§ 2.43 p.m.
§ Order of the Day for the Second Reading read.
§ THE MINISTER WITHOUT PORTFOLIO (LORD SHACKLETON)
My Lords, I beg to move that this Bill be now read a second time. For some of your Lordships there will fie a feeling of having been here once before. Certainly the noble Lord, Lord Erroll of Hale, is exceedingly familiar with the process, both of nationalisation and of denationalisation of steel, and a short time ago I noticed a number of your Lordships in the House of Lord's Library looking up your earlier speeches. I noticed, too, that the volumes had been elevated to such a height, through age, that it was a somewhat hazardous operation.
My noble and greatly loved friend, the late Lord Hall, who introduced the 6 Second Reading of the Bill nearly twenty years ago, started by pointing out that we should all agree that it was a controversial measure. The present Bill has been the subject of prolonged, thorough and, let me say, unguillotined debate in another place. The policy contained in it is one on which opposing views are strongly and, I believe, sincerely held in this House as elsewhere. Nevertheless, there are important changes as compared with the situation that existed on the previous occasion. To begin with, we on this side of the House shall not be so lonely as my noble friend Lord Longford and others were, because many of my noble friends who have joined us since that time will be taking part in this debate; and also, and equally important, during the discussions of the last two years much common ground has been revealed. I should like to start by pointing to three major points of agreement.
The first of these major areas of agreement is that there is a need for a fundamental structural reorganisation of the British iron and steel industry. The British Iron and Steel Federation themselves have recognised the need for basic change by setting up their Development Co-ordinating Committee, under Sir Henry Benson. In their Stage 1 Report published last July this Committee said thatthe cost, including capital charges, of producing British steel would now be reduced by developing works which are substantially larger than the average run of steel works at present existing in Britain and mostly some way larger even than the biggest of the existing British works.This new emphasis on larger works and companies results to a large extent, though not wholly, from recent advances in technology and in management techniques which are making economies of scale increasingly important in the steel industry.
It is worth referring to the advantages of scale of which we hear so much. First, there are those which arise from the technological conditions of production. The Benson Committee formed the view that because of recent technological advances the optimum size for steel works would in the mid-1970s be 5 million ingot tons annual capacity for wide strip mills and 3½ million ingot tons capacity for multi-product integrated works. It is clearly impossible to accommodate 7 works of this size into the present structure of the British steel industry in which the largest company—Richard Thomas and Baldwins—has an annual capacity of less than 4 million ingot tons. The second type of advantages of scale are those which flow from bringing existing works under one central management for major policy and investment decisions.
This can clear the way for considerable economic gains—for example it makes possible the concentration of production on works with the lowest escapable costs and rationalisation in the movement of raw materials and finished and semifinished products. The scope for this type of rationalisation has been increased and will go on being increased by the development of new management techniques based on the use of computers. If I may give a particular example which is relevant to a single, organised steel industry, the Central Electricity Generating Board have shown, for example, how mathematical techniques, models and so on, and computers can be used to plan investment, not just in terms of individual power stations, but in relation to its effect on the electricity generating system as a whole over many years ahead.
The steel industry is well qualified, in the skill and scientific background of its managers and scientific advisers, to apply techniques of this sort once the basic organisation is there to enable this to be put into effect. While the British steel industry as now organised is unable to secure these advantages of scale, it is a fact that our main overseas competitors have been rapidly putting their steel industries into a position where they can secure these advantages. There are no steel works in this country with an annual capacity of more than 4 million tons; but there are seven in the United States, two in Japan and one in the European Coal and Steel Community. As for companies, there is none in the United Kingdom with an annual capacity of more than 4 million tons, but four in the E.C.S.C., eight in the U.S.A. and five in Japan. These figures emphasise, if any emphasis is needed, the urgent need for structural change in the British steel industry. Here I think there will be general agreement among your Lordships.
The second major area of agreement is that this basic industry cannot be left to 8 the free play of competitive forces, subject only to those restraints which apply to private industry as a whole. The steel industry is very capital intensive and subject to strong cyclical fluctuations in demand. As the experience of the 1920s and early 1930s showed, this means that in periods of surplus capacity, such as exists to-day, all-out competition would be likely to load to price cutting to a level which would endanger the future of the industry. The need for limitations on competition and a measure of outside supervision was recognised in the early 1930s when the tariff on steel imports was introduced and the Import Duties Advisory Committee secured the establishment of the British Iron and Steel Federation and a voluntary control on steel prices. This need was reaffirmed by the Conservative Party in the Iron and Steel Act 1953 and by the industry in the proposals for a new supervisory authority submitted last year which I understand were generally endorsed by the Party opposite. Thus the argument is not about whether there should be free competitive enterprise or public control in the steel industry; it is about the form which public control should take.
The third main area of agreement is that an end must be put to uncertainty and the industry must be given a permanent statutory framework in which to operate. The point was well put by Mr. Judge in his presidential address to the British Iron and Steel Federation in March last year shortly before the General Election, when he said:The British steel industry stands plagued with a political atmosphere of nationalisation and denationalisation ad infinitum. I should like to feel confident that the Government we have after the Election will see that there must be an end to this. Britain needs a real and lasting solution for steel.That it is the intention of Her Majesty's Government to achieve. I would only add that the need to put an end to uncertainty and introduce the new arrangements quickly is emphasised by the difficulties now facing the industry which were outlined by my right honourable friend the Minister of Power in his Third Reading speech in another place.
Now I fear I have to leave those areas on which there is wide, if not unanimous, agreement, and come to the controversial question: is this Bill the best method of 9 giving the industry the new statutory framework that it needs? Would it not be better to leave the industry itself under a new supervisory authority to make the necessary changes? And is it not true that it has already made a start on this with the Benson Committee and the proposed merger between Dorman Long, South Durham and Stewarts and Lloyds? Let me take the latter question first. The short answer is that the industry in the last few years has not made the necessary structural changes while its foreign competitors were doing so, and that the recent moves were made only after it had become clear that the Labour Government were going to be returned to office with a majority large enough to carry through the nationalisation measure. The Benson Committee was established on March 9, 1966. The proposals for a new supervisory authority were not submitted to my right honourable friend until May 10, 1966, after the General Election and after the Queen's Speech had announced that a Bill would be introducedto restore public ownership and control of the main part of the steel industry".As for the merger, I cannot do better than quote from the leading article in The Times of November 29 last:They"—that is to say, the three companies—will prove that the threat of nationalisation is not stultifying progress in the industry. In this case the reverse is true. The threat has encouraged the merger.The necessity for such mergers is not something new. The Iron and Steel Board, the independent supervisory body established under the Conservative Iron and Steel Act 1953, said in their last Annual Report that the Board hadfor long"—and I stress the words "for long"—been of the opinion that the industry needs to be reorganised into fewer but individually larger units equipped with plant of a greater size than is generally the case at the moment.The case for this Bill is not just the negative one that the industry has failed to reorganise itself. We are not concerned here with punishing sinners, however repentant. The case for the Bill rests on two positive points. First, if reorganisation is to be effective, it must cut right across existing company frontiers—for example, it may well be desirable to group together under one management the three 10 works in South Wales and also the three works at Scunthorpe. The works in each of these complexes are owned by different companies which also own works in other parts of the country. Such drastic reorganisation is possible only with common ownership of all the main producing units, which, of course, means public ownership. Second, there are likely to be substantial economic advantages to be gained from strong central control exercised in certain fields by the proposed National Steel Corporation. For example, the Corporation, taking a view of the industry as a whole, will be able to take central decisions about new development and the withdrawal of obsolete plant and to ensure that their decisions are put into effect—a power which the Iron and Steel Board themselves have stated they lack. They will be able also to take measures to improve efficiency by concentrating output on works with the lowest escapable costs. They will be able to promote exports by concentrating them on works best placed to ship overseas. Measures of this sort go beyond anything which is possible with the existing companies or even with the multi-product competing groups envisaged by the Benson Committee.
Perhaps the main argument which has been advanced against the Bill is that it will lead to a monolithic central organisation eliminating all competition and all diversity. But this is not the intention of the Bill or of the Government. Certain key functions such as the planning of investment and the withdrawal of obsolescent plant, national labour negotiations and price policy will have to be exercised centrally by the Corporation. But, equally, it would clearly be impossible and undesirable in such a large organisation to take or even to attempt to take the day-to-day operating and management decision centrally. It will be necessary for the Corporation to reorganise the nationalised companies into a small number, probably from three to five large groupings and to delegate responsibilities to them to the maximum extent consistent with the efficiency of the industry as a whole. This technique of decentralisation, while exercising the necessary central control, is a matter which is well understood by the industry.
Let me now turn to the detailed provisions of the Bill. These give effect to 11 the general objectives which I have set out. The Bill establishes a National Steel Corporation. Clause 9 provides that there will vest in this Corporation the securities of the 14 major steel companies listed in Schedule 1, which satisfy the criteria in Clause 9(3). These companies form the dominant sector of the steel industry. They own all our integrated iron and steel works. Together they and their subsidiaries had in 1965 a capacity of 29 million ingot tons and they produce well over 90 per cent. of the country's total production of pig iron, crude steel and heavy products. They employ nearly 280,000 people, and have a turn-over of about £1,000 million. Their combination under the Corporation will therefore create a unit of management well able to stand up to those being created abroad. Concentration on these 14 major groups will also make it easier for the Corporation to concentrate quickly on major issues of policy without distraction.
Under Clause 9, nationalisation is to be effected by transferring to the Corporation the securities of the 14 scheduled companies. This is the simplest and most expeditious method. It will initially leave the companies in existence as going concerns. But the Corporation will be their sole shareholder and, as such, will be able to reorganise their company structure, to wind up companies, effect mergers and establish new groupings.
The Bill itself does not prescribe the form of organisation for the nationalised sector. The Government decided that it should not do so, for two reasons. First, it would be wrong to take decisions in advance about the organisation of the industry before those who would actually be responsible for running it could form their own views and give their advice. And, second, to prescribe the form of organisation in the Bill would have meant—and I emphasise this—undue rigidity, since the organisation could then have been changed, in response to changing economic and technical conditions, only by means of amending legislation. The essence of the situation is that here is an industry in which important technological developments are continuously occurring, which may affect the structure and organisation of the steel industry.
12 But the organisation of the nationalised sector of the industry is so important that it must come under the ultimate control of the Government and of Parliament. Clause 4 therefore requires the Corporation to undertake a review of the public sector's organisation immediately after vesting day, and to submit a report to the Minister within a year, or such longer period as the Minister may allow. It also requires the Corporation to submit further reports as often as they think it necessary or the Minister requires it. All such reports will be laid before both Houses of Parliament. Finally, Clause 7(2) gives the Minister power to give the Corporation specific directions on organisation; and, of course, the Minister will be answerable to Parliament for the use he makes, or fails to make, of this control. These provisions should ensure both that the organisation of the public sector is flexible and that it is under ultimate public and Parliamentary control.
Clause 4 also requires the Corporation to consult the trade unions before reaching conclusions on organisation, and Clause 30 contains important new provisions, introduced in another place, which makes it clear that there should be joint consultation between management and employees on all aspects of efficiency in the nationalised steel industry, and that the participants in the joint consultative and conciliation machinery should have all the information they reasonably need to play an effective part in the discussions. These are far-reaching new provisions which show the Government's determination to ensure, while maintaining—and this is important—the responsibility of management to manage, that the workers in the steel industry should have a real opportunity to participate in the taking of decisions affecting their livelihood and in the continuous development of the Corporation's general policy.
I should now like to turn briefly to the subject of compensation. I shall not say very much about this, because there will be further opportunities on which noble Lords will be able to deploy arguments. I will just state that compensation for quoted securities is to be based on the average of Stock Exchange quotations on mid-month days over alternative periods, whichever gives the higher valuation. The longer period is the 61 months from April, 1961, to April, 1966; the shorter 13 period is the 6 months from November, 1965, to April, 1966. The value of unquoted securities is to be settled between the Minister and the stockholders' representative. If they cannot agree, it is to be such value as may be determined by arbitration to be the value the securities would have had had they been quoted. Compensation will be satisfied by the issue of Government stock to the value, calculated in the way I have described, of the securities which are taken over. In our view the average of quotations over a five-year period is fully adequate to reflect fairly the value of the securities, in the light of the industry's varying performance and prospects. But no doubt other views will be expressed on this matter, and my noble friend will be prepared to deal with this more fully in reply to the debate. There are undoubtedly those who consider that the compensation is mean, but there are also those who think that it is over-generous.
Let me say a word about diversification, on which I think some quite unnecessary fears have been expressed. I hope that what I have to say will show the real anxiety of the Government to ensure that this situation is properly understood. The Corporation, under Clause 2, will have the power to undertake any activities which any publicly owned company was at any time authorised to undertake, and, by agreement, to acquire interests in companies other than those which are nationalised under the Bill. This is not a back door to wholesale nationalisation. All I want to say now is that the Government believe that it is right that a nationalised steel industry should have the same powers as privately owned steel industries to follow commercial opportunities and secure the advantages of diversification, provided that two conditions are met.
The first condition is that there must be some check to ensure that measures of diversification by the nationalised steel industry are consistent with the national interest overall. The Bill provides for this, in Clauses 2 and 37, by making any extension of the diversified activities of the Corporation and the acquisition of interests in companies by the Corporation or the publicly owned companies subject to the Minister's approval—a negative power of the Minister. The second condition is that all reasonable information must be published, so that there can 14 be Parliamentary and public scrutiny to ensure that inefficiency or losses in the diversified activities are not hidden in the results of the Corporation as a whole. This condition is met by a very important new clause, Clause 25, which was introduced in another place, and which requires the Corporation to publish very full information, going beyond the requirements imposed on companies by the Companies Bill, about the diversified activities of the nationalised steel industry. But, my Lords, again speaking as one who has been in industry, I would say that it is unlikely that any responsible management, would seek, merely for the hell of it, so to speak, to advance into areas which are not properly to the commercial advantage of the Corporation; and there will be the veto of the Minister where the national interest may transcend the commercial advantage to the Corporation.
Let me now turn to another area where anxiety has been expressed; namely, the private sector. The private sector of the iron and steel industry, after nationalisation, will consist of about 250 iron and steel companies and some 1,200 iron and steel foundries. Together, these concerns have an annual turnover of £400 million to £500 million, and employ about 200,000 people. This is still, on any account, a substantial section of the national economy, but it does not occupy anything like the same dominating position as the steel industry as a whole. Two points follow from this. First, it would be absurd for the Government, having decided that this sector should not be nationalised, to encourage or permit the nationalised sector, by unfair competitive practices, to drive this substantial private sector into the ground. Second, it is in general not necessary to continue special statutory supervision over this private sector. Clauses 27 and 28 and Schedule 2 to the Bill therefore provide for the dissolution of the iron and Steel Board and for the discontinuance of the powers of the Board, with one exception. It has always been recognised in the steel industry—and the Benson Report reaffirmed this—that the development of the industry needs to be looked at as a whole. Clause 15 therefore continues, but in a restricted form applied only to the basic fields of iron and steel making, the control over investment projects which is now exercised by the Iron and Steel 15 Board and which after vesting day will be exercised by the Minister of Power.
My Lords, while the Bill removes most of the statutory controls over the private sector it introduces a number of provisions designed to protect the private sector against the possibility of unfair trading practices by the Corporation. The Government believe that the fears which have been expressed on this score are without foundation, but we equally believe that it is desirable to do what we can in this Bill to remove the genuine misgivings of the future private sector companies. Accordingly, under Clause 2 and Clause 37 the Corporation and the publicly owned steel companies are required to obtain the Minister's consent before acquiring interests in any private sector steel company, even though that acquisition can in any case be effected only by agreement. Clause 5 requires the Corporation to publish the normal prices and terms and conditions of sale of iron and steel products by themselves and the publicly owned companies; and, in accordance with an undertaking given in another place, I shall be introducing an important new clause to give private sector iron and steel producers a right to appeal to the Minister against alleged unfair trading practices by the Corporation. I hope this will show to your Lordships the determination of the Government to encourage the iron and steel industry in its private sector.
My right honourable friend the Minister of Power will be the Minister with production responsibilities for the iron and steel industry as a whole—both the nationalised and private sectors—and he has repeatedly made clear that he intends to exercise these responsibilities in a positive and vigorous fashion to promote the health of both sectors of the industry. We may have an opportunity at a later stage to go into some of the plans he has for encouraging and assisting both sectors.
My Lords, let me turn now to the steps that will have to be taken after the passing of this Bill into law. Clause 9(5) provides that vesting day may not be later than 36 weeks after Royal Assent, and Clause 4 requires the Corporation to submit to the Minister within 12 months of vesting day a report on the future organisation of the industry. These two periods are, however, maxima, and the Govern- 16 ment hope and intend that both periods will in practice be well within these statutory limits. To this end, my right honourable friend the Minister of Power appointed at the end of September an Organising Committee to prepare for the establishment of the Corporation and the transition to public ownership. Their work has already gone a long way, and the Government are confident that, because of it, the transition to the new arrangements will be quick and smooth. The Government particularly welcome the fact that the leaders of the industry, both those who have joined the Organising Committee and others, are co-operating fully and whole-heartedly in the practical implementation of the new arrangements, irrespective of whether they were themselves supporters of nationalisation. In this connection, I should like to pay a very warm tribute to the undoubted achievement in terms of human relations and ability of the noble Lord, Lord Melchett, Chairman of the Organising Committee.
May I now sum up the case for the nationalisation of the steel industry? Here, I ask noble Lords who do not agree with the views of those of us who sit on this side of the House to accept our belief that, in the special circumstances of the steel industry, where free competitive enterprise has not existed for many years, public ownership is necessary to make the industry more effective, more viable, and more adaptable to future developments. This is not just an attempt to introduce more nationalisation into British industry. What is the best form of organisation for each industry depends upon its particular circumstances. Whatever may be the long-term views of those of us who sit on this side of the House, as Socialists, of the sort of society we should like to build, the primary aim of this Government—indeed, it should be of any British Government—in the industrial field must be to stimulate quickly greater efficiency and increased productivity. In the aircraft industry the Government rejected proposals for either nationalisation or a majority holding. We have repeatedly recognised the importance of profits and the desirability of encouraging competition, where it is possible, as one stimulus towards more efficient management. I do not therefore believe that anyone can fairly accuse the present 17 Government of making a dogma of nationalisation; but I hope, also, that no one will want to make a dogma of private enterprise. Developments, both in this country and abroad, show how old-fashioned such a dogma would be.
I have to-day argued the case for public ownership of the iron and steel industry on its merits, and at this stage I do not want to embark on too long an argument of nationalisation versus private enterprise. I am bound to say, however, that it is my personal opinion that we have failed to give credit to the achievements of the publicly owned industries in this country. This is largely as a result of the political prejudices of the Conservative Party, who still to-day make a shibboleth of private enterprise and regard any extension of the direct influence of the community over industry as the work of the devil. It is high time we recognised that our nationalised industries—and this is technically so—are among the best managed in this country. It is interesting to see the unwillingness of noble Lords opposite to recognise this. There are noble Lords on that side of the House who have had experience, and who know how efficient they are. Let me point out that in certain areas these industries are leading the world. The gas industry has carried through with vigour and success one technological revolution. The Atomic Energy Authority and the electricity supply industry, working with the nuclear consortia, have given this country the lead in the exploitation of nuclear power.
I beg noble Lords opposite to recognise these facts, bearing in mind that public ownership flourishes in other countries and not least in the steel industry itself. Two of the fastest-growing steel industries are the Italian, in which the major steel producer is in public ownership, and the Austrian, which has produced the Linz-Donawitz technological development which has revolutionised steel-making. And steel is not the only example. I would also point out to the noble Earl, Lord Jellicoe, that the French half of the Concord is being produced by a publicly owned company.
One could go on endlessly, but what I wanted to say was this: public ownership has proved itself to be successful not only in the field of public utilities—which is sometimes said, unfairly and 18 absurdly, to be the only field for public ownership—but also in the field of competitive commercial enterprise. As one who has worked for many years in a highly competitive enterprise I have never been able to understand why private ownership was the only sine qua non for commercial efficiency.
§ LORD WINDLESHAM
My Lords, I hope the noble Lord will excuse me; but since he seems to be making quite a lot of this point may I ask whether he would agree that the return on capital employed in the nationalised industries or in private enterprise is indicative of efficiency? Some figures were given by a member of the noble Lord's Party in the House of Commons: in B.O.A.C., for 1964–65, the return on capital was 2.2; in B.E.A.. 3.5; in the National Coal Board, 3.7; in the Gas Area Boards, 4.3; in the Electricity Area Boards, 5.7; in the publicly owned sector of the steel industry, 0.2—and in the privately owned sector, 7.2.
§ LORD SHACKLETON
My Lords, I will not give way to the noble Lord again. He will know, when he has been longer in this House, that interventions should be rather brief; and he will know also, when he has been here longer, that we have debated these matters at length. I could produce an equal number of figures of returns for the industries which he did not mention and still they would be of no more relevance to the case which is confronting us to-clay in organising the steel industry. However I know the noble Lord is active in the Conservative Party research centre, who no doubt produced these figures for him.
My Lords, there are other advantages in public ownership which are relevant to the steel industry. This is a great manufacturing industry which, whether under public or private ownership, needs to be run on vigorous commercial lines. But it is also an industry of focal and dominating importance to the economy which provides a basic raw material for manufacturing industry generally. And the role of the steel industry is not merely passive: it has a dynamic and positive role to play in sustaining economic development and in regional economic development. This again noble Lords opposite must recognise. The Government do not believe that functions as 19 important as these to the community as a whole should be left to private interests. They must be entrusted to a publicly owned industry the directors of which will be responsible to a Minister and ultimately to Parliament, for the efficiency with which they run the industry and for ensuring that the policies of the industry, while vigorously commercial, are also consistent with the wider national interest.
I do not expect the Conservative Party to accept these, as they seem to me, obvious social principles, but the Government's decision does not rest on these alone. The question to be asked is: could a steel industry organised into competing private companies carry through rationalisation with the speed and completeness which the situation demands? This is a question which noble Lords who reply to this debate must in fairness answer. Overseas steel industries have been carrying through rationalisation, in all sectors, for many years. We must, if we are to remain competitive, do very soon and very quickly what they have taken years to do. And the rationalisation must, as theirs has been, be really radical, extending into every branch of the industry. I am bound to say that I can see little prospect of a rationalisation of this sort being carried out with a privately owned industry as fragmented as the steel industry is. There are many conflicting and quite legitimate private interests involved here. Rationalisation may very well be to the short-term commercial disadvantage of some companies and their share-holders. How are we to deal with these conflicting private interests? Only by a long process of persuasion, for which we cannot afford the time, and with no guarantee at the end that the changes will be sweeping enough. The only alternative would be to impose rationalisation which, while the industry remained in private ownership, would mean sweeping aside quite legitimate private interests. In short, although the industry might be able to make some progress towards rationalisation by itself, it could not, with the best will in the world, carry through the radical and urgent reorganisation which the industry's circumstances demand.
The limited nature of the recent developments—the fact that the recent 20 merger is restricted to one sector and that the Benson Committee, while drawing up an ideal blueprint, has not solved—and I shall be interested to know how anyone would solve it—the basic problem of how to induce all the interests to move towards that new policy, proves that no solution other than the radical and whole-hearted one of public ownership will meet the needs of today.
The steel industry has suffered for too long from political uncertainty. It faces short-term problems of great difficulty and a fundamental structual reorganisation is urgent. The need now is to end uncertainty by passing this Bill into law and introducing the new arrangements. I know that many of your Lordships do not like the Bill althought I hope, I must admit with no great confidence, at least with the Party opposite, that my arguments for it have made some impression. But the last thing which the industry and the nation can afford is a prolonged delay. I do not ask any noble Lord to withhold the expression of strongly held beliefs. I do ask, in the interests of the industry and the nation, that you should give the Bill a Second Reading to-day and speed the completion of its remaining stages. I beg to move.
§ Moved, that the Bill be now read 2a.— (Lord Shackleton.)
§ VISCOUNT MASSEREENE AND FERRARD
May I point out that 90 per cent. of the steel production in the free world is in private industry?
§ 3.30 p.m.
§ LORD ERROLL OF HALE
My Lords, I should like to congratulate the noble Lord on the Excellent Socialist speech he made. In accordance with the latest technique, one trots out various semi-spurious management arguments, throws a computer or two about the place and talks about economy of scale—for once, we did not get "critical path analysis"; but I expect it at any moment. Then when we really got down to the dogma of taking things into public ownership, his eyes lit up and he almost began to foam 21 at the mouth with the joy and pleasure of taking over yet another industry. This is why, I submit, we must not be taken in by the so-called managerial arguments. Although it is a bulky Bill, it is a very empty Bill. It does very little. It is, as the Minister in another place when introducing it correctly described it, an enabling Bill, a Bill to enable the Socialist Government to take over the privately owned iron and steel industry, to compensate inadequately the shareholders and to set up one or two rather odd ancillary organisations of one type or another, some of which were referred to by the noble Lord, Lord Shackleton, in his speech of introduction.
Therefore I submit to your Lordships that we should not be taken in by the so-called managerial arguments. They change as the years go by. The noble Lord, Lord Shackleton, was in the House of Commons with me when the then Labour Government introduced the steel nationalisation Bill in 1949. The arguments were somewhat different then. There was talk of various matters. Indeed, the arguments were different in the inter-war years when the Labour Party extolled the necessity for the nationalisation of the iron and steel industry. Though the arguments change, the objective is always the same: "We are going to take over this industry, whatever people say and however poor the arguments may be"—and that is what we are witnessing to-day.
We are told, of course, that we must not say a word against the nationalised industries and that we should be reactionary old "so-and-so's" if we did; but we could produce many arguments against the nationalised industries, and if I am not too long in the course of my remarks I may do so to-day, or I may do so at a later stage in the discussions on the Bill. Let us look at the case for the nationalisation of the iron and steel industry without dragging in the other industries, good, had or indifferent—and some of them have very poor performances indeed.
The Socialist Party nationalised the industry in 1949. When we denationalised it in 1953, we made a sincere attempt to provide a permanent solution by setting up an Iron and Steel Board, which would offer that degree of central supervision which the noble Lord sug- 22 gested is needed now, and which at the same time enabled the denationalised companies to pursue their policies with the maximum degree of individual and competitive freedom. I freely admit that, after ten years' experience of the workings of the Board and the denationalised industry, some changes were required; indeed, after a decade it would be surprising if some changes were not needed, particularly with regard to the powers of the Board. As a result of investigation by the Restrictive Practices Commission it was clear that a change in pricing policy was needed. But this, of course, was no argument for wholesale nationalisation—none whatsoever. All that the Labour Government have done on returning to power is to say, "We must have nationalisation, and we will find some arguments to justify it afterwards." From time to time pious allegations of inefficiency are made, dropped when exposed, and then new hares are started. It is very interesting to see how the arguments have changed in the short period between the Minister of Power making a Second Reading speech in another place, and the present Minister's Second Reading speech in this House.
Of course, my Lords, the iron and steel industry faces problems of organisation and development, but this Bill makes no attempt to solve them. Instead, the Bill says, "We will nationalise the industry first and let the National Steel Corporation solve the problems afterwards", which is going about the whole matter in the wrong way, because the National Steel Corporation may well find that it might be better if the industry had not been nationalised. Then, of course, it would probably be too late, with the present Government in office, to turn the clock back.
If I may give an example from another industry where a Socialist Government have behaved in a much more rational way, I would mention to your Lordships the shipbuilding industry, where there are problems of far greater magnitude in proportion to the size of the industry than in the iron and steel industry. In this case they proceeded in what I would call a normal way. They said, "There is something the matter here. We will set up a special and urgent committee to go into the matter", and they set up what is known as the Geddes Committee which reported quickly. As a 23 result there is a Board in existence which is looking into what needs to be done to reorganise the shipbuilding industry. Surely, the time for legislation will be when that Board has completed its work. If the Board recommends public ownership of certain sections of the shipbuilding industry it will be a rational and logical development, and the proper subject for legislation; so that if the Socialist Government had been intellectually honest in this matter that is the way they would have proceeded. They would have examined the industry and the proposals made, and if the proposals included nationalisation, they would then have had ample justification for bringing this measure before your Lordships' House.
My Lords, of the many arguments which the Labour Government have put forward, it is possible for me, in the course of a short speech, to refer to only one or two. We are told that the industry needs reorganising; but the Bill does not tell us how this is to be done. We are merely referred to the National Steel Corporation who are to do it for us and we, as one of the two Houses of Parliament, are to have no say whatsoever in their plans and dictates. We are told that rationalisation is needed, and that foreign steel groupings are bigger than the ones in this country. But those foreign steel groupings have been brought about, not by nationalisation, but by the free flow of competitive forces. We are to be the only free-enterprise country with a substantial iron and steel industry that is to be nationalised in some extraordinary attempt to make it better able to emulate free-enterprise industry in other free-enterprise countries. Japan, America and the others are said to have bigger and better industries than ours; but they, fortunately—and Germany, too—have escaped the dead hand of nationalisation. I do not think we need say that the steel industry of Italy is any way comparable to that of Britain, and it is not a proper example or comparison for the Minister to give.
The Minister made great play with the L.D. process in Austria, an interesting development already being overtaken by the spray steel process in this country, being put forward by a small company, 24 the Millom Company, at its own expense; and because it is a small company it has been told, at the instigation of the British Government, that it is not to be allowed to proceed with this development.
§ LORD SHACKLETON
May I interrupt the noble Lord? It has actually been told that it cannot go on, so far as it has been so told, by the Iron and Steel Board which was set up by the previous Government. Furthermore—the last thing I want to do is to say anything to the discredit of this highly enterprising company—the process was, of course, very largely developed by BISRA. I pay full credit to them for introducing it. But the noble Lord must not say that it is the Government who have said this development must not proceed. Indeed, the company would have a right to appeal to the Government.
§ LORD ERROLL OF HALE
My Lords, I should be very surprised if the Iron and Steel Board, under the threat of dismissal in the next few months, would dare to take a decision of that sort without consulting the Ministry of Power—
§ LORD ERROLL OF HALE
It is not cheap or unfair, my Lords. That happens to be the case. As regards BISRA, who is the principal subscriber to the funds of BISRA? It is the privately owned iron and steel industry.
§ LORD ERROLL OF HALE
My Lords, I am quite willing to give way to the noble Lord, but I thought that your Lordships would like me to get on with my speech.
§ LORD MITCHISON
I wonder whether the noble Lord contends that Stewarts and Lloyds, who put up and completed for operation about a year ago an extremely large and expensive plant based on the L.D. process, have been doing the wrong thing the whole time.
§ LORD ERROLL OF HALE
No, my Lords, they were doing the right thing at the time. But then developments take place. The trouble with Socialists is that they are for ever looking backwards and not forwards. They cannot accommodate themselves to changes in technology 25 and techniques. It may be that this great concept of large units is already out of date. With new processes it may be better to do it with small units. There is no guarantee. All we are being told by the Minister is that we must move towards larger units. I accept the fact that they may have been right at the time, but it does not mean that they are going to be right in the future; and it certainly was not right to stop the Millom company from making the developments with which they had planned to go ahead.
§ LORD ROYLE
May I interrupt the noble Lord for a moment? He is very generous. Why is it that the Millom firm have had to appeal to the Minister, if it is the Minister who is responsible for deciding? In fact, it is not the Minister, but the Iron and Steel Board.
§ LORD ERROLL OF HALE
My Lords, as I said, I am quite sure that the Board would not have reached a decision without first consulting the Department, and I shall be very surprised if the Minister overrules the decision of the Board. If he does, I shall be very glad to withdraw, but I do not for a moment suppose that he will.
We have been told that the industry has failed to put forward its own proposals, but it has been getting on with the job all the time. It has had to cope with the uncertainty arising from a situation after October, 1964, but it got down to the job and produced the Benson Committee Report. It has already been proceeding with its own ideas of rationalisation, so that the industry has not been backward or asleep in this matter. Then we have been told, if not this afternoon, certainly in the Minister's Second Reading speech, and in later propaganda, that there is no proper pricing or competition in units of the industry. Ask any salesman in the privately owned sector of the steel industry, and he will tell you that there is plenty of competition between the different companies, if not in price, then in quality, delivery and service. And the situation has been changed, of course, by the ruling of the Restrictive Practices Commission. As a result, the industry proposed to introduce a more competitive system of pricing, but that has been vetoed by the present Labour Government. How, in these circumstances, will nationalisation help to make the industry 26 more competitive in itself and with its overseas competitors?
Then it is frequently said that the industry cannot get the finance required for its development. This is quite untrue, because the industry has been able to invest well over a £1,000 million in major development schemes during the last ten years. In the case of Colvilles, a £50 million loan was made by the Government for the continuous strip mill which was to be located in Scotland, expressly at the Government's request for the development of industry in Scotland. That was a case of Government intervention rather than of putting industry where it was economically most suitable. It hardly counts, therefore, as a case of the industry being unable to raise any money for its own capital development. The industry is convinced that it can raise funds for its forward development programme if it is permitted to charge fair prices, and if it is freed from uncertainty about the future. A further charge made against the steel industry in its present form is that not only is it not making sufficient investment, but it has not sufficient capacity for the future. This is clearly contradicted by Labour's own National Plan, which on page 144 states:Steel capacity should be adequated to meet the needs of the Plan in the period to 1970.There is also the question of exports. We are told that the steel industry is not doing well because it is not increasing its exports. But it is important to realise that the developing countries are setting up their own iron and steel industries—Argentina, Egypt and India, to name but three—so that those overseas markets are no longer available for British steel exports. Even so, the year 1965 was a record for direct steel exports from this country, which stood at a level of 4.7 million tons. At the same time, imports were reduced by 1¾ million tons. By value, exports were £203 million and imports £43 million. So that the iron and steel industry in its present ownership has made a substantial favourable contribution to the balance of payments.
There are many arguments against this Bill, and I hope that I shall not be accused of being an old-fashioned dogmatist if I dare to produce a few arguments against nationalisation. I do not mind admitting that I am against nationalisation in all its forms. I saw a good 27 deal of it at first hand when, as Minister of Power, I had the difficult position of trying to supervise three nationalised industries. I have seen some of the difficulties from inside. But as regards the iron and steel industry, the real difficulty with this nationalisation Bill is that it is going to cause a considerable measure of disruption in the short time that elapses while the new plans, whether they be good or bad, are worked out. In any event, it is boing to break up the integration of certain firms—notably Parkgate Iron and Steel Works, a subsidiary of Tube Investments, part of the Vickers Group, and another, as well. On the one hand, Socialists tell us that we should have big units and integration; but when it comes to steel industry we must break up this integration when it suits their book. In the case of the steel construction industry, we shall have the absurd situation of half the industry being nationalised and the other half, not nationalised, with all the problems that that poses for obtaining fair competition between the two sides of the industry. I am sure that when it comes to giving the benefit of the doubt by a Government Department, it will be the nationalised half of the industry that will get the contract and not the private firm.
The steel plant industry, a very important exporting industry, is currently almost crippled by the lack of orders for new steel plants for no reason other than that the Government are determined to nationalise the industry. The industry has approached the Ministers concerned. It has been referred to the Chairman of the Organising Committee, who, I quite understand, is not in a position to say anything at this stage. But meanwhile this important exporting industry is languishing. There are unfair conditions for the firms who are left out, despite the assurances given by the Minister. Moreover—most important for the future—Britain's entry into Europe will be made more difficult. I am not going to deal with this aspect in detail, because my noble friend Lord Windlesham, when he comes to wind up for the Opposition, will do so.
But one of the worst features of this nationalisation Bill, even as thoroughly explained by the Minister, is that the spur of competition will be removed. In 28 conditions of competition it is only the successful that survive, and in the free-enterprise system it is interesting to see how many there are who fail, or who are swallowed up, before they finally fail, by those who are successful. One of the great difficultes for a nationalised industry—
§ LORD PEDDIE
My Lords, I wonder if the noble Lord would be good enough to explain to what extent and in what way competition is expressed in the steel industry?
§ LORD ERROLL OF HALE
My Lords, there is a limit to the number of times I can give way. I am already giving offence to my noble friends on this side by doing so. There is considerable competition on price, quality and delivery by existing firms: and some do well, and some badly. Richard Thomas and Baldwins, who have lost something like £30 million over the last four years, provide a good example of a company who would have gone under if they had not remained nationalised and been supported by public money being poured into them. In conditions of competition, only the successful survive; and nationalised industry, deprived of its competition (and we have seen this in other industries which are already success symbols in the eyes of the Minister), will put on weight, in the form of more staff, with a slight laziness of attitude: "When in doubt, we can put up prices. We have only to go along to some consumer council, or similar body, to get official approval, or get the Minister to agree to put up prices." There is no difficulty in the long run. In the case of a nationalised industry it makes its case, and gets it prices up. And, of course, it always has more and more offices.
The present Labour Government can never make up their minds about offices. They do not like people working in offices, but everything the Government do creates more offices. We see a special section of this Bill devoted to ensuring that the many offices of the National Steel Corporation shall be located in the right places. What on earth are all these offices going to do? They will not be producing any steel. They will not he doing anything but producing typewritten bits of paper and committees and subcommittees. We have only to look at the 29 enormous bureaucracy of the electricity supply industry, and compare it with the industry before it went into public ownership, to see just what this office bureaucracy means, and to know that this is what the iron and steel industry will be saddled with in the course of the next few years.
Another weakness of nationalised industry is that nobody ever gets "sacked". Life becomes cosy and comfortable, with a few exceptions—those at the very top, who sometimes get pushed out. There is no need to worry about losses, because the taxpayer will pay. The industry must go on. It is nationalised. It is in public ownership. Bad luck about those losses, old boy, but the taxpayer will "ante" up. Short of capital? No need to worry: no need to attract private savings in competition with other private industries—which is what private enterprise has to do. Just put in a case to the Treasury, old boy, and after a bit of argument and with a bit of political pressure, you will get your money all right. This is what nationalised industry is really like, my Lords. So far as exports are concerned, there will be no need to fight for overseas markets any more. All there will need to be is a Committee on exports, who will report that it is really very difficult to export and probably not really worth the effort.
In this particular case, I hope that the Minister will keep a note for the Committee stage. We should like to ensure that the position of the steel export merchants will be safeguarded so that when the National Steel Corporation utterly fail to maintain their exports they will not have killed in the process the steel export merchants, who will be able to take over where the Corporation have failed. At the same time, the Corporation are being granted powers to go into other industries quite unconnected with iron and steel—everything from paintmaking to brewing. There will be no need for another Bill to nationalise another industry—the National Steel Corporation have the power already.
From a census that was taken it is clear that the bodies representing steel users do not want to deal with a nationalised industry. Labour voters themselves, in a recent Gallup Poll, do not want it, either. Only 20 per cent. of the Labour voters approached were in favour of steel 30 nationalisation. The Prime Minister did not even mention steel nationalisation in his own 1966 Election Address. Nevertheless, this Bill was passed by a large majority in another place, after a dummy run, so to speak, in the previous Parliament.
I think, therefore, that noble Lords on this side of the House (and I am sorry to put it to them) should acquiesce, allow the Bill a Second Reading, and do what they can to improve it during later stages. At the same time, we on this side of the House, and I hope everyone else, can remember the pledge given by Mr. Barber the Shadow Minister of Power, as recently as October 14, 1966, when he said:To whatever extent is necessary and practicable…and to provide the disciplines of competitive enterprise we shall denationalise the industry.
§ 3.50 p.m.
§ LORD OGMORE
My Lords, my noble friends, myself and the Liberal Party in general are against this Bill and against nationalisation. We believe that the origin of the Bill is not economic, but political, and, in our experience, no informed person outside the Labour Party believes that it will solve the problems of the industry. What the industry needs is rationalisation, not nationalisation. The background of this Bill, of course, is Clause IV, thecommon ownership of the means of production, distribution and exchangewhich clings round the neck of the Labour Government and the Labour Party like the Old Man of the Sea clung around the neck of Sinbad the Sailor.
The noble Lord, Lord Erroll of Hale, has indicated some of the difficulties that he and others have experienced with regard to the nationalised industries already in existence. My experience has been somewhat similar. In the first place, we have the airlines. The civil airlines and the Air Corporations have been under constant interference throughout the years. Time after time Ministers have tried to interfere with them, not on aviation grounds but on grounds of national prestige and matters of that kind; and from time to time some of us have complained in this House over the years on this score. The airlines have lost money very often because they have been forced to take decisions by successive Ministers which they would never 31 have taken if they had been left to their own devices. Then let us take coal. This has been a great disappointment, partly, I think, because expectations were raised too highly with regard to coal nationalisation. Certainly in my area in South Wales there is a feeling of great disappointment over the nationalisation of coal.
We come to the nationalisation of steel, and particularly the nationalised public company, Richard Thomas and Baldwins. This is a classic example of Government interference, backed, I may say, by the official Opposition. No Government, whether a Labour Government, a Conservative Government or even a Liberal one can be trusted to run an industry. The fact is that this classic example was before your Lordships in 1960 when a Bill was presented to this House on April 4, 1960, for the financing of the Richard Thomas and Baldwins works.
The strip mill which was proposed was desired by Richard Thomas and Baldwins in one part—preferably in South Wales, but definitely in one part. For political reasons—not for reasons connected with steel or for economic reasons—the Government were foolish enough to divide it up into two unequal parts, one-third in Scotland and two-thirds in Wales. I protested in this House on that very day, April 4, 1960, and pointed out that this was in defiance of the wishes of Richard Thomas and Baldwins, and made no economic sense. Not the Conservative Government, but a Labour Opposition speaker called me parochial in making that suggestion. He supported the Conservative Government in this absurdity, and said that I was parochial because I wanted it in one piece. Perhaps I was parochial, but my parochialism would have saved the enormous sums which have been lost by Richard Thomas and Baldwins, not because of their own fault but because of this ridiculous decision. They have lost £30 million in the last four years, and for this the Conservative Party were responsible.
On top of this, I would point out in this regard that a Conservative ex-Minister, who was at the Treasury at the time, speaking in the last week or two, has admitted that this decision was taken for social reasons, which is a polite way of saying that it was taken for political 32 reasons. And in the current issue of Crossbow, on page 26 (Crossbow, as your Lordships know, is the journal of the Conservative Bow Group), this very transaction is severely dealt with and condemned.
May I now turn to the question of a mandate? No doubt it will be said in some of the speeches that we shall hear this afternoon that there is a mandate for the nationalisation of steel. In my experience of politics, it is very rarely that one issue is picked out in the course of a General Election, except possibly in certain areas. Generally speaking, the views of the Parties are taken into account, their previous performance is analysed by the electorate and, except on some great issue, it is rarely that a particular issue is picked out all over the country. So I do not believe in the mandate argument. But should it be held that the mandate in this case is important, then the mandate was the other way about, because at the last Election the Conservatives and the Liberals were against the nationalisation of steel and the Labour Party were for it. A majority of 874,256 people voted for the Conservative and Liberal Parties: in other words, the votes cast for the Conservative and Liberal Parties were that number more than the votes cast for the Labour Party.
§ LORD OGMORE
Must we have these interruptions? The noble Earl is going to make a speech. In the old days in this House I may say that interruptions were very rare. Now people pop up like a Jack-in-the-box.
§ THE EARL OF LONGFORD
The noble Lord obviously does not like interruptions. Am I allowed to interrupt?
§ THE EARL OF LONGFORD
If the noble Lord will allow me to put a point, I have been in the House for a good many years longer than he has.
§ THE EARL OF LONGFORD
No; more than two. Perhaps the noble Lord would answer this simple point. If the Conservatives and the Liberals in the course of an Election collect more votes than the Labour Party, does that mean that the Labour Government have a mandate for nothing?
§ LORD OGMORE
It means that they are a minority Government, and should not use the argument of the mandate. I am not saying that they should not do anything. I am only quoting a possible argument that might be used from the Benches opposite about a mandate. There are something like another twenty speakers and somebody may use this argument. I am only saying that if there is a mandate, then surely the argument in this case should be on the other foot.
The trouble is that the boards of nationalised industries are very often creatures of politicians. They are liable to be dispensed with at any time if they offend for some reason, perhaps for a political reason. If they offend the Minister, the Minister can exercise personal spite by getting rid of them; and this has been done. In this case, as the noble Lord, Lord Erroll of Hale, said, a huge monopoly has been created. The industry will get feather bedding. What it really needs is competition so that it gets into a really competitive frame of mind. Instead of that it will have long-term security, a pension to look forward to and a hand in the taxpayers' pocket. In my view, the Government should hold the ring and see fair play. The Government themselves are to be one of the parties, and a very important party—the most important party; and the other parties, if there be any, find it very difficult to believe they are getting fair play.
Finally, may I say that I think this is a singularly inopportune time to bring forward this Bill, in view of our attempts to get into the Common Market? Entry into the Common Market means the adoption of a pricing system and also anti-cartel legislation, and both these items will be very difficult to adhere to if we have in this country one colossal monopoly, one great nationalised steel industry, whose tentacles will go, as Lord Erroll of Hale said, into so many different parts of the commercial and industrial field. I and my colleagues on these 34 Benches think this is a sad day: a sad day for the country, and a sad day for steel.