HL Deb 18 February 1980 vol 405 cc509-29

4.5 p.m.

Second Reading debate resumed.

Baroness SEEAR

My Lords, when the previous Administration introduced the National Enterprise Board, we on these Benches welcomed the general initiative, welcomed the introduction of the board, as we had considered that the abolition of the IRC had, in fact, been a serious mistake. But we did at that time feel that some of the powers of the NEB were too extensive; that they had taken on to do too much and that the provision for the extension of public ownership was a quite unnecessarily doctrinaire element introduced into the legislation—legislation much needed in order to further the development of British industry.

That doctrinaire element, that partisan element, has unfortunately been reflected in the legislation which is before your Lordships' House today. Just as the original introduction of the NEB was accompanied by an injunction to extend public ownership, so the present Bill is founded, apparently, on the belief in the importance of pushing private enterprise to the limit, in so far as that can possibly be done, and reducing the function of the NEB in the interests of trying to extend private enterprise. This partisan approach to the functions of the NEB from both of the major parties seems to us entirely regrettable.

British industry, in its present situation, needs a partisan approach to its development as it needs a hole in the head, and the sooner we get out of the mood of thinking that the flourishes of the manifesto of either party have to be reflected in the policies adopted before our miserably ailing industry, the likelier it is that we shall move towards the recovery that all of us presumably wish to see. Let nobody underrate—and I am sure that nobody in your Lordships' House does underrate—the seriousness of the decline in industry at the present time, and the urgent need to have policies which rise above party considerations and which put the real reconstruction of industry, the real development of industry and the hope of a future for industry, before all manifestos and all party political advantage.

Surely, it must be clear that we need a National Enterprise Board. Facing us over the next years is a mammoth task of reconstruction and development. Inevitably, there will be a running-down, but let it be a guided and a planned running-down of industries for which there is very little future. We have just been talking of some of those problems in connection with the Statement which we have been discussing. We need an instrument to spearhead that development and that running-down of industries which cannot hope to survive in the world that is changing around us from month to month rather than from year to year; of industries which have somehow to forge a new future against the rise of the middle income countries—the very welcome rise which is reflected and underlined, after all, in what we have been reading in the Brandt Report. It is highly desirable that these new countries with new industrial enterprise should go ahead, but this requires changes of a mammoth kind in this country. For this, we need a really effective instrument to guide and help the reconstruction and development of the new industries which will have to arise to take the place of those for which there really is no future.

Therefore, we are of course glad that the Government have recognised that it is necessary for the NEB to have funds to inject into the industries of the new technology, but this kind of development needs greater, not reduced, funds. That move from the declining industries to the new industries must be done on a large scale and must be done quickly so this is surely no moment to be reducing the amount of money to be put into the hands of a National Enterprise Board—granted a reconstructed National Enterprise Board—when we need a board of the highest calibre for the work that has to be undertaken in the immediate future and in the not so immediate future.

So we regret the whole trend of this legislation which is to minimise the function of the National Enterprise Board, which reflects a lamentable underestimate of the task of restructuring and reorganisation that faces this country, the mood in which it needs to be undertaken and the resources that are required in order to bring it about.

Along with this, we must regret the decision to move away such powers as the National Enterprise Board has had back into the Department and the hands of the Secretary of State. Why is it that the Government have decided to do this? I know that at the present time Quango hunting is a favourite political and media device, and no doubt it has great support in official circles. But there are Quangos and Quangos. Surely we need to remind ourselves that we set up Quangos because we need bodies of people of high expertise to undertake tasks which can be undertaken only by people who are specialists and expert in the areas in which they are required to work.

We need a National Enterprise Board comprised of men and women with the highest possible training and experience in finance and industry—people who, because they have inside knowledge and inside experience, will understand in detail what is involved in this task of reorganisation. With the greatest respect to the Department of Industry, our Civil Service tradition is such that it does not give us people with that degree of specialisation and expert knowledge.

Sometimes we in this country forget that over the last decade we have bred a generation of younger men, coming out of our universities and business schools with experience in our most successful industries. And do not let us forget that we have successful firms. I know that the noble Viscount, the Minister, is very well aware of this, but perhaps not all his colleagues, who lack his industrial experience, are aware of how much things have changed inside the industrial field and inside the leading British firms. It is people with that kind of experience whom we need to lead the changes which have to take place in British industry; they have the discernment and the experience that is required to decide on the policies and programmes which this restructuring requires. You do not rightly go to the Department of Industry and you do not rightly go to the Secretary of State and his Civil Service advisers, if you want that kind of job done.

It was for this sort of reason that Quangos were set up. While there have been some Quangos which have indeed been redundant—and it is a good thing to see them go—there are others which require this kind of specialised knowledge and detachment, for which we very badly need to keep them; and because of the particular kind of knowledge which is required and which cannot be found inside official circles I suggest that the National Enterprise Board is pre-eminently such an organisation.

Finally, we can only deplore the extraordinary decision that the National Enterprise Board should no longer have a responsibility for developing industrial democracy. "Industrial democracy", I recognise, is an extremely vague term. No three people gathered together will agree on what the meaning of "industrial democracy" is. But perhaps in this context that is an advantage, because in this context the injunction to develop industrial democracy could well be interpreted to mean that there has to be a decided, firm effort to get the maximum degree of employee understanding, involvement and participation.

We are talking, in terms of the work of the National Enterprise Board, of change—of the very painful alterations which have to be made as old industries decline and new industries are being born and developed. If ever there were a situation in which it is absolutely essential for success that employees should fully understand what is involved, and in which, understanding, they should be committed to the change because there is a direct advantage for them, it is the situation in which the National Enterprise Board operates.

It is a lamentable indication of the Government's failure to understand the problems of change in this country that has led them to remove this instruction to the National Enterprise Board to foster industrial democracy. It passes my comprehension how the Government can believe that market forces, to which they are so devoted, will by themselves bring these changes about. These changes involve changes in the lives and expectations of individual men and women in industry up and down this country. They are not understanding of the hidden hand; they want to know, in terms of the detailed changes in their own work situation. They want to be convinced that it matters to them. They want to have it explained to them why it is necessary that changes should be made, and how change is going to affect them.

The job of the National Enterprise Board should be to bring about the change in industrial organisation and industrial structure which this country is crying out for, and without which we shall decline beyond recovery. If this is to take place, then it must be done with the maximum degree of understanding and involvement in industry. The case for industrial democracy, however defined, is stronger in this context than anywhere else.

4.17 p.m.


My Lords, in the spate of controversial legislation that is about to descend upon your Lordships' House from another place, there may, I think, be some Bills which raise larger moral issues than the one which we are discussing tonight, but I do not think that there can be one which more devastatingly exposes the contradictions and conflicts at the heart of the Government's philosophy in relation to economic policy.

I am most grateful to the noble Viscount, Lord Trenchard, for the skill and clarity with which he has explained the concrete measures by which that philosophy may be put into effect in this Bill. Naturally, he has not explained the philosophy itself, because that he takes for granted. I am also grateful to the noble Baroness, Lady Seear, for her spirited defence of the National Enterprise Board which will be the main theme of my observations tonight. On behalf of the Liberals, she has accused both main parties of doctrinairism. Perhaps it is the function of the Liberal Party to take strong lines and to avoid the charge of being doctrinaire by the avoidance of any conspicuous doctrine.

First, to understand this philosophy I must ask your Lordships to go back to the Budget which this House introduced last summer. In that Budget, the Government, in honourable discharge of its election promises, made substantial reductions in income tax. Those reductions had been estimated to amount, in a full year, to no less than £4,610 million, which is still, even today, a very considerable sum of money. I am quoting from a Written Answer given in another place on 3rd July of last year. Of that large sum, about 16 per cent. went to 41 per cent. of the taxpayers with the smaller incomes—incomes, that is to say, not above £4,000 a year. Slightly over one-third went to persons at the other end of the scale, with incomes of over £10,000 a year, and nearly half of that went to persons whose incomes exceeded £20,000.

These concessions were ostensibly justified at the time by the Conservative philosophy that high taxation, especially on the larger incomes, has operated against incentives and that the recipients of these larger rebates would devote the additions to their incomes to developing and modernising stagnant British industry. In passing, my Lords, I cannot refrain from observing that, as I see it, the "true blue" Marxists are found not on the far Left, but in the heart of the Conservative Party, for their absolute conviction that mankind is motivated by economic influences alone.

Now, my Lords, what happened? These relatively affluent taxpayers received considerable sums of money but, so far as one can see, far from opening up new and experimental businesses concerned with new technology and so forth—things which most of us laymen do not understand, and most of them did not understand either—they appear, as we might well have foreseen and some of us did foresee, to have spent the money in trying to restore their personal standards of living to the levels by which they had been eroded by previous taxation. They used the money to change their cars, to restock their cellars and possibly to renew their Caribbean holidays. Perhaps the more prudent among them thought they should make further investments lest once again there might be a succession of Labour Governments who would erode their income by further taxation. If so, they very prudently (one imagines) purchased Stock Exchange securities relating to companies whose future, they felt, was reasonably well assured rather than to new and experimental things on which the future of British industry depends. For that, there is no evidence that they would take the trouble or the risk involved. Probably they felt it would be safer and simpler to buy the Stock Exchange securities that would be their standby. But, my Lords, purchasing bits of paper on the Stock Exchange does not increase employment or even swell our gross domestic product. Anyway, whatever became of that £1,560 million? It has not revitalised British industry and noble Lords opposite have been heard to express regret that the tax reductions that were intended as incentives have proved so disappointing a stimulus to industrial progress.

We have to reckon with some new facts in the present situation which this philosophy overlooks. The first is that well-to-do individuals no longer fill the role traditional in the economic theory of a capitalist society. Today, at the best their contribution to investment is not what it used to be, owing to the growth of corporate enterprise. Moreover, at the moment private persons are so discouraged and fearful about their future that they are, in a manner of speaking, as private investors, striking. So what could the Government have done in the face of these facts? Instead of donating that £1,560 million to the higher taxpayers, they might have redirected it to the one and only institution in the country which would be bound by statute to invest it, and to invest it particularly in the rehabilitation of British industry; namely, the NEB. After all, my Lords, the NEB has a pretty good record.


My Lords, may I ask a question? I always follow the noble Baroness with great care. Is she suggesting that never in any circumstances, on the basis of her argument, ought taxes to be reduced, particularly the high ones? Is that the end of her argument?


My Lords, it is not the purpose of my argument. I am in favour of reducing taxation in certain areas and at certain times; I am not in favour of reducing taxation by a sum of £1,560 million in the hope that it will stimulate the growth of new industries, which it will not. I am referring to personal taxation, of course. The noble Lord well knows that any argument can be held up to ridicule by perpetuating it to infinity, which is the line which he has followed. I am not dealing with infinity.

The record of the NEB, discounting the millstone of British Leyland and Rolls-Royce which has hung round its neck from the beginning, and which has always been regarded as an extraordinary item not to be included in the regular accounts, shows that it has done pretty well. If we look down the list of companies in its last report, of the 16 subsidiary companies in which it has a majority holding and the 26 other companies with which it is associated with a rather smaller holding of shares, we see that many of them are concerned with micro-processors, data systems and other modern mysteries, unknown to most of my generation but which we realise are essential to the effective future of British industry. They have in fact done the job they were expected to do.

Would not expansion of those enterprises have been a more productive use of that £1,560 million than putting it into the pockets of individuals already fairly well off, to spend exactly as they please? But no. In the Tory philosophy the NEB is a form of public enterprise; and public enterprise, straight and simple, is a Bad Thing—capital 'B' and 'T'. So instead of using the NEB to break the strike of private investors—and the Government, after all, have no conscientious objection to strike breaking—the Government introduced this Bill in order to hamstring the NEB in every possible way; to reduce its funds, to cancel any future Secretary of State's power, to raise further funds; and to compel the board to hand over any of its assets on demand to the Secretary of State. In that case presumably the industries involved would be consigned to the tender mercies of the civil servants in the Secretary of State's department.

Here come the conflicts. I should have thought that in Tory philosophy that would have been an even more pernicious form of public enterprise than leaving those industries in the hands of a board, the members of which had at least a good deal of business experience. In the end it looks as though the NEB is going to be left with two functions, and those only for the time being: for the time being it is still to continue investment in advanced technology where the risk has discouraged private capital, and it is to assist firms, particularly very small firms, in areas of severe unemployment. Apart from that, as the right honourable gentleman the Minister for Industry put it in another place, we must expect to see disposals by the NEB as a natural part of its activities. A most elegant description of suicide!

What it comes to then is that the NEB is to be continued, and it was praised by the noble Viscount, Lord Trenchard, and encouraged for its future, which is never to touch any juicy plums but to cope with a few distasteful items from which the business world recoils. So there we are. Private enterprise continues, quite understandably, to sulk in its tents while for doctrinal reasons a lively and efficient public body is not allowed to fill the vacuum thus made, even though it has amply demonstrated its ability to make a profit of 11 per cent. or 12 per cent. per annum. But for that achievement it is to be rewarded by a Bill which expressly forbids it to extend public ownership, including of course extension into areas of profitability. No wonder the members of the board all resigned in a body when they saw the red light warning of what was likely to come! They have been replaced by others who have presumably accepted these appointments on a temporary basis, organising their own suicide as the noble Viscount, Lord Trenchard, has so elegantly described.

Meanwhile the more affluent taxpayers are disposing as they please of the £1,560 million which would have done a lot of things in other directions as well as that in which we are concerned in this Industry Bill, such as encouraging new and modern forms of investment. That money might have been not returned to the taxpayer but redirected to the one body which could have handled it with experience already gained in assisting industry to adjust to the changing demands of modern technology. Surely the savage attack on the NEB contained in this Bill carries doctrinaire prejudice on public ownership to a level which is sheer irresponsibility.

4.31 p.m.


My Lords, I rise to congratulate the two noble Baronesses for their speeches, which were devastatingly effective. It seems to me that the other side ought to listen to their arguments, which are not merely theoretically sound but tested in practice.

This measure is a replay of Heath Mark I when he abolished the Industrial Reconstruction Corporation and regretted it ever after, and said so. It seems that the present Government are not going to learn even from the mistakes of their predecessors.

I would like to say only one more thing to strengthen the case which the two noble Baronesses have made to the House and that is that general measures palpably fail. We had very significant under-valuation of the pound in 1975/76 and industry did not revive. I think that even the Cambridge Applied Economics Department does not quite go far enough in trying to get the necessary weapons and policies right for the revival of British industry. General measures fail and general tariffs would also fail.

I am quite convinced that there are only two ways out of our malaise, or perhaps a combination of the two. The first is to have a National Enterprise Board with extended, not reduced, powers and undertake the restructuring through it; the other is selective protection supervised by the NEB. We have had protection in the form of devaluation and depreciation, which did not help, and therefore either selective controls will be necessary—in which case either the Ministry or the NEB will have to be given greater powers to supervise the effective use of the funds which accrue to industry as a result of the depreciation—or indeed, if that is not considered feasible under our obligations to GATT and the EEC, there is only one way, and that is the way which was trodden rather slowly, rather too late, in establishing the NEB. I hope that when this Government goes out in defeat and obloquy there will still be some industry left for a new extention of the NEB to take charge of.

4.35 p.m.


My Lords, I had come to listen to the speeches in this debate with no intention of making a contribution, but I do not think anybody with any sense of fairness could sit in silence and listen to the last three speeches without putting some other comment on the record. I believe that for the two noble Baronesses who have made a contribution, as always supported by the noble Lord, Lord Balogh, to show such irresponsible impatience in dealing with a matter of this importance is quite unforgivable, particularly as they are all well esteemed and experienced Members of your Lordships' House.


My Lords —


My Lords, my name is not on the list, but I do not think there is anything in the Rules which would not allow a Member, with the permission of the House, to make a comment at the right time. The noble Baroness always likes to interrupt me, but I am not easily interrupted when there is a point that I think ought to be made. The point that I think ought to be made is the absolute nonsense of the suggestion being made by all of the speeches, that the lack of investment and the fallback in industry generally today has anything to do with what the Government have done. This Government have been in power for seven months. Does any noble Lord think that in that period any government legislation can even begin to show itself? Do not noble Lords think that before they made this wholesale criticism —

Baroness SEEAR

My Lords, when the noble Lord reads Hansard he will find that it is not there. I never said anything about the failure of this Government to intervene.


My Lords, perhaps I was referring rather more to the other speeches. I will make a comment on the speech of the noble Baroness in a moment.

Baroness SEEAR

My Lords, the noble Lord was referring to the three previous speeches.


My Lords, I will come to the speech of the noble Baroness in a moment, because there was one part of her speech which I found completely unacceptable. But, if I may deal with this point first, the idea that in seven months you can expect the waving of a magic wand to produce the sort of panacea suggested —


My Lords, I made no reference whatever to the failure of the Government in seven months. I made reference to the fact that private investors have not come forward with money.


My Lords, the noble Baroness said that the amount of money left in the taxpayers' pockets in the last Budget had not shown itself in investment. How does she know? The actual payment of the tax reduction agreed in the last Budget has not been made yet. How does the noble Baroness know how it will be used? What evidence has she got that it is being used to enhance people's standards of living with all the fripperies that the Left Wing always talk about? There is no evidence yet that this tax reduction has been used in any other way than in a sensible and responsible way.


My Lords, the noble Lord does not read the newspapers, that is the trouble.


My Lord, the noble Lord is too much of an academic to know what really happens in this world.


My Lords, since the noble Lord would not allow me to intervene for a moment, although he has since, perhaps he will allow me to say that I was not going to interrupt his argument; I would not have thought it was worth it, frankly. What I was going to ask him was whether he thought it proper or wise to refer to two of the most respected Members of this House, personally and intellectually, as irresponsible.


My Lords, is the noble Baroness saying that in this House we are anything other than equal? She heard the comment the noble Baroness made about my question. Is she allowed to hit back hard, and we, because certain people are sacrosanct because of their general reputation outside this House, cannot do the same? Is that what the noble Baroness is saying?—because I am not prepared for people on this side of the House to sit in silence, as they have done over the years, listening to the sort of criticism which bears no relation to the real world in which we live. I believe if we are to preserve the free enterprise system of this country we on this side of the House have to be prepared to hit back and fight hard for what we truly believe is in the best interests of this country. That is why, without having my name on the list, I presumed to come in; I thought it right to have on the record a contrary view to that of the noble Baroness, whose reputation is very high in this country. There is no truth in the suggestion that the tax reductions have been used in other than a responsible way. The noble Baroness has it on the record that they have been wasted and frittered away.

If I may turn to the noble Baroness, Lady Seear, I was very interested when she skirted around industrial democracy and said that it is so vague that nobody knows what it means; it can be be meant to mean what you want it to mean at the minute when you want to win a particular argument. But the part of industrial democracy that taught me to beware of the message of the noble Baroness is this. Is she suggesting in her interpretation of what industrial democracy should be that the National Enterprise Board should lay down what the relationship is between management and men?

Does she not think that, if there is to be real understanding in industry —and Heaven knows! we all want that because the nation needs it —it should be brought about not by a Quango or any such thing but by the management and men who have to work together every day? In my view, to put forward the argument that some outside group, because of some special qualifications that she says they have (but they do not always have those special qualifications), can step in and do the job, which good management with good relations with the men on the shop floor must do, is, in my view, dangerous talk. I do not believe that there is any shortcut that way. I believe that we must let the private enterprise industries, which are overwhelmingly the wealth producing parts of this country, sort their problems out themselves, because they are together every day and they know their problems.

I do not believe that the last three noble Lords who contributed to this debate were fair. In particular, I do not believe that the noble Baroness who I admire so much and whose reputation is held so high, used the great skill and knowledge that she possesses in a proper way today. I say that because of the description she gave of the possible effects of the very essential reduction in taxation which this over-taxed country needs if it is to get initiative back again. It was only because I felt incensed because the record was too one-sided, and did not give a true picture of any hope for the future, that I felt it right to take advantage of the opportunity to intervene in this debate, although I do apologise for not having put my name down on the list of speakers.

4.42 p.m.


My Lords, let me begin by saying that I recognise the great sincerity with which everyone who has taken part in this debate has spoken. Nevertheless, I marvel, along with my right honourable friend, at the degree of certainty which noble Lords and Baronesses in the Labour Party have expressed that central policies carried out either by themselves or, as we are discussing mainly this afternoon, by their agencies, are the answer to the appalling difficulties that the country and British industry are in today.

The idea that the NEB could be a panacea to put right our vast industrial problems is, I think, a dreamland idea. No matter how high a calibre the individuals in that organisation have been, it is to over-estimate central human powers by factors of 100, 1,000 or even a million. I do not say that our predecessors alone —which I think the noble Lord, Lord Lee of Newton, suggested —are responsible for the situation in which British industry is today. I believe that in their years of rule they have certainly contributed, and contributed heavily. But, whether it is proper for a member of the Government to say so or not, I am absolutely clear that in recent years previous Conservative Administrations have contributed to the clobbering of British industry through price controls, personal taxes at a higher level than any of our major industrial competitors, differentials lower than those which exist in those countries, and a ruined profitability and cash-flow which I described in my lead-in speech.

Against that background, and against the success of other countries both in the past and even currently, on very different policies, I marvel at the certainty with which some noble Lords opposite cling to policies which we see as doctrinaire, in the same way as they see our policies as doctrinaire. We believe that it has been proved in Japan, in Germany, in the United States in the past, and in Britain in the past, that you should rely on harnessing the talents of all the people and not on yourself, and not on your specially chosen appointed panacea or agent.

The noble Lord, Lord Lee, mentioned a theme which the noble Lord, Lord Kaldor, and the noble Lord, Lord Balogh, have mentioned many times; namely, that we have been declining for 100 years and that that proves that the policies which have been effective in other countries are no good to us because we have tried them from time to time. First, I must say that our policies do not act immediately; they are not immediate panaceas and they are not magic wands. As the noble Lord, Lord Harmar-Nicholls, pointed out, nobody in this House, I hope, will assume that in seven months the decline of British industry could be arrested and sent on an upward course by a new policy.

However, I wish to deal with the 100 year decline as though it were inevitable and British, as though it assumed that the British were bound for decline willy-nilly and that the talent was not there. I do not believe that to be true. In the first case, we had the Industrial Revolution first, and nobody could assume that a small island of our size with our resources could hold on to the vast majority of the world market just because we moved first. Therefore, there was a gradual decline —as the noble Lord, Lord Balogh, knows as well as I do —through to the beginning of the First World War. However, we still were second only to the United States at that time in nearly all the economic measurements that count. Between the wars, as the noble Lord, Lord Balogh, and the noble Lord, Lord Kaldor, have said many times, we in fact made a recovery. Moreover, not immediately after the war, but especially between the years 1925 and 1937, we outpaced nearly every other industrial country in growth of productivity and competitiveness. Those times were in parts extremely harsh times, which no-body wants to see return. However, let us acknowledge the system under which we were working at that time.

In Japan, which I visited recently, there has been 30 years of a policy of steep incentives to work rather than not to work; to work harder and obtain bonuses which apply to all and sundry; to take more responsibility and get substantially higher salaries; and to take risks. I am prepared to say that, if we had had such a policy for 30 years, we would not be talking about the Japanese work ethic today; we would be talking about the British work ethic, and our shares of the market would be rising everywhere.

I shall deal with some of the detailed points. The noble Lord, Lord Lee, suggested that we were hiding the "economy purpose" in regional expenditure, if I may put it that way. We have never hidden it. Public expenditure cuts have been a major part of the reason for the new regional policy. But I have said in this House before that I was extremely surprised to find the degree to which that policy could be altered with, in my view, little to no effect on the areas of major unemployment.

I shall not repeat all the arguments of the situation that I found in 43 per cent. of the country being treated as assisted areas; nor the fact that the largest quantum of assisted areas—the intermediate areas—had unemployment levels exactly the same as the national average. Therefore, it was not too difficult to make changes and yet to retain the purpose of regional expenditure, whatever view one takes of how successful that purpose has been in the past.

The noble Lord, Lord Lee of Newton, and others mentioned the profitability of the National Enterprise Board. I think that it is worth putting a fact or two into the debate. The figures I give are all on historical costing bases which, as noble Lords will know, are very much higher than that which most accountants and economists would regard as real profitability. In 1977, before tax, the figure was 11.4 per cent.; in 1978, it was 11.3 per cent. and for the first half of 1979 it was 8.6 per cent. The figure for 1979 as a whole will be released shortly. In total, this is not the steady progress which was required by the financial duties of the NEB. I do not for one moment want to say that the very talented people in the previous National Enterprise Board have not had some successes; but the overall situation is not clever and certainly plays a comparatively small part in any possible recovery of British industry as a whole.

I want to deal with one other awkward point because I think it should be dealt with. The noble Lord, Lord Lee, again referred to the statement of my right honourable friend the Secretary of State in the other place in relation to his answer to a hypothetical question, that in certain circumstances he believed that bankruptcy was the right answer. I must tell the House that having examined closely (with those very diligent and fair-minded civil servants who help one in the Department of Industry) what has happened in a number of cases when the alternative policies of rescue with the taxpayers' money or of allowing bankruptcy have been allowed to occur, there is certainly a clear set of evidence which suggests that regeneration is often quickest and most effective after bankruptcy.

The noble Baroness, Lady Seear, in one of her as usual and as we expect from her, devastatingly clear speeches which she makes without what the noble Lord, Lord Shinwell, calls the "encumbrances of notes" —and I never know how she does it —appealed to us to avoid partisan legislation. She asked us not to underrate the situation. I do not think that anyone has, least of all me in this House or even in this debate. The situation is appallingly bad for British industry. The noble Baroness, therefore, called for changes of a mammoth kind. I find it difficult to understand her faith or that of her party, with their traditions and beliefs, in conventional wisdom —in central form —being the answer to a mammoth task of this order.

I have industrial experience in a very large organisation, and with absolute sincerity I want to tell the noble Baroness that, given all the finance that was proposed, I do not believe that I could make a significant or a good contribution, certainly not one which would begin to be in line with the talents of the country as a whole, if they are encouraged and not controlled and discouraged.

Baroness SEEAR

My Lords, I hope I did not imply anything to the contrary, but will the noble Viscount not agree that advocacy of the NEB, with its spearheading function, in no way contradicts his other aims, with which I personally would be in most strong agreement, of encouraging the great mass of people in industry to go ahead as far and as fast as they can? They are not alternative policies; they are, surely complementary.


My Lords, we are not abolishing the NEB. We leave it with the mammoth task of having some 60 companies already and with roles to help others in the situations which I have described and which are in the guidelines. In all conscience, in my view that is as much as any high-powered organisation stands a chance of making a real success of.


My Lords, I want to ask for clarification about this, because I am bound to say that I have not found it in the Bill. I have to say "if that is so" as a starter, not expressing any doubt about it. If that is so, what kind of companies will the Secretary of State direct should be transferred from the NEB to the Government? I am afraid that I have not understood that.


My Lords, the major reason for the power to transfer is in relation to the Rolls-Royce case, where the Secretary of State's intention has already been announced and which will come into operation on the enactment of this Bill; and possibly in relation to British Leyland in the terms of which I spoke in my introductory speech. No other contemplations are in mind, but when altering legislation we do not believe that situations remain forever constant. Therefore, for the two cases concerned —one of which is certain and the other being tentative —we certainly need these powers.


My Lords, will the noble Viscount agree that in, I think, July last or in the Budget his right honourable friend was insisting on the NEB finding £100 million in the course of this financial year? That cannot possibly apply to Rolls-Royce or Leyland. Of whom was he thinking when he said that?


My Lords, the noble Lord has raised a different point. The first point which we were discussing was, I thought, the continued role of the NEB, the companies that it has and the need for transferring one or possibly more of the large companies directly to the control of the Secretary of State. The NEB has a new task of maximising private investment and of disposing, as and when it can. In my introductory remarks I dealt with the amount of money expected; I have nothing further to add there, and I answered the noble Lord's question when he specifically asked me about it during his speech.

I should like to return for a moment to the question of Rolls-Royce, and thus, to the powers of the Secretary of State to transfer Rolls-Royce and possibly others to his direct control. Again, I say to the noble Baroness, Lady Seear, that it is not a question of believing in the Civil Service being skilled managers or directors of industrial organisations. Rolls-Royce is an enormous company. If we do not have the Rolls-Royce board right—and I believe that we have a very fine board —there is no hope for Rolls-Royce. To put another board of equally eminent gentlemen—and eminent gentlemen do not always agree the one with another—above the board of Rolls-Royce and between them and the Government, who in many of the activities of Rolls-Royce are inevitably involved in foreign trade and in finance as it is required at the moment, is an organisational nonsense. All my personal experience leads me to support the Government line enthusiastically. I believe that the Rolls-Royce move was right and that it is not a question of moving the company to the control of civil servants. Civil servants help Ministers to monitor the use of finance on behalf of the shareholders, to watch the progress and to watch the national interest and the national and taxpayers' liabilities. We do not want two boards of management, one on top of the other, for organisations of that size.

The industrial democracy point was raised by the noble Baroness and by others. Let me say, first, that the Government are not against the steady further movement of companies towards getting the whole of their force of employees to work as one towards a common objective. There are many different ways of doing this. I find Lord Lee's and others' views regarding the forcing of this on companies—as indeed the previous Administration were proposing in some of their laws—a bit in conflict with the marked reluctance to accept even a small part of the law regulating trade union affairs which exists in other countries.

I must finish off quickly. I apologise for the length of time, but there have been a number of interesting interventions. I should like to turn quickly to the points made by the noble Baroness, Lady Wootton, and to say that I too have been accused of not working for money alone, which is true. One gets thoroughly involved, and most of us in this House only notice at the end of the day that there is not much left. But this is a slow-acting policy. I do not believe that human nature has been changed radically in recent years —and possibly if it has, not for the better. I do not believe that deliberately ignoring in the rising generation the encouragement of incentive is a thing that we can continue to do, and to do so to a greater extent than other successful countries.

The noble Baroness put her tax points in a particular way, which is a perfectly fair way, but noble Lords know that in fact the vast majority of the Government's tax concessions, in terms of cost, were off the standard rate. It is true that the higher incomes because they pay more standard rate also get more tax concession. We still have a more egalitarian tax system; we still have more egalitarian differentials in this country than in most of our economic rivals. I believe that the Government's policies in this respect, and in respect of controls and other things which also blunt incentive, have to be given, as my noble friend Lord Harmar-Nicholls said, the full opportunity to work here as they have worked elsewhere.

These principles have lifted standards of living well beyond ours. The argument that standards of living have risen and that the situation has changed is true. There is much change in detail. But the principles of an economic organisation ignore basic human nature which can be motivated—it is not motivated only by money —by scope, excitement, freedom to try and "do its own thing", but also by incentive. Without these, I have seen economies, including our own, suffer slowly and finally to a devastating degree. We do not mean to let that happen in future. I beg to move that this Bill, as an important part of our policy, be given a Second Reading.

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

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