§ 2.48 p.m.
§ Lord KIRKHILL
My Lords, I beg to move that this Bill be now read a second time. This Bill seeks to fulfil the Labour Party's Manifesto pledge to take the aircraft and shipbuilding industries into public ownership and control. We have solid, pragmatic reasons related to the circumstances of each industry for proposing this measure, and I shall come to that in a moment. But the case for public ownership has other strands. Like all the nationalisation measures, this Bill is strongly influenced by the belief that people will find greater satisfaction in working for industries which belong to them and which contribute to the wealth of the nation rather than to the wealth of particular individuals or groups, whether private shareholders or institutional investors.
I would not dispute that, thus far, the reality has fallen short of the ideal, because workers in public enterprises 173 have not so far been able to make their full contribution to the industries in which they work. This Bill aims to help them do so in the aircraft and shipbuilding industries, in particular through the industrial democracy provisions. These impose a duty on both corporations to promote industrial democracy. To ensure that real progress is made and action taken reasonably quickly the Corporations are required to consult the unions about how this is to be done within three months of vesting and both must take it into account in designing their organisational structure. We believe that these provisions will provide a favourable climate within which industrial democracy will grow and develop naturally from the wishes and aspirations of those who work in the industry. This will not take place overnight; we do not expect it to spring up like a magic beanstalk, but hope that it will take firm root and in due course yield substantial and important benefits.
It will contribute to the wellbeing of those who work in the industry by allowing them to make their full contribution to its success. In turn, we can expect that the performance of each industry will improve immeasurably if the skills, energies and enthusiasms of those who work in it are fully utilised and so our industrial wealth will be enhanced. As my right honourable friend the Secretary of State for Industry said in the Third Reading debate in another place, "Efficiency follows consent". Indeed, in our view, public ownership provides a unique opportunity for resolving the problems which for a number of years have made it impossible for either of these industries to make the maximum contribution to the national economy.
Turning first to the aircraft industry, the Bill takes into public ownership the main companies making complete aircraft and guided weapons—the British Aircraft Corporation Limited, Hawker Siddeley Aviation Limited, Hawker Siddeley Dynamics Limited, and Scottish Aviation. These have a proud record of technological achievement and export sales, although some, but not all, of the apparent recent increase has been due to inflation. In many respects the industry is a successful one. The companies are profitable and our aircraft industry is the largest in Europe, second only to the Americans in size and technical pre-eminence.
174 We recognise the achievements of the industry but we believe that it has not realised its full potential. While the companies may be profitable, new and successful civil aircraft projects are urgently needed. This requires us to add to our technical skills the ability to make the right judgments in a very difficult market and to exploit the opportunities fully. Here as elsewhere we must be able to pick winners. But if our products are to sell in world markets, we must increase efficiency and productivity. We are convinced that a merger of the main companies offers great opportunities for deploying our resources more effectively and for doing the same things more efficiently and more cheaply.
It has long been recognised, by both Labour and Conservative Administrations, that structural reorganisation was badly needed. Over ten years ago the Plowden Committee of inquiry concluded that competition between the two main airframe companies, Hawker Siddeley Aviation and the British Aircraft Corporation, was not sufficiently strong or useful to have a significant bearing on future organisation. The honourable Member for Henley, when he was Minister for Aerospace, made strenuous efforts to bring the two companies together, which he described to the Standing Committee in another place.
I do not think anyone would be able to make out a convincing case against merging these two groups. Their aircraft have often competed and overlapped. Their design teams work on speculative design studies across the whole range of products, and until recently their efforts in the field of international collaboration have been unco-ordinated, if not in active competition. For at least 10 years the need for a merger has been recognised. This has failed to come about with the companies in private ownership and is another overwhelming reason for taking them into public ownership. Now more than ever we simply cannot afford wasteful duplication of resources. Under private ownership, there have been no signs that this would ever come to an end. Public ownership will mean reorganisation and should lead to a more effective use of resources.
In the present economic situation this is particularly important. The world civil aircraft market is depressed, but there are 175 signs that a recovery is not far off. It is already clear that any new project on a substantial scale is likely to be launched on a collaborative basis because of the high costs involved. The French, the other European manufacturers, and the American companies, like ourselves, are all actively considering possible future projects and collaborative partnerships.
The United Kingdom is taking a leading role in the work that is being done to define future aircraft requirements and the possible collaborative arrangements for producing them. My noble friend Lord Beswick and the Organising Committee have already made a significant impact on the European aircraft industry and have set up studies with the French, Germans and Dutch on the Airbus, and with the French on the HS146 and other aircraft. We believe the time is not yet ripe to foreclose on any of the options, but if we are to secure our due share of the future market, we need to be able to negotiate with the single authoritative voice that British Aerospace will provide.
I turn now to the shipbuilding industry—an industry of crucial importance to our nation. As a major shipping country, with a large volume of seaborne trade, and as a naval Power of some significance, it is essential for us to maintain a home base for shipbuilding. Moreover, 70,000 people, mostly in areas of high unemployment, have invested their life's work directly in shipbuilding. The Government are therefore determined to ensure a viable and competitive shipbuilding industry.
Unfortunately, the history of this industry in the last 20 years has been one of stagnation. Launchings of merchant ships have fallen from 26 per cent. of the world tonnage output in 1955, to less than 4 per cent. in 1975. Over the same years world output has grown at an annual rate of just over 10 per cent. each year, while British output has remained virtually the same. Moreover, since 1966 over £300 million has been given or committed to our shipyards to meet losses. That figure excludes investment grants, regional development grants, and other assistance given to industry generally.
In addition to suffering from an indifferent record, the industry is now experiencing its worst crisis since the 1930s. New orders have rarely been so 176 difficult to secure. The problem is of course worldwide. Following the oil crisis of 1973 and the recession in trade, the tanker market has collapsed; 18 per cent. of all tanker tonnage is now laid up, and another 18 per cent. surplus capacity is accounted for by slow steaming. Orders amounting to over 50 million tons deadweight have been cancelled. Whereas in the five years to 1974 world new orders averaged 35 million gross tons per year, they fell to 15 million gross tons in 1975, and for the next 10 years economists forecast an average rate of ordering of only 10 to 15 million gross tons per year.
It is therefore vitally important to take action to enable our shipbuilding industry to survive in an extremely hostile world. At present, however, it suffers from some severe handicaps which this Bill is designed to correct. The first handicap is the fragmented structure of' the industry, which does not lend itself to individual shipbuilders acting together in a coordinated manner. The Bill will take into public ownership under British Shipbuilders all the major shipbuilding companies in Great Britain and will enable this country to have a coherent shipbuilding strategy for the first time.
But there are other failings which we hope this measure will help to remedy. The industry's strike record compares badly with the national average. The skills of the labour force in shipbuilding are first rate. It is essential that these skills be used to best advantage. We build ships of as high quality as any country in the world, but we are unable to make sufficient profits partly because of our shortcomings on the commercial and marketing side of the business.
The Government are proposing nationalisation after less radical measures have been tried and have manifestly failed. The Geddes Report, in 1966, clearly highlighted the shipbuilding industry's problems. When Booze Allen and Hamilton investigated the industry again in 1972–73 they found almost exactly the same shortcomings and failures as Geddes did. In the Government's view, the necessary changes cannot be achieved within the existing fragmented structure.
My Lords, I recognise that there are of course several differences between ship repairing and shipbuilding. Ship repairing 177 is a short-term service industry rather than a manufacturing industry. It covers a wide variety of work from voyage repairs to major refits and the marketing requirements are different from shipbuilding. But in spite of these differences the two industries are closely related. Many shipbuilding companies also carry out ship repair work. Several repair companies, although separate organisations, have close links with shipbuilders. Some of the arguments which have been put forward by the opponents of this Bill about shipbuilding and ship repairing necessarily being entirely separate activities are not borne out by experience in this country or abroad.
I understand that some of the most modern and successful shipbuilding undertakings overseas also carry out ship repairing in the same yards, using the same facilities, and moving labour from one activity to the other, according to need. My honourable friend the Minister of State for Industry was very much impressed by this practice of combining shipbuilding and ship repairing when he recently visited major yards in South Korea and Japan. We are convinced, therefore, that there is a strong industrial case for vesting the major ship repair companies together with the major shipbuilding companies in British Shipbuilders. The Bill also provides for the acquisition of the builders of slow speed diesel marine engines in Great Britain, whose fortunes are completely bound up with those of the shipbuilders named in the Bill.
My Lords, I now mention the question of public accountability. In the aerospace sector, as in some others, private firms have for a long time been unable to finance the huge scale of current projects from their own resources. Firms have now to come to the Government for help. That help has been provided through launching aid and special arrangements, as in the case of Concorde. We have also financed basic research to the benefit of the industry. This is quite apart from the overwhelming dependence on Government military orders. All this has made the aircraft industry dependent to an unusually large extent on public money and public procurement. I firmly believe that this massive public stake should be based on public ownership. This makes it possible for the degree of accountability which 178 Parliament expects to be exercised at the strategic and corporate level to replace the detailed intervention and oversight which is necessary when the companies concerned are privately owned. The aircraft industry is the only industry in the private sector which has received more taxpayers' money than the shipbuilding industry, which, as I indicated earlier in my remarks, has received since 1966 a total of over £300 million of the United Kingdom taxpayers' money.
§ Lord ORR-EWING
My Lords, would the noble Lord allow me to interrupt him? Is it not true that, of that £300 million, 90 per cent. has gone to shipbuilders who are already nationalised?
§ Lord KIRKHILL
My Lords, I am unable to say whether the figure is as high as 90 per cent. I would confirm, however, that the figure given to those shipbuilding yards which are nationalised is a very high one. As to whether it is exactly 90 per cent., I cannot be certain.
My Lords, we believe that where public money is being committed on a large scale the companies concerned should be in public ownership, and I have just discussed in the context of aircraft our reasoning behind this conviction—a reasoning which is equally applicable to the shipbuilding industry. Indeed, we see the public corporation as offering substantial advantages as an organisational framework for industries which depend to a large extent on public money. The public corporation can combine a well-tried system of public accountability with the necessary independence and flexibility which the industries must have if they are to be able to operate successfully in a commercial environment. In the past, some nationalisation Statutes have been unintentionally restrictive, imposing arbitrary limitations on the operations of the industries concerned. No company in the private sector would be confined in this way, and we are seeking to see that British Aerospace and British Shipbuilders will have the same freedom to make the most of commercial opportunities as a company would. This is particularly important in high technology industries, which may have to respond to technological change with far-reaching implications and which face aggressive competition overseas.
179 My Lords, although we are anxious to allow the corporations a sensible degree of operational freedom, they will operate within stringent financial disciplines. What we are doing is establishing a financial structure which will ensure that the industries are not prevented by lack of funds from pursuing economically viable policies. It is also our firm intention that both industries should operate profitably and achieve an adequate return on capital. Any enterprise, whether in the public or private sector, needs financial disciplines of this kind to ensure that it operates efficiently and that resources are effectively used. At the same time, different considerations will apply to different activities in each corporation, and it would be possible to set different financial objectives for, say, aircraft and guided weapons.
I should perhaps add that, in the case of British Aerospace, the corporation will normally be responsible for financing its own projects from its normal financial resources. We do not consider it appropriate to continue launching aid arrangements, since at the heart of these is the concept of risk-sharing between the private company and the Government—no longer appropriate, we think, when the project is being undertaken by a public corporation. The Bill does provide, though, for the Government to make payments to the corporation in the very rare cases where they feel a project should be undertaken for reasons of wider national policy though not justifiable on strictly commercial grounds. We believe that this arrangement, by identifying instead of concealing the case when special help is given, will also help to promote the sort of vigorous financial disciplines and taut management which we should like to see.
My Lords, in extending public ownership we are acquiring undertakings from the private sector by Act of Parliament. It is important that the owners of those undertakings should be properly compensated for what they have lost. The Government have taken great care to choose a basis of compensation which is objective, clear and expeditious. Above all, we believe the terms to be fair. They are fair to the taxpaying community as well as to the shareholder, and are fully in accordance with recognised international 180 standards. I do not propose to discuss these arrangements in detail on this occasion, but there have been criticisms of several of the main features of our compensation proposals, and I should like to say something about these.
First, compensation will be based on the average values of the shares of the companies to be acquired during the six months to 28th February, 1974. Under the Bill, it is shares that will vest in the new corporations, and it is shares that we shall pay for. Some have argued that this is unfair and that we should value assets. But, my Lords, the value of assets depends on what they will earn, not upon the differing and often inflated values at which they are written into the books of different companies. In the last analysis compensation is paid, not for an industry, not even for a particular firm, but for the capital and income which every shareholder is losing. This is properly and adequately reflected in the value of the shares.
Second, we have been criticised for valuing shares during a past period. There are good reasons for this which are precedented in every past nationalisation measure. The period immediately before the February 1974 Election was chosen as the most recent period before the prices of shares were affected by the prospect of nationalisation. Use of a later period would have led to the charge that the Government were acquiring shares whose values had been affected by their own policies—that the Government, in fact, had "rigged the market" in their favour. The particular period chosen also happens to be as representative of the share price market as at any time during the last four years.
Third, it has been argued that compensation which is based on average market values of listed shares is unfair, and particularly inappropriate for two industries in which only one of the companies to be acquired has a full Stock Exchange Listing. My Lords, the Government cannot accept this criticism. Many of the companies to be acquired, though not themselves listed on the Stock Exchange, constitute the whole or a very substantial part of publicly quoted groups. The listed prices of these groups will provide an objective guide to the value of companies for compensation purposes. But they are not the only guide. They 181 are but one of the relevant factors to which stockholders' representatives and my right honourable friend will have regard in agreeing upon the price of shares in unlisted companies by using stock market analogues. The use of the Stock Exchange analogue is useful and well precedented as a way of fixing the parameters of valuation. In particular, it is the basis which best solves a particular problem in devising fair compensation: how to allocate compensation paid in respect of particular undertakings fairly among the differing classes of security holders in those undertakings.
My own view is that the compensation approach in the Bill is the fairest that can be devised—given that we are acquiring at one time 43 companies in different industries with widely differing capital structures. Your Lordships' House will have understood that the approach has two basic strands. The one is to devise general principles of common application to all the companies to be acquired; the other is to apply those principles in the fairest way possible to the different underlying circumstances of the many companies covered by the legislation.
Some concern has been felt about the position of companies outside the scope of the Bill which will find themselves in competition with a large publicly owned corporation. So far as British Aerospace is concerned, there are virtually no companies in the private sector carrying on the same business—the manufacture of complete aircraft and guided weapons. On the shipbuilding side, we have introduced a new clause which we hope will allay the fears of companies in the private sector. We did not include such a clause in the original Bill because we considered that our competition legislation which applies equally to the public and private sectors, and the way in which we expect the corporations to operate, would ensure fair competition.
The fact, for example, that the corporations will have rigorous financial objectives will mean that it would be no easier for them than for a company in the private sector to undercut their competitors. Some also fear the possibility that they may buy out either their competitors or their suppliers. Again, my right honourable friend the Secretary of State would need to be satisfied that any proposal to 182 acquire a new company—which could only be done by agreement—or to undertake new activities would yield a satisfactory financial return. He also has overall responsibility for these two sectors of industry, and before allowing the corporations to acquire any new business he would want to satisfy himself that it was in the interest of the whole sector whether in public or private ownership. Even without the new clause there were a number of safeguards for private sector companies. I believe that the new clause underlines the importance which we place on seeing the development of a healthy industry in both the public and private sector.
My Lords, this measure has been delayed for a long time in another place. I will not dwell on the reasons; these have been dealt with in the other place. Delay has only made more difficult the situation of the two industries. Many in senior management in the industries, who may be opposed to the principle of nationalisation, have made it clear that the most important thing is now to settle the issue. Further delay and uncertainty would be gravely damaging.
The measure will make possible the much needed structural changes so releasing the full potential of these industries and allowing them to make their full contribution to the economic life of the country. Both industries have a past of which we can all be proud and I commend this measure to your Lordships as the best way of ensuring that they can match these achievements in the future. I beg to move that the Bill be now read a second time.
§ Moved, That the Bill be now read 2a—(Lord Kirkhill.)
§ 3.13 p.m.
§ Lord CARR of HADLEY
My Lords, I must tell your Lordships straight away that we on this side of the House are strongly and wholly opposed to this Bill. If I may say so to the noble Lord, it does not appear that his own side of the House is exactly enthusiastic in its support. When I look down the list of noble Lords who have expressed their intention to address the House in this debate, I can find only one Member of the Benches opposite. Although I must not in any way imagine that I know what the noble Lord, Lord Shinwell, will say—I know 183 from past experience in another place that that is a dangerous thing to do—I do not believe that he is the strongest advocate, at any rate these days, of the creation of State monopolies of this kind as described in this Bill.
Our main case against this Bill is that, on the one hand, in order to bring about the sort of reorganisation that may be required in the two industries or two main sectors of industry which we are talking about, it is wholly unnecessary; and, on the other hand, it will seriously damage the national interest and our industrial prosperity in the longer run. Already, even before its enactment, this Bill has been the cause of postponing investment and the cause of loss of business through the uncertainty and lack of confidence which has been created both home and overseas. Therefore, already, this Bill has been the direct cause of some of the unemployment from which we are suffering in this country today. It will certainly do more damage to job prospects and export earnings in the future.
One thing the Government seem to have wholly omitted in their considerations is that many overseas customers, and particularly Governments of other countries in their capacity as customers which are of special importance to these two industries, have rooted objections to doing business with nationalised State monopolies whether they be British or of any other country. Therefore, we are putting these industries at a grave disadvantage with some of their most important customers overseas. Another factor which I am sure we must take into account—and certainly the Government ought to take it into account in view of the pound's performance at the moment—is that nationalisation is undoubtedly one of the factors and elements in the present Government policy which disturbs overseas confidence and therefore contributes to the disastrous fall in the value of sterling.
It is no good members of the Labour Party in this House or in the other place or outside Parliament saying that this is none of the business of people overseas. It would be none of their business if we were prepared to live within our means; but when in order to live we have a Government which insists on borrowing 184 from overseas on these enormous scales it is very much part of their business. You cannot be a borrower on the scale of the present Government and then be indifferent to the views and opinions, whether or not you agree with them, of those from whom you borrow and on whose good will and credit you depend. So, my Lords, for the good of the country and particularly for our own hopes for the industrial prospects of this country and for a return to full employment in the future, we are in no doubt that this Bill ought not to reach the Statute Book. Nationalisation equals inefficiency and inefficiency equals unemployment; nationalisation equals loss of confidence and loss of confidence equals a falling value of the pound; and that equals rising prices at home.
It is therefore with great reluctance that we have decided that we ought to uphold the established convention that the House of Lords does not actually vote against the Second Reading of a major Bill which was included in the Election programme of the Party with the majority in the other place. It is with great reluctance that in this case we felt it our duty to uphold that convention. We are going to do so; but I want to warn the Government that we shall examine this Bill with very great thoroughness during the later stages. I hope that they will be prepared for all the time that that will require.
We shall vigorously seek to move and to carry a considerable number of major Amendments to this Bill. These Amendments will include, for example, the removal from the Bill of certain parts of the industries at present included. They will include the curbing of the excessive and unprecedented Ministerial powers at present proposed; Ministerial powers which, perhaps I should remind the House, include the power of the Minister by Statutory Instrument to nationalise companies and sections of industry which have nothing to do with those that we are discussing today. If the Minister took it into his head to nationalise the production of paper bags, he could do so under this Bill subject only to Statutory Instrument. We also intend to move to reform the present gravely unfair terms of compensation. I am not going into as much detail as did the noble Lord; in fact, today I am not going into detail at all 185 about compensation. But forgetting altogether the fairness of the total amounts of compensation, one has to have only a modicum of industrial knowledge to look at these 43 companies and see the gross unfairness as between one company and another which is produced by the terms of compensation proposed in this Bill.
Also we intend to move major amendments in the field of bringing about really genuine worker participation. The noble Lord made a lot about industrial democracy in his remarks. All of us will agree that if we can get all those who work in this or any other industry really feeling involved and belonging to that industry, contributing to it, then efficiency will increase and industrial peace will also improve. But it must be all the employees. This Bill is riddled with proposals which are prejudiced and partial in the form of the participation which it provides. All the employees must have the chance to participate and be consulted, not only those belonging to the major shop floor unions. Of course, the members of those unions must have full rights to participation. I am not throwing any doubt upon that. But they cannot have a monopoly right to it because that is not going to bring about the spirit which the noble Lord mentions. There are many other important matters on which we shall also be seeking to move Amendments.
The case against this Bill is in part general and in part particular to the different industries involved. I shall be dealing only with the general arguments. Later in the debate my noble friend Lord Campbell of Croy will deal particularly with the arguments affecting the shipbuilding, ship repairing and marine engine industries. The noble Earl, Lord Ferrers, will be dealing particularly, but not exclusively, with the aircraft industry.
May I turn to the general arguments. The noble Lord explained parts of the Bill, but I must say to him he totally failed to justify it. He identified certain things which need to be done in these two industries, but he made no attempt to justify beyond assertion that nationalisation was the only, let alone the best, way of bringing those changes about. The truth is that there is no justification for this Bill. This Bill has no sustainable industrial strategy or logic behind it. Even if a 186 theoretical case could be made out for it—which it has not been—we have now had repeated and overwhelming evidence that nationalised State monopolies simply do not work in practice.
The track record of nationalisation is now appalling. The rate of return on capital in nationalised industries in the past quarter of a century has been consistently only a fraction of that achieved in private industry. What is even more significant is that, when you add new investments to an industry, the return per £100 of new, extra investment in nationalised industries has been consistently lower than the return on or similar quantity of new investment in private industry. The accumulated Government subsidies, capital write-offs and other payments to nationalised industries has now reached a total of something like £8 billion—and, my Lords, I said "billion" and not "million". Over and over again nationalisation has failed to produce in practice the benefits claimed for it in theory, benefits claimed whether in terms of economic performance or of achieving industrial peace or providing job satisfaction to those who work in the industries, or providing service to the consumer and to the public at large.
The great majority of people in this country are fed up with nationalisation and want no more of it. This goes for the great majority of industrial workers as much as for anyone else. A careful, comprehensive survey of opinion published last year showed that 67 per cent. of employees in industry were against the nationalisation of their firms, and only 18 per cent. were in favour. Yet Mr. Varley, the Secretary of State for Industry, in moving the Second Reading of this Bill in the other place, claimed that the Government's major reason for nationalising the aircraft industry, at least, was that the workers in the industry wanted it to be taken into public ownership.
Of course it is true that the leadership of the unions involved want it to happen, as do the activist Left Wing minority in the Labour Party. But what evidence is there to suggest that it is the wish of the majority of the workers in these two industries? There is no real evidence to suggest that the views of workers in the aircraft and shipbuilding industries, and related industries, are in this matter substantially 187 different from those of industrial workers as a whole throughout the generality of industry in this country. I am sure that the Government would never dare to risk putting this issue to a secret ballot of all the workers in this industry. They would never dare to do it because they must know in their hearts that if they did there would be a substantial majority of the workers against nationalisation.
§ Lord DAVIES of LEEK
My Lords, would the noble Lord be kind enough to give way? I hate interrupting the constructive way he normally puts forward his case, but does not the noble Lord agree that he is now exaggerating? Can he give this noble House one example in the aircraft industry 13, here Government money has not first of all subsidised the prototypes? This therefore means we are now devolving a system where Government money has to be put in Concorde and other aircraft to keep private industry going.
§ Lord CARR of HADLEY
My Lords, I am grateful to the noble Lord. That is another point which I shall come to in a moment. That has nothing to do with the wishes of those who work in the industry, which I am talking about. What is true of the workers in the industries themselves is even more true of the country as a whole. Poll after poll shows the dislike of nationalisation felt by the majority of people in this country. The Government seem entirely to forget that they hold office with the support of only about 38 per cent. of those who actually voted in the last General Election, and with the support of a mere 28 per cent. of the electorate as a whole. Moreover, public opinion polls repeatedly show that, even among Labour voters, the majority do not want nationalisation of more industries.
One of the first questions we need to ask ourselves in this House is how can democracy remain healthy, and how can respect for the authority of Parliamentary Government be maintained, if, in order to appease a minority of unrepresentative hot heads among their own supporters, a Government persist in imposing major changes on the country against the wishes of the great majority of the country, regardless of their political allegiance? 188 So the first general argument against the Bill is the straight democratic one. If we do not remember soon in this country that one of the basic principles of democracy is that on the whole the will of the majority should he established and allowed to prevail, we and no one else will be to blame if Parliamentary democracy here eventually dies.
The second general argument against this Bill is constitutional. We have a number of reasons for saying this. We believe it is monstrous that all these industries should be lumped together in a single Bill. Six industries are being lumped together in this Bill: the airframe industry, the guided missile industry, the merchant shipbuilding industry, the naval shipbuilding industry, the ship repairing industry and the slow speed marine diesel industry. The noble Lord convicted the Government out of his own mouth when he tried to excuse the present compensation formula on the basis it had to fit 43 or 44 separate companies in a wide disparity of industries. Out of his own mouth he made the very case which we are making on constitutional grounds.
Our second constitutional objective, partly arising out of this lumping together of all these different and disparate industries, is that the Government have only forced through this legislation to this stage by an abuse of Parliamentary procedures in another place. I am not going into some of the torrid history of it today. It is well known to Members on both sides and to the public. I am going to point out that here we are nationalising six industries and there was only a day for the Second Reading debate in the other place. Even Labour Members complained about that. Similarly, only one day for the Second Reading in this House is totally inadequate for the discussion of principles and of the different conditions and needs of these six different industries.
Secondly, there really has been inadequate time for detailed consideration. I know it has been said that the Standing Committee in another place sat more often than any other Standing Committee in history; but then it is nationalising six different industries. But look not just at the number of Sittings but at the number of hours involved. I think I am right in saying that the Bill had 140 hours in Committee. The Labour Party, in Opposition in 189 another place, took (or at least were given) some 230 hours in Committee on the Housing Finance Bill in 1972. So really 140 hours for this monstrous measure—monstrous at least in a literal sense of a huge area of six industries to cover in one Bill—is far from excessive. Indeed, it is not enough. I think we must bear in mind, when we come to the detailed consideration, that this lack of time was made even more serious by the application of the guillotine to the Report stage of the Bill, particularly in view of the fact that during the Committee stage the Government themselves volunteered, I think in several hundred instances, to make further statements on the Report stage, and then that Report stage was curtailed by the guillotine.
Our third major constitutional objection is the one I have already referred to briefly: the unprecedented powers given to the Minister. They are without parallel in any previous nationalisation Bills. However, I need say no more about that except to repeat that when we come to the later stages of the Bill this is one of the areas in which we shall be moving and pressing most important Amendments.
The third of our basic general arguments against this Bill is that its proposals are wrong-headed in terms of industrial policy and strategy. It achieves nothing which is necessary and desirable in industrial terms which could not have been achieved more quickly as well as more easily in other ways. Of course, I accept that the merchant shipbuilding industry certainly needs, alas! both contraction and major re-structuring, partly because of the world slump in shipbuilding and the gross oversupply of shipbuilding capacity throughout the world, but partly, unfortunately, because of the old nature and low productivity of some—though 1 am glad to say not all—British shipyards. But this could have been done perfectly well under existing powers, and done much more quickly under existing powers. Two years have been wasted, and employment in the British shipbuilding industry will never be as high in the future as it could have been, simply because of the waste of these last two years.
Moreover, quite apart from the question of delay, the last thing to do in terms of industrial structure is to put into one nationalised monopoly organisation this 190 mixture of disparate companies—some flourishing, some failing, some efficient and highly competitive, others, alas! comparatively inefficient and uncompetitive. Almost inevitably, once they are all under a single State corporation, it will be the bad which will hold back the good and instead of reinforcing success we shall be propping up failure. The speed of a convoy is no faster than that of its slowest ship or, to move into another analogy, "bad currency drives out good". If nothing else had done so, the terrible experience of British Leyland should have taught British Governments of whatever political colour that lumping together successful and unsuccessful companies in a single unwieldy group is much more likely to destroy the successful than it is to save the weak ones.
Turning to the aircraft industry, we again see the damage to the future done by the delay and uncertainty which have occurred. The aircraft industry at the moment is, thank goodness! highly successful and flourishing. It has certainly no need of being turned upside down. Its only need is to be allowed to build on its present success and to develop organically from that success to greater success in the future. Only in the last week or two the noble Lord, Lord Beswick, addressing a conference in London, spoke about the current order book, and this is what he said:The current order book of the aircraft industry is in the region of £1½ billion, and exports in 1975 represented over 50 per cent. of sales.This industry is in no need of help or of propping up. It has contributed enormous amounts to our export sales, and this year it has again beaten last year's records month by month. Exports totalled no less than £526 million in the first seven months of the year—£80 million more than the same period last year. For goodness sake! let us learn to leave well alone and not tear up by the roots those companies and those institutions in this country which are being successful and are functioning well.
§ The MINISTER of STATE, NORTHERN IRELAND OFFICE (Lord Melchett)
My Lords, if the noble Lord is going to leave that point, as he has quoted my noble friend Lord Beswick on the current state of the order book, I wonder whether he would also care to quote 191 what the noble Lord said on that occasion about the role which British aerospace and the organising committee were playing in finding future orders for the industry.
§ Lord CARR of HADLEY
My Lords, I do not think I can quote the noble Lord, Lord Beswick, on that point. I will read what he has to say and take note of it; but I was just coming on to that very point. Although the industry is flourishing at the moment and its order book for the future is so strong, what we have to realise is that the aircraft industry is peculiarly one where long-term and very long-term plans are necessary and where co-operative ventures on an international basis are increasingly essential because of the huge and still growing development costs of new generations of modern aircraft. But if one looks at the last two and a half years, how can other Governments and the aircraft industries of other countries have got together to exchange provisional plans and schemes of partnership on new projects with our industry with any certainty or confidence? I am quite sure that the noble Lord, Lord Beswick, and his colleagues are doing all they can to help in this, but however much they do one cannot undo the basic damage this industry is going to suffer as regards its part in the next generation of international aircraft because of the uncertain state in which it has been for the last two years.
Admittedly, as the noble Lord has said, there is a strong case for considering a merger of our two major airframe manufacturers, but this could have been considered and, if thought advisable, put into effect without nationalisation and without any compensation cost to the taxpayer. The Government—any Government, not only in this country but in any country—have great power over their aircraft industries, both by the need, mentioned by the noble Lord, Lord Davies of Leek, for Government and public help in launching new projects, and because inevitably, at least on the defence side, Governments are very dominant customers of every country's aircraft industry.
So Governments have great influence. Indeed, the fact that the Government are such dominant customers of the aircraft industry not only gives them exceptional 192 power which makes nationalisation unnecessary to bring about any rationalisation which may be required, but also makes nationalisation exceptionally inappropriate. Economy and technical competitiveness are usually best served by keeping the largest customers separate from monopoly suppliers. For aircraft the Government need to be a tough and demanding customer. They do not need to be the 100 per cent. owner of their only British suppliers. Indeed, in industrial terms, the nationalisation of aircraft production creates an incestuous relationship which is highly likely over a period of years to blunt the edge of technical excellence and the international competitive power of our aircraft industry.
May I make one last general point about the nationalisation of any industry—and it is really the one which the noble Lord, Lord Davies, raised. Of course, I acknowledge that there is a real argument of public accountability when the Government give public money to an industry, for whatever reasons, and I see that if public money is put into an industry there is an argument that there should be a public equity stake in it, at least on a temporary basis. But this is not an argument for nationalisation in the form propounded by Socialists. To equate nationalisation with public ownership is a typical example of 1984-style double talk. The creation of a State-owned monopoly run by a single centralised corporation is not the same thing as public ownership in any sense that is meaningful to ordinary men and women in this country, including those who work in the industries concerned. That, of course, is one of the reasons why nationalisation is so unpopular among everybody in this country. It is the reverse of the creation of a property-owning democracy. It is the growth of State power which threatens everybody, as at least the present Foreign Secretary showed he understood in a recent speech in Costa Rica.
That brings me to the fourth and last of the major general arguments against this Bill; namely, its cost. Even the Government now admit the urgency of cutting back public spending and, above all, of reducing the intolerable size of the Government's public sector borrowing requirement. In July, the Chancellor imposed cuts in spending and increases in taxes, in order to reduce next year's 193 borrowing requirement by some £2 billion. Whatever we on this side of the House may think about the proposed cuts in public spending being inadequate in total or badly chosen in kind, the fact remains that they are hard to bear, and they do things which hurt—genuinely hurt—great numbers of ordinary people and their families throughout this country. As a result of those cuts, fewer new homes will be built, fewer old houses will be renovated to make decent homes, education services will be poorer, urgent capital expenditure on our hospitals will be reduced and urgent capital expenditure on the existing nationalised industries will he cut back. Despite this, the Government come along with this nationalisation Bill which we estimate will cost, in total, something like £900 million.
Admittedly, some of this money would have had to be spent in, for example, restructuring the shipbuilding industry by the use of other powers than nationalisation: but not nearly so much. At least, the cost of compensation could certainly have been avoided and we gather that that must be at least of the order of £300 million. The payment of compensation in Government stock must affect the gilt-edged market. It must add to the pressure to increase interest rates, which is a very big handicap to the growth or the resurrection of productive investment in industry. The interest payable on the compensation stock is bound to be higher—at least, in the short and medium term—than the Government will get back from their new equity holdings, and the difference means extra public expenditure, extra pressure on the public sector borrowing requirement, in order to reduce which the Chancellor has just imposed these unpopular and hard cuts to which I was referring just now.
It is therefore undeniable that, but for this nationalisation Bill, the Chancellor, by his own criteria, need not have made such heavy cuts elsewhere in public capital spending in order to contain the borrowing requirement next year to the level which he believes is right, and which we, of course, still believe is too high. In other words, paying for this nationalisation measure will mean some fewer homes, some less well-equipped hospitals and a poorer education service, among other things. Is this what the people of this country want? It was once said that Socialism 194 was the language of priorities. All I can say is: what an order of priorities! Doctrinaire, Marxist-inspired measures, the advancement of State collectivism ahead of homes, ahead of schools, ahead of health—is this really what the Government believe the people of this country want? If so, they must be mad. All I can say to them is: let them go to the country and ask.
§ 3.45 p.m.
§ Viscount SIMON
My Lords, before I start upon what may, I am afraid, be a rather longer speech than I usually inflict upon your Lordships, I have a small personal interest to declare in the outcome of this debate as I am a modest stockholder in the P and 0 Company, which is the parent of one of the ship repairing companies which appear in Part I of Schedule 2. Like the noble Lords sitting on my left, my noble friends are wholly opposed to this Bill. We have no doctrinaire objection to nationalisation in appropriate circumstances. We believe in a mixed economy, but we also believe that a mixed economy must have a proper balance between the public and the private sectors, and we consider that already too large a share of national resources are devoted to the public sector. So we consider that any further proposals for nationalisation, including the proposals contained in this Bill, must be shown to be justified on economic and not on political grounds; that the advantages must be carefully weighed against the disadvantages, and only when Parliament is satified that this is a proper area in which to extend the public sector should legislation of this kind find its way on to the Statute Book. It is difficult to believe that the Government have looked at the matter in that way at all, when they have lumped together live or six different industries all with differing problems into this one Bill.
It is impossible to deal comprehensively with a Bill of this scope and complexity in a single speech of acceptable length, and I propose to speak mainly on the question of the nationalisation of the shipbuilding industry. My noble friend Lord Kimberley will be speaking later about the aircraft industry; my noble friend Lord Wigoder has a special point that he wants to raise, and my noble friend Lord Lloyd of Kilgerran will 195 speak about the ship repairing industry. But I think that what I say about shipbuilding will be found, to some extent, to have relevance in these other fields as well.
First, I would ask your Lordships to look at the reasons which have been advanced by the Government—both by the noble Lord, Lord Kirkhill, and also by Ministers speaking in another place—for which they have sought our support for this Bill. The noble Lord, Lord Kirkhill, mentioned very briefly—I am glad that he did not emphasise it, but it was made a great deal of in another place—that the proposal was in the last Labour Manifesto. With great respect, that is not at all an argument for the Bill. It is a statement of fact, but it is not an argument.
But even if the Manifesto had been supported by a majority of the electorate—and I was glad that the noble Lord, Lord Carr, pointed out that that was not so, because otherwise I should have had to do it—surely, it is only under totalitarian regimes that the ruling Party's programme is not open for discussion, that those who do not accept it in full are deviationists or three-quarters of the way to being traitors to be consigned to reindoctrination centres or, perhaps, mental hospitals. That is not the kind of democracy we are, and I hope that noble Lords opposite will agree tht anything in the Manifesto which their Party produces must be argued out on its merits.
I was, quite frankly, really appalled to hear what I understand (because it was only repeated to me) the Secretary of State for Energy said either yesterday or the day before, when he seemed to suggest that we are quite unentitled to criticise what is contained in the Labour Party Manifesto. Another argument was used in another place, and perhaps it was allied to that one, when the Secretary of State at the time, Mr. Varley, said that the aim is simply expressed: it is an extension of Socialism. Again that is not an argument. We can argue the merits or the demerits of Socialism, but just to say that this Bill is an extension of Socialism is not an argument. It seems to me that the Secretary of State, by expressing himself in that way when advocating Government policy in another place, has shown up 196 all too clearly the essentially doctrinaire nature of these proposals.
I come next to a point upon which the noble Lord, Lord Kirkhill, spoke at some length: that it is the wish of the workpeople in these industries that they should be nationalised. As your Lordships know, we on these Benches yield to nobody in our enthusiasm for improving the opportunities for workpeople—and I include in that every employee of the company—to take a share in important decisions of policy affecting the company. But we do not believe, and I do not think that noble Lords opposite believe, that this means that the will of the employees should prevail over everything else. I hope that that is not what noble Lords opposite think that it means. Personally I have always disliked the phrase "industrial democracy" just because it might give people the impression that it means that the undertaking should be ruled by the people working in it. But that is by the way, and perhaps when we come to the Committee stage we might suggest an alternative expression.
It is curious, is it not, my Lords, that the Government, whose intentions in this respect we warmly support, should have thought it right to impose upon the boards of these new corporations the duty to proceed with discussions for industrial democracy within, I think, three months of coming into operation? The new boards will have a tremendous task in front of them in moulding together a number of diverse undertakings, and I should have thought that in making a move of this kind it might well have been better, without any legislation at all, for the Minister to direct either the Railways Board or the Iron and Steel Corporation to come along with their proposals. After all, they are already in the saddle and would be in a much better position to undertake this difficult task than these new boards during the early months of their existence. But, in any case, we are all waiting for the Bullock Committee's recommendations which will lead, as I understand it, to legislation in the next Session. Would it not be better to wait for the few months that are still left before plunging into this very difficult subject with a new board? I am not saying that merely because I disagree with the general idea.
197 The noble Lord, Lord Carr of Hadley, questioned whether in fact the workpeople in these industries really want nationalisation, and I want to do so as well. Are the Government really sure that this is what is wanted? When a Secretary of State or a Minister, flanked by trade union officials, visits a factory and says, "Do you want nationalisation?" I can well imagine that very few people put up their hands and say, "No". Why is that? If the Minister really wants to find out why, does he ever ask intelligent workpeople why? I suspect that it is largely because the workpeople are loyal trade unionists and because a number of them are loyal members of the Labour Party. They know that this is the policy of the trade unions and of the Labour Party, so they fall in with it.
I agree with the noble Lord, Lord Carr of Hadley, that if it were possible really to find out what the workpeople want it is quite unlikely that it would be found to be what the Government think it is they want. After all, has the experience in the nationalised industries been so good? I am quite sure that when nationalisation began the workpeople had the idea, which I think the noble Lord, Lord Kirkhill, mentioned, that they were going to feel awfully good working for the community, that it was going to be so much better than working for a capitalist boss, and so on. But I should have thought that a lot of that starry-eyed idealism has fallen away. Are the conditions in the nationalised industries better? Is job security better? Is the boss more approachable? I should have thought that on the whole the boss was much less approachable. Can the foreman or under-manager deal with problems as they arise, or has he to refer to higher authority? These are the kind of questions that I should like to ask intelligent, deep thinking workpeople.
I was very interested, and other noble Lords may have been interested, too, when reading the debates in another place to find that an honourable Member who was supporting the Bill told the House that in his younger days he had worked for five different shipbuilding companies. I am sure that when he moved from one company to another he did so because he thought that the conditions or the prospects were better. I wonder whether 198 anybody reminded him that if the industry had been nationalised he would not have had the opportunity to do that. He would have lost what I regard, and what I think many working people will regard, as a really valuable right—that is, the right to sack the boss, to give in his notice and go to a better place. I agree that at this moment in our history it is a right which nobody is very likely to exercise, but when things get back, as we all hope and pray they will in the least possible time, to normal that is surely a valuable right which is denied to men who work in a nationalised industry, unless they are prepared to go to a job where they will not make full use of the skills which they have learned in their occupation. I regard this as very important and I just wonder whether noble Lords opposite who have greater experience of industrial life than have I would agree with me about it.
§ Lord LEE of NEWTON
My Lords, would the noble Viscount say which of the large nationalised industries he would like to de-nationalise?
§ Viscount SIMON
My Lords, I think that I said at the beginning that we on these Benches are not doctrinaire and anti-nationalisation. I am not suggesting that we should de-nationalise any of the nationalised industries.
§ Viscount SIMON
My Lords, I am not going to be drawn on that point. I disagree with my noble friend, but never mind. Now I come to the most serious economic argument deployed in favour of the Bill. It was mentioned by the noble Lord, Lord Kirkhill, but I take it from the noble Lord, Lord Shepherd, who, speaking on the Finance Bill, said on 27th July last, at column 1255 of the Official Report:I do not know whether noble Lords would dissent from it; but I, personally, when it conies to very large sums of money, would prefer to buy the equity and have some say in management rather than merely to provide large sums of money to the shareholders of companies who may fail to exercise their responsibilities …I am going to be bold enough to disagree with the noble Lord, Lord Shepherd 199 on that matter. In the shipbuilding industry we all recognise that things are very difficult and that if the industry is to get on to a profitable basis it will be almost certainly necessary to have some further reduction in its capacity. Certainly if we are to achieve international agreement that is absolutely fundamental. When that happens we shall have lost some of the equity, and it strikes me that it is far more sensible for the Government to provide the money, in the capacity of a banker of last resort who can impose upon the company any conditions it likes to control the way the company makes use of that money.
If noble Lords opposite are at all doubtful as to whether those powers exist, may I say that I found an ally in a statement made by the Under-Secretary of State in another place on 4th August at column 2070. Mr. Clinton Davis was talking about something quite different. He was talking about Government money that had been provided for a certain company in connection with the rescue of Brentford Nylons and he was being criticised by his own Party for having provided that money. I will quote only the one sentence. The question was whether the Secretary of State could effectively control the use of this money and Mr. Clinton Davis said:It is quite clear that the Government have the ability to impose conditions.That to my mind would be a much more economical way of doing this. After all, as the noble Lord, Lord Carr of Hadley, has said, if money has to be provided to tide the industry over this difficult period and to cushion the effects of restriction and redundancy, they have to provide that whether the industry is nationalised or not; therefore why in addition pay the compensation which will be payable under the Nationalisation Bill?
That reminded me, my Lords, of another quotation from the noble Lord, Lord Shepherd. I am sorry he is not here because I have not been able to trace the reference, but I am sure it will be in the recollection of noble Lords that when speaking on one of the debates on the economic situation earlier this Session, he was rather twitting noble Lords opposite who were asking for this or that additional expenditure and he said that no 200 additional expenditure could be considered unless there was a corresponding cut somewhere else. That is a point to which the noble Lord, Lord Carr of Hadley, has already referred and I should like to ask the noble Lord who is to reply to the debate whether he can tell us where the cut will fall that represents the money which the Government are going to put into these industries as a result of the nationalisation proposals.
§ Lord WYNNE-JONES
My Lords, would the noble Viscount allow me to ask him one question to elucidate that point? He asks where the money is coming from. Does he mean any additional sum which has to be supplied because at the present time the industry does not have enough resources? Or does he mean the pure transfer of money in moving ownership from one hand to another? It seems to me that the transfer of ownership neither creates nor destroys money. It is when one has to pump in resources in order to get something done more effectively—
§ Several noble Lords: Order, order!
§ A noble Lord: It is a damned long one!
§ Viscount SIMON
My Lords, I think I understand the question which the noble Lord, Lord Wynne-Jones, has asked, but I am considering the Government's accounts. It is they who are having to pay out the money and therefore will have less money to spend on something else. The noble Lord, Lord Melchett, is shaking his head. I do not know whether he wants to answer this question now or wait until he is replying.
I will turn to one other argument which is presented also I think to some extent by the noble Lord, Lord Kirkhill, and 1 take it from something said again by the Secretary of State in another place and which I think is worth reading just to say how profoundly I disagree with that argument. It was at the end of his introduction on the Second Reading and he said:Above all, the Bill helps to fulfil our aim of bringing about a fundamental and irreversible shift in the balance of wealth and power in favour of working people and their families."—[Official Report, Commons, 2/12/75; col. 1462.]201 We on these Benches, as noble Lords know. have a great deal of sympathy with the views of noble Lords opposite in this field. We are not egalitarians because we stand for individual freedom, but we share with noble Lords opposite their anxiety to create a fairer society in which wealth and power are better distributed. But we disagree entirely that this Bill will have any effect in that direction at all. In fact, as the noble Lord, Lord Carr of Hadley, said, if anything, the creation of these great national corporations is going to work in the other direction—it will reduce the freedom of people.
My speech is getting much too long. I propose to leave to the Committee stage the important argument—it is a difficult one and will be better discussed in Committee—as to whether there is a special case for the warship constructors. I propose to leave to the Committee stage the discussion as to whether there is any argument at all for taking in the marine engine builders. The only suggestion that has been made is that it will help them to match production to possible sales. But that, surely, is the main function of management in that industry and I should think they have done it very well in the past. It seems to me that that particular suggestion may be based on a quite wrong idea that it is the shipbuilders who decide what engines they are going to put into a ship, whereas of course it is the ship owner who orders the ship who decides what engines he wants. So that relationship between the engine-builders and the shipbuilders does not help in any way to match production to sales. We shall certainly, with the noble Lord, Lord Carr of Hadley, want to discuss the powers of the Minister in Committee and we shall want to discuss compensation.
I was going to make only one comment about aircraft, a subject which I am leaving to my noble friend Lord Kimberley, but the Minister did suggest that there was some wastage in having research and development carried out by two separate companies. I am much concerned that in this, and to some extent in the shipbuilding industry, too, one effect of nationalisation will be to limit technological competition because it is technological competition which, though it may be 202 a little wasteful, is the way to lead to excellence. I think that this is a matter about which we must be more careful. If you have only one centre deciding what research is to be done, you may hit the right issue, hut you may also quite easily miss it.
Finally, my Lords, we are told that we ought to let this Bill go through in order to end the uncertainty. That is an attractive argument in some ways. Of course, the Government could end the uncertainty tonight if they were to say that they would withdraw the Bill. I confess I do not think it very likely that the noble Lord, Lord Melchett, has instructions to do that, but perhaps before the Bill has finally gone through this House he might have that opportunity. But is this not rather a dangerous situation? Who knows what other seeds of uncertainty are being sown this very day in Blackpool? Is it to be that there is uncertainty, that threats are made, and continue to be made for three, four or five years? And is it to be that then someone will come along and say, "We must finish this uncertainty by carrying out what has been threatened"? I see this in the long term as a really dangerous situation. We ought to examine very carefully before we leave this Bill whether that is a good ground—although I know it is supported by many people closely involved—for letting this Bill go through.
My Lords, I want now to say one other thing. We all know that in the Party opposite there are a number of people—indeed, I expect there are a number of noble Lords in this House—who sincerely believe that the total abolition of private capital in industry is to be desired. They want a system which I am going to call in shorthand Marxian Socialism, because I do not like to use the word "Communism", which I know raises emotional tones. These people are quite entitled to their view, but I am perfectly satisfied that the great majority of the country reject it. There may be among those members of the Party and, indeed, among the most intelligent of them, people who still have this as their aim but who recognise that it will be more easily obtained and, indeed, obtained with less damage to the structure of society and industry, if it is done step by step. So to them, perhaps, this Bill is four or five steps in the direction they are going.
203 It seems to me that before the next Election—if not earlier—the people of this country will ask the Labour Party what is their aim. The energetic Secretary of State for Energy will no doubt tell us that it is a dynamic Party and that they alter their views from time to time. That is quite right; I do not object to that at all. But, surely, every Party which has a claim to support in the country must have an ultimate aim for which it is going. There can be changes in the route, there can be changes in the timing, but it must have a clear idea where it is intending to go. I feel that is why the Labour Party, because of its anxiety (which I can well understand) to retain the support of people who are probably a minority (I hope they are) as the noble Lord, Lord Carr of Hadley, said, find it necessary to throw in a sop here, make a move there. But I earnestly suggest to your Lordships that the time is ripe for a clear statement from the Labour Party on a suitable occasion as to what is their ultimate aim; what is the ultimate society which they want to see established in this country.
§ 4.14 p.m.
My Lords, being a shipowner I have attended the launching of many ships, but this is the first time that I have launched myself. I find the making of a maiden speech in such distinguished company rather daunting. Although I am not expecting a bottle of champagne to be cracked over my head, nevertheless, I ask the indulgence of your Lordships for my brief remarks which I hope may be helpful in the deliberations on the Bill under discussion. My Lords, the noble Earl, Lord Inchcape, currently President of our General Council of British Shipping, in which I am happy also to play a small part, will be speaking later, representing to your Lordships the collective view of British shipowners. I speak to your Lordships now not only as an individual shipowner but also as a satisfied customer, and a staunch supporter of the British shipping industry, as were my father and, before him, my grandfather, when they headed our family business. I do not think my course will diverge very much from that of the noble Earl.
My company is presently building, or has on order, in a yard on the North-East coast recently taken into State ownership, 204 seven cargo liners, part of an order for eight such ships, the first of which was delivered to us earlier this year. The ship in question was the first to be built in a splendid new covered yard, the largest of its kind in the world, recently completed, and officially opened in April by the noble Lord, Lord Melchett. Despite the difficulties inherent in operating a new concept, the ship was delivered by the yard on time. We were pleased and proud to take her into our fleet as a first-class ship in every way. When the order to which I have referred is completed, my company will have built, since the last war, 78 ships totalling approximately 1 million tons deadweight, all of them in British yards.
I can assure your Lordships that our reason for building in this country is not merely one of sentiment. We have built in Britain because over the years we have consistently had value for money; value for money means to us effectively a well-built ship, built at a competitive price, with delivery when we wanted it. I sincerely hope that in the event of the nationalisation of the shipbuilding industry the Government will pursue a realistic policy based on sound commercial principles. Such a policy must ensure value for money, and that within the United Kingdom efficient yards are encouraged to maintain their efficiency. It must also ensure that the necessary capital resources are made available to keep the yards technically to the fore. We shipowners operate in a highly competitive world market and, in doing so, contribute considerably to the invisible earnings of the United Kingdom. We can only continue to do this if, in our respective trades, we have the right ships to carry out the task efficiently.
As shipowners, however, we are subject to the disciplines of the market, and cannot, and must not, be expected to place orders for ships unless we can foresee a commercial requirement for them. If British yards can provide the right ship at the right price and at the right time, we will give them, and be glad to do so, our whole-hearted support, irrespective of whether they are nationally owned or not.
There is one hope which I should like to voice. Shipowners want to deal with men they know, not with a committee or a faceless organisation. It would pay British shipbuilders to keep as much 205 decision-making power as possible where it is now, in the individual shipbuilding companies. My company is also a substantial user of the United Kingdom ship repairing industry, which operates in an exceptionally competitive world market. Ship repairers, unlike shipbuilders, work on a day-to-day basis, and whether or not they obtain business depends on a combination of quality of workmanship, price and, what is more important with the present high cost of ship operations, the time taken to do the job. Further, unlike shipbuilders, who are having difficulty in raising capital for their long-term projects, the majority of ship repairers are efficient and competitive, and are not hungry for capital injection.
There is a general feeling among shipowners that bringing the ship repairers of Britain into one State monopoly would lessen the competitive spirit existing between individual yards, would lower their efficiency, and would result in a loss of business to this country. I can see no commercial reason for their being taken into national ownership, and for the foregoing reasons I hope they will be excluded from the provisions of the Bill.
My Lords, in conclusion I have one further point in regard to the shipbuilding industry. It will not be able to begin to solve its desparately difficult problems until the issue of ownership has been decided once and for all. So far as I am concerned, the sooner a final decision is reached, the better for everybody. I am most grateful for the courteous and sympathetic attention given by your Lordships to my first efforts in this House.
§ 4.20 p.m.
Lord CAMPBELL of CROY
My Lords, it gives me the greatest pleasure to be the first to congratulate the noble Lord, Lord Inverforth, on his outstanding maiden speech. He spoke with an ease and fluency which completely belied the nervousness of which he spoke at the beginning of his speech, and we congratulate him on his skill, because he succeeded in speaking on a controversial Bill without becoming controversial. We were all greatly impressed by his speech and by its content, based on his own experience, which will continue to be of value to the House. I know I am speaking on behalf 206 of all of us in saying that we look forward to hearing him again on many occasions.
My Lords, I intend to concentrate on the parts of the Bill relating to ships. Where the sea is concerned, as distinct from aerospace, no less than four industries are threatened by this Bill, as my noble friend Lord Carr has earlier described. Each of these industries is entirely different in its operations from the other three. The Government have not recognised this in their Bill, and this is a reflection, I suggest, of the careless bundling of industries into nationalisation by a Labour Government for political reasons. Dogma has prevailed, not logic.
Let us consider first the merchant shipbuilding industry. This, as has been described already, is suffering from a world recession. All the shipbuilding nations have been experiencing an acute reduction in orders. But this is happening after a period in which certain countries have set out to capture very large shares of the world market. Japan has sought 50 per cent. of the world market, and Korea, a newcomer to the field, is rapidly expanding, with long hours and cheap labour with which to operate. The world's capacity to build merchant ships has been doubled in recent years while the demand for them has been halved. The capacity now existing in Japan alone could provide all the merchant ships likely to be needed in the world over the next few years.
That is the nature of the crisis facing every country possessing a merchant shipbuilding industry. It is a grim and gloomy situation. The British industry, with West European shipbuilders, has been striving to co-ordinate and rationalise. Against that background no one connected with this particular industry, the merchant shipbuilding industry, would pretend that it was not faced with a crisis. The British industry has severe problems. But nationalisation is certainly not a way of solving them. It would only add to them. Instead of concentrating on getting through this crisis with the minimum of damage to British interests, the Government are making it an excuse to carry out doctrinaire socialism.
In the competition in recent years all Governments of countries with merchant shipbuilding industries, Britain included, 207 have resorted to giving financial help. Subsidies have been both open and concealed. To stay in the race British efforts should have been concentrated in the last two years, and should be now, on a co-ordinated national policy unfettered by the complications of the transfer of responsibility to new nationalised bodies and all the ramifications of vesting in new ownership.
The Government could be playing a key part. For, my Lords, all the powers needed have been available in the Industry Act 1972; that is to say, all the powers to enable the Government to carry out restructuring of the industry and to give help to particular companies or areas if necessary. And of course those powers were added to the powers which became available in the 1975 Industry Act. The complacency of this Government in regarding nationalisation as the only remedy has been monumental.
§ Lord MELCHETT
My Lords, I apologise for interrupting the noble Lord. This is a point that has been made before in the debate. I wonder whether the noble Lord, although he is speaking particularly about shipbuilding, could tell us why it was that his honourable friend the Member for Henley did not succeed in his attempt to restructure the aerospace industry if he had all the necessary powers; and indeed why the Party opposite did not restructure the shipbuilding industry, facing, as they say it is now, a terrible crisis, if they had all the necessary powers?
Lord CAMPBELL of CROY
My Lords, I am sorry the noble Lord has not read Hansard from another place, because that exact question was put to my honourable friend Mr. Heseltine, and he gave an admirable answer, which I do not intend to read out now. He himself was the Minister responsible for the aerospace industry. He gave an answer straight away to that very point. I have not got the reference column in my notes; otherwise I would give it to the noble Lord. I will do so soon after I have sat down, and he can read Mr. Michael Heseltine's reply to that point. I wish to continue by going on to the ship repairing industry, because it would take at least five minutes for me to deal with that point that Mr. Heseltine has already dealt with.
208 The ship repairing industry is entirely different from shipbuilding. There are over 90 companies in Britain which carry out ship repairing. Twelve are listed in Schedule 2 on page 81 of the Bill. No plausible reason has yet been given by the Government for the inclusion of ship repairing in the Bill. The criteria on which the 12 companies have been selected appear arbitrary. Indeed, the criteria have been changed at least twice since the proposals were first published, including the turnover figure of £3.4 million. Here there is also a point of possible hybridity to which I must draw the Government's urgent attention. It seems that the list of 12 companies in Schedule 2 does not accurately conform with the criteria in the Bill. The House is always concerned that specific private or local interests should be treated fairly and on an equal basis in a public Bill, if they are affected by a public Bill, but if all such interests of a single category are not so affected special procedure should allow the private interests to be heard. The Hybrid Bill procedure makes provision for this.
The point, which was brought to my attention only yesterday, arises on a Schedule which did not receive full examination in the Commons because of the guillotine. The criteria in Schedule 2 for ship repairing companies to be nationalised include that the turnover in the relevant financial year, together with the turnover of each of the associated ship repairing companies for the relevant financial year, exceeded £3.4 million. That is paragraph 3(1)(c) at page 83. There are also definitions of an "associated company" and "relevant financial year". The latter is related to the company's accounts and the date of an annual general meeting. It should be possible to determine, therefore, by inspection of company records at the companies' registration offices in London, Edinburgh and the Isle of Man, whether or not a company falls within the criteria. I have been informed that examination of such records had disclosed discrepancies between the list in the Bill and the companies which appear to meet or not to meet the criteria. If that is correct, then companies in a single category as defined in the Bill would not in fact be treated equally. I have today passed the information and the figures to the Government. They 209 can start immediately the necessary checking of company records to ascertain whether they are correct.
It may help the House if I outline one example. Three companies were included in the Consultative Document, issued by the Government in July 1974, for nationalisation. They were Humbers and Anders Engineering Company, James Robertson and Sons, Fleetwood, British United Trawlers and Engineers. Grimsby. All are members of the Associated Fisheries Group. They were no doubt included because their combined turnovers exceeded the then criterion figure, which was less than £7.4 million. When the turnover figure was raised to —3.4 million, they disappeared from the list. But there is another ship repairing company in the Associated Fisheries Group which appears to meet the criteria, Associated Fisheries Engineering (Scotland). When its turnover is added, then the total of that group of ship repairing companies' turnovers comes to more than the £3.4 million.
The existence of that fourth company in the group may have been overlooked, or there may he some other explanation. At first sight, and without being able myself to have a check carried out on company records since yesterday, the information which I have passed to the Government, including the case which I have mentioned, indicates discrepancies between the list of 12 companies in Schedule 2 and the fulfilment of the criteria in the Bill. If that proves to be correct, then the Bill seems likely on examination to be found to be hybrid in its present state.
I do not expect the Minister who is replying tonight to be able to comment on the material that has been provided. Further examination of company records is clearly necessary. Errors or misunderstandings may be revealed. But the matter must be cleared up by the Committee stage. I am raising this now as it seemed the earliest appropriate moment to do so while giving the House and the Government reasonable notice before any action is considered. The Government now have some days in which to examine the situation fully. I hope that they will have the answer by the beginning of the Committee stage. There is, as your Lordships know, more than one course open. I understand that, should it be found necessary, the House could decide, 210 upon a Motion, to refer the Bill to Examiners.
I will now turn to one of the other industries to be nationalised under the Bill, and that is naval shipbuilding. There is a very different situation there to the one I have described for the merchant shipbuilding industry. The three firms, Yarrow, Vosper Thorneycroft, and Vickers, are profitable, they are operating in a separate market, and they are winning exports. They are dependent upon specialised knowledge and particular markets. Why subject them to the upheaval of nationalisation? No case for doing so has been made, and it is likely to damage their technical efficiency and their prospects, to the detriment of Britain.
The Bill is before us because a proposal to nationalise aircraft and shipbuilding was put before the Labour Party Conference a few years ago, and then placed in the Labour Party's Election Manifesto. We cannot ignore therefore what is now happening at Blackpool this week. Proposals for a further slice of nationalisation are being put to the Government by the National Executive Committee of the Labour Party—the banks and insurance companies. Like the contents of this Bill they have no relevance to solving the urgent and very serious economic problems which confront us. Surely as a country we should be concentrating all our efforts on making the economy in its present mixed state work as effectively as possible. That should be our goal as a nation. The vast majority in the country would agree—I suspect, including a number of noble Lords opposite.
Is the difficulty not this: that a Socialist Party must continually have a recognisably Socialist element in its economic programme in order to enlist the continuing zeal of its Left-Wing supporters. Is it not possible for it to imply in its Manifesto that no more public ownership is needed without losing the support of some of its most active members? If not, it is a dismal prospect for our country. It means an annual sacrifice of one or two industries or institutions to propitiate the Tribune Group. It means also that Labour Party policies must in the end lead by stages to a completely nationalised system of industry and commerce. In 211 turn, this would stifle those British attributes of inventiveness, enterprise, and merchant skills upon which our livelihood as a nation has depended.
The Prime Minister is clearly aware of this danger to his Party. On Friday he described those new proposals as an electoral albatross. I am sure he is right. What he omitted is that this is not the first of those birds to have appeared. It is the second. And the first of the albatrosses is here; it is this Bill. The Labour Government will feel the weight of this first albatross around their neck; they will feel that weight when the ship yard workers discover they were fooled about the security of their jobs under nationalisation. The Labour Government will feel its weight when those industries are seen to be in the indecisive clutch of a new centralised bureaucracy. They will feel its weight, too, when the full cost of this unnecessary nationalisation becomes clear at a time of enforced retrenchment.
If anyone is speculating as to who is the Ancient Mariner who prepared the weapon that killed the first albatross and is trying to kill the second, the mariner with the glittering eye who is aiming at a brace of albatross—what might be described as a "Left and Left"—is not the present Secretary of State for Industry. I leave it to your Lordships to decide which of the Members of the Cabniet is the mariner concerned. The Government should still have the opportunity in this House, and they should take it, of second thoughts about the whole of this Bill. For the sake of the country they should drastically change it or withdraw it.
§ 4.38 p.m.
§ The Earl of KIMBERLEY
My Lords, we on these Benches would also like to congratulate the noble Lord, Lord Inver-forth, on his maiden speech. I did not make mine in your Lordships' Chamber all that long ago, and I know what he must have gone through before. My only comment is that I still go through it every time I stand up in your Lordships' Chamber.
Over the nationalisation Bill of aircraft and shipbuilding I want to speak specifically about aviation, but there are two general points. One has been covered 212 by several noble Lords this afternoon; that is, the origin of this Bill which, as the noble Lord, Lord Campbell of Croy, has just said was born in Blackpool and put into the Labour Manifesto, alas! not to improve the two industries but purely to satisfy totally illogical Socialist dogma of the Tribune Group, who appear unfortunately to be hell bent on running this country into the ground. My one regret this afternoon is that there are so few noble Lords sitting opposite me, because maybe they do not only not want to hear what I have to say but what other noble Lords in this Chamber have to say about the whole of this sad Bill.
I feel that this must be obvious to those noble Lords who are here, wherever their allegiance or their affection may lie. They have only to read Sir Richard Marsh's indictment when he left British Rail on what he thought of the nationalised industry. The second point is that the Bill is destructive and it is negative. It does not take into account that one industry is highly profitable and highly successful whereas the other, in many instances, is the reverse and somewhat sick. Whatever the final outcome of this Bill may be, these two industries should be kept completely separate. It is madness to confuse and muddle up viable and unviable concerns. Except in the Fleet Air Arm, aircraft and ships do not mix. The flying boat has been obsolete for a lone time.
One shipping concern which has been mentioned—and I know that my noble friend Lord Lloyd of Kilgerran is going to go into much greater detail—is the Bristol Channel Ship Repairers. I must concur that I, in my poor layman's way, do not think they should ever have been considered in the Bill.
Returning to the subject of aviation, I have always advocated, and I am not alone in this, that BAC and Hawker Siddeley should have been merged in some way or other a long time ago, particularly in view of the ever-increasing costs of research and development in all forms of aviation. This is rationalisation and not nationalisation. As the noble Lord, Lord Campbell of Croy, said, it could still be done, even at this late stage. It is not too late. Mr. Arthur Palmer, Chairman of the Select Committee on Science and Technology, is reported in Hansard of the other place on 29th July to have said— 213 his words appear in columns 1003-4—that apart from Concorde, the civil side of the industry had few new projects. I ask: whose fault is that? It is certainly not the fault of BAC or Hawker Siddeley. The blame must lie with Governments, past and present, and especially, in my humble opinion, with the bungling interference in many instances of Government advisers. Mr. Palmer went on to say that he hoped that the problems would disappear with the new people coming in. One can only assume that he means even more interference by politicians and certain civil servants. I ask the noble Lord, Lord Beswick, who I hold in great esteem, who these new people will be. I predict that if this happens, the aerospace industry will, within a short time, be in the same slough of Despond as is part of the shipbuilding industry.
What, therefore, should be done? Let us examine the situation. First, the management of the aircraft industry is complex and difficult enough without the threat of nationalisation hanging over it like the Sword of Damocles. There are problems of investment and commitments to customers, and they will become even more hazardous; there are redundancies, which cause hardships to families, and simultaneously redundancy payments and unemployment benefits will become an even greater drain on a Government whose funds are already over-extended. Up to now, the British aerospace industry has been in the hands of private enterprise, but even so it has been largely subject to Ministerial management as regards the funding and control of projects, military projects with the Ministry of Defence and civil ones with the Department of Industry; and for Concorde a separate controlling body called the Concorde Management Board was formed and it has been very controversial in the past.
In the last two decades of Government guidance, £368 million has been wasted on cancelled projects, of which I will give a sample: the Vickers 1000 civil transport; the Hawker P.11–21, a supersonic Hunter it would have been; the Hawker P.11–54, the first vertical short take-off supersonic fighter; the Hawker Siddeley 681, a short take-off transport; the TSR 2, a low-level bomber; the BAC.311, a civil transport; not forgetting the A.300B, one of the great successes of Europe which, through the 214 private enterprise of Hawker Siddeley, we have a part of—the wing—whereas we might have had a much larger share, and the list goes on and on. As a result of the scrapping and cancellation of these aircraft, which were way ahead of any foreign competition and which would have earned millions of pounds for this country, we have had to buy the equivalent from the United States, and that equivalent has in many instances not been equivalent as the product has sometimes been inferior.
Thus, not only have we lost out financially, but sometimes we have had to put up with second best. Two glowing examples are the Trident and the VC-10; their specifications were changed to make them less viable and the necessary funds to make them world-beaters were withdrawn. Are American aircraft better built? Are they more comfortable? The answer is, No. And, in regard to cost, one Boeing 707 costs more to re-certify than the whole of the British Airways' VC-10 fleet.
Under the proposed new corporation, if it happens, certain questions arise which I hope the Minister will be able to answer. Will British Airways be allowed to stipulate its own specifications for airframes, engines and ancillary equipment? If the new corporation should become hamstrung by Government edict, how autonomous will British Airways be allowed to be? And how far will the Minister interfere in British Airways' business, in spite of the honey-coated words in the Bill, in promoting:… the efficient and economical design for aircraft, both civil and military, having full regard to the requirements of national defence"?It appears that the Secretary of State has the power of the final say, a veto. Can that be right? I agree that the Secretary of State is required to consult with the corporation before exercising such powers, but there is no provision for him to consult the airlines. Should there be a dispute between the corporation and British Airways—which, let us face it, is the customer—there is no apparent provision for arbitration. However conscientious the Secretary of State may be, I do not think that he can possibly be expected to have a full working knowledge with the know-how of successful commercial and professional airline operations.
215 I have been trying to ascertain the total amount spent by British Airways on United States aircraft and it is not an easy figure to arrive at. However, one figure given to me by somebody at British Airways suggests that it is over £300 million. Last year, in British Airways' balance sheet, the loan repayment was about 11.8 per cent. of turnover. This does not appear to me to be right. It cannot be right to spend the loan repayments of a nationalised corporation's funds on partially subsidising the United States' aircraft industry. Alas! this has been brought about simply and solely through a lack of foresight and gross political mismanagement in the past, and for this mismanagement, irrespective of the Government at the time, most of the blame must, I repeat, be laid at the door of the Government's advisers and in this connection I cite three examples. The TSR 2 was scrapped and replaced with the F.111, which was not a success; the Hawker P.11–21 was replaced by the Phantom, a good aeroplane; and the Hawker Siddeley 681, which was 10 years ahead of its time, was scrapped and we bought the Hercules, which started in 1965 and cost us 1,400 million dollars to buy. At that time the present Chancellor of the Exchequer said that Britain was better at making motor cars than aircraft and that we could not afford the research and development, yet recently he produced £1,400 million to bail out BMC.
There may be some argument favourable to some United States military aircraft which would help to explain the standardisation of our partnership in NATO, but standardisation is still a long way off. To give an example of this, the McDonnell Douglas F4K Phantom is filled with British avionics and is powered by two Rolls-Royce engines, which makes it a completely different Phantom from any other Phantom used by NATO or the United States, and it cannot even be fully serviced in Europe without proper back-up facilities from the United Kingdom. There is one bright spot, and that is the Jaguar, the Tornado and the Lynx, which are entering NATO service and which will slightly loosen the United States stranglehold on European aerospace. The tragedy is that Europe has the capability to produce top world-class aircraft, both civil and military—the 216 Concorde, the Harrier and the A.300B—and there is no doubt that Great Britain itself is way ahead at the top in terms of overall prowess in design and innovation.
But any organisation must have a leader. Otherwise it wallows in disarray and confusion. We are in a unique position to lead European aerospace, provided we have a long-term policy which is well planned and firm to withstand changes of Government in the next ten years. The plan must be flexible and capable of improvisation and modifications, but these modifications must not be allowed to fragment it. Do not let us forget that we won most of our wars because we in this country are masters of improvisation. So let us be positive; let us be constructive; let the prime consideration be for new projects to be totally European and not just a licence to build American aeroplanes. If we do that, the long-term benefits shared by all in the European Economic Community will be many and great. Money will be spent internally in the EEC and this will not only provide jobs but it will also provide world export potential.
On the development of Concorde, detailed representations have already been made and only require implementation. Together with the £600 million that we have already invested, a very small amount of extra money will give a relatively great return in producing a more economic and more efficient aeroplane. The use of the two existing pre-production examples—01 and 202—which could be used as large research and development aircraft on a contract basis, would be valuable. Remember, my Lords, that the Americans have nothing like Concorde for size, speed and capacity. Also, it could be used to help solve the many problems which they have with their Rockwell V.1 bomber and the Space Shuttle. Thereby we could earn dollars as well as the respect of the United States.
Turning to the Hawker Siddeley 146, there is still a world-wide need for an aircraft of this size and type. The preliminary work has already been done and that would save money overall and reduce the time of entry into operations. Then there is the AWACS Nimrod. Due to the sophistication of British radar already fitted in Nimrods, conversion to the AWACS role would be a lot quicker and much cheaper than buying the American 217 Boeing 707 derivative. An acceptance of Nimrod by NATO would increase European co-operation—which is vital—and would also mean that all money spent on AWACS is spent this side of the Atlantic.
We have no heavy lift helicopter. I would agree with anybody who said that Westland would not be able to have enough money to build one by themselves but they could in conjunction with, say, Aerospatiale. We have another very fine aeroplane—the Harrier or the Sea Harrier. I accept that, for the present, it is being allowed to go ahead, but we must not in any way allow it to suffer the interminable and oft repeated stop-go policy which has been all too common in the past. It is a unique aircraft and has the most fabulous export potential, as had almost all the aeroplanes we have cancelled over the last 20 years.
In addition, it is time we came back into the light aeroplane market. With two exceptions, the Bulldog and the Whittaker, every new light aircraft in this country is either imported or is a licence-built variant. Considering that the number of light aircraft on the register is something like ten times that of commercial aircraft, the amount of foreign exchange paid out on this item must be staggering.
The other day at Farnborough, the President of a United States airline and a very keen Concorde man, mentioned to me and a member of the hierarchy in BAC that by 1984 there would be a need for 2,700 new civil air transports in the world to replace the 707s, 727s, 737s, DC8s and 9s and BAC 1–11s. What a challenge to the British aerospace industry! I am sure that if that industry is allowed to pick up the gauntlet it can produce a winner here.
I do not want anyone to think that I am being anti-American in this speech. I am trying to show the difference between what a highly successful, Government-backed business organisation which is dedicated to overseas selling, particularly of military and civil aircraft, has achieved, while we have so often vacillated and made only half-hearted attempts to do the same. Very often, even our half-hearted attempts have been baulked and hindered by past Governments. To give a present example, 218 the other day I was asked by Philippine Airlines whether I could help them—which I could not—to obtain landing rights at London Airport. Philippine Airlines have for 20 years bought British aeroplanes against American competition. They are also a very hot potential customer for Concorde. Yet they have been refused landing rights two or three times a week on their Manila/Frankfurt flight. They feel very hard done by and offended. Surely, it is not the way to try to sell them a £35 million aeroplane to tell them that they cannot land at London Airport. Yet when I. spoke to the Department of Industry and the Department of Trade, the impression I received from both was that they thought it was none of my business and that they were very evasive and prevaricating and had a "couldn't care less" attitude. One is led to believe that, as so often in the past, the right hand does not know what the left hand is doing.
I should like to ask the Minister in relation to Clause 30 of the Bill, which deals with the dissipation of assets before vesting day, why the acoustic sound chamber and the stratosphere chamber at Weybridge are being closed down. These are two unique facilities which the Government should surely do all they can to preserve if we are to stay in the air race.
The sale of aircraft is big business. The recent Lockheed exposures amply demonstrate this. So, if British Aerospace is to survive, it must have very strong, capable management—management that can cope with ministerial interference very often generated by Government's technical advisers. I repeat, let us rationalise not nationalise. Otherwise, we shall witness the final blow of the executioner's axe on Britain's greatest technological industry which has led the world for years and will continue to do so if it is allowed to.
§ 4.56 p.m.
§ Viscount MELVILLE
My Lords, it is indeed my great privilege to address your Lordships' House for the first time. I must apologise for holding two slips of slightly scruffy looking paper, but they are my notes and I find this reading complicated and technical to a degree.
The very violent argument over nationalisation has disguised the fact that different 219 parts of the industry are in very different shape. We have a curious situation where some shipbuilders are broke, battered and besieged and are probably only too happy to be taken over, while there are others who, since the proposals were first mooted, have prospered enormously but yet have not been allowed to increase their dividend in proportion. If the Government take these companies over on the original compensation terms, that will surely be a splendid cash bonus for the Government and little more than a patronising tip for the shareholders.
It is a very varied industry and I am sure that your Lordships may agree with me that nationalisation in itself is not altogether an answer to any problem. It is merely a transfer of ownership. It is what the new owners will do with the industry subsequently that matters. For instance, how do they propose to be better shipbuilders than the private firms are now? The latter have, after all, been in the shipbuilding business for some time and the record of, for example, Harland and Wolff in Belfast does not suggest that they have found the magic way to create the kind of revitalised industry we all want.
Is it too late to suggest that the Government should take a more modest step in the direction in which they want to go? In other words, could they not make a compromise and consider becoming equity holders in each company, for example, by acquiring shares either by purchase where new capital was needed or by putting in fresh funds themselves? This would surely entitle them to appoint directors to those boards to make certain that the public funds invested were being properly used.
I personally believe that some partial State intervention could have many advantages. It would enable the Government to guide rather than force the industry in the direction it wants. It could also create a partnership with private industry rather than a confrontation. It could inject much needed funds for modernisation, and it would provide safeguards for public money. Finally, I humbly believe that the Government are buying some very large problems along with this shipbuilding industry of ours. They could also buy themselves 220 a lot of good will by showing by a compromise that they were prepared to work with all sides of the industry in tackling these very weighty problems.
§ 5.1 p.m.
§ Lord SHINWELL
My Lords, it falls to me to follow the noble Viscount, and affords me the opportunity of tendering cordial congratulations upon his speech which, if it was non-controversial, was thoughtful and technical and an excellent contribution to the debate. Indeed, I preferred that type of speech to some of the speeches to which I have been compelled to listen all afternoon. Therefore if the noble Viscount feels disposed on a subsequent occasion to offer his views on any subject—important or unimportant; it is a matter for him to decide—I can assure him that I will listen with rapt attention.
This afternoon we have had some remarkable speeches which remind me of the technique employed in another place: fulminations against the Government, criticism of this and that, and above all the submission that the only people in this Assembly, or indeed in the other Assembly, who were assured about the right course of conduct for a Government, or an Opposition, were members of the Conservative Party. It reminds me of a statement made by Arthur Balfour many long years ago. It so happens that he was still in the House of Commons when I entered that Assembly. He was an ex-Prime Minister, an intellectual, a man of parts, and he expressed the opinion that the Conservative Party, whether in a majority (and therefore in Government) or in Opposition, must accept the responsibility for controlling the destinies of our country. That was Conservative philosophy then. We have had a revival of it this afternoon.
I have several qualifications to offer in the course of this debate in the context of the legislation under review. One is a major qualification, and I had better state it right away. In the circumstances that have confronted the United Kingdom in the past few months, leading to tension, almost financial chaos, subordination to the IMF and the moneylenders, and all the rest of it—matters with which noble Lords are now familiar—instead of proceeding with legislation of this character 221 I would have sought co-operation even with those on the other side of the political fence, and the financial pundits in the City of London and the universities, with a view to finding—I will not rate it higher than this—an approach to a solution of our economic and financial problems, and would have placed our political shibboleths in the icebox temporarily, and perhaps for some time to come.
In other words, I would have dealt with first things first; and I say that not because I have any objection to nationalisation, philosophically, constitutionally, or democratically, but because nationalisation will not make any effective contribution to the solution of our immediate problems. In the circumstances our primary concern must be what are we to do about those problems? At the same time I must confess that I have no time at all—I had better be quite blunt about it—for the Rip Van Winkles who have come from another place and who are using the technique of the other place in order to try to convert Members of this Assembly, if they need to be converted, and making no contribution at all to a solution of our problems.
I have of course some minor qualifications to which I shall address myself in a moment or two. But let us consider the philosophical aspects of what is described as nationalisation. We have been told that it is all due to the doctrinaires in the Left Wing of the Labour Party. What nonsense! The fact of the matter is that nationalisation ipso facto has a very moderate relation to Socialism itself. I have had some experience in this matter. It was my responsibility not only to advocate nationalisation for many years, as a propagandist for the Labour Party, but also, as a Minister, to pilot a nationalisation Bill through the House of Commons.
I am going to say something which I hope will not offend my friends on this side of the House. I do not believe that the two Bills which I piloted through another place—dealing with fuel and power, including electricity—made any contribution whatever to the solution of the problem of unemployment. On the contrary, because they were expected to promote greater efficiency, to introduce automation, rationalisation (a term 222 mentioned by the noble Earl, Lord Kimberley, in another context) pits were closed down—about 300 of them—during the period of office of the noble Lord, Lord Robens of Woldingham, and thousands of miners discovered they were redundant.
In 1945, 1 million miners or mine workers of various categories were employed in the mining industry. Now there are 300,000. More than 300 pits have been closed down. Not only has this happened in connection with the mining industry. What about transport? We nationalised the railways, and we endeavoured to bring into the ambit of that nationalisation some other forms of transport, but it was not very effective and we had to abandon it in the long run. But the nationalisation of our railway system has made no contribution, either, to the solution of the problem of unemployment. On the contrary, Dr. Beeching made it his business—it was expected of him—to close down branch lines, to introduce automation, rationalisation, mechanisation, efficiency; and fewer people are employed.
Now what is to happen as regards this special piece of legislation? So far as the nationalisation of shipbuilding is concerned, I am bound to say it is inevitable. We had a remarkable speech from the noble Lord, Lord Inverforth, speaking as an expert, as a shipowner. He said two things of the utmost importance. One was, "Get on with it; let us settle this question of ownership one way or the other". How right he is. The time has come to do that. The other thing he said was that we have got to leave the production of ships, the construction of these vessels that are part of the maritime heritage of the United Kingdom, to the several shipbuilding companies which, although merged in a nationalisation scheme, will operate quite individually according to their abilities and their merits. That we should expect of them.
There is something more. It was amazing, as I listened to the noble Lord, Lord Carr, that it never occurred to him that those who first supported the subsidisation of shipbuilding in this country were not the Labour Party. It was the Conservative Party. It began over the "Queens". I took part in the debates in 223 another place when Mr. Ernest Marples was Minister of Transport and provided out of public funds a £3 million loan in order to build one of the ships. Without that subsidy, that ship would never have been built. Why? It was because the company, John Brown and Company, could not afford it, and the banks would not provide the money. The investors were coy, reluctant to furnish the necessary cash. The Government had to come to their aid.
But, my Lords, this is not peculiar to this country. Forgive the personal note, but I entered the House of Commons way back in 1922 and I can recall the then attitude of the United States of America in this matter of subsidising the mercantile marine. The Matson Line, which was a private company, was wholly subsidised, and without the subsidy the American mercantile marine would never have developed. The same applied to other countries. It applied to Sweden, it applied to Norway, it applied to Germany. I am not sure about the situation in Japan, but suspect that even if the Japanese shipbuilding industry is not nationalised it is under the direction of the Government of Japan, and no nonsense about it: they have to do what they are told.
I therefore submit to Members of the Lordships' House that so far as shipbuilding itself is concerned (I am speaking of the mercantile marine) the time has come to bring it under public control—but, I want to add, with a measure of Parliamentary control. One of the blunders that we were responsible for—I confess it although I was not myself responsible for it; it was not my own idea, it was the idea of the late Herbert Morrison—was that if we were to take over or transfer private industry to the State, we should do it through the medium of public corporations who were to operate on commercial lines, and no nonsense about it; with no Questions to Ministers, and the like. We are still suffering from that defect, even in this Assembly. When we ask Questions we are told, "Go to the Post Office", "Go to the Coal Board", Go where you like, but do not ask us the questions" —not because they are confessing their ignorance but because they are unable to operate as they should. I should make it 224 clear that here I am referring to the mercantile marine; I am not dealing with shipping as a whole. I would not nationalise shipping, not for anything, and would fight the Labour Party tooth and nail if they tried that. That is an international problem, and we have got enough to do to solve our national problems without butting into international affairs. That is that.
Now, what is my other qualification? It has sometimes been suggested that the boot and shoe industry should be taken over by the State. Why leave it in the hands of Charles Clore, the multimillionaire, making huge profits? Go along Oxford Street. I am not going to provide a gratuitous advertisement, but if you go along Oxford Street you see this name and that name, but they all belong to the same company and are under one control. Suppose we decided to nationalise the hoot and shoe industry. I do not suppose Members on the other side of the House would object to that very strongly; that is not up their street at all, it is not their line of country. But suppose we did that. Should we then nationalise all the people who from time to time sole and heel our boots and shoes—the cobblers? Of course not. Therefore, in heaven's name, if we are going to nationalise the building of ships, why should we bother about ship repairing?
My Lords, I want to make one thing quite clear. I understand that there is an impression abroad that many Members of Lordships' House have been suborned by one of the ship repairing firms who have been, not bribing—I would not suggest bribery for a moment—but sending out letters, having interviews, forming deputations and all the rest of it. They have been having lunches, and so on. I assure your Lordships that I have been very grievously disappointed: I have not had a single lunch out of them. Nobody has offered me a penny. What I am saying I am saying on my own, and because I believe it. It is this: I would not touch the ship repairing industry. If there is a case against the Government, it is the transfer of the ship repairing industry. First of all, they do not intend to nationalise the whole of the ship repairing industry; only those companies which have made a profit above a certain limit. You have got to make about £4 million, and then you come into the 225 category which decides whether you should be taken over or not. But if you are under the £4 million for some reason or other, you are out.
§ Lord MELCHETT
My Lords, I am very grateful to my noble friend for giving way. Just in case we get involved in any more problems of hybridity, perhaps I can put the record straight. It is actually turnover, and not profit, which defines the category.
§ Lord SHINWELL
Anyway, my Lords, there is something that is almost inexplicable about the suggestion that some ship repairing firms should be taken over and some should not. If we are going to take over the ship repairing industry, take the lot or leave it alone—and I suggest we leave it alone.
Now I come to another point which has been raised by the noble Lord, Lord Campbell of Croy, and that is naval shipbuilding. Why interfere with Yarrows, or with any of the companies which are responsible for naval shipbuilding? They are not in the same category. The building of merchant ships is quite a different proposition from the building of naval vessels, particularly in these times, when they are so intricate, so automatic and technical to understand. Leave those alone. Nationalise the shipbuilding industry for the simple reason that nationalisation has become inevitable; that it cannot develop any longer!
My Lords, this is my final point about nationalisation. The idea that nationalisation is the beginning and the end of socialism is a complete illusion. It is nothing of the sort. I will tell noble Lords what socialism is. Socialism is the creation of a society where there is liberty for the individual, within limits, providing he commits no offence against society; where all the facilities that are provided by the community shall be made available to all members of the community and that neither wealth nor poverty should stand in the way of their acquisition; that we should organise our resources for the common good—it does not mean the end of profit making; not at all; that services, in so far as is practicable, should be freely available to everybody. Take the National Health Service, now emasculated because of gross stupidity on the part of many of the people associated 226 with the system. That is what we mean by socialism: a free society.
If we are to take over industries and to transfer an industry from private hands to the State, let it be clearly understood that it has to be done because changes of that character in our industrial organisation are inevitable, they cannot be avoided. It is not peculiar to this country; it is happening everywhere.
My Lords, one final word: some Members of the Liberal Party have spoken this afternoon. I rather favour the Liberal Party at the moment because I have views about electoral reform—not because I want to see the Liberal Party form a Government; that is the last thing I want. But I want to see everybody in the country, every elector in the country, effectively and efficiently represented in Parliament. That is what I want. The minority ought to he represented. I would not leave everything to the majority. I agree with Henrik Ibsen that the minority is always right. I am inclined to favour the Liberal Party; but I hear them talk about "this doctrinaire nationalisation". I do not mind rationalisation. I do not mind efficiency. No. It is not going to work. We have to face the fact that many industries in this country have got to be transferred to the State. But with Parliamentary control; let that be understood—the public corporation and the rest.
I am told that some people now dislike nationalisation; the public opinion polls say they do not like it at all. What are the reasons for that? Why do I sometimes dislike nationalisation. I will tell your Lordships. It is when I hear that somebody has been appointed chairman of a nationalised board at £24,000 or £30,000 a year: somebody who, when he perhaps was an associate of mine at some time—and I will not mention names—was hardly worth talking about, mediocre to the nth degree. When I think that all they do is close down this and close down that, I could have done it for much less!
So I can understand why people dislike nationalisation. There are many miners who dislike nationalisation of the mines. They do not get out of it what they thought they would get out of it. Many people dislike nationalisation of the mines because they pay high prices for coal. I have to travel tomorrow to 227 Durham for the purpose of opening a centre for mentally handicapped people. I do not know why they selected me; unless they think that perhaps I am reaching that stage. I must pay my fare; and am amazed at what I have to pay. Of course I dislike the nationalisation of railways. And if I have to have food on that train, then I dislike it still more. There are many reasons for disliking nationalization—but not because somebody in the Labour Party has been advocating it. You must not dislike it because you do not like change. I say to those who sit on the other side of the political fence, "You must accept change. The sooner you appreciate that, the better it is going to be".
My Lords, let us accept the nationalisation of shipbuilding. Let us object to and reject the nationalisation of ship repairing unless we take over the whole lot. And as for aerospace—one final word; I nearly forgot it—I would not touch that either. And tell your Lord-ships why; it is because it is highly speculative. It is never going to pay, for the obvious reason that in the case of a ship, you build it but you need not change the design when you build another. You have standard ships. In the case of aircraft, you build an aircraft, it costs £30 million or so to build it (but I am not quite sure about that) and after you have done it you discover that it requires more frills, more adjustments, and you have to build to another design; and so it goes on. That is going to happen in the aerospace industry. I would not nationalise it for a moment. Exercise control over it, yes; but as for nationalising it—if anybody thinks that that is going to solve unemployment or the problems that are going to be encountered in future years in connection with the aerospace industry, they are making a serious mistake.
That is the position. I hope I have not disposed entirely of this legislation. It was the noble Lord, Lord Carr, who directed attention to the fact that only one member of the Labour Party was going to take part in this extraordinary debate. Why leave it to me? Why pick on me? Or is it that we have lost our enthusiasm?—not at all; it cannot be that. Is it because we no longer believe in nationalisation? Of course, not. No, it is simply that we 228 know we have not got a chance in this place. You can argue as much as you like, you can be the most eloquent of debaters, you can use language which is superb, you can dispose of your opponents just like that. You can do all that; but they vote against us. What chance have we got? Would it not be a good idea to nationalise this Assembly? In other words to transfer it from private hands to public hands; in other words, to institute the principle of democracy in this Assembly? Then we on this side could take part in debates on equal terms. We should have a chance. There was one occasion when in the Division Lobby I found myself along with members of the Conservative Party. When I was asked, "Why?" and whether it was because of the subject, I said, "No. It is that I want to be on the winning side."
My Lords, I am sorry to have spoken for so long, but I did it deliberately and I shall tell you why. The noble Lord, Lord Carr, spoke for 29 minutes. I watched the clock. The noble Viscount, Lord Simon, spoke for 31 minutes. I thought: "Why should not I have a show?"
§ 5.29 p.m.
§ Lord WIGODER
My Lords, it is always an ordeal to make one's maiden speech. I should like to join in the congratulations extended to the noble Lord, Lord Inverforth, and to the noble Viscount, Lord Melville, on their excellent and exceptionally lucid and constructive contributions to this debate. They will learn in due course that there is one greater ordeal in this House, and that is to be called upon to speak as the noble and incorrigible Lord, Lord Shinwell, sits down. I can only hope that the Party of which he has been for so long such a very distinguished member will read carefully and reflect upon some of the devastating arguments that he has put forward this afternoon in this debate.
I must apologise now for lowering the tone of the debate after Lord Shinwell's contribution. I want to revert for a few moments to the matter which was raised by the noble Lord, Lord Campbell of Croy, on the possible area of hybridity in this Bill. I say at once I am very much aware of the fact that "Down with hybridity!" is not an election-winning 229 slogan. Before I embark on the topic, I will remind your Lordships that what we are really discussing is the making by the Government of invidious and arbitrary distinctions between various private interests. This is not therefore simply a technical legal matter; it is a matter which involves the liberty of the subject, the subject's right to put his own case, and it is a matter that involves accepted constitutional procedures. I know that your Lordships will agree that it is the duty of this House to be quite certain therefore that any Bill with which we are dealing does not fail because it is a Hybrid Bill and that the matter is examined with care at this juncture.
The noble Lord, Lord Campbell of Croy, put the matter in this way: if any companies are named in the Schedules to this Bill which have not complied with the criteria laid down in the Bill, it will follow that invidious distinctions are being made and that the Bill is therefore hybrid. That is a proposition with which I expect the Government would agree almost without reflection. Therefore I want to draw the attention of your Lordships to three companies which are named in the list of ship repairing companies in Schedule 2 to the Bill at page 81. I do this in the knowledge that no doubt the Government have the most expert advice at their disposal and that they have no doubt been through the documents and records of these various companies in the greatest of detail. I do it therefore really by way of inviting the Government to look with their advisers at certain aspects in relation to these three companies again in order to make sure that no material matter has been omitted which might render this Bill a hybrid one. The first company is Scott Lithgow Drydocks Limited.
The file of their annual returns is contained in the company registry office at Edinburgh. I have had the opportunity of seeing photostated copies of what I think are most of the documents in that file. I invite the Government to rescrutinise all those documents, to look very carefully at dates of the various returns, the dates on which the documents were compiled, the dates on which the documents were submitted to the registry (which appear from the folio numbers which the registry have entered upon the documents) in order to answer the crucial point about this particular company, 230 which is this: there was one year, and one year only, in which its turnover exceeded £3.4 million. By some happy chance—and it is a happy chance because, as I understand it, Scott Lithgow are not averse in their present position to being nationalised—the figure returned was £3,403,118, some £3,118 above the qualifying limit. That figure appears as the turnover in the accounts for the year ending December 1972.
I would ask the Government to look carefully at the documents to see whether those accounts were laid before an annual general meeting of the company held before the qualifying date in July of 1974. There are indications on the papers that the meeting took place after the qualifying date and not before. It may be that there are other factors about which I know nothing. There may be other documents which I have not seen. I ask the Government to take a further look at that matter and examine it with care. So far as I know there are no associated companies of Scott Lithgow whose turnover can be used to bring the aggregate up above £3.4 million. Mr. Kaufman in the other place said there was no question of there being any other associated companies.
The other two companies to which I refer are two associated companies: J.B. Howie Limited and Western Shiprepairing Limited. They are, within the definitions provided by the Bill, associated companies that come within the Laird group. Their records are in the company registry in London, and what appears there is that the turnovers of those companies at the last annual general meeting at which accounts were laid before the qualifying date so far as J.B. Howie was concerned were nil, and the figure so far as Western Shiprepairers were concerned was about £1¾ million. It is proper within the terms of the Bill to aggregate those turnovers, but somehow some figure has to be attained which will bring the aggregated turnover above the figure of £3.4 million laid down in the Bill.
I ask the Government again if they would be good enough to indicate how that figure was reached. There are possible ways in which it can be reached which have been brought to my notice. There may be others as well. One is the fact that early in 1974 the company, J.B. Howie Limited, acquired a business 231 called the C.B.S. Engineering Company, and it is possible that the turnover of that company has been aggregated to the Howie turnover to make the qualifying figure. If that be so, I should like the Government to be good enough to consider whether that is in accordance with the terms of the Bill because, as I understand it, the CBS Engineering Company—despite its name—is not a company; it is a partnership. Looking at the terms of the Bill, it appears as though a partnership cannot be a member of a group of companies. The other possible way in which I am told it might be that some other company's turnover has been aggregated with Howie and Western Shiprepairers is that the turnover of Cammell Laird Shipbuilders has been taken into consideration. Again I do not know at the moment whether this is right. If that is so, I ask the Government to look again to see whether Cammell Laird Shipbuilders are a subsidiary of the Laird Group within the meaning of the definition of the word "subsidiary" in the Companies Act. The information that I have been given tends to show that it is not a subsidiary and therefore would not be an associated ship repairing company.
I apologise for raising this rather detailed matter in this way. As with the noble Lord, Lord Campbell of Croy, the information only reached us some 36 hours ago. It was clearly inappropriate to put down any Motion today to refer this Bill to Examiners. It would have aborted a useful and constructive debate. It would not be fair to the Government to face them with the problem of answering questions of detail of this nature. Like the noble Lord, Lord Campbell of Croy, I do not expect a detailed reply from the noble Lord, Lord Melchett, tonight. I would be grateful if he could indicate that these matters and the matters which the noble Lord, Lord Campbell, raised will be looked at with the greatest care by the experts at the noble Lord's disposal. Perhaps a full explanation (possibly by way of a Statement) could be given to the House before Committee stage so that we on these Benches can consider whether all doubts about hybridity have been removed, and whether it is therefore possible to avoid before Committee stage moving to refer this Bill to Examiners.
§ 5.40 p.m.
§ The Earl of INCHCAPE
My Lords. I should like to add my congratulations to my noble friend Lord Inverforth on his admirable maiden speech. Not only does he carry a famous name in British shipping but as he is fully active in industry his views carry great weight, and what I have to say will only support what he has said so clearly and succinctly. Year after year, between 60 and 80 per cent. of the shipping built in United Kingdom yards is delivered to British owners. As President of the General Council of British Shipping, I represent those owners and should like to try to give their views on the issue which is before your Lordships today. I must also declare a further interest, in that the shipping company of which I am chairman is also the owner of a small ship repairing company which is included among those to be nationalised under this legislation. But the views that I want to put to your Lordships are not those of the ship repairers but of the ship owners—the customers of the shipbuilding and repairing industries, with whose destinies we are often linked.
Shipping and shipbuilding are two completely separate industries. Shipbuilding is a manufacturing industry and shipping is a service industry, selling its services to the world. Last year, the gross earnings of United Kingdom owned and registered ships—that is, freight, passenger revenue and charter receipts—were over £2,000 million. Every penny of that sum was earned in international competition. Cargo owners around the world are free to use our ships or not to use them, and they will use British ships only if our costs are lower, or at least no higher than our competitors', and if our services are better. That means we cannot afford to buy ships at uncompetitive prices or to become the milch cow of the British shipping industry. For all that, other things being equal, we shall always build in this country, because we want to if we can and because it suits us. For example, it is easier to supervise construction here, and there are no currency risks in the United Kingdom when the price is in sterling.
Thus, we have continued to be far and away the biggest customer of United Kingdom yards, taking seven out of ten of the ships they produce. Indeed, a 233 greater proportion of British-built ships go to British owners than Japanese-built ships go to Japanese owners, Swedish-built ships go to Swedish owners or, indeed, West German-built ships go to West German owners. As a result, British ship owners are united in wanting to see a strong and profitable British shipbuilding industry, competitive in world terms and capable of winning orders from both British and foreign owners.
It is against this aim that we have looked at the present Bill. Whatever their personal views of the theory and practical working of nationalisation, British ship owners collectively look pragmatically at the proposals now before your Lordships. We ask whether they will help or harm the prospects of British shipbuilders, and our belief is that in practice the change in the ownership of the industry will not have any great effect one way or the other. But it provides one way of restructuring the industry, which could be an advantage if the opportunity is firmly grasped and if the nationalised industry is run commercially, as it must be.
On the other hand, if the Government of the day were to restrict the international market for British-built ships—for example as an economic weapon against countries whose political complexion is distasteful to them—the shipbuilding industry could be severely damaged. What is important is that the present uncertainty, as my noble friend Lord Inverforth stressed, should be ended as soon as possible. Ship owners hope that we in this House can give our views on the Bill with our usual despatch. Already, those responsible for selling and building ships have been diverted from their primary task for far too long.
I should like now to turn to ship-repairing; and here I speak as President of the General Council of British Shipping, and on behalf of ship owners generally. This Bill provides for the nationalisation of several quite separate industries. Two of them, ship repairing and shipbuilding, have something in common, but not very much, except ships. They are as different as motor manufacture and motor repair. Shipbuilding is concentrated; ship repairing is dispersed. Shipbuilding is longterm while ship repairing is short-term.
234 Shipbuilding, as the noble Lord, Lord Kirkhill, said, is a manufacturing industry and ship repairing is a service industry.
The ship owners are the customers of the ship repairing industry and, as customers, we believe that nationalisation will damage successful ship repairers and make them less able to stand up to the fierce internatonal competition for business. Those repairers depend for their survival on foreign as well as United Kingdom business and they cannot afford the damage that this Bill would do. The shipping industry hopes, therefore, that your Lordships will accept in Committee an Amendment to strike out the nationalisation of ship repairers.
We cannot discuss the Bill which is before us today without referring, as several previous speakers have done, to the fall in orders in United Kingdom yards and the consequent threat to employment. With or without nationalisation, there is no magic solution. When the price of oil soared three years ago the tanker boom came to an end and the shipping industry, like the shipbuilding industry, was faced with the need for some major readjustments. For nearly a year, between 4 million and 5 million deadweight tons of British tankers have been idle, and about the same tonnage has been underemployed through slow steaming. This is not pleasant, but it is inevitable that the industry has had to adjust to the changing facts of economic life. In the case of the shipbuilding industry, adjustment is just as necessary. The noble Lord, Lord Campbell of Croy, referred to the world capacity of shipbuilding. According to recent OECD studies, by 1980 the average annual demand for new ships is likely to be between 10 million and 12 million gross tons, while world shipbuilding capacity is expected to reach 50 million gross tons by 1978. As a result, shipyards all round the world—in Japan, as well as in Europe and elsewhere—are cutting back. The OECD has agreed that a reduction in world shipbuilding capacity is inevitable, and the EEC proposes to play its part in bringing about that reduction.
Against this world-wide recognition of the need to contract it would be foolish to think that the British shipbuilding industry can, uniquely, remain unaffected by changes in the needs of its customers. It would be equally foolish to think that 235 it can avoid change by dictating to those customers. The ships that British owners buy have to compete in the world markets, and if British shipping companies cannot buy at the same prices as their competitors, there is no point in their buying at all. Fortunately, this is now almost universally recognised and the Government and the shipbuilding industry have acknowledged that their aim is not to compel their customers, whether British or foreign, but to attract them.
We, for our part, are doing what we can by telling every British owner what type of ships each yard can build, when it has berths available and what to do if he experiences any difficulty in placing an order in a United Kingdom yard. The Government have described this as an encouraging response from the shipping industry, and we want to be as helpful as we can. There are, of course, limits to the points on which the customer can advise. The shipowner cannot tell the shipbuilder how to organise his production, conduct his labour relations, or obtain the finance that he needs.
The area in which he may have something to offer is in indicating to the shipbuilder the relative importance of price, delivery date and contract terms. The customers, British and foreign, need good ships, certainly; they need them at world prices, obviously, and they also need them delivered at the contract date. We know that, if this Bill goes through, Mr. Graham Day will do all in his power to see that delivery dates are met, but some yards have not found that easy in the past. I hope, therefore, that British Shipbuilders will see that their contracts provide that where delivery is delayed the shipowner receives full and adequate compensation. I can assure your Lordships that the fear of delay in delivery is a strong influence on the mind of a shipowner who is deciding where to place a new order. British Shipbuilders would be well advised to try to allay that fear in the way I have suggested.
There is one other piece of advice which we, as shipowners, would offer to the Government and to the organising committee of British Shipbuilders. It is this. If and when this Bill goes through, you will have a vast and frightening 236 responsibility for the prosperity of British shipbuilding. Do not make the mistake of trying to be shipowners as well. There are many good reasons for not doing so. You cannot make money by selling ships to yourself. You would, quite unnecessarily, alienate some of your more valuable and potential customers, the British shipping, community. Finally, you do not have either the money or the management time to spend on extraneous activities. I believe that for British Shipbuilders even to contemplate operating ships on its own account, as there is power in the Bill to do, or going into joint ventures in which its return depends on the risks of shipping would be foolish and damaging to both the shipbuilding and shipping industries.
I believe that for British Shipbuilders to have power, not merely to own but to operate ships, would be of negligible practical importance to British Shipbuilders. But to British shipowners it would be the thin end of the wedge which could cause irreparable damage. We do not fear fair competition from a successful ship-operating subsidiary of British Shipbuilders; after all, we compete successfully against far more formidable rivals. What we fear is an unsuccessful rival. If such a Government-owned company were to find profits hard to come by and cargoes hard to obtain, there would inevitably be some who would suggest that it should have special access to Government-controlled cargoes. And so, for the sake of one limping little subsidiary, the whole principle of freedom of shipping would be threatened, and that by the British Government, the leading world maritime power. Cargo discrimination is the enemy of international trade and it is the enemy of British shipping, which earns so much of its revenue in the cross-trades. To introduce it in Britain, of all countries, would be unutterable folly. I hope that in Committee we can so amend this Bill as to remove any possibility of such a disastrous development.
Finally, let me say that there is plenty of cause for gloom about the prospects for shipbuilding today, but I believe that it can be overdone. Shipbuilding is not a new industry. There is a tremendous amount of experience and skill in our British yards, and if only we build on our strengths and not on our weaknesses the 237 British shipbuilding industry can be strong again, and that is something which is in the interests of us all.
§ 5.54 p.m.
My Lords, it is a pleasure to follow my noble friend Lord Inchcape, with the eminent position that he holds in his own company and, indeed, in the shipping industry of the United Kingdom. With other noble Lords, I should also like to congratulate the two maiden speakers who have made such important contributions to our debate today. I want to concentrate on the shipbuilding industry where, as we have seen, there are a great number of different points. But there is one point with which I want to deal, which I think will be applicable to both industries; that is, the effect of nationalisation on the operations of the boards of the companies being taken over.
To turn for a moment to the background, as has been said the shipbuilding industry—always a cyclical industry—has been, and still is, passing through one of the worst troughs that it has ever known. The reason for this has been pointed out—the fact that there is a very real lack of orders, notably in the tanker trade. We have already heard about the enormous number of tankers that are laid up, to say nothing of something in excess of 250 tanker orders that have been cancelled, amounting to over 55 million deadweight tons. The reason for that we know—the effect of the operations of the OPEC countries in 1973/74. But the result, which we cannot get away from—there are no excuses—is that we have vast over-capacity in many sections of the shipbuilding industry, and quite alarming competition. That, also, has been mentioned.
Perhaps I could focus the effect of this competition by quoting one example, which I heard on very authoritative lines towards the end of last year. A shipowning company in this country had been negotiating with a Japanese company 12 months previously for a certain ship. Those negotiations fell through, but 12 months later they reopened. They asked what the price would then be, and it was not rather more but 40 per cent. less than it had been 12 months earlier, despite the effects of inflation. That 238 focuses the tremendous competition that the shipbuilding industry has to put up with today. When one couples that problem with the problems that all industries have been up against during the last two or three years, one sees how difficult the present position is and how alarming it must be to shipbuilders when they see their order books dwindling rapidly, with virtually no new orders on the horizon.
Obviously, these very difficult circumstances offer a marvellous and God-sent opportunity to the would-be nationalisers to step in and take advantage of them, and in the short-term it is rather difficult to argue against that, but one must look at the whole situation in the longer term and argue strongly against the present proposals. I do so primarily not on any political ground, because I am not particularly interested in ownership. But I am interested in the fact that, as I see it, nationalisation creates serious weaknesses which are inherent in the forms of nationalisation that we have known over recent years since 1945, and which are also, as I read the Bill, largely perpetuated if not increased in the present measure.
Let me make it quite clear that, with other noble Lords, I am absolutely convinced that we need and can have a strong, progressive and profitable shipbuilding industry. This is absolutely essential in a country which is an island and which has such a large trade, and there is absolutely no reason why we should not achieve this again, even though we have to admit that sometimes our costs and our productivity have not always been as good as we should like. Our reputation for deliveries has not been as good as we should like. On the other hand—and this has been said by other noble Lords—the quality of our ships is, I am certain, regarded by owners both at home and abroad as first-class and second to none. Therefore, if we are to have this upheaval in the industry by the Bill, whether it has been brought about by economic pressures or by political whims, that upheaval will not be worth while or justified unless it introduces into the industry not further weakness but added strength. In this context we should remember that the nationalisation of these industries with their worldwide commercial operations will be the first time, forgetting 239 steel, when there can be said to be a guaranteed monopoly. If there is no guaranteed monopoly, then therefore there cannot be an indefinite guarantee of the status quo, whether we look at it from the point of view of the size of the industry, the shape of the industry or the employment in the industry. This, I think, is a very important point.
What is very obvious to me is the apparent serious lack of any national policy for the shipping industry and the urgent need for one. Just two years ago, in September 1974, the industry put forward to the then Secretary of State its proposal for a national policy. Nothing came of that proposal and two years of very valuable and important time have been lost. The blame for that delay can, I am afraid, be placed only upon the Government. Nationalisation is not necessarily the answer, but to go ahead with nationalisation without a plan first is surely to put the cart before the horse. First, surely we should have a plan and then we should see whether nationalisation is the best way to implement that plan.
The need, as I see it, is for a two stage plan. First, there should be a plan to meet the immediate difficulties to which I referred a moment ago—the difficulties that the industry finds itself in now. Some degree of calculated cutback is essential, although one hopes that it would be temporary. But is this cutback being worked out now? Is it to be a 10 per cent., 20 per cent. or 30 per cent. cutback? What is it to be? I understand that other European yards are working very hard on this problem, but are we working on it?
When the noble Lord replies I very much hope that he will be able to say something about what is being done about preparing a plan so that we are not left in the situation where the organising committee will say, "Well, we are working on a plan but it will take a long time to produce it". If that is the way it is to be done, the plan will take too long, it will be too detailed and it will be out of date by the time we get it. Therefore I hope that the Minister will say something about the work that the organising committee is doing today on that basis.
Following the need for an immediate plan there is the longer term. In drawing 240 up such a plan, I would urge that a co-ordinated plan should be agreed by the management, the trade unions and the Government and that, once agreed, it should then be handed to the industry which ought to be allowed to get on with it without interference.
This brings me to the firms that are to be included in the Bill. I feel very strongly that the firms in Northern Ireland should be included in the Bill, and I include both the aircraft industry, Short Brothers and Harland, and Harland and Wolff, of which I had the privilege to be chairman up to the end of last year. Clause 48 of the Bill does not, in my view, go nearly far enough. I hope very much that we may come back to this point at the Committee stage and examine it from every point of view.
As other noble Lords have said, the long-term plan must involve some degree of rationalisation. It must also be coupled with a policy of financial assistance that is obviously no less favourable to the policies that occur in other shipbuilding countries but is equally less sporadic than the rather ad hoc approach that we in this country have tended to pursue in the past. I quite understand and, indeed, accept the argument that if companies have a sound case for continued existence, that if they need cash and that if the only way they can get cash in the prevailing climate is from the Government, then the position of the Government in relation to that cash should be exactly the same, no better and no worse, as that of any other lender or investor. I can see no difficulty about it. We have a precedent for it already, without wholesale nationalisation of the industry and the weaknesses, which I want to talk about in a moment, which go along, in my view, with it. We need to be able to assist companies which run into crisis situations on an individual basis but on a basis which, in turn, can be developed into a long-term overall plan. What I should have thought ought to be avoided at this moment is an attempt to prepare a plan in advance of really detailed study of it. As I said a moment ago, it would be out of date.
During the Second Reading of the Finance Bill in your Lordships' House on 27th July, the noble Lord, Lord Shepherd, who was then the Leader of the House made a most important and relevant 241 statement. It appears at col. 1255. The noble Lord was referring to the very large sums of money which would be required by the shipbuilding industry, whether or not it was nationalised, and he went on to say:… I, personally, when it comes to very large sums of money would prefer to buy the equity and have sonic say in management…—[Official Report, 27th July 1976; col. 1255.]I go a long way with the noble Lord, Lord Shepherd, on that. If I personally were putting a large sum of money into a company I should want to have a say in management, just as would the noble Lord, Lord Shepherd, and I certainly do not object to the Government purchase of equity if permanent capital is required. However, I am doubtful about what happens if the Government try to interfere with management. This is what alarms me. It is a question of Government Departments, acting in the name of the Secretary of State, having a say in management. My own experience—and the far greater experience of others in like positions to whom I have spoken on this point confirms my view—is that this is the sure way to lead to the very opposite outcome which the noble Lord, Lord Shepherd, and I myself would want. I shall develop this argument in a moment.
Turning to the particular proposals for nationalisation, like other noble Lords I find it very difficult to see why these two industries, which are so widely divergent, have been included in one Bill, unless it be for political reasons. If we accept that the Acts under which some of our nationalised industries operate now are not right, surely it would have been better to have taken one of these industries, studied what had gone wrong with other nationalised industries, created a new Statute, tried that out and then, if the Government liked, gone on in the second stage to the second industry rather than to have done it all in one go. I would pose the question that other noble Lords have done: Is it still too late to consider that line of approach?
I will not take up your Lordships' time by referring to ship repairers. Other noble Lords have referred very cogently to why they should be removed from the Bill and I wholeheartedly ageee with them. The attitude of mind of the shipbuilder with his computer-planned and controlled 242 approach is entirely different from the attitude of mind of the ship repairer who has to use his experience and ingenuity, maybe on large jobs, maybe on small ones. It is quite a different approach, and although the individuals who work in these two industries may belong to the same unions, they are different people. That was undoubtedly my experience when I was at Harland and Wolff because we had both ship repairing and shipbuilding, and they did not mix together at all. I hope that we shall come back to that again in Committee and perhaps make some alterations there.
The major question I ask myself—indeed, my Lords, the only question that really concerns us—is, will this Bill help to strengthen the industries concerned? That is the only question; ownership is secondary. I was very interested to read that the two corporations own a number of subsidiary companies and it is, therefore, the link between the Government and the companies, or the Government and the corporations, about which I now want to say something because it is in this area that such damaging weakness can arise.
We hear today a very great deal about what goes on or does not go on within companies. We are exhorted to invest, to have better communications in industrial relations, to have more imaginative research, better training, higher productivity, prompter deliveries, and so on, all the familiar jargon we know so well and all immensely important, but we hear very little indeed about the boards of directors. We hear very little about them unless something goes wrong and there is some alleged scandal. The only thing we tend to hear about them is in derogatory terms.
My Lords, that is all wrong. The board of a company—and in saying this I hope that I shall be forgiven for stating what to me is the obvious—is an essential but very delicate and sensitive piece of machinery. It is a piece of human machinery. It is like the heart of a body. It is the heart of the undertaking, and while it may sometimes make mistakes—we all do that—unless it is given every encouragement and allowed to work smoothly and freely and without undue interference, that undertaking which it directs will not produce the best results, and it will not do so however skilled 243 the workers on the shop floor, however experienced management—whether lower, medium or top management—however experienced individual members of the board may be, whether they are executive directors, non-executive directors or worker directors.
It is the board itself that is the delicate piece of machinery that needs to be handled immensely carefully. The chairman and all directors of course should receive every encouragement, and they should know clearly what their responsibilities are, and where they stand themselves as individuals, as regards remuneration, retirement benefits and arrangements. They should know that promptly and not grudgingly, and in fact they should feel that as individuals they will receive the same degree of consideration under State ownership as they would—and I am sorry to have to say this—in the more sympathetic atmosphere of the private sector. I am afraid it does not need me to say that this is not always the case. I believe that the need to safeguard this very delicate piece of machinery is rarely understood by those who have not had some experience of what I am talking about, and certainly least of all by Government.
Looking back over the years of what I have seen in nationalised industries, reading between the lines of what appears to have been happening earlier this year in our already nationalised industries, and indeed from my own experience, it seems clear to me that we have not yet arrived at the right arrangement for the control and accountability of our centralised, State-owned industries; yet in this Bill we seem to be repeating many of the conditions that we have made and the weaknesses there have been in the past. Indeed, when we look at Clause 2, the Secretary of State seems to have been given even wider powers.
I can perfectly well understand this in a way. Ministers after all are answerable to Parliament for their industries, an their civil servants who advise them are obviously over-anxious that, so far as they are concerned or can possibly influence matters, the monitoring of what goes on will be impeccable. Obviously they do not want to discover any awkward skeletons that subsequently appear. I seem to remember that there was a word 244 that used to strike terror into the hearts of some civil servants. It was the mention of that dreadful word "Beagle". Some of your Lordships may know to what I am referring. But it is these excellent intentions by the Departments to be absolutely perfect that can be not merely frustrating but actually damaging to the industry itself when those responsible are really trying to do their best.
Difficult as it might be to bring about, I should like very much to see senior or potentially senior civil servants seconded to an industry for a few years, so that they can see for themselves what goes on; and seconded not as non-executive directors but to senior positions of responsibility so that they can feel the pressures which they sometimes help to bring about.
I hope I am not appearing sadistic because I do not want to make it seem as though I am suggesting that we should make the punishment fit the crime, but I really think such a course would greatly help. In saying that I hope I shall not be accused of being critical of Ministers and civil servants I may be known to have worked with. I am not criticising individuals, but I am criticising the system. In this context I would remind your Lordships of the many businessmen who were seconded into the Civil Service during both World Wars, and of the tremendous value they were at the end of the War when they came out of the Service and were able to see the position from both sides.
So, my Lords, may I make three points which to my mind are relevant to what I have been saying. It seems to me, first, to be forgotten that a board is not just a collection of individuals covering a specified range of expertise. It has to operate as a team working under its chairman and it is important, therefore, that once the chairman has been appointed by the Secretary of State then the major responsibility for appointing the rest of the directors, including the managing director, must rest with the chairman, even if the formal appointments are made by the Secretary of State. After all, it is the chairman who is responsible for welding them into an effective team and then seeing that the team works. Looking at the Bill, I have grave doubts whether Clause 1(2)(d) goes far enough, and I think it needs careful watching. The 245 consultation which is referred to may have many interpretations these days and can at times mean little or nothing.
My second point is that with nationalised industries, instead of being responsible to thousands of shareholders, the boards become responsible to one shareholder. Where one has several shareholders they are seldom oppressive when all is going well, but where one has a single shareholder who thereby acquires immense potential, almost executive authority, if this authority is not handled with the utmost delicacy, restraint and understanding it can do an immense amount of damage.
My Lords, my third point, and particularly concerning the shipbuilding industry, is that in one respect it is already in the public sector, and I am not referring to those companies already State-owned. I have in mind the existence of the Ship Mortgage Finance Corporation, whose operations, amounting to many thousands of millions of pounds, gives the Government the last word in some of the most important commercial decisions that a company may have to take. I am not for one moment suggesting that the Ship Mortgage Finance Corporation should be done away with; it does an immensely important job, and nearly every other shipbuilding country has something of the same kind. I merely mention this because it emphasises the point I have already been trying to make, that the Secretary of State in certain respects is the chief executive. This is unhealthy, and certainly a situation that should not be extended, as it appears to be in this Bill.
My Lords, the Bill is bound to go through in some form or another. I hope it will be improved on the lines I have been suggesting. But even so, the question arises of how best it can be made to work. Here, there is one aspect which, in the light of what I have been saying, perhaps could be a good deal worse. I have been rather critical so far, but now I will say something that I like about the Bill, which is that the corporations are clearly envisaged largely as being holding companies for the different existing subsidiaries. This suggests a degree of decentralisation of the operations which is very encouraging.
246 I was glad to see right at the end of the stages in another place that Clause 5(2)(a), which deals with this particular point, was inserted. All I would say is that I hope I am not being too cynical if I express some doubt as to how that might work out in practice, because the two corporations are given not merely coordinating and supervising jobs, but they are also given certain executive jobs to do themselves. It could be all too easy for them, in trying to carry out these jobs well, to interfere with the practical operations of the different operating companies. Of course, there must be very close co-operation between the corporations and the companies. The corporations will need the normal reports that other shareholders have. But if I may put it this way, the corporations, and, indeed, the Ministers and civil servants, must deny themselves the pleasure of breathing down the necks of companies and thereby stultifying their enthusiasm and efforts.
Let us be quite clear on this point, that under this measure the boards of the operating companies inevitably lose a good deal of power and authority, and individual members much of their standing. If in addition there is undue interference from above, if senior executives feel they are not being given the scope to develop their own style, maybe even allowed to make their own mistakes and to demonstrate what they can do on their own initiative and then be given credit for it, the outstanding men will not be attracted to these jobs. Rather, they will be men of mediocre ability, and that is bound to have a damaging effect on the results that the companies themselves will contribute.
There are many points I have said nothing about. My noble friends have talked about compensation, and so on. I would merely conclude by saying that assuming we are to have this Bill in this form, let it be made to work. It must work so that it helps the industry, and so that it does not merely satisfy political ambitions.
§ 6.25 p.m.
§ Lord KINGS NORTON
My Lords, may I add, to those they have already had, my congratulations to the noble Lord, Lord Inverforth, and the noble Viscount, Lord Melville, on their maiden speeches.
247 Each of them gave us an admirable example of succinctness and I hope we shall frequently hear from them in the future.
This evening I intend to speak only in relation to the aircraft industry. For a great part of the time during which the nationalisation issue has been debated and discussed, I have been against nationalisation. I found the arguments of the noble Lord, Lord Carr of Hadley, extremely convincing, but I think that now the time for resistance in principle is past. Already, the industry has been damaged by the inevitable deferring of important decisions until Parliament has reached its decision, and the longer the argument is prolonged, the greater the damage will be. Moreover, the vital business of bringing together the major components of the intended Aerospace Corporation, with their material and intellectual assets, cannot begin until the Bill becomes law. As my primary concern is with the health of the industry, and as in my view, short of a miracle, the outcome in Parliament is clear, I say, let us get the matter settled quickly. In that one respect I agree with the noble Lord, Lord Kirkhill.
I am none the less sad about it, my Lords; I am sad because of the impending end of a great private enterprise, one of the greatest private enterprises this country has known, the British aircraft industry. But I must say, and I say it with the greatest sincerity, that I take comfort from the fact that the new Aerospace Corporation, when it comes into being, will be led by the noble Lord, Lord Beswick. I have long known him to be a friend of aviation, so while I cannot agree with him, or with his friends, in their aviation policy, if we who think differently have to give way, better that he should lead the new organisation than anyone else I can think of. I take comfort from the list of people the noble Lord has so far chosen on the organisation committee, which is presumably the nucleus of the aerospace board.
To say in one breath, "I know this is wrong in principle but I do not intend to try to stop it" may suggest that one threw up the sponge, sat down, and said no more. But having accepted what now appears to me inevitable, I think 248 it is absolutely vital to make sure that the inevitable works with the maximum efficiency. While I know we must give this Bill its Second Reading, there is much in it which I think must be changed in Committee.
I have all my life been in or close to the aircraft industry. My life approximates closely to its life. We think of heavier-than-air aviation as starting with the Wright Brothers. Well, they flew a few months after I was born, and aviation and I have grown up and got old together. I joined my first aeroplane design team in 1918. I helped to design and build a great airship. I have been intimately concerned with the research and development of airframes and engines and their airworthiness. So I know the business of designing and constructing aircraft thoroughly and I conclude that if ever there was an industry for private enterprise, this is it. I have known the men who made it—I even knew one of the Wright Brothers—and I know the men who can still take British Aviation to the heights. I would like to be sure, and at present I am assailed by some doubts, that they are allowed to do this in their own way—a manifestly successful way—and are given the support deserved by the successful.
This is an industry I know well, and I know that if its enterprising spirit is frustrated its visions will be dull, its inspirations flickering, and it will fade away. It has in recent years taken some very hard knocks. We have seen the great Concorde enterprise, utterly British in conception, endangered three times by Government vacillations. We have seen splendid projects quashed. The noble Earl, Lord Kimberley, gave us a long sad list of them. We have seen a great engine on the brink of liquidation. Somehow this resilient industry has come through and earned more and more for this country. But there is a limit to what it can take, and now it faces what could be, if we are not very careful, the greatest danger of its life.
We have to make sure at this critical time that the administrative changes which are to be made can be made to work in such a way as to encourage the enterprise, to encourage the imagination, the vision of this splendid industry, without which this country really has no future as a 249 major Power. I wish the noble Lord, Lord Beswick, were taking part in this debate. I wish the rules that we follow did not prevent him, because I think that by giving us his views he would give us some reassurance. I know he wants to do all he can to preserve the attributes which have made the British aircraft industry the greatest in Europe.
I have described this industry as a great private enterprise; that is, an enterprise in which the equity is held by individuals or institutions whose equity is so held. It is now going to be a public enterprise; that is, an enterprise in which the equity is held by the State. Can we not ensure that while the technical character of the enterprise changes in this way the quality of the enterprise does not? The man already chosen for the controlling board, Lord Beswick and his team, have all the talents, all the vision, to achieve this. The danger, the great danger, is that they will be cabined, cribbed, confined, and if I may take that quotation from Macbeth a little further than is usual,cribbed, cabined, confined, bound in to saucy doubts and fears".For example, Clause 1 of the Bill gives the Secretary of State powers to regulate the internal arrangements of the corporation in a way which I regard as incompatible with the degree of autonomy which a great corporation should have. Clause 2 gives him powers to alter the duties of the corporation in what I believe are ways unprecedented in nationalisation legislation. Perhaps these clauses are intended only for use in great emergencies but even if that is so they are dangerous, and I hope, with the noble Lord, Lord Carr, that we shall be able greatly to amend them. In this connection I have two observations to make.
One of them has, in a different way, been made already by the noble Viscount, Lord Rochdale. It is this. In a great industrial enterprise the shareholders do not interfere with the running of the company unless things begin to go wrong. So long as it is successful they are content to observe, to monitor and to profit.
And the second observation is this. For many years I was associated with the old Air Registration Board, the airworthiness authority created by Statute in 250 1936. The relevant Minister had effective powers to interfere in the management of that body, though not such wholesale powers as the ones to which I object in the present Bill. To the best of my knowledge—and I was chairman for many years—he never took advantage of his powers. It may be said that in the operation of the present Bill, if it becomes law, we may expect a similar forbearance. I would rather draw from my own experience, however, the conclusion that if the arrangements for the creation and maintenance of the organisation are correctly drawn, and it is up to us to see that they are, the Government do not need powers such as they seek in this Bill for fundamental modifications to the structure and purpose of the organisation.
My Lords, the Government are responsible for aviation policy. The corporation must clearly work closely with the Secretary of State in its precise formulation. But the corporation should be left to construct its own administrative machinery and implement policy in its own way.
Although my remarks have been general in character, I am aware that they may be construed as critical. I want to refer now, with approval, to the same paragraph to which the noble Viscount, Lord Rochdale, drew attention in Clause 5 of the Bill. In it the corporation is directed to take account of the desirability of promoting the largest possible degree of decentralisation of management. This is of paramount importance in the field of design. There are in the industry a number of design teams. There must be no attempt to centralise design. Conceivably there may be reasons for adjustment in the number and scope of design teams in the process of merging complex companies, but the process of reorganisation must always have regard to the merits of delegation of responsibility and the fostering of individual and team initiatives. The new corporation must take care to respect the loyalties which inspire, and have always inspired, so much of the brilliant work of the design teams of the aircraft industry.
But while I think we may be reasonably confident that there will be no undue centralisation under the Aerospace Board, can we be confident that there will be 251 no undue centralisation above it? I have heard with alarm, and indeed read with alarm, the idea of tighter Community control with policy and finance channelled through the Commission in Brussels. One does not have to be unduly chauvinistic to believe that to try to control the European aerospace industry through one top body in Brussels would be disastrous. If decentralisation and delegation of responsibility is good for British aerospace, it is good for European aerospace too. Collaboration between the national industries is essential and we have already seen how well it can be made to work. But supra-national control, no.
When we do collaborate—and for the more ambitious projects of the future it has long been evident that no country will be able to work alone—may we hope that the Aerospace Corporation will be allowed to make its own collaborative arrangements? Too often in the past in joint projects we seem to have played second fiddle. I am not urging that we should always play first fiddle, but I am saying that in future negotiations we should remember that ours is the second biggest aircraft industry in the Western World, with a long record of success, and we should behave accordingly.
While I do not want nationalisation to go any further in this industry than is at present contemplated, one cannot but be surprised by the logic of the Bill. Why is Scottish Aviation, a Scottish company, to be part of the British Aerospace Corporation, and Short & Harland, a Northern Irish company, already Government owned, not? Why are Hawker Siddeley and B.A.C. to be part of the corporation and Westland Aircraft not? Helicopters, like aeroplanes, inhabit aerospace. Is there something repulsive to the Government in rotating surfaces? If so, aeroplanes driven by propellers and turbo-fans should be taboo as well. I think the time has come to explain these puzzling circumstances, and if indeed it has been explained and I have missed it, I do apologise. But at the outset in Clause 2 of the Bill the corporation is charged with the design, development, production, sale, repair and maintenance of civil and military aircraft. Are not helicopters aircraft? Not until we come to Page 80, in Schedule 1, do we discover that for the purposes of the Bill they are not.
252 I do not think any noble Lords will want to oppose the Second Reading of the Bill. The outcome, I think, is a foregone conclusion, and not only many of your Lordships but most of the people in the industry itself want the Bill to be law as soon as possible. We are too far down the road for any other course. Decisions long deferred can then be taken, and the organisation to implement them created. The British aircraft industry, particularly on the design side, can again gather momentum. But we must scrutinise with the greatest care the detailed provisions at the Committee stage with, I suggest, the objective of ensuring that while Whitehall is concerned with policy the corporation, and only the corporation, is concerned with implementing it.
§ 6.41 p.m.
§ Lord ORR-EWING
My Lords, it is always a joy to follow the noble Lord, Lord Kings Norton, because he is always stimulating, original, and speaks with a great knowledge and wisdom of the aerospace industry. I think I should first declare an interest; it is only proper in the House. I am a non-executive director of a firm which is going to have its slow-speed diesel engine works and possibly its ship repairing business taken over if this Bill goes through in its present form. I own 200 shares in that firm, and I hope that it will not be thought that I am in any way too biased as a result of that interest. I hope to speak with knowledge having served on that board for five years.
Like the noble Lord, Lord Carr, I feel—and I have studied the Manifesto of 1974—that there is really no mandate for this Bill at all. In that Manifesto the words appear—and I do not know how many people read it but I hazard damn few people, and certainly no more than read the Conservative Manifesto of the same period—that they "will take into public ownership" the aircraft and shipbuilding industry. It says, "into public ownership". That does not mean total nationalisation; it means you take a public stake in it. It is generally recognised that if you have more than 30 per cent. of the equity you have got de facto control of a company. That is the normal criteria. So the Manifesto did not even say that it was going to be totally nationalised.
253 Now that the Government are a minority Government, and their policy is controlled by a minority within that minority, I feel that in trying to push this thing through our House at the end of a long period of debate in another place they are acting unwisely and acting as a minority. I am afraid that one has to conclude that they are doing it in order to appease their Left Wing. The Left Wing have taken control of the National Executive, and the election of the Treasurer in Norman Atkinson today will not reduce the strength of the Left Wing. It seems to me that too many of the constituency Parties are also increasingly coming under the domination of the Left Wing, and this has been very largely echoed by Reg Prentice in the last two days, and by Frank Tomney and by many other genuine social democrats. It is the loyal social democrats who, of course, form the vast majority of the Labour Party and of the Government, and I only hope that they will be as vociferous as others in opposing measures which lead us down a totally Socialist road.
There is nothing fundamental in this Bill—in the opening speech it was suggested there was—which could not have been achieved in 1974 or in 1975 by making use of the 1972 Industry Act. So far as the restructuring of industry is concerned, I would remind the noble Lord who opened the debate that great names, as the noble Lord, Lord Kings Norton, knows only too well, have disappeared from the aircraft industry in the last two decades.
One has only to mention Vickers, de Havilland, Avro, Bristol, and a host of others which have been merged in the restructuring over that period of the aircraft industry. It is well known, and it has been said in another place, that Mr. Heseltine was well down the road to bringing together the two airframe companies Hawker Siddeley and BAC in the autumn of 1973 when we were faced with the economic crisis, the oil crisis, and the three-day working week. All that could have been done, as my noble friend Lord Carr said from the Front Bench today. There is tremendous power in any Government, when they are such big customers, to lean on airframe companies and to secure the restructuring which has been successfully achieved by voluntary methods in the past.
254 It is significant, too, that this Bill only just scraped through in another place. I do not want to go into the practices which were used to get it through, but I think it is particularly unfortunate at a time when Parliamentary democracy is under attack: it was one further method of lowering the standards of integrity in Parliament. It is clear from this debate that there is not great enthusiasm in this House for this Bill. No doubt Ministers from the Front Bench have been going round in recent days and saying, "It looks terribly bad. There are 32 speakers in this great Second Reading debate, when we are taking over six separate industries, and we cannot find a single person to speak in its favour from the Labour Back Benches."
§ The MINISTER of STATE, NORTHERN IRELAND OFFICE (Lord Melchett)
My Lords, if the noble Lord is going to suggest that Ministers have been going round saying that, perhaps he would care to say which Ministers have, because certainly I have not.
§ Lord ORR-EWING
My Lords, personally, I like to have allies behind me. The first job of a Front Bench is to make sure they have the support of a team behind them. I am sure that it would not be in any way a derogation of his duties to get allies. He has not succeeded in getting any. If he has not done that, then I think that he has much to learn. It is always fun to have a few "hear hears" from behind as well as some hostile criticisms from in front.
There is not much enthusiasm in this place. We have had critical speeches from the Liberal Benches, from the Tory Benches, from the Cross-Benches, and the one speech from the Labour Back-Benches was also highly critical as well. Nor is there any enthusiasm in the country. This is not surprising, because if you look at the financial or the other achievements of nationalised industries over the last 30 years they are really deplorable. You cannot take a single criterion, whether it is return on capital, profitability, output per man, or even strike records, where the nationalised industry has beaten the private sector. So it is not surprising that in the country as a whole there is not much enthusiasm.
255 If you look at the financial performance—and there have been some Questions for Written Answer on this recently, and I would quote them—the capital debt and revenue deficits of the nationalised industries since 1945 have been £3,780 million. I would also refer noble Lords to a Written Commons Question on 21st July at column 491, where it says that in the latest year the losses on revenue account of the nationalised industries are £769.2 million. This is really a desperate record when we are struggling as a nation to be successful and pay our way.
If one has to pick out one of the most unsuccessful ones it is British Rail, and it is not improving, it is getting worse. If one takes the losses over the last three years, and this is after you have taken off the social grants for holding down prices, which I agree distorted the results, British Rail had a £26 million loss in 1972/73, the next year £52 million, in the next year £158 million. If you look at electricity, it was £2 million loss, then £176 million loss in a year, and then £257 million loss. So you have a loss situation expanding. Every measure like this which puts more of our industry under State control means that it is going to be more difficult for a narrowing private sector to carry this enormous over-burden on its back. They have to make up with profits the losses made by the nationalised industries.
In introducing the Third Reading on 28th July at column 981 the Secretary of State for Industry said:Another place may want to pass a minor Amendment or two.My Lords, I think he slightly understated the case there. Another place will certainly want to pass Amendments (and they will not be minor Amendments) before this Bill is passed. I hope the Government will listen sympathetically because many of our suggestions will be constructive and perhaps we can achieve some improvement in the Bill before it becomes law.
First, and I have a lot of support for this view, I should like to see ship repairing taken out of the Bill. It is a totally different industry and I have some experience of it. On the whole, the firms are small and flexible and depend tremendously for their success on a personal relationship between the firm 256 and the shipowner's superintendent. That is a personal relationship built up and based on trust. Ships will want to come in not necessarily during weekdays but at odd times. We have to make sure that managers are available; their telephone numbers must be known and they must be able to be contacted at any time—on bank holidays, weekends and on any occasion when emergency arrangements for repairs need to be made. I do not see that happening, even under an enlightened nationalised organisation.
Ministers have not succeeded in making even a plausible case, for the nationalisation of this part of the industry, which will leave 40 ship repairers right outside the Bill; only 12 are listed for nationalisation. In my view, if this part of the industry was taken out of the Bill the Government would have some allies, and not only among your Lordships. I have a feeling that it would please the Treasury, our overseas creditors, to whom we owe a vast sum of money, the IMF, to which I think by November the Government will be back again cap in hand for another large slice to support the pound. Lastly, a large number of Labour MPs who have constituency interests and who are under pressure to persuade the Government to make this alteration.
Secondly, I wish that we could persuade the Government to exclude warships. Here the Government have not made out their case; the point was not even covered today. There are highly specialist firms involved in this work. Today I am wearing my Board of Admiralty tie and, having had on that Board as my boss for five years my noble friend Lord Carrington, we can speak with some experience of the building of warships as distinct to merchant ships. This again is a different industry. It is building highly complex ships with many weapons systems closely integrated with data systems and damage control systems. It is totally different from building a merchant vessel or a tanker.
One need only to look at the results of Yarrows and Vosper Thorneycroft to see what they have achieved in the last four years. These two firms together have expanded their sales from £45 million to £118 million in the last four years, and their pre-tax profits have gone up in the same period from £0.9 million to £9.6 257 million. As for their personnel—this is particularly important in terms of the unemployment rate at present—that has gone up from 6,300 to 11,600, and their exports are second to none. Thus, there is no case for taking over those two companies, which at present have superb export orders, £270 million for Vosper Thorneycroft and £66 million for Yarrows. That is no mean performance and the foreign customers who put their trust in them would not wish to see them come under direct Government control. It was a disastrous experiment when Yarrows were put in with UCS. They have recovered since being separated and have done wonderfully well.
Thirdly, I come briefly to the question of compensation. The present terms are utterly farcical. On many occasions Ministers in another place have talked about terms that are "fair and reasonable", but these are not. As Mr. Willey said in another place, these terms pay many too much and a few too little. The terms are fixed on some quite arbitrary figure over a very arbitrary period, when the stock market was completely distorted. Only one of the 43 firms to be taken over has a stock market quotation, which means that it is a phoney criteria in a phoney period.
In his introductory speech the noble Lord, Lord Kirkhill, said that he would like to see the terms being "the fairest that can be devised". I hope that he will look to see whether a better method can be worked out to ensure fair and reasonable compensation for these firms. Perhaps he will be able to devise fairer terms and maybe we could have a tribunal. That was done with previous nationalisation Bills to ensure that fair and reasonable terms were given, bearing in mind the return on their assets and profitability, not over a six-month period but perhaps from September 1973 to September 1976—this month. That would be a much more typical period over which to base compensation.
Baroness WARD of NORTH TYNESIDE
My Lords, in regard to this question of compensation, would it not be a good idea for the House to know the original compensation arrangements and how they were devised when the nationalisation of the coal industry was introduced? Because I have lived a long time, I 258 remember quite a lot and I remember that when the coal industry was nationalised the terms of compensation were considered reasonable. Might we not use the same sort of method?
§ Lord ORR-EWING
My Lords, I am grateful to the noble Baroness. She always makes sensible interventions and perhaps the Minister will consider her suggestion. I should have liked to say quite a lot about the aerospace industry. In my view its performance is excellent and of course its exports are outstanding. Its international co-operation, even before the noble Lord, Lord Beswick, played a part, has been tremendous. Look at the Jaguar and the MRCA. I travelled back from Washington last week in the Anglo/French Concorde. While in Washington I heard praise for the vertical take-off Harrier, which is not just a British aircraft having considerable success in the United States but is an example of co-operation with American industry. Here are examples of what is being achieved without nationalisation; international co-operation can be achieved without it all being taken over.
I, like others, wish Lord Beswick every success. I was interested in studying a speech which he made to a Financial Times convention on 1st and 2nd September. I am sure that he was absolutely sincere in what he said, and he said that he wanted to see the amount of bureaucracy kept to an absolute minimum. He said:We shall have at the top a non-functional board capable of deciding strategy, able to monitor performance but determined to delegate as efficiency permits.I wish him well in that. The noble Lord said that he would not be buying a big new office building. I was pleased to hear that, and I would remind him of a good criterion in the City. It is that as soon as anybody builds a new office block, sell the shares. It is a fact that if one has a big office building one soon finds that there are a lot of people sitting in it. The answer is not to have such offices, I have had experience of this, and on one occasion I had to tear down some offices and turn them into production space, and of course nobody wanted to sit between the machine tools. Fewer administrators helps in keeping overheads down. I wish him well in trying to control this side of it because Parkinson's Law is tremendously strong 259 in this respect. The noble Lord will find that if he goes too far into monitoring, there may be a tendency to build up staffs, then assistant staffs, then secretaries and so on, and before he knows what has happened he has a bigger organisation than he desires. I wish him luck in trying to control it.
In relation to diversification, I must say that here is another danger. I have in mind the danger of the gradual takeover of subsidiary industries which are supplying shipbuilding and aerospace, in particular the electronics industry. This could easily happen because within the guided weapons divisions of Hawker Siddeley and BAC there are strong electronic teams and I can see arguments being put forward that they should manufacture some of the electronic equipment rather than leave it to some of the great British firms which are so successful in exporting avionics and communications equipment.
I am not happy to leave the matter, as it is in the Bill, to the Minister to decide. I hope that some form of procedure will be established by which a firm which feels that they are being unfairly treated and have unfair competition can go to a neutral body and complain. This happens when a complaint about dumping in this country is made. If somebody feels that goods are being dumped here at well under production cost he can put his case to the Department and have it investigated. Perhaps something of the same nature could be devised in this espect.
I should have liked to say much else, but time is going on and I know that many others want to speak. Finally I come to this point: the Chancellor of the Exchequer has recently made a £2,000 million cut in the plans he had intended for public expenditure. He felt it necessary to cut public housing and education, to have fewer nurses, fewer teachers and fewer social workers, yet here we have a Bill which is bringing forward an expenditure on take-over of £300 million, and which is giving borrowing powers to the shipbuilding corporation of another £300 million and to the aircraft corporation of £250 million, with a special extra £50 million under Clause 45. So a total of 260 £900 million can be drawn under the Bill which we are considering.
I understand that the Government are doing this to paper over the differences between themselves and the extreme Left Wing, but I ask them to consider most seriously the fact that this is one further large stride to make a narrower private sector, which is struggling to earn exports, carry the overheads of a considerably larger and more expensive, loss-making public sector. With the falling value of the pound, by taking out some of the sectors in this Bill we could save a lot of money which might give the people from whom we borrow overseas encouragement to believe that we are making a realistic change. There is only one good point about all that I have said; namely by appeasing the Left Wing with this measure, the Government will bring closer the day when Mrs. Thatcher, who was sitting in our House on the steps of the Throne an hour ago, enters No. 10 Downing Street.
§ 7.4 p.m.
§ Lord NELSON of STAFFORD
My Lords, may I add my congratulations to the noble Lord, Lord Inverforth, and the noble Viscount, Lord Melville, on the excellent maiden speeches they have made during the course of this debate? I must also, before speaking, declare an interest, as I am chairman of a company which has a 50 per cent. interest in the British Aircraft Corporation. I have, however, spent a lifetime in the aircraft industry and I shall therefore confine my remarks to that industry with one exception; that is, to add to the point made by previous speakers who asked why these two great industries (or more if one likes to split them up) are grouped together in one Bill. Their circumstances are quite different, as are their backgrounds, their histories, their products, their technologies and their markets. The contradiction was brought out in the opening remarks of the noble Lord, Lord Kirkhill, when he seemed to say that we must nationalise the aircraft industry because it is prosperous and is going forward and we must make it go forward faster, and that we must nationalise the hilpbuilding industry because it is in decline and is going slower and will go slower still. These seem to be arguments 261 for nationalising anything one wants to nationalise.
Turning now to the aerospace industry, I must express disappointment that this debate has not brought out more of a case for the step which is now proposed. I draw some satisfaction from the fact that I find myself in good company with the noble Lord, Lord Shinwell, in arguing that there is no case for nationalising the aircraft industry. Of course I find myself in complete agreement with my noble friend Lord Kings Norton in wishing well to the aircraft industry in the future. We all wish it well, but my noble friend qualified that with a lot of ifs and buts and hopes that this, that and the other would happen. The point is that these are things which are not happening in the industries that have already been nationalised and I therefore do not share the noble Lord's optimism that they will come about in the aircraft industry.
The aircraft industry is not a lame duck, nor is it a static industry. It is not in decline, and I am very glad that this was recognised in the opening speech of the noble Lord, Lord Kirkhill. The industry is dynamic and financially sound; it has within it some of the ablest men of our country, and it is led by men of great experience in industry and in aviation. I should like to have it stated here in this House that this industry has served the country well.
The noble Lord, Lord Shinwell, referred to the necessity for facing up to change. No industry has faced up to change more readily than the aerospace industry. Look at the changes in performance of every type of aircraft, of aero-engine, of equipment, of guided weapons and of weapons systems that have been introduced over the past 30 years. Many new technologies have had to be introduced and still we lead the world and are one of the major aircraft influences in the Western World today. That is not because change has been resisted in this industry.
I would also draw attention to the fact that when rationalisation became necessary in 1960 the industry rationalised itself and did it without any loss of momentum and without any loss of good will among its customers all round the world—a matter of great importance. The aerospace industry has also given a tremendous lead 262 to the equipment and materials industry of this country. I refer to a remark by the noble Lord, Lord Kirkhill, at the beginning of the debate when he mentioned that anxiety for the future exists in some quarters. There is anxiety, and it is particularly in these areas of the equipment and material suppliers that it exists because, as we have seen earlier from the arguments put forward, a case can be made for extending nationalisation to all these other activities which are so essential and which are so intimately linked with the aircraft industry. Perhaps the noble Lord will say something about this in his reply to give confidence to these people.
We all recognise that development in the aerospace industry requires Government finance and support. That holds throughout the world and the thing which has struck me over all the years in which I have been associated with the aviation industry is how, in a truly British way, we have developed a method of working between industry and Government in this complex arena. In the early days, we had the Air Ministry, then the Ministry of Aircraft Production, the Ministry of Supply, the Ministry of Technology, the Ministry of Defence and we how have the Procurement Executive of the Ministry of Defence. This latter is one of the best moves which have been made and it works extremely well. Throughout this period, excellent relationships have been built up between the industry and the Government and their excellent research departments, each complementing the other and leading to a degree of success which has brought great reward to this country in export orders and, I would say, an excellent back-up service to our Armed Forces.
This does not mean that the structure is good for all time. Of course it must change and evolve. It is evolving all the time, but I do not agree with noble Lords who have said this afternoon that there should have been further mergers in the aircraft industry in the last 10 years. It is only 16 years since the great merger took place. It takes time to consolidate from such change and time to benefit from it. The industry has demonstrated that it can and will change when it is necessary and the time is ripe. I suggest that it has not yet been necessary to change and that this could have come 263 about in a natural way if it had been allowed to do so.
Why do we now propose to change all this? Why do we propose to have a major reorganisation, to discard proven teams, to bring in new structures and teams? I agree with my noble friend Lord Rochdale in his remarks about boards of directors: these are delicate instruments. Why change it all and bring in new people? However well it is done—and I hope and believe that it will be done well—it is bound to take time; it is bound to make mistakes. Why go through all that exercise when it is not necessary?
If one looks at the performance of nationalisation where it has taken place today, it is just in these areas where it has been conspicuous by its lack of success, by its groping towards new methods of handling its affairs which are even being commented upon by the chairmen of those industries themselves.
This Bill is not supported by clear cut arguments. A Consultative Document was issued; we had three weeks to comment upon it. There were hours of debate in another place; none, or very few, of the Amendments were accepted. Many of them came of course from the industry itself. Looking at this picture one cannot but feel that the nationalisers, having captured the heights of the economy—perhaps not knowing what to do having got there, when one looks at the economic situation today—now move down to the foothills.
Where do they go from there? We already have rumblings from the Labour Party Executive of more moves in the same direction. How far is this to go? The Minister of State, in his own words, in the Commons Standing Committee, made it clear that this measure is intended to bring about an extension of socialism. Is this what the country wants? As my noble friend Lord Carr of Hadley has already asked, is this what the country, in its present circumstances, can afford? I do not believe that it is.
So what do we get? What shall we have in place of past successful arrangements, after the disruption has been sorted out and, eventually, recovery sets in? And do not forget, my Lords, that 264 time once lost in this industry is never recovered. Instead of the arm's length relationship between an independent industry and Government, monitored by well-proven systems to take care of public accountability, we are now to have one Government Department talking to another. How is this to work? Perhaps the noble Lord opposite in reply will tell us a little of how it is to work.
We watch with interest the difficulties which the Secretary of State for energy seems to have in solving the difficulty between conflicting interests in his own Department in the energy field. As I see it, we are going to have the same thing here between the purchaser and the supplier and the financier—all arms of Government. There will be no independence of thought, and independent action seems to be bound to be curtailed. It seems to me that that stabilising influence of an independent industry in the middle will be missing. All argument will finish up between career personnel, between different arms of Government. This seems to me a fertile ground for the growth of bureaucracy, of which we have already seen too much.
What do we find in the Bill? Immense powers are being given to the Secretary of State. My noble friend Lord Rochdale has already referred to this, and I hope that the chairmen designate of the new Corporations, when these come about and when they take over will not find themselves in the same position as other ex-Chairmen, from other nationalised industries have found themselves, complaining of the powers which the Ministers have had over their actions and the control to which they are subjected.
There is one further point I would make in that respect. The aircraft industry is a long-dated business. It takes seven years to develop a new project which then has a 25 to 30 years life. That is the span of the activity for which the aerospace corporation is responsible.
In the past 30 years, we have had 20 Secretaries of State responsible for aviation. So the average life of a Secretary of State has been 18 months. The best, I think, has been about two years and the worst has been much shorter. Is the Secretary of State going to be the chief executive of the national Aerospace 265 Corporation, as my noble friend Lord Rochdale, rather thought might be the case, judging by the powers this bill confers upon him? I would hope not. I think it is vitally important that your Lordships should consider that point very carefully in committee because you will want to know that those who are charged with these great responsibilities for these industries will be there to see their decisions through and that they will not be interfered with from day to day.
As the noble Lord, Lord Shinwell, said, this measure solves nothing. It brings no more work; in fact, it will bring less work if confidence is lost. It does not solve the problem of new civil projects. What does it do? It substitutes unknown problems for known problems. That is no formula for industrial success. Look at the performance of the French nationalised aerospace corporation, "Aerospatiale". It lost £57 million last year, and it has lost £150 million since 1972. That is the French nationalised industry.
In my opinion, the accountability argument does not hold water. We have already heard that the Government have all the power they need to ensure accountability, and how excellent systems have been worked out to ensure such accountability. And as for industrial democracy, why do we have to nationalise two more industries, or six, in order to bring about industrial democracy? Why do we not try it out in the industries which are already nationalised and show that it can work and be a success, and that it brings the type of advantages which are claimed for it; namely, greater involvement and greater performance and productivity?
In my view, these proposals are misconceived. I think that the real issue is that Government money has to be spent in this industry. How is it best spent? Is it best spent through Government agencies controlled by Government which, if I may say so, have not shown themselves to be conspicuously good at controlling their costs? Or is it best controlled through private enterprise with the disciplines which have been proven over the years? The aircraft industry is a competitive, dynamic, international business. Efficiency is vital to its success, and it is also vital for the effective arming 266 of our Services. If it is to survive it cannot stand political experiment or over-manning or in any way being part of a social security scheme.
I do not believe that a State-run industry meets these requirements. I do not believe that a case has been made for it, and I hope that the Government will take note of some of the suggestions which your Lordships have put forward during the course of this debate, and that they will think again about this important and major change in our industrial set-up.
My Lords, I have not spoken about compensation; this is not the time nor place. I have made my views on this clear elsewhere. But I would urge that the noble Lords in considering these proposals should look at these proposals very carefully to see whether they are fair. As my noble friend Lord Carr of Hadley has said, they are, I believe, grossly unfair, and I would say this: if they are, not only will a grave injustice be done to those who have invested their savings in this great industry, but it will also be a great disincentive to industrial investment just at a time when what is needed is maximum confidence, and it will be a great deterrent to those from overseas whom we wish to encourage to invest their money in this country. I urge your Lordships to consider those points very carefully when dealing with these clauses in Committee.
§ 7.20 p.m.
§ Viscount CALDECOTE
My Lords, by any sensible standard it is clearly absurd to deal with two such different industries as aerospace and shipbuilding in one Bill, as my noble friend Lord Nelson has already said. It is totally illogical if the objective is industry's efficiency; but, of course, the real reason, as we have heard today on one or two occasions, is the extension of Socialism. It is a terrible doctrinaire irrelevance when the country is fighting a desperate battle for economic survival; and it is damaging, too, because it is going to divert effort, and has already diverted effort, from the real tasks of designing, making and selling the products of the industries. It is adding to the costs of non-productive overheads, and it is delaying decision with multiple layers of direction.
267 What are the reasons given for the nationalisation of these industries—apart that is, from the extension of Socialism and industrial democracy? The first reason that was given by the noble Lord, Lord Kirkhill, was the greater satisfaction that is obtained by working in nationalised industries. Have the Government asked the employees at Westlands, I wonder? Because the reason they are not nationalising Westlands is that the employees said they did not want to be nationalised. So they do not seem to have got the right answer there. Then, the noble Lord said that it was necessary to nationalise for improved performance, for increased ability to make right judgments and to increase productivity. Has that happened in the case of the railways and the steel industry, my Lords?
Now I turn to the aerospace industry. The noble Lord, Lord Kirkhill, in opening the debate, said that the aerospace industry has not reached its full potential. How has the aerospace industry failed, my Lords, since the war? It has led Europe in designing, making and selling successful products. In many it has led the world: the Canberra, built in large numbers under licence in the United States, and the Hunter, sold with the Canberra in large numbers all over the world; the Viscount, the VC 10; the Harrier, the vertical take-off aircraft; the BAC 111; the Hawker-Siddeley Executive Jet—superb aircraft, proclaimed the world over. They have earned hundreds of millions of pounds, and have provided thousands of jobs. And the Concorde, too, in its turn, will be successful. Indeed, already it is successful in its reputation and in the high regard in which it is held by our American friends.
The industry has been equally successful in guided weapons and in space. It has put up successful United Kingdom research satellites, and it has had big sub-contracts from the United States for other important space projects. It has been in the forefront of design, and it has earned millions in exports. The total exports are now running at the rate of over £800 million a year. Has it really not reached its full potential? Is that really a fair criticism? Of course it is not, my Lords: it is just an effort to try to find a reason to nationalise the industry when the real reason is the extension of Socialism.
268 Of course, the doctrinaire critics say that all this has been achieved with Government assistance, but that is not peculiar to the British aerospace industry. Of course, there are large Government contracts: for defence, and for great projects like the Concorde. There has been launching aid or similar aid for civil aircraft. As I understand it from the noble Lord, Lord Kirkhill, there is to be no more launching aid. "No more risk-sharing", he said. No more risk-taking, I assume. The British Aerospace Corporation will provide the finance. The major effect can only be confusion, the blurring of responsibilities, less pressure to contain costs and less concentration on value for money.
As has already been pointed out, Clause 10 requires this industry, the nationalised Aerospace Corporation, to produce an adequate return on its capital employed. That percentage is to be determined by the Secretary of State on behalf of the Government. The Government will also place large contracts with the industry, and they can easily settle the prices so as to give a satisfactory return on the capital employed, which they have already determined themselves. As my noble friend Lord Carr said in his excellent speech, a most incestuous and unsatisfactory arrangement.
My Lords, take one other example. Over the last few years there has been a growing emphasis placed on incentive-type contracts between Government and industry. Those are contracts where the contractor takes the risk of making only a small profit, or perhaps a loss, and it is balanced by the opportunity to make high profits by efficient working. Those kind of contracts, it has been recognised and widely agreed, provide the best way to obtain the best value for money. But in such an arrangement it is essential to have tough negotiation between contractor and customer, who are financially separate. But when the contractor is owned by the customer, where is the incentive?
I really doubt whether those who have not worked in the industry, as I did for 15 years, who have not worked on incentive contracts with substantial penalties and with substantial risks, too, appreciate the pressures under which people work in those conditions. They are good pressures.
269 They give good value for money. People work all hours of the day, and they work at weekends. People negotiate during long hours to get the right price levels, so that the risk is properly balanced. My Lords, how are you going to get that sort of incentive when it does not matter a twopenny bun whether the contract is profitable or loss-making because the money simply comes out of one pocket of the Government and goes into another?
It is true that in the past there have been abuses. Unacceptably high profits, and sometimes unacceptably high losses, have been made from these incentive-type contracts. But in 1969 a body called the Review Board for Government Contracts was established. I served on it from the beginning, and I retired after seven years' service in July of this year. I believe it has been widely agreed—and I hope this will not be thought to be blowing my own trumpet; I was only a very small part of it—that the procedures it introduced have worked very smoothly. It has protected the Government from excessive profits by the contractor, and it has protected the contractor from making excessive losses which might cripple him. It is widely agreed, as I say, as a good protection and a satisfactory way out of a difficult situation where incentive contracts on a non-competitive basis have to be placed. So, my Lords, why spend money to confuse, to increase costs, to reduce incentives and efficiency? The only answer, again, must be this wild desire by thә Government, or their wild acceptance of the view of their Left Wing, to increase Socialism. All other objectives can be achieved by other, less wasteful means.
May I turn briefly to shipbuilding. This presents a different picture. Some companies are of course in trouble. There are real problems of employment in difficult areas; there are real problems, as has already been said by those much more expert than I, of over-capacity. But the country is in a desperate financial situation. It is vitally important to conserve resources and to apply them where they will be most effectively used. If we accept, as I do, that some Government intervention in this industry is needed, it must be applied selectively, with the optimum effect. So, surely there is clearly a case for excluding companies as had already been suggested 270 which do not require any help—to exclude Yarrows and Vosper-Thorneycroft, Austin and Pothergil—companies who have used great ingenuity and initiative in producing new designs off their own back, financed them themselves and gone out into the world and got fine valuable export orders.
Now the ship repairers, my Lords. I am no expert in this field, but there is no case whatever, it is quite clear, for nationalising the independent ship repairers. Perhaps some small case can be made out for including those which are closely attached to shipbuilders; I do not know. But certainly no case can be made out for nationalising the independent ship repairers such as the Bristol Channel Ship Repair Company. There is a dangerous false argument, often used, that successful companies must be included in these nationalisation schemes to support the unsuccessful. This is an attractive idea in industry. I have often heard it put before; but it is an idea which must be resisted. If you put one company which is earning 25 per cent. on capital employed together with another earning an unsatisfactory 5 per cent., you may produce a company producing 15 per cent. on capital employed which does not look too bad; but you have achieved absolutely nothing. All that you have done is to add success to failure, to conceal the weakness and to have obstructed effective corrective action. That is what will be done in this case; so, even at this late hour, I would add my plea to leave out the successful companies in the shipbuilding industry and the independent ship repairers.
Finally, my Lords, to return to a few general considerations. Clause 5 rightly lays emphasis on the importance of decentralisation. We are told that there will be no big HQ staff, no interference with management, no delay in decision taking. No doubt that is the true intention—not least of the chairmen of the nationalised boards. The trouble is that experience shows that they will not be allowed to stand clear of management. The Minister will interfere with the board and the board will have to interfere with management as has happened with every existing nationalised industry. This is all too clear from those who have had first-hand experience over many years in nationalised industries such as Sir Richard Marsh and Sir Monty Finniston, neither 271 of whom can be regarded as dyed-in-the-wool capitalists or Tories. Industrial relations, too, will be confused by the trade unions, when in a difficult position, going round the back of management and appealing to the Minister. Decisions will be delayed by more levels to be consulted.
My Lords, the fact is that the greatest argument against nationalisation is that we do not yet know how to run the existing nationalised industries. Surely we should not, at this critical time, add more nationalised industries before we have learned how to run our present ones. The greatest service that the Government could do to the nation would be to abandon these proposals. It would have a dramatic effect on confidence overseas. But, in spite of the many adverse comments made here and in other places, the Government are clearly hell bent on going ahead. I hope sincerely that the Govenment will co-operate to reduce the damage that will be done by this Bill by limiting the scope in the way that we suggest and will accept Amendments that we will propose which will markedly improve it.
§ 7.33 p.m.
§ Lord SOMERS
My Lords, I should like to begin by adding my congratulations to our two maiden speakers today. I am sorry that neither is here; both have been sensible enough to go to get something to eat. Personally, I enjoyed both speeches very much. The noble Lord, Lord Inverforth, and the noble Viscount, Lord Melville, both spoke with knowledge and information and seemed to have no great difficulty in doing so. Despite the fact that I have been in the House now for nearly a quarter of a century my own maiden speech is still to me a memory of absolute terror; but they did not seem to feel that, so I sincerely hope that we shall hear them often again.
I want to say that I am not against nationalisation per se. There are cases in which obviously it is the best thing to do. But I hold strongly to the principle that nationalisation can be justified only if by applying it one makes the industry in question more profitable, more efficient, more productive and more easily available to the public. In some cases this has been so. Take electricity, for instance.
272 We are far better off now that we have a National Grid, the same voltage throughout the country and standardised fittings, than we were in the days when we had little local power stations run either by the local authority or by some independent firm. Some of them generated AC current, some DC; and there was a variety of voltages. No one, I think, could deny that nationalisation has been of great benefit in the case of electricity.
But let us look at some of the others. Take iron and steel, for instance. Is that more profitable? Is it more efficient? Is it more productive? Take the railways, which were referred to by the noble Lord, Lord Shinwell. Are they more efficient? Are they more productive? Are they more easily available to the public? Such a suggestion, I think, almost deserves a laugh if it were not so tragic.
But there is another point. The noble Lord, Lord Carr, during the debate on the Second Reading of the Iron and Steel (Amendment) Bill last July said:So often we are told by the Party opposite that public accountability through Parliament is supposed to be one of the virtues of nationalisation." [Official Report, 22/7/76, col. 990.]Well, that might be the case if only the Government would do a wholehearted nationalisation; in other words, take over the industry completely when necessary, make it a Government Department and really control it. But instead they prefer to use what I like to call their "half-baked method" of nationalisation. Instead of taking over industries, they simply form large public corporations in whose policy they seem to have very little say whatsoever. All they can do is to pour millions of pounds of taxpayers' money into these corporations to make good their losses. Some of those losses were quoted earlier by the noble Lord, Lord Orr-Ewing.
An outstanding example of the difference between these two methods of nationalisation is the Post Office. In the days when the Post Office was a Government Department with the Postmaster-General having the rank of a Minister it was a highly efficient body. But the Government chose instead to use their "half-baked method" and they turned it into a public corporation, since when its decadence, rising prices and abysmal service are too well known to need any recounting. A 273 good example, I think, of this question of public accountability through Parliament is the BBC. Time and again I have heard Questions raised in this House about some programme or feature which was considered undesirable. The answers have always been the same: that the BBC is an independent corporation and that it is not for the Government to lay down any guidelines. How is that for public accountability through Parliament!
My Lords, to get back to my original principle about what nationalisation should consist of, the Bill we are considering today includes ship repairing. I should like to draw your Lordships' attention to a firm which is listed in the Bill. I will not name it because there may be many other such firms. I should like to examine some of its features. For one thing, it is a model of industrial democracy: for every 50 workers it has one worker representative on the board, elected by secret ballot by his fellow workers. No fewer than 97 per cent. of the workers are shareholders. During the past eight years, the firm has not lost one working day through industrial disputes. Because they are highly successful they have never needed a Government grant. If, when he replies, the noble Lord, Lord Melehett, can quote any similar case from the nationalised industries I shall be greatly interested. I do not think he is very likely to be able to do so.
This is a small firm employing only about 400 workers; but if ever there was an absolutely unquestionable contradiction of the theory held by some that a small firm can never be viable, this one is surely just that. What is the threat that that firm fears? For one thing, they estimate that a good 80 per cent. of their income comes from work on foreign ships. If they are nationalised, and their efficiency as a result becomes less, they will not get that foreign trade. Foreign shipowners would prefer to go somewhere where they would get the work better done. So far as the worker shareholders are concerned, I do not know what the conditions will be there, whether they will be forced to give up their shares or whether they will still be allowed to hold them. If they were forced to give them up it would be a very great shame for the firm because the workers would then lose all interest in its future and all desire to see it prosper. As I have said, there may 274 be other firms like this one; this happens to be one which has come to my notice.
I am not qualified to speak on shipping or the aircraft industry, I have not enough knowledge about either of them. I am convinced that ship repairing should be removed from this Bill and I shall, if necessary, put down an Amendment to that purpose when we come to the Committee stage. I hope that for their own sake, the Government will listen to what I have said. It will not do them any good for the public to see a once prosperous and flourishing firm sinking into the dregs of nationalisation and inefficiency.
§ 7.45 p.m.
§ Lord STRATHCLYDE
My Lords, the consistency with which Her Majesty's Government cling to nationalisation, seemingly in the belief that it provides the cure for all our ills and troubles, seems to me, in view of the terrible record of those industries and services already nationalised, to be remarkable and indeed somewhat pathetic. In that connection, I wish to deal with some of the statements made by the noble Lord, Lord Shepherd, then the Leader of the House, in the debate on Her Majesty's Speech on 20th November last, as reported in Hansard of that date, at column 48. The noble Lord informed the House that he sat on a number of Cabinet Committees which had to look into the problems of companies which applied for assistance. He continued:… the story is the same. It is management, its weaknesses, the failure to use whatever investment was available for a long-term plan for … development … which is the cause of the trouble.The noble Lord then turned to ship building. He said that he knew of one shipbuilding company making sufficient capital to keep its plants modernised. I think the noble Lord's use of the word "capital" was a slip of the tongue. In that connection, the word "profit" would have been more appropriate. The noble Lord then emphasised that he was speaking of this country, which was, he continued:… once one of the major shipbuilding countries of the world.How then, I wonder, has shipbuilding come to such a sorry pass that it has to seek Government assistance? The noble Lord places the blame firmly on management. I wonder whether that is really the true answer. I have never known 275 managements which are not anxious to keep their capital equipment not only up-to-date, but ahead of those of their competitors. Why, then, have they not done so? Is not the obvious answer—and I believe this to be true—that these companies seeking assistance have not available to them the money necessary to enable them to invest in more modern equipment? Again, I am inclined to ask: Why is that? Is that not due in great part to the failure of Government in the management of the economy, to the weight of taxation, to the limitation on profits and dividends, to the threat of nationalisation and to inflation? I believe inflation has caused the shop floor to demand ever higher wages.
When I discuss these demands with shop floor workers who live near my home, I am inevitably met with: "But we are a very wealthy country; there is plenty of money". They would have added, if they had known, "… to which we have to thank the printing press". There were other obstacles in the shipbuilders' path: strikes holding up work and making it impossible to meet delivery dates; and also inter-union demarcation disputes. I well remember a time when orders were hard to come by, causing a great deal of anxiety in many shipyards, that Fairfields on the Clyde—in fact, within the boundaries of the City of Glasgow—was one of these. After a hard struggle against great competition, a contract for a cable laying ship was won. That contract ensured work for a considerable period ahead and relieved anxiety as to finance. During construction all went well. The launching date was fixed when there was an inter-union demarcation dispute as to whether the boilermakers or the shipwrights were to fit the closing plates. The launching ceremony had to be postponed, with the consequent disorganisation of the yard's programme. I do not think anyone can lay the blame for that on management.
Now we have the Government taking over and nationalising our aircraft and shipbuilding industries. I ask myself, why? Surely, it cannot be claimed that the aircraft industry is badly managed. The shipyards of which I have knowledge, Yarrows, Vosper Thorneycroft and Scott Lithgow are certainly not badly managed. Are they then to be 276 nationalised? Are other well-managed companies to be nationalised, simply because of circumstances over which they have no control and because they have, in the prevailing economic position been forced to ask the Government for assistance? Can anyone really believe that by nationalising these industries better management will be obtained? If that is the belief held by the Government, may the House be told on what that belief is founded—Upper Clyde Shipbuilders, Harland and Wolff? Perhaps the experience gained in some other industries would support the belief—Leyland, Chrysler or even British Steel? The House surely has a right to be told.
Further, is there any reason to believe that nationalising these two industries is in the national interest? In these days of financial crisis?—a crisis greater even than that of the early 1930s—and of unparalleled unemployment, the Government have indicated that drastic measures are called for, including the most drastic cuts in public expenditure. Is this really the time to bring forward this Bill, the implications of which will cost many millions? The figures have been given, but I wonder whether the Government would tell the House before this debate closes the estimated cost of nationalising these industries and where the money is going to come from.
There are many questions that call for answers. For instance, do the Government believe that the industries, when nationalised, will obtain the same percentage of the world's shipbuilding and aircraft orders as they have done in the past? Do they realise that in general, as with people in this country, foreign nationals prefer to deal with companies not controlled by or connected with Government? Firms like Yarrow, for close on 100 years now, have been building very close relationships with their customers by frequent personal visits and consultations, and so have gained their complete confidence, understanding and trust, so that at times they have been able to provide them with ships which in some respects have proved to be in advance of ships going into service with the Royal Navy.
Surely the Government could not have realised the damage they did to those relationships when they forbade the 277 delivery of ships ordered by foreign governments—South Africa and Chile—which were complete and ready for delivery, because they did not approve of the policies and the political views of those particular foreign Governments. In issuing those orders, the Government must have omitted to take account of the fact that our Navy had been so reduced that it could no longer keep the yards which specialise in naval shipbuilding employed or that the greater part of their profits came from contracts with foreign Governments. Nationalise these yards, and those relationships will be broken. It will take many years to build them up again.
That will also be the effect on many yards in relation to foreign orders for merchant ships and other vessels. There is no evidence whatever to support the probability that, when nationalised, these industries will be successful. I would ask: are we not jeopardising orders from abroad, and indeed from our own shipping companies, which provide employment and help our balance of payments? Are we not jeopardising also the jobs of many thousands who are employed in these industries—and that at a time when this country is deeply in debt and dependent on the good will of our creditors to obtain the food which our people require and the raw materials for our industries? It seems to me, at any rate, to be the height of folly.
For many years, this House has restricted its role to that of a reviewing Chamber and has not divided on a Bill at Second Reading. With this Bill, together with the proposals to nationalise insurance and banking, it seems to me that the time has come for this House to reconsider where its duty to the nation lies and whether, when great issues are at stake, it would not be the duty of this House to return such Bills to the other place so as to give the chance for reconsidering such Bills in principle. I would invite Members of this House who are not committed to doctrinaire nationalisation, as are the Government, to support that view in their speeches tonight.
§ 7.55 p.m.
§ Lord AUCKLAND
My Lords, your Lordships' House has been recalled to debate and discuss some Bills of a highly 278 reactionary nature, and I submit to your Lordships that this particular Bill comes very high in that category. I have no financial interest to declare in either the aircraft or shipbuilding industry, but as one who has worked in the field of insurance at Lloyd's for much of my working life, I have seen a little of the marine market and of shipbuilding and ship repairing as a whole.
Only last week I visited one of the small ship repair yards to which reference has been made, and saw for myself quite a lot of what went on there. This particular company has been the recipient of a good deal of banter because of its protests against being taken over. Of course, any Government are entitled, and in fact have a duty, to put the record straight when facts have been erroneously stated. At the same time, any company, and particularly a small company, has the right to defend itself from actions of Governments, no matter what colour they may be.
This firm enjoys particularly good labour relations, as has already been said. I, myself, with two colleagues from this House, met several of their managers and a number of their shop stewards last Friday. We had a full and frank discussion. We also went round one of the ships which is in process of being repaired. It happened to be a Danish vessel, and the interesting thing is that this particular yard is capable of carrying out the repairs appreciably more rapidly than some of the larger yards. The workmanship there—we saw some of it—is of a very high calibre.
The real question here is whether nationalisation, as proposed in this very long and, in parts, devious Bill, will improve this and other ship repairing yards. One thing is quite certain, and this was made very clear to us; the number of foreign shipping companies which have contracts with this particular organisation have made it quite clear that if it is taken over by the State they may well cancel their contracts. It may be said that is merely a veiled threat, but clearly they will have to be convinced, if the worst happens, that this is more than a veiled threat and that improvements will occur. As has been pointed out several times in the course of this Second Reading debate, previous records of nationalisation do not entirely bear this out. There is 279 still a great deal of vagueness as to how the boards are to be run. They will need personnel of considerable expertise.
It is very depressing to note, as was pointed out earlier, that a person like the former chairman of the Steel Board—one person who really understood industry at both managerial and shopfioor levels—who was beginning to make some kind of success of that industry, was put out to grass, so to speak, because of his forthright views. We live in a time of very serious economic recession which is not confined to this country, as has been pointed out, when those who really understand industry at both managerial and shopfloor levels have a duty to make their views known.
Last week I returned from a four-day business visit to Sweden in connection with the insurance company at Lloyd's where I work. The very first question which was put to me by one of the four insurance companies I saw, before asking me anything about the company for which I work, was: is it true that your Government are going to nationalise the insurance industry? We are not discussing insurance this evening, but that came from a country which at that time was in the throes of an election and it was put to me by a number of people connected with that company, some of whom were no doubt supporters of the late Government and some will be supporters of the present coalition Government. I answered that I was not empowered to speak on behalf of the British Parliament, or indeed on behalf of my company, but I thought that for the time being, at any rate, it was merely a veiled threat but was not one which could be completely overlooked.
I am convinced that if I had had time to visit a shipyard in Gothenburg or elsewhere in Sweden the same question would have been put. What will be the result, if and when the British shipping industry is nationalised? I ask that because, although in Sweden they have had a Socialist Government for 44 years they have not run their nationalisation projects in quite the same inflexible way as they have been run over here. They have at least had consumer representation on a number of their boards. There is genuine anxiety here, and the loss of orders which could well ensue if the Bill goes through in 280 its present form is something which must give rise to considerable concern.
There is much that needs to be done in Committee. There are a number of clauses which need to be examined with the greatest possible care, notably Clause 3(2) which gives these corporations swingeing powers, particularly bearing in mind that they are taking over two enormous consortia, for want of a better word. The mind boggles, if the wording of this Bill is to apply as literally stated, at how much power the Government will have, despite some of the restrictions which are placed upon the boards, when the Bill becomes law.
As has been stated by our Front Bench and elsewhere, it is not the custom of this House to divide on the Second Reading of a Government Bill, and it would be quite wrong to do so this evening because it will need a long and, I hope, constructive period of discussion during the Committee and remaining stages. But it must be stated that there is widespread anxiety in this country among management and unions—this is not confined only to the Parties in Opposition—about the implications of this Bill, and of certain other Bills which we are to discuss, and unless and until this is removed there is little hope that our industrial situation, which is already very serious, will improve.
§ 8.6 p.m.
§ Lord LLOYD of KILGERRAN
My Lords, may I add my congratulations and pay my tribute to the two maiden speakers whom we have heard during the course of this debate. The noble Lord, Lord Inverforth, spoke from the Cross-Benches with great force and persuasion, because of his experience in the field of shipping, and the noble Viscount, Lord Melville, spoke very briefly but cogently from his experience. They both made excellent contributions to this debate and I, like other Members of this House, hope that we can hear them frequently in the future.
As my noble friend Lord Simon said, as it now seems a long time ago, the task allocated to me is to urge the Government to remove the ship repairing firms from the scope of this Bill. In doing so I must declare an interest in that I am a minor shareholder in Vosper Thornycroft Limited. To persist in the retention of the ship repairing industry is likely to lead to serious 281 damage, not only to this virile and successful industry, small as it is in comparison with the shipbuilding and aircraft firms, but also to the large number of small firms who are sub-contractors associated with the main shipbuilding firms. To nationalise these ship repairing firms would, in my view, be contrary to good economic common sense and could turn out to be a national disgrace in that it would seriously harm employment and the conditions of industry in the regions where they now operate, and may be considered an unnecessary attack on small firms generally.
As I have indicated to the Minister in a short note, I shall also take this opportunity of urging the Government, in the interest of the international technical competitiveness of the two corporations to be set up, to consider sympathetically whether the duties of the two corporations should include specific reference to the desirability of fostering innovation, invention and design, in addition to the duties referring to efficiency and research which are already allocated in the Bill to these corporations. In this connection, may I also declare an interest in that I am President of the Institute of Patentees and Inventors, and no doubt the Minister is aware of the discussions now pending between the TUC, the Department of Industry, the Institute and other organisations in relation to these subjects involving the fostering of innovation, invention and design.
Coming to the ship repairing industry, I submit that there is no coherent justification for including any part of this industry in the Bill. The ship repairing industry is service-based, often carried out by small units of between 35 and 100 persons. The jobs may take a few hours or several months, under a wide variety of conditions both on-shore and off-shore, and firms often have to respond at short notice to small demands. These, in my view, are characteristics of the operation of a firm which are not the usual characteristics of larger institutional organisations such as our nationalised industries.
Ship repairing is now a specialised industry, separate from that of shipbuilding. It is quite easy to make the mistake of lumping ship repairing with shipbuilding but during the last few years ship repairing has developed into a separate 282 industry. It would seem to me that the ship repairing industry requires some assistance in order to make progress. Therefore the National Enterprise Board could well assist this industry; but public ownership of the ship repairing firms listed in the Bill can only do serious damage to the industry by impairing its quality of service, its efficiency and its international competitiveness as well as damaging, as I have said, the economy of the regions where they are now situated.
Quite simply, having read the debates in the other place and listened to the speeches which have been made here today, it seems to me that there is an overwhelming case that ship repairing should not be nationalised. In this connection, again I should like to make reference to the speech of the noble Lord, Lord Inverforth, who, speaking from his own great experience, advocated that ship repairing should not be included within the scope of the Bill.
May I come to my second point relating to innovation, invention and design, an aspect of which was so cogently referred to by the noble Lord, Lord Kings Norton, in his moving speech. Both of the industries with which this Bill is concerned, and particularly the aircraft industry, have powerful technological potential. It is basic to their international competitiveness and to the United Kingdom economy that that potential be sustained and fostered. In my view, it is the duty of the Government wherever possible to foster and encourage in specific industries a far more rapid progress in technological innovation. This was accepted by the noble Lord, Lord Beswick, when I raised these matters during the course of the discussions in this House on the scope of the Industry Bill. May I also join other noble Lords in wishing the noble Lord, Lord Beswick, every success in the difficult task to which he now has acceded.
The Bill that we are discussing refers to the duties of each of the corporations proposed to be set up as being, inter alia, to promote research and efficiency. In my view, that is not enough. One of our industrial problems has been the failure to appreciate that the case for faster economic growth is closely linked with the case for more rapid technological innovation. The process of innovation in an industry does not so much depend 283 directly on advances in scientific knowledge as upon fostering the close association of a variety of talents in many employees in various fields, such as invention, design, marketing, production and profit making in a way not often to be found in the ordinary United Kingdom firm. The corporations set up under this Bill should, in my view, seek, and be ordered to seek by their terms of reference, every opportunity, both directly and indirectly, to enthuse and vitalise their industry. One way of doing this would be by consciously including as part of their duties the promotion of innovation in addition to research and the seeking of further knowledge.
Innovation constitutes the dynamism required by industry and its promotion has made a substantial contribution to increasing national prosperity. This view has been supported recently by the Council for Science and Technology. Perhaps I may quote Professor Fellgett, Professor of Cybernetics and Instrument Physics at the University of Reading, at a recent meeting chaired by the noble Lord, Lord Bowden, and reported in the Journal of the Institute of Patentees and Inventors for September 1976, who put the matter very realistically:Innovators are a small minority in society. They are also important to society because it is from them that ultimately the wealth of society flows. As a minority it is easy for society to misunderstand their needs and motivations and to under-reward them. But because they are so important to society, society serves its best interests by a conscious effort to avoid these errors.I thought at one time that perhaps it was not necessary for me to stress this aspect of innovation because it might be considered that the fostering of innovation could be included in the words contained in Clause 2(9) of the Bill. Subsection (9) states that it shall be the duty of each corporation,… to promote industrial democracy in a strong and organic form".The words "industrial democracy", particularly "in a strong and organic form", are, of course, difficult to define, but rather to my surprise the Secretary of State for Industry, as reported in Hansard for the other place at col. 783 on 28th July last, attempted such a definition. He had been pressed by the Opposition to describe what was meant by "industrial democracy 284 in a strong and organic form". After suggesting that those who had any industrial experience knew precisely what these words meant he went on to explain that the words really meant that the corporations would have to identify their workers with the corporation's decision making at the plant. Not being satisfied with that simple explanation he went on, and emphasised three times, that the words "industrial democracy" involved giving opportunities for those who work in industry to participate in decision making. This seems to me, my Lords, a somewhat limited and narrow interpretation of these words.
I do not know whether the Front Bench for the Government in this House accept those words of the Secretary of State uttered in the other place. Therefore, it seemed to me to be desirable to clarify the terms of employment of workers in these corporations who are concerned with making inventions and designs in the course of their employment. Thus, the Trades Union Congress recently has referred to the unsatisfactory position in firms of employees who are inventors or designers. It seems to me, subject to what the Minister may have to say in his reply, that having regard to the somewhat limited view of the Government in regard to the scope of industrial democracy special reference to the terms of employment of employee inventors and designers should be referred to, apart from the reference to the formulation of' corporation policies and plans, now to be found in Clause 7 of the Bill, regarding the employment of persons generally.
My Lords, in conclusion, may I say that I am fully aware of the general interest and encouragement given by the Government in connection with promoting innovation and encouraging invention and design, but when setting up the two corporations referred to in the Bill, in the light of their well known technical potential, it seems to me that it is the duty of the Government to ensure that these matters should be specified as part of the duties of these corporations in order to help to maintain the high level of employment and international competitiveness.
§ 8.20 p.m.
§ Lord TREFGARNE
My Lords, casting my mind back to the time some 285 years ago when I made my maiden speech, I imagine that the noble Lord, Lord Inverforth, and the noble Viscount, Lord Melville, are happy to have completed theirs, and that your Lordships will be pleased that they have made their maiden speeches and will look forward to hearing them both in the near future.
The Bill before us tonight presupposes that in all the industries to be acquired there is some fundamental fault which can be rectified only by wholesale nationalisation. I should like to examine that assertion now. First, the aircraft industry: all the firms to be acquired have a good, or indeed excellent, record of profitability. Furthermore, they have an enviable record of technological achievement, one unequalled in the world. Witness in recent years the Concorde, the Harrier, the Hawk, and many others. What benefits will then accrue from nationalisation of that industry? Greater profits? I think not. Faster or larger aeroplanes? I doubt it. Cheaper aeroplanes resulting from more efficient production? I find that equally hard to believe. I am particularly perplexed by the inclusion of a small Scottish aviation company, and I shall wish to explore that matter at the Committee stage. They manufacture only very small aeroplanes and were apparently slipped into the Government's proposals at a late stage. Why?
It is said that because the Government have spent so much money with the industry—and I stress "with the industry" rather than on the industry—by way of defence purchases and by way of financing British Airway's purchases, this entitles them to a stake in the companies' equity. I find that logic—if logic it be—impossible to follow and I hope that the noble Lord will expand on that point later. To suggest that any industry's major customer should also be its controlling shareholder is an absurdity and I do not believe the Government can seriously advance that proposal.
My Lords, the aircraft industry, anyway since the war, has always been beholden to the Government for a major part of its business, both, as I have said, by reason of their defence requirements and through British Airways. But the industry has, I believe, responded properly and successfully to the situation by 286 agreeing very detailed supervisory procedures with the Government in respect of both costs and design and production. Nationalisation can do no more. While meeting the nation's need for modern and effective weapons and aeroplanes, the industry has made a major and much-needed contribution to our balance of payments. There are real grounds to fear that overseas customers will not buy our aerospace products with the same enthusiasm once the new nationalised corporation comes into being.
Turning now to the shipbuilding industry, I recognise at once that in some areas there are problems. Indeed, without putting too fine a point on it, there are, I am told, some shipbuilding companies which oppose this Bill with less vigour than might be expected. I will mention no names but I believe that disappointing state of affairs may have something to do with the lopsided compensation arrangements provided for under the Bill. Nationalisation is absolutely no solution for a thin order book or a shortage of cash. Anyone in the industry or elsewhere who believes that a blank cheque is coming their way is misguided or misinformed. Even this, alas! spendthrift Government will one day lose the ability to prop up an endless list of ailing public enterprises, and that may be sooner rather than later. When that happens, the unwisdom of nationalisation will perhaps come home even to the most diehard socialists. They will then perhaps appreciate the sounder and more positive solutions provided for under the Industry Act which is already on the Statute Book, which are in my view absolutely adequate to meet the present situation in the shipbuilding industry. But by then it may he too late.
I should also like to say a special word about the naval shipbuilders also included in this Bill. I suggest that a case for their exclusion can he made out along the same lines as for the aircraft companies. They are successful and profitable and will surely cease to be so under the new régime. Their great export performance is bound to suffer, as many overseas countries will not wish to deal in this sensitive area with an enterprise owned and managed by Her Majesty's present advisers. After all, their record in matters of finance and commerce is not exactly brilliant. If I were a foreign 287 Defence Minister I should wonder whether any nationalised concern led by the right honourable gentlemen or noble Lords opposite could be relied upon not to go back on contracts for curious or spurious reasons such as we have seen in the past. That argument must apply with equal force to all the industries to be acquired under the Bill.
My Lords, the ship repairing industry was originally included in Labour Party doctrine, in the mistaken belief that it was indivisible from shipbuilding. It is true no doubt that some of the shipbuilding companies do some repairing, and I recognise the difficulties of separating the building and repairing activities in some of the larger companies. But I do not think that the difficulties are insuperable. The only situation where separation is impossible might be where the repairing side of a business is very small compared with the building side, and in that case I should have no compunction about prohibiting the nationalised shipbuilding companies from carrying on a repair business. I cannot agree with all aspects of the campaign that has been mounted by a certain company in the ship repairing business, but anyone who opposes nationalisation with the vigour that it has done deserves to succeed and I shall do everything in my power to secure its exclusion at the Committee stage.
The independent side of the ship repairing industry is, of course, a wholly different story. The business is quite differently set out from the companies in the shipbuilding business, and I believe that my noble friend Lord Carr of Hadley, assisted by the other members of the Front Bench, will be right to insist on Amendments to secure the exclusion of the ship repairing business.
I have little more to say, my Lords, except that the issue of hybridity has been raised. I am not myself an expert on the implications of that suggestion, but I hope the Government will consider very carefully the assertions that have been made and the proposals made by my noble friend Lord Campbell, when the appropriate stage of the Bill is reached.
§ 8.28 p.m.
§ Lord GOODMAN
My Lords, I hope that I can reassure the stalwart survivors of this mammoth and slightly turgid 288 debate that I shall not delay them for more than a few minutes. I believe that everything that has been happening here this afternoon, this evening and tonight has been of Himalayan irrelevance to the nation's affairs. It is possible to believe that by tomorrow there may be such important and dramatic changes in the constitution of our Government that we shall even forget the tedium we have suffered here this afternoon. I very much hope that this may be the case, because it looks to me at this moment as though we may be sliding to disaster. One of the reasons we are sliding to disaster is that we are engaged in debates at this moment in time. It is exactly as if the ship is sinking and the captain and other senior officers are having a heated discussion with the steward about the dinner menu.
§ Several Noble Lords: Hear, hear!
§ Lord GOODMAN
The degree of Governmental self-indulgence demonstrated by proceeding with these measures is of historical enormity. Having said that, I should like to say that it is very much my hope that the Government will reconsider their position in relation to the restoration of morale in the nation, and of the belief that we have a Government concerned with economic relevancies.
Having said that, I should like to add that it is gratifying to see that this debate is being invigilated by a young and exceptionally brilliant Minister. The intellectual ossification which takes place with age obviously cannot have taken place in his case. It may well be possible that he is open to consideration of ideas on which his colleagues are apparently impenetrable, and it is with great gratification that I see someone sufficiently young to be receptive of notions that are new and that are important.
The first thing I should like to say is that I understand that we are not going to divide on this Bill, which is obviously right. By precedent, by tradition, and by my own experience of trying to persuade Her Majesty's Opposition to move in cases where it is exceptionally necessary that they should, I would not be over-encouraged by any expressions from either side of their intentions to conduct heroic actions. But even if we do not divide, we can send a message to the Government in this matter. Nationalisation is a 289 process which may be right or wrong. You can afford it in certain circumstances where you have a stable economy, and where you can take the length of time necessary to see how to put it into operation. You have only to consider the massive new army of civil servants and officials needed to supervise the conduct of these industries under nationalisation to realise the heavy burden of additional cost to be added to the profitability of these industries.
I would not wish to say a word of criticism about civil servants. Others say quite enough about them with sufficient justification, and there is no need for me to add my voice on this subject. But the idea that a new army of them is to be introduced for the purposes of these industries at this moment is not sanity. I beg the Government, which contains people of exceptional talent, courage and resource, to emancipate themselves from the more mad utterances of some of their Left-Wing supporters, and to lead the nation as it hopes to be led. When one reads, as one did only yesterday, that apparently there are people claiming to be sane, passing resolutions that Governmental expenditure should not be curtailed but expanded, one thinks that the growth industry we really need is that of the manufacture of straitjackets. We, the critics of this Bill, are not concerned to suggest that the nationalisation of the shipbuilding industry should or should not be carried out; that is a matter of whether one considers that nationalisation is some-thing that now is an economic sanity.
We shall take the view, and I believe Amendments will be moved to suggest, that the ship repairing industry and the aircraft industry should be excluded. So far as shipbuilding is concerned, there is a strong argument that there are elements of it in desperate need of injections of finance, and it would be contrary to the national interest to defeat this Bill so as to delay their receiving those injections of finance. Whether or not that finance could have been provided by other means is a different argument.
I hope I may allude, without appearing unduly egocentric, to my own experience of what I regard as an almost ideal situation in a mixed economy; that is, the housing corporation of which I have the honour to be chairman. This is an 290 organisation using governmental money for the building of housing through non-nationalised methods. I think I can claim it is the only organisation in the country which has been successful in expanding the building of houses in the last four years. We have had such dramatic success that we have been the subject of some complaint that we are eroding too much the laggardly methods of other authorities charged with that duty. I believe passionately in a mixed economy.
If we can procure a partnership of those situations where nationalisation and Government support is indispensable, those where it can be dispensed with, and those situations where some Governmental money and assistance can also be supplied, we shall be on the road to the sort of Government and economic situation which may restore us to prosperity. There is a doctrinaire approach to this matter of the type, alas!, the Government displayed in relation to this Bill, despite the vehement, passionate objections of some elements in industry, desperately striving to preserve their businesses, established over generations, from nationalisation which they do not want and which their employees do not want.
One of the most disagreeable aspects of the conduct of this Bill has been the way in which the Government have treated some of the people who have objected. They have actually been pilloried and stigmatised as though they were criminals. On one particular occasion I observed references to one very valiant and vociferous gentleman who it may be considered was perhaps a little overenthusiastic in his efforts to defend his company. It may be suggested that, if he had conducted matters in a different key, it would have been better. The Government should be well mannered, objective and fair, and accept that if they are pursuing a policy that touches someone's vital interests, he is likely to protest in terms often a little beyond what we in this House would regard as purely Parliamentary. For the Government to do as they did yesterday, and for a senior Minister to call a Press conference in order to suggest that some impropriety had been perpetrated because a gentleman had discussion with another Minister and suggested that this Bill might be hybrid, but it was not a point he wished to take if they were prepared to concede his simple 291 request to be left out of the Bill, does not seem to be a heinous crime. To condemn it as such seems to show a sad set of values, and a lack of understanding of the essential interests and concerns of the citizens of this country.
Whether or not shipping nationalisation is required, it seems to me manifest; I may say that I should declare an interest because I have over the years acted for a couple of the companies mentioned in the Schedule, but they are not regular clients of mine and that is not why I am making this speech. I have had a chance to see something between ship repairing and shipbuilding. The ship repairer is to the shipping industry what the garage is to the motor manufacturer. It would be a classic absurdity to nationalise garages because you were nationalising the manufacture of motorcars. The same may be true of the aviation industry, of which I know little, but I intend to support any Amendments put down to leave ship repairing out of this situation.
I again invite the Government to consider whether this is not a proper case to restore public confidence to a considerable extent by showing that they are open to reasoned arguments, that they are open to supplication by people whose interests are vitally involved, and to concede some of the representations made now over months and almost years, that both aviation and ship repairing should be left out of the Bill. There is no doubt that we shall have further long debates on these matters if the Government do not concede in this regard. There is no doubt that there will be a great expenditure of public time and effort which will be totally wasted because no advantage will come to the nation by retaining these two activities within the Bill.
I should like to conclude by saying that I have waited late into the night, devoid of food, and as your Lordships will observe, in considerable need of nourishment. I have waited simply to make this appeal to the Government, that at this time when confidence is waning all over the world, when our economy is in the most dangerous and perilous situation, it behoves the Government to lead us back to prosperity by demonstrating that they are concerned with the real and vital issues relating to the prosperity of the nation
§ 8.38 p.m.
§ Lord HARVEY of PRESTBURY
My Lords, in following the noble Lord, Lord Goodman, may I say that we have all found his remarks extremely refreshing. His suggestions were sound. I know it is impossible for them to do it, but if the Government could say tonight that they were going to drop measures with regard to the ship repairing and aircraft industries, what would happen to the pound tomorrow? Instead of being at 1.62 it might be at 1.70. The whole world would be impressed if the Government took such a measure. Day after day the country is being strangled by economic legislation. From Blackpool we hear that the banks are to be nationalised. We are denigrating our nation in the eyes of the world. It is no good blaming the foreign bankers. They assess us on what they think we are worth. I have myself spent most of my adult life in aviation, in the RAF, selling aeroplanes for five years in China, on the manufacturing and operating sides. I have seen the industry grow from aeroplanes made from glue and tintacks to Concorde of today, an industry exporting last year to the amount of £700 million, an enormous contribution to our economy.
If I may refer to the speech of the Minister who opened the debate, he said the reason for taking the industry into public ownership was because there was no competition between Hawker Siddeley and the British Aircraft Corporation. Well, in fact there has been competition. But if that was the criterion, surely the thing to have done would have been to merge those two companies. It could have been achieved. They have all been on a string for the last two years, with lack of decision in every direction. The Minister also quoted the United States. He did not go on to say that not one single airframe or engine manufacturer in the United States has been nationalised. Boeing's shares have gone up from 20 dollars to 45 dollars, purely on profitability and results in the last twelve months. Lockheed, who were very nearly broke eighteen months ago, today have got a full order book for military and civil aircraft. They are thriving. What are we doing? We are going to strangle our industry. It is a very sad occasion.
293 Furthermore, under the Bill, as I understand it, the Government can take over other industries not concerned with aviation or shipbuilding, merely by Statutory Instruments. The powers are far too wide. I see sitting opposite the noble Lord, Lord Rhodes, and I am very glad to see he is wearing a Royal Flying Corps tie. There are very few of those left today. He was a pioneer with a very great record in the First World War. I remember in the other place discussing these matters way back in the days of the Attlee Government.
I look upon Lord Rhodes as a very old friend and I am very glad to see him here tonight. But I do not think I can congratulate Lord Beswick on the task he is undertaking. He is chairman designate of the corporation and he has my sympathy. He has had eight agonising months wondering whether he is going to get a job or not. He has a fairly wide knowledge of aviation. He is of the same generation as myself. But he has got an impossible task to bring this industry together on the lines the Government see it. I will not go into the details of the Bill, but I cannot think of a more shabby piece of politicking than took place in another place to bring this Bill about, the worst thing I have seen in my thirty years in politics.
Unlike other industries which have been nationalised, the aircraft industry has a record of which it can be proud. Unlike with a ship, when you export an aeroplane you are not selling lots of materials; there is very little material in an aeroplane. You are selling the brains of Great Britain in every aeroplane and every instrument that goes overseas. That is how we have got to live. We have got to be ahead of the Japanese. We have got to have the technology, whether it is putting pipes under water to get oil or whatever it is; we have got to be ahead of other nations. Today, there is not one television set being made in the United States; they have passed that: the Japanese are making them. We must follow a similar technology. As I said, the exports last year amounted to £700 million worth and this year they are running at an even higher figure.
When the Government control this business, as they undoubtedly will, it is not going to be easy for the Government 294 to deal with Governments. There will be some Governments who will not want to deal with the British Government. You will not have the entrepreneurs running the industry as we have had previously. The Labour Government, I must say, over the last thirty years have very little to boast about so far as the aircraft industry is concerned. I remember, after the war, that a Minister in the Attlee Government gave the Soviet Government one of our early jet engines, the de Havilland Ghost. That Minister was the late Sir Stafford Cripps. I am sorry to criticise a man who is dead, and it was a Government decision. It was the most shameful thing immediately after the war to hand this jet engine on a plate to Soviet Russia. I thought the Government must be stark raving mad.
Then we had the TSR-2, probably the best military aeroplane ever built. Wing Commander Beaumont, the test pilot, with whom I served in the war, told me he had less trouble flying the TSR-2 supersonic than he had with the Canberra. What happened? The Australians would not buy it, because Sir Harold Wilson, when in Opposition a few months before the Election in 1964, said that if his Party came into power they would scrap the TSR-2. Having cancelled it when they came into power, they destroyed the jigs and tools. I went and saw Mr. Roy Jenkins, the then Minister, and I begged him to leave the jigs and tools as they were in case there was a change of policy and we could then proceed to manufacture. But, oh no! They thought the Tories might come into power and build the aeroplane which they had scrapped. They even put a steam roller over the jigs and tools. It was the most shameful thing. This Government have very little to be proud of in thirty years' history of aviation.
But why is this industry being nationalised? Certainly not to assist the economy. The noble Lord, Lord Goodman, referred to our economy. We see the pound dropping today five cents. I hope everybody at Blackpool will read what the noble Lord said tonight, the wisdom in the short speech he made. There is talk about the banks and so on. It will achieve nothing. Take British Railways. Three or four weeks ago Sir Richard Marsh finished his term of office. He was not a whizz kid from the 295 City; he was a bright young ex-Cabinet Minister who had been Chairman of British Railways for five years, and he said to get out of the job was like taking a breath of fresh air. There they have interference from Whitehall.
I am glad to see the noble Lord, Lord Beswick, in his place. We are old friends. He has my sympathy in the task he is undertaking. I hope he will succeed, and I hope he will keep down the numbers involved. He said recently that he was going to have a very small staff. We have heard that so often before. The chairmen of great corporations say they are going to keep the staff to the bare minimum, but it grows and grows and they move into bigger premises. We have seen it happen all over London. That will be the noble Lord's biggest headache in trying to run this corporation.
Rolls-Royce, of course, has been nationalised, but I never thought the business should have gone bankrupt at all. There was no need for it to have gone bankrupt. I am sure that company could have been saved on its technology and its progress, and I am glad to say it is doing well at the moment. I am concerned about the hundreds of small component manufacturers—not just the airframe makers or the engine makers, but the firms which make the bits and pieces that go into the aeroplane. Are they to have the same relationship with the manufacturers as they had previously? One has only to go to the Farnborough air display, to the static exhibition, to see where the British brains lie in producing the bits and pieces that go into an aeroplane. I should like an assurance that they are going to get a fair deal, and that there is going to be very real collaboration with the European manufacturers. We have the French air bus, the A300. Quite a number have been sold, and I am told it is a very good aeroplane, but not enough have been sold to make it viable. Then we are told the French company Dassault is going in with the McDonnell Douglas Company on producing the Mercure 200. Can we be told whether or not this is true? Where do we stand in the situation in collaboration with the French? There are many things we ought to be told. This decision 296 on the part of the French was totally unexpected and I think it needs clarification.
So far as Concorde is concerned, twice to my knowledge Labour Governments have tried to scrap that aeroplane without success. General de Gaulle had far too tough an agreement even for the Labour Government. The plane is flying. It is losing money, but it is a tremendous piece of technology and it is not a waste of money. The fallout of technology in metallurgy, avionics and so on has been of immense value to the engineering industry in Britain and in France. I would say this to the Government: we have 1½ million unemployed. Why not try and do a deal with the Boeing Company, who have done quite a lot of research on supersonic flight, and with the French, to build the Mark II Concorde, an aeroplane that will carry 220 passengers and have another 1,000 miles range? You will then have an aeroplane that will last another 30 years and you will be in the forefront of aviation. Do not stop now. You have to show courage. That is where I think the Government may be lacking; they will not have that courage.
I want to ask the Government this further question. I notice that Westlands have been left out from the companies to be nationalised. I know that they do not make aeroplanes, they make helicopters. But these do many things that an aeroplane will do, and some of them better. Why have Westland been left out? I am told that they have been left out because they have many agreements with the French Government on patents, and if the company was taken over those patents might be lost. If that is so it seems extraordinary to me, and we should be told what is the real position.
The Government's intentions are profoundly disturbing to a very happy industry. The aircraft industry is a happy industry. You do not have many strikes. You do not have there the goings-on that you have in British Leyland and in the motor car industry. It gets on with the job from top to bottom, and most of the leaders in the aircraft industry are men who started on the shop floor. Sir Roy Dobson, or any of them, all went to the top in that way. The top and middlemen are irreplaceable; they are men with experience, many of whom will not go into the 297 new corporation. They will leave this country. Shoals of people are leaving—doctors, engineers, and so on. This is very disturbing. We heard this afternoon from my noble friend Lord Carr, who opened the debate, that 67 per cent. of the workers in the industry do not want nationalisation. Yet the Government go on with it. It is absolutely incredible. This industry has been built up over a period of 50 years. Why disturb it?
There may be a case, as the noble Lord, Lord Goodman, said, for taking over shipbuilding, because you require large ships for the Navy and that is a different proposition. There may be a case there. I do not know enough about it to argue the matter. But concerning the aircraft industry there is no case whatever. With barely a majority in another place the Government are riding roughshod over the nation as a whole. The Government today should surely be studying the things that really matter—the cost of living, the old-age pensioners, many of whom cannot afford a bag of coal, but who see this nonsense going on in both Houses in the middle of September. It really is disgraceful.
I should like to see the Government come to their senses over these matters in the days ahead. There are not weeks left. I do not believe that a great many of the Members of the Government realise how serious this situation is. I am off to New York tomorrow morning and I know exactly what I shall be told by friends and colleagues over there about the state of our nation. They think we want our heads attending to. To see this great country, with its great traditions, its great technology, and the honesty of its work people who know their jobs, falling apart like this is one of the biggest tragedies in the last 30 or 40 years.
I have not much more to say. There is just one question I should like to put to the Minister about the repair of Tyne engines. The Tyne is a turbo-engine made by Rolls-Royce. I am told that the Royal Air Force is now not going to have its engines overhauled by Rolls-Royce. I should like to know whether these engines, owned by the civil and continental operators, are to be overhauled at Derby or whether they are going to be sent to Canada. If they are going to be sent to Canada it will be quite disgraceful, 298 with 1½ million unemployed here. There is a great opportunity for this Government—and they will not lose face at all—if they climb down on part of this Bill. I beg that they will think again and save this great industry, as I see it, from nationalisation.
§ 8.54 p.m.
§ Viscount BROOKEBOROUGH
My Lords, having listened to many of the speeches in this debate I feel that so much of the area has been covered that it may be a little difficult if I turn from the major picture of the whole nation to deal with a certain part of the United Kingdom; that is, Northern Ireland. I do not apologise for it because the two industries, aircraft and shipbuilding, affect Northern Ireland in such an exaggerated way that I feel that it is right to take some time of this House tonight.
May I say first of all how impressed I was with the speech by the noble Lord, Lord Goodman, who has just gone out, because he spoke in such terribly sincere and passionate terms. I believe that his passion for the state of the nation should be expressed by everybody in this House, as it has been expressed today, because I feel exactly the same. I feel that the whole future of the United Kingdom is at stake. If I go to the particular of Northern Ireland it is not because I do not appreciate the serious crisis that faces this United Kingdom.
First of all, with the permission of the House, I should like to say how very pleased I am personally that the noble Lord, Lord Melchett, has been translated, if that is the right term, to Northern Ireland to be our Minister over such a large area of Northern Ireland politics. I believe that he has been faced with a great challenge, and I am delighted that it should be presented to somebody so young and so flexible as he is, and I look forward very much to his term of office. I may disagree with him on many matters where politics ensue, but I wish him very well indeed. Nobody could be anything but impressed by his handling of matters in this House. He will meet a lot of good will, and a lot of it has been generated by the noble Lord, Lord Donaldson of Kingsbridge, whose accessibility and charm in dealing with people in Northern Ireland has laid very good foundations for somebody coming from 299 this House to deal with the position in Northern Ireland.
At this late hour I should like to be extremely short, and I am lucky in that the grand scene has been so brilliantly painted by so many other speakers, including the noble Lord, Lord Carr, whose speech I thought was most effective, and most devastating so far as the Government are concerned. This Bill seeks to nationalise virtually all the shipbuilding and aerospace industries within the United Kingdom except for two major projects in Northern Ireland. The first is Harland and Wolff, which is world famous for its shipbuilding, and the second is Short Brothers and Harland, which commands a position within aerospace technology which other companies within the United Kingdom have not in fact reached in the form of podding of jet engines in aircraft and also in the form of guided missiles. They stand very high in this field of technology.
The question that I raise first of all is: Is it right to leave them out of this Bill, because this is a United Kingdom Bill, and the titles are the British Shipbuilders and British Aerospace? That is the first question, because I am only going to deal from now on with the Northern Ireland part of it. I shall be very interested to hear what the Government have to say as to why they are left out. My noble friend Lord Rochdale made a most telling statement from great experience as chairman of a Government owned body, Harland and Wolff, who have been effectively Government owned for some considerable time, and lie made a very effective case for their inclusion. If they are left out does this Bill provide those two industries with an opportunity of fair competition against these two vast bodies? They are vast; 90,000 and 70,000 employees, backed by the whole wealth of the United Kingdom, which, even with the falling pound, is great. Is it going to provide those two industries with fair competition?
On the first question I have to say that at the present moment I believe it to be wrong for them to be left out. I believe that they should not be left out. I believe they should be included, but let us assume that they are left out. On the second question, while I feel the Government 300 made some concession in the guillotined Report stage in the Commons, by which in Clause 48 they laid a duty on the British shipbuilders to consult Harland and Wolff, I do not think that this is strong enough at all. May I take up the time of the House to the extent of reading what Clause 48 says, because the situation must be looked at as to whether it is going to give fair competition. Clause 48 says:In carrying out their functions British Shipbuilders shall have full regard to the need to consult with, and wherever possible co-ordinate their activities with those of, any body corporate in Northern Ireland whose equity share capital is held by or on behalf of the Crown…We then go back to Clause 2 which is quite different. It imposes on British Shipbuilders a totally different and compelling duty. It says:It shall be the duty of British Shipbuilders to promote and secure the promotion by its wholly owned subsidiaries of…and then it refers to…the efficient and economical design, development, production … research …and various other matters. That is quite different from the use of the word "consult". I have been in Government, I agree as a Junior Minister, and I know what consultation means if one does not want to do anything about something.
The duty must be applied so that British Shipbuilders will, in fact, give the same rights and help to Harland and Wolff as they give to British shipbuilders, and as far as Shorts and Harland are concerned, they are not even mentioned. I intend, with the help of my noble friends, to move Amendments to remedy this position because the dominance of these two industries in the Northern Ireland community is very great and a failure to make sure that they have an equal right to compete—I am not asking for an unequal right to compete, only an equal right—is vital in order that they may survive, and it would be a catastrophe to the economy of Northern Ireland if they did not. Northern Ireland is a small place but there is hardly a farm or household in the community which does not have, at the outside, a first cousin who is not involved in one of these industries. Harland and Wolff have 10,000 people employed and 15,000 indirectly employed, while Shorts have 7,000 directly employed and some 13,000 indirectly employed. If one adds that total to the unacceptable 60,000 at present unemployed, or 10 per 301 cent., one can realise the catastrophe that might ensue if these two industries were not given fair competition.
I must remind noble Lords that effective Government ownership of these two industries has been in existance for a very long time, though it is not the question of ownership about which I am speaking. In one of them in particular, Shorts, ownership was transferred recently, in August, from the DTI to the Department of Commerce in Northern Ireland. I do not want to dramatise, but I can say that as far as the trade unions and management are concerned, they view this transfer with a great deal of fear because until it occurred the DTI owned the shares, owned Shorts, and therefore the duty lay on them to see that research was transferred there and that promotion, marketing and all sorts of new projects were transferred there. Indeed, looking at one sphere in which Shorts at present have a world standing, the podding of aero engines, it was the DTI which channelled it to them.
Imagine the situation after the passing of this Bill. There will be no obligation on the DTI as far as I am aware. Certainly there will be an obligation, as under Clause 2, on the Aerospace Industry Board to achieve the same sort of cooperation with Shorts as now exists. Will it not be a question of out of sight, out of mind? I remind noble Lords of the fact that the aerospace industry is an efficient and happy one but that so much of that depends on personal contact. For example, the present managing director is consulted on various matters and is in the total swim of British aerospace industries in their dispirit way, whichever industry it is. What would happen if Shorts were completely separate from British Aerospace? He would be forgotten and that is a major factor.
In his opening speech the noble Lord, Lord Kirkhill, prided himself on the vast coherent industry which would be created. If that is the case and if that is how it is to be, how much more dangerous will it be for Short Bros. and Harland, for when a new enterprise is being considered by, say, the American Boeing company or in Europe, will Shorts be considered, remembering that it is basically a small industry, 10 per cent. the size of British 302 Aerospace with only 7,000 employees as opposed to 70,000 in British Aerospace? I am afraid that they will be left out.
In this high technology industry confidence is a vital part of the achievement of orders. I do not believe that confidence in the industry, in Shorts, can be achieved without a link written into the Bill to ensure that they have the ability to deliver, and to maintain that confidence my noble friends and I intend to table Amendments which will ensure a proper relationship between British Aerospace, British Shipbuilders, Harland and Wolff and Short Bros. and Harland.
§ 9.6 p.m.
§ Lord MERRIVALE
My Lords, I agree with the noble Viscount, Lord Brooke-borough, that at this late hour one may to some extent be repetitive, but that the presentation of one's case and the emphasis given to it may to some extent be different. I therefore trust that in my remarks the Minister will bear that in mind. I propose to confine myself to Part I of the Bill, in particular to the shipbuilding industry as a whole, and I begin by referring to the remarks of the Secretary of State for Industry in another place on 17th March last year when he said that the Government had decided that the objectives of public ownership would be achieved by nationalising companies which met each of the definitions contained in his Statement of that day.
Then, curiously enough, he grouped together within the shipbuilding sphere merchant shipbuilding, naval shipbuilding, ship repairing and marine engine building, which in effect are totally separate industries being substantially different in character and operation. Even more curious is the fact that this statement follows the Government's discussion paper, Public Ownership of Shipbuilding and Associated Industries, of 31st July 1974. The then Secretary of State for Industry, Mr. Wedgwood Benn, said in another place on that date:I propose to undertake consultations on the basis of a discussion paper."—[Official Report, 31/7/74; col. 809.]He also sent copies of this paper to the CBI and the TUC. Was he not calling for the best organisational structure for the nationalised industry? I presume that he was. The CBI is quite explicit on this 303 matter, for it says that, due to the fundamental difference between the shipbuilding, ship repairing and marine engineering industries, it is difficult to see how they will benefit from being administered by a common organisation; namely, British Shipbuilders Corporation. In its memorandum on the discussion paper, the CBI specifically states:It is incorrect to link shipbuilding and ship repairing. They are quite different industries requiring different solutions to their problems".In the past, there may have been criticism of the ship repairing industry for its industrial relations record and its use of a casual labour force. However, those are matters of the past. Now there is a more stable work force, which has resulted in a reduction in the total numbers employed. Also, the industry is now concentrated into specialist areas and I understand that the industry feels that it has the correct basis for growth in the future as it adapts to keep pace with the rapid fluctuation in demand experienced in this specialist industry.
Curiously again, the discussion paper fails to recognise these achievements of the ship repairing industry. Nationalisation can only bring disruption and a lack of flexibility to an industry which has proved its ability to adjust. En passant, I should like to mention that I was in Cardiff and Barry last week, as, no doubt, were other noble Lords. Naturally, questions of flexibility, personal relations and industrial democracy arose. In talking to local directors, managers, shop stewards and workers, and even clients (for there was a refrigerated vessel of the Danish Lauritzen fleet in dry dock for repairs) one appreciated the need for and the existence of flexibility, personal relationships and industrial democracy.
In Barry, the impression was of a family business with good communications at all levels. One would not have been surprised, in effect, if one had seen the Mr. C. H. Bailey of 1893 working alongside the men on the shop floor. As there are 58 workers at the moment, there was one worker director elected by his fellows. It was interesting to think that so many of the workers should own shares in the business. I would say, as others have said, that this is a good example of industrial democracy.
304 In Cardiff, on the flexibility aspect, the personal relationships existing between directors, managers and ship owners, including their representatives, were very noticeable. Under nationalisation I fear that that very important relationship might disappear, with the added difficulty, too, that immediate decisions would have to be taken through an excessive centralisation. I feel that that is a very important point indeed as regards ship repairing, where immediate decisions are vital at certain times.
On the marine engineering side, it is once again curious that, in marked contrast to the official attitude to the industry as laid down by the Geddes Committee, which felt that shipbuilders should divest themselves of their engine building interests in the interests of efficiency, the discussion paper states:In the interests of rational planning of shipbuilding as a whole specialist makers of slow speed diesels should be included in the nationalised sector.That is a complete contradiction or volte-face if I interpret rightly the words on page 66 of the Committee's report, where it is stated:Engine building must be recognised as a specialised activity entirely independent of the processes of shipbuilding and unsuitable to the jobbing approach. It is therefore important that engine building should cease to be regarded as an engineering adjunct to shipyards.So I feel that there has been a great volte-face here, and I should be very interested if the noble Lord, Lord Melchett, when he replies can explain the reason for this volte-face. According to the CBI the record of commercial success of the marine engine manufacturers is good, costs are competitive, and few engines are imported into the United Kingdom, despite the absence of tariff or quota protection.
Equally, I think a case has not been made out by the Government for nationalising the naval shipbuilding industry. While recognising the severe problems of the merchant shipbuilders—the worst performers being some of those which are already State owned: Govan, Harland and Wolff, with respective losses of £9½ million last year and a current weekly loss of around £½ a million now—the position of the naval shipbuilders is quite different. For instance, Vosper made a pre-tax profit last year of £4 million and Yarrow made a pre-tax profit of 305 £5.6 million. It is a profitable industry, depending heavily on a special expertise at all levels, plus its own particular balance of skills and trades in the workforce. It is competing successfully against world wide competition, compared with the indifferent record of the United Kingdom merchant shipbuilding industry. Employment with the naval shipbuilders has risen too, over the last few years, while it has been slumping with the merchant shipbuilders.
Finally, my Lords, the addition of an extra layer of unneeded management—that is the British Shipbuilders Corporation—plus the cumbersome hand again of centralised control can only be detrimental to the export competitiveness of this highly specialised industry. Consider also, my Lords, the Government's stated reasons for nationalising shipbuilding, which as I understand them are: under-investment in capital equipment; failure to win an adequate share of world markets; trading record and lack of profitability; and the need to safeguard employment. This would lead me very much to believe that naval shipbuilders should be excluded from this nationalisation process, for in effect this criteria does not apply to that industry.
My Lords, I have not said anything previously regarding investment, so I think it is worthy of mention that Yarrow Shipbuilders, from their own resources, are currently investing in an £8 million project for the development of specialised shipbuilding facilities. I am sure that noble Lords will appreciate that specialisation comes into it once more.
In conclusion, I would say that there are very strong reasons on grounds of productivity, competitiveness, employment and industrial relations for considering merchant shipbuilding completely separately from naval shipbuilding, ship repairing or marine engine manufacturing. Dogma and ideology cannot replace efficiency, and I think that in so far as the shipbuilding industry as a whole is concerned advances can be made only in the context of an agreed programme undertaken by all parties—that is, management, workers and Government—bearing in mind the need to develop and continue the progress made towards reform and adaptation to new markets; in other 306 words, future development of the industry based on partnership working toward the goal of a more prosperous future.
§ 9.22 p.m.
§ Lord CLIFFORD of CHUDLEIGH
My Lords, the great advantage of the two maiden speakers this evening, for which they should be congratulated, is that they were able to be extremely short, and I hope to follow their example. Before I get on to the one and only point that I wish to make this evening, I should like to take up a point of the noble Lord, Lord Harvey, and say that at the time I happened to be staying with Air Marshal Sir Valston Hancock, Chief of the Australian Air Staff, when he told me that he had recommended to the Australian Government that they should buy the TSR-2 if the British Government went ahead: if not, they should then transfer to the American 'planes which they bought instead.
Looking at it as a whole, to me small is beautiful—and I am referring to businesses and not to myself or to my noble friend Lord Goodman. Therefore, naturally, I am against nationalisation, especially of small companies. I want to take up one point only, and that is a point raised by the noble Lord, Lord Campbell of Croy, and the noble Lord, Lord Wigoder; and, following on from that, the article on the front page of The Times today. I should like to say to the leaders of the two Opposition Parties, first of all, beware of indifference.
If the Government are going to produce an Amendment in Committee to dodge the hybrid charge which has been mentioned today, they must not be allowed to exempt that small firm, whose only crime has been to refuse to assist at their own funeral. I have real fears of that, because, as your Lordships may have noticed, yesterday a Minister took 40 minutes of his precious time to issue an inaccurate account of a meeting he was not at and which, at the Government's request, was supposed to be confidential. I can bring this forward today only in connection with the circumstances that the noble Lord, Lord Campbell, and the noble Lord, Lord Wigoder, referred to, because I have great fears that, such is the envy, hatred and malice that seems to be borne, there might be some more skulduggery to this effect.
307 I would add only this, that I have seen a letter to the Clerk of Parliaments written by the chairman of the company referred to in which he states that for two years he has been trying to get an interview with the Minister concerned, and has not had that opportunity. Therefore, the only point I want to make this evening is that I hope the leaders of the Opposition Parties, if they are going to do any deal with the Government on this hybrid issue, will make quite certain that there is no victimisation of a firm which has been trying to fight only for its own liberty and existence.
§ 9.25 p.m.
§ Lord REDESDALE
My Lords, speaking to rather "thin" Benches opposite gives one a feeling of intimacy. I see that the noble Lord, Lord Strabolgi, who is an old friend, indicates that we are pretty "thin" on these Benches also. I take his point. Perhaps I should say, "speaking to a 'thin' House …" gives more intimate feeling like cabaret, but it brings me to the point that the noble Lord, Lord Melchett, and myself are playing to the second house with another turn after this.
I will take one point and I shall be as brief as possible for his sake and for everybody else's. I want to talk about one aspect of this Bill: that it is made up of so many different, disparate companies that it is a very strange mixture. I should like to start with the sad roll call of nationalisation. Since the war there have been nine nationalisation Bills. Each one has concentrated on a single industry. I will run through them briefly: the Bank of England, 1945; coal, 1946; civil aviation, 1946; Cable and Wireless, 1946; transport, 1946. An interesting point here is that the canals came in but they were owned by the railways and so brings me to a point that I will return to later. To carry on with the list: electricity, 1947; gas, 1948 and two iron and steel Bills, 1948 and 1967.
The Aircraft and Shipbuilding Industries Bill is the first nationalisation Bill to include industries quite unconnected with one another. The Bill includes industries that manufacture things. You have aircraft, guided weapons, ships and marine engines. Interestingly enough, it also includes service industries like ship repair and marine training companies, a point 308 which is often missed. In these categories there is no consistency. Although it nationalises aircraft manufacture, it does not nationalise helicopter manufacture (as has been stated already); and although it nationalises ship repairers it does not nationalise aircraft repairers. Although it nationalises both aircraft makers and shipbuilders, it does not touch hovercraft builders and, to use a "dirty" word, a hovercraft is perhaps a hybrid between a ship and an aircraft.
Among the 43 companies listed to be nationalised, there are further inconsistencies. Aircraft companies are to be nationalised over a turnover of £7.5 million and ship repairers over £3.4 million. Ship builders are to be nationalised if they build warships over 750 tons; but if they are merchant ships, the figure has to be 15,000 tons—merely a matter of twenty times larger. Aircraft companies and ship repairers are nationalised on the size of the company in terms of turnover; whereas marine engine builders are nationalised on the performance of their products—the particular horsepower at a specified number of revolutions per minute. Ship builders are nationalised on the size of their products.
The 43 companies are all very disparate and I suppose the only way that all 43 can be categorised is that they have shareholders. The companies of these shareholders are selected from different initial dates, different levels of make-up and turnover, different relevant financial years, different industries and different parts of those industries; and only some of the shareholders receive compensation. This, in my humble opinion, makes the Bill to a degree hybrid for a start.
My Lords, I have mentioned already the extraordinary way in which this Bill has been put together. It is a mish-mash, wholly unprecedented. It seems that the 43 companies have been put together not on any other basis but on the basis that the companies were selected and the criteria found afterwards. All nationalisation Bills in the past, however foolish, have at least dealt with coherent industries.
They have nationalised coal, electricity, iron and steel, gas, et cetera. They have never attempted to bring together parts of wholly different industries in the same Bill. As I say, I do not know if this makes the Bill a hybrid Bill, but it certainly makes it a dangerous principle. Are we 309 to expect more of these Bills nationalising a bit of this and that? One could almost describe this as a set menu. Nationalisation was a thing of the past, and now we have a rather newer thing which is called à la carte nationalisation. Indeed, the Labour Party's ideas on nationalisation of bank and insurance companies fits, I suppose, quite well into this à la carte scheme. It would be possible to go much further, as the noble Lord, Lord Shinwell, said. Whether cobblers or boot repairers, whichever it is, you can go on ad infinitum with Statutory Instruments.
I wanted to bring in one other point, and that is that the Council of Engineering Institutions are extremely worried about the consultation within the industries. The noble Lord, Lord Beswick, is not in his place now, but I talked to him earlier and raised this point with him: it seems unfair that trade unions are statutorily required for consultation whereas the professional engineers are not. It was said, I believe, on an Amendment in another place that it was dangerous to bring in other people like the engineers because it could leave the door open for a lot of other people. If you can bring in the trade unions, then I believe you can bring in the engineers. I hope that this point will be raised later at the Committee stage. The 43 companies named are very disparate, and this is a mess. In my opinion they have been chosen for the reasons that they are attractive to the Government. It seems to me the Government are working on the school principle that if it works, smash it. That seems to be vandalism which at this moment of time the Government can ill afford. I deplore the Bill.
§ 9.32 p.m.
§ Lord MONSON
My Lords, I should like to congratulate the two maiden speakers on their pertinent, succinct and altogether admirable contributions to this debate. At this time of night it seems both considerate and prudent to concentrate upon only two aspects of this Bill. The first one concerns the firm of Bristol Channel Ship repairers about which other noble Lords have spoken, Why, one wonders, has this small, contented, strike-free and totally successful firm been included? Several explanations are possible. One is driven to the conclusion that it is for two reasons: first, 90 per cent. of the workers are shareholders. This is 310 something which disturbs the Left. The idea that workers might also become shareholders is thought to weaken their traditional allegiances and make them less unsympathetic to capitalism. The second reason is worker directors, who have been introduced without fuss fairly recently, are elected by secret ballot. We know secret ballots are anathema to the extreme Left, whether in unions or elsewhere.
The main aspect of this Bill which concerns me is the so-called compensation terms. Here I must declare interest. I do not own shares in any of the companies affected directly, but indirectly I am a beneficiary via unit trusts, investment trusts, and, indeed, through with-profits insurance policies. In this regard, I am no different from hundreds of thousands—perhaps millions—of other individuals in this country. I said so-called compensation terms because the word "compensate" means, according to my dictionary, to make amends. That is what I regard compensation, pure and simple, as being sugar on the pill, a disturbance premium, if you like, on top of what ought to be called a compulsory acquisition price, the latter being no less than what a willing buyer would pay a willing seller at or near the date of transfer of assets. Anything less is patently unfair. The noble Lord, Lord Kirkhill, in his opening speech said that the terms were fair but later he said that they were the fairest that could be devised—which, if I may say so, is a rather different thing.
During previous bouts or orgies of nationalisation, I think it will be conceded that acquisition terms were not, perhaps with the exception of certain steel companies' debenture and loan stocks, wildly unfair. But things could not be more different today as far as the aerospace and naval shipbuilding interests which are to be acquired are concerned. One might instance the arbitrary valuation period chosen, which includes the oil crisis, the miners' strike, the three-day week, dividend limitation, the lack of any allowance for profits ploughed back into the firms concerned in the 3½ years intervening, the absence of any allowance for inflation—because the cost of living, according to my calculations, has risen by 59 per cent. since February 1974. Indeed, the Secretary of State has admitted in Standing Committee in another place:We are not taking over these companies on the basis on which a willing buyer would get them 311 from a willing seller. That is not what we are doing. We are nationalising them. We are taking them over by Act of Parliament. Therefore the terms on which a willing buyer buys them from a willing seller are not the terms on which we are offering compensation.Why this hard-line attitude? I think the answer may lie in an article written recently by Dr. Stephen Haseler, a Labour member of the Greater London Council, in which he talks about:a transformation in the political complexion of the Labour Party so profound as to make it almost unidentifiable any longer as a Party of social democracy. The Party apparatus has moved decisively towards the authoritarian Left. The shift from Parliamentary to trade union power has turned Britain into arguably the least free of the small group of liberal democracies still left in the world.Reinforcing this is an article in a newssheet of the Social Democratic Alliance published on 16th September which says:Within the Labour Party terrible destructive forces are at work, cynically and methodically undermining the structure of a Party created to fight for specific objectives within a parliamentary democracy.As it happens to be Labour Party Conference time, I wonder whether perhaps those responsible for much of this Bill are the spiritual, if not the actual, descendants of those who roared back at Mr. Gaitskell at an earlier Conference a resounding, "Yes" when he asked if they really wanted to nationalise every small corner shop in the land. Be that as it may, the compensation terms proposed are in flagrant violation of subsection (2) of Article 17 of the United Nations Universal Declaration of Human Rights in 1948, which states:No one shall he arbitrarily deprived of his property.The word "arbitrarily" in my dictionary includes the definitions "unreasonable" "capricious", "despotic" and "tyrannical". I would say that all those words describe the compensation terms. It is true that the United Nations Universal Declaration of Human Rights has no force in English Law. But the European Convention of Human Rights, which was ratified by the United Kingdom in 1951, does. The first Protocol to the Convention states:Every natural or legal person"—and, after all, a company is a legal person—is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest, subject to the conditions provided for by the law and by the general principles of international law.312 So far as the latter goes, I would think that overseas holders of shares in the companies concerned could indeed invoke international law. The Government might well say that "peaceful enjoyment" is a suitably vague and unspecific definition, but the Convention or the Commission has subsequently interpreted it more precisely in French. This says in Article 1:Je dirige essentieilement contre la confiscation arbitraire de la propriete.So it does follow more or less the United Nations Universal Declaration on Human Rights.
If there is no hint or agreement that the compensation terms may be improved, then I am bound to say that the organisation of which I have the honour to be President, the Society for Individual Freedom, intends to do all in its power to arrange a petition to the European Commission on Human Rights under Article 25 of the Convention. I hope that this will not be necessary and that the Government will come to agree, as it appears that Mr. Callaghan has come to agree at Blackpool today, that it is really time that the Tribunite tail stopped wagging the Social Democratic dog.
§ 9.41 p.m.
§ Lord GISBOROUGH
My Lords, the Minister of State said in the Commons Standing Committee that what we want from this Bill is an extension of socialism. State control of the shipping and aircraft industries is therefore no longer a question of taking over the commanding heights of industry, but is just a question of State control wherever possible. Mr. Harold Wilson, speaking in 1967, said that the economic problems of this country cannot be solved, nor will industry be able to make its full contribution, except on the basis of public ownership, and the state of the steel industries in the ensuing years is comment enough on the benefits of nationalisation. But perhaps nationalisation is just a matter of job protection in a Welfare State.
If this Bill is to protect all the jobs in the shipbuilding industry, then it will be counter-productive. The protection of highly paid uneconomic labour and jobs bleeds profitable private industry, as expensive nationalised industries have already done; bleeds private capital to pay for it, as taxation has already done. Indeed, private capital, long drained to supplement over-taxed income, will soon 313 be taxed away altogether. Little wonder that industry complains of being short of capital. Eventually, the profits of private industry will no longer be able to support the losses of State industries, along with all the other public spending, and its demise will create as much unemployment, or more, as the nationalised industries have protected.
By subsidising the least efficient, as nationalisation will almost certainly do at the expense of industry as a whole, the employment potential in the profitable and efficient industries will be decreased, as in fact has happened. It is counterproductive to protect jobs in an oversized industry with prospects of eventual closure, and it is better to take the bull by the horns and retrain the labour force into jobs which have some future. But perhaps under nationalisation the Government do not propose to keep employed all the labour at present in the industry. Perhaps there will be rationalisation and a drastic pruning of the labour force.
There are a number of yards in the industry which are competitive and profitable, and yet there are larger yards which are not competitive and are loss-making and which have survived only by massive grants from the Government. Will it be fair to assume that the small profitable yards will be allowed to carry on and the larger yards, with their large labour forces and powerful unions, will be closed down? Will it not be much more likely that the large unprofitable yards will be kept on, and the small profitable yards which have less of a union voice will have much of their work transferred to the larger yards? If I were involved with working in one of the smaller and more profitable yards, I would certainly have a great worry about nationalisation.
One of the reasons given for nationalisation is that there must be a fundamental and irreversible shift in the balance of wealth and power in favour of the working people and their families. There is, however, very little evidence that this has happened in other nationalised industries, or that, if it has happened, it has made any difference whatsoever to the labour relations in that industry. It is said that there is a need for reorganisation and, of course, this is accepted by the industry, but they have put forward their own proposals for reorganisation, and nationalisation in no way improves on the suggestions of the industry. Streamlining 314 of the industry, which is certainly necessary, will be much harder under nationalisation with the Government being both owner and manager.
It is claimed that, because of the enormous amount of finance injected by the Government into the shipbuilding and aircraft industries, the Government must have accountability. But privately owned businesses have their own built-in and proven financial disciplinary systems, so that projects have to be financially viable, after taking into account such grants as the Government may have seen fit to supply. Once industries are nationalised, we have seen over and over again that in practice they draw on the Exchequer for endless grants, feeding annually on the tax paid by the individual, or on the very capital of the country through capital taxes, or on the tax paid by private companies that can continue to make profits.
Furthermore, the Government have been able in the past to monitor the profits of those private firms which have required large Government subsidy—for example, the development costs of aircraft and defence projects which are quite beyond the resources of any single firm. But the Government have not, and cannot be expected to have, the depth and knowledge of the aircraft or any other industry to assess where best to throw the taxpayers' money in grants. An example is the European A.300 from which the Government withdrew their support, and it was the HSA which in fact took the risk, with rewarding results. While Government support is necessary to the huge civil and military projects, private industry can use the taxpayers' money to the better advantage of the nation than nationalised industry, with its repeated record of failure and waste.
There have, of course, also been large grants by the Government to keep shipbuilding firms ticking over, but the great majority of these grants have gone to publicly owned businesses, like Govan, rather than to privately owned yards. While successful shipbuilders such as Yarrow and Vosper are to be immersed into the monopolistic nationalisation, State owned Govan has been losing millions year by year. Govan itself is the reincarnation of Labour's fated Upper Clyde, which collapsed with £28 million losses, and the two between them have had £65 million of assistance from the 315 Government. This was all at a time when Swan Hunter and others were making substantial pre-tax profits. Meanwhile, workers from other industries, particularly textiles, with thousands of jobs at risk, noted that the money poured into this yard by the Government exceeded the total aid to their industry. Harland and Wolff, State dominated if not wholly owned by the State for years, have had a history of vast losses and State aid. State control of Harland and Wolff has done nothing to help efficiency, profits or even labour relations.
It is interesting to note that between 1955 and 1973 the net return on assets in the nationalised industries was averaging 4 per cent., while in the private sector as a whole it was 19 per cent. Indeed, in BAC in 1973 it was as much as 26 per cent., and in Hawker Siddeley it was even more. The wet blanket of nationalisation is to be spread over these profitable firms. Their private sector profits will become public sector losses. Few nationalised British industries show a profit, and even in the EEC 13 out of 21 made losses in 1974.
It is claimed that the output per man in British aerospace is half that of the American industry but, comparing nationalised electricity generating in the United Kingdom to America, we produce just over half what they do per man. In nationalised steel it takes three people in the United Kingdom to produce what one man produces in the United States. It takes 2½ men in nationalised British Airways to do the job of one man in TWA. No Government spokesman has—
§ Lord WYNNE-JONES
My Lords, does the noble Lord mean that when the steel industry was under private control its efficiency was superior to that of the American industry?
§ Lord GISBOROUGH
No, my Lords, I do not. I mean no more than I have said, that it takes 2½ men in the United Kingdom to do the work of one man in the United States.
No Government spokesman has so far given any valid reasons why nationalisation will contribute to any of the many problems in the shipbuilding or aircraft industries. They do need reorganising, probably on a basis of European cooperation, and on a system of funding which retains the commercial discipline of private enterprise. Nationalisation will 316 make co-operation and commercial discipline difficult to achieve. Rationalisation without nationalisation has been successfully achieved in many industries in many countries. One can look upon ICI, GEC, Hawker-Siddeley as all successful examples. Where does one look in the nationalised industries for success?
It is claimed that the workers want the industry to be publicly owned. If all workers are in agreement with their unions, the Confederation of Shipbuilding and Engineering Unions, then that might be so; but we all know that unions take their decisions by very small representations of members and so a union official view may bear no relation to the majority view of its members. On the other hand, opinion research centres showed that two out of three workers interviewed were against nationalisation. The yards have been prepared to start talks on reorganisation, but the Government have persistently turned down every offer to start reappraisals. For two or three wasted years when the order books were full, when something could have been done, the Government held no dialogue.
Now things are desperate, orders are scarce and the industry is in dire straits. It accepts nationalisation as the drowning man clutches at a serpent. Accepting this fact, then, one must look at the Bill and see what can be done to improve it. There is the aircraft industry which does not need nationalising and can only suffer under nationalisation. There are the shipbuilding yards which will probably be condensed into the areas of highest unemployment and least efficiency. There is the question of fair trading. There is the question of industrial democracy which is in evidence in some of the shipbuilding yards, but less in evidence in the nationalised industries. There is the question of foreign owners. It is questionable to what extent they will wish to put their naval building programme particularly into the hands of a British Government-owned shipyard. There is the question of structure and composition and policy of the board, which is not mentioned in the Bill. There are new powers given to the Secretary of State. These are much more sweeping than in previous nationalisation Bills. Much has been said about compensation so I will pass over that, but it seems to be totally absurd and out of relation to the values 317 of all the various companies, some of which are grossly over-valued and some grossly under-valued.
If nationalisation has to come, with its monopoly of inefficiency, bureaucracy, waste and expense and interference from the Government to the shipbuilding firms, that is bad enough. But shipbuilding has to be rescued somehow and it is probably too late now for any other way. It is sad that our successful aircraft industry has also to be nationalised; but it is inexcusable that the ship repairing sector should also be included. It was probably a mistake on the part of the Government in the first place that that was included in this Bill. The problems of the ship repairing industry are totally different from the problems of the shipbuilding industry and the solutions required are different. There is no justification for lumping them all into one nationalisation net.
It is also said that shipbuilding has failed to increase its absolute output. Other countries have certainly built new yards on green field sites to build large tonnage ships over the last 25 years and thereby have reduced the percentage of world ships built in Britain. Had we done the same, the present world surplus and our own industry's indebtedness and losses would have been that much greater now. But this country has produced its fair share of ships, and particularly of the smaller more sophisticated and expensive ones. The Government have given no reason why nationalisation will speed up further modernisation of the ship repairing yards or why it will in any way improve efficiency, labour relations or any other factor. We hear a common complaint from the chairmen of all nationalised industries about the excessive interference from the sponsoring Departments and must expect the same or worse for these industries after nationalisation. As far as the labour force is concerned, wherethere are strikes these will in future be nationwide rather than local.
There is a great deal of argument to deploy against the Bill and I shall look forward to Committee stage when it will be appropriate to go into detail on many aspects. The Government have already considerable power of control over the industry. The industry can reorganise itself without nationalisation. All the requirements, except political, can be met 318 for Government and industry and manual labour at far less cost than under this Bill and it will be money spent to no advantage for the nation and at a time when hospitals are closing, schools not being built and our debts are astronomical and likely to last in perpetuity.
Mr. Callaghan today has called for recovery through healthy manufacturing industry. "Doctor Nationalisation" has been in business for 30 years. He has yet to revive his first patient. The pound is falling fast. If the Members of the Government were businessmen they might have some idea of what this means. Some do not seem to be aware of the damage beyond making their Yugoslavian holidays more expensive. Surely the time has come at last, with the pound now draining down the plughole, for the Government to put the interests of the country before those of their Party doctrine.
The moderates and the realists of the Labour Party always seem to be out-numbered and out-manoeuvred by their Left Wing and have to acquiesce in collective support in ever further Left Wing socialism at bitter cost to the nation and probably against their own convictions. That is what it seems. Yet the moderates and conservatives must number 75 per cent. of the membership of another place. So it must be that 25 per cent. have their own way over the 75 per cent. And in this House we have heard nobody from the other side at all except the noble Lord who moved the Bill. I wish the Government would take courage to save the pound at whatever cost to the Left and to the Government themselves and withdraw the Bill or agree to alter it drastically. I believe that if they did this, in one day the pound would leap on the exchanges and our creditors would see some resistance to the Left and some realism, sanity, and good housekeeping.
§ 9.55 p.m.
§ Lord MOTTISTONE
My Lords, first must join with those who have congratulated our two maiden speakers. I shall not detain your Lordships long. My problem over this Bill is that I do not understand the basic thinking. For about 25 years now I have not understood why there is a large number of obviously intelligent people who support the Labour Party, who seem to think that State control of enterprise works. If one reads history, 319 and I have read a lot of it—recently I have read some dissident Russians who took me back to 2,000 years before Christ—there is every shade of evidence in the world to show that State control of enterprise, unless backed by secret police, just does not work.
In his opening remarks, the noble Lord, Lord Kirkhill, said that this is a great moment for the workers, who will feel they are serving the country—or words to that effect. I hope I have not misquoted the noble Lord; can he improve on it?
§ Lord MOTTISTONE
My Lords, that sort of thing was said, perhaps. It seems to me that that is not the way it is in real life. It seems to me this is a theory which somehow has caught on. Not only does history prove us wrong, but also immediate past history, the shape and size of our own nationalised industries now. The noble Lord asked a question about the steel industry, as to whether its productivity was better under private enterprise. The poor old steel industry has been in a state of flux ever since 1947 or thereabouts because it has been nationalised, denationalised and renationalised. There are other things about it, but the fact of the matter is that it has not been effective. None of the nationalised industries has been effective.
Why is this so? I think the noble Lord who came closest to the point was the noble Viscount, Lord Rochdale, who made the point that the management of an enterprise is a very delicate instrument. The noble Lord was talking about the board of directors, but I would take it slightly more widely. in an enterprising firm under free enterprise (and I have worked in them, so I know) broadly speaking everybody from the responsible people on the board down through the management, all through the business, has one aim and end; that is, for the business to be effective. I know there are bad businesses where this does not happen. I know there are quarrelsome ones, and businesses where workers get diverted by trades union officials who perhaps have a different attitude of mind; but on the whole in a good business all the people within it have one aim. Furthermore, and perhaps 320 this is a discipline that they need, they know that if their business is not effective, then some of them, if not all, will be out of a job. This is a very healthy world in which to live. It is a world which human beings understand. It is a world which gives an incentive for good results and, if you like, a penalty for bad results. But the fact is that in a sort of way they all have the same attitude of mind.
When one introduces a State-controlled system such as this particular Bill is doing to excess—the paragraphs about the Secretary of State will do this, the Secretary of State will do that, Clauses 2, 3, 4, and 5, and I did not come to the end of what the Secretary of State would do—one introduces an intervention into the business of people with a different frame of mind. Of course, one must quickly say that the "Secretary of State" as such does not mean just an individual but a person who changes from time to time, aided by very capable advisers, who are employed within a body of people whose duty it is to advise and not to make a success of a business.
Inevitably the advisers, on the one hand, and the Minister, on the other, even if he has come from business—with the greatest respect to my noble friends and others who have been in business and also in Government, am sure they would agree that the effects of their business life gets dulled when they get into Government with different responsibilities and different requirements—have an attitude of mind different from that of people who are trying to run an effective business. I am sure that this is the fundamental reason why the practice does not match the theory; you are trying to put together two different attitudes of mind which in the last resort cannot meet. The governmental frame of mind, kind gentle Auntie Government, however benevolent, cannot be the same attitude of mind as that of people who are trying collectively to make a success of their business.
It seems to me it is extremely tough on those gallant people, like the noble Lord, Lord Beswick, who take on the job. I am sorry the noble Lord is not allowed to talk to us, because he would be able to give us a very good story about this. It seems to me the people who are taking on these jobs—one has heard it and read it in the papers—the people who are trying to act as buffer men between "Auntie" Government and the business, are in an impossible situation.
321 Although perhaps in the short run their life is tenable and the thing will work, in the long run, and the not so very long run at that, they find that they cannot get on with the job of running the business effectively because the Government must intervene.
One might say: "Why should they if the business is running effectively?". It was recently said by one of these gentlemen taking on a nationalised industry, "It is easy. You treat the Government like a group of shareholders". The fact of the matter is that you cannot do that because they are not. A group of shareholders, if they wish to, can sell their shares and switch to some other industry, but in nationalised industries that cannot be done. Even if they could do it, even if they set up two totally separate nationalised concerns, it would be irresponsible of them, looking after somebody else's money, to do that sort of thing. Therefore, they must intervene, in the nature of things, and directly they do they bring what is sometimes an alien attitude of mind to bear on the problem. That is the first thing that is wrong.
The second is the question of the unfortunate workers. I say "unfortunate" because I really believe that the average worker—and I am not now talking about senior trade union officials about whom I will say a word in a moment—has been led to believe over all these years that somehow life will be safer if his business is nationalised, and he particularly feels this is a good thing if he knows that his business is not doing very well anyhow under private enterprise. He does not know that it is not doing very well because the Government are making it impossible for private enterprise to succeed, because that is kept from him. But forgetting that side of it, he had been conned, if that is not too strong a word, over these years into thinking that somehow everything will be all right when "Auntie" Government takes over. Of course, it is not, and we have all the evidence in the world that it is not. The result of this has been a lot of disillusion within the nationalised industries.
If only people would put in a little more effort it would probably solve our problems overnight. How can you expect them to when they have not got any sort of leadership which could encourage them to do that? They cannot have the leadership from their nationalised industry 322 because this has been thwarted by the aid and interference from Government. They cannot have it these days so readily if they are in a big concern from their private enterprise, because the private enterprise is taxed so heavily and restricted so heavily that it is not as free to develop its enterprise as well as it should. So at every turn the people who are employed in this country are finding themselves, without really knowing why, in concerns which are not as effective as they should be, and certainly are not as effective as they used to be. The result is that we then get these nationalisations to take them over; the lame duck situation creeps in all over again.
I read recently, as I am sure many other noble Lords have, particularly on these Benches, an article by the noble Lord, Lord Blake, in which he said that 20 years ago a man with a wife and three children had to earn 1.9 times the average wage before he started paying tax, but today the man with a wife and three children has to pay a standard rate of income tax if he earns two-fifths of the average wage. This is a point well worth taking, because if this is so it means that the relatively high priced people in the nationalised industries who are being heavily subsidised are being subsidised by people who are earning perhaps one-fifth or even one-tenth of their salaries. This is a transformation in the relative position of the people in this country. It means that the people who are well below the national average are paying tax to support the Government expenditure. If that is not a recipé for great disturbance, if not revolution, I suspect that noble Lords ought to think very carefully before they dismiss it as a very serious point to be taken into account.
The net results are that the businesses cannot work when they are nationalised because the management is thwarted, and the employees are frustrated because they expect something which they do not get. I trust that noble Lords opposite will listen carefully when, as I suspect, from these Benches we put to them Amendments which invite them to cut out from this Bill as many of the firms as they possibly can instead of trying to encompass all that they can. Of course it is true that some of the firms, for all sorts of reasons, are in a difficult state, and maybe they ought to be nationalised. They will not survive if they are nationalised and they will 323 not survive if they are not; it is just a matter of time. But at least let the profitable ones escape from this ghastly net.
§ 10.10 p.m.
My Lords, although this has been a long debate I suggest that in view of the very serious nature of the Bill it has not been a minute too long. It is an important subject and many speeches have been made which have indicated the large areas of the Bill which require to be carefully scrutinised. The debate has been notable for two maiden speeches and I wish to add my congratulations to those which have already been expressed to those maiden speakers. It has also been notable for something else: and that is that, of the thirty-one speakers so far, only one has been in favour of the Bill, and that was the noble Lord, Lord Kirkhill, who introduced it. Only one Labour Back-Bencher has actually taken part in the debate, and he spoke against it. I am bound to say that it is staggering that when a Bill which is, and has been, fundamental to Labour Party policy for the last two years comes up for Second Reading in one of the two Houses of Parliament, the Labour Party cannot find even one of its Back-Benchers to support it.
It is not unfair to say that their interest has not been exactly enthusiastic. I counted 29 noble Lords opposite at the outset of the debate but by half past four this afternoon that number had dwindled to five. When the noble Lord, Lord Shinwell, rose to speak admittedly the number rose a little, but seven minutes after he sat down we were back to five again. I conclude that the impression which the Benches opposite have given is that they are not enthusiastic about the Bill. This contrasts starkly with the vital importance which the Government as a whole have laid on the passing of the Bill as an essential part of their legislative programme.
§ Lord WYNNE-JONES
My Lords, would the noble Earl not agree that there are times when one does not want to labour the obvious?
There are times when the obvious requires explaining, my Lords, and that perhaps the noble Lord, Lord 324 Melchett, will do tonight. I intend to confine my remarks, on the whole, to the aircraft industry and I should like to preface what I have to say with one cheerful thought, and that is to congratulate the noble Lord, Lord Beswick, on having been chosen to be the first chairman of the proposed new British Aerospace Corporation. It may well prove, even yet, however, that the appointment was a trifle premature, but those of us who have had the opportunity and privilege of knowing the noble Lord, both in Opposition and in Government, and who have heard him operate from the Dispatch Box in answer to debates on the aircraft industry, have been delighted to detect on numerous occasions that the views which he expressed were not just pedantic Ministerial briefs but were in fact his own views. His heart is in the right place; I congratulate him on his appointment and wish him success and happiness in it—that is, if lie ever actually gets the job, which I hope he will not, because I happen to believe that if Parliament eventually decides to nationalise the aircraft manufacturing companies in the Bill it will he against the interests of the companies, against the interests of those who work in them, against the interests of the nation and against the interests of advancing technology.
The Bill seeks to give the Government total ownership in a unified body of the four aircraft manufacturing companies. I have yet to hear a single convincing reason why that, of itself, will enable the industry to work better, to work more efficiently or to work more profitably. The noble Lord, Lord Shinwell, even said that it would not make any effective contribution to our national economy, and I would agree with my noble friend Lord Harvey of Prestbury when he asked: Why, therefore, do it? The most persuasive argument, even though I am not persuaded of it, is that it will bring about the rationalisation of the industry and the making, among other things, of one firm of aircraft manufacturers out of BAC and Hawker Siddeley Aviation. If one feels that that is the right thing to do, then one can achieve it without nationalisation.
What is proposed will certainly mean one thing, and that is the loss of jobs. The noble Lord, Lord Shinwell, said graphically that the nationalisation of the 325 coal industry, for which he was responsible, resulted in redundancies. The nationalisation of British Rail resulted in the closing of stations as well as redundancies, but no Minister has yet explained to the public—perhaps Lord Melchett will tonight—how the rationalisation of this industry, which will inevitably follow the Bill and which indeed is part of the proclaimed objects of it, can possibly be carried out without the loss of these jobs, or how the retention of these jobs can possibly be justified after it.
I believe, though, that the incipient damage which this Bill does is not confined to the industry but goes further and will affect the whole nation. It is the witness of yet another major advance by the State into the lives of people and the life of industry, and for no material benefit. I venture to suggest that much of the trouble with our country today can be attributed directly to the numbing influence of the State which is creeping like a mycelium into every facet of our daily life and, as it does so, so it stultifies the initiative of individuals and so it dulls the cutting edge of businessmen and entrepreneurs. Why try to make a profit when the State takes it all? Why bother to work hard when the fruits of effort are always as Tantalus found with the oranges, deliberately kept out of reach? What is the point of initiative when the path of progress is studded with stakes which say, "You musn't", "You can't", "You shouldn't", Why try? Why bother? What is the point?
That is the real English disease and, when the cutting edge of leadership dulls, so the dynamism of industry runs down. I would put it no higher than this: can we risk that the dynamism of the aircraft industry should wind down, even by a little? This is an industry whose cutting edge is remarkably brilliant. It can compete—and it can compare—with its competitors in international markets. Over the last ten years, it has exported £3,500 million worth of goods and last year its exports totalled £800 million. Last year, BAC showed a profit of £27 million on a turnover of £300 million and the two Hawker-Siddeley companies had a profit of £ 20 million on a turnover of £220 million. From 1955 to 1973—an 18-year 326 period—the nationalised industries showed a net return on assets of between 2 and 6 per cent. a year. In the private sector, it was 19 per cent In BAC in 1973, it was 26 per cent. and in the aerospace division of Hawker-Siddeley, it was 30 per cent. Of all the aircraft manufacturers in Europe, BAC and Hawker-Siddeley head the list as making the highest profit as a percentage of turnover.
These are great achievements of vigorous, successful companies. There are no lame ducks here. But what about the great international competitors? Within the last 10 years, the three main civil aircraft manufacturers in the United States have all been in trouble. Douglas was about to go into liquidation because of the DC9 when the company was taken over by McDonnell. Lockheed practically went bust over the TriStar. Boeing nearly collapsed developing the Jumbo, and only staved off disaster by cutting its work force from 90,000 to 25,000 in 18 months. The French nationalised company, Aerospatiale, was formed in 1970. It made a loss in 1972 which became systematically worse in 1973, 1974 and 1975.
§ Lord WYNNE-JONES
My Lords, can the noble Earl say exactly what has happened to Rolls-Royce over the same period?
My Lords, it may not have been drawn to the noble Lord's attention that Rolls-Royce is not a part of the Bill.
§ Lord WYNNE-JONES
But, my Lords, does the noble Earl deny that the Conservative Government took over Rolls-Royce?
No, my Lords. What happened about Rolls-Royce was that it went bust because it was developing the R.B.211 engine. Why did it do that? Because Mr. Wedgwood Benn, when he was Minister of Technology, persuaded Rolls-Royce to do it. That is the reason why the company went wrong. The noble Lord has made his point and I have answered it. What I was about to say 327 before the noble Lord interrupted me was that the deduction which one can make from these points which I have tried to put forward is this. The international aerospace business is nothing other than financially a hair-raising business. Thestakes are high and the penalties for failure are substantial. Size does not guarantee success. Government ownership does not guarantee success. But ours works and it makes a profit—and a good one.
My noble friend Lord Orr-Ewing said that its goods are wanted; 50 per cent. are exported overseas. It has not gone bust, nor has it nearly gone bust. What possible reason, or even sense, can there be in altering it all and putting the whole future at risk—and, of all times, now? I find it difficult to see how one can justify spending hundreds of millions of pounds buying an industry which does not need to be bought. When the noble Lord, Lord Wynne-Jones, made an intervention earlier this afternoon I was surprised when he said that it really does not make very much difference whether or not the Government buy an industry because one does not really have to pay money and the assets are the same whoever buys it. It is that typically dangerous form of thinking that is the kind of thing which runs us into a mess, and if the Government have to buy out this industry it will be very costly to the country, as my noble friend Lord Carr of Hadley explained so clearly in his opening speech.
However much Ministers will say—as indeed they will say, and have said—that they intend to leave the industry to run itself and not to interfere, and however much they may genuinely mean this to happen, it will be the civil servants who will badger it to death. The noble Lord, Lord Shinwell, said that what we want is Parliamentary control. We all know what that means—and what he means by that. But it is the control by the civil servants which is what will destroy this industry. I venture to make one forecast, which is that if this industry is nationalised, within 18 months the fat will have crept in and this vigorous industry will have lost its sparkle.
It is of course true that Government funds—large Government funds—are 328 involved in the aircraft industry. That is inevitable and is so throughout every single country in the world which is involved in making aircraft frames or engines. That is inevitable and there is nothing derogatory in it. The noble Lord, Lord Kirkhill, said that the aircraft industry had had to come to the Government for money and that that is an overwhelming argument for nationalising it. The noble Lord, Lord Davies of Leek, said the same thing. With the greatest of respect, I find that a monstrous contortion of the facts, because much of the expenditure of Government funds is on military aircraft and missiles; and what matters is that the Government should get value for money.
This expenditure is as a result of freely negotiated, arms' length contracts between the Government and the company, often undertaken in the face of fierce competition—American, French and international competition. It is not given to prop up the industry, but it is given to ensure the proper defence of the nation. What is more, if the money were not spent on British companies it would be spent abroad and so worsen the balance of payments; and the industry cannot be accused of going to the Government for that kind of aid. Of course the Government aid to civil aircraft programmes is different. It is never given except under detailed contracts with many provisions, one of which is that the Government should receive a levy back on all the sales. The financial support which the industry receives is therefore not a subsidy, but is largely a payment for services rendered and for value received.
In the ten years from 1964 to 1974 of all the Government funds given to the British aircraft industry for civil projects 93 per cent. went on Concorde and the R.B. 211 engine. Those were both projects which were subject to Government policy and Government involvement. The remaining funds, which were given by the Government to civil aircraft production, amounted to about £6 million per year over the previous ten years. That is hardly a massive stake. All Government expenditure within the industry is quite properly and quite correctly monitored. So also are the profits appertaining to it; and no Minister 329 has yet said that this system is inadequate, and no Minister has yet explained what extra accountability is required which only nationalisation can give.
The noble Lord, Lord Kirkhill, laid much emphasis on the stimulating effect which industrial democracy will have, whatever that may be. People, he said, will find greater satisfaction in working for a publicly-owned business. I do not know from where he draws his facts for that, but I will say only this about industrial democracy at this stage. This industry, if it is about anything, is about customers. It is about creating, making and selling highly specialised advanced technology systems to highly sophisticated customers. If the customers are satisfied, then the producers will flourish; but if the industry is to become producer-orientated, its cutting edge will be blunted, the customers will be lost and the producers, along with the nation, will suffer. I think it was Sir Keith Joseph who said that once an industry becomes producer-orientated instead of consumer-orientated, it is well on the way to being crippled. I venture to suggest that there is every virtue in consultation, but there is no virtue in "Buggins's turn"—no more in the board room than there would be in the cockpit or in the drawing office.
My noble friends Lord Carr, Lord Nelson and Lord Rochdale, have all referred, as indeed have others, to the unprecedented and sweeping powers which the Secretary of State has over the corporation. They are powers which have never been given to a Minister before; even the power to alter the constitution of the corporation. The Bill gives the corporation powers to diversify, as my noble friend Lord Carr pointed out; and, indeed, Mr. Kaufman has encouraged this by saying:We very much champion the rights of British Aerospace to diversify.My Lords, is it small wonder that the 300-odd firms in the aerospace business begin to see their future threatened by creeping nationalisation? Is that the real way to get the investment in industry for which the Government, the unions and, indeed, everyone is calling? One would have thought that the Government would have learned one lesson about encouraging investment from their own recent experience, and that is that 330 Marathon would not have invested one penny piece into their own shipyards if they had not first extracted from the Government a specific pledge that, having invested, that company would not be nationalised.
So, my Lords, if this Bill goes through the Government will frogmarch into the ranks of the nationalised industries this successful flourishing industry; but there is one significant difference in this new recruit to the old guard. Almost all the other nationalised industries are service industries, with policy and pricing closely controlled, even interfered with, by Whitehall. It is unprecedented to subject a high technology industry to this same bureaucratic management and political interference—an industry which, by its very nature, has to be geared to international business efficiency in competition, with the ability to take quick and far-reaching decisions. This is being done for one main reason—the reason which has been quoted so often this evening. In the Minister of State's own words, it is because it is an extension of Socialism.
My Lords, this extension of Socialism is shown all too clearly by the system of compensation which the Government propose. The noble Lord, Lord Kirkhill, said that it was the Government's intention that firms should be properly and fairly compensated. I am glad he said that. He will be reminded of it. I think he said that it would be the fairest that could be devised. We shall read his words carefully. In fact, what has been suggested in this Bill bears no relation to fairness and little to common sense. It relies entirely on the utterly false assumption that the companies have share prices which are quoted and the value of which are therefore readily recognisable and readily determined. The fact that of the 37 companies involved in the Bill only one has a quotable figure renders the whole data on which any computations are to be made wrong, utterly unrealistic and indeed unfair. This is merely one example of the inquiries which we hope to make of the Government at the Committee stage.
However, I suppose that we must not be too surprised if it is unfair because despite Mr. Benn's assurance when he was Secretary of State that compensation would be fair, the Government's true 331 colours emerged at the Committee stage in the other place when the Minister of State for Industry admitted that fairness was not the real issue. He said:We are nationalising; we are not buying by negotiation; we are not taking over these companies on the basis of what a willing buyer would get from a willing seller. We are nationalising.That is strong, clear, unjust stuff. This is where the Government, in my humble opinion, stand condemned. In so far as there is a problem in the aircraft industry—and I have tried to show that it is infinitely smaller in comparison both with our overseas competitors and with many of our home industries—the Government have sought to impose not an industrial solution but a political one. Far from building on success and fostering new energies, they have hypnotised the industry and their customers with apprehension and fear—apprehension of the unknown, the future; and apprehension of the known, the other nationalised industries.
There is one publication which, I suppose, is the leading aircraft publication in the world. It appears in the United States and its views are highly respected throughout the world. It is Aviation Week and Space Technology. One of its editorials said:The experienced, technically educated managers of British aerospace have made their share of mistakes although none with an order of magnitude of the Government official blunders; but they have managed to surmount their difficulties, to maintain a viable, successful and survivable industry. What manner of fool would imagine that a collection of politicians could do better?This is from a competitor country. All that I would say to that is: "And so say all of us!"
My Lords, this is a bad Bill. It sweeps together two totally different industries—or as my noble friend Lord Carr said, six industries—and treats them for Parliamentary purposes as one. It gives the Secretary of State huge powers, the like of which have not been seen before. It produces a compensation system which is manifestly unjust. It permits the Government to spend money which we have not got when the Government themselves say that expenditure should be curtailed. It takes the entrepreneurial 332 "stuffing" out of both industries. It is political in concept and in application and it puts economic power—as nationalisation always does—in the hands of those who have political power. I venture to suggest that, far from being a progressive step forward, the Bill will prove to be a disservice to both industries, a disservice to those who work in them, and a disservice to the nation as a whole.
§ 10.35 p.m.
§ Lord MELCHETT
My Lords, I should like to start by joining other noble Lords in congratulating the two maiden speakers who took part in this debate some time ago now, in particular the noble Lord, Lord Inverforth, who reminded your Lordships that he and I met at the opening, in this country, of what I believe is the largest covered shipyard in the world owned by a State-owned company, Sunderland Shipbuilders. I was delighted to hear in the course of the noble Lord's maiden speech that the ship (which I assume was the one I saw under construction when I opened the yard) has now been delivered to his company on time. I congratulate the noble Lord and his company on the proud record they have of buying British ships constructed in British yards, and very much welcome the constructive attitude which he and the noble Earl, Lord Inchcape, took towards the Organising Committee for British Shipbuilders. I am sure it will be fully reciprocated by the Organising Committee themselves.
I should also like to congratulate the noble Viscount, Lord Melville, on his maiden speech. People who wind up debates at this hour of the night are always grateful for maiden speakers in the list because they tend to speak more briefly than do some other noble Lords. I am particularly grateful to the noble Viscount for his neat contribution, if I may so put it. I am also grateful to the noble Lords, Lord Campbell of Croy, and Lord Wigoder, for raising at this early stage of our consideration of the Bill the grounds for their concern that the Bill contains elements of hybridity. I am aware that they took the earliest opportunity that they had to draw these matters to my attention. However, I am sure that the House will appreciate that the warning the Government received was very limited. While all 333 these points have previously been considered by the Department in their work on the Bill, I agree that the right course, as both noble Lords proposed during the course of the debate, is for me to make a considered response on behalf of the Government before the start of the Committee stage of the Bill. This will provide the Government with an opportunity to resolve these issues to the satisfaction of your Lordships' House.
I think I should probably take for my text for this winding-up speech something which, with great wisdom, my noble friend Lord Shinwell said earlier in the debate. He said that the minority is always right. I must say that I feel myself in something of a minority in replying to the debate in your Lordships' House tonight. My noble friend is no longer here, but he sent me a note explaining that he had to leave. I also agree with his remarks about the nature and composition of your Lordships' House. That may go some way to explaining the reason why there were not very many speakers from our side of the House taking part in the debate. I should like to return to that matter in a moment.
I have listened to almost all the speeches. Unfortunately, I missed one of them this evening. Although they all took a fairly consistent line in opposing the Government's Bill, I regret to say I have not found myself converted to their point of view. I have a feeling this may partly be because I have found myself moving gradually further and further to the Left of my Party during the course of the afternoon and evening. As someone who supports the Bill, I have been called "Far Left", and a "Marxist Socialist". Then I became a "Marxist" later in the afternoon. I was called a "lunatic", a "Tribunite", and then a mentally deranged person. The noble Lord, Lord Goodman, wished to put me in a straitjacket, which seemed a slightly Victorian approach to the problem of mental illness.
The fact is I support this Bill, as do all Members of the Labour Party, because this was a pledge in the last two Election Manifestos on which all Members of the Labour Party fought the Election. The Bill has already spent a considerable period of time in another place. It was debated in all for 185 hours there and, with another eight or so hours this evening, I suspect it is on its way to some sort of terrible record. We still have 334 before us the Committee stage. The noble Lord, Lord Orr-Ewing, gave me one clue why noble Lords opposite felt it necessary to turn out in such large numbers this evening when he alleged that Government Ministers had been going around attempting to whip up support from these Benches and that they had miserably failed. There is absolutely no evidence that any of us had been going around whipping up support, so I assume he based his remark on the behaviour of his own Front Bench. That is a natural mistake, but it is an explanation as to why there were so many speakers.
I suggest to noble Lords opposite that the fact that the Bill has been extensively considered by another place over a long period of time might be one reason why my noble friends very sensibly considered that all that possibly could be said in its favour had already been said. What is more, very little new was likely to be said in your Lordships' House, if I may say so with great respect to noble Lords opposite, despite the issue of hybridity with which I dealt before venturing on this part of my speech. I think this is probably the case.
Daunted as I am by the prospect of attempting to convert 30 speakers with one speech, when 30 speeches have not converted me, I should like to attempt, without taking up too much of your Lordships' time, to answer some of the main themes that have run through the debate today. I must make the usual apology to noble Lords whose particular points I am not able to answer, and I will certainly write to noble Lords on points which need an answer before Committee stage. However, I suspect we shall be covering most, if not all, of this ground again at the next stage of the Bill.
A great deal has been said in the debate about the power the Bill will allegedly give to the Secretary of State and the lack of Parliamentary control over that power. I should like to respond to this not as a Party political dispute—though, to be frank, there is some element of that in what has always been, since the post-war nationalisations, a politically active subject—but constructively. There is a genuine dilemma. First, these industries, more than other nationalised industries, are commercial undertakings operating in a highly competitive world environment. They are national assets. We should not shackle them in such a way as to restrict 335 their freedom in world markets. We cannot afford to blunt their commercial cutting edge.
Secondly, the Government stand in effect in the position of shareholder. It is the responsibility of Government to be satisfied that the particular policies being pursued by publicly-owned enterprises are consistent with the wider national interest—for example, that a public corporation, in pursuit, very properly, of its commercial interests is not damaging, say, the employment prospects or export markets of another United Kingdom company. Thirdly, Parliament has a proper concern for the conduct of public enterprises and the activities of Ministers in relation to them.
As a broad statement, in this Bill the Government are following the same method of reconciling potentially conflicting interests as has been adopted in other legislation of both Parties governing public corporations. The public corporations will not be the commercial success that I hope we would all like to see unless they have the scope to exploit market opportunities. At the same time, they must to some extent, because of their role in the economy and their source of finance, be subject to ministerial control at the strategic level. If that strategic control is exercised by weighty and lengthy procedures, we shall risk damaging the industries and hence their contribution to the economy. The Government need to be able to respond quickly and flexibly, while in many cases maintaining commercial confidentiality. For these reasons, we believe that the best compromise remains, as Governments of both Parties have conceived in the past, ministerial control of the industries at the strategic level, combined with accountability by Ministers to Parliament for that stewardship.
The provisions in the Bill are essentially on that basis. We have adjusted the traditional arrangements here and there in line with current practice and thinking—for example, in the case of corporate planning in Clause 7 or the case of annual accounts in Clause 17—where the initiative on the form and contents of the accounts has been shifted from the Secretary of State to the corporations themselves. Funnily enough, this was an innovation no noble Lord opposite saw fit to draw attention to during the debate.
336 We have preserved the role of Parliament—for example in connection with the organisation in Clause 5—and where we have introduced a new degree of flexibility in relation to corporations' duties in Clause 2, we have ensured a role for Parliament by applying the Resolution procedure. Indeed, by making it easier to alter statutory arrangements to reflect change of practice, both the Government and the corporations will in fact be subject to more frequent Parliamentary checks and hence more effective control.
Finally, it is not true that we have rejected all criticism of the powers and duties section of the Bill, as some noble Lords have implied. On the contrary, I would cite four important changes which we made in response to criticism. The first, which we made in the light of comments made on the Bill as first introduced, before it was reintroduced in November last year, was to limit the Secretary of State's power to prescribe new objectives and conditions so that they must be objectives and conditions of a general character. We did this to demonstrate that it was not the Government's intention to interfere in day-to-day management, but to exercise supervision only at the strategic level. Secondly, during the same period, the requirement was added that the Secretary of State should consult the corporations before making an order under Clause 2(5).
Thirdly, at the Report stage in another place, and specifically in response to an undertaking in the Committee in another place to consider the matter, we removed the power in Clause 3 to amend the powers of the corporations by order. Fourthly, we introduced at Report stage, again in response to pressure, a new clause on the fair trading practices of British Shipbuilders. These were all important changes and, together with a very large number of other changes made in the Bill which were made in a serious and constructive response to the criticisms made, I believe that they make it clear that the Government have already responded to all the reasonable points put to us. I have had the feeling very much during the course of the debate that noble Lords opposite have been sharpening their knives on various sections of the industries covered in the Bill that they wish to see excised during the Committee stage—
§ Lord CARR of HADLEY
My Lords, I apologise to the noble Lord for intervening at this late hour. Before he leaves the question of Ministerial powers, and since in his explanation he has rested fairly heavily on saying that the Government are trying to follow previous patterns in this field, can he tell the House of any example in any other nationalised industry where, by Statutory Instrument, a Minister can alter the duties and the powers of the corporations virtually to go into any other field of industry, absolutely undefined and unrestricted by the terms of the Bill? I am not suggesting that they would make paper bags but, as I said in my speech at the beginning, as I understand the Bill, if the Minister liked to give the corporations the power and the duty to make paper bags, they could do so.
§ Lord MELCHETT
My Lords, as I made clear in discussing that power it is an innovation in the Bill, and as I also made clear it is my firm belief that it will, in fact, subject the powers of the corporations to greater Parliamentary controls than has been the case in the past. In particular, the experience of some other nationalised industries, because their powers have been laid down strictly by Statute and are not alterable at all easily, has been that they have needed in normal commercial practice to stretch their powers very slightly. That is clearly undesirable, and I would suggest to the noble Lord that the fact that Government Ministers, if they wish the corporations to have further powers, have to come back to Parliament and get Parliamentary approval will be an extension of Parliament's stewardship over the conduct of these industries and not the reverse.
I was saying that some noble Lords appear to have been sharpening their knives on certain sections of the Bill which they wish to see omitted during the Committee stage. My impression has always been that noble Lords opposite subscribe to the theory that your Lordships' House is a revising Chamber. But I must say that there was a stage during the debate when it appeared that halfway during the Committee stage we were not going to have anything left to revise, if everybody's knife was plunged where they appeared to be aiming it. But I should like, if I may, to deal with one or two of the points that have been raised on the 338 inclusion or exclusion of certain parts of the industries in the Bill. Some noble Lords appear to subscribe to the theory that only loss-making companies should be taken into public ownership.
§ Lord MELCHETT
Several noble Lords have suggested that several parts of the industries now covered in the Bill should be omitted, their main justification being that in fact they are making a profit. If the noble Lord had been present for so much of the debate as I have, he might have heard more instances of that being said by his noble friends on that side of the House. However, it has been given as an excuse for numerous examples that I am about to go into, if the noble Lord will allow me.
This is not a proposition which the Government accept because it is wrong in principle for the losses to be nationalised, as it were, while private interests are left to enjoy the profits. In particular, this applies to warship builders. It would be illogical if in taking the shipbuilding industry into public ownership we were to exclude precisely those companies which are most dependent upon the Government for their survival. Great stress has been placed on the importance of the warship building sector.
The Government believe that we as a nation must have an overall plan for our national shipbuilding resources. Arguments advanced on the importance of warship building are therefore arguments, in my view, for including that sector in the future public sector. The significance of warship building for the industry is clear. In a booklet commissioned by the two warship shipbuilders named in the Bill, Vosper Thornycroft and Yarrow, entitled The Special Case for the Naval Shipbuilders, it is claimed that in five years the two companies have secured export orders worth £273 million. The three warship builders give employment to 20,000 people in the industry. I believe that these are all good reasons for vesting these companies in British Shipbuilders and not for excluding them.
The Government fully recognise the differences between warship building and merchant shipbuilding. These differences will, of course, have to be taken into 339 account in the future organisation and that is why the Organising Committee have visited the yards in question and are consulting with representatives of management and labour in this sector. I certainly recognise the expertise which lies within this sector and the contribution which it has made but, as I say, that seems to me and to the Government to be a good reason for including these companies within the scope of the Bill and, hence, within the scope of British Shipbuilders.
A great deal has been said about ship repairing in general and about one company in particular. I do not intend to go into the details of that because numerous noble Lords have promised me the opportunity for further debate during the Committee stage. However, I should like to deploy very briefly the general industrial case for including ship repairing in the Bill.
The proposals to include ship repairing in the Bill follow the report on the industry which was produced in 1974 by PA Management Consultants Limited who were, as noble Lords opposite will know, appointed by a Government of their own Party. This report highlighted a number of problems. They were principally the development of an already strong industry on the Continent, the existence, in some cases, of several ship repairers on the same estuary, outdated facilities which were likely to become even more unsuitable in the longer term and unsatisfactory labour relations in some yards. PA Management Consultants also concluded that assistance was needed from the Government to finance essential investment, as sufficient funds are unlikely to be forthcoming from the private sector.
In the past 10 years, employment in ship repairing has halved and, without modernisation, PA Management Consultants forecast further job losses. Taking into public ownership all the larger companies on the main estuaries, as is proposed in the Bill, would enable British Shipbuilders to produce a coherent strategy for this industry for the first time.
I said that unfortunately I missed one of the speeches during the course of the debate and I very much regret that it was the speech of the noble Viscount, Lord Brookeborough, that I missed. However, I was given a full note of what he said and was particularly interested in his remarks, 340 in view of my new responsibilities in Northern Ireland. The noble Viscount made the point that Harland and Wolff and Short Brothers were excluded from the Bill and I should like to touch on that point very briefly. No doubt this is something to which we shall return in greater detail at the Committee stage.
Along with most Parties who participate in the Northern Ireland constitutional convention, the Government are committed to the return of a devolved Government in Northern Ireland. If a future devolved Administration is to have effective control over the Northern Ireland economy, it, rather than central Government or a central organisation in this country, must control Harland and Wolff, which is Northern Ireland's largest employer. This would be particularly difficult if Harland and Wolff had first to be extricated from British Shipbuilders.
Harland and Wolff has been in full public ownership since the Shipbuilding (No. 2) (Northern Ireland) Order of 1975. That order received the approval of noble Lords on all sides of the House and provided for all shares in Harland and Wolff to be vested in the Northern Ireland Department of Commerce which also has responsibility for providing finance and monitoring progress. This emphasis on regional control is to be found throughout the public sector in Northern Ireland, as I am rapidly discovering and I have no doubt the noble Viscount is well aware already, including, for example, railways, gas and electricity, and it is for that reason Harland and Wolff have been excluded from the Bill. No doubt we will go on at Committee stage to discuss in detail the particular provisions of the Bill dealing with Harland and Wolff and the need for consultation between them and British Shipbuilders.
§ Viscount BROOKEBOROUGH
There is a material difference between Harland and Wolff and the gas supplied to consumers within Northern Ireland. This is an international industry involved in total international trade and is quite different in every possible way, as indeed are Short Brothers and Harland, and therefore there is a difference in this matter. Further to that, the possibility of getting a devolved Government is very far in the distance and it is no use 341 sitting back and doing nothing. We have to tie in whatever is necessary to tie in and if it is a difficult job to unscramble the egg it must be done at the point in time at which devolution occurs.
§ Lord MELCHETT
My Lords, as I said, no doubt we will return to this debate at the Committee stage. I would not be quite so pessimistic as the noble Viscount about the prospects of a devolved Government, but that again is another subject which it might be wiser for me in my state of inexperience in Northern Ireland's affairs not to say too much about at the moment.
Several people mentioned Westland Helicopters and asked why they had been excluded from the Bill. The United Kingdom helicopter industry is structurally separate from aircraft and there is at present no great scope for improving efficiency or for solving the problems of either sector by merging them. The Government certainly sees no merit in size for its own sake.
My Lords, as I said, it seemed to me that the theme running through a great many of the criticisms of inclusions of particular sectors of these industries in the Bill was the fact that they were making a very handsome profit, and therefore what was the need to nationalise them? There seems to be something of a circular argument being deployed by noble Lords opposite. First, they say it is wrong to nationalise anything which is making a profit, and secondly, they criticise anything already nationalised for not making a profit. And they then make sure that the circle keeps moving around smartly by, during their period in office, depressing nationalised industries' prices just to make sure none of the nationalised industries could make a profit if it wanted to.
Another theme running through the debate has been the suggestion that we simply cannot afford further public ownership and that nationalisation will cost too much. The noble Lord, Lord Carr of Hadley, told us a heartrending tale of no more schools, no more hospitals, no more houses, and so on, if this Bill is passed. If I may say so, the noble Lord omitted to mention at that point in his speech—though I may have missed it at 342 some other point—two major planks of his Party's policy. One of them this Government support fully, and that is that more of this country's resources must be devoted to manufacturing industry if the country is to solve the serious economic problems which we face, and therefore to some extent it is right that there should be less increase in the housing programme, less increase in the hospital building programme, and so on, than was planned in the past. Secondly, the noble Lord failed to mention that it is his Party's policy, as I understand it, to introduce far greater cuts in the number of houses, hospitals and schools than this Government has done, and so whether we had the Bill or not there would be even less of them in an Administration of noble Lords opposite.
§ Lord CARR of HADLEY
My Lords, since the noble Lord, I am sure quite intentionally, misquoted me, may I be allowed to put the point. The point we made is, if one is going to spend capital monies on this compensation stock there will be less money, given whatever limit you like to set to the public sector borrowing requirement, to spend on homes, schools and hospitals and the Chancellor has imposed cuts on all those. We would at least save those cuts to the extent of at least the £300 million involved in this compensation.
§ Lord MELCHETT
My Lords, that sounds satisfactory, but I am afraid does not accord with the facts of the matter. Compensation will be paid for in the form of Government stock. The issue of Government stock does not form part of public expenditure, neither does it have any immediate effect on the public sector borrowing requirement. It is true that, if securities are traded, there may be some small effect on the money supply, but my right honourable friend the Chancellor of the Exchequer has all the powers and will certainly take steps to correct that if that happens.
My Lords, what the noble Lord, Lord Melchett, is saying is fascinating, because if it is not going to cost the Government anything, and the Government are going to give people pieces of paper saying there is a certain value attached to it, is that not printing money?
§ Lord MELCHETT
My Lords, it is called transfer of resources. Although I did economics only up to "A" level, I know enough to know it is not the same thing as printing money, which noble Lords opposite obviously do not know. If I may say so, it is a fairly simple fact of economic life that a transfer of resources does not involve either public expenditure, or necessarily an increase in the public sector borrowing requirement. The effect on money supply comes when the securities transferred are traded, and that will be marginal. My right honourable friend the Chancellor of the Exchequer has all the powers necessary to control the increase in the money supply if the need arises, which is not the same thing as public expenditure or the public sector borrowing requirement.
§ Lord ORR-EWING
My Lords, the noble Lord, Lord Melchett, is on an abstruse subject which some of us do not quite understand. Are we going to be given money in compensation which is not convertible? Are we not going to be allowed to invest this money to buy new machinery for those parts of our works which are not nationalised? Is the paper that we are to be given not convertible?
§ Lord MELCHETT
My Lords, I have said three times that the effect comes when the stocks are traded, if they are. They are Government stocks. I cannot see what the noble Lord—
§ Lord ORR-EWING
My Lords, it is convertible, then? You are giving us some certificates which are immediately convertible so that we can resurrect our businesses and invest in new offices, factories, machinery and so on? Is that right?
§ Lord MELCHETT
My Lords, for someone who is a director of one of the companies affected, if that is something which the noble Lord needs me to tell him, it may not be a bad thing if public ownership is on its way! There is the strongest possible industrial case for nationalising both the aircraft and the shipbuilding industries. With aircraft, the need to combine the resources of the two main airframe companies is almost 344 universally recognised. This was recognised 10 years ago by the Plowden Committee, but the private sector has failed to bring it about. We see public ownership as the only sure and effective way of doing so. It will make possible the creation and implementation of a national plan for the whole industry. Recent discussions on future civil aircraft projects with manufacturers in Europe and the United States have underlined the need for a unified approach.
The United Kingdom industry is bound to do better if, instead of demonstrating conflicting interests, it can speak with a single authoritative voice. The Organising Committee under my noble friend Lord Beswick has already made an excellent start getting the companies to work together so we can make the right choice about what project to take part in, and with what partners. In response to the point made by one or two noble Lords in the debate, I should like to emphasise that I am quite sure that, damaging as the delay over this Bill may have been, it has not damaged the interests of the aircraft industry in deciding what projects to go ahead with over the next few years, because no decisions have yet been reached by anyone in the field. But I am equally sure that further delay to the Bill will damage this country's prospects in the international aviation market.
My Lords, I wonder whether the noble Lord would be kind enough to answer a question I put. As a result of the rationalisation this Bill is going to cause, does he foresee a diminution in the number of jobs, or will the number remain the same?
§ Lord MELCHETT
My Lords, jobs are currently contracting in the industry and it is likely that that process will continue; but that must depend on the future orders which the industry can attract, and that must depend on getting a single unified voice in the bargaining going on between countries. It makes no sense to have two companies arguing between themselves, when we are facing an international market with countries combining together to build the next generation of civil aviation projects.
I turn briefly to the shipbuilding industry. Public ownership could be our 345 last chance of survival as a world shipbuilding nation. Our share of the world market has dwindled rapidly over the last 20 yeats. Shipbuilding over-capacity is now a serious worldwide problem and new orders over the next five years will be very difficult to win. A concerted national effort will be required to achieve a competitive industry which will survive the difficult years ahead. We have brought together in the Organising Committee for British Shipbuilders a first-class team who have made an encouraging start to their task. We are engaged in an important series of tripartite discussions with them and the trades unions on the strategy needed to meet the industry's problems. Public ownership offers the only prospect of applying an effective overall strategy; without this the industry simply will not survive.
My Lords, for the sake of all those working in the industries, naturally I am glad that noble Lords opposite have decided not to divide the House against the Bill this evening. I think it would be fair to say that one message from this debate has come out very clearly, particularly from those noble Lords currently connected with the industries concerned. It is that further uncertainty would be intolerable. I have been asked—I am not sure whether as a rhetorical question or not—whether it is not too late for the Government to reconsider this Bill. This Government always have believed, and continue to believe, that the only viable future for these industries lies in public ownership. Given this conviction, I am sure the greatest service this House can possibly do to these two industries is to ensure for this Bill rapid progress to the Statute Book.
§ On Question, Bill read 2ª, and committed to a Committee of the Whole House.