'No loans or payments may be made by the Secretary of State by virtue of section 1 above until the Corporation shall have provided the Secretary of State with a computer analysis of their reports and accounts for the last five years and of their current forecasts which would include current and anticipated levels of: (a) stocks, (b) wages and salaries, and (c) pension liabilities.'.—[Mr. Michael Marshall.]
§ Brought up, and read the First time.
§ Mr. Speaker
With this we may take New Clause No. 3—"Prospects for Steel"—and New Clause No. 4—Annual statements on project appraisals and costs of maintaining uneconomic plant.
§ Mr. Marshall
This group of clauses covers a vast canvas. I wish to express my appreciation for the way in which the Chair and the Clerks at the Table have been helpful in trying to consider this Bill.
It is one of the problems which this House continues to face that in view of the substantial amounts of public money that are now at stake in BSC, the House must properly concern itself in greater and ever-increasing detail with these matters. Hon. Members on both sides of the House would be happy if BSC's fortunes were such that we could see a substantial improvement so that we would not need to make a detailed examination both of the Department and, by implication, of the work of the Corporation.
We are proposing in this group of clauses to seek additional annual reports relating to the prospects for steel, annual project appraisals, and annual assessments of the cost of uneconomic plant. We are also seeking to bring in computer analysis to the report and accounts of BSC and future forecasts. The difficulties 919 in dealing with such a massive range of matters are immediately apparent.
Let me explain what we mean by computer analysis. It is essential to make clear from the outset that we are looking at something which is not a vast exercise. The House and others outside are already undertaking such exercises and one of the concerns mirrored in the new clause is the feeling that the Department is not coming up with any clear assessment of the way that it views the work that the BSC is undertaking in this area.
We are talking about a time-series of all published financial data including, for example, the previous 10 years' annual reports and accounts and, particularly, the use of the notes in those reports and accounts, which are often far more significant than the bald figures. From such computations it should also be possible to deduct quite quickly standard business ratios and any unconventional ratios, whether demanded by Ministers or hon. Members.
It is important to emphasise that we are seeking access for hon. Members, through the Secretary of State, to the BSC's work in this area. It is appropriate that when hon. Members have access to the Treasury's macro-economic model, there should be an opportunity, through the Department of Industry, for hon. Members to switch in quite quickly to the key operating ratios of the BSC when we have a debate such as this.
The sort of questions that hon. Members could readily put in such a study would quickly yield answers on, for example, the breakdown of salaries over a certain level. That is a significant figure, as I shall show later. It would also be possible, using a purely historical data base, to look at some simple mathematical extrapolations to try to find pointers for the future.
The significance of this has been brought out time and again. Hon. Members will recall that year after year at around this time the Government propose further take-ups of borrowings well in excess of those that were previously anticipated. This is part of the monitoring that we would seek to do, not just when measures come before the House but through other opportunities when that computer data base was available.
920 We are not talking of a major systems task. The Select Committee on Nationalised Industries was able, through voluntary help from outside, to put together a data base on the last 10 years' reports and accounts in a matter of six weeks and, through one of the advisers, it was possible to use that data effectively within two weeks. It is worrying that there are those who would turn their face against the extension of computer usage not only for the Department but for the House. It was significant that in its recent study of nationalised industries, NEDO commissioned a paper on the finance of nationalised industries but that none of it was put on computer and is not available on a continuing basis to hon. Members.
The situation in relation to steel is somewhat different because we have the advantage of the data base that the Select Committee made available through its findings. The figures in that study show the value that the House could obtain from the Department of Industry's assessment of the BSC's computer work. The Select Committee study of a 10-year pattern and projections based on historic basis with relatively simple assumptions, taking a fairly optimistic view, consistently gave the Committee the opportunity of seeing an accelerating worsening of the financial position, apparently long ahead of the Department of Industry. That is our immediate and fundamental worry and our reason for proposing New Clause 2. It was because of the Select Committee being alerted in this way, and feeling that its concern was not being shared by the Department, that we had the row earlier this year. We do not seek to rehash that row, but it showed, as I hope the Minister will agree, the value of establishing a data base.
There is another indication of the way in which the data base can be used quite quickly and effectively. It has been demonstrated in the last few days by a former adviser to that Select Committee, Mr. James Taylor, who has been able to take advantage of help offered privately to put together an assessment and data base of recent reports and accounts and to make certain estimates for the future.
The Minister of State will no doubt know about the findings reported in Mr. Taylor's article in The Observer on Sunday. I hope that the right hon. 921 Gentleman will comment on some of those findings, which are of great significance. I am sure that we all pay tribute to Mr. Taylor's enthusiasm and public spirit in making this information available to the House in time for debates such as this.
The relevance of his recent studies is that he has not only repeated the Select Committee's exercise but has followed the pattern proposed in New Clause No. 2 by taking the last four years of the BSC's reports and accounts and projecting on a range of assumptions to give a 10-year picture. In many ways, his findings are disturbing and The Observer article is one that many hon. Members will wish to read and reread with special care in the light of experience over the coming months.
We suggest three items in New Clause No. 2. It is not an exhaustive list, but they are items that seem, on the basis of Select Committee studies and Mr. Taylor's current studies, to raise matters of particular anxiety.
Stocks have risen substantially during the last four years from £19.7 million in 1974 to a peak of £342 million in 1977. We do not have the latest report and accounts, but we see from the unaudited accounts up to March 1978—and we appreciate the Minister of State making these available to us—that stocks now stand at £143 million.
It might be argued that this shows a welcome reduction of stocks. Obviously at a time of ever-increasing financial crisis for the Corporation, one of the immediate areas in which we would expect to see substantial reductions is the disposal of stocks—money that is tied up. The Corporation has been encouraged to have this money tied up in the past because of the counter-cyclical stocking schemes. The Government's schemes in this respect explain part of the significant rise in stocks, but that goes back to 1976 and it is hard to understand why stocks should still be 70 per cent. higher than they were four years ago—a time of more profitable trading.
On wages and salaries, Mr. Taylor points out in his article that in the three years to March 1977, a period when pay controls were supposed to operate, the number of BSC employees earning more than £10,000 a year rose from 66 to 455, 922 while the average wage costs increased by 90 per cent. to more than£800 million.
These are substantial increases during a period of wage restraint and massively increasing losses. What assurance can the Minister give that they do not include an element of rip-off—an element of saying "As long as we can go back to the taxpayer for more money, wage increases should press on, irrespective of the way in which our results are worsening"? It is an accepted fact that much of the cash intended for investment is being soaked up in operating costs and the largest part of this goes in wages and salaries. This has led to arguments, which the Government do not accept, about restrictions on the amounts that should be spent in capital expenditure. In thinking about how this figure should be kept updated through the Corporation's computers, it would be helpful to have some idea from the Minister how the figures, which we now know, can possibly be justified. We cannot update these figures to the latest date, because we do not have the latest report and accounts.
On pension liabilities, there is yet another difficulty. We have not been able to get all the information that we sought. However, I express appreciation to the Minister of State for the information that he provided in response to a letter from me. In his reply of 12th June he gave more information about pension fund liabilities. But, in giving that information, he may be as much concerned as I am to recognise that the implications of the inability of which he spoke there to look at the matter on anything other than a triennial basis put us in real difficulty.
Much of our concern in the new clause is to look at the off-balance-sheet liabilities. The main unknown is the pension fund liability. That arises, as is well recognised, from inflation-proofing. Of course, it could change dramatically if there is a change in the relationship between staff and manual schemes—a matter to which the hon. Member for Newcastle upon Tyne, East (Mr. Thomas), whom I am glad to see in his place, has paid particular attention.
Therefore, I should like to ask the Minister of State three questions on pension liabilities. First, does the British Steel Corporation have a pension fund 923 valuation programme on computer? This is a simple and straightforward subject on which I hope he will be able to give us some information. I shall seek to write to him in more detail on some of these matters, because I accept that he will not be able to give detailed answers today. But the basic question, whether the British Steel Corporation has a pension fund valuation programme on cumputer at present, is one to which I hope he will be able to reply today. Given any kind of annual data, such as we have suggested, it should be possible in a matter of minutes to produce what we are now told is the subject of a three-year actuarial review.
That brings me to my second question. If, as the Minister's letter of 12th June shows, the one year between March 1976 and March 1977 threw up an uncovered liability of £270 million, what is the effect of the rise in unemployment costs from £897 million to £1,075 million in the period 1975–76 to 1977–78? Surely the Minister must agree that, with figures of that kind, a triennial valuation is an archaic actuarial practice in a period of rapid inflation when increases are likely to be in hundreds of millions of pounds.
Thirdly, what would he the uncovered liability in upgrading from the manual scheme to equal the staff superannuation scheme? It seems clear that it is bound to come. Surely it means that on present estimates there would be an increase in total liability to the pension fund of 20 per cent. with a far higher increase in uncovered liability.
Those are three important areas where the data base and the computer analysis would allow the Secretary of State, and thus the House, to monitor past history and current prospects for the BSC.
We must also consider the other information which is called for in New Clauses Nos. 3 and 4. New Clause No. 3 simply seeks to ensure that "Prospects for Steel," which was made available to the House as background for Second Reading, is made available annually on an updated basis. It would also provide Ministers with the opportunity, which I hope they will take today, to return to their undertakings given in Committee.
We need to be clear that there is agreement on the general principle that 924 "Prospects for Steel" would be a valuable adjunct to the report and accounts and/or to be used at the time of any annual take-up of borrowings. The Opposition are flexible about the date when the publication should be issued, but that it should be updated and published annually seems to us to be of the highest importance.
In Committee, we touched on the question of the way in which "Prospects for Steel" could be beefed up. But our main worry was the speed with which many of the assumptions which it included were being invalidated. For example, there are widely shared worries now about the difficulty of getting agreement on a European pricing scheme for steel, there are suggestions that the BSC may find substantial claims made upon it for anti-dumping in the United States and there are the effects of the strike at Llanwern, to which my hon. Friend the Member for Kingston upon Thames (Mr. Lamont) drew graphic and detailed attention. All these matters must have an immediate effect on many of the assumptions in "Prospects for Steel."
There was also the question of other additional information. In Committee, the hon. Member for Merioneth (Mr. Thomas) sought to gain additional information about the activities of British Steel Corporation Industry Ltd.—an activity to which my hon. Friend the Member for Kingston upon Thames referred.
On top of the other matters which have been raised, I suggest that the sale of redundant plant or joint ventures would be fitting subjects to incorporate in "Prospects for Steel". That document will inevitably allow the Corporation a greater area of editorial assessment of its general situation as opposed to the perhaps stricter legal and accountancy requirements of its report and accounts.
In New Clause No. 2 we seek assurances from the Secretary of State. In New Clause No. 4 we are beginning to look more at what the Corporation can do to reassure the House, though the Secretary of State, on two major areas.
The first is the question of updating the figures for maintaining uneconomic plant. I recall that the Under-Secretary of State gave an assurance that he would give a figure. I appreciate that, through his 925 right hon. Friend, he has made information available to me showing that the current figure for maintaining uneconomic plant stands at£111 million compared with £65 million, which was the last published figure by the BSC.
This is not an idle, esoteric exercise. It is important to remember that the cost of maintaining uneconomic plant—generally regarded as Beswick plant—has had a direct impact on the Corporation's profitability. If those of us who are from time to time critical of the Corporation or the Department wish to strike a balance, it is essential that we point to the cost imposed on the Corporation by the Government's decisions on the Beswick plant. But the question now is beginning to go even wider. The fear that many of us have—this is where the point of New Clause No. 4 will be immediately apparent—is that what is perhaps economic plant is becoming uneconomic plant over a wider canvas.
To the extent that investment programmes are now being curtailed, one of our fears is that we shall find added to the uneconomic plant list a number of the major projects which we had previously anticipated as having a reasonable pay back. Therefore, I hope that the Government will concede the principle of New Clause No. 4 and will seek to use it in a flexible way to list such plant as is running into financial difficulty.
That brings me back to the now long debated question of post-completion projects appraisals. We have had considerable debate about this matter from time to time. Again, I express appreciation to the Minister of State for sending me a letter yesterday which outlines a number of the factors which are taken into account in post-project appraisals, particularly in the light of experience gained during the last two years.
Before dealing with that matter, I should like to refer briefly to column 83 of the proceedings in Committee. The Minister of State gave three examples of the kind of post-appraisal reviews which the Department was undertaking with the Corporation. He mentioned, first, the preparation of raw material; secondly, steel making; and, thirdly, product finishing. The right hon. gentleman did not spell out which those projects were. I 926 understand part of his reticence. However, I think that he is a little oversensitive in these matters.
For example, the preparation of raw materials must clearly refer to Redcar. When hon. Members have had the opportunity of visiting Redcar, they have frequently been told that what is happening there is fully in line with anything that is going on in the world, including Japan. Therefore, that must be one of the successful projects to which the Minister of State referred. We would like to hear about some of the successes as well as the problems.
In Committee, the Minister sought to draw a range of findings within his Department in which performance rangedbetween an outcome which was very satisfactory and one which showed that considerable improvement could be made."—[Official Report, Standing Committee B, 13th June 1978; c. 83.]It is on this question of where improvements can be made that the House necessarily feels that it must show a particular interest. Here I refer to the letter of 22nd June in which the Minister of State said:during the past two years increasing emphasis has been put on … Personal commitment".That makes sense. To many of us who try to follow these matters there has been a feeling of uncertain personal responsibility over a range of products. The Minister goes on to list a number of main areas in which personal commitment would apply. He refers to increased delegation of authority on project approvals, and projects of up to £2 million, which are now authorised within divisions within specific annual limits. He refers also to personal responsibility of a nominated individual for each project, to consultation with the unions on manning levels and work practices, and to consultations with contractors on the improvement of on-site performances. He expands that list with two short final points and speaks of budgetary control' procedures which have been improved, mainly on the internal rationing of cash allocations to projects and of further development of control systems and procedures.
We are grateful for that information, but it is very general and we cannot leave the subject without reminding the Minister of what we seek in New Clause 927 No. 4. It has been sought on many occasions. It is some greater feel—and we do not want to put more strongly than that—some balancing of the factors as between inflation, escalation clauses, and scope changes, by which we mean the way in which changes are decided as between the BSC as the customer and the plant manufacturers as suppliers. There is evidence of where the Corporation has from time to time changed its mind at cost to itself and, in effect to the taxpayer. The House should know much more of such matters.
I give one example. Owing to scope changes at Hunterston, special sealed wagons were found at a late stage to be necessary and the cost of the project was increased. We seek to delineate that part of the increases in capital costs in projects which arises from industrial disputes and delays because of labour shortage, and we seek to find out which part of those increases arises from Government action, as we have argued earlier.
In the broader area, too, it would be foolish to suppose that this House or the country could remain unaware of the evidence which arises in the Press and other channels about failures in design and engineering and about failures in project control. There is also, and perhaps this is more critical now, the way in which some projects, having been put torward and committed at low capital cost, become a continuing drain when there are changes in Government policy. Redcar is a good example of where there appears to be a turning back after the expenditure of some £500 million. Further examples are the way in which Ravenscraig has risen in cost between 1972 and this year from £28 million to £243 million. For Scunthorpe, the 1971 estimate of £180 million has now risen to between £500 million and £600 million. At Lackenby the £20 million development on pollution control, to which the Minister of State referred, had to be rebuilt because of a design failure, at a cost of £60 million, in 1977–78. And so one could go on.
The problem that arises in discussing all these examples is simply that they throw very grave doubts on many of the assumptions and conclusions which the Secretary of State put to us in introducing the Bill and which the 928 Minister of State tended to argue through Committee. Without assurances and agreements to improve reporting systems as outlined in the clauses we have to say that capital budgets and profitability calculations are not credible. The cash flow budget itself becomes doubtful and, as we know from past experience of the BSC's impact on the public sector borrowing requirement, the Treasury's estimate of that figure is not reliable.
Finally, and this is the point which I am sure will ring a bell in the hearts of all hon. Members, Parliament has no way of controlling or even forecasting the cash outflow and commitments covered by measures such as this unless we can have some assurance and unless there can be a greater reliance on the intelligence of hon. Members in discussing this wide range of factors. It is for these reasons that we seek to persuade the Government that the adoption of these new clauses would greatly help that cause.
§ Mr. Kaufman
I wish the hon. Member for Arundel (Mr. Marshall) many happy returns of the day before yesterday. I always have particular reason to know when his birthday comes round.
The hon. Gentleman has asked me a number of detailed questions. He has sometimes in the past made a practice of writing to me in advance when he has such questions to put. On those occasions I am able to prepare myself adequately to deal with them. On this occasion, if the hon. Gentleman is agreeable, I would much prefer to write to him on the detailed questions rather than seek simply to give him answers on the basis of hurriedly scribbled notes which, apart from anything else, might not be accurately read. I hope that he will agree to that.
I have a comment on one of his points which I make not in any way to denigrate the way in which he approached it, but to show the problem that can arise in trying to deal with these matters. The hon. Gentleman quoted an article from this week's edition of The Observer. He dealt in the serious manner that we would expect of him with some of the matters raised in that article, including the question about wages and pay. But if he refers to the article he will find that the author, 929 writing about the problem of the rise in salaries and so on, refers tothe last three years to March 1977, during which pay controls were supposed to be in operation".That is not the situation. The Government's revised pay policy did not begin until July 1975. There was a period from March 1974 until July 1975 when no formal ceilings were in operation. One must therefore take into account that this was a situation in which, for nearly half the period, there was not the kind of pay policy that now exists.
The House is well aware that since July 1975 when the Government introduced the policy in the White Paperv "The Attack on Inflation" the Corporation has observed all of the Government's pay guidance. But the period referred to in the article includes the time when there was no quantified Government guidance on the appropriate level of wages settlements and when wage costs in industry rose substantially.
When the hon. Gentleman asks for information, as he always does—and I do not in any way complain about it—I always do my best to respond. We gave commitments in Committee, all of which either my hon. Friend or I have fulfilled, including an approach I made to the chairman of the Corporation to provide information supplementary to "Prospects for Steel", and that was the burden of one of the letters I wrote to the hon. Gentleman.
Without needing to write anything into the Act—and in some ways it would be inappropriate to do so—I give the hon. Gentleman the assurance that I shall do my best to go on providing a regular flow of information. I very much take the point implicit in his remarks that the information should not need to be assembled only when legislation or a Statutory Instrument is going through the House, and that some kind of more periodic arrangement might be of assistance.
Obviously, in the light of the hon. Member's latest proposal, I should like to discuss that with the Corporation. But there has been a very wide welcome for "Prospects for Steel". When a book gets such good reviews, the author often likes 930 to bring out supplementary editions. Let us see how we get on with that. I shall do my best to supply any information that I can.
I should like to come to the three new clauses specifically. As regards New Clause No. 2, the Iron and Steel Act 1975 already provides, as the hon. Gentleman will know, for the Secretary of State to obtain from the Corporation such returns, accounts and other information with respect to its property and activities and the property and activities of the publicly-owned companies, as he may from time to time require. The proposed new clause would therefore duplicate existing powers.
Officials of my Department already analyse BSC's management accounts and a computer analysis of BSC's annual reports and accounts for the last five years would not provide a basis for any worthwhile study because they are too general.
As regards New Clause No. 3—we have already discussed this matter both this year and last year; this year, much better than last year, as I think is agreed—the Corporation has responded to the needs of Parliament by providing a prospectus on the Corporation's activities, together with its consolidated accounts in a provisional and unaudited form. I know that that is not as good as the final accounts, but the hon. Gentleman has been good enough to acknowledge that we have done our best to supply this information. I explained in Committee why no cash flow forecast was included, and I have written to hon. Members updating the existing information on the financial controls.
I repeat emphatically that both the Corporation and the Department of Industry are anxious to meet Parliament's proper needs for information. While I am always ready to act as a channel between the hon. Gentleman and the Corporation, if there are any other specific points that he or other hon. Members would like to raise I suggest that they should take up the invitation of the chairman of the Corporation to interested Members to discuss the annual accounts with him and his colleagues on 4th July.
In the light of the Corporation's voluntary provision of detailed information both this year and last, I hope that the hon. Member will agree that it is 931 unnecessary to place a statutory obligation on it to provide such information in the future. Also, when market conditions become more stable, it will be unnecessary to repeat all the detail given in "Prospects for Steel", since major changes will be infrequent. However, I shall put to the Corporation the hon. Gentleman's suggestion that a more regular and perhaps annual edition of "Prospects for Steel" might be useful.
§ Mr. Mike Thomas (Newcastle upon Tyne, East)
Did I understand my right hon. Friend to say that in considering the proposal for regularly publishing "Prospects for Steel"—which is a very useful publication—he was considering that future publications should not contain the amount of detail that "Prospects for Steel" contains? I think that many hon. Members would wish that such future publications did contain it.
§ Mr. Kaufman
I should not like to be categorical about that. I am very much in favour of providing the maximum amount of information. What I was trying to imply—I know that my hon. Friend will accept this—was that as conditions change it may not be necessary for "Prospects for Steel", if it is to be published in the future, to take precisely the same pattern as the current edition. However, I always welcome more information rather than less.
§ Mr. Mike Thomas
I am sorry to interrupt my right hon. Friend again. Will he confirm that he is aware that two matters are important to hon. Members? The first is that there should be the possibility for the House to judge performance against promise. There is always the temptation on the part of any nationalised industry, when asking for investment money or whatever, to accentuate the positive. That must be discouraged. Secondly, some idea of the assumptions on which the projections are being made should be made clear as well as just the end of the mathematical process. This is extremely important.
§ Mr. Kaufman
I know the importance that my hon. Friend attaches to that. Apart from anything else, it is very important to make sure that performance is constantly watched. I have been in touch with the chairman of the Corporation and he tells me that the latest 932 situation of which he is able to tell me is that the Corporation's results for the first two months of the current financial year show some improvement on the annual operating plan projections.
As hon. Members know, it is very difficult to be certain about the way in which the international steel market will move. That makes it extremely hazardous to give any firm indication of what the out-turn for the year would be.
However, with that proviso, it would appear that the Corporation is at present on a course which will at least hold the AOP projection which, in its publication "Prospects for Steel", the Corporation indicated would be a loss of about £400 million, including its usual contingency provision.
The annual accounts for 1977–78 will be published on 4th July. The chairman will then give some indication of the likely result of the first half of the current year. As I have said, I understand that it is the chairman's intention to invite interested Members on that day to discuss the annual accounts with him and his senior colleagues.
My hon. Friend spoke about the importance of measuring performance as against promise. We have made it clear to Sir Charles Villiers that we regard it as a matter of prime importance that the Corporation should make every effort to improve on performance levels provided for in this year's AOP. I had better add, so that the House is aware of the gravity of the situation, if it was not aware of it before, that when I further questioned Sir Charles about this matter yesterday, what he said—I quote his words precisely—was:Nothing has got better and one or two assumptions connected with the market look to have got worse.So I think that I had better put that on record. I am grateful to my hon. Friend for enabling me, through one of his well-judged interventions, to do that.
I come now to New Clause No. 4. My Department does not carry out post-completion project appraisals although, as has been explained elsewhere, from time to time it studies the project appraisals carried out by BSC. Naming the appraisals carried out and providing individual details of loss-making plant would, I feel, lead us into the discussion 933 of issues which are properly the sphere of BSC's management.
As I explained in Committee, my Department has discussed three appraisal reviews with officials covering three particular aspects of BSC's activities. Hon. Members will be aware that the Corporation has been very successful in bringing projects into commission on or before time. The Scunthorpe rod mill was built to programme, and Thrybergh bar mill, which aimed to achieve a production figure of 8,000 tonnes a week after 100 weeks, achieved this result in its 46th week. The projects studied by my Department covered performance ranging from "satisfactory" to "showing scope for considerable improvement". Instances emerged of under cost estimating, design problems leading to plant not performing to intentions and major changes in a project's scope. The Corporation is constantly trying to improve its procedures to reduce the possibility of recurrence of these problems. Hon. Members might also like to know that all cost overruns come up for reauthorisation, and where the scope of a project is changed the project is re-evaluated.
Although in the past scope changes have caused project costs to increase over original budgets, improved planning processes have largely eliminated this sort of increase.
I have sought to deal in some detail with the substance of the new clauses. I have noted very carefully the points that have been made. I know that the hon. Member has not himself felt, on this or any other proposals that he and his colleagues have framed with great skill and ingenuity in order to allow us to have debates, that he wanted to insert them into the Bill. We shall consider where it is possible to assist. Where it is possible and appropriate, we shall do so. I hope that the hon. Member will not feel it necessary to press the new clauses.
§ Mr. Michael Marshall
By leave of the House, in order to make progress, since the Minister has said that he will write to hon. Members on these matters, it might be helpful to put to him two or three other short points which arose from his speech and which might have come up if we had debated Third Reading.
934 The basic question is the problem of the Corporation as it stands today. The Minister quoted the work of Mr. Taylor, of which I do not defend chapter and verse. However, the burden of Mr. Taylor's argument was that the Government's suggestion of a future financial reconstruction meant, first of all, that dividends on £1.5 billion would be payable only after a financial reconstruction which had no terminal date and which apparently had no sanctions in the event of failure to reach an agreed date. In other words, all that the Bill offers at present is a return on the £1.5 billion on the never-never.
Secondly, financial reconstruction—I hope that the right hon. Gentleman will be able to assure us about this, if necessary through correspondence—clearly means that the debt will be written off. At present, that means that the money which the taxpayer is asked to provide under the Bill is to be advanced with the declared intention of not paying it back.
If we simply ask for the overall financial situation, we must remind ourselves how, year after year, in June or July, we find that forecasts are well adrift. Mr. Taylor's point was that two years ago the chairman of the BSC forecast that the House would not be required to increase borrowings until 1979–80. Yet, despite a vastly reduced capital expenditure programme, there is a shortfall in internally generated funds—that is, cutbacks in excess of £1,200 million—of about £400 million. In other words, that is a net failure of estimates of £1,600 million in two years. That is an alarming figure. It is one that the Minister has argued in the past is related to changes in the market, but I fear that that is not an argument that he has been able to sustain in our debates on the new clauses.
I hope that the Minister and his hon. Friend will turn their attention to the real implications of the BSC's own flexibility as a monopoly which should be able to thrive better than its competitors in a declining market. It should be able, above all, to see some restoration in the severe loss of its domestic market, particularly from British Leyland and Ford, which take half their steel requirements from the BSC and would probably take 80 to 90 per cent. if it were available at the right quality and at the right price.
935 On our worries about internal managerial and project controls, we have raised a number of points which the Minister has said he will consider further and which are the summation of three years' pressing for information. Little by little the Select Committee and through the Minister of State and his hon. Friend we have received some additional information. I pay my tribute to those who have made that information possible. I recognise the load which has fallen on the Minister's officials in helping him to give his replies to the House.
The matter is grave and urgent. Three years ago, the Minister told us that he thought that the good times were just around the corner. He has had a difficult ride on the question whether he misled the House. I take the view that perhaps he misled himself. There were some difficulties a year ago. The assessment that we then made was particularly difficult, but the difficulty was based partly on the failure of internal communications. This time we are asked to wait and see. We are willing to do so, but we shall watch with ever-increasing vigilance.
§ Question put and negatived.
§ Bill read the Third time and passed.