Nationalised Industries: Capital Expenditure (Hansard, 4 June 1981)

§ Lord Orr-Ewing
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ The Minister of State, Treasury (Lord Cockfield)
My Lords, external financing limits are set at a level which takes account of the approved investment programmes of each industry. In setting these limits regard is also paid to the extent to which the industry concerned may have internally generated funds to finance investment and the extent to which it may need to borrow to meet losses or other outgoings.
It is the primary responsibility of the management of the industries concerned to ensure that they meet their targets and carry out their investment programmes within the resources provided for this purpose. But sponsoring departments do keep in close touch with developments in the financial position and investment programmes of the individual industries.

§ Lord Orr-Ewing
My Lords, I thank my noble friend for that reply. Is it not time that a better method was introduced whereby monies granted for capital expenditure should be used for capital expenditure and should not be used to subsidise uneconomic competition against the private sector?

§ Lord Cockfield
My Lords, I entirely appreciate the point that my noble friend makes, and it is always a matter of regret when rising costs result in money, which was intended to provide for investment, being diverted to other purposes. Perhaps I might draw his attention, however, to what was said by my honourable friend the Minister of State for Industry when announcing the increase of £200 million in British Telecom's external financial limit. He said: As a condition of the increased external financing limits the chairman has agreed to make the necessary arrangements to ensure that the additional sums are used exclusively for capital expenditure". I am sure that my noble friend will welcome that development.

Lord Bruce of Donington
My Lords, is the noble Lord aware that there is a widespread and responsible opinion which says that the controls that the Government have over the financing of the nationalised industries are being badly applied and make economic nonsense? Is he aware that those views are shared 1349 by the Confederation of British Industry, by the National Enterprise Board, and also, one would hope the noble Lord notes, by the man who was designated by the Prime Minister as a "super guy", the chairman of British Steel?

§ Lord Cockfield
No, my Lords, I do not agree with the views expressed by the noble Lord, or quoted by him. If he would care to refer to the actual figures for last year he would find that investment undertaken by the nationalised industries fell short of the original planned figures by no less than £730 million, despite the fact that external financing limits had been increased by £585 million over the figure originally provided. The reason for this was that the losses of the nationalised industries increased, or their operating surpluses fell, by no less than £1,315 million. The best way that the nationalised industries can provide additional funds for investment is to control their costs, reduce excessive manning levels, and improve their efficiency.

Lord Bruce of Donington
My Lords, perhaps the noble Lord will explain in those circumstances why it was that the investment programme of the Gas Board was restricted so that a poll tax could be obtained from the public as a result of the increased prices that were ordered by the Government, in order that more money could be paid in Government funds by way of tax?

§ Lord Cockfield
My Lords, it is essential from the point of view of energy policy that gas prices should be realistic, and the Government are doing no more than that. The very large apparent profits of British Gas are really a rental from North Sea equivalent to the kind of rental enjoyed by the oil companies operating in the North Sea which is skimmed off by the petroleum revenue tax—a tax which no doubt the noble Lord supports.

§ Lord Tanlaw
My Lords, in view of the noble Minister's answer about telecommunications, would he be able to say to the House that it is now the Government's policy to assess financial assistance to nationalised industries on the basis that capital programmes are distinct from expenditure programmes? In which case, would he also give an assurance that the British Rail electrification programme will be judged on exactly the same terms in which he described the capital programme for telecommunications?

§ Lord Cockfield
My Lords, there is a fundamental difference between British Telecommunications and British Rail. British Telecommunications are making a profit; British Rail are making a huge loss. The loss which is estimated for the current year in fact amounts to well over £800 million—the figure is £885 million—which shows an increase compared with the last year's loss of £818 million. The very large investment programme to which reference has been made in the press so far as British Rail is concerned is primarily intended to enable them to continue to operate at a loss, although at a smaller loss than they have hitherto achieved. Whether that is the right way to use scarce natural resources is a debatable question.

§ Lord Beswick
My Lords, may I ask the noble Minister this? If he thinks that British Rail are being run so badly, why did he not hand it over to private enterprise and not just the profit-making hotels?

§ Lord Cockfield
My Lords, I am grateful to the noble Lord, as I always am, for his wholehearted support for the principle of privatisation, which we propose pursuing as vigorously as we can.

§ Lord Orr-Ewing
My Lords, is my noble friend aware that some of the figures he has given the House will be of tremendous encouragement, and have drawn attention to the need to improve the system of control so that capital expenditure is used for modernisation of our nationalised industries, and to provide jobs in the private sector who meet these needs? Is he aware that BSC only in recent months has spent £3 million buying up a private steel stockholders in the Midlands, and that does not create extra jobs? It only means that you are using public money to subsidise and to compete against the private sector, and this tends to be inefficient and is certainly not the intention of Her Majesty's present Government.

§ Lord Cockfield
My Lords, I fear I cannot comment on the specific case raised by my noble friend. I agree with him in his general proposition; the most fruitful source of additional revenue for capital development lies in the nationalised industries improving their performance. A reduction of 1 per cent. in their operating costs would make another £300 million available for investment.

§ Baroness Gaitskell
My Lords, may I ask—

The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers)
My Lords, it seems that the possibilities for supplementaries on this Question are absolutely legion as well as being fascinating. I suggest it might be prudent if we moved on, but I know that the noble Baroness, Lady Gaitskell, has been trying for some time to put a supplementary. Perhaps noble Lords would agree that she should put her question and we should then move on.

§ Baroness Gaitskell
My Lords, in view of the fact that the Government have increased unemployment time and again since taking office, may I ask the Minister to agree that instead of bamboozling us with figures—figures which are quite meaningless to most noble Lords here and certainly to most people outside—it would be more becoming for the Government to be rather less proud of what they are doing?

§ Lord Cockfield
The rise in unemployment is not primarily due to the Government's policies, my Lords, but is the result of three factors. The first is the long-term problems of the British economy, which were greatly exacerbated during the period of office of the previous Government. The second is the world recession. The third is the very large rise in levels of pay in 1979–80. As for the general point which the noble Baroness raises, I would remind her that the money provided for capital development by the nationalised industries in the coming year will 1351 show an increase from about £4½ billion, at which it stood in the last three years, to £5.2 billion. That illustrates the importance the Government attach to capital development, including capital development by the nationalised industries.