NATIONALISED INDUSTRIES LOANS BILL (Hansard, 25 March 1958)

§ THE MARQUESS OF LANSDOWNE
My Lords, I beg to move that this Bill be now read a second time. Its purpose is to extend for a further period of five months the powers given by Section 42 of the Finance Act, 1956. That Act provided for the making of advances from the Exchequer, through the Ministers concerned, to certain nationalised industries. The nationalised industries concerned are the public electricity, gas and transport undertakings, and the two Airways Corporations. The total of advances allowed for under the section was £700 million, and the date on which these advances were to be terminated was March 31, 1958.
The present Bill extends from March 31, 1958, to August 31, 1958, the limit of time within which advances may be made. It does not increase the limit of the amount of the advances above the original figure of £700 million prescribed in the Finance Act, 1956. This limited extension of time is required because it is appropriate that the methods of providing finance for these industries should be considered as part of the general review by Her Majesty's Government of economic policy and announced in the context of the Budget. If it should then be decided to continue the present system, these provisions would extend the power to make advances until the Finance Bill can become law. If the system should be discontinued, these provisions will give time for some other method of financing to be introduced. Your Lordships may wish to know that the unexercised powers under Section 42 of the Finance Act, 1956, are expected to amount to about £120 million. The estimated requirement during the period for which this Bill makes provision is about £117 million. The effect of the Bill, therefore, will be to give a natural life to the powers which Parliament has already granted. I beg to move.

§ LORD PETHICK-LAWRENCE
My Lords, I do not rise to oppose a Second Reading of this Bill. On the face of it, 434 it is a very modest little measure, providing for only a slight extension of time on the law as it stands at the present moment. I want to make it perfectly clear, however, that we on these Benches are very apprehensive of the ultimate intentions that lie behind this Bill The noble Marquess who moved its Second Reading did not fully acquaint your Lordships with the situation, and therefore it falls to me, I think, to be a little more explicit over this matter.
Up to two years ago, the nationalised industries obtained directly from the public the money they required for development. First of all, they were inclined to borrow from the banks; then, when they had borrowed a sufficient amount, they went to the public for a loan (and this is the important point) guaranteed by the Treasury. And not only was it guaranteed by the Treasury, but if the amount required was not fully subscribed, Government Departments (which as your Lordships will know have considerable holdings of gilt-edged stocks) subscribed the necessary amount; so that the loan was not only guaranteed but actually supported by Her Majesty's Government. The disadvantage of that method was that the nationalised industries went to the market at times which were not necessarily convenient for public finance, and so, in order to bring the borrowing into line with what the Treasury required, the present Prime Minister, when he was Chancellor of the Exchequer, substituted the present method under which Her Majesty's Government should finance these things and raise money by loans as a whole (what are called "global" loans) in order to pay for the capital development of the nationalised industries.
The reason why we on this side of the House are alarmed, as were some of our colleagues in another place, is that in the last few months there has been a great deal of loose talk about the nationalised industries, in whole or in part, being expected to go to the public without a Government guarantee and without Government support; and that that will be the method proposed by the Chancellor of the Exchequer in his Budget speech. Some authorities are suggesting that that is what the Chancellor of the Exchequer will say. It may be something quite different: he may 435 have some perfectly reasonable proposal, which we shall regard on its merits, and perhaps be able to support. Nevertheless, it seems to us important that the five months' period has been selected for it would appear that the Chancellor of the Exchequer proposes to take some new method of financing these nationalised industries. If that be so, it seems to us very likely that it will be of a kind to which we shall take very considerable exception.
Let us just look at the matter. To some people who have not thought about it, it may seem quite reasonable that these nationalised industries should have to go to the country, as ordinary private enterprise might do, to get money which it must raise on terms which are appropriate, granted that the public have confidence in these nationalised industries. But what is entirely forgotten by those who take that view is that these nationalised industries are of an entirely different character. In the first place, they are fundamental monopolies, because they are the basic sources of power, heat and light required for the industries of the country, and they must expand. It is certainly not for the general public, faced with an issue, to decide how far these industries should expand. That must be a matter of political decision. So far, the Government have recognised that fact, and the present Government have been notable for the fact that they have declared in advance exactly how much these nationalised industries ought to be expanded. They have changed the figure from time to time, and it is ludicrous to imagine that it is for the general public to come to a decision on purely financial grounds.
Another factor to be taken into account is that, unlike private industries, these industries are not free in their dealings. An ordinary private enterprise may make a profit by increasing the price of what it sells—the price of its goods or services; and it can cut out a part of its service which is unprofitable. Under the present law it is not open to the nationalised industries to do that. They are under the authority of Her Majesty's Government. Many of them cannot increase their prices except with Government permission; nor can they cut out certain services which are neces- 436 sary. They are, therefore, in a totally different category. Hitherto they have gone to the Government and offered securities which are equivalent to debentures or loans of that kind at a fixed rate of interest. But the public enterprises have not gone to the public for what are known as equity shares, which are entitled to profits in certain circum-stances. There is nothing comparable with equities in this case at all. As I have pointed out, there are regulations, orders and Government control. The Government could prevent a profit from being made; they could make the profits enormously greater, and the public could not possibly subscribe in the dark without knowing what the Government intend in the matter.
Therefore, we come to this situation: that if it were possible for these industries to go to the country without a Government guarantee, the general public would want a far higher rate of interest, and therefore it would be far more costly to the country to have these loans than if the industries go with a guarantee. As a matter of fact, the Government could not allow these nationalised industries to default and, therefore, however high an interest rate were charged for the loans, the Government would in the last resort have to go behind them to support them. As to an equity kind of loan, which depended on the making of profit and not on a fixed rate of interest, that, as I have pointed out, would be ludicrous, in the particular circumstances in which a nationalised industry is placed.
These are not opinions of Socialists alone, but opinions that have found a place in a paper which is very far from being Socialist, the Economist, which never takes a Socialist point of view on anything. This is what the Economist says: The most likely result of sending nationalised industries to the market without official support, indeed, would probably be that some of them would not be able to raise the money. That, of course, is the fact. So if it is the intention of the Government to create an entirely new method of raising the money from the public for the floating of the costs of the necessary extension of the nationalised industries, they will find a very considerable opposition not merely from Members in this House on the Opposition side, or Members of the other 437 House, but, I am confident, from persons of much public and financial knowledge throughout the country. Of course, there may be nothing in the point, but since the Government do not tell us why they are introducing this Bill—it is a case of "Open your mouth, shut your eyes and see what we are going to give you later on"—we feel it necessary to make this protest at the outset, so that the Government will know that they cannot make any such changes as I have hinted they might make, without there being very strong opposition.

§ THE MARQUESS OF LANSDOWNE
My Lords, I am sure we have all listened with great interest, as we always do, to the observations of the noble Lord, Lord Pethick-Lawrence. Tempted as I might be—I will not say to take up the challenge, but to follow the interesting discussions he has put before us, I know that he, of all men in this House, will realise that it is quite impossible and 438 quite inappropriate for me to do so, Whereas he says that he has got to open his mouth and shut his eyes, I think it is for me to shut my mouth and keep my eyes wide open. In those circumstances, I hope that your Lordships will now give the Bill a Second Reading.