HL Deb 22 July 1969 vol 304 cc947-68

11.29 p.m.


My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Shackleton.)

On Question, Motion agreed to.

House in Committee accordingly.

[The Earl of Listowel in the Chair.]

Clause 1 agreed to.

Clause 2 [Public investment in the Corporation otherwise than by way of loan]:

On Question, Whether Clause 2 shall stand part of the Bill?


I am sorry to detain your Lordships at this late hour—all I can say is that this is not about sewerage. I should like to take this opportunity of saying something on Clauses 1 and 2 of the Bill; something, that is to say, regarding the reduction of the Corporation's commencing capital debt and also on the question of public investment in the Corporation; and particularly in connection with the £700 million which will be deemed to have been paid by the Minister to the Corporation on the vesting date. I should add immediately that there are a number of Amendments which I might have put down similar to those moved in Standing Committee and on Report in another place. The other place spent about 15 days on this Bill but we have had only last Friday and to-night.

With the exception of the Amendment to Clause 5, I have not put down any other Amendments, but I should like to ask the noble Lord, Lord Shackleton, how the figure of £700 million came to be fixed. I was glad to be able to give him notice of most of the questions I shall ask on this and other clauses. I should like to know what were the criteria in arriving at this figure of £700 million. I know that the noble Lord pointed out in his opening speech on Second Reading that the Corporation had asked that the £700 million of the commencing capital, or some two-thirds of its total long-term debt, should take the form of public dividend capital such as was adopted for B.O.A.C. as an experiment in 1966.

I am not now going to repeat my criticisms of the concept of public dividend capital as I did this very fully on Second Reading. Nor am I threatening to reduce it by way of Amendment. I know that the Government take the view that this form of capital is appropriate for those nationalised industries which are fully viable but which are subject to fluctuating returns because of their trading conditions and the nature of their assets. I accept only too readily that public dividend capital is quite different from the capital used in public companies and, as I say, I will not repeat the strong criticisms which we have made of it as a bogus kind of capital with the dividends paid by the taxpayer.

The noble Lord said on Second Reading that initially the Minister will accept that as a minimum all profits after clearance of any losses—and I underline those words—shall be paid as dividends until the Government have received by way of dividends and corporation tax a sum equivalent to the interest which would otherwise be paid on public dividend capital had it been in the form of fixed interest capital.

I now come to the second question which I should like to ask the noble Lord to-night. It is this: what dividend do the Corporation in fact expect to pay? I know from what the noble Lord said that it is for the Corporation to make a proposal about payment of dividend on this public dividend capital each financial year, though the final determination will rest with the Minister after agreement with the Treasury. I should like to know, therefore, in addition to how much it is expected will be paid out by way of dividend, who really is the manager in this respect. Is it the noble Lord, Lord Melchett, and the Board of his Corporation who decide this, or is it in fact the Minister after agreement with the Treasury? I think it is very important to know who the manager really is. Decisions of the Corporation will be considerably inhibited if they always have to refer back to the Minister in taking decisions. Like the noble Lord, Lord Shackleton, I certainly would be willing to trust the noble Lord, Lord Melchett, and his Board to make the right sort of decision.

Lastly, I should like to ask the noble Lord whether it is expected that the Corporation will make a profit; or is it expected that it will make a loss? The noble Lord referred on Second Reading to the clearance of losses. I wonder how much these are expected to be. I should be grateful if the noble Lord would give me answers to these four questions which I have put to him.


I am grateful to the noble Earl, Lord Bessborough, for his restraint at this time of night and for giving me notice of some of these points. He said that he was not going to repeat his criticisms of public dividend capital, although he could not refrain having a stab at it; and he made one rather remarkable statement, but it may have been a slip of the tongue, about dividends being paid by the taxpayer. Perhaps when the noble Earl looks at Hansard he may realise that there was a slip at that point.


Ultimately this can be said to be the case; but I will not go into it in detail now; and it was threshed out elsewhere.


I can only say that ultimately it will not prove to be the case. The noble Earl asked me a question to which it is extraordinarily difficult to give the clearcut, scientific answer which the noble Earl would expect—how was the figure of £700 million capital arrived at? The Corporation propose to convert £700 million of their total longterm capital of £1, 000 million into public dividend capital. A proportion of two-thirds of so-called equity capital—I share the noble Earl's doubts over the use of the word "equity"—to one-third of fixed interest capital, was in line with the proportion in industry generally in this country and among some of the Corporation's major competitors. The Minister considered that the figure proposed by the Corporation was acceptable.

This is very much a matter of judgment. Any noble Lords who have been concerned in company management will know that there is no fixed proportion. I would not say that it is just a figure plucked out of the air, but nor would I say that there is a hard and fast criterion which can be applied. In the judgment of those very experienced people who manage the Corporation, this was the appropriate figure, and it was one acceptable to the Minister and to the Treasury. This is not, I would admit, an extremely enlightening answer and I apologise, but it is a truthful answer.

I have also been asked for further explanation of the statement I made in my Second Reading speech about the clearance of past losses before profits are paid as dividends. I admit that I looked at this at the time and wondered whether there was some deep and hidden meaning. Rather is it a blinding glimpse of the obvious. We have in mind that the Corporation should be allowed to set profits against any accumulated losses since vesting date before profits become payable as dividends. We are so accustomed to having complicated subjects wrapped up in seemingly innocent phrases that I am happy to say that this was as innocent as it appeared.

The noble Earl asked me what dividend the Corporation expect to pay. I rather think that he has in mind the rate, or average rate, of dividend. I really would like to help on this point and I have gone into it rather thoroughly. Paragraph 10 of the Memorandum on the Bill (Cmnd. 4022), which I am sure the noble Earl, who has been very assiduous in this, has studied, says that the Corporation were expecting, on the capital requirements and internal resources forecast by the Corporation, to pay some £125 million in dividends in the three years from September, 1968, to September, 1971, and £295 million in the five and a half years from September, 1968, to March, 1974. These figures were based on the Corporation's original price proposals and will be affected in the early period, though we hope not over the whole period, by the abatement of their proposals. The noble Earl will remember that there was some abatement.

To arrive at the percentage of dividends to be paid, these dividend figures need to be expressed as a percentage not necessarily only of the £700 million, but of the total amount, including any additional dividend capital that may be paid to the Corporation, and we do not know what this further amount will be. The Government have not yet decided in what form the additional finance will be provided to the Corporation and therefore I am afraid that it would be unrealistic to seek to express the absolute level of dividends shown as a percentage.

If noble Lords are saying that it is time we got clarity in these matters, I would remind your Lordships that it is not long since the Corporation were set up and it is remarkable how rapidly they have got themselves organised. I assure the noble Earl that we certainly intend to keep him or any other noble Lord informed on this matter as it develops.

The Earl of KINNOULL

May I interrupt the noble Lord for one moment? It is surely remarkable also how quickly the Corporation has borrowed large sums of money. I think this is a pertinent point made by my noble friend.


I do not know whether the noble Earl was here for our Second Reading debate, but I explained what the money was wanted for. I do not know why it is that when money is raised for investment in private industry it is regarded as entirely respectable, but when a nationalised industry is raising money for investment it is thought that somehow the taxpayer is being "done down" by it.

I was asked one important question by the noble Earl, as to who finally determines the dividend. He said that he would be willing to trust Lord Melchett. Those of us who know Lord Melchett have a high regard for him and undoubtedly trust him and his advisers as men of great capability. But I em- phasised in our debate last Friday that the capital reconstruction was not intended to be an easy option. Clause 2 of the Bill accordingly makes it clear that the final decision on the dividends to be paid by the Corporation shall rest with the Minister. The Corporation must make a proposal about the dividend initially, but it is for the Minister, after consulting with the Corporation, and with the approval of the Treasury, to determine what level of dividend should be paid. This seems to me to be entirely consistent. After all, the Board of a company may propose a dividend, but in the last resort the shareholders have the say, and however much we may trust a particular body it is one of the essences of public organisation of this kind that it is for the Government to watch out for the public interest and determine the matter.

I think noble Lords on the other side have been concerned about possible criticism that we might be giving them too easy a run. I can assure noble Lords that, if there was any temptation in that direction, certainly my right honourable friends at the Treasury, whether Mr. Diamond or others, are not inclined to make easy assumptions. I do not doubt that this will be arrived at as a result of sensible calculations and sensible exchanges.

I think I have answered most of the noble Earl's points, but if I have missed anything, he can either ask me now, or I will write to him. I hope that I have given some information.


I am grateful to the noble Lord for the further information that he has given. I think it was a worth while exercise from both our points of view. I do not think I will make any further comment.

Clause 2 agreed to.

Clause 3 [Limit of borrowing by, and investment in, the Corporation]:

On Question, whether Clause 3 shall stand part of the Bill?


Again I have put down no Amendment to this clause, but I should like to ask the noble Lord a question regarding the capital borrowing powers of the Corporation. As we know, under the principal Act borrowings by the Corporation were not to exceed £300 million, but in July of last year this limit was raised to £400 million, and under Clause 3 of the Bill a new limit or £500 million is fixed, the same clause empowering the Minister to raise the limit to £650 million. I asked the noble Lord, Lord Shackleton when these tremendous increases in the borrowing powers were likely to stop. I also referred to the new steel developments at Scunthorpe and at Redcar on Tees-side. I should like to ask the noble Lord how much of this £500 million which the Corporation will now be entitled to borrow will be taken up by these new developments. How long, in fact, is the £500 million expected to last?

I have here a Press release of July 11 by the British Steel Corporation in which it says that the rolling mills at Scunthorpe will cost an estimated £130 million, and that the iron ore terminal at Redcar, Tees-side is likely to cost £15 million. It also says that a study is now in progress to develop either an ore terminal on the Humber at a possible cost of £5 million, or a rail link with Redcar to supply ore to Scunthorpe. All this is a little vague, and I should be grateful for more details of the Corporation's capital investment programme over the next five years. Is it all going to dribble out piecemeal, or can we expect to have a more comprehensive statement from the Government or the Corporation?

The borrowing powers have already increased twice, and now under this Bill they will increase a third and possibly a fourth time. I should like to know to what extent this money will be invested abroad. I am not quite certain whether I gave the noble Lord notice of this question. I should be interested to know the answer to it. Will the money be invested in Europe, for example? I have heard that there may be a possibility of investing in Holland. The point I want to make is that the Government are piling up all these debts just at a time when they should be reducing them. I pointed out on Second Reading that this country's total debts abroad now amount to over £6, 000 million. They are a millstone hanging round our necks for years to come.

The noble Lord admitted on Second Reading, rather blandly I thought, that the real effect of this borrowing was to convert short-term debts into long-term debts. As I told your Lordships on Friday, the Financial Secretary to the Treasury said only last Wednesday that it must be recognised that our short-term debts should now be paid on a long-term basis. The millstone will hang for a longer time round our necks. I do not think this is good enough, and nor does the world at large. Already the Germans are having second thoughts about lending the sums asked for in respect of certain of our nationalised industries, and I spelt this out on Second Reading. Are the Government really happy about our large scale borrowing abroad, or are they being rather complacent about it? How much do they expect to obtain from overseas, and at what rate of interest? These rates have certainly been going up as a result of scarcity of capital, and I am much disturbed by these borrowings.

11.48 p.m.


My Lords, I must say that the noble Earl does his best to disturb foreigners in the matter—and anyone else. Some of the questions he asked were fair enough; others were not entirely fair. Let me deal straight away with the last point—the question of investing certain monies in foreign countries. I cannot say what countries they will be; it will entirely depend on the particular trading and investment needs of the Corporation. They may wish to protect their raw material sources. They may also wish to arrange for certain preliminary processing of materials, but there is no particular intention for a major investment abroad. The contingency allowance of £150 million allows for investment abroad, but there arc no specific proposals before the Minister at present; and this is the sort of flexibility which any corporation or company would wish to have in the interests of its trading success. On the question of the difference between medium-term and long-term borrowing, here again there is no precision in these matters. In general the Government take the view that the longer the term of the borrowing the better, but any movement away from immediate or short-term borrowing is to be encouraged as a means of rephasing debt; and I think that the funding of our debt is something of which the noble Earl will approve.

The noble Earl is tackling me in an area of such complexity that I am tempted to read out the very lengthy briefs I have on these various subjects, and even the rather lengthy explanation that I supplied to the noble Earl earlier. However, probably the best thing I can do is to deal with certain particular points. I should like to set them in the background—because this is the crucial matter—of the investment programme. I should mention that the first borrowings under the 1967 Act were designed in the light of assumptions about what would be needed. In the event, the Corporation's requirements turned out some £100 million greater than had been expected. This is the main reason why further powers were needed earlier, and why more was needed now.

I was asked also how long the £500 million is to last. The Memorandum to the Bill, in paragraph 10, indicates that the limit on borrowing by and investment in the Corporation of £500 million is designed to last until September, 1971. But I hope noble Lords will not try to create a picture of a profligate Corporation just drawing money in and spending it. What they are doing is investing it in vital industry to this country; and this is a pattern that must go on both in private and in public investment.

I should like to say a little more in relation to the investment programme. As I explained in my Second Reading speech, it is impossible to say now exactly what steel plant will be built, exactly where, and to make exactly what products. But the general pattern is clear. I should like just to develop my earlier remarks a little further. The Corporation's brochure, Finance for Steel, showed that their projected capital expenditure up to 1973-74 will be £875 million. Of this sum, £100 million is needed for working capital, £50 million for projects under way, £100 million for small projects costing under £100, 000 each, and another £100 million for projects costing between £100, 000 and £500.000 each, which are of a comparatively routine nature. This leaves about £500 million for major capital expenditure, and this expenditure will produce crude steelmaking capacity totalling 30 million tons a year by 1975, compared with about 25 million tons now.

This figure is made up as follows. First, perhaps two-thirds of the total will come from a comparatively small number of plants producing carbon steels in bulk. These plants will be near deep-water ports, and preferably near supplies of coking coal, and will be on a scale that will allow full advantage to be taken of the economies of size in the modern steel industry on which we are all agreed. They will use the most modern equipment; all of them, for example, will be based on the Litz-Donowitz steel-making process—the so-called L.D. process. These plants will be based on existing works; but it has not been decided where all of them will be. Port Talbot and Tees-side are, however, already undergoing major development, including the installation of Litz-Donowitz steelmaking. The Corporation have recently proposed a major scheme for development at Scunthorpe (and I will say a little more about that in a moment), again related to the capital sums involved, which is in their capital investment programme now being considered by the Minister of Power. There will also have to be further substantial expansion of strip-mill capacity.

Secondly, about half the remaining production will come from smaller integrated hot metal works, including specialist plants making high-value carbon or alloy steels; and finally there will be several scrap-based works, each of about a million tons capacity, located in or near scrap-producing areas like the Midlands. I have so far mentioned only plant producing crude steel as well as finished products. There will also be a limited number of works making only finished products from semi-finished steel made in the steel-melting and primary rolling works I have described.

Let me just say a further word about Scunthorpe, which brings us back to the investment total. The total cost of the Scunthorpe development, including working capital, is £153 million. This is under one-fifth of the Corporation's total investment programme and working capital requirements for the years to 1973-74, which is £875 million, the figure I have already mentioned. To meet this £875 million we have allowed for the Corporation to borrow or receive as p.d.c. £315 million, raising the rest from their own resources. It is not of course possible to say, for each component item in the £875 million, exactly how much will come from external resources and how much from the Corporation's own cash flow. I am sorry to race rather rapidly through this explanation. I think I have been able to give some information which has not been given quite so explicitly before, and I shall of course be very willing to provide any further information at a later stage.


Again I am most grateful to the noble Lord for giving us that information, which I do not think emerged in another place, or on Second Reading here.

Clause 3 agreed to.

Clause 4 agreed to.

Clause 5 [The Corporation's financial duty]:

11.58 p.m.

The Earl of BESSBOROUGH moved Amendment No. 1:

Page 4, line 29, at end insert— ("( ) The operation of section 24 of the principal Act shall be amended so that in addition to the provisions therein the Corporation shall in its annual statement of accounts present details of the rate of return both on the total net assets of the Corporation and on the net assets of each of its principal regional or product groupings as is for the relevant period determined under subsection (1) above.")

The noble Earl said

A similar Amendment to this was put down as a new Clause 1 on Report stage in another place, but as I indicated on Second Reading I think it goes better at the end of Clause 5, concerning the Corporation's financial duty. The effect of this new subsection will be to require the Corporation, in its annual statement of accounts, to present details of the returns, both on the total net assets of the Corporation itself and on the net assets of each of its principal regional product groupings. In effect I should like to keep the product groups as separate accounting units and to require the Corporation to define the financial target in each case.

I explained all this on Second Reading and made the point that when a Corporation is virtually a monopoly and is dividing itself up into monopolistic groupings, customers of the Corporation will want some insight into the trading activities of the group. A public company would have subsidiary companies, each of which would give separate returns. Fuller disclosure of information is to-day, as the noble Lord knows, a general trend, and I should like to see this spelt out in the Bill.

It is true that the noble Lord, in replying to me on Second Reading, gave me certain assurances on this question. He added that he would convey my point to his right honourable friend but said he did not know how far the Government would go in this. He said that it was a matter for the British Steel Corporation and he was sure, having seen their publications and the amount of information they had already given, that they would do their utmost to provide all the information possible.

The Minister in another place gave similar assurances, which I certainly welcome. None the less, I think that the requirement to give such information with regard to the financial results of the product groupings would be desirable. However, if the noble Lord does not like the precise terms of the drafting, I should be very happy if the Government would be willing to put forward an Amendment in their own terms giving effect to the same intention. I know that there may be drafting difficulties and legal difficulties in regard to my present text, but I should like to see this requirement written into the Bill. If the Government would table a similar Amendment, I would, of course, withdraw my own. I beg to move.

The Earl of KINNOULL

I should like to support my noble friend in his very persuasive argument and I trust that the principle of this Amendment will be accepted by the Government. May I say to the noble Lord, Lord Shackleton, that I was not here last Friday; some of us, surprisingly, have to earn our bread and butter outside, particularly from this side of the House. As my noble friend said, a similar form of Amendment was moved in another place, although it went a good deal further than the present Amendment, and at that time there were in fact, rather noticeably, six speakers in favour and only one against, that being the Government spokesman. The principal aim of this Amendment is to lay a statutory duty on the Corporation to provide full information not only on the central organisation of the Corporation but also on its major subsidiaries. This proposed statutory duty is not a wrecking Amendment; nor is it an unnecessarily wasteful duty. It is a duty, I would submit to the Government, Which the Corporation would in any case welcome, and I do not think personally that the Government disagree with the principle. It is a reasonably sensible and, I submit, essential duty.

Its advantages are obvious. In the first place, it brings a form of discipline to the Corporation; secondly, it lets us all see what is the true financial position of the Corporation's subsidiaries at any time; and, thirdly, lets us all judge the viability, profitability and efficiency of all the major activities of the Corporation, and weigh up the earnings on capital and all the other financial criteria. The argument between my noble friend and the Government, if they decide not to accept this Amendment, is not on the general principle, so far as I understand it, but more on the very narrow issue of whether or not this duty should be written into the Bill.

Even at this late hour, I may perhaps remind the Committee that in another place the Government's reasons for refusing the Amendment were based on three arguments. In the first place, the Amendment was called impossibly vague and legally meaningless, but so far as one can see this Amendment is certainly not vague; it is, I believe, strikingly clear. The wording perhaps may need improvement, but with the Government's help I am sure this could be achieved. So far as being legally meaningless is concerned, I think one can say that it is not very uncommon with a number of recent Government Bills for some of us to feel that they are Bills which are legally meaningless—such as the Land Commission Bill, which has been particularly difficult to understand for many of us. Again, I think one could take the example of Section 17 of the Companies Act and find that a similar form of wording could be used for this Amendment.

The second argument made in another place was that their main concern was with the central body and to a lesser extent with the results of its different activities. I really felt that this argument was, to say the least, most futile. If there is any future trouble over the Corporation's finances, what will happen? The Government surely will wish to know immediately the reason for the losses. So one simply says: "Why should not we all know the reasons and have the information? Why not make the information available now?"

The third and final argument which the Government advanced was that the Corporation have no product grouping in operation at present. Again, I feel that one can dismiss this argument as neither very sophisticated nor convincing. The Government spokesman then turned, one might say rather smartly round, to say that Section 25 of the 1967 Act, the major Act: was expected to be brought into effect soon and so requiring details of turnover and estimate profits". Finally, the Government spokesman, during the Bill's passage through another place, when pressed why the Corporation were not bound to produce half-yearly statements similar to those required by the Stock Exchange, replied—and again I quote: It is my intention to approach the Corporation with a view to its publishing this information". Surely this is a rather watery way of agreeing to step into line with the principles of the Companies Act, that Act which of course ensured that there should in future be full public disclosure by both private and public companies and, one assumes, by State Corporations.

As I said at the beginning, I do not believe that the principle of providing further information divides us. The real point is simply whether or not the duty of supplying further information should be laid down as a statutory duty: whether we should rely on the Minister's vague undertaking or the Corporation's present policy, both of which can be changed, or whether a simple statutory duty, costing nothing, damaging not one wit of the Corporation's work, should be written into the Bill and giving the investors in this the largest industrial enterprise in this country, involving I believe over 1, 000 million of capital, a small safeguard that their money is being properly used, and is seen to be so used. This is an issue upon which I hope that my noble friend will stand firm if the Government are unable to accept the principle. During the Second Reading of this Bill my noble friend was accused by the noble Lord, Lord Shackleton, of being too fervent. I must say that during the last six hours of waiting for this Amendment to be called, my fervour has increased hour by hour.

12.3 a.m.


The noble Earl said he hoped I would not say that this Amendment was meaningless. I certainly shall not say that. I just do not think it happens to bear the meaning that noble Lords opposite put on it, and I am in some doubt whether to reply to the Amendment or to the noble Earls. I think I had better do both, even at the risk of taking a long time. I am delighted to hear from the noble Earl, Lord Kinnoull, who is, I know, something of a night bird in this House (he can always be relied on to keep going) that his fervour is still strong, and I will try to match this in the energy of my reply. I must first of all, however, warn him that if ever there is an unreliable statistic as to the value of a particular view, it is a measurement of the number of speakers on one side or the other. If he studies the statistics on Committee stages, whatever Government may be in power, he will always find that the Government of the day are outnumbered 10 to 1 in the number of speakers. This is part of the nature of our system of Opposition and Government.

This Amendment is very similar to part of a new clause which was proposed on the Report stage of this Bill in another place, where its effect was debated and the Government's reasons for not accepting it were recited by my honourable friend the Minister of Power. In the course of that debate—as the noble Earl, Lord Kinnoull, said—he gave assurances first that Section 25 of the Iron and Steel Act, 1967, requiring details of turnover, estimated profit, and estimated capital employed for different activities, would be rought into effect soon; secondly, that the financial objective, or duty, to be laid upon the British Steel Corporation under Clause 5 will, like those of other nationalised industries, be fixed as soon as possible and announced to Parliament. Moreover, though he could not agree—and I hope noble Lords will agree because there is always the risk that one day they will have responsibility in this area—to a duty to prescribe financial objectives for subordinate groupings, he could give an assurance that the Corporation will be expected to publish details in their statement of accounts of the returns earned by the Corporation as a whole.

The Earl of KINNOULL

Could I just correct the noble Lord? He said that his right honourable friend said that Section 25 would be brought in; in fact what his right honourable friend said was "Section 25 is expected to be brought in". There is a vast difference here. Is the noble Lord saying now that it will definitely be brought in?


I am not sure whether he was using it in a nautical sense. It is rather like "intention to proceed", which means something different to the Navy, and it may be that the words I used in this House bear a different significance. I can only say that I have firmly stated what I am in fact authorised to state, but if there is any lack of clarity on this point I will certainly be prepared either to correct it or to expand it, or even to answer a Question.

In view of those assurances, and a further undertaking by the Minister to approach the Corporation with a view to the publication of unaudited half-yearly statements similar to those required by the Stock Exchange in accordance with the undertaking given by companies in the private sector having a Stock Exchange quotation, the proposed new Clause in another place was, by leave, withdrawn. However, I do not complain of the action of noble Lords in bringing it up again. As the noble Earl, Lord Bessborough, said, whatever the Amendment may say, our aims are similar.

The noble Earl again (and I appreciate this) was kind enough to give notice in our debate on Second Reading of his interest in reviving part of the proposed Clause in the form of an Amendment to Clause 5. I said, as he mentioned, that I would convey to my right honourable friend the particular point raised by the noble Earl regarding the provision in the Corporation accounts of information on the product groups equivalent to that now being provided on the financial results of the publicly-owned companies. The various accounts, the ones they publish already, are so heavy in size that I am afraid I have not brought them into the House. There is no doubt that a vast amount of information is given. I think it is a little ungracious to suggest that we ought to initiate the standards required of companies in the private sector, when I think it must be acknowledged that nationalised industries have been pacesetters in this field.

I should like therefore to rehearse the very serious arguments for resisting this Amendment. First of all—and I know the noble Earl's difficulty in these matters, and anybody in Opposition is in this position—this Amendment would not in fact achieve its purpose because it is based upon its reference to a determination made under Clause 5 (1) in respect of the net assets of each of the Corporation's regional or product groupings. Subsection (1), as written, does not provide for the determination of anything other than the rate of return on net assets which the Minister considers it is reasonable for the Corporation to achieve. There is no mention of subordinate divisions or groupings.

Be that as it may, there are more fundamental reasons for rejecting this Amendment, and it is here that I somehow find myself parting company with what I thought the noble Earl was advocating. It would appear that the Amendment was drafted with two things in mind; first, the determination by the Minister of separate financial objectives for the Corporation's regional or product groupings; and, secondly, the publication of financial objectives in the accounts. I turn to the first of the two points—the fixing of financial objectives for regional and product groupings. The reference to "regional and product groupings", I am sorry to say, is really of no use at all as a description. It just does not stand up, unless we are prepared to go into a series of definitions which would not be appropriate in an organisation which must be dynamic and changing. The difficulty that the movers have found themselves in can be appreciated, because the Corporation have announced that they are considering the possibility, subject to the Minister's consent, of changing from a largely regional, subordinate organisation to one based on products. But even if this difficulty were removed, a reference to a "product grouping" would, I fear, still be legally meaningless.

More important, however, is the fact that the only statutory body which we are dealing with here is the Corporation itself, and the Minister would not wish to be under a statutory duty to determine—and this is one of the effects of the Amendment—the rate of return earned by any subordinate organisation within the Corporation. Whatever the noble Earl has said—and I thought he said something to this effect—1 very much doubt, whether, on reflection, he would want this degree of direct interference in the internal organisation, as opposed to the overall picture. It is not even certain whether each of the subordinate groupings will be intended by the Corporation to break even, or whether the Corporation will be concerned with the central result. Noble Lords who have been in business will be well aware that subsidiary organisations with separate accounts are sometimes organised in companies whose financial results are entirely determined by policies taken in the rest of the organisation. Certainly the Minister's chief concern must be with the central result, and he would not wish to take powers to determine separate financial objectives for the different subordinate bodies in the Corporation's organisation.

It could be that one reason behind this Amendment as drafted is that, with only a central financial objective, the Corporation may be in a position to subsidise one activity from another. I think I can deal with those fears by pointing to the fact that the Corporation published detailed turnover and profit and loss accounts and balance sheets for its different activities at Appendix B at the end of its 1967-68 accounts, and, as my right honourable friend confirmed in another place, Section 25 of the 1967 Act, requiring details of turnover, estimated profit and estimated capital employed is expected to be brought into effect soon. I accept that we shall have to get that point clear. But I think it is going to be brought into effect. This publication should be a sufficient safeguard against cross-subsidisation of diversified activities. I should be very willing, if I have any doubts on the strength of the undertaking which I have given, to inform noble Lords and, if necessary, to reply by Question and Answer.

As to the second main point, the publication of financial objectives, I suggest that as drafted the Amendment appears to require publication only of the financial objective prescribed by the Minister in the accounts, and not, apparently, of a statement of progress towards achieving it. On the former point, we have already given undertakings that the financial objective of the British Steel Corporation will be announced to Parliament. This was stated in another place and an assurance was given. I have already mentioned that the Corporation will publish details in their accounts.

I have thought carefully about this matter because we have had this sort of argument before, and I am not at all averse in principle to writing into legislation the kind of safeguards that we all want to see; but I submit that in view of the assurances given this Amendment is unnecessary, and, since the Government cannot agree to a duty to prescribe financial objectives, which is the effect of the Amendment, for the subordinate groupings, the question of the publication of that aspect in the accounts does not arise.

However, I appreciate that what the noble Earls are really after is the maximum amount of information, and I have drawn the attention of my right honourable friend to the concern expressed in your Lordships' House that information should be published in the Corporation's accounts about the results of its subordinate groupings, and he has assured me that he will have this matter in mind in his discussions with the Corporation on the form of their consolidated accounts. As the new organisation has not yet even been set up, however, it is impossible to go any further at this stage; but I hope the assurances I have given meet the concern of the noble Earl.

I am sorry to have spoken at length, but it is a complicated subject. I think we are agreed on the purpose. I think the assurances I have given are as practical as possible in the circumstances as they apply now. I know both noble Earls will be vigilant in the future, and if the Corporation accounts do not give the sort of information they want I shall expect to hear from them; and I expect the Minister will also hear from the noble Earls' honourable friends in another place.


I am most grateful to the noble Lord for giving us that detailed reply. I think it was very useful, and worth giving. I am also grateful to my noble friend for having supported the Amendment so cogently. From what the noble Lord has said, I think he accepts the principle and the intention behind this Amendment, and that indeed our aims are similar. I was glad to hear him refer to the details which are given in the 1967-68 accounts, and the details which are likely to come in the future. Clearly, at this hour there would be no use dividing the Committee—in any case I do not think then: is a quorum. Therefore, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 5 agreed to.

Remaining clauses agreed to.

Schedule agreed to.

House resumed: Bill reported without amendment; Report received.

Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of July 14):


My Lords, I beg to move that this Bill be now read a third time. I would make only one or two very brief remarks. I am grateful to noble Lords for their co-operation. I want to emphasise that the capital structure we are proposing does not by itself improve the efficiency of the industry or its financial return, but we are satisfied that after the heavy initial losses—we discussed how they came about—there is a strong case for this reorganisation. I would again draw attention to the safeguards, for there are safeguards. The first is the policy on public dividend capital. I have mentioned that. The second safeguard is the financial objective. The other main purpose of the Bill is to facilitate the dissolution of the publicly owned Steel companies. I know that there will be some regrets at this; but we have given the reasons. I stress that the famous names will still be capable of being used. But it is the firm recommendation of the British Steel Corporation that this is how they should proceed. Behind the provisions in the Bill is the search for greater efficiency. I commend this Bill to your Lordships for a Third Reading.

Moved, That the Bill now read 3a.—(Lord Shackleton).


My Lords, with the indulgence of the House I should like to make it clear beyond the shadow of a doubt that whatever criticisms we on this side may have made of this Bill we wish nothing but success to British Steel. We hope that Lord Melchett will make of his Corporation a model of a nationalised industry—if any nationalised industry can be a model of industry.

We were not able to stop the nationalisation of steel despite the fact that we did not like it. We do not like this socialistic tendency to nationalise all those industries, the commanding heights of the economy. We do not think it is healthy to do so; and, by and large, the returns on capital have not been satisfactory. We get more offices and bureaucracy and, I fear, less efficiency. My noble friends made all these points and more during the passage of the 1967 Bill and I still think that the Government clearly underestimate the value of retaining company names. But since we have to accept what the Government have done, I can only hope that the noble Lord, Lord Melchett, will make the British Steel Corporation effectively competitive internationally in what is still a competitive world—even if British industry in general under the present Government seems domestically to become less and less competitive.

It was very sad to read in The Times Business News this morning of the British Steel Corporation's recent strike losses, which I gather amounted to nearly 150, 000 tons. It seems that five out of the 72 blast furnaces are out of action because of strikes at two of the biggest plants; and that three out of five blast furnaces at Port Talbot are out of action. Other details were given—


My Lords, is the noble Earl blaming this on nationalisation?


My Lords, what I was about to say, and I think the noble Lord, Lord Shackleton, realises this, was that we might express the hope that this strike will be resolved at the earliest possible date. We must all have at heart the success of the British steel industry at home and its success as an exporter abroad.


My Lords, I will not reply to the noble Earl's political remarks. We have heard them so often. They still show a great lack of understanding of what goes on in the world. But I would just give one more piece of information about the unofficial strike at Port Talbot. This is worrying; but there is some encouragement in the fact that a meeting took place yesterday between the men's unions and the General Purposes Committee of the T.U.C We must all hope that the strike will shortly be settled.

On Question, Bill read 3a, and passed.