HC Deb 01 March 1978 vol 945 cc625-36

Motion made, and Question proposed. That this House do now adjourn.—[Mr. Coleman.]

11.30 p.m.

Mr. T. H. H. Skeet (Bedford)

The planning agreement concept was provided for under Section 21 of the Industry Act 1975 and it has been extensively referred to in two White Papers, "The Approach to Industrial Strategy" (Cmnd. 6315) and "The Regeneration of British Industry" (Cmnd. 5710). Yet nothing really significant has been achieved in the past four and a half years. Only one planning agreement has been negotiated, namely, that with Chrysler UK Ltd., and there have been incomplete discussions with the National Coal Board. We had a statement on that on 13th February this year.

With the British Steel Corporation, an agreement has been delayed because of contemporary problems. With British Airways, it has been delayed because of organisational changes. The Labour Programme 1976 insisted that such agreements if backed by a major extension of public ownership into the main sectors of industry would provide a Labour Government with the decisive leverage it needs". The egregious Frances Morrell and Francis Cripps, political advisers to the Secretary of State, announced in a paper to the National Energy Conference in June 1976: It has been seen that a planned energy policy would involve deciding which fuels should be used, and by whom and how they should be used, just as much as deciding how the supply industries should develop. Planning agreements thus provide the initial step in the phased movement towards the complete socialisation of the commanding heights of British industry, aided and contrived by the National Enterprise Board.

The National Coal Board was recently reviewed by the Secretary of State and its position was revealed. The right hon. Gentleman said: the planning agreement will cover forward marketing, prospects for coal, the objectives for output and productivity, financial results with implications for prices and borrowing, investment plans, capital investment, product and process development and exports. The agreement will cover the whole area."—[Official Report, 13th February 1978; Vol. 944, c. 6.] For an industry nationalised over 30 years ago, already covered by at least 50 Acts of Parliament and plagued by low productivity and high costs, what conceivable benefit is expected from the conclusion of a formal planning agreement? Perhaps the Minister will tell me.

I come to the Electricity Council, the Central Electricity Generating Board and others. Little has emerged and less is expected after 30 years of public ownership and three Acts restructuring the industry. Even the advice of Plowden on the structure of the industry seems to have been shelved, and the chairmen of the major fuel corporations are locked in public conflict over the parity pricing of fuels.

With the British Gas Corporation, while it is open to the Secretary of State to issue a general directive to the industry under Section 7(1) of the Gas Act 1972 to enter into a planning agreement with the Government, he has not done so. Informal discussion is thought to be sufficient, and such has been the calibre of chairmen that unnecessary intervention by a Government Department is not to be tolerated.

With the British National Oil Corporation, although the Secretary of State may issue a specific directive under Section 4 of the Petroleum and Submarine Pipelines Act 1975, no attempt has yet been made to cajole the corporation into a planning agreement. And while the Government hold a substantial investment in BP the Secretary of State is confused about the nature of the general agreements negotiated by the BNOC.

The right hon. Gentleman stated in the House, in answer to a question from his hon. Friend the Member for Bolsover (Mr. Skinner), that his hon. Friend will recognise that a planning agreement is involved"— in participation agreements— and that … the oil companies have entered into a treaty relationship with the Government".—[Official Report, 17th January 1977; Vol. 924, c. 14.] Yet in the following November he stated: There are no planning agreements. There are participation agreements to which BNOC is a signatory ".—[Official Report, 18th November 1977; Vol. 939, c. 1018.] Obviously, the Secretary of State is confused and now wishes to attach to the industry both participation and planning agreements.

The difficulty today is a plethora of rules, orders and demands made on industry quite beyond what the situation requires. Data-collecting is fashionable and it is of little concern whether the information is collated or utilised. It is enough for the Government's purpose that it is collected and stored on tapes for some future occasion. There is a general suspicion, borne out by the utterances of the Labour Party, that the data to be collected and planning agreements are supposed to give a thrust to a future Labour Government's drive forward against what the Labour Party has chosen to term "citadels of capitalism"

The Government should make a success of planning agreements in the public sector before use is made of then, in the private sector. That has been the experience in France, Belgium and Italy. There is no evidence that the Government have a better idea than the corporations themselves of what lies in the national interest. This was clearly evidenced over the British Steel Corporation and borne out by the Select Committee's report. It is also evident with the NEB and the Scottish Development Agency, which has lost considerable money through the purchase of bad assets. The public interest might, indeed, turn out to be based on an ad hoc Government view limited to short-term electoral advantages.

Companies in either sector are not opposed to a continuous dialogue between the Government and industry, but they see little point in a formal written document, preferring, if anything the flexible French approach, designed to be helpful to the industry in question. If planning agreements are confined to data exchange, there is little point in companies subscribing to them in view of paragraph 13 of Command 5710, which emphasises that aid will be paid in any event.

On the other hand, if the agreements go beyond the provision of information, the terms could contravene the Restrictive Trade Practices Acts 1956–76 and prove incompatible with the fair trading provisions of the Rome Treaties. This was recognised to be the case with participation agreements, and it took a recent Act of Parliament to correct the position.

An attempt to involve the unions in planning agreements is short-sighted. They have proved more interested in short-term problems and have proved slow to accept technological change and to reduce overmanning. For example, the commissioning of the new steel plant at Llanwern and the retirement of old plant have been a source of concern for the British Steel Corporation for a long time.

Participation agreements and planning agreements are cumulative and would impose an intolerable burden upon the operations of the petroleum industry. Further, they would involve an industrial inter face with two Departments, Industry and Energy.

I come to an important point which I wish to stress for the benefit of the Minister. The lessons of the past month have persuaded the House that if the 10 per cent. limit on pay increases may be enforced by unconstitutional means rather than by legislative process—namely, by refusing discretionary grants of aid or withholding contracts on public purchasing—there is no reason why the same process should not be extended to enforce acceptance of planning agreements.

This is reported to be the argument put forward in a joint committee of the Cabinet and the Labour Party National Executive, mentioned in The Guardian on 21st February: On public purchasing the report says that there can be little doubt that it can be harnessed to the needs of the industrial strategy given the 'political will to do so.' The most simple method would be to operate a black list of large firms who were unwilling to cooperate. In this respect, the study team uses the Government's black list of companies breaking the 10 per cent. guidelines as a precedent. Further, the policy has been outlined in Labour's Programme 1976. It says: Planning agreements provide a basis for channelling selective Government assistance to those firms which agree to help us to meet the nation's planning objectives … and for making large companies accountable for their behaviour and for bringing into line those who refuse to co-operate—using … the powers of public purchasing. Both public and private sector companies would be vulnerable to this approach.

Planning agreements are primarily interventionist and are calculated to achieve their purpose through agreement with the parties in an industry, including the trade unions. The purpose is the authority over or in an industry that the Government hope to secure, since they sense that Parliament would not be prepared to incorporate the authority in legislation. It is a movement away from the statute book to administrative order, thus bypassing Parliament completely.

In a Written Answer two days ago, reported at column 10 of Hansard for 27th February, the Government disclosed their disappointment at the industrial response to planning agreements, but the Government have done little to extend the concept to de State corporations which are their direct responsibility. Perhaps the Minister of State at the time revealed his hand when, on 15th March 1976, he said in a Written Answer: There are no immediate plans to enter into planning agreements covering North Sea oil operations. Under the terms of licences my right hon. Friend has powers of control over all important aspects of operations, including field development and production."—[Official Report, 15th March 1976; Vol. 907, c. 390.] It would seem that paragraph 18 of "The Regeneration of British Industry" is pure window-dressing when it says: The major nationalised industries and publicly-owned firms will also fall within the scope of the Planning Agreements system". The target, of course, lies elsewhere. Is it not the real purpose of data collection now that the answers will be used not to serve industry but to destroy it in the name of Socialism and the corporate State?

11.42 p.m.

The Under-Secretary of State for Energy (Mr. Alex Eadie)

I congratulate the hon. Member for Bedford (Mr. Skeet) on his initiative in bringing about this debate. He has raised some of the issues before, particularly during the last Department of Energy Question Time.

I think that I can best reply to the hon. Gentleman by trying to describe the system about which we are talking, because there may then be some understanding of what we are trying to achieve. The hon. Gentleman mentioned a number of industries which are the responsibility not of the Department of Energy but of other Departments.

The planning agreement system is envisaged as improving communications between Government and firms in the context of the industrial strategy. The Government's objectives for the planning agreement system are: first, better understanding and consultation with industry, and hence a better basis for formulating economic and industrial policy secondly, providing a vehicle, where relevant, for the discussion of sector working party objectives; and thirdly, better arrangements for tackling specific problems between companies and Government, and hence improving industrial efficiency.

The Government also hope that the planning agreement system will lead to improved employee participation, building on companies' existing arrangements. The system is therefore intended to provide explicitly for the company to discuss its long-term policies with its employees, with the object of enhancing the contribution of employees to the success of the company's plans.

That the major nationalised industries would be included in the planning agreements system was announced in the August 1974 White Paper "The regeneration of British Industry" (Cmnd 5710). This recognised, however, that the nationalised industries' corporate plans were already the subject of close consultation between industry and sponsoring Departments. But there are advantages for the nationalised industries in entering a planning agreement.

Mr. Peter Viggers (Gosport)

The Minister talks about close consultation between the sponsoring Department and the State corporation. Perhaps I may refer him to one specific example of this close co-operation—when the International Monetary Fund required the Government to do something about their revenue account and the Government ordered the British Gas Corporation, without consultation with the corporation, to increase its prices. Is that an example of close co-operation? Is it not an example of the fact that the planning agreements are nothing more than Socialist pie in the sky?

Mr. Eadie

I thought that the hon. Member would be advancing an argument about difficulties, as anyone could, but his last question shows that, like his hon. Friend, he completely misunderstands the whole position.

Mr. Skeet


Mr. Eadie

If there is time, I shall come to the question of the policy on inflation, the question of sanctions and the article in The Guardian. If the hon. Member will contain himself, I hope that I shall be able at least to answer—I do not know whether satisfactorily—what I think was a debating point that he was raising on this particular issue.

I was saying that a planning agreement provides access to the powers in Section 21 of the Industry Act 1975, which enable the Government to underwrite certain levels of selective assistance, especially regional development grant. It encourages union involvement in strategic planning.

The House is already well aware that the Government, the National Coal Board and the mining unions have entered into an agreement on future joint planning procedures embracing a formal planning agreement. Following from this, the industry's medium-term development plan for the next five years—now submitted to my right hon. Friend by the NCB and the unions—will be the basis for a formal planning agreement. I wish that I had time to outline that planning agreement because it is very important in relation to the argument and the debate that the hon. Gentleman has shown such initiative in bringing before the House.

But, of course, planning agreements are not the whole story. In the nationalised energy industries, we have been experimenting with various methods of achieving in the public sector the improvements in communication and consultation between Government and industry which planning agreements offer to private companies. In fact, the relations between Government and the nationalised energy industries have been conducted as though there were planning agreements for many years.

The main element in this relationship is the discussion of the various industries' corporate plans in the course of the annual planning cycle. These plans, which are revised annually, cover all aspects of the industry's business for the next, five years. But there are other elements in the relationship—for example, discussions on longer-term strategy, both on a Government-to-industry basis and, taking the industries together, in the working group on energy strategy; and, in the shorter term, the Government's role in monitoring the industries' outturns, on capital and current account, against forecast. This is a major part of my Department's responsibilities.

We are continuing to develop these arrangements for consultation and communication between Government and industries. The introduction of the planning letter system is a recent and important innovation. We propose to issue a planning letter to all the nationalised energy industries as part of the annual planning cycle. It will record our response to the main points in the industries' corporate plan and will convey policy guidelines for the future. Perhaps I can tell the hon. Gentleman that we have already sent such a letter to Lord Kearton, Chairman of BNOC.

I know that the hon. Member often questions the role of BNOC. Perhaps I can assist him in this matter. BNOC's role is in fact perfectly clear. Perhaps I may restate it. First, it is a commercial oil company running operations on the United Kingdom Continental Shelf—the Thistle field, for example, where BNOC is the operator. It is also taking part in operating committees, even where it does have an equity stake, through participation. It is thus building up a considerable fund of knowledge and experience about United Kingdom Continental Shelf development.

Secondly—I believe that this is also important—BNOC is an adviser. The Government have their own staff of petroleum engineers to study development plans. However, it is immensely valuable to have the advice of people who are actually involved in development and know about it from the inside. No one would quarrel with that. Since BNOC will be trading in considerable volumes of oil, it will be able to provide valuable advice on that aspect of the industry too, so that the balance of payments and the general benefit to the United Kingdom economy can be safeguarded.

Mr. Skeet

The Minister has been pointing out the various operations of the BNOC. What conceivable value is there in having a planning agreement which will cover BNOC when we already have rules, regulations, Acts of Parliament and participation agreements?

Mr. Eadie

I am sorry if the hon. Gentleman has not been listening. I have tried to explain that the concept of planning agreements covers people who work in the industry. It is obviously difficult to get across to the hon. Gentleman that we are talking about people rather than companies as such. The question of participation and planning agreements really involves people. It is important that that should be established.

During the course of his remarks, the hon. Gentleman talked about the role of the Secretary of State. I want to stress that the Secretary of State's role continues to be a regulatory one.

Another important development relevant to the improvement of communica- tions between Government and public sector bodies is the appointment of civil servants to nationalised energy boards. Since 1976 BNOC has had official members on its board, and we want to extend this practice to the other energy boards.

As I said at the beginning, the main objective of the planning agreement system is the improvement of employee participation and in this area there have been very important developments indeed.

As my right hon. Friend the Secretary of State for Trade announced on 28th July, the nationalised industries and associated unions are now developing joint proposals for improvements in consultation and participation. They are to report back before the Summer Recess.

This exercise must be seen against the background of the good progress that the nationalised energy industries have already made. This is particularly advanced in the coal industry, and the hon. Member must concede that if he concedes nothing else. Since 1974, main policy questions in this industry have been discussed on a tripartite basis between the Government, the Coal Board and the coal unions.

My right hon. Friend has informed the House of his intention to develop suitable joint management-union planning arrangements with the other publicly-owned fuel industries in which he is actively encouraging the development of tripartite and bipartite arrangements.

There is one further and most important way in which the objectives of the planning agreement system—improved consultation between Government and industry, and improved employee participation—are already being met in the energy sector. Last autumn my right hon. Friend appointed an Energy Commission to advise him on the development of an energy strategy for the United Kingdom and on other energy policy issues. The commission includes representatives of the energy industries, trade unions and industrial, consumer and other interests.

The record of the public energy sector in consultation and employee participation is, therefore, a good one, and it is getting better all the time. The hon. Member does the industries a disservice in suggesting otherwise.

In the course of his remarks, the hon. Member referred to a front page article in The Guardian of 20th February which claimed that the use of sanctions under existing legislation to force firms to negotiate planning agreements had been accepted in principle by a joint committee of the Cabinet and the Labour Party's National Executive Committee. The article was, in fact, reporting on a paper which had been prepared by the NEC for confidential consideration by the NEC—Cabinet Joint Working Party on Industrial Policy. The report gave a fairly accurate account of some of the measures suggested in the paper but was totally wrong in saying that these measures had been agreed in principle. The joint working party was not due even to consider the NEC paper until Thursday 23rd February.

The paper argued that, since the Government were prepared to apply sanctions to firms which break the pay guidelines, it should also be prepared to use them to strengthen the planning agreement system. But there is no real comparison. The battle to combat inflation is a vital necessity and an essential part of the Government's economic strategy. On the other hand, planning agreements, though an important part of the Government's strategy, are intended to provide the framework for better understanding and closer co-operation with leading firms in key sectors of industry. If introduced on a compulsory or near-compulsory basis, their effectiveness would be much reduced.

If the hon. Gentleman reflects on what I have said, he will see that I have tried to outline the general philosophy behind the whole planning agreement side, which is the question of participation and involvement of work people.

I hope that I have answered the main points that the hon. Gentleman raised. I shall examine very closely what he said, and if I can give further information by letter or in any other way I shall do so. I congratulate the hon. Member on his enterprise and—

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Twelve o'clock.