§ 2.44 p.m.
§ LORD NUGENT OF GUILDFORD
rose to call attention to the White Paper (Cmnd. 3437) on the Economic and Financial Objectives of the Nationalised Industries and the implications which this has on the policies of Her Majesty's Government; and to move for Papers. The noble Lord said: My Lords, I beg to move the Motion which stands in my name on the Order Paper. The starting point of this debate is the While Paper published by the Government last November (Cmnd. 3437) of their thoughts about the running of the nationalised irdustries. The premise which I am making in my speech is that a large number of these State corporations are likely to continue in existence irrespective of Government. This does not imply that I approve of the new entry to the sacred herd. In fact, 779 I consider them to be a suspect lot and due for the Government's slaughter policy. But this is not the occasion to pursue that argument. My premise is that the total sector of the nationalised industries is such a large and important sector of the national economy that all Governments, irrespective of Party, are bound to regard their success as a matter of first concern as, indeed, we did when we were in Government.
In regard to the size of the nationalised sector, there are now 14 nationalised industries, with 3 more in the pipe-line in the new Transport Bill. They employ about 8 per cent. of the total national labour force. They invest annually about £1,700 million, over 60 per cent. of which comes from the taxpayer. This annual investment is equal to the total annual investment of the private sector of manufacturing industry. The net capital assets of the existing nationalised industries are about £12,000 million, so that there is no doubt about the immense importance of this sector to the national economy.
The performance of these industries over the past twenty years is that they have written off capital to the tune of some £2,289 million, including the amounts provided for in the current Transport Bill. Their accumulated trading loss until the end of 1966 was £796 million, making a total of just over £3,000 million on that side, against which the nationalised industries have paid to the Exchequer £1,952 million by way of interest and £192 million by way of taxes, making a total of £2,144 million. So that there is a total deficit over the twenty years of £942 million. Of course, these gross overall figures cover a wide range of differing performance, but the figures are enough to pose the question: nationalised industries, asset or liability to the national economy in our struggle to adapt ourselves to the 20th century? The fair answer to that question, in an uncontroversial debate, is that some of them have very far to go to make themselves assets to the economy. This is the measure of the challenge of Government, either the noble Lord opposite who are the progenitors of these industries, or indeed future Conservative Governments in tackling the problem of making these large industries an asset to the nation.
780 I suggest that there are five factors which are clearly essential to success. The first, and by far the most important, is the major policy objective for these industries: is the nationalised industry to be run for political and social ends, or is it to be run for economic ends? I turn to paragraph 14 of the White Paper, which describes what I regard as a disturbing trend. It reads as follows:Indeed it"—that is the Government—must take a wider view than that of the industry itself, since the Government's objective is to secure the maximum social return on the capital invested, while the industry's concern is properly with the financial return.I find this double theme running through the document—the hands are Esau's and the voice is Jacob's. If I compare this with the White Paper of 1961, Cmnd. 1337, in which the Conservative Government first defined their ideas of running these industries. I find a very distinct change of emphasis. If I may quote what I feel is the relevant point of paragraph 2, it says:First, the task of government is to ensure that the industries are organised and administered efficiently and economically to carry out their responsibilities, and that they are thus enabled to make the maximum contribution towards the economic wellbeing of the community itself as a whole. Second, although the industries have obligations of a national and non-commercial kind, they are not, and ought not, to be regarded as a social service absolved from economic and commercial justification.Then, as your Lordships will remember, the White Paper went on to define the idea of financial targets which were set with the specific idea of giving financial discipline to these individual industries, and at the same time giving them a maximum independence of Government to get on with their respective jobs. I hope that when the noble Lord, Lord Beswick, replies he will clarify this point, because as I read this Paper I find what I regard as a dangerous change in the general emphasis on the objectives of these industries.
My own view is that the less Government interference, the more efficiently and productively these industries will run. Conversely, the more Government interference, either for political or for social motives, the less efficient and productive they become: and for two reasons. In addition to the direct loss from pursuing 781 uncommercial objectives, there is an indirect loss by weakening the keeness of commercial spirit in the industry itself. One sees this at its most serious, of course, in the present condition of the railways. In my judgment, the nationalised industries can serve the nation best if they are run with the maximum industrial efficiency to produce their goods and services at competitive prices and make a sufficient surplus to keep their demands for capital to a reasonable minimum. By thus strengthening the national economy and the nation's export-earning; power, they will help to make the whole community better off.
In this context, a nationalised industry has to overcome a natural in-built disadvantage. It bears no trading risk. It is insulated by the Exchequer from the ultimate sanctions of the market. At this moment in time we are all very conscious that we as a nation are not so insulated, and, indeed, that the penalty for failing to pay our way on our national trading account is that we shall have to work harder for some time to come for less reward in order to pay off our debts. All private business, of course, lives with this risk. In crude terms, they either make the business pay or they "go bust". In effect, every private business is to that extent bearing its share of the nation's trading risk. But as nationalised industries are insulated from this risk, in my judgment the only safe policy to ensure that they are assets and not liabilities to the economy is to limit their social and political objectives to the minimum, both in size and in time. When Government finds it necessary, for some overwhelming national reason, to take action in this field it should, in my judgment, bring a specific proposition before Parliament—for instance, the Coal Industry Act—to meet the special strain of rapid contraction. If I may say so, I think the social provisions are much sounder than the industrial ones.
With regard to price levels, my belief is that it is best if Government leave nationalised industries to settle their own price levels; but, if, at a time of emergency, it is necessary to take action then it should be action right across the board for all nationalised industries; and, indeed, for the whole private sector as well. If that is done, I think, it is fair and 782 acceptable. In general, however, I am sure that the best way to ensure that the nationalised industries' price levels are right is to provide by one means or another that there is competition in their fields. We can see that working best in the fuel industries, where there is very stiff competition. I believe that the consumer's best friend is competition, and I hope that the rumours that have been heard of a possible merger between the electricity and the gas industries are completely wrong. I am sure that such a merger would be quite disastrous.
My concluding point on the objective for nationalised industries is that the record of the past twenty years shows that those which have done best were those which were the least interfered with. I hope, therefore, that the noble Lord, Lord Beswick, when he comes to reply, will be able to tell me that I have drawn an incorrect inference from the White Paper, Cmnd. 3437, and that the economic objective for these industries will be priority No. 1 and will be maintained.
My second point for success is undoubtedly management. For this purpose, I would put the Chairman of the Board as the key figure. We have seen over these years that a man with the right qualities, of the top calibre in industry, a man of vision and courage, is able to define the right policies, to get the right men under him in the right places to carry them out; and, by his leadership, to inspire the whole of the vast army of employees that he leads. This, of course, is not achieved overnight; it takes some years to achieve it. But we have seen examples of this, and I am sure that this is the high road to success. Of course, not only does the right calibre of chairman get the right results within his industry, but usually he seems to get the best relationship as well with his sponsoring Minister. Perhaps good examples of that are the two Air Corporations in the 1950s, when B.O.A.C. had a succession of chairmen and wilted and was in all kinds of trouble—quite a bit of it, of course, was inherited which did not make it too easy—but B.E.A. under a strong chairman thrived. In passing, let me say how glad I am to see that B.O.A.C. to-day—and also Sir Giles Guthrie, whom we appointed in 1963—is doing so well.
783 The conditions of employment for the Board chairman must be such as to attract the kind of top calibre man needed to fill this role; not, let me say, that I think all chairmen should come from outside these industries; I am sure it would be healthy for them if more came from inside. But the first condition, undoubtedly, is the salary and pension which is to be paid. The Government must be prepared to pay the market rate, and I congratulate the noble Lord, Lord Beswick, and his colleagues, on paying the right rate for steel. But I regret their timidity in the rest of the field.
There are three specific points on this. The first is, of course, that it is unfair to the present chairmen to pay them less than the market rate. Secondly, it will undoubtedly be a serious handicap to finding adequate successors when the time comes, unless the market rate is paid. Thirdly, as the present rates of salary are fixed, there is undoubtedly a serious restriction in the salary levels for the top executives on whom so much depends.
Let me say in passing that a good example of the wrong approach to appointing chairmen was undoubtedly the recent Dutch auction in appointing the Chairman of British Rail. It could have done nothing but harm to the tone of management. I am bound to say that it seemed laughable to me to boggle at paying an extra £5,000 a year, when the Treasury are pouring out £150 million for the deficit.
My next point refers to the question of pensions. I am sure that chairmen ought to have an adequate pension level, comparable with the kind of "top hat" pensions which are paid in private industry. Noble Lords must have been astonished to learn—I certainly was—that when Sir Stanley Raymond made his enforced departure from British Railways, his total pension after a good many years of service was under £3,000, especially as he apparently established an additional claim to danger money in his parting cri de coeur, "I never could understand women". In any event, I think the previous record confirms the insecurity of the chairmanship of these industries, and it makes my point that the hazards for continuity of service 784 necessitate that pensions should be on a generous scale.
§ LORD BOOTHBY
My Lords, will my noble friend forgive me for one moment if I ask him what he thinks about pensions for Members of Parliament? I was a Member of Parliament for 34 years without a pause. What is my pension? Naueht!
§ LORD NUGENT OF GUILDFORD
My Lords, I have great sympathy with the noble Lord, but fortunately his present earning capacity is so great that I do not think he need worry about a pension for a long time.
§ BARONESS SUMMERSKILL
My Lords, may I ask the noble Lord also, as he has just mentioned Sir Stanley Raymond and his comment that he never could understand women, this question? If he was so stupid that he never could understand women, does the noble Lord not think that he might not have been equally stupid in his job?
§ LORD NUGENT OF GUILDFORD
My Lords, I should not have thought that it was a direct qualification for running a railway. Apart from the objections of the noble Baroness, I know the Treasury objections to paying higher salaries and pensions—particularly, for example, the implications on other salary levels—but I would suggest that the experience of the last twenty years has shown that it is a grave handicap to the management of these huge industries to underpay the chairmen. When Government have had the courage to pay the market rate (twice under a Consevative Government and once under a Labour Government) it has been no more than a nine-days' wonder and everybody has accepted it as the commonsense thing to do.
The second condition for attracting the right kind of chairman, I suggest, is that he has the prospect of reasonable freedom to get on with running the industry that he is taking on. Undoubtedly the prospect of pressure and interference from Members of Parliament and Ministers deters numbers of high-grade industrialists from considering such a job. That brings me to the third point which I feel is vital for success, and that is the right relationship between the chairman of a nationalised industry and the sponsoring Minister, and vice versa.
785 When I read this Paper it occurred to me that it would be most illuminating to read a similar paper written by the chairman of a nationalised industry defining his idea of what should be the relationship between Ministers and chairmen of nationalised Boards. Fortunately, into my hands within a very few days came this admirable paper by the Chairman of the Electricity Board, Sir Ronald Edwards, giving just such a commentary—his Stamp Lecture. Sir Ronald, as noble Lords will know, has been Vice-Chairman and Chairman of the Electricity Council for the last ten years, and I think, by common consent, has given brilliant leadership to the electricity industry. He therefore, in my judgment, speaks with very great authority.
Now there is a major dilemma here, and we must face it squarely. There is a divided responsibility for these industries. Ministers, on the one hand, have their statutory responsibilities laid down in Acts of Parliament, and those responsibilities they must discharge to Parliament. On the other hand, Boards have their responsibility in managing and running their industries, and Ministers are entitled to expect chairmen to give them every reasonable co-operation. Indeed, in his paper Sir Ronald Edwards recognises that fact. But Sir Ronald observes a trend towards a greater intervention in nationalised industries, and in his paper, which I am sure noble Lords have read, he warns most cogently against it.
I am sure Sir Ronald is right. The record shows that these industries will do best if Ministers limit their interest to the broad strategy of the industries and, having picked the right men to run them, then leave them alone to get on with the job. No business can succeed unless the management defines its policy and consistently follows it over a period of years. It takes time for those policies to pay off, even if they are the right ones. Ministerial interventions inevitably change either the emphasis or the direction of policy, or both, and the result, of course, is a loss of confidence, a loss of impetus and, if continued, a loss of morale as well. So my point here is that Ministers should limit their activity to defining the general strategy.
There is just one further field in which I feel Ministers should particularly re- 786 strain their activity, and that is the field of labour relations. Experience over the years has shown that it is fatal for a sponsoring Minister to intervene and take a direct hand in disputes between his Board and trade unions. First the sponsoring Minister gets involved, and then the Prime Minister gets involved. We have seen all this happen again and again, so that there is now a well-worn track from the N.U.R. headquarters to 10 Downing Street, where these things have gone on time and time again. In my judgment, there is nothing more damaging to the authority of a Board than to have these basic management matters settled over its head. It is bound to be de-moralising to the authority and spirit of the Board, and can but do damage to the service provided at the end. I exclude, of course, the Minister of Labour's specific conciliatory functions, which may be, and are from time to time, used in any dispute.
When in Government we had our troubles in this field, too—I freely admit it—and I know only too well the intense political pressures which are put upon a Minister when there is a threatened railway stoppage. But I believe that the public is learning about these things and would support a Government which firmly refused to be implicated and referred the dispute back to the Board of the nationalined industry concerned, for them to settle. This is delicate and controversial ground, perhaps, but what is incontrovertible is that those nationalised industries which have settled their own labour affairs over the years have got far better labour relationships and I think probably higher standards of service to the public as well. I am quite sure that they get far better results if they can avoid all this public drama.
My fourth point concerns the raising of new capital. At present, some £800 million per annum is being provided by the Treasury out of tax revenues. This system of financing new capital out of tax revenues was introduced by us in 1956 or 1957 following a very learned and helpful Report by the noble Viscount, Lord Radcliffe, and his Committee, which had examined the whole problem of raising the large and increasing sums of money needed to finance the new capital for these industries. The burden of their recommendation was that the 787 sums required were so large that the market could no longer absorb them in a reasonably managed way. Therefore the Conservative Government of the day adopted that recommendation and brought to an end the previous system of going to the market and raising money on fixed-interest, dated stock.
The present system works well mechanically, but I suggest to noble Lords that there are serious objections to it and the time has come to take another look at it. First of all, it is objectionable in principle to compel our people to provide the investment needed, because it exceeds what they can save voluntarily. This must in the long run be injurious to incentive on account of the very much increased direct taxation that there must be; and it must also be injurious to thrift, which is equally important. I suppose that if this was taken in terms of the standard rate of income tax it would be more than 3s. in the pound, although I do not say that if it was changed it would all come off there; it might come off other places as well.
Secondly, this arbitrary method of capital allocation undoubtedly runs the risk of misusing our scarce capital resources; of using them not to the best advantage in terms of increasing national productivity. I take the figures from the last Annual Report on the Nationalised Industries, which gave a net return on them of only just over 4 per cent. compared with the net return on the 300 largest industrial companies of just on 12 per cent. This makes my point that we must ask ourselves the question: Are we allocating by this method the very scarce capital resources of this country in the best way in order to get the maximum increased production and productivity?
Thirdly, my Lords, because of the present system, the nationalised industries do not have to face, as private industry does, the disciplines of the market. However difficult the Treasury may be, I am quite sure that the disciplines of the market are a great deal tougher. It is 12 years since the Radcliffe Committee reported. In the interval, financial targets have been set up for these industries and they have shown us that self-financing of the nationalised industries has been possible and on very much larger scale 788 than any of us previously had thought possible. I suggest that the time has now come to look at this problem again to see whether the nationalised industries should not earn a net return nearer to private industry—for even electricity, the strongest of the lot, earns only about 7 per cent. net return—and thus by slowly raising financial targets increase the prospects of self-financing to the point where the profitable nationalised industries could go to the market for their fresh capital. In passing, let me remind noble Lords that the oil industry—the nearest competitor to the nationalised industries in the field of fuel—raises its capital almost entirely by self-financing with sums comparable to those raised in the nationalised industries. I make the point that this deserves fresh thought, and I hope that the noble Lord, Lord Beswick, will be forthcoming on this and will undertake that the Government take a look at it. I believe the point deserves consideration.
The final point I should like to put before the House is the relationship between nationalised industries and Parliament and public opinion. The original Statutes setting up nationalised industries—and here I should congratulate in particular the noble Lord, Lord Hurcomb, for his part in some of them—very firmly excluded matters of day-to-day management from ministerial or Parliamentary scrutiny. This was undoubtedly a wise provision, but unfortunately over the years the pressure of critical public opinion—and one must accept that there is a large section of public opinion in all Parties who will "shoot" at nationalised industries—has eroded this constitutional safeguard. Therefore, it is now possible to set down on the Order Paper in another place Parliamentary Questions on a very wide range of management matters.
This, I am sure, is wrong. In some cases it has a most disturbing effect on the management and staff of the industry concerned—and here again the railways suffer particularly. I suggest that the original statutory position is the right one, and I hope that the noble Lord, Lord Beswick, will be able to say something forthcoming about the possibility of reasserting that position. It is there on the Statute book. I recognise that this will not be easy, for Members of 789 Parliament are very tenacious in hanging on to rights that they have achieved. Therefore, something must be given in exchange. I am firmly in favour of public accountability, both to Parliament and to the nation; and, therefore, in order to do that, I would suggest that the Select Committee on Nationalised Industries (which, on the whole, has proved to be a most useful piece of machinery both to Parliament and to the industries) should be somewhat expanded and should be strengthened with professional staff. It could thus be put into a position of annually examining specific points in the nationalised industries in a wide enough range of subjects to keep Parliament fully informed on both their performance and their prospects. I do not suggest a continuous audit—that would be obviously most disturbing to them—but enough to give Parliament the assurance it needs.
I observe that the Government have moved to strengthen the Prices and Incomes Board with professional staff for the specific purpose of examining the problems of nationalised industries. I would suggest that this is a mistaken approach, and that the right approach, I am sure, is to strengthen the relationship to Parliament. It is to Parliament and to the Ministers that the nationalised industries are accountable. Anything we can do to strengthen that relationship—which is what ray suggestion would do—would at the same time make it possible to define more clearly the independence of the Boards so that they could be left more free in order to run their own businesses as they think best. Let me say in conclusion that the nationalised industries are clearly a field in which the Government can make an immediate contribution to the national economy. I hope that my thoughts may help them on the way. I beg to move for Papers.
§ 3.15 p.m.
§ LORD BESWICK
My Lords, I am sure that we are all most grateful to the noble Lord for moving this Motion in such an agreeable and constructive way. I should like to offer my thanks to him and also congratulate him. I thought it would be most convenient for the House if I dealt, at this stage, with what I might call the Whitehall thinking behind the White Paper (Cmnd. 3437). If I deal 790 now with this narrower aspect, that is to say, the financial aspect of the problem with which the noble Lord has dealt, then, with leave, it may be that I could offer comments at the end of the debate on other interesting matters raised by the noble Lord, together with anything I might usefully say on the other speeches, to which I look forward.
Before I come on to the current official doctrine behind the White Paper, a few words about the earlier background might be in place. Various reasons have been advanced through the years for bringing an industry or service under public ownership. One primary argument concerned the need to bring monopoly, or near-monopoly, under effective public control. It was Karl Marx who first showed that, as the tools of trade become more sophisticated and more expensive, and as industry became more heavily capitalised, the trend towards mergers and monopolies was inevitable. In this, if not in other matters, the analysis of Marx has been proven correct. The consequential argument was that, given the economic justification for monopoly, the public needed to be protected from private exploitation; and public ownership was the answer.
But it was clear to many, and has become clearer to all, that public ownership, like patriotism, was not enough. While there would be no question of the consumer being milched for the benefit of private capital, there was still the possibility of sloth and inefficiency. If the consumer was really to be protected then special devices or techniques were needed to look after his interests. In other words, having set up the Board as the champion of the public interest we then had to ensure that the champion himself was sufficiently energetic.
I used to argue that maximum efficiency really meant a fair deal as between what I called the two sides of industry; namely, producers and consumers. If we had adequate and equal representation of these two sides on the policy-making Boards then a decision which satisfied them both would necessarily mean maximum efficiency. But representative Boards in that sense were ruled out, and what we actually got in the ensuing legislation were Minister-appointed Boards, and Minister-appointed Consumer Councils attached to them. Then, in an attempt to 791 satisfy the producer element, there was a statutory obligation placed upon the Boards to consult their employees. I occasionally make the claim that it was an Amendment which I drafted to the 1946 Civil Aviation Bill which, for the first time, gave workers in a British industry the legal right to be consulted on matters affecting the operational efficiency of their industry. This form of words was subsequently adopted for all Acts of nationalisation.
No one can claim that the early hopes which we had, idealistic hopes if you like, were realised. The effort to ensure economic efficiency and social responsibility has subsequently taken various forms. The right of Parliament to debate reports was one form, and dates were eventually set aside for this purpose. Then there was the development of the Select Committee on Nationalised Industries—I hope to say a further word about that later in the debate—and very useful this Select Committee has become. The 1961 White Paper, as I understand it, was a further attempt to impose constructive economic discipline on the public Boards. Financial targets were set for each of them. The 1961 targets were criticised because they lacked obvious economic justification, and, in any case, it was suggested that it was too easy for industries to meet their targets simply by putting up prices against the consumer. The 1967 White Paper, which we now have before us, takes account of these criticisms and brings into the picture the Prices and Incomes Board as a still further development.
The noble Lord, Lord Nugent of Guildford, said, as I understood him, with respect to the financial targets, that there was still too great a gap between the return which capital invested in the public sector was expected to make and that shown by the private sector. I think that to some extent the noble Lord was not giving the full picture, because 4.2 per cent., which is the actual figure of return on the capital employed in the public sector, is the average for the whole of the public sector; and if one excludes British Rail—which for this purpose I think it reasonable to do—which is in deficit, then the return is about 6 per cent. I agree that it is still only about half the private sector rate, 792 but, as the noble Lord will agree, in no country is the return on capital invested in the public utilities expected to come up to that invested in other commercial enterprises. In any case, in the White Paper which we are discussing all new investment will be expected, indeed will be required, to earn 8 per cent. or more.
My Lords, it has been said that though one of these two White Papers was produced by a Conservative Administration and the other under a Labour Government, it would be impossible to distinguish their respective political pedigrees. Indeed the noble Lord, Lord Nugent of Guildford, implied, though he did not say in terms, that on this question of the control of the public sector the two sides of this House and all the major Parties are now coming much closer together. One other explanation, however, of the similarity in the terminology of these two White Papers is, I suspect, that in recent years there has developed in Whitehall a much more sophisticated professional body of knowledge about public industry and about the techniques necessary for ensuring efficiency within them. In any event, I say that the second White Paper follows naturally from the first; although it does, of course, in certain respects, as the noble Lord said, make a very definite change of emphasis.
The 1961 White Paper set out financial objectives in the light of which decisions on investment and pricing were to be made. Now in the revised doctrine the objectives are claimed to be economically justifiable only to the extent that they reflect sound investment and pricing policies. This, surely, is the better way round, and I hope that the noble Lord does not criticise that change of emphasis. But to say that there should be a sound pricing policy is one thing; to define one is, of course, another and a more difficult problem. There is to-day an understandable public demand that in the public sector, which directly or indirectly they control, the Government should restrain price increases. The Government accept their responsibility and, for good measure, decided last September to get an independent check upon the validity of proposed price increases by the nationalised industries by referring them to the Prices and Incomes Board. Naturally, I cannot anticipate the findings 793 of the Board, but clearly, part of the increase now under review is needed to offset increased operating costs; although to some extent the public sector, as with the private sector, is expected, and indeed must, absorb this increase through increased productivity and efficiency.
In addition, in common with all other industry, they are faced with increased costs for the goods and services which they have to buy. Once again, to some extent these can be absorbed by improved purchasing techniques, and proposals in the recent Maxwell Report on public purchasing are relevant to the nationalised industries. But when increases in labour and material costs cannot be absorbed, the basic tenet of the White Paper is that consumers should pay prices which fully cover the true cost of what they consume. If they do not, then, as the noble Lord said, we as a nation shall devote more resources to the production of those services than we should and shall have to cut back on things for which people are prepared to pay the full economic price; and the result would be a distortion of the whole economy.
The White Paper also emphasises the important question of relative prices between competing nationalised industries and between those industries when in competition with the private sector. So far as possible the nationalised industries are to charge their consumers the costs specifically attributable to the provision of services which they demand. Where a lot of spare capacity exists in the industry, so that the cost of providing extra goods or services is low, consumers will be charged a low price. Conversely, when the cost of extra services is high, as in the case of peak electricity, then prices should be high. Relative prices should encourage customers to use spare capacity and to refrain from using congested capacity. All this of course refers mainly to operating costs, but the capital requirements of nationalised industries, as the noble Lord said, form a very high proportion of their total cost. Unless the present consumer pays a price related to total costs he is encouraged to demand more of the under-priced goods and services; and consequently more capital needs to be invested to meet this demand. This again means a misallocation of our national resources.
794 However, my Lords, we should not exaggerate the extent to which the present consumer is asked to pay for capital costs. The Economist claimed the other day that the Government had decided to finance the whole of nationalised industry investment out of the industries' revenue. This is quite wrong. For some years now the average level of self-financing by these industries has been just below 50 per cent.—lower than the average for private industries. For the next year or so it is likely to be even lower, and the figures, more accurate figures, will be put in the National Loans Fund White Paper which should be available in a few weeks' time.
There have been some reductions in capital programmes as a part of measures which accompanied devaluation, but we cannot inflict serious damage on our industrial infrastructure by pursuing too far the possibility of dealing with financial demands; and I hope that nothing which the noble Lord said in his speech means that the Party opposite wish us to curb or crib further these essential public industries which form the basis of so much of our other industrial activities. But of course there are other possibilities of raising finance. The Government could allow the industries to borrow on the market again, as they did before 1956. But if their borrowing took the previous form of Government guaranteed stock issues, all that would happen would be some diversion of funds from Government stocks to Nationalised Board's stocks. No new source of borrowing would be opened up, and the total amount of public sector borrowing from the market would remain unchanged. It is possible that new forms of security could be devised which would tap new sources of funds, but most of the schemes which have been discussed so far are, I understand, ruled out for various practical reasons.
Another possibility would be to allow the industries to borrow overseas. This possibility has been under study within the Government for some time. Here again there are a good many difficulties, and it will be some tune before we are able to announce the results of this study. This leaves us with only the present arrangements under which the industries borrow from the Government—or in 795 future, from the National Loans Fund. Big increases on the scale of Government borrowing would have the effect of driving up interest rates, which, apart from other considerations, would make both private and local authority housing more costly to provide. For the rest, therefore, the choice is to raise prices or to increase taxation; and in the main the emphasis here has been put upon the value to the economy of raising finance through the price instrument.
What is the objection to price rises in the nationalised sector? Mainly, of course, the argument is that they are inflationary—that is, that they set off a chain-reaction, leading to further demands for wage increases, and to price increases by manufacturers who depend on the power, and so on, produced by the nationalised industries. But it is not at all clear that such increases are more inflationary than the corresponding tax increases would be if the alternative method of raising capital was used.
The noble Lord, Lord Nugent, suggests—and this I thought was his main criticism of the White Paper—that the new White Paper puts undue emphasis upon social returns and to this extent sets back the progress achieved under the previous White Paper. With respect, I think that he has exaggerated this. I am bound to comment, incidentally, that the noble Lord who sits next to him occupied a good deal of my time on the Civil Aviation Bill recently in demanding that in that Bill we should make provision for implementing precisely this aspect of the White Paper which the noble Lord now criticises. There are four references in the White Paper to social costs and benefits. Although the noble Lord mentioned one of these, he must surely agree that if we are to assess their impact as a whole we have to look at them in the context of the whole policy. The White Paper says:The economic value of investments cannot always be measured by reference to the financial return to the industry concerned. Many investments also produce social costs and benefits which can in principle be valued in financial terms and which when taken into account will provide a good economic justification for them.This seems to me incontrovertible as a statement of principle.
796 The problems that are then presented are practical ones. How does one measure what I understand economists call the "externalities"? And having measured them, what does one do next? These are not new problems; nor are they peculiar to the nationalised industries. All Governments have to take account of broader economic and social obligations than are shown in a profit-and-loss account. For example, there are balance-of-payments considerations; the encouragement of the efficient use of labour; and there is regional policy, which is so important at the present time. This Government and previous Governments have used fiscal instruments either to bring home to particular enterprises the social costs which they impose on the community, or to encourage them to take action which will bring benefit to the community. Subsidised factory estates in development areas are, of course, another example which springs to mind in this context.
But the fiscal instruments which are appropriate to private enterprise are not always appropriate to nationalised industries, which have different capital structures, attract different tax treatment in consequence, and (with a few exceptions) are not eligible for incentives like investment grants or regional employment premia. So from time to time more direct action by the Government may be appropriate—always with the purpose of maximising the total social return to the whole community, even if the return to the nationalised undertaking would be lower unless covered by a subsidy or some other adjustment.
An obvious and recent example of this was the one which the noble Lord himself mentioned; namely, the Government's request to the Central Electricity Generating Board to use more coal. Even though the cost to the C.E.G.B. would be higher, the cost to the community as a whole is less than that of alternative fuels. This is a case where social and financial returns varied, and the Government decided to intervene. It is also a case where the Government decided to make a cash payment to the C.E.G.B. to make up the difference, and a cash payment out of general taxation to cover the difference, rather than adjusting electricity prices. In other words, here again was a choice between 797 direct taxation and increasing prices to the consumer, and in this case considered on its merits, the choice was to make the payment by general taxation and not by an adjustment of prices. This would amount to taxing the electricity consumer to meet the social costs of the rundown in the coal industry. This is absolutely in line with what the White Paper says in paragraph 37:Where there are significant social or wider economic costs and benefits which ought to be taken into account in the industries' investment and pricing, these will be reflected in the Government's policy for the industry: and if this means that the industry has to act against its own commercial interests, the Government will accept responsibility".Here is something which I should have thought was not only in the framework laid down in the White Paper, but in the interests of the national economy as a whole, and did not detract from the profit incentive which was placed before the nationalised industry concerned.
The White Paper goes on to say that this may mean an adjustment in the financial target for the industry—that is, asking it to earn less, thus forgoing a financial return to the taxpayer—or it may mean a cash payment; that is, making the general taxpayer pay directly. There is no hard-and-fast rule for determining which method is best; it will depend on the circumstances. In some cases the social obligation is so small that one can safely ignore it and not attempt to give a specific subsidy—which means of course that other consumers have to pay a subsidy in their prices. Two examples there are rural electrification and the provision of telephone kiosks; both genuine social services, but neither of them having serious impact on the finances of the industries concerned.
My Lords, it really is important not to over-stress this question of social return. In practice, there are not many cases where social costs and financial costs diverge widely. It was, I suggest, absolutely right to set out in the White Paper the Government's policy for handling these cases, and I am glad to be able to assure the noble Lord that this does not imply any dramatic change of policy. I look forward to what is said in the remainder of the debate on some of the other interesting matters which the noble Lord has raised, and I hope that I shall 798 have an opportunity of commenting on them later.
§ VISCOUNT STUART OF FINDHORN
My Lords, before the noble Lord sits down, can he tell me whether the policy of the Government and the noble Lord who has just spoken is that the profit motive is ruled out; and that nobody should toy with anything so disgraceful?
§ LORD BESWICK
No, my Lords. On the contrary, it means that the profit motive will be there. The profit motive will be a most important motive. The difference between the noble Lord's thinking and that of us on this side of the House is that the profits so made will be used for the benefit of the industry and for the benefit of the consumer.
§ 3.40 p.m.
§ LORD ROBERTSON OF OAKRIDGE
My Lords, the noble Lord, Lord Nugent of Guildford, has invited us this afternoon to discuss the problems of the control of the nationalised industries. Those are problems that have been with us now for quite a long time, and they remain with us to this day. The industry with which I have had personal concern is the transport industry, and that, especially the railway section of it, is, I suppose, the biggest problem child of the lot. Various men, including myself, have made attempts to solve the problem which that industry sets, and yet the problem is certainly still with us. I think, in parenthesis, it is fair to remark that every railway system in Europe this side of the Iron Curtain is in financial difficulties. Well, one should perhaps except the French railways. So long as I have known the French railways they have always run at a deficit, and, so far as it is possible to make out from their accounts what that is, it is larger than anybody else's. But the French are proud of their railways, and with justice, and they do not seem to worry very much about the deficit; but that is not a thinking that would be acceptable, certainly in this country.
Now the Minister is presenting us with another confident attempt to solve this problem. After a barrage of White Papers, she has presented a Bill which 799 is now in front of Parliament, though not yet in front of this House, and it is not, of course, our job to discuss it today. But I hope it is fair just to say one thing. Some men have said that transport should be taken out of politics. That is silly. Of course you cannot take it out of politics. Transport affects the everyday life of every man and woman in the country, for every day in the year, and we cannot take it out of Party politics. But I think it is fair to say that the problems of the industry are very difficult, very complicated, and to a large extent very technical, and therefore they are not suitable—forgive me for saying this—for Party political pillow fights, as they have been used sometimes, even in your Lordships' House.
Paragraph 2 of the White Paper (and the noble Lord, Lord Nugent of Guildford, referred to this) sets out the statutory duties of the nationalised industries. The words have changed very little over the years. They are words that were probably drafted by Herbert Morrison or Cyril Hurcomb or somebody like that, and have changed very little over the years. The financial objectives were sharpened up in 1961, and that was a good step and was certainly taken as such by myself and my colleagues in the transport industry at the time. It is clear from these words that the intention was to set these industries up as independent corporations; they should be given certain objectives and certain rules to follow, but then they should be free to manage their industries themselves, without interference from Government through the Minister.
That was on excellent principle, but it has never been implemented. Interference by the Government started in the very early days—the noble Lord, Lord Hurcomb, would, I am sure, confirm this—and it has gone on ever since, and has reached an all-time high under the present Minister. But one must be fair about this. It is all very well, but these industries are essential industries. What they do has great political content, and it is only fair to understand that the Government and the Minister are under very heavy pressure. It sounds all right in the paper to say that the chairman should stand up on his feet and quote the Act and tell the Minister to "go to hell", but it does not really work out very well 800 to do that, especially in an industry in which the financial situation is a bit wobbly. After all, would the chairman of a board of a private enterprise industry behave like that to his chief bank manager? I think he would be unwise to do so. This is a matter which was discussed at considerable length between the noble Viscount, Lord Watkinson, and myself in days gone by, and, whatever recollection he may have of those years, I hope he has felt after them that he and I worked together and did our best loyally to support each other and do our best for the industry.
This leads me on to say a word about the appointments to the Boards of these industries, particularly the key appointment (as I believe Lord Nugent of Guildford called it) of the chairman. The Minister makes these appointments, and the Minister has a perfect right to appoint whoever he thinks most suitable, to appoint the man with whom he believes he can work. If the Minister takes over an industry which has at its head somebody with whom the Minister does not think he can work, the Minister is perfectly entitled to make a change, and nobody should "belly-ache" about it. He is perfectly entitled to do it. But, my Lords, there is a right and a wrong way to do these things; there is a decent and not-so-decent way of doing these things. I am bound to say that I agree with the thought expressed by the noble Lord, Lord Nugent of Guildford, that—shall I say?—the way in which the matter was handled recently in regard to the chairmanship of British Railways was not a brilliant example. Frankly, if this kind of thing goes on, in my view it will become impossible to get men to take these jobs.
Lord Nugent of Guildford said that the Government should pay the salary suitable to the job. I agree with that, but I do not think it is the whole business; I do not think that salary alone will do it. If any man were to come to me and say, "I have been offered the chair of the so-and-so industry"—the railways, if you like—"I have been offered the chair of the Railways Board. Do you think I should take it?", I would say, "Well, it is a challenge. If you think you are up to it, certainly take it. But before you finally make up your mind on the subject I suggest you satisfy yourself on two matters. First of all, are you satisfied 801 that you have the hide of a rhinoceros?—because you will certainly need it. Secondly, are you satisfied that your own private means are such that you can face the prospect of resignation or the sack at short notice with relative equanimity?—because I believe that that also is quite important."
Having made those remarks about the appointment of chairmen, I would ask all your Lordships to join with me in wishing the best of fortune to Mr. Johnson, the new Chairman of British Railways. When that appointment was announced there was some very sharp criticism—for example, in a journal I read every week and enjoy greatly, and also in another place. Apart from the fact that it seems to me to be rather mean to criticise an appointment before the chap has had a chance to show what he is worth., I should like to tell your Lordships, from my own knowledge of Mr. Johnson, that the Minister has now appointed a man who is a born leader and who will have the loyalty and support of every man and officer in British Railways. What is wrong with British Railways, my Lords? Demoralised. That is what is the matter with them: demoralised; and surely, therefore, to appoint a leader of this sort must be worth something—that quality must be worth something—in addition to commercial and financial genius.
The White Paper goes on to speak about investment, and I have no particular quarrel with the paragraphs on that subject. To my mind they are a little pedagogic. The control of investment is of course the Minister's job, and in presenting their case the nationalised industries must support it with the most sophisticated methods of appraisal. That is perfectly right. But there has been a tendency to go a little further than that. I almost smelt it (if I may use the expression) in one or two remarks made by the noble Lord, Lord Beswick. There has been a tendency to go from there to saying that the Minister needs to have with him a Civil Service staff who are themselves authorities in management and are capable of reviewing and passing judgment on the technical opinions expressed in the proposal. I have the greatest respect for our Civil Service; indeed, I think we have the best Civil Service in the world, and they are 802 often most unfairly criticised. But I am not in favour of giving the Civil Service a share in authority—in management. After all, they cannot be expected to accept responsibility for the results, and authority without responsibility is the historical privilege of another and much older profession.
At this point I should like to draw attention to another Government Paper, Cmnd. 3439, which is called Railway Policy. This deals with the financial problems of the railways and also with organisation, and it seems to me to be an excellent Paper. If the Minister had limited her Bill to this Paper I think she would have found it sailing through Parliament with very little opposition. The paragraphs dealing with the financial aspects of the railways seem to me to be very good, and the paragraphs dealing with organisation are excellent. They will involve a certain reorganisation for the railways, and here I should like to make another point—indeed to make a personal plea. A book has been published recently called I Tried to Run a Railway. It is a very amusing book; it should not have been written, of course, but that is beside the point. In that book the author quotes a friend as saying "When we reorganise we bleed". My Lords, I can assure you from my personal knowledge that that is a perfectly true statement, and that when the railways reorganise they bleed—they bleed from the Marylebone Road right down to the furthest country station, the smallest goodsyard and the most remote signal box.
I would make a plea to your Lordships, and through you to the leaders of our great political Parties, that when this Bill is dealt with, when the reorganisation—whatever it is—has been ordered, thereafter our political leaders should accept a self-denying ordinance and not demand further reorganisation of the railways for a period of at least ten years, but should allow them to get on with the job.
I should now like to turn to a mater which is hardly mentioned in the White Paper, but I noticed that the noble Lord, Lord Nugent of Guildford, made reference to it. These industries do not consist just of machines. Their problems are not to be solved merely by a slide-rule. They are largely human problems, and it is about the human side of the 803 industry and the industrial relations side that I should like to say two words. The first indeed has been said by the noble Lord, Lord Nugent of Guildford, and that refers to industrial relations in these industries. I believe very strongly that these industries in the field of industrial relations should be treated exactly the same as any other industry. In particular, if they get into difficulties and the Government think they ought to intervene, all right—let them intervene, through the Minister of Labour and nobody else; and certainly not the Prime Minister. Once the unions get it into their heads that the Chairman and his Board have no real authority in this matter, why should they bother to try to reach a settlement until they get round that green baize table in Downing Street? And that is not, in fact, the best place to settle these arguments.
There is another matter to which I should like to refer. I flatter myself, perhaps wrongly, that I have a few good friends in the railway trade unions, and I do not want to lose those friendships by anything I say this afternoon. But I feel bound to speak my mind on this subject. I think that the time has come when somebody should get together the heads of the railway trade unions, and maybe also those of the other transport union and the engineering union, and should then say to them: "Gentlemen, it is really time that you reorganised your-selves on more sensible lines. It is really time that you should bring your thinking into tune with modern conditions". Who should do this? The Minister of Labour, of course—he is just the chap.
My Lords, I should like next to refer to the Select Committee on Nationalised Industries. When I joined the Transport Commission I found an opinion on record by my distinguished predecessor saying that he disagreed quite strongly with the creation of such a Committee. I do not think I have ever disagreed with the noble Lord, Lord Hurcomb, on any other point, but I certainly disagreed on this one. Of course I had not the length of experience of the noble Lord in the matter, but I had some, because I had had some experience in Germany, and I said that I would welcome the appointment of such a Committee. My experience showed me that my advice 804 was wise—at least that is how it seemed to me. Parliament has been called a "watch-dog", and it is through a Committee of this sort that, in my view, it can best exercise its functions; and I think it would be good if these Committees were to conduct their investigations more often.
Of course it is well to remember that when the Select Committee is sitting the Chairman and his Board have no time to do their own jobs. Their whole time is taken up in preparing for the Committee and for their questions. Therefore it will be necessary for the Committee to confine its investigation on each occasion to a narrow field. But I think that if it did that it could investigate each industry considerably more often than it does at present.
I have come to an end, my Lords. I have no peroration for you; I really almost have no conclusion to offer you. I have spelt out a certain number of thoughts which have occurred to me from thinking over my own experience. If there is one thing which emerges from my remarks, perhaps, more than another it is the reminder I have tried to give that the problems of these industries are also human problems, and that they will not be solved if this is forgotten, in particular that Parliament, Government, Ministers—all should know that they are dealing with men and women who are not all fools and who, though certainly they should be criticised and blamed if they are wrong, should also be praised if they are right and every now and then given a bit of encouragement.
§ LORD BOOTHBY
My Lords, before the noble Lord sits down, may I ask him one question? Does he think that the House as a whole would accept the Reports of the kind of Committee he clearly has in mind, because that would be important?
§ LORD ROBERTSON OF OAKRIDGE
My Lords, I do not know whether I have said something that was not clear. I was talking about the Select Committee on Nationalised Industries. I think that that Committee should be a Joint Committee of both Houses. Subject to that, I feel that the House would welcome the Reports of that Committee, as I certainly should.
§ 4.2 p.m.
§ LORD DELACOURT-SMITH
My Lords, I hope that your Lordships will extend to me the consideration and patience which is traditionally extended to somebody who addresses your Lordships' House for the first time. I have been encouraged to intervene in this debate in part by the generosity which I have seen your Lordships extend to those who have spoken for the first time on previous occasions, and partly because the greater part of my working life has been spent in trade union organisation and trade union representation in the Post Office, which over the last years has been more and more treated as a nationalised industry and which no doubt before long will have the legal status of one. I am tempted to say that the only break in my working life was spent with another nationalised service—the Army. The history of the way in which nationalisation superseded private enterprise in that field, extending, as it did, through the whole period of the Tudors and the Stuarts, would take us too far from to-day's debate.
To-day we are debating a White Paper which carries us a valuable stage along the path of discussion of the complex but very important question of the control of this country's nationalised industries. The White Paper gives a more flexible, a more discriminating, guidance than these industries have previously had to the bases upon which they should conduct their policies. I think that nobody can deny or overlook their vital importance in promoting national growth, national wealth and social progress. But if they are to make that contribution in the most advantageous way they must have stimulus and guidance in a way which they have not hitherto had, because it appears that throughout their history there has been a degree of uncertainty about what was required of them, about what was to be the criteria by which their success was to be judged.
Was the criterion in the end to be a financial one, of profit and loss or of meeting a financial target, or was it to be that of the social benefit which the industry could bring to the nation as a whole? The pursuit of these two aims, the attempt to meet these two criteria, which have often conflicted, has constituted a problem for many of the nation- 806 alised industries throughout their existence. I believe we should agree that neither criterion by itself is sufficient. The financial criterion, no matter how refined, how sophisticated, how subject to adjustment and modification, is in the end too narrow. The social criterion is at the same time too vague.
The White Paper brings out more clearly than anything previously authoritatively written on these industries that there must in the end be a balance between these two criteria. There must be a balance between the meeting of a financial target and the test of long-term social benefit. But it is easy to say that. Anyone who reads the White Paper and tries to put to himself the practical problems which arise year by year for a nationalised industry will be inclined, I think, to believe that there are many points upon which the White Paper does not, and of its nature cannot, give sufficiently clear guidance in individual cases.
I find myself in very substantial agreement with what was said by the noble Lord, Lord Nugent of Guildford, on the subject of Parliamentary questioning and of what happens on the Order Paper in another place. I am one of those who believe most firmly that the interventions of Ministers in the day-to-day affairs of nationalised industries ought to be limited, explicit and public. There must clearly always be an area of consultation, of good relations, of understanding, but in so far as the Minister imposes his will upon a nationalised industry that, I suggest, should be an explicit and public act. I should like to put forward the constructive suggestion that it might perhaps be worth the drawing up by the sponsoring Ministry, in consultation with each industry, of a directive, running for one, two or three years, according to circumstances, which would interpret in the light of that industry and of the national need the particular principles which this White Paper sets out. I believe that such a directive, more detailed, more specific than a White Paper can be, but certainly not too detailed, certainly not opening the way to day-to-day interference, could provide a standard by which both those inside a nationalised industry and those outside it could judge its performance.
807 This White Paper contains a great deal of meat. It is tempting to pick up many of the points to which reference is made. I should like, if I may, to mention three points which seem to me to be of great significance. The first is the relationship of nationalised industries to regional planning. It may well be that in the long run one of the most important things that the present Administration will be seen to have done will be its emphasis on regional policies and its effort to halt the trend to the greater concentration of the activities of this country in the Midlands and the South-East. If Scotland, the North, Wales and other parts of the country which have been the subject of these regional policies are to flourish, the nationalised industries have a part to play, not only in terms of what they might do in manufacturing and in providing direct employment, but also in what the transport services, the telephone and postal services and the other services might do to provide the framework of essential services without which the parts of the United Kingdom which are the subject of the Government's regional policies cannot fully develop.
Here there might well be a conflict between the financial criteria and the social considerations. It would indeed be a strange thing if at the present time, when all Parties are increasingly prepared to accept the concept of economic planning—which, after all, is the concept that social considerations must come into broad industrial decisions and that the financial test is not necessarily the determining one—we were in the nationalised industries to put an excessive emphasis on the financial target, to the detriment of the maintenance and even the development of social services and of the infrastructure, in Scotland, in Wales, in the North of England, and in the other parts of the country which have been less economically active over the past decade.
The second point I should like to make relates to the co-ordination of purchasing policies in the nationalised industries. As has already been said, the investment programmes of the nationalised industries are vast. It is unavoidable that they should be. They must be vast because they are concerned with expensive essential services. But if these investment programmes, present and in pros- 808 pect, are so large, there is the particular necessity emphasised, or mentioned at any rate, in the White Paper, to keep them under a continuing appraisal, not only financially but technically as well. And there is a good deal of scope, I venture to suggest, for the nationalised industries themselves to consider how far they can co-ordinate their purchasing policies, how far they can standardise upon the very wide range of items which they themselves require, and by that kind of standardisation, by making available the advantages of large scale manufacture, not only pursue a policy beneficial to themselves but to other industries as well and to the national interest.
Lastly, the White Paper refers to the position of those who work in the nationalised industries. It is in the field of making the maximum use of the human resources available to them that the nationalised industries could perhaps set a very valuable example. There is a reference in the White Paper to the importance of developing further consultation and participation of workers and staff at all levels, and this is of immense importance. But the using to the maximum advantage of human resources goes a little beyond, a great deal beyond, having good collective machinery and using that machinery well. It is a question, too, of the industries assessing the individual human material at their disposal and seeing that the individual human beings who serve those industries have the fullest opportunity of developing their talents and reaching positions of responsibility as high as they can bear.
We have had in the last few years in this country great developments in educational opportunities, but there are many men who have served for ten, fifteen, twenty or twenty-five years in nationalised industries, who came to those industries before the public educational development had taken place, men of great potential which has never fully been realised; and the more our nationalised industries, as many of them to their great credit have already done, can develop comprehensive internal schemes of training and advancement, the more they will enhance the use of the human capital which this country has, and the more, too, they will remove some at any rate of the sources of frustration in those industries.
809 I suppose that for some years there will always be some element of controversy about the nationalised industries in this country, particularly about the issue of how far, if at all, the boundary of nationalisation and public ownership should extend. Some of the controversy which has surrounded the nationalised industries in the past would now, I think, in the view of all of us, be seen to have had some elements that were unfair. We have, I believe, on all sides of political life, a duty to make our consideration of the nationalised industries penetrating, critical, but fair and objective. I do not think that the nationalised industries would expect those who share the general viewpoint of those on these Benches to see them always through rose-coloured spectacles. I think they would equally be entitled to expect that those who share the general viewpoint of noble Lords on the Benches opposite would not always see them through dark glasses.
Certainly whatever controversy there may be about the frontier of nationalisation, whatever skirmishing there may be left, there are great areas of our economy where, without any serious challenge, without any serious doubt, public ownership and nationalisation is now the accepted pattern, and it is in the interests of all of us, and above all in the interests of the future of our country, that those areas should be areas of growth, areas in which there is the stimulus of new ideas, areas in which science and technology are most fully brought to bear upon our problems, and areas in which the individuals concerned can feel that their talents are put to the fullest use. It is in the interests of all of us and in the interests of the country, and I believe that this White Paper sets us not the whole of the way, but a number of valuable steps along the road to finding the way so to administer and control these industries that they may live up to those expectations.
§ 4.18 p.m.
§ VISCOUNT MILLS
My Lords, it is my privilege, because I follow the noble Lord, Lord Delacourt-Smith, to congratulate him on his maiden speech. But it is also my pleasure to do so because I have listened to a very able, well-balanced speech; and although I do not entirely agree with all the inferences he drew, it 810 was a real pleasure to listen to him and I hope we shall often hear him speak again in your Lordships' House.
We are invited by the Motion put down by the noble Lord, Lord Nugent of Guildford, to consider the implications on the policies of Her Majesty's Government of the White Paper which was issued by the Chancellor of the Exchequer in November, 1967. I am influenced in my thinking on the subject by two main things. First, as Minister of Power in 1957 and onwards I had some concern with the nationalised industries, coal, electricity and gas, and also with the unnationalised industry, the oil industry. Then I am influenced to a very great extent by the views expressed b} my friend Professor Sir Ronald Edwards, whom I appointed to the Electricity Council and who, I think everyone agrees, has done a magnificent job as Chairman of that Council. As the noble Lord, Lord Nugent of Guildford, told us, he has put down some of his views on the problems of the nationalised industries, their duties, their responsibilities and their relations with Government, in the Stamp Memorial Lecture which he gave as a commentary before the University of London on November 9 last. It is the fact, as he states, that the post-war Statutes which set up the nationalised industries gave them the minimum duty of breaking even, taking one year with another, and there was no further guidance.
I apologise to your Lordships if, in the course of this speech and, I must say, following the lead of the White Paper, I state some obvious things which, in my earlier business experience, I used to term "business for boys". I used to believe, and still do, that adequate profits were necessary to the wellbeing and the progress of any business and to all those concerned with it; that without adequate profits any business was bound to decline and wither away. I also used to believe and still do, that one of the responsibilities of management was to provide and train its own succession.
But those responsible for the nationalisation Statutes after the war—that is, the post-war Socialist Government—did not seem to like the word "profit". I assume they believed that men would give of their utmost, would work hard and do their best, because they were working in industries which they were 811 told they now owned. The responsibility was laid upon the Minister to appoint the members of the Boards at what then were most inadequate salaries, which in effect meant that he received recommendations from his Department which, in my view, were generally not based on convincing experience and careful analysis of the qualifications required.
We Conservatives, who were distrustful of, and opposed to, the ill-considered nationalisation Statutes, nevertheless decided to do our best to help the industries to work. It is interesting to remember the words of the late Sir Winston Churchill who, in his own inimitable way, said:We abhor the fallacy, for such it is, of nationalisation for nationalisation's sake. But where we are preserving it, as in the coalmines, the railways, air traffic, gas and electricity, we have done, and are doing, our utmost to make a success of it, even though this may somewhat mar the symmetry of Party recrimination.As Sir Ronald Edwards in his commentary, which has already been referred to, points out, until the White Paper, The Financial and Economic Obligations of the Nationalised Industries, was issued in 1961, the attitudes of the industries and within individual industries towards working profits varied considerably. The attitudes were coloured in part by the background of the chairmen themselves. It was also my experience that, whatever the attitude might be, the ability to make profits depended largely upon the competence of the Boards concerned. Generally speaking, profit-consciousness did not rank high in the thinking, either in the Ministries or in the nationalised industries. I myself was satisfied that in the great public services—coal, electricity, gas, transport—a measure of control and direction was necessary. But I was also convinced that not only should they be required to make profits, but that they should be required to show an adequate return on the capital employed in them.
I am not unaware of the great difficulties with which those industries have had to contend, nor of the criticisms which they have had to face, which were of a different order and magnitude from those which beset private industry. I also knew of the lack of clear definition in the original Statutes as to their duties, particularly on this question of making 812 profits. I therefore welcomed the White Paper of 1961 which set out profit targets for the nationalised industries. For this, the Treasury must take the credit. Those proposals did much to improve the outlook of the industries and of all those engaged in them. Under private industry the nature and scale of the investments are based on the need to make profits, avoid bankruptcy and accept the discipline of the market.
The concept of the nationalised industry was fashioned in the days of the laissez-faire State, when Government control of industry was unknown. In private industry, the pricing of the product, at any rate until the advent of this present Government, was based on the business judgment of men responsible for making profits. But in nationalised industry the Government are involved as well as the management. That, perhaps, is quite inevitable. As Sir Ronald Edwards expressed it:Management does not have the freedom to optimise its own performance in pursuit of a single objective, or even in pursuit of a number of stable and compatible ones.Let us examine the part played by the White Paper in endeavouring to define more clearly the economic and financial obligations of the nationalised industries. If, in the light of nearly twenty years of experience, it has clarified them it is to be welcomed. If it could lead back to woolliness in financial objectives and to their real purpose being lost sight of, it would be a retrograde step. But, my Lords, this is just what I fear is the effect of the White Paper that we are now debating. I gave credit to the Treasury for the 1961 White Paper. But while this latest White Paper is issued in the name of the Chancellor of the Exchequer, I wonder how many Departments played a part in preparing it, how many Ministries were involved, and how many civil servants were called to examine it. I will not embarrass the noble Lord, Lord Beswick, by asking him to tell me how many Ministries or how many civil servants were concerned with this White Paper, but the White Paper itself might well be a compromise of a number of opposing views.
In paragraph 5 of the White Paper the Government's objectives for industry are stated as:to increase the productivity of both labour and capital employed; to raise the rate of 813 new capital formation to ensure that new equipment is as technologically advanced as possible and is effectively deployed; to increase the profitability of new investment; and to obtain the maximum return in terms of the production of goods and services.I am sure that industry would not quarrel with that. There is nothing new in that statement. These have been the objectives of industry ever since I have been concerned in industry, and that is why I was tempted to say that a good deal in the White Paper was just "business for boys". But the White Paper goes on to say:The nationalised industries have a vital role to play in the attainment of these objectives as well as in the development of the Government's wider social and economic policies.How is the management of the nationalised industries to construe this statement? Does it not lead back to woolliness in financial objectives and to their real purpose being lost sight of?
I realise that in the White Paper there is a growing readiness to accept the distinction between commercial and social services, but I question whether the right way to deal with the problem is to make adjustments through the charges made by the nationalised industries. Such solutions can easily provide an alibi for bad management; they can destroy the stimulus provided by insistence on a proper return on capital being required from the nationalised industries, as is the case in private industry. Such a practice can lead to the industries' pleading social conditions when such a plea is not justified. It could also enable Ministers to pursue policies which have not been fully discussed.
If the Government wish certain classes of consumers to be favoured, for whatever reason—to make an industry more competitive, or to encourage supplies of goods and services to certain areas or consumers who cannot afford them—would it not be wiser to make direct grants, rather than to require the industries to lower prices in particular cases? I believe that the profit spur does not appeal to many Socialists as really necessary. For my part, I know it to be essential to the wellbeing of the nationalised industries and to all those engaged in them.
Although the White Paper recognises that the circumstances of the industries are very diverse, and says that this will 814 be taken into account in formulating detailed policies for the sectors concerned, nevertheless the White Paper seems to me to be an attempt to lay down some general conditions, however inappropriate some of them may be, which might be applied to any nationalised industry. For example, paragraphs 13 and 14 of the White Paper seem to have been largely influenced by conditions concerned with transport, but it could easily be held that the use of exemptions and preferences in respect of other industries would be appropriate under these clauses.
To sum up, my view is that the White Paper could have real implications on policies of Her Majesty's Government. It contemplates using the working of the nationalised industries as an instrument of Government policies. It obscures what should be the clear financial and economic objectives for those industries which should ensure that all engaged in them can clearly see the paths which they are following and be encouraged to reach the targets set. The post-war Statutes setting up the nationalised industries resulted in confusion which could have been avoided, so far as proper commercial guidance to the industries was concerned. But I suggest to your Lordships that this White Paper, which I am glad the noble Lord has put down for debate, has made confusion worse confounded.
§ 4.37 p.m.
§ LORD BEECHING
My Lords, may I follow the noble Viscount, Lord Mills, by adding my congratulations to the noble Lord, Lord Delacourt-Smith, on the excellent and constructive nature of his maiden speech. The White Paper which has given rise to this debate is a most extraordinary document. It expounds elementary economic principles with admirable clarity, and with an air of discovery that almost persuades us that it is saying something new. It never boggles at platitudes. For example, the section headed "Investment", on page 4, starts with the sentence:Investment is fundamental to economic growth and largely determines the way in which industries develop.That is a very modest statement of the obvious. But the section on "Prices", on page 8, starts with the sentence:The use of correct methods of investment appraisal will only be effective if the nationalised industries also adopt, within the context of 815 national prices and incomes policy, pricing policies relevant to their economic circumstances.'That, I think, could fairly be described as platitudinous gobbledegook.
It is not my purpose to ridicule the White Paper. Indeed, it reminds me so much of the sort of report that an earnest but not very imaginative newly fledged graduate might have written that I think it would be unkind to appear to ridicule it at all. But it is presented by Her Majesty's Government as a serious contribution to thought on a very important and difficult subject. As such, its main merit is the devotion of its whole last paragraph, headed "Conclusion", to a description of its own triviality. It declares an avoidance of the main problem—the basic relationship between Government and nationalised industries—and admits to a not surprising inability to produce a solution to the dependent problem of setting financial targets. It produces no solution better than, "It all depends".
This failure of the White Paper to produce any real basis for a debate is the best reason of all for having one, for we are faced with a chronic problem of great importance and difficulty. The nationalised industries are a major element in the national economy, and I think we must all recognise, whether with satisfaction or dismay, that they will remain so. It is therefore of paramount importance that they should be managed well, which means, in the case of most of them, that they must be run very much better than they have been in the past. But this will not be brought about, nor will it be materially assisted, by a vague indication of new financial targets, any more than it was by the old arbitrarily precise ones. Indeed, even the least suspicious of people may see the purpose of the change as a removal of embarrassing precision and, in particular, removal of an obstacle to the arbitrary restrictions of the rise in electricity prices. It restores freedom to move the goal to catch the ball after the game has been interfered with.
The efficiency with which the nationalised industries are run must of course depend upon the quality of their managements, but it depends even more upon the relationship between them and the 816 Government. Advocates of nationalisation all see it as the most direct and obvious way of enabling the Government to superimpose on the undertakings considerations other than those which would influence them if they were purely commercial enterprises. What they do not agree about is the purposes to be served by this interference.
Once an industry is nationalised, however, any Government is bound to interfere, partly because it will want to, and partly because it will be pressed into doing so by factions among its own supporters, with a diversity of objectives in mind. As a result, any nationalised industry is in great danger of becoming a political shuttlecock, buffeted about by policy changes of a magnitude and frequency to which it cannot possibly adapt itself because of its own inherent inertia. It will be lucky, too, if within this fluctuating framework of policy it does not find itself subjected to pressures and directives which are so incompatible, one with another, and so restricting in toto, that it is utterly impossible for the undertaking to discharge all its statutory duties within the resulting straitjacket, and pay its way as well.
The fixing of financial targets in circumstances such as these is likely to prove either futile or inflationary—futile because they are so demanding, in relation to the liberty left to the undertaking in the situation in which it finds itself, and so restricting that it cannot possibly meet them; inflationary because it meets them by exercising its freedom to raise prices, and includes in those prices the cost of all sorts of services provided uneconomically. The effects of this treatment are most obvious in the case of those industries which are very heavily pressed by competition and struggling financially. Because they are struggling, they receive even more than a fair share of Government intervention, and because they are interfered with so much they can never pursue any plan for their own salvation to a conclusion.
Sensible Members of all Parties realise that this is a silly situation which ought to be brought to an end. They realise that, even if doubts remain about the denationalisation of some industries—and that would be one way out of the impasse, were it possible—it is quite obvious that the problem of controlling 817 large nationalised undertakings in some sensible manner is going to remain. Also, even though Parties are very ready to push the hapless undertakings about when they are in power, they must realise that, viewed in retrospect, their own actions have often been damaging rather than beneficial, and that, in any case, the Opposition will have its own destructive turn in due course. But foolish as all this seems, and is seen to be, successive Governments are driven by Party antagonism and Back-Bench extremism to a perpetuation of this form of folly.
The industries deserve far better treatment than they have had in the past, or are getting now. The management is being abominably maltreated and frustrated. The people of the country are being given a flagrant example of industrial misdirection at its worst. Leaving aside the question as to which, if any, particular policy is right, it is still certain that it cannot be right to pursue incompatible objectives simultaneously, or to veer from one policy to another with a rapidity to which the undertakings cannot possibly conform.
My Lords, the problem is how to stop this nonsense—and it really is nonsense, because once the impossibility of denationalisation has been accepted, as it must be in many cases, the issues which truly divide the Parties are small. They both want to run the industries so as to give the people of the country the best possible value for money. They divide mainly because they fail to distinguish between commercial considerations and economic considerations. Bearing in mind that the basic reason for nationalisation is to enable the Government to override purely commercial considerations in some respects, it is absurd to suppose that a stable policy framework for a nationalised industry can be established if it does not include provision for economically sound social benefits which the undertaking is capable of providing, even though it may not by itself be capable of recouping the cost through its charges. On the other hand, it is equally absurd to suggest that anything which the undertaking is capable of providing should be provided regardless of cost, just because it would be nice to have it. But, in fact, the two Parties are often seen to adopt one or other of these absurd postures.
818 Between sensible men the important questions are, first: "Is the social benefit worth its cost?"; and, second: "How should the cost be levied to make it fall in approximately the right place?" These questions do, it is true, leave some room for differing judgments of the value and incidence of benefits, but not so wide that rational men could not be expected to reach some acceptable compromise. It is the absence of any serious attempt to quantify benefits and costs that, in most cases, prevents any reconciliation of views, and hence prevents that stabilisation of policy which the industries most certainly deserve. In my view, we shall stabilise the policy framework within which particular nationalised industries are expected to work only if we provide strong, influential and reasonably objective bodies of men which will absorb much of the factional pressure from Parliament on the Ministers responsible for the various undertakings, and will, if necessary, moderate any over-readiness of the Ministers to modify policy or give directives to the Boards.
These bodies might well be special Committees composed of Members drawn from both Houses of Parliament and rendered as non-partisan as possible by a balanced representation of the Parties. They would have a professional type of job to do, and would fill their buffering and stabilising role by assuming a responsibility for ensuring that policies and directives were such as to give the public good value for money; and by periodic monitoring of the undertakings' performance to ensure that policies were being implemented effectively and that budgeted performance was being achieved. I myself see separate bodies for each of the industries, not one large Select Committee for Nationalised Industries; and such a Committee should be seen not as a means of increasing Parliamentary control over an undertaking in detail, but rather as a means of coalescing the many conflicting demands into a coherent, realistic and stable policy framework within which the Board of the undertaking could manage with confidence.
It may be argued that this proposal would give rise to difficulties. And so it might. But the present situation is 819 worse than difficult; it is inexcusably destructive. It is obvious, my Lords, that we must find some way of shielding the nationalised undertakings from alternative waves of Party prejudice, and we should not be deterred from doing so merely because it is difficult to establish bodies of reasonable men.
§ 4.52 p.m.
§ VISCOUNT WATKINSON
My Lords, I certainly agree with the noble Lord, Lord Beeching, and I think with most other noble Lords, that all is not well with the nationalised industries. The problem the noble Lord faced very honestly—as did the noble Lord, Lord Robertson of Oakridge, before him—is the immense difficulty of arriving at a solution that is politically viable as well as practical from a managerial point of view. I think this is the sadness—and I use that word advisedly—and the frustration of the whole concept of nationalisation; because there is no doubt at all that those early planners who conceived this way of running large sectors of the economy were moved by very sincere and very honourable motives. They really did think that men and women would work better and more fruitfully if they worked for a national goal, for the nation, rather than for the profit motive; and I think we must not forget these things when we try to see what we can do to make the nationalised industries more efficient. They sprung from very honourable motives.
The trouble was that the early pioneers, I think, did not believe in the profit motive; and they did not know much about management practice or the whole concept of private enterprise. The result—this is a view, I think, from the ministerial side of the problem as opposed, perhaps, to the noble Lord's views from the managerial side, but I think I might carry him with me when I express it—is that, in my view, successive Ministers responsible for nationalised industries have been presented with a practically impossible task; and I think this is true whatever political Party they have represented. I think an almost impossible task has been placed, too, on the shoulders of the chairmen of nationalised industries, particularly in their relations with Parliament and with the Minister; and I think 820 we might perhaps make a little more progress if for a moment we turn aside and try to look at this concept as a management proposition.
Quite frankly, my Lords, if we do this we see that it is about as up to date as the brontosaurus. Let me give your Lordships one or two practical examples of what I mean. I tried very hard, with Sir Brian Robertson, as he then was (the noble Lord, Lord Robertson of Oakridge, as he is now), to bring some semblance of business management to the railways, and I would never wish to have a better colleague with whom to try to do an impossible task. But it was an impossible task, and we were defeated time and time again, as I imagine the noble Lord, Lord Beeching, and his ministerial colleagues were after my time, when we tried to bring some sense into what after all was really a very big business which had got into a bad way. And why had it got into a bad way? We all realise now, with the benefit of hindsight, that if only, after the war, expert management had been brought to bear on modernising the railways, instead of arguing about the pros and cons of nationalisation, denationalistion and all the rest, we might to-day have a railway system which was efficient and, indeed, might be in sight of breaking even.
It was the diversion of effort, skill and all the rest, into arguments about theories of management rather than getting on with the job that presented such an impossible task to those who managed and those who were supposed to represent the public interest. Therefore I would say (as an Irishman, if you like) that the failure of the railways was certainly a failure of management, but it was not a failure of the managers. They were merely trying to operate a quite unworkable system. This dragged heavily at the loyalty of trade union leaders, of chairmen and their colleagues and of Ministers. I think we have to face the fact that if a major industry like the railways is in serious trouble, if it is threatened by labour unrest or if it wants to put up its prices, it is utterly unrealistic to say that if there is a Minister sponsoring that industry he can shed the whole burden on to the chairman of the industry. It is utterly impossible. He could not live with his colleagues or with the House of Commons if he did. The only other comment I would make is this. How can you 821 run a big business if you have to meet your shareholders once a week, which is what a Minister has to do if he is looking after a nationalised industry, every time he goes down to the House of Commons? That, perhaps, is enough about that.
Turning to the airlines for a moment, which are very important, we are still the centre of the world's airline network and we still have to go on exporting, more than ever we hope, aerospace products. I have a very great respect for Lord Douglas of Kirtieside—he did a wonderful job with B.E.A.—but I give this example of the sort of problems which Parliament, in its wisdom or lack of wisdom, put on the shoulders of chairmen of nationalised industries and their sponsoring Ministers. The noble Lord will know something about this, because he is an old political adversary but also an old political friend. When B.E.A. were trying to decide on their next aircraft all their planning, all their own particular route justification, suggested quite clearly that the concept of what became the Trident airliner was absolutely right for B.E.A. At that time, other experts in my Ministry and in what was then the Ministry of Supply took a quite different view. They took the view that a quite different configuration would meet enough of B.E.A.'s requirements and get B.E.A. along its profitable road, but would also give a much bigger opportunity for an aircraft which might sell around the world. In the end, Lord Douglas, quite properly and quite constitutionally, said to me that if I as Minister were willing to give him a public, written directive to buy an aircraft of my choice, and not his, he would accept it. Not surprisingly, he did not get the directive. But what an impossible management task to place on the shoulders either of Lord Douglas or of the Minister at that time.
May I give just one other example? Turning to B.O.A.C., I do not think anybody in this House would now deny that B.O.A.C. picked the right aircraft when they picked the VC 10. If you do not believe it, you have only to look at the passenger lists, and all over the world passengers are saying, "Can I not fly in a VC 10?", as opposed to other commercial jets. Yet what a tragedy! At a critical stage in aircraft development, when more export sales were a definite 822 possibility, the chairman of B.O.A.C. had, quite rightly, to give more priority to getting his airline out of the red and into the black than to sponsoring that particular aircraft at a time when it could have made a lot more sales. I am not saying he was wrong. Indeed, as I understand it he was under a directive from the Minister to get his airline out of the red and into the black. I am not blaming him or anyone else: I am merely saying that these requirements, put upon a man who is trying to manage a very complex anti competitive industry, and put upon a Minister who has some rather undefined responsibility for him, is not a good way to run a business—and that is what these things are. I will not trouble your Lordships further with reminiscences. We can all add to the long tale of differences.
§ LORD BOOTHBY
My Lords, may I interrupt my noble friend for a moment? The Chairman of B.O.A.C. did write down the VC 10 publicly.
§ VISCOUNT WATKINSON
That may well be. I do not disagree with the noble Lord. I told him at the time—and I think I wrote a letter to The Times to the same effect—that I thought he was utterly wrong so to do. I am trying to give a balanced view and report to the House. I am not saying that the decision was right; I am merely trying to expose the incredible difficulties of operating in a sphere such as this under the kind of pressure which Parliament puts upon us.
Therefore I want to suggest one or two ways in which I think we could make some progress out of this mess. I think they will shock some noble Lords; but there it is. First, I think we should look again at the possibility of denationalising some sector of the nationalised industries. This cannot any longer be a large sector. I do not think there are many areas where you could raise private capital to replace public investment. But where you could, you should, because I think this is an impossible task to place upon Parliament. I think the Industrial Reorganisation Corporation may well be a useful body to look at this area and at those industries or parts of industries which could be returned—not really to private ownership, but to a dependence on private capital and the profit motive. That would be the first thing I would 823 suggest: to hive off what you can. It probably will not be very much.
But what are we to do with the sector of nationally-owned industries which have a possibility, anyway, of breaking-even or of making a profit? I must say that in my view I think they should be firmly divorced from political control, even through the back door. I think they should not have to present an annual report to Parliament, and I think they should not have a Minister directly responsible for them. I think their control should revert to the Treasury which holds the ultimate responsibility for their capital and for their profits and losses. Treasury interest could be secured by a certain number of directly Government-nominated directors on each board—but not the majority of the board. Once that is done—although, possibly, the first chairman would have to be selected by the Government—thereafter they should do what all the big industries do: train their own successors, bring them up and see them into the job.
But how are we to secure the public interest? I think they should present annual reports, have annual general meetings, and I think a very interesting proposition might be (if the Treasury were willing) to nominate people from the learned and technical societies such as the Society of Mechanical and Electrical Engineers to be their representatives at the annual general meeting, to go along and cross-question the Board and see that it is doing its duty. Of course, in the charter under which they act they would certainly be subject to the Treasury putting in a receiver if, over a reasonable period of years, they failed to make a profit. If this happened they would fall under my third example, to which I would turn now.
In the case of the nationally-owned industries which show little or no signs of making a profit, for very logical reasons—and perhaps the railways and the coal industry are two examples—I believe we should sweep away this quite false concept of a working relationship between the Minister and the House of Commons, or your Lordships' House, and a chairman who is supposed to act according to his commercial judgment. It is a quite unworkable situation. We should 824 face the logic of it. In these industries we should first divorce from them their ancilliary industries. I do not see why the railways or the Coal Board, to take two examples, should have a lot of side industries in which they are engaged. They should be slimmed down to their main business and Parliament should have a Minister for Coal and a Minister for Railways for which they are directly responsible. A Minister can stand up in Parliament and answer for his own actions and for those of his Ministry: and everybody will know exactly where they stand. I am not sure that I would volunteer to be such a Minister but none the less I think this brings matters to a proper crunch and gives reasonable compromise between the good management principles, which we really must have, in what is now a very large sector of our total economy, and Parliamentary accountability. There must be some chance for those men who, as Lord Robertson of Oakridge said, have been and are getting no thanks and taking all the risks. Why should they do so unless they have a fair run for their money? At least, Part 2 of my scheme should give some chance of giving them a run for their money. In my view, they deserve it. If they do not get this chance, these men will become unrecruitable.
These are not, perhaps, suggestions that will be very agreeable to either side of this House. I do not expect the Government to welcome them because, in a way, this is to say that the whole concept of nationalisation is proving to be more and more unsuitable for Britain in the second half of the 20th century. I believe that Britain has a future in the second half of this century only if we rely on private enterprise and the profit motive. If we do not, we shall suffer even more indignities and hardships before we decide what is the truth, and that that is the only way we can run our country. But that is another matter on which I will not delay your Lordships now.
May I say one or two words at the end? When you have been in charge of a nationalised industry you have a great affection for it. I will always have a great affection for the railways. It is therefore a great sadness for me to see the quite lamentable state into which they are lapsing—in morale, in management, 825 in almost everything. One must hope that anything one says in your Lordships' House may, at least, lead the Government to have another look at this. If anything that I have said can do anything to make this sector of the economy a little more attractive to the trade unions who work in it, to the managers who give their lives to it, and even to the unfortunate Ministers who get stuck with it, I shall feel well repaid.
§ LORD ARWYN
My Lords, it is a very pleasant privilege to congratulate my noble friend Lord Delacourt-Smith. I am sure that his speech was the first of many we can hope to look forward to. It was a serious objective speech, enabling us to look on national problems and conditions devoid of any emotions. My speech is going to be a short one dealing with specialised subjects. Before I tackle these I should like to express a measure of congratulation to whoever wrote this White Paper. I confess that I expected many more platitudes mixed with statistics relevant and irrelevant; but instead we have what I can describe as a serious attempt at an objective thesis; and as such it should be respected.
There are many on both sides of this House who are connected with industry, sitting in positions of power and responsibility for many thousands of men. There is much in this White Paper from which we can all learn. In paragraph 37 on page 14 there is a sentence which stands out. I will quote:Nationalised industries, which command much greater resources than all but the very largest private undertakings, should expect to be numbered among the most progressive and efficient concerns in the country.I do not think that anyone can disagree with that, especially as we are told that the net assets are now valued at some £12,000 million and that their annual rate of interest is equal to the whole of that for the private manufacturing industry; that is, £1,700 million per annum. As to the last part of the sentence that I have just quoted, the words "progressive" and "efficient" rarely leave the conscious mind of any top-rank industrialist. We can never become sufficiently progressive or efficient in our own minds if we are doing our duties as executives in industry.
826 My Lords, for me to attempt a catalogue of the merits and demerits of the many departments in each of the nationalised industries would be unwise; but the spirit moves me to ask whether there is hope of art enthusiastic liaison between the research departments of the nationalised industries; or are they becoming cocoons in order to satisfy a pattern which could become a dangerous trend? The result of research often leads to a patent, and here again I should like to ask the question: is there an organisation, available or contemplated, to deal with patents emerging from the results of combined research? I do not mean a collection of patent agents, but trained, experienced men who know their way about in one of the most dense of industrial jungles, the efficient exploitation of patents. Those of us who have experience in the patent world will know exactly what it means, especially when you are up against the German patent office. It is not good enough to have people who cannot stand toe to toe with the Japanese, the Germans and the Americans. They have an exceedingly efficient intelligence system, and no sooner is the ink dry on the specification than you find one of those boys on your doorstep. Each one is a very experienced expert in his own field, especially in getting licences. This is followed up by an improved patent.
The nationalised industries have an opportunity to go much further than most industrial organisations in this sphere. It would be a tragedy if such an opportunity were lost through any protective jealousies which could be generated between one nationalised industry and another. Many of us are aware of the type of jealousy to which I refer: you see it very often in senior common rooms. We have scientists and men of academic distinction on research work, and jealousy may often be a natural consequence, unless it is discouraged. If such an attitude exists it must be destroyed, if the country is to reap the benefits which can emerge from an investment of £12,000 million.
My Lords, I have only touched on the subject this afternoon as it is relevant in a debate on a review of the economic and financial objectives of the nationalised industries. At an early opportunity I hope to be permitted to initiate a debate on this question of patent exploitation 827 and the need for the co-ordination of research not only in the nationalised industries but in all industry and our universities. Unnecessary duplication and fragmentation in this field could easily lead to a greater disaster than we can envisage. Each of us is a shareholder in the nation's wealth. Whether we have a large or a small share is of less importance than our right to expect maximum efficiency throughout our industries, whether or not they are nationalised.
§ 5.14 p.m.
§ LORD BEAUMONT OF WHITLEY
My Lords, the point I should like to make this afternoon may perhaps seem to your Lordships a minor one after the important speeches which we have heard from noble Lords who have such an enormous breadth and depth of experience on the question of the nationalised industries. Among them I would class the remarkable maiden speech of the noble Lord, Lord Delacourt-Smith. As one who has just gone through the ordeal of making a maiden speech I was filled with admiration.
I hope, my Lords, that you will agree that the point I am raising is one of considerable public interest. The situation which I should like to draw to the attention of your Lordships is the temptation which always seems to exist in large, nationalised, centralised or socialised bodies to indulge in "empire building"; in particular, to indulge in ancillary trading ventures in such a way as to compete very unfairly with private traders.
This sometimes arises through the enthusiasm of experts within an industry; for instance, in the National Coal Board, where it is necessary, and indeed extremely desirable, that there should be experts dealing with tree transplantation and growing trees for use on opencast sites. It may happen that the experts are very keen on their job and suggest that there should be a great expansion and that more should be done for the general public. Or it may come from a laudable desire to spread the burden of overheads and reduce losses or increase profits. The first example I should like to bring to the attention of your Lordships relates to the National Coal Board, who have circulated local authorities with an offer to 828 transplant semi-mature trees for landscaping "at cost price", in their words, which amounts to 50 per cent. or less of the price that the members of the private organisation, The Association of Tree Transplanters, can offer.
We all know that tree transplanting is, in general, an important amenity and something we should all like to see improved and extended to enhance the quality of our countryside and urban landscape. It should be encouraged so far as possible. We also would agree that it is a very good thing that the National Coal Board should take on the responsibility of landscaping their opencast sites. But surely it is unjust that, by the simple expedient of not charging their full overheads, they should undercut the most important sector of the private market.
The legal department of the National Coal Board justifies this on the grounds that it facilitates their making coal cheaper and therefore it is intro tires. I think that a specious argument. Most private tree transplanters have small businesses, for as yet it is not a large industry, and surely they are entitled to seek protection from this juggernaut which will rob them of 95 per cent. of their market and may easily, and probably will, ruin their businesses. Although these businesses are small, there is a lot of capital involved, largely in the plantations of private landowners who are growing trees on contract with the Association. The Association has vainly sought the assurance of the National Coal Board, first, that they will confine their semi-mature tree transplanting to a role incidental to the getting of coal, and, secondly, that they will not grow and sell semi-mature trees for transplanting in the private sector.
There is another example which is slightly outside the purview of this debate, but I hope your Lordships will admit it as being an example of the tendency about which I am talking. The British Broadcasting Corporation recently unilaterally revoked an agreement with the Periodical Proprietors' Association on the subject of the Listener magazine. It was a definite agreement as to what percentage of the Listener should be devoted to broadcasing, so that the Listener could use to the maximum the resources of the B.B.C. for promotion 829 purposes. The result of this unilateral renunciation has been that there is at the moment no generally agreed limit to the degree to which the Listener can encroach upon the field of general political and cultural weeklies.
My Lords, as someone who has been involved in the past, I want as much as anyone to see an increase in the number of good magazines in this country, and I think that the Listener is a good magazine. But that it should be able to compete with private enterprise by selling at 9d. as a result of getting a cash grant of, I am reliably informed, over £40,000 a year from the B.B.C., in addition to being the only commodity of any kind which is advertised on B.B.C., seems to me to be absolutely wrong. In addition (and here I must confess my interest as a book publisher), the B.B.C. has also announced its intention of going more deeply into the business of book publishing. It may be—and I hope it is—that the book publishing will be entirely incidental to broadcasting, but the point I am making, I must insist again, is not one of individual instances but of a general tendency.
There are two things which the Government could say about this—possibly there are more, but I think that these are the two main ones. First of all, they could say that these cases were either infra vires or ultra vires, that this is a matter of fact and that if there is a dispute it ought to be left to the courts to decide. Secondly, they could argue that these are matters which fall in the field of day-to-day administration and are not matters of public interest. I submit that, if put forward, these would be short-sighted views. To start with, the determination of fact can be a very costly business. In both the cases I have mentioned there is counsel's opinion that these actions are ultra vires, but I have no doubt that with little difficulty counsel's opinion could be obtained to say exactly the opposite and the matter could be decided only at great expense in the courts. But there is no doubt that, whatever the legal situation, when Parliament drafted these Charters and Statutes the clear intention was that these bodies should stick to certain fields and should not unfairly undercut private industry in ancillary fields.
Nationalisation and centralisation are regarded by some people with great sus- 830 picion.I am delighted that in this debate we have not been looking at the nationalised industries with rose-coloured spectacles from one set of Benches and with dark spectacles from the other, as one noble Lord had feared. But such suspicion is not lulled by encroachments of this kind; nor is it lulled, to take another example of what I feel is a most unfortunate case, by Sir Giles Guthrie's recent remarks to the Air Transport Licensing Board on January 16. On that occasion, after referring to two of the independent airlines as "very, very small fry" and "not likely to be in the big league" and to their proposals as "paltry", he went on:Looking at their proposals with the cold eye of a merchant banker, and knowing as I do rather more about the finances of some of the independents than is public property, I must say that I for one would not be happy at the prospect of putting my money into their business.This seems to me to be an improper remark and one that tends to increase suspicion. Sometimes this suspicion is right and sometimes it is wrong. The Liberal Party, in its time, has supported nationalisation, and in its time has nationalised. It has also refused various forms of nationalisation. But I would suggest to the Government—and I would ask the noble Lord, Lord Beswick, whether he would be good enough to reply to this point—that they could disperse a great deal of suspicion and engender a great deal of good will by issuing a general directive to the nationalised industries and similar bodies, ruling that a matter of public interest is involved and laying down broad principles to be followed while engaging in these ancillary trading facilities.
§ 5.26 p.m.
§ VISCOUNT BRENTFORD
My Lords. I do not think it is necessary to tell your Lordships that personally I am not in favour of nationalisation. Nevertheless, I realise that nationalisation has come to stay and that it must be made to work. I would go along with my noble friend Lord Watkinson in the remarks which he made about one of the potent factors in the introduction of nationalisation—the idealistic theory that when working for the common good, and for the community as a whole, men and women would work very much better, much harder and more intelligently than when 831 they were working for the profit of their bosses. That has been proved to be wrong. In practice, we have found that people do not work harder and more intelligently and with any greater enthusiasm when they work for the community as represented by the nationalised industries. There are just as many strikes, and less of the spirit of service among the people who work in them.
The first industry to be nationalised, apart from the Post Office and some old industries, was the coal industry. As has been stated this afternoon, that was an almost impossible task. An enormous number of companies, which had been competing one against another, were suddenly thrown together, when they had no desire to merge and on top of that all sorts of other industries, such as coke ovens, brickworks, bakeries and boot factories, were lumped in with them, for all of which the National Coal Board became responsible. It really was an impossible task. Again I would agree with my noble friend Lord Watkinson that it could be but beneficial to the efficient working of these industries if they were hived off. When I was involved in the Ministry of Fuel and Power we sought on every possible occasion to see whether it was possible to hive off some of the Coal Board's ancillary undertakings, but always we came up against some potent objection, generally from the unions, who could not bear to see any part of the empire which they had created in the nationalised industry being broken off.
Again, in another capacity I have striven with Minister after Minister to persuade them to release from nationalisation the heavy haulage group in the British Road Industry, represented by what used to be Pickford's. There again I never met with any success, for a different reason. Minister after Minister would tell me that that was the only part of the nationalised industry which regularly made a profit, and a part that made £4 million a year could not possibly be released, otherwise the balance sheet would be that much more in the red.
The National Coal Board is only now finding its feet again, and for two reasons: first, because of the efforts which we took when we were in Government to respond to the appeals which we received from every level of the in- 832 dustry, from the Chairman of the Board down to the branches of the unions, to do something to relieve the industry from the terrific demand on coal which was then rampant throughout the country and to enable them to have some slack they could use in order to reorganise the industry from top to bottom. In response to that appeal, we succeeded in persuading a great many users of fuel to go over to oil and we relieved the pressure of the demand upon coal production, which resulted in the Coal Board being able to adopt several schemes of reorganisation. The second reason that I would offer is the ability and the leadership of the noble Lord, Lord Robens. He has proved to be an exceedingly successful leader of that industry and has done a wonderful job of work. I would agree with my noble friend Lord Robertson of Oakridge that one of the principal ingredients of success in the nationalised industries is having someone at the top who has such power of spirit and leadership.
The most successful of the nationalised industries, I should say, is the gas industry. I would again offer two reasons for that success. First of all, it was the last of the fuel and power industries to be nationalised, and in nationalising that industry I think the Government were already beginning to learn from the mistakes that they had introduced into earlier nationalisation Bills. Secondly, it was left largely as it had been under private enterprise. Very little change took place, and the personnel in the industry were largely the same people who had been running it when it was in private hands. Those two factors together, I think, resulted in the industry proving to be probably more successful than any of the other fuel and power industries.
The least successful of the nationalised industries, I should say, is the railways. This is so disappointing, knowing the efforts which have been made at all levels—at ministerial level as well as at board level—as has been pointed out this afternoon, to try to achieve the impossible. The result certainly has been that the efficiency of the service has deteriorated. The work is being perpetually interrupted by labour disputes. The industry is eternally subjected to modernisation, which never seems to achieve anything permanently, and as soon as it 833 does something it is out of date. When there are no strikes, the trains generally run late; the passenger facilities are dirty, and the goods facilities are utterly unreliable. One can hardly claim, in these circumstances, that the system is working successfully.
§ LORD ROBERTSON OF OAKRIDGE
My Lords, perhaps the noble Lord would allow me to intervene for a moment. When he says that modernisation never seems to achieve anything of any use, I think he would agree that the electrification of the lines North from Euston is now paying hand over fist and has achieved something.
§ VISCOUNT BRENTFORD
I agree that that is an exception. I think my remarks were rather sweeping. However, it has taken a long time for that modernisation to come into operation. That really is my point: the fact that modernisation takes so long that by the time it is achieved it is almost out of date.
What is the answer to these exceedingly difficult problems? The nationalisation of industry has for many years been one of the principal targets of trade unionism, and the nationalised industries have now become something of a sacred cow to the trade unions. They are exceedingly loth to admit of the introduction of any changes into the system for fear that they will lead to a break-up of the nationalised system. The question of modernisation in the docks is a case in point, as to which, as your Lordships are aware, great difficulties have been experienced. There is indeed a great tension throughout these industries. The declining industries, which have less to offer in the way of further employment than the others, present a very real problem. The responsibility of the trade unions for the efficient operation of the industries, which really they have brought into creation, is something which I do not believe has been fully recognised as yet, but I very much hope that it will be.
For my part, I am convinced that the only real solution is and must be a financial one. We have to get back to the profit motive. I believe this is so not only with the boards of the industry themselves, but throughout the whole system. We must introduce a system of checks in the form of cutting one's coat according to one's cloth, and a system of balances, which I would represent as being finan- 834 cial incentives. Any nationalised industry labours under exceedingly difficult re-relationships. As has been pointed out this afternoon, the industries are not autonomous; the Minister has policy control, and the Minister has responsibility to Parliament.
One of the principal things lacking in the nationalised industries are shareholders—and I think this is a point which my noble friend Lord Watkinson was making. One recognises that one cannot suddenly introduce shareholders into nationalised industries. But my noble friend Lord Watkinson suggested a representative body who could be classed as share holders, and I should like to offer an alternative suggestion to that which may be able to be worked in with it. I believe that what is really wanted is something in the nature of an annual general meeting, which will cause the chairman of the Board to have to put his thoughts together and make them public, and will, enable questions to be put to the chairman and his colleagues to justify their policies, the work they are doing and the way they are carrying it out.
The question is: who is to be in the body of the hall, and who is to ask the chairman questions? In addition to the representative shareholders proposed by my noble friend, I should like to offer as a suggestion the consumer councils. Most of these industries have a considerable number of representatives on the consumer councils—and I have never thought that they had a very fair show in their relationship with the industry. I do not think we have ever used them as fully as we could use them, and I do not think they have been enabled to play a full part. But if they could be treated as shareholders, if the annual report could be presented to them and they could have the opportunity of criticising, questioning and making constructive proposals to the chairman of the Board, then I think that something might possibly be achieved.
I recognise that the success of the nationalised industries is vital to the economy of our country. As we heard from my noble friend Lord Nugent of Guildford in his opening speech, they invest as much capital annually as is invested by the whole of private enterprise, and all the commerce and industry of our country depend upon their 835 efficiency. By and large, I think it must be admitted that to-day they are not efficient; and if they fail further in their efficiency I suggest that the economic survival of this country will be in peril. I think it is not unfair to put it as high as that. But if the nationalised industries will really subject themselves to a critical reappraisal of their responsibilities, and if they introduce, even at this late hour, a far higher degree of efficiency than we have seen in the past, then there will be great opportunities to our country to win through successfully.
§ 5.40 p.m.
§ LORD GRANVILLE OF EYE
My Lords, I hope that the noble Viscount who has just spoken will forgive me if I do not follow him immediately into some of the controversial aspects which he outlined, or referred to, on the profit motive. I think that this debate has been very constructive and very helpful. Perhaps the tone was set by the noble Lord, Lord Nugent of Guildford, who spoke for the Opposition in what was a very able and constructive review of the financial and economic policies of the Government's White Paper. I should like to pay my tribute to my noble friend Lord Delacourt-Smith on a very able maiden speech. I am sure that, with his great and considerable experience of his industry, we all learnt a great deal from it, and certainly we look forward to hearing him speak in future debates.
One advantage which I suppose your Lordships' House has is this. I have listened this afternoon to many noble Lords who have personal experience of running these so-called nationalised industries, which is a great advantage, as they were naturally able to give us the benefit of their important experience. I suppose that when the noble Viscount, Lord Brentford, was referring to shareholders in relation to these nationalisation debates in both Houses, he implied that we are in a sense, if they are annual events, somewhat in the position of shareholders acting on behalf of the nation and the country.
I should also like to congratulate my noble friend Lord Beswick on his up-to-date survey of the economic and financial objectives in the White Paper. I think it is a very good White Paper compared 836 to some of the others we have had. I thought that in parts it was a little like Professor Galbraith's book on the organisation and management of industry in the United States of America, in the cooperative State. But, in any event, we have certainly come a long way since the days of 1947, when presumably it was the policy of the Government to appoint the directors who had been previously running these great industries, to tell them to get on with the job, and to leave them to it.
However, I felt that we are in some danger in these debates, and in our attitude to these industries, of looking at them, both in the public and in the so-called private sectors, as though they are almost in private or separate worlds. I feel that we do not want this mentality to grow up. We do not want a kind of Hadrian's Wall dividing the national sector from the private sector, and all that that means; or, in the terms of yesterday's debate on self-government for Wales, we certainly do not want an industrial mentality which envisages industrial self-government and this thinking in each sector in these great industries. I believe that the more co-operation we can get in these days between the two sectors of industry, the better for the country and for industry as a whole. We are in this battle of survival together. If we are going to safeguard our standard of life, the more co-operation we can get, the better it will certainly be.
But behind this White Paper, which sets out the Government's policy very clearly, everything depends on what is going to happen in what I think the noble Lord referred to as the modernisation of some aspects of these great national businesses. It is one thing to write 15 pages of an economic report; it is another thing to get great industries, responsible in their annual investment for 50 per cent. of the national economy, efficient and modern with the proper incentives. A great deal must be done to provide the right incentives for this varied list of these great industries, and to provide the efficiency which is absolutely vital in any industry, in any country, if it is to succeed. What it really means is that in these great national businesses, perhaps as never before, we must find the right staff and the right management. It means that the Government have to face up to 837 this question of the difference in incentives between the private and the national sectors of business if we are going to attract the right staff and the right top management.
In these national businesses we shall have to face the fact that in the private sector it is possible to get extensive fringe benefits. So many senior executives look at fringe benefits as never before, and at superannuation. These are the things they can get in the private sector; and when young men come down from universities or from training colleges, or after they have trained the hard way in industry, one of the first things they look at are the fringe benefits, including superannuation, which industry can offer. And I think it will involve in these industries the question of the status symbol. That is what we are really talking about when we speak of incentives in industry.
My noble friend Lord Delacourt-Smith referred to the number of loyal people inside the existing great nationalised industries who have given long years of service and are waiting their opportunity to get progress and promotion, neither of which they will be able to get unless we can get into these industries adequate training courses and an opportunity for them to attend them. These courses are very important. I remember discussing this subject with the late Lord Morrison of Lambeth, many years ago. I said that I thought we needed far more training colleges, such as that at Henley, than we have.
I know that we are doing a great deal inside the nationalised industries—and other countries think that we are, and are setting a good example—but more must be done if we are to give these people full training techniques and an opportunity to acquire the status of top management. If we can create the right conditions and opportunities in these nationalised businesses, they will attract the young people who every year are going to join industry. So I should like to see a greater exchange between both sectors of industry, and not see the mentality growing up in which they are almost operating as separate worlds.
I do not know, but I cannot help thinking, having listened to noble Lords opposite whose great experience has been in industry, that profit is not the only yard- 838 stick in so-called private enterprise. These are the days of the takeover, of large-scale industrial units, and of bids. The units are not getting smaller in any country; they are getting bigger and bigger and in this situation, in my view, the profit motive alone is playing a less important part than it has ever played before. Even in the private sector of industry, in the federations and trade organisations, the old spirit of competition, of "The Devil take the hindmost," of competition in labour costs and so on, is fading out. To-day firms, including competing firms, openly exchange with each other information on costing, labour relations, employment of the right materials and techniques of productivity. This is common ground to-day, and the old bitter spur and fight of competition is becoming blurred; it is fading. There is far more co-operation growing up than ever before in the firms, in the companies and in the trades which are to-day active in what is called the private sector of industry.
I do not want to see these two worlds—H. G. Wells's "Two Worlds"—in industry. I should like to see a great of this information exchanged with the nationalised concerns. I should also like to see an exchange of personnel—of staff and of top management, as well as of technicians. I was glad to hear the noble Lord, Lord Robertson of Oakridge, refer to the recent appointment of the head of British Rail. He is a professional, and I believe that one of the things the Government must look at in the appointments to some of these Boards is to give the people underneath the training facilities and incentives to gel to a position in the top management of their own industry. One cannot run an industry with amateurs to-day; they must be professionals. And that applies to the railways, to the power industry and to many other nationalised industries.
Some reference was made by the noble Viscount, Lord Brentford, to private enterprise and shareholders' meetings. I think that to-day most of the large private industries are director-controlled to a far greater extent than they used to be. I do not know whether 51 per cent. of I.C.I. shareholders can turn up for an annual meeting or can get to the directors if they want to, but to-day in this country, and perhaps even more in the United 839 States of America, the large private industries are director-controlled. We must live in a controlled and planned economy. We see it in America, on the Continent, in the great industrial countries, and now in this country, and I believe that eventually the Party opposite will abandon its old slogan of years ago, "Set the people free!". Private enterprise is outmoded and irrelevant.
Take the aviation industry. A great deal is said about private enterprise in that connection. Both here and in the United States of America the Government and the aviation industry are identified as never before, and this is even true in the airlines, to which reference has been made. Even the independent airlines cannot be absolutely free or belong to "pure private enterprise", as one so often hears stated. They depend upon Government tax, Government regulators, Government subsidies of airports; left, right and centre they depend upon Government help and initiative in a Government-planned economy.
I also believe that we must not be afraid to look at some of the techniques of the nationalised industries from wherever they have come. In the United States of America, in the old days it was the "executive suite" which was responsible for running the great industries such as General Motors and Fords. But to-day there has been something of a change, and personal leadership is a factor in all industry which matters as never before—I believe it is referred to as conning tower and computers and personal assistants, rather than executive suite. These and all management techniques must be looked at by the nationalised industries because the running of these great concerns in the national interest depends upon efficiency and upon incentive.
My Lords, the Government review in the White Paper, and the thinking behind it, are, I believe, a step in the right direction. If it is followed up with proper incentives it can be exciting, and a rewarding challenge to all those people who are engaged in these great national industries. I believe that if we face this task with good will and determination we can make those industries succeed as never before.
§ 5.56 p.m.
§ LORD TANGLEY
My Lords, may I first add my word of thanks to the noble Lord, Lord Nugent of Guildford, for opening this debate and for doing it in such a thoughtful and unemotional style. We are all the more indebted to him for that because one of the troubles about our nationalised industries is that too much emotion and too little thought went into their engendering in the first instance. A little "family planning" might not have been out of place. I could never share that emotion. I could certainly never get worked up enough to join the noble Lord, Lord Stonham, and the noble Lord, Lord Blyton, in singing "The Red Flag" when the Bill to nationalise coal was passed.
§ LORD RHODES
My Lords, I wonder whether the noble Lord knows what Mr. Tomlinson said when he heard them singing it? He said. "You will alter your tune".
§ LORD TANGLEY
My Lords, I do not know which tune was to be altered, whether it was the policy of nationalisation or the tune of "The Red Flag". But the point I am making is that I find it exceedingly difficult to sing either tune with any enthusiasm, as indeed I think the noble Lord, Lord Nugent of Guildford, does. This may be, perhaps, in the eyes of Party zealots a rather Laodicean attitude, but I feel that way about it, and that is perhaps why I have followed a somewhat empirical course so far as nationalisation is concerned.
I am part author of one scheme—Cable and Wireless. With the noble Lord, Lord Reith, I visited all the Dominion capitals in an antediluvian aircraft which survived the flight only by 48 hours. In the course of that flight we devised the scheme for Cable and Wireless, and subsequently I represented the British Government at the Commonwealth Communications Conference when the scheme was perfected and accepted. In one way or another I have tried to help in some of the other nationalised industries, and in one capacity or another I have found it my duty to oppose other schemes. So to-day I still find myself neither hot nor cold, but, like the noble Lord, Lord Nugent of Guildford, just cool on this subject.
The truth of the matter is that I cannot find nationalisation as being either good 841 or bad in itself, and I judge each scheme simply as a possible means of reaching a desired end. If that end can best be reached by nationalisation, then so be it. But if not, let none of us be misled by the glamour of the word. Nationalisation by itself solves no economic problems. The elimination of profits and shareholders does not bring a new heaven and a new earth. All the old problems remain, and, as the noble Lord, Lord Nugent of Guildford, and the noble Viscount, Lord Watkinson, and other noble Lords have reminded us, on top of the unsolved economic problems there are added very serious political problems which in no instance have yet been fully solved.
So it seems to me that the basic question we ought always to bear in mind in approaching any proposal for a nationalisation scheme, and also in considering the organisation of any existing scheme, is: What is its end? What is its purpose? In a word, what is it for? It seems to me, and I think experience proves it, that it is a principle of all good organisation that one should ask and answer the right questions in the right order, first "why" and then "how". When one does that one gets a satisfactory system. When one's questions are muddled one gets a muddled and an unsatisfactory system.
May I illustrate this very shortly by contrasting two schemes with which I have been personally concerned? One is Cable and Wireless, to which I have already referred. There we had a perfectly clear objective. It was to maintain the union of cable communications and wireless communications in the same hand. Before the war that had been achieved by a loose federation of companies. That federation was falling apart before our eyes. The only solution was to dismantle this company union and put it together under Government control both at home and overseas. That was the "why". The "how" was complicated. It involved nationalisation Bills in no fewer than five countries, but it was carefully adapted to the end in view, and it worked.
The other scheme I should like to refer to is London Transport, which is about to disappear. There the "why" was muddled and the "how" could never be right. I recall this process vividly, and perhaps the noble Lord, Lord 842 Hurcomb, who with me must be one of the few survivors of those actively concerned with the stars of this business, will recall it, too. Here was the muddle. The then Minister of Transport, Mr. Herbert Morrison, wanted a bit of "Socialism in our time". The unions liked the idea of a monopoly which would be more amenable to pressure than a number of competing organisations. The Underground group of companies, including the London General Omnibus Company, had had growing difficulty in earning dividends, and under the leadership of their Chairman, Lord Ashfield, and the Managing Director, Frank Pick, had unsuccessfully tried to organise a monopoly under private ownership. So they joined in the promotion of the Board as soon as the compensation terms for their shareholders had been settled.
Your Lordships may be amused to hear a little rhyme made up by one of the many counsel engaged at that time. I noticed the noble and learned Viscount Lord Simonds here this afternoon; he may remember it, or would do if he were still here, because he was one of that team of counsel, though he was not the author. Here is the rhyme:Now give three cheers for Ashfield and three for Mr. Pick,Who manna bring to hungry souls and comfort to the sick.They've found us what we long have sought and never yet enjoyedA reasonable return upon the capital employed.And so the Board came into being with an obligation to provide services everywhere, with no defence against wage demands and under statutory obligation to pay fixed interest on its stock, whether earned or not. This was a hopeless task with which a succession of most able men have struggled, and it is not their fault if they have failed to do the impossible.
Now, I believe, the undertaking is to be handed over to the Greater London Council. I am sure your Lordships will forgive me if I show a little paternal feeling towards the Greater London Council, and I am glad that they are to be relieved of the burden of servicing, I believe it is, £400 million of stock. But it is not being written off. These words are used much too loosely and too lightly. The taxpayer is going to continue to provide that reasonable return on the capital, whether it is lost or whether it is 843 not, whether it is employed or whether it is perpetually unemployed.
My Lords, I am sure I have said enough to illustrate the need to be clear about objectives. What ought they to be? I would concede that there may be a number, but the primary one must be efficient management. If you do not have that you cannot have anything else. That means that a good service must be given to consumers at reasonable prices, and at the same time a proper return earned on the investment. That is vital to our economy; and, after all, our economy is only another name for our national life. But I accept that a nationalised industry may properly be required to do things for social reasons rather than for purely economic or commercial reasons. That is why, I suppose, most of the nationalisation Acts reserved to the Minister the power to give general directions to the managers.
I suggest to your Lordships that three things follow from this situation. The first is that you must get good men, not only at the top but down the line also. The second is that there must be a clear chain of authority and responsibility. And the third is that there must be a clear demarcation of responsibilities. I support, and I am not going to repeat, what has been said about remuneration, pensions and so forth. I know that we have been very lucky in the past to attract able public spirited people at cut prices. But that will not go on for ever, particularly when you consider the treatment that some of these great public servants have received. The day is past when you can treat the head of a nationalised industry as a sort of hybrid, a lusus natureœ, a sport of Nature, part business executive and part civil servant. There is no such animal in existence, and to set your scale of remuneration in the hope of attracting him is to live in a dream world.
That brings me to my second point. Having got your management you must let them manage for a reasonable time. There cannot be efficient operation if your top management is constantly interfered with by people in politics. No one can deal effectively with difficult economic problems if he has to be perpetually looking over his shoulder to see 844 how his actions fit in with the predilections of the moment of his political masters. The French, the Italians and the Germans understand this; we do not.
We criticise our railways, and as a long suffering Southern Region commuter I certainly do—although I may say that things are improving very fast indeed now. But we are lucky to have any railway system working at all. For many years now management have been working under one system while yet another is being devised from above. Government has never let management settle down. My Lords, this is an absolutely impossible situation, and it must stop. I listened with tremendous interest and respect to the speeches of the noble Lord, Lord Robertson of Oakridge, and the noble Lord, Lord Beeching, this afternoon. The thing that struck me almost more than anything was the masterly under-statement and restraint in what they said about the treatment they had received.
I say therefore, and it must be common ground. I suppose, that management must be allowed to manage. But I also accept that a nationalised industry may properly be required to do things for social rather than purely commercial or economic reasons. For example, the closure of the coalmines may, in my humble opinion, be properly slowed down because of the social questions involved. An airline may be required to use aircraft other than those it would find economical to run. The noble Viscount, Lord Watkinson, gave some examples of that. A railway may be kept open where it is not financially justified. These things, I concede, may quite properly happen. But when we consider them, I beg your Lordships to realise and remember that we are on very dangerous ground indeed.
Economics and social need do not always conflict to anything like the extent that we may suppose. What do often conflict are economics on the one hand and the politicial convenience of some Minister on the other hand, and that is not necessarily the same thing at all. This brings me to the nub of the problem, which has been referred to by the noble Lord, Lord Delacourt-Smith, in his admirable maiden speech, the noble 845 Lord, Lord Beeching, and the noble Viscount, Lord Watkinson. What is of cardinal importance, I suggest, is that Ministers should openly take the responsibility for any decision that social need should take precedence over economics. These decisions should be expressed as general directions to the industry concerned, and the Minister should be openly responsible to Parliament for each and every direction so given.
I shall be told that that is not practical politics. I shall never forget the throw-away line of the noble Viscount, Lord Watkinson, when he said that Lord Douglas of Kirtleside had asked him for a direction that he take an aircraft that he did not want. The throw-away line was "Of course he did not get it". It may be that we shall seriously have to consider the remedies for these pressures that have been put before us by the noble Viscount and others; but while the situation is as it is, under the Acts as they are, then I suggest that that throwaway line has to be thrown away and that Ministers have to face up to their responsibilities in Parliament.
Huddles behind the scenes will not do, fireside chats between Ministers and heads of nationalised industries will not do. They lead to a dispersal of responsibility and authority which is subversive of all accountability. At the end of the day, when the taxpayer is forced to take on yet another burden, everyone can turn round and say, "Please, sir, it wasn't me; it was him". That may do for an immature schoolboy; it will not do for grown-up Ministers or managements. For let us remember this, that every decision to let social need take precedence over economics is a form of concealed taxation. It means either that the consumer pays or that the nation gets a lower return, or no return, or a negative return on the investment. As things are to-day, these decisions are taken in secret, their effects are not quantified, and Parliament knows little, if anything, of what is going on. After a few years, Parliament sees the cumulative effect in a Bill to unload another few hundred millions on to the back of the taxpayer, and then it is too late to do anything about it but heave a sigh, pass the Bill, and hope that the next one will not come along too soon.
846 I have tried to concentrate on what seem to me to be the vital points, and I want to mention only one more. I earnestly hope that there will be no attempt to restrict the competition of one nationalised industry with another. This is something we shall have to look out for when we begin the mammoth task of cleaning up the Transport Bill. Competition is the soul of efficiency, and I frankly rejoice when I see the noble Lord, Lord Robens, and Sir Ronald Edwards slugging it out in public. The danger about restricting competition is an insidious one. One sometimes hears a whisper, "Does it make sense for gas, and electricity to open competitive showrooms and to advertise against each other?" If that attitude had prevailed 25 years ago in regard to the gas industry—I know what I am speaking about here—there would have been no gas industry to-day at all. It seemed to be dying on its feet. One of the astonishing things has been the come-back of gas, not only here but in other countries It is entirely due to its vigorous and unrestricted response to the fierce competition it has received from electricity and oil. Long may they all flourish!
We now have had a quite long experience of nationalisation, some of it happy, some of it unhappy. I hope for a long and prosperous future for those industries. We must all be grateful to the noble Lord, Lord Nugent of Guildford, for giving us this opportunity of laying before your Lordships the fruits of our experience.
§ 6.15 p.m.
§ LORD AMPTHILL
My Lords, like all noble Lords who have spoken in this debate I, too, am grateful to my noble friend Lord Nugent of Guildford for putting his Motion on the Order Paper to-day. The noble Lord, Lord Beeching, made some most amusing criticisms of the White Paper, with many of which I agreed. But one thing the White Paper has done is to produce this most interesting, informative and, I think, helpful debate. Speaking as I do from these Benches, your Lordships; will not be surprised to learn that I am not a fervent believer in nationalisation as such, and so long as I have a vote in this place I shall use it against any further extension of the principle. May I say, in passing, that my opposition to nationalisation is not swayed by the fact that I lost the 847 best secretary I ever had to the Coal Board. She went to live in Lancashire and was therefore of no further assistance to me. To-day, I do not intend to enter into a discussion on the merits or demerits of nationalisation. I have a number of quotations I could use—what Socialist Ministers said in earlier days of nationalisation. They are quite entertaining to read now, but I do not intend to waste the time of the House. In the few remarks I am going to make I hope to keep politics and personalities out of it.
My sole purpose in speaking to-day is to draw attention to what I believe to be the most important fact stated in the White Paper; namely, that the nationalised industries employ 1,881,000 men and women. If the Government proceed with their plans for further nationalisation this could well reach two million or more before we are much older. This, the White Paper tells us, is 8 per cent. of the working population of these Islands. The White Paper also tells us that the nationalised assets are worth nearly £12,000 million, and that the annual investment is running at £1,700 million, over half of which is financed by the Exchequer, which of course means the taxpayer. But to me the most important of these figures is that of the number of people employed in the industries.
These huge figures are useful, too, to remind us of what vast responsibilities are carried by all those concerned with, or who have been concerned with, the management of the nationalised industries. Whether they are managements themselves, trade unions, Ministers or the officials of the sponsoring Departments, they have all had, and have, a large responsibility. But I must come back to what to me is the most significant figure; namely, these two million men and women in the nationalised industries to-day. These are the people upon whose daily work in the mines, power houses, railways and elsewhere, we depend to achieve the economic and financial objectives, the social objectives and all the rest of it, as set out in this White Paper or in any other White Paper.
Obviously, these people expect, and deserve, the best possible working conditions, which includes many things, not only wages and salaries. I do not intend 848 to discuss them in detail. There are many noble Lords here to-night who know as well as I do what these things mean, and I do not wish to waste your Lordships' time "teaching my grandmother to suck eggs". There is a vital need, in dealing with these enormous numbers of personnel, for first-class communication in all these industries. I use the word "communication" in the sense that it is largely used in industry to-day—the word has been used in debates in this House, and your Lordships will understand what I mean—namely, the need to let these people know, clearly and unequivocally, the aims and purposes of the enterprise for which they are working. The sheer numbers of these people, their geographical spread all over the country and the diversity of their operations, make good communication in the nationalised industries unusually difficult for the managements and the trade unions concerned.
Private industry faces the same problem. It is becoming more acute every day, with mergers and amalgamations and with all the difficulties involved in size. We can no longer rely on the old-fashioned conception of the "gaffer" who went round his work place, who knew all the chaps and girls by their Christian names and everything about them. That is no longer possible in these large industries; it is certainly not possible in the nationalised industries. The people who work like to see the "gaffer"; they occasionally like to see their boss.
A number of the managements of the nationalised industries do their best in this respect. But the managements of nationalised industries have imposed on them a handicap which is not imposed on private industry. Managements of nationalised industries constantly have Ministers and officials in Whitehall breathing down their necks. This matter has been discussed in great detail to-night, and I do not want to go into it in detail, but would emphasise the effect of such activities on the way in which managements are able to communicate with their own people. The policy of all Governments, to quote the White Paper, is to treat the nationalised industries as commercial bodies and to leave their running to the Boards. But how often does one hear, in response to a 849 Parliamentary Question, that this is not a matter for the Government but for the nationalised Board concerned? The fact is that the managements of nationalised industries are troubled by this constant pressure from Ministers and officials in Whitehall, and it creates difficulties for them. I could not work under that sort of system and I think that Ministers and officials in Whitehall should take special care not to come between the managements of nationalised industries and their people. To put it crudely, they should take particular care not to foul the lines of communication, and in all their words and actions to make it easy for managements of nationalised industries to pass down the line unequivocal, clear and unambiguous directives.
Good communication in industry is the prime responsibility of the management concerned. The unions concerned have also a large part to play, and they can do so only if they are in step with management. There is a responsibility lying upon both sides, management and trade unions, to keep in step right down the line, not only in the head office in London but right down to the people on the factory floor. All this is well-understood by senior management and senior trade union officials, but I am not so sure that it is equally well understood right down the line, and I feel fairly certain in my own mind that it is not well understood in Whitehall. From my long connection with industry, and more particularly with the Industrial Society, I am well aware of what is being done to improve communications in many industries, including the nationalised industries. I will not trouble your Lordships with the details, but I am also well aware that much remains to be done in this respect. This means training and education. Government, sponsoring Departments, managements and trade unions alike—all have their part to play. Good communication is an art rather than a precise science. It needs close attention to detail, great understanding of people and knowledge of what makes them "tick". I will not go into the subject at length as so many of your Lordships have far more experience in this matter than I.
We can spend millions on equipping the nationalised industries with the most advanced technological equipment, and indeed we have done so and are con- 850 tinuing to do so. But, in the end, it is people that count, whatever may be their job, and however sophisticated the equipment which they operate. It is not sufficient to give these two million people the tools and hope that they will get on with the job. We must make it possible for them to take a real pride in their work. Then we shall get the results which we all desire. Men or women cannot do their best unless they are able to take a real pride in a job well done. All the criticisms which people level—and I criticise as much as anybody else—the "cracks" about British Railways, the National Coal Board and so on, make it difficult for the men and women to feel that they are doing a good job; it is not very helpful to them. Skilful use of good communication alone can ensure this and avoid the demoralisation to which one noble Lord referred: I think he really meant low morale. In a short speech it is difficult to do justice to the subject of human relations and communications, and I have left unsaid much that could be said and needs to be said. I conclude by saying that, in this technological age, people are still important—very important; much more important than pushbuttons.
§ 6.30 p.m.
§ LORD BESWICK
My Lords, I am sure we shall all agree with the closing words of the noble Lord, Lord Ampthill. Apart from the Government contribution to this debate, I hope the noble Lord, Lord Nugent of Guildford, will feel that the debate which he stimulated has rewarded him for the care which he took in the preparation of what he had to say to us at the outset.
I should like to join with all those who have congratulated my noble friend Lord Delacourt-Smith on his maiden speech. It was informed, well-reasoned, and persuasive, and he spoke with special authority as one who has been connected with a body of workers who have done as much constructive thinking on worker participation in public industry as any other organisation in the country. We all look forward to hearing from him on this and other subjects in the future. The noble Lord stressed, in particular, the importance of procurement. He will probably have noticed in the recent White 851 Paper on Public Purchasing and Industrial Efficiency, that the Government made clear the valuable function which the procurement of the nationalised industries could perform as part of the total leverage effect which public purchasing has over manufacturing industry in the private economy. One practical way in which we are now trying to use this leverage is by making progress towards greater standardisation.
In general—and, of course, I exclude the noble Lord, Lord Beeching—there was a welcome for this White Paper. The noble Viscount, Lord Mills, had certain reservations. He asked about the number of Departments which helped compose the document, but, as he will know from his experience, all interested Departments in Whitehall are asked to comment on a Government document and this was no exception. The noble Viscount had doubts about the confusion between the commercial objections of public enterprise and the social aspects, in the second of these White Papers. I hope that I went some way, at any rate, to removing the confusion from the mind of the noble Lord, Lord Nugent of Guildford. Certainly, I stress again to the noble Viscount, and to the noble Lord, Lord Nugent of Guildford, that the Government's objective is to hold a sensible balance between national and commercial interests. Across the greater part of the field with which we are concerned, there is little or no divergence between the two—I gave some examples of where there is a divergence—but there is a very clear assessment as to where the responsibility lies for meeting the cost of a non-commercial activity.
The noble Lord, Lord Beeching, suggested that in such cases it will always be possible to agree between reasonable men, but this in fact is what the White Paper says. Of course it will be possible, and the White Paper says this; but the noble Lord seems to think that because it says this, and other sensible things, it comes under criticism as being obvious. The fact of the matter is that most of the truest things in this world are fairly obvious. One of the criticisms which has been made before about the public sector is that the obvious elementary economic principles to which the noble Lord referred have not been 852 applied. This was a criticism which had been made in the past, but now in this White Paper it is spelled out for all concerned, just how those economic principles should be applied.
The noble Lord, Lord Beeching, went on, after his very weighty complaints, to state what we should do. He said that all we had to do was to decide: Is the social benefit worth its cost, and how is it to be assessed? There can be nothing more obvious than that; indeed, nothing could be more simple than that. But I would not pour scorn upon the noble Lord, Lord Beeching, because he said that. It is elementary to me, but nevertheless I thought it was worth saying, and although I repeated the words in the White Paper it was none the worse for that.
The noble Viscount, Lord Watkinson, said that probably (he was making no Party point and, indeed, he bracketed us all together) we, the political masters, had not understood the managerial problems when we undertook this task of bringing certain industries under public control. It is possible that we had a lot to learn, and I think we have learned. But if understanding organisation and management problems is to be judged by results, then the previous managers of the coal industry, for example, or the railway industry fell somewhat short of an absolute and perfect understanding of what was required.
The noble Viscount went on to say that the real problem was one of modernising industry, but I believe that he was to some extent begging the question. That was not the only problem with which we were faced. It was not simply a technological question of modernising industry. Where the noble Lord, Lord Beeching, went wrong in my judgment—when he had control of some of our national affairs—was in considering it simply as a technological question. It was not simply a technological question; there were social and political problems as well—and I put it to the noble Viscount that in the case of transport integration of road and rail involved political questions. With respect, I thought the noble Viscount, Lord Brent-ford, was possibly judging this subject from a political point of view more than from a purely economic one, when he 853 spoke about his efforts to bring one of the big road haulage firms back into the private sector. The noble Viscount, Lord Watkinson, made some rather novel proposals about administrative changes in our constitutional affairs, and I can only say that to-morrow I shall read carefully in Hansard what he had to say.
I was particularly interested to hear what the noble Lord, Lord Robertson of Oakridge, had to say about some of these affairs. If I may say so to him—and I say it to him with real affection as well as with respect—I feel that his speech was so typically generous that it made me, and possibly some others who have indulged in political rhetoric on these matters, feel very humble. I was particularly interested to hear his favourable views on the Select Committee on Nationalised Industries. I personally am sure he was right, but it was good to hear him say it from his point of view. One ought to say that to some extent the high standard which the Select Committee on Nationalised Industries has set in no small measure is due to the very able Chairmen which it has enjoyed; not least, the noble Lord, Lord Nugent of Guildford, and another colleague of ours in this Howe, the noble Lord, Lord Aldington.
The noble Lord, Lord Robertson of Oakridge, made the interesting point that it might be possible for a Select Committee to concentrate on a narrower field of any particular industry, when it pursued some of its other investigations. It is an interesting thought, but I am not sure that the Committee can do a really satisfactory job f it restricts itself in this way. But one of the interesting ideas which has emerged recently, is that the Committee should look, not only at an industry in depth, but at a particular aspect of all the nationalised industries. At the present time it is considering the question of the Ministerial responsibility for all these industries, about which we have had so much to say in this House to-day.
I should have thought, too, that the subject of training was another which the Select Committee might also look into. I agree with what was said by my noble friend Lord Granville of Eye about the importance of training. I think he would agree—as, I think, would my noble friend Lord Delacourt-Smith, who also re- 854 ferred to this—that in the field of training the nationalised industries, or most of them, at any rate, are second to none, and some of the work which they have done in this field might well be of use outside. If a Select Committee is looking around for another subject, it could be useful for industry as a whole if the Committee went into this aspect of the nationalised industries' affairs.
The noble Lord, Lord Beaumont of Whitley, asked some questions about alleged unfair competition of public industries with private enterprise. He apparently seemed to think that now the Listener has become more readable it is being unfairly competitive. I understand what he had in mind. I am informed that the Periodical Proprietors' Association has made representations to the Postmaster-General in the terms of Clause 20, subsection (2), of the B.B.C. Charter, submitting that the B.B.C. are acting in breach of the Charter and asking him to call upon the B.B.C. to observe its terms. To some extent then, this matter is sub judice and your Lordships will understand that I do not wish to comment on it further.
As another example of unfair competition, the noble Lord made complaint of the National Coal Board's tree-transplanting unit. I am sorry he raised this matter, because I must say that I thought this was an example of public spiritedness on the part of the National Coal Board, and certainly what they have done has, I understand, met with the approval of the Civic Trust, who have encouraged local authorities to plant more trees. They are able to plant more because they are able to plant them more cheaply by using this machine which the National Coal Board has at its disposal; and as this means that the machine is being used more fully, the N.C.B. is able to spread its charges. The noble Lord wants a directive sent to the industries on this matter, but I should have thought that the Command Paper itself, in paragraph 18, gives him what he wants; namely, an insistence that there should be a proper pricing policy which rules out uneconomic cross-subsidisation of minor activities by major ones.
The noble Viscount, Lord Brentford, spoke, as did, I think, other noble Lords, about the gas industry and the remarkable way in which the old image which 855 it had has been transformed. It is certainly one of the most successful of the public industries; it has the least publicity; probably the least industrial troubles; and I also think I am entitled to call attention to the fact that there is less talk about the need for these great industrial tycoons to go into the gas industry. I am not at all sure that there is not a relationship between these facts.
I often used to discuss with the late Sir John Stephenson the fact that the gas industry, for which he was responsible, and the air transport industry, on the Board of one of whose corporations he also sat, were entirely different so far as their labour relations were concerned. I was most interested to hear him say how, from his experience, he felt that the decent, honourable, probably rather slow tempo in the gas industry, with its great tradition of personal relationships and of son following father in the industry, had a good deal to do with it. Once one starts bringing in these great men of genius who turn things upside down, then invariably one gets labour troubles.
The noble Lord, Lord Nugent of Guildford, was the first to speak of the relationship between Ministers and Board chairmen. There were others who also dealt with this very fascinating area of human affairs. I must say that it is an area into which I move very warily indeed. There have been unsatisfactory episodes. I thought the noble Lord, Lord Beeching, was exaggerating when he spoke about "abominable maltreatment". I do not think that really helped. I think it is unprofitable, too, to allocate blame as between personalities. Here again, I come back to the approach of the noble Lord, Lord Robertson of Oakridge. I should have thought that if anyone had a grievance it would be he, but no one would have any inkling from his attitude that he had any complaint to make.
In case the noble Viscount, Lord Watkinson, had made an issue of this, I had come armed with an extract from the autobiography of Sir Miles Thomas; but as the noble Viscount was so good and fair-minded on this, I do not propose to quote it. But I think he will agree with me that at any rate no political Party point can be made about this. To some extent, I think we are all to 856 blame. But one generalisation which might be made is that the relationship between Minister and chairman tends to be the most equable and satisfying when the industry concerned is sure of its place in the economy. If, as the noble Lord, Lord Robertson of Oakridge, described it, it is a wobbly industry; if it is a contracting industry; if too much publicity is focused upon it; if redundancy is more talked about than career prospects; then there is more likelihood of friction between the Minister and the chairman. I am inclined to think that the root trouble of the undoubted difficulties of which the noble Lord, Lord Beeching, spoke has nothing whatever to do with public enterprise as such. It was the result of the inevitable pains of a technological revolution.
To those who say that the sponsoring Minister and his Department should keep out of the affairs of a nationalised industry, that the Minister should in effect mind his own business, I think I can do no better than quote from the same Stamp Memoral Lecture by Sir Ronald Edwards to which so much generous tribute has rightly been paid. Admittedly, I must make it quite clear that he was in fact being a devil's advocate when he said this, but he put as clearly as anyone could the absolute inevitability in a modern economy for a Minister to intervene (if one likes to use the word) in the affairs of the industry for which he is responsible. As he says:… Ministers have the duty of appointing and judging Board members. They must be able to form an impression of the skill and efficiency with which the industries are being run, and they must be able to get to know not merely the most senior people but the group below them".He goes on:… some of the growth in the paper work now required and the 'intervention' that flows from it are associated with the struggle to stimulate, direct, and control the economy generally, e.g. national and regional planning, prices and incomes policy".Then he says:… the demand for and supply of capital should be put right by a change in the rate of interest or discount; short-term fluctuations in the supply of resources requires administrative action. This, of course, is a euphemism for capital-rationing.He goes on to say that the Government, the Minister and the Department must therefore know enough of the investment plans of different industries to 857 be able to judge which can stand the largest temporary deferment, so that the aggregate disadvantage is minimised. I hope I am not quoting Sir Ronald unfairly, but, as other noble Lords have said, he has had much experience of this. I do not think that he himself is unduly borne down by ministerial intervention. He carries it very calmly. Certainly he carries the admiration of us all for his custodianship of the industry for which he is responsible.
The noble Lord, Lord Nugent of Guildford, said that the calibre of the chairman is important; and, of course, it is. But how do we measure the calibre of a chairman? And, probably even more controversial, how do we attract the individual whom we want? Money is certainly important, and several noble Lords have this afternoon stressed the importance of money. But I refuse to believe that it is all-important. I absolutely agree with the noble Lord, Lord Robertson of Oakridge, in this. There was a review of salary structures in the nationalised industries in 1964, under the last Administration, and there has been considerable discussion since. Current salaries vary. The span now seems to extend from £11,000 per annum for the smaller nationalised industries to the chairman of the Steel Corporation with £16,000—although, strangely enough, his deputy is paid rather more.
Of course, none of these sums is excessive in modern terms. But are those much-publicised tycoons who draw higher salaries from £40,000 to £50,000 really the people we need to run these public services? Do these highly-paid men really add to the quality of our life? It certainly does not seem to satisfy them. I read an interesting account this week of one chairman with £90,000 a year bemoaning his fate because of the heavy taxation he has to meet. There are able people willing to serve their country for less. The Chief of Air Staff gets pay and allowances of less than £7,000 a year. The responsibility he has to carry is as great as any man in industry has to bear; and he carries it with as much distinction and as much ability. So does the Chancellor of the Exchequer with his £8,500 a year; and so does the Head of the Civil Service with his £9,200.
We tend to stress this business of salaries too much. I think with humility 858 that we might even have a little to learn on this matter from the five typists of Surbiton who were prepared to give rather more work for no more money. Recently there has been the development of the doctrine of head-room. It is said it is not the top men who are so concerned with more money but the fellows under them Of course, there is something in this. But I advance the personal view that other considerations do count. If the prestige of these public bodies can be improved: if we can, as we must, eliminate these public quarrels; if we can give better security; if we can pay more attention to pension entitlement; then I think we might achieve the quality of direction we need.
Incidentally there was a very interesting article in the Financial Times this morning which, no doubt, most noble Lords, have read, in which the theme is developed that over a given size it is less likely that an industrial organisation can be run efficiently from a single office. When you get over a certain size, as I read the article, it was suggested that these great men of genius, the men who run flings by hunch and from absolutely undiluted energy, are less suitable for the job. When we get to the size which most of these nationalised industries are already, new techniques, new management systems and team work are much the more important qualities needed.
I am rather sorry that the issue of the chairman has been raised but that nothing was said of the role of the chief executive. I should have liked to hear the argument as between having one great man as undisputed chairman, and the older style of a chairman and a chief executive. I am not sure that we have not slid too easily into this situation of the combined position of chairman and chief executive. If one can get the right combination with two individuals, I should have thought there was much to be said for having two separate positions.
Tribute has been paid earlier this afternoon to the great success which the noble Lord, Lord Douglas of Kirtleside, had at B.E.A. The real secret there was the admirable combination between the man who was the chairman, a first-rate chairman, and the first-rate chief executive who served with him. I think that is a model which might usefully be 859 studied. To have only one top position not only deprives the Minister of an additional source of information and guidance when he has to make decisions in relation to a corporation, but tends, on occasion, to inflate the influence of the chairman. And if he has at his disposal the professional techniques of modern publicity, this danger of inflation, or of over-inflation, is increased. Good teamwork between the chairman and the chief executive can be more important than the I.Q. or energy of the individual genius.
I agree absolutely with what was said in the closing words of the last speech to which we listened, and that of my noble friend Lord Delacourt-Smith, that proper communication all the way down, joint consultation with the staff at all levels, is a potential we have not tapped nearly sufficiently. My Lords, we have had a very interesting debate about an absolutely vital sector of our economic affairs. There have been no Party points made, although there have been one or two side-swipes at nationalisation. But in the main we all agree with the noble Viscount, Lord Brentford, who said that nationalisation and the nationalised industries are here to stay and it is up to all of us to see what we can do to snipe at them less and to help them more.
§ 6.56 p.m.
§ LORD NUGENT OF GUILDFORD
My Lords, may I thank noble Lords on all sides for making such an interesting debate on this Motion which I moved? For my part, I listened to nearly all the speeches and found them of enormous value, and I cannot help feeling that they will be of great help to the Government and to the nationalised industries. I should like particularly to join my congratulations to those of other noble Lords on the excellent maiden speech of the noble Lord, Lord Delacourt-Smith. His great authority in industrial affairs made his speech of special interest and, with others, I look forward with much pleasure to hearing him often again.
The noble Lord, Lord Beswick, answers my critcisms and queries in such a disarming manner that it is very difficult for me to find fault at all. I could not help feeling, seeing the noble Lord, Lord Shepherd, sitting alongside him, whose 860 manner was of the same kind, that the mantle now seems to have descended on Lord Beswick—which is most unfair. I thank the noble Lord for taking so much trouble in his busy life to study the subject and for making two such interesting speeches. And I thank him particularly for his very full exposition of the Government objectives for the nationalised industries. I think noble Lords on all sides regard this as the vital aspect. His exposition will certainly clarify the picture a great deal. For myself, I gladly accept his assurance that the Government do not intend any dramatic change of emphasis. I hope he will recognise that the White Paper could so have been read.
The fact that my noble friend Lord Mills weighed in with some fairly strong strictures about the White Paper on this particular aspect gives weight to the criticisms we made. But on this, time alone will show what will happen. I must hope that the Government will live up to what the noble Lord, Lord Beswick, has said and that in the main these industries will be allowed to follow, so far as possible, commercial objectives. I thought that, in this context, if I may say so, the speech of the noble Lord, Lord Tangley, was exceptionally interesting because of his great personal experience in setting up two of these nationalised industries—Cable and Wireless and London Transport—one, as he explained, for the right motives; and one for the wrong ones. We could not help thinking at the end of his speech that he might with Shakespeare have said:There is nothing good or bad but thinking makes it so".We really got into a difficult field in deciding what are the right objectives.
The speech made by the noble Lord, Lord Beeching, was particularly interesting to me because I think he was to some extent following the same theme as I was: the necessity to stabilise (I think that was the word he used) those nationalised industries that are particularly implicated in the political field, and prone to political upheavals. I am certain he is right. His thought of a series of Parliamentary Committees to review each nationalised industry was, in principle, the same as mine. My thought was of expanding the Select 861 Committee on Nationalised Industries which then, with professional staff, could examine particular aspects of nationalised industries—which is possibly the same point as was made by the noble Lord, Lord Beswick—right across the board. Machinery like that might be sufficient to give Parliament a sense of confidence that it knew what was happening, both in performance and in prospects, in these industries, and might help us thereby to get them into calmer waters.
I think that the suggestion of the noble Lord, Lord Beeching, of separate committees would be impracticable in political terms, but there is something in this thought, and I hope that the noble Lord, Lord Beswick, may pursue it with his colleagues. I am sure that this debate has brought out that this is the major problem, especially in relation to industries with a contracting trend. There is no doubt about it; just to keep altering the structure will not get us anywhere.
I thought that my noble friend Lord Watkinson gave a most vivid description of a Minister's dilemma in dealing with this, in that there are certain political situations where he cannot avoid intervening, however little he may wish to. My noble friend's idea that we might eventually be driven to making these contracting industries—railways and coal—the direct responsibility of a specific Minister may well prove in the end to be the answer. Not only noble Lords opposite but we on this side of your Lordships' House may well find it impossible to preserve a really commercial structure in industries where the trend is to contract rapidly, and where it is virtually impossible to have major developments of other kinds in other lines, as would happen in private industry. If I may say so to my noble friend, I considered that a very interesting thought, as was his other thought, that the remainder 862 might be put under the Treasury and so eliminate the sponsoring Minister. That idea also seemed to me worth further consideration.
Finally, on the point with which the noble Lord, Lord Beswick, finished, relating to chairmen, I do not make any point about their individual merits, and I am sure that in public life there are many people whose individual merits may be greater and who have far less money. The practical point I was trying to make—it is one which other noble Lords made—is that the Government now, and we in the future, must often draw chairmen from the market of industrial and commercial life; and if we are to be sure that we shall have the choice of the best, we have to pay the market rate, or somewhere near it. But I quite agree with the noble Lord, Lord Beswick, that money is not the only thing. I should think that the relationship with the Government is equally important.
My Lords, perhaps this debate has helped to ventilate these subjects. We have heard very interesting views from both sides of your Lordships' House which will be helpful to noble Lord; opposite and to ourselves; and perhaps these industries may be helped to play an even better part in future in the affairs of the nation. I ask permission to withdraw the Motion.
§ Motion for Papers, by leave, withdrawn