§ 3.26 p.m.
§ THE PAYMASTER GENERAL (LORD SHACKLETON)
My Lords, I beg to move that this Bill be now read a second time. In the White Paper on Industrial Expansion (Cmnd. 3509) the Government set out the case for extending their ability to help in the modernisation and technological advance of industry and in the expansion of its capacity. The White Paper explained that the proposed legislation would provide for the financing of a number of projects already well advanced and would create a new procedure for helping future projects which would, at the same time, provide for effective and rapid Parliamentary scrutiny. The Bill now before the House is therefore in two distinct parts. The first part lays down procedures for providing Government assistance for future schemes which are likely to benefit the national economy; the second part deals with specific projects—finance for Concorde production, for the "Queen Elizabeth II", and for the acquisition in Beagle Aircraft Limited, an increase in the borrowing powers of the National Research Development Corporation, and so on.
I believe it will be for the convenience of the House if I deal with the main features of the Bill in clause order. I would propose first to give some explanation of why new powers to help industry are needed. I shall then explain the form these powers are to take, turning later to the specific clauses dealing with particular projects.
My Lords, Government financial support for industry is not new. Since the beginning of the century successive Governments have felt called upon to help industry from time to time, and in a number of ways. Government help for civil research and development dates from 1915. There has been support for industries as varied as cotton, shipbuilding and aircraft, both in the years between the wars and more recently. There has also been support for particular projects in private industry, of which the loan agreement with Colvilles and the financing of the Wiggins Teape paper mill at Fort William are examples. Indeed, I doubt whether there is an industrially advanced country in the world——there may be, but there will not be many—where 1206 the Government has been able to leave the development of productive industry entirely to private resources and private initiatives. The industries offering growth prospects, particularly in the longer term, or necessary to maintain a balanced economy are not always those which attract private capital in sufficient quantity or which, if left entirely to private enterprise, will develop fast enough to compete successfully in world markets.
It is not perhaps surprising that in our country the powers to help industry have grown up in a somewhat haphazard way. They have usually been devised to meet particular situations which have faced the Government of the day and have called for particular actions. The most massive help has been provided on the one hand for industries which were declining or in danger of decline, such as cotton and shipbuilding, and on the other hand for industries essential for the nation's defence, such as aircraft and electronics Wide powers exist to support research and development, but only in a few selected areas do the powers extend to support for production. The piecemeal nature of the existing powers gives rise to anomalies. For example, the Minister of Technology can support the production of civil aircraft by means of launching aid, but he has no similar power to support the early stages of production of new machine tools or computers.
Successive Governments have brought before Parliament proposals for support for particular industries and even for particular industrial projects or companies. These proposals have been in the form of Bills, and they have passed through the complete legislative process in both Houses of Parliament. There are, of course, I fully acknowledge, many advantages in a procedure that gives Parliament ample opportunity to examine and discuss what is involved. But there is one great disadvantage, and that is the time the procedure necessarily takes. As my right honourable friend the Minister of Technology pointed out in another place, it took a full year from the point at which the Government agreed to implement the recommendations of the Geddes Committee on the Shipbuilding Industry to the point at which the shipbuilding Industry Act 1967 gave the Government power to put the recommendations into effect by setting up the 1207 Shipbuilding Industry Board. In industrial situations—and the shipbuilding one was an example—decisions often have to be taken quickly and to be put into effect immediately if market opportunities are not to be lost and the foreseen economic gains which are hoped for are to be realised.
The purpose of the early clauses in the Bill now before the House is to place the Government in a position over a wide range of industry to react to proposals which merit some form of Government assistance, and to do so promptly. Clauses 1 to 7 of the Bill will enable a Minister with sponsorship responsibilities for an industry—and there are a number of different Ministers involved—to make an industrial investment scheme in connection with any project which he considers is likely to promote efficiency and profitability, productive capacity or technological advance. The scheme will take the form of a draft Statutory Instrument to be laid before both Houses of Parliament, being subject to Affirmative Resolution of the House of Commons. I think I should mention that this particular procedure has been adopted as appropriate to proposals which essentially involve requests for authority to spend money out of Votes.
Industrial investment schemes may be of various kinds. First, there is what might be termed a "particular" scheme. This would usually arise from an approach by a company inviting Government support for a particular project. Secondly, there is what is called in the Bill a "general" scheme. This would be a scheme covering some activity affecting an industry or a sector of industry designed to improve the efficiency of that industry. And there is an important variation of this: for a certain kind of "general" scheme there is provision for the setting up of an industry board to advise on the application of the scheme, and perhaps to administer it if the Minister concerned wishes this.
Industry boards are not the only form of machinery that the Government may use in connection with the preparation and execution of industrial investment schemes. Under the provisions of the Bill the Minister of Technology will be setting up an Advisory Committee and the task of the Advisory Committee will be to 1208 assess and advise on individual projects referred to them. This Committee will also be charged with considering whether the projects have any features which would involve unfair discrimination, and advising on the action that might be taken to avoid it. In addition, the Bill specifically provides in relation to "general" schemes that schemes of this kind can be made only after a preliminary inquiry into the conditions in the industry or the section of the industry concerned. It is envisaged that the inquiry would normally be undertaken by a committee independent of the Government, like the Geddes Committee which operated in connection with the shipbuilding industry.
This summary of the main features of the early clauses in the Bill would not be complete without a reference to the provisions that place limits on expenditure under industrial investment schemes and about reports on schemes. It is specifically set down in the Bill that each scheme will indicate the aggregate amount of the expenditure that may be incurred on it. It is also provided that the total of these amounts shall not exceed £100 million, though this limit may be increased to £150 million by Order subject to Affirmative Resolution of the House of Commons. Commitments beyond £150 million could not be undertaken without an amending Act of Parliament. The provisions about reports illustrate the importance the Government attach to informing Parliament on the exercise of functions under the Bill. This Bill requires an annual report to Parliament by any Minister who may have exercised the functions and by each industry board that may have been set up by a scheme.
I should like now to turn to the clauses of the Bill which deal with specific projects, and perhaps I might inform your Lordships that I have arranged that copies of certain Papers should be made available so that when we come to the Committee stage all of us will have the benefit of certain information. These were made available in another place. I might mention, because it might be helpful to noble Lords, that these Papers cover a Note on how the Bill would affect the Ministry of Supply Act 1939. I suspect that only the noble Lord, Lord Drumalbyn—I was going to say is capable of doing all the homework necessary to understand that. Certainly 1209 I shall not, but perhaps the noble Lord, Lord Erroll of Hale, who is an ex-Minister of Supply, will have managed it easily. Then there will be a list describing the responsibility of Ministers for sponsorship of particular industries. There is one on finance for the Concorde—that is Clause 8, the brochure on the Concorde, and also a Note on the Beagle aircraft. These Papers are now in the Printed Paper Office.
Clause 8 deals with the provision of financial support for the production of the Concorde supersonic aircraft. I should stress that this relates to the production phase of the Concorde, and it has to be sharply distinguished from the development phase. The House will recall that the development phase is financed wholly by the French and British Governments, the latest agreed figure between the French and ourselves for our share of the development costs being estimated at £250 million at 1966 prices. The production phase is essentially commercial and the main responsibility for producing and selling aircraft to the airlines rests on the manufacturers. But the House will appreciate that to have aircraft ready for sale at the earliest practicable date it is necessary to commit oneself to production before the prototypes have flown and proved themselves. These costs cannot be wholly financed from the manufacturers' own resources, and Clause 8 therefore provides for the Government to give financial support, and sets out those kinds of support which are being considered at the moment—Government loans, guarantees of loans that the manufacturers may obtain from financial institutions and the underwriting of losses on production. There is a limit of £100 million on Government loans or guarantees of loans, and the clause further provides that, with the approval of the Treasury, the limit may be increased up to £125 million by Order subject to Affirmative Resolution of the House of Commons.
Clause 9 provides for loans of up to £24 million to the Cunard Steam-Ship Company Limited and Cunard Line Limited towards the construction and introduction into service of the Queen Elizabeth II. In this connection, I would recall to the House that one of the agreements reached by the previous Adminis- 1210 tration under the Shipbuilding Credit Act 1964, was to lend the sum of £17.6 million towards the costs of this liner. This clause will enable the Government to vary the terms of the proposed loan under that Act, the change being principally dictated by the additional cost of the ship. Clause 10 amends the Shipbuilding Industry Act 1967 by substituting for the present Section 3 a new section. This new section will continue to apply the condition in the old Section 3 that a shipbuilding or main engine undertaking may qualify for grant only if they are putting into effect, or have put into affect, a satisfactory reorganisation of their resources. However, the conditions of eligibility will be relaxed and I shall, of course, be prepared to go into this in more detail in Committee. I am sure this has not escaped the attention of the noble Lord, Lord Drumalbyn, in view of our discussions on the Shipbuilding Act. The overall ceiling on grants will be raised from £5 million to £20 million.
Clause 11 raises the limit on outstanding advances to the National Research Development Corporation to £50 million. The limit was increased from £10 million to the present figure of £25 million about two and a half years ago by the Development of Inventions Act 1965. Again, the noble Lord, Lord Erroll of Hale, may remember, as I do, when the N.R.D.C. was originally set up. If I remember correctly, at that time Sir Stafford Cripps announced the initial limit of money available as £5 million. This represents a big increase and also the importance which the Government attach to the sponsoring of new and promising projects. The House will appreciate that it is in regard to commitments, as distinct from actual expenditure, that the borrowing limits of the Corporation are particularly relevant. On the present estimates, it is expected that the Corporation's commitments will approach the £50 million figure not later than 1972.
The need for Clause 12 arises from an interpretation placed on Section 1(1) of the Civil Aviation Act, 1949. This subsection contains a proviso that prohibits the Minister of Technology or the President of the Board of Trade from manufacturing civil aircraft. It is considered that the intention of this proviso would be contravened in any case where the 1211 Minister acquired all the shares, or otherwise took such an interest in a company manufacturing civil aircraft as to give him effective control. Clause 12 sets aside this proviso in connection with the proposed purchase by the Minister of Technology of the assets of Beagle Aircraft Limited. The clause further provides that the application of the proviso will be nullified in relation to a transaction which is the subject of an industrial investment scheme. Clauses 13 and 14 contain a useful rationalisation and modernisation of powers. Clauses 15 to 18 contain the usual formal provisions.
As I move to a conclusion, I should like to say that I am impressed by the clearness and conciseness of the way in which this Bill has been drafted and thus reflects so easily and accurately the Government's proposals. In the past I think we have all had occasion to criticise legislation because of its complexity. Whether or not this was an easier subject I do not know, but this is almost the only Bill I have been able to read through and, on the first reading, think that I understand it. This is an example of draftsmanship at its best.
I am tempted at this moment to debate the role of Government in a modern industrial society, but I will wait until we have heard from the noble Lord, Lord Erroll, and from other noble Lords who are going to speak. This raises interesting philosophical and practical issues, but I want to make it clear that the intentions of the Government are to give support to industry in certain defined circumstances, and it is made clear that the Government mean to act in agreement and partnership with industry. There is nothing compulsory in the Bill. It is also made clear that the Government are extremely anxious to bring industrial wisdom to bear at all stages. I want to emphasise this, although we may have some jolly quips from the noble Lord, Lord Erroll, on Government interference in business. However he seems to be in a benevolent mood to-day—indeed he usually is. Thus the keynote of the Bill is partnership in developing the economy. The Government intend to promote and encourage this partnership, and it is in this spirit that I move that the Bill be now read a second time.
My Lords, before the noble Lord sits down, could he enlarge a little on the purpose of Clause 14, which he rather passed over? It has some extraordinary wording and sounds terribly sweeping. I am not quite sure what it is intended to mean.
§ LORD SHACKLETON
My Lords, the noble Lord has rather caught me on the hop. I was hoping to deal with this matter at the Committee stage. Clause 14 generalises and improves upon the provision which is customarily included in enactments conferring functions on the Board of Trade, indicating by whom in the Board these functions are exercisable. The clause is drafted in terms which refer not only to the powers of the Board exercised under this Bill but also to those exercised under any other enactment, public or private, whether passed before or after the Bill. It will make it unnecessary to insert Board of Trade powers provisions in future enactments, or for officers of the Board to have specific authorisation in writing, because their authority to act will flow from the nature of their office. I hope the noble Lord is wiser now.
§ LORD BARNBY
My Lords, may I also ask the noble Lord, with regard to Clause 2 (which says that a competent authority may move), whether it is to be understood that the initiative might, or may, come from an industry; or must it come from a "competent authority", which might be the Board of Trade?
§ LORD SHACKLETON
My Lords, I ought to say that I deplore the asking of too many questions in a Second Reading debate, but certainly the initiative can come from anywhere. It will be for the Government to take action. I am speaking entirely "off the cuff", but I should have thought that the initiative could come from industry. Indeed, in a sense it must do, because it will be necessary for the Government to judge the position, and in the last resort it will be for the industry or the firm to agree to the Government's initiative. But this does not rule out the Government's taking the initiative. I hope that that answers the noble Lord.
§ Moved, That the Bill be now read 2a.—(Lord Shackleton.)1213
§ 3.49 p.m.
§ LORD ERROLL OF HALE
My Lords, I am sure that noble Lords in all parts of the House would wish me to express their thanks to the noble Lord, Lord Shackleton, for the lucid and relatively brief way in which he has introduced this sizeable and important Bill. He managed to avoid all forms of modern jargon which is apt to creep into such discussions.
§ LORD ERROLL OF HALE
I was waiting for "technological spin-off" and "cost effectiveness"; and we never even heard about "ground rules", a term which is so extensively used in another place.
§ LORD ERROLL OF HALE
My Lords, I can assure the noble Lord that he has not spoilt my speech. I should like to thank him for the generous way in which he referred to my noble friend Lord Drumalbyn and to our earlier experiences in another place together.
The noble Lord referred to the Government's seeking to co-operate with industry in the matter of this Bill, yet he skated over—or, rather, omitted altogether—the fact that industry does not want this Bill at all. It shows itself to be a rather strange form of co-operation, industry having clearly said that it does not want the Bill, that the Government make no modification even to meet the views expressed by the Confederation of British Industry, push ahead with the Bill, and then say that of course they want to cooperate with industry. I think it might be worth reminding noble Lords briefly of the extent of this opposition to the concept of the Bill.
The C.B.I., on November 10, 1967, said bluntly in a statement:The C.B.I. cannot see the need for the legislation in any way whatsoever.In supporting statements issued during the same week in the periodical produced by the C.B.I. they quote Mr. John Partridge, Chairman of the Imperial Tobacco Company, a company engaged in wide diversification at the present time. He said:I am strongly opposed to the Bill".1214 Mr. Christopher Thompson, Chairman of John Thompson, the £12 million engineering group, said in the same issue:How can the Government with its limited experience and expertise be expected to spot opportunities for investment? In some magical way it has suggested that the Government will of itself be able to see some fascinating prospect that the people whose own money is involved have missed.Mr. Robert Beldam spoke on behalf of the small and medium firms, and he said that the private sector would be distorted by "this industrial patronage".
I could quote many other cases, possibly the most interesting of all being the statement made by Mr. Grierson, former managing director of the Industrial Reorganisation Corporation who on November 10, 1967, in an article in the Spectator called the BillA form of gimmickery … one of its real tragedies is that it elevates a temporary expedient to a major principle of economic administration.These are strong words from one who had worked actively in support of Government policies for the previous eighteen months. I need hardly add that the Institute of Directors was also wholly opposed to the Bill, representing as it does over 50,000 directors of large and small companies, who, of course, will be very largely concerned with the way this Bill is implemented if it ever reaches the Statute Book.
One of the difficulties with which we have to deal is that the Government seems to hold the belief that there are many desirable projects which are not proceeded with because they lack funds. But although Her Majesty's Government, by the introduction of corporation tax, have made it more difficult than in the past for industry to raise money on the market, the fact remains that nearly all worthwhile projects do find the funds required. So it is not easy to see what moneys will be required, and by whom. In any case, quite apart from that, there are already in existence Government agencies fully capable of providing all the funds which may be needed. First of all there is the National Research and Development Corporation, referred to by the Minister, which was introduced by Sir Stafford Cripps. There is the more recently formed Industrial Reorganisation Corporation, which in my view could perfectly well fulfil all the functions now proposed 1215 under the Industrial Expansion Bill. Indeed it is interesting to note that the Ministry of Technology has been unable to produce any convincing list of projects which would be serviced by this Bill. The Times on January 17 this year claims that the Industrial Reorganisation Corporation has actually been warned off certain of its own projects precisely so as to give this Bill a good start.
Another form of Government assistance which was not mentioned by the Minister but which is of growing importance at the present time is the massive aid given to firms in the development areas, which now cover something like half the country. In the whole of that part of the country there is, in my submission, no need for the additional source of finance represented by the Industrial Expansion Bill. A good example of how massive this Government aid can be to a firm in the development area is given by the story of a small company called Multyfiex. The capitalisation of the company is £130,000, of which £40,000 was provided by Board of Trade loan, £26,000 by capital grants, training grants another £7,000, and additional fringe benefits a further £7,000, which means that over 60 per cent. of the capital of this company—and it is going quite well, I am told—has come from Government sources. So I submit to noble Lords that not only have we no list of projects for implementation if the Bill becomes law, but I cannot see what need there is for the Bill at all. There are already sufficient Government or semi-Government agencies for carrying out the Government's avowed purpose. This, indeed, is another of those so-called good ideas which is not so good when it comes to practice.
The Ministry of Technology is a young Ministry, but it is significant to note that in many of its decisions the facts do not work out in accordance with the predictions. There is the interesting case of the proposal to have a stock-building scheme for machine tools. I mention that because it is an example of what the Ministry of Technology currently does. It proposed a £2,500,000 scheme which on the surface looked attractive. The money was to be used as a kind of insurance policy for the machine tool industry. If the companies agreed to build up and hold stocks up to a certain limit, the Government would underwrite 1216 50 per cent. of any losses they incurred by doing so up to December 31, 1968. In this industry only one machine tool company responded to the proposal. They preferred to arrange things their own way. It is interesting to note that the only firm which did respond had as its chairman a former civil servant who used to be at the Ministry of Supply.
§ LORD SHACKLETON
My Lords, may I ask the noble Lord his conclusion from that last remark? Is he suggesting that the firm in question were prejudiced by the former training of the chairman in question? The noble Lord will admit he is a very distinguished naval man.
§ LORD ERROLL OF HALE
My Lords, I am suggesting that we must be careful when the Ministry of Technology put forward schemes which appear to be new or original or apparently exciting. Here is one that has shown that, although money is offered by Her Majesty's Government, industry does not necessarily want to have it, and I quoted this case in support of my general thesis for saying that at any rate Part I of this Bill is not required—that industry does not want it, and for very good reasons as well.
§ LORD SHACKLETON
My Lords, I must press this point. There was a certain imputation against an individual: that he arrived at some sort of improper decision or judgment because he was a former civil servant. Perhaps the noble Lord did not mean that, but it sounded very like it.
§ LORD ERROLL OF HALE
My Lords, if I gave that impression I would withdraw any such impression straight away. I merely mentioned it as a fact. Of course I was not making any imputation against the individual concerned, whom I know personally and for whom I have a high regard. I am glad the noble Lord has given me that opportunity to correct any false impression I may have given on that score.
I was also grateful to the noble Lord for dividing the Bill informally into two parts, because although the Bill is not shown as in two Parts, it is so, and I shall be glad to follow the nomenclature he himself used. As I have tried to make plain, we on this side of the House see no need for part 1 of the Bill. Granted that there may be one or two cases for 1217 which the Bill is appropriate, despite the absence of any detailed particulars, I query whether the Affirmative Resolution procedure is the proper procedure. I doubt if in the long run it will save any real time. The noble Lord said the Shipbuilding Industry Bill took about a year to get through, but there was no need for it to have taken so long. If the Government had moved more quickly the Bill could have been on the Statute Book much more quickly. If a special case does arise from time to time, I think it would be a much better technique to have appropriate legislation properly put through both Houses of Parliament. One particular case which the noble Lord mentioned was the paper and pulp mill at Fort William. I had a share in promoting that legislation, and we got it through both Houses very quickly. I suggest that that is a much better way of doing it, if for no other reason than that it is possible for the Bill to be amended while going through Parliament. The disadvantage of the Affirmative Resolution procedure is that although it provides opportunity for debate, it does not provide an opportunity for amendment. The Resolution, if rejected, must be taken away by the Government and a new Resolution put up in its place. I suggest that this is a serious disadvantage to the so-called quicker procedure.
Towards the end of his speech the noble Lord stressed that in this Bill there was no compulsion. It is correct to say that there is nothing in the Bill which could be said to confer an absolute or mandatory power on any Department. But reading between the lines, and following the White Paper as well as the Bill itself, there are plenty of opportunities for coercion or arm-twisting; and although the noble Lord said that he was not prepared this afternoon to discuss the inter-relationship between industry and Government—and a most interesting subject it is—I think it is important to bear in mind while considering this Bill that Ministers, and under them their officials in Whitehall, are developing increasing powers of coercion or persuasion.
§ LORD SHACKLETON
My Lords, may I interrupt the noble Lord? I would not want to give the impression that I did not want to discuss this matter. I merely meant that I was not going to open a discussion on it. I think it is a most interesting subject to discuss.
§ LORD ERROLL OF HALE
Well, my Lords, I am here opening it; but I had hoped to have just a lead from the noble Lord first. For example, the prices and incomes policy has always been a voluntary policy, but if you do not conform you get caught. Firms who are dependent on Government contracts—and here I do not mean only firms engaged in the defence field—are of course going to be open to a new form of coercion. If they refuse Government assistance, the Ministry of Technology officials can say: "Of course, we had better just have a word with the Stationery Office, for instance, about those printing contracts which you get." This has only to be possibly a hint, an allusion; it may not even have to come to that. The firms will say: "Because we are so heavily committed with the Stationery Office we cannot afford to have a row with the Ministry of Technology. We had better go along quietly".
The Ministry of Technology, being a new Ministry, is undoubtedly employing some rather "racy" techniques in this field. I know that their method of inducing mergers is one which I think is rather hot. I am going to give only a hypothetical case, but I could give actual cases. Let us say there are four firms engaged on manufacturing a particular product in the Midlands. The Ministry of Technology, in its wisdom, thinks that it would be a good thing if the four firms were merged. The technique is to go to one of the firms and say: "You have been chosen by the Ministry to be the lead firm, and you will get all the support necessary to take over the other three". Perhaps this firm does not want to take them over. Say the officials from the Ministry: "Ah! Then if you are not interested we shall go to the next firm on our list, and if they accept the assignment you, in turn, will be taken over yourselves". This is the sort of power of coercion which officials not only possess in these days but which, from my own experience, I know they do not hesitate to use. This Bill will give them additional powers of coercion. This is one of the things which I deplore.
I was surprised, in view of what has been said in public comment as well as in another place, that the noble Lord made no reference to the power to be 1219 given to the Government under the Bill to acquire equity holdings in individual companies. Here again, we have been told that there is no compulsion. But, of course, there is plenty of scope for coercion, because all that the Government have to do is to make a more attractive offer if a share in the equity is conceded by the company than would otherwise be made available. I accept that it is not compulsion, but it is coercion of a particularly objectionable sort.
In contrast to the noble Lord, I intend to devote a few minutes of my speech to this important question of the Government taking power to hold equities in individual companies. First of all, there are the practical objections. If it is to be a true equity interest, then Her Majesty's Government will be at a disadvantage in several respects. The Government will usually be unable to get their own money back. The taxpayers' money is, so to speak, lost for ever. I know that the Government have the investment, but unlike a private investor they will not normally be able to realise their equities on the open market should they wish to recover the original capital or the enhanced value of the equity of a successful company, for the very good reason that the Government's holding would normally be too large to sell on the open market. It would soon get known that there was an attempt to make such a sale, and this could have a depressing effect on the company concerned. So the Government will be stuck with their equities more or less indefinitely.
Noble Lords may be thinking of British Petroleum, a remarkable company which has a large Government investment. But surely this only serves to illustrate my point, which is that the Government have the investment but they cannot at any time release it. The only actual benefit to the public is the dividends which the Government receive on that score. A term loan, on the other hand, which was the technique of the Administration to which I belonged, did a great deal to develop this. It becomes available once again on repayment for further lending. In that case the public's money is not lost for ever, but goes on as a kind of revolving fund. This, I believe, is the proper way for the Government to put their 1220 money into industry in those cases where it is thought necessary to do so.
Then comes the question: but if it is a successful company, why should the other shareholders get the dividends whereas the taxpayer, through the Government loan in this firm, does not get anything more than interest payment? Why should not the taxpayer share in the success of the company in which public money has been invested? This is an attractive argument, but I submit to noble Lords that it is a false one. It is false for this reason: that the taxpayer, through Her Majesty's Government, will in fact receive 42½ per cent. of the net profits anyway, through corporation tax, regardless of any distribution by way of dividend, large or small, to the equity holders. Thus the public are going to share in the success of a company, however the Government tranche of capital is injected into it. This 42½ per cent. of all net profits which automatically accrues to the Government, will come in on the profits earned by all the capital and not just on the Government's own equity holding.
Then, if the Government insist on taking equity holdings in companies they will have to work out—and certainly they have not given any sign yet that they have done so—what they are going to do with their equity. What are they going to do about their powers as a shareholder? First of all, at the simplest they will receive the usual proxy form as a Government shareholder, if they are not going to attend the annual general meeting. Will the Government shareholder automatically give the proxy to the existing board of directors? Will the Government shareholder, presumably the Minister of Technology in this case, nominate directors, vote them on the board, or take them off? Will he be involved in getting rid of directors who are unsatisfactory? If it is to be said that the Government shareholder is going to be a sleeping shareholder, there are cases already—for example, the abrupt sacking of the chairman of Short Brothers and Harlands—of action by the Government shareholder.
In any case, the Government shareholder will not be able to stand aside in a take-over bid. The Government shareholder cannot possibly remain neutral. 1221 He must take sides, and this could represent further powerful intervention by Ministers and by the Government. Indeed, I think it is going to be a quite difficult task for the Ministry concerned when it has acquired the equity holdings, to know how to respond to its new responsibilities, because at every stage the Government shareholder will have to decide what to do and how to vote. It is significant that the Bill makes no reference to whether or not the Government are to acquire a controlling interest in the company. This can be of great importance, since once a Government acquire more than 50 per cent. of the shares the board of directors simply become employees of the Government. But even if it is less than a controlling interest, the Government, as a large minority shareholder of 25 or 30 per cent. are bound to exercise substantial influence in perpetuity on the affairs of the company. These are the practical reasons why we object to the power being taken for Government to acquire equity holdings.
There are political as well as practical objections. We take the view that this is a form of backdoor nationalisation. The Labour Party after 1959 went through a period of intensive self-examination as to what new forms nationalisation could take because they had apparently found that, in the traditional form, nationalisation had lost popularity. Their main policy document, Signpost for the 'Sixties, first published in 1961 and reproduced for the eleventh time in 1964, reiterated on page 16 the arguments for the extension of public ownership by various means. It suggested that the taking of equity shares was one of these means.
I should be the first to allow a Party, on coming to power, perhaps to abandon some of the things which they have said when in opposition. I would accept that as a possible argument. But as recently as June of last year, Mr. Michael Stewart, who was then head of the Department of Economic Affairs, said in Birmingham that the Government might have to take powers to change the structure of industry and that:the kind of changes needed were those that moved in the direction of extensions of public ownership.Four months later the proposal for this Bill was included in the Queen's speech. 1222 So that it is obvious that there is a determination by Her Majesty's Government to introduce back-door nationalisation in the first part of this Bill. I hope that the noble Lord will not deny this. We should all respect Her Majesty's Government if they would come out into the open and say: "Yes, we are a Socialist Government; we believe in the extension of public ownership or nationalisation, and this is one of the ways in which we are going to do it." Then industry would know where it stood and there would be some honesty in this Bill. When in Opposition the present Prime Minister scornfully referred to industry's coming to Whitehall "with its begging bowl". But now that the Party opposite are in power the "begging bowl" has become a silver salver on which the taxpayers' money is proffered to those who say that they do not want it, and who, in turn, will be scorned for ref using to conform to Government policies.
To summarise my remarks on the first part of the Bill, there is no need for the Bill, and industry is against it. Secondly, it is an enabling Bill which gives Ministers and officials increasing powers of coercion, and it denies Parliament proper debate and power to amend the proposals for individual companies and industry. Thirdly, the equity proposal is wrong on practical grounds and dishonest on political grounds.
Noble Lords in all parts of the House might expect me to urge my noble friends to vote against the Second Reading of the Bill, and I should dearly like to be able to recommend them to do so. Unfortunately, that would mean that we should ultimately throw out what the noble Lord has called part II of the Bill, and it would be irresponsible on our part to hold up the production of the Concorde. Whether we are wholly in favour of it or not is another matter. We have learned from the Minister this afternoon that the moneys to be authorised by this Bill for the Concorde are in connection with the production, which will follow on the expensive investment in research, design and development of this aircraft. Clearly, it would be wrong to deny the Cunard Steamship Company the additional money which it needs in order to see "Queen Elizabeth II" sail the seas. On the Beagle aircraft I hold no particular opinions, but because of part II of 1223 the Bill it would be wrong for us to vote for the rejection of the Bill this afternoon. Instead, I suggest to my noble friends that we concentrate our energies on the Committee and subsequent stages to amend the Bill, where practicable, and also to obtain from the Government, so far as they are able to give them, explanations about some of the strange doctrines and policies that lie behind a Bill which we believe to be useless and valueless.
§ 4.15 p.m.
§ LORD RHODES
My Lords, I usually try to make it a rule never to speak in a debate unless I can hear it out. I apologise in advance for perhaps not being able to observe that rule this afternoon. May I say to the noble Lord, Lord Erroll of Hale, who has made a most reasonable speech, that some of its weaknesses are very obvious? I should like to draw his attention to the propaganda which has been put out for so long by the machine tool industry, which throughout the years has suffered from cyclical disturbances in trade just as the textile industry has done. Their cycle of trade has not been the same because it has been longer; the textile trade has been on a three-yearly basis. The machine tool industry have said for ages that unless the users of their machines can look forward to a steady background of trade, they cannot bring about the development of the modern machines which they need. We must congratulate ourselves on having done very well in the export field in recent weeks; and we welcome the news that Rolls Royce engines have sold very well indeed. But it is significant that we shall need enormous numbers of machine tools to deal with the orders which we have gained. Surely it is salutary that we are having to go abroad for more than 50 per cent. of the machine tools which will be required by Rolls Royce to undertake the export orders.
On the question of the particular type of Government participation, which the noble Lord referred as to "equity", I do not see in this Bill any underhand attempt at nationalisation by the back door. There are enough of us on the Labour side who think that there is sufficient nationalisation already and that any more of the kind that we had in the past would be far too much. There will in the future, 1224 however, be need for Government participation if firms, particularly those in the engineering industry, find that they are perhaps the sole makers of a particular type of machine and that, through their neglect, ill-fortune or whatever it may be, they cannot find the money to set about doing a job of work for the trade.
I should like to deal with what the noble Lord said regarding development areas. What he said is quite right, and he has said it on so many occasions that more people should take notice of it. There is a definite leakage of public funds here at the present time, and the system needs a new and drastic overhaul. I know of a man who went to the Board of Trade and said that he received 61 per cent. to 65 per cent. of his equity for his capital requirements, and he boasted that he could get his money back in nine months. He might be able to get his own money back in nine months, but he would not get the taxpayers' money back in nine months. That is one of the points in the noble Lord's speech of which it is worth taking notice.
I consider that this Bill is really putting into action what has been put over for some time now by the O.E.C.D. in Europe. It happens that this week there is a certain document in the Vote Office, and I read of the effort that is being made through this Bill to carry out a certain task. It is defined very well in this document, which says:The performance of a country in technological innovation has been defined as the rate at which new and better products and production processes have been introduced and diffused throughout its economy.I think that is a fair definition. The document goes on to say:It should be noted that thus defined technological innovation is different from invention. Invention can be defined as the establishment or postulation of the technical feasibility of a new or better product or process. The translation of an invention into an innovation normally requires development work together with manufacturing and market activities.Indeed it does, my Lords! Anybody who was upstairs last month at the discussion of the Parliamentary Scientific Committee, when we heard the heads of one of the City investment groups, and also the head of one of the organisations which has been mentioned in this debate to-day, the N.R.D.C., will have found it an education.
1225 There are many conflicting views as to whether we are slipping up on the development of things, and I shall quote, if the House will bear with me for one or two moments, from where the O.E.C.D. Committee comes to its conclusion.
There is, however, one conclusion that appears irrefutable. United States firms have turned into commercially successful products the results of fundamental research and inventions originating in Europe. Few cases have been found of the reverse process.That is salutary, and yet the Managing Director of the N.R.D.C. said—and I am quoting from the report of his address which has been sent to the Press:The N.R.D.C. has never been short of money to support good ideas.I should like to ask the Government why the Corporation needs more money. If the Managing Director of the N.R.D.C. says that it has never been short of money to support good ideas, why are we giving it more? He also said that he knewof no case in the last twenty years where a British invention has failed to be developed in this country and has been developed overseas.He was, perhaps, excluding the aircraft industry, about which he was not qualified to speak. Then he said:It is one of the popular myths, that we invent the original idea which is not taken up here and which is developed overseas.There you have a conflicting view. I should like to see some of these conflicting views rationalised.
I should also like to see a little more reason advanced for ideas of this sort, coming from a Department like the Ministry of Technology, which I do not accept as "gimmickery". If it had no real function or ability to make its impact in the diffusion towards the making of better products and the better processes to make the products, then I would admit in time that it was a gimmick that was being put up. But I am perfectly certain that in this Bill the Government are not putting forward something which is just a gimmick. I advise the Government to fit this in, not so much to a written plan, like the plan we had so many years ago, which is now dead and gone, but into what is really accepted as the corollary to this kind of expenditure and initiation in, at any rate, the Western world with its experience of marketing and trading on the modern scale.
1226 I return to what I have said time and time again. These separate operations cannot be undertaken in isolation. They have to be taken into the conception—I nearly said of a national plan, but I do not want to say that: of what is needed as a whole. I have pointed out that the Japanese have got ahead in a terrific way. When we view, say, the steel industry over the last six months and then view what is happening today in the world in terms of steel, and what the Japanese intend to do in terms of large scale, the prospect is just frightening.
Since the war Japan has mastered the technique of market forecasting and has a method allied to government. The Japanese have their own central statistical organisation which is master of its subject. They have their industries separated down: those which are growth, those which are standing still, and those which are going backwards. Accordingly, they devote their activities either to investment or to something else. Unless we, in this country have the same sort of idea, so that we know what we are spending the money for, we shall land in trouble.
There is a case for this Bill. I remember that in September, 1946, I was standing in the office entrance of a huge firm in Massachusetts. The village where I lived was a household word throughout the world for a machine. I put my card in at the window. It was an open office and there were hundreds of clerks there. A titter ran around this place, and I thought, "It cannot be me. I am looking very smart." I looked at my wife who was standing with me and thought, "It cannot be her. She is all right." Eventually the managing director came out and I asked, "Why are these people tittering?". He said, "I will tell you. It is your village. I Will tell you the story."
Then he went on, "We had a relationship with a firm, and we swapped knowledge with them for years. They gave us the know-how on carpet looms. We gave them the know-how on dollies for Yorkshire worsted looms. Then the war came and the arrangement lapsed. We had the benefit of research, development and the rest during the war that you did not have in England. I came over on a bomber plan to Prestwick. I came down from Prestwick to Victoria 1227 Station, Manchester." Anybody who knew Manchester in November, 1945, knew something. We talk about the underdeveloped areas—Manchester was appalling. There were no lights; there were hardly any services in the hotels; everything was run-down. This man tried the three principal hotels, and then he rang through to the managing director of this firm and said, "Look, I have come over because I want to offer you the whole of our range of new products". The managing director said: "It is difficult. It is late at night, you know". This man said, "Shall I get a taxi?", hoping that the managing director would say, "I will send for you". But he did not, and he left the man at Victoria Station all night.
My Lords, that was the man whose firm sold to the firm of which the noble Viscount, Lord Eccles, is a distinguished director, Courtaulds, millions of pounds worth of looms suitable for their particular trade. I am talking now about Crompton and Knowles. Those looms could have been made here. That man went back on the same date. He closed it up. That was the story told to me.
Let us look at two more machines in the same industry. Warp knitting machines can be obtained in this country in very tiny quantities. The major makers of warp knitting machines are in East Germany or West Germany. Millions of pounds are paid out every year, because they now have a near monopoly in the making of these knitting machines. Yet this machine was invented in this country, and the making of it lapsed for some years. After the war the East Germans took it up, made a tremendous success of it, and now we are spending millions of pounds of money buying the machines from them. The same thing has happened with regard to looms for ordinary knitting. The noble Lord talks about the money paid out in development areas. We are expanding in the development areas in various fields, textiles in particular. Where do we go for the looms? We go to Switzerland. There is hardly a new loom which is going into the development areas which has been made in this country.
What I want to say to the Government is this. They have my blessing so far 1228 as this Bill is concerned, and if they make intelligent use of it then it can be of tremendous benefit. If the Government take action in the case of commodities or machines, shall I say, that need to be developed—and there is no need for there to be any discrimination of the kind that has been mentioned in criticism—then there is no doubt that the Bill can fulfil a tremendous need. I sincerely hope that notice will be taken of some of the suggestions that I have made; but before I sit down I want to ask one question, which is this. If one of these Industrial Boards is set up for a particular industry, can such a Board buy know-how or licences directly for cash from overseas if they are needed? Because if that were practicable, that in itself would be justification for the Bill.
§ 4.35 p.m.
§ LORD ARWYN
My Lords, one observation I should like to make regarding this Bill is that if the first part had been in operation many years ago we might have been far better off now. I am afraid that I do not share the fears of the noble Lord, Lord Erroll of Hale, about the dangers of back-door nationalisation. Partnership in risk capital; yes, by all means.
I had hoped that the objects in the first part of this Bill might be extended specifically to help in the exploitation of inventions—in other words, perhaps to carry the ball further than N.R.D.C. The inventions made by large corporations as a result of long-term research programmes are usually well cared for, and the technique of exploitation is on a far higher level than is the case when a patent is exploited by smaller companies or individuals, who can often be robbed because they lack the know-how or the money to fight infringement.
It is the way in which inventions are exploited that matters. I am sure that many Members of your Lordships' House have experienced the mental turmoil which follows the birth of an invention. Fears accumulate that someone will file, or already has filed, an improved patent. Infringements are likely, and so on. The life of an inventor can be Hell. Anyone who can will rob him, whether it is a big corporation or a private individual, if there is any chance of getting away with it. Actions to protect patents are notoriously expensive. The first step towards giving some protection to inventors 1229 under a Government umbrella was taken by my right honourable friend the Prime Minister, when he was President of the Board of Trade. In 1948 he instituted the National Research Development Corporation, which has been an outstanding success.
One of the essential ingredients to ensure industrial expansion is the encouragement of inventiveness by providing every incentive and protection. Goodness knows how much we have lost through the flabby handling of licensing foreign licensees! We are so far behind the technique and strategy of the Germans, Japanese and Americans that only those of us who have had bitter experiences can realise the gap. Anyone who has had occasion to visit the German Patent Office soon realises that they are concerned not only with the validity of a patent but with how it is to be exploited. They are interested in who are to be granted licences. Now more than ever we must realise that the expansion of industry will always depend largely on our capacity to encourage and exploit the native genius of our people. This Bill affords an opportunity to develop that faculty. I am positive of this. I think that the objective will be realised in a very short time after the Bill is passed into law.
My Lords, the organisation of industry in this country is now of the hybrid kind, part nationalised and part capitalistic. As a result, we are in one respect in danger of getting the worst of both worlds. Foreign concerns, and in particular the Americans, can and do take advantage of our capitalistic structure to come in and use their patents and inventions to establish subsidiary companies in the more profitable areas of the economy. The companies in this country's public sectors are, in common with most nationalised industries in other parts of the world, intended to operate mainly in the domestic market and within this country. By reason of inherent structure, outlook or temperament, the nationalised industries seem unsuited for foreign adventure.
This making of valuable inventions within these industries does not result, in Britain, in the setting up of profitable subsidiary overseas companies. I think I might remind your Lordships that there 1230 are research teams working in every nationalised industry, and that they do bring results. I have not heard yet of any subsidiary company being formed outside Britain to exploit these inventions—though I may be wrong, or I may not have sufficient knowledge of what is happening. As a world-wide phenomenon the contrast between the achievements of private and public companies in establishing profitable subsidiaries in foreign countries is very marked. By way of extreme example, one may compare the achievements of industrial organisations in Russia with those of the United states in this respect.
It is obvious that some machinery is necessary to enable the inventions made by the publicly owned industries to be exploited to the best advantage, not just by way of mere licensing arrangements but also through the use of British-owned and controlled subsidiaries, not only to bring profit back to this country but also to give us an influence in the industries of foreign countries comparable with that exercised by foreign concerns, and particularly the Americans, here. We have an excellent corps of patent agents; our Patent Office is efficient; our patent laws afford an excellent and remunerative practice for some of the most brilliant members of the legal profession. We need the same efficiency in the exploitation of patents. The proper exploitation of patents, whether from private concerns or from public corporations, must be treated with the same care as that needed before a patent is granted. It is not enough to take care in hatching the egg: the bird must be taught to take care of itself; to fly and to fight, if necessary.
I have dealt with only one of the benefits which could accrue from this Bill; that is, the encouragement of the development of inventions. But I think the occasion is opportune to draw the attention of the Government to the need for placing the exploitation of our own inventions as a top priority under their wing. I do not mean that the exploitation of patents should be controlled by a Government Department, but that expert advice, guidance and protection should be available. If an inventor so desires, there is no reason why the complicated process of licensing could not be supervised by a Government Department. The commercial counsellors in various Embassies 1231 could do some valuable work in this respect. Likely infringements would not be so tempting if the infringer knew that he would be up against an efficient Government Department.
My Lords, I have made some inventions in my time, but about 45 years ago I made one of my best. I was young and did not have much money; I went to the bank manager and asked him if I could have an unsecured loan of £5,000 to develop my patent. Of course, he could not sanction this. He wrote to his head office and the answer was very polite, but with no result. I had letters of introduction to some merchant bankers. Only one of them paid some attention; but he wanted to have an option on 78 per cent. of the shares of the company which would own the patent. I felt very depressed. I went home; and that was the end of that. But had that patent been developed, it would have been quite helpful to the national economy. Some fifteen years later I was able to recover something of the self-respect that I had lost when I found that a large corporation had, after some years of research, arrived at the same conclusion as I had; and had developed it. It is still working and is making big profits. This is a personal case, and I am sure that there are Members of your Lordships' House who have had similar experiences—and harsh ones.
If this Bill enables people to go to some Committee or Council or Board to have the whole thing vetted, perhaps in conjunction with the N.R.D.C., there will be a wave of enthusiasm in this country; because the talent here is enormous. I am sorry to have bored your Lordships with my "hard-luck story"; it is the only one that I have ready to hand to explain the possibilities, the resources and the genius which, given some encouragement, can be tapped. We must promote this aggressive spirit in this country. It is the attitude in other countries. I am sure that Members of your Lordships' House who sit on boards have had knocks at the door from Japanese, Germans and Americans and others, as soon as a patent has been filed and published, asking what are the terms of the licences. They are on the 1232 spot, not within 24 hours, but certainly not long afterwards. If we are to preserve that which we have built up in this country, we have to be equally aggressive. Our foundations were laid by the enterprise of the merchant adventurers and I believe we must ensure that our industrial expansion is fostered and encouraged aggressively and positively in the same spirit and, if the occasion demands, with the same degree of ruthlessness.
§ 4.47 p.m.
§ LORD HIRSHFIELD
My Lords, the Industrial Expansion Bill should be welcomed for two reasons. First, it brings what I believe is a necessary broadening and strengthening to the scope the Government have to promote planned economic growth. Secondly, it contributes in a highly important way to the means by which the Government can exercise control over the use of public money by private industry. I shall confine my participation in this debate to these two points because not only are they, in my opinion, the crucial ones, they are also the onus upon which the Party opposite has apparently chosen to centre its attack.
The Government have agreed that it has become increasingly clear that there must be an increase in the speed with which they can provide financial support for modernising industry; that there is a continued need for more rapid application of advanced technologies in industry; that as the Ministry of Technology is presently constituted it has wide powers to support research in technological development but very little scope to support the exploitation of the results; and that, because there is likely to continue to be a succession of industrial cases requiring Government help, they must have effective power to take advantage of new industrial opportunities quickly.
I consider that all these factors gain credence and validity if we examine the weaknesses in the capital market at present. Of course, as the Conservative Opposition has rightly said, if an industrial project is worth the effort in clear and fairly immediate profit terms, the market will ensure that adequate finance capital is available. There is certainly no lack of finance for profitable projects. But there is an increasing number of areas where, due to divergence between the straight calculations of cost 1233 and benefits worked out on a commercial basis and those made when national costs and benefits are considered, essential capital finance is not forthcoming unless the Government take the initiative.
My Lords, one of the most obvious examples in recent years has been I.C.T. which in 1965 badly needed cash to develop its 1900 series of computers but could not raise it on the market. Fortunately the I.R.C., with the support of the Minister of Technology, was able to help, and that intervention has brought very notable benefit not only to the computer industry but to our balance-of-payments position as well. It is, in fact, possible to itemise at least seven areas where there are major gaps in the capital market and where, unless Government machinery is developed along the lines proposed in the Industrial Expansion Bin, economic development which is in the long-term interests of the economy as a whole will fail to occur.
First there is the industrial structural gap. For a long time the capital market has shown its inability to provide adequate capital finance for handling major processes of structural change. Rationalisation in coal, steel, cotton and shipbuilding has been achieved only through Government initiative and help. It is eminently sensible, therefore, for the Government to seek, through the Industrial Expansion Bill, a readily available way of enabling them to carry through, as they are doing in shipbuilding, the major structural reorganisation required. Next there is the regional gap. We have a continuing need on national economic grounds for a higher level of industrial investment in the development areas, but there is a continuing lack of sufficient initiative on this front coming from the capital market and financial institutions. In this context, too, therefore, the powers contained in the Industrial Expansion Bill can play an important part.
Then there is the long-term finance gap for the smaller company. The raising of permanent or long-term capital was dealt with by the MacMillan Report, although this covered only issues of over £2,000. The position has improved, and it is now possible for selective companies to raise lesser amounts by a public issue, but the costs are a deterrent to many smaller companies. The Industrial and Commercial Finance Corporation was formed 1234 to fill this gap, but often its approach can only be described as over-cautious. It is perhaps common to lending institutions, and to I.C.F.C. that the majority of applications are turned down, but a considerable proportion of I.C.F.C. finance is provided to companies which are already substantial. I hope that the noble Lord, Lord Sherfield, will not mind my suggesting that a detailed review of the operation of I.C.F.C. might be useful at this time, and in the interests of a rather wider section of British industry and enterprise.
My Lords, I come next to the medium-term finance gap. On the whole, large firms are in the happy position of being able to rely on their overdraft facilities continuing uninterrupted and without reduction. In case of need they have no difficulty in funding their borrowings by recourse to the new issue market. Smaller companies, however, find it more difficult, and in comparison more costly, to obtain long-term finance by these means, yet they cannot commit themselves to relying absolutely on being allowed to continue their bank overdrafts at the, same limit. This situation obviously creates uncertainty for the smaller company, and such uncertainty cannot but have a most sobering, even dampening, effect on any planning for future capital investment.
One can also recognise an inventions and innovations gap. The provision of finance for the development of new inventions involves both technological and commercial risks. And the existing City financial institutions are usually not prepared, or even appropriate, to undertake such operations. I feel that the obvious body for carrying out this specialised financing function is the National Research Development Corporation. But the Corporation is still operating on too small a scale and needs to be considerably expanded if it is to shoulder adequate responsibilities in the area of the inventions and innovations gap.
Another significant gap is connected with company mergers and rationalisation. The object of any particular takeover may be improved efficiency, or it may to some extent aim at a greater or dominant share of the market. It is to be hoped that the Industrial Reorganisation Corporation is paying more attention to the social consequences and benefits 1235 of mergers and to the problems of labour relations which they involve. The I.R.C. should also be in a position, perhaps, to offer financial inducements to achieve those mergers which it wishes specifically to bring about.
Lastly in this group of capital market gaps is one which has been called the exceptional or disproportionate borrowings gap. It is usually found that the larger a company is and the better its earnings record, the larger are the sums which it is able to borrow. But circumstances can arise when a company should be able to raise finance to an extent which is out of all proportion to its present size. For example, it might then be possible to achieve a major development in a fraction of the time it would take under normal financial arrangements. Or some new piece of research could be developed and exploited to attain a success which would be missed without the provision of special finance. The I.R.C. seems to be the most appropriate vehicle for such operations, which might well be combined with its interests in mergers and rationalisation schemes.
Does not it follow, my Lords, from this somewhat sketchy account of major gaps or weaknesses in the capital market—weaknesses which I believe are, if anything, increasing—that there is enough evidence to show the importance of having efficient and adequate Government machinery to fill those gaps and weaknesses? And in this situation, the general principle incorporated in the Bill which gives the Government increased powers to act quickly and decisively is of the first importance.
There are also some secondary issues which can be mentioned here. For instance, there is a need to ensure adequate co-operation between the various Government Ministries and public agencies involved in industrial modernisation. This raises the question of whether in the longer term a reorganisation of Government Ministries should be undertaken, leading perhaps to a Ministry for the private sectors. Public finance for the private sectors should be provided only on certain strict conditions. There should be a continuous concern for the taxpayers, as there is in the equity provisions of the Bill. But there should also be an attempt to enforce other basic 1236 standards in the industries receiving public money, particularly recognition of the right to trade union representation.
My Lords, much has already been said by the Party opposite about the doctrinaire nature of the Bill; that it is an attempt to secure rationalisation by stealth. And despite all that has been said about the fact that the Bill has nothing to do with such aims, these arguments still persist. Indeed, during the Second Reading debate on this Bill in another place my right honourable friend the Minister of Technology gave an intriguing historical account of past instances where the Governments of both Parties have accorded financial support to industry in the past, sometimes with equity participation. What is so strange about this criticism is that it comes from a Party which has always claimed to have the taxpayers' wellbeing in the forefront of its mind, and which has always accused Labour Governments of extravagance.
I see the equity provisions as a right and relevant way of strengthening the measure of public accountability and control over public funds employed in industry, and I regret to say that the opposition to this Bill is one further example of indifference to our nation's urgent task. The waste of public money which took place under earlier Governments—the Bristol-Siddeley affair is only the latest of a long catalogue—showed clearly enough the importance of having adequate Government control over those areas of the economy where public funds are employed. I welcome the Government's concern on this issue, which they have expressed in the Industrial Expansion Bill, and I believe that it deserves the support of all sections of your Lordships' House.
§ 5.0 p.m.
§ LORD GRANVILLE OF EYE
My Lords, like my noble friend Lord Hirsh-field, I welcome this Bill, which comes to us from another place after it has been extensively debated. I listened with interest to the speech of my noble friend the Leader of the House, in which he gave a close exposition of the clauses of the Bill. I gather from the noble Lord, Lord Erroll of Hale, whose speech I listened to with interest because of his ministerial and industrial experience, that while the Opposition do not want to oppose the 1237 Second Reading, they intend to do something with regard to Part II of the Bill on Committee stage.
I think that this is a good Bill. It is a wide, almost an omnibus, measure and it is considerably overdue, as my noble friend Lord Hirshfield has suggested. It is so long overdue that I should have thought it was almost a non-controversial Bill. I feel like the young man who said, "I'm glad you've arrived; but what kept you?". The Bill is to help projects unlikely to get finance from alternative sources. As the White Paper says, it is… to enable the Government to help projects which were in the national economic interests but which, because of a divergence between national and private costs and benefits, especially in the short term, could not be expected to go ahead solely on the basis of finance from existing sources. The legislation would not confer any compulsory powers.The White Paper also says:In the ordinary course, companies will continue to rely on their own resources, augmented by general schemes of fiscal and other incentives, or to secure support from commercial sources and existing financial institutions. The Government have no intention of displacing these sources of finance.It has been made clear, both in the debate in another place and in the speech of my noble friend Lord Shackleton, that this is not just a setting up of another borrowing bank. Other large industrial countries have been doing this on a considerable scale for some time. In Italy, in Japan, certainly in the United States, and in France, this has been almost the practice for large-scale industry, and this country has been lagging behind. Previous Governments have given considerable support to the aircraft, shipbuilding, cotton and other industries, but hitherto in the discussions which have gone on between industry and the Government of the day the Ministers have given the go-ahead and sought approval afterwards, whereas this Bill lays down the ground rules; but Parliament must approve each individual project and the form of Government assistance is subject to negotiation between the parties.
The Bill also sets out some of the projects—the Beagle Aircraft Company, the Concorde and the "Queen Elizabeth II". I am not sure whether it refers to the hovercraft industry, but I hope that in the consideration of the various proposals, the smaller ones, especially those 1238 to develop new ideas and inventions, will be given full opportunity. I know a concern which many years ago could not get financial help for an important project and they had to go to Japan. To-day they have an overturn in this country of £30 million, with a 40 per cent. export.
I am not sure from the Bill who is going to decide between the various projects. I hope that whoever it is will bear in mind that quick profits should not be the sole and all-important criterion. Under the Bill, the Minister is to be advised by committees and boards. I should like to ask who is to select those committees—the Minister or his advisers? It is important that those who are selected to advise the Minister should have the necessary qualifications and know what is required in industry. It is no good appointing caretakers or timeservers, whoever may suggest their names. The Government must get men who believe in the policy, and we should not find, as in steel, that consideration is given to people who say that they are completely opposed to the Government's policy. This has nothing to do with "jobs for the boys" or "admirals for marketing organisations". It is my view that we must get on these advisory committees younger men who do not care two hoots for the old labels.
It is important that all this should be given a pull in the right direction. We have to give these men adequate training facilities and, if necessary, send them to various parts of the world to study the implications of the export markets. That has been one of the shortcomings in the past. They should be industrial leaders who understand productivity at plant level. They should be technocrats with a forward view, but, above all, they must understand and support the policy of the Government of the day, whichever Government it may be.
In my submission, this requires a new type of industrial leadership. Until we make a break from the outworn labels of the past and the endless Party discussions and arguments about private interprise, we shall continue to lag behind other countries in development and planning. Government in this country and in every major country in the world affects every kind of business, by taxation, regulation, subsidy and policy, and to-day it is this. They have my blessing so far 1239 these things. Try to sell aircraft to the United States of America without Government help and see how far you can get. You may say: "Well, there is the Minister of State of the Ministry of Technology. And people from the industry could probably go and achieve the same results." But I doubt that very much because they would not have the power and authority of the Government and the Government Department behind them. I suggest that, instead of this endless debate on the old labels, the criterion to-day is business enterprise, and the yardstick is efficiency, and efficiency alone.
This Bill was necessary. Professor Perlmutter, who is a distinguished Economist in Switzerland and is shortly taking up an important post in the United States, estimates that in 20 years' time 300 giant firms will rule world trade. Perhaps I may quote from what he said in a lecture that he gave recently. He said:In 20 years' time the business world will be dominated by 300 monster international companies. They will have world-wide manufacturing and distribution facilities controlled from headquarters staffed by multi-national teams of executives.He also said:And swimming around the leviathans and their victims will be shoals of small, fast fish—mounting guerrilla raids on key markets, bringing out new products to fill the gaps, and living off their wits and their ability to react instantly to any shift in the balance of power.Well, my Lords, if that is an accurate forecast by a distinguished economist in Europe, how does anyone expect to try to finance private enterprise in the future? As my noble friend Lord Hirshfield suggested, in future capital requirements alone will require Government financing on a large scale. As my right honourable friend the President of the Board of Trade said in his speech:The Government have no doubt that the leading firms in the major industries must take their place in the big international league. They must operate on a world-wide scale, and this means they must be of great size and strength.This, I think, is the future trend with all the major industrial powers in the world, and as an industrial country we have to get out in front; we have to become the powerhouse of technique and productivity for Europe. I would ask the Government to take the risks about this, not to be too crotchety about their consensus, and not too conservative in 1240 taking their decisions. I believe that we can succeed in making this country a great industrial power giving a lead to Europe and the world. For those reasons, I support the Bill.
§ 5.13 p.m.
§ LORD TREFGARNE
My Lords, I should like to thank my noble friend Lord Drumalbyn for allowing me to intervene in your Lordships' debate before he addresses us. Broadly, I share the views of my noble friends on this side of the House in thinking that some of the broader objectives of the Bill need to be looked at again in Committee. However, I welcome the provision in the Bill for the acquisition of Beagle Aircraft Limited, and for the subsequent financing of the Concorde project.
If I may dwell for a moment on the acquisition of Beagle Aircraft Limited, the notes that were placed in the Printed Paper Office for us were helpful, but your Lordships may not have appreciated that the Beagle Company has been in commercial operation for, I think, six or seven years, and is already achieving a world-wide reputation for the excellence of its products, although, of course, any firm of this nature takes more than that time to build up a sufficient volume of sales to be able to attract private capital in sufficient quantities.
There are, however, one or two points that I hope it is proper to inquire about at this stage of the Bill, in particular as to this acquisition of Beagle Aircraft Limited. First, is the decision to acquire the assets in the company, rather than in its shares, based on a commercial foundation, or is there perhaps some more or less sinister reason that I have not discovered? What, for example, is going to happen to the shareholders in the old Beagle Company? Your Lordships will recall that not only is the Pressed Steel Company a substantial shareholder, but there were a number of private individuals—I think chiefly employees of Beagle—who had small shareholdings. What form will the new company that is to acquire the Beagle assets take? Will it be a corporation, like the one that is proposed for the Post Office, or will it be simply a new private limited company, with the Government as the sole shareholder?
My last point is the question posed by Clause 15 of the Bill, which leaves some 1241 doubt, at least in my mind, as to what will happen to the profits that we all hope Beagle will in due course make: because, although in that clause reference is made to interest on loans and other financial enterprises that the Board of Trade may enter into, no reference is made to any receipts of interest or other payments for dividends on shares. I hope that it will be possible for the noble Lord, Lord Shackleton, to answer that point when he winds up, although I appreciate that, owing to the lateness of my intervention, he may not be able to do so.
§ 5.17 p.m.
§ LORD DRUMALBYN
My Lords, we have had an interesting debate, which has covered a wide area and has dealt pretty thoroughly, from various point of view, with this Bill on its Second Reading. We have had a particularly interesting speech from the noble Lord, Lord Hirshfield, which has analysed the gaps which could exist, although I am bound to say I think that, if the Government really intend to set out to fill all these gaps, it will not be possible for them to carry out the intentions they have expressed in the White Paper.
We have had an interesting speech from the noble Lord, Lord Arwyn, on the development of inventions. And the noble Lord, Lord Granville of Eye (I do not now see him in his place), has also addressed the House and said that many other countries have the sort of provisions that are contained in this Bill. That may be so. But we have to consider our own Constitution and the way in which we handle matters in this country. We certainly do not want to be too slow in dealing with things; on the other hand, we certainly do not want to be too quick either. There has been a certain amount of stress on doing things quickly and decisively. Yet every one of the kind of projects that the Government must have in mind requires the most careful evaluation, and I trust that the quickness and decisiveness will not be such as to exclude this kind of proper inquiry that is required before Government money is committed to any project.
I mentioned our constitutional position, and I think that this Bill is of some constitutional importance. It may also have far-reaching effects, which might be good or bad, depending on how well 1242 the schemes are conceived, not only in particular industries and particular firms but on the whole structure of industry and on the relationship and confidence between Government and industry; and this is a point that ought always to be kept very carefully in mind. It would be wrong of the Government to disregard the reception that this Bill has received from industry, for that reason. My noble friend Lord Erroll of Hale referred to this matter and I do not intend to go over it again. I do not propose, either, to say much at this stage about the particular industries and firms dealt with in the Bill. At least we can say that Parliament is being given an opportunity to discuss and amend those proposals.
The main effect of Clause 9 seems to be to confirm the agreement with Cunard to raise the loan from £17.6 million to £20 million, and to increase the limit of the shipbuilding credit of £75 million established by the 1964 Act by £6.4 million. As to Clause 10, I, for one, could not complain of the amendment to the Shipbuilding Industry Act contained in that clause because I argued in favour of making grants available for a shipyard or an undertaking making main engines which was carrying out a reorganisation scheme, even if it was not participating in a regrouping scheme. Although I welcome the change of mind and heart of the Government in this case, I am bound to comment on the sort of change which can take place in a very short time in the opinions of the Government as to where the national interest lies on a particular case. That is important when we are considering a Bill designed to provide a permanent basis for subordinate legislation and so avoid the need for further legislation as each case arises.
As to Clause 11, it would not be unreasonable to take this opportunity to increase the limit of loans to N.R D.C. if there is any likelihood of the present limit proving inadequate. The noble Lord, Lord Rhodes, asked why they need more money now. It is only three years since the limit was increased, with the general approval of Parliament, from £10 million to £25 million. Now it is to be doubled. Here again, since a financial limit is imposed for the main purpose, 1243 for the first part of the Bill, it is relevant to comment on the facility with which this Government think of a number and then double it within a very few years. It is plain that the possible limit of £150 million in the first part of the Bill has little value as a safeguard except in the very short term, and so can give those who are suspicious of the Government's intentions no reassurance at all. Perhaps the noble Lord, Lord Shackleton, can tell us what is the total of loans to N.R.D.C. at the present time, and what is the present estimate of forward commitments on which this increase is asked for.
As to Clause 12, I am glad that my noble friend Lord Trefgarne came into the debate and spoke on this clause and so saved me the trouble of commenting on it. The noble Lord, Lord Shackleton, was good enough to explain the purpose of Clause 13, and we are grateful to him for making available the Papers, which I am told are in the Printed Paper Office but which I myself have not yet had the opportunity of seeing. I understand that Clause 13 virtually continues on a permanent basis powers which are at present enacted from year to year. All these matters are tacked on to the main part of the Bill, most of them with a retrospective flavour. Parliament is now being asked to agree to what has been done, or at least to what has already been agreed to be done.
But perhaps I should come to the main part of the Bill. I should like to comment first on Clause 3, which enables the Government to make general schemes for the purposes of particular industries or sections of industry. Such schemes may be made and laid before both Houses of Parliament. They are subject to Affirmative Resolution of the House of Commons. No doubt your Lordships could debate such a scheme and might even pass a Motion commending or deploring it, but we could not stop it, however inappropriate or disastrous your Lordships might think it. Considering that such schemes have in the past been introduced by legislation (I am talking of the whole industry schemes), and that that legislation has been fully considered by this House; considering also that this House has never rejected any such scheme approved by another place, your Lordships may think that, to use the 1244 Civil Service word, this is "unfortunate". For since even the other place will be unable to amend such a scheme, it is plain that the Government regard the approval of the other place as a mere formality and take no account of the collective wisdom and knowledge of particular industries that exists among Members in another place, to say nothing of the interests of their constituents. They have certainly completely disregarded the expertise that exists in your Lordships' House.
The other place is obviously merely expected to sanction the scheme from the point of view of the money to be made available under it—a mere formality. Indeed, the noble Lord himself practically said this. I think his words were, "consent to Government requests to spend money out of Votes". If that is all there is to be, I am bound to say that Parliament is not being given a proper opportunity to consider these schemes. Your Lordships might have been disposed to regard this arrangement with less misgiving had any proper procedure been laid down in the Bill for consultation and inquiry. But Clause 3 makes no provision at all for consultation. It stipulates only:such inquiry as the authority"—that is, the Minister concerned—considers appropriate as to the conditions prevailing in any industry or section of an industry".In the White Paper, to which the noble Lord referred, paragraph 15 talks of:inquiries into the needs of particular industries normally by a committee specially appointed by the Government, but possibly carried out by other bodies such as the economic development committees, may lead on occasion to recommendations for general schemes of support for the industry concerned as distinct from support for individual projects".Ought not something of this kind to be put in the Bill? Why should the Bill not say that if, as a result of an inquiry carried out by a committee appointed by the competent authority, or by N.E.D.C., or any other body, perhaps, whether at the request of the competent authority or otherwise, it appears to the authority that the industrial investment scheme should be made, he may, after consulting such organisations as he thinks represent persons engaged in the industry, 1245 and such other persons as appear to him to be interested, make a general scheme, et cetera? Surely this would be a much better way of dealing with the matter. If the noble Lord will look again at this point I think he will be bound to agree that at the moment what appears in the Bill has an apparent air of arrogance. If the Government intend to have proper consultations, either through an ad hoc committee of inquiry or direct, why not put it in the Bill?
I come now to Clause 2, which has evoked most comment. This enables an industrial investment scheme to be made for the purpose of any project which, in the opinion of the authority, is likely to benefit the economy of the United Kingdom or any part of it, and would not be undertaken without financial support from the Government. The financial support may take one of eleven forms set out in six paragraphs. The first paragraph says that support may be given either by loan or by grant, but not, apparently, by both loan and grant. Why is that?
The most controversial paragraph, of course, is paragraph (e), which would enable the competent authority to subscribe for shares in a company or to purchase them by agreement. My noble friend Lord Erroll has dealt very comprehensively with this, but there are some points that I should like to emphasise here. Subsection (3) provides, among other things, that the authority may do so only with the consent of the company. I hope that when we come to the Committee stage the noble Lord will be able to tell us precisely what that means in the various circumstances that can be envisaged; for example, where part of the authorised capital has not been issued; or where it all has and it is to be increased by a special issue to the authority; or, again, where preference shares or other shares ranking before any of the existing ordinary shares are being taken by the authority, and so on. I hope he will be able to assure your Lordships to-night that in no case will a scheme be made without the consent of the existing shareholders, and that that is what the consent of the company means.
The White Paper emphasises that there will be no compulsion, and I take it that 1246 that means either directly or indirectly. Among other things, it means that there will be no compulsion either on the board of the company or on the shareholders. It also means that there must be no pressure amounting to compulsion. The company must be absolutely free to choose either to accept or reject the Government's propositions. The White Paper says that for the Government to use compulsion would clearly not accord with their purposes, so we are bound to ask how voluntary is "voluntary" there. Parliament and the Press will watch most carefully to see that the Government fulfil their expressed intention. It amounts to a pledge, and we take it as a pledge.
I ask that particular attention should be given to the next question. If an industry wants to start up, or is willing to start up, in a certain place, whether a development area or not, the social cost to the community may be heavy in respect of houses, schools, roads and so on; and if it starts up in a development area the financial cost under the Local Employment Acts also could be heavy. I will not follow what the noble Lord, Lord Rhodes, said on this, but the point I am making is that I should like the noble Lord, Lord Shackleton, to give an absolute assurance—and I do not mince words in this—that the Government will not sell industrial development certificates in return for a shareholding, or in any way at all—even taking into account that the grant of an I.D.C. may mean heavy social expenditure. These are separate functions, and if the Government start to do that they will put our enterprises at a disadvantage compared with competitors in other countries
§ LORD SHACKLETON
My Lords, I should like to ask the noble Lord what he means by "sell": I hope he will use precise language.
§ LORD DRUMALBYN
My Lords, I apprehend that something is sold if it is given in return for a consideration, and that is precisely what I mean. If, in consideration for granting an I.D.C. the Government were to insist on a shareholding, I consider that would be selling the I.D.C.
§ LORD DRUMALBYN
My Lords, as I have said, the Bill makes it absolutely clear that an industrial investment scheme can be made only on two conditions: first, if it is likely to benefit the economy and, secondly, if it would not be undertaken without Government financial support. But the judge of both these matters is the Minister concerned. It is his opinion, his opinion alone, and merely his opinion. According to the Bill it cannot be challenged. When the scheme comes before another place, no doubt at a late hour in the evening, the Whips will dutifully ensure a Government majority. No matter what may be said, this must be wrong. There must be some means of testing that opinion. For example, what happens if, when the scheme is published, events give the lie to the Minister's opinion, and some other company comes along with a better offer than is contained in the scheme?
Your Lordships have a committee which deals with Orders. The other place has none. Perhaps that is why Orders embodying investment schemes are not to be subject to scrutiny by your Lordships. It looks as if the Minister is afraid of having his opinion tested to see whether it is soundly based. I challenge the Government, if they are not afraid, to give an assurance that they will invariably publish proposed schemes before making a draft to submit to Parliament. Will they consider objections? Will they go further and put that assurance in the Bill? At the very least they should encourage the setting up of a committee in another place to examine the draft Order, and to satisfy themselves that there really is no alternative to Government financing.
Admittedly the White Paper says that the Government will submit projects to the Advisory Committee to be set up under this Bill for comprehensive evaluation, but no amount of evaluation can establish whether the market will or will not finance a project. The only way to find that out is to take it to the market and see; and before Parliament consents to an Order someone must certify that that has in fact been done. A mere opinion as to what the attitude of the market would be is not enough.
My Lords, the Government have only themselves to blame if this Bill is regarded with deep suspicion, even where it is not condemned outright. Had the Govern- 1248 ment come along with a list of projects which the market had been offered and had declined to finance, or for which they had failed to find enough capital, and had they then said, "This is the sort of thing we want these powers for", Parliament would have been able to evaluate for itself the usefulness or otherwise of the Bill. As they have not done so, we can only conclude either that there are no plans and that the reports in the Press of some twenty projects which the Government have up their sleeve are false, or else that the Government dare not publish the schemes because, if they did, the market would be interested in them and willing to finance them.
The Bill purports to help industry to make improvements which would not otherwise take place—improvements in efficiency and profitability, technological improvements in processes or products, the creation, expansion or maintenance of productive capacity. The implication is that in the view of the Government these things are not taking place, presumably because the flow of investment is inadequate. If so, cannot the Government handle the economy in such a way as to increase the flow of investment? This is what "managing the economy" means. It does not mean managing particular industries in the economy, but seeing that the flow of investment for worthwhile projects is adequate. Business will always promote a project if it sees a prospect of a return on its money. This is what it is there for—to judge of a particular project whether it offers the prospect of a return on the money invested.
Considering the effect of inflation on replacement costs and the uncertainty created in the market by Government somersaults and other antics, it really is surprising how well investment has been maintained. It may be that the Government consider that there are projects which would be worth while in the national interest but are so unlikely to prove economic, that the market will not touch them. If that is so, what is the point in committing the taxpayer to take shares in such a company? The Government already have powers to take a shareholding in an industry through the I.R.C. to facilitate the bringing together of companies in a merger, on the understanding that the I.R.C. will rotate its 1249 funds and not sink them permanently in shares. But this proposal is a quite different one. It is for direct Government shareholdings on a long-term investment with, presumably, a Government nominee or Government commissar on the Board.
There are three reasons why such investments are undesirable in competitive conditions. First, there is an inevitable and undeniable temptation to discriminate—and even if that did not operate there is always a suspicion of discrimination—in favour of companies in which there is Government participation. This cannot be solved by referring it to the Advisory Committee at the project stage. Secondly, there is the handicap that Government participation can involve for exports. Thirdly, there is the political pressure for assistance to this or that company, and the political credit which the Government will take and to which they are bound to have regard.
The best that can be said for this clause was said, I think, by Sir Ronald Grierson in the Spectator, that "the chances are it will somehow do some good somewhere," and that, as one Labour Member wrote in The Times, in 99 cases out of 100, projects which are worth supporting will attract private capital, but there remains the hundredth case.
Are not the dangers threefold? The first is that the Government will induce industry, through the bait of financial support, to take on far too many projects, in the mistaken belief that each of them is a hundredth case, when in fact it is not worth supporting at all. The second is that the various Departments, believing, or pretending to believe, that the market would not put up the capital for quite viable projects, will prevail upon companies, by one means or another, to accept Government financial support in return for a shareholding. The third is that the market will become less and less willing to put up risk capital because it knows that the Government can do so if the market does not. I believe that this erosion of enterprise through Government subvention is the most insidious and pernicious danger of all. That is one of the main reasons why I dislike this Bill. The other reason is that it contains no adequate constitutional checks on what are politely called the "competent authorities." I believe that, however competent these Ministries may be in their own sphere, they simply have not 1250 the expertise to carry out the functions given to them in this Bill, and that no amount of advice from advisory bodies can fill that gap.
My Lords, the Bill is brought before Parliament as a kind of bounty. Those who regard it in this way should remember that before accepting a gift of money it is wise to reflect very carefully indeed and to make sure that the real object of those who offer the shekels is not to apply the shackles.
§ 5.43 p.m.
§ LORD SHACKLETON
My Lords, I congratulate the two Opposition Front Bench speakers on their speeches. Of course, nobody else in the House agreed with them, but this does not discourage them from trotting out all the old stuff that we have heard for years. I must say I am rather worried at the way the noble Lord, Lord Drumalbyn, is coming so much under the influence of the noble Lord, Lord Erroll of Hale. We are accustomed to this sort of stuff from the noble Lord, Lord Erroll of Hale, but I did not like some of the implications, which seemed to me to be unworthy, and I should like to get these out of the way—these phrases about selling I.D.C.s, coercion and so on. The noble Lord, Lord Erroll, made a lot of the potential power of civil servants to coerce firms to comply with the Government's wishes. I very much hope that the noble Lord will reconsider what he said. These are really serious allegations—indeed he implied that such actions were almost within his own experience and knowledge. I really feel that if he is going to make allegations of this sort he should do something to demonstrate them.
Perhaps the most bothersome thing was the failure to recognise the purpose of this Bill as a sincere and, I hope, very carefully considered attempt to achieve a sensible sort of partnership between industry and Government. For the noble Lord, Lord Drumalbyn, to imply that if the economy is properly managed the market will always provide the funds is totally to ignore the evidence, not merely of the last three years but of the last hundred years. Why in that case did the previous Government continue to foster the National Research and Development Corporation? I may have misunderstood him, but this was the implication of everything he said. When we look at 1251 the criticism that is made by industry, and in particular the criticism by the C.B.I., it is worth noting that the Confederation's main objection addressed to the purpose of the Bill was that the support given by the Government might have to take the form of acquisition of shares by agreement. I submit that this really is going too far. Surely at some stage in our national life it will be possible to believe in the good intentions of Government on some occasions, whatever Government it may be.
I am well aware that there are those who believe that Government support of industry blunts the effectiveness of market forces and is bound to cause the economy to lose its competitive edge. I heard what the noble Lord, Lord Drumalbyn, had to say on this. He suggested that funds find their way basically for profit; if the profit is there, and there is a clear enough area of profitable or prospective profitable investment, the funds will be there. I will not go into the whole question of management of investment, although I am sure my noble friend Lord Hirshfield would be able to answer the noble Lord.
The amount of money that is going to be forthcoming from Government in this is a fleabite in comparison to the total amount of money invested. Noble Lords opposite have been ignoring the weight of evidence from past initiatives of successive Governments that co-operation and partnership with industry is possible, and they have had answers today from my noble friends on this side of the House, from men of wide experience in industry, direct managerial experience. We had my noble friend Lord Rhodes, with years of experience of management in the textile industry, deeply interested in the research field; my noble friend Lord Arwyn; my noble friend Lord Granville of Eye, an experienced businesman; and not least, my noble friend Lord Hirshfield, who knows more about market activities and investment, I think, than probably the great majority of Members of your Lordships' House.
What noble Lords opposite fail to realise is the nature of the competition that our industries, and particularly our science-based industries, are facing, and 1252 the fact that if we are to make our way in the world then we have to foster a number of these industries. It may well be that Governments of both Parties have made mistakes in this field in the past, and that there will be mistaken investments in the future. One cannot guarantee against this. But there have, of course, been successes. The recent initiatives by the Government in certain areas have already yielded encouraging results—for instance, in both the shipbuilding and the computer industries—at least the first steps in recuperation of the shipbuilding industry. What does the noble Lord think we ought to have done about the computer industry? This is the classical example of the first item on the Government's "shopping list" for which he asked.
§ LORD DRUMALBYN
My Lords, I would only suggest that this could easily have been dealt with under the Industrial Reorganisation Act.
§ LORD SHACKLETON
My Lords, I want to come to the I.R.C. in a moment. Certain things can be done under the I.R.C. Act. No doubt we shall come to discuss this at the Committee stage. There was a suggestion that the I.R.C. had been "warned off" by the Government from any activity that mighe be a candidate for support under the Bill. The Government made clear, in paragraph 12 of the White Paper on Industrial Expansion, that it did not intend to take action under the Bill that would duplicate work already in the province of the I.R.C. Indeed, members of the I.R.C. will be on the Advisory Committee that will advise the Minister in these matters, to ensure that projects are properly processed and that proper advice on them is available. I would assure noble Lords that there is already agreement with the I.R.C. that, subject to their main commitments to assist in the restructuring of industry, the Corporation should support development projects, and it has already taken action. I could give a number of examples of this.
The noble Lord made something of the fact that we could deal with these matters by ordinary Bills. I thought there was considerable force in the argument in relation to the procedure in regard to Orders. That is a matter on which, in an earlier age, violent views 1253 used to be expressed in another place, certainly just after the war. But the noble Lord, Lord Erroll, will himself recall that it is often difficult to get a Bill into the legislative programme. Although in recent years quite marked improvements have been made in the procedure of another place, it is still a slow process. I think he has an interesting point there, and although this is not germane to this particular Bill I hope that procedure in relation to Orders made under Bills will be one of the subjects which will be examined and in regard to which possibly a better procedure may be evolved when and it reform of your Lordships' House comes about. This is one of the attractions of the reform: that we may be able to bring about a more sensible technique for dealing with these matters.
It is always preferable, given the time, to do everything in a Bill; but there is not time to do so, and although I think there is substance in these matters the fact is that if an Order is made under a Bill and the scheme which is published is unsatisfactory it will be open to another place to reject it; and it will of course be open to us, because the Order will be laid, at least to debate it and to express our views. It is perfectly possible for a Minister to withdraw an Order and then to re-lay it instead of amending it. In our view, it would be quite inconsistent to have compulsory Bill powers in the Bill, and I reject that the Government or any civil servant will use the sort of coercion that noble Lords have suggested.
The noble Lord, however, raised a particularly interesting point with regard to the consent of the company. The noble Lord is aware of the number of circumstances in which certain procedures are necessary—the great variation between the Articles and Memoranda of many companies, the extent to which the new shares that are acquired are a new issue within the authorised limit of shares, or whether in fact a new authorisation is necessary which undoubtedly calls for a company meeting.
I hope the noble Lord will forgive me if I deal with this subject in precise detail in due course. Although I have had a good deal of experience and have 1254 been tripped up by this arrangement in the past in business, I should like to give a quite considered reply to the point he has made. I would urge on the noble Lord that a great deal depends on the intentions of the Government of the day. I do not believe that the noble Lord, Lord Erroll, if by chance one day he returns to office and is a sponsoring Minister, would depart so greatly from the declared purposes of the Bill, which is of a partnership with industry, as to pursue a deal with a company which would be singularly objectionable to the shareholders of the company. But, none the less, I am prepared to deal with this matter in rather greater detail.
No doubt we shall discuss the equity arguments. They have already been answered most effectively by a number of my noble friends. Of course, it may well suit in certain circumstances. Equity participation may be more appropriate for the company itself where it is unwilling to accept an obligation to repay fixed interest loans and where, if the Project was successful, the returns would be high. That is the proper role of equity; to carry the greater risks and to share in the profits. I believe it right that public investment in such a project should be suitably rewarded. I am dubious in the extreme of the logic of the noble Lord, Lord Erroll, when he also moves into the equation the taxation return in relation to this particular brand of Government investment.
I should like to talk at greater length on a number of the interesting points that have been raised. I have already dealt with some of them. I have dealt briefly with the question of the Affirmative Resolution procedure; the fact that there is the disadvantage, which struck me greatly, that these Orders will not be coming before this House formally, as Orders, for approval. But I think this again is one of the matters which may be corrected if the reform of your Lordships' House goes through. In certain matters it may be possible to ensure that we have a due interest.
I will not deal with the noble Lord's hypothetical case, but I must point out that the Advisory Committee are going to play an important part in this matter. It has been decided that an Advisory Committee will be set up, and if the Government are to get anywhere in this field, 1255 if their concept of partnership is to succeed, it must mean that they have the co-operation of industry and that the people who will serve on the Advisory Committee are satisfied as to the purposes of the Government action. Although I noticed that the phrase "back-door nationalisation" was dragged in without a great fanfare of trumpets, I do not believe that either of the two noble Lords think that this is a form of back-door nationalisation.
We heard an interesting speech from my noble friend Lord Rhodes who explained to the House that he had to leave. I was not sure whether his reference to the need for extra money related purely to the National Research Development Corporation or whether it related generally to the purposes of the Bill. If it was to the purposes of the Bill, I would point out that there is a distinct difference between the role of the N.R.D.C. and the role of investment under this Bill. But as for the need for money—this is not inconsistent with the quotation which he gave—an examination of the last two Reports of the N.R.D.C. make clear the need for new money. Even back in 1965 they were sayingon present estimates it seems likely that the Corporation will by early 1968 be committed up to the £25 million limit of its present borrowing powers, and a further increase will be needed.There were similar remarks in the later Report. I hope, therefore, that that answers my noble friend.
He also asked whether industry boards will be entitled to buy licences. I think he is misconceiving the concept of industry boards and their functions. The industry boards will not themselves manufacture or exploit inventions. It will be their function to give support to companies in the particular industry or sector of industry who may themselves wish to exploit new ideas. The industry boards will be appointed by the sponsoring Minister, while the Advisory Committee will be appointed by the Minister of Technology.
The noble Lord, Lord Trefgarne, made some interesting points about Beagle Aircraft. Here again one could mount a complete debate on the subject of 1256 Beagle and the role of light aircraft; indeed, I see that the noble Lord has down for next week a Question on this matter. I should like to deal with this at more length, if necessary, at Committee stage. There has been a long negotiation on this matter, particularly with Pressed Steel, and the Government have looked at a number of solutions. The Government entered into this matter with some reluctance, because we are not particularly keen to move into the responsibility of taking on a complete firm in this way. It was only that it became clear that, if we were to have a light aircraft industry, the Government themselves would have to decide to take the responsibility and the risk. But it is hoped that it will be run in as commercial a way as possible with as little direction from the Government as is necessary.
§ LORD TREFGARNE
My Lords, may I intervene? Can the noble Lord say whether the existing Beagle Company will therefore be wound up, once the assets have been sold, and that the existing shareholders will get nothing?
§ LORD SHACKLETON
My Lords, I have a very full brief. It is true (I say this subject to correction) that the Government are taking over the assets for a particular figure. Such assets as may remain which are not transferable—tax losses, for instance—will remain in the hands of the present shareholders. I think that the present shareholders are predominantly Pressed Steel. I think that it would be better if I were to give a considered reply to the noble Lord on this point. If he wants to know very quickly, I will let him have it in writing; but at the moment I am not sure how much of the information I have at my disposal is confidential. I hope that the noble Lord will acquit me of any discourtesy. In any case, I do not know the answer with enough certainty to be able to give it to him this afternoon.
I am sure that all your Lordships were impressed by the speeches of the noble Lords who have particular experience of industry. My noble friend Lord Arwyn mentioned efforts to develop patents at an early date. One wonders how many other people there were in the same position as the noble Lord, and how many 1257 possible industries we have lost. It was interesting to hear the noble Lord, Lord Hirshfield, point to the many gaps which exist in the market in the matter of financing. It is true that, generally, financial resources, and even credit facilities for various purposes, have considerably extended and increased in recent years. Nothing in the Bill is intended in any way to be a reflection on those financial institutions which are such a great feature of this country.
This Bill is aimed at meeting a particular need. If noble Lords criticise, then it is up to them to say what else they would do. I suspect that, in the long run, they would probably do the same thing as the present Government, but that they would do it too slowly and too late. I hope that they will play their own part in conveying the impression that the Government are not seeking to gain an improper influence over industry, and also in allaying the fears of industry. There are always fears in these matters. There were great criticisms when the Industrial Reconstruction Corporation was set up; and many other bodies which were criticised at first are now lived with quite happily; and people have forgotten how critical they were at the time they were set up.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.