§ 2.52 p.m.
§ LORD STONHAM rose to draw attention to the large sums of public money spent on Government assistance to industry, without an adequate measure of control or a public interest in the equity; and to move for Papers. The noble Lord said: My Lords, when I last had the privilege of initiating a debate from this Box, I was greatly heartened by the general agreement which was accorded to the views which I expressed. I expect no such unanimity on this occasion, not because there is any doubt, in my view, about the facts and figures, but because when it comes to the investment of Treasury funds in industry there is a fundamental cleavage of opinion between Government and Opposition. We disagree particularly over the criteria determining the industries in which we should invest; on the degree of control which the Government should exercise; on the return to be expected from the investment, and on the manner in which the fruits of the investment should be distributed.
§ The Conservative attitude, as I see it, was vividly demonstrated one day last week on the front page of the London Star, when, on the same front page, there appeared two headlines. One was "More State aid for planes", and the other. "Government Whips face revolt over rail pay". Obviously the Government regard aircraft firms as founder members of the "hand-out club", because no Government Back Bencher asked any questions; they did not ask how much was to be spent, what was to be done with the money, or what the conditions were. They obviously regarded it as non-controversial. In much the same way the Institute of Directors, through their house organ the Director, suggesting that the. Cunard Steam-ship Company 290 might get a Government subsidy of as much as £40 million, declared that "such a decision ought not to be politically contentious". How different the attitude when the same people discuss the difficulties of another form of transport, the railways! The Press is full of letters from Conservative M.P.s giving all sorts of good advice to the Transport Commission. But until the last few days, if anyone suggested a subsidy for the railways a kind of collective shudder ran through the Government Benches—something like the reaction which was evoked a few years ago by the suggestion that Gentlemen and Players should come out to bat through the same gate at Lords.
§ I want to make it perfectly clear that my Party are not opposed to the investment of public money in private industry, but we insist that where public money goes, public policy must follow, and that our investments, if we were the Government and if we were making them, would be subject to the conditions that the policy of the firms or industries concerned must be designed to fulfil four requirements. Those four requirements, as we see them, not necessarily in the order of importance, are these: first, that the industries must make the maximum contribution to full employment and to our balance of payments; secondly, that they must contribute to the stabilisation of living costs through the maintenance of reasonable selling prices; thirdly, that they must provide satisfactory conditions of employment for their employees, and fourthly, that the Treasury should receive a proportion of the earnings of the enterprise appropriate to its share in the total risk capital employed. The justice of those four criteria, when it comes to the investment of public money in private enterprise, cannot be disputed, because it is our money, contributed by everyone in varying degrees, rich and poor alike.
§ In my view, whenever the Government make an investment in a commercial undertaking which does not substantially satisfy those four conditions, they are misappropriating our money. The nationalised industries, although, of course, there is still great room for improvement, measure up to these criteria very well. None of them is subsidised. All exist on fixed interest or loan capital borrowed at normal rates of 291 interest. For example, the electricity undertaking has contributed to full employment by more than doubling its output through its enormous expansion, and, incidentally, it has taken electricity to rural areas which private undertakings had previously rejected as uneconomic. The price of electricity has increased by only 33 per cent. compared with a 66 per cent. general price increase over the same period. But, despite low prices and the payment of £340 million interest on capital, the Authority has earned net profits exceeding £100 million.
§ In the case of gas, output has been increased with fewer employees. The price increase again has been well below the general average, and the Board has paid £120 million in interest and earned a profit, and the whole community has shared from these benefits. The Coal Board has revolutionised the miner's working and safety conditions, his pay and retirement provisions. They have paid £240 million in interest charges, and borne the quite unfair burden of the £60 million losses on imported coal. Imagine demanding that a private undertaking should do that. Throughout the period British coal has been selling at £1 a ton less, on average, than similar coal produced in comparable conditions in Western Europe.
§ Then, if we look at civil aviation, B.O.A.C.'s output in load-ton miles has increased fivefold and B.E.A.'s eight times. While the general level of costs has been rising by 66 per cent., B.E.A.'s cost per capacity ton-mile has dropped by 40 per cent. One part of their contribution to our export drive was the earning last year of no less than 6 million dollars in the United States and Canada. Alone among the major countries of the world, we expect our public airlines to bear most of the cost of encouraging and developing transport aircraft. It is solely because they are public undertakings that we have been able to develop the Viscount turbo-prop and the pure jet Comet IV into world-wide successes. Indeed, our private enterprise manufacturers would be out of business to-day if it were not for the publicly-owned airlines.
§ By and large, therefore, without subsidies, but with public control, these undertakings have helped to provide full employment, they have kept down prices, 292 paid their way and, in addition, conferred on our people immense benefits which do not and should not figure in the balance sheets. It is also the case that in November, 1958, when the Government were in a panic about the unemployment figures, they could turn only to the nationalised industries to get them out of the mess. But on these Benches we do not say that nationalisation is the only way. Britain's is a mixed economy and is becoming more so every year. There is room, in our view, for great diversity of Government investment according to the nature of the industry. But, in our view, whatever the method, it must satisfy the four criteria which I have mentioned and which I believe you must accept.
§ Let us examine some recent Government investments in private industry and see how they measure up to the agreed four conditions. First of all, steel. We are in the curious position that seven years after denationalisation the Iron and Steel Holdings Realisation Agency still holds some £206 million of fixed interest investments and loans in the steel industry in companies whose control has been sold to the shareholders. Thus although in many cases we still hold 60 per cent. or more of the capital employed, control and profits are in private hands. Since also we, as the taxpayers, as the people, receive on average less than the current rates of interest, the Treasury does not receive anything like a proportion of the earnings of the company appropriate to our share of the capital. Indeed, since in the event of bad times our money would in some cases be the first to be lost, it could be fairly said that we own all the risk capital, because the shareholders do not take any risk as all, or at least not any risk worth talking about. So the industry falls down on that criterion.
§ It also falls down on the criterion of full employment, because last year we had steel workers unemployed, and something like 60 per cent. of the industry at one time was working short time. Then, again, on prices, although these are controlled they have been stepped up to unnecessarily high levels. Since denationalisation steel prices have increased much more than the average increase in other manufacturing industries. So on all four criteria the Government have failed. And, naturally, high prices have meant very much higher profits. For example, last 293 year the output of United Steel, the biggest producer, was 4 per cent. down, but their profits were £1½ million up and the dividend was stepped up from 12½ per cent. to 15 per cent. It is a measure of the Government's failure, I would submit—and this affects every one of us, whatever industry we are in, whatever job we do—that the difference between current dividends in the steel industry and the interest which was paid under public ownership is equal to an extra £1 on every ton of steel produced. That is a very bad thing for the country as a whole. The industry, in fact, has been allowed to use our money to hold us to ransom.
§ The proposals of the Iron and Steel (Financial Provisions) Bill make the situation even worse. Let me say at once that we fully support the provision of public funds to finance the building of new mills at Newport in Wales and Ravenscraig in Scotland. They are in the right places, they will provide employment where it is wanted and they will boost exports. But the financial arrangements for the loan of £50 million to Colville's are intolerable. When it was returned to private ownership this company had ten million £1 ordinary shares which were sold to the public at 26s. each; that is £13 million. The I.S.H.R.A. retained £14 million of fixed interest shares and debentures, returning an average of slightly under 5 per cent. compared with the 14 per cent. which the shareholders of Colville's are now receiving. Two years ago the company issued £6 million of 6 per cent. debentures which had the right for a given period of transferability into ordinary shares. To-day those ordinary shares stand not at 26s. but at 75s. 6d., so the shareholderse have made a profit of nearly £25 million—£25 million which should have belonged to the nation, because it has been created entirely by our money, by public money.
Now it is proposed to lend Colville's another £50 million. The rate of interest (and I quote) is to be
the cost of borrowing by Her Majesty's Government at that date, for a similar period"—
that means virtually the Treasury Bill rate, and that may be as little as 4 per cent., a rate which we deny to local authorities for public purposes such as the building of houses. If I want to build a new factory (I do at the
moment) I have to pay 1 per cent. over bank rate for the money I borrow, and I and other manufacturers have to pay our taxes and then see them used to subsidise this private company to the tune of £1 million a year. You must agree that it is utterly scandalous.
My Lords, could the noble Lord explain his calculation? The idea of being able to borrow long at 4 per cent. is a very interesting one. I am not quite sure how it is going to be done.
§ LORD STONHAM
My Lords, I wonder myself sometimes how the Government intend to do it, and still more how they intend to justify some of the things they are doing. I can only say that the right honourable gentleman the Chancellor of the Exchequer has consistently refused, despite very great pressure, to say precisely how much interest this firm will have to pay. I have repeated exactly the official words, and the noble Lord will have to make just as much out of them as I have tried to make myself.
But the Government have not even asked for the same rights as have been accorded to ordinary members of the public when the debentures were issued, namely the right of transferability into ordinary shares. If the Government are determined that this industry must remain in private hands, why do they not use our money to buy a share in the equity? Is there something immoral in the thought? Disraeli did not offer the Khedive a loan; he bought his shares in the Suez Canal, an act of immense importance to this country from which we all benefited for three-quarters of a century, and the squalid termination of that deal does not alter the fact that this was a great act of statesmanship on behalf of all the people of this country. Sir Winston Churchill had no moral scruples about buying the country into British Petroleum, and that investment has increased one hundred-fold. If this Colville deal goes through unchallenged, the nation will then own four-fifths of the company's capital, take most of the risks and get nothing out of it. The shareholders owning the other one-fifth and taking no risks will get the lot.
When this proposal was debated in another place last week the Ministers who opened the debate and who closed 295 the debate were its only supporters. Such a distinguished financial expert as Mr. Enoch Powell, a former Minister, said:the borrowing of money on Government credit to be advanced to private enterprise on economic grounds cannot be justified or defended.And, of course, it cannot. I have no doubt that in Samuel Pepys's day at the Admiralty this sort of transaction was commonplace, but this is 1960, not 1660, and since then we have built up a tradition that public money cannot be used for private gain. The Government is faced with the dilemma that in these great industries whose expansion depends on the taxpayer's money the public interest demands that we either buy ourselves in and put directors on the boards or take them into public ownership. I want, on behalf of my Party, to make it perfectly clear that in demanding that there should be Government representation on the boards I am speaking of Government investment as a matter of policy. I am not referring to a later possibility, for example, of the National Superannuation Fund buying equities as an investment. In our view, in such circumstances they would then be in the same position as ordinary shareholders and have exactly the same rights and no more. But we do demand that when the taxpayer's money, public money, is used in industries such as I have described, then, if we do not acquire them altogether, we should have a share in the equity and a few more seats on the board.
We say also that the Government must abandon this policy of using public funds to create fortunes for private firms and individuals. If they will not do so, we want to know the method of selection. How do they choose them? How are the recipients of public bounty picked out? Is the begging bowl more welcome in Whitehall if it is airborne or if it comes in a big Bentley? Would it be for the good of British Railways if Sir Brian Robertson bought a Rolls? The City is interested, too. According to the Economist other industrialists would like to be "interfered with" in the same way as Colville's. They ask. "When does the ravishing begin?" What a pass we have come to when the custodians of the public purse can be thus ridiculed by a responsible journal! Since I know that my noble friends have 296 other things to say about the steel industry, so much, for the moment, for that industry.
Now let us have a look at the aircraft industry. For many years Governments of varying political complexion have, understandably, been in its main customer and support; its main business has been defence, and the State Air Corporations are the biggest single customers for civil aircraft. But since 1945 over £4,000 million of State funds have been spent on the purchase and 'development of aircraft. Now, with defence orders diminished, the aircraft industry does not conceal its anxiety that public money, rather than its own, should be spent on civil projects. I think it is true that, even with the new amalgamations and those which perhaps will still take place, our aircraft companies will need help in financing expensive new development. It is in the public interest, because they are in competition with manufacturers in other countries, who can rely on Government orders or subsidies, or both, and we cannot afford to lose any part of the aviation exports which are now running at some £150 million a year. But the conditions should be fair all round, and we are already helping a great deal.
According to Mr. Andrew Shonfield's estimate (I would emphasise that it is extremely difficult to extract from the different Votes just how much public money is spent on research in private industry, and this is the only estimate I have been able to obtain which seems to be regarded as reasonably reliable) the Government in 1955–56 were spending about £120 million a year on research and development in private industry, and at least half of this total, probably more, was on aircraft—a very substantial sum. Now another £16 million is to be added in the next year, of which £9 million will be for the development of civil aircraft. This, of course, will assist both full employment and exports, but on other aspects, as The Times editorial puts it,the Minister's statement was disappointingly vague and left most of the important questions unanswered.My Lords, I am afraid that the vagueness about the financial return to the Treasury was intentional.
297 The Minister has indicated that we shall share in the proceeds from commercial sales. That might lead some of us to believe that we are going to share in the profits. Nothing of the kind! Because on February 15 Mr. Sandys indicated that the arangements for sharing of proceeds would be those set out in the Third Report of the Committee of Public Accounts for 1956–57. I was a member of that Committee. I was responsible for asking a number of the questions which produced the information in this Report, and I have always regarded the arrangements as most unsatisfactory and most unfair to the taxpayer. I should like to read your Lordships the relevant paragraph from the Committee's Report—it is the Report for 1056–57, paragraph 26:Contracts for the design and development of aircraft and aero engines, where the whole, or a substantial part, of the cost is borne by the Ministry, normally provide that the design shall be the property of the contractor, but that he shall not sell articles, of that design, or grant a licence to manufacture, without first agreeing with the Ministry the amount he will pay to them for the commercial use of the design. The amount so agreed is normally either a percentage of the commercial selling price or a fixed sum per aircraft sold.On manufacturing licences the Ministry (who have provided all the money) usually take one-third and the contractor two-thirds of the licence fee. The Report goes on:In no case have the Ministry recovered their full expenditure on any civil aviation project.In fact, at that time the highest rate of recovery on an aircraft was eight-ninths, but on the engine which powered it, only two-ninths. Of course, since then the full outlay on the Viscount (that was the case where the amount recovered was at that time eight-ninths) has been recovered. But that is the only one.
The Minister, Mr. Sandys, said on Monday that we have had some profitable and some unprofitable deals. But that is not correct; we have never had a profitable deal. Out of £430 million we have paid to the industry in the last nine years for development of contracts we have received back precisely £24 million—about 1s. 1d. in the £. The contractors have had the other 18s. 11d. and have paid dividends out of it. It is therefore wholly misleading to suggest that, in the ordinarily accepted sense of the term, we share in the profits. At 298 best, if the project is successful—and there has been only one such case—the Government recover the whole or part of their outlay, while the manufacturer takes all the profit. It is wholly misleading again for the right honourable gentleman the Minister to point to the advantages of a contract where we can recoup proceeds even where there is no profit. That has never happened, and never will happen, because it is a case of "heads they win, tails we lose" so far as the manufacturers are concerned.
If your Lordships consider that assessment unfair, just look at a few recent examples of our losses on aircraft and aero engines. Naturally, these are mainly on service aircraft, but the civil development contracts are made on similar terms, and, as I have just indicated, according to the Minister's answer, that will still be so. The first example is that of the Orion turboprop, on which the Ministry discontinued financial support after it had cost us £5 million. That was an egg that was not hatched. The R.A.29 engine, on which the Government's liability for development was originally estimated at a little over £2½ million, has cost us nearly £9 million to bring it up to the reasonable requirements of de Havilland. As regards the Swift fighter, each airframe cost us £120,000, compared with an estimated £28,000, plus £6½ million for the prototype, £8 million for engines, and £6½ million in cancelled orders. The last item was really paid to provide profits and dividends despite the contractors' appalling failure.
Again, I would refer to the Third Report of the Committee of Public Accounts, that for November, 1956 to November, 1957, page XII. That Report indicates that on the Swift we paid in all £40 million, and we got back 129 flyable aircraft, not one of which was fit or could be used for the operational purpose for which it was intended. The Report goes on:The Treasury Solicitor advised that even if a clear failure to comply with the specification could be shown … any claim for breach of contract had been irreparably damaged by acceptance of the prototypes … the Ministry had no remedy under the contract for the contractors' failure to produce an aircraft capable of the performance that the contract was intended to specify.Yet it is apparently the intention of Her Majesty's Government to continue 299 this type of contract and thereby to court similar disasters. There are many such examples. The Vickers V.1000, which was described by the Select Committee as "the most expensive of all the aircraft which were never produced" cost us £4 million, and the prototype remained earthbound. Then there were the advance versions of the Swift and Hunter interceptors (regarded as insurance against the failure of the P.1), which cost us £1¾ million before they were abandoned.
Some of these losses may have been unavoidable, though, as I shall explain, the present system made them larger than they need have been. But, meanwhile, what about the companies engaged mainly on aircraft production? Were they suffering? Were they losing, as we were, so hopelessly? Certainly not. Bristol Aeroplane pay 10 per cent.; Fairey and Handley Page each pay 15 per cent. They are all doing very nicely, and apparently all expect this set-up to continue. Sir Roy Dobson, Managing Director of the Hawker-Siddeley Group, in welcoming the Minister's statement is reported in The Times as saying:Nobody should quarrel with the Government's desire to share in the proceeds from the sale of aircraft which it has helped to develop, but as soon as it has seen a fair return of its investment it should allow the manufacturer to plough back his profits.My Lords, when I read those words I was reminded of a once popular song: "Give me the moonlight, give me the girl, and leave the rest to me." Sir Roy's paraphrase is "You take the losses, give me the 'planes, and leave the rest to the shareholders."
I hope that Her Majesty's Government will reconsider these arrangements, because if we take the risks we should share the rewards. The man in the street, though perhaps he does not quite understand the term—and perhaps I do not either—believes in a quid pro quo. All I can see is millions of quids and not a quo in sight, and if Her Majesty's Government deny what I regard as the only logical conclusion to be drawn from the facts I have put forward, and refuse to take the industry into public ownership, let us take equity shares for our money. Then, if the project succeeds we shall succeed together; and let us have Government directors on the boards. It is 300 only in this way that we can ensure that public policy follows public money. In this way, also, we can eliminate the appalling waste on Government development contracts. And this is a matter that concerns us all.
On Saturday last I was present at a conference of aircraft technicians and supervisors, drawn from aircraft firms in all parts of the United Kingdom. Every major firm was represented there. I was seriously disturbed, as your Lordships would have been, at the allegations to which I listened, allegations not from just one quarter but from all over the room, of thousands of pounds wasted every day—of men on ordinary orders being instructed to book part of their time to the Government development contract; of tiny empires allowed to remain undisturbed, and of tests that were continued indefinitely and uselessly, rather than that their personnel should be transferred to other work. A roar of laughter greeted the reading of a statement by the Minister that:These contracts are rigidly supervised to see that we do not incur any unnecessary expenditure.If we took shares for our money this waste would be eliminated, because nothing would be gained by putting the losses on to the Government contract. These men—technicians, foremen and supervisors—absolutely irreplaceable and representing the cream of the aircraft industry, who have a far greater stake in it than any shareholder, are anxious about their future. There is redundancy in some areas and they expect much more redundancy to arise from the rationalisation within the new groupings. We should, in the public interest, insist that aircraft firms in receipt of State funds must make plans now to avoid the dispersal of skilled teams who will be badly needed before very long.
The right honourable gentleman the Minister (Mr. Sandys) has said that the aircraft unions have a big rôle to play. I entirely agree, and I urge him to help them to play their part by the creation of an Advisory Council composed of representatives of his Department and of the unions, so that he can be kept fully informed at shop-floor level of technical and supervisory opinion. I urge, also, that public investment in aircraft firms should be conditional on the 301 setting up of terminal payments schemes equal to those in public undertakings. For example, technicians with more than one year's service employed by British Overseas Airways Corporation are entitled to severance pay on a progressive scale, amounting, after 24 years' service, to one year's pay. In the aircraft industry, skilled men, although they have devoted their whole lives to that industry, get precisely one week's notice when they become redundant. The Government have the power to alter this, and should do so without delay.
I have dealt with just two industries in which public money is heavily involved; my noble friends will deal with others. But whatever the industry, the principle of public responsibility is the same. Most of us have sat on Select Committees with honourable Members or noble Lords of differing political Parties from our own, but on those Committees we have never had a difference of opinion about our duty to ensure that public money is spent only in the public interest. It is often in the public interest to engage in research without expectation of financial return. It cannot be in the public interest to engage in private trade without ensuring that an appropriate share of the earnings are returned to the public purse. Your Lordships may not agree with our suggestions for ensuring this, but you must agree with our objective. I believe that it is our duty to consult together and to insist that Her Majesty's Government alter their policy, so that the principle of public responsibility can continue unimpaired. I beg to move for Papers.
§ 3.29 p.m.
§ LORD GRANTCHESTER
My Lords, I am very glad that the noble Lord, Lord Stonham, has introduced the Motion before us to-day. As happens quite frequently, he is chiefly attacking Her Majesty's Government for not doing enough and for not getting enough control in return for the money that is being made available to private enterprise. I am sure that Ministers will deal with his references to nationalised industries, and that other noble Lords with detailed knowledge of the matters to which he referred will deal with his references to private firms. But, if his remarks prove anything, I think it can be said at this stage that they show how unsuited Ministry officials are to deal 302 with business negotiations. That is no reflection upon the officials of the Ministries. They cannot obtain the necessary experience to do so. For my part, in a number of cases I deplore the fact that Her Majesty's Government are making the advances they propose to private industry at all. I agree with the noble Lord's remarks so far as new advances to the steel industry are concerned. I do not want these advances to be used to secure either seats on the boards or a share of the equity. I would rather the Government did not make them at all. In other industries I regret that the Government's failure to ideal with certain fundamental issues and underlying causes of malaise, which may seem to make Governmental assistance to other private industries inevitable. I think these remarks apply to both the shipping and the textile industry.
May I be a little more specific with an illustration? A Government supported by the noble Lord, in one of their most comprehensive Acts, secured complete control of the board and the whole of the equity when they took over the railways of this country. The cost I think, was of the order of £1,000 million. It is said thatThose whom the gods would destroy they first make mad,and if ever there was an example of lack of business acumen it was to invest £1,000 million of the people's hard-earned savings in British Railways when they did so. It is now suggested by many of the same persuasion as the noble Lord who has introduced this Motion that this expenditure should be written off as a total loss. The noble Lord cannot be surprised, therefore, if many of us feel that neither an adequate measure of control, nor the acquisition of an interest in the equity, in return for more expenditure of the people's savings is a very good idea.
Of course, there are many industries in which to-day an investment may be considered extremely attractive. But as we were reminded, I think very wisely, by the noble Lord, Lord Amwell, yesterday, the industrial pattern changes, and in these days changes more rapidly than ever before. It must not be forgotten that half of those employed to-day in industry are employed in industries which were unknown 50 years ago; that 303 future change will be more rapid than it has been during the past 50 years. In such circumstances I submit that Governmental control is totally unsuited to cope with the sort of problem which has to be faced by industry. There is a field for Governmental action, and if I may I should like, before I sit down, to say a few words about this aspect of the problems we are discussing. But suffice it for me to say at the moment that Governmental policy on taxation, on depreciation and on a number of other matters which are rightly within the province of Government, has a vita] bearing upon the future and the position of industry.
The noble Lord, Lord Shepherd, yesterday, and a number of other noble Lords who sit on the same Benches on previous occasions, have tried to discredit proposals which I have made from time to time by hurling at me the words, "Laissez faire." They seem to think that, by so doing, any suggestions I have put forward are thereby relegated beyond the pale, unworthy of any consideration, or at any rate outmoded and out-dated. My Lords, I venture to suggest that the use of the words "laissez faire" almost as a term of abuse is likely to be a boomerang coming back on those who so misuse the words. The term "laissez faire, laissez passer", as noble Lords well know, has a very honourable origin and was coined by the champions of the cause of freedom in eighteenth century France, whose aim was not dissimilar from, although it was more comprehensive than, the professed ideas of those who are now setting up a Common Market in Europe. The choice, as one well-known living economist puts it, is not between a plan and no plan, as some noble Lords who have criticised me seem to think; but the question, "Whose planning?" Laissez faire, laissez passer is an appropriate motto in any struggle for freedom against Government omnipotence. As the same writer already quoted puts it, laissez faire means, "Let the common man choose and act; do not force him to yield to a dictator;" and I would add, "or to a number of little dictators".
My Lords, it is significant that the only agreement among the planners is that they reject what they term laissez faire, often with little idea of its real meaning. 304 But there are almost as many plans as planners. When it comes to action the planners disagree among themselves. This is not surprising, because no one has a monopoly of wisdom, and we get into much trouble because those who think they know better how to run other people's affairs take on more than they can manage. As I have said, the idea behind the coiners of the phrase laissez faire is by no means outmoded. There is a great deal of support around the world to-day for the idea of breaking down barriers, and even those who have been ardent restrictionists are having to admit that the breaking down of restrictions is bringing increased prosperity—the breaking down of restrictions imposed by Governments is bringing increased prosperity where it is being successful. I must apologise for taking up a few minutes of your Lordships' time in self-defence, but this issue is basic to the subject we are discussing to-day, as it was to yesterday's debate and to many another problem which in future will be coming before your Lordships' House.
After that somewhat deviationary interlude, may I say that, in principle, I would oppose any proposal which forces the citizen to put his money into something which he would not do if he were making an investment for himself. If this is done it calls for the clearest justification on the part of any Government who go in for such action. In many cases to-day money is being, promised to one industry after another without any attempt to put forward this justification. May we look at this matter a little more specifically? Should it not be abundantly clear that there is no case for advances to an industry which can raise the money itself? The Governor of the Bank of England has recently drawn attention to a state of affairs which he describes as "too much money chasing too few shares." In the prosperous state of the steel industry at the present time, should not the Government be taking the opportunity to dissociate themselves entirely within a short period of time from their investment in it, instead of increasing their investment in it?
In principle again, my Lords, I am opposed to the subsidisation of uneconomic enterprises, because such subsidisation delays the developing pattern of change; in the long run, aggravates the 305 difficulty of the industry, and increases the ultimate loss which falls upon the people who invest in that industry. I believe that the whole question of agricultural subsidies should be looked at again. They take a lot of Government money. In view of our commitments to existing farmers, which must be honoured, I should like to see considered a scheme to substitute some form of annuity payments for existing subsidies, followed by a return to production which would be justified on economic grounds without subsidy, more or less along the pattern prevailing in Denmark.
Again in principle, my Lords, there is probably a case for limited Government expenditure in the field of research—and this, I think, is where we come to the aircraft industry—but I consider that expenditure on research should be kept distinct from the subsidisation of a particular firm. The trouble is that the pace today is so fast, and the strain on Ministers is so great, that there is too little time for thought. A number of the problems of industry (and I am thinking particularly of the shipping and textile industries) are due to penal taxation over a long period and to inadequate depreciation allowances. This is a general problem in industry, particularly as changes take place so rapidly that no one can say which industry may be the next to suffer from a change of fashion. I therefore consider the whole problem of depreciation a general one rather than a matter for discrimination or for special allowances to individual enterprises.
I referred earlier to certain fields of study and exploration which properly can be considered the function of Government and which I think are being neglected. There is the whole question of discrimination—flag discrimination in shipping, subsidisation by Government, restrictions on ships that may carry goods, et cetera. Now some inter-governmental agreement seems to be called for on such matters. There are questions affecting British investment in many parts of the world which seem to make it desirable that rules should be agreed by intergovernmental convention to secure fair treatment, security and honest trading.
There are the operations of the World Bank, which I think deserve more study. It is not so much the lending of forced 306 savings extracted by over-taxation that is called for as some form of insurance against the political risks which deter the private investor. I have mentioned just a few of the problems which call for Government consideration. If they would turn their attention to some of these overriding problems, I think we should hear less about the necessity to indulge in the new interventions which they keep making into the affairs of private industry.
If these questions are impossible to discuss in prevailing conditions with all the countries of the world, surely they might be put on the agenda for the forthcoming Commonwealth Conference. It would be a fine achievement if, on some of them, we could get agreement among members of the Commonwealth, and then tried to extend the field of agreement reached among those who will be meeting in London in May. In fact, what we have to agree are the basic principles upon which the standard of living of the West, which is now the envy of less developed territories, has been built, and hope that others will apply them with equally beneficial results.
Once again I want to press a question which I put yesterday: where is the money coming from that is being offered to industry after industry? If what I was after was not understood yesterday, may I ask: will this expenditure appear below the line in the forthcoming financial statement with the Budget? What is the total expected to be? If so, how is this money to be raised? Is it to be by a new Governent issue, by long-term borrowing, or by short-term borrowing? What is in the mind of the Government? How much will the supply of money (which is one of the matters discussed and brought to our notice by the Radcliffe Committee as being very important) be affected by what the Government are doing? What steps are they proposing to take to avoid what may well start off a new inflationary trend? My Lords, these are desperately important questions affecting the lives and the security of all of us, and we are entitled to hear the Government's views, and to ask for assurances. From these Benches I should like to ask that information be given on these important matters and that that information be given in some detail.
§ 3.48 p.m.
§ THE PAYMASTER GENERAL (LORD MILLS)
My Lords, this Motion deals first with the amount of money—"the large sums of public money", it describes it—spent on Government assistance to industry; and, secondly, it states—not infers, but states—that this is done without an adequate measure of control or of public interest in the equity. I think the noble Lord, Lord Stonham, who introduced the Motion, was quite right in saying that it would be controversial. A good deal of what he says is controversial; and his criticisms were addressed to the Government's advances to private industry. In fact, listening to the noble Lord I had the feeling—and he probably meant it—that you have merely to nationalise an industry to make it an angelic thing, and if you keep it private it has motives which are not in the best public interest.
§ LORD STONHAM
My Lords, if the noble Lord will allow me to interrupt, may I say that it is probably my fault that he did not hear what I said, but I distinctly said that we do not believe that nationalisation is the only way. We de believe in a mixed economy, and Britain's economy is getting more mixed every day. We believe in investing public money in private industry, but we also believe then in controlling the four criteria which I very clearly explained.
§ LORD MILLS
My Lords, I fully accept that, but I do not think it alters what I said; and if the noble Lord would be good enough to study what I did say, I think he might agree. There have been, of course, enormous sums of money spent in helping industry, but perhaps the greater sums have been spent in respect of the nationalised industries—coal, electricity, gas and transport—both to meet the heavy capital expenditure with which they were confronted, and, I regret, in some cases, to meet deficits arising from failure to balance their accounts taking one year with another. I am not criticising the nationalised industries; I have had too much to do with them. On the whole, they do a very good job. It has been obvious for some time that the cheapest and best way of financing the nationalised industries is from the Exchequer.
308 So far as private industry is concerned, the Government have made it clear on many occasions that money should be found to finance private industry only in exceptional circumstances, and I think that it will be found that that has been the rule which has been followed. Why should these great sums of money be necessary both for nationalised industry and for certain private industries? I think we are all aware of two matters. One is that the great scientific and technological advances which have occurred in recent years have resulted in plants and equipment being more elaborate and much more costly; and the second is that at the same time the money available to industry has been reduced in purchasing power since before the war. The cost of a steel works to-day is reckoned at many tens of millions of pounds and the initial cost of an aircraft is many millions. So the demands on our capital resources have greatly increased over recent years.
These increased costs and the reduction in the purchasing power of the currency have affected the nationalised industries as well as private industry, but private industry, in general, has ploughed back its profits, has gone to the market and has itself financed the replacements of its assets and their expansion. The noble Lord, Lord Stonham, talked at some length and in a not very complimentary way about the steel industry, although perhaps the lack of compliment was directed against the Government rather than against the individual firms. I had much to do with the steel industry al the time it was decided to make advances to Richard Thomas and Baldwins and to Colville's. The noble Lord knows quite well why money had to be found by the Government and why they have not been able to dispose of their holdings as quickly as they would have liked to do. It was owing to the actions and attitude of the Party opposite.
I announced the decision to expand Colville's and Richard Thomas and Baldwins in your Lordships' House on November 18, 1958. This decision was the result of very careful consideration of the requirements of the country and of the economy of steel production, taking into account the need for Scotland to have a basic steel industry of 309 this kind (sheet steel) and the opportunities which might be afforded of attracting other industries to that country. The noble Lord said that he had nothing to quarrel with in that, but he did criticise the fact that money was being advanced to a private industry on a fixed-term arrangement. I think he has not got his facts right about the interest. The interest varies according to the rate at which the Government could borrow at the time the advance was made.
I am going to say this about Colville's. Colville's undertook a very grave risk. They were going to provide capacity for sheet steel and sheet steel products in front of the demand, and the Government supplied money which at that time the company could not get on the market, not merely to feed their business but to provide for that expansion. The Government thought it right, and think it right, in spite of what the noble Lord says, that that should be a charge on the business, the best charge the Government could secure, with interest, just as the company would have had to pay for a capital advance had it been able to raise the money on the market.
§ LORD AMWELL
My Lords, may I be allowed to ask a question? If it was a matter of demand, why not subsidise the consumers for a change?—for instance, from the point of view of purchase tax. Why is the consumer always left out of account?
§ LORD STONHAM
My Lords, as the noble Lord has been interrupted, I wonder whether he would mind my saying that the company had borrowed at 6 per cent. on debentures and has now borrowed at a much lower rate from the Government. It is not the market rate at which they are borrowing.
§ LORD MILLS
My Lords, if I may answer the question of the noble Lord, Lord Amwell, I would say that to subsidise the consumer would be no answer to this. There are all kinds of consumers. In the case of Colville's, some of the consumers are not yet in existence. And that is the answer to why the Government should give terms which reflect the rate at which they can borrow, because Colville's were undertaking grave risks. Colville's were accepting a charge on their business. The Government felt that they were fully secured 310 and that the greater risk was being taken by the firm. I consider that in the circumstances this was just normal finance.
Let us take the aircraft industry. I will come back to the noble Lord's question of criteria in due course. I was very struck with the noble Lord's illustrations of the aircraft industry. They were nearly all drawn from defence requirements. I do not think the noble Lord was quite fair in his references to the aircraft industry, because there is all the difference between a development contract and a situation which a company accepts in putting a new civil aircraft on the market. The great changes in the defence requirements owing to technical advances necessitated the making of plans to provide a measure of support for the aircraft industry. As the noble Lord has referred to what my right honourable friend the Minister of Aviation said in another place, perhaps there is no need for me to repeat it, except to say this. The Government intend to maintain a substantial programme of aeronautical research; they intend in certain cases to help to finance the putting into operation of new types of aircraft; and they intend in certain cases to contribute towards the development and tooling of these aircraft: in other words, they intend to contribute towards the initial costs of launching a new type.
The Government are of the opinion that the arrangements they propose to continue with the aircraft companies are best suited to the occasion. There is no guarantee of success in these types and, therefore, the Government, in my view quite rightly, are saying: "If this thing proves a seller, and you sell it, we will take a certain percentage of your sales in respect of our help." It must not be forgotten that the civil aircraft firms are taking big risks; the risks are rot confined to the Government. That seems to me to be a reasonable arrangement which should appeal to anyone. The manner in which these arrangements will be made will vary from firm to firm and in accordance with the project.
The noble Lord put forward the view that where public money goes public policy follows, and I would not dissent from that view. But as to what comprises public money, there I differ from the noble Lord. He referred to 311 maximum contribution, to full employment and to our balance of payments. I suggest that in any case where it is proposed by the Government to lend money to private industry that would be one of the first things to be looked at, and it would be looked at. I have already said that it is the Government's policy that money should be advanced to private industry only in exceptional circumstances, and high in those circumstances would be the desire to maintain or expand employment and to improve our export trade by reason of providing production which would not otherwise be there. It is not quite clear to me what the noble Lord had in mind in suggesting that the criterion for public assistance should be reasonable selling prices. So far as iron and steel is concerned, there is an Iron and Steel Board to fix maximum prices, and although the noble Lord may have his own view as to the nature of those prices, I prefer to accept the views of the Iron and Steel Board, which was put there for that purpose.
Then, so far as aircraft are concerned, there is constant contact between the aircraft manufacturer and civil airlines, and there is intense competition for aircraft. All these things should, and I am sure do, combine to keep a fair price. So I am a little at a loss to know what the noble Lord would do to ensure reasonable selling prices. I think the position is taken care of.
The noble Lord then suggested that there should be satisfactory terms of employment. But is a financial contract to provide money the right place to try to guarantee that? It is true that in all Government contracts for supplies there is a fair wages clause. That is necessary because supplies are secured in competition, and the Government have always wanted to ensure that no one would be tempted to cut conditions of employment in order to put in a low tender. I think that that is right and proper. But to-day, surely, there are plenty of checks, and rightly so, for employees for fair wages and conditions, without our finding it necessary in a plain financial contract to insert conditions of that kind.
I now come to what I think is the main point of the noble Lord's speech—namely, the suggestion that there should 312 be a return to the Treasury, in the form of a proportion of the earnings of the enterprise, appropriate to the Government's share in the risk capital employed. It is no part of the Government's policy to advance money repayable in the shape of equity capital. I have already explained that in the aircraft industry it has been the practice, and will continue to be the practice, for the Government to recoup their expenditure on the sale of aircraft. But this kind of financing is of a different order, where there is no certainty that the plans will result in success.
§ VISCOUNT ALEXANDER OF HILLSBOROUGH
My Lords, could I ask about those aircraft prices, and perhaps the Minister will correct me if I am wrong? I seem to recollect that the money which was recouped from the Viscount aircraft arose from a practice of adding 10 per cent. to the normal price for selling, in order that the 10 per cent. might be paid to the Government. Surely, on any ordinary business basis it should be adjusted differently from that. If you want to get the trade expanded you should sell at nothing higher than the cost-plus-profit basis. You could share in the ordinary normal profit of the company.
§ LORD MILLS
You would also share in the losses—and there were very heavy losses made on some types of aircraft.
§ VISCOUNT ALEXANDER OF HILLSBOROUGH
I assume, therefore, that my recollection of the practice is right. I would only add that if that is so, surely you are not going to get your markets; you are going to lose a good deal of your markets.
§ LORD MILLS
My Lords, I do not accept the noble Viscount's statement. There were taken into account the ordinary costs of the aircraft and the amount the Government had contributed; and then a figure was settled as to what should come back to the Government in respect of their contribution. Advances for expansion to normal ordinary businesses like the steel business are in a different category. The loan is expected to be repaid. There is every reason to expect it to be repaid with interest; and, meanwhile, there is a charge which can be exercised if that expectation should not be realised and in case there is any default in principal or interest.
313 I know the noble Lord opposite would like to see the matter dealt with on a different basis, presumably at the same time as we secured that the advances were as safe and as preferential as possible. He would like to see a share in the equity given to the Government, and Government representation on the board to have their say in the board-room regarding the way Government finance should be: spent. As a matter of fact, to go back to the Colville agreement, the way the money is to be spent is specified in the contract, and the directors of that company are under a liability to see that the money is spent in that way. I suggest that if the Government insist upon having the best of all worlds—security, preference, as well as some stake in the equity, and representation on the board—many projects which deserve Government assistance will never see the light of day.
It has been suggested, although not mentioned by the noble Lord, Lord Stonham, that the Board of Trade's financial inducements to build new factories where the Government want them raise these issues. I saw that one paper yesterday stated it in this way, that to help a particular industry, or to fertilise an area of high unemployment, may be a good use of public money; but it should have the same chances of capital appreciation and of earning dividends as private shareholders' money. Now is that a fair statement? In the particular type of transaction to which the paper was referring, the Government are supplying a property to be paid for after inducing or persuading a firm to go to an area of high unemployment. Why should the Government be concerned, except to see repayment of its outlay? Why should they have to wait upon the results of the business, and take over the responsibilities, including board representation, which would inevitably follow? I am afraid that there is the fundamental difference. The Government cannot escape the need, in certain cases, to advance money for expansion—and all these things are questions of expansion—and they think it right that they should take all steps open to them to see that their money is secure and repaid with interest. We do not accept the suggestion or the insistence of the noble Lord that the Government should start dealing in the equities of these 314 companies, including representation on the boards.
§ LORD STONHAM
My Lords, do I understand from that that the Government also disagree with, and will not repeat, the procedure under D.A.T.A.C., where in all sorts of industries they have appointed Government directors on the board?
§ LORD MILLS
My Lords, I think that that is a different matter. I was referring to the issue of large sums of money in special circumstances to provide for the expansion of industries which cannot be provided for in the normal way.
The noble Lord also suggested that it should be a condition of the contract to advance money that there should be terminal payments to employees who become redundant in industries which are the subject of Government advances. We all like to see fair arrangements made between a company and its employees, or between an industry and the trade unions, to take care of redundancy. But is this a suitable thing to write into a contract, the object of which is not to create redundancy but to prevent it? I suggest that that matter is adequately taken care of already.
The noble Lord stated that where public money goes public policy must follow. The object of supplying money to public industry and to private Industry is to serve in one form or another the public interest. It is not the Government's business to insist upon extraordinary conditions to satisfy someone's belief in nationalisation or anything else, making it difficult for a firm to accept public assistance in those cases where public assistance is designed to serve the national good.
§ 4.20 p.m.
§ LORD WISE
My Lords, in breaking into this discussion at this point, I do so with some diffidence, but I want to deal with a problem which I think is covered by part of the reference in the Motion. I may be thought to be going off at a tangent when we are discussing heavy industries and others of a similar nature. In what I have to say this afternoon I do not expect an answer, but I want to put a point of view to the Government which I think may be worth consideration. I am sure that in what I have to say I shall take all noble Lords 315 who are interested in agriculture with me.
Among the vast sums of money paid out as national assistance by way of grants or loans to industry, that given to agriculture is so great that, as I said, it calls for attention and consideration in our discussion. I am not objecting to such a system in present circumstances, nor decrying it in any shape or form. The farming industry could not survive without it. Existing conditions make it imperative that Government help in full measure should be given to the industry. I want to stress my reference here to existing conditions, because if conditions were different than they are at the present time subsidies might not be necessary. I need not enlarge upon the difficulties, frustrations, disappointments and uncertainties of farming life and business. Without subsidies and grants the position might, by reason of high agricultural costs, be even worse than those we remember all too well in the period of the 1930s. Government help very materially lessens the strain. Such help is probably now as great as the national interest will allow.
In looking at the agricultural subsidy position, I want to discuss the question of some measure of control which might be beneficial to the industry. It can be argued that the allocation and operation of agricultural subsidies are not always along lines which can be approved without reserve or comment. In connection with agriculture there cannot be any question of the Government's securing a share in the equity. The industry is made up of thousands of individual and sometimes small units. There are approximately 300,000 farmers; the figure may be a trifle higher than that particular number.
In answer to a question in another place a few days ago, the Minister tabulated fourteen farming grants and subsidies and ten agricultural price guarantees. Payments under those for the present farming year, according to the Minister, will amount as follows: 14 farming grants and subsidies, £94.6 million; 10 implementation of agricultural price guarantees, £157.8 million that is, a total of £252.4 million. In addition, the administration overheads in this connection amount to £5.5 million, making that total practically £258 316 million. There are small payments to Northern Ireland which I do not propose to deal with. Last year the figure was £241.4 million. The individual figures differ from year to year, but this year will show an increase of approximately £18 million. As agriculturists, we cannot complain; as taxpayers, we might do so. The figures show the measure of national generosity to the industry. Their significance, as bearing upon our prosperity, and their importance to us will be apparent when I give further figures.
We welcome their assistance and appreciate the vital impact which they make upon our livelihoods, but we should also be concerned that their operation is correct, above suspicion, and that Government assistance goes to the primary producers for whom it is intended, and not into other channels. I mentioned these figures in a recent discussion. They were of interest both in your Lordships' House and outside. I have amended them in the light of present circumstances. According to the forecast in the last Annual Review, the farming profit for 1958–59 was estimated to be £327 million. The prosperity this year may have increased, so for my purposes I shall add another 10 per cent.—that is, £33 million—making a total of £360 million. Perhaps I have been a little generous in my 10 per cent. allowance, because it is well known that 5 per cent. was the limit in an award or gesture last week, and I believe the National Union of Agricultural Workers' members received only 2» per cent. increase, or thereabouts. That total is £360 million, and of that total subsidies, without capital grants, amount to £240 million—that is, for the sake of information, £252 million less about £12 million. Your Lordships will see, therefore, that the subsidy portion of our profits is in the region of two-thirds.
Subsidies bring the average profit of farmers to possibly a figure round about £1,000. A small farmer, with subsidies, would probably make no more than about £400; some would be less, and some would actually show losses. It will thus be seen that without subsidies, after allowing for the personal allowance, earned income relief and children's allowances in some cases, the income tax payment of the agricultural industry would be negligible. But, of course, it must be 317 realised that part of the subsidies paid by the Government in fact come back to the Revenue by way of taxation.
Having dealt with the impact of subsidies upon farm income and prosperity, I want now to touch upon the consumers' interest and some absence of control by the Government. Let me first of all deal with fertilisers. The question of fertilisers is topical news and is somewhat startling. According to the figures given, I believe by the Minister last week, the amount of subsidies in regard to general fertilisers is £29 million. Last year it was £25.8 million. The lime subsidy is £11 million, making a total of £40 million, as against a total last year of £35 million. Therefore, your Lordships will see that the fertiliser subsidy is a very high part of our general subsidies.
If one thing emerged from the Monopolies Commission Report, apart from the excessive profits which had been charged against the industry, it would seem that there has been a complete absence of Government control of prices in the interests of the consumers—the consumers in this instance being the farmers. That is the situation that I want to see put right in the future. We can gain by the experience of the past. I believe from what I have read of the proceedings in another place that, after the matter has been considered, the Minister is proposing to take up with the industry this question of fertiliser prices. I hope that his conclusions will lead eventualy to control of cost, and so benefit the farming industry.
On the question of costs of fertilizers, the cost to farmers rose from £59½ million in 1951–52 to £93½ million in 1957–58, and if I am right in thinking that the subsidy is to be deducted from those figures, it will be seen that about one-third of the cost was reimbursed by the subsidy to the industry. I understand that the fertiliser subsidy is calculated on the basis of the analysis of the fertiliser, the percentage payment fluctuating according to the month of delivery. The price of the commodity apparently does not influence the amount of the subsidy, but the higher the cost to the farmer the lower his farming profits fall and the merchant or manufacturer gains at the expense of the consumer. Sometimes I have a feeling that the receipt of subsidies and grants by 318 farmers may lead to the imposition of higher prices upon them for commodities which they may have to buy. They may be thought by the manufacturers or merchants to be "fair game". Agricultural subsidies are for the benefit of producers, to sustain efficient production, and also in some respects for the benefit of the consumers; but on no account should they be considered as pickings for other industrialists and merchants.
Now I want to call attention to the cost to the farmers (this afternoon I am dealing mainly with the question of the control of costs) of implements and machinery, and also feeding-stuffs. Here, I hope that what I have to say will lead to some sort of investigation by the Government as to whether the costs which we bear show legitimate and reasonable profits to the suppliers. The cost of implements and machinery rose from £127½ million in 1951–52 to £212 million in 1957–58—an increase of about 70 per cent. The cost of feeding-stuffs rose in the same period from £180 million to £328 million. That is roughly a 70 to 75 per cent. increase. The latter rise is significant, because it occurred at a time when the Minister was pressing farmers to make particular use of their own products; and his advice was taken. Both these items could well be officially investigated to our advantage. According to my information, the costs of feeding-stuffs have nearly doubled in that period, but I have not noticed that the prices paid by the merchants for our home-grown cereals have risen proportionately during the same time. Here again, by reason of heavy deficiency payments paid by the Government to offset the low price received by the producer, the farmer may again have been considered as fair game for exploitation.
In conclusion, should like to say just a few words about stock deficiency payments. The noble Earl will know that I have repeatedly, on other occasions, expresed my view about this particular item. The sum of £50 million which is paid in deficiency payments for livestock is a large sum for the Government to pay out without effective and adequate control over whose pockets the money goes into. I believe I am Tight in saying that generally, when fat or special weight stock is sold on a dead-weight basis, the deficiency payment, if any, is collected from the 319 Government by the purchaser and is not paid direct to the producer. The prices in this class of stock are generally fixed prior to a knowledge of what the deficiency payment will be for that particular week, and an estimate by the purchaser is included in the price he offers. This may react against the interests of a producer who is unable, as many small producers are, to sustain weekly sales of stock. The big farmer may not lose—in fact, he may be about right on balance, owing to the fact that he is able to send stock in week by week. As I have said, the farmer may lose and the purchaser gain, as he will, in effect, retain deficiency payments to which the producer should be entitled. In my view this is unsatisfactory. I have heard it said that the amount so retained is very considerable. I do not abject to sales on a dead-weight basis, provided that the purchaser pays the price for what he receives from the producer and does not include do that price a figure for something else which legally is due to the producer and not to the purchaser.
I want for a moment to come back to the question of the administrative expenses. According to the figures I have given, they amount this year to £5½ million. I suggest that by reorganisation, the whole of the subsidies, or deficiency payments, could be paid direct to the producers. An amount of £51 million for administrative costs seems to me to be on the high side, and it might well be that by some reorganisation, in the offices or otherwise, the deficiency payments, instead of being paid in bulk to the large producers, could be paid as other payments are made—direct to the producer. In regard to livestock auctions, week by week, the guaranteed price payments are paid direct to the farmer.
When we make grants for various items of capital improvement we should follow up to see that the nation is still getting value for money after that money has been handed over. There should be further departmental interest shown in that transaction after the cheque has been sent and the book entry ruled off. The national interest in that land, or farm, should not cease from that moment, and I trust that that is not so 320 in those cases I have mentioned. I hope I have stated a case for agriculture which will warrant consideration by Her Majesty's Government. As I said at the commencement of my speech, I do not expect an answer this afternoon, but I should like to feel that in view of what has happened during the last week in one section of our industry, Her Majesty's Government might well think it worthy of further consideration. In conclusion, I want to suggest to Her Majesty's Government that our costs should not rise out of proportion to our receipts.
§ 4.43 p.m.
§ LORD MCCORQUODALE OF NEWTON
My Lords, I think we should all be grateful to the noble Lord, Lord Stonham, and the noble Viscount, Lord Alexander of Hillsborough, who first put down this Motion, which was taken over by the noble Lord, Lord Stonham. It comes at a very apposite time—shortly before the Budget—and focuses the attention of the House on the possible trend of Government policy towards some participation in private industry which gives some of us much food for thought.
I do not wish to deal at length with the speech of the noble Lord, Lord Stonham, and I imagine that he will not expect me to do so, in view of the massive reply he received from the noble Lord the Minister. But I would say, in passing, that he seemed, in his frequent references to equity and equity advantages, to forget entirely that something like half the gross profits of our private industry go immediately to the State in taxation. In that way, the State already has a half-share in the total profits of the industry—not in the dividends paid out, as they would if they had put up their own money but in the total profits of profitable industry—and therefore gain immeasurably when industry is profitable, and do not suffer the losses which they would otherwise suffer when losses are incurred in certain sections of industry.
No doubt in this connection the noble Lord, Lord Stonham, will remember that some years ago there was a tale about ground-nuts which some of us have not forgotten. I found myself in very considerable agreement with the noble Lord, Lord Grantchester, in what he said. I am sorry that he is not here 321 now, as I should have liked to take up one or two points with him. I hope that the noble Lord, Lord Wise, will forgive me if I do not comment upon agriculture, a subject on which I confess I am woefully ignorant.
We had a somewhat spirited debate here last summer when some of us tried to obtain from noble Lords opposite—Her Majesty's Opposition—a statement as to where they stood on the whole matter of nationalisation and public ownership and public control of industry. We had what we thought were some pertinent questions to ask from this side of the House, and a lively debate ensued. But I think, somewhat naturally, because there was an Election in the offing, we failed to draw noble Lords opposite in the way we had hoped. Perhaps I might refer for a moment or two to that debate. Some of us tried to point out that in our view all the political portents of the time pointed in one way. Gallup Polls, "quizzes" and canvassing all showed, I believe, that the general public, having tried nationalisation and public ownership, had decided they did not like it. They tack a poor view, we ventured to suggest, of nationalisation up to date, and certainly did not wish to see it extended. And so, as we all know, it turned out to be when the General Election took place.
It would not be appropriate for me (and I have no wish) to enter into the "agonising reappraisal" (if I may use Mr. Dulles' own words) which is apparently publicly going on in the Labour Party to-day on this matter. But it seems to me, from my point of view, that if we have public ownership—or "public control", as it is now euphemistically called—the real point at issue is where power lies. We on this side of the House do not wish to see all the power resting in Whitehall. I think it is worth remembering in this connection that the wind of change is blowing all through Western Europe in the consideration of these matters. The so-called Social Democrat parties on the Continent are turning away, and in many cases have already turned away, from the old severe doctrine of public ownership of the means of production, distribution and control—a famous phrase—towards a doctrine of public control where the public interest demands at least, that is the way in which I believe it is usually defined. 322 Well, who is to define where the public interest demands except the Government of the day? And that places control right back again in Whitehall.
I would, if I may, take up a minute or two of the time of the House in commenting upon this revisionist feeling, this revisionist wind, that is blowing across Western Europe. I was very much interested in an excellent article by Mr. Crosland, in a paper called Encounter for March of this year. He summarised, most usefully I thought, what is happening to Left Wing thought in Europe in this matter. In Holland, the Dutch Labour Party have publicly said that public control must be exercised over privately owned undertakings in industry if this should be proved to be necessary in the interests of the community. The Swedish Social Democrat Party Prime Minister is preparing a new draft for his Party in which he says that social democracy supports the demand for public ownership or public control to the extent that is necessary to safeguard important public interests—the same thing, in another phrase. The Swiss Social Democrat Party says that monopolistic enterprises must be dealt with either by establishing the conditions necessary for fair competition or by placing them under public control. It is the same in Germany; and it is interesting that the Labour Parties in Australia and Canada seem to be going in the same way, with the emphasis on public control and not on public ownership.
We have heard some of that to-day from the noble Lord, Lord Stonham, when he advocated further incursions of public funds into private industry, whether by subsidy or otherwise, with a measure of public control over industry. I am myself, however, wholly persuaded that the results of private enterprise, competitive enterprise, are, both morally and materially, vastly superior to public ownership or public control in industry. Materially, we see the advantages quite plainly. The country needs no reminding of that. Morally, I would say that competitive private enterprise demands the virtues of self-reliance; of private thrift and private saving; of hard work and courageous forward planning and risk-taking. But if those who work in so-called private enterprise can confidently look to the taxpayer for subsidies to 323 protect them from their own mistakes or misfortunes, then the virtues disappear; the self-reliance disappears; the thrift and the hard work are no longer necessary. I would agree with the noble Lord opposite and with the Minister that if subsidies became widespread (which, Heaven forbid!) the demand would be made—and it would be difficult to oppose it—for some form of public control over those firms where the subsidies were placed. We should then be drifting back to the doctrines of public control which are now sweeping across Left Wing Parties in Europe—public control of industry, which I assert is bad, and which those of us who believe in private enterprise (and we are in the great majority in this country) emphatically rejected at the last Election.
What is the position to-day? Have we already cause for alarm at the possible direction public affairs are taking? The Times gave us on February 16 an admirable chart, which I have here, in the form of a diagram. "Possible Government Aid to Industry over £200m." is the heading. The sub-headings are: Motor Cars, Steel, Shipping, Cotton and Aircraft. I do not wish to go through the whole statement. It says at the bottom:It will be seen that the main purposes are (a) to divert private firms' new developments to areas of high unemployment, (b) to provide funds not otherwise available, and (c) to ease the concentration problems of the aircraft and cotton industries.The figure given is over £200 million. It is obvious that the problem is of major importance, and that is why I am grateful to the noble Lord who raised it.
§ LORD STONHAM
My Lords, would the noble Lord allow me to interrupt? He just mentioned The Times. Is he aware that The Times to-day described the Government's policy, in, I think, the third leader, as "bullying and bribery"?
§ LORD MCCORQUODALE OF NEWTON
My Lords, I am afraid that I have not read The Times quite so fully as the noble Lord opposite, but I have lead one article in The Times to-day to which I am going to refer in a moment.
We had a most interesting discussion yesterday, and noble Lords in all parts of the House were agreed that it was right and proper to endeavour to put industry into those parts of the country 324 where people were already waiting for employment. To that extent some inducements are necessary. I was much interested in the suggestion made by the noble Lord, Lord Grantchester, that possibly the inducements offered would be much better if given by way of depreciation allowances rather than by public loans. I think that that suggestion is well worth exploring. Under the heading of "Shipping", The Times has a long leading article which sets out the position so clearly that I would not wish to comment on it. When we come to the cotton industry I think there is nobody who has studied this question who would to-day say that, in the light of subsequent events, we should now do what we did three years ago. The change in the cotton industry, and the position of Lancashire and the yarn position in general, is so great that undoubtedly there would be a different conception of things to-day than there was then; and I go no further. The aircraft industry has been dealt with very closely by the noble Lord, Lord Mills, and I do not wish to add anything to it.
It is obvious that this whole question is large and needs threshing out; and those of us who believe in private enterprise will wish to assert, I think, that subsidies or the provision of public funds for private industry are inherently bad. Circumstances do arise, as we have seen, when it may reasonably be argued that, in certain cases, more good than harm may come by public intervention in private industry. Therefore I am in full agreement that we cannot lay down any hard-and-fast rule in this matter. But I would say to noble Lords that I believe the dangers inherent in any system which can be loosely described as subsidising—loans, gifts, grants, what-have-you—are so great, or tend to become so great if unwisely handled, that we must urge the Government to take the utmost care to ensure that the use of public funds in this way is made only in exceptional circumstances.
§ 4.56 p.m.
§ LORD SHEPHERD
My Lords, I believe that this afternoon my noble friend Lord Stonham made a damning indictment of Government actions in the methods of granting aid to industry. The noble Lord laid his case with cogent arguments. There were no sweeping statements; each point was carefully 325 made, fully backed and supported by evidence. I thought it was one of the most remarkable performances that I have had the privilege of listening to in this House. I suppose my noble friend would have regarded this Motion as the first attack that noble Lords on this side of the House have made upon the Government since its return at the last General Election. I hope the attack will continue, and that it will be penetrating and persistent. I did not come prepared to speak on nationalisation—my noble friend avoided it—but as the noble Lord, Lord McCorquodale of Newton, has raised it, I do not propose to avoid it.
The Tory Party at the last Election made one of their main attacks upon the British Labour Party because of their support of the theory of nationalisation or, as some of us prefer to call it, public common ownership. The Tory Party during the Election, I thought, made many wild attacks upon the nationalised industries. In many respects I thought they were completely reckless. They had no regard to the morale of management and the workers of the nationalised industries. I thought also that they were reckless in regard to the accuracy of their charges. They singled out for abuse the coal industry and the railways. They never mentioned the other nationalised industries. There is atomic energy, which has made us, I am sure the House will agree, the leading atomic Power in the world to-day. Atomic energy is a nationalised industry. There are electricity and gas. We heard the evidence of the growth of those industries from my noble friend Lord Stonham. We have the records of the British Overseas Airways Corporation and of the British European Airways, and of their pioneer work in the field of British aircraft. And when the Conservative Party was lauding the wonderful performance of free enterprise in steel, did they ever mention the name of Richard Thomas and Baldwins, a wholly-owned State company in the steel industry? I will deal with that company later.
My noble friend, when speaking of the steel industry, did not draw the attention of the House to the past difficulties of this industry. It had difficulties in 1930–31, when the Government came to the aid of the industry (admittedly, on to-day's values, in a modest way), and again in the days of 1938–39, when the 326 existing steel industry was unable to meet the requirements of the rearmament programme. Then, again, the State had to provide aid for its development. At the Election, the Conservative Party, supported by the steel industry itself and by the Institute of Directors, led the public to believe that this industry was completely free; that it stood on its own resources. As my noble friend Lord Stonham has told the House, approximately £240 million of State money is now invested in the steel industry: £92 million is invested in wholly-owned companies within the steel industry, and the balance is invested in one form of loan to the private companies. In this loan we do not share in the equity; we earn the minimum of interest; we fail to share in the capital appreciation of the industry; and I suppose one could say that, if inflation continues as it is at present—slowly now, but previously high—the loan that we have made in the past will be of less value than it was when we put it in.
§ LORD MCCORQUODALE OF NEWTON
My Lords, I wonder if the noble Lord would allow me to interrupt him for one moment. It seems to me that he has made a remark which is of some importance and should be elucidated. He talks about the State taking advantage of the advance in the value of the equity of the industry. The only way the State can take advantage, of course, is by selling, by jobbing the market, by speculating in stocks and shares. Is he wishing that the State should take part in buying and selling in the hope of capital gain? If the State wishes to stay in the industry, the advantage is in the income tax. I am sure he really does not wish to advance the position that he is now taking up, that the State should take part in speculation on the Stock Exchange.
§ LORD SHEPHERD
I thank the noble Lord for elucidating that point. I should certainly never dream of suggesting that the Government should go on the Stock Exchange and take part in the buying and selling of shares. You gain in value with the capital appreciation of the company; but by having the equity, as I can show later with some figures, you will earn a greater percentage for the taxpayer than by having it on a fixed interest.
327 Now, my Lords, in another place there is a Bill to increase the sum of State aid to the steel industry by £120 million. I think I should again emphasise, as did my noble friend Lord Stonham, that we have no objection to giving aid, but what we want to know and to be satisfied about is that the return to the taxpayer will be at least comparable to the income and the interest of the private investor. I should like to quote some figures, because in his speech the noble Lord, Lord Mills, mentioned the difficulty steel companies had in obtaining loans in the normal market. He maintained that it was difficult because of the attitude of my Party. My Lords, my Party was defeated in October. This is February, and the Bill was introduced in February. The noble Lord said that money was short. I wonder whether the noble Lord can remember that only a few weeks ago the Governor of the Bank of England expressed serious disquiet at the lack of first-class equities in which the smaller shareholders could invest their money. There are vast sums of money that are being invested and which I am certain would have gone into the steel industry, because the profits that arise if the money goes in as equity are quite considerable.
Surely the key really lies in this: that Colville's will be borrowing at approximately, we estimate, 4 per cent. We have no definite figure, and we can only estimate it, because we have been told it will be based on the rate at which the Government can borrow, but we estimate that they will pay approximately 4 per cent. Can any noble Lord believe that if Colville's went to the City of London and tried to borrow money at 4 per cent. they would be successful? And what difference does it make to Colville's? It must surely mean that, by borrowing from the Government, they are saving at least a million pounds in interest. So, my Lords, I do not think that the case of the noble Lord, Lord Mills, stands any investigation. The noble Lord then said that Colville's were taking a calculated risk in opening this new strip plant. My Lords, there is every evidence that strip steel is in grave short supply to-day. I believe that some motor car companies are curtailing production because of the shortage of strip steel. It may well have been a calculated 328 risk, but it was a very good risk, particularly when you are going to borrow at 4 per cent.
Now I should like to say something about these companies—I have four in mind—in the steel industry, and their attractiveness to the market. Let us take Colville's. The figures I have here come from one of the leading stockbrokers in London. The pre-nationalisation price for Colville's shares was 38s. for a 20s. share. The price at denationalisation—that is, the price at which the privileged or the lucky paid for their shares in that company—was 26s., and the price to-day (the price I have been given is a little lower than that quoted by my noble friend Lord Stonham) is 74s. When we realise that Colville's have only £10 million equity private money and £14 million of Government loans, is it any wonder that this company can make this profit and bring this big capital gain? Any company that has the resources the Government are prepared to give must, with good management, make a profit.
Let me take the Steel Company of Wales. The price of their shares before nationalisation was 25s.; the price at denationalisation was 20s., and to-day's price is 47s. That company has £40 million capital and it has received aid to the amount of £105 million, and I understand that the rate at which it borrowed at that time was 5½ per cent., due to the high bank rate of two years ago. I would not criticise the steel industry as being inefficient. They had a market open for their commodity and they have taken advantage of the demand for steel. They have had Government aid at low rates and they have reaped the benefit.
I must now turn to the firm of Richard Thomas and Baldwins. The noble Earl who is going to reply will know that this company is a wholly State-owned company. It is a company that is efficiently managed and has made remarkable progress. Last year, it carried out developments out of its own resources to the amount of £9 million, and increased its profits by £2 million—a fact which will please noble Lords opposite. I believe that it is now accepted on all sides that we shall have a form of mixed economy. Why is it, then, that the Government have made a declared policy statement that this company is to be 329 sold? There is absolutely no justification whatsoever. This company is efficiently managed. It has had the resources of the taxpayers. Then why should the taxpayers be denied the benefits of their own State company? I think that before we adjourn to-night the noble Earl who is to reply should give us a proper answer to that question.
The House will remember the firm of S. G. Brown & Co., the gyroscope manufacturers. This company was so inefficient that it was unable to provide the equipment that the Navy required in the heat of the war, and the situation was so desperate that the Government nationalised it. Through efficient management, it was turned into a satisfactory, profit-making company. A year ago the Government declared their intention to sell this company. Why? It was efficient, it was earning money for the taxpayer—but it must be sold. The only reason we were able to get from the Government was that the Admiralty did not want to be bothered with it. But the Admiralty never carried out any part of the everyday control of the company. Your Lordships' House should insist that the Government give a valid answer as to why this company should be handed back—I will not say to speculators, but to the men who can anticipate the cream.
I should like to turn to the cotton industry, again one to which the noble Lord, Lord McCorquodale of Newton, referred. Government aid to this industry, I think he will agree, fell into two parts. One was the Government's severe pressure on Hong Kong, India and Pakistan to restrict their exports to this country. This has created a degree of hardship, particularly in Hong Kong. The Government have even incited America to take similar action. This is not the occasion to debate the matter, but it should be put on record that Government aid is not only in money; it is also by political pressure.
Governmental financial aid came in a Bill which the noble Earl, Lord Dundee, presented to your Lordships' House, by which approximately £30 million was to be doled out (I use the words deliberately) to the Lancashire cotton industry. But when we asked the noble Earl, as we did from this Despatch Box, what type of industry would be left—would it be efficient; would it be economic; would 330 it be competitive?—he naturally could not give us an answer, because the industry itself did not have the answer. But we know that, from the reception of that aid, the prices of shares of cotton companies moved steeply. The shares of Amalgamated Cotton on June 2, before the Government announcement was made, were 11 s. 9d.; to-day, the price is 23s. 7d. On June 2, Lancashire Cotton was 48s.; to-day, it is 62s. 6d. On June 2, English Sewing Cotton was 31s.; to-day, it is 50s. How the Lancashire cotton companies have taken the cream following Government aid!
THE EARL OF WOOLTON
It is very difficult to sit and listen to this. I wonder whether the noble Lord is referring to the Lancashire cotton industry, of which I have some knowledge, or to the Stock Exchange. The two things had perhaps better be separated.
THE EARL OF WOOLTON
I wondered what was the point of the noble Lord's previous observations. I was hoping that he was going to talk about the industry. But he has not been doing so, and, if I may say so respectfully, what he is saying strikes me as little other than abuse of the Lancashire cotton industry.
§ LORD SHEPHERD
I suggest that the noble Earl reads the Motion before us, because what I am saying is most relevant. I am trying to show that, because of Government aid, the capital appreciation in which the country has not participated has been considerable.
I will put this point to the noble Earl. I think he will remember that, prior to the Government's promise of aid to the industry, for many qualities of grey cloth in Lancashire the price was fractionally the same as the c.i.f. Hong Kong price. I can tell the noble Earl that to-day, instead of Lancashire being equally competitive with Hong Kong, there is now a gap of at least 4d. to 6d. a yard. We do not know what will be the final result in the industry of the aid the Government have given. We have had the Spinners Order, which is now in the process of being worked out, and we have the Weavers Order. But we are still awaiting the Order regarding the printing and finishing section. My information is that that particular section of the industry cannot agree on what is to be 331 done. I am not being abusive. I have to sell many of the products of Lancashire. I want to see Lancashire as competitive as Germany, and possibly as competitive as Japan. But I do not believe that Lancashire has taken advantage of the aid that the Government have given. The cream lies in the figures I quoted.
§ LORD SHEPHERD
Yes, the Stock Exchange figures.
As I see it, the Motion that my noble friend has put before the House falls into two parts. The first calls for a share in the equity. I can see absolutely no reason why public money, put in at the request of industry itself—and I make this point, as my noble friend Lord Stonham made it—should not go in on the same basis as money that is put in by the Prudential or any of the other big insurance companies, or by any of the trust companies that are now flourishing in the City of London. In that way we should gain capital appreciation, and we should have a real part, though not necessarily a dominating part, in control—and I am certain that my noble friends on this side do not want to go in and dictate to the men on the board of any steel industry who have taken our money on the everyday working and policy decisions. All we want is that the public should enjoy the same rights, the same privileges, and the same return as the private shareholder. In the matter of control, we should not use our share of the equity in any company to obtain outright control. Although it might be beneficial in some cases, I think it would be injurious in many others. I think that what we have to decide to-night is what is right and what is just to the taxpayer. It is the taxpayer who is providing this money. Why, therefore, should he not enjoy some of the cream that comes from industry?
§ THE MARQUESS OF SALISBURY
May I ask the noble Lord where the taxpayer gets his_ money from? He gets it from productive industry.
§ LORD SHEPHERD
The taxpayer, if it is a company, gains by its own production. In the case of the man who works in the factory or goes around the 332 world as an executive, he pays taxes on his income and he is contributing to the common weal.
§ THE MARQUESS OF SALISBURY
I do not want (to interrupt the noble Lord, but I feel that he starts too late in the argument. All wealh comes from productive industry ultimately. Both the man who works in the works and the shareholder in the firm get their money from profits of productive industry: and to that extent all wealth comes from productive industry. Subsidies which are given back by the Government are, to a certain extent, a repayment to firms which have been too heavily mulcted in taxation. I will not go on, because I do not want to make a speech. But I should like to tackle the noble Lord on this point at some time or other, because it is a fallacy of the Party of noble Lords opposite to think that public money comes from some source other than from productive industry.
§ LORD SHEPHERD
I will accept the offer of the noble Marquess to discuss this matter at another time. Obviously, if we have an argument across the Floor of the House now we shall delay the House, and I do not think that would be appreciated by other noble Lords.
§ 5.28 p.m.
§ LORD SINCLAIR OF CLEEVE
My Lords, I think it is true to say that the essence of the Motion which is before your Lordships' House is whether, by way of grant or loan or in any other form, Government assistance should, so to speak, not be made, if it is a large amount, unless accompanied by some measure of control and/or an equity interest. That, I think, is a difficult proposition to establish. The noble Lord who introduced the Motion stated four criteria, of which I took note, which might be the conditions under which the qualification for assistance might be granted. He grouped these criteria under what I may call the umbrella of the proposition which says that where public money goes public policy must follow. I have been pondering over this proposition in the course of the afternoon, and, if I may say so without the least disrespect, it seems to me to be an analogy to the age-old priority problem of the chicken and the egg; in fact, I think I can see circumstances where the converse would be just as true. As regards the fourth criterion which the 333 noble Lord postulated, which was that the Treasury should receive a share of profits appropriate to its proportion of the risk capital involved, I would see no difficulty whatever in satisfying that condition, because I would (as I hope to show) see considerable arguments against the Government taking an equity interest in these problems.
This is a many-sided question, and I will not attempt to comment on the position of grants to a wide variety of industry. I have not sufficient knowledge to make such comments usefully. I would agree very much with what my noble friend Lord McCorquodale of Newton said in reference to the broad question, namely, that such grants or loans which are becoming considerable in amount should be made only in exceptional circumstances.
I will, if I may, address myself in the main to the economic arguments regarding action under the Local Employment Bill, but without the kind of strings suggested in the Motion, and, secondly, to some of the points of principle involved in the proposition that there should be some measure of Government control, or a Government-owned share in the equity in any case where large sums are advanced by way of assistance to industry. But since, however, the terms of the Motion cover all forms of assistance to industry, I will ask your Lordships' indulgence if I refer quite briefly to a kind of assistance which has not yet been mentioned this afternoon. It is small in amount, but I believe it to be considerable in value. I refer to the assistance to such bodies as the Dollar Exports Council the British Productivity Council, the Council of Industrial Design and the British Standards Institute.
In the early days the Dollar Exports Board and the Dollar Exports Council were both admirably led by Sir Cecil Weir, and the latter body, of course, still flourishes under the dynamic chairmanship of the noble Lord, Lord Rootes. The Anglo-American Productivity Council initiated those extremely useful interchanges by management and workmen in industries with their opposite numbers in North America, and thereby gave to industry in this country a great benefit through obtaining detailed knowledge of production systems and methods, techniques 334 and technological developments; and, by widening experience and stimulating a more critical analysis of our own methods, thereby improving our competitive power. As regards dollar exports, it would, of course, be ridiculous to claim that the Dollar Exports Council is responsible for the gratifying increase in our dollar exports, but it is no exaggeration to say that that body has had a great influence in guiding and aiding in a variety of ways, and in occasionally smoothing the path for individual firms by whose own efforts those results have been secured. In none of those cases, of course, is there any question of Government control. In most of them a considerable degree of finance is provided by private industry, but they are grant aided. The total amount of grant in all these four cases is comparatively small, but the work which collectively these bodies do is, I believe, of great value to industry and to the country.
To turn to the two main aspects to which I earlier referred, the Local Employment Bill, which was debated in your Lordships' House yesterday, found a good deal of acceptance and sympathy with its objects. I would be one of those who welcome it, particularly as an indication that the Government were taking a new look at this problem, and I would hope that a real effort would be made to ensure efficient and, as far as possible, simpler administration. The economic corollary to the checking of rampant inflation has been, and to some extent always will be, less than full employment in certain areas. No one will deny that the general economic position of the country is to-day much sounder than it was three years ago—indeed, probably stronger than at any time since the war. Yet no one can be satisfied that there should continue to be areas where, in these times, an appreciable proportion of the working population is persistently unemployed.
As I see it, there are two ways of remedying this situation. The first which can be only temporarily successful, and very soon will be disastrous, is to endeavour to stimulate demand to a point where there is no unemployment anywhere. The other way is by ad hoc measures such as can be taken under the Local Employment Bill, to spend sizeable sums of money in helping, one 335 might say artificially helping, to provide jobs in areas where, for one reason or another, labour is relatively plentiful. But to be effective, action under this Bill must include some relatively large transfers of work. Here may I observe how fortunate it is that to a considerable extent useful action under the Bill can be taken by steering expansion to these areas rather than by relying wholly on diversification per se.
As regards the return for the assistance that the Government may give under the Bill, ex hypothesi if there is an established case for assistance, the siting of the expansion in the development areas is not of itself going to increase the profits; so that, apart from the interest on the capital provided, the real return lies in the contribution to the general economic health of the country and in the reduction of demoralisation and expense associated with persistent unemployment. There is, surely, nothing wrong in a company which is prepared to fall in with Government policy to the extent of undertaking an expansion in a development area, while its own convenience and probably its own more immediate considerations of profit dictate an expansion nearer home, being, where necessary, assisted; but if the assistance takes the form of a loan, the terms and conditions of which are negotiated between the firm and the Government, it is, I think, a mistake to superimpose other conditions tantamount to a measure of control.
I have seen nothing to justify the belief—I am afraid I am going to be controversial here—in the proposition that Government control increases the efficiency of industry. Indeed, there has been a wealth of experience to the contrary. But I will not weary your Lordships with a repetition of arguments against nationalisation in general, or against the general proposition of large-scale acquisition of equities by Government in order to participate, otherwise than through taxation, in industrial prosperity, with, of course, the corollary of participating in losses when times are not so good.
Perhaps I might now refer to the points made by the noble Lord, Lord Shepherd, when alluding to the appreciation in market values of the shares of so many companies in industries to 336 which, in greater or less degree, some assistance had been given. The figures he quoted of Stock Exchange prices have nothing to do with the case, other than that they are a reflection of improved earnings for one reason or another; and, as the noble Lord, Lord McCorquodale of Newton, pointed out, the Government receive their share of those improved earnings through taxation and not through dividends.
On the question of Government assistance in cases of the kind we have been considering this afternoon, I would unhesitatingly say that in principle it is wrong that that assistance should take the form of an equity interest rather than a loan. It could be the thin end of a very dangerous wedge. The Government ought not to, and indeed in practice cannot, efficiently exercise control over a wide variety of industries. I know that it has been said on the other side this afternoon that "What we are thinking of is not really control so much as looking after, and an equity interest without any control." But, my Lords, there really is no half-way house between control and influence on, and therefore to a greater or less degree interference with, management—in effect usurping some of the functions of management.
§ VISCOUNT ALEXANDER OF HILLSBOROUGH
My Lords, I am most interested in this argument and one always values the arguments in business matters of the noble Lord. I am very interested in this question of how far one can go in exercising efficient control in a big organisation. Is not the whole tendency now towards concentration of still larger and larger groups, take-over bids leading to that result as well? We find a man who is chairman of as many as forty companies, all carrying heavy labour and industrial responsibilities. What sort of control does he exercise in relation to what could be done by the Government?
§ LORD SINCLAIR OF CLEEVE
My Lords, I cannot speak from personal experience of the position the noble Viscount last referred to. I have been engaged in industry now for slightly over forty years. I would regard this latest phase of take-over bids to which the noble Viscount referred as having nothing whatever to do with the proposition I am trying to establish. This is 337 not a question of the basis on which Government can, or should, take an interest which amounts to Government control—at least that is my belief.
I believe that the Government's real function in the sphere we are considering to-day lies in taking such measures as are within their power to encourage the development which serves the whole economy but which, without such encouragement, would be delayed, and in taking those measures in the way best calculated to produce the desired results. In so far as such encouragement requires additional finance beyond what can be found in the ordinary way in the capital market, the Government, where they are satisfied as to the creditworthiness of the borrower, can well make loans on appropriate terms. The return of the Government should be an interest in the ultimate repayment of the loans and the tax that may accrue according to the profitability of the undertaking.
I would not venture to express a view on whether, for example, in the circumstances of the day, the loans to which the Government committed themselves some time ago, which have a very considerable bearing on the terms, to the two large new strip mills in South Wales and Lancashire are the right amounts. I do not profess to know whether £30 million sterling is the right figure for assistance for reorganisation of the cotton industry, or to what extent Government finance is necessary to give effect to changes in Government policy with regard to the aircraft industry.
I would, however, say this: whether a loan or grant is in the form of assistance to relieve and reduce persistent local unemployment: whether it is finance for the re-deployment of an industry such as the cotton industry, or whether it is finance for large-scale undertakings, whether steel, aircraft or some other kind of undertaking, where the national need calls for such a large amount of additional finance in so short a time as to be in part, at any rate, beyond the capacity of the capital market, it is not right that the Government should seek to control, either by an equity interest or in any other way, the management of the undertaking in question. That, as I see it, is not the Government's job, and it is not a job that any Government can do efficiently. The minority equity interest is, as I have 338 said, only the thin end of the wedge which leads to responsibility for management.
I was interested to hear the noble, Lord, Lord Stonham, in introducing the Motion, quote something which the honourable Member, Mr. Enoch Powell, said in another place last week, to the effect that he did not believe that, as a matter of settled policy, the borrowing of money on Government credit to be advanced to private enterprise can be justified or defended on economic grounds. My Lords, I am afraid that that is a counsel of perfection. Although, as I believe, private enterprise is incomparably preferable to State ownership as the basis on which the general industry of the country should be run, there must come times when the interests of the national economy, which it is the Government's duty to shape and guide, and the carrying into effect of changes in Government policy which require some reorientation of industrial effort, do justify the application of Government assistance; and if the specific assistance proposed takes the form of an enabling measure, then there is full opportunity for Parliament to debate the merits of each case.
As the noble Lord, Lord Shepherd, stated, this is the taxpayers' money we are talking about, and it is right that the Government should see that such money is fruitfully applied. But my contention is that it can be most fruitfully applied in the broadest sense if thereby industry is helped and encouraged and not put into leading strings, and if the Government do not waste more money and effort in trying to do things they are not equipped to do. As I see it (and I admit that I am biased in favour of private enterprise, because I believe in the individual; because I believe in the profit motive, though I certainly do not idolise it; because, in general, I regard State control as not conducive to efficiency or good management—though sometimes for a time you may get good management under State control, particularly if it is the old management under a new hat), the Government may well satisfy themselves of the necessity for financial aid, and may lay down conditions for repayment and performance appropriate to the circumstances of the case. But they should never seek to control or direct the management as a general 339 principle, or seek to take an equity interest in the undertaking.
§ 5.50 p.m.
§ LORD CITRINE
My Lords, I rise to support the Motion. Let me say right away that I see nothing wrong in the principle of subsidies from public funds to private industry. Everything depends upon the circumstances and the conditions under which the subsidies are granted. I cannot imagine anybody disputing the necessity, where public money is concerned, of a measure of accountability, and I have not yet heard in the course of this afternoon any contention against that principle. What there is contention about is the manner in which that accountability can be achieved.
I listened with a certain amount of pathos to the remarks of the noble Lords, Lord Grantchester and Lord McCorquodale of Newton, in their earnest pleas for Government to keep out of industry. I understood that quite well. As a trade unionist who has spent a great deal of his time in discussions on the broader questions of industry with representative employer organisations, I understand quite well their desire for what might be called self-government, free from interference by the Government of the day. I felt just as strongly the desire for the trade unions to have a right to conduct their business without Governmental interference. But I am bound to say that to build up a thesis that, under modern conditions, the Government can keep out of industry is to postulate something which is quite unreal.
I would remind the noble Lord, Lord Grantchester, that in the period between the wars there was a great deal of depression in this country which showed itself in the highest level of unemployment that has ever been seen or known—three million people were out of work. I recall quite well a very, as I thought, constructive and thoughtful book published by the Liberal Party dealing entirely with industry and the measures that should be taken—it was called The Liberal Yellow Book. It was a most constructive book which dealt entirely with the things that Government could do and ought to do to help industry and with what industry should do to help itself; and so far as my recollection goes it was in quite the opposite direction to the free 340 competition that we hear so much about from time to time.
§ LORD GRANTCHESTER
My Lords, I will not argue with the noble Lord on that subject at this stage of the debate, but I would express direct disagreement with the views that he is putting forward.
§ LORD CITRINE
My Lords, I am sure that, although the noble Lord, Lord Grantchester, was careful to tell us what laissez faire means (incidentally, some of us already knew that), he did not subscribe, in regard to industry, to the absolute application of that doctrine, because it is quite out of date and could not be applied in modern circumstances. When the coal industry, in private hands, was in a parlous state it was a Liberal who was appointed as Chairman of the Coal Commission. There was no Labour representative on that Commission, but another Liberal—a most distinguished one in the economic sphere, Lord Beveridge—was a member. They were telling industry what to do. They were not keeping out of industry and keeping away from industry, letting industry run according to its own sweet will. But they gave most constructive and valuable advice as to how a basic industry might be conducted.
The efficiency of modern industry is a thing which ultimately determines the standard of life of its people. It ultimately determines the position of a country in the world, at least in the broad sense of the term, and I cannot see how Governments can ever escape the necessity from time to time to assure themselves that industry is, in fact, being carried on as efficiently as the communal necessities require. I remember that between the wars—not at a time when we had full employment; not at a time when we had, as it were, to overtake the arrears of various kinds that accrued during the late war, but at a time when competition between the nations was extremely fierce—inquiry after inquiry took place into the efficiency of particular industries: of the textile industries; coal and cotton; iron and steel; and a number of others which for the moment escape my memory. But that the Government of the day, irrespective of colour, can just forget that there is something called industry, and can stand away from it without any kind of advice, is, to my mind, utterly impossible.
341 I served for a number of years on the National Production Advisory Council on Industry. Who presides over that Council? A business man or a politician? It is presided over by the Chancellor of the Exchequer. There there are discussions on those phases of Government activity which are relevant to the success and the progress of modern industry. I say that the views interchanged by that mechanism cannot fail to be of benefit to all who participate in the discussions and to their various organisations or firms. We live in a competitive world. Although that has not emerged very prominently in the post-war period, who would be so venturesome as to say that sooner or later it will not emerge? Who is prepared to say that it will always be possible to maintain the proud position we now occupy in regard to full employment, irrespective of what may happen in some other part of the world? We are world traders, and it is quite impossible for modern industry to function in an environment which keeps it oblivious to those things; and the instrument to guide it is essentially the Government.
I think it is perfectly natural that any Government should seek to shape its policies so as to help industry, because in industry all the communal interests are represented. Other Governments do not hesitate, with all kinds of devices (subsidies may take many different forms) to assist their particular industries. I can recall, in those bitterly competitive years between the wars, how time after time the coal industry here drew attention to the subsidies that were given in Poland and in other countries by cheap carriage of coal on the railways. The same sort of thing could happen in a myriad of ways some of which would be very difficult indeed to detect. We heard the other day, during the shipping debate in this House, about some of the devices to which Governments resort in order to help their industries, often helping them in ways which appear to us very unfair. None the less, it is quite clear that there is no intention whatever on the part of those Governments to turn their back on the principle of subsidies, direct or hidden, or whatever they may be.
In Britain there is a natural reluctance, which I understand quite well, to develop 342 a system of subsidies as a general principle, because that, of course, as everybody knows, would tend to undermine the efficiency of competitive industries. The noble Lord, Lord Mills, for example, referred to the fact that the policy was to grant subsidies in exceptional circumstances and cases—I am not giving precisely his language, but that was the gist of what he was saying, and I agree with it. The cotton industry reorganisation could never have taken place if Her Majesty's Government had not been prepared to put up sufficient money to make it possible. I think it is rather a curious situation into which we have got ourselves. In my early days, reading industrial history, I remember learning of some people called Luddites—Luddites of Leicester, and later of Lancashire—who smashed up the machinery because they thought it was putting them out of work. Now we do not do it in quite that way. We buy the machinery and afterwards scrap it, and pay some £30 million in the process.
Please do not misunderstand what I am saying, my Lords. I am not criticising that measure at all, but merely trying to make the point that it is impossible, in particular circumstances, for any Government, if it does its duty, to refrain from coming to the help of an industry, or even of a particular firm. We had before the House yesterday the Local Employment Bill. That does not involve a subsidy in the strict sense of the term in which people use it, but it is a hidden subsidy, just the same, in providing premises—and wisely—where firms can conduct their business without the heavy capital cost involved in building modern factories. And I read to-day in The Times a whole page advertisement by the Ministry of Commerce, Northern Ireland, showing the inducements they were offering, on the same broad lines, and the facilities they were providing for firms to come there. I saw there tributes from three American firms—impoverished as we know all American firms are—who had taken advantage of those facilities and were very satisfied as a consequence.
Subsidies can take many different forms, and my noble friend Lord Mills dealt only with one form—loans. I am sure that, much as we admire him and his conciliatory method of handling these questions in this House, we on this side 343 could not regard his answer as in the least convincing. As I see this question, Her Majesty's Government seem, characteristically British, to apply this empirically and haphazardly, and I cannot see any broad policy. I know haw impatient people are over planning. I used to meet that in the trade union movement. In the course of a morning we could draft a plan which would put right any industry or series of industries; but we had great difficulty in applying a plan to our own internal affairs.
People are impatient about planning because they know that when there is planning a long way ahead, particular circumstances may develop which make the plan impossible of application. But, after all, Governments are required to look ahead sometimes and try to formulate some code of principles on which to act. I do not know what broad principle underlies the Government's activities in this, beyond the desire to give help where help is needed for the benefit of the community, but I do not see any principles or tests to be applied.
We ought to know what gain there is to the community in particular cases and what is the advantage that is to accrue. While I am not sufficiently politically minded to be able to follow closely what happens in another place, I do not know that there has ever been a proper analysis, in the case of particular subsidies, announced as a reason for granting those subsidies. No doubt that comes up in debate, but I do not know that it has ever been formulated. I believe it is imperative, in any form of Government help of the kind we have been describing, to show how the national interest is advanced.
It cannot be, and I do not think it would be, denied—and this is not a cheap sneer from me—that the most likely people to benefit are the shareholders of the organisations concerned, because if a concern is prosperous that prosperity is bound to be reflected, in greater or lesser degree, in the dividends paid. Though dividends need not be at all excessive, that increased prosperity is more likely as a consequence of Government help in particular cases could not. I believe, be denied. I read the other day a statement by the chairman of Colville's to the effect that the help which the Government were giving would 344 no doubt be reflected in the profits of the company—I would be the last person to misquote him but it was something to that effect. My Lords, my noble friend Lord Stonham has been good enough to supply me with the chairman's exact words: that the help "would contribute to the general profits of the company." I do not at all deny the shareholders' right to some advantage from the money they have invested, but I believe that other interests besides the shareholders' are to be considered, and I am concerned to find some way by which we may be convinced, when subsidies in the broad sense are granted, that in fact the community is getting some advantage.
I understood the noble Lord, Lord Mills, to say that he accepted the principle that the policy operated by companies who receive subsidies must be broadly in line with the national policy. I hope I have not done the noble Lord an injustice in putting it in that way, but it is not always easy to remember precise language on these occasions. I was rather glad that the noble Lord made that broad acceptance, because it is one of the criteria which, I believe, my noble friend Lord Stonham laid down. Nor can I see that there is anything wrong with the holding by the Government of shares in a particular company that is of vital importance to the national economy. What is wrong with that? I am not sure that the noble Lord, Lord Sinclair of Cleeve, did not say something of the kind. It was the consequences of that shareholding, I think, which rather appalled him. But that a Government should take shares in a particular company is, I believe, perfectly logical. What about British Petroleum? Is it argued that British Petroleum today is less efficient and less shrewdly conducted because the Government have holdings in that company and because they appoint a director to that company? Is that really conceivably argued?
§ LORD GRANTCHESTER
My Lords, may I remind the noble Lord that the fact that the British Government were involved caused a great deal of trouble at Abadan.
§ LORD CITRINE
My Lords, I am tempted to reply in kind, but will avoid it as I am anxious to get on with my 345 points. The most direct way of sharing in the prosperity that comes from subsidies is to take a shareholding in the company concerned. And why should it be assumed that if the Government appoint a director or nominate someone to a concern, that person is necessarily a nincompoop? I have worked at close quarters with very prominent businessmen from time to time and I have found it very hard to discover the genius which, apparently, is regarded as one of the qualifications for a directorship. I know of very prominent businessmen serving on public boards. I recall Lord Heyworth, for example, the chairman of one of the largest of our concerns in this country with a world-wide scope, and Lord Heyworth served on the National Coal Board. I cannot see that we are so devoid of public-spirited people and competent people that, if the Government had an equity holding, that director, nominated by them, would disrupt the normal business efficiency of that concern. It is asking too much for my rather guileless political mind.
I should like to say just a word which may sound provocative but which is not intended to be that. As time goes on, it is going to be more and more difficult for companies operating in our major industries to raise the capital that they will need for the operation that they will conduct. I do not think there is any doubt about it. There cannot be. This is an age of mechanisation, and when one buys machinery it costs a great deal of money. I cannot see how, with the demand for large sums of money to be spent, for example, in research, in particular firms and industries to keep them abreast of their competitors, it is possible for that money, with the exception maybe here and there of cases, to be raised normally on the open market.
Whether we recognise it or not, and however hateful it may seem, we are, as my noble friend Lord Stonham said, in a mixed economy now—I do not mean "mixed" in any logical sense, although I am quite sure there are many illogicalities in our economic system. But the primitive conception, we will say, that modern industry, what we call modern capitalism, is not evolving to something different—that it is static—to my mind is completely unreal. I believe that the genius of the people of this 346 country is going to evolve a form of economy over the years (I shall not live to see it) which will be neither Communism nor the crude, stark capitalism we have seen in some countries which shall be nameless, with their battles with the workers and their state of almost civil war. Nor would it be an economy in which there is complete State ownership. But we shall evolve some means and some habit whereby the different types of organisation can co-exist side by side.
I want to say a few words about the other people who are in industry besides, shall I say, the directorates of firms. What about the people employed in industry? Ought they not to get some benefit from the prosperity—I hope I am not overstating it—which comes, or should come, from help from the Government? I take it that the Government would not grant a subsidy in a hopeless case and if the firm concerned had no prospects whatever of producing an efficient operation. The shareholders would benefit directly, and undoubtedly the workpeople in the industry would benefit indirectly, by greater stability of employment, perhaps by higher wages or profit-sharing or co-partnership or something of the kind. All that is possible. But I think that one of the criteria which my noble friend Lord Stonham laid down is surely a fair one: that satisfactory conditions of employment shall be established.
We have a fair-wages clause which operates in all Government contracts. I helped to draft that clause, in my Trades Union Congress days, jointly with the then director of the British Employers' Confederation, of which I think the noble Lord, Lord McCorquodale of Newton, is the distinguished President. That clause has stood the test of time. It is applied in all Government contracts. So far as I know, it is applied by all the national Boards and by most, if not all, of the municipalities. It is a perfectly fair clause, and it is a wise protection, where Government money is concerned, to ensure that fair conditions of employment, as defined by that clause, are applied. Many individual firms accept this. On large contracts with which I personally have been concerned in recent years, some of them running 347 into many millions, the fair-wages clause has been accepted without demur.
Then there is the question of the provision for collective bargaining. I should have taken that as axiomatic, arrangements between the trade unions, on the one side, and the particular firm or body of employers, on the other. But in one of the modern trading estates I came across a firm that was not carrying out this principle. It did not treat its employees badly, or anything of that kind, but it just did not think there was any advantage in conducting discussions with trade unions. I cannot imagine there would be very much difficulty about that. A firm has been mentioned to-day—perhaps we should not go on mentioning it—Colville's, for example. I do not imagine that, with the relations which now exist in the steel industry, there would be any demur on the part of a firm like Colville's to the acceptance of a fair-wages clause or of the principles of collective bargaining, because they practise them. But not everybody does; and it is always well, as I have discovered in my life, to have conditions laid down, provided always that they are not too onerous for the other party.
Then what about joint consultation? This, I would say, has become an established system. I see that as far back as 1946, in the Conservative Industrial Charter, the statement of Conservative industrial policy, it was laid down quite clearly what ought to follow on this point. It said:Conservatives want to see a big extension of Joint Production Committees and any similar system by which workers can be brought into frank and friendly touch with Directors and managers. Their ideas are needed. And they should know the facts about their firm—how it is getting on, what orders it has, how taxes are affecting it and the like.In this way we can have real partnership"—I am not deriding the statement—a team instead of two sides, and all working for the benefit of all.I am trying to keep Party politics to a minimum in this discussion. I would have said that people who hold those sentiments, and the people forming that Charter, would be broadly representative of industry—not in the political connection; but their industrial interest would 348 be very considerable. So I do not think there should be any real trouble about that.
Now I come to the question of redundancy. There is great anxiety on this matter. We are having a process going on, which I think is inevitable, called automation. Automation means that men are, temporarily of course, being replaced by machines. We know from the history of machine production that eventually the market expands, and that employment is found for far more people than formerly. But there is a time lag always, and it is that time lag and the fear of unemployment during the time lag that actuates people. I have no need to refer to the strike that is taking place now at the coal mines in Kent on this very point of redundancy, despite the fact that very great efforts have been made by the National Coal Board to deal with this problem jointly by agreement with the Mineworkers' Union. There is more in this question of redundancy than meets the eye. I am sure that it is at the basis of such restrictive practices as trade unionists and other workers employ. I think we must all recognise that when the Government of the day lay it down as a condition of help to the cotton industry that provision must be made for compensation for redundancy for the men displaced, there ought not to be very much argument about applying the same principle when it comes to the granting of help to particular industries.
My Lords, I think that the principles I have been trying to put forward are reasonable and equitable, and I hope that most of what I have said is not a matter of at least Party contention. I am not a prophet of woe. I have tried to be optimistic for the major part of my life, but I have also tried to combine a certain amount of prudence with my thinking and with my actions over the years. I know that pessimism, if it is widespread, can easily create the very conditions that it wants to avert, and that if we all start talking about unemployment we may get unemployment. I know that quite well. But I would say that we ought to be prudent to look just outside the sphere in which we are functioning at this moment, to look a little way ahead and prepare for the days when the winds of adverse trading conditions 349 may be felt by us a great deal more than we have ever felt them in the post-war period. I think the workers, as well as others, should participate in the Government help given to individual firms, and I do not see any great difficulty in writing the broad conditions I have mentioned into any contract where that help is given.
§ 6.22 p.m.
§ LORD SHACKLETON
My Lords, although I strongly support the Motion I am in some difficulty, as I find that my points of view on many of the matters that have been discussed differ in some degree from those of some of my noble friends on these Benches. I will not say that they differ as much as that of the noble Lord on the Liberal Benches, who obviously belongs to the ultras in the matter of Government aid to industry, but I rather suspect that we on this side of the House are in danger of falling into what I can describe only as a capitalist heresy.
This is a very complicated subject indeed. It is obvious from most of the speeches, I think, that noble Lords accept the necessity not only of the State's providing finance but also of some degree of intervention; and this is a process that is bound to continue. One way or another, whether we like it or not, more and more money is going to find its way into industry. To realise that, we need only look at the vast increase in the funds that are going in by way of research, which is of course a direct Government subsidy. Money is going into research associations in the interests of the community without any claim by the State to share in the profits. But the amount of the taxpayers' contribution, whether by direct financing or by guaranteed loans raised through the Exchequer, is very great indeed. The problem—and I believe that this is one of the major problems of this age—is how we are to harmonise this State intervention with whatever may be regarded as private rights, and also ensure that we sustain enterprise and efficiency.
I hope very much that the political conditioning to which we have all been so subjected will not prevent us from looking at the actual details of how this is going be done. Just at a moment when the Labour Party, in particular, is looking for instruments other than nationalisation, there are tendencies on 350 the part of the Conservative Party to regard private enterprise as more than ordinarily sacred. That has not been apparent from most of the speeches from those Benches to-day, and certainly not from the speech of the noble Lord, Lord Mills. But the question is: how do we control these big public funds? How do we ensure that the taxpayers' investment, so to speak, is looked after? We have to accept that in these circumstances we are not dealing with competitive free enterprise but with a different state of affairs altogether; and I see no reason why we should not try to find—and I think it is possible to find—a reasonable harmony. I think we ought to be able to do it without regarding it as indecent for the State to participate in the rewards and in the profits of industry. People who regard it as highly immoral for the individual shareholder not to get his rights sometimes find their consciences a little bit blurred when it comes to the matter of the community sharing in those rights.
But, my Lords, we are in difficulty on this matter. This is a particular field where we are at the mercy of the tyranny of words. Take this question of the word "profits". To some people the word "profits" conjures up something slightly nasty: to other people it conjures up something pretty fine. Profits are, of course, an indisputable and inevitable part of the running of industry as it is operated to-day. I might prefer to see a society which operated entirely on a basis of public ownership—and one day, perhaps, we shall advance much nearer to that—but at the moment profits are part of it. Of course, it is gross profits that we are talking about. The net profit that goes to the shareholder may be a relatively small amount. I have to see these things in balance sheets continually, and somehow the gross profit has a most unfortunate way of disappearing and of becoming a great deal smaller. This is where I find the word "equity" somehow a dangerous word. It is bandied about with some freedom and gaiety. It is a very convenient word. We all think we know what it means, and we go on gaily pursuing a course which will enable us to participate in the equity. What do we mean by this? Do we mean ordinary shares? The irredeemable ordinary share, which is the basis of our society, is in any case 351 a rather peculiar invention, but I will not follow that particular line of development.
I believe that it is possible to share in what one might call the net profits. If the State is able to drive the bargain that it needs in order to do it, then I think it is perfectly proper—and, indeed, desirable—that it should do so. But, first of all, of course, there have to be those profits; and in some industries we have to face the fact that the size of the profit, if there is a profit at all, is going to be of a doubtful nature. I believe that in the case of the publicly-owned industries, where we are all so obsessed by this wretched word "profit", it would be very much better if we recognised that some of them did not have to make a profit but had to be run as a service. We expect private industries to make profits, but it is quite obvious that the aircraft industry is never going to be able to run at all except with a very large measure of State aid. We are then faced with the question of whether or not it should be nationalised—and for a number of reasons I am against nationalising the aircraft industry. I think we have taken over enough dubious prospects, and I would rather take over something more profitable next time. However, we have got to sustain the aircraft industry, and money will have to go into it.
§ LORD SHACKLETON
Steel is a different matter. I am in favour of re-nationalising steel: but the aircraft industry is one which is going to need a lot of Government money put into it.
In another place the Minister of Aviation said that he would take steps to ensure that the Government, or the community, share in the proceeds. He was unwilling to be drawn further, and whether they are returns, profits or proceeds we do not know. I think that the time has come when the Government ought to state, when we ought to know, what the principles are. I fully realise that this may impose a multiple approach. There are different ways of pumping in money. There will be certain funds which, frankly, will have to be a "give-away" in the interests of the community, but, 352 for most, there will have to be established sound principles. This is not necessarily done by the holding of equity shares. Whether it is an old-fashioned capitalist prejudice or an old-fashioned Socialist prejudice I am not quite sure, but I have a prejudice about the holding by the State of equity shares. I would much rather see a fixed arrangement, like participating debenture shares, which to my mind is a much more humiliating thing to demand from an undertaking than ordinary shares.
I am inclined to think that in many of these industries it is a matter of making sure that the State share is properly safeguarded by whatever way may be best suited—it may be, as has been said in regard to Colville's, second debentures. But there should be proper provision so that the money is as secure as possible. Where industry is going to progress it is proper that the State should participate in some way in the increment, though I hope to see the time when these remarkable capital gains on the Stock Exchange (I agree with the noble Viscount, Lord Woolton about the relevance to this debate of Stock Exchange quotations, though the fact remains that a large number of people are able to dispose of their shares at a very comfortable profit) come to an end. I hope that the Government will drive the best bargain they can on behalf of the community and not shrink because of Conservative principles of finance from seeking to ensure that, by royalty or in some other way, a share of any further increment is obtained. I should not be surprised if there were some people in the Treasury who have some interesting ideas on how this might be done. I believe that this is a matter of honour as much as a matter of interest.
I turn to the question of control. This, again, is a word which means different things in different circumstances. To-day we are discussing the overall control of industry by devices with which we are familiar. It has been established in the past that certain conditions can, and should properly, be imposed. These will depend on the particular firm. The question of the Government director worries me. In certain circumstances it is proper, especially in 353 the case of firms financed under the D.A.T.A.C. scheme. Government directors are appointed under this scheme, but their powers are severely limited. In small firms it may be useful, at least in seeing that they do not fall foul of the law. This is a job which directors have to do in some small firms, but in a large firm which knows its business the influence of an individual director is slight. Here I would take up the point which my noble friend, Lord Citrine, made in his speech with so much wisdom. Certainly the British Petroleum agreement may have done no harm to British Petroleum in providing for the appointment of a director, but I do not know whether is has done the country any good. The bigger and more complicated a business, the more difficult it is for a director individually to be a channel of policy from the Government. I should like to know who is going to give him instructions. I believe that it is not open to a company director to say that they must charge less for their commodities in the public interest. He must act in the interests of the firm.
I would much prefer that, in the matter of price reduction, the Government should abolish retail price maintenance and set firms free from that type of Governmental control. But in this field a director has very limited powers. He can be a channel of information, and in small firms he can ensure that policy is applied, as in the recent reorganisation of the cotton industry, in the event of a policy of the kind suggested by my noble friend Lord Citrine being adopted. He may even enlighten the board occasionally on new methods. Without disagreeing much with what the noble Lord, Lord Sinclair of Cleeve, said, I must say that an outside director, even one from the Government, could bring new knowledge and new ideas to a large number of firms, and I think that this is something which in the course of time will have to be developed.
Obviously, we have to see that this money invested brings further benefits, if it can, to the community. Again, I should like to take up a point put forward by my noble friend Lord Citrine. Some steps might be taken in advance for getting closer participation by the workers in these firms—in other words, the development of industrial democracy. But we should be careful not 354 to interfere with the purpose and unity of the group of people running an enterprise. I have seen firms which have ruined themselves by arguments that went on at board meetings, until one ended up, as a director, by trying to keep things out of the hands of the law. If things get into that state, the appointment of an outside director would achieve little.
I hope that the Government will investigate this matter of the public interest a great deal more effectively than was done in the case of commercial television, into which Government money has gone and where the public interest is notably lacking. I think that there ought to be a general and really searching inquiry, on the lines of that made by the Radcliffe Committee. The matter should not just be left to the Fabian Society to do this work for the Government. It is on these thoughts that I wish to close my remarks. At the present moment the Government are putting this money into industry. He who pays the piper ought to call the tune, but I think that this must be done without ruining the concert.
§ 6.40 p.m.
§ LORD MILNE
My Lords, as tenth man in and close of play in sight, I propose to limit my remarks merely to accountability. Some part of my duties is the supervision of money lent to industry under the development areas legislation, and I must therefore declare a certain interest. I am aware that money so lent is but a small proportion of the total Government outlays to industry of one sort or another. Nevertheless, it is worth while considering in this context, if for no better reason than that this and kindred legislation is considered to be working extremely well—that is, in spite of the strictures of noble Lords yesterday which I think can easily be 'surmounted.
Noble Lords will no doubt remember that the administering body is a Committee under the Treasury, composed partly of Government servants and partly of independent professional men. This Committee itself employs a similar mixed body of professional and technical supervisors allotted each to several companies, to stand between the Committee and the companies concerned, submitting the necessary accounts and reports. 355 Although the prime motive of these loans is political rather than commercial, the terms of those with which I have had to deal are entirely commercial as to interest, capital repayment, security and other relevant matters, while the degree of supervision and accountability required by the Committee is generally far greater than would be expected in ordinary commercial borrowing. The loan is made to the company for the purpose of Government policy, and, subject only to compliance and continuing supervision, no attempt is made whatever to interfere in its management, constitution or day-to-day running, or in the ownership of its shares.
I have described this procedure at length so that your Lordships may be able to visualise accountability in practice, for these companies, from the date of borrowing until the date of repayment, are in as effective yet as simple a form of harness as could be devised. If such a system of virtual control and accountability has been devised, possibly on those lines, then the ownership of the equity capital is, to my mind, to be avoided. Even in theory I doubt whether Government ownership has the importance attributed to it. The money required to acquire the capital must always be derived originally from the personal savings of the people, whether it is in the hands of the individual, the Government or the bank. To the man on the shop floor, the person most intimately concerned, I cannot believe that it matters. In fact, unknowingly, an increasing proportion of industry is owned by its employees indirectly through the pension funds and other deductions, a fact of which the majority are completely unaware.
As I see it, Government lending to industry will seldom be purely commercial in motive, unless possibly the sum is so vast that this method is preferable for practical reasons. In such a hypothetical case, if the terms are commercial and the facility available equally to all, and if some degree of accountability is assured, I see little or no harm in the method, though it may have vast unforeseen economic repercussions. But where the purpose of the loan is not entirely commercial, as in the majority of cases, it is then important to see the political as opposed to the purely commercial 356 purpose, assess the difference in terms of cost and present the Bill to the Government as for services rendered in carrying out their policy.
The Motion mentions adequate control, for it is this question of accountability which seems to give rise to so much misgiving. To me, my Lords, it is no problem, being simply a question of money, men and a condition of the loan. What is adequate is admittedly always a matter of opinion. I have described in detail one system which works quite well in practice and could. I think, with modifications, be adapted in several directions. But there must always be an element of faith: faith in the system devised, in the people who devise it and in those who operate it. All of these must be of the highest quality. Industry to-day is very complex. I doubt whether one layman shareholder in 100 understands the accounts of a single group of companies in which his money is invested. How much less does he understand the accounts of an industry such as the steel industry or the railways. What he requires is a filtering service, such as is provided by the financial columns of the Press. Exactly the same holds with the Government. Even if the control is devised, it is not reasonable to expect the responsible Minister to know all the answers. He, too, needs a filtering service to avoid saturation, and any Question for oral answer must be framed in this context.
To conclude, therefore, I would say that on the question of public or private ownership I am open. But as industrial borrowing increases, as it inevitably will, partly through Government policy and partly out of industrial need in the face of scientific progress, so this very fact alone will bring industry more and more under one form or another of Government control, for in every society, in the long run, he who lends the money will always call the tune.
§ 6.47 p.m.
§ VISCOUNT ALEXANDER OF HILLSBOROUGH
My Lords, I think that noble Lords on all sides of the House will agree that we have had a good debate to-day. I do not think we have been guilty of arousing special temper or anything of the kind. We have been dealing with matters which are not only 357 important to us now, but will be increasingly important in the future—namely, the growth, management and development of industry in general. I am grateful to my noble friend Lord Stonham for the breadth and the efficiency of his opening of the debate this afternoon. Up to the present, I am disappointed only that the reply from the Government has been so lacking in amplitude and in detailed answer to the points so firmly made, and I hope the noble Earl who is to reply will be able to take up the points made by my noble friend which have not yet been answered.
Incidentally, I would say how much I enjoyed and welcomed the speech from the Cross-Benches made by the noble Lord, Lord Milne, with all his accountancy experience and obviously with a full knowledge of the kind of accountability which has already been practised in a number of schemes, many of which have been the subject of public aid. The only thing I felt when he was giving his illustrations was this: that when he rather kindly suggested to the House that it must always be at some point a matter of faith in the particular system which is adopted, I wondered whether he would prefer to adopt a scheme which he had seen grow up and prosper in dealing with accountability or rely on the kind of scheme that has been practised, and is, we are told, to be repeatedly practised in large aid to the aircraft industry, which is to depend on a matter of good faith as to whether they can sell some aircraft. As I listened to the noble Lord, although he was putting such an objective case I felt that, after all, in argument, at any rate, he was on our side and perhaps when we look at his speech in print, as we surely shall, we shall be able to confirm ourselves in that matter.
I have listened carefully to the noble Lord, Lord Grantchester, but he knows perfectly well—and he and I are old friends by now—that I did not agree with one iota of what he said this afternoon; and I do not suppose there is to be found a majority of the Party which he so decorates which would agree with hint on all the points he made. Certainly it seems to me that the Liberal Party to-day—though not so much as in the days of the Yellow Book, I would say to my noble friend—are still playing about in their Election programme with 358 State aid here and there. So I do not think I ought to bring further disturbance into the limited ranks of the noble Lord by taking up his points in detail.
I have already said that I am disappointed with the answer given by the Minister, the noble Lord, Lord Mills, to the case put by my noble friend this afternoon. I did not get any argument from him as to what were the real reasons why he was so convinced that private enterprise was always going to be better than any public enterprise. I heard a faint kind of opinion uttered, without any evidence, from the noble Lord, Lord Sinclair of Cleeve. If we look at the working of the Distribution of Industry Act, and of the comments of even good (I suppose I must say that) Conservative papers like the London Times upon that particular type of measure, I should have thought that there is still something to be said on our side. What did The Times of October 29 last say on this? They said:The Government's policy on areas of unemployment has gone through some remarkable changes during these past two years. It was less than a year ago that the Government were still clamping down completely on some of the major normal activities under the Distribution of Industry Act, were scarcely sanctioning or themselves carrying out any new building under it, and were giving no aids to local authorities for special work on basic services in the development areas.That was written only last October. I wish they had written a little more about it before the Election, but in fact they left it until some weeks after.
It is perhaps welcome, in spite of the statement made by the Minister, to find that, after years of neglect of the machinery which is available under the Distribution of Industry Act, the Government have at last come to something like major programmes for use in the development areas, even with the help of grants or loans to industries of the kind we have been debating this afternoon, with great help to employment in the areas and to the general economy of the country. Noble Lords—either they or their successors—will learn as years go by that we shall go on following that which we have been preaching for decades and put it into operation.
During the course of interruption and debate (I think it was during the Minister's speech) some mention was made of the railways. It is a curious 359 thing that, in all the attempts during the last six years to turn the word "nationalisation" in the English language into a dirty word, nobody among those who have raised questions about it will ever tell us what he would have done about British Railways. The noble Lord, Lord Grantchester, was rather interested in that point. But what would the critics have done? Here is a great national system which could not pay its way for its shareholders to reap any benefit at all before the war: a system which, through lack of manpower and lack of materials, which were otherwise required for war purposes, was allowed during the war to get into a state in which it had to be subsidised right the way through in order to do the strategic work which is so important in the case of railways; which was allowed to get into a state from which it has never recovered, and with a rising cost of living and the end of Lease-Lend facing the workers in the industry.
I have asked: what would you have done with it? I have never had an answer yet. If we had remained in office I do not think the position would have been as bad as it is now. I am not at all enamoured of the efforts with which the railways have had to contend in the placing of more and more stress upon oil and other factors, so making it more difficult for them; or of the shameful, purely political action of denationalising that part of our original nationalisation measure which dealt with heavy road transport, and which was making a profit available to the general purposes of the Transport Commission. Certainly the Party opposite have not helped in that situation at all.
Now we have had a few weeks and months to think over the situation since the present Government obtained their increased mandate from the country. We will not discuss tonight what methods they adopted in order to get the mandate. But after these weeks and months, we now have to sit down and look at the situation of these industries. In trying, during the Election, and prior to that, to make the word "nationalisation" a dirty word it was always assumed that private enterprise would be there, instead of nationalisation, in a profitable condition and able to contribute to the general prosperity of the nation and to 360 the good of the nation at large. In 1951 the Government promised that if they were returned to office they would de-nationalise iron and steel at once. I think it has been perfectly well proved by my noble friends to-day that they have not de-nationalised it completely now. In fact, up to the moment the public money being used by the steel industry is 60 per cent. of the total—Government money. That is an amazing situation, but it is a fact.
If you look at the position now of a great company like Richard Thomas and Baldwins you get a situation in which there is not the slightest justification in the national interest for denationalisation. I did not hear a word from the Minister on that particular point to-day. Perhaps it was not put in that particular way to him, and from that point of view I excuse him. But what is he going to do with Richard Thomas and Baldwins? We wicked Labour people do read papers like the Financial Times—we like to see what the other side is saying about things.
Take the report of Richard Thomas and Baldwins. They have modernisation already achieved, and to be immediately achieved, far ahead of any of the rest of the steel industry in the country. Would the Minister agree with that, because it is quite true? I gather he does. Within a very few months you will have the most modern and up-to-date oxygen system working there. In the last financial year they increased their net profits by 25 per cent. What sort of price are you going to charge to the outside speculator for buying back the value of this business? Are you going to do it on the same basis as with Colville's, sell at a price of 26s. equity shares which, in the very year in which you are advancing £50 million to them at specially favourable rates, are standing in the market at 74s.? Are you going to do the same sort of trick in selling Richard Thomas and Baldwins? I think the public are entitled to know that. We have not been able to get anything from the Ministers in another place except to say that they are going to denationalise. That is all we get. When are all the loans to the companies which have been disposed of through the Agency going to be redeemed? I think the public ought to know. If you are going to maintain the situation of this 361 enormous amount of Government finance to the iron and steel industry, at present more than 60 per cent. of the total, then what about the accountability we want for the nation?
My noble friend, Lord Shackleton, expressed some doubts about the equity share and the like. Well, there is a great deal of virtue in some types of debentures; I agree with that. But there is one thing you will very rarely get; you will rarely or never get the kind of thing which the Government has made available to the ordinary speculators on the Stock Exchange, a capital appreciation which is almost beyond the dreams of avarice to most people in the country, an extraordinarily capital appreciation. If it has been true, as has been said in the past, that one point on the Stock Exchange index represents a value of £54 million, what sort of increase in the valuation of stocks in the country has been arrived at on the Stock Exchange in the last few months? I have not looked at the index for the last day or two, but I saw it rise in the last two-and-a-half years from 160 to 280 soon after the Election, and then go on to 350. From assessments made by other people, the Stock Exchange index, now something over 330, shows an increase in capital valuation of £6,600 million in the course of the last twelve months, taking it over an even longer period than that in which that particular rise has taken place. How much of it has been due to the Government's action? How much has been due to the confidence created by Government aid for the purpose of accumulating private profit?
It is no good the noble Earl, Lord Woolton, saying that this is the Stock Exchange, that this is industry. It is not much use for the noble Marquess, Lord Salisbury (whom we are always glad to see here and whose interventions we always enjoy), to talk about what public money is and who is the taxpayer. We should agree with the noble Marquess about the basis of all wealth, but not quite in the way he put it; I put it on the old Henry George basis—from the application of labour to land. That is the basis.
§ A NOBLE LORD: What about Lord Grantchester?
§ VISCOUNT ALEXANDER OF HILLSBOROUGH
He understands. He is prepared to vote with me, but the noble Marquess is not. That is the whole difference. It was very interesting to see in the other place this week a little controversy between Government supporters themselves. There was a little argument as to whether these monies which are being loaned are in fact public money or not. I think it was Mr. Nabarro who was quite happy to get from one of my colleagues in the other place a statement that, after all, they were financed from the Consolidated Fund and that the Consolidated Fund is really public money. The taxpayers, I would say to the noble Marquess, now cover a very wide range. The taxpayers include the average citizen in the country, who pays an enormous indirect taxation. I would agree with the noble Lord, Lord Grantchester, in most of his criticisms of indirect taxation. What a vast sum of money now goes into the British Treasury by taxation of goods, materials and the like, through purchase tax and import tax!
I was very glad to hear the noble Lord, Lord Wise, speak about agriculture; what a vast difference there is between the public help to agriculture, which is still subject to that rigid control of the Annual Review of Prices in the interest of the consumer, as well as of efficiency, and the help given to industry at large, which we are all glad to see flourishing but which enjoys the constant protection of high import duties, all of which finally have to be paid by the home consumer, the taxpayer. I thought that at the back of his mind the noble Marquess must have been thinking only of that limited number, about three quarters of a million, of income tax and surtax payers at the other end of the table. I admit they do a lot.
§ THE MARQUESS OF SALISBURY
My Lords, I do not want to interrupt, but the fact remains that whatever goes into the Treasury, from whatever source, comes ultimately from the profits of industry. I do not care what form the tax takes, purchase tax or whatever it may be. If industry—and I do not mean only private industry but public industry, too—did not make a profit, nothing would come into the Treasury at all. 363 I do not really think there is such an enormous difference between the noble Viscount and myself. But there was an impression created by the noble Lord, Lord Shepherd, when he was speaking, that it was merely public money going out. That was the impression he made on a large number of people in the House. I thought that that was a fallacy that ought to be disputed. I do not want to carry the matter further to-day, but it is not because I have not anything to say.
§ VISCOUNT ALEXANDER OF HILLSBOROUGH
We shall all be happy to come back to it. I shall be happy to meet the noble Marquess again on the matter, and we always enjoy his interventions. On the other hand, of course, I look at the other side of it. What does nationally-owned industry do for the people? We do not get any offers now to take the railways over, but they have been of enormous value to the people of the country. Where are your offers? But if we happen to be showing a great future for the iron and steel industry, with the first real national planning they have had laying the basis of the expansion which has taken place, you begin to lick your lips at the prospect of the improving profits available. That is taken back, and you have only to look at the fat profits which are made. The noble Earl, Lord Woolton, says that that is the Stock Exchange and that is industry. You do not get the Stock Exchange price index continuing at a level of 331, and an average number of more than 32,000 or 34,000 transactions per day on the Stock Exchange, and not have some sellers and buyers. That money has been made and passed from hand to hand. So do not let us have quite so much nonsense about these things. We are interested in these things. We look at them and study them, and see every day what is going on; and even the noble Marquess, with his experience of banking, knows that, whether the country is supposed to be well or ill, in a period like the one we have been going through these last five years the banks will always show increased profits. The bank rate goes up or the bank rate goes down, but the banks always make an increased profit.
§ VISCOUNT ALEXANDER OF HILLSBOROUGH
Not in an arbitrarily enforced fashion. The bank just charge you; there is no dispute about it. I have seen a long and hard fight for labour to keep pace, in its weekly remuneration, with the increased cost of living and I have lived a great many years and been through a great many disputes. I think we have every right to take the line which my noble friend took in moving this Motion to-day. We entirely agree with something which was not the invention of the Labour Party; that was, the giving of aid to private industry. We were assisting private industry for decades and decades. During all the years from 1921 that I was in the House of Commons I was a party to the passing of measure after measure for giving Government aid to private industry. The only difference we have with you is over who should get the ultimate benefit. The noble Lord, Lord McCorquodale of Newton, who spoke this afternoon—he is not here at the moment—took a particular line upon this question. I would say, quite frankly, that the noble Lord has done perhaps as much as any Conservative Peer or politician I know to bring good harmony into the relationship between employers and employed; so we always listen to him with great interest—and I am sure that my noble friend Lord Citrine would say the same. But I felt that I could not possibly agree with the remarks the noble Lord made to-day. I have tried to be fair, but I could not agree with the rest of his argument. However, I am not going to pursue that any further at the moment.
I would say that there is plenty of evidence as to why the Government should halt in their tracks, at any rate before they go further with this aircraft business. I feel that neither the Minister in another place nor the Minister who replied for the Government to-day have made any attempt to justify continuing, as they have both insisted, quite frankly, that they are going to continue, the same old thing. Will they never learn? What, for example, did we find when we joined with the Conservative and the Liberal Parties in a Coalition in 1940?—that from the time of the reopening of rearmament in this country the principle 365 adopted was that of cost, labour and always plus a fixed 10 per cent. for profit. When a detailed accountancy examination was made it disclosed that depreciation in assets was taken into account, some of it written up in the balance sheets of the firms, yet always brought into charge in settling the cost upon a particular contract or operation. Do we never learn?
Can you not gather from the report my noble friend gave of his meeting with the technicians in industry last Saturday afternoon what wants inquiring into? Can you not see the absolute necessity, if we are going to spend what will, in the end, amount to hundreds of millions of pounds on aircraft production, of having a proper check up on it? That is what we ask for—accountability. We ask for representation upon the direction. We ask as a matter of right that if you give £50 million by way of loan to Colville's, who are already able to raise a debenture at 6 per cent. with the great advantage to the taker-up of the loan of being able to convert it into equities, why should we not be able to claim the same for ourselves and the Government, at such a time as would enable the whole nation to join with all the other holders in that company in what counts by way of capital appreciation? Is it so wonderful to get a capital appreciation simply because you give it to a limited number of people who can be included in the present shareholding? You get the great advantage of limited liability, and so you get only a certain number of shareholders and you get the capital appreciation. What is to prevent you from having the capital appreciation eventually in the national concern? We are not going to see all the services nationalised, but we ought to have a share in the capital appreciation which is brought about by financial direction of money into these channels.
I do not propose to take up any more time to-night. There are many other things that I wanted to say, but I am quite sure of this—I may not be here; I may have reached my long life's end and have been taken away for cremation or had something done to me; but, as certain as your Lordships' sit in this House to-night, there will come a time when you will have, first, a larger number of nationalised industries and, 366 secondly, the majority of the rest of industry organised upon the basis of large corporations; and it will have to come to the central governing authority for nearly all its finance. As so many papers I could have quoted will point out, when a thing becomes too big to finance on the market if can go only to the Government to finance it. And that situation will come. I hope that the noble Earl who mostly answers on these matters in the House will go back to the article in an issue of the Daily Telegraph of last June and read what was said there. I will not occupy the time of the House in quoting it all. It will tell you that it is inevitable. I agree with it: it is absolutely inevitable; and from that point of view I hope that we shall carry the Motion to-night.
§ 7.17 p.m.
§ THE MINISTER WITHOUT PORTFOLIO (THE EARL OF DUNDEE)
My Lords, the Motion of the noble Lord, Lord Stonham, has enabled a number of your Lordships to engage in some discussion on the question of nationalisation against private enterprise—a most important and interesting topic, which most certainly and legitimately arises out of the terms of the noble Lord's Motion, as might also the principles of Henry George to which the noble Viscount has just alluded. But the question of nationalisation, I always feel, is often apt to lead to rather prolonged conversation, and at this time of the evening I should prefer to confine myself more strictly to the actual terms of Lord Stonham's Motion.
The noble Lord himself began by saying that he accepted the existence and continuance of a mixed economy. I should like to extend to him my best wishes for the agreement of his Party about the precise nature of the mixture—I hope that it will not be too explosive. I certainly do not want to say anything about nationalisation which might perhaps have the effect of impeding an amicable settlement among the Party opposite on the question.
§ VISCOUNT ALEXANDER OF HILLSBOROUGH
You will not help it very much if you denationalise Richard Thomas and Baldwins. You will have 367 your explosion all right, and it will be in South Wales.
§ THE EARL OF DUNDEE
I am not quite sure whether, or how, that would affect Clause 4 of the Labour Party's constitution, and I am most anxious not to say anything which might exacerbate these little disagreements which seem to be inevitable at the moment.
My noble friend Lord Mills stated that the policy of Her Majesty's Government on this matter was that any kind of financial assistance to private industry should be exceptional. That is our view, and I hope that such assistance will continue to be exceptional, although many of your Lordships who have spoken have rather given the impression that it is not at all exceptional and that there seem to be a very large number of industries all over the country receiving all kinds of subsidies, loans and aids of every kind. I entirely agree with the noble Viscount, Lord Alexander of Hillsborough, that we have had an interesting debate, and I particularly agreed with his statement that it had been conducted with such good temper. I am not quite sure that I agree with him, however, when he says that this subject will be of even greater importance as time goes on. If the noble Viscount is referring to nationalisation he may be right; but I would not agree with him if he is speaking of the question of special financial assistance to private industry.
I was most interested, as your Lordships were, in the extremely entertaining and excellent speech of the noble Lord, Lord Citrine. The noble Lord said that in modern times the Government cannot ignore the existence of industry; and I very profoundly agree with him if he means that our fiscal policy and our economic policy must more and more be based on consultation with leaders on all sides of industry and the National Joint Advisory Council, to which he referred. But if he meant that Government financial assistance to private industry—which is what this Motion is about—is likely to become other than exceptional, then I would say that I certainly hone that is not so, and I do not think that it will be so.
By far the greatest amount of assistance given to private industry, far more than all the rest put together, is, of course, 368 the assistance which is given to agriculture; yet only two of your Lordships have mentioned agriculture this afternoon. The noble Lord, Lord Grantchester, made a suggestion about an alternative to deficiency payments, and the noble Lord, Lord Wise, devoted his speech to the subject; and in all this excellent and delightful debate which has lasted now for some four or five hours only about 5 per cent. of the time has been given to about 80 per cent. of the assistance to private industry.
§ VISCOUNT ALEXANDER OF HILLSBOROUGH
My Lords, would the noble Earl forgive me? I did point out myself that there was a difference in this class of subsidy, because it was really under Government control each year in the Review of Prices and the like. That is certain. May I also point out that we have referred to the protection of industry by way of imports tariffs, and this aid to agriculture is in direct substitution for what agriculture would otherwise get by way of protective tariffs.
§ THE EARL OF DUNDEE
My Lords, when the noble Lord, Lord Wise, got up to make his speech I could not help wondering whether he was going to suggest that in return for this very large Government assistance to agriculture a proportion of the earnings of the enterprise should be taken by the Treasury—that the Treasury should take a share in the profits of agriculture. Had he said that I am not sure that his great popularity among the farming community would have survived.
The noble Viscount, Lord Alexander of Hillsborough, has just said that subsidies to agriculture are a substitute for protection, and I think that is probably the right way to look at them. But I do not know whether noble Lords would regard protection as assistance to private industry. I believe that most people did; certainly the old Free Trade argument was that the price always went up by an amount equal to the tariff that was imposed. It was paid out of the pockets of the people and was equivalent to a subsidy to the producer and in the case of agriculture it may be considered better that the subsidy should 369 be paid by the general taxpayer and not by the consumer of food. But although there is a far greater part of public assistance given to agriculture than to private industry no suggestion has been made that the Government should take a share in the equity or profits of agriculture.
There are other reasons, apart from assistance being a substitute for protection, for which special help might be given by the Government to private industry. There are the urgent needs of defence. If an industry concerned with the production of some material vital to our defence would not produce, in the ordinary course of its commercial activity, what the Defence Departments wanted, of the right kind and in the right quantities, that industry might have to be persuaded to do what they would not do in the ordinary course of their commercial activities. Her Majesty's Government have occasionally considered, and might at any time consider, that special financial assistance of one kind or another was justified in such a case. The aircraft industry, which has been mentioned a good deal in this debate, and with which my noble friend Lord Mills has dealt in his remarks, comes very largely under that category, because aircraft are still vital to our security and defence.
Then there is the help which your Lordships discussed in our debate yesterday—assistance of various kinds given to industries which we are trying to persuade to go into the development areas. I believe that that is a policy of which all of your Lordships approve. As I explained to the House yesterday, these industries are not often helped by direct subsidies but are helped sometimes by loans and sometimes by the provision of Government-built factories. Though I may have missed the reference, I do not believe I have heard any suggestion in the debate to-day (possibly the noble Lord, Lord Shackleton mentioned it, though I did not quite follow the connection), or any argument put forward, that a condition of any help given to industries which we persuade to move into the special areas—perhaps by refusing them a development certificate elsewhere—should result in the Government's being given a share in their equity capital and in the appointment of a Government director to their 370 board. I would ask your Lordships to consider whether, if that were made a condition of our help, we should be likely to get quite so many industries as we want to go into these special areas. For my own part I do not think we should.
Another industry which is now receiving special Government assistance and to which reference has been made is cotton. That was mentioned first by my noble friend Lord McCorquodale of Newton, whom I am glad to say I can see—though I seldom have much difficulty in seeing my noble friends. Perhaps it is a pity I can see him, because one might otherwise pay him many more compliments, as indeed the noble Viscount opposite, I am glad to say, did in his supposed absence. He, and also the noble Lord, Lord Shepherd, spoke on the subject of assistance to cotton, which I had the duty of explaining to your Lordships last summer. I do not think it is necessary to go into the details of the plan, which is familiar to your Lordships, but you may remember that at the very end of July last, the last occasion on which we discussed the subject, I mentioned that a sudden temporary boom in cotton had begun. It was not a result of our measures of assistance; it was a coincidence; and we in fact were rather afraid that this boom, coming just at the moment it did, might have the effect of delaying, or even frustrating, the carrying out of our plans. I am glad to say that it did not. I think the cotton industry on the whole have too much sense; and I would say again that this world increase in the price of cotton may not last for very long.
The voluntary restriction on imports will come to an end in two or three years, and it is, as I think the industry knows, of very great importance that this scheme should be carried out and proceeded with, and that it should not be delayed or checked in any way by the present coincidental prosperity. I do not think it was argued last summer (it may have been, but I do not remember hearing any proposal put forward from noble Lords opposite) that, because of this plan we are carrying out, we should demand equity shares in all the cotton concerns which might receive assistance under this scheme, or that we should appoint Government directors to 371 the boards of the Lancashire cotton companies. And, again, I must say that if we had done that I should have very grave doubts about the co-operation of the industry, which we have had, I am glad to say, in carrying out this very important reorganisation scheme.
§ LORD SHEPHERD
My Lords, while the noble Earl is on that point, I think he will agree that the complaint we made from this side, so far as Government aid was concerned, was that we were being called upon to agree to the payment of £30 million-odd for the scrapping of machinery, and the noble Earl and his colleagues, and even the industry, could not tell us what type of industry, what structure of industry, would result from the gift that was being made by the Government.
§ THE EARL OF DUNDEE
My Lords, I remember noble Lords making that complaint, and I think I tried to tell them that the structure of industry we wanted was an industry with fewer looms and spindles, but making a higher class of finished goods; and we thought that that would offer a very good long-term prospect for a renewed and prosperous cotton industry.
I was just going to say that this cotton scheme did contain a condition about provision for redundancy. There was a special reason for that: that the first effect of the scheme was, and was intended to be, the scrapping of a whole lot of machinery, and therefore, presumably, the displacement of some workers. Although it was certainly hoped that most, if not all, of them would have little difficulty in finding alternative employment, we could not be sure that that would be so, and we therefore felt it right to make this condition. We were very careful indeed not to take any part ourselves in preparing a redundancy scheme. As a matter of very important principle, that was left entirely to discussions between the unions and the employers. The only condition we made was that the unions and employers should agree upon a scheme before we gave any assistance. But, in general, I would not consider it right that we should interfere with the natural free bargaining, free negotiation, between employers and trade unions in industry on matters of this kind.
§ LORD CITRINE
My Lords, may I ask the noble Earl this question? Does he really mean that he would not think it proper for the Government to put forward a scheme for redundancy in the case of a particular industry; or does he mean that he would think it wrong that the Government should request an industry, by collective bargaining, to provide that scheme?
§ THE EARL OF DUNDEE
My Lords, if the Government did any of these things, if they assisted the unions and employers at their request, or if they put it to them that they should work out a scheme, I should say that such Government action should apply to all industries and should not depend simply on whether the Government happened to have given financial assistance to an industry, which is, or ought to be, a very exceptional thing.
§ LORD STONHAM
My Lords, the point I have in mind is that if Government money is involved then the public morality should be of a higher order than that in a private enterprise.
§ THE EARL OF DUNDEE
No, my Lords; I think the noble Lord is a little off the rails there. Surely our labour policy ought to be to encourage the higher standards everywhere, and I do not think it would be right in one particular case to say, "We are going to make you do something different from what we insist on for the rest of industry because we happen to have lent you some money."
On steel, the noble Lord, Lord Grantchester, expressed the view regarding these two steel firms who had been lent money, that if steel were entirely denationalised and the process of denationalisation had been completed, and if there were no threat of re-nationalisation in certain political contingencies, then they would have been able to raise the money without any help from the Government. Although it may be a hypothetical question, I would agree with that. I think that is probably the case. The reason why it was necessary for these loans to be made by the Government for the particular purpose we had in mind was that the public were obviously unlikely to subscribe to a loan when they knew there was a considerable 373 chance that the steel industry would be re-nationalised again in the near future.
§ LORD GRANTCHESTER
My Lords, does the noble Earl mean that, in present circumstances, there will not be any more?
§ THE EARL OF DUNDEE
My Lords, there again is a hypothetical question, but there again I would be inclined to agree with what the noble Lord has said. Of course, it would obviously be undesirable if I gave any indication of the possible speed of de-nationalisation of what is left. I cannot meet the request of the noble Lord, Lord Shepherd, to enter into a general debate of the reasons for the nationalisation and the denationalisation of steel. That was done when the Act was passed in 1953; and the position has been in regard to this last company which has not yet been de-nationalised that directors have been appointed by the Realisation Agency on the understanding that they are running an industry which is about to be de-nationalised and that the Agency will not interfere in their conduct of it in any way. But as for the time when the actual financial business of de-nationalisation takes place, that obviously depends on what the Treasury would consider the most favourable time from the taxpayers' point of view, and it would clearly be undesirable for a Minister to say anything about that until the Government are in a position to make some announcement.
§ LORD SHEPHERD
—why the Government believe this State-controlled company in the steel industry should be de-nationalised, as it is agreed that we are going to live in a mixed economy.
§ THE EARL OF DUNDEE
My Lords, I am sorry, but I cannot agree that your Lordships are entitled on a Motion of this kind to have a speech from me on the subject of steel nationalisation.
§ THE EARL OF DUNDEE
I would ask the noble Lord, if he wants to know the Government's reasons for doing this, to read the debates on the Bill in 1953.
374 As regards the four proposals which the noble Lord, Lord Stonham, and his supporters put forward, I think the one on which he intended our attention to be principally concentrated was that any kind of assistance should be accompanied by equity holdings for the Government and the establishment of a Government director. I am not going to enter into an argument as to whether free enterprise always makes a profit or whether State enterprise always does not. I think there was perhaps a disposition among some noble Lords to assume that all Government-assisted industries must automatically make large profits and have large capital appreciations, especially when the Government have a holding in them—and a disposition to regard an equity share as what the noble Lord, Lord Shackleton, would probably call a "gaiety" share, if I followed him rightly. Again, I am not going to argue as to whether a Government director is always a particularly good man or is, as the noble Lord, Lord Citrine, put it, a nincompoop. I think it might possibly be the case that if there were only a few Government directors in all industry they might be men of great ability, but if there were hundreds of them it might be more difficult to find enough men to keep up the same standard of ability.
I would ask your Lordships to consider as a remote hypothetical possibility that some industry might make a loss instead of a profit; and to consider the possibility, even, that perhaps the presence of Government directors might restrain certain types of industry from taking good risks, and that profits might not be as good as before. I would suggest that in that event, the Government, the State, the Treasury, the taxpayer, has far more to lose than it has to gain, because the Treasury in any case gets very large receipts from a successful industry in the shape of taxation. As my noble friend Lord Salisbury pointed out, if a prudent industry has its dividend covered two or three times it may only pay 10 per cent. dividend out of a 30 per cent. profit, but it pays profits tax on the 30 per cent. And if that profit is converted into a loss, not only do the Government fail to receive any equity profits but they lose all the taxation which they had been getting on other people's profits. Therefore it is worth 375 considering the risks, as well as the great advantages, of the Government's having equity holdings in every kind of concern.
§ VISCOUNT ALEXANDER OF HILLSBOROUGH
I should think that unit investment trusts ought not to be the only people who know how to cover, by width, a certain risk.
§ THE EARL OF DUNDEE
I am sure they are not. I am sure there are many other people who do.
My Lords, as to the fourth of the four propositions of the noble Lord, Lord Stonham—the return to the Treasury, as a condition of assistance, of a proportion of the earnings of the enterprise—the noble Lord said frankly when he started his speech that he did not expect us to agree with him in that, and I am afraid I must confirm that he is correct in that supposition. As for satisfactory conditions of service for employees, of course that is a reasonable point. But I would say this: that in so far as the State thinks it right to impose conditions of employment through Factory Acts or Wages Boards, and so on, it ought to be done for all workers. Workers engaged in an industry which has received, let us say, a loan from the State (which, in our view, should be a very exceptional thing) should not be put in the position of having special arrangements made for their benefit which do not apply to other workers.
As to the maintenance of reasonable selling prices, we agree with the noble Lord on that, although I know he thinks that in one or two cases we have failed to translate our agreement into practice. However, we do agree with him on that. We also fully agree on his first proposi-
§ tion, that there should be maximum contribution to full employment and the balance of payments, and I hope that there at least we may find nothing to disagree about. I am glad to find one matter on which I hope we can end up, in complete harmony, such a good debate, which, if I may say so, was initiated by the noble Lord in such a very able and animated speech.
§ 7.45 p.m.
§ LORD STONHAM
My Lords, I am most grateful to the noble Earl, Lord Dundee, for his extremely kind remarks and for his careful, courteous and most diligent attempt to answer our case. I am extremely grateful, too, to the noble Lord, Lord Mills, for the great care which he took in dealing with the remarks that I put forward. I am also grateful to all those noble Lords who have taken part in what I think has been rightly called a very good-humoured and, I hope, useful debate. Unfortunately, however, despite—or perhaps because of—the diligence with which the two Ministers prepared and delivered their speeches in replying to our debate, we feel that they did not answer our case; and therefore the fundamental cleavage of opinion between us which I mentioned at the beginning still remains. In those circumstances, we feel that we must press this Motion for Papers.
On Question, Whether there shall be laid before the House Papers relating to the large sums of money spent on Government assistance to industry, without an adequate measure of control or a public interest in the equity?
§ Their Lordships divided:—
§ Contents, 17; Not-Contents, 43.377
|Alexander of Hillsborough, V.||Lucan, E.||Shepherd, L. [Teller.]|
|Burden, L. [Teller.]||Macpherson of Drumochter, L.||Stonham, L.|
|Citrine, L.||Nathan, L.||Taylor, L.|
|Crook, L.||Pakenham, L.||Wilmot of Selmeston, L.|
|Greenhill, L.||Pethick-Lawrence, L.||Winster, L.|
|Lawson, L.||Shackleton, L.|
|Auckland, L.||Cholmondeley, M.||Derwent, L.|
|Bathurst, E.||Colville of Culross, V.||Digby, L.|
|Bossom, L.||Colyton, L.||Dundee, E.|
|Brecon, L.||Conesford, L.||Fortescue, E.|
|Buckinghamshire, E.||Craigton, L.||Grantchester, L.|
|Chesham, L.||Croft, L.||Grenfell, L.|
|Hailsham, V. (L. Privy Seal.)||Newall, L.||SoM̃ers, L.|
|Hawke, L.||Onslow, E. [Teller.]||Soulbury, V.|
|Kinnaird, L.||Perth, E.||Spens, L.|
|Long, V.||Polwarth, L.||Swansea, L.|
|McCorquodale of Newton, L.||St. Aldwyn, E. [Teller.]||Tweedsmuir, L.|
|Merrivale, L.||St. Oswald, L.||Waldegrave, E.|
|Mills, L.||Salisbury, M.||Waleran, L.|
|Milne, L.||Sinclair of Cleeve, L.||Wolverton, L.|
Resolved in the negative, and Motion disagreed to accordingly.