§ 5.17 p.m.
§ The MINISTER of STATE, DEPARTMENT of ENERGY (Lord Balogh)My Lords, I beg to move that this Bill be now read a second time. The main purpose of this Bill is to give a limited extension to the powers which our predecessors took to make payments in compensation for price restraint to the gas and electricity industries and to the Post Office. I say "a limited extension", because we consider it essential—and I have no doubt this view is shared by noble Lords opposite—that these subsidies should now be phased out as quickly as possible. If the policy outlined in the White Paper, Attack on Inflation, is to succeed, we need to pay the strictest attention to economic and social priorities in allocating resources for public expenditure. Subsidies to the Post Office, for example, benefit primarily the business consumer and the better-off.
As an energy Minister, I must say that I attach particular importance to strict economy in the use of scarce resources. Subsidies for energy consumption simply cannot be justified at a time when it is a national priority to reduce consumption. This is especially true in the case of electricity, which at the margin is generated almost entirely from imported oil. Finally, the industries must be encouraged to contribute more to the financing of their own investment programmes in order to reduce the public sector borrowing requirement.
Inevitably, the decision to phase out the subsidies has meant substantial increases in nationalised industry prices and, as your Lordships will be aware, the Post Office last week announced proposals for further tariff increases. Unpalatable as they are, it is clear that we cannot continue with deficit financing. Our programme for phasing out the subsidies is still that which the Chancellor of the Exchequer laid down in his Budget Statement and re-affirmed in the recent White Paper. We expect to pay subsidies for this financial year, but to pay no 1308 subsidies for 1976–77. We have already made considerable progress towards achieving this aim and, because of this and of the pay limit announced by the Government on Friday, there are good prospects that the rate of price increase in the nationalised industries as a whole should be markedly lower next year.
The price restraint compensation provisions of the Bill represent the first of its five separate and distinct purposes. It also increases the borrowing limits of the British Steel Corporation and of the National Bus Company, makes sonic amendments to the borrowing powers of a number of the public corporations, and provides for the Government to take over from the industries concerned the financing of the Electricity Consultative Councils and the Gas Consumer Councils. I should like to comment briefly on the detail of these various provisions.
Clauses 1 and 2, together with Schedule 1, deal with compensation for price restraint. They extend for a further period of time and with some changes in the method of payment the powers in Clause 2 of the Statutory Corporations (Financial Provisions) Act, which the Conservative Government enacted in 1974. The period is the financial years 1974–75 and 1975–76, and there is provision for this to be extended to 1976–77. The year 1974–75 was intended to be covered by the previous Act which set a financial limit of £500 million for the two years 1973–74 and 1974–75. But that limit has proved quite inadequate.
This possibility was indeed foreshadowed to some extent by the noble Lord, Lord Aberdare, when he spoke for the then Administration in the Second Reading debate on the 1974 Bill. He said that his Government had looked at the provision and decided that it should not be changed because of the very great uncertainties at the time, but he warned that the increase in the price of oil and the effects of the coal industry dispute were bound to lead to substantial deficits. In the event, subsidies totalling £355 million were paid for 1973–74, leaving only £145 million of the limit for 1974–75. Until the audited accounts for the industries are available and have been examined, we shall not know the exact amount of subsidy which will be required for 1974–75, but it will be of the order 1309 of £650 million, and new legislation is therefore necessary.
Turning now to 1975–76, we expect to see a dramatic reduction in the levels of subsidy paid. Subject to a price increase in the autumn, the gas industry hopes to break even; so, too, do the Scottish Electricity Boards. At the time of the Budget, we estimated that £100 million in total would be needed for the electricity industry in England and Wales and for the Post Office, of which £70 million would go to the Post Office. Since then, as your Lordships will know, the Post Office has reviewed its financial prospects for the year, and this review revealed a serious deterioration mainly on account of higher inflation. In order to prevent its estimated deficit rising above £70 million, the Post Office has announced proposals for tariff increases and service economies which will now be examined by the Post Office Users' National Council and the Price Commission. The Government are convinced that the necessary action should be taken to prevent the estimated subsidy requirement for the Post Office from rising above £70 million. It therefore remains our estimate that the total subsidy bill for 1975–76 will be about £100 million.
As I have said, this Part of the Bill also provides for the possibility of an extension, to 1976–77 of the period for which subsidies can be paid. We have always regarded this as nothing more than a prudent contingency provision since it is our firm intention to phase out the subsidies by April 1976. In the light of the new pay policy, and the intention to bring the year on year increase in prices to single figures by the end of the next year, agreed between the Government, the TUC and the CBI, this intention is now reinforced.
I should now like to turn to Clause 3 of the Bill which provides for an increase in the borrowing limit of the British Steel Corporation from £1,250 million to £2,000 million. The present limit was set by our predecessors in 1972 and has lasted for a year longer than they expected, but about £900 million is now outstanding against it. I need hardly say that, at a time when we are striving to reduce the public sector borrowing requirement, the Government have had to satisfy themselves that there are cogent reasons why an increase in the limit is 1310 necessary. But it is our view that it is right to make an increase now to fund the Corporation's increasing cash requirements and to leave a safety margin for contingencies and fluctuations in working balances. Although the Corporation's capital expenditure programme this year and next is at constant prices likely to be in line with the figures in the Public Expenditure White Paper, sharp increases in plant costs will considerably increase the outturn figures. The Corporation also has to finance the increasing value of stocks and a proposal for a counter-cyclical stock-building scheme is under consideration.
These increasing capital requirements come at a time when the Corporation's capacity for self-financing has been cut sharply by what your Lordships will know to be one of the worst recessions since the last war which affected the world-wide demand for steel. For the first time we had a sharp reduction of investment and of the world-wide demand for steel. It is essential to modernise our steel production capacity, lest we run into shortages; then the recovery will set in, and we shall have to increase our imports because we do not have adequate modern plant at our disposal. Taking all these factors into account, it is estimated that the Corporation could require external financing of up to £550 million if it were to break even this year, and even more if adverse trading conditions force it into deficit as now seems increasingly likely. The increase of £750 million in the borrowing limit is therefore essential and will indeed suffice only in the short term. Parliament will have a further chance to consider, most likely in the next Session, what further adjustment is required. In the meantime, the proposed increase will enable the Corporation to continue its major modernisation and expansion programme. We shall expect the Corporation in carrying out this programme to be fully viable and to provide a return on the public funds, including public dividend capital, which will continue to be invested in it.
I do not think I need detain the House with long explanations of the remaining clauses of this Bill. Clause 4 increases the borrowing limit of the National Bus Company from £130 million, at which it was set in 1968, to £200 million and this extension should 1311 be sufficient to cover the Company's borrowing for the next five years. Clause 5(1) is a tidying-up measure to bring the foreign borrowing of all the statutory Corporations into line with one another. Clause 6 will bring the Electricity Consultative Councils and Gas Consumer Councils into line with the other statutory nationalised industry consumer councils by providing for them to be financed by the Government. The invaluable work done on behalf of gas and electricity consumers by these Councils over the years can only be enhanced by making their financing independent of their industries. My Lords, in commending this Bill to the House I would stress that the Government regard it as an essential basis for a return to sound financial health for the nationalised industries, and therefore an important part of the Government's economic programme for salvation. My Lords, I beg to move.
Moved, That the Bill be now read 2a—(Lord Balogh.)
§ 5.26 p.m.
The Earl of GOWRIEMy Lords, Statutory Corporations (Financial Provisions) is not, if I may so put it, a very sexy title for a Bill, and that is why I think neither the noble Lord, Lord Balogh, nor I are drawing quite the House we like to think of as our due; or why, perhaps, neither of our respective parties appears to be cheering us on from behind. I believe that this situation would have been very different if the House had been aware that we are in essence debating the affairs of the Post Office, which are much in the public's appalled gaze at the moment; the affairs of the Electricity and Gas Councils; the affairs of the National Bus Company; the affairs of the British Steel Corporation—old uncle Sir Monty Finniston and all. This debate is really a curtain raiser, it seems to me, for the central debate on the attack on inflation on the White Paper which the noble Lord mentioned. For the moment, I feel that this Bill is an indication of an extreme confusion of mind which is reigning among those in charge of our economic affairs. I go even further than this—and I think the House knows me to be normally rather mild in my criticisms of the Government—and say that the Bill is an indication 1312 of why the counter-inflation policy, which we on this side would like to see succeed, is in its present form almost bound to fail.
As the noble Lord, Lord Balogh, has told us, the Bill before us is an extension of the Conservative Government's Bill of the same name. When Mr. Heath's Administration introduced price restraint as a way of balancing and making acceptable wage restraint, they obviously had to compensate the nationalised industries for those rises in costs which could not, under Mr. Heath's legislation, be passed on. Just as obviously, there were drawbacks to making such compensations. It increased rather than reduced the high level of public spending which attracts inflationary wage claims in both the public and private sectors of the economy. It denied vital resources for investment. It was introduced because Mr. Heath's Administration then, just as Her Majesty's Government now, had to contend with what I think is the almost universally held public view that you somehow can hold down wages if you will only hold down prices—a view that skates over the icy truth that holding down prices costs money and that if you cannot get the money off the public you have to print or to borrow it.
Before the noble Lord, Lord Balogh, who always rather enjoys a little Party altercation, pounces on me with glee and talks of splits within the Tory ranks or of my not accepting the miniscule Ministerial responsibility that I then held, I would remind him of just one thing. Mr. Heath's counter-inflationary policy, including its price restricting side, had a considerable success—
§ Lord BALOGHMy Lords—
The Earl of GOWRIEI should like to finish the point, my Lords. Mr. Heath's policy had a considerable success because it started from a much lower base rate of inflation than obtains at the present time. In other words, my right honourable friend had designed an orderly and, above all, a progressively phased policy to reduce what was then a 12 or 14 per cent. inflation to a level far below Mr. Healey's famous 8½ per cent. inflation, which I always like to think of as being the "Ides of October". If the noble Lord now wants to come in, I will give way.
§ Lord BALOGHMy Lords, I thank the noble Earl. I should like to ask him which Mr. Heath? Is it Mr. Heath Mark 1, or Mr. Heath Mark 2? Surely the policy in 1970–71 cannot be equated with the policy that was pursued later on.
The Earl of GOWRIEMy Lords, as a member of the present Administration, the noble Lord should know far better than me what lies behind this kind of criticism. A Government come in on a political programme which they do their best to put into effect. If levels of inflation or other external events get in the way of this kind of policy, naturally they have to change it. We are criticising not that there should be a change of policy, but that the change is from a bad policy to a worse one. I am arguing that the present Government have produced a package which is designed to take far more drastic action than Mr. Heath's Government had to take—more drastic not because they are more virtuous or less in favour of inflation or whatever, but because the Mark I Social Contract—to borrow the noble Lord's phrase—involved the Government in such high levels of public expenditure and such low resistance to pay demands, that they will have to put on the brakes at a rate that will satisfy their creditors. To continue that metaphor, they may smash the noses of most of the rest of us against the wind-screen in the process. When you slam on the brakes, there is considerable risk of a skid and that your vehicle—in this case our economy—will not react as you hope it will.
I said that this Bill is a symptom of confused thinking and I should like to elaborate this point. When the Chief Secretary to the Treasury, who was then the Minister of State to the Treasury, introduced our Bill in another place about five weeks ago, the Chancellor and the Prime Minister were not committed to a statutory policy. In fact, they were belatedly conducting a fiscal and monetary policy of the kind that most of us would associate with The Times newspaper, or even with my right honourable friend Sir Keith Joseph. Indeed, I am surprised that it is Mr. Prentice who is in trouble with his local association. I should have thought that the Chancellor would be in a far greater pickle.
But as I say, introducing this Bill the Chief Secretary used language which 1314 could do credit to the Conservative Party Central Office. He said—and the noble Lord echoed him today—that the Bill was a very-short term extension of the Conservative Government's Bill introducing payments for price restraint for certain nationalised industries. He said he believed that they should be phased out quickly, because it is essential to reduce the level of public expenditure, as scarce resources must be directed towards investment and because the borrowing requirements must be reduced. I agree, and your Lordships will not be surprised that I agree, with every word on that score that both the Chief Secretary and the noble Lord, Lord Balogh, uttered.
As against what has been said, however, what has happened? Between the Second Reading of the Bill in another place and the Second Reading in this House today, the Chancellor has made his Statement and the Prime Minister has introduced his White Paper. Far from phasing out subsidies in lieu of price restraint, more compensation payments will be the order of the day as the Government try to make their incomes policy acceptable, their incomes policy stick. We read that the Price Code will be continued after March 1976, yet it was Mr. Sheldon who said on the Second Reading of the Bill that the policy of price restraint—he was referring, of course, to Mr. Heath's policy—was responsible for many of our current ills, including the public sector borrowing requirement. Moreover, price restraint will be imposed on selected products of special importance to family expenditure. Yet we all know perfectly well that further price restraint means further compensatory financial provisions. These are the kind of provisions that this Bill purports to be phasing out, not phasing in.
We were told that food subsidies would go. Now they are not only going to be retained but increased and that, in the present context, means more compensatory payments somewhere. So does the holding down of the increase in council rents. It seems to me to be the sheerest economic schizophrenia. In opposition, one's job is to oppose constructively, but that assumes that one is dealing with a rational policy, however misguided one may feel it to be. We on this side have schizophrenia to contend with.
May I give a few further examples of this extreme confusion, as I see it, drawn 1315 from the Bill in front of us? The White Paper says that there must be extensive use of cash limits as a means of curbing public expenditure at central and local levels, but this Bill has no cash limits written into it. It is essential that they should be written into the Bill; otherwise, the temptation to use price restraint compensation as a shield for other forms of subsidy may be too great to resist. The Conservative Act, as I think the noble Lord, Lord Balogh, acknowledged, set a cash limit on the central compensation subsidies of £500 million for the two years 1973–74 and 1974–75. Last year it turned out to be £355 million and the present year will be £600 million to £650 million, yet the Chancellor is committed to lopping £1,000 million off public expenditure. In the light of this Bill he should revise his estimate, and revise it down.
To take another case, your Lordships will be aware that there has been a row over the Post Office confusing £70 million for £300 million—a little local difficulty in accounting to the tune of £230 million. As a result of the attention focused on this row, the public recognises that the Post Office is in hock this year to the tune of about £300 million. But what the public does not perhaps recognise and what this Bill brings to our recognition is, in fact, much worse. On top of the £300 million, a further £330 million will have to be paid in compensation for price restraint. The true drain on public funds so far, therefore, is £630 million. It was suggested that there must be another further increase in prices and an increase has been named. But added to this situation the wretched Post Office is in what can only be called a "Catch 22" position. If you subsidise price increases to such a degree and at such a rate, you get into a situation where you cannot raise prices to the public at a rate with which they can cope—a rate, therefore, which becomes economically viable.
I am a partner in a very small firm—in fact, a two-man firm of which I am one. We spend £15,000 to £20,000 a year on mailing, so we know what we are talking about. Treasury Ministers are constantly reminding us that the Government's source of money is not a bottomless pit. Surely there comes also a point when even the users and customers of 1316 the nationalised industries are not themselves bottomless pits. When the Post Office puts through another round of price increases—making a general rise of 400 per cent. since January 1971—the traffic will further decline and the deficit further increase. Then perhaps we shall have an Amendment to this Bill on compensatory prices.
As we shall learn in the debate on the anti-inflation White Paper at the end of this month, the Government have, I acknowledge, at last undertaken to act to halt the erosion in the value of our money—which is only to say to halt the erosion in the value of our social and political lives. This erosion has created the problem. They are attacking a 28 to 30 per cent. inflation, each pound today worth 70p next year. They are attacking it armed with an existing deficit in the nationalised industries alone of about £1,000 million and with interest accruing on foreign loans of about £9,000 million. Far from phasing out such a deficit, if one can use language such as "phasing out" about debts of around £10,000 million, this Bill contains provisions adding to it. Far from providing a very short-term—these were the words of the noble Lord—extension of the Conservative Government's Act, this Bill will soon have to be amended by Order to take account of what the White Paper will be doing.
For the moment I shall withhold any further fire until we debate the White Paper, but the kindest thing we can say about the present measure is that, like its parents, it is confused and out of date.
§ 5.40 p.m.
§ Viscount MASSEREENE and FERRARDMy Lords, before the noble Lord, Lord Balogh, replies I should like to support my noble friend Lord Gowrie. What I find extraordinary about this Bill is that Clause 1 is to give subsidies to nationalised industries in respect of any losses occasioned by compliance with a policy of price restraint in the financial year 1974–75. If we look at the Post Office in the year 1974–75, far from any price restraint the Post Office increased its prices by 200 per cent. We have here a Bill, the excuse for which is to give subsidies to nationalised industries because they have had to have price restraint. The Post Office cannot have had any price restraint because, as I have said, they 1317 increased their prices in the last year by 200 per cent. and as my noble friend has pointed out, since 1971 they have increased their prices by 400 per cent. The noble Lord, Lord Balogh, has said that the Post Office are now to get a subsidy of an extra £100 million. Whatever that subsidy is for, please do not let the noble Lord say that it is for price restraint, because any organisation which has increased its prices by 200 per cent. within a year cannot be said to have practised price restraint.
My noble friend mentioned the word "confusion" of thought, and I heartily endorse it; it is like "Cloud-Cuckoo-land"! It would be so nice if one day we could have from this Government a Bill which, instead of borrowing hundreds of thousands of millions of pounds and doling out hundreds of millions of pounds, created some wealth. That would be a really nice change. I had not intended to make a speech, but I intervened because we seem to be a little bare—in the right sense!—behind my noble friend. I just wish to make the point that, certainly so far as the Post Office is concerned, price restraint cannot enter into it.
§ 5.43 p.m.
§ Lord WYNNE-JONESMy Lords, after listening to the noble Earl, Lord Gowrie, and to the noble Viscount, Lord Massereene and Ferrard, I really wondered what sort of world we were trying to live in. When I listened to the noble Earl I thought I was back again in that game that used to be played in gardens which I think was known as battledore and shuttlecock. He was tossing this bird backwards and forwards and claiming that he was contributing towards a discussion of the serious content of this Bill. Surely this Bill is concerned with the problem which is faced by national industries. I know that there are a number of noble Lords who sit on the Benches opposite who seem to think that a national industry is something to be knocked; is something, if possible, to be made non-productive; is something which, if you could really do it, you would make it an absolute failure.
§ Viscount MASSEREENE and FERRARDThat is nonsense.
§ Lord WYNNE-JONESMy Lords, I agree that it is rubbish. It is exactly what is always being said from the Benches opposite; that is exactly the rubbish that they speak. It is absurd to think that when we have taken the trouble to secure—and even smiling Lords on the Opposition Front Bench took some part in this themselves (although one noble Lord may be too young to have done it)—the creation of some of our nationalised industries. They may choose to forget it but they were responsible, for instance, in the setting up of the Electricity Board. It is important to realise that the national industries belong to all of us. It is important, and in the interests of every single one of us in the country, that these industries should flourish and it would be absurd if we were to say that we were not going to put resources into these industries.
It is all very well to say that this is a means of inflation. Is it really inflation to make an industry work more effectively? Is that what one means when one is talking about inflation? One tries to ensure that, for example, the steel industry of this country works better than it has done in the past. One knows perfectly well that the steel industry has fallen behind because in the past it did not invest enough, because it was not building up in the way that it should have done. We are now trying to build up the steel industry to make it an effective, competitive industry in the world. We can do this only by investing money in the steel industry and it is no economy to say that you will continue to keep the industry at a low level of investment and refuse to make it an effective competitive industry. That would be the worst possible thing to do; it would be better to close it down altogether than to do such a thing.
It may well be that there are certain things which we ought to look at carefully and ask ourselves whether they are worth doing. There may be many industries—I am not at all certain, for instance, that the shipbuilding industry is not one—into which it might be foolish to put a lot of money, but I am quite sure that unless we put a lot of money into our steel industry we shall not have a steel industry at all, and far from improving our economy that would wreck it. Does the noble Earl wish to intervene?
The Earl of GOWRIEMy Lords, I just wish to say that I do not think this is the time to get into a debate about it, but far from attacking the idea of investment in nationalised industries what I was saying was that if you spend such scarce resources as you have on protecting the consumer from price increases and fail to halt the erosion in the value of money which makes those price increases inevitable, you do not have any money left for investment. It is just the contrary of what the noble Lord is accusing me of.
§ Lord WYNNE-JONESMy Lords, I am not going to enter into an argument with the noble Earl on such details. What I was saying was that the main purpose of this Bill is to ensure that the national industries have the resources to carry on. I quite agree with him that it may be argued that whether or not you use this money for keeping down prices is certainly a matter which has to be considered, and must be considered by the Treasury; but when one is talking about the viability of our national industries it must be realised that they cannot be viable unless resources are put into them. It is nonsense to say that you waste money when you put it into a national industry and that you do something marvellous when you put it into a private industry. That is absurd.
§ Lord WYNNE-JONESIn each case you are using national resources and the national resources must be properly used. I quite agree that we have to consider the matter carefully, but I maintain that the industries mentioned in this Bill are those which must be maintained for the good economy of this country.
§ 5.50 p.m.
§ Lord ROBBINSMy Lords, a word from the Cross-Benches. The debate seems to have resolved itself into a series of mutual reproaches and I confess that I feel some qualified sympathy with both sides in this matter. I feel sympathy with the Opposition Front Bench if the vigour and eloquence of the original statement of the noble Earl may have given rise to the impression, which I am sure he did not wish to create, that he just wanted to "bash" the nationalised industries, a policy which I am sure no 1320 reasonable person would wish to support at this moment of national crisis.
On the other hand, I feel some sympathy with the noble Lord, Lord Balogh, in the overtones of the speech of the noble Earl, in which there seemed to be some implication that the noble Lord, Lord Balogh, or his Party, was responsible for all the difficulties with which we are confronted at the present moment, and with some of the difficulties with which this Bill is designed to deal. Frankly, there is some reason to suppose—and I am choosing my words very carefully—that inflationary impulses operate with a time lag of at any rate up to 18 months. This is a figure often bandied about by expert American economists. But with the best will in the world, I find it impossible to exculpate Mr. Heath and the noble Lord, Lord Barber, for responsibility for some at least of the troubles which are happening at the moment.
My Lords, my own belief is that it is better to forget the past, to abandon mutual reproaches, and to ask what is best done for the future. We shall have ample opportunity for discussing the broad lines of policy on another occasion, but concerning the Bill which the noble Lord, Lord Balogh, has expounded to us with moderation and lucidity, I find myself torn. It would be folly to impose too strict a curb on investment in an industry such as steel which, needless to say, for various reasons not unconnected with politics, has had a very raw deal in the past and which, perhaps, has not caught up with the investment which might otherwise have been desirable. So far as that part of the Bill is concerned, my sympathies would lie with the Government to some extent, although without committing myself to quantities.
On the other hand, I must say I have some reservations about the continuation of subsidies to goods and services which are the subject, in some measure, of consumption expenditure. I accept the good faith of the Government in declaring that these subsidies will be phased out. But I ask myself whether, in point of fact, there is any compelling reason why they should not be phased out rather more rapidly. It seems to me that the onus of proof is on those who argue that I, as a middle-income chap, should get my electricity, for instance, at a price which 1321 involves any subsidy at all. I would have thought that where real hardship was involved in allowing prices to rise to a level which covered production with reasonable profit in a nationalised industry, it was better to meet such cases in another way than by keeping prices lower than might otherwise be the case. Thus, my feelings about the Bill are divided. I understand the reasons for part of it. I regret that other parts of it are not sufficiently austere.
§ 5.55 p.m.
§ Lord BALOGHMy Lords, when I spoke earlier I thought that we would and could discuss a tidying-up measure which really spans a transitional period to something which I hope will be to the greater liking of the noble Lord, Lord Robbins, in a non-political way. Indeed, I thought that I cooed like a dove and was pounced upon by a hawk. I must say, in passing, that it is very gratifying for both of us, because we have similar faults, that the rules of the House are extraordinarily elastic. I think that in another place the noble Earl would have been "pulled up" for speaking on something quite different from the subject under discussion.
§ Lord BALOGHNo, my Lords; my introductory speech was made in an explanatory situation. I did not reflect once upon past policies. I have been provoked, and had I not changed my seat from the higher Benches to the lowest Bench, I would hit back. I am not a German, but a Hungarian, and so it is in my nature to hit back. But I am going to make a superhuman effort not to cause controversy, and not to ask the noble Earl how certain things which he and his friends are now brewing would affect the problems. I could, but I shall not, go into this. I resist the temptation. I will not remind the noble Earl of the difficulties in his own Party, nor about the situation when we took over in 1974.
However, the noble Earl said certain things, quite rightly, which I think ought to be answered. The first, and I think most general, is on the subject of cash limits. In political economics or economic politics, there are certain catchwords. Sometimes it takes quite a long time for these words to "catch on", so to speak, 1322 and sometimes they "catch on" quite soon. The period of gestation is often different. We have had the public sector borrowing requirement. However, I do not wish to go into this because I might get into great trouble with my own people.
There are other things, and "cash limits" is the newest of these catch words. One would love to know how it is all going to be arranged. There are industries which we consider are trading bodies because their expenditure covers a multiplicity of things such as wages, stores, fixed investments, working capital and the acquisition or sale of assets. I should like to point out what an assinine situation would arise as a result of this cash limit principle, that when a highly profitable industry is being acquired by one of these industries, this should be then made impossible, or only made possible by, say, curtailing investment or cutting wages. However, do not let us talk about that. On the whole, I do not understand why so eminent a speaker as the noble Earl should think that this is a concept which is applicable to these industries, or applicable anywhere.
The Earl of GOWRIEMy Lords, it is not necessarily I who think this a viable concept. We could argue this another time. My complaint is that the Chancellor says in the White Paper that it is a viable concept, and then does not include it in this Bill.
§ Lord BALOGHMy Lords, it is a viable concept in certain circumstances for a restricted number of cases which the Chancellor has taken care of, but certainly not applicable, generally speaking, to the nationalised industries. I think that we will leave that on the side.
The noble Viscount, Lord Massereene and Ferrard, whose contributions always fill me with great joy and some amusement, has taken the Post Office to task. I should first like to ask him whether I understood him to say that the Post Office increased charges by 200 per cent. in the last year.
§ Viscount MASSEREENE and FERRARDMy Lords, between 1974 and now, 1975.
§ Lord BALOGHMy Lords, I feel, as I always suspected, that the noble Viscount's great attraction to the House is 1323 that he says such startling things. The startling thing in this case is that the position is just 100 per cent. different. It is true that since last year the charge has been increased, but the increase from June 1974 was from 3½p to 7p. In my calculations—and the noble Lord, Lord Robbins, can testify that I am a terrible econometrician—that gives me only 100 per cent. May I beg forgiveness—and I hope that I shall not ruin the atmosphere of amity which rules here on this Bill—in order to say that we had no increases in charges by the previous Government, and therefore an enormous deficit was built up. This we inherited and had to deal with somehow. If we had dealt with it totally the subsidy would have been very much greater. We were able to limit the subsidy to a certain level because we also increased the charges. I should have thought that, at least for noble Lords opposite, this was a sign of virtue and surely not a sign of sin.
The contribution of the noble Lord, Lord Robbins, as always in my humble opinion, was like a fresh wind. I must say that I agreed with almost everything he said. I would submit to him the following consideration. It always takes time for new thoughts to take root. While from the Opposition or Cross-Benches one can always demand extreme virtue, in Government one has to make compromises. I submit, not as a declaration of policy (for which I have no sort of authority), that it might well be that when one keeps prices increasing less fast—I am not saying that we have "at a stroke" succeeded in striking down this evil—it is possible that by handling the affair with patience, though one knows that patience might be dangerous, one in the end achieves more.
§ Viscount MASSEREENE and FERRARDMy Lords, before the noble Lord sits down, may I say that if he takes from 1st January 1974 to this new price increase to 8½p on postage this autumn, he will find that it amounts to over 100 per cent.
§ Lord BALOGHMy Lords, at least we are coming nearer to each other.
On Question, Bill read 2a, and committed to a Committee of the Whole House.