INDUSTRY BILL

HL Deb 22 March 1971 vol 316 cc670-723

3.45 p.m.

Second Reading debate resumed.

LORD BYERS

My Lords, in continuing the Second Reading debate on the Industry Bill, I do not think that the noble Lord, Lord Shepherd, would expect me to follow him in every detail of the panegyric which he gave us of the Labour Party's industrial record in office. One of the major and, I think, justified criticisms of the Labour Administration was their inability, through inexperience, to understand the world of business. But I must say that after nearly a year of Conservative practice, I and many others are beginning to wonder whether the Conservative Party are going to be any better, particularly when they come forward with such a Bill as this. I am really referring only to the Industrial Reorganisation Corporation side of the Bill. I suppose I have an interest to declare in the Industrial Expansion Act, which is also covered by the Bill, because my company was, and is, involved in one of the aluminium smelters. I must say, in passing, on this question of industrial expansion, that I should be very surprised if this Government can get through without some means of providing selective assistance in areas where they want the economy to expand.

I think one is justified in asking what on earth does go on in the Conservative Cabinet to-day, so far as industrial matters are concerned. There are plenty of people in the Tory Cabinet, unlike the Labour Cabinet, who have actually been in industry and business and have had to earn their living in this way; but so far as one can see, either they have lost their voices recently or their influence is becoming more and more minimal. The Prime Minister, with the least business experience of the Cabinet, seems to have cowed the rest of his colleagues. It is the old story of the dictatorial chairman of the board whose favourite motion was, "All those against, will say, 'I resign'". They seem to be locked in.

I find it totally incomprehensible that the Government should come forward with a Bill such as this, whose aim is apparently to deprive them of an agency which has done very little harm and, I think, has done quite a lot of good. I cannot see where the abolition of the I.R.C. fits into the Conservative Party industrial policy. There are, I suppose, two possible answers. One is that they are still tilting at windmills, or trying to fight the anti-Socialism battles of long ago—what was called the "dismantling of the Socialist legacy". That is "old hat", and I think we have all grown out of that sort of thing. Possibly the answer is that it does not fit into their industrial policy because they have not yet formulated one.

The argument that the I.R.C. was a weapon of the Socialists designed to further the extension of nationalisation just does not hold water on the record of the I.R.C., because it could not be used for this purpose while a Tory Government remains in office, and if there is a future Labour Government it would not be very difficult to revive the I.R.C. and to start it off again. I do not see the logic of this particular Bill. I think the answer is that the Government have not yet got a coherent policy for industry. In so far as one can detect a policy, it is something like this: first, those aspects of nationalised industry which are making, or could make, reasonable profits are to be hived off to private enterprise, leaving the loss-making side as a potential, or present, burden on the Exchequer. This is paralleled only by the Socialist policy of looking round to find a loss-making industry and nationalising it. Between the two, I must say that I am getting very confused. I think that both policies are absolutely daft. But if the Conservative Government are determined to sell off profitable nationalised assets, at least the I.R.C., with its commercial experience, would be a far better vehicle for that sale than Government Departments which are, rightly, a long way removed from commercial and industrial practice.

The second aspect of Government policy appears to be to condemn all companies or industries which are not currently making profits and to classify them as "lame ducks". Whether the "lame ducks" are to be fed to the jackals, as the noble Lord, Lord Shepherd suggested, I do not know; but this is a very odd one, too. I think it is far too glib a concept to say to one company, "You are a lame duck". and to another, "You are not a lame duck". In fact, in the case of Rolls-Royce the Government showed how farcical such a policy was.

The fact is that Rolls-Royce entered into a bad contract. Fixed price contracts in times of inflation are always very risky unless you have a good margin to play with. Fixed price contracts, when you have not completed your technological work, often mean the road to disaster. But the Government's first reaction was to treat Rolls-Royce as an exception to the "lame duck" philosophy, and to provide it with £40 million. When that proved insufficient, the Government reclassified Rolls-Royce as a lame duck and withdrew support. That is not leadership; that is pussy-footing, and it is certainly not an industrial policy.

This was surely a case where the I.R.C. should have been directly involved. In fact, I believe it was the I.R.C. which initially tipped off the Government many months ago that things were not as good at Rolls-Royce as they should have been. The I.R.C. had the ability to sort out the situation which had been created, instead of leaving it to the mercy of the Cabinet. What appalled so many of us was the total ineffectiveness of the Government and the lack of understanding of what it was all about, at the moment when the Rolls-Royce disaster struck. Since then, the Government have done what many of us would have expected a well-run business to do: they have sent a team over, they have sent people representing the Government, and they have got people over there really getting down to the job, getting out to California, going to the White House and so on. But I should have hoped, with all the experience that agencies such as the I.R.C. possess, that that sort of reaction would have been immediate and that the response would have been such as to enable the Rolls-Royce matter to be sorted out in a much quicker and more efficient way than appeared to be the case at the beginning.

Apart from that particular effort, why do we have to get rid of an organisation which was heralded with enthusiasm by noble Lords on the Tory Benches, such as the noble Lord, Lord Aldington, who I am glad to see is going to speak to-day. I do not know what he is going to say, but he has a great deal of business experience—a lot more than many in the present Cabinet. We had a very good speech from the noble Lord, Lord Shawcross, saying what a very good idea the I.R.C. was. These were not Socialists. The noble Lord, Lord Shawcross, has long repented of his neo-Socialist inclinations.

LORD ALDINGTON

My Lords, may I interrupt the noble Lord? I do not know whether he read the report of the speeches which were made then. If he did, he must have read a different version from that which I have read. I did not notice any great enthusiasm. There was a balanced acceptance by the noble Lord, Lord Shawcross, and by myself that this was worth trying, and I shall explain the matter further later.

LORD BYERS

My Lords, I am very grateful. I thought it was a first-class speech. If the noble Lord wants to retract any part of it now, the House is always very sympathetic to people who want to do that sort of thing. But it was a well-balanced speech and it came down on the side of the I.R.C.

The reason for dismantling the I.R.C. gives an equally disturbing insight into Tory industrial policy. It is that the I.R.C. cannot function without substantial funds—that is what the noble Lord, Lord Denham, said to-day—and this does not fit in with the Government's policy of cutting public expenditure. But the function of the I.R.C. was to use money to increase the national wealth and to improve our growth. They were to work on the basis of a long-term revolving fund, and that is the way to get growth. This is the positive side of the coin. Expenditure cuts may well he necessary, but not in an area which can promote growth.

I did not understand what the noble Lord, Lord Denham, was saying when he was denigrating the efforts and achievements of the I.R.C. He said that there were 600 mergers and the I.R.C. were responsible for only 20 or 30 of them. What is the charge—that they did too little, or that they did too much? We ought to know this. As the noble Lord, Lord Shepherd, said, it depends on the quality; it depends on whether you get growth. Of course you will make some mistakes, but I do not see what the alternative is going to be. Are the Government going to promote mergers themselves through the Department? I should have thought that that should give rise to some very difficult situations.

If one looks through the Press, I would say that, on the whole, one finds that on several grounds informed opinion condemns the Government's action to abolish the I.R.C. First, it removes from the Government's armoury a valuable and respected ally, which is a shortsighted policy. Secondly, it does so when other nations in Europe and the Commonwealth are introducing such agencies. Thirdly, it is bound to lead to more direct Government intervention in areas where the Government decide to reorganise. I think that, on the whole, this is an unfortunate measure and it reflects the Prime Minister's lack of understanding of industry, and the Government's determination to carry on this phoney battle of trying to put into Purdah anything that might lead to any form of Government intervention. I believe that the Government will have to intervene selectively in certain fields to get reflation and growth, and I think it is very shortsighted to get rid of this particular agency.

3.55 p.m.

LORD GOODMAN

My Lords, if I can contrive to do so, I must speak with circumspection and discretion this afternoon, because I am a member of the Board of the I.R.C. I am not sure at what stage my abolition takes place. There is a slightly disquieting remark in the Memorandum explaining the Bill, that the Board members will cease to hold office as such. I am not sure whether that means that other delectable appointments are going to be offered to us. But I should utter a warning that neither I nor my colleagues will accept any such offer unless we have an assurance from Her Majesty's Opposition that they will not abolish us with the same unseemly speed as the Government did so.

The first remark I should like to make is that it would not be right for any member of the I.R.C. to suggest that there is the slightest resentment on the part of the Board at the action taken by the Government. There is not. The Board remains as good-humoured and good-tempered as before its abolition. The members of the Board will all find other things to do. It is absolutely right that a Government should pursue their own policy and, contrary to the noble Lord, Lord Shepherd, who made a most effective and thoughtful speech, I regard the explanation as totally convincing. The explanation is that it is contrary to the Government's philosophy. If the Government pursue a policy of believing, for instance—I do not suggest that it is so—that the earth is fiat, then they are quite right to proceed on that basis. It would also be totally wrong that those of us who had been instruments of Government should seek to be joined in proposals which were designed to advance that belief.

It is not perhaps surprising that if there were a Government which believed that the earth was flat they should find themselves a little short of arguments, as was the noble Lord, Lord Denham, in the very best efforts he could make, to justify changes consistent with their philosophy. However, although we wholly accept that it would be wrong for any member of the I.R.C., or for that body itself, to complain about its abolition, it does not prevent us from suggesting in the mildest terms that the notions behind our abolition are misconceived, misguided and wrong. This is what I want to do in a few brief remarks.

This is a very big subject. I believe that the I.R.C. is an instrument of a mixed economy. The noble Lord, Lord Shepherd, remarked very much to this effect, but did not dilate upon the subject to the extent upon which it should be dilated. I believe that it deserves a debate on its own, because I believe passionately and fervently in a mixed economy. I think that a mixed economy is the answer to Karl Marx and the answer to Fascism. It is one of the most remarkable political developments that this country has demonstrated to the world, and I believe that if we pursue the philosophy of a mixed economy we shall avoid many of the problems, many of the abrasions and many of the conflicts that we are otherwise bound to encounter. I am terrified at the notion of our having a Government that may have rejected that conception, and it would be wrong if one did not say that there are very disquieting signs that this Government have rejected it.

The mixed economy is a means whereby we can contrive to maintain at their fullest the notions of private enterprise, with a sensible understanding that there are areas where private enterprise needs the help of the society at large, and that there are other aspects of society activity that must be carried on by society alone. The extent to which a mixed economy is appropriate for a particular problem is one of the great problems of government that we have not yet resolved and to which we have not sufficiently turned our minds; and the dissolution of a Governmental instrument like the I.R.C. is, to my mind, an unhappy demonstration of a rejection of the whole notion of the mixed economy as a system of government.

It is too large a subject on which to dilate at the moment, but let me take a few illustrations culled from the speech of the noble Lord, Lord Denham. He said that out of 600-odd mergers that had taken place, the I.R.C. had participated in only 22—as though there were some virtue in mergers; as though if we had produced a large number of mergers we should have behaved virtuously and well. The noble Lord, Lord Byers, said that he was not quite sure of what we were being accused: whether we were being accused of being too inactive, or of being too diligent. My own belief is that the accusation, if made at all, would be that we were too diligent; that we had covered too much ground, having regard to the amount of money that we had and the opportunities available to us.

But what I would point out to the Government is that there is no area of financial activity more suspect, more questionable and more in need of constant review than the takeover and merger field. Here the I.R.C. was performing a most valuable function, because not only did we promote a number of valuable mergers but we prevented a large number of mergers which would not have been valuable and in our view were not in the public interest and not in industrial interest. It is the case that hardly a merger, hardly an approach, took place for the international acquisition of British assets without prior inquiry of the I.R.C.; and I believe we had contrived such a degree of influence that no one would have been foolish enough to attempt a major merger unless he was satisfied that we had no reasoned objections to it. That is not to say that we had a stranglehold on this matter, but it is to say that we had developed a corpus of knowledge and of information in relation to this field that, in the short time we were in existence, was unique and was enormously of public benefit.

This, again, is too big a subject for this afternoon, but I would point out the extreme undesirability of our present takeover procedure, where the matter is dominated solely by financial considerations in the City. A merger, if it takes place, takes place at boardroom level and at no other level. It is rare in the extreme for the engineers or the technicians to be consulted, or for those people concerned with the process of manufacture to have any say in the matter. It is determined on balance sheet considerations. The injury to the national good, to the national economy, in pursuing this course cannot be exaggerated. I should like to see an investigation into the results of the amalgamations and mergers that have taken place over the last 15 years, to see to what extent they have resulted in national good and social good and to what extent they have resulted in social detriment. The idea that we continue to pursue a course where we have let loose the full powers of private enterprise, of commercial laissez-faire in this field, seems to me extremely unwise and injudicious, and I shall be astonished if another machinery has not shortly to be sought after to enable the regulation of mergers in some fashion.

LORD ROBBINS

My Lords, may I ask the noble Lord an entirely uncontroversial question? It would be deeply interesting to the House, I think, if at this moment he were to explain to us his conception of the functions of an ideal I.R.C. in relation to the functions of the Monopolies Commission. I think it is very germane to the last few sentences he uttered.

LORD GOODMAN

My Lords, that, if I may say so, is an exceptionally fast ball. What I shall say of it is that it is so wide of the off-stump that I intend to leave it alone. Because the members of the I.R.C. were not responsible for the Monopolies Commission, and there is plainly, and always was, a clear-cut conflict between the activities of the two bodies. All I can say, however, is that the I.R.C. was an efficient and effective body; and, as to the Monopolies Commission, I think on the whole any assessment would be quite unworthy on the part of a member of the rival body.

I hope that that answer will satisfy the noble Lord; but it brings me back to the conclusion of my last remark: that I believe we shall have to search for a means of regulating takeovers, for a means of regulating mergers, that ensures that it is not totally a matter of so-called shareholder control; because one of the myths of the present generation of company lawyers is that the shareholder controls these situations. Of course the shareholder does not control them: some astute gentleman in a merchant bank or in a stockbroker's office controls them and creates the legend that there is a sort of company democracy arising from the fact that the shareholder has a vote. On a number of occasions I have travelled through the country with someone who has suddenly said to me, "Ah!, there is Bunce and Bunce Limited; I have a share in them. What do they do?" The notion that you can leave decisions of this importance, touching the employment ment of thousands of people, touching the financial interest of thousands of suppliers and thousands of customers, to shareholders whose purchases relate solely to the dividend they will get and who will change their loyalty to the company overnight on the recommendation of a stockbroker's circular is, if I may say so, a completely fanciful notion; and the I.R.C. was serving a most useful purpose in correcting this situation, if nothing else.

Then we come to the question of nationalisation. The idea that the I.R.C. was an instrument of Socialist policy is really a classic absurdity. If anyone had attended the meetings and seen the members of the board rubbing their hands with satisfaction at the way in which they were acting as a corrective to Socialist policies and the way in which they were ensuring that the end of nationalisation had come because they were the answer it would, I think, have caused the Government not to proceed with quite such unseemly haste. The haste, of course, is another matter. I am reminded of a supposed inscription on the tombstone of a small baby. It was supposed to be an Elizabethan inscription, which read: If I was so soon to be done, The wonder is I was ever begun. This would seem to me an entirely suitable inscription on the tombstone of the I.R.C.

The other thing I should like to say is this—and I shall not keep your Lordships long because this is an enormous topic. The I.R.C. was an extremely interesting instrument of Government of a type which we were beginning to develop. It was an instrument of Government involving people who were nonpolitical. Although politicians may find this difficult to credit, there is a large range of very useful people who do not wish to associate themselves with political activity but are nevertheless prepared to serve the community on a nonpolitical basis. It behoves every patriotic citizen who believes that he can do something for a Government to do it regardless of political consideration. A means of doing this had been found by instruments like the I.R.C. and, if I may venture to say so, speaking with greater authority, by instruments like the Arts Council. Here, there can be devolved upon bodies of people totally free from political control the discharge of specialised duties.

This is an absolutely splendid thing; but, of course, you will find that it is not totally beloved by all bureaucrats. Governments like it, but there are areas of bureaucratic activity where no great affection for this dwells; and when you get a change of Government bureaucrats will crawl out from the holes that they occupy at given moments and seek to denounce the existence of any kind of Governmental organisation which is not open to their control and domination. If I may venture a word of advice to a new, fledgling Government: watch out very carefully for this. The moment you get a firm bureaucratic recommendation for the abolition or curtailment of the powers of any body, that is the moment to take the strongest action to suppress that recommendation. I believe that when history comes to be written we shall find that the end of the I.R.C. was by no means totally the fault of the extraordinary economic philosophy which may obtain at the moment. I think we shall find that it was also the fault of very firm bureaucratic recommendation. This is something about which democrats should be extremely concerned.

I know that there are to follow me people who can speak with much greater authority on this subject. Lord Brown is to speak. I believe the whole of the I.R.C. conception arose from a memorandum he himself wrote when he was the adviser to the Ministry of Technology. Lord George-Brown is to speak (that happy hyphen prevents confusion between their identities), and his authority on this subject is second to none. But as a member of the I.R.C. it would be wrong if I did not deplore the fact that what I regard as an excellent non-political organisation which made some very good decisions, which made some wrong decisions and which was the forum for very free and open debate between its members, has been abolished too hastily, and without sufficient thought to the functions that it can usefully perform for this society of ours on a non-political basis.

My last word is this. I was grateful for the expression of appreciation that the noble Lord, Lord Denham, made, particularly to the staff of the I.R.C. We have in the Chairman, Sir Joseph Lockwood, and his predecessor Lord Kearton, very remarkable men who discharge duties in a remarkable fashion. We have in the managing director, Mr. Villiers, equally a most remarkable man with a degree of energy and determination which will undoubtedly find adequate expression in other fields. But, above all, someone had devised a method of recruiting young men of astonishing diligence, of astonishing talents and with a remarkable dedication to the function of the I.R.C. Anyone who believes that the I.R.C. was an unworthy political instrument need only come to speak to our staff. He would have to understand how it was possible that these young men saw in it an instrument of most effective and hopeful achievement in relation to future government. I would rather they spoke for the body than I—and I may say that they have all been snapped up by industry all over the place; and their careers, I hope and believe, are assured. When the history of the I.R.C. comes to be written, one of its outstanding features will be the way it found it possible to recruit these young men of great talent.

I believe that the existence of bodies like the I.R.C. and of similar bodies, free from Governmental control while remaining Governmental instruments, would go a long way towards smoothing the asperity of labour and employer relations that exists at the moment. It was the case that in no single I.R.C. investment, in no single matter in which they concerned themselves actively in reorganisation, did we find any union trouble or labour problems. This was due to the exceptional talent and dedication of that remarkable man who died so tragically, Mr. Les Cannon; but the fact remains that if you can demonstrate to the employees and to the employers in an organisation that there is an element within it which is not concerned solely with profit making, not concerned solely to ensure larger wages and shorter hours to employees, but is concerned with the prosperity of the institution as a whole, it will go a long way towards removing the problems with which we are confronted at the moment and with which, unhappily, we look likely to be confronted for years to come. I think that the abolition of the I.R.C. was on reflection a mistake, and I shall be surprised if we do not have to reinstate a body of this kind before very long.

4.12 p.m.

LORD GEORGE-BROWN

My Lords, I am delighted to have the chance to follow the non-political bureaucrat who has just spoken. I doubt very much that in this particular case it was the bureaucrats crawling out of their holes who induced the Government to carry out this particular piece of stupidity. The origins of the Bill are, I think, much more (a) political and (b) spiteful on the part of some merchant bankers in the City who thought that somebody else was getting into their act and was doing it better than they had with bureaucrats in the offices of the Departments of Whitehall. So much has been said that almost certainly one is going to repeat what has already been said even better. I intervene only because I had a good deal to do with this and I was in fact responsible for getting Parliament to accept it and my colleagues to provide the resources which it needed. I felt that I could not let this melancholy occasion pass without adding my own little word to what has been said by others.

The arguments as they are put up for doing away with this body seem to me to be so trivial as to be really rather frightening as to what is going to happen so long as this Government last. Listening carefully to the noble Lord, Lord Denham, he really had only one argument. It was that this was using public funds (as the noble Lord, Lord Goodman, said) and that somehow this was wrong; although this Government are using public funds on such a vast scale to aid industry that I cannot think that the noble Lord, Lord Denham, really meant that. The Government are already responsible for expending far more public funds in non-selective, non-positive ways than the I.R.C. either did or will do from here on. But then he went on to say—and this seemed more his real argument—that there would need to be more public funds committed from here on if the instrument is not wound up.

It has been worked out—I have the quotations here if noble Lords wish to hear them—by people, not Socialists, not responsible for setting up this instrument, people who began by being very suspicious of it, that the order of funds from here on start at about £20 million in a year and would rise perhaps to double that if nothing else happened. But this is just the moment when the instrument, because of its past wise (if I may say so) policies is (a) getting a return on its funds, is now collecting the dividends and (b) beginning to get some of its funds repaid. This will go on at a faster rate. In this as in other things I think that the Government have an extraordinary form of accountancy in which they add up only one side of the ledger and forget to deduct what is on the other side and then come out with the original figures unaltered.

In fact from here on the I R.C. will be doing what we always saw it as doing: it will begin to embark on a period of self-financing where the returns will be coming in and payments going out and it will be using its past funds twice over—which, if noble Lords would do me the credit of reading what I said in the opening debate when moving the original Bill, was its original purpose. There was £150 million to get started. We did not put a time limit on it; but we could look to see whether we needed more thereafter. What we expected was that it would not tie up those funds in a once-and-for-all operation but would use them so that they would reactivate themselves and would reactivate the return on themselves, which could be used again and again. This instrument is being wound up just as that was beginning to happen—and there is no dispute about this—without giving any opportunity to find out at what pace this regeneration of money would go on. Instead, it is just chopped. The excuse given is that we must save public expenditure and that £20 million is too much; we must just cut it out irrespective of what good it was doing, what its effectiveness was in British industry.

My Lords, I believe that it goes rather deeper. I do not believe that the noble Lords occupying the Treasury Benches at the moment are really as superficial as they are forced to appear by their masters down the road. There are two other factors. One is that when the idea was evolved and we introduced it, a number of Conservative politicians really did believe that this was an attempt by us to socialise by the back door. I well remember the instant reaction of the present Chancellor of the Exchequer on the occasion of the White Paper debate and that of the present Secretary of State for Social Services, Sir Keith Joseph, who dealt with it on Second Reading. They could not conceive that we had any other purpose in mind. This must be the reason that they both announced that they would dismiss it the moment they came to power. This was their instant reaction.

At that time quite a number of industrialists and commercial people had a reserved approach to it. They were suspicious, but they did not denounce it outright; they warned us that they would watch it carefully. Among those was the present Secretary of State for Trade and Industry, the then Director-General of the C.B.I., with whom I had discussed the setting up. His position was much more reserved. He wanted to see how it would work. Over a period, some of those who took that initial view retracted. Sir Keith Joseph, in the most recent debate in the other place, said just before the Election that if the I.R.C. was still doing a useful job if and when they came back into power they would look carefully at its powers and its resources to see whether they needed narrowing, or redefining or limiting. That was a very sensible approach.

The noble Earl, Lord Jellicoe, speaking, I think, in this House on July 23 last year, said that his personal view (I am paraphrasing the noble Earl, but I do not think that I am doing him an injustice; he can read the quotation if he wishes) was that the Corporation had a very useful role to play if its function, its resources, its powers, were properly looked at again, and properly defined. No one on this side of the House could complain if any Government, theirs or ours, looked again at the definition we had applied at the beginning, when we had little experience on which to go. I might or might not agree with any decision to which they came, but it would be a sensible thing for an incoming Government, of either Party, to do. But not go back to the beginning and just dismiss it, once having said, "We now think it is doing a useful job and in many ways it has been efficient, but we are not sure that all its resources and powers are needed". The first course would have been sensible; the other course really is not.

This causes me to ask myself, "Now what?" Is all this because—as I think the noble Lord, Lord Byers, said—the dictatorial Chairman of what passes for a Cabinet nowadays said, "I committed myself to this view at Bexley Heath and I am the sort of chap who never goes back on a view I once committed myself to at Bexley Heath."? We encountered the same problem over the Rolls Royce question; we should not be in our present situation had he not taken up that attitude. That is possible, my Lords. It is possible that a lot of sensible, more progressive and constructive members of the Administration were prevented from being progressive and constructive, because the gentleman from Bexley Heath said that he could not go back. I could well believe that that is exactly what happened.

There is a supporting point. I see that the noble Lord, Lord Aldington, is in the Chamber. Reference has been made to him, and we shall hear him in this debate. It is quite true, as I well remember, that the noble Lord, Lord Aldington, was one who—contrary to the instant reaction of the present Prime Minister, the present Chancellor of the Exchequer and the present Secretary of State for Social Services—took a restrained attitude at the beginning. It is true that he did not go out on a limb in support of it. But then the noble Lord has never been that kind of a chap; he has always been a little reserved when it comes to committing himself in the end. But—fair play!— he did take a restrained and constructive, "I'll have a look", sort of attitude.

LORD SHEPHERD

My Lords, may I remind the noble Lord, Lord George-Brown, that the noble Lord, Lord Aldington, moved two Amendments which not only improved the Bill but also even strengthened it?

LORD GEORGE-BROWN

In which case, my Lords, the noble Lord, Lord Aldington, is going to occupy an interesting position this afternoon. Because I understand, from what I have heard from my spies in the City, that Lord Aldington no longer takes quite the same view.

This brings me to the interesting question: what in fact has changed the views of some people on to whom the Government have been able to latch? One thing that people could argue, and do argue—I am not in a position really to challenge the argument; I do not know enough about it—is that the I.R.C. made a couple of mistaken decisions. One that is hotly contested is the Kent-Rank issue. So far as I can understand it, I think that on the whole the I.R.C. were probably right, but it is a point of argument whether they were or not. If anyone in this world is going to get all ten decisions right, it will not be the present Government; and, with great respect, to the noble Lord, Lord Aldington, neither is it the present collection of merchant banks in the City.

I would draw the noble Lord's attention to a fascinating article which appeared in one of the Sunday newspapers—either the Sunday Times or the Observer. I forget which—in which the writer asked which shares of which merchant banks would you buy on their record for the last year or so. I must say that what with the Metropolitan Estates, Hill Samuel and what not, the writer came to the conclusion that there were really only two in the league. One was Schroder Wagg and one was Warburgs. So far as I know, those were the two merchant banks which provided the most distinguished members of the board and the staff of the I.R.C. The problem here is that the I.R.C. turned out to be a rather more successful merchant bank than some of the merchant banks have themselves turned out to be. They burnt their fingers and lost vast sums of money—I do not know whose money it was—and the idea of this other body in the field did not appeal to them very much. That has played a part in supporting the decision of the Government to get rid of what was an effective instrument.

After all, nothing can be more interesting than to see oneself copied. It is interesting to see that the Common Market countries, whom we are, as I understand it and if the Government are to be believed, seeking earnestly to join, have equipped themselves with this very instrument since we had it—and they have accorded parenthood to us—so that they could meet us when we came in, because we had this instrument. So now, my Lords, we throw this instrument away, so that we can meet them when we go in without it—when they have got it. Really, my Lords, whichever way you look at it, it is, with respect, just about as barmy a way to behave as any Government could conceive. There has been a tremendous retreat here, as better Ministers know very well. Whether the noble Earl, Lord Jellicoe, will tell us which of these various suggestions is the right one, or which combination is right, I rather doubt. It would be interesting to hear it. The noble Earl may know, though I am not sure that he does; because I gather that the Government have a Cabinet, and lesser cabinets, and lesser cabinets beneath them; so he may not have been told.

I should like to take up a point made by the noble Lords, Lord Goodman and Lord Byers, about the Press attitude to this matter. I have collected a few cuttings, going back as far as July last year and including one from the Observer of November last, where the heading is, "Davies was wrong on I.R.C." Then I turn to the Financial Times—that great "Socialist institution", headed by that great socialist Lord who intervened just now. The Financial Times refers to The usefulness of the I.R.C. and we are told that … it is undeniable that the I.R.C.—small, expertly staffed, with a wide range of contacts was able to do certain things … The article ends by saying that Mr. Davies would have to find some other instrument with which to do them.

I move on to the Sunday Telegraph and Mr. Patrick Hutber's column on November 8. Patrick Hutber tells us, not surprisingly, that he had some trouble making up his mind. Those who read his column understand that this is a weekly problem for him. He says: I think again on free market principles there is a good case for an I.R.C. type body … Then I go to the Daily Telegraph of November 9, the piece headed "Institutions will need an I.R.C. of their own". It goes on for a whole column telling us how good the I.R.C. operation was, and that, since the Governmnet got rid of it, the institutions will have to set one up for themselves—this time, of course, with no public accountability and with no prospect by which we can check the purposes of its operations. There is a further cutting from the Financial Times, headed, "I.R.C.: 'New problems for the City'." There is a cutting from the New Scientist, "Bring back the I.R.C."

The fact of the matter, my Lords, is that the Government—they may, or may not, regret it; and they may think it relevant or irrelevant—have no support at all from outside a small area of the City—which is jealous of its own prerogatives as it sees them—and some politicians on the Government side of the House who think they have given political pledges to which they must stick. There was no ideology in setting up the I.R.C. The noble Lord, Lord Goodman, has made that plain. I remember so well being attacked as violently by Members behind me, because there was no ideology in it, as from the other side because they thought there was.

This Corporation was set up for no other purpose than to give British industry a chance to conduct a revolution in restructuring in a desperately short space of time. It was not to take private enterprise out of business but to make private enterprise more capable of operating successfully. It was not set up (I say this with respect to the noble Lord who preceded me) merely to encourage mergers. It was designed to encourage mergers where they were relevant in getting a better structure in industry and making industry more competitive, but it was designed also to avoid mergers where they would be obstructive to development and where they would have led to a monopoly situation that would have run counter to the doctrine against which the Monopolies Commission was there to guard. But it was there to do other things, too: to provide for particular industries resources which they could not easily get through the market. This is a problem which many medium-sized businesses know. I think that we can do it by merging the I.R.C. with I.C.F.C., and this may be well worth looking at. But there is no case for throwing one of them away.

I think I can finish by asking the noble Earl, when he replies, to address himself to the question already put to him: have the Government a positive industrial policy? It is helping lame ducks, heaven alone knows! with large sums of money, but helping them for no identifiable purpose or reason, or just because somebody puts on the pressure and they cannot stand up to the strain. I believe that the I.R.C. was doing this very job and doing it in a positive, selective and considered way. We need to have cooperation between the Government and industry and the financial and commercial areas if we are to develop our resources and opportunities. Do the Government deny that? Or is it really, as the noble Lord, Lord Goodman, said, that they want to get rid of the public sector in a mixed economy? Like every other nation in the Western World, we need a degree of co-operation between Government and industry. No country denies itself this. And this is what the I.R.C. was doing. What is wrong about it?

The Prime Minister and his Ministers keep telling us about the one-day and other strikes that diminish our capacity to earn a living abroad. I do not dispute that many of them do. I have repeatedly said that many of these strikes are unreasonable and irresponsible. But what about all the internecine competition between British companies against each other in the export market; all the inefficient management; the forcing of bankruptcies and the climate they produce, and the timid attitude towards investment which they give to our economic climate?

The I.R.C. worked, I think, moderately well to improve the structure of industry, to promote better management in industry and a growing degree of investment in industry. I think that it did very well, though the Government Front Bench may be more reserved and may say that it did not do so well, though obviously it had some achievements to its credit. In that case, review it. It became unpopular because it was challenging inefficient managements, and inefficient and unsatisfactory financial areas in the City, and because some people did not have the courage to say that, despite what they said at the General Election, having had a better look at it, they are now not sure there is a better way of doing it.

I agree with the noble Lord, Lord Goodman, and other noble Lords, that we shall as a nation regret its abolition. We shall have to bring the I.R.C. back in some form. It seems silly, therefore, to go through this misery, and then bring it back again in some other form, after having destroyed what existed, lost the expertise built up, lost the tiny staff (there were just over 30) and lost the momentum in a job which I think in our hearts all of us know needs doing.

4.35 p.m.

LORD ALDINGTON

My Lords, I think your Lordships enjoy listening, as I do, to the noble Lord, Lord George-Brown; and when speaking of one of his offspring he is entitled to claim your Lordships' attention. He has many charming attributes, if I may say so, among them his almost unfathomable ability to lead with his chin from time to time. In the course of his remarks he took a side glance at the present running of the Cabinet and the present Prime Minister. He must have forgotten for the moment those pungent remarks that he made about his own Prime Minister at the moment when he resigned.

LORD GEORGE-BROWN

No, no, my Lords; I recognise it more clearly.

LORD ALDINGTON

My Lords, the noble Lord has made my next remark for me. He is assuming that his right honourable friend Mr. Wilson is still in office.

So much of what he and other noble Lords have said from the opposite side of the House has been on the assumption that a change of Government did not take place in June of last year, and that we are continuing now with the kind of economic climate to which we have grown accustomed in the last six years. If I may refer to what the noble Lord, Lord Goodman, said (I will say some words of admiration later on), he said that in this country we have a mixed economy. Most certainly we have; and I do not detect in what has been said by my noble friends any intention of removing the mixed nature of that economy. But it does not follow from that that the only way the private sector of the mixed economy is to be efficient and responsive to the needs of national industry is to have the I.R.C. or something like it. I think it true that in the kind of economic climate the Socialist Government like to see—they think it good for us—something like an I.R.C. is very good, but it does not follow that in a different climate we must have an I.R.C. to ensure the efficiency of the private sector.

I think that I ought to state my position clearly. I am in favour of both parts of this Bill, that part which terminates the Industrial Expansion Act and that part which terminates the Industrial Reorganisation Corporation Act. I have always opposed the Industrial Expansion Act, and I do not think it necessary to detain the House by arguing why. However, for the reason hinted at by the noble Lord, Lord Byers, and other noble Lords, I should say something about the I.R.C. And may I ask the House to excuse me if I do not remain until the end of the debate. I have some important discussions with some gentlemen who have flown here from the other side of the Atlantic. I have left them to come to this debate; they have to go back tomorrow, and I should like to finish my discussions. So I hope that the noble Earl will forgive me if I am not here to listen to all that he has to say.

My Lords, I admit that I have had mixed feelings about the ending of the I.R.C. and about its capacity, even in this new climate, to do something useful. I have had mixed feelings about that ever since it started, and so have many others. I do not think that the noble Lord, Lord George-Brown, is right in saying that the reason for its ending is related to the vested interests in the City or to the jealousy of those vested interests. There are much more rational—almost balancing—considerations which have been borne in mind. But in trying to explain my attitude to this decision I should like to give a little of the background to my approach to this problem, starting, as the noble Lord rightly said, with the measure of support that I gave to the Bill in this House on December 1, 1966.

Perhaps it might help your Lordships to remove from your minds some of the myths and prejudices about this not unimportant Corporation that have arisen really out of political discussion by people who, for one reason or another, did not have the full facts. The noble Lord, Lord Denham, gave us some of the facts this afternoon; the noble Lord, Lord Shepherd, in his valuable speech, gave us some others, and other noble Lords have also helped. I hope to carry this process one step further.

I gave the idea of the Corporation my support. I realised that its principal aim was to help the country to make effective use of its resources, both human and material. I gave my support, as those who read my speech again will see, following a serious balancing of the various arguments. But I gave it with an explicit regret that public money was to be used rather than City money: and I said so at the time. I remember having in mind those two organisations which the noble Lord who preceded me mentioned, the F.C.I. and the I.C.F.C., as better precedents, and again I said so.

I did not think it was the back door to nationalisation. I did not think it was an instrument of Socialist policy. I did think it was necessary, on the other hand, because of the interventionist climate in which noble Lords opposite believed and to which many of us had grown accustomed, and which was generally accepted as continuing at least for the time being. I felt that, in that interventionist climate, a body like this would be a good way of achieving the ends of making more effective use of the nations' resources both human and material. I thought, too, that those who expressed the feelings—by no means only belonging to the Party opposite, or to the Liberals—that both the structure of industry and its management needed a shake-up were correct. I thought it was also correct to say that the size of many parts of British industry was not large enough to compete with the multi-national corn-panics of America, or even some of the larger companies in Europe. I thought this was as urgent as noble Lords opposite did, in view of our hope that we should get into Europe. It seemed to me that a Corporation composed, as was proposed, independently of Ministers would offer some hope of improvement.

But, my Lords, I expressed some fears then—and I have always felt those fears since—of the real danger to the efficient running of industry and commerce in a mixed economy that might result from any substantial interference with market forces. I do not think your Lordships will want me to re-state the theory behind that proposition. But do not let us forget that market forces may allow for some individuals making mistakes, including the mistakes of sloth and delay, as they allow for some individuals' succeeding. If Government subjection of those forces may prevent those mistakes, including sloth and delay, it may also lead to gigantic error, with no counterbalancing forces to correct it.

What was the history of I.R.C. in this matter? I think that, in the main, it sought not to override market forces, but rather to help them and to hurry them on. In the main, the Corporation did that. But sometimes it quite deliberately—so, at least, it appeared to others outside—felt that it had to override those forces. Was the Corporation right? We have it from Lord Goodman's own mouth that, at least on some occasions, it made mistakes. I think that is bound to have been so. If it was aiming at growth, it certainly has not always achieved growth. Mistakes there were bound to be.

How did the Corporation work? When it started, it started as it said it would, with surveys, discussions and interchange of ideas, relying mainly on persuasion; and important things were done in that way. Then the Corporation moved to a second stage, including all the factors of the first stage, but added to them a driving sense of urgency, a dedicated sense that it was the duty of the Corporation to force through the changes that seemed good, and, if necessary, to make full use of the power given to it by the availability of public funds. I make no criticism of that: in fact, I admire the courage and persistence with which many of its ideas were pushed through. It is sometimes forgotten that that change from stage one to stage two did take place. It is also important, I think, to emphasise that even in the second stage there were a number of ventures with which the was associated that were successful without the employment of public money.

The working of this Corporation centred on the two chief executives, Mr. Grierson and Mr. Villiers, both of whom are respected friends of many of us here, and to both of whom, in my belief, the I.R.C., industry and the nation owe a great deal. That any of us may feel that we should have done things differently from either of them on one or more things that they tackled does not in any way reduce the sense of admiration that I am now expressing. I should like to follow others in coupling with my tribute to them a tribute to the board, including the noble Lord, Lord Goodman, who must on many occasions have enlivened the Board meetings with his wit, as he enlivens meetings with his clients, as I well know. I would also pay tribute particularly to the two Chairmen, the noble Lord, Lord Kearton, whose vigour and courage, and ability to handle Ministers, is almost unbelievable, and Sir Joseph Lockwood, who succeeded him and led the Board well in the last period.

My Lords, it is my opinion that if a Government want to see intervention of this kind, it is better for them to set up an agency like this Corporation, staffed and led by people who are expert in the business of financing industry and understand management problems, than to distort the functions of civil servants, and place directly on Ministers and highly gifted civil servants a burden which they have neither the experience nor temperament, training or staff, to carry. I believe that to be a highly controversial statement. Nevertheless, I hold to my view that this is a better way of doing things than having direct intervention by Ministers.

Many of your Lordships will know that the company of which I was then chairman, the General Electric Company, was closely involved with the I.R.C. over a number of years—in fact, over the whole of its life. I think it is worth while placing on record certain points because of the misunderstanding of the position of that company that has come from the mouths of many people talking in another place, and of some people writing letters to the newspapers. Of the two mergers accomplished during this period, the I.R.C. raised the idea of doing the first merger, that is the merger of G.E.C./A.E.I. in May, 1967. It discussed the pros and cons with us, and we discussed the pros and cons among ourselves. I hope that the noble Lord, Lord Goodman, knows that in our mergers manufacturing and export considerations were very much to the fore at all times. It was only after quite lengthy discussion among ourselves that we came to the view that this was a merger which was good. It was only after further discussions with the I.R.C. that we came to the view that the integration involved was not only desirable on economic grounds, but that it was practicable to be achieved at that time. It was the idea of the timing rather than the idea of the merger for which the then I.R.C. should take credit. We had, of course, been thinking for several years of links in the electrical industry.

After the decision—which was our decision—had been taken the I.R.C. gave support, acted between us and the Government in explaining the facts, and in ensuring that Government policy and proper legislative requirements were followed by us. In particular, it acted for us in explaining the facts to the Monopolies Commission. We had to involve ourselves in that explanation as well. No one will ever know what would have happened had the I.R.C. not acted as I have described. It is very doubtful if its intervention actually helped in the take-over bid; by supporting us it created as much bow wave as helping us.

In the second merger, that with the English Electric Company, the proposal for the merger was made by the companies concerned, and its timing was brought forward by the intervention of a third party. The I.R.C. did not take part at that time, but it most certainly took part following our decision. It discussed the matter with us; it examined the proposition. It then gave that merger its support and acted in the same way between us and the Government. In neither of those mergers did the I.R.C. provide any money. Indeed, if any noble Lord thinks that my attachment to the I.R.C. may be due to the fact that I have had some money from it, this is far from correct, for since these mergers G.E.C., far from taking money from the I.R.C., has repaid to it £12½ million borrowed by others. Those are facts. There is also the story that by bowing to the "dictate" (as it is called) of the I.R.C. the management and board of the General Electric Company did their shareholders harm. That is entirely untrue. One only has to look at the rise in earnings for the G.E.C. shareholder between 1966–67 and 1969–70 to see how untrue that is. The rise in earnings has been substantially above the rise in the retail price index. If one thinks that it has damaged exports or production efficiency one only has to look at the figures. This merger has undoubtedly been a success. It was not just a boardroom merger; it was a merger very carefully worked out with management.

So much for the G.E.C. This is only interesting to your Lordships because it gives a background to how these things happen. Following those mergers there was continued close discussion to ensure that there could not be further rationalisation, or improvements in the position. That was good; it gave an exchange of ideas and it led to some minor, but important, changes. Sensible restructuring of industry seems to me to be an essential part of sensible change in our country's life. In that interventionist climate the I.R.C. performed an essential role in that regard. It worked effectively and efficiently without fear or favour. In doing that work it sometimes performed a function which shareholders were not fully performing, of shaking up management, and even leading to changes in management. It was able to do this because its staff was of an exceptional quality, splendidly led and imbued with a selfless purpose. Their skills and attitudes are well worth study, and that they are now dispersed in many other places is not a disadvantage to our national life. It may be a great advantage.

So much for what happened in the interventionist climate. The climate has changed since June. One may say "Thank Heaven for that!", if one believes as I do; or one may thank the British electorate for it—it does not matter. The climate has now changed from an interventionist climate into a climate where, in our economic life, individual responsibility is being encouraged and, I would say, almost forced upon us. A strong sense of discipline is being restored both to individuals and individual companies in industry and commerce.

Noble Lords may not agree that that climate is right, but I beseech them to accept that the change has taken place. When I listened to the noble Lord, Lord Shepherd, suggesting that we had switched back to the 19th century, I did not think that was quite right. As he went on to say in a rather inconsistent part of his speech, we certainly enjoyed in the 19th century a greater national wealth than we had every enjoyed before. It is an odd comment to accuse us of going backwards to that. But I do not want to digress on this. I do not think that we are going back to the fine old days of the attitude of the Party of the noble Lord, Lord Byers, in the 19th century. We are not doing that, but we are going back to the restoration of discipline and individual responsibility.

Frankly, I do not think that this restoration of discipline and individual responsibility will be achieved if you leave with a Government agency the power to override the decision taken by people whom you are trying to discipline and get to accept individual responsibility. That is the problem. It is quite right of the noble Lord, Lord George-Brown, to remind the House that the Conservative Party did not in their Manifesto, or in their immediate post-election speeches, promise to remove the I.R.C. straight off. They said that they would review it. That, surely, was the right decision, to see if there was a place for the I.R.C. without the use of massive public funds.

The Secretary of State in another place has told us what happened. There was that review, there was an attempt to see whether the I.R.C. could be fitted in either to a new City institution, or to one of the existing F.C.I.s—the I.C.F.C.—and I would hope, too, that there was a study as to whether it might not even fit into the Bank of England. It was eventually found that none of those courses was practicable. I accept that. It is no secret to noble Lords opposite that in a way I rather regret it, but I accept that that is the position as it is. I accept it particularly because I welcome, and everyone with whom I work welcomes, the drastic alteration in attitude and climate which this Government are rightly bringing about. I believe that other forces are at work to bring greater efficiency now, to compel desirable change and adapt industrial structure. Other institutions can and will fill the place of much that I.R.C. did.

LORD BROWN

My Lords—

LORD ALDINGTON

I am just finishing, if the noble Lord will sit down. Other institutions are already fully in action in Europe, and for British industry in Europe. To those noble Lords whose judgment in these matters I have followed very carefully, and with whom I have shown myself to be in sympathy in their climate, I say that if they feel that that neither industry, nor its financial resources, can be fully efficient without the I.R.C., there is a simple answer to that—I think that they are being ostriches. Things are different now. If it were true that under a Socialist economic direction of our affairs I.R.C. was necessary—and the noble Lord, Lord George-Brown, has told us that it always will be necessary—under a different economic climate that need not be true, and in my view will prove not to be true.

LORD BROWN

Before the noble Lord sits down—and I can understand his reluctance not to allow me to have a say when he is speaking—can he tell me why, in this non-interventionist atmosphere which the Government are generating, the I.R.C. is no longer necessary, and why efforts were made to fit it into the Bank of England, and so on? He seems to want to have it and not have it.

LORD ALDINGTON

I thought I spent a lot of your Lordships' time explaining that; perhaps the noble Lord will read what I said.

5.2 p.m.

LORD HOY

My Lords, I am delighted to follow Lord Aldington in his speech. I do not know that it had very much to do with the Bill that is before your Lordships' House. It seemed to me that the noble Lord's speech was an apologia for what had happened as betwixt the G.E.C. of which he is Chairman and the I.R.C., followed by a peroration that had absolutely nothing to do with this Bill. That part of his speech did not surprise me. The noble Lord and I entered another place at about the same time. He in fact entered as a brigadier, and I entered the House as a corporal, so we were very much apart. It was not until I heard the noble Lord speak in another place that I realised how difficult it had been for the corporals to win the war.

I also did not quite appreciate his stricture about what you would require if you were going to be a businessman in this country. I remember the noble Lord when he held two Ministries—first, if my memory serves me correctly, the Ministry of Supply, and later the Board of Trade; and I do not recollect him excelling in these particular functions. In fact, I think he found it so unprofitable to be in politics that he decided that a much easier way to earn a living was to get out to the City and into business. So those who failed the Ministry became chairmen of the G.E.C. and other authorities of that kind.

To-day I want to say one or two words in support of the Industrial Reorganisation Corporation, and I want to say two words in support of the noble Lord, Lord Byers, because his word was brought into question as to who did and who did not support the I.R.C. when it was introduced in 1966. Reading the Report of the debate of that date, one sees that the noble Lord, Lord Aldington, and later the noble Lord, Lord Shawcross, took part, and the noble Lord, Lord Shawcross, in his concluding sentences, said this: As I have said, this Bill is no doubt loosely drawn, and I daresay many improvements can be made to it in Committee."—[OFFICIAL REPORT, 1/12/66; col. 849.] The noble Lord, Lord Aldington, said that he got two Amendments carried, so that statement was obviously true.

The noble Lord, Lord Shawcross, went on to say (col. 849): That is one of the useful functions of your Lordships' House, but in broad principle, and in so far as this Bill will encourage a change in climate and promote bigness and rationalisation in industry, I commend it to your Lordships. These were the words of the noble Lord, Lord Shawcross. He was immediately followed by the noble Lord, Lord Aldington, who said (col. 850): My Lords, I find myself in such almost complete agreement with the noble Lord, Lord Shawcross, that in the last few minutes I have been wondering whether it would be right for me to detain your Lordships further … With all due respect, the noble Lord cannot come along at this time of day and speak as he did. He may get away with it in the City, and in the G.E.C.: but not in your Lordships' House. Some of us have memories; indeed, we have only to read the written word. I have read to your Lordships the written words. The noble Lord's quarrel, if he had a quarrel at all, was with the noble Lord, Lord Drumalbyn. Noble Lords will remember that the noble Lord, Lord Drumalbyn, in summing up for the Opposition at the time, did not reject the Bill. He said that he had a few doubts about the Bill, and expressed three doubts on behalf of the noble Lords then sitting on this side of your Lordships' House.

First of all, he said there was a danger that if we passed the Bill—if we made the I.R.C. a reality—the temptation would be for the I.R.C. to become obsessive rather than discriminating. If ever that argument was destroyed, it was destroyed by the noble Lord, Lord Goodman this afternoon. What the Government, in Lord Denham's speech, were accusing the I.R.C. of was this. They said, "We have had 300 amalgamations but you, the I.R.C. took part in only 22". That destroys the noble Lord's argument about the I.R.C. being obsessive. The noble Lord cannot advance that argument in 1966 and then come along in 1971 and say that the Corporation has interfered so little that it should not have been brought into existence. That surely destroys the noble Lord's argument completely, and indeed the great trouble with the noble Lord's speech was that it was written by Mr. Davies in his pre-"lame duck" days, and delivered only this afternoon.

The second accusation made by the noble Lord, Lord Drumalbyn, was that there was a danger that setting up the I.R.C. would mean departing from voluntary co-operation, and would end in compulsion. But the I.R.C. never had the power to compel anyone to do anything; I.R.C. could amalgamate only if it could get agreement beween the parties, and I defy Government, or any noble Lord opposite, to quote one instance of compulsion by I.R.C. No noble Lord can do it; the Government cannot do it. So on these two counts the argument falls completely. Thirdly, we had the usual old canard introduced by the noble Lord, Lord Drumalbyn, about the systematic intrusion of the State into the area of private enterprise, and all that sort of nonsense. That has not happened at all. No noble Lord can give an instance of it. So the three reasons they gave in 1966 for having doubts about the I.R.C. have proved completely false in 1971. Indeed, the Government have had only one speech in support this afternoon, and that was the appalling speech just delivered by the noble Lord, Lord Aldington.

I do not want to detain your Lordships, but there are two specific points I want to raise. One of them concerns the work of the I.R.C. As many of your Lordships know, I was for six years Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food, and in the course of my work we had to face the problem of the fishing industry of this country. Perhaps it is an exaggeration to say we could not make sense of it; but we were having difficulty with its organisation. The object was to provide the best and freshest fish in the world—the best food we ever get and the one that is uncontaminated, even to-day, for no fertilisers are involved in its production. This we had, but difficulty arose because of the finances involved. We thought that there was little more that could be done and so we introduced the I.R.C. The I.R.C. took over the job of amalgamating and bringing economic co-operation into that industry, and it was as a result of the action of I.R.C. that Associated Fisheries and the Ross Group joined together in an economic unit to provide not only food for the country but employment for thousands of people; and they have done a first-class job. If noble Lords opposite want to know what other members of the Government think about that action, let the noble Earl who is to reply to this debate remember that the man who was then chairman of Associated Fisheries is now President of the Board of Trade in the present Conservative Government. He had no objection to the assistance of I.R.C.—none at all. And so far as my personal association with them was concerned, I have nothing but praise.

My Lords, I come to my final point. I am sorry to trouble your Lordships with it once more, but I was interested in the question put by my noble friend Lord George-Brown: "If not I.R.C., then what?" What do we have in its place? I do not want to claim too much credit for it, but three weeks ago I was putting the same question in your Lordships' House. We were debating on March 3, and I received a note in which the noble Earl, Lord Jellicoe, kindly invited me to let his office know whether I had any point to which I wanted a reply. I accepted the invitation and asked for information, but he did not give it to me when the debate was replied to. I am bound to say, in fairness, however, that I had a letter from the noble Lord, Lord Aberdare, apologising for the tact that the point was not mentioned in the reply. However, I want to raise it again to-day because it is so important to the economic life of Great Britain.

I raised particularly the question of the British machine tool industry. I pointed out that when I was a member of the Public Accounts Committee that Committee always used this particular industry as one of their guides to the economic well-being, or otherwise, of the country.. I said that, so far as I knew, the industry had got into a pretty bad way; and I quoted the report of the industry itself, because it thought that it was in difficulty and that something required to be done. Before the Labour Government went cut of office they appointed a special Committee, under the chairmanship of Sir Richard Wainwright, to examine this industry and to make a report. This Committee found that if the machine tool industry was to make a real contribution to the economic stability of Britain, reorganisation must take place, because the outlook for that industry, on which the future of so many other industries depended, was not good enough. The position of the machine tool industry was so important that it called for action. And the Wainwright Committee said, "There is one organisation that can do this job successfully and that is the Industrial Reorganisation Corporation".

However, unfortunately, before this Report could be formally presented the present Government had decided to get rid of the I.R.C. So I was asking the noble Earl three weeks ago, "If no I.R.C., what then?" What answer have the Government? Have they in mind some other organisation that they can advance to take over this job? Or is it sufficient for the Government simply to say, "We believe in private enterprise, and industry can go to the wall if it likes"?

When I hear the noble Lord, Lord Aldington (and I do not want to become Party political in this debate) say that we shall come to an independence, I ask, "An independence of what?". The Government have an inflation rate greater than we have had previously this century; they have an unemployment total of nearly 800,000 people who are signing at the labour exchange. That is not independence; that is poverty for a tremendous section of our community. What we are entitled to ask the Government to-day is this. If for merely Party political purposes they want to get rid of the I.R.C., what are they going to do to fit out, or help to fit out, British industry to play its part in the future of our country? Certainly on this particular issue which I have raised lastly I shall expect a pretty specific answer from the noble Earl when he comes to reply.

5.16 p.m.

LORD BROWN

My Lords, this Bill clearly is almost completely destructive. We have not heard so far any cogent argument in defence of the act of destroying the I.R.C. We ought to be a little kind to the noble Lord, Lord Aldington, who unfortunately has had to leave us, because it is quite clear that somebody, besides the Ministers on the Front Bench, had to speak from the opposite side, and he was dragooned into it. He did an amazing acrobatic act, on which I think he ought to be congratulated for the facility with which he developed two completely contrary lines of argument.

EARL JELLICOE

My Lords, I am sorry to interrupt the noble Lord, Lord Brown, at this early stage in his speech, and I will do so for only a second. But if he had tried his hand at dragooning my noble friend Lord Aldington he would realise that it is a contradiction in terms.

LORD BROWN

Yes, my Lords; I suppose that is correct. The noble Earl must have used some other means. In any event, I am going to make a rather attacking speech. I feel reluctant to do so, because when I look at the noble Earl, Lord Jellicoe, on the opposite Bench I recall that I have great respect for him as a man, and for his intelligence, and for him as a merchant banker. I cannot believe that he is going to rise to his feet in a few minutes' time and defend this particular Bill with much relish.

We are an increasingly complex society; we are a highly populated island. We are going to need, whether the present Conservative Government or other Conservative Governments we may unfortunately have in the future realise it, more and more institutions. They are necessary to co-ordinate the affairs of our society as indeed society itself becomes more complex. All Governments recognise that additional institutions have to be brought into being—as indeed this Government realise, involved as they are in the Industrial Relations Bill at this moment. What worries me is where this destructiveness is going to stop. Is it going to travel to the Council of Industrial Design, or the Central Office of Information, the Export Credits Guarantee Department or the Board of Trade Advisory Committee, to name organisations I happen to be familiar with? Poor as the arguments that could be advanced to abolish those institutions are, they would certainly be no less impoverished than the arguments which have so far been advanced this afternoon in support of this Bill to abolish the I.R.C.

We have had—the noble Lord, Lord Byers, referred to it—the incident (if I may refer to it in those terms) of Rolls- Royce. Had the I.R.C. been in existence, I have little doubt that the experienced team which constituted that institution would have been able to deal with the Rolls-Royce affair much more discreetly and effectively than the scratch team which the Government had to get together at the last moment, led by the noble Lord, Lord Carrington—an able man, dragged from his proper job and thrust into a welter of commercial and technical detail, with which I have no doubt he is as unfamiliar as the rest of the team who had to deal with this affair. The fact is that this Government, in their doctrinaire enthusiasm for this catchword "non-intervention", prefer destruction to any form of cogent thinking about what is going to happen in the future.

May I make one other point in this connection. The I.R.C. was not an institution which was revenue spending; it was an investment institution. Its funds, once voted, were going to revolve through various investments in industry; and this has been made quite clear from the very start of I.R.C. The money which it actually received from the Government has not been spent; it has been invested in industry. I am reminded of the argument so often used in the United States of America, which seems to be one which is now being endorsed by this Government; that is, that private investment, however large, is always good and public investment apparently in the eyes of this Government is bad. That is one of the reasons why I.R.C. is to be abolished, because it was public investment rather than private investment; and this despite the fact that currently one of the greatest menaces to our future prosperity is the lack of general investment in industry.

The noble Lord, Lord Robbins, asked a question of the noble Lord, Lord Goodman, about the Monopolies Commission. I have never seen any conflict between the I.R.C. and the Monopolies Commission because the Monopolies Commission was always wrongly named; it is an industrial efficiency Commission which looks into the affairs of individual companies to make sure that they are not perverting the interests of the consumers. But they cannot invest. The I.R.C. could invest, and that is what differentiated them. As I saw it, the role of the I.R.C., as my noble friend Lord Shepherd has already mentioned, was to inhibit unwise foreign takeovers of key industries; to rescue essential companies like I.C.L., so that we have a computer industry in this country; to build up bigger units, not on the grounds that "bigness" is good but because bigness is sometimes necessary and it presents an opportunity—

EARL JELLICOE

My Lords, I am sorry to interrupt the noble Lord, but did he say that the I.R.C. "rescued" I.C.L.?

LORD BROWN

What I intended to say was that if we had not had I.R.C. I doubt whether we should have I.C.L. today.

EARL JELLICOE

My Lords, I do not wish to catch the noble Lord out on a small point of fact, but I think it was under the Industrial Expansion Act that the loan was extended to I.C.L. So far as I know, it was not anything to do with the I.R.C.

LORD BROWN

My Lords, I am grateful for the correction. The noble Earl is right, but the point is that the Industrial Expansion Act and the I.R.C. are one of a piece so far as philosophy towards industry goes, and the Government are about to destroy both of them. So we will not quibble over it. There is a need to sort out problems of apparent inefficiency leading to vast imports and unsatisfactory exports, such as, for example, the boot and shoe industry, which I know a little about, in which there are to-day still nearly 400 factories employing an average of 200 people each. It may be a craft industry, but one cannot run industries on that basis and something should be done about it. But, of course, it will not happen now.

Here we have this body just learning how to help; just getting down to the job and with a successful record developing. One looks at the last statement of accounts published by the I.R.C.—and I think these facts should be brought out. In the year ending March, 1970, they paid interest on the money they had borrowed from the Government; in terms of corporation tax they made payments total-ling over £3 ½ million; they paid a dividend of £500,000, and they carried forward a balance of some £70,000. In the year they initiated 32 projects, 15 of which required no investment by them but in which they were lending a helping hand, and in 17 of which they invested money in the form of rolling investments which have been extracted later by sale and ready for investment elsewhere.

One may assume that the Government expect the merchant banks to fulfil the role that has been carried out successfully by I.R.C. I have every respect for our merchant banks; I think the country generally benefits very much from their existence, but one thing that they cannot do is to fulfil the role of I.R.C., because they cannot take the initiative when they see a national necessity for, perhaps, two firms to be brought together. They must follow the course which in the long run will yield them a profit—not that there is anything disgraceful in that, but if clients do not take their advice then they will have to help them follow a course that is against their advice. It is for these reasons that the merchant banking community, in a different, private role, cannot substitute the work that has been done by the I.R.C.

Turning to the question of management, inevitably in British industry there are companies which are led by men who should not be leading them. We all know that. From time to time we face the fact that large corporations are on the downgrade, and this is very detrimental to our national interests. At the present moment, without I.R.C. we have absolutely no weapon for doing anything about this situation. On the boards of these companies there are internal executive directors whose manager is the managing director or chairman of the company, who cannot be expected to suggest that he should retire; and there are external directors who largely are unable to spend sufficient time on the affairs of the company to propose that the managing director is getting a bit "mossy" and should perhaps be asked to retire. This is a situation that can develop. I am not making a general attack on the management of British industry; I certainly do not feel that is warranted. But I am pointing to the fact that these situations emerge and that the I.R.C. has dealt with some of these situations. I will not mention any names, because I do not think there is any point in pouring scorn on people who are in jobs which are too large for them.

The only recourse left to Government in cases like this is to watch an industry employing thousands of people gradually go down the hill into liquidation. This is an appalling way of dealing with a company which is simply badly led. The hardship imposed on people is only part of the trouble. The damage done to the economy by large corporations being allowed to "go west" in this way can be intolerable, and the manner in which our economy is moving at the present time, with a continuation of current Government economic policies, will mean an increasing number of large companies going into liquidation when in fact some move towards the management might have prevented this happening. Amalgamation, advice and rationalisation by members of the I.R.C. have been able to avoid some of these situations and now we are flinging away the only instrument we have for dealing with such situations.

My Lords, we are faced with a Government who are steadily committed to the pursuit of a laissez-faire doctrine to an extent which I think might have shocked even previous Conservative Administrations. We are following a course which the United States of America used to follow. I have just come back from that country, in which I find the attitude is now one of deep thinking, and I should expect to see some departures from the laissez-faire doctrine which used to inhibit their thoughts in the past. We go to a country like America, we see the ghost towns of New England rotting because industries have removed themselves from one part of the United States to another.

We see all sorts of things being done in America in the name of efficiency which I hope we shall never see done in this country. Indeed, in looking back to past deeds of the Conservative Government, I have always admired them for the fact that they faced up to the problems of our own textile industry, provided funds and rescued the industry from an excess of capacity on the part of individual producers which really saved Lancashire from disaster, and then helped to introduce new industries. And yet these are the sort of acts which to-day are described as intervention and, therefore, taboo to this Government. These are the sort of acts which require an institution like the I.R.C., and this is the institution which you are now about to destroy.

I would make one last point. When I was a Minister at the Board of Trade it was my duty to see a large number of visiting foreign trade ministers and members of overseas chambers of commerce. Most of them had high on the agenda of matters that they wished to raise when they saw me or the President of the Board of Trade some information about the I.R.C. This was one of the new institutions in this country which really excited their interest. We know now that the French based an institution very like I.R.C. on our experience of that body and that Signor Colonna of the E.E.C. Council has recommended an institution in the form of I.R.C. to the European Investment Bank. There are many other countries where our experience with I.R.C. is being investigated, and yet we are going to destroy it.

I deplore this Bill. I wish that the decision could be reversed. I am quite certain that this type of institution will be revived in the future. I think the best epitaph that I can give it is to thank the team of people who served on the I.R.C., not only its directors but its staff, for setting a magnificent pattern on which future experience can be based. We thank them for what they have done.

5.32 p.m.

EARL JELLICOE

My Lords, I think that there has been, despite some surface appearances, a certain measure of agreement in your Lordships' House this afternoon on at least three issues. The first, which I should like to take up straight away, formed the conclusion of the speech of the noble Lord, Lord Brown, and was the general agreement in your Lordships' House that, whatever may be our feelings, philosophically or practically, about the I.R.C., this organisation has been quite remarkably distinguished by the quality of the people who served on it and were attracted into it. I should like to add my tribute to those remarkable people. Its two chairmen, Lord Kearton and Sir Joseph Lockwood, are amongst the most distinguished industrialists in this country. There are on its present Board two most notable Members of your Lordships' House, the noble Lords, Lord Stokes and Lord Goodman. I was glad, parenthetically, that the noble Lord, Lord Goodman, found time from his multifarious activities to come here and speak this afternoon, although at times I felt I could have done without some of the things he was saving. In Ronnie Grierson and Charles Villiers, it has had two managing directors of quite outstanding ability, both known to many Members of your Lordships' House. Whatever else any of us may feel about the I.R.C. I do not think any of us can question the quite extraordinarily high quality of both its Board and its small but elite staff. I say this gladly and I say it sincerely.

The second issue on which I think there would seem to be a certain amount of implicit agreement in your Lordships' House this afternoon is that, while we have heard a great deal about Clause 1 of the Bill, there has been an almost total conspiracy of silence about Clause 2, the clause which deals with the Industrial Expansion Act. I have not been surprised that this has been the case, because despite the fanfare of trumpets with which this Act was announced by the last Government they made little or no use of it. Only three projects fell within its scope—admittedly big ones: the two great smelter projects and I.C.L. But the fact remains that all three of those projects were deep in the pipeline before that Bill became law, and since then this child of the last Government has been a neglected one. Therefore, I am not entirely surprised that its demise has been virtually ignored in your Lordships' House this afternoon.

The third issue on which there has been a certain measure of agreement has been the clear agreement in your Lordships' House this afternoon to disagree on the merits of the I.R.C. case. To judge from some of their speeches this afternoon, the I.R.C. would seem to be, to many noble Lords opposite, the touchstone of all that is virtuous. For them it seems to have represented not only the key to the restructuring of industry and a channel for selective investment, which, as I understood it, were the two primary tasks of the I.R.C., but it has also been synonymous with higher investment in our key industries, support of our technologically most advanced industries, success in our export markets, successful defence against possible predators from abroad, and some sort of manifesto for management efficiency; that is quite apart from having appeared to them to constitute some sort of automatic crutch for lame industrial ducks. Quite apart from that, some noble Lords have portrayed the I.R.C. as the root of any sane and progressive regional policy; and to deny all these virtues would appear to be a sin against George Brown.

I should like to ask your Lordships to look upon this issue in less manichaean, less black and white terms. I would remind your Lordships that performance here has been far less than promised. For example, we all want higher investment in industry. We all know that it is here above all that we have been falling, year after year and decade after decade, behind our industrial competitors; but we also know that after five years we are still continuing to trail behind in that respect. The I.R.C., if it has helped us, certainly has not helped us much. We all know, too, and we know it from very recent experience, that when we come to our front runners, the really advanced technological industries of this country, we still have our problems, and we have had the I.R.C. for four years. And we know, too—and this is surely the crucial point—that it is not the I.R.C. but it is the Government of the day, right or wrong, which is the trend-setter, the pace-maker, the decider, certainly so far as regional social policies are concerned. I think it is a gross exaggeration to credit the I.R.C. with that key central role which a number of noble Lords would appear to have credited it with this afternoon.

I believe it is important that we should come down to earth, because we are not discussing macro economic policies here. These are the concern of Government as a whole, and it is them and their impact upon our life to which the Chancellor of the Exchequer will be addressing himself in his Budget Statement in a few days' time. We are not discussing the economic wood here, we are discussing the economic trees, albeit some very important industrial and economic trees, and it is on them that the axe of this Bill is intended to fall. I therefore suggest to your Lordships that it is a mistake to look upon this Bill, and to have conducted this debate, in such black and white terms, and also I believe that it would be a mistake not to keep things in proportion here.

In order to bring the debate back to a reasonable sense of proportion and to quantify things, I should like to re-present the statistics which my noble friend Lord Denham, presented to your Lordships earlier this afternoon in moving the Second Reading of this Bill. I will do this in a slightly different way. It is merely to remind your Lordships that in the period 1967 to 1970 something between 2,500 and 3,000 mergers took place in this country, involving a total consideration of something like £5,000 million. I think it would help us to keep a sense of proportion here if we were to remember that the contribution of the I.R.C. in this period to that wave of mergers was no more than a mere 100 or so, 4 per cent. at the most.

LORD BYERS

My Lords, forgive me for interrupting, but is the noble Earl saying it should have done more?

EARL JELLICOE

My Lords, I had realised that the noble Lord was about to ask me that question. I am not arguing whether it should have done more or less, I am merely repeating these facts in order to quantify the contribution it has made. I am not saying whether it is good or bad, or whether it could have been better or worse. These are the facts.

LORD BYERS

My Lords, when the Government took this decision what had they in mind? Was it that the I.R.C. ought to have done many more of those mergers, or that it was so dangerous that they did not want it to do any more at all?

EARL JELLICOE

My Lords, I think since we are abolishing the I.R.C. it is rather evident that it should have done less, in our view, at that time. That was the quantitative side. May I come to the qualitative side of this? On the qualitative side, again I think a great mistake is made in thinking that in every merger that has taken place where the I.R.C. has played a part—it has played a useful part, and I am the first to acknowledge this having seen some of these mergers at fairly close hand—that part has been the decisive element. I think, here again, that the noble Lord, Lord Aldington, in telling us something of the facts behind the G.E.C. merger, put the debate in perspective.

Having said that, I should only like to say that I agree with a great number of noble Lords who have voiced the view in your Lordships' House this afternoon that there is no particular mystique about mergers: some may be good, some may be bad; some are successes, and some create more problems than they solve. I think the Pennsylvania and New York Central merger probably created more problems than it solved. Another one which has been quoted in another place—a very indigestible one—has been Montecatini Eddison; and we have seen the difficulty which some of our own merged companies have met with in recent years.

LORD SHEPHERD

My Lords, the noble Earl is going very wide afield. Perhaps he would be able to tell us whether the mergers in which the I.R.C. has been involved, or any of them, have run into the sort of problems to which the noble Earl is drawing attention?

EARL JELLICOE

My Lords, I think probably some of them have.

LORD SHEPHERD

Which?

EARL JELLICOE

My Lords, I think it would be much better not to be too precise here. We all know that our motor industry is faced with great problems at the present time. I am not saying that that is as a result of the mergers, but there are some considerable problems facing our motor manufacturing companies at the present time.

LORD GEORGE-BROWN

My Lords, I do not want to interrupt, but this will not do, I suggest to your Lordships, when the noble Earl says that mergers sometimes create more problems than they solve. That sounds an unexceptionable statement. But the noble Earl mentions the Pennsylvania Railroad, which clearly the I.R.C., by definition, have nothing to do with; he mentions Montecatini Eddison, which clearly the I.R.C. had nothing to do with. When asked which one the I.R.C. had to do with that created these problems, he says it is better not to be precise. Is that because the noble Earl is afraid of naming the merger, or because he does not really know of one that happened in this country?

EARL JELLICOE

My Lords, I was making a perfectly general point about mergers, and I think when one is dealing with prominent companies it is often much better not to be too specific. That was the precise reason. I would have thought that the noble Lord, Lord George-Brown, with his experience, would have recognised that. Having said that, I should like briefly to run over some of the reasons why we have had doubts about the good sense of continuing the I.R.C. I should like to make it perfectly clear that these doubts have not been the result of doctrine. It is quite absurd for the noble Lord, Lord George-Brown, to suggest that the Government have danced to some obscure City tune, and I do not think he really believes it himself. At the same time, I would suggest that our reasons, although not doctrinaire, have been perfectly definite. We have had doubts, and I make no bones about this. Some noble Lords have criticised this decision on the grounds of public expenditure, and it is no secret that this Government believe in reining in public expenditure. It has been estimated that if the I.R.C. was to continue effectively (and there is very little point in it continuing other than effectively), it would have made a demand of something like a further £40 million a year on public funds.

LORD BROWN

My Lords, I have already made the point that this is revolving investment. It really is exaggerating grossly to suggest that there is a continuing need for the I.R.C. to receive £40 million each year. The terms of the Act are quite clear. I have made the point myself. This is tending to distort the facts.

EARL JELLICOE

My Lords, I do not wish to bandy words with the noble Lord on whether it is investment or expenditure of public funds; I merely point out that, so far as I know, those funds have not yet revolved. But of course this may be because most of the investment—call it investment—was on a five to seven year term, and this may be the reason. However, it has not yet revolved, as the noble Lord, Lord George-Brown, anticipated, I hope correctly, that it would when he introduced a White Paper on this four or five years ago.

LORD BROWN

My Lords, I do not want to interrupt too often, but is it not clear that the Government could have left the institution in being and simply said, "You are an institution dealing with a revolving fund, and until you get your money back you will not have any more to invest". At least this would have been a half-measure which would have continued the Corporation in existence.

EARL JELLICOE

My Lords, this Government are not necessarily wedded or addicted to half-measures.

The question of public expenditure is not the only doubt. There is a much more serious doubt behind this. What has worried the Government has been the clear evidence that the I.R.C., especially in its more recent manifestations, has tended to work increasingly not with but against the grain of market forces. I would not suggest for one moment that the market, the City, are always right; but, by the same token, I find it hard to persuade myself that 15 or 20 very bright people in the I.R.C., however talented, are necessarily the best judge of whether, in a contested situation (and that is using the phraseology of the last Report of the I.R.C.), there is a compelling, identifiable national interest which should lead the I.R.C. to put its shoulder behind one party to a bid rather than another. I would not for one moment argue that in certain circumstances discrimination may be right in the national interest, but I ask myself whether it is right for a virtually autonomous agency of the Government to be permitted this discretion to discriminate.

LORD GOODMAN

My Lords, I hesitate to intervene, but I think it would be of value if, the noble Earl would tell us, in the absence of the I.R.C's. judgment in this matter, what forces would otherwise resolve the situation?

EARL JELLICOE

My Lords, first, of course, there are the market forces. Secondly, behind them there is always the ability of the Government to intervene in a specific situation if they judge it right and appropriate to do so.

LORD GOODMAN

My Lords, does the noble Earl suggest that intervention by the I.R.C., a carefully selected instrument of Government, is not intervention by the Government? Why should any other form of Governmental intervention be any better?

EARL JELLICOE

My Lords, it has always been my understanding that the I.R.C. has operated with a high degree of autonomy. Certainly that is what the I.R.C. has prided itself on in its Reports, and this is certainly my understanding of the position.

I should like to make it clear, since my own position on this matter has been mentioned, not least by the noble Lord, Lord George-Brown—quite fairly, may I say—that I felt some years ago that there might be a place in our system for the sort of industrial midwife which, as I understood it, the I.R.C. was originally conceived to be. My right honourable friend the Secretary of State for Social Services was expressing a rather similar view when he said three years ago in another place: A facilitating I.R.C.—that is, facilitating the market mechanism—is one thing and may be useful. But a fighting I.R.C. is another animal altogether, because it uses the taxpayers' purse to back its judgment on what, in almost every case, can only be a hypothetical and marginal difference in national interest. That is precisely my own position.

I personally do not see any objection, I have not seen any objection—indeed, I have seen some advantage—in what I termed in a previous debate, last July, "I.R.C. Mark 1". But I have seen, and I do see, grave and serious disadvantages in I.R.C. Mark 2—the sort of animal which the I.R.C. was increasingly becoming and which was evident in its actions, right or wrong, in the Kent-Cambridge case. As the I.R.C. moved increasingly in this discriminatory and intervening direction, its role became increasingly unacceptable to the present Government. Again, I would entirely agree with those noble Lords (my noble friend Lord Aldington mentioned this) who pointed out that when we came to power we were not committed to the repeal of this Act. In explaining why we have now come round to repeal, I can only repeat what my right honourable friend the Secretary of State for Trade and Industry said in another place; namely, that we have come down in favour of repeal only after the most careful investigation.

LORD GEORGE-BROWN

My Lords, I have one short question. I apologise to the noble Earl, but this is important. He said, in explanation of his speech of July last year, that I.R.C. Mark 1 was not too bad. But it was different when it became an aggressive animal, Mark 2 —and he cited the case of Kent-Cambridge as evidence that it had become an aggressive animal. Has he forgotten that that was before July, 1970?

EARL JELLICOE

My Lords, the noble Lord, Lord George-Brown, occasionally bowls very easy long hops or full tosses. If he had done me the credit of reading with care my speech of last July, he would have realised that I was saying then, as I am saying now, that I had no objection to I.R.C. Mark 1—

LORD GEORGE-BROWN

Which included the Kent-Cambridge case.

EARL JELLICOE

My Lords, I was perfectly well aware of the date of the Kent-Cambridge deal, and I was perfectly well aware that it preceded my speech in July by a year or so. Really! It is ludicrous of the noble Lord, Lord George-Brown, to bowl these long hops.

LORD GEORGE-BROWN

I am sorry, my Lords. If the noble Earl takes that line, then O.K. But I submit it cannot possibly be ludicrous, because he said that he had changed his mind on the evidence of Kent-Cambridge from July, 1970. Since it happened before 1970, how can that explain why he changed his mind?

SEVERAL NOBLE LORDS: Order!

EARL JELLICOE

My Lords, I find it rather difficult to give way all the time to the noble Lord, Lord George-Brown, but I should like painstakingly to try to explain my position here. I said in July, that, so long as the I.R.C. remained in its Mark 1 guise, I had no great personal quarrel with it. I was perfectly well aware, when I was speaking in July last year, that it was no longer in that guise. I was not saying that I approved of it in July last year. I was merely saying that if it had remained in Mark 1 guise I should have had no great quarrel. Is that clear to the noble Lord, Lord George-Brown?

LORD GEORGE-BROWN

Anything but.

EARL JELLICOE

My Lords, after this debate I shall endeavour to explain my position with even greater precision to the noble Lord.

In any event, I was saying before I was interrupted that my right honourable friend came to the decision in favour of repeal only after very careful and prolonged investigation. We looked at the possibility of the I.R.C. reverting to a purely advisory role, but I think the Corporation made it clear that that was not "on". We looked at the possibility of the I.R.C. reverting to its Mark 1 role—and I hope that the noble Lord, Lord George-Brown is not going to interrupt me—but I very much doubt whether the Corporation, having tasted blood would have been willing to revert to a more vegetarian diet. We also looked at the possibility of its attracting private financing; but that, too, proved impracticable. It was only after that careful investigation that we came to the conclusion that the best course was to wind up the I.R.C.—what is implicit in Clause I of the present Bill.

I have taken rather a lot of your Lordships' time, not entirely due to my own volition. But I should like to deal with one or two questions which have been posed in this debate, and if your Lordships' forbearance will last I will do so fairly quickly. Some noble Lords have suggested that by abolishing the I.R.C. we are here setting our faces Canute-wise against an international tide. They have pointed out that there may be a tendency abroad to model institutions after the fashion of the I.R.C. I would merely suggest that a closer examination of some of these organisations reveals that none of them is a real counterpart to the I.R.C.

For example, the in France, which is I think the closest, depends to a considerable extent on private funds. The I.R.I. in Italy is an organisation quite dissimilar from the I.R.C. It is essentially—and I am sure that noble Lords opposite who know about these matters will not dissent from this—a giant State-controlled holding company, with a board composed entirely of Government officials; a very different animal indeed. I do not question the fact that the I.R I. may work quite well in Italian circumstances, but it is worth remembering that the Italian capital market is a very under-developed one compared with the City.

There is V.I.A.G. in Germany—again a different body; and finally there is the proposal to widen the scope of the European Investment Bank—the proposal to which the noble Lord, Lord George-Brown, referred. That proposal to promote industrial restructuring within the European Economic Community falls well short of a European I.R.C., as I understand it, and it is a proposal which has by no means yet received the unanimous approval of the member governments. What is clear beyond dispute is that the I.R.C., as constituted, could not have played a major role in Community restructuring, as I think was implicit in what some noble Lords opposite have suggested.

Another suggestion which was made—and I find it an odd one, coming from so revered a quarter—was that of the noble Lord, Lord Goodman: that by our action in abolishing the I.R.C. this Government are in some way showing that we are against a mixed economy. I cannot see how the abolition of the I.R.C. and opposition to a mixed economy can be synonymous. Again—and I think it is a thread which has run through much of the comments from the Benches opposite—there has been the suggestion that we have been activated here by pure doctrine. We all have our philosophies in politics. On the whole, we favour individualism while noble Lords opposite favour a more collective approach. But, from time to time, we all have to bend to the harsh winds of fact and circumstance, and I would merely point out that this Government, like all Governments, have bent to that wind to show that this accusation of being activated by sheer doctrine is sheer nonsense.

There has been the Rolls-Royce case; there has been the Yarrow case. I was surprised to hear the noble Lord, Lord George-Brown, say that he could see no identifiable reason for either of those two cases—or it may have been the Yarrow case to which he was referring. In both cases the primary reason was the defence interest of this country. Again, we have bent, as all Parties do, in the case of Harland and Wolff, and I was glad to have the approval of the noble Lord, Lord Shepherd, for the action taken there, for obvious social and political reasons which I think were overriding.

My Lords, other noble Lords have asked: what about this type of activity, now that the I.R.C. will be departing? Quite clearly, however much we should wish to disengage from industry there is no question of being disinterested and this Government, like any Government, must bear in mind the need to improve management and industrial performance. I would remind noble Lords that this point was touched upon by my right honourable friend the Secretary of State for Trade and Industry when he addressed the I.C.F.C., the institution to which my noble friend Lord Aldington referred, last November, and, as on most valid points, I do not think that what he said will suffer from being repeated. He spoke of the need—and I quote his words— to place as much reliance as possible on the free working of the market and on the independent decisions of responsible management in industry, commerce and the institutions", and he went on to say that he had no doubt that the resources of the City would be equal to this task.

I would only say that I have rather more faith in City institutions than perhaps some noble Lords opposite. I also have a belief that the City is not a static animal: it is capable of development, and if there is a need to develop there, or elsewhere, some institution to do some of the work which the I.R.C. has been doing, if this cannot be taken up through the normal City mechanisms, I see no reason at all why the City should not be equal to that task. I personally should not wish to turn my face against that, although I should hope very much that any precondition would be that this would be done by private funds.

LORD SHEPHERD

My Lords, would the noble Earl not agree that any merchant bank or organisation in the City would be bound to be motivated by its own personal profit and basically would not be taking the national interest into account? Is that not one of the weaknesses in the noble Earl's case: that the City can provide the sort of service and expertise that has been provided by the I.R.C.?

EARL JELLICOE

My Lords, I do not think that a profit, properly pursued, is necessarily a bad criterion, and all I would again point out is that the Govern- ment have reserve powers in any case. But I think it is now a little late to pursue that matter in too much detail.

There were some further questions which I rather wanted to answer. I have in mind the machine tool industry, and on this occasion I can assure the noble Lord, Lord Hoy, that he will hear from me personally. I apologise for the fact that I did not write but that my noble friend Lord Aberdare, who happened to be winding up the debate, wrote; but the noble Lord got a much better letter from Lord Aberdare than he would have had from me.

LORD HOY

My Lords, if the noble Earl will allow me to interrupt, may I say that I have no doubt about that; but what I was about to say, if the noble Earl will forgive me, was that it might not be a had thing if what the noble Lord, Lord Aberdare, had to say was said publicly, so that the machine tool industry could then understand what the Government's views were about it.

EARL JELLICOE

My Lords, I will gladly accept the invitation of the noble Lord, Lord Hoy, at the risk of detaining your Lordships for a minute or two longer. It is arguable, and indeed debatable, whether the particular problems of our machine tool industry arise from its fragmentation. There is certainly no evidence so far as I know that increased unit size is a necessary precondition of efficiency in this particular industry. I point, for instance, to the example of Germany, where the performance of the machine tool industry judged by most criteria is a high one; yet the size of the units in the German machine tool industry is no different, broadly speaking, from the size of the units in our own industry. So far as the future is concerned, it is my belief that the only satisfactory long-term solution to the problems of the machine tool industry lies in developing an increased and sustained demand for its products—and "sustained" is clearly important in an industry which is by its very nature very sensitive and to a large degree cyclical. To this end, I should like to assure noble Lords that we must have growth in the economy, and this growth the Government intend to promote as soon as our more immediate and pressing economic problems have been overcome.

LORD HOY

My Lords, if the noble Earl will allow me to say so, I am grateful for what he has said so far, but even now he has not gone quite so far as his noble friend Lord Aberdare. I hope that I do not misquote him but I thought the noble Lord was saying to me that the machine tool industry would in fact have a preference over certain other industries.

EARL JELLICOE

My Lords, I will quote the words of my noble friend Lord Aberdare in order to have them enshrined in the sanctity of Hansard. The sentence in the letter of the noble Lord, Lord Aberdare, which I think Lord Hoy would like me to quote—and I do so gladly—is: The machine tool industry would of course be amongst the earliest to benefit from a change in trends towards increasing investment, even though in the meantime individual firms may experience difficulties. My Lords, I think it is really time that I concluded, and I should like to do so by quoting some words from the last Report of the Industrial Reorganisation Corporation—the 1969–70 Report. They concluded their Report with these words: Some British managements have flair, courage and commercial application which make them world beaters sonic trade unions have led their members with responsibility and success; some investment programmes offer the prospect of sharp increases in exports, productivity and profit. But until alt come up towards the performance of the best, we shall not break out and recreate the wealth needed to pay for the social programmes and the higher living standards which all political Parties profess. My Lords, I would not dissent for one moment from that as a statement of general principle. Like noble Lords opposite, neither would I dissent for one moment from the proposition that in industry today, be it in the public or be it in the private sector, there is too great a difference between the performance of most of our industry and that of the best of it.

Where we differ from noble Lords opposite is in our belief that it is not primarily through the creation of more Government-sponsored organisations, it is not primarily through more direct Government aid, it is not primarily through more Whitehall arm-twisting, direct or indirect, that the breakthrough will come. We believe, rather, my Lords, that it is through giving freer play to the forces of competition, incentive and initiative, both individual and corporate, that we shall breathe fresh air into our industry and release the innate dynamism in our economy. That belief, my Lords, quite apart from the practical considerations which I have sought to underline, lies behind this Bill.

LORD GOODMAN

My Lords, before we allow the noble Earl to escape, I wonder whether I might, at the risk of prolonging the debate—but I think fairly, because he introduced a count in the indictment against the I.R.C. which I had never heard before—ask him a little about that. As I understand it, one of the major reasons why he supports the abolition is that the I.R.C. changed its character. It had been a nice, peaceful, law-abiding, milk-drinking body which, because it had tasted blood, was prowling all over the place, liable to attack innocent companies at the drop of a hat. If I may say so, that would be the most astonishing, the most amazing, revelation to every member of the board of the I.R.C., and I should be grateful indeed if the noble Earl could tell me whether a single intimation of that suspected change was ever conveyed to any member of the board of the I.R.C., either by the previous Government or by the present Government; because, if so, it was certainly not drawn to my notice or to the notice of any of my colleagues.

EARL JELLICOE

My Lords. I cannot speak for the previous Government on what correspondence they may have had with the noble Lord and his fellow board members on this matter, but I am surprised that the views of the then Opposition, which were certainly not confined to Jellicoe personally, as the noble Lord will have realised from the words of my right honourable friend the present Secretary of State for Social Security, were not communicated to the noble Lord and his colleagues. They were communicated by Sir Keith Joseph in the speech from which I quoted.

LORD GOODMAN

My Lords, obviously we were conscious of political polemics being uttered in various directions, but the difference between that and a serious and sober intimation to a Government Board is one with which the noble Earl ought to be well acquainted.

EARL JELLICOE

My Lords, I think that the noble Lord is trespassing on the outer frontiers of order at the present time, so I shall refrain from further polemics, whether of a political or other nature, with him.

On Question, Bill read 2^a, and committed to a Committee of the Whole House.