HC Deb 02 July 1981 vol 7 cc989-91
1. Mr. Whitney

asked the Chancellor of the Exchequer if he will make a statement on the operation of the policy of applying cash limits to the nationalised industries.

3. Dr. Mawhinney

asked the Chancellor of the Exchequer if he will make an assessment of the effect on the public sector borrowing requirement of the terms on which subventions are given to nationalised industries as regards earmarking of funds for capital and current expenditure.

The Chief Secretary to the Treasury (Mr. Leon Brittan)

Ordinary market disciplines do not apply to the raising of finance by industry in public ownership. The amount of external finance, therefore, has to be determined by the Government. The limits set for each industry are derived from their medium-term objectives and take into account their investment programmes and their ability to generate finance for such investment internally. Government finance is not generally hypothecated to particular purposes.

Mr. Whitney

I thank my right hon. and learned Friend for that statement. Does he think it surprising that chairmen of the various nationalised industries should undertake expensive and extensive political campaigns, apparently in conjunction with the relevant trade unions, to force the Government to relax their policies on public sector spending? Will my right hon. and learned Friend confirm that in the case of British Railways, 1 per cent. less in wage increases could provide funds for a 5 per cent. increase in investment?

Mr. Brittan

I agree with my hon. Friend. Such campaigns are not only surprising but deplorable. I do not believe that the money obtained by nationalised industries, from whatever source—whether through what they charge for their products or from elsewhere—should be spent in that way.

The figure quoted by my hon. Friend is correct. Each 2 per cent. off wage costs in the nationalised industries generally would save about £250 million per annum. Each 1 per cent. off total costs would save about £300 million. That would give substantial scope for investment.

Dr. Mawhinney

Is my right hon. and learned Friend aware of the growing concern about the practice of giving large amounts of taxpayers' money to nationalised industries without any policy guidelines or restrictions being set by the Government? That money could be used for excessive wage settlements. Does my right hon. and learned Friend share that concern?

Mr. Brittan

I share the concern that money given to nationalised industries should be used sensibly. It is precisely because of our efforts to ensure that that happens that some nationalised industries are uncomfortable with our policies.

Mr. Shore

I am sure that the House can do without the Chief Secretary's homilies addressed to the nationalised industries about what he calls political activities—considering that they are being politically assaulted in the most absurd and ideological way. Does the Chief Secretary agree that in the light of the experience of last year—and, to some extent, this year—in which he has had progressively to change EFLs for different and important nationalised industries, he has set the target at a ludicrously restrictive level? Is not the only effect of doing this to drive up prices faster in the nationalised industries than anywhere else? Indeed, last year prices increased by 22 per cent. Why does not the right hon. and learned Gentleman reconsider his EFL policy?

Mr. Brittan

The right hon. Gentleman cannot have it both ways. He cannot criticise us for having unrealistic EFLs and then criticise us for changing them. It is a strange sort of assault on the nationalised industries that increases planned investment from £4.5 billion in 1980–81 to £5.2 billion in each of the next three years. Many private concerns would like to experience that sort of assault.

Mr. Renton

As every household and every company in the private sector separates clearly the money that it borrows on capital account from the money that it borrows on current account, does my right hon. and learned Friend think that it would help if that were done much more visibly and clearly by nationalised industries? If that were done much more ostensibly, would it not help the British public and members of this honourable House to evaluate the performance of the nationalised industries' capital programmes?

Mr. Brittan

I agree that we could usefully make the distinction clearer. However, full figures for public corporations' current and capital expenditure are shown in the national income Blue Book. It may be that we should bring the distinction more to the fore.

Mr. Dubs

Is it not a fact that the Government have been refusing nationalised industries opportunities to indulge in profitable capital investment? Does not that inevitably make the task of the nationalised industries more difficult? Does the right hon. and learned Gentleman agree that by following this policy the Government are indulging in a vendetta against nationalised industries?

Mr. Brittan

I find it a strange sort of vendetta that increases by 15 per cent. the amount of money available to the nationalised industries. The answer to the first part of the hon. Gentleman's supplementary question is "No". In the investment of nationalised industries over the past decade there is no evidence to support the suggestion that genuine investment that can be productive has been starved by Government rationing.