BRITISH AEROSPACE BILL (Hansard, 3 March 1980)

§ Lord ORR-EWING
My Lords, to resume after that unusual intervention, I 34 wish to reply briefly to what the noble Earl, Lord Amherst, said concerning the interference of the Treasury. I would agree with him in that I am always suspicious of Treasury decisions. I recall asking a Question a few years ago about how many chartered accountants there were in the Treasury, and the answer was three; this is the Ministry responsible for financial control over the whole spectrum of British life.
I am also suspicious that there are not quite enough people with trained engineering and scientific knowledge, and as a result sometimes projects of great promise are torpedoed by the Treasury, and I believe wrong decisions were made in the time of the last Government and probably it was the Treasury that tried to persuade them to cancel Concorde and the Channel Tunnel. Fortunately, Concorde went ahead, because it was a joint project. When the French wanted to cancel it we did not, and when we wanted to cancel it, the French did not; and in any case they had by agreement to go to the International Court to get agreement. The party who made the cancellation had to pay all the fees and the costs of the other party; and that was a very good discipline. Concorde went ahead, and is now making a profit. I think that no single, advanced scientific venture has captured the imagination of the public all over the world more than has this particular aircraft, which I believe might have been cancelled. So I should not wish to see the Treasury play too big a part when this great industry of aerospace is returned half to Government and half to the private sector.
The noble Lord, Lord Ponsonby of Shulbrede, in his engaging way said that he simply could not understand why the proposal is necessary. I shall try to point out why I believe that it is necessary. Since the end of the war the nationalised industries have in general produced rather disastrous results. I feel sorry for the Labour Party because, despite Mr Gaitskell's gallant efforts, they never really managed to get rid of Clause 4, and I have no doubt that in their next manifesto they will still have some reference to further nationalisation. I remember what Manny Shinwell (as he then was) said in 1947, with his engaging and refreshing honesty, which has not deserted him in any way since he came to this House and has grown even more mature. 35 He said that when they started on the great nationalisation programmes after the war they did not realise how many problems there were, and if they had realised, perhaps they would not have undertaken them. Perhaps I may borrow the phrase used by the noble and learned Lord, Lord Elwyn-Jones: they were acting first, and thinking afterwards.
It is true that a few of the nationalised industries have made profits, but the great majority have made losses. In my weekend reading I found that the Economist was apt on this point. When one looks to see which nationalised industries are making a profit and which are not, it is very difficult to make comparisons because it is not a case of comparing like with like. This is what the Economist says: … oddly enough, hardly anyone knows how profitable or otherwise they are. This is mainly because they choose to adopt inconsistent and occasionally bizarre accounting policies". Later on it says: State industry chairmen have up to now fiddled the figures to suit their books". As I understand it, the Treasury are now taking steps to try to standardise the accounting procedures of all our nationalised industries, and it will then be easier for Parliament, in both Houses, to compare the performance.
Certainly it is true that from time to time huge debts have been written off. It is so difficult to compare the performance of nationalised industries one against another because of these debts. They certainly all make gigantic demands, and targets have been set by successive Governments regarding their external financial borrowing limits. The strain on the PSBR is obviously great as a result of these demands. The last Government, under IMF instructions, reined back the PSBR very rigidly, and relatively successfully; that is how they managed temporarily to get down the inflation rate substantially.
Much of the brunt of this financial drain is borne by the taxpayers. It is worthwhile for a moment to look at the biggest borrowers among the nationalised industries. British Rail's borrowing is £ 715 million in the current year, and will be £ 750 million next year. The second biggest borrower is the National Coal Board, with a figure of £ 709 million for this 36 year and £ 834 million for next year. British Steel, which is in such trouble, has a borrowing figure of £ 700 million for this year, and after the closures, as we hope, the figure for next year will be £ 450 million. So by any standards the nationalised industries are not profit earners— except in very rare cases— and they are certainly enormous borrowers. That is one of the reasons why we desire to have a joint venture owned partly by the Government and partly by the private sector.
Surely every political party must agree that the nationalised industries, not because of lack of good management or lack of good will, but by virtue of their enormous size, their management structure, and, above all, because of political pressures— no party has solved this problem— cannot be as flexible and responsive to market demands, particularly international market demands, as the private sector companies— —

§ Lord STRAUSS
My Lords, surely the noble Lord appreciates that one of the reasons why some of the nationalised industries have not made profits, or their profits have been lower, has been that the Government have stepped in and controlled the prices of the products. That is the most important factor which the noble Lord must take into account.

§ Lord ORR-EWING
My Lords, I would absolutely agree. This is one of the difficulties of nationalisation. One of the three points that I mentioned is that they suffer from political pressures. Therefore they do not always attract the best managing directors or chief executives, because people do not want to go into an industry where they become a political football, kicked about in the public sector and in the newspapers and other parts of the media. It is exactly that political interference that distorts that which is probably in the long term good of the particular industry.

§ Lord PONSONBY of SHULBREDE
My Lords, I fail to follow the noble Lord's argument. He complains of the enormous size of the nationalised industries, and says that this is one of the reasons why they cannot react quickly to market trends. Yet the proposal here is that British Aerospace will remain exactly the same 37 size; there will be no dismemberment at all of the corporation. So I cannot see how the noble Lord's argument affects British Aerospace.

§ Lord ORR-EWING
My Lords, it would be a very brave man, a prophet, who would say that there will be no restructuring of the British aerospace industry over the next 20 or 30 years— because that is what we are thinking of. Whether or not their size remains the same depends on how thoroughly they meet the requirements of customers, both internationally and at home. If they make the right aeroplanes they will continue at the same size. If they do not make the right aeroplanes, if their decisions have been wrong, they must run down, just as British Steel is being forced to run down.
I want to make the point that in the last five years the drain on taxpayers from the nationalised industries has totalled £ 3.8 billion. In regard to British Steel alone, there has been a subsidy equivalent to £ 200 for each taxpaying family in this country. So huge sums of money have been invested by the taxpayers in a modernisation programme and in support of these nationalised industries.
There was the report of the noble Lord, Lord Beswick; and I should like to endorse in as generous terms as possible what has been said already. Under his leadership British Aerospace has done extremely well. The noble Lord has worked most assiduously, as he always does— we know him for that in this House — and I should like to endorse the thanks of the nation. We had the Beswick Report on steel in 1974– 75. I want briefly to touch on the steel industry because it is very much in our minds while we are discussing the merits of nationalisation or denationalisation. As long ago as January 1976 there was a joint statement by the management and trade unions that working practices would have to be greatly improved and, above all, productivity increased. That was— if I may borrow the old term— a solemn and binding undertaking, and I am sorry to say that it was never honoured. So for a long time it has been realised that something had to be done to streamline BSC. In the following three and a half years the Labour Government believed— and I think they still believe in opposition — in Government interference, but it 38 does not seem to have been used on that occasion to pressurise either BSC or the unions to increase productivity. Political pressures were being exercised, and actions to close unproductive units were delayed. There was delay, procrastination and postponement— in some cases of course until after the election.
If one looks at the position in France, Germany, Belgium and Italy, one sees that there was a much quicker and more flexible response to the world market conditions. They have all had problems, but they realised that steel capacity had to be cut, and they made arrangements for retraining for alternative jobs, redundancy payments and all that makes the situation less difficult and more palatable.
Of course, British Aerospace has done well, but this is on a two-and-a-half-year run. What we are trying to look forward to is the next 10 or 20 years. Until now they have been marketing aircraft which were developed, tested and became operational while the decisions were being taken by private enterprise. It takes a long time to make these decisions and to bring an aircraft to operational use. Eight to 10 years for the development of an aircraft is not unusual; a further 10 years for the mainstream production, during which there is updating and improving of the aircraft and its engines; then, probably, a period of 10 to 20 years on top of that, when the aircraft is in operational use and there will be work for the manufacturers in restructuring it, updating it and the like. So you here have decisions taken today which will affect the aircraft industry for the next 10, 20 or even 30 years, particularly in the military field. So I think the solution is a sensible one. We have a mixed economy in this country, and I only wish it was accepted that it should stay mixed as at present, with each side of it making their efforts— —

§ Lord ORR-EWING
Mixed. Yes, my Lords, because this is going to be a mixed company, as I am going on to say— a mixed economy. It must not be the ratchet principle which has been used— that every time something is nationalised it cannot be denationalised— because in that way we shall end up as a Soviet State, with everything in the hands 39 of the Government, and no social democrat would wish that. But in a mixed economy we were asking for mixed ownership, not dissimilar to the BP model, and I think that has worked pretty well. I thoroughly support it. I noticed that there was no mention, no welcome, from the opposite side as to the employee shareholding. I would have thought that that was a step forward in what has been a nationalised industry. Certainly I believe we shall get a quicker and more flexible response, and I believe we will get a more market-oriented company.
I should like to offer a little comfort to the Opposition. This is what they said in their Labour Manifesto of 1945 about nationalisation. Amalgamation among public ownership will bring great economies in operation and make it possible to modernise production methods and to raise safety standards in every colliery in the country. Public ownership of gas and electricity undertakings will lower charges …". Then it goes on: Public ownership of iron and steel.— Private monopoly has maintained high prices and kept inefficient high-cost plants in existence. Only if public ownership replaces private monopoly can the industry become efficient". That, my Lords, is an industry which is at present on strike. I do not believe that even the Opposition would use those words today, so certainly the Labour Party have learned something since 1945, and the public has learned a whole lot more; that is, if you want to have a progressive, dynamic industry, do not nationalise it. That is why I support this Bill.