Industry: The Public Sector

HL Deb 04 February 1981 vol 416 cc1221-71

Debate resumed.

4.18 p.m.

Lord Harris of High Cross

My Lords, I would have waited just a little longer, but I am glad to begin by thanking the noble Lord, Lord Beswick, for the opportunity to join in this wide-ranging debate. If I may say so, without appearing to patronise, I thought that his speech was quite delightful and that it was, in parts, very plausible and that it tended in other parts towards excessive complacency.

I must at the outset apologise to noble Lords that a meeting of the Political Economy Club, of which I am the honorary secretary, will prevent me from staying until the end of the debate. But I shall read the full Hansard with special interest because in one respect at any rate I stand midway between the Opposition and the Government Benches on this matter.

I must confess that I do not make any complaint about ministerial criticisms of the so-called "public sector". But I do complain that Ministers have not acted sufficiently on their criticisms in curbing the heavy cost of what I would rather call the present governmental conglomerate.

Government, in all its aspects, now spends one-half of the national income and it employs almost one-third of the total labour force. In raising its revenue it is inevitable that it should throw some burdens on to private industry. Taxes, after all, inflate costs; they discourage effort, they discourage investment and they can discourage employment. Yet much of this hard won tax revenue is then spent on shielding the nationalised industries from the very market disciplines to which private industry is fully subjected. A series of Written Answers last October from the noble Lord, Lord Cockfield, revealed the fact that the current and capital subsidies to the nationalised industries—excluding the NEB—amounted since 1960 to £26,000 million at 1978–79 prices.

Steel, which is dealt with quite separately for accounting purposes, has, in addition, already run away with £6,000 million since nationalisation in 1967. I do not believe that it is fanciful to regard this process as a perverse transfusion of finance from struggling, productive industry to a pampered and often less efficient sector under Government control and regulation. If we were to add the cost of nationalised health, nationalised education, nationalised housing and assorted local government services, the full burden on the private sector would be truly crushing.

I sometimes detect some scepticism in this House about economists and their conflicting theories. I think that is a healthy instinct, and it seems to me it would be particularly correct on the issue before us today. I want to say that throughout my lifetime much of the most damaging Government intervention of which I complain has been based upon a false deduction drawn from an abstract economic theory. This theory taught to every first-year economist, starts from a concept which is called "perfect competition". Perfect competition assumes that consumers and producers have complete knowledge of all relevant facts. It assumes that there is free mobility of all the factors of production, and it assumes an unmixed range of products that are homogeneous and compete only in price.

Not surprisingly, economists who come into the real world find that markets do not operate in full accord with this textbook model. But they then make the naive deduction—a misplaced deduction—that if private enterprise works "imperfectly", public intervention would necessarily work better. It has taken long decades of empirical experience to discover that Government failure is often so much worse than so-called market failures.

This word "public"—of which the noble Lord, Lord Beswick, made such effective use—is often a semantic pretence. I once recall seeing a notice board which gave the game away; it read simply "Public property—keep out". The plain truth is that the ordinary public have less access to the control of the National Coal Board or the BNOC than they have to ownership of Shell or ICI. The critical difference which makes public industries different from private industries is that the nationalised industries cannot go bankrupt, because the public can be made to pay their debts.

As the noble Earl the Minister said, where nationalised industries are monopolies they can sometimes collude with powerful trade unions to batten on the public as both taxpayers and customers. There are many examples which we could take, but the case of the National Coal Board is instructive. The oil cartel obligingly raised the price of the main alternative fuel ten-fold in the decade of the 1970s. Yet the National Coal Board, having raised its price sixfold in a decade, is to this day still a charge upon the Exchequer, and its coal is still more expensive than coal we could import from the United States or from Australia.

It is well known, especially to those who have been involved in nationalised industries, that they have often become the playthings of political expediency. There are many examples in many industries going back over the last 20 or more years. But my favourite example was revealed by one of the former colleagues of the noble Lord, Lord Beswick, a Labour Member of Parliament who is now going straight. Sir Richard Marsh has told how, when he was Minister of Transport in the late 1960s, he found that there was a railway line 90 miles long which lost £380,000 a year and carried six regular passengers. He set his heart on what may seem to be a rather modest ambition for an able Minister in a radical reforming Government; he set himself the objective of closing that uneconomic line. He has told how he mounted a strong case and brought it, with some confidence, before the Cabinet, where he reports it was turned down after very little discussion when the Welsh Secretary declared that that railway line happened to run through six marginal constituencies.

We must make these allowances when we talk of how the public sector will be run. There was once in Cambridge a Professor of Economics who understood the real world rather better than some of the present incumbents. His name was Alfred Marshall. When students used to urge on him that this and that problem should be solved by Government intervention, Marshall always used to ask the same question—you will find it in the "Memorials" of Alfred Marshall: "Do you mean Government all-wise, all-just, all-powerful or Government as it now is?"

The trouble with our mixed economy is that the frontier between the market and the political domain is drawn on no stable principle. Every extension of Government soon creates a pretext for further encroachments. I think that the noble Lord, Lord Beswick, said "Heaven help us if we leave everything to the market economy". Of course the noble Lord is setting up an Aunt Sally. We need Government—we need effective Government—to fulfil quite specific tasks, well understood in the literature on the subject. We need Government to provide defence, to provide law and order, to guarantee minimum standards, to assist those poor or handicapped who cannot maintain themselves in a market system. We need Government—dare I say it?—to provide a stable monetary system.

But in Britain and elsewhere the mixed economy has degenerated into a muddled, mixed-up economy. It muddles the jobs which Governments have to perform with jobs which the market could do better. It muddles help for the needy with indiscriminate provision of welfare and other services for all, irrespective of need. It muddles compassion and good intentions with ill-chosen methods and perverse results.

I conclude with a simple question. When Governments of both parties have so often failed to live up to their hopes and promises, should not the noble Lord, Lord Beswick, and others set a more modest objective for politicians in the future? Let us suppose that we aimed at getting central and local government out of all activities which private enterprise could do better. We would then free politicians and their hard-pressed bureaucracies to concentrate on the limited range of tasks which Governments must discharge and which, in our experience, they have often discharged very badly indeed.

4.29 p.m.

Lord Glenamara

My Lords, first, I should like briefly to associate myself with the noble Lord, Lord Rochester, in what he said about the late Lord Amory. I, together with many noble Lords and Baronesses here, sat with him for many years in another place and we came to have great affection for him. Over the years I have had many kindnesses from him and have received a great deal of sound but always gentle advice. He will long be remembered.

Secondly, I should like to say how grateful we are to our noble friend Lord Beswick for initiating this debate. It seems to me that after 21 months a clear, two-pronged strategy of this Government is emerging. First, they seek to reduce the welfare state to an irreducible minimum; secondly, they seek to roll back the public sector also to an irreducible minimum, which the private sector will not be interested to acquire. If this is done, we are told, by some mysterious economic alchemy self-help will become the order of the day, everybody will stand on their own two feet and become much more reliant, the private sector will be liberated and small businesses will blossom in everybody's backyard. Every month, every week that goes by, shows the utter lunacy of this strategy.

Of course this debate is not about the welfare state; this is about the public sector, for which the Prime Minister and her Ministers have such an abiding hatred. If the noble Earl, Lord Gowrie, wants more evidence on this I would be pleased to send him another 20 quotations by his colleagues about the public sector. Incidentally, I was astonished to hear him advocating syndicalism, which the Labour Party abandoned 70 years ago.

The public sector to the Government, of course, means all Government departments, all local government, and all publicly-owned industries. This all-encompassing definition is the first illogicality; the lumping together of half a dozen of the biggest industries in the United Kingdom, a dozen or so medium-sized industries, together with Government departments and local authorities which are purely administrative bodies, sometimes providing a service but of course not concerned with reaching commercial and financial targets.

The Government's policy is to roll back the whole public sector. Less Government, less local government, less publicly-owned industry. So far as the publicly-owned industries are concerned they aim to do this in three ways. First, by—and I use this dreadful word they have coined—privatisation; secondly, by ending monopoly rights and obligations—the noble Earl, Lord Gowrie, told us today that that process is going on; and, thirdly, by sheer attrition, if that is not a contradiction in terms; the kind of war of attrition we have heard announced against ILEA today.

All that can be summarised by saying that their policy is to "do in" the public sector by any means available. But of course this is part of the credo of monetarism; to do the public sector in. When I was a child I learned the Church catechism. I think I can still recite the whole of it. Learn to fight against— the devil and all his works; the pomps and vanities of this wicked world and all the sinful lusts of the flesh". I think there is a kind of monetarist catechism which ministerial hopefuls in the Government probably have to learn. It goes something like this: They have to promise to fight against the public sector and all its works; against the posts and telecoms of this wicked world; and against all the sinful chairmen of all the public bodies.

In their war of attrition against the public sector of industry the Government's heavy artillery is the device known as external financing limits; cash limits. When I was Postmaster General in the 1960s the Post Office aimed at generating about half the funds it needed for its investment programme and borrowing the other half from the Government. But in the 1970s the problem about public expenditure was such that cash limits were introduced by the Labour Government in 1976; but the Labour Government on the whole applied them sensibly and flexibly. This Government, on the other hand, are using them, or abusing them, with such rigidity and ferocity as to make it virtually impossible for the big public corporations either to reach their financial targets or to carry out their obligations to their customers. Perhaps noble Lords have read an article by Sir Leslie Murphy in the Guardian today where he says precisely that.

When the corporations do fail to meet their obligations to their customers, it will then be said, and it is being said—the noble Earl, Lord Gowrie, almost said it today—that they are failing the nation; in the case of the energy industries, the Post Office and British Rail, that they are rapidly increasing charges, and are inflicting great hardship on the public and on private industry—which indeed they are—but of course these are Government induced increases. I think that the noble Earl, Lord Gowrie, agreed with that today. I am not quite sure what he said, but I shall read it tomorrow. Of course increased charges for transport, for gas, for electricity, for telephones are just as acceptable to the monetarists who are running our affairs today as an increase in income tax.

The EFL device, cash limit device, is a simple one. So, of course, is the hangman's noose, or the executioner's axe, and, like them, its consequences can be dire in the extreme. It means that any excess expenditure, current or capital, over internally generated funds has to be borrowed, as in any other business. It is this additional amount over and above the normal cash flow which is subjected to arbitrary Government imposed limits. They do that on the argument that the enterprise is owned by the Government and the Government must ultimately guarantee its repayment, and this will apply, of course, even if the borrowing is from non-Government sources.

I read the statement made in a Committee in the other place yesterday, and it is quite clear, as the Daily Telegraph comments today. I quote from the Telegraph: No method has yet been devised, as the Minister admitted yesterday, to keep such borrowing out of the public sector borrowing calculation". So what was announced yesterday makes no difference whatsoever to the operation of this device. In the case of the Post Office in particular, and other profitable publicly-owned industries, there is not the slightest possibility of them defaulting on the repayment of these loans. But none the less, despite that, the Government lump it with all other Government and local government expenditure and count it as part of the public sector borrowing requirement, which they limit, they believe, in order to limit the money supply, which in turn they believe will bring down the rate of inflation.

So the borrowing requirements of some of Britain's biggest industries, which are vital elements in an efficient economy, are subject to the same constraints, the same device, the same mechanism, as expenditure on Whitehall Government departments, or on social security, or on local town halls. Many noble Lords are involved in the business world, and rightly so. Supposing that a private company's banker placed an arbitrary limit on the finance he was prepared to lend, for reasons which were unconnected with the business concerned. Your Lordships would be the first to complain, and rightly so. It would disrupt that company's investment and development planning; it would cause great problems in the workforce; it would frighten off outside investors, and of course it would greatly reduce that company's competitiveness because its competitors would not be subjected to the same constraints. But that is precisely what the Government are doing, and that is precisely what is happening to these large public corporations, which are Britain's biggest businesses.

The Earl of Gowrie

My Lords, would the noble Lord give way? I am most grateful to him. The noble Lord mentioned me. Surely the essential difference between the analogy he gives and the position that the Government are in is that the bank manager can see his client, in the noble Lord's example, going bankrupt, whereas in the public sector that is much more difficult for the Government.

Lord Glenamara

My Lords, I think that the noble Earl has said that many times before. We are told now that the dreadful dog's dinner which the Government intend to create out of the telecommunication side of the Post Office—it will be a chaotic pattern they are creating—is going to include a number of subsidiary companies. This has been said in the Committee in another place. These companies are going to he ordinary Companies Act companies, but owned either by British Telecom or jointly with private enterprise. We are told that the cash limits will apply equally to these subsidiary companies, unless of course British Telecom is a minority shareholder. They will have to compete with private industry with their hands tied behind their backs. It is the theology of monetarism carried to the point of sheer absurdity to say that subsidiary Companies Act companies which are to be created to carry out profitable enterprises under British Telecom will be subjected to the same kind of mechanism. Were it not so serious, it would be comic.

The method by which the cash limits are arrived at each year, as well as the arbitrary fixing of them, causes problems as well. It is a typically Civil Service method; in November of each year assumptions are arrived at by the Treasury about pay and price levels for the following 18 months. Governments—I speak from experience—are always over-optimistic about the way in which their policies will work out, and Government assumption on prices and pay are almost invariably over-optimistic. Until recently these were kept secret. They may still be, but I understand they are to be reported in future as a result of the joint committee which considered this matter.

At the same time, the industries concerned make their own assumptions on these matters. As they are living in the real world, their assumptions are nearly always much more realistic. They may or may not coincide with the Government's assumptions on pay and increases in prices, but the Treasury's assumptions always prevail in arriving at the cash limits. In our Whitehall machinery the Treasury always gets its way. In my view, the Treasury in Britain is the biggest impediment to good government and if I may give my right honourable friend the Leader of the Labour Party some advice; when he comes to office, if he does, in two years' time he should move out at least 20 to 25 people from the top of the Treasury and bring in some good accountants and businessmen from outside to advise.

If pay and prices do not turn out as they have been assumed, the Government will not alter the cash limits, except in so far as they recently agreed to a small relaxation whereby a small percentage from the following year could be brought in, but with no increase over the two-year period. What can the corporations do when, first, the external financing limit is inadequate to start with, and most of them are this year, or, secondly, the assumptions on which they are based, about prices and inflation, prove to be inadequate, as they usually do? Of course, if these corporations—the Coal Board, the Post Office, British Rail and so on—want to continue their investment programmes, as they must, they must take short-term measures, which are very often against their better commercial judgment.

A recent example was putting up the charges for telephones by a total of 30 per cent. in 1980, an increase which was damaging to private industry and which is causing great hardship to many telephone users, especially old people. But they had no option; it was the only option left to them if they were not to cut their investment programme. As I said, in effect this 30 per cent. is additional taxation induced by the Government, but of course it is disguised and described as the inefficiency of public enterprise, or alternatively as the weakness of public enterprise in agreeing to over-large wage demands, both of which are demonstrably untrue.

The Government's stated aim over the four years 1980 to 1984 is to secure a turnround of £3,000 million in borrowing from the Government: from minus £2,300 million in 1980 to plus £400 million in 1984. I am aware that in the last few weeks this has become some-what unstuck, but it is still presumably the Government's broad aim, and so far as subventions to British Leyland, Rolls Royce and British Steel—all legacies of private enterprise—are concerned, the Daily Express rightly points out today that had the Government let them go under, it would have been the equivalent of a nuclear bomb in the economy. This turnround represents the biggest financial upheaval ever imposed on the public corporations. The aim is to cut back their size and scope simply because they are public and not private.

The Labour Party has always been accused of being a doctrinaire party. The Rabbinical scholars who erected those pyramids of theology, the relatively simple Law of Moses, had nothing on Mrs. Thatcher so far as theology is concerned. As the noble Earl said, the publicly-owned industries account for one-tenth of the national product, one-fifth of the total fixed investment, employ 7 per cent. of all employed people, hold the dominant position in energy, communications, steel and transport and their influence on the economic performance of the United Kingdom is enormous. It follows therefore that an efficient public sector in industry can at least create the conditions for an efficient economy, but it can do that only if it has the support and encouragement of the Government.

The present Government inherited this weapon; it was placed in their hands by the electorate in 1979. They could have nurtured it and used it to do just that—to create the conditions for an efficient economy—but instead they are selling it off, eating the seed-corn and creating enormous and damaging problems for it. They are harassing it at every turn. It is difficult to speak temperately of a Government who are destroying the manufacturing base of our industry—that is another of the most demonstrably true facts in the current scene—and at the same time are making life impossible for public industries which underpin the private sector. Incredulous though it may seem, the Government are pulling down the walls of the economy and attacking the foundations at the same time. It will take a generation for Britain to recover from this Government.

4.48 p.m.

Lord Thorneycroft

My Lords, it is a privilege to speak following the noble Lord, Lord Glenamara, who himself made an important contribution to the public sector in his work, and I wish at the outset to thank him for the tribute he paid to my friend the late Lord Amory. It was only a few months ago, just before I last spoke in your Lordships' House in an economic debate, that telephoned Lord Amory—it was in the closing days of his life—to ask his advice. I will not be the only person in this House to miss the counsel and advice of that wise and good man. I thank the noble Lord for that tribute, and I thank the noble Lord, Lord Beswick, for the way in which he opened the debate. His Motion taunts the Government with their attitude to the public sector. I suggest the argument is not really about whether we have a public sector; obviously we are going to have a large public sector in this country. I think the argument is about the size of the public sector and how best its welfare can be secured.

I speak as a Conservative and I happen to be the chairman of that party. The Government deal with the detail of the argument. If the House will forgive me—and I shall speak briefly—I should prefer to stick mainly to the principles; and may I say that we in the Conservative Party make no apology whatever for where we stand in regard to public enterprise in this country. I would put briefly before your Lordships four propositions which I intend to deal with in my speech.

First, we believe in a mixed economy, like the noble Lord, Lord Beswick. We believe that there is a role for both public and private enterprise in the United Kingdom. Secondly, we think that at the moment the public sector has become too large and too costly to be easily supported by the private sector and private citizens as they are today. Thirdly, in those circumstances our role is not to abandon the public sector. The role of a Conservative is not to destroy things; it is surely to support them. We should provide the public sector with management and money. We should reduce it, and, where we can, provide it with partners and additional finance. Fourthly, and overall, we should, by our financial policies, seek to reduce that inflation which is so damaging to public and private enterprise alike.

That seems to me to be the central position of British politics today. All the rest is on the periphery—the question, for instance, of what one does about an incomes policy? That is very difficult. The noble Lord, Lord Rochester, referred to this, but the problems that he posed were of a fantastic character. There is, for instance, the question of how one handles the leadership of the Labour Party. These are fascinating problems, but they are peripheral to the real issues which we are trying to debate.

I accept that if one is in the centre of events, and is attempting a central position, one is open to attack. I accept also that occasionally we are attacked as rabid monetarists—by the noble Lord, Lord Glenamara, for instance—and for providing a billion pounds to support and maintain the great car industry of this country, upon which thousands of jobs today depend. If one is in the centre of events, one must expect to be attacked from both sides. But we in the Conservative Party are as proud and as unapologetic about our determination to contain inflation, as we are about our determination to support both the public and the private industry of this country in the middle of a world recession, and so help it fight its way back to the proud position that it has always held in the conduct of trade throughout the world.

That is where we stand. If I may say so—and I agreed so much with what the noble Lord, Lord Harris of High Cross, said—we stand there in a real world. It is not an imaginary world. It is not the world of a perfect market, beloved by some of the economists. It is not a working-class proletariat talked of by the Marxists. It is the real world of this country as it is today, with the British people, with all their faults and virtues, in the circumstances in which in fact we find ourselves, far from perfection in many respects, but in which we can only do our best.

But if we say that that is where we stand, I think we are entitled to ask where other people stand. The noble Lord, Lord Beswick, spoke for the Labour Party as I speak for the Conservatives. The Labour Party, it seems to me, has moved very far to the Left. I make no personal criticism of a man whom I have known as a friend and opponent, as well as a brilliant parliamentarian, all my life, but Mr. Foot believes—and has said so—in a continuous process of nationalisation. Nobody imagines for one moment that if Mr. Foot were in charge, the balance between the public and the private sectors would remain where it is today. We are told in every speech, on every television programme, that the balance would move much further—much further—towards the public side.

I think that your Lordships should ponder the wisdom or otherwise of a policy of that kind. It is a policy which is proving daunting even to many members of Mr. Foot's party, members who stuck with it right through the re-nationalisation of steel, right through the rather unpleasant business of the takeover of shipbuilding and aircraft; but even they are now finding that enough is almost, though perhaps not quite, enough, and they are by slow degrees tending to leave the party. I would suggest to your Lordships that whatever else may make sense in British politics today, a further extension of the public sector could not possibly make any sense.

There are arguments about the public sector which one can make. It has problems. Even its keenest supporters would admit that it has problems. It has problems about the monopoly power that it gives to unions, about the control of prices and, above all, about the fact that it never goes bankrupt. It never closes that railway line in Wales—and the wonderful thing about the illustration given by the noble Lord, Lord Harris of High Cross, is that that conversation in the Cabinet could have taken place in the Cabinet of either party. The damn thing goes through the marginal seats. It is too embarrassing. There are difficulties about the public sector—and let all of us, however much we support it, admit that they exist. And may I say that there are great pluses, too, and it has made—and many areas will always have to make—an enormous contribution to various things.

But my arguments about the public sector are not doctrinaire; I am not going to bother with that. They are based on something much more pragmatic: the question of what one can afford. The public sector costs money—a little money to buy it, but enormous sums of money for the new capital formation that has to go into it, or for the losses which are sustained. This year the revenue from North Sea oil was £4 billion. What pride we can take in that? What a magnificent thing for this country? The external financing limits—the money that goes into the public sector—amounted to £3 billion, or three-quarters of the total of the North Sea oil revenue. I am not saying for one moment—and I hope I am clear on this—that that money was wasted; I am not saying that. What I am saying is that it is an enormous financial responsibility, and it seems to me that it should make anyone pause before he says, "We are going to extend these obligations further".

Lord Beswick

My Lords, I wonder whether the noble Lord would allow me to interrupt him? I am moved to get to my feet because the noble Lord, Lord Soames, was rather inciting me. Would the noble Lord, Lord Thorneycroft, be kind enough to analyse that large figure and tell us how much of it is going in investment and how much is going to be returned on that investment?

Lord Thorneycroft

My Lords, my noble friend Lord Gowrie spent paragraphs doing this in his opening speech, and that is why I said I was not going to go into massive figures. I simply say this—and I think that I probably carry with me quite a number of noble Lords on both sides of the House—that however good public enterprise can he, there is a limit to what you can do in the way of adding to it; and if anybody really suggested today that we should as a matter of policy add to the public sector and these financial burdens, I should have thought that that was an area of policy which most sensible men of any political party would reject.

Now large areas will remain—of course they will—and I certainly am not opposed to that. Nor do I oppose public enterprise; I count many friends among those in it. I have had the privilege to work with men like Derek Ezra, who has made a tremendous contribution to the affairs of this country—a man of wisdom, of courage and of humanity. Then, look at the trade union leaders: men like Joe Gormley and Tom Jackson, in the tradition of some of the great trade union leaders of this country and, on the whole, an immensely moderating influence on the difficult and tangled industrial scene that often confronts us.

But I would utter this warning, that too large a public sector, struggling, to reduce its costs and supported by an overburdened and overtaxed private sector, is a recipe for unemployment. It really is. If the objective of policy—and it must be high among our objectives—is to find jobs at the present time, then a smaller, more efficient public sector, supported by a richer and expanding private sector, must be high on the list of political objectives in the United Kingdom. Match that with new investment, with the minimum Government interference, with low taxation and, for the sake of employment in this country, (and I would commend this to the Labour Party) with retaining the massive potential market which lies in Europe, and match it also with financial policies which really pin inflation down—this is the broad, central ground of politics today, and I must say that I am proud and happy to see the Conservative Party securely placed upon it.

5.4 p.m.

Lord Kaldor

My Lords, I should first like to associate myself fully with what other noble Lords have said about the late Lord Amory. I participated in numerous debates which he initiated, or in which he took a prominent part, and I learned to appreciate not only his intellectual qualities but his exceptional honesty and seriousness of purpose, and his search after truth and after the common ground. After many of the debates I had a feeling that our points of view moved closer together, and were nearer to each other at the end of the debate than they were at the beginning. I think this is the first economic debate in which I have participated in this House at which Lord Amory is not present, and I think that we on this side of the House, too, will miss him for a long time to come.

My Lords, I was glad to have one assurance from the noble Lord, Lord Thorneycroft: that he agrees with the view I was going to express that, apart from a lunatic fringe, there is no one in this country who belongs to either extreme in the matter of private versus public enterprise. We do not have many communists or many Left-wing socialists who want to abolish private enterprise altogether, nor do we have very many Right-wing capitalists who want to get rid of public enterprise. What is true is that the present Government and the party opposite, as Lord Thorneycroft emphasised, find that the public sector in this country is too large—a blot on the landscape. He did not explain on what basis they regard it as being too large, but they regard it as a burden and they want to reduce its size—and they neglect no opportunity to emphasise their intention to re-privatise publicly-owned enterprises, at least those which yield a profit and for which buyers can be found.

My Lords, I would advise them to hurry up if that is their intention, because soon they may find it difficult to find profitable sectors to hive off, and they may find it even more difficult to find buyers, knowing the uncertainty to which the future status of such re-privatised businesses will be subject. But I am not very optimistic, from their point of view, about what is going to happen, because the real trouble is that by their present general economic policies—the policies of economic depression—they are destroying private industry so fast that, contrary to their objectives, they are rapidly diminishing the weight of the private sector relative to the public sector, and not the other way round. They scream against nationalised industries, but it is private industry which they ruin, much more than nationalised industry. On top of that, they might well end up, as the depression deepens, having to take large enterprises into public ownership to prevent their extinction, just as Mr. Heath was compelled to do in the case of Rolls-Royce aero engines, to give but one example.

The noble Earl, Lord Gowrie, said that the difference between public and private enterprise is that private enterprise can go bankrupt. I think this is not quite accurate. If private enterprise is important, or if it supplies something which is vital to the national interest, or simply if it is an important segment of the economy, then it cannot go bankrupt, any more than can public enterprise. What happens is that it is taken into public ownership, which is not the same thing. Bankruptcies caused by recession simply increase the size of the public sector, just as, if you look at Mussolini's Italy, which was all against public enterprise, you see that they ended up with almost the whole of industry being owned by the state.

This could possibly happen here, also. This is not a debate on the economic situation, and therefore I cannot now go into the reasons. But, contrary to the optimism expressed by our Prime Minister in numerous speeches, prosperity is not just around the corner, and we are not approaching the bottom. I think there are important forces making for economic contraction which have not really begun to operate yet. We have had a big recession due to de-stocking, but the consequences on private consumption, on private investment, on fixed investment, and on exports—the three main factors determining the level of economic activity—are all set to turn down, and as they do we are going to see a much deeper recession than has yet been seen. In the course of that, I am willing to prophesy, the range of the public sector will be rapidly enlarged and not diminished.

Leaving aside the current situation, I can quite see that it is in the interests of the owners of capital that the opportunity for making profits should be spread as widely as possible and every act of nationalisation which narrows that field is inimical to their interests. This was no doubt the motive behind the agitation and lobbying for commercial television some years ago. When the question was first debated, there were many who feared that this was bound to lead to the kind of gutter television concentrating on sex and violence found in America. In retrospect, these fears were largely groundless, but mainly because the publicly-owned sector, the BBC, more than held its own and by its success forced the private commercial sector to compete with it in programmes of high quality.

The BBC is a unique institution which has no equal in any other country in the world, as people of many nationalities would confirm. I think noble Lords will not disagree—any more than they would in the case of the Navy—that this is a field in which public enterprise has proved far more efficient and imaginative than private enterprise.

We have another unique national institution which has been much in the news lately; that is The Times, a newspaper which for the greater part of nearly two centuries has been recognised as the authentic voice of Britain. I much regret that the possibility of nationalising The Times—by which I mean transferring its ownership to a public corporation run on much the same lines as the BBC—has not been contemplated, let alone seriously discussed. Its future, its independence and its ability to serve the national interest would have been far better guaranteed in that way than by its absorption by—I was about to say an Australian but perhaps should say a multinational publishing empire of chequered reputation.

I realise that a BBC-like solution may not suit the party of the noble Lords opposite nearly as much, since the present arrangement will ensure that The Times will continue to be a thinly disguised organ of the Conservative Party and not a national paper above parties. However, I suggest in all seriousness for the future that if national newspapers continue to run into the sort of financial difficulties which we have witnessed so frequently in the past 30 years, the Government should be ready to step in and transfer their ownership to a public agency with the independence of the BBC or of the judiciary or of many others of the best institutions that we possess. Democracy requires a press that speaks with many voices. I do not think that that would be disputed. More than any other nation, Britain has a tradition of public service and of institutions which are capable of jealously guarding their independence. We are therefore exceptionally well placed to use the assistance of the state to preserve an independent press which speaks with many voices. I think that would be a most important guarantee for the survival of a healthy democratic system.

For reasons which were set out by my noble friend Lord Beswick, the industries which the first post-war Labour Government nationalised brought enormous benefits to the British economy. A far more efficient service was created in vital sectors than could have been provided under private enterprise. Why was that? It is partly because the nationalised industry was able to work on the basis of a comprehensive, long-term plan, and partly because, barring exceptional periods of ideologically hostile Governments such as the present one, it was able to undertake sustained investment on a very much larger scale than private enterprise would have done.

In these respects, British private enterprise, I regret to say, is in general much inferior not only to British public enterprise but to the privately-run industries in other industrial countries. We have one of the most extensive and sophisticated financial markets in the world to serve the needs of industry, yet industrial investment has been inadequate in this country for more than 100 years. As a proportion of the value of manufacturing output, gross investment in manufacturing has been only one-half as high in the post-Second World War period as in our competitor countries. If we go back to the 1920s, or even further to the 40 years preceding World War I, inferiorty of industrial investment of Britain was far greater in relation to countries such as Germany, America, Japan and so on.

What has been the main reason for this? There are no universally accepted explanations, and I do not think that my own view would commend itself to many people in this House; but my view is that the very existence of the City of London, the supremacy of financial capitalism over industrial capitalism, has had a deleterious effect on our industrial development. It has certainly increased the attractions and the facility of foreign investment against home investment.

It has also meant, in the more recent decades since the Second World War that the managers of our businesses have been engaged in a continuous struggle either in averting certain takeover bids or in putting themselves into a position to be taken over on favourable terms, or else in the position to take over other firms—a game which requires clever accountants who can show the best-looking profit and loss accounts. We find more accountants among the heads of industrial firms of this country than in any other country in the world. This financial game, the gains from successful takeover bids—that you are either taking over or else are taken over—are far more rewarding to owners and controllers of firms than the profits derived from developing new lines or new markets, all of which are, by their nature, slow and long-term operations, but which, in contrast to the short-term financial gains, are in the national interest.

The Earl of Gowrie

My Lords, I am grateful to the noble Lord for giving way. I am following what he is saying with great interest. Would he not think that one of the reasons why the City in his argument may have been inimical to industrial investment on the scale that both he and I would like is that the fiscal policies of successive Governments have provided strong disincentives to the smaller or individual investors (who are most likely to gain from a generalised capital or equity market) and therefore strong incentives to the large corporate investors who will go naturally for the longest and safest return?

Lord Kaldor

My Lords, I should be far more ready to follow the thoughts of the noble Earl were it not for the fact that all these shortcomings I have been talking about were more prominent in the late Victorian era and the Edwardian era (when the fiscal disincentives that he mentioned were completely inoperative) than in the years since the Second World War, or even in the period between the two wars. The real period of Britain's poor performance relatively to other countries was from 1873 to 1914. It has never been worse than that either before or since. That was not a period in which fiscal disincentives could possibly have played a role.

I need not say to noble Lords that there is a great difference between large gains made from takeover bids and gains made developing new markets. The latter add to national wealth; the former merely change the distribution of wealth. Economists call it a zero sum game; what some people gain, others lose. I am convinced that if we wanted to make private enterprise capitalism more successful, we should need revolutionary changes in our institutional framework, in our company law, in our system of technical education and in our system of selection of business leaders.

In the meantime we require more public enterprise, not less, and a fundamentally different attitude to public enterprise—not one which regards public investment as a burden on the community. In the past few years— and I admit that the last years of the Labour Government share part of the blame—economies in public spending were largely concentrated on public investment as the easiest field in which to cut. This was the result of muddled thinking—people thought—and ministers still think—that, compared with private investment, public investment was not wealth-creating, that it was just a burden on the taxpayer. This is of course nonsense. Take, for example, motorways. Superficially there is nothing to distinguish British motorways from French motorways except that they are called autoroutes. But in the eyes of Ministers there is all the difference in the world. French motorways are profit-making enterprises and therefore they are wealth-creating. By levying a toll on users, just like the turnpike trusts in Britain in the 18th century, they are made highly profitable. They are built by companies which are in part at least—sometimes 50 per cent., sometimes more—privately owned.

The French Government may be just as anxious to keep down their version of the PSBR (which is a much more sensible version than ours to start with) but all this does not come into it. It does not make them cut road building in times of unemployment for utterly irrelevant financial reasons. Although the French Government are criticised quite a lot in France for their financially conservative attitudes, they are miles ahead of us in their attitude to economic development, to co-operation of public and private enterprise and meshing the development of various sectors together, and also to the central direction of industrial investment, none of which is known in this country.

However, before I sit down—and I am sorry that I have spoken for too long—I must congratulate the Government on having had the courage to suspend their convictions in the decision to rescue and try to put British Leyland on its feet. I should also like to congratulate the noble Earl on what he said in encouraging workers' co-operatives as a form of enterprise. I hope that he will have success in convincing his colleagues in the Government. I should also like to congratulate them on encouraging Datsun to manufacture cars in this country. The Japanese are so much ahead of us, both in technical know-how and in human relations—in showing how to treat their employees and get the best out of them—that we ought to give them every encouragement to transfer more of their industrial activities to Britain and, if possible, take some of our industrial managers in exchange. In the long run this might have the same kind of effect on our industrial future as the coming of the Flemish weavers in the 15th century.

The most urgent problem of any in this country is not whether more or less wealth should be privately owned, but that capital investment should be stepped up as soon and as much as possible, both in manufacturing industry and in social infrastructure if we wish to arrest and reverse our economic decline and add to our total wealth. This must involve a dramatic increase in the scale of capital investment in modernising our manufacturing industries. I can see no other way of doing this at the moment except either by creating new public enterprises or by new joint enterprises which are at least in part publicly owned.

Very few noble Lords realise that the possession of North Sea oil will give us no benefit whatever if it merely means a corresponding shrinkage in manufacturing or in other sectors of the economy. To derive a benefit from it, we must use it so as to enlarge our productive potential in manufacturing industry and in the other sectors. We can only do so if North Sea oil is used in order to increase our investment on a very large scale. I see that this runs contrary to the wholly mistaken monetarist philosophy of this Government, and I do not see how this conflict can for the moment be overcome. But I am convinced that this is the only way we can save ourselves.

5.27 p.m.

Lord Underhill

My Lords, I am positive that there is no noble Lord on this side of the House who regards public ownership as the panacea for all our problems. In any event, public ownership would need to be linked to appropriate economic and fiscal policies. They would have to go hand in hand. Public ownership opens up the possibility of effective economic planning, greater accountability and planned investment. On this side we accept the need for a mixed economy. Noble Lords opposite say they do so also. If one goes back to previous economic debates, I have had to complain of how seldom noble Lords opposite have gone out of their way to praise in any way sectors of public ownership. I hope that will be done in the same way as on this side we will give full credit to the best elements in private ownership.

Public ownership is not a British Labour Party monopoly. It so happens that I was looking at a document issued in 1978 which revealed that eight of the top 20 industrial companies in Europe were wholly or part state-owned. In West Germany the Government have a participating share of the top 50 industrial concerns, including Volkswagen and Lufthansa, the national airline. In Italy the Government, through the holding company, owns concerns such as Alfa Romeo, four major banks and again the state airline. In France we have the giant Renault concern, 100 per cent. state-owned, and the Government have an important stake in the oil business.

In Sweden, I find that one of the largest iron ore producers in the world is owned by the state as is also Sweden's largest commercial bank. Austria have a large national holding company which accounts for 20 per cent. of the industry. Most companies of any size, ranging over steel, oil, chemicals or engineering come under the holding company. It also controls two main joint stock banks. These are just some examples to suggest that public ownership is not just a British Labour Party disease.

I find also that the nine EEC countries have a pattern of public ownership similar to ours. Basic industries and services such as fuel, transport, post and telecommunications are all in their public sectors. Those countries seem to have come to terms with public ownership in their mixed economies. Also, I wonder whether it is fully understood how much of the banking in EEC countries is in the public sector—state-owned, municipal and co-operative—because I have found that an answer to a Written Question to the Commission of European Communities (835/77) was given as a percentage of deposits in public sector credit institutions which, as the answer said, in the wider sense includes not only those institutions established by law but those controlled either directly or indirectly by a public authority, whether central or local.

The figures given are as follows: France, 80 per cent., Italy, 70 per cent., Germany, 60 per cent., Belgium, 50 per cent., the Netherlands, 40 per cent., Denmark, 30 per cent., Britain and Ireland, which are lumped together for some reason, 10 per cent. I mention these facts to indicate how respectable public ownership is in other countries and how essential public ownership is regarded by those other countries, which accept also the need for a mixed economy.

The noble Lord, Lord Glenamara, said that in talking about the public sector we must include the Civil Service and those in local government administration. Tributes are paid time and time again to the fact that we have the best Civil Service in the world as regards its integrity and impartiality; yet we have to listen to snide comments which give the impression that those who are in the Civil Service or engaged in local government administration are shameful persons living on Government funds. I hope that that attitude is going to be corrected.

There is no immutable law as to whether things should be run by public ownership or private ownership. No one except a madman—even the Conservative Government—would think of handing over our police service to the private security firms or handing back the Fire Service to the private insurance companies who had them at one time. It is good to hear the noble Lord, Lord Thorneycroft, say that the question is: "How much public ownership?" I wondered what a little research would yield if I looked back at all the speeches that were made when all the Labour Government Bills for public ownership were introduced. I cannot remember the Conservative Party supporting any one of them, no matter what might now be said about support for a certain amount of public ownership. The question is: what are the economic arguments for public ownership and the political decisions that have to be made?

It is worth while looking at some of the older nationalised industries which took over out-of-date assets which were badly in need of replacement. I think everybody would recognise that was so in respect of the railways. The community paid £941 million through 3 per cent. transport stock; and even the House of Commons reference sheet on the financing of public industries, as I noticed the other day when I looked at it, said that the assets were over-valued and that their earning capacity was virtually nil. In fact, I believe that in the years prior to the war no ordinary dividends had been paid in the private companies for some years. Does anyone visualise handing back the railways to private ownership? If not, somebody ought to say "Why not?"

My noble friend Lord Beswick referred to the gas industry. Those who move around the country will recognise small undertakings, many of them broken down with differing degrees of viability and will have noticed the change that took place within a few years. As one travelled around, one could see what was happening to the gas industry once it had passed into public ownership. Does anyone really envisage disbanding the Electricity Council, the Central Electricity Board and the area boards? I am not quite certain what the noble Earl, Lord Gowrie, said about this aspect, but part of what he said rather suggested that there might be a certain breaking-up, and that greatly alarmed me.

I know it is history, but as regards coal, where would the coal industry be if the Labour Government had not decided to bring it into public ownership in that great reforming Government of 1945–55? Before the war, commission after commission had said that the only hope for the coal industry was to bring it under nationalisation, and it was not until the Labour Government in 1945 that that was achieved. I moved to Birmingham in 1948 and travelled around all the coalfields in the West Midlands. Frankly, it was amazing to see the change which came over small, broken-down townships with coal nationalisation. A new pride and a new standard of living was secured for those engaged in that dangerous industry. As regards research and safety, last year I understand that the number of fatal accidents in the coal industry and the number of reportable accidents was the lowest on record—an achievement which has gradually been developed under public ownership. Again, I doubt whether anyone would suggest that coal should revert to private ownership, and again I say that it would be interesting to know why.

Did not our publicly-owned Atomic Energy Authority lead the world in developing the use of nuclear energy for commercial purposes? We ought also to refer to the work of the National Research Development Corporation. Despite the cash limits, most of our public institutions have manged to carry out intensive training and also research. Perhaps I could just mention some good examples: the development by British Rail of the high-speed train and the advanced passenger train. Its research and consultancy service are much sought after by railway administrations overseas, and now they are experimenting with a light rail-bus which they are developing themselves.

There is also a love hate relationship with the Post Office and telecommunications (Telecom). When I go, as I do most years, to the far North-East Highlands of Scotland, I can appreciate what a great institution our Post Office is. Even in the most remote hamlets letters are delivered and there is a post-bus service which is now covering some 170 routes. I hope that will be further developed. This much-criticised institution has developed Inter-post, the world's first electronic mail service for sending mail by satellite. That is to be extended. We have the Data-post for overnight express delivery and delivery door to door; we have the Expresspost, from same-day collection and delivery by special messenger. Some may criticise the fact that the Post Office has 23,000 post offices—more per head of the population than any other developed country. I think it is an asset to our country and is a great contribution to the ordinary people who need to go to the Post Office for all sorts of operations.

Perhaps I might also say a word about Telecom. In the last year, despite criticism, 2 million additional telephones were installed. There is now inland direct dialling by STD to every customer and our publicly-owned Telecom led the world in international direct dialling: some 420 million telephones in nearly 100 countries are within reach of 96 per cent. of Telecom's customers. Then there is British Prestel, the first in the world, for a public view-data service. It is to be followed in July by Prestel International, which will be the first world international service. All these things have been achieved by research and development through our public institutions.

My noble friend Lord Beswick referred to the Federation of Civil Engineers. I should like to quote one sentence from a statement issued by that body which is: … The Government's general prejudice against the public sector is widely acknowledged, even among their own supporters, to be leading to highly damaging cuts in public capital investment programmes". In an accompanying document, The British Economic Base, it is stated that the whole of British industry, which accounts for 47 per cent. of GDP, is wholly dependent for its operation on the services provided by the public sector by road and rail networks, docks and airports, and the energy undertakings of coal, gas and electricity. Another quotation from that document is: Public sector investment has compared unfavourably with that in all other industrialised countries which have achieved a comparable level of economic development". The Government have allowed their doctrinaire attitude to dominate their decisions.

Incidentally, I wonder what would have happened if public ownership had made a mess-up of the contract that was made with Rolls-Royce—an institution which we all greatly admire, whether it is private or public. That great concern was nearly brought to its knees. Then, why place the British Transport Docks Board in private hands, when Government Ministers have paid tribute to the efficiency and good standing of that undertaking? Why mess about with it? Why not leave it where it is? We shall be debating that, and the sale of British Rail subsidiaries, under the Transport Bill, but may I just mention one?

The Railways Property Board has contributed useful money to British Rail, where it is carrying out developments jointly with private developers. Why not leave it where it is and let British Rail have the benefit of appreciating land values and increased rates? Why did the Government even consider placing the very successful Ordnance Survey in private hands? We have not heard much of that recently, so I hope that that idea has been dropped.

I hope that that is also the case with the Government's suggestion of taking the testing of heavy goods vehicles and public service vehicles out of the public sector, when even the Ministers responsible have said that it is a most efficient unit and is practically the best in the world. This is why we say that this Government is doctrinaire. Why do these things to units of an organisation which are functioning so successfully?

In conclusion, I hope that this debate will encourage the Government to drop their doctrinaire attitude and, in words which some noble Lords have used today, will generally accept the essential need for public ownership within our mixed economy, and will ensure that there is adequate investment to assist the development of these organisations on which the private sector depends. As we have said in previous debates, the amount of development in the big public organisations can greatly affect the success of private industry, and many firms are looking to the development of the publicly owned organisations in order to get out of their own recession.

5.43 p.m.

Lord Boyd-Carpenter

My Lords, may I join with most noble Lords who have spoken so far, in paying a short but very sincere tribute to Derrick Amory? I do so with particular feeling, because I think I probably knew him longer than most noble Lords in this House, having the privilege of first getting to know him well before that war in which, as your Lordships know, he served with such gallantry and suffered so severe a wound. I shall miss him a great deal.

I could not help recalling, particularly during the opening passages of the speech of the noble Lord, Lord Underhill, the experience which a good many noble Lords now in this House had—for example, I see the noble Lord, Lord Bruce of Donington—of serving in the 1945 Parliament, when the procession of nationalisation statutes was making its slow but inevitable progress towards the statute book.

Those of your Lordships who had that experience will recall the splendid and rather touching enthusiasm with which those measures were supported. There was going to be a new heaven and a new earth, under the magic touch of public ownership. Your Lordships may recall that ringing remark of the late Aneurin Bevan, that they would bring the commanding heights of the economy under public ownership. Now perhaps if that great master of phraseology was still with us he would describe them as the demanding depths.

But I have never taken—and I shall quote an example in a moment, if it be necessary, to demonstrate it—a doctrinaire view of public ownership. My own view has always been that each case should be looked at on its merits, and that there are undoubtedly cases in which public ownership is the only sensible solution, as there are equally cases in which to impose it is lunacy.

I can quote in self-justification my experience a quarter of a century ago, when I was Minister of Transport—my noble friend Lord Thorneycroft will recall the occasion—and when I incurred a great deal of demerit with my own party, by declining to push the denationalisation of road haulage through to the final point of dismembering the national road haulage network, which could not be disposed of en masse and which I declined to break up for the purposes of sale. I quote that only to show that, not only in making a speech but as a practical working rule, I have never taken the extreme view which some noble Lords, and still more people in another House, take either way on this vexed question of public ownership.

It is in that spirit that I approach this very peculiar Motion which the noble Lord, Lord Beswick, has put on the Order Paper. His speech—if it is not an impertinence for me to say so—was admirable. But I would not extend that comment to this quite extraordinary Motion, even in its final or expurgated form which we arc actually, as a result of a variety of matters which I will not go into, now debating. First, it confines itself to a grumble, because some of Her Majesty's Ministers have dared to say unkind things about some nationalised industries. It goes on to criticise proposals for the return to the private sector of certain aspects of publicly-owned enterprises, and then has a wonderful ringing phrase about, a more constructive and positive policy which recognises the value of a properly balanced and integrated mixed economy". I should like to pursue that last splendid phrase, which must have cost the noble Lord, Lord Beswick, or his assistants, much midnight oil and, at a time of need for energy economy, one realises how dearly that has been bought. What does that mean? Does it mean that the party for whom he speaks—and he speaks for his party from that Box—is committed to the mixed economy? Has he studied the speeches of his leader in another place and, still more, the speeches of the likely successor of that leader, both of them advocating, in their different ways and with their different emphases and techniques, very substantial increases in public ownership? It is very easy to say that you want a mixed economy, if you do not predicate how the mixture is made up.

In that connection, I could not help recalling the delightful cartoon in the Daily Express the other day. At some business conference, a gentleman was ordering a drink and turning to the waiter said, Make it a gin and tonic, with a 51 per cent. controlling interest for the gin ". I suspect that that is rather the attitude of the noble Lord, Lord Beswick, except that I do not think he would stop at 51 per cent. This is, of course, very germane to his Motion.

If Labour Governments, when they are in office, regularly nationalise and transfer sections of British industry to the public sector, as they are entitled to do if they have won a majority at the election and have put it in their election manifesto—I shall not pursue in the noble Lord's presence the sensitive question as to who in future will draft that manifesto, or be responsible for it—then surely it follows, if one believes in a balanced economy, that when a Conservative Government are returned to power, with a manifesto commitment to de-nationalise certain parts of the nationalised sector, they arc fully entitled so to do. I hope that the noble Lord, Lord Beswick, will take this point. Unless this is so, it is sheer mockery to talk about a mixed economy, if what he really means by it is simply that the mixture gets stronger and stronger on the nationalised side, and smaller and smaller on the private sector side. If the noble Lord is asserting the right of his party, should it ever again come to office—perhaps that is a matter of entertaining speculation at the moment—to nationalise some more, why on earth, if he believes in a mixed economy, does he grumble when a Conservative Government, looking at particular cases on their merits, denationalise?

The noble Lord objects to their de-nationalising profitable sections of the public sector. I hope that the noble Lord will be realistic. I have had to undertake the process of de-nationalisation and I can give noble Lords opposite the present of saying that it is not a particularly easy thing. If you are to denationalise you have got to find a buyer. It is plain that if you are to find a buyer—at least a buyer whose mental stability might not involve certification—it is unlikely that you will be successful unless the enterprise in question looks as though it is going to be profitable. The noble Lord—I will give him another question if he wishes to rise so that we can economise his time, which I know is precious—should consider this: if, for example, someone were to say that he was quite prepared at the moment to buy British Steel that might raise a question, (might it not?) as to his mental stability? If the noble Lord wants to intervene, of course I shall be delighted.

Lord Beswick

My Lords, can I put it this way: if noble Lords opposite take such pleasure in decrying the public sector, is it not rather odd if they sell off the profitable ones and then say how badly the rest are doing?

Lord Boyd-Carpenter

My Lords, let me take this by stages. The noble Lord did not challenge my proposition that it was likely, if you were permitted to sell off—and I think he accepts that you are—that you would sell off those which are saleable, otherwise you would be wasting everybody's time. Those are the profitable ones. The noble Lord then led me very tactfully to the second part of his Motion: disagreement with the utterances of Ministers on the subject of the nationalised sector. The noble Lord quoted the Prime Minister's moderate phrase about "a financial haemorrhage". It is typical perhaps of my right honourable friend's habitual moderation of language and elegance of phrase that she used the word "haemorrhage" instead of, as perhaps others ight have, the synonym "a bleeding shame".

The attitude of noble Lords opposite, that you may not criticise any part of the public sector, is extraordinary. Given whatever its faults, given the present position of the public sector, or some parts of it, and given the enormous deficits which are having to be met by taxpayers' money, is the noble Lord suggesting that Ministers should indulge in paeons of praise of the public sector and say, "This is wonderful, isn't it? It's only costing us £3,000 million this year. Aren't they absolutely marvellous?" The noble Lord is hardly in the real world when he suggests that any Government, even a Government composed of his noble friends, would not be disposed on occasion to make a mildly critical observation about a section of activity which was involving this very substantial sum of money. If the Government did not do so, we should find many other people who would.

Those of us who are in industry—and many of us are in industry which, despite the problems of the day, still returns a modest profit—are not all that enthusiastic about being heavily taxed in order to make up the deficits of other industries which are making a loss, simply because they are in public ownership. Noble Lords must understand that those who struggle in the conditions of today to carry on a viable enterprise are not full of enthusiasm at having to hand over substantial proportions of the hard-earned profits that they make in order to maintain other industries which, for whatever reason, are themselves failing to pay their way. If after his experience both as a Minister of the Crown and as the very successful head of a nationalised industry the noble Lord does not understand that, it suggests that he really does not understand how people's minds work. Does the noble Lord, Lord Kaldor, wish to intervene?

Lord Kaldor

My Lords, does not the noble Lord agree that it clearly follows from his remarks that the lower the level of economic activity and the less the profits that are earned, both in the public and the private sectors, the more the enterprises which will be run at a loss, and that if more enterprises are run at a loss the necessary consequence will be that the state will have to take over more enterprises? Instead of re-privatisation, there will be the very opposite.

Lord Boyd-Carpenter

My Lords, I could not count whether there were three or four non sequiturs in that observation. But the most obvious and patent of them, which therefore stuck in my mind, was Lord Kaldor's suggestion that if an enterprise was failing the State would have to take it over.

Lord Kaldor

My Lords, that is right.

Lord Boyd-Carpenter

My Lords, I certainly do not accept that. If an enterprise is failing, it by no means follows that other enterprises should have to be taxed in order to maintain it. If it is failing, it is failing for one of several reasons. Either it is making a product which people do not want and which they are not prepared, for that reason, to pay a reasonable price for, or it is inefficient, or it is extravagantly run. I simply do not accept that, although I am grateful to the noble Lord for giving us this blinding revelation of the philosophy which he holds. Your Lordships will be aware that it is very interesting as indicating the noble Lord's philosophy. And he is a most distinguished economist. Your Lordships will recall that successive Governments of the party opposite have acted with absolute devotion on the noble Lord's advice. We are learning this afternoon some, at least, of the explanations of the disastrous outcome of the financial policies of quite a number of Labour Governments.

Lord Kaldor

Conservative Governments, also, my Lords.

Lord Boyd-Carpenter

My Lords, I have already given way and I must not detain the House for too long. That was a most interesting intervention and the noble Lord will allow me to thank him most warmly for it. It was most helpful and it greatly sustains my argument. To return to my argument, why does the noble Lord, Lord Beswick, grumble because there are criticisms? Is he really arguing that there is no ground for criticism? Unless he is arguing that, surely it is not only the right but it is the duty of those responsible for managing our national affairs to make criticisms when they are due. Does the noble Lord really feel that those men, many of them very able men, who run these industries are such shy, sensitive flowers that they will be blighted by a harsh word from my noble friend, that a slight comment from the Secretary of State for Industry or an aside by my honourable friend the Parliamentary Secretary at the Board of Trade will blight them and that they will go into a decline? If there were such people in charge of such industries, the sooner they went into a decline the better. But many of them are very able men. I join in the tribute which my noble friend Lord Thorneycroft paid to Sir Derek Ezra whose services to the coal industry, to the country and to a succession of governments of all colours are very remarkable and deserving of the highest praise.

So what does this motion boil down to? It boils down to a one-sided view of a mixed economy, an economy which is always being mixed one way but which it is an offence to mix backwards. It sets up the idea of a public sector so sensitive, so delicate that even if it fails in any respect nobody is allowed to point this out. This is quite an extraordinary Motion, so may I suggest to my noble friend a somewhat entertaining outcome to the debate. This is basically a Motion for Papers and there is a precedent for acceptance by the Government of a Motion for Papers. The precedent is that of that great man, the late Lord Woolton. May I suggest with respect to my noble friend that he accepts the Motion for Papers and then tomorrow morning, in compliance with the wishes of the House, delivers to the private residence of the noble Lord, Lord Beswick, a selected mass of the quotations from the 1940s onwards of those who have said that our economy would be saved by nationalisation. It would be a wonderful collection which would give the noble Lord a most entertaining and reminiscent weekend.

6 p.m.

Lord Davies of Leek

My Lords, it has been entertaining to listen to the intellectual gymnastics of the noble Lord who has just sat down because he has put logic before common sense. In the first place he has misinterpreted the Motion, as I will show in a moment. Nevertheless, do not let us spoil the atmosphere. There was a purpose about this. We have had an admission from a noble Lord opposite who has had experience in this House and in the other place as long as I have had and who was an excellent Minister, and a very able noble Lord who has just spoken. We have had an excellent example of the capacity of both men when they were in positions of responsibility.

This was meant to be not just a carping criticism but a serious look at the problems confronting us today. If one is eulogising private enterprise, God knows what we think of it at the present moment all over the world, not just in Britain—the business system seems to be breaking down and there is no one at the moment, including the monetarists, finding the answers. Those of us who have been around a long time know how difficult it is. Now we have an admission that both sides of the House recognise that ownership of some of the public sectors is needed to get—and I will use the words contained in the Motion—" a balanced economy ". We may argue about how we will finance it; we may argue about how much. Nevertheless, we are not arguing about that tonight; we are arguing for the acceptance of the fact that public ownership is needed. I will deal with one case particularly and I shall try to speak for only 10 minutes. I do not want to reiterate all the arguments because the House is getting tired. I will deal briefly with forestry later on.

A Government, whether it is Labour, Liberal or Conservative, do occasionally dream a few dreams and think about beauty. When the forestry devastation Bill comes before this House to "pinch" the land set up by an intelligent Government in 1920 for the Forestry Commission, will noble Lords from the backwoods of Britain pile up those Benches like trenches and fire at the Government as they have been doing all this week on wildlife? This is a section that is needed for the spiritual health of the country as well as for the economic areas, such as forestry. Those are the kind of things. The ideology of the—not of noble Lords but of some members of that party opposite is becoming as fanatical as that of some of the communists, whom they talk about. That is the problem. Monetarism has gone mad and it is rather pathetic.

I will not analyse the semantics of this point. The noble Lord has interpreted it completely differently from what the Motion is aiming at. As I promised to take only about 10 minutes I will not analyse it like he did; I will get down to the "nitty-gritty". Let me ask the 64,000 dollar question. I am suspicious about steel. I think, having read the speeches by the West German Minister, that there is now an underground agreement that the main steel industry of the Common Market of Europe is no longer to be in Britain or France or anywhere else but in the Ruhr and parts of the Saar, and there is an underground agreement somewhere that the steel industry could possibly move into that area. If that is true, the British steel industry is fighting a losing battle.

We want to know about this because there seems to be a common acceptance that the European steel industry will be built up. So are we cutting off the steel industry and bringing in Americans galore? There are more Americans than Tommy Lipton's good tea leaves advising the Prime Minister, rolling through the door of No. 10 every day of the week. They are supposed to be experts on finance, yet America has bigger problems than we have and in unemployment in Detroit. Anyone who knows the car industry there will know the truth. They are facing the same problem; I have been there and have seen it. So let us shut up in running Britain down all the time and running anybody else down who happens to criticise what this Government are doing to the public sector. I want an answer one day about the steel industry.

This is not a policy. We are not judging on merit. We are judging, on an ideology, as to what we should do. An avaricious, greedy, covetous, grab and grasp group of people with no souls will willingly take their chance at public enterprise that is being sold off and which has already been subsidised by the taxpayer for 30 or 40 years. My noble friend pointed out, but he had no time to go into the fact that there were no shares being paid out until the Labour Government nationalised and took over the railways of Britain.

With regard to the roads, we could have done a better job on the roads. If we are accused, we should remember that there are responsible Members on both sides of the House, and there is the chairman of the Commons Treasury Select Committee, none other than the right honourable Edward Du Cann who in his report talks about investment. What does he say in Hansard on the 7th May 1980? This is one of the leading, able, financial experts and industrialists. He says at cols. 328 and 329: My right honourable and learned friend is right to say that the Government cannot control everything". Right. Nor should they attempt to do so. Again, he was right when he said that perhaps there is a new mood of realism in our nation in that people are understanding better the realities of our economic situation. That is all the more reason why the Government should set an example of good management in their own house. More serious still is the continuing emphasis that is being given to cutting capital rather than current expenditure … the Committee received extremely worrying evidence. That is the committee on which the noble Lord sat in his day — A statistic or two will illustrate my point. Capital expenditure will fall in 1980–81, as a proportion of total programmed spending, from 13 per cent. last year to 11 per cent. It was twice that six or seven years ago. Between 1972 and 1978 public sector capital investment fell by nearly 20 per cent. The result of all this neglect over many years"— and this is pathetic— is that large parts of the nation's vital capital structure are ageing, deteriorating, not being built or not being modernised. The longer the work is delayed, the more expensive it will become; and in fact part of Britain where we are hoping to build up the tourist trade looks like a slum, because we are cutting local government services, sewerage systems, refuse collection. It is terrible for those of us who have knocked around the world, to see this great country of ours deteriorating because of this ideological fanaticism to cut sections of the public sector in the hope of reviving industry in this country. People are beginning not to come here because of it. That report, the chairman of which is a respectable member—and probably always will be—of the Conservative Party, should make this noble House think.

The other night I listened to the right honourable lady. I have every respect for her but she is like an ornamental catalpa tree, sitting there, trumpeting away, fanatically. I do not think she will last as the leader of the party opposite if they are going to carry on this policy, because the country will be in such a state that no longer will there he anything else that they can sell off.

I have one minute that I can spend on my forests. I do not want to trespass on the time of the House; we have heard things repeated 10 times over. Are we going to sell off this forestry land? Are the Forestry Commission lands going to be sold? If they are, why not sell Hampstead Heath as well? There are some Philistines who would do that! Is not there something worth saving besides pounds, shillings and pence, and which will give a nation at least the timbre of greatness? If ever this microcephalic Government start selling off forest land, I hope when they start to do it, as I said at the beginning, noble Lords will come here and fight tooth and nail to prevent this public sector forestry being sold to private enterprise. Only 8 per cent. of Britain now has this wonderful chance of forest land, compared with about 24 per cent. over the rest of Europe.

I promised to be 10 minutes and I have been, and I am cutting some of my speech. But I will finish with a tribute to a noble Viscount I had the pleasure of working with, who has now passed away and to whom tributes have been paid tonight; we worked on the Commodity Commission together. I thought he was a great, noble—all right, Conservative—gentleman, and there is no better praise you can give to a man than that.

6.11 p.m.

Lord Nugent of Guildford

My Lords, I certainly join with the noble Lord, Lord Davies of Leek, in that tribute to my old friend Lord Amory. I must thank the noble Lord, Lord Beswick, for giving us the chance to discuss this interesting topic, and in fact I can, perhaps rather surprisingly to him, give him a little support on the first part of his Motion. As an old boy of the club of chairman of nationalised industries, I have some sympathy with the first part of the Motion. Chairmanship of a nationalised industry, as those of us who have so been know, is a very arduous job; it really is a bed of nails. You are on your own. It is poorly rewarded in material terms, though somewhat better now than when I started eight years ago; even the honours which used to be distributed to those who took part are now withheld.

In fact there is only one motive left and that is pro bona publico. I agree with the noble Lord that there are some very dedicated men there. In addition to guiding the affairs of a major national industry, the chairman must cater for the political relationship with the Secretary of State to whom he is responsible. He must, therefore, develop a relationship of mutual confidence with the Secretary of State, so that the management of his industry conforms so far as is possible with the political policies of the Government of the day and does not expose his Minister to political attack. He must take care to warn the Secretary of State in good time if a situation is developing in the industry which may have political implications. In return he should be able to expect from the Secretary of State reasonable support in the political field for the leadership in and management of the industry as it develops policies to meet the future.

All this means that a chairman must have exceptionally well developed antennae to cultivate public confidence in his industry, both in the industrial field of his customers and in the political field of Parliament and the Government in particular. If then his Minister gratuitously knocks him about, for political or other reasons, he is put in an impossible position. He cannot retaliate publicly without causing a public row, but if he takes it lying down his position of authority in his industry is undermined. In my opinion, such action by Ministers is counter-productive in terms of the good management of the industry concerned and should be avoided at all costs. I add this point, that we all know that when a chairmanship falls vacant today there is no ugly rush of first-class applicants to fill it; in fact it has become increasingly difficult to find men of the necessary calibre, and the supply will dry up altogether unless these chairmen are treated with reasonable consideration.

With the other parts of the noble Lord's Motion I do not feel so much sympathy, and I have a critical word to say. In my opinion, justification for nationalising an industry must, as my noble friends on this side have said, be exceptionally strong, because it is thereby protected from the risks of the market. And here I entirely agree with my noble friend Lord Gowrie, who most trenchantly dealt with this point. Private industry and commerce must sell its goods and services at home and abroad in competition with all comers. By the profit on the total operation we as a nation make our living. Companies or individuals who fail to make a profit pay the penalty and go out of business. I do not think I need deal further with the point raised by the noble Lord, Lord Kaldor, after the comprehensive comments of my noble friend Lord Boyd-Carpenter. They do go out of business, and governments on the whole are not going to pick up the bits.

No such penalty hangs over a nationalised industry. In the great nationalised utilities, which are mostly monopolies, if there is a trading deficit it can always be met by increasing the price to the customers, the public. And even in the nationalised industries which are not monopolies there is always taxpayers' money to be drawn upon to cover a deficit or to provide new capital. These are facts. Experience has shown over the past 30 years, during which we have had a great deal of experience of nationalised industries, that, compared with the private sector, the public sector operates at a serious disadvantage in terms of reducing overmanning and increasing productivity, and thus reducing the cost of the service, the product, for the benefit of the nation. This is a matter of fact. It is particularly evident at the present time, when we see in the private sector great resilience, great initiative being shown by firms up and down the country in keeping their selling prices competitive, whereas the public sector is increasing its prices very much more in percentage terms.

In addition to this sheltered trading position, the public sector carries the further burden for the nation of index-linked pensions for all its employees, thereby giving them at the expense of the nation protection against inflation, which nobody else gets.

Lord Glenamara

My Lords, will the noble Lord allow me to intervene? Is he aware of the reply to a parliamentary Question in another place which stated that 64 per cent. of all pensions are index-linked? That means a vast number of pensions in the private sector are index-linked as well. Can we end this myth that they are only in the public sector?

Lord Nugent of Guildford

My Lords, I should like the noble Lord to give me details of the private firms that do give index-linked pensions. I simply do not believe it. It cannot be done. Perhaps the noble Lord, Lord Glenamara, will give me that information. The fact is that in the public sector the pension funds provide what pensions they can, and in order to keep at the level which has been set every year the employer's section has to increase its contribution in order to keep the pension fund solvent. Private firms cannot do that; they cannot go on increasing their prices in order to do it.

That is not to say that I am knocking nationalised industries. I should like to pay a tribute to the great efforts that are made by boards of management generally to try to improve productivity, to try to reduce overmanning. But the fact is that these organisations do lack the incentive and the urgency of private business. Those which can make a profit I applaud; British Gas has been mentioned and British Aerospace as well: very good. But generally speaking this is the situation. And it is against this background that I maintain the general proposition that nationalisation is only justified in the national interest in very exceptional circumstances, such as overwhelming techno logical advantage, perhaps in one of the great utilities, electricity, gas water, the industry in which I served myself.

In this context, Britain has one of the biggest public sectors in the world of free economies—some 25 per cent. of the working population are engaged in the public sector. And—to answer the point raised by the noble Lord, Lord Underhill—in Germany the relevant figure is 11 per cent., in France 13 per cent., and in the United States it is 15 per cent. That gives some idea of the extent to which our public sector is larger than that of other nations with whom we must compete.

I believe that the over-large public sector in our country is a positive disadvantage to our competitiveness as a nation, to our prospect of winning new markets, expanding our businesses and reducing the number of unemployed. Accordingly, I warmly support my noble friends and my right honourable friends in the Government in their policy of selling-off selected bits of the nationalised industries where they have a reasonable prospect of profitable, independent existence. I believe that that would be for the benefit of the economy. I believe that we should be moving into a better balance in the mixed economy, which we all accept, than we have inherited from the last Government.

A further inherent weakness in nationalised industries is undoubtedly in the area of industrial relations. For several years I conducted the industrial relations of the water industry, including, of course, the wage and salary negotiations. At this moment, when wage negotiations in the water industry have reached a critical point, and the leaders of the trade unions concerned arc threatening industrial action unless their demands for a wage increase are met, the question is squarely posed whether any body of men should be given the power to hold to ransom the life of the nation. That is the position. That is what industrial action, which stops the supply of water to every home and work place in the country, means. The same goes for electricity and gas. That question, clearly put to the nation, could have only one answer and that answer would he a resounding, No, from everybody—high, low and in the middle. Yet, that is the dilemma with which we as a nation have to live. In my judgment one day some government must grasp the nettle and consult with the trade unions concerned with a view to legislating to set up a structure of arbitration to settle the wage and salary levels of these great utilities on which the life of the nation depends, without the kind of hassle that is going on at present—and the sooner the better.

In the meantime—and I say this with regard to old friends in the water industry—I am sure that the great majority of those who work in the water industry, whether salaried staff or manual, just would not take action to cut off the water supply on which our life depends and that goes for the trade union leaders too. I therefore earnestly hope that wiser counsels will soon prevail. In conclusion, I reckon that the major single factor—and I say this with all sincerity to the noble Lord, Lord Beswick, who I know cares a great deal for the public sector—which would improve the climate of opinion for nationalised industries, for their welfare, would be stability in this area. If the Labour Party would stop committing itself to a whole shopping list of new nationalisation, if we could reach stability in this area, then the passions that are aroused as regards this matter, not just in Parliament but throughout the country, would have a chance to die down and there would be a reasonable prospect that gradually, with stability, the public would stop shooting at these bodies, fighting over them, and there would be a reasonable chance for the boards and the managements to make the best of their industries for the benefit of all concerned.

When we look at other countries like France, Italy and so on which have been mentioned by the noble Lord, Lord Underhill, we find that nationalised industries work quite well. A motor car industry like Renault is marvellously successful and the banks in Italy are doing extremely well. However, they stabilised years ago and they do not keep on extending their boundaries. It is the continuous extending of the boundaries which raises passions and makes it impossibly difficult to give a fair judgment to the nationalised industries as they now exist. So I hope and pray that the noble Lord with much common sense and with great ideals in his head, will have some influence on his colleagues to stop them committing themselves to another great slice of nationalisation. Let us denationalise what can reasonably be done and then, for Heaven's sake!, let us call it a peace and try to make the best of what we have.

Lord Kaldor

My Lords, before the noble Lord sits down I should like to ask him what were the last industries that were nationalised by a Labour Government for reasons of nationalisation'? So far as I know, the only cases of nationalisation were those done by the Conservative Government under Mr. Heath which nationalised Rolls-Royce Aero-Engines and, I believe, also Upper Clyde Shipbuilders. There was also British Leyland. They were all cases of nationalisation because the companies were bankrupt.

Lord Nugent of Guildford

My Lords, I shall give the noble Lord a comprehensive list of what his party nationalised during their years of office from 1974 to 1979. I shall give him a supplementary list of those that his party is committed to nationalise now—such as insurance, construction, banking and so on. I earnestly ask the noble Lord, with the influence that he possesses, to try to get some common sense into this. Unless we get stability our nationalised industries will never have the chance that they have in other countries to make the best of themselves.

6.26 p.m.

The Earl of Longford

My Lords, in recent times I have followed the noble Lord, Lord Nugent of Guildford, so slavishly on one or two moral issues that I was rather nervous at the thought that today I might have to differ from him sharply. But at any rate his opening remarks were of the utmost value and indeed fitted in extremely well with one aspect of the Motion and one aspect of what the noble Lord had to say. The noble Lord, Lord Nugent—and it comes particularly well from him in view of his very successful conduct of a public authority—knows extremely well and told us very clearly that the nationalised industry chairmen have not had a fair deal to the extent that we might reasonably expect. I shall not dwell on his later remarks because they would need thinking over more carefully.

There have been a number of very important speeches. Indeed, all the major points have been covered and, therefore, I shall try to think of something else to say and not repeat what has already been said. However, I must repeat two matters which have been mentioned. I must certainly repeat the tributes paid by so many people to Lord Amory. It has been expressed in different ways by different members of the House, notably by the noble Lord, Lord Boyd-Carpenter, but I would suggest that there is probably no member of this House whose opinion one would rather have on any point affecting the technique of debate or more fundamentally a moral topic. I would think, therefore, that his opinion was perhaps the most valued of any individual noble Lord's opinion during his life.

I should also like to repeat the handsome tribute paid by the noble Earl, Lord Gowrie, to my noble friend Lord Beswick who referred to him as widely experienced, and—what is even more important—widely respected. There was a time—now he is my leader and I am an acolyte—when I was a Minister of Civil Aviation and he was my parliamentary secretary. Even in those far off days he was a man already beginning to be much respected and that has continued ever since.

About 50 years ago I came to know the arguments in favour of nationalisation very well and as I was then working in the Conservative Research Department I found it easy to believe many of them. A few years after that I became a Labour councillor for the Cowley and Iffley ward of Oxford—we were a fairly Left-wing party in those days—and I came to know the arguments for nationalisation just as well as I had known the arguments against nationalisation and, in due course, I believed many of them.

But at no time have I ever supposed that if my party, the Labour Party, came to power they would nationalise all the means of production, distribution and exchange. I have never supposed that that would happen. In my opinion there is no possibility of that happening in the lifetime of the youngest here. I have always assumed that we should have a mixed economy but that it would be necessary to possess what later came to be a called the "commanding heights of the economy". If I may say so very respectfully, the noble Lord, Lord Boyd-Carpenter, fell below his usual standard of wit and humour by making a very ponderous reference to—what did he call them?

Lord Boyd-Carpenter

My Lords, as the noble Earl is polite enough to be interested in my phrase, which I personally rather like, I can tell him that it was, The demanding depths of the economy as an antithesis to the commanding heights".

The Earl of Longford

My Lords, the noble Lord is a master of phraseology. In his time he was the most brilliant epigrammatist in the Oxford Union. But I think that that is the feeblest joke that he has ever made, either in the Oxford Union or in your Lordships' House, and I know that he will never sink to such demanding depths again. However, I hasten to say that he made many other points which were interesting to listen to.

For all those years I and many others in the Labour Party have believed in a measure of nationalisation. How far nationalisation should go will always be a matter for argument. It is a practical question, and it is no good anyone trying to dogmatise now, saying that we have reached the perfect amount, that we must never go any further or never go back in any direction. We shall continue to argue about that side of it.

This debate is not only about what one might call economic performance; it is about attitudes. The Motion starts by referring, indirectly, to attitudes. If I may say to my noble friend Lord Boyd-Carpenter —if I may venture still to call him that—the remark that he found so amusing to deliver is a good example of the contemptuous way in which over the years Conservative statesmen have spoken about the nationalised industries. If we made that sort of remark about private industry, people would think that we were four-letter men. It would be thought to be a disgraceful remark to make. Anything goes about the nationalised industries; that was so in my time when I was a Minister and it is so today. That sort of remark is just tossed off, the man who makes it thinking nothing of it.

However, I think that we should consider the question of attitudes a little more closely. The noble Lord, Lord Kaldor, referred to the coming of commercial television. I very well remember the debates in those days. The Conservative notables—including the noble and learned Lord, Lord Hailsham of Saint Marylebone, then a rising star—took a very poor view of commercial television. They thought that the introduction of commercial standards would lower the tone of the public corporation and of broadcasting generally. The noble Marquess, Lord Salisbury—then the Leader of the House—gently explained that, from his experience of the City, although politicians might regard their morality as a great deal higher than that of businessmen, curiously enough in business it was exactly the other way around. The noble Lord, Lord Thorneycroft, is equally eminent in politics and business, and he will know that what Lord Salisbury said was remarkably true.

I remember the time when, having been Minister of Civil Aviation, I became chairman of a bank; I took the Underground—I did not run to a company car in those days—from the Mansion House to Westminster or vice-versa, and I suddenly found myself in a world of different values. I am not saying which values are better or which are worse, but it was a world of different values. Many people in this House today have had experience of business and politics and they know to what I refer.

Turning to the nationalised industries, they come halfway between Government service—such as the Civil Service and the fighting services and, for that matter, politics—and private business. I think it is fair to say—and I am not being disrespectful to the nationalised industries—that they have not had time to work out a completely new identity for themselves. Therefore, I do not think that the public are quite sure how to regard them. But as the noble Lord, Lord Thorneycroft, and other noble Lords have said, there they are. There is no question of abandoning the nationalised industries. They will be a very considerable sector of our national life, and this country will not succeed unless the nationalised industries are successful. So we start from there. It is no good sniggering or sneering at them. I am not now referring to what my noble friend Lord Boyd-Carpenter said. It is no good deriding them. That is not helpful to the country. The noble Lord, Lord Nugent, brought out that point very well.

However, I must record my opinion, and it endorses the first part of the Motion of the noble Lord, Lord Beswick, that over the years Conservative politicians and Conservative newspapers have gone in for this very process. They have derided these industries and those who perform in them at high or low levels. I was Minister of Civil Aviation for three years and I found out how that process worked; day in and day out there was this process of denigration and disparagement. It did not matter whether the chairman was a distinguished businessman like the late Miles Thomas or a Marshal of the Royal Air Force like Sholto Douglas. It did not matter who the chairman was and I do not think it was a question of who the Minister was; they were recorded as contemptible objects and they were treated in that way in those years gone by.

In his speech the noble Lord, Lord Beswick, produced some fairly good examples—and no doubt he will produce a great many more—of how that process continues today. I see that. understandably at this point, the noble Earl, Lord Gowrie, has fled from the House because I was going to ask him rather an awkward question. However, if he returns I may still have an opportunity to do so. The noble Lord, Lord Beswick, produced examples of how these industries are referred to by Conservative leaders. However scholars may explain away Mrs. Thatcher's remarks, if I were working in a nationalised industry now I would regard her as having continued this process of denigration and disparagement, which was first begun so many years ago.

How can we overcome this attitude of intolerance and, indeed, contempt towards people who are undoubtedly doing a very important job? We must try to ask ourselves what is to be our attitude to private business, public service and nationalised industries. I have spoken for 11 minutes, which is one minute longer than the noble Earl, and I shall not go on for long. When I was an undergraduate my economic set books were Adam Smith's Wealth of Nations, which I believe has recently been introduced to Mrs. Thatcher—or at any rate she has recently quoted from the Wealth of Nations as a new bible—and Karl Marx. The noble Lord, Lord Robbins, did not have the pleasure of teaching me those subjects because he left New College to go to higher things at just about that time. However, those were our economic set books. I cannot imagine which would be more likely to do harm to the immature mind: the Wealth of Nations, which I have consulted in the Library after a lapse of 50 years and which makes excellent reading (there is a copy free of charge in the Library), or Marx's Das Kapital, which undoubtedly does not make for such easy reading. If anyone wants a quick guide to Marxism, they had better take the Communist manifesto, which can he read in half an hour.

Let me take Mrs. Thatcher's new bible, the Wealth of Nations. Adam Smith had the idea that if a business man served his own interests, he served the interests of the country. To quote only one sentence: By directing industry in such a manner as his produce may be of the greatest value"— that means to himself— he intends only his own gain"— this is the businessman— and he is in this, as in many other cases, led by an invisible hand. To promote an end is no part of his intentions". So he believed in the invisible hand. That is what we are being guided by in Britain at the present time, the invisible hand—and unfortunately its handiwork is a bit too noticeable to millions of unemployed. That is the doctrine. She espoused Adam Smith only the other day, and that is what he taught us.

I was subjected to these two poisons. I can only hope that one poison, so to speak, was an antidote to the other. I quite agree that the Marxist poison is at least equally as poisonous and possibly in the end more so, because it is more immoral. At least Adam Smith was a moralist. Heaven forbid that the Labour Party should ever go Marxist. Of course there have always been elements who were Marxist in the Labour Party. When I first joined some of them were crypto-Communists, but there have always been such people about in the Labour Party. But there are some odd fish, if I may say so respectfully as someone who lapsed many years ago from the Conservatives, even in the Conservative ranks. At any rate there have been these Marxists in the Labour Party, but Heaven forbid! that they should ever get control or become dominant.

I now say something that I hope will not cause offence to the noble Earl, Lord Gowrie. Well, it cannot, because he is not there, but it might cause offence to the noble Lord who is going to wind up. I hope it will not cause offence. These perpetual attacks on the nationalised industries, if you like, are a smaller aspect of this policy, but the ideological fanaticism, this pursuit of monetarism which is the latest version of Adam Smith's doctrine carried to the extremes it is now being carried, is one way in which the Labour Party could be driven into Marxism. I hope that point can be placed in front of noble Lords opposite.

I shall not continue further. I end the way I began: we all want to make a success of the nationalised industries in our better moments. I only hope that the Conservatives will realise that their attitude to the nationalised industries can be, and has often been, and is still being very damaging to the country, and I hope and pray that they will reconsider their attitude in the future.

Lord Boyd-Carpenter

My Lords, before the noble Earl sits down, perhaps he would address himself on that last point to the point my noble friend Lord Nugent made so well; that so long as the Labour Party goes on advocating an extension of nationalisation, it is quite inescapable that Conservatives will criticise it. If Labour will drop those desires of extension and call it a day, they are likely to find the whole atmosphere changed as the noble Earl wants, and as I want.

The Earl of Longford

My Lords, I cannot make any sense of that suggestion. The noble Lord made a denigratory remark, albeit it may be said humorously, about the nationalised industries. Whether the Labour Party is trying to extend the area or not does not affect the issue. We have got these nationalised industries and I beg the noble Lord, certainly as much respected as any Member of this House, to think again in the future.

6.44 p.m.

Baroness Phillips

My Lords, I begin to feel that it is a pity we ever invented the word "nationalised" industries. I recall quite recently doing some canvassing, and a very strange old lady told me she did not want to support the Labour Party because they were going to nationalise all women. I suggested to her that possibly it would have increased her chances, but she did not seem to accept the nature of my comment. When I was a young Socialist we did not speak of nationalised industries, and neither did the noble Lord who introduced this debate. He referred to public owned. I always saw community-owned facilities.

I certainly think that you could never really give a true service to everybody if you were going to demand a profit. This seems to me where we went wrong, and this blame must lie, also, with some of our own Governments. You cannot give a true service in transport to everyone who needs it if you are going to demand a profit from that undertaking. You cannot give a true service in energy if you are going to demand that everyone must pay for this. I repeat what I said once before; there is a total nonsense in the poor old lady who cannot afford her gas bill and has to go to the Supplementary Benefits Commission in order to collect the money to pay another undertaking owned by the community. We have got to cease this crazy idea that the nationalised industries, in inverted commas, must always provide a profit. They are there to provide a service.

When I taught school it never entered my head that I would receive a capitation fee for a child that I taught, and no doctor would want to revert to the idea that he only received a fee when he went out to serve someone. If something is community owned then that is the basis on which it must be considered. Unfortunately we moved a long way from this. In passing, I noted that the noble Lord, Lord Nugent, paid tribute to those who control our publicly-owned corporations. I would ask in passing, why has there never been a woman chairman? Perhaps they would be a little too efficient and actually get the thing moving in a much better way. We have to do a complete rethink on what we have, the publicly-owned services which are there for all the community.

I resent very much the suggestion that came again today from the Minister who introduced the debate—and he might be surprised to know my defence here—that only the inefficient will go to the wall. Just how true is that statement? I am now going to speak of private industry. It is one of my privileges to go round and give the Queen's Award for Industry, and I have had the opportunity to talk with many small industries. Why do we always talk about the vast industries? This is a country made up of many small industries; family firms which have made goods for many years.

The problems which confront these small industries have nothing whatever to do with the publicly-owned sector of our economy. They are certainly nothing to do with efficiency or inefficiency. I could have selected any number. I could have selected the textile industry, of which the noble Lord, Lord Rhodes, spoke eloquently, and which we have allowed to die. You have only to go to Lancashire or to the Midlands to talk to people not in the vast firms but in small firms which have been allowed to die, and not from in-efficiency.

You could go to the Potteries and talk to the industries there. Have they been allowed to die through inefficiency? It is not so. I just choose two small ones, but what I have to say is typical of a vast group of industries in this country. I went round a factory the other day where they employ about 200 people, all craftsmen, making small, exquisite, leather articles with a high export performance. It is a family firm which has been looking after this particular industry for many years, going back to the grandfather and the great-grandfather.

What did the owner say to me? She said, "I am terribly upset. I have got these 200 people and I am responsible for them". That is the attitude of the good employer. They have a moral responsibility to their employees. She said, "I have got to get orders. But when I get orders, look at the factors that work against me".

I would take in that connection another small craft industry. It is a family industry, an all-family firm, not making vast profits, this is the point, and working always in the factory with their workers. That is those who make pianos. I noted that the noble Lord, Lord Davies, said, as he always does, that man does not live by bread alone, and that the people who provide the things we enjoy in our leisure are equally as important as the people who provide the articles that we need for our working lives. For many years this industry has concentrated on exports, exporting about 50 per cent. of the goods it makes. It fought to get those markets. Exports are not easy to get and it does not ask for any quarter or resent fair competition.

What has gone wrong with these sort of industries? That is the question I put to the Government and I do not pretend to have the answer; I am not an economist. The value of the pound against the currencies of other manufacturing countries has a strong bearing on this. It must be only we, the British, who could turn oil into a disaster. The Arabs seem to have managed to use it much more efficiently and they are busy buying up the rest of the world, including Britain. We have hardened the pound to the point where it is difficult for those who want to export to do so, and what that has done to our tourist industry is nobody's business.

In the industry about which I am speaking, and which is typical of many, the penetration of the EEC market by goods made in the Comecon countries and South-East Asia, using cheap exploited labour, has been terrific. I always try to put over to consumers the fact that if you can buy a plastic toy for 20p, does it not occur to you that it was made by an exploited child on the other side of the world? We must educate consumers as well in considering this matter. These industries have to try to compete with that activity. Indeed, many articles are sold at the price which the acutal materials cost the industries in this country.

Pianos are made in South Korea and Taiwan, who even go in for the dubious method of selling of using some mysterious names which rather look like names we all recognise, so they mislead the public. The facts are frightening. These small industries are going under day by day, and it has nothing to do with their efficiency. Interest rates for borrowed money are far too high, and that applies equally to the public sector. Employers are having to reduce their staff and even close their factories. It is not a case of waiting for the upturn but of considering for how long they can continue to trade. Will the Government please examine this and not glibly say that only the inefficient go to the wall? Those who go to the wall may be the people who will never re-open their doors again.

6.53 p.m.

Lord Winstanley

My Lords, I hope I shall be excused if, speaking below the line, as it were, I introduce some new thoughts on this subject at this late stage. I shall probably find it necessary to do that because, I say with great respect, in some ways the Motion of the noble Lord, Lord Beswick, is defective in that it focuses our attention on the wrong issues. The noble Lord, Lord Boyd-Carpenter, described it as peculiar, and to that extent I am with him. Nevertheless, I am grateful to Lord Beswick for what he said and the way he said it, and I agreed with much of what he said. In particular I agreed profoundly when he said that we should not turn the debate into an argument about the relative merits of nationalised industries and private enterprise.

The speech of the noble Lord, Lord Beswick, was concerned mainly with persuading the Government to acknowledge the contribution—in my view the immense contribution—made to our affairs by the public sector. I entirely agree with him on that. Indeed, when a curious accident of fate projected me on to the Post Office Board for about two years, I often thought that our activities were not wholly acknowledged in the right places and that the efforts made by our posts and telecommunications did not always receive the kind of credit they deserved.

For the sake of balance—and the noble Lord, Lord Beswick, refers in his Motion to the need for balance—he should also have endeavoured to persuade some of his party colleagues to recognise the immense importance of the private sector. I appreciate that many of his noble friends recognise that—indeed, many of them are substantially the private sector—but the morale of private industry is not helped or stimulated by people like Mr. Benn going round the country talking about nationalising 100 companies in a fortnight, or whatever the figure was. I sometimes rather depart from Mr. Benn on the numbers game. I recall it was 1,000 new Peers in 100 days, so I may be wrong in the other figure, but I think he spoke of nationalising 100 companies in a fortnight.

I regret the tendency of some of the honourable friends of the noble Lord, Lord Beswick, to attack the private sector, particularly when it makes profits. I hasten to say to noble Lords on the Labour Benches that I do not for a moment regard profit alone as a wholly adequate motivation for all our activities. Indeed, I believe that on many occasions what is very profitable in the short-term can be very damaging in the longer-term. But it is not a helpful stimulus to efficiency if merely to be profitable is to attract the criticism of one particular party; and the noble Lord, Lord Kaldor, put the record right a little in relation to independent television. Perhaps the independent television companies would not have been criticised so much had they not been so profitable. Should they cease to be so profitable, as the case may be, if certain trends continue, they may then get more recognition.

Referring to another industry about which I know a great deal, although I hasten to add that I have no interest whatever in it to declare—the pharmaceutical industry—I accept there is much wrong with it. It is a highly competitive industry and I accept that much of the competition is wasteful and sometimes leads to costly duplication. It is, nevertheless, a fact that in the Soviet Union, where immense strides and advances have been made in surgery and medicine, the wholly state-owned pharmaceutical industry has not yet produced a single new therapeutic substance of any real significance. Our private sector pharmaceutical industry has changed the whole face of our lives in many ways and has abolished certain diseases from the face of the earth. That does not mean that I think the pharmaceutical industry is wholly well-organised, but I am bound to say that merely transferring it into public ownership would have very adverse effects, rather than the reverse. I am in this context thinking very much of large-scale enterprises which are sometimes almost in a monopoly situation.

Many of my noble friends on these Benches, rather like the noble Baroness, Lady Phillips, think the real opportunity for growth in both productivity and employment in this country lies in small businesses, and inevitably small businesses must be in the private sector and cannot really be in the public sector. I am glad of the recognition I have heard so often from Government spokesmen of the need to assist small businesses. Unfortunately, however, when I have talked personally to Ministers in the present Government, as I have on the subject of small businesses, I have soon found out that they seem to be talking about Ferrantis, Pilkingtons and "small businesses" of that kind. There seems to be a failure to understand that much of the wealth of Britain was built up in the North of England on small businesses which consisted initially of two men and a lad and that, by the use of a great deal of ingenuity and effort, they then grew.

It is said, as the noble Baroness said, that many of these small businesses are going into liquidation. They tend then immediately to be swallowed up by large enterprises, and once they are swallowed up with their personnel and resources by big outfits, their entrepreneurial spirit tends to be extinguished and thereby we lose a great deal. However, despite my preference for the small, I have to accept that in the science-based industries, and particularly those involved with new technology, there is no substitute for size; the massive investment necessary means very large units.

Indeed if those industries are in a monopoly situation, there are sometimes sound arguments in relation to the public interest as to why perhaps they should be in public ownership. That was a point upon which the noble Lord, Lord Boyd-Carpenter, spent some time, though I doubt whether he would agree with me wholly. Let us look at some of those industries and consider posts, about which I know something. I am quite sure that there would be much enthusiastic competition by the private sector to run postal services in London or perhaps in the metropolitan counties of Manchester or Merseyside, but I doubt whether there would be much enthusiasm from the private sector to run posts in Cornwall, Cumbria, or the Isle of Mull. There are difficulties there.

If some of these types of monopoly industries and large industries are to be in public ownership, then I certainly do not wish to see Governments seeking to intervene in detailed management decisions. However, I should like greater recognition from Governments of the fact that the huge purchasing power of these bodies, if used creatively, could be a major factor in the rejuvenation of the private sector.

The question facing us is not, Who owns the shop? but, How should we organise and structure large-scale enterprises, irrespective of who owns them, so as to make them competitive, humane, sensitive, and, above all, accountable to those who depend upon them for goods and services, as well as those who depend upon them for their livelihood as employees? On the question of depending on these organisations for goods and services, I would say that I was interested in what the noble Earl, Lord Gowrie, had to say: his view was moving towards syndicalism. He appeared to believe not just in worker participation, or co-partnership, or even worker control, but in worker ownership. I go a fair way with him in that. But once one gets into that area, one tends to forget altogether about the customer; and I believe that the customer, the consumer, the person dependent on the organization—be it nationalised or private sector—really ought to have a better voice than he has now.

We have tried many means of organising these large-scale enterprises and I think that many people have been surprised by the results. I have had close connections in many ways—family connections and so on—with the mining industry, and I remember very well that before nationalisation miners tended to feel that once the colliery companies went into public ownership, they would all be working for themselves and the whole thing would change and be very different. But in reality the divisions are still the same. It is still "us" and "them", and there is no substantial difference to the collier between the National Coal Board and the old coalmine owner, though I agree that conditions have improved vastly, but not enough, as I am quite sure many noble Lords would agree.

However, regardless of whether these large-scale enterprises are to be in private or public ownership, it is surely vital—and not just for the sake of industrial relations, but also for productivity—that we should do something in these large outfits to bring decision-taking closer to the work front. How do we make these organisations more accountable to the customer? We have tried many methods. It is interesting to look at the work of the consumer councils in relation to nationalised industries. These bodies do excellent work, but I fear that they tend to become merely the respository of complaints. They allow time to pass and perhaps indignation to wane a little, but they are not really in a position to do a great deal about the complaints. From my own experience on the Post Office Board I believe that the Post Office Users' National Council does an immensely good job, but I think that it might do a slightly better job if its chairman was also a member of the Post Office Board and was able at board level to raise matters concerning the customer, the person on the receiving end.

I was on the Post Office Board with the responsibility of representing consumer interests, and I felt that the work was interesting. If your Lordships will forgive me for saying so, l believe that there are perhaps advantages in having an amateur blundering about on a public board, occasionally unearthing things which are of great significance to the consumer but which management sometimes likes to be quiet about, or has perhaps forgotten about. We should rethink the way that we represent the consumer interest on the boards of public enterprises.

I do not want to go on and on; time is pressing. I say that we are trying to answer the wrong question. It is not the question of who owns the shop, but rather, what sort of a deal does the shop give us? If we are customers the question is asked in terms of goods and services, and if we are employees we want to know what sort of a deal the shop will give us. How accountable it is to us as employees or as customers? It is about that question that we should be thinking. We should be thinking not of whether or not the organisation is nationalised, but about how we should run it and make it much more accountable.

Finally, I should like to underline very strongly what my noble friend Lord Rochester said earlier in the debate about the need for a long-term strategy with regard to the balance between the public and private sectors and the need for stability and continuity. Here I really was surprised that the noble Lord, Lord Thorneycroft, dismissed totally our electoral system as being wholly irrelevant to these issues. I understand his motivation in so doing, but surely we should not persist with a situation in which we oscillate from a Government who want to nationalise everything, or, if they do not actually want to do that, tend to threaten to nationalise everything, to a Government who want to denationalise everything, or, if they do not actually want to do that, tend to threaten that they are going to denationalise everything. I do not believe that that kind of perpetual oscillation provides any means towards stability and continuity. It can result only in the further decline of both public and private sectors, and not in the kind of re-invigoration which we all so much need.

7.7 p.m.

Lord Gregson

My Lords, speaking at the end of this wide-ranging debate—and I am not sure that it has kept strictly to the subject—in the vernacular of recent debates in this Chamber, I feel that most of the foxes have been shot. Therefore I shall attempt to confine myself to a few remarks which may add to the debate as it has proceeded. Like the noble Lord, Lord Thorneycroft, I, too, believe in a mixed economy. I believe that there are overriding questions with regard to matters such as the defence of the realm and the economic well-being of the nation as a whole which simply cannot be left to the interplay of the so-called market forces. There are also services where duplication would be economic nonsense and would result in many areas of the country being ill-served with essential requirements. Equally, I completely accept that there is a need for entrepreneurial enterprise of all kinds, in particular in manufactured goods and direct services, and most of these are better created and fostered by the private sector. There is more than enough room for organisations of all kinds, both private and public, to contribute to the essential wealth creation needed by this kingdom both now and particularly beyond the period of the bonanza of North Sea oil and gas; and I shall return to that question later.

I am principally employed in the private sector, but I am a part-time member of the British Steel Corporation and I have been associated with other parts of the public sector, particularly those relating to energy and defence, over a period of many years. The enigma that I do not understand is that I find it quite impossible to recognise the dedicated, hard-working, competent people with whom I deal in the public sector in the role of incompetent spendthrifts, which seems to be implied by many of the comments that are attributed to the party opposite.

On the other hand, I have also found it difficult to identify some of the people I know, and have known, in the private sector under the collective noun that might relate to paragons of virtue. Further, my Lords, I also find it difficult to understand the differential distribution of chastisement and sympathy to organisations, public and private, that have been drastically affected by the catastrophic economic crisis which exists in industry in this country at the present time.

I would comment to the noble Earl the Minister that one of the problems of the sort of comments that have been made and are continuously being made is that, like when throwing a stone into a pond, the ripples spread outwards. Perhaps I can quote the leading article in the Daily Telegraph on Monday last as an example of the immoderate language which is created by this atmosphere that everything in the public sector is bad. I quote: it is the haemorrhage'"— that is quoted from elsewhere— into BSC, British Leyland, British Shipbuilders, British Railways, NCB, etc.…"; and, these parasitic nationalised work-simulation centres". I would suggest that that sort of comment is not helpful or constructive in generating the sort of feeling and effort that one requires among the workforce within the public sector.

The Earl of Gowrie

My Lords, I am most grateful to the noble Lord for giving way. The Government are not yet in the position of dictating the leaders in the Daily Telegraph.

Lord Gregson

My Lords, if I may reply briefly to that, the need for that particular quotation was, in inverted commas, the word "haemorrhage", and that did come from the Government. That is what started this whole series of comments.

Lord Thorneycroft

My Lords, the noble Lord will also note that that leader made a savage attack on the Central Office at the same time, so I hope he will feel that we are all on the same side about this leader.

Lord Gregson

My Lords, I am delighted to find an ally. In the most part, the public sector provides goods and services to the rest of British industry and to the public, and is directly affected by their economic circumstances. This direct effect means that both the private and the public sectors are finding great difficulty in maintaining control considering the unprecedented rate of decline that has been wrought on the British economy as compared with the conditions pertaining in the rest of the Western world. The point I am making here is that it is the rate of decline which is affecting so much of British industry. It is a rate which has not been seen in this country this century, possibly, and certainly it is a rate of decline which is greater and faster than that in any other part of the Western world at the present time. It is a totally unstabilising situation.

There is no doubt that there are problem areas on both sides. There are successes, there are failures; there are problems of motivation, and there are pockets of unacceptable practices. But they are the same people. There is no monopoly of horns and forked tails on one side and haloes on the other; and what this Motion is asking is for equity of treatment and recognition of the devoted service which, in this country, is synonymous with the public sector.

Perhaps I may now turn to a related subject that I have introduced into debate previously in your Lordships' House; namely, the failure of the United Kingdom over a period of many decades to invest ill innovation and product developments—a failure which has built up over the years to what now amounts to a massive backlog. This, my Lords, is really a failure of private industry, since we spent more than most nations on research, particularly in the universities, and with some outstanding successes, but industry has failed miserably to exploit the outcome.

An outstanding example of this is to be found in the problems that have confronted, and continue to confront, British Leyland. The failure over a number of decades to invest in product development when that company was in private hands, or even in its original constituent companies, is manifest. In fact, until quite recently the company was without proper test facilities—it is almost unbelievable—and its engineering capacity was woefully inadequate. It is expensive to retrieve this situation, and I agree that it is costing an awful lot of money. But when things have been allowed to slide to that extent there really is no alternative if we are to have a viable manufacturing industry.

The overall problem of our out-of-date product range was clearly outlined by Sir Alan Cottrell, Master of Jesus College, Cambridge, and a former chief scientific adviser to the British Government, in his lecture a fortnight ago to the Society of the Chemical Industry. With your Lordships' permission, I shall quote part of that lecture: Looking in the overall, statistical way at our problem, we can say first that any given line of industrial product becomes more and more out of date, the longer it is on the market. Eventually it becomes too dated to be saleable any longer. This obsolescence time obviously varies greatly, e.g. five years for aerospace and electronics goods, 10 years for motor vehicles. As a broad average we will take it as 10 years for the bulk of industrial goods. Applying this factor to the £46,000 million of manufactured goods (i.e. 28 per cent. GDP), we see that about £4,500 million becomes unsaleable each year, at present values. Merely to stay level in the markets, then, this amount has to be replaced with newly marketed goods each year. Again, a rough rule is that £1.5 of capital investment is needed to provide the equipment to produce £1 of net output. Hence, nearly £7,000 million of capital investment, per annum, is needed purely for innovation to keep level. Experience shows that about half as much again is needed to service this innovatory investment with R and D, design, trials and testing, modifying the initial product, stockpiling and marketing". This gives a total of some £10,000 million each year that needs to be spent on innovations merely to stand still in the markets.

Sir Alan then goes on to analyse as clearly as he can what might be the sort of figure that is being spent in this country at the present time, and the nearest he can come to a figure, which he admits is probably the top figure, is £2,000 million. There is a differential of 5 to 1, and that is the rate at which we are sliding into decline; that is the rate at which our industry is disappearing into a non-saleable product situation. One has only to look back at the British Leyland situation to recognise how long the Mini was on the market before its replacement came along and the amount of money it was necessary to inject into the development of the new Metro in order to replace that product. It is one enormous problem.

I have no doubt that this problem will be overcome only by Government intervention in both the public and the private sectors, since market forces have led to the present state of affairs and there is no way, starting from now, that private finance can make up the difference. On this question of intervention, this is really no different from the practice carried out in most other countries in the Western world, either by direct public sector support, as in France, or by private sector support, as in America, either through state support for industry or through agencies, like the massive support that is poured into American industry by their enormous defence programme. And we should remember that the whole technology of micro-electronics, for instance, including the silicon chip, came directly from Government-funded research and development in the United States of America. There is no question, I believe, that Government assistance to industry in both sectors is absolutely vital if we are to stand any chance of recovering from the economic decline which is now firmly established in this country.

If I might comment on one or two of the remarks which have been made so far, I would comment first on the various questions raised by the noble Earl, Lord Gowrie. The first comment I would make is that I do not really believe that private ownership or private investment is the answer in a quite broad spectrum of the sort of services that the public requires in any civilised country. For instance, when the full history of the Three Mile Island accident in the United States is published I think that we shall thank Heavens that we in the United Kingdom have a publicly-owned electricity generating sector, because the thought of the type of problems that have arisen with the funding of the utilities in the States, and the way they are managed, raise grave questions over that type of activity being in private hands.

The other point that I should like to make—this point has been made thoroughly elsewhere—is that do not think that cash limits is a very accurate or flexible tool by which to control industries of the size of the nationalised industries. I think there are many better ways of coming to that sort of control over the requirements of those industries.

The Earl of Gowrie

My Lords, I am sorry to interrupt the noble Lord, but he will be aware that it was the previous Labour Government who introduced—rightly, I think—the cash limits system; and we praised them for it at the time.

Lord Gregson

My Lords, I accept the point entirely, and I do not take back one word of what I have said. If I could comment shortly about the speech of the noble Lord, Lord Harris of High Cross—and I am sorry that he had to go—I think that when he reads in Hansard the very useful comments made by my noble friend Lord Kaldor he might modify his opinions somewhat. I hope, too, he will take the trouble to obtain Sir Alan Cottrell's lecture in full and read that. I think it was an important and serious contribution to the debate in this country. I find myself on dangerous ground in dealing with Lord Thorneycroft's speech because I find myself agreeing with almost everything he said. I was not quite sure whether we ought not both apply to join the Social Democratic Council—but he got it right at the end; and the point where I decided that I should disagree with him lay in the fact that I do not believe that private finance without Government assistance will be able to turn round the economic problems of British industry. I seriously believe that Government assistance will be required to put thrust into the change of direction. That is where we disagree. I am glad that we reached the point where that happened.

I make one or two comments now about the wide-ranging speech of the noble Lord, Lord Boyd-Carpenter. He said that we were "reacting to mildly critical remarks". I do not think that we would react to mildly critical remarks. I think that the whole tenor of Lord Boyd-Carpenter's speech turned on the fact that he used that phrase. We are saying that the remarks are not mildly critical. The other point is that we are not only talking about the people who run the nationalised industries. It is just as important, and probably more so, that the people who work in the nationalised industries, right down to the shop floor at whatever level, must be motivated. The way not to motivate them is to perpetrate some such remarks as those made by the Daily Telegraph on Monday.

Lord Boyd-Carpenter

My Lords, may I put to the noble Lord a point that I put, without getting a response, to his noble friend Lord Longford? Will be appreciate that so long as he and his noble friends pursue and announce a policy of further nationalisation, so long will, inevitably, the whole working of nationalisation and the nationalised industries be a matter of controversy? He would find that the criticisms that he is talking about would die away if they dropped these policies.

Lord Gregson

My Lords, can I suggest to the noble Lord that we ought to concentrate upon this point in time instead of flights of fancy into the future; we need to concentrate a civilised approach to those parts of the nationalised industries which exist at the present time. Let us forget the flights of fancy into the future. They are not real. We have a real problem on our hands—

Lord Trefgarne

My Lords—

Noble Lords

Order, Order!

Lord Gregson

My Lords, we have a real problem of trying to rescue the whole of British industry—and that includes the public and the private sectors. All that I am suggesting in this is that we deal in a civilised manner with the public sector.

I make one more point to the noble Lord, Lord Boyd-Carpenter. I know from my many friends who work in the Civil Aviation Authority of the respect that they have and had for the noble Lord for the period of time that he was chairman of the Civil Aviation Authority. It was a tremendous respect. If somebody said what the Daily Telegraph said on Monday about the Civil Aviation Authority when Lord Boyd-Carpenter was the chairman, I know for certain what he would do and say.

Lord Boyd-Carpenter

My Lords, they never did!

Lord Gregson

My Lords, if I may comment on a point that the noble Lord, Lord Nugent of Guidlford, made—it also reflects on what the noble Earl, Lord Gowrie, and the noble Lords, Lord Thorneycroft, said—there is a misunderstanding about the question of private companies going into bankruptcy. There seems to be a feeling—and it came through in this debate—that that was the end of those companies. But it rarely is. In many cases for many of them it is the beginning of a new life. They go through receivership. There arc very few of the major British companies that go, in effect, into bankruptcy—or however one may wish to express it—who do not come out on the other side of the receivership in some form or another. There is continuity in that situation. It is not quite the dichotomy with the public sector that is being suggested. One can give a whole list of companies who went through—

Lord Nugent of Guildford

My Lords, I know that the noble Lord has put up with many interruptions; but I must say that private capital is lost on a large scale every time that happens. If the noble Lord understands the problem of making private capital, that you have to start by borrowing and creating it, he will realise that this is a loss which cuts deeply.

Lord Gregson

My Lords, I could not agree more. The shareholders lose out, just as in the public sector. It is just the same. Finally, could I say to the noble Lord, Lord Winstanley, on his comments about the remarks by Members of the Labour Party in the other place that we now have a large cross-section of opinion in our party; and you choose which bit you like. Thank you, my Lords.

7.30 p.m.

Lord Trefgarne

My Lords, I wonder whether I could start to pull some of the threads of this debate together by adding my thoughts on the tragic death of my noble friend Lord Amory, with a story that he told me a year or so ago. It was about the time—I think it must have been around 1951—when he was appointed as a Minister of State by the then Mr. Winston Churchill.

Lord Amory was summoned to No. 10, as is the practice, and was offered the job of Minister of State which at that time was a new post—I was going to say that Ministers of State had fallen into disrepute at about that time. Mr. Amory (as he was then) asked the Prime Minister what exactly was a Minister of State. The Prime Minister apparently was not immediately certain but replied that it was a position of the utmost dignity and importance. I know that Lord Amory found that very reassuring in the years of office that followed.

If I may put the Government's policy towards the nationalised industries first in the context of our overall economic strategy, the nationalised industries are such an important component in the national life that they cannot be allowed to be insulated from the pressures for efficiency facing the private sector.

We are applying to the nationalised industries a framework of financial discipline in place of all the competitive pressures faced by the private sector. Noble Lords opposite have, as their record in office showed, misunderstood, I fear, the burden on the economy and indeed upon the private sector of a policy of profligate public expenditure. Worse, there has been inadequate restraint on the increasing costs of the nationalised industries. Costs in these industries rose well ahead of those in the rest of the economy.

During the past 10 years employment costs per head have risen much faster than the average for the economy. For example, they rose particularly fast in energy and telecommunications; in the British Steel Corporation unit labour costs rose 50 per cent. faster than in the rest of the economy. I hope that this point will not be lost upon the noble Lord, Lord Davies of Leek.

This, I fear, is an unacceptable burden for the consumer and taxpayer. As my noble friend Lord Thorneycroft so rightly pointed out, our financial policies and our policies towards nationalised industries seek to reduce the damaging inflation. We have, as my noble friend Lord Gowrie indicated, taken steps to see that the nationalised industries earn a proper return upon the very considerable assets which are employed. As a result, they are now moving towards soundly based financial targets and pricing.

Regrettably, after years of artificial price restraint this is a painful experience. But the alternative is to waste national resources and formalise inefficiency. This is not to say that we are satisfied with the unrestrained use of monopoly power. We have taken positive steps to increase the pressure of competition. For some nationalised industries this means an increase in competition for their products and services. For others it means the infusion of private capital.

For all the nationalised industries which remain in public ownership there must be a continuous improvement in working methods and efficiency. We are setting for each industry performance targets as a means for reassuring the consumer that where the industries are monopolies, the financial targets are met with due regard to costs and efficiency. Here, as elsewhere, our aim is to provide both a stimulus and an objective measure of assessing performance to substitute for lack of competitive pressure.

My own department, the Department of Trade, has an important role to play in this area. We have undertaken a series of references to the Monopolies Commission. The reports that we have received so far show the scope for improvement in efficiency. The report on the London commuter train services, for example, found that since 1970 productivity increased by only 5 per cent. That is 5 per cent. in 10 years. The report on the inner London letter post found: During the 11 years 1968–1979 productivity in inner London appears to have declined by 20 per cent. to 25 per cent.". I stress "declined".

The Government do not interfere with the day-to-day management in the industries. The Government cannot themselves therefore bring about these improvements. Our role is to encourage and stimulate—by criticism, if necessary—rather than to cushion and protect.

A number of noble Lords—particularly the noble Lord, Lord Glenamara, and indeed the noble Lord, Lord Beswick—have criticised the Government's approach to the operation of external financing limits. The Government regard EFLs as one of the main elements in the framework of financial discipline within which the industries are required to operate and as an essential instrument for the short-term control of public sector borrowing. In the present circumstances, therefore, they are bound to be operated tightly. But it has always been recognised that since the nationalised industries are trading organisations with large flows of expenditure and revenue, EFLs cannot be immutable and the statement issued by the Chancellor in his Statement of 4th August, which followed consultations with the Nationalised Industries' Chairmen's Group, announced two elements of flexibility in the administration of the system.

The first is if economic circumstances differ significantly from assumptions made at the time the limits were fixed, industries or Government will be able to initiate consultation over corrective action by the industry and for adjustment of the EFLs. Secondly, increases in short-term borrowing from the NLF will be allowed at the end of a year in excess of that year's EFL, within one per cent. of forecast turnover and fixed investment, on condition that the excess is deducted from the following year's EFL. This element of end-year flexibility will be operable from the year 1981–82.

By these arrangements, the Government are seeking to provide a degree of flexibility which is helpful to the industries while at the same time manageable in terms of our overall financial responsibilities which require that a firm framework of financial discipline should be maintained.

The noble Lord, Lord Beswick, also suggested that the industries' external financing requirements for profitable investment were being unduly hampered. But most of the burden on the PSBR can be explained in terms of grants and "soft loans" to the industries. Perhaps I can draw your Lordships' attention to some of the facts and figures. In 1979–80 the industries' capital requirements amounted to some £4,000 million (1980 survey prices) £2,600 million of which was met from external finance, £1,400 million from internal resources. In aggregate therefore the industries were one-third self-financing. Of the £2.6 billion external finance, grants amounted to some £1.1 billion and PDC and issues under Section 18 of the 1975 Iron and Steel Act to £1.2 billion. So the greater part of the industries' net external finance needs in 1979–80 took the form of grants and soft loans.

For 1981–82, the industries' capital requirements are projected at £5.45 billion, their internal resources at £3.7 billion and external finance at £1.75 billion (all at 1980 survey prices). Hence next year the industries in aggregate are projected to be two-thirds self-financing. Grants are again about £1 billion, PDC and Section 18 issues about £¾billion, NLF borrowing being balanced by net repayments of overseas and market borrowing. The aggregate net external financing figure is again explicable in terms of grants and soft loans.

The lesson is clear. It is to press ahead as rapidly as possible with our efforts to get the loss-making industries to stand on their own feet so as to achieve further reductions in the industries' external financing requirements and further reduce the burden of public expenditure and a high PSBR on the economy.

Lord Beswick

My Lords, if the noble Lord has finished on that point, I did ask about the possibility of short-term borrowing outside the National Loans Fund.

Lord Trefgarne

My Lords, that is a detail point on which, if the noble Lord will allow me, I will write to him.

The Principal Deputy Chairman of Committees (Baroness White)

I ask the noble Lord whether his attention has been drawn to the article by Sir Leslie Murphy in today's Guardian, where he points out what to many of us would be the highly inappropriate way in which the Government appear to deal with profitable and loss-making industries on more or less the same lines? If you have a profitable industry, you should surely relax your borrowing restraints upon it, my Lords.

Lord Trefgarne

My Lords, the difficulty is that whatever the trading position of the nationalised industry at the present time, the money still has to come from the public purse or at least be counted against the PSBR, and that is the figure that we are endeavouring to contain.

Baroness White

My Lords, with great respect to the noble Lord, the end result is very different.

Lord Trefgarne

My Lords, I agree that the net result on the enterprise itself is very different, but the net result on public borrowing requirement is the same, and that is what we are seeking to control.

Lord Glenamara

My Lords, would he say why the Post Office, a highly profitable enterprise, should not be able to borrow from non-Government sources? Why should that be counted in the public sector borrowing requirement when there is not the slightest possibility of their not being able to honour that debt?

Lord Trefgarne

My Lords, this is a matter of long tradition and the fact is that the doctrine I have enunciated this evening is not a new one: it is one which applied equally in the time of the earlier Administration. The truth of the matter of course is that lenders lend with considerably more alacrity to bodies like the Post Office, in the sure knowledge that if anything went wrong the Government would stand behind that particular loan. The noble Lord suggests that the Post Office would never renege on its commitments. I have no doubt that that is true, but in the back of the mind of the lender is standing the security of the British Government; and that is where the difference lies.

I turn now to some of the other points that have been raised during the debate. One noble Lord raised the question of British Airways, and that is a matter which now falls directly to me and to my right honourable friend the Secretary of State for Trade. We had a series of very thorough and constructive debates on the Government's plans to privatise British Airways when we considered the Civil Aviation Bill last year. It is evident from some of the contributions today and outside the House that there remains a fundamental disagreement regarding the principles and purposes underlying that policy and I do not delude myself that I shall persuade otherwise those Members of your Lordships' House who disagree with them. However, I should repeat very briefly why the Government consider that the policy is right.

Unlike many nationalised industries, British Airways is not a monopoly. It has to compete with a large and increasing number of other airlines in both domestic and international aviation markets which are becoming more and more competitive. It is the Government's firm belief that in these circumstances British Airways will stand the best chance of competing successfully and profitably both at home and abroad only if it is given freedom from the existing régime of Government controls which are applied to the nationalised industries. British Airways therefore should be taken right out of the public sector and its management given sole responsibility to decide essential matters such as the amount and nature of the airline's capital investment and the level of borrowings. They should be answerable for such decisions direct to the airline's shareholders and bankers. That would provide a necessary degree of freedom, balanced by traditional private sector disciplines.

My noble friend Lord Gowrie referred to the offer for sale of shares in British Aerospace. My honourable friend the Minister of State for Industry is this evening making a full Written Answer in another place. Perhaps I could repeat the main points of that Answer for the benefit of your Lordships. I apologise for the fact that it is a little long, but this is a crucial matter, and I think that the noble Lord, Lord Beswick, in particular would be anxious to know about it. I quote: Arrangements have now been completed for the offer for sale by Kleinwort, Benson Limited on behalf of my right honourable friend the Secretary of State for Industry of up to 100 million ordinary shares of 50p each of British Aerospace Public Limited Company at 150 pence per share, payable in full on application. The offer for sale has been underwritten by Kleinwort, Benson Limited, Hill Samuel and Company Limited, Morgan Grenfell and Co. Limited and J. Henry Shroeder Wagg and Co. Limited. The prospectus will be advertised in the newspapers on Monday, 9th February 1981, and will be laid before the House on that day. Application lists will open at 10.00 a.m. on Friday, 13th February 1981. Of the Ordinary Shares being offered for sale, 66,666,667 are new Ordinary Shares which my right honourable friend the Secretary of State has agreed to subscribe at the offer price and which will be paid for out of the proceeds of this offer for sale, thus raising £100 million of new equity capital for British Aerospace PLC. The Government have made arrangements for each employee of British Aerospace PLC who is eligible under the terms of the British Aerospace Employee Share Ownership Scheme to be offered, free of cost and at the Government's expense, 33 Ordinary Shares (worth approximately £50) to be held on his behalf by the Trustees of the Scheme. In addition the Government have arranged for up to 2,178,990 Ordinary Shares to be available to eligible employees for purchase at the offer price (subject to a limit of 600 Ordinary Shares per employee and to scaling-down in the event of over-application by such employees); each employee who purchases shares under this arrangement and vests them in the Trustees will then have appropriated to him, free of cost and at the Government's expense, an equal number of Ordinary Shares to be held on his behalf by the Trustees. In addition, preferential consideration will be given to applications received from all employees at the offer price; and so far as possible the Government's intention of promoting the widest possible ownership of shares will be taken into account when making allocations in the event of oversubscription. Immediately after the offer for sale, the Government will hold the same number of shares as are sold under the offer for sale (that is, between 48.37 per cent. and 50 per cent. of the issued share capital of the Company), the balance of the issued share capital being those shares acquired by or on behalf of the eligible employees under the special arrangements which I have described. In order that British Aerospace PLC should remain under t he control of citizens of the United Kingdom and Colonies, the Articles of Association of the Company restrict the number of foreign-held shares at any one time to 15 per cent. of all the voting shares in issue". My honourable friend's announcement also includes the text of a letter written by the Secretary of State for Industry to the chairman of British Aerospace PLC concerning the future relationship between Her Majesty's Government and the company. I am arranging for a copy of this letter to be placed in the Library of the House. I apologise for the length of that statement but I thought it would be of interest to your Lordships.

The noble Lord, Lord Glenamara, argued that the nationalised industries' external financing requirements should be stated separately from the PSBR and even removed from it. I think the noble Lord has gone, but perhaps I dealt adequately with that point earlier and I need not return to it now. The noble Lord, Lord Beswick, suggested that there should be no further pressure on British Gas to sell off its offshore oil interests, particularly in Wych Farm. I can see no reason to give the noble Lord such an assurance. The Government are concerned to reduce the size of the public sector where activities could equally well—sometimes better—be in the private sector. I recognise that the Wych Farm oil field is something of a success story but it could not be immune from consideration on that account. A self-damaging ordinance in respect of this or any other prima facie commercially attractive asset does not seem appropriate, but I will, of course, draw the noble Lord's concern in this matter to the attention of my right honourable friend the Secretary of State for Energy.

The special relationship of the industries with Government cannot exempt them from the need to change. We are prepared to help in this in the interests of the economy generally. Within the public sector there is scope for a sustained and determined effort to bring about an improvement in productivity efficiency and in levels of service. An important task therefore devolves upon the managements concerned: but in carrying it through the industries know that they have the Government's continuing and wholehearted support in the interests of securing a better balance and a more productive economy. I hope that my remarks, and in particular the more eloquent words of my noble friends, will have persuaded your Lordships of the shortcomings of the Motion moved by the noble Lord, Lord Beswick, and that he will therefore see fit to withdraw it.

7.50 p.m.

Lord Beswick

My Lords, it will not be expected of me to go over all the arguments again, but I should like to thank those who have taken part in the debate. I should particularly like to agree with my noble friend Lady Phillips that the word "nationalisation" should be dropped from our vocabulary. I never allowed it to be used in my office when I was chairman. It now has the effect before certain Tories that I understand the bell had before Pavlov's dogs.

The noble Earl, Lord Gowrie, said that I was wrong to consider that the criticism that I quoted had any personal content. Of course, I know the individuals concerned well enough to realise that their kindly nature did not mean it to be taken personally. I accept that. On the other hand, the noble Earl must also accept that an organisation is made up of human beings. I absolutely agree with what the noble Lord, Lord Nugent, said, that if you criticise an organisation in those terms inevitably it means that the individuals, the men and women, the human beings, inside that organisation take it very hardly indeed.

The noble Lord, Lord Boyd-Carpenter, spoke very gaily about their not being shrinking violets. No, my Lords, but they arc human beings, and my experience of life is that you get better results, sometimes, from encouraging, rather than from the kind of language to which I referred. If this debate enables all of us to consider rather more carefully our comments about the public sector of our economy, and the efforts of those who work within it, then I shall feel that the debate was worthwhile. Meanwhile, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.