretary of State is reported to be revealing to the House later this month the detailed strategy for the development of public sector steelmaking.

Are we not entitled to be privy to this information before discussing the complexities of a Bill like this? Were we not entitled to a statement if, as has been suggested, it is a major change or embellishment of the existing policy, so that we may know the Government's exact intentions towards the conduct and management of the corporation before sanctioning a massive increase in the borrowings?

We should also like to know the conclusion of the little Neddy which has been inquiring into the iron and steel industries. Both that information and the detailed financial accounting information should have been available to the Committee and the House. Without it we have no way of knowing whether we are doing a proper job as trustees of the public purse by sanctioning at some indeterminate date a substantial increase in the corporation's borrowing powers.

We hear that the Government's working party is concerned by a failure to achieve smooth implementation of the steel development programme and that productivity and manning levels in the corporation are not making sufficient progress. Are we not entitled to know what progress has been made, whether it is sufficient, whether it matches up to the agreement that the corporation made with the trade unions earlier this year, and whether it justifies some of the assumptions which the Government have made? [Interruption.]

Mr. Deputy Speaker (Mr. Oscar Murton)

Order. It is wrong for hon. Members to make interventions from a sedentary position, even if they are pointing apparently at an empty Bench.

Mr. Nelson

I share your concern, Mr. Deputy Speaker. I had felt that all my points were valid and new, arising out of discussions in Committee which involved scrutiny of a substantial amount of public money, and that we were entirely proper in our concern to ensure that there was proper scrutiny. We are suggesting something which should find agreement on both sides of the House. It is terrifying that we can face each other, shadow boxing all night, and when a sensible proposition is advanced in an amendment such as this it is met with nothing but jeers and jokes from the giggle group on the Labour Benches.

As the corporation's borrowing limits will inevitably be reached, probably sooner than projected, why not provide in the Bill one limit which can be justified now and substantiated on the basis of the information the Government have made available? We welcome what information has been provided, particularly the unaudited statement of accounts that the Minister was good enough to obtain for members of the Committee. But if more is needed in some years' time, let the Parliament of that day consider the matter on the facts available. It should not be our remit at this time of stringent economic conditions to provide contingent finance for public-sector industries.

Mr. Kaufman

The amendment is not acceptable to the Government. Even though the immediate increase of £1,000 million in the British Steel Corporation's statutory borrowing limit, as provided for in the Bill, looks very large, the scale of the corporation's operations and its financing needs under the development plan approved by the right hon. Member for Worcester (Mr. Walker) when he was Secretary of State for Trade and Industry are such that £1,000 million could not be expected to last very long. Given the time normally required for the passage of legislation, it would be only about another year before the House would have to start considering a further increase.

While the Government fully accept that the House should have an opportunity from time to time to debate the BSC's affairs, it is unnecessary and unduly cumbersome to consider the borrowing limit at intervals as frequent as one year. It was only a year ago that the matter was covered in another Bill, now the Statutory Corporations (Financial Provisions) Act 1975. The present Bill provides for a further increase in the limit to be made by statutory Order subject to affirmative resolution of this House, so the House will then have an occasion to debate the matter. To go further is unnecessary.

4.15 a.m.

Mr. Fairbairn

I find it amazing that Government supporters should find it useful to point to these empty Benches when throughout the Report stage and Third Reading of the Development Land Tax Bill, which is supposed to represent their policy, not one Labour Member was present to support the Minister. [Interruption.] I am perfectly willing to wait for the obscenities of hon. Members opposite to die down. I do not think that I can be accused of provocation when Labour Members are making remarks such as those about getting criminals out of gaol.

Mr. Deputy Speaker

Order. I fail to see what this has to do with the amendment.

Mr. Fairbairn

We ought not to forget that we are discussing proposals that will increase the borrowing power of the British Steel Corporation by £2,000 million. I represent about a thousandth of the country's voters, which means that we are discussing a debt for my constituents of £2 million. Labour Members who represent urban areas are committing their constituencies to debts of £2 million or £4 million. We should not regard as frivolous the reality of what we are doing to our constituents. [HON. MEMBERS: "You are frivolous."] Hon. Members say that my attendance here is frivolous, but they were not here when we discussed the Development Land Tax Bill.

Mr. Deputy Speaker

Order. The House must conduct itself with more courtesy.

Mr. Fairbairn

I am obliged to you, Mr. Deputy Speaker. Let us be realistic. Labour Members are often anxious about the rents and taxes that their constituents have to pay. They are anxious about poverty and about debt. Let us not treat as frivolous legislation that will commit each of our constituencies to a debt of between £2 million and £4 million. Let us be absolutely clear about what we are doing.

The Minister spoke glibly of £1,000 million lasting only a year and if its being cumbersome to come back for more every year; and so we have £2,000 million and we have the Government coming back every two years. What is not cumbersome about two years that is cumbersome about one year?

Mr. J. W. Rooker (Birmingham, Perry Barr)

An extra 12 months.

Mr. Fairbairn

An extra 12 months. Just an extra £1,000 million. We need to get some order and reality into this matter. What does not impress me about Members on the Government side is that they constantly call for control and for public accountability, and say that the people should own everything. They call for democratic principles. [Interruption.] But here we have the people's money and they are saying that the people should not have any control over the spending of it. They say "If the Minister thinks it would be a nuisance to come back in a year, let us make it £2,000 million." Why not £10,000 million? There is no principle in Members on the Government side. They are not concerned with tax or with the real effect on human beings, or on their constituents. They just believe in extravagance.

Mr. Flannery

What about Lonrho?

Mr. Fairbairn

I do not think that Lonrho arises in the amendment.

Mr. Tom King

On a point of order, Mr. Deputy Speaker. We were making quite reasonable progress but I think it will be within your observation that since the sedentary interruptions have started we are now making slower and slower progress. I appreciate your difficulties in controlling the House. But there are some hon. Members who are interested in making progress.

Mr. Deputy Speaker

I am not aware of any difficulty that the Chair may be having in controlling the House. The Chair will make the decisions. I should indeed be grateful if there were fewer interruptions and if the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) would continue as quickly as possible with his speech.

Mr. Fairbairn

I am not upset by the bad manners of hon. Members opposite—

Mr. Deputy Speaker

I am appealing for courtesy on both sides. Perhaps we can continue with the debate. I hope that hon. Members will keep strictly to the amendment.

Mr. Fairbairn

I am not even upset by the courtesy of hon. Members opposite. But I was asked a very simple question. I was asked "What about Lonrho?" It is very relevant to this matter. The Steel Corporation has to borrow £4,000 million. Lonrho cancels out that sum. That is the difference.

I refer to the report of the steel corporation on this matter. Hon. Members opposite will no doubt be interested in it. Under three consolidated accounts, the subsidiary companies of the corporation, which with minor exceptions have been consolidated in these accounts, are those in which the corporation holds either directly or indirectly more than 50 per cent. of the equity. The exceptions relate to companies in liquidation, subsidiaries in Rhodesia and a few more subsidiaries the consolidations of which would be of no real value in view of the insignificant amounts involved. The insignificant amounts involved are only £10 million. Let us be clear. We are dealing with money, with human beings. That is all it is about.

If we are to say that these corporations, these nationalised industries, are accountable to the people, who are their representatives, if not us? To whom can they report, if not us? To whom can they appeal, if it is not us? To talk of another £1,000 million so that the Minister does not have the inconvenience of having to come back in a year seems to me to be an offence against each constituent, which each of us, whatever view we take, represents.

Let us be clear that we represent the interests of our constituents who earn the few pounds from which the tax will be taken, and out of which this will have to be paid. It is easy for hon. Members opposite to giggle and laugh and to think that it is easy to raise £1,000 million, but it will be coming out of the wage packets of those whom they continually claim are the people who are over-taxed, who are over-burdened, who are over-poor. Yet in one sentence they can ask "What is £1,000 million for another year?" [Interruption.] The sedentary objections made by Government supporters below the Gangway do nothing but prolong my remarks. I hope that, one day, they will realise that the money has to come out of the wage packets of those whom they represent and they should not pass measures of this kind so easily, assuming that the money will come from someone else. It comes from their constituents—

Mr. Flannery

So do the profits looted from them.

Mr. Deputy Speaker

Order. We cannot have two simultaneous debates from both sides of the House. I appeal to hon. Members to allow the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) to get on with his speech, so that we can perhaps make progress.

Mr. Fairbairn

I am obliged to you, Mr. Deputy Speaker. However, the point made by the hon. Member for Sheffield, Hillsborough (Mr. Flannery) is a good one. So do the profits looted from them, as he puts it. But it is from profits that tax comes. It has to come either from profits or from wages. That is where the £1,000 million will come from, unless it is borrowed from the Arabs, and that eventually will have to come out of wages.

Let us not be fundamentally stupid. The money has to come from one or the other, and, since there are not many profits left, it will have to come from wages.

So do not let us agree another £1,000 million as a mere nothing, as if it did not affect anyone except the rich. It affects every constituent whom we represent.

Let us not overlook the fact that it is irresponsible for this House merely to say "Anything will do—£3,000 million, £4,000 million: it does not matter. The Minister can decide." If that were the attitude of a private company, Government supporters would object strongly. Let us not allow it to be the conduct of this House.

Mr. John H. Osborn (Sheffield, Hallam)

I have been interested in the iron and steel industry all my life, and to speak in this House as dawn breaks is no unusual experience for me. But when I was doing it 10 years ago, the conditions were different. The proposal then was to bring steel into public ownership in order to improve the efficiency of the industry and to produce an industry of which the nation could be proud. Just about 10 years ago, these debates were at their height. If I had been asleep for the past 10 years and had awakened this morning, I should feel rather like Alice in Wonderland meeting the Mad Hatter.

A number of very good new clauses and an amendment have been put forward to control public expenditure and to control money which must come either from outside sources or from the hard-pressed taxpayer. As regards this amendment, I am surprised that the Minister has been allowed by the Treasury to insert the figure of £4,000 million at this very critical time. I wonder whether the Chancellor of the Exchequer and the Treasury, on behalf of taxpayers and the people lending money to the country, have done their job.

We have a Select Committee on the Nationalised Industries and we have other Select Committees looking at the expenditure of the public sector, and it comes as a shock to me to discover that we are discussing a difference not of £300 million or £400 million but of £3,000 million or £4,000 million.

The Opposition want to include a provision to demand, as any outside banker would demand, a reasonable assessment year by year of the return on capital. I visit many companies, including the British Steel Corporation in my area. The professional management is there in both the private and public sector. Perhaps, in the public sector, management is disspirited in many ways because it is unable to control the rising and mammoth public expenditure and investment for which it is responsible. But the same problems rest with the private sector. As has been pointed out, the sources for public finance must come from the individual and from the corporate company as taxpayer to meet ventures such as this.

4.30 a.m.

I would make it clear that I am a Member of Parliament from the Sheffield area, who has been in the steel industry all his life, who wants to see wise capital investment, and good capital investment, in the steel industry. There are added problems in my area for it appears that steel is being dumped in Sheffield itself. One might analyse the reason for this. We in Sheffield want proof about whether, in fact, our competitors are dumping steel in Sheffield and whether the steel produced in other steel works, where productivity is very much greater, is not the cause of the dilemma with which we are faced.

However, the money-lenders, the bankers and those, who in this case represent the Sate, must ensure that there is adequate return on capital. They must ensure that as money is loaned on a major capital investment project of this type, that project is going well. Perhaps the tragedy is that we are not able to break this expenditure up into small packages so that we can assess the competence of the management. As the present chairman and previous chairmen have found, management within a corporate body such as the British Steel Corporation must be extremely difficult. Obviously, having embarked on an investment programme, which seems to be escalating, some formula must be found for not having to cut it back.

Hon. Members opposite should remember that I meet many business men, chairmen and boards who are looking at the capital investment of their own companies. They have not got dissolute bankers, perhaps an almost dissolute Treasury, behind them such as the steel industry, and other public sector companies, have. They have bankers who apply the disciplines which are applied in the steel industries elsewhere in the world. At the present time too many boards resent the criticism, which has been voiced in the last 12 hours in this House, in respect of private boards not proceeding with investment programmes on the scale of State industry. One reason is that the funds to finance the steel corporation, and other public projects, are coming from over-taxed private sector industry.

It is wrong, at this hour, to ignore an amendment such as this. It is a reasonable amendment and I believe that the taxpayers in this country would support the proposal that the Select Committees advising the House should apply control, for unless the Chancellor puts the brakes on this country will suffer a further lowering in the value of the pound.

I think that I have said enough. My colleagues on this side of the House, for the last two or three hours, have carried out a valuable operation in the interests of the taxpayers and people of this country. I hope that the Minister will have second thoughts in respect of this amendment. I hope that a Treasury adviser is present. Perhaps we ought to have more advice from the Treasury at this time. A blank cheque for £4,000 million in present circumstances is a recipe for economic catastrophe. I hope that in three months' time, hon. Members will recollect my words at 4.30 this morning.

Mr. Giles Shaw

I emphasise how saddened we were at the tone of the Minister's response to my hon. Friend the Member for Chichester (Mr. Nelson). The Minister seemed to want to override any further accountability to this House for the operation of the Bill. He said it was unacceptable—because it was inconvenient—to accept an amendment requiring further legislation to be introduced, possibly within 12 months.

In considering major nationalised undertakings, we represent the taxpayer, the shareholder and the consumer. That is why we have to treat these undertakings differently from the rest of industry. The Minister is fond of saying that we seek to put shackles on the BSC which would not be put on other commercial companies, but it is because the taxpayers, shareholders and consumers are represented in the one institution that the corporation must turn to that institution when authority is required for major investment.

I am deeply saddened that a way for Parliament and the nationalised industry to meet and discuss a sensible method of control and future activity has been dismissed in such a cavalier manner by the Minister.

Mr. Fairbairn

My hon. Friend should not overlook the fact that in a public industry the whole public are shareholders and we are their representatives. This House is the meeting place of the representatives of the shareholders.

Mr. Shaw

That is the point that I thought I was making. We are acting as proxies—I am not sure whether that word exists north of Hadrian's Wall—for the shareholders of the BSC.

Ways must be found to improve the technique by which Parliament scrutinises the money being spent. I hope that the Minister will appreciate our anxiety when we see money apparently being put down in advance. The Minister says that legislation would be inconvenient because the BSC may run out of money within 12 months. He suggests a little cash in advance—and decides on £1,000 million, hoping that inflation does not make it £2,000 million by the time it is spent.

Parliament needs a clear indication of the purpose for which money is required, together with how much steel will be produced and how many workers employed. I am sorry to have to return to this subject at this hour of the morning, but that is the sort of discussion we need. We must consider whether we are making sensible use of a dwindling national asset.

Mr. Peter Bottomley

This debate indicates just what Socialist planning is capable of. A year after the Iron and Steel Act, the Government have had to come back for an extra £2,000 million or £3,000 million. I hope that when current nationalisation plans are costed, the country will be made aware of how quickly the bill can increase.

It is clear that the capital needs of the corporation have increased because of the inflation of the past 12 months. When I was working in the BSC eight years ago, we negotiated a minimum pay agreement of £13 is 6d per week. The minimum wage is now probably three or four times that figure and the financial requirement for financing new plant and equipment has probably increased by a similar amount.

When one looks at the finances of the corporation today and compares them with years ago, one can see how ridiculous has been the race of pay after prices, fuelled by Government inflation, epitomised by the increased borrowing requirement now before us. At the same time, I think that the House will regret that during our many debates there has been little from the Government on exactly how the British steel industry will become competitive.

I refer the Minister to an article in the Lloyds Bank Review that is an apologia for nationalisation. The author makes the point that it is only relevant to make international comparisons. I am disappointed that throughout the past few hours the Government have not explained exactly how their Iron and Steel (Amendment) Bill, or their strategy for the steel industry, will make British steel competitive with our European partners' steel, or that of the Japanese and the Americans. It is clear to me and to anyone with any common sense that mucking around with the steel industry does not achieve anything, and that—

Mr. Deputy Speaker

Order. The hon. Gentleman must confine himself to the borrowing powers mentioned in the amendment.

Mr. Bottomley

But if investing an extra £2,000 million or £3,000 million does not have the result of making British steel competitive with our international trading competitors, Mr. Deputy Speaker, there is no point in the whole exercise. It is a matter of deep regret that the Government ask to extend the borrowing powers of British steel and yet pay no attention to how we shall get a prosperous steel industry.

The purpose of borrowing this money can only be to make the production of steel more efficient and cheaper for the user. It can only be to ensure that those who work in the industry can earn high wages. But if we are to have a featherbedded industry, if we are to delay making the decisions that other countries have made, there is no point in this exercise.

It is worth reminding ourselves that the extra £1,000 million that the Minister wants to play with looks rather substantial in comparison with one or two of the other matters that we have debated in the past week or two. I remind the House of the £750,000 net that the Government felt they could allocate to the 600,000 one-parent families—[Interruption.]—on supplementary benefit.

Mr. Deputy Speaker

Order. That has nothing to do with the amendment.

Mr. Bottomley

The hon. Member for Sheffield, Hillsborough (Mr. Flannery) and his hon. Friends, who have continually interrupted those who have spoken from the Opposition Benches, do themselves and their party no service.

Mr. Flannery

Get on with the amendment. The hon. Gentleman has not touched on the amendment.

Mr. Bottomley

If the hon. Gentleman wants to intervene, I am willing to give way to him, otherwise I should be grateful if—

Mr. Deputy Speaker

Will the hon. Gentleman please address himself to the amendment?

Mr. Bottomley

If it were possible to reduce the £4,000 million for which the Minister is asking to £3,999 million, we should be able to double the extra earnings disregard which a one-parent family on supplementary benefit could receive from an average 8p a week to 16p a week, yet the Government cheerfully talk about an extra £1,000 million.

If we set aside not £4,000 million but £3,850 million, we should be able to double the child benefit scheme from which the Government have run away. Labour Members, who through their seated interventions and their conversations have indicated their lack of interest and their lack of support for the amendment, will have to explain to their constituents why they were willing to set rid of whatever accountability there may have been in the steel industry before granting the extra £3,000 million for which the Government are asking. They will have to explain why the Labour movement, composed of the Parliamentary Labour Party, the trade union movement and the National Executive, can backtrack on one of its most solemn commitments, thereby committing what the Prime Minister called the betrayal of trust and the breach of the voluntary agreement, and yet ask for an extra £2,000 million or £3,000 million.

4.45 a.m.

When the public expenditure accounts are published we shall learn exactly what the accountability which is supposed to come with public ownership of the steel industry means. When Socialist planning in the steel industry has shown that it has been a failure and when Socialist planning in other areas which are Government controlled, such as the supply and employment of teachers, comes amuck, the present Government will get their come-uppance and, no doubt, against the wishes of hon. Members opposite, not only shall I be re-elected but, apparently against the prophecies which they have been making in the past five minutes, nearly all the other Conservatives will be re-elected as well.

Mr. Deputy Speaker

Order. The hon. Gentleman really must not stray from the amendment to the hypothetical question of elections. He must confine himself to the amendment under discussion.

Mr. Bottomley

If we are talking about an extra £2,000 million or £3,000 million, if Socialism is the language of priorities and if elections are decided according to how Governments discharge their responsibilities in dealing with public money and in safeguarding the public purse, I think that the present Government, both by their action this morning in their cavalier attitude to money, and in their cavalier attitude to people in this country, especially those who are not represented by the big battalions on the Government benches, will get their comeuppance and they will deserve it.

Mr. Nelson

My hon. Friend the Member for Woolwich, West (Mr. Bottomley) has given his candid views on this important amendment and has given to this debate a breadth which is worthy of considerable attention by hon. Members on both sides of the House. I shall say why I think it is worthy of our consideration. What my hon.

Friend was talking about, and what we are discussing, is opportunity cost. The Government have only a limited amount of taxpayers' money for spending, and we are concerned with priorities in the social and industrial field. The Government, for what it is worth—and it is a policy decision with which we on these benches have a great deal of sympathy—have expressed a priority for encouraging investment in industry—

Mr. Flannery

On a point of order, Mr. Deputy Speaker. Is it in order for the hon. Gentleman to speak a second time in this debate without the permission of the House?

Mr. Deputy Speaker

The hon. Member does not need the permission of the House. He moved the amendment.

Mr. Nelson

Thank you, Mr. Deputy Speaker.

I was pointing out the degree of support which we on this side of the House have for the priority that the Government have given to the industrial programme. While we recognise that it is a matter of different priorities in spending, we welcome the Government's intention, which has been reported during the passage of this Bill, to stick to the difficult and expensive decision to go ahead with the British Steel Corporation's extensive development programme.

My hon. Friend the Member for Woolwich, West spoke of the dramatic effect of the increase in inflation on the costs of the British Steel Corporation—a rate of inflation which has not only forced the Government to bring forward this increase in the required borrowing limits but has also built into their projected forecasts 13 per cent. inflation reducing to 10 per cent. by the end of this decade. which must add considerably to the potential financing requirement of the Corporation and will affect the date at which that increased amount of borrowing will be required.

My hon. Friend the Member for Pudsey (Mr. Shaw) spoke of laying out money in advance. This House has always been rightly concerned to look carefully at retrospective legislation. It is appropriate that we should look increasingly carefully at prospective legislation which seeks to bind future Govern- ments and which seeks at a later stage to allow subsidised amounts of public money to go through on the nod under a procedure which in past years would have been unthinkable.

My hon. Friend the Member for Sheffield, Hallam (Mr. Osborn), with his close and experienced interest in the affairs of the steel industry, spoke of the need for an adequate rate of return, and I share his concern that adequate information should be brought forward before any increase as provided for in the order procedure is put into effect.

Many of us would be sympathetic to proposals whereby the Select Committee had an on-going ability to scrutinise the operation of the British Steel Corporation and the extent to which the finance which it makes available for its own development programme is funded properly, whether by public dividend capital, foreign currency borrowings or whatever it may be. I am sure that the Select Committee has a valuable part to play here, and we hope that the Government will take note of that view.

Finally, though by no means least, my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) spoke about the issue which is central to all the new clauses which we have debated and to this amendment as well—that in the end it is the taxpayer who pays, that the buck stops with the taxpayer. Our proper remit is to scrutinise the ability which the Government enact for themselves substantially to increase the borrowing powers of the corporation at a later stage.

I was disappointed that the Minister of State felt able to respond so briefly to the amendment. Although I recognise that it is important that the Bill should go through for the on-going development of the British Steel Corporation's programme, and we certainly should not want to inhibit its early implementation, I consider that the Minister could have made some more conciliatory and more positive remarks with regard to the procedures for sanctioning further amounts of public debt made available to the corporation and for the presentation of information at that stage.

However, since we have no desire to inhibit the main intention of the Bill to provide the tranches of moneys involved —both the £3,000 million and the £4,000 million—and since the projections of cost for the investment programme have spiralled in the way I have described, I feel that it would be inappropriate for us to force a Division. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.52 a.m.

Mr. Kaufman

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

4.53 a.m.

Mr. Michael Marshall

The Minister of State has moved the Third Reading with the brevity which we have come to expect from him. I think it right that, in spite of the hour, we should take this opportunity perhaps to draw breath and to consider some of the implications of this measure, which has been before the House and in the minds of many hon. Members on both sides since its Second Reading on 26th April.

It is customary at this stage of a Bill to thank the Ministers who have guided it through Committee and to this point, and that I do. On several occasions I have referred to the help which they have endeavoured to give us in providing information. We have not been satisfied with the range of information or felt that we have really managed to get down to the—[Interruption.] If the hon. Member for Birmingham, Perry Barr (Mr. Rooker) wishes to intervene, I shall gladly give way. Otherwise, I hope that he will give me the courtesy of a hearing. Those of us who have been concerned with the Bill since 26th April have a perfect right to consider the matter in a sensible way.

The Bill has raised a number of important issues for the whole future of the way the British Steel Corporation's finances are operated, and it is right that the House should be concerned at a state of affairs in which the corporation's borrowing of £300 million in 1972 is likely to reach £4,000 by 1979–80. I am quoting these figures, on which we have to rely in much of our proceedings, but all the recent indications give me cause for alarm. I hope the Minister will take my questions seriously. If he is unable to give categorical answers now, I should be grateful if he would consider ways in which we can be given answers to these questions at a later stage. Because of the nature of our proceedings, I have had to leave some of these questions to the end. Some of the answers could have been given in our discussions on the various new clauses.

My understanding is that the latest estimate of the BSC's 1972 investment programme, to be completed at the end of the decade, is £9,000 million. Taking into account the estimate of 20 per cent. working capital, that brings us to a figure of £10,000 million or £11,000 million as the total requirement for the 1972 investing programme.

These figures are so massive that one does not need to apologise for looking at them yet again, even at this late hour. On Amendment No. 1 my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) was right to point to this dramatic increase in the level of borrowings by the BSC. He was also right to point to the lack of a Treasury voice in our proceedings. On Second Reading we urged that we should have a Treasury Minister present during the Committee stage. The lack of that voice has been a disadvantage at all stages.

The Minister will be aware that those of us who are members of the Select Committee on Nationalised Industries and have been examining the activities of the BSC in that context have had the opportunity to question Treasury Ministers. It is clear to many of us and from Press reports that there is grave disquiet about the growing discrepancy between the view of the Department of Industry in putting forward unadulterated the BSC viewpoint and the natural reluctance of the Treasury to give so sweeping and wide-ranging a blank cheque.

I turn to the questions which I wish to put to the Minister—questions entirely relevant to the Bill. Since the level of capital investment appears to be massively in excess of anything we had envisaged, will the Minister give the House an assurance that the BSC is physically able to support this level of debt? As my right hon. Friend the Member for Henley (Mr. Heseltine) pointed out on Second Reading, these sums envisaged are so far in excess of anything the corporation has achieved in the first nine years of its life that we have a valid worry and concern whether the corporation is sufficiently solvent to maintain these important anticipated earnings.

The advice we have been given by informed and professional accounting sources suggests on the one hand that a proposal involving a debt equity ratio of the corporation would be raised on a 55–45 basis, and, on the other, that a level of borrowing of £9,000 million to £10,000 million is a figure on which even the biggest corporations in the world would hesitate to embark. In a normal commercial situation the first of those alternatives would mean that they could show that they had a substantial and major breakthrough envisaged by way of a new product. The second would mean that they could show that in a period of greatly increased world demand they expected that they would substantially increase their share. Can the Minister confirm that he has any expectation of the corporation developing along those lines? If he does, that does not square with the most optimistic views of those within the corporation to whom I have spoken or those of steel observers outside.

What are the corporation's expectations about the repayment of debt? As we understand the present loans, they have come from the National Loans Fund on 17-year terms but we always need to remind ourselves that the corporation tells us again and again that it regards its borrowings as extremely expensive in terms of paying the commercial rate in this country. That is why it has had recourse to borrowing in foreign exchange to a substantial extent. Again and again in our proceedings my hon. Friend the Member for Chichester (Mr. Nelson) has had occasion to query that borrowing, because here again we have a total vacuum in terms of Government policy. We have no idea whether the Treasury is willing to allow borrowings in foreign exchange to the total exclusion of United Kingdom borrowing.

If we take these levels of borrowing, it is essential that we begin to get some feel as to precisely what are the repayment intentions of the corporation. Does it see some kind of debt scheduling scheme about which the Minister can tell us? Does it see advantages in making early and advance payments? If the corporation is to sustain the present levels of interest charges on its level of debt, it is difficult to see how it could possibly have a sufficient borrowing surplus to meet that kind of commitment.

I ask the Minister to take this opportunity to say that he has no intention of coming before the House before the expiry of the Bill's arrangements to seek debt write-off. This is important, because the Minister will remember that when we sought from the corporation—because we did not have it on Second Reading—an outline of the way in which it saw the £3,000 million to £4,000 million borrowing levels applying over a period it was kind enough to send us a breakdown which showed that £3,000 million would be exceeded and that the £4,000 million take-up was likely to be exercised in 1979–80. Can the Minister give us a clear assurance that he will not come before the House to seek to alter the debt/equity ratio of the corporation, to transfer the debt capital to PDC, or in any other way to write off its substantial debts. That is a fair question that we should consider, and I hope that the Minister will be able to answer it as a matter of urgency.

Finally, as an adjunct to the whole question of the level of borrowings, I must revert to the way in which, on earlier new clauses, we discussed the relationship and, indeed, the implications of joint ventures between the corporation and the independent steel companies. As I said earlier, we see that as exercising the corporation in ways which I shall not repeat but which are well documented. The corporation has a number of joint ventures and is seeking other joint ventures with other European steelmakers and other European fabricators, and this would go downstream within the industry.

Equally, there are a number of joint BSC-independent company ventures. Round Oak steel works is a good example of a work owned 50–50 by BSC and TI. It is a good example of industrial relations and profitability, and it brings clearly into focus the need for this House to have some better feel for and, indeed, a better understanding, of the Government's commitment to the continuation of a mixed economy in steel. To the extent that the Minister is able to, I hope that he will give us an assurance that the Government are encouraging that situation. If he can, we shall feel that perhaps there is some kind of cushion and an addi- tional opportunity to offset this highly worrying, totally unspecified and largely unquantifiable level of debt.

Will the Minister of State repeat, in effect, the assertions made in 1967 at the time of nationalisation by the then Minister of Power, Mr. Richard Marsh—or Sir Richard Marsh, as he is now—that it was the intention of the Labour Government, and future Labour Governments from that point onwards, to help to encourage a vigorous, alert and profitable private sector as well as a public sector in steel? He made the point that an independent sector was equally important to the Government as a public sector.

In his time in the Department of Industry, the Minister of State has acquired a great deal of knowledge of this matter. The relationship between the two sectors now is one which could be crucial in terms of the NEDC working party and the wider NEDC studies about the whole relationship of nationalised industry to government and the role of the independent companies and the BSC.

We want a clear assurance from the Government tonight that they will in no way seek to inhibit the present relationship, and not stand in the way of further joint ventures, but will encourage such ventures. That assurance will go some way to making us feel that the worrying levels of debt have a chance of being eased by some flexibility.

This has been a most important debate, and, despite the badinage which has taken place in the wee small hours, all those hon. Members who have taken part have done so out of genuine interest in the subject. It does not help to have hon. Members opposite shouting out about numbers on this side of the House. We all know the numbers game. They have to maintain 100 hon. Members, and I can understand their feelings on this But, instead of venting their spleen on us, maybe they should vent it against the Government's business managers. Had they brought this business forward at a reasonable hour, we could have given the matter a great deal more attention.

I put this plainly and squarely to hon. Members opposite, a number of whom have taken a keen interest in the matter. It has been a loss that they have not made any contributions tonight, and I want it formally on the record that I regret but understand the reason for their silence. This debate started just after midnight, and we have covered the subject with only a bare minimum of attention. But the discussion we have had has been crucial and important, and, what is more, it is the kind of argument which will not go away. The arguments we have sought to put forward will return again and again.

When we come to this final tranche of £4,000 million, I urge the Minister to think seriously of the way in which the House should debate these matters. If he tries to come forward with that kind of order after midnight, it will be inimical to proper discussion and debate on matters of the highest importance. It is in this sense that I regard the whole exercise as being one not just of importance on this occasion but of putting down very important markers for the next few years ahead.

5.10 a.m.

Mr. Peter Bottomley

I will try not to repeat the remarks that I made on Report. I hope that the Leader of the House will recognise the interest that many hon. Members are taking in the debate even at this late hour. I believe that the Minister of State would be well advised to pay attention to the fact that our manufacturing industries are critically dependent on the efficiency of the steel industry. I do not think that its efficiency and its accountability to the country through this House are served by having debates like this so late at night. That has been shown by one or two things that have happened in our debates.

The Government should also recognise that if they are talking about an investment programme of over £500 for every ton of steel produced, they need to demonstrate where the savings are to come from for that investment.

I was working in the steel industry in 1968 and I remember how pay for groups of 21 people had to come up through division to Grosvenor Place and then to the Ministry and from there to the Prices and Incomes Board. So often we tend to stifle industries on which we depend by putting them under public control but losing public accountability.

The Government, especially at a time of recession, when steel output is remarkably low, and of large import contracts, must be more open in saying what are their targets for the industry and how they are being met. I recently asked the Minister whether planning agreements were in force with the nationalised industries, but I got an equivocal answer. If such agreements are to be the salvation of industry, as some hon. Members opposite believe they will be, perhaps the Minister can tell us how they apply to the nationalised industries.

Mr. Deputy Speaker

Order. The hon. Gentleman is straying from the Bill. On Third Reading, no question of planning agreements arises.

Mr. Bottomley

I understand that the Government have some good reason for asking for extra money for the steel industry, and that must come into some sort of plan. One asks that in the nationalised industries such planning agreements and others will be open and above board, as they must be if any kind of accountability is to be possible.

If they mean to lead this country through some kind of industrial regeneration, the Government are more likely to be able to do it by avoiding situations like this, when we have had to debate most important matters concerning the steel industry at this late hour. I hope that never again shall we have a debate like this, with so many hon. Members opposite present but taking little interest.

5.15 a.m.

Mr. Ian Grist (Cardiff, North)

Rarely, if ever, has the House voted such a large amount of money at this hour with such a skimpy prospectus. I have been disappointed—some would use stronger language—that the Government have refused, throughout our debates, to give further information or to press the BSC for more information to be made available to Parliament and the taxpayers, and thereby to its employees. That is a sad reflection on the way in which the Bill has been handled.

An undertaking in Committee from the Minister involved the investment of about £600 million, which pre-empts the £1,000 million tranche. The investment was that which may or may not take place at Port Talbot. On 17th June the Minister said that an early decision would be forthcoming. Earlier than that he said that he or his right hon. Friend hoped to make an announcement on this vital investment for the steel industry in South Wales. I hoped that by this evening we would have had some news about this major plant. It is of considerable concern, not just to the workers at Port Talbot but to workers in the related tinplate works in South Wales.

If we are to vote these huge sums of money knowing nothing about where they are to be spent or what return they will earn, the Minister should at least say when a decision will be announced. If he can do that, perhaps our time will not have been utterly wasted.

5.17 a.m.

Mr. Nelson

We have had an interesting debate. It has provided an opportunity for hon. Members on this side of the House to embellish points made in Committee and to emphasise their concern about the inadequacies of information and monitoring and the deficiencies of the BSC operation. It is a shame that the full discussions and contributions from this side of the House have not been matched either by Government Back Benchers or by Ministers. My sympathy is with the advisers and civil servants whose hard work on the briefs has remained unheard while we remained ignorant of the enlightenment which they could have thrown on the discussion.

Five major areas which arose in Committee and on Report are worthy of mention at this final stage. We hope that they will be implanted in the Government's mind as being worthy of further consideration and that they will be an encouragement to the BSC. They are: first, the production and supply shortages problem; secondly, the size and implementation of the investment programme; thirdly, plant closures and policies; fourthly, redundancies and manning levels; fifthly, foreign currency borrowing levels.

I intend to keep strictly to the provisions of the Bill. Fear was expressed by the Government working party of shortages in home-produced steel. There are alarming reports of certain shortages, chiefly in certain strip mill products.

The capacity is there but lack of cooperation at Llanwern strip mill division means further increases in imports. That is important because the lack of investment or inadequacy of production at major steel plants has resulted in increases in imports of steel into the country. Because of unreliability of BSC supplies, many United Kingdom customers have now switched to, and stayed with, foreign suppliers. Their sources are now more reliable.

This has been reflected in the decline in the proportion of the United Kingdom steel market which the corporation has taken. Let us look at the last seven-year period, between 1968 and 1975, which has not been selected as particularly unusual. Imports increased from 9 per cent. to 19 per cent., and the BSC's contribution to the United Kingdom steel market decreased from 66 per cent. to 55 per cent., whereas the contribution of the private sector was roughly the same, increasing from 25 per cent. to 26 per cent.

What estimates have been made of the effect of the pick-up in the European economy, particularly the automotive industries, this autumn, and the amount of stocking going on in anticipation of shortages later in the recovery cycle or increases in prices? These are important matters, because they will undoubtedly affect the drawdown of further tranches and the timing of the investment programme.

The corporation's prices, at least for some of its strip mill products, are well below market levels internationally. This must be a matter of concern to all of us. Here we have a product in very short supply, which there is a certain amount of capacity to produce in this country, yet the figures seem to indicate that the corporation is charging generally a price which is still, despite the alleviation of the pricing policy in the industry, substantially below the rates prevailing in the rest of the world.

If there are shortages, it must be madness to sell products below the increased price agreed this year. This artificial pricing policy must distort the demand and supply relationship, and it will act to the detriment of the corporation's profitability and, therefore, its ability internally to fund a substantial amount of its own development programme.

The corporation produces four-fifths of the United Kingdom steel output, yet our great fear is that in sustaining industrial and economic recovery the corporation will be unable to play its part because of past decisions on products, pricing, plant and personnel which were either not made or not made early enough. Therefore, we support the Government in their deliberations on a surgical approach to certain operations of the corporation.

We cannot afford to go into the recovery cycle of the British economy and of demand for steel simply utilising some of the older capacity, thereby ensuring that there will be in an eventual downturn or easing of the market the problems encountered two years ago, which were reflected in the current year's lack of profitability. The problems then will be even greater unless at this prospectively good time the Government are prepared to take a much longer look at the development programme and the need for rationalisation, for want of a better word.

The size and implementation of the investment programme are matters on which we have sought detailed assurances. The cost of the expansion of the BSC has now soared to over £5 billion compared with the estimate of £3 billion in 1973. The original estimates have been rendered obsolete by inflation and slow progress with the building of certain major new steel plants.

The Minister told us that in its projections the corporation had assumed a rate of inflation of 13 per cent. a year towards the end of this decade, reducing to 10 per cent. Even assuming that those figures are correct, what sort of return is considered to be attainable on the size of capital outlay? We did not have detailed answers when we discussed what we thought was a positive amendment to change the corporation's target. We received neither sympathy nor explanation.

The upturn in demand may substantially increase the temptation to retain inefficient steel plants and capacity, especially where large numbers of workers are affected, rather than taking the longer-term view, which in many circumstances may or may not be—but probably will be—necessary with a view to introducing certain new systems, whether direct reduction in the ore field or basic oxygen systems themselves.

The corporation is subject to a cash limit, to which the Secretary of State referred on Second Reading, and which we understand to be currently £950 million for this financial year. Will this or a stricter limit restrain the capital programme of the corporation? Is it possible that any further consideration of cutbacks in public expenditure, while not directly affecting the priority given to the industrial sector, will in some way restrain the cash limits provided for the exercise and thereby inhibit the implementation of this very important programme?

Thirdly, on a number of occasions we have expressed concern about the lack of information and decision on certain plant closures and investments and the policy behind them. This is relevant is estimating likely cash flow or draw-down under the Bill and potential profitability. Decisions on Shotton and Port Talbot are long overdue.

We sincerely recognise the importance of a decision that affects 6,500 employees, but uncertainty is often worse than a closure and some certainty would have enabled many people—certainly some—to widen their personal horizons.

The steel makers recently made the point that the corporation's strategy leans too heavily towards concentrating production in a few very large coastal works. In view of the diverse and specialist nature of the clients of the corporation, should the Government at this stage be embarking on a second phase or major new phase of the corporation's development? Are the Government satisfied that the right balance has been drawn between mini-mills and medium-sized or large plants? What progress has been made and what objectives are being set with regard to introducing direct reduction and BOS systems in BSC plants? We should like the Government to be more forthcoming about this broad area of meeting the competition of major industrial and steel-producing countries, such as Japan, which has a far higher productivity than our BOS methods.

I come now to redundancy and manning. We recognise the importance of pressing ahead with plans to reduce manning levels and thereby increasing the productivity of the corporation and the degree to which it can internally finance its major development programmes. But we are gravely concerned about the report of the corporation and the TUC steel committee meeting recently to discuss the progress in the implementation of the demanning agreement signed in January. The corporation will certainly not achieve its target of 40,000 jobs reductions by the end of 1977. The corporation has reduced its work force to 213,000 by a reduction of only some 7,000.

Manning levels are essential to the sanctioning of the Bill, and the prospects of the corporation financing its own development programmes rather than following a broad lead from the Government will be substantially prejudiced if the Government and the corporation are not prepared to go ahead to try to implement the spirit and the wording of the agreement made with the TUC.

The unions have co-operated on the initial slimming operations but they are now taking a tougher line about what they regard as the inbuilt overmanning in the industry because they believe that the pay policy agreed between the Government and the TUC does not allow more pay for streamlining job structures. We believe that that is inadequate and that the corporation should take a stronger view.

The letter from Mr. George Wright, the General Secretary of the Welsh TUC, to the Secretary of State for Industry recently pointed out that the shortage of special steels meant, in his view, that there was a future for all Welsh BSC plants. If the letter were made public one might be able to consider the way in which the case is substantiated Nevertheless, it is very important, when looking at an increase in the borrowing powers of £4,000 million, to be certain that the BSC will not only save money but increase productivity and the efficiency of the overmanned and elderly plants.

Finally, I refer to the foreign currency borrowing policy of the corporation—a question on which I and a number of my colleagues have spoken. During the Committee stage our fears have been increased, rather than allayed, that the ability of the BSC to borrow abroad will be unfettered, and that, far from just allowing it to borrow abroad, there is under the present Treasury exchange rate guarantee scheme a positive encouragement for it to do so, which inevitably results in a liability to the British taxpayer.

Even where the BSC borrows in foreign currency, without the benefit of the exchange rate scheme, this has, as we have learned, resulted in substantial loseses for the corporation in terms of the write-off of its own borrowings. This has meant that it will eventually have to be paid for by the taxpayer.

Approximately half the corporation's debts of £1,050 million are for currency borrowing. Of this, £246 million is covered by the Treasury exchange rate scheme, but £237 million is not covered at all and is purely at risk at a time when there has been a very substantial and startling decline in the value of sterling compared with other currencies.

The Treasury scheme provides positive encouragement to other industries to borrow abroad. The BSC is not alone. It is a policy which is spreading unfettered towards other areas of the public sector. The National Coal Board last week floated a $50 million loan at 81 per cent. for five years. This again is a largely unfettered ability to borrow abroad, not only creating a foreign currency liability but transferring the foreign currencies into sterling and applying them in British assets, thereby doubling up the liability which the taxpayer carries and on which we have been seeking to provide adequate constraints.

I pay tribute to the work of my hon. Friends in Committee during the passage of the Bill in pressing the Government so hard to obtain adequate information. I hope that, despite the poor comments and the paucity of their language on this occasion, many of the points we have made will be taken seriously both by them and by the BSC.

We feel that our contributions have been positive and will genuinely encourage the success and the return to profitability of the BSC, while at the same time, with a massive increase in investment, increasing its accountability to the House of Commons and to the taxpayer, whose interests we are all here to serve.

Question put and agreed to.

Bill accordingly read the Third time and passed.

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