§ 2.35 p.m.
§ LORD JACQUESMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they are "ready to consider any viable proposal for transferring the ownership and management of the State Breweries to a suitably constituted local body, such as a trust", in accordance with the declaration of the then shadow Home Secretary in January, 1970.]
§ THE MINISTER OF STATE, HOME OFFICE (LORD WINDLESHAM)My Lords, the Government have considered this possibility but concluded that a trust set up for this purpose with public funds would not be viable.
§ LORD JACQUESMy Lords, I thank the noble Lord for that reply. Is the noble Lord aware that the State scheme 2 is both compact and efficient; that it uses its efficiency to keep down prices, so much so that the Carlisle beer is the best value of all beers in the country? Would it not be practical to vest the control in a local body which was appointed by the Minister and which could be subject to the same criteria as the nationalised industries?
§ LORD WINDLESHAMMy Lords, this proposal was considered by the Government and we came to the conclusion that it would not be practical to vest control in a trust using public funds on the lines envisaged by the noble Lord and indeed by my noble and learned friend on the Woolsack at an earlier stage. It is true that prices are low and the quality of the beer is good, but it is also true that the return on capital is only of the order of 4 per cent., as opposed to something nearer 10 per cent. for the brewery industry as a whole.
§ BARONESS BACONMy Lords, is the noble Lord aware that the State scheme makes nearly £300,000 profit and that when it is sold off by the Government there will be a rush by breweries to buy it? Would he not agree that, while changes are probably needed in the State scheme, these changes could have been brought about without a sell-out to other breweries?
§ LORD WINDLESHAMMy Lords, we do not believe that this is the case. The Bill has been debated very thoroughly in another place and will be discussed in your Lordships' House on Friday. My honourable friend the Parliamentary Secretary has explained in some detail 3 what the economics of a proposal of this kind would be.
§ LORD POPPLEWELLMy Lords, would the noble Lord say what in the opinion of the Government should be the return on capital? He has indicated that the return here is only 4 per cent. Since my noble friend indicates that there is a profit of £300,000, may I ask what, in the opinion of the Government, the percentage should be?
§ LORD WINDLESHAMMy Lords, it does not seem to us to be very good economics for the Government to receive a return of 4 per cent. on assets which can be realised, when to borrow money the Government are paying between 8 and 9 per cent.
§ LORD JACQUESMy Lords, is the Minister aware that it would be possible to increase the prices and therefore increase the profit of 4 per cent., and still have the cheapest beer in the country? Furthermore, before I sit down may I ask whether the noble and learned Lord on the Woolsack is now open to transfer, and could he be transferred before the Bill is discussed here, so that his considerable talents might be used in a good cause?
§ LORD WINDLESHAMMy Lords, what my noble and learned friend on the Woolsack said was that a proposal of that kind should be considered; and indeed it was very thoroughly considered for the reasons which the noble Lord opposite has just given. Prices have been increased recently and I have no doubt that they are now closer to prices for beers in the North of England as a whole.
§ LORD NUGENT OF GUILDFORDMy Lords, is my noble friend aware that in view of the low return of 4 per cent on the capital involved, it should be possible to command a purchase price which would give a good return to the taxpayer, because the valuation will be drawn up on the basis of an 8 per cent. or 9 per cent. return? Therefore it will be far better value than the excessively low return which is being obtained now.
§ LORD STONHAMMy Lords, that would be so if the valuation obtained were vastly higher than the £4.7 million which is suggested in the Explanatory 4 Memorandum. Can the noble Lord say what, in the Home Office consideration of this matter, are the particular elements in the sale of beer which make arrangements which have been suitable in other industries totally unsuitable in a State management scheme?
§ LORD WINDLESHAMMy Lords, to be frank, we regard this scheme as an anachronism. It was introduced over fifty years ago, in 1916, by the Lloyd George Government, when there was a great deal of drunkenness in the shipyards in Cumberland and the surrounding area. The scheme has remained in existence ever since. If it were desirable for the State to own public houses, presumably the State would own public houses in other parts of the country.
§ LORD HOYMy Lords, why does the noble Lord speak so derogatively of 4 per cent. return on capital, when in fact this is a figure the Government are aiming at in regard to wage increases?
§ LORD WINDLESHAMMy Lords, if the noble Lord thinks that that is a sound economic observation he must take part in the debate we are going to have on the Bill. The Second Reading will take place on Friday and I have no doubt we shall be discussing these matters at some length.
§ LORD STONHAMMy Lords, would the noble Lord say that any institution which has operated for sixty years is an anachronism and therefore must be abolished? What about the Monarchy?
§ LORD BARNBYMy Lords, would the noble Lord agree that since it has recently been announced that the average depreciation in the value of money over the last five years was 3 per cent., 3 per cent. deducted from 4 per cent. means that the return is only 1 per cent. per annum?
§ LORD JACQUESMy Lords, is this scheme so successful that it must be destroyed because it is too dangerous a precedent?
§ LORD WINDLESHAMNo, my Lords; I do not think that the noble Lord, Lord Stonham, and those who have had experience of this scheme would regard it in that light. It is not being destroyed in that sense. There are assets here: £4.7 million of public money is 5 tied up in public houses and in the brewery in Carlisle. It seems to us that this is not the best way of using public funds.
§ LORD POPPLEWELLMy Lords, would the Minister agree that the sale of these State breweries is really in response to the activities of the brewers, who have always been among the first type of people to receive benefit from the Tory Government when they have been in power?
§ LORD WINDLESHAMMy Lords, there is no connection between that observation and the Government's Bill. As I have said, there is a measure before Parliament; it will be before your Lordships' House on Friday of this week. We shall have a Second Reading debate and then Committee and subsequent stages later. Perhaps we could develop some of these arguments rather more fully then than in the course of question and answer.
§ LORD DOUGLASS OF CLEVELANDMy Lords, if the Government argument is that a profit of only 4 per cent. has been made in a nationalised industry and therefore it should be sold off to private enterprise, does the same argument apply to all nationalised industries?
§ LORD WINDLESHAMMy Lords, the main reason why the Government have come to the conclusion that these assets should be disposed of is that this is not an appropriate area of activity for the Government to be involved in. The lack of profitability is secondary to that.
§ LORD SLATERMy Lords, in view of the attitude of the Minister in the course of his replies, basing his argument on the 4 per cent., no doubt he is well aware that the Government have fixed a return between 4 per cent. and 7 per cent. in particular types of industry—
§ LORD SLATERThis is the question. Is the Minister aware that they have fixed 7 per cent., whereas outside industry has been claiming 10 per cent.? If it is the policy to break up this national asset, can he say whether it will be left to open tender? Shall we be given the names of the people responsible for making the tenders?
§ LORD WINDLESHAMMy Lords, I should like to give the noble Lord the information. There is a good deal of it and it is quite detailed. But perhaps the best time to do so would be in the course of our debates on the Bill.