IRON AND STEEL (FINANCIAL PROVISIONS) BILL

HL Deb 04 April 1960 vol 222 cc626-66

2.51 p.m.

Order of the Day for the Second Reading read.

THE PAYMASTER GENERAL (LORD MILLS)

My Lords, I beg to move that this Bill be now read a second time. The Bill we are considering to-day is short and simple in its purpose. Under Section 5 of the Iron and Steel Act, 1953, the Minister of Power can, with the approval of the Treasury, provide or make arrangements with other persons for the provision of steel capacity needed in the national interest, if the Iron and Steel Board have reported to him that they cannot secure the provision of this capacity in any other way. As the law now stands, the money which the Minister of Power needs for such purposes can be drawn only from his Departmental Vote.

Your Lordships will be aware that the Minister has used the powers I have mentioned to conclude two loan agreements, one with Colvilles, Limited, the other with Richard Thomas and Baldwins, Limited, and the purpose of this Bill is to enable him to finance these two loans from issues made by the Treasury below-the-line from the Consolidated Fund instead of above-the-line from his Departmental Vote. It is a question of suiting the Government's accounting procedures to the work in hand. They are commercial loans; they are repayable, and bear interest. It is therefore sensible and appropriate to class this expenditure with other revenue-producing, repayable expenditure below-the-line, and this is just what the Bill does. These agreements were negotiated well over a year ago.

On November 18, 1958, I told your Lordships that the Government had decided to secure the construction of two new strip mills, one in South Wales and one in Scotland, and that the work would be undertaken by Richard Thomas and Baldwins, Limited, and by Colvilles, Limited. I then also said that the Government would lend the two companies the money they would need in addition to what they could provide from their own resources for this purpose. On January 21, 1959, I made known to your Lordships the terms on which the Government were prepared to advance up to £50 million to Colvilles, Limited, for the Scottish strip mill, and the terms on which up to £60 million would be lent to Richard Thomas and Baldwins, Limited, for the new strip mill to be constructed at Newport, Monmouthshire. During the second half of last year it became clear that the demand for sheet steel was likely to be even greater than had been previously estimated, and last December the Government increased the maximum of the loan to Richard Thomas and Baldwins, Limited, to £70 million in order to accelerate the scheme and to extend it to provide half as much steel again.

May I now return to a point of detail in the Bill itself? The amount provided in the Bill is limited to the maximum amount of the two loans, and the time in which issues may be made under the Bill is limited to the period in which advances may be taken under the loan agreements. To dispel any possible uncertainty let me assure your Lordships, as my right honourable friend the Minister of Power has assured honourable Members in another place, that none of the amount of £120 million provided in the Bill will be used for any other purpose than the loans to Colvilles, Limited, and Richard Thomas and Bald-wins, Limited. The companies may draw less than £50 million and £70 million respectively, but not more.

The agreement with Colvilles, Limited, provides for making a review of the balance of the loan in October, 1962, in order to see whether, in the light of the company's situation at that time, any reduction can be made in that balance; and the Government will review the arrangements with Richard Thomas and Baldwins, Limited, in connection with any rearrangement of the company's capital structure before denationalisation. Further, Sir Andrew McCance, the Chairman of Colvilles, has recently confirmed to my right honourable friend the Minister of Power that: … it is the intention of the Board of Colvilles, Limited, to draw on the loan of £50 million from the Government to the smallest extent practicable. For all these reasons the advances made to the two companies may prove to be less than £120 million. But my right honourable friend the Minister of Power has given a clear undertaking in another place that any balance remaining will remain unspent. Nor is there any question on re-issuing sums which might be repaid before the term specified in the Bill; indeed, legal advice is that there is in any case no power in the Bill to allow this. The money provided in the Bill will be applied to these two contracts only.

Your Lordships will appreciate that the Bill, being concerned only with the method of providing money for the loans, is not concerned in any way with the Government's policy towards the iron and steel industry. Nevertheless, I hope that your Lordships will allow me to review briefly the circumstances of the loans themselves and to say a little about their purpose. I should also like to touch on some criticisms of the loan agreements which have been voiced in another place, and to show why the Government are wholly satisfied that the agreements serve the national interest.

We must look back as far as 1957. In that year the Iron and Steel Board published a Special Report on Development of the Iron and Steel Industry in which they drew attention to their estimate of the need for another strip mill by about 1962 to meet the future demand from industries using sheet steel: first and foremost the motor-car industry, but also the producers of durable consumer goods, such as cookers, refrigerators, washing machines and so on, and for export. The publication of the Board's report gave rise to much public discussion about the need for another strip mill; about the likely rate of expansion of the user industries; about the siting of the mill; about its effect on employment; and about the problem of finance. There was, naturally, a variety of opinion about the time when another strip mill would be necessary: but the Government, advised by the Iron and Steel Board, were convinced that a large increase in sheet steel capacity must be secured as rapidly as possible. I am sure we all remember the keen interest awakened by the question of the site. The rival claims of Wales and Scotland were strongly urged. Wales was feeling sharply the effect of the modernisation of the sheet and tinplate industry, which brought about the inevitable closure of the hand mills which had served the country so well in the years that had passed. But Scotland, relying in the main on shipbuilding and heavy engineering, was in urgent need of other industries which would vary the pattern of production, strengthen her economy, and help to deal with her unemployment problem.

To return to Wales, Newport, in Monmouthshire, was agreed to be a natural site. Richard Thomas and Baldwins, Limited, could build the capacity there, and technical opinion was satisfied that a strip mill situated at Newport would be a sound economic proposition. The company had not yet been denationalised, and an early start on a strip-mill project would necessarily require Government finance. But Scotland's urgent need required further consideration of the problem. Colvilles were already undertaking developments at Ravenscraig, and it was possible for the strip-mill scheme to be fitted economically into these developments if the finance was available. The amount required, £50 million, was great. In January, 1958, Colvilles had raised £6 million by issuing debenture stock, but to raise £50 million would, in any case, have presented a problem of quite a different order; and by the time the scheme came under consideration the steel industry had been obliged to give up any attempt to go to the market for money so long as the threat of possible renationalisaton continued. These were the circumstances in which the Government decided that an immediate start should be made with the schemes to increase sheet steel capacity, by Colvilles, in Scotland, and by Richard Thomas & Baldwins, Limited, in South Wales, and that Government finance should be available to make this possible.

I have mentioned criticisms of these arrangements, and particularly of the arrangements with Colvilles, Limited. On the one hand, it has been said that public money should not be provided to finance a denationalised steel firm which could quite well go to the market in the present circumstances. On the other hand, objection has been raised to the terms of the agreement with Colvilles. It has been argued that a high interest rate should have been demanded, or that the Government should have taken an equity interest. The first criticism is, I submit, invalid. The agreement was not made in present circumstances. It was made at a time when Colvilles were quite unable to go to the market; and if the scheme was to proceed without delay, there was no alternative to Government finance.

LORD WILMOT OF SELMESTON

I wonder whether the noble Lord could say when the agreement was in fact made.

LORD MILLS

The agreement was made in the winter of 1958–59, and I announced it to your Lordships' House, as I have already said, in January, 1959.

VISCOUNT ALEXANDER OF HILLSBOROUGH

I am sorry to interrupt the noble Lord, but in that case could he tell us during the course of his explanation what were the circumstances then which prevented them from going to the market? They were paying at that time, I think, 11 per cent.

LORD MILLS

In answer to the noble Viscount, I have already said that it proved impossible for a steel-making firm with the threat of renationalisation hanging over it to raise the money to the extent required.

LORD STONHAM

If the noble Lord will allow me to interrupt him, can he say, if that is true, how it was that other steel firms managed, by the end of 1959, to raise a total of £60 million on the market by the issue of ordinary shares?

LORD MILLS

Surely the noble Lord has in mind that that figure was made up of a number of small subscriptions, compared with the £50 million which Colvilles had to face. They had to face it when the demand in Scotland was not there, in the hope that the demand would accrue. I doubt very much whether the noble Lord himself would have advanced the money in those circumstances.

I would add that, the contract having been made, the Government cannot accept the line of thought that would suggest that a freely negotiated contract—which this was—should be broken when circumstances alter. As for the second criticism, the terms agreed were the best and the fairest that could be negotiated in the circumstances. It must be remembered—and again I am repeating what I have already said—that in 1958 there was no certainty of an early market for strip-mill products in Scotland. It was expected that the market would develop slowly, and that the establishment of user industries would take time; and there was a very considerable risk involved. The Government's agreement with Colvilles took cognisance of these facts, and I think we shall all rejoice to see that our decisive action is already drawing new industry to Scotland. As to taking equity in Colvilles, which was the other criticism levelled, it is hard to see how anyone could suppose this to be compatible with the Government's policy of denationalisation of the steel industry.

VISCOUNT ALEXANDER OF HILLSBOROUGH

Why?

LORD MILLS

Because the Government believe that these industries are better conducted by private enterprise.

VISCOUNT ALEXANDER OF HILLSBOROUGH

But what is the difference in principle between that and a former Government's action in relation to the Anglo-Persian Oil Company? That action has redounded to the very great profit of the nation at large without interfering, apparently, with private enterprise management.

LORD MILLS

I do not think the two things are comparable at all. These loans will secure solid benefits to the country, a rapid increase in sheet-steel capacity, additional employment in Scotland and South Wales and the attraction of new steel-consuming industries into these areas. I invite your Lordships to give a Second Reading to the Bill, so that the loans to Messrs. Colvilles and Richard Thomas and Baldwins may be financed in the normal manner in such transactions. I beg to move.

Moved, That the Bill be now read 2^a.—(Lord Mills.)

VISCOUNT ALEXANDER OF HILLSBOROUGH

I am not clear as to the exact terms on which they are borrowing. At the time when the noble Lord made the announcement it was to be on the most favourable current borrowing terms. I have seen it stated since that they are repaying at least at 5½ per cent. Is not the most favourable basis of Government borrowing, generally speaking, the level of the rates paid on Treasury Bills? If so, what is to be the index of rates paid?

LORD MILLS

The rate of interest is related to the rate at which the Government can borrow when the actual instalment is taken. I think that is clear.

3.12 p.m.

LORD WILMOT OF SELMESTON

My Lords, the noble Lord who has presented this curious little Bill to the House this afternoon is obviously nearly as uneasy about it as we are. The noble Lord has a long record of distinguished public service, in which very often he has put his undoubted outstanding business ability at the service of the State, much to the benefit of the taxpayers and others. I can relate his apparent uneasiness to-day only to the fact that any businessman looking at this transaction must be somewhat shocked about it. For it really is, in my view, one of the most indefensible pieces of business that has been brought before this House since I have been a Member. That is not so very long, I know; but this is a very bad business.

Here we have an agreement to lend money to a privately owned undertaking, made years before it is proposed to implement it, with, so far as I can see, no terms in it: the terms to be what they turn out to be when the thing is carried out one of these days. Does any banker make loans on those terms? When one borrows money from the bank the terms are either fixed or they are related to the bank rate ruling at the time. I have never seen an agreement to lend money by anybody to anybody made upon such loose terms as these, let alone an agreement by which public money, for which we are all trustees, is to be lent to a privately owned commercial undertaking.

What is the need for this Bill? There are already in the legislation which has been passed ample powers to do what should be done, which is to find public money for publicly owned undertakings if it is necessary in the public interest that some development should take place. That is the case in regard to the Richard Thomas and Baldwins loan; and I do not see why this Bill is necessary. The loan of public money on proper terms to a publicly owned undertaking is a very proper transaction, and as the owners are the same as the lenders it is purely a book-keeping transaction. That will continue to be the case so long as Richard Thomas and Baldwins are publicly owned. But if this is a loan of public money in anticipation of the same of this undertaking to private enterprise, then it is a highly questionable business.

So far as Colvilles are concerned, I can see no justification for it at all. Here is a company who are making very good profits. The last recorded dividend that I saw was 14 per cent. on the ordinary shares, and the year before that I think it was 11 per cent.; and the capital profits that have accrued to the fortunate shareholders in this undertaking are enormous. There is absolutely no reason why this company should not go to the market and borrow the money they want for their shareholders' undertaking from the proper place from which commercial people borrow money.

In 1958 they borrowed from the market £6 million, on 6 per cent. debentures at 99. But when they borrowed from the market they very properly had provisions for trustees who watched the security of the loan during its currency; they had a debenture which was a first charge on Vie undertaking; and they had conversion rights which enabled the lenders to convert their loan into equity stock as soon as it became of advantage to do so. Why should not such terms be included in the loan that is being made by the Government to the same undertaking? Why has not the public interest the right of trustees to watch the situation, and to conversion rights, so that if this public loan proves to be profitable, as the chairman of Colvilles says it will be, advantage can be taken of it?

He has been very frank with his shareholders—much franker than the Government have been with the public whom we represent. He has told the shareholders that borrowing this money from the Government on these remarkable terms will turn out very profitably for the shareholders. And I expect he is right; because, being one of the ablest men in the industry, he knows what he is talking about. He knows that he will make a big profit out of this agreement. Yet the lenders are not to have a share in it. They will get their money back one of these days, having lent it at rates far below the current rates, with no security at all, except the right to call for a second debenture, which is about the most insignificant security that anybody could invent and in case of trouble would be of no use at all.

If the company did not want to go straight to the market, they could have taken another course which many other big public undertakings have taken; that is to say, they could have made use of the facilities offered by the Finance Corporation for Industry, which was set up for this sort of purpose. Had they gone there, wanting to get the money somewhat cheaper than they would have got it on the market—and that, in my view, would have been the proper place to go—they would have been subject to rigorous terms in the interests of the people who were lending the money. I noticed an interesting reference by the Chairman of the Finance Corporation for Industry to the purpose of his Corporation and the nature of the arrangements which they make when they make loans like this. He said: As you know, under our Charter we can only make advances to new projects which will be of benefit to the national economy, and even then only when the required finance cannot be obtained from any other source. This means that in the initial stages of any venture which we are financing it is impossible to determine whether it will succeed or not. In the event of the venture not achieving what was hoped and expected, all we can look for is the small margin on the interest rate. … In the event, however, of the venture succeeding, we feel we are entitled to some reasonable return for our courage in providing the necessary finance. Broadly we do this by attaching conversion rights in the equity of the concern to our loans or by taking options to subscribe for shares". And that is a very proper way to administer this public undertaking. The right honourable gentleman, however, has done nothing of this. He has done nothing to secure that if there are profits accruing from this cheap loan, as the chairman of the company says there will be, the public will get any share of them.

This company has had very good luck in raising capital. I am convinced that they could have raised this capital on the market, and a great many people who know much more about it than I do are equally convinced. After all, it is not so many years ago that they issued 10 million ordinary shares. Those ordinary shares were over-subscribed thirteen times. They were issued at a price of 26s., and the last quoted price was 74s. A company whose equity record is like that does not need to be treated in this highly generous way out of public funds. What the noble Lord has said to-day in no way goes to justify this transaction, because in this company there is already a large public investment. Of the £64 million of capital of all kinds employed in the business, or subscribed for the business of Colvilles, only £16 million has been subscribed by private subscribers, and £4 out of every £5 of Colvilles' capital is still publicly owned. It seems to me quite monstrous that, in those circumstances, an agreement should have been entered into, years before it was to be implemented, promising to lend public money upon these outrageous terms to one of the most prosperous undertakings in Great Britain. It cannot be justified.

3.24 p.m.

LORD GRANTCHESTER

My Lords, I agree with the noble Lord, Lord Wilmot of Selmeston, that the Minister showed some uneasiness in introducing this Bill. I can well understand that, having regard to the experience he has had in private industry. As I understand it, his case is that he is already authorised to find this money by Section 5 of the Iron and Steel Act, 1953, and that, strictly speaking, no new legislation is necessary at all. I understand that to be the position but I also understand that there is some doubt whether, if he relied on the 1953 Act, the money provided would appear in the Consolidated Fund Account above-the-line or below-the-line.

Personally, I am not at all sure that this comparatively recent innovation of putting items "below the line" is a very good one anyway. It certainly leads a Government along a path which many of us deplore, because we do not think that any Government does commercial transactions very well; and certainly if ever there was evidence of that fact, this Bill is evidence enough that Governments do not do commercial transactions at all well. What a Government should be directing its mind to is to ensuring efficiency by allowing a much more rapid rate of depreciation than is permitted for tax to these industries in this country. While I am referring to the Act of 1953, I should like to ask the Minister one question. It would be interesting if he would tell us whether he or any one of his predecessors has taken any action under that Act for the provision of additional production facilities outside Great Britain for mining ore or manganese ore, a matter which is referred to in the second paragraph of the Explanatory Memorandum attached to this Bill.

As I was saying, the Minister must have found it very embarrassing to introduce this Bill. We have been told that it authorises two loans—£50 million to Colvilles and £70 million to Richard Thomas and Baldwins—out of the Consolidated Fund, to be shown "below-the-line". First of all, this is a dangerous method of financing. It is a method which is likely to be inflationary, and certainly unless balanced by additional savings. That is expectation at best and may turn out to have been but wishful thinking. There is only one safe course for any cautious and responsible Government to follow, and that is neither to spend nor to lend money which it has not raised either by taxation or in the market. Any other method of spending or lending runs the risk of causing a renewal of inflation.

The Minister says that these loans should be provided in the same way as other commercial loans. Some of these loans were discussed in a recent debate. So far as we on these Benches are concerned, we do not think the Government should make loans to private companies for commercial purposes at all. It is very difficult to list these loans. As I understand it, in this case only £1 million will appear this year with other items "below-the-line", and probably some £30 million more each year for four or five years ahead. With these odd items included in a figure below-the-line, it becomes extremely difficult to sort out what the Government are doing in commercial loans.

I would also draw attention to the unsatisfactory way in which Parliament was made aware of the Government's intention to make these two loans. As the Minister has told us, it was in the summer of 1958 that consultations took place between the Minister and the Board which was advocating the provision of additional facilities for steel production. Then there was a statement in another place that the Government proposed to help towards this end.

LORD MILLS

And in your Lordships' House.

LORD GRANTCHESTER

Yes; I will come to that. Finally, the details of the help proposed were given in reply to three questions in another place; one in January, 1959, one in March, 1959, and one in December, 1959. It was not until December, 1959, as I understand it, that Parliament was fully aware of the terms and full implications and of these loans.

LORD MILLS

I should like, with your Lordships' permission, to correct that statement. The December, 1959, announcement was an extension of the Richard Thomas and Baldwins loan from £60 million to £70 million.

LORD GRANTCHESTER

I said the full implications. It is true that that last announcement was merely an extension of the amount of money to be provided; but that fact was. I think, covered by my words "the full implications of these agreements". There was no debate in another place on the terms, and there was no debate in your Lordships' House on the terms. The Minister says that the announcement was made on January 21,1959. Well, some of us on that date were engaged in a meeting of the Council of Europe at Strasbourg, so I personally was not in the House at the time it was made. I do not quite recollect how the announcement was made, but certainly, so far as I know, there was no debate. It may have been just an announcement, the implications of which were perhaps not fully realised at the time. I do suggest that we ought to say, and say very clearly, that this is not a satisfactory way of conducting a commercial transaction or of exercising supervision over Government expenditure or of considering the proper terms upon which trust money should be invested. I entirely agree with the noble Lord, Lord Wilmot of Selmeston, when he says that this money should be treated as trust money in the hands of the Government.

I do not consider that the Government can shelter behind a mandate in this matter, for if there was one matter upon which the electorate expressed themselves clearly it was that they did not wish to have any more of their money put into the steel industry. Certainly we all know that the steel companies, including Colvilles, made it abundantly clear that they wished and preferred to stand on their own feet and did not want to be controlled or financed by the Government. Nor is it sufficient excuse for the Government to say, as they do, that in 1958, when this matter was being discussed, there was a General Election pending and that in the uncertainty caused by the announced intention of the Labour Party, should they be returned, it was impossible for the steel companies to raise money in the market.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, had not the position of the Labour Party been made perfectly clear as far back as 1951, seven years before, and in the intervening period the iron and steel industry had found no difficulty in raising the money they wanted?

LORD GRANTCHESTER

Whether that is so or not—

VISCOUNT ALEXANDER OF HILLSBOROUGH

It is so.

LORD GRANTCHESTER

Even if it is so, that was not the point I was trying to argue. The point I was trying to argue was that even if the Government were correct in saying that this money could not have been raised owing to the attitude of the Labour Party in 1958, the Government knew at that time—I am willing for the moment to admit or take the point that the Government make—that the money was not actually required until 1961 to 1965. So they could at that time, and surely should, had they been commercially minded, have inserted a proviso in any agreement that if the result of the Election should make it possible to raise the money in the market their promise to find the money should no longer apply.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, what the noble Lord really means is that the attempt to get this agreement—and they got it in 1958—was solely for the reason that they were afraid that they were going to lose the Election, and so they made a corrupt bargain before the Election. Is that what you mean?

LORD GRANTCHESTER

I did not go so far as that. I think it was a matter of sensible commercial foresight, without bringing in speculation on the result of the Election, that if at the time the money was required it should be possible to raise the money in the market, then the Government's promise to find the money should no longer apply. But obviously the Government were not commercially minded. That is one of the reasons we think they should not dabble in what they are now pleased to call commercial loans. I do not like to suggest that the Government, even if they made a stupid contract, should unilaterally break the agreement they made. Had it been a commercial agreement or an agreement entered into commercially by private persons, this agreement, I think, would have been legally quite unenforceable, as the noble Lord, Lord Wilmot of Selmeston, has implied. But surely the Government should now go back to Colvilles and say that after what both parties to the agreement said both before and during the Election, any question of Government loan now should be dropped by mutual consent.

In the case of Richard Thomas and Baldwins, Limited, the Government were laying down their intentions in the circumstances of 1958; laying down their intentions to what, without any disrespect to Richard Thomas and Baldwins, I must call their own puppet. But they made it clear, even in 1958, that if they should continue in power they had quite different intentions; certainly no intention of continuing to keep the steel industry nationalised. I contend that in the Election promises they made they spoke both for themselves and for their puppet.

I suggest that the Government should get on quickly—for if they do not get on quickly it may not be too easy an operation—with their promise to carry out their programme of de-nationalisation. I think that their puppet, Richard Thomas and Baldwins, Limited, must accept the consequences of being a puppet and now take steps to free itself, to grow up and to act for itself. This is the path which the Government, who, after all, are ultimately responsible for its management, have marked out for it. So, in conclusion, I suggest that the Government would find it much less embarrassing to withdraw this Bill rather than to pursue it, and by so doing, and only by so doing, will they be able to convince some of us that when they speak of their principles they mean something and have some intention of trying to practise them.

3.40 p.m.

LORD STONHAM

My Lords, it can rarely happen that a Bill in another place and here in your Lordships' House is attacked by every speaker who addresses Parliament except for the unfortunate Minister who has the responsibility of persuading the House that the Bill should go through. I am not suggesting that everybody attacks the Bill for the same reason, but never before in my experience has it been the case that a Bill has been attacked so vehemently. There is no Member of another place for whom I have greater regard than the right honourable gentleman the Minister of Fuel and Power. I have not personally known the noble Lord, Lord Mills, long enough to claim friendship, but a least for his utterances I have the same respect. Therefore, nothing that I now say can be taken as having any kind of a personal implication, but I do share with other noble Lords who have spoken a feeling of regret that this afternoon he should be in what I regard as an embarrassing position.

As I see it, this Bill is one of the rotten fruits of the Government's attempts to denationalise the steel industry; that is why it is so bad. It arises directly from the fact that although the capital of the steel industry is still four-fifths publicly owned, six-sevenths of the industry is in private hands as far as policy and profits are concerned; and, since the principal concern of private interests was with profits, and since there was therefore a feeling that they should restrict production, or at least not allow production to develop at the same tempo as the Government quite rightly require, there has been a holding back in capital investment and a consequent shortage of steel. That is why we have this Bill now. In particular, this Bill—the terms of which were described by a Conservative Member in another place as "shattering and dastardly"—arises directly from the Government panic on the actual and pending shortage of strip steel. The Government's forecast of our steel requirements was absolutely right, and the manufacturers' estimate was wrong; therefore, on economic grounds, the Government are 100 per cent, right in their determination to provide the money for these two new mills—there is no question about that. On social grounds it is also 100 per cent. right that one of the mills should be in Scotland. But the terms of the £50 million loan are 100 per cent. wrong.

It is perfectly clear that the announcement, made on January 22 last year by the noble Lord, of what Ministers have described as a "solemn contract", which was, in fact, a stupid, perhaps even a sinister, contract arose because, in their panic the Government approached Colvilles and indeed bribed them to engage in an undertaking about which, at that time, the firm was not too keen. There is no question of Colvilles coming to the Government; the Government went to Colvilles and offered these terms. Long before this Bill was presented to Parliament, it was obvious to the Ministers that the Colvilles loan was unnecessary and that its terms were insupportable; so, in order to ease its passage through the House, they have coupled with it the £70 million to Richard Thomas and Baldwins. This transparent artifice, as I regard it, deceives no one, because we are all aware that the Richard Thomas and Baldwins loan could have been financed by other means. From the Government viewpoint, however, these tactics have the advantage that, although everyone condemns the Colvilles part, we cannot reject the Bill. In that respect I do not agree with the noble Lord, Lord Grantchester, in suggesting that the Government should withdraw the Bill. We want these mills in Scotland, and we want them making profits.

LORD OGMORE

My Lords, may I ask the noble Lord whether he is correct in saying that it is economically right to have two mills? Was it not in fact the view of Richard Thomas and Baldwins that the setting up of the mills, one in Scotland and one in Wales, was going seriously to affect the economic development and the running of the mill in Wales?

LORD STONHAM

I think the noble Lord is wholly wrong, because Richard Thomas and Baldwins originally asked for £60 million. The entire amount which is going to be invested by Richard Thomas and Baldwins is £110 million. It is economically a completely satisfactory unit. I agree that it would be better to have the whole thing in Wales; but I adhere to what I say, that the Government were 100 per cent. right to have the total production of these two mills, even if one was in Scotland. I do not adhere to what I regard as the more parochial view expressed by the noble Lord, that the whole attempt should have been made in Wales.

LORD OGMORE

My Lords, may I ask the noble Lord whether he would agree that it is not a parochial view at all, but it was a view expressed by Richard Thomas and Baldwins that for continuous production you must have the whole process in one mill, and not split it up into two—whether that process was in Scotland or in Wales, it should not be split up into two? That was their viewpoint.

LORD STONHAM

My understanding of the matter is that there will be two complete strip mills to be erected—that is, in fact, two continuous complete processes, one in Wales and one in Scotland. That is perfectly satisfactory. If you have areas, such as Wales, with 2.7 per cent. unemployment, and Scotland, with 3.9 per cent. unemployment, particularly in the district concerned, then I think it is common sense and common humanity to have one of the mills in Scotland. I, for one, am applauding the Government for that part of their decision. I am not objecting to the money; I am objecting to the terms. But I would submit that we can seek to amend the Bill, if we cannot reject it; and I hope to give an indication of the points which I think noble Lords on this side will pursue.

I should like to draw attention to what I regard as a fundamental difference between our point of view and that of the Government. It will be in the recent recollection of the House that last Tuesday, in the Highlands and Islands Shipping Services Bill, I described the proposal to build and charter ships as "nationalisation", and the noble Viscount, Lord Massereene and Ferrard, said that I was "slightly off the rails". He added—I quote [OFFICIAL REPORT, Vol. 222 (No. 61), Col. 431]: You cannot regard this Bill as a nationalisation Bill. I do not think any of us objects to State intervention for communal purposes; … What we object to is when the State seeks to seize these great wealth-producing industries which produce our standard of living". In other words, when it comes to losses, the State, meaning 52 million people, can have them, but when it comes to profits, they must be reserved for a few hundred thousand holders of equity shares.

We on this side of the House utterly reject this doctrine. If a man runs his business without the help of public funds and under conditions of free enterprise, in our view he and his shareholders are entitled to enjoy the profits. When public money, the taxpayer's money, is pumped into a private company, we are all shareholders and we are all entitled to enjoy what our money earns; we are entitled to see how our money is used and spent—in fact, we are entitled to representation. Less than 200 years ago great battles were fought on the issue "No taxation without representation". We lost a sub-continent over that. It seems now that we have to fight that battle all over again, because this Bill provides no controls or safeguards regarding the use of public money; there is no provision for an equitable distribution of profits, no representation by Government-appointed directors, and no compulsion on the Minister to lay before Parliament any proposals for varying the scheme. I know that assurances have been given, but there is nothing written into the Bill.

We are not talking about a private enterprise industry. The major part of the capital of all the denationalised steel companies is still publically owned; it is only the control and profits which have been denationalised. There is not the slightest element of free enterprise in the steel industry. The industry does not fix its own prices—the Iron and Steel Board do that, to the great satisfaction of the companies, because they are fixed at a level which will show a good profit to the least efficient producer. There is no intention to return the industry to private enterprise. Indeed, the steel companies fight bitterly against any such suggestion. For example, when the Government scrapped the control of prices of scrap steel the industry at once got into a "huddle" with scrap merchants and agreed a new fixed price. There is no real competition between the steel firms, and nothing approaching free enterprise. They carve up the field between them, and carve up the consumer in the process; and now Her Majesty's Government are adding insult to injury by carving up the taxpayer.

In case anyone should think that that is too strong an indictment—and I see the noble Lord, Lord Mills, smiling, perhaps a little grimly—I will endeavour to prove it. It is proposed to lend this £120 million from the Consolidated Fund, borrowed money, the taxpayers' money, at rates of interest lower than the firms would get on the market. The noble Lord, Lord Mills, suggested, when I intervened during his speech, that I myself would not have lent money under the conditions prevailing in 1959. But if I could have borrowed £50 million on those terms I should have made an enormous profit. It might have been a sound thing to do as a businessman. It would have been an unconscionable thing to do as a Member of this House or of the Government.

The £70 million loan to Richard Thomas and Baldwins is part of a £110 million project, and the balance will come from other public sources such as the Iron and Steel Holding Realisation Agency. Now the honourable gentleman the Economic Secretary to the Treasury has reaffirmed the intention of Her Majesty's Government to sell this fine, efficient, profitable company to the public by marketing ordinary shares, the equity; and it has been forecast that the value to be placed on that equity is £25 million. That will be in conformity with the practice on steel pursued by the Government since 1953 of having public ownership under private control. They will sell £25 million of the equity in Richard Thomas and Baldwins and have far more than £100 million still under public control. The private owners of the ordinary shares doubtless will enjoy standards of dividend paid by other steel companies, but the taxpayer will get only from 3½ to 5 per cent.

Moreover, owing to the excessive prices which, in the present set-up, it is possible to charge for steel, the whole of the loan capital, including this £110 million, can be paid back in ten years, so that the shareholders will then have the lot, with no risk and without raising a finger to earn it. That happened with the other Welsh company—the Steel Company of Wales. The equity of that company was sold as recently as March, 1957, for £40 million and £105 million of loan capital has since been made available to the company at low interest rates. The shareholders are getting 10 per cent. And had they preferred to do so, they could have sold their £1 shares at any time in the last few months for some 50s. to 55s. each. The market value of £40 million has increased to over £100 million—all done on public money with Government connivance! My Lords, this is more than "carving up" the taxpayer: it is piracy of the public purse. That is what it is, in my view. It is small wonder that the shares of some steel firms have shot up by over 300 per cent.—one, indeed, by more than 400 per cent.—in value. So many people want to share the plunder.

How do we stand, as custodians of the public purse? Let us look at Colvilles. My noble friend Lord Wilmot of Selmeston, has given the position with regard to Colvilles in some detail. May I summarise it? In 1955 that company's 10 million shares were sold to the public at 26s. each—a total of £13 million. The dividend is 14 per cent., compared with less than 5 per cent. which we receive for our £l4 million loan to the company. Not surprisingly, the shares went up to between 74s. and 75s., making a comfortable untaxed profit of £25 million for a few thousand people. But that is nothing like the whole picture. In the financial year 1958–59 Colvilles earned a net profit equal to no less than 74 per cent. on their equity capital. In the five years since denationalisation for which returns are available, they have paid over £7 million in dividends and ploughed back to reserve £20½ million of undistributed profits. That is a total of £27½ million in five years, which is more than twice the entire cost of the equity.

Two questions come to my mind. The noble Lord, Lord Mills, asserted that the company was obliged, because of the conditions which he described, to abandon any attempt to get the money on the market, he nationalisation "bogy", as my noble Leader has mentioned, was raised in 1951 and everybody knows that throughout 1958–59 the value of steel shares on the Stock Exchange was fully maintained, completely discounting any bother about nationalisation—because they have since gone up from 300 to 400 per cent.; and at the very lowest the Steel Company of Wales has gone up 140 per cent. since. No, my Lords: that horse will not run. Since the noble Lord says that the company were obliged to abandon any attempt to get the money on the market, let me ask him this question. Does he still seriously maintain that a firm with this record and earning each year, in net profits, three-quarters of their equity, could not possibly have got all the capital they needed on the market? I hope he will answer, bearing in mind that during the same period other steel firms have raised £60 million on the market through share issues. It is no answer to say that those were various steel firms raising money in small amounts. They were able to raise at least £60 million; and on a proposition of this kind, with the prospects that Colvilles have, they would have had no difficulty.

The second question I would address to the noble Lord is this. If he maintains that Colvilles could not raise the money on the market, why did the Government not secure better terms? Why, as my noble friend has asked, were the terms not equal to those offered by Colvilles to members of the public—6 per cent. on debentures, with the right of conversion to ordinary shares? Those debentures carried the right to transfer into ordinary shares at prices ranging from 28s. 3d. to 30s. 11d. per share three years hence—shares which to-day are worth 75s. to 80s. Why have we not had the same right? Will the noble Lord say why Her Majesty's Government have denied the taxpayer rights freely granted by Colvilles to members of the public?

As my noble friend has said, this Bill, is going to increase their profits enormously. It is well known and generally accepted that the average percentage profit on capital investment in industry is 15 per cent., and in steel to-day the figure is probably 20 per cent. But, taking the lower figure, Colvilles, after paying 5 per cent. interest to us, will have a margin of the other 10 per cent.; and on £50 million that 10 per cent. means another £5 million a year "for free". There are some who estimate that as much as 40 per cent. per annum will be earned on this investment for which Her Majesty's Government, on our behalf, accept a miserable 5 per cent. I would remind your Lordships that the money is coming out of the public purse—the Consolidated Fund—of which we are the custodians. We are, in fact, the trustees for the lenders, and in this Bill Her Majesty's Government are compelling us to enter into a transaction which is a breach of public trust.

My Lords, I think I have proved that the words I used earlier, strong as they were, were in fact an understatement. This Bill is unnecessary, indefensible and unconscionable. In my belief there is little that we on this side of the House can do except try to save something from the wreckage—for example, to secure the appointment of a Government nominee to the Board. Her Majesty's Government gaily agreed to this on the Highlands and Islands Bill—although I admit that that was a loss-maker. They have no fewer than 354 Government nominees on 98 other companies, and that list does not include the scores of Government-appointed directors under D.A.T.A.C. Will the noble Lord agree that we should have just one or two on Colvilles's board, especially as this company have no previous experience of strip mills and no one on their board with such experience? Again taking a leaf from the Highlands and Islands Bill, will the noble Lord agree to include in this Bill the same provision for a statutory instrument and consideration by Parliament, to apply to any revisions required in the terms of the loan, after the passage of the Bill? This may be to some extent locking the stable after the horse has bolted, but even some improvements to a very bad business are welcome. They will be still more important if they ensure that never again will any Government come to Parliament with such a disgraceful measure as this. We are asked to approve to-day something which no Member of your Lordships' House would approve, either on his own behalf or on behalf of anyone for whom he was trustee. If we do approve it it will leave a stain on us all.

4.2 p.m.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, the noble Lord the Paymaster General who introduced this Bill to us to-day said at the outset that this was a very short Bill, and simple, too. Certainly this is short and simple. It is just to get Parliamentary authority for the taxpayer in the end to be plundered, not upon loan payments but upon what he ought to have the right to expect from the investment of the money provided by the State. The Bill is short and simple!

This iron and steel industry has been of vast interest to me during the whole of my observation of it since I first went as a candidate to the Sheffield constituency in 1921. What a state it was in under private enterprise! If the process the Government are now adopting with regard to this particular company of Colvilles is something they were willing to regard as a Conservative principle, why then was it not regarded as a Conservatime principle when we had 60,000 unemployed in Sheffield, and the total output of the whole of the British steel industry dropped to 6 million tons? Not a finger was raised under this wonderful Conservative principle in politics to come to the aid of the industry. Steadily, later, as the years went on, slow assistance came by means of protective duties, keeping out imports, and trying to give them a special grip on the home market. But nothing else was done. How is it then that we have now come to the situation when it is regarded as a high principle of finance by a Conservative Government to loan these tens of millions to an industry they regarded in that position years ago? It is an extraordinary thing to me. It is very interesting to me to observe the change in mind.

Of course, in my political life in this last 40 years I have seen a completely changed attitude of the Conservative Party, and the Government it gets elected, towards this matter. It is true to say that, instead of taking what would be a strictly "Manchester school" view of matters, which the noble Lord, Lord Grantchester, always so clearly explains in this House, nowadays they have taken a leaf out of Labour's book and, apparently, are ready to put capital into any industry, only without the same conditions as Labour itself put in—to recognise, in fact, the case for national economic planing in the country's main industries which they always used to reject. The only difference is that having done the planning they want all the profits to go to small groups of private enterprise in the country instead of having the result of national planning on an economic basis redound to the advantage of the whole of the community and not to one section only.

In fact, we have the iron and steel industry to-day in such a flourishing condition as it never was in before. It had a setback two years ago; but apart from that it is in a more flourishing condition than ever it was before. And one of the great reasons has been the real basis of national planning which was made possible by the nationalisation Act. The great advance made in the iron and steel industry has come from the date of nationalisation.

LORD HAWKE

My Lords, if I may interrupt the noble Viscount, may I say that these plans were all made by the industry before it was nationalised and a great many were put into operation afterwards?

VISCOUNT ALEXANDER OF HILLSBOROUGH

Why were they not put into operation before?

LORD HAWKE

The resources were not available.

VISCOUNT ALEXANDER OF HILLSBOROUGH

Exactly! Resources like that are soon available to private enterprise—that is the amazing thing—when it comes to the development of an industry in the general national interest. You are limited, of course, by what you think you can effectively make for small groups of capitalists. We have a case on this matter and we want you to accept it.

We have the same position in other industries. The Government are now steadily expanding this whole business of giving great capital aid to a single industry at the taxpayers' expense. Look at the new ventures in the aircraft industry—all these new schemes under the new Minister of Aviation! Look at the revelations in the Committee of Supply downstairs as to what has been done in that industry in the past! I know that a great deal of the money they have had has been due especially for defence purposes, but it has not been entirely for defence. Whenever there have been very serious losses in the various stages of experimentation, research, development, production and the like—there have been great mistakes made—always through those periods the companies concerned, the private economic companies, have paid a substantial dividend to their limited number of shareholders. We have the same story now in cotton, and the Government are now in course of discussing the same principle with regard to shipbuilding, whether they are going to build replacements for the "Queens" and the like. The situation is fairly brought to a fine point in bringing the case forward in this Bill.

The iron and steel industry was nationalised and going strongly—there is not the slightest doubt about that. If there is anything wrong with the successes which can come by nationalisation, say, in the case of Richard Thomas and Baldwins, I should like to hear it. Is there any case of any steel undertaking in this country at all which can match the development of Richard Thomas and Baldwins under nationalisation, which is still their position up to now? Is there anything to compare with it in the industry? What is all this talk about the failure of nationalisation when we come to look at a case like that? Their last statement of accounts, if I remember aright (I read it some time ago), showed that their profits in that particular section of the industry for the last year were 25 per cent. more than the high profits of the year before. Where is all this terrific case that was put up at the last Election against nationalisation? And the Government are still continuing, with a sort of bastard capitalism and socialism mixed up, to advance large sums of money for the purpose of supporting certain industries, but with the end being that of private profit, to a limited number of shareholders, instead of to the benefit of the whole community. That is what is actually happening to-day.

How different that situation is from that which was announced in 1953 by the Minister of Supply at the time, Mr. Duncan Sandys, when he introduced the Act to denationalise steel! I think I have here something which was quoted in the other place the other day. I am quite sure that the Minister, with his usual care and diligence, has already looked this up. It is an astounding state of affairs now. This is taken from column 979 of the Hansard of another place for March 28, where what Mr. Duncan Sandys said when he was speaking on the Bill in 1953 is quoted. He said: When the industry has returned fully to private enterprise there will be no public money involved at all."—[OFFICIAL REPORT, Commons, Vol. 510, col. 1138.] That is a straightforward statement. What is the situation now? It is not merely Labour politicians like myself who call attention to the state of public money in the industry. Let us look at the Daily Express. I kept this article very carefully. It is from the issue of February 8: The steel industry is prospering. Never has the outlook been so bright. Production is climbing to new peaks—and so are profits. And shareholders in the steel companies have made huge gains in the stock market, with their shares soaring ever higher since the election. So now let's take the taxpayers' money out of steel. Eleven out of the 50 steel companies whose shares have been sold back to free enterprise are still 'subsidised' with huge loans from the Government". This is not the Daily Herald, my Lords; this is the Daily Express. You really must take note of the papers who are said to support your point of view from time to time, at any rate.

The Daily Express goes on: All told, £176 million of the taxpayers' money is tied up in Debenture and Loan stocks in the 'free' steel concerns. The companies pay interest on these State-owned stocks averaging 5 per cent. But the money is being used to make profits far in excess of what is paid out in interest. Of course it is. I wonder whether that had anything to do with the dating of this agreement with Colvilles. I have already pointed out to the noble Lord, Lord Grantchester, in regard to the argument that he was making, that the position of the Labour Party as to what it would do as the Government was made perfectly clear in 1951; and for seven solid years, therefore, you have had the case that Labour stood for the nationalisation of the iron and steel industry. And yet it is said now, to-day, that the State assets actually lent to the steel industry (and the figure used by Mr. Nabarro, I think it was, in another place is probably the correct one) are, altogether, something like £250 million. When you have added the £120 million of these two loans now under discussion, the stake of the State in the steel industry will continue, until some of these loans are repaid, to be something like £360 million to £370 million. I should like to have a little confirmation of that from the Minister. What has happened to this pledge—because it was a pledge—of the Minister of Supply of the Conservative Government in 1953, that when denationalisation had been secured there would be no public money in it?

I agree entirely with my noble friend Lord Stonham, who spoke so well a few moments ago, that the need for having these strip mills is entirely conceded. We want the mills; and I agree with my noble friend entirely on the point that the two strip mills will in themselves be economically sound and self-supporting on the plans which have been made. But I am bound to say that the manner in which Colvilles is to be financed is a disgrace unless you are going to have proper returns to the taxpayers. In this House we are, I think quite rightly, because we are non-representative of constituencies, prevented from bringing any Amendments to bear on any such a point as that. We cannot do it. This is a certified Bill, and we could not move Amendments here upon financial issues. But on the general principle we are entitled to state a view, and the view that we hold, and hold very strongly, is that if you are going to have a steel strip mill owned by Colvilles, and you are going to lend upon these most favourable terms for a period, then you must accept the statement of the Chairman of Colvilles that there is no doubt—and that is what he said, "there is no doubt"—that this strip mill, financed in this way, will redound to the general profits of the company. Of course it will.

When one looks at the fortune which has been made by the many shareholders who have gone in and out, and in and out, of the steel share market since last October, turning their money over again and again, with the prices of Colvilles shares varying from 29s. to 80s. at times, one begins to wonder how it was that an agreement of this kind was ever come to at the date that it was come to. Why was it? Was it, as I suggested earlier in an interjection, that the Government were terribly afraid that they were going to lose the Election, and therefore that they made this agreement with this firm in advance, so that any Government coming in would be faced with the fact that there was a business agreement between this firm and the Government, arrived at before the Election, which could not be overridden? That is an amazing situation. I wonder whether the Conservative speakers throughout the country told the electors that at the time of the Election. It is a most extraordinary situation to me, at any rate.

I suggest that I am not alone in the views which I take about this Bill. I have already quoted the Daily Express. Let me also quote what perhaps I can call a more continuous supporter of Conservative Party policy than the Daily Express might be regarded to be. Let me take the Daily Telegraph. This is from the issue for March 1 of this year—that is, only just over a month ago. Let us hear what the Daily Telegraph correspondent says: Vast sums of public money are being shovelled into private industry at this moment. … Once the word gets around that gold has been struck in Whitehall, we shall see such a rush as will make Klondyke look like a Sunday-school outing. There will be great forests of outstretched hands—not all over-clean. There will be pressure groups packed tight to the horizon, all lobbying and manœuvring as never before, not all of which will stop short of bribery and corruption. My Lords, what an outcry there would be if that were being quoted from, say, the Tribune or the Daily Herald! It would be regarded by every Conservative as scurrilous, untrue and wilfully libellous—the lot. But this is from the Daily Telegraph. We do not seem to be entirely alone in our criticism of the methods of Government finance on behalf of the private profits of groups of private individuals.

LORD MCCORQUODALE OF NEWTON

My Lords, I wonder whether I might interrupt the noble Viscount.

VISCOUNT ALEXANDER OF HILLSBOROUGH

Of course. I am glad that somebody is at last coming to the assistance of the Government.

LORD MCCORQUODALE OF NEWTON

It is terribly difficult to follow his argument, but previous speakers on that side of the House have spoken on how prosperous the steel industry is. I do not like Government lending to industry, but in this case there was a certain amount of justification. The rates are perfectly satisfactory, and the country is getting a very good deal. The industry is good, and we are not going to make losses. We have already been told by speakers on the other side of the House that there is no chance of making a loss. In that case, what is the objection to the Government's acting as bankers?

VISCOUNT ALEXANDER OF HILLSBOROUGH

This is most interesting. I am not sure at what stage of the debate the noble Lord came in.

LORD MCCORQUODALE OF NEWTON

I have listened to all of the speeches.

VISCOUNT ALEXANDER OF HILLSBOROUGH

Then the noble Lord certainly heard the case put on that point by my noble friend who opened the discussion from this side of the House. He put it perfectly clearly.

LORD MCCORQUODALE OF NEWTON

He asked for special benefits for the country. He did not ask for proper banking terms, which were loans on the security.

LORD WILMOT OF SELMESTON

He asked for normal rates on borrowing.

VISCOUNT ALEXANDER OF HILLSBOROUGH

We say that if you are going to lend money to private industry, then lend at the normal rates. But, in any case, if you are going to lend to private industry for national as well as the private economic service, then if you are going to lend in such a manner as to give huge profits to a small group in the country, that is wrong. You should have a director on the board. And if, as the noble Lord suggests we have said, the industry has become so prosperous—we do not say so specifically, as he does; but the steel industry has become prosperous, although it may yet see harder days—then surely we ought to have an equity. I had no real answer from the Minister when I put a question to him in the course of his speech as to what was the difference in principle—he said we objected to the Government having anything to do with the ownership of private concerns—in this iron and steel industry and the Anglo-Persian Oil Company. The Anglo-Persian Oil Company had to have money put in to the extent of—was it £500,000?

LORD MCCORQUODALE OF NEWTON

That was a highly speculative industry at the time.

VISCOUNT ALEXANDER OF HILLSBOROUGH

But no doubt the noble Lord approved of the Government going in on that occasion.

LORD MCCORQUODALE OF NEWTON

I was not in Parliament then.

VISCOUNT ALEXANDER OF HILLSBOROUGH

It has redounded to the benefit of the general taxpayer by putting up the value to the State by tens of millions—millions repeated again and again. It is about the only case I can judge, from what my noble friend, Lord Wilmot of Selmeston said in opening for us this afternoon, in which we put a director on the board of what was going to be a highly profitable and flourishing concern. Nearly always the Government seem to put directors on to only those concerns or corporations to whom money has been lent when there is a great danger of there being a loss; and the idea of putting a director on is only to try to ensure that the loss shall not be larger than can possibly be helped. Why not put on a director in regard to Colvilles? What is the objection to that? If I may say so to the Minister, he did not really give us an objective reply. He said that the Government do not agree with it. What is the objection to putting a director on to a concern which will have so much benefit from public money, so that we might see how it is going, and have reports and even get advice?

LORD MILLS

My Lords, I do not like to interrupt the noble Viscount in his speech, and perhaps he will wait until I reply.

VISCOUNT ALEXANDER OF HILLSBOROUGH

Very well. You do not mind my asking questions, I am sure. It must be awkward sometimes, I agree, to have so many rhetorical questions put in the course of an argument, and I apologise if they are too many. But, believe me, we shall be most interested in the replies the noble Lord will have to make.

The Minister referred in his introductory speech to the fact that in another place a strong argument was put up for equity shares to be taken in such a matter as this. What is the objection to that? There used to be grave objections in this country as to what trustees of charities, trustees of private estates and of this, that and the other, could invest their money in. There used to be, in my early days, so far as the national insurance offices and various insurance offices were concerned, a great idea that you could not go outside gilt-edged securities for the very large part of the life and fire insurance fund. What is the position to-day? They are now all up to their necks in equities. And you have even had papers coming before Parliament from time to time in regard to different corporations and trusts, permitting them in future to go away from trustee securities (as they used to be called) and to enter into equities for the purpose of the particular trust. What is the objection to the Government's having some equity shares on behalf of the general taxpayer; and especially if it means that thereby you can have some advantage for the general community out of the specific help that the general community has given to the particular private industry?

Let us look for a moment or two at Richard Thomas and Baldwins, Limited. I have said a word or two about the wonderfully prosperous position of that great organisation, which is still under national ownership, and with all the figures and finance in it that my noble friend Lord Wilmot of Selmeston mentioned at the outset. I understood, again by a chance phrase that occurred in the Minister's speech, that the Government are determined to denationalise Richard Thomas and Baldwins. Why? Is it because it is not successful? Or is it, as your decision was in 1953, to denationalise purely out of political dogma? Is that the reason? Surely there is no economic and no financial reason whatsoever for denationalising Richard Thomas and Baldwins, which I still submit, with all the returns I have been able to see, is; the most successful steel organisation in this country to-day, if you look at the period of 1957–58 right up to the beginning of 1959, when some steel firms in this country were having difficulties and there was unemployment and a good deal of under-employment, as well, you will find that there was never such a condition in Richard Thomas and Baldwins.

LORD GRANTCHESTER

My Lords, I do not want to interrupt the noble Viscount, but as he interrupted me, perhaps I may be permitted to do so. I would ask him to look at the steel developments that are going on in the world and to see a little of the competition with which the British industry may be faced, and then ask whether it is still such a bad idea to denationalise Richard Thomas & Baldwins as he thinks.

VISCOUNT ALEXANDER OF HILLSBOROUGH

That is a most interesting comment. It looks as if the noble Lord, Lord Grantchester, is a little anxious about lending this money to Colvilles at all. He thinks that circumstances in the future will not be quite so sound as has been said.

LORD GRANTCHESTER

I should be very anxious if we continued with nationalisation.

VISCOUNT ALEXANDER OF HILLSBOROUGH

I should say that from the nationalisation point of view you would have the greatest safeguard against any losses to the State in that particular matter of competition. I still ask the noble Lord to explain how it is that this nationalised concern is still the most successful British section of the steel industry. That is the fact. And there is not the slightest need to denationalise. What is the real reason for it? And may I ask the Minister (because Parliament is now giving approval in this Bill to another £70 million advance to Richard Thomas and Baldwins, who badly need it for the new strip mill which they are building for social as well as economic purposes) at what sort of price they are going to float the equities in the agreement when they denationalise Richard Thomas and Baldwins? Would you think to-day, on the prices at which the other steel concerns were denationalised by the flotation of shares, that they were floated at a fair price and one which brought proper compensation to the State? At what sort of price will you float it? I think we should have some information if Parliament is going to give consent to a £70 million loan to this particular concern.

I must say, looking at the facts about Colvilles now, that the shareholders who went in at 26s. in 1954 or 1955 were on a very good thing. I wonder how many of them sold out at £2, and re-entered at round about the same figure or a little less, and sold again at 75s. and 80s. It is "a very good game played slow" if you have the capital. I ask the Minister, therefore, to give us some idea of what will be the policy with regard to Richard Thomas and Baldwins.

Lastly, I would say this. I badly want to see all our basic industries, like iron and steel, coal mining, transport and the like, under national control, and for these basic industries to be made the servants of the rest of the nation—servants to the rest of industry. They are absolutely necessary and essential, and if you want to do that and obtain the most economic benefit in the results to the whole community, you will get them all into public ownership. In the meantime we shall continue to watch this matter with the greatest possible care, because some day all the extraordinary cases which were put to the country in 1959 will come to a far more considered judgment.

LORD WILMOT OF SELMESTON

My Lords, with the permission of your Lordships, I wonder whether I might ask the Minister, in replying, if he could give us some guidance. In view of the fact that this Bill is a certified Money Bill there will be no Committee stage, and therefore we shall be unable to move any Amendments in Committee for the purpose of improving the Bill, which is what we should wish to do, without destroying it, because of its public purpose. These so-called agreements are, of course, subject to Parliamentary sanction. Since every single speaker in this House has spoken against the Bill—and that is largely true of another place—could the Minister take this Bill back with a view to making a reasonable arrangement with Colvilles who, in view of their honourable reputation, would probably be willing to do so?

4.32 p.m.

LORD MILLS

My Lords, I was described as being confused and later on as being unfortunate in having to put this Bill forward. I am neither embarrassed, confused nor unfortunate. As I said at the beginning, the Bill is a short and simple one. But I did not expect that it would be listened to by noble Lords opposite without their taking the opportunity of speaking in support of their pet theories, which, fortunately, the country rejected on the last occasion. Noble Lords have said that nobody has spoken in support of this Bill. I think that is natural. Everybody thought that, as the Bill was what it was stated to be, this was not going to be a debate on whether these amounts which were reported to Parliament so long ago were in fact proper to be made. That is why no one on our Benches has risen to speak in support of the Bill. Noble Lords on this side thought, and naturally thought, that the Bill was a proper instrument to give effect to the Government's intention to have this sum dealt with below-the-line from the Consolidated Fund. In fact, however these amounts were met they would be from the Consolidated Fund. The Act of 1953 provided that they should be from the Minister's Vote above-the-line. We say that, because these are proper investments in the circumstances, they are proper to be dealt with from the Consolidated Fund below-the-line; and that is what your Lordships are asked to approve in this Bill.

I have no intention at all of taking this Bill back for reconsideration. We have had some interesting speeches on the iniquity of the steel industry making profits, but it has not been our experience that industries under nationalisation make profits at all. In fact, they were never required to make profits; they were required to balance their accounts taking one year with another. I think we all ought to be very thankful that this virile industry is now making good profits, and, what is more, is supplying steel in ever-increasing quantities.

I am neither embarrassed nor confused, because I was the Minister responsible for the subject about which we have been talking this afternoon. I came to the agreement with Colvilles, Limited, and persuaded them to undertake this great act of faith in Scotland. The demand for strip products in Scotland was not very great, because the industries using strip products were not in Scotland and, of course, transport was largely instrumental in inducing people to buy products nearer to where they were using them.

LORD WILMOT OF SELMESTON

Are these products sold at a flat all-in price, irrespective of transport?

LORD MILLS

They are sold at flat prices, but one knows quite well that if you have a steel works adjacent to you, you have to take from that steel works if you can. In any case, Scotland was not making steel products, and I submit that it was a great act of faith, and a patriotic act, on the part of Colvilles to undertake this work.

I was responsible, too, for deciding that an agreement must be made to settle the terms upon which the Government would make money available to Colvilles. Why? Because I wanted Colvilles to undertake to do the work and thus provide industry so badly needed in Scotland. Your Lordships have tried to indicate that there might be some sinister motive for this. There was none at all. There was merely the desire to get the matter concluded in order that it could start.

VISCOUNT ALEXANDER OF HILLSBOROUGH

Has it started?

LORD MILLS

Yes, indeed. Now as to the terms, because I was responsible for those, too. It is not true to say that £50 million could have been raised for this purpose on the market. I would remind your Lordships that the steel industry has not gone along an easy path. It is true that it has raised money on the market. But how? In many cases the underwriters were left with it. I remember one case where there was £8 million offered to the public, and the underwriters were left with 92 per cent. of it. That is not a very good background against which to raise £50 million for one undertaking. Therefore I considered it necessary that the agreement should be completed. I considered that the important thing was to protect the Government against loss, and not to share the risks any further with Colvilles. Let the equity take the risk. So we had the agreement signed.

It is rather a remarkable thing, my Lords, which I ask you to ponder upon, that with the Election out of the way the steel industry starts to mount upwards. Nationalisation, I am going to say, would not be a good thing for the steel industry, and the Government have been pursuing and will complete their programme of denationalisation. In considering what was done one must take into account the expansion in the steel industry and the great investment in the steel industry that has been going on. They have been ploughing their profits back to provide the capital expenditure. As it is, if you look at the last report of the Realisation Agency on September 30, 1959, you will see there the extent to which the industry has been denationalised.

LORD STONHAM

Before the noble Lord leaves that point, could he say whether he would regard the industry as denationalised if large sums of public money were still with the firms as loan capital? We cannot call it denationalisation.

LORD MILLS

I would describe it as in the process of denationalisation. I agree, too, that as soon as we can we should get rid of the fixed charges. Let me make a point on this. The Government do not believe in loaning money to private industry except where the national requirement demands, and that is the policy we have always pursued.

The noble Viscount the Leader of the Opposition asked me what are the reasons for denationalisation. I might equally ask him what are the reasons for nationalisation. But we have made no secret of the fact that we believe that nationalisation does carry with it certain disadvantages, and that denationalisation or free enterprise allows for the fullest degree of management and progress, and on that we take our stand. The noble Viscount also asked me what sort of price we should ask for the shares in Richard Thomas and Baldwins when they came to be denationalised. I would say the very best price we can get in the circumstances; and it would be a lot better to-day than if we had been able to offer them when the threat of nationalisation was hanging over the whole industry.

The noble Lord, Lord Stonham, I think, described the agreement with Colvilles as a transparent artifice to deal with this situation and to make sure that private industry got the profits.

LORD STONHAM

I used the words "transparent artifice" to describe the Government's decision to put the Richard Thomas and Baldwins proposal and the Colville proposal in the same Bill. That was the only sense in which I used those words.

LORD MILLS

If I may deal with that, they are in the same Bill because of the purpose of this Bill, which is merely to treat these loans as below-the-line items. The Richard Thomas and Baldwins loan would clearly have been dealt with in that way as an advance to a nationalised industry. Colvilles is a similar kind of advance: it bears interest; it is repayable; and, as the noble Lord himself pointed out, we have taken what measures of security were open to us. Therefore it should be dealt with in the same way and it was not an artifice of any kind.

The noble Lord, Lord Grantchester, asked me whether the Government had ever made any advance to deal with iron ore or manganese. That has not been necessary; the industry has financed its own purchases in that way. The noble Lord also said that these loans were inflationary. I do not see any sign of inflation about them. They will be the means of providing this country with very much-needed capacity, and I hope soon will be making their contribution to the economy of the country. The noble Lord, Lord Grantchester, also said that there had been no opportunities of debate in so far as these loans were concerned. He did say that at the time the matter was raised in your Lordships' House he was attending a Council of Europe meeting in Strasbourg. From what he said this afternoon, I can only assume that had he been present in your Lordships' House he would either have had a good deal to say then or would have demanded a debate. I would remind your Lordships that the question of these loans has been before you for a very long time, and the object of this Bill this afternoon was not to have a debate on this—though I am glad to have a debate—but merely to ask for the finance to be dealt with in a certain way.

I would remind your Lordships, in regard to the question put forward by the noble Lord, Lord Stonham, that the arrangements with Richard Thomas and Baldwins do provide that there shall be a review in the event of denationalisation proposals being implemented.

LORD STONHAM

I am grateful to the noble Lord for giving way. Could he at this stage say whether he will also accept the suggestion I made, that if there is such a variation it will be by means of a statutory instrument presented to Parliament for discussion?

LORD MILLS

I will see that consideration is given to that point by my right honourable friend the Minister of Power. I should not like to reply to that "off the cuff", but we are always, I am sure, most anxious that your Lordships' House and the other place should have the opportunity of looking at our arrangements.

LORD WILMOT OF SELMESTON

May I trespass on the noble Lord's kindness to ask whether the terms of repayment of the Colvilles loan will also come before the House?

LORD MILLS

My Lords, I think that the exact terms of the Colvilles loan have already been reported to your Lordships.

LORD WILMOT OF SELMESTON

Not about repayment.

LORD MILLS

I think so. Perhaps the noble Lord will allow me to look into that and to write to him about it.

LORD WILMOT OF SELMESTON

I thought I understood the noble Lord to say, in the course of his most interesting speech, that at a certain date in the future the question of repayment would be discussed with Colvilles and, I assumed, determined then. I was asking whether Parliament would have an opportunity to discuss those terms before they are agreed.

LORD MILLS

I misunderstood what the noble Lord was after, because there is provision in the Colvilles agreement for the matter of any balance outstanding to be looked at at a certain date which I quoted to your Lordships. It is that to which the noble Lord is referring.

LORD WILMOT OF SELMESTON

Not only that. I was not aware that the general terms had been published.

LORD MILLS

I believe they have.

LORD GRANTCHESTER

On that particular question, may I ask the noble Lord this? He says that we were informed of the terms; but is the agreement public—has it been published as a White Paper, or what?

LORD MILLS

I do not think there has been any White Paper, but I think the terms were reported here. But perhaps your Lordships would like me to check that.

LORD STONHAM

They were reported and, indeed, were in Hansard on the 21st; and again on February 2 of this year, they were the subject of Question and Answer in another place.

LORD MILLS

I was under the impression that that was the case, but I never like to be definite if I am not entirely sure.

VISCOUNT ALEXANDER OF HILLSBOROUGH

The noble Lord is very good, and we are grateful to him for giving way. I understood from the debate in another place that the agreement will make provision for the advances to be made in periods—a sort of slice each time, spread over six, seven or eight periods. In view of what the noble Lord said about there being reconsideration from time to time, I take it that when each slice is going to be made there will be a sort of reconsideration of the general situation. If from time to time we could have reports of that, I think it would help my noble friend.

LORD MILLS

The noble Viscount is not correct in that. There is no provision in the agreement except to reconsider the balance outstanding at a certain date, to see whether that balance is still needed in full. That is written down in the agreement. I think I should be courteous to the noble Viscount and refer to his question of Government directors. The agreement with Colvilles did not provide for the appointment of Government directors; nor, in my view, was there any necessity for a Government director to be appointed. The agreement with Colvilles is a signed agreement. I am quite sure that they would not welcome, nor should we seek, to raise again the question of a Government director.

My Lords, may I again remind your Lordships of the purpose of the Bill? It is to provide that these two loans, which were negotiated with the companies in question, and signed, should be dealt with by advances from the Consolidated Fund below the line, and not from the Vote of the Minister of Power. That is the sole purpose of the Bill. We can go on debating the merits and the demerits of nationalisation. I detected that the noble Viscount was trying to convert me to the merits of nationalisation, but he is on a rather hopeless task. I have had a certain amount to do with both private industry and nationalised industry, and I would not encourage him to go further with that. I hope that I have answered, however inadequately it may be thought, the various points put forward. I believe that the Government were right to help these companies. I believe that they were right, in particular, to help Colvilles, because without that help we should not have had a strip mill being erected in Scotland.

VISCOUNT ALEXANDER OF HILLSBOROUGH

May I ask one further question? I was most interested in what the noble Lord said about not having a director. From all his great business experience, can he think of any great commercial corporation which has obtained a £50 million loan advanced from private sources, or City sources or market sources, where the people lending the money have not been represented on the board or been given a share? Does it really happen in the world of commerce that £50 million can be advanced and those advancing it not be given representation or a share?

LORD MILLS

I think it can. I honestly think it can.

VISCOUNT ALEXANDER OF HILLSBOROUGH

I do not know of any.

LORD MILLS

There have never been any advances comparable with these advances. I was just saying that I hoped I had answered, however inadequately, the debate on nationalisation. I would again remind your Lordships of the purpose of this Bill and ask you to give it a Second Reading.

On Question, Bill read 2^a: Committee negatived.