The Public Sector: Privatisation and Efficiency

HL Deb 21 April 1982 vol 429 cc557-613

Debate resumed.

3.57 p.m.

Lord Tanlaw

First, my Lords, I owe an apology to the noble Lord, Lord Beswick, because, due to unforeseen circumstances, I had very short notice to prepare for this debate. The noble Lord, Lord Bellwin, may consider this to be an intervention which I started on Monday in dealing with the Armitage Report, developed in far greater detail in debating the Oil and Gas (Enterprise) Bill, and now—as some noble Lords will be gratefully concluding—am ending with a debate on privatisation. This subject was discussed in considerable detail—and with some force from the Labour Benches—yesterday, and it would be unproductive to go over the whole area again. But, for the sake of noble Lords who were not in the Chamber yesterday, I wish to restate the Liberal view, which is simply that we are against nationalisation, that we are against monopolies and that we have based our policies for many years on those facts.

This debate enables me to ask a question I have wanted to ask since I first stood for Parliament in 1959. Another candidate at that time, the Socialist—he was a democratic Socialist—was very keen on Clause 4, which is for the public ownership of all means of production, distribution and exchange. As we were both standing for an agricultural constituency, I asked him where his party stood on the nationalisation of land and, in particular, farms. Because that occurred so long ago I cannot remember his answer in detail, but it was basically to be on the same lines as those in the Eastern bloc countries. However, I have never heard a proper argument put forward by the Labour Party for the nationalisation of land and farms, and this debate might provide an opportunity for some speakers to develop that and to produce reasons for it. My view is that Western agriculture flourishes and will continue to flourish so long as agriculture in the Eastern bloc countries is run on the lines it is run today.

Lord Stewart of Fulham

My Lords, if the noble Lord wants a really authoritative case for the nationalisation of land, he should read a volume called The Green Book which was published by the Liberal Party in 1922.

Lord Tanlaw

That was a bit before my time, my Lords, and I thought that by talking about 1959 I was going back far enough. I assure the noble Lord that that volume did not belong to anything produced by the Young Liberals, of whom I am still one.

I come to the wider question. We are talking about privatisation, and the noble Lord, Lord Beswick, has put a case against it. I should like to hear from the noble Lords on those Benches as to what is the motivation for nationalisation? Is it just Clause 4?—in which case that is a very easy answer. If it is more than that, if it is for efficiency or for some other reason, I shall be very pleased to hear the argument developed. We in the Liberal Party have always had a different approach to this question—wider share ownership—and that is why, as I said yesterday, we do not oppose this aspect of the Oil and Gas (Enterprise) Bill. I do not want further to embarrass noble Lords on the Labour Benches, but we did ask some straight questions about compensation for pension fund managers and others who have bought shares in good faith. If a Labour administration took over, what compensation, if any, would there be, and on what basis would it be made? I am still waiting for a clear-cut answer to that. If that is Labour Party policy, it is only fair for the people involved—many of whom are working people—to have an answer.

From these Benches we have also developed the idea of profit sharing. This is a point which I fear enters into the area of taxation, which is outside the sphere of the debate. But why have successive Governments always refused to alter the taxation rules in order to encourage profit sharing? It is very difficult to do that in any company, small or large, without creating non-benefits for those with whom one wishes to share the profits.

We have also previously raised—I mentioned it yesterday—the question of worker directors. This is another, more constructive, approach towards getting workers and management working together in harness in a company, whether it he nationalised or non-nationalised. I am still awaiting a reply from the Government on this suggestion in relation to the Oil and Gas (Enterprise) Bill, but we shall work on that in Committee.

We also want to see, instead of nationalisation, more incentives being given to co-operatives in farming districts, so that small farms can co-operate in using the same machines. This, too, is an area of taxation that has not been touched in order to encourage such co-operation. Briefly, those are the kind of points that have from time to time been made from our Benches and have certainly been developed in another place.

I want to come back to the question of nationalisation and profits. The noble Lord, Lord Bruce of Donington, in a most forceful speech, said that some nationalised industries made profits. Indeed they do. But the question is, where are the dividends? Who gets the dividends? The dividends do not go to the people. The shareholders, so-called, of a nationalised industry are the public—you, me and everybody else. If such industries make profits the dividends go into the Treasury; they do not go to the people who support those particular industries. That is why I feel that when it comes to answering this point there remains a great deal to be desired.

As I have from time to time said from these Benches, the accountability of companies in the public sector is not satisfactory. The shareholders, the general public or indeed Members of Parliament, have little, inadequate, access to full accountability of what is going on inside the companies. There is no annual general meeting similar to that in a private sector company.

The noble Lord, Lord Beswick, mentioned the Public Accounts Committee. It is my understanding that the civil servants who give evidence to the committee go into training three months before they meet the Members of another place, who possibly have only as much notice and as much briefing as I have had in order to make my intervention today. For three months civil servants can practise the answers to all the questions that they are going to be asked, so as to divulge only the minimum amount of information. I am not being hostile to the Civil Service. I fully understand why civil servants do this, but this is not a good method by which to extract information on where taxpayers' money has gone, or is going, in a public enterprise. I am very sorry to hear that Her Majesty's Government of the day still want to keep this system going. I believe that time and time again we shall, when it is far too late, discover a ghastly muck up, such as that which involved the Crown Agents, because there has been inadequate supervision and inadequate access to information on what has been going on inside a public sector company.

So much for the accounts, which is not a very interesting subject, but one in which the Government have interested themselves enormously, in the sense that they have based their policy on monetarism and, presumably, some working knowledge of accounts. I again remind the House that there are only 18 Members of another place who are qualified to read a balance sheet. So if a cover up is required in a public enterprise, the odds are in favour of those who wish to cover up, rather than those who wish to uncover—

Lord Beswick

My Lords, the noble Lord has put some questions that are quite irrelevant to what I said. Would he be kind enough to comment on what I did say on this subject?

Lord Tanlaw

My Lords, I said that I was going to be fairly brief, but the noble Lord did mention the Public Accounts Committee and nationalised industries.

Lord Beswick

My Lords, I went on at some length—as the noble Lord will see when he reads my speech—putting forward alternative proposals for dealing with precisely the problems that the noble Lord is discussing.

Lord Tanlaw

My Lords, I fully heard those remarks, but we have not yet heard from the Government on these views; so it is a little difficult to put my own view. Unless the noble Lord, Lord Beswick, thinks, somewhat unfairly, that I am being far too critical of his speech or of the nationalised industries, I should like to give my personal reason for opposing the nationalised industries. The problem is that they have become far too big, and they thus require management techniques that are not easily available on either side of the Atlantic. When a corporation, be it General Motors or the Ford Motor Company, or a large organisation, such as the National Coal Board, acquires a certain dimension, it needs a new type of management which can be found only in very exceptional men. This is a point that has not been looked into by management specialists. It is the size of the nationalised industries that has created some of the problems to which I have been referring regarding the accounts and some of the problems which the noble Lord, Lord Beswick, wishes, as much as I do, to cure.

In the chairman of nationalised industries the country has been served by a most remarkable band of businessmen. They have been prepared to give up large monetary sums and careers of one kind or another to undertake what I believe to be most unenviable tasks. Not only do they have to deal with problems such as I have described but they are subject to constant interference from Government departments or changes in Government policy. They also have to confront the media at a moment's notice, and get on with their business at the same time. The noble Lord, Lord Kearton, is an example of the kind of people of whom this country should be proud. There are not many people of this capability, even at international standard, who can run a business in the kind of efficient way that the noble Lord has done. There are others, too, whose names are all known to your Lordships.

We should look more carefully into the question of reducing the size of some of the nationalised industries, so that they are more easily managed. One cannot rely on easily getting men who are big enough to run them. I speak as the chairman of a small private engineering company that has dealings with nationalised industries, but there are areas of investigation which I find very difficult to get clear. I have in mind British Rail, for instance. There must be a need to improve the investigation into the working of British Rail Engineering. This is a big engineering company, which I believe runs without any cost structure at all, and with very few costing procedures. It is producing goods without the full knowledge of what they cost. I might be completely wrong on this; I hope to goodness that I am; but the difficulty is that I cannot be proved to be wrong. This is an area in which perhaps further enlightement will come from this Government.

I think, too, in terms of the Coal Board. Is it not time to question the policy instigated by the noble Lord, Lord Robens, regarding the uniform price of coal? Is this not a time when we should again consider whether, if coal is to be used as an effective energy source for industry, the price can be variable? Surely prices must be much lower than they are at the moment if coal is to retain its position as a source of energy for the next ten years, which are vital for this industry. I come back again to the Gas Board, and I ask whether the noble Lord, Lord Beswick, has read my speech of yesterday. If he has not, I am not going to take trouble to remind him this afternoon, but the point is that we are against monopolies, as I said at the beginning of my speech, and it is most unfortunate that the Gas Board has been a monopoly. It is also unfortunate, I feel, that it is putting forward a case against the Oil and Gas (Enterprise) Bill in order to maintain its monopoly. Its opposition in this area is unfortunate because the arguments are definitely weak when it comes to the benefits to the consumer. I think, in particular, that what was meant by the noble Earl, Lord Lauderdale, and the noble Lord, Lord Polwarth, yesterday was that the lack of exploration to know what really is the extent of our gas reserves is putting us all in a much more difficult position to develop an integrated energy policy.

I believe—I hope like the noble Lord, Lord Beswick—that in fact the nationalised industries are not perfect. I also think that they need to be looked at again quite objectively and quite without the force and fervour which was put forward by the noble Lord, Lord Bruce of Donington, yesterday, quite rightly for political reasons; because what is far worse than nationalisation and far worse than privatisation is de-nationalisation and de-privatisation.

I want to end up, my Lords, by saying that what has broken the back of British industry today has not been nationalisation itself: it has been nationalisation and de-nationalisation, and then re-nationalisation. Are we not entering again into this same era, with the same arguments put forward from the Conservative Benches and the same forceful arguments put forward from the Labour Benches? Are we not going again into this ping-pong game in which our whole economic future is at stake? Therefore, when the noble Lord, Lord Beswick, and the noble Lord, Lord Bruce of Donington, say that they want to deprivatise, what is this going to mean? Is it going to mean the re-nationalisation of BNOC? I cannot see any argument for this, not for political reasons but for the sake of the industry as a whole.

4.13 p.m.

Lord Boyd-Carpenter

My Lords, I hope the noble Lord, Lord Tanlaw, will not think me discourteous if I return to the subject-matter of the debate and do not follow him in his entertaining canter round the outer perimeter of the subject; but I must correct him on two questions of fact on which he made statements which I think he himself, on reflection, will realise were unfair.

In the first place, in a reference to profit-sharing, the immediate relevance of which to this debate I myself (it is no doubt my fault) found it a little difficult to follow, he said it was remarkable that no Government had taken steps to help taxation-wise with the development of this admirable activity. If the noble Lord will look at the Finance Bills of both 1979 and 1980 he will see that the present Administration, in successive Finance Bills, granted increased tax concessions in respect of payments made by companies to their employees as part of a profit-sharing scheme. So I hope he will feel that on this point he owes Her Majesty's Government some apology.

Secondly, I am bound to say that I took somewhat amiss, as a former chairman of the Public Accounts Committee, his very slighting reference to a body which, leaving aside from the time I was involved in it, I believe has done enormous public service. To say that because civil servants treat the Public Accounts Committee seriously—and, of course, he is quite right, they do; they spend a good deal of time preparing to appear before it, and that is right and proper—the members of the committee are incapable of dealing with them, is simply not borne out by the experience of this committee, whose reports seem always to be accepted by successive Governments of every party and which have indeed resulted in very substantial savings in public funds.

Of course, when the noble Lord talked of briefing he entirely overlooked the fact that both the chairman of the Public Accounts Committee and his colleagues have the enormous advantage—it is perhaps a greater advantage than is enjoyed by any other Select Committee at Westminster—of being supported, briefed and informed by the Comptroller and Auditor-General, with his staff of between 400 and 500 very able officials who are working inside the departments throughout the year. I would be very surprised if any noble Lord (and there are a number) who has had an experience similar to mine in serving on the Public Accounts Committee did not find his derogatory reference to that committee as something only to be excused by invincible ignorance.

Lord Tanlaw

My Lords, I apologise to the noble Lord and to the House if I appeared to be derogatory of the Public Accounts Committee. I was not being derogatory: I was merely saying that the civil servants had a better hand of cards than those whose duty it was, like the noble Lord, to interrogate them.

Lord Boyd-Carpenter

My Lords, I can only leave the matter to be judged by those who have actually either participated in the gatherings or read the reports and seen the action of successive Governments. I see my noble friend Lord Reigate here. He was a colleague of mine for many years on that body, and he can confirm this. I hope that when the noble Lord reads his own speech in Hansard tomorrow he will feel that he owes something of an apology to that succession of people who have worked on that committee over the years, to the great benefit of the national finances.

Now, my Lords, I come to the essence of the debate, which is, of course, the speech of the noble Lord, Lord Beswick. Lord Beswick adjured us quite a number of times (I did not actually count them) to avoid prejudice. In rebuking prejudice, the noble Lord seemed to show the same expertise that Satan has in rebuking sin, because his own speech manifested that particular quality quite continuously. Of course, for a very creditable reason the noble Lord, Lord Beswick, looks at the nationalised industries, I will not say through red but through rose-tinted spectacles, because in my own experience over the years the noble Lord (he will allow me to say this) was, with the possible exception of Sir Derek Ezra, the most successful chairman of a nationalised industry of whom I am aware—and I am glad the noble Earl, Lord Longford, agrees with me.

It is natural, when one has made, as did the noble Lord, Lord Beswick, a great success of an extremely difficult task, that he feels somewhat genially disposed to the area in which his triumphs took place. But I would ask the noble Lord, when he criticises my noble friends, and indeed, I think, personally my right honour- able friend the Prime Minister, for their alleged antipathy to the nationalised industries, to realise the contributions which he and his colleagues make to that attitude. So long as it remains the policy of the party to which the noble Lord belongs to increase the area of nationalisation, so long as Clause 4 continues to be part of the Labour Party constitution, it is quite inescapable that those who do not share that view should find it necessary to draw public attention to the defects of the system of public ownership in industry.

I am sorry that the noble Baroness, Lady Gaitskell, has left the Chamber, because I meant to say, and I will still say, that I have always had the greatest admiration for the courage and persistency of her late husband Hugh Gaitskell in his gallant efforts—gallant but, alas!, unsuccessful—to rid the party opposite of the incubus of Clause 4. But, my Lords, while it is the reiterated policy—not a matter of Clause 4, but the statements of Mr. Michael Foot and his putative successor, Mr. Benn—to increase the area of nationalisation, it really is inevitable that there will be criticism. It really is not good enough for the noble Lord to say, "If you make this criticism it is hard on the morale of people who are doing an excellent job in running these industries". So far as I know, none of the attacks is directed at the personal qualities of individuals. I myself have been chairman of a body which ranked sufficiently as a nationalised industry to enable me to be a member, as was the noble Lord, Lord Beswick, of that interesting body, the Chairmen of Nationalised Industries Committee.

It is the criticism of the system of public ownership which is relevant. Let me say that I have never taken a doctrinaire view on this, a view that there should be no industry in public ownership. I believe, on the contrary, that some public utilities such as rail, electricity and gas which operate on a monopoly and on a non-competitive basis on the whole are probably best handled in public ownership. I can confirm that that has been my attitude by reminding your Lordships that some 27 years ago I got myself into great trouble with my own party when, as Minister of Transport, I refused to press the de-nationalisation of road haulage to a point involving the break-up of the national road haulage network. I had a rough time with the 1922 Committee, as one or two noble Lords may recall; but my view prevailed and I was very glad when, as I ventured to prophesy, the party opposite when they came to power left the status quo as far as road haulage was concerned and we arrived at an overall, non-doctrinaire, pragmatic solution. So I have reasonable credentials for saying that I do not take a doctrinaire view.

Let us analyse the basic problems of the nationalised industries. I think the first and the most difficult problem that those who run them have to face is the knowledge—or the thought—on the part of their workforce that they cannot be bankrupt. Of course that may be wrong; but so far they have not been bankrupt. In the private sector, even the most forceful of trade unions does not wish to push either disruption of production or excessive wage demands to the point that they put that company out of business; because they will destroy their own jobs in the process and this is a salutary restraining force. In the nationalised sector this is not so. It is difficult—and I do not want to mention names or examples—to envisage anywhere in the private sector having to deal with a union like ASLEF. So in the management of those industries there is not the same power of resistance to excessive demands as there is in the private sector. That is one of the reasons why many people in the trade union movement are very fond of the public sector, because they feel they have a freer hand there.

Secondly, there is the lack of feeling among those who manage the industry that their personal position and livelihood depend upon the industry being profitable. I know that they do their best and I am not making any reflection on their zeal and enterprise; but they are not subject to the same compelling disciplines as those who operate in the private sector and who say: "If we fail to run our company over any period of years at a reasonable profit, not only will the company fail but we shall be out of a job". This discipline does not exist in the public sector. That is a pity.

There is then the problem of the consumers. In the private sector, on the whole, if a consumer does not like the product of a particular company, he can withhold his custom and say, "Very well, I can go elsewhere". Faced with a public monopoly, he, on the whole, does not have that option. It has been sought to compensate for this weakness by setting up various aspects of consumer protection and representation and some of these have been quite successful. When I was at the Civil Aviation Authority I set up the Airline Users', Committee and I was fortunate enough to enlist the noble Baroness, Lady Trumpington (as she now is), as its chairman, I need hardly say that it was a highly effective, not to say aggressive body.

There are areas where even the protection of a consumer organisation does not exist. I have been in correspondence with my noble friend Lord Bellwin about the absence of any such machinery in the water industry. My noble friend, with the loyalty to those he represents which he always shows, has endeavoured to satisfy me that there is adequate representation in that industry because the water authorities contain in their membership nominees representing local authorities. Certainly, my experience has been that those gentlemen, once appointed to the authority, develop a sort of loyalty to the authority of which they are a member and cease to be effective representatives of the conflicting interests, in many cases, of the consumers, so that one does not get the balance of forces which is present where there is an organisation, on the one hand, and representatives of the consumers on the other. There is the additional fact that they are not elected to represent consumers; they are nominated by local authorities. My own experience in the area in which I live is that no one has the faintest idea of who they are or how to approach them. Therefore, there is great weakness there which did not exist in the days of the old water companies.

So there are very real and fundamental difficulties about the nationalised industries. How are we to resolve them?—because I agree very much with the noble Lord, Lord Beswick, that we want to consider how to improve them. I have two suggestions to put forward. One follows up the remarks I made in reply to the noble Lord, Lord Tanlaw. I like very much the proposal that the Public Accounts Committee should be given full authority to investigate the nationalised industries' finances. I am told that there has been objection in another place that this would inhibit their freedom of operation. I am extraordinarily sceptical of that and I will tell your Lordships why.

When I was chairman of the Public Accounts Committee we considered—and the noble Lord, Lord Robbins, will remember this—extending the scope of the Comptroller and Auditor-General and of the Committee to the finances of the universities. We were treated to the most superb mass of evidence from the most distinguished persons in the academic world demonstrating to their own complete satisfaction that were accountability to the Comptroller and Auditor General and the Public Accounts Committee over the universities to be established, then academic freedom in this country would come to an end. There were only one or two academics who saw a little further than that and who saw that a little expert accountancy and financial advice would be helpful to the universities—and so it proved. Therefore, one gets sceptical of those who say that if they have to account for public monies, this will inhibit them in doing the job that they ought to do.

The other point that I would make is that all Governments should seek to limit the interference—not by Ministers, which is limited, if only because Ministers have very limited time—but by civil servants in their departments. In certain departments, it is the practice of civil servants to make inquiries and to put points of view to the nationalised industries concerned ostensibly in the name of their Minister—although on one or two occasions in my own experience I have checked with the Minister and found that he had taken no such initiative. A strict instruction in departments that nationalised industries are not to be harassed with inquiries or demands without the express authorisation of the Minister would be of great assistance to those who have to run them.

I listened with a certain wry amusement to the noble Lord, Lord Beswick, when he said that the present Government's policy had done much to undermine the morale of the boards of the nationalised industries. I wonder whether he recalls—I recall, for I was on the non-receiving end of it—the events of the winter of 1975–76 when the review body on top salaries, under our late and very much lamented old colleague, Lord Boyle, came out with recommendations for increases in the remuneration of Ministers, of senior officers of the armed forces, senior civil servants, judges and the boards of nationalised industries. The Government of the day, of which the noble Lord was a supporter-I am not sure whether he was a member but he was certainly a supporter—granted these increases, or some of them, to all the other categories, but not a penny to the boards of the nationalised industries. This was said to be the result of a compromise arrived at in the then Cabinet in deference to the views I believe of the present Leader of the Labour Party.

Lord Beswick

My Lords, may I say to the noble Lord with great kindness, because I should like to thank him for his previous references, that I was not a supporter on that occasion; I was a victim.

Lord Boyd-Carpenter

My Lords, that helpful intervention only increases my sympathy with the noble Lord because so was I. I think that I can take it from the information that he has now given the House that he wholly agrees with me in the criticism that I am making of the then Government. It was a deplorable thing and had the result in the body in which I was concerned that by the time it had been remedied we had over 100 subordinate officials below board level who were being paid more than members of the board. That is an indication—it is now in the past—of some of the things that have been wrong.

On the more major issues, I believe that as some industries will plainly have to remain nationalised they should be given much greater freedom, including greater freedom on such matters as pay and remuneration, and should not be subjected to interference by civil servants but subject only to directions on major issues of national importance made by Ministers personally.

I come finally to the point which the noble Lord, Lord Beswick, made. He dislikes the privatisation—I agree with him in disliking the word—which is taking place. It is a matter of judgment how large or small the public sector should be. The party opposite, as I have said, are committed to increasing it. My right honourable friends were elected on the basis of reducing it. We believe that by reducing it, by putting more of our industrial effort into an area where the salutary forces of competition and incentive operate more fully, we are greatly improving the working of the national economy.

I agree with the noble Lord in one criticism that he made. I think that one or two disposals have been made at prices which were quite unnecessarily low. I believe that when a Government dispose of public industrial property—I leave aside the separate question he raised about local authority housing—they should get as good a price for it as they can. I hope that my noble friend will say that with further disposals, which I hope are coming, greater efforts will be made perhaps by seeking the aid of people of better judgment in the City than were available on some of these other occasions. I hope that the Government will try to see that they get a better price for these assets. I agree entirely with the noble Lord that public property, when it is sold, should be given a fair price.

Regarding local authority housing, I differ from him. I happen to believe that socially home ownership is one of the most valuable and stabilising influences in our society. As, after all, local authority tenants have been subsidised in their rents for a great many years, there does not seem to me any great difficulty in principle in subsidising them when they become house owners.

We are indebted to the noble Lord for introducing this debate. This is a problem of great importance to our economy. I believe, subject to the minor criticisms that I have made, the Government are on the right lines. I am sure that we shall all listen with the greatest of interest to the full statement that I know my noble friend will give at the end of the debate.

4.35 p.m.

Lord Taylor of Gryfe

My Lords, before discussing the subject which has been introduced today by the noble Lord, Lord Beswick, I feel it right perhaps to correct two points made by the noble Lord, Lord Boyd Carpenter. In his criticism of the public sector he described British Railways, for example, as a monopoly. Anyone who has been involved in British Railways will accept that they operate in an extremely competitive environment. The Inter-City services are certainly faced with the competition of the airways. The National Bus Company run inter-city services also against British Rail. In the market for freight, British Railways have to price themselves competitively in order to survive and get traffic.

The second point I want to make is that the noble Lord was somewhat unfair in his suggestion that in the public sector there was a too soft attitude in relation to employees and employment because no industry can go bankrupt in the public sector. The strict application of the external finance limits in the nationalised sector has had a very severe disciplining effect in this area. If one looks at the number of employees in British Rail or in the coalmining industry British Railways reduced the number of their employees from 500,000 to 325,000 inside 10 to 12 years, which suggests that there is not necessarily a view in the industry that they must maintain employment as a first obligation. In fact, they have a continual battle against the external financial limits which are established by the Government—and rightly so.

Lord Boyd-Carpenter

Will the noble Lord allow me to intervene? I know that he has great experience in this matter. I think that he was on the board of British Rail, Scotland at one time. But will he not accept that recent events, such as the ASLEF strike, are almost inconceivable in an industry in which those fomenting that strike would know that if it were carried on on the same basis in such a private sector industry they would all be out of a job and the firm closed down?

Lord Taylor of Gryfe

My Lords, I am not sure that the same difficulties have not arisen in some of the private industries. The ASLEF dispute is something that I would not want to discuss today. But I make the general point that there has been a substantial reduction in employment in many of the nationalised industries and they had to slim down in the same way as private industry in order to meet competitive circumstances.

I welcome this opportunity to discuss the present situation in the nationalised industries, for two reasons: first, I have on the Order Paper a Motion for a short debate in the financing of nationalised industries, which is a subject in itself and a very important one. Secondly, I believe that if there is one area in which the Social Democratic Party has a distinctive and useful contribution to make it is in relation to the nationalised industries.

The trouble about about the two main parties, despite the reasonable statements that have been made by the noble Lords, Lord Beswick and Lord Boyd-Carpenter, is that they are both prisoners of their own prejudices in this matter. We have to accept that if the Labour Party are returned to power at the next election, they are committed to a massive dose of nationalisation or re-nationalisation. Indeed, in the public prospectuses which are now issued by the de-nationalised companies there is a statement to the effect that this share is at risk because of the commitment of an alternative Government which may re-nationalise, and shareholders are entitled to take that into account. Not only does it appear in the public prospectuses, but it also appears in the Labour Manifesto. So we shall be faced with re-nationalisation on a massive scale.

In addition, there will be a further group of industries which embrace the so-called commanding heights of the economy. I suspect that the noble Lord, Lord Beswick, recognises this, that such a policy can contribute little towards solving the nation's economic problems. It is a policy that is irrelevant and irresponsible. By the same token, the Conservative Government seems to believe there is something inherently wrong with state enterprise and something inherently virtuous about the private sector. This leads them to conclude that the selling off of successful nationalised industries will make some substantial contribution to the nation's welfare. I do not believe it.

There are good and bad practices in the state sector, as the noble Lord, Lord Boyd-Carpenter, said. I recall discussing with a Clydeside shipbuilder, following the nationalisation of shipbuilding, how he was faring. He said: "This year I have had to build into my costings £900,000 for centralised charges from the new state-owned organisation." I am happy to say that that situation has now been corrected under the new chairmanship and new direction, and the industry is no longer so centralised. It is now based in Newcastle instead of Mayfair. I had the pleasure the other morning of calling on Ian MacGregor at an early hour in his new headquarters on the South Bank of the river, where there will be 170 people employed as against the 1,000 people who were formerly employed in the old central headquarters at Grosvenor Gardens. I believe the nationalised sector is trying to get this right.

The problems of nationalised industries are many. They usually operate on annual budgets and cash limits imposed by the Treasury, when many of their development programmes require long-term investment strategies. They are upset occasionally by uneasy relationships with Ministers, particularly after there has been a change of Government.

Similarly, performance in private industry is uneven. There are excellent companies in the United Kingdom: ICI, GEC, Pilkington, Sainsbury, Marks and Spencer, and so on. But in the past few years there have been many examples of companies going to the wall as a result of bad management and failure to respond to the changing climate of competition. The affairs of ACC, which are featured in the newspapers these days, bring no credit to the private sector. That is why the Social Democrats take the view that the appropriate basis for a healthy economy must rest on a mixed economy with the acceptance that a well-managed and reasonably financed public sector should be encouraged alongside an efficient and enterprising private industry.

There are sections of nationalised industry which should be sold off—for example, British Transport Hotels are quite peripheral to the basic business of British Rail. On the other hand, British Rail are pressed to dispose of their property assets, which have a growth potential for the future financing of the British railways system. The British Railways Property Board, of which I am a member—and I declare an interest—contributed £72 million last year to BR finances to help to cover the deficit. If there is a continual pressure on British Rail to sell off these property assets in a weak market, they may square the books for this year but they will be destroying the prospects for future revenues to finance the British Rail network.

At the moment they are in fact, in order to meet immediate cash requirements, selling off properties with a long-term growth potential and five-year rent reviews which could help to finance the railways 15 or 20 years from now. It is that kind of pressure and that kind of strategy which I believe is damaging to the nationalised industries and also damaging to the total economy of the country. I believe we should take the whole discussion about nationalised industries—and here I commend the very reasonable approach of the noble Lord, Lord Beswick—out of the straitjacket of doctrinaire policies and give some of the nationalised industries a chance.

The present Government were elected on a promise in their document called The Right Approach to the Economy; and I quote from that as follows: We aim to protect the management of the nationalised industries from constant Whitehall interference.". Perhaps that text should appear on the desk of every sponsoring Minister, alongside the wise words of Herbert Morrison, who in 1933 wrote these words: A mischievous and not too competent Minister could easily ruin any business undertaking if that were permitted, while a weak and inefficient management would protect itself from public criticism by spreading the story that there is too much Minister in the running of this show'. This is always an uneasy relationship. The Minister has three important duties. First he must appoint a competent chairman and a good board. Secondly, he must give that board clear-cut policy objectives. Thirdly, he must assess the performance of that board but not on a day-to-day supervisory basis. Appointing chairmen seems to be one of the greatest problems of the present Government. May I suggest a job specification? He should have a good track record; he should be responsive to his consumers and his customers; he should have a good PR sense, so that the public know what he is about; he should be able to understand and live with his Ministers and to accept policy directives; he should understand the Treasury and not be bored by endless committee sessions; and, above all, he should command the respect and support of his workforce.

Too often, chairmen—and again reference was made to this by the noble Lord, Lord Beswick, today—do not know until within days whether they will be reappointed or not. Sir Derek Ezra goes in a few weeks but so far no appointment as his successor has been made public. Sir Peter Parker, I think, has 18 months to go and Michael Edwardes, I believe, goes some time in the autumn. The chairman of the CEGB, Mr. Glyn England, was available but was not reappointed on 2nd April when his contract expired on 8th May. Businessmen who serve the public sector are entitled to be treated in a manner that enables them to plan their future. I do not know whether Mr. England's declared membership of the Social Democratic Party had anything to do with that dismissal. I hope not, for the Minister should note that ICI were not inhibited by the political affiliations of their new chairman. Indeed, reference to ICI prompts a comparison. When they recently appointed a chairman they had a choice of three distinguished contenders. That is the difference between the private and the nationalised sectors. There were three vice-chairmen of ICI who could all have filled the role, and had prepared themselves to fill the role, as chairman. Yet we have several important nationalised industries which are responsible for very large investments with no chairmen in sight. That is bad business. It creates uncertainty and diminishes efficiency.

The Government have recently announced that the nationalised industry boards will, in future, be smaller but with more non-executive directors. I welcome this as a general principle, but I would counsel the Government not to establish a uniform pattern for all industries. They are widely varied and they may have to be diversified in their board structure and control in order to fit in with the environment in which they operate.

The Sunday Times stated recently: Boardroom structure is important, but if you look at Matsushita, GEC or ICI you find structures change to suit personalities or different trading climates. There is no universal formula. That Whitehall thinks there is, merely shows its lack of contact with business management".

Perhaps the difficulty in recruiting chairmen for nationalised industries has something to do with the numerous controls and constraints which have now been imposed on these industries by the Government. I have been involved in the nationalised sector, but I spend most of my time on the boards of private sector companies. In the latter, we make our decisions, we carry them out and we stand or fall by the results.

Compare that, my Lords, with the nationalised industries of which British Rail, with which I am familiar, is a fair example. It has a good chairman and a competent board, including distinguished non-executive directors. The technicians—and this is the process of decision-making—and the planners prepare their investment programme and take it to the board. They approve it and then they take it to the sponsoring department. The sponsoring department has a team of economists who examine the programme. They then take it to the Treasury, who, in turn, have a team of economists who examine that same programme; and, since it frequently has to go to a Cabinet Committee, the Minister then asks for options. The whole process then goes into reverse and you again go back to the board and ask for policy options on that investment. That is the kind of frustration which makes it difficult for a leader in private industry to fit into this kind of environment. I understand that this is being looked at and that the right honourable genetleman Mr. Patrick Jenkin, the Secretary of State for Industry, has just announced, the strengthening of business expertise' in Whitehall to assist the monitoring process".

On top of these tiers of decision-making that I have just mentioned, British Rail and others are now to be subject to the Monopolies and Mergers Commission for a full-scale management audit. On top of this, the Treasury is now recruiting a cheap six-man unit of economists to monitor the performance of nationalised boards. They will get monthly reports, mainly cash flows, and systematic quarterly reports and will then make an extensive annual review jointly with the sponsoring Ministries, which have parallel teams doing exactly the same jobs. On top of this, at the end of the day, you have two Commons Select Committees—the Select Committee on Nationalised Industries and the Public Accounts Committee—monitoring their activities.

What are the non-executive directors of nationalised boards supposed to be doing, if they are not checking investment programmes and monitoring performance against these programmes? That is their duty. What is happening is that their responsibilities are now being diminished. And what is the expensive chairman supposed to be doing? He is too busy attending investigations, inquiries and committees galore to have time to run the industry which is his basic responsibility.

I should have thought that a Government of businessmen would have devised a much less crippling structure. No private business could live within that bureaucratic maze. If the Government are serious about safeguarding these great national assets, they will have another look at the structure and control. The Government have a responsibility for these industries. They are of great importance to the economic well-being of Britain. They are responsible for 8.3 per cent. of the total labour force of the United Kingdom and 16.6 per cent. of our total annual fixed investment. Their annual output exceeds £18 billion or 11 per cent. of the total GDP. Their expertise is internationally recognised by their export performance and by their retention by overseas Governments as consultants in railway planning, major power station projects, coalmining and so on.

Let us be a little more proud of these national assets. They are responsible for a healthy partnership which is helpful to private industry and GEC, BICC, Plessey and the construction companies, like MacAlpines and Wimpey, can all testify to the value of that relationship. In the interests of Britain, let us stop this arid debate between the Conservatives, who want to sell all that is profitable, and the Labour Party, who seek to re-nationalise and embark on new areas of nationalisation. Let us examine the structure of these industries and improve it. Just as private industry has had to slim down and become more competitive, there is room for similar disciplines in the state sector.

My advice to the Government is to stop tinkering, stop the threat of selling off as the price of success and examine how other countries, such as France, have taken the state sector out of politics. Go for good and able management and give them a stable financial base with a balance of equity as well as loan capital, which would help to induce the disciplines of the private sector. The Social Democrats are committed to a mixed economy, and would look at these problems pragmatically and without prejudice, free from the confrontational climate which, in these days, is crippling our economy as well as these industries.

4.58 p.m.

Lord Underhill

My Lords, may I say what a pleasure it is to follow the last noble Lord's very thoughtful and constructive speech—except for two or three parts. I think it proves that he should still be where his heart really is, with those who stand firm on the policies which he is trying to explain. Also, may I apologise to the noble Lord, Lord Bellwin, if I am not in my place when he rises to speak, but I have another prior enagement in this House.

The noble Lord, Lord Boyd-Carpenter, referred to the Government's election policy as being one of seeking to reduce public ownership. As he is only one of two Conservatives who are supporting the Minister, I thought it might be useful to find out just what is the Government's policy. The Conservative Party's manifesto never leaves my brief case. Frequently, one has to ask Ministers the basis of their policies and they say that it was in the manifesto. I am not one of those who believe in manifesto politics. I do not believe that the electors rush to our manifestoes to see what we are after. But, having said that, manifestoes are a general statement of our desires and of what we wish to achieve.

What does one find in the election manifesto of 1979? There are very limited proposals to deal with public ownership. The shares in British Aerospace have already been sold, and I think it will be agreed that some profit has accrued. The National Freight Corporation was in the Transport Act 1980. I think it was difficult for the Government to find a purchaser, and, but for the internal moves by previous employees to get finance from the banks, that might still be in public hands. No action was taken to deal with British Shipbuilders. Reorganisation has been partly successful, but the Government will find it very difficult to carry out that part of their election policy.

Their election policy also proposed the relaxation of licensing regulations to allow new bus and other services to develop: hence the Transport Act 1980. We all agree that the development of inter-city express coach services has been achieved, a point which has already been mentioned by the noble Lord. This means that they are in competition with British Rail. But very little, if anything, has been achieved in starting new bus services. Where new services have been granted, they are in competition with existing public services and are creaming off some of the routes. This is what we said would happen. Nothing has been done about looking at the possibility of an integrated transport policy, which I suggest can be achieved only if there is a solid base of publicly owned transport.

There was also a proposal to restrict the powers of the NEB to the administration of temporary holdings which would be sold as circumstances permit. What has happened is that the Government have mutilated the NEB which was starting to develop as a very useful economic planning instrument. It is the Labour Party's policy to restore the position. Reference has been made to the bankruptcies of Rolls-Royce and British Leyland, which were saved by public ownership. Despite what has been said about private industries having to go under, nobody would have permitted either of those two great concerns to go under. Public assistance had to be brought in. Incidentally, it was public assistance which saved the British computer industry; namely, ICL. Turning to the BNOC, the only reference to it in the Conservative Party's election manifesto was that they would undertake a complete review of its activities. There was nothing in their manifesto about the Bill which we discussed yesterday which affects BNOC and Britoil. There was nothing in that manifesto about the development of private gas suppliers, nothing about the proposal to sell off the Gas Corporation's showrooms, nothing about preventing the Gas Corporation from having any participation at all in the sale of gas appliances. The Government did not set out their full intentions. I believe that there would have been public concern if they had fully spelled out not only the points I have mentioned but other items which were not in the manifesto but to which I shall refer. There was nothing in the manifesto about their general doctrinaire attitude: to destroy as much as possible of public ownership.

But what did the manifesto say about those concerns which the Conservative Party, if they formed a Government, did not propose to deal with? We read on page 15: We want to see those industries that remain nationalised running more successfully and we will therefore interfere less with their management and set them a clearer financial discipline in which to work". Let us see exactly how that declaration has been borne out. There was nothing in the manifesto about Cable and Wireless. We know what happened there. There was nothing in the manifesto about British Airways. That Act has already been passed. However, the Government would find certain difficulties over carrying out the sale of shares in British Airways. There was nothing in the manifesto about the Government's proposals for interfering—and I deliberately use the word "interfering"—with telecommunications, whereby private interests will be allowed to use the telecommunications network. And there are fears of even further development. There was nothing in the manifesto about the possibility of private interests creaming off some of the best parts of the Post Office in some of the big conurbations, thereby imperilling the national network of the Post Office. There was nothing about British subsidiaries. I agree so much with the noble Lord, Lord Taylor of Gryfe, in what he said about the compulsory sale of British Rail properties.

These are instances, time and time again, of what the Government have attempted to do or have done. They have done it for immediate cash receipts. This will imperil future possible assets which will appreciate, as property assets will appreciate—a point which we made when the Transport Bill was being discussed in this House in 1981, but to which the Government paid no attention. Sealink has not been disposed of, although the Government have powers to do so. I would remind the Minister of the promise which I think he made to me, that Sealink will be disposed of only as one complete unit: shipping and harbours combined. I believe they will have difficulty in carrying out that promise. There was nothing in the manifesto about the possible sale of the British Transport Docks Board. If that sale is carried out, it will destroy the possibility of a national ports authority, which we regard as vitally necessary. That is another reason why we deplore the abolition of the National Ports Council. All these are instances of what the Government have done, most of them outside their own manifesto.

I ask a simple question of those who know more about financial matters than do I: what will happen if all these interests are floated at the same time, or within a few months of each other? Surely the position, if one does not like the words "asset stripping", will be one of giving people very valuable things on the cheap. No regard has been paid in what has been done to the effect on the national networks: the bus service, the NBC, Telecom, gas. I would remind noble Lords that the Government even went so far in the Local Government Act 1981 as to instruct the new town corporations to dispose of some of their properties in order to bring back to the Treasury certain finance. Again this was a short-sighted attitude of disposing of properties which will be valuable public assets in the future.

Of course we all want efficiency. When one listens to certain Ministers one imagines that there is no efficiency at all in the publicly owned industries. However, quite a number of tributes are paid not only to the efficiency but to the expertise and to the research carried on in the nationalised industries. We want there to be a development towards more efficiency, but that does not mean mutilation to secure it.

Reference has also been made to competition. If one took this argument to its logical conclusion, that competition is the solution to every problem, we should be in a devil of a mess. Then we might start introducing it into such bodies as the police force. Heaven help us if private security companies are involved! As has been mentioned, British Rail are having to compete with other transport interests. So far as energy is concerned, we have gas, oil, coal—all competing for custom. Nobody has ever suggested that there should be any interference with the National Coal Board. I wonder why? I wonder why there has been no proposal from the Conservative ranks for action to be taken regarding the National Coal Board?

We had a long debate concerning reliance upon market forces. That has been carried further by what the Government are doing in their so-called privatisation policies. What are the reasons? It is partly because of the Government's anti-public ownership attitude. It is also because of Treasury pressure to obtain immediate funds to reduce the PSBR—a short-sighted policy because, as other noble Lords have mentioned, it means immediate cash but the loss of possible long-term benefits. Another factor is that the Government wish to reduce the number of civil servants, irrespective of how that reduction is to be achieved.

Most of the Acts in which the Government have dealt with public ownership give considerable powers to the various Secretaries of State. Minister after Minister comes to the Dispatch Box and in all sincerity says that Ministers will act responsibly, will act reasonably. However, as I have said on previous occasions, it is the words and the powers which are given in the Act which matter. The fact is that many important matters will be determined by negative instrument and not by affirmative discussion. The Government even went further. Was it really necessary to deal with the Forestry Commission and sell off certain forestry lands? Everybody agrees that the Forestry Commission has been a most successful undertaking.

I have been trying to ascertain what exactly will be the financial position in respect of the Government's decision to give design work valued at £2,000 million from the road construction units to some 15 consultants. It is very difficult to find whether at the end of the day the Government will not find that they are paying more. This is a case where I believe the decision was taken solely to reduce the number of civil servants.

Why have the Government decided to interfere with Ordnance Survey, which has served this country so well? There is no reason at all why we should mess about with Ordnance Survey.

Lord Davies of Leek

They are the best in the world, my Lords.

Lord Underhill

I agree, my Lords. Also, we shall shortly be debating in this House another Transport Bill. I will not weary your Lordships with all my points but here are just two of them. First, the testing of heavy goods vehicles and passenger service vehicles will be taken out of the Ministry sector and transferred to the private sector, when every single body among the operators, both private and public, opposes this proposal. Secondly, we find that the Government, having made the position of Express Coach Services successful under their 1980 Act, are now going to propose that the express coach services of the National Bus Company shall be taken away, again lessening the ability of the National Bus Company to carry out its other services.

I would like to take up (but time does not allow) what the noble Lord, Lord Boyd-Carpenter, said about Clause 4. I have the actual terms of Clause 4 in my pocket, because it is on a membership card of mine. It is often misinterpreted by many people. What my friend Hugh Gaitskell was endeavouring to do was not abolish Clause 4 but to set it out with an explanatory note in a more modern context.

Lord Boyd-Carpenter

Very funny, my Lords.

Lord Underhill

Well, we can have a debate on that at another time—but at the moment I am dealing with the Government's policies, although I thought I should mention that point in the light of what was said by the noble Lord, Lord Boyd-Carpenter.

Lord Boyd-Carpenter

I should leave it, if I were you.

Lord Underhill

Other countries do this much better than we do, particularly countries in the EEC. They seem to be proud of their public industries. Why can we not adopt the same attitude? I will ask a question. Why is it that no one has suggested that we should interfere in the Bank of England, which is a publicly-owned institution? Why is it that most of the EEC countries have the bulk of their banking either in state, municipal or co-operative hands? We have only 2½ per cent. of our banking in public hands in any form.

I believe we have to get away from the Government's attitude, which is dogmatic. Somehow, we have to lift the morale of the public industries. A few months ago we had a debate, again led by my noble friend Lord Beswick, on the general attitude of Govern ment Ministers to the publicy-owned industries, when he detailed numerous vicious attacks and unfair comments. We must help to lift the morale in public industries. As has been mentioned, there will be changes in the chairmanship of some nationalised industries. I hope that the Government will appoint people who believe in the principle of the public industry they are going to be asked to run, and that they will not be appointed with a view to forming subsidiaries with the intention of disposing of them outside the public interest. I believe that would be fatal.

We must ensure that the publicy-owned industries are not creamed of their more remunerative parts and left with the less remunerative sections which must be carried on in our various networks. We must also develop through the trade unions greater worker involvement in the publicly-owned industries. I welcome the debate we are to have on the financing of public industries, because I believe it is important that a higher proportion of investment in some of our publicly-owned industries should be gathered from within the industry if there is no possibility of gaining investment from the market. We ought to distinguish between investment for capital purposes and that for revenue purposes.

So far as I am concerned, the Labour Party also stands strongly for a mixed economy. We have recognised that time and time again. First of all, as democrats we believe in consumer choice, and one cannot have consumer choice unless one has a mixed economy. We have challenged the Government time and time again, saying that they give lip-service to a mixed economy and then within a few hours bring forward another proposal to mutilate or damage another public industry. We ought to challenge the Government over what are their criteria and where they stop. Most of the Government's actions and statements seem to imply that all public investment, no matter whether commercially or socially desirable, is an undesirable thing. We challenge that view, and that was the main point of the debate led by my noble friend Lord Beswick in what I consider to be a most helpful and constructive speech.

5.16 p.m.

Lord Wynne-Jones

My Lords, I am very grateful to my noble friend Lord Beswick for having introduced this important debate, because it gives us an opportunity to discuss what we frequently try to sweep under the carpet—that is, the whole question of how we are concerned with the economy and indeed the whole social character of our country. My noble friend Lord Beswick has called attention to the consequences of the Government's increasing policy of privatisation and the importance of concentrating on a positive policy to secure maximum efficiency within the public sector.

Since 1945 this country has steadily—with ups and downs, but on the whole steadily—pursued a policy of moving towards a more publicly controlled economy. Sometimes we have moved fast and sometimes we have moved slowly. But this has not been a matter which has been decided by one party or another. One party may have wished to go forward fast and the other party may have wished to go forward more slowly. As the noble Lord, Lord Boyd-Carpenter, admitted in his own speech, he himself was prepared to move in the direction of public ownership.

Lord Boyd-Carpenter

My Lords, if the noble Lord, Lord Wynne-Jones, will allow me to say so, what I said in fact was the complete opposite. It was that I was not prepared to move further in the direction of private ownership.

Lord Wynne-Jones

My Lords, if the noble Lord, Lord Boyd-Carpenter, considers that to be the opposite, then I find his use of the English language somewhat strange. I would have said that he was saying exactly what I said, only slightly modifying the emphasis.

It is quite clear that no Government since 1945, until 1979, was prepared to put forward avowedly a complete reversal of policy. We are not dealing now with a state of affairs where a Government are trying to improve things or modify things—not at all. The Government today say that they are deliberately and avowedly moving back and reversing what has been done over a period of 35 years. Incidentally, we are going back to much before 35 years ago, because it was a Conservative Government, not a Labour Government, that produced central electricity generation in this country. Now we have a Conservative Government saying that they want to go back. Do not let noble Lords say they no do not intend to go back, because of course they do. Perhaps I may quote what was said in another place in a debate the other day: I believe on principle that where competitive private enterprise can operate profitably, the State should stay out of these operations. Only where social conditions necessitate the maintenance of a public service should State-owned corporations exist". Is that what is intended by the present Government? because that is what one of their supporters is saying. Is that what they mean? Do they mean that they are going to disintegrate the whole of our nationalised industry structure? And where do they stop? It is no good just nodding the head, because it is perfectly clear from the statements made in debates in the other place this year, that it is the policy of the present Government to destroy everything that is publicly owned. It is their deliberate intention to pull the whole structure down.

One does not have to believe that a nationalised industry is perfect. The noble Lord, Lord Beswick, has very clearly indicated that; the noble Lord, Lord Taylor of Gryfe, also indicated it. Of course, it is too much to ask the present Government to be rational; but if they could be, if they for one moment could concentrate their minds instead of waving their swords and flags, they might be able to look at the state of our nationalised industry and try and see where they could improve it. That is the reasonable thing to do. I think there is no one on these Benches who would oppose such an investigation into how to run nationalised industries; we would welcome that. But, my Lords, that is not the proposal that comes forward from the Government; not at all. On the contrary, every proposal made is one of disintegration and pulling down what has been carefully, systematically and often very successfully, built up.

My Lords, I speak as one who believes in a socialist society. I believe completely in a socialist society; oh, but I do, it is no good the noble Lord waving his head. I do believe in a socialist society.

Lord Boyd-Carpenter

If the noble Lord misunderstood my gesture, I was expressing sympathy.

Lord Wynne-Jones

Well, a nod is as good as a wink to a blind horse. My Lords, I am a socialist because I believe that we can only get liberty, we can only get the full development of the personality, under socialism. I am convinced of that, and it is why I am a socialist. But that does not mean that I want to nationalise everything. That is not what is meant by socialism.

I spent a short time, but a very profitable time, many years ago in the Soviet Union. I was in Leningrad, Moscow, Tiflis, and I saw quite a lot. What interested me very much was that the big things they did remarkably well; the little things they did very badly. For example—others will confirm this—almost everywhere you go the plumbing is quite deplorable, but the construction is good. When it comes to the minor things, things are bad. The reason for that is that they have concentrated on the major things; in my opinion they made a mistake. But who am I to judge how another country runs its affairs? I think they made a mistake in not allowing the private individual to run the very small businesses, like shoe repairing, plumbing and things of that sort, because in the end the minor businesses, in my opinion, are not properly controlled from the centre; they are more easily undertaken on the local and small scale.

But that does not apply to our big nationalised industries. Our nationalised industries should not be broken down, should not be sold off; and that is not in the interests of any individual but in the interests of the whole community. It is madness to do it.

My Lords, this Government are so obsessed with the idea of what they term "privatisation" that they want to privatise education, they want to privatise medicine, they want to privatise every type of industry in the country. It would not surprise me if they got the bright idea to privatise the army and navy next. They will do anything to pursue their dogma because they are obsessed with this idea of privatisation. They do not worry about the consequences for you and for me. They will destroy not only our nationalised industries, they will destroy our education service, they will destroy our National Health Service, they will destroy everything which over the past 35 years has been built up as what we call the welfare state. All that will be privatised. "Oh, yes", they say, "we would not dream of doing such a thing. Did not we say that we would never touch it?" But they have already started touching it; they have already got to work on it, and it is happening under our very eyes at the present time.

May I make one or two further observations. It was said by a well-known writer, writing on political matters before the last war: Liberty in the capitalist epoch has been conceived of almost exclusively as the absence of restraints. It is seldom thought of as the presence of opportunity". It is the presence of opportunity which matters to people. That is the real freedom that we all want; it is the freedom to learn, the freedom to study, the freedom to think and to do the things which we want to do; not the liberty to boss people about and to make vast profits on the Stock Exchange. That is not liberty in the sense that a socialist thinks of liberty. He thinks of it in terms of personal liberty; the liberty of the individual to grow up, to have his children grow up the way he wants them to.

Sometimes, in talking about these things, I find people saying, "Oh, well, of course in other countries where you do not have private enterprise dominating the whole of your production then you do not get the inventiveness, you do not get the innovation". Inventiveness and innovation occur everywhere. They are not the particular prerogative of any certain country or society. But at least one can say that under a socialist society there would be no inhibition on it, whereas there can be elsewhere. Of course, it is true that even when you get this inhibition, even when you get these restraints, the human spirit can be big enough to break out of it.

I was thinking earlier today as to what I might be saying, and I suddenly recollected that in 1980 the Noble Prize for Peace was awarded to Senor Perez Esquivel. Is it not fascinating to think that an Argentinian less than two years ago received the Nobel Prize for Peace?—and he received it because of the work which he did throughout South America in organising a campaign for human rights. He was imprisoned by the Argentinian Government in 1977. They released him on condition that he was virtually unable to speak to anyone else and in particular he, as a Catholic, is not allowed to approach the Pope. However, that is an example of the triumph of the human spirit under the most shockingly repressive conditions. I think that one should not link genius, innovation and courage to any particular organisation. I would not for one moment claim that capitalism has not produced its heroes and its great people. But I would say that the time is now for us to march onwards.

Viscount Massereene and Ferrard

My Lords, before the noble Lord sits down I should like to ask a question. As he thinks that the socialist economies of the world are so efficient, why is it that the private economies of the world have to feed the socialist world? If we take Russia as an example, we find that before the Bolshevik revolution she had a private economy and she was the greatest exporter of grain in the world.

Lord Sandys

Order, order!

Viscount Massereene and Ferrard

My Lords, today she is the greatest importer. That is the point.

5.31 p.m.

Lord Oram

My Lords, when I read the Motion which has now been moved by my noble friend Lord Beswick, I was prompted, as apparently my noble friend Lord Underhill was prompted, to turn to the Conservative Manifesto for the 1979 election. Unlike my noble friend Lord Underhill, who apparently keeps it in his briefcase, I have been wearing it next to my heart for the past few days. In addition, I have another document which I am wearing even closer to my heart for good reason and that is the Labour election manifesto for the 1945 election. I should like, for a few moments, to contrast those two documents.

The Labour manifesto of 1945—and I hope that noble Lords will take an opportunity of re-reading it—clearly put before the electorate what it was proposing to do about the nationalisation of basic industries. The policy was clearly stated about the nationalisation of coal, of all forms of national transport, of gas, of electricity and steel. I recall—because I was a candidate in that election—that a great deal of the campaigning in that election concerned putting before the people of this country very clearly the case why the nation should take into its possession the basic industries upon which the economic health of the country depended. My party having overwhelmingly won the election, the Attlee Government proceeded to act in accordance with one of the clearest mandates that any Government have received from any electorate. In other words, we told the people what we were proposing to do. We got their approval and we acted accordingly.

What a contrast I would suggest there is with the 1979 manifesto of the Conservative Party. My noble friend Lord Underhill enables me to make a shorter speech than I might otherwise have done because he has spelt out systematically the fact that in that manifesto there was no reference to a large part of the privatisation measures which the Government are now undertaking. He did so in great detail and I will just summarise the situation.

There was no reference to British Airways; there was no reference to transport; there was no reference to Cable and Wireless; and there was no reference to the privatisation of gas or of oil. There was no suggestion that the Conservative Government had received a clear mandate in the last election for doing what they are now doing. But, of course, as soon as they were in power, they set about selling off all the profitable sections of the nationalised industries. The list grows longer month by month of profitable parts of nationalised industries being sold off to private owners. I believe that soon we will be in a situation where all that will remain in the public sector will be those industries which are recognised on all sides, except by, perhaps, the noble Lord, Lord Tanlaw, as being essential to the economy, but which from their very nature, for a variety of reasons, cannot be run at a profit. Moreover, because they cannot be run at a profit by private enterprise, it is necessary that the state should operate them because they are essential for the wellbeing of the community.

I accept that that is one of the very good criteria for public ownership. It was illustrated—as I think my noble friend Lord Beswick and someone else pointed out—a few years ago, when a Conservative Government nationalised Rolls-Royce. It was inconceivable—and all were agreed—that Rolls-Royce should be allowed to disappear; but it was beyond the capacity of private enterprise to run it at a profit. Therefore, it had to be taken over by the state.

In a recent debate before the Easter Recess we heard the noble Lord, Lord Marsh, with his considerable experience of public transport, explaining that in no major city in the world could private enterprise run the transport system at a profit. He was rebutting an absurd suggestion from a noble Lord opposite in that same debate that even parts of London Transport should he sold off to private enterprise, which struck me as an illustration of the extremes to which ideological fervour for privatisation can lead.

Lord Bellwin

My Lords, will the noble Lord give way? In fact, the noble Lord, Lord Marsh, was rebutting that only in an observation which he made when he said that he wondered who would in fact want to buy it.

Lord Oram

My Lords, it was in the context of a statement by the noble Lord, Lord Marsh, that it was a public responsibility to run transport in major cities. That was quite clear and I am sure that the noble Lord, if he recalls the speech in more detail, will agree.

Early in the debate the noble Lord, Lord Tanlaw, said, in turning to these Benches, that he would like to hear the case for nationalisation. He was present, I think, to hear the speech by his noble friend, or his noble colleague in the alliance, Lord Taylor of Gryfe, who I thought put forward a magnificent justification for a major sector of public industry.

Lord Tanlaw

My Lords, perhaps I may interrupt the noble Lord because I think that he was referring to me. The noble Lord also said that there was a great case against renationalisation which, I think, was the main tenor of his speech.

Lord Oram

My Lords, a major part of the noble Lord's speech was a justification for the existing nationalised sector. I suggest to the noble Lord, Lord Tanlaw, that if he wants to read the case for nationalised industry, he would do well to read Lord Taylor's speech tomorrow and perhaps sort out between the two allied parties just where they stand in these matters.

I would add only one or two general principles to the case that we heard from a very experienced public transport man, the noble Lord, Lord Taylor. I believe that there is an overwhelming case for public ownership of the extractive industries—the mining industries—because the public have a vital interest in the efficient exploitation of national material resources. It is also important to have a balance between the interests of one generation and those of another, and I believe that that can be achieved only by a publicly responsible body. Here I echo the words of the noble Lord, Lord Boyd-Carpenter, who agreed that in common services—such as power, transport and water—there is a case for nationalisation. I would suggest that this is because the product is largely uniform, the demand is pretty well universal and the optimum technical area of operation is usually a very large one. I think that all these considerations build into the case, which I see that the noble Lord accepts, for that kind of industry being within the public sector.

I also believe that where an industry requires enormous sums of investment—it may well be beyond the power of private investors to assemble the requisite amount—there is a strong case for the public to own those industries, because it is only public institutions which can guarantee their viability. Where the prices of a product of an industry—this applies to coal, transport, steel and others—enter very much into the general cost of living—and pricing policy of those products is important from the point of view of the general cost of living—there, too, I believe that the industries themselves are an essential element which the Government of the day alone should be enabled to exercise.

Broadly speaking, those were the criteria upon which the nationalisation programme of the 1945 Labour Government was based. It is those principles which in my view, are now being quite recklessly abandoned—doing damage to our national assets to such a degree that it will be extremely costly and extremely difficult for a future Government to repair the damage that is being done.

In terms of the reorganisation of industry, I believe that it will be the verdict of history that the 1945 Attlee Government was the most constructive Government that we have known, certainly since the war. Equally, it will be the verdict of history that the Thatcher Government will have been the most destructive Government that we have known. Yet there is a sense in which the Attlee Government's programme of nationalisation contained the seeds of its own destruction. I have said before in this House—in fact, quite recently—that I have some severe criticisms of the methods—not the principle and not the basic policy of nationalisation —which the Attlee Government undertook, which I believe were open to criticism. The noble Lord, Lord Skelmersdale —who I see in his place—yesterday did me the honour of quoting a remark somewhat similar to those that I am about to make. I am glad that he pays such close attention to my speeches; I am sure that it does us both good.

In my view, there have been two causes of concern about the way nationalised industry has progressed over the last 30 years, and they were, indeed, spelt out by my noble friend Lord Beswick. These are in relation to worker participation and in relation to consumer control or influence over their operations. Whereas the Government ensured that the ownership of these industries was transferred to the public—and it was done in a straightforward programme of nationalisation—not nearly sufficient was done in the enactments or has since been done in administration to make the public conscious of their new role as a proprietor of industry. Neither the workers nor the consumers have been encouraged to participate in the decision-making—in the affairs of the running of the industries—to the extent which I think was desirable.

In saying these things I cannot be accused of being wise after the event. Rather, if I am to be accused of any sins, it is that I am saying, "I told you so"; because I can go back 30 years to a pamphlet which I wrote and which I entitled, The People's Industry, which put forward the criticisms—particularly in terms of worker participation and consumer participation—of what were called the Morrisonian pattern. I believe that that method made insufficient attempt to democratise industry. I believe that a great problem which we now face is how to democratise industry, both nationalised and private. It seems to me that within the nationalised industries there is still a confrontation between the bosses and the workers. Insufficient of an integration of interests has come about as a result of what we have done.

In other words, I am saying that although the nationalisation programme was one which I whole heartedly supported, we missed an opportunity at that time of introducing industrial democracy, which has eluded us ever since. I should like to take a specific example, reverting to my title, The People's Industry. If British Airways had been the people's airline—as it could and should have been—no doubt Mr. Freddy Laker would have been deprived of the phoniest of his publicity stunts. It is that state industry which should be the people's industry and the people should be conscious of it as belonging to them, and they should be conscious of being able to influence the running of its affairs.

I conclude with one example of the privatisation which has been going on, which is significantly different. I refer to the case of the National Freight Corporation. That enterprise was sold off, not as the other sectors of industry have been to a new alien set of owners, but was sold off to the existing management and workers. Let me make it clear that I am very far from accepting that there was a case for hiving off the National Freight Corporation from the public sector. But I am of the view that if it was to be hived off, then the method that was adopted in that case was far preferable to the sale of shares on the Stock Market, which was the method adopted in the privatisation of, for instance, Amersham International or Cable and Wireless. At least the National Freight Corporation is now in the hands of its employees. It is now socially owned. It is now in common ownership.

I would love to enter the debate between my noble friend Lord Underhill and the noble Lord, Lord Boyd-Carpenter, as to the content of Clause 4 of the Labour Party. It is different from what the noble Lord, Lord Boyd-Carpenter, seems to think it is. It is common ownership which is quoted, and there are many forms of common ownership. One of the forms of common ownership which hopefully will succeed is the method that the National Freight Corporation is now adopting. It is too soon to say whether it will be successful; it is too soon to say whether it will develop into a good example of a worker-controlled institution. But I believe it is possible, and I certainly wish them well.

I could offer—not this evening but on other occasions—detailed suggestions which might help its democracy, because I believe there is a danger that it can develop into a new kind of élite; an élite of the management. I hope it will not. I shall be watching it, as I hope others will, to see whether it progresses along acceptable lines. If it does succeed, then I believe it could be a good prototype for other hivings-off. Not hivings-off to private ownership but hivings-off to other forms of social ownership. Co-operatives have been mentioned. As noble Lords may know, that is a cause particularly close to my heart. For example, there is no reason why British Rail Hotels should not be still attached to the parent body, but in a different form of ownership and operation which gives a great deal of control to those who work in the body.

I believe that all these things—and that is an example—need a great deal of further thought by all parties. When I was until recently chairman of the Co-operative Development Agency encouraging the development of co-operatives, I found support for those ideas in all parties in the House. I think that we can approach not the basic industries but peripheral parts of the industries from this point of view. I would hope that by some such means—and particularly by the means which my noble friend Lord Beswick spelt out so clearly involving consumers and workers in the control and operations of the nationalised industries; all those things are worthy of great study—we can try to get this public sector out of this silly game of football that we have been playing with it, particular if we look at the history of the steel industry—sometimes in, sometimes out of the public sector. We must bring that to an end.

Surely the time has come for us to recognise two truths. The one obviously the Government are far from accepting but they may learn, and that is that there is the positive need for a very large public sector of industry as a basis upon which success can be achieved in other parts of industry. Secondly, as I have mentioned in one or two connections, there is the need to find ways and means of bringing the workers and consumers into the control of the undertakings in which they work, and we should not rely, so far as the public sector is concerned, so exclusively as we have done in the past on monolithic state organisations. We should diversify. We should make use of the great variety of methods of public and social ownership which are available to us. In my judgment, they have been sadly neglected ever since the Second World War.

5.55 p.m.

Lord Boardman

My Lords, like other noble Lords who have taken part in this debate, I am grateful to the noble Lord, Lord Beswick, for enabling us to discuss and debate this issue which is so critical to such a large part of our economy. May I follow the noble Lord, Lord Oram, on two points. He referred to the Government policies on privatisation as being disastrous, with possibly the one exception of the National Freight Corporation. I waited with interest for him to give perhaps just one example, or a few figures, to show any case where the privatisation that has so far taken place had been adverse, or could come in any way under the description of disastrous. In fact, if he looked at the record—I am sure that my noble friend replying will illustrate this—he will see that there have been great successes in the advances that have already been made.

Lord Oram

My Lords, would the noble Lord allow me? I made the point that the sectors of industry which are being sold off are those which are clearly profitable. Clearly, therefore, they are successful either nationalised or privately owned; but it is reducing the nationalised sector to a position of great difficulty.

Lord Boardman

My Lords, perhaps I may come on to the other part of it later in the remarks that I shall make. The noble Lord also, following the noble Lord, Lord Underhill, made some play about the Conservative manifesto not spelling out the various parts of privatisation that we have achieved. Let me say that I believe that we were much too modest. In electoral terms there certainly can be no advantage in nationalisation. Indeed, it defeats me why the Labour Party have adhered to that El Dorado, as they have looked upon it in many cases, as they have. I would endorse what my noble friend Lord Boyd-Carpenter said in the absence, then, of the noble Baroness, Lady Gaitskell, when my noble friend paid a very fitting tribute to the work that was done and the brave and courageous way in which the late Hugh Gaitskell fought against Clause 4. I was glad to hear my noble friend put it so eloquently.

Nationalisation is shown by the opinion polls to be of decreasing popularity. It is disliked by all the consumers. It is hated by taxpayers who pick up the bill. Those who work in the nationalised industries are convinced that they are having a raw deal. I feel that we were modest in not claiming in our manifesto to do all the things which the Government are now so well doing. Of course, many of the criticisms made of the nationalised industries I believe to be unfair. There is a wide criticism of anyone who works in a nationalised industry. I believe that this is quite unjustified. I had some experience as a Minister responsible for many of the nationalised industries, and I have found that their qualities, skills, dedication and so on are in general no less than in the private sector. But what is different is the environment within which they work, the system. It is that which encourages an attitude which contrasts their performance with that in the private sector.

I make no apology for wishing to see the extension of privatisation going as far and as fast as it reasonably can. I believe that the consumer resents the lack of choice that he gets from so much of the public sector supply industries, and resents the escalation of prices, when prices in the public sector have on average risen at twice the rate of those in the private sector. I do not necessarily blame the Government of the day, nor do I blame those industries. I am sorry—perhaps I should say that I do not blame the industries of the day for some of that price escalation. Much of it is a result of Government intervention distorting the policies. The Chancellor of the Exchequer said that prices were increased when the Government wanted money and were pegged or subsidised when they wanted votes, and the nationalised industries have had to bear the burden of the criticisms that have come on such occasions.

The problem is not so much one of ownership as of monopoly. Because of the power of a public monopoly, the costings—I am speaking particularly in the pricing field—are done the reverse way; the industry thinks of the profit, or reduced loss, it aims to achieve, and then works back to find out what price it must charge the consumer to endeavour to achieve that result, and insofar as it fails to do so, that may be a measure of its inefficiency. Either way, it has no fear of competition, no fear of the shop next door. There is within the public monopoly no incentive to cut costs, or very little such incentive. There is very little inducement to invest. Indeed, there is a positive resistance often to investment in that it may be claimed to reduce manning levels and cause redundancies.

Successive Governments have attempted to monitor the performance of public sector industries and they have had mixed successes. The present Government are making further advances along that path with their monopolies and mergers inquiries and with the extra surveillance that will now come from the Public Accounts Committee. I endorse what my noble friend Lord Boyd-Carpenter said about that com- mittee, of which I had the privilege of being a member for a number of years. I found that the way in which it analysed and investigated the cases which came before it—the few, of course, which could be analysed in depth—was an effective discipline. Perhaps the main lack is that following the report of the Public Accounts Committee, more is not done to show that the faults disclosed have been put right and that those at fault have suffered the penalties they would suffer in other sectors of society.

Despite attempts at various ways to monitor performance, no one has yet found an answer to making the public sector effective and efficient in a way that it competes with market forces. There has been reference to ministerial interference, and it is interesting to consider to what extent Ministers should get involved in the management of a business, or indeed to what extent Parliament should be involved in interfering with the management of nationalised industries. There is a strange contrast between, say, the National Health Service, about which the Secretary of State is questioned almost daily about minute details—for example, why hospital beds were not provided with certain types of blankets, or whatever the question might be—yet with regard to the nationalised industries, the Minister's power to interfere and his responsibility to answer are extremely limited. A Minister's only really effective way is to issue a direction, unless he is able to achieve his end by persuasion.

It is interesting, too, to consider what changes, if any, should be made to achieve the right balance. Inevitably there tends to be considerable duplication; the department concerned will be building up its own models while the industry is building up its models. A great deal of time is spent by both parties doing that, after which they do not agree and then they all get together and do a third set of models to try to find which is the right one and what is the right line to pursue. When I had some ministerial responsibility for the steel industry, my first move was to say to the late Lord Melchett, who was then chairman of the British Steel Corporation, "You are building models and have a number of staff doing that and trying to predict what will happen. My department is doing the same. They never agree and a great deal of time is spent trying to reconcile them. I am prepared to accept your models, your view, if you will honestly tell me, as I know you will, what your predictions and so on are, and I will call off those who are harassing and haranguing you and making your task more difficult". We agreed that we would work on that basis and we moved quite a long way in that direction.

As for natural monopolies—gas and electricity distribution, the railways, the postal services and the like—there are particular problems in that it is impossible to create effective competition, although more could be, and indeed is being, done. The Government, by allowing telephone installations in the home—it was previously a nonsense that the private sector should have been excluded from that activity—and by arranging delivery services which will compete in some areas with the postal services are moves in the right direction, but a lot more could and should be done.

For example, could not British Rail consider Pullman cars? The noble Lord, Lord Tanlaw, referred yesterday to British Rail using part of their track for private purposes. There is a great deal of scope for the development of such activities, particularly for some of those industries which must, in the main, be natural monopolies. And even with a natural monopoly we are entitled to query whether a publicly-owned monopoly is necessarily more efficient than a privately-owned but publicly regulated monopoly, as works effectively, for example, in the United States, though I recognise of course that there are considerable problems to achieving such a fairly dramatic change.

Nevertheless, there can be no excuse for allowing the large monopolies to continue to hold what I call their peripheral activities, those things which are not essential to their main line business. The noble Lord, Lord Taylor, referred to British Rail Properties resisting the sale of a number of their properties. I wonder what yield those properties were returning. I imagine it was a fraction of the yield on the cost of the money they were borrowing.

Lord Taylor of Gryfe

The properties of British Rail are not based on borrowed money, my Lords. BR do not borrow money in the market to finance their property portfolio; they are in possession of those properties and sites. It is a question of the future development of those sites as a source of revenue for keeping the railways going.

Lord Boardman

Yes, my Lords, and I understood the point the noble Lord made, but he referred to the revenue being generated by those properties being available for the further exploitation of the railway system in the years to come. I imagine that the properties which have been realised had a yield of 3 to 6 per cent., while British Rail were borrowing at a rate greatly in excess of that. Those are sums which are leading companies in the private sector, which are having to borrow money at high rates of interest, to look through their portfolios to see which of their low-yielding properties and assets should be divested. I call that a sensible course, one which it would be right for British Rail to follow.

Why should the National Coal Board, for example, have large sums of money invested in builders' merchants? Is that not right outside their main line activity and should not those funds be deployed in their main business Such peripheral activities are often starved of cash because the funds are required for, say, a new mine or the like, with the result that the peripheral activities tend to get run down, yet they still hang on to them.

I have some personal experience of that kind of situation in that nine years ago I persuaded the National Coal Board to sell its brickworks. It was not easy to persuade the board, and I had to see the unions as well as the coal board in order to persuade them that it was better that the proceeds should go into developing coal mines rather than be left in building bricks, which had nothing to do with mining coal. The brickworks had been starved of money. Nine years later a company of which I am chairman acquired a company which had bought a number of the brickworks. The brickworks have had vast sums of capital invested in them, and are probably the most efficient in Europe. They are making a contribution to the national economy that could never have been expected of them had they remained as part of the National Coal Board.

On these occasions the objection put forward by the industries concerned, influenced very much—and understandably so—by the unions, is that any sale-off will inevitably create redundancies. If sales-off must inevitably create redundancies, that is a complete admission that there has been overmanning. In the private sector the cash pressures, in particular those in the past couple of years, have forced companies to look through their portfolios to see what they had which was peripheral to their main line of business, and then to realise those peripheral undertakings. Indeed, many of these transactions have been achieved with the help of management buy outs and the like, and I congratulate the Government on making that possible. I hope that my noble friend will be able to assure me that the public sector are being required to look through their portfolios just as keenly to see whether they contain anything which can well be returned to the private sector so as to provide cash for the expansion of the main line business. I think that my noble friend and other noble Lords will be surprised to find the extent of the bits and pieces lying around in some of these big industries.

With regard to the noble Lord's second point, about securing maximum efficiency from the businesses in the public sector, as I have already said, there is clearly a limit to what can be done. Here businesses fall into two categories. There are those which are subject to market forces. Examples are the British Steel Corporation and British Leyland, and I congratulate in particular the management of the British Steel Corporation and Mr. Ian MacGregor on the progress that has been made. A noble Lord opposite referred to morale being low, but I believe that since nationalisation morale in the British Steel Corporation has seldom been higher than it is today. This is a matter on which to offer considerable congratulations to the management.

Similar remarks are applicable to Sir Michael Edwardes and to British Leyland, but I am sure that both chairmen and both their boards would accept that they have a very long way to go before they can produce a return on the capital employed comparable with that which would be expected by the Treasury and which would have to be achieved in the private sector. It was my noble friend Lord Boyd-Carpenter who said that he doubted whether either business would be helped by its workforce knowing that there was no possibility of its going bankrupt, and that I believe is a handicap under which the managements have to exist.

In regard to those elements of the public sector that have a natural monopoly and which are not subject to market forces, I find it difficult, indeed impossible, to give the complete answer, but I would suggest that there are various things that must be done. First, as I have said, I believe it necessary to have a sale-off of their peripheral activities, to clear out those activities and let others manage them, so that the industries can get on with their main-line business. Secondly, I suggest that major use should be made of the increased powers of the Monopolies and Mergers Commission, and I am sure that the Public Accounts Committee will also use its powers to look at elements within these industries.

Further, we should encourage private competition so far as it is practicable, and the telephone system is one example to which I have already made reference. I believe, too, that every effort should be made to break up the big monopolies into smaller profit centres, smaller accountable units. While they would not be competing with one another, they would provide a very much better focus for management if they were broken up, instead of being grouped together in one vast organisation, with centralised accounts.

I suggest, too, that further use should be made of international comparisons, and these should be widely published. I accept that, whether we like it or not, we have a mixed economy, and to those noble Lords who, like myself, believe that public ownership is not helpful to our economic prosperity, I would say that we should do all that we can to reduce it in all possible areas. Those noble Lords opposite who believe that further nationalisation and public ownership is a good thing must be prepared to accept the electoral consequences of that view, because I do not believe that the public agree with them.

6.16 p.m.

Lord Molloy

My Lords, I want to follow in particular the last point made by the noble Lord, Lord Boardman, in which he exalted the present Government, this businessman's Government, for their many achievements. It slipped his mind to remind us that never in the post-war years have bankruptcies been so numerous as they have been since the present Tory Government took over. Never before has inflation been created by any Government whatsoever to the extreme extent that this Tory businessman's Government has inflicted on the British nation. Never since the time of the last depression have there been 3 million of our fellow countrymen on the dole until this Tory Government of businessmen and businesswomen took over. The noble Lord was also a little upset—

Viscount Massereene and Ferrard

My Lords, may I interrupt the noble Lord?

Lord Molloy

Yes, surely, anytime.

Viscount Massereene and Ferrard

My Lords, although there are today 3 million people unemployed, we are now proportionately employing more people than we were in the early 1950s, when there were 350,000 to 400,000 unemployed. The population has gone up considerably since then.

Lord Molloy

Well, my Lords, that is about the lamest excuse that I have ever heard in my life, and if this Chamber believes that, it will believe anything. The fact is that when people find themselves faced with an ugly, irrefragable truth, which is devastating, they jump up and make silly statements. I am very glad that the noble Lord, Lord Boardman, did not fall for that one. I could not entirely agree with the noble Lord when he rebuked my noble friend Lord Oram because he said—and I think that he was right in what he said—that the Conservative Party did not include in its manifesto proposals on what it would do with British public assets. I must say to my noble friend Lord Oram, do you really expect that from the Tories? In a society built on greed and avarice, which must go back to the 'thirties and to the time of the old-fashioned Tory Party, a society in which there will be a couple of million, or perhaps even more, unemployed, does one expect transparent honesty in any Tory Party manifesto? Let us take the manifesto of Mr. Edward Heath. He won the election on a single phrase: "We will cut prices at a stroke". I will give way to any Tory noble Lord opposite who will say that I am wrong in claiming that that was an untruth and that no prices were cut.

Lord Boardman

My Lords, perhaps the noble Lord will recall that that alleged quotation was not in the manifesto.

Lord Molloy

If it was not in the manifesto, where then was it? Why were they posted about? Why were the leaflets created? And who in the Tory Central Office at the time of that election distributed that quotation from the leader of their party? It seems that in the upper echelons of the Tory Party they do not even mind deceiving themselves; and as for the British nation, that is a bit of trivia that can be led up the garden path and deceived at any time.

What else has been remarkable about this debate is that everyone has at some time had something good to say about public ownership. Indeed, there were one or two noble Lords opposite who even claimed authorship for their party of certain forms of public ownership—and that, of course, is perfectly true. But one has to look at the difference as to why we on these Benches, as socialists, thought that public ownership was important. It was something new, like democracy. Democracy is something comparatively new. In the history of mankind it is the great dictators who have ruled, and ruled for centuries. It is the great landowners who carried on their vulgar, appalling and terrible way of life—like in the Soviet Union; like, indeed, in our own country.

How difficult it is to understand how, in the discussions on the 1832 Reform Act, which tried to get the then Tory Party to stop children of six years of age going into the iron ore factories and down the pits, there was an economic argument. "If", said Conservative spokesmen, "children have to wait until they are 10 years old before they can work in the pits and mines and in iron ore factories, look at the loss of labour. The economic facts will not allow it; there will he a terrible crash". In short, what they were saying in those days—and they have not changed much—was that the efforts of child labour were building the so-called British Empire, and if you did away with child labour the whole economy would collapse. Of course, we know that for the load of rubbish it was.

Therefore, as mankind has progressed, so one can see what has happened in the United States, even. I ask noble Lords opposite to take note of this, and perhaps the noble Lord the Minister will reply to it. More than any other nation outside the Soviet bloc, the greatest piece of nationalisation and public ownership of land is in the United States of America. And when you have a look at some of the other Western European countries you see that the principle of public ownership has moved along there, in its role of bringing about public social advance, to a greater extent, even, than it has in our own country.

At this stage I want to say that I disagree, too, with those extremists who want to nationalise everything they can lay their hands on. Every barber's shop shall not have a wavy pole but a Union Jack running down from it! I do not belong to that ilk. On the other hand, I think there are equally dangerous people who think the other way—one or two of them seem to be members of the present Cabinet—and that is indicated by the selling off of British publicly-owned assets. The very mention of public ownership—municipal ownership, nationalisation—horrifies them. If they had their way, would they denationalise their own systems? As we went from street to street, would we pay a private toll? Would they de-nationalise the sewer systems of our great nation? It would cause a lot of dirt if they did! Are they going to de-publicly-own every little issue that is vital to the goodness of our society? Are they going to do away with the public health inspector? Are they going to do away with all these wicked controls that make sure that we have a proper, civilised society?

I do not agree with either of those two extremes, but it disturbs me that this Government just will not learn. There has been more unemployment since the war under this Tory Government; there have been more bankruptcies; more businessmen, as well as workers, have suffered in a most tragic way under this Government of businessmen than under any other Government since the war. That cannot be denied. There are many other things as well, because when you are talking about businessmen going bankrupt by the hundred every week, when you are talking about 3 million people being on the dole, it is not just the figures alone. It is the misery within the family, the agony within families—indeed, sometimes the quarrelling among families—that these appalling Tory policies create, as well as the economic damage.

My Lords, like my noble friend Lord Wynne-Jones I believe in some form of sensible co-operation, because I do not think that the communal need and private greed should be in constant war with each other, which was the system before. Otherwise, what will happen is what happened between the wars—and many of us experienced it. Of course there was deprivation; of course there was appalling housing; of course there were workhouses; of course there were no nationalised mines or nationalised railways—that terrible word! And nothing was done about it. As Parliament did then, Parliament now, under Toryism—and this is the grave danger—may well revert to that ancient, useless role of being a public mourner for private crimes.

Now I should like to turn to why some of us believe that some great industries have to be publicly-owned—not merely for the economic future, and not even for the economic improvement, which has been massive. If I had had time I should have liked to go into the great technological advances that there have been in the publicly-owned industries on a wide variety of subjects. We had the simple little matter under wicked public ownership of taking the filthy dust out of the air of the pits where men laboured and then, under those previous Tory Governments, where children laboured. That alone saved something like 5,000 or 6,000 lives in a few years. The death toll in the pits dropped dramatically because of some simple changes, because at this time nationalisation meant that there was a parliamentary responsibility. These are the things which we believe are terribly important, and we hope the House will understand.

There is another thing which I find totally and wholly repugnant under the theme which has been advanced by various Members on the other side today. It grieves me to think that in our modern, civilised society the prototype of the successful man is not the scientist, is not the inventor, is not the surgeon, is not the scholar, but is the financier and the gambler with massive social "pull". These are the people who have been elevated to among those who make a real contribution to society today. Therefore, I say that what nationalisation did for us—and this is why it was always in our thoughts—was to help us to escape from poverty. The public ownership of the mines, the public ownership of the railways and the public ownership of the steel industry all helped to make that massive contribution, so that millions of the citizens of our country could escape from poverty. In so doing, of course, we created full employment, which this Government have also destroyed. Just as surely as they have destroyed the publicly-owned industries, so unemployment will reach the high heavens in figures. This is something they ought to take very seriously.

One would think that they would have this in mind when in their manifesto they speak in the terms in which they do speak of what is publicly-owned. I will tell your Lordships what they did mention. They mentioned in their manifesto, or their spokesmen said, that our defences would be sure. If it were not so serious, that would be a joke. They also mentioned how they would concentrate on law and order. I do not know what has been happening in our great cities with frustrated youth. These are the things they should concentrate on and not on absurd doctrinaire issues of trying to get rid of the valuable parts of what is publicly owned. Can any noble Lord opposite tell me how many public drains there are in Manchester, Swansea or London that they are going to "flog off"? They will not do that; there is not much money in that. The whole art must be not even adherence to any political or religious principle, but rather how much money can we make for our friends?

I submit that the youngsters in our universities and our great cities are realising this and know well that many of them walked to school from a state-built council house into a state-owned school, taught by wicked state teachers; and when they were ill they had the wicked National Health Service to turn to. They realise these things when they become 16 or 17, and when they see the policies of this Government they realise that something must be done to change them. I hope they will have more sense than to use violence in the streets and will wait until they are 18 and use the power of their democratic vote to get rid of this appalling, reactionary and, above all, inefficient Government. That is the great crime of this Government: they are inefficient. For them to be worrying now about selling off priceless assets of the British economy is a total disgrace.

When they look at these great industries—and I hope that this is appreciated on the Benches opposite for I must say that it is appreciated by many efficient, big businessmen who depend on their great customers like the National Coal Board, like British Rail and the steel industry—they do not say, "We don't want orders from wicked nationalised industries". In the old-fashioned working-class phrase, they say to themselves, "Not on your nellie!" Because efficient business men know that many of the great publicly-owned industries are their source for building up their own industries. I believe that from this sort of thing flows something else. From the efficiency of these great industries there flows the wherewithal with which we have been able to construct our social furniture, and that is the link, the link between the socially owned industries and the social furniture of a decent society.

I want to say, in conclusion—and I am hoping that this will not horrify noble Lords opposite—that I am a believer in planning and logic, a great believer in both. I want to see planned co-operation between both sectors. I am not one of those people who believe that there is no room for the private sector. That is an absurdity. Equally, I am not in favour of inefficient publicly-owned industries. Much could be done to make them even more efficient. Let us not forget the hundreds of thousands of men and women who work in these industries and who are very proud to work in them.

Some of them are old enough to realise what a magnificent change there has been in at least their conditions of work. They are not satisfied with the speed of industrial democracy, but in the conditions under which they sell their labour there has been a great improvement; and, because of that improvement in the public sector, the private sector has been compelled to follow. That is a sort of competition that they are not too fond of.

If we can get a new feeling, a new spirit and not an arid, continuous debate; if we can get something along the lines of the contribution we had from my noble friend Lord Beswick, who led this debate in an admirable way, and the superb contribution of the noble Lord, Lord Boyd-Carpenter, I believe that that is the intelligent way to go forward. Why should we not have the best of all worlds—the best of the publicly-owned sector and the best of the private sector? In that way, we shall restore the health of the economy of our country. When we have done that we shall move forward to enrich the lives, not of any sector or group but of all the people of our land.

Viscount Barrington

My Lord, before the noble Lord sits down, will he agree that whether or not democracy is a new thing, it is a very old word? It is an older word than "Tory". It was coined in 500 BC. The word "Tory" was not in use in the year 1500 AD, and in those days it applied to certain Irish ragamuffins who wanted to defend their own rights against the landlords. Simply on this point of words, would the noble Lord agree that democracy is an old idea?

Lord Molloy

My Lords, democracy is an old idea, but it was not a democratic process. There is something else which I could tell your Lordships is ancient—phrases like, "Love your neighbour" and the parable of the Good Samaritan. We have lots of churches, lots of bishops, but we are not moving towards those principles, either. The nearest thing which has been put in the principles—

Several noble Lords

Order!

6.36 p.m.

Lord Davies of Leek

My Lords, we are indebted to my noble friend Lord Beswick for having raised this issue. I think it is obvious—and it was pointed out by my noble friend Lord Molloy—that we cannot go on for general election after general election leaving big or little businesses in a quandary, they not knowing what the next Government are going to do. If every five years massive changes are to be made in certain sections of British industry, it is conducive neither to efficiency nor, if one wants to use the word, to profit. Profit should not always be the yardstick—as I shall prove as I go along—on whether an industry should be under public ownership.

The word "nationalisation" seems to have an ugly connotation. It is not not very euphonistic. If people have a musical ear they may not like it; but "public ownership" will be a little softer on the ears of the more delicately attuned individuals. I am worried about the consequences of this policy over the years. The unreality (with respect to the Prime Minister) of her statement on the progress or non-progress of the economy is, to me, absolutely amazing. At least when Nero burned Rome and fiddled, he could read the music. I do not think that this lady can read the music.

While the right honourable lady attacks the nationalised industries and gathers up all the points, what do we see? She keeps telling us that every day—like M. Coué in my youth—things are getting better. In January 1980, when unemployment stood at 1.4 million, the right honourable lady's "New Year Message" was beautiful. It was: There were signs of a new spirit of co-operation, of a more realistic approach to our problems. Let this spirit rise high, for it will signify that our country is on the way forward to prosperity". That was printed in the Conservative News of January 1980.

One year later, in January 1981, the numbers of unemployed by now had gone to 2.4 million. Nevertheless, again we had this wonderful magic formula while the old fiddle played the tune: We are absolutely on the right track and people know it and feel it". That was the Financial Times on 2nd January. Nine months later—the gestation period—in October 1981 the number of unemployed were 2.9 million. At the Tory Conference the lady got a rousing welcome—bless her! We are winning through. We are within an ace of success. That was a quote from The Times of 17th October 1981.

But by January 1982 everybody knew that unemployment would be above 3 million—but not this undaunted iron lady. A New Year message: This year 1982 has all the signs of being one of the great opportunities for Britain, if only we have the courage and determination to succeed. The Conservative News printed that in January 1982. While all this was going on we were confronted with a pessimistic outlook in industry, on the Stock Exchange and—more important—with the ordinary people. Nevertheless, the Chancellor of the Exchequer now came in helping and the right honourable Mr. Geoffrey Howe said that he hoped that the defeat of inflation would be his New Year message and that there were now clear signs of our success.

When the Government came into power inflation was 10.3 per cent. It is not even down to that level at the present moment. While that has been going on, public ownership increased because it was said that it would help industry. Valuable nationalised industries are being threatened on the grounds that private enterprise is better than public ownership. The noble Lord, Lord Beswick, yesterday in an excellent and constructive speech, as was that by the noble Lord, Lord Taylor of Gryfe (who is not in his scat at the present moment), pointed out that there was nothing wrong with some of these industries. They made a profit. In some cases they made vast profits. Nevertheless, they were hived off.

There are three ways that this Government have approached these industries. One, a successful public enterprise is sold either in part or in whole. Two, when a public industry is not doing well enough to be sold off entirely then any part of it that is profitable or ancillary to the enterprise is sold. For instance, British Rail are being compelled to sell all its cross-Channel ferries and hotels—anything that will help to make it a profit. Then it is said that they have to charge the present prices for train fares, otherwise a profit cannot be made. They forget entirely that the profitable parts have been hived off.

We have reached a new formula in economics—socialisation of the losses and privatisation of the profits. We take from the Post Office just the areas around the towns. But the old country postman has to walk 20 or 16 miles a day to deliver a 10p. letter—or a 151/2p. letter these days—at an old farmhouse. He still has to trudge through the hills and the woods and by the streams to deliver the letters. No private company wants to take that part of the delivery and supply of communications. This is the sad fact about avaricious Conservatism. I am not blaming the whole of the Conservative Party for being avaricious; but I do not think that they look at this enough in depth.

The third point is that private operators are encouraged to compete in the most profitable areas of the activities of the publicly owned businesses. In the case of British Airways or the National Bus Company, they are allowed to cream off the best traffic, leaving public enterprise to operate the essential less profitable routes. These are the facts. It should not have been done whatever political colour the party in power happened to be.

Now the programme is proving difficult because of the slump. British Airways are an example of this. Naturally, the proposed sale of British Gas Corporation showrooms was the piece de resistance for the trade union movement. After a one-day strike and industrial action was threatened, the Government get a Bill through Parliament, changing the national industries into a company, and then under the Com- panies Act the relevant Ministers take the opportunity to sell their shares. Half the shares, for instance, of British Aerospace were sold off in this way. Cable and Wireless have already had shares sold.

I want to point out the danger here. This is with regard to oil, and both sides of the House should look at this in regard to the Falklands crisis. We inherited treasure—oil—in the North Sea and Clemenceau's famous words in the 1914–18 war were: A drop of oil is worth a drop of blood. We only won World War I and World War II because we had access to oil supplies.

I accuse this Government of not having looked in depth at the military security of Britain by hiving off the British National Oil Corporation. That oil should be in the hands of the British people's representatives—namely, the Government of the day in power. God forbid that this lesson should be learned in the Falklands crisis! They have hived off that oil without any control of the private entrepreneurs who get the shares in the oil. They can sell their oil anywhere in the world where they wish. We have no control over the destiny of that.

There are five major oil fields which are now pretty well on the verge of being sold off by a Government which are facing for the first time since World War II the problem of the defence of this little country. In the defence of this country with the Navy that they have cut down, I cannot understand them. I am not a military fanatic. They have cut down and undermined our security by letting this rich source of oil he used and be parted from the power of the British Government. This is the truth. I think that the Conservative Government and the Cabinet should think twice about it at the height of this crisis.

I shall refer to another example. I shall not tell all the facts about this, but I know them. Why did we sell British Aerospace, and what has happened to it? British Aerospace was created in 1977 when four major aircraft manufacturers combined. That proved to be one of the most successful nationalised industries in Britain. The selling off of British Aerospace could lead to the collapse of British avionics. What else could happen? That has made a danger now to our military strength. Private firms and others will be under pressure to be seconded to the United States of America. This will reduce the action of British Aerospace in producing valuable military aircraft and other equipment. I shall go no further than that, but I should like a reply in writing if the Government disagree with what I am saying.

In other words, I accuse the Government of taking two vital sections of the British people's assets. One, the God-given success in the North Sea oil fields. Two, in selling off British Aerospace, which was one of the most successful industries in the world, and not considering the influence of that on British defence—or having not thought about it. Was all this discussed by the Cabinet with military people? Did they call in military commanders and aviation commanders when aerospace and when oil was being moved? Did they know Churchill's attitude to the oil problem in the days of the 1914–18 war or in the 1939 War? We won it on a sea of oil and today I accuse the Conservative Government, who are brave, successful and patriotic people—there is a roll of honour in this building to the men who have sat on those Benches over the years and who gave their lives—of thinking so much of the aridity of profits that they did not look into the problem of British security when they dealt with the selling of oil in the North Sea and mucking about with British Avionics and aerospace. I have been speaking for only 14 minutes.

A noble Lord

It seems longer.

Lord Davies of Leek

I have listened, my Lords, to some other speeches which have taken half an hour.

In January 1980 British Petroleum and the National Enterprise Board were instructed to sell off; then the National Research and Development Corporation through the British Technology Group and Aerospace, in February 1981. That was not enough. Cable and Wireless were sold off—all valuable for communications. As to the National Freight Corporation, agreement was reached and they could not move quickly enough on 18th January 1982 to get rid of that. They formed a consortium of management, staff and pensioners and, as my noble friend Lord Oram pointed out, a new formula was introduced here that might in the future prove successful. He spoke about the management and people working in the British Freight Corporation.

I have mentioned British Rail and I shall not reiterate that, but there are further plans for the British Transport Docks Board and the National Coal Board. There is one part of it which they tried to privatise. I happen to know about the mining industry—the levels. They tried to sell those to private enterprise—some people call them "foot rails". Open-cast mining is more and more given to private enterprise. There might be a case for that—I repeat that there might be a case—but it should be looked into in depth.

I now come to the last little point I want to make. Yesterday and today this House had to face the hard facts of the kind of world in which we are now living. I was going to deal with gas, but the House has listened carefully to many speeches and I think I should finish in the next minute. I really believe we should reassess and step hack from putting into private enterprise oil, and particularly British Aerospace. I interrupted during the debate on oil and pointed out the position of Venezuela—and I suggest that people read. It is not so long since I was in the country. For years the Venezuelans have tried to get control of the oil. They have done it, and they have done it with a democracy. They own the oil and they have the oil now for the people. For years it was exploited and for years they were treating. Today a drop of oil is worth a drop of blood, and no Conservative Government with sense would privatise our oil wells.

6.54 p.m.

Lord Cledwyn of Penrhos

My Lords, earlier today I thought that the shadow of our debate yesterday on the Oil and Gas (Enterprise) Bill would rest on today's discussion, but that has not been the case. We have in fact had a most interesting debate on a subject of great public importance and interest and I should like to add my own tribute to my noble friend Lord Beswick for initiating the debate and for the stimulating speech with which he opened it. I am personally grateful also to my old friend Lord Boyd-Carpenter for his tribute to my noble friend. The noble Lord, Lord Boyd-Carpenter, was himself a most successful chairman of the Civil Aviation Authority and he made a temperate and most helpful speech, although he would not expect me to say that I agreed with every detail of it.

This area which my noble friend has chosen as a subject of debate is one of which he has great personal knowledge and experience. I thought he made out his case well and did so without prejudice, with common sense and with moderation. He made a number of important proposals, and I hope that the Government will have taken note of his recommendations and that possibly the noble Lord the Minister, when he comes to reply, will be able to comment on some of those suggestions.

My noble friend posed two questions: namely, whether sufficient is being done to encourage the public sector to be efficient and whether there is merit in denationalising or privatising the public sector in whole or in part. There is an element of ideology on both sides of this argument. One must recognise that in all truth, and I will return to it in a moment. But the chief consideration of course must be the public interest, and this means the interest of the whole population and not a section of it.

Is what is being proposed by the Government in dissecting, quartering and stripping selected parts of the public sector, in the best interests of the great majority of the British people at this time? That is the question before us. For my own part, I have always been, and remain, a strong believer in the mixed economy and in maintaining the right balance between public and private ownership. In the period since the end of the last war, a number of major industries have been brought into public ownership. That was consistently opposed by the Conservative Party, but I believe that in each case what was done was in the public interest.

The state of the railways before the war, and the state of the coal industry before and after the war, made public ownership of those industries essential at the time. There would have been great public unrest had the Labour Government not come into power in 1945 and carried out these important tasks. Furthermore, the need to bring electricity and gas to all parts of the country—to the cottage as well as to the factory—made it vital to bring them under some form of national control. That was done; and we would not, for example, have had rural electrification if we had relied on the old dispensation.

I recall that when I was a parliamentary candidate in the 1945 election—and I still have the manifesto engraved on my heart since I learned it off by heart at the time, because I was a very inexperienced public speaker—the cottages of Anglesey had earthen floors; and our old friend Clement Davies had conducted an inquiry into tuberculosis in Wales and had found that the incidence was higher in Anglesey than anywhere else. There was no piped water, no electricity and no gas. The roads were poor. Private industry had failed to bring these things to the people of this country. These are the facts that noble Lords opposite must accept them. Council houses were built to house the people and water was brought to those houses and others by way of a public undertaking. Gas and electricity came; all these provisions were made, and, thank God! tuberculosis was removed because of the National Health Service.

So we have an enormous debt of gratitude to our former colleagues the Ministers, and indeed to Clement Attlee, who brought these things about. I am sure that no reasonable noble Lord opposite would oppose what I am now saying. I am pointing out that millions of our fellow citizens enjoy services today which they would not have had, had it not been for some form of public ownership. It is a remarkable story.

Like my noble friend, I do not argue that the administration of these public industries has been perfect. I take the view, personally, that there has been too much centralisation; a falling-off and a decline of local accountability and control. Great power in any sphere has unattractive features and it is essential that there should be democratic control of public industry. As one noble Lord pointed out, the consumers' interest must be protected. But in their enthusiasm to make this point, the opponents of the public sector must bear in mind that it is, even so, subjected to greater scrutiny than private industry at all levels. The structure of publicly-owned industry needs to be investigated regularly—and in this I agree with the noble Lord, Lord Taylor of Gryfe—so that the public who own it can be satisfied that it is being run as efficiently as possible in their interest.

In the final analysis, Parliament itself has the last word about public industries. One of the least satisfactory things about the Oil and Gas (Enterprise) Bill is the lack of parliamentary control. That reveals the weakness in the Government's thinking and in their general attitude. There is, and must be, public accountability in the public sector and the machinery of accountability must be overhauled and oiled from time to time. But it seems that when the Government de-nationalise, they do not lay down adequate procedures for accountability. This is the criticism of the Bill, and it is a criticism that is made not only by members of Opposition parties, but by a member of the noble Lord's own party, as he will know if he read the reports of the Second Reading debate and the subsequent debates in another place.

The Conservative Government told British Gas two years or so ago that it must raise gas prices by 10 per cent. in real terms. I think that the action of the party opposite on gas has really been indefensible. It was they, during the premiership of the noble Lord, Lord Home of the Hirsel, who set up the British Gas Corporation and gave it the powers. The Government themselves, and not the public industries, are responsible for recent increased electricity and gas prices. It is not a happy story, and high-flown charges against the public sector of inefficiency and the need to curb monopoly ring very hollow, when we really get down and look at the facts.

As my noble friend Lord Oram said, one of the misfortunes of the post-war period is that the public sector has become, as he called it, a political football. This has tended to sap the confidence of the management and of the public which it seeks to serve. The chairman of British Gas made his annual statement recently, and what he said illustrates the frustration and sense of unfairness which exists. This is what Sir Denis Rooke, the chairman of British Gas, said: 1980–81 is likely to be remembered as the year when it seemed that British Gas was under attack from every direction. What does seem incomprehensible and unfair is that we should be under attack when we have again demonstrated that British Gas, left to itself, is doing a responsible and efficient job. At a time when many industries are suffering the effects of the general economic recession, British Gas continued to provide the service its customers want and prepared for growth in the future. The popularity of gas was shown by the fact that we added nearly a ¼ million more customers and there are now more than 15½ million gas users. These are the facts, and I think that the Government and noble Lords who are members of the party opposite should be prepared to pay a tribute to the people who are responsible for this achievement.

In his speech, my noble friend listed some of the industries which were nationalised by Conservative Governments, and I think this is a point that needs to be stressed. He mentioned the Act setting up BOAC, promoted by Sir Kingsley Wood. There was the Continental Shelf Act 1964, passed when the noble Lord, Lord Home, was Prime Minister; and, of course, there is the British Gas Corporation for which he was responsible. There are other cases, like Rolls-Royce and British Leyland, where Conservative Governments have been obliged to use public money, quite properly, to save important private companies which had come to the verge of bankruptcy or, indeed, had nearly toppled over the verge. They were, in effect, nationalised. Against that background, it is difficult—certainly difficult for me—to understand how some members of the party opposite can be so virulent in their attacks.

My noble friend referred to the Financial Times of 7th April, which described the chairman in the public sector as battered by hostile Government. It really is not good enough and it is inflicting lasting damage on the nation. It makes for polarisation as between those who work in the public sector and the Government. It does not do the public sector any good and, if I may say so—and here I am giving a word of advice to the noble Lord and his noble friends—it does not do the Conservative Party any good, because they, after all, can govern only with the consent of the people, and the people include those who work in the public sector who make an invaluable contribution to our national life.

I turn to another point and to the speeches made by the noble Lord, Lord Tanlaw, on behalf of the Liberal Party, and the noble Lord, Lord Taylor, who remains a friend and who was until recently a noble friend. They referred to the policies of the Labour Party. I am going to be generous to the noble Lord, Lord Taylor, and will not make too much reference to his speech, because I do not want to lose his friendship. But I would say to both noble Lords that we do not yet know what will be the contents of the Labour Party's election manifesto. These matters are still under discussion. I suggest to the noble Lords that they look with care at their own manifestoes, because they seem to be lacking in any information on anything of substance. Of course, when they are published we shall be glad to look at them in the most friendly way and to debate them, if necessary, with the noble Lords. It would give me great personal pleasure—

Lord Tanlaw

My Lords, this is not the moment to discuss or exchange manifestoes. If the noble Lord has not read our manifesto and expresses ignorance in this debate, that is his problem, not mine. I know my manifesto and I am sure that the noble Lord, Lord Taylor, knows his, and we make very strongly clear what our position is.

Lord Taylor of Gryfe

My Lords, I very much welcome the suggestion that we should be prepared to debate our manifesto. Unfortunately, although in this House we have 36 Members, we have not yet been afforded one day in which to sponsor a debate of that kind.

Lord Cledwyn of Penrhos

My Lords, I am bound to say that, so far as I am concerned, that is a red herring drawn across the theme which I am seeking to develop. So far as the noble Lord, Lord Tanlaw, is concerned, he is quite wrong when he says that they have published their election manifesto. There is no Liberal election manifesto. There are broad generalisations, in which the Liberal Party are expert, but, so far, there is no detailed election manifesto—that is what we are waiting for—in his party, in the noble Lord's party or in our own party. But our business, at the moment, is not to criticise the election attitudes of opposition parties, but to scrutinise the policies of the Government in power. That is our job and that is what I am trying to do.

I believe, also, that we have a special function in this House as opposed to another place, in that we are in rather a detached position. Therefore, it becomes our duty to look rather more carefully at the way in which the nationalised industries are working at the present time. We must keep a balance between the public and the private sectors, and I think we have probably got it about right. There may be some industries which need to be nationalised again, but that depends on the merits of the case at any given time.

The state already controls what our old friend Aneurin Bevan called "the commanding heights of the economy" and it is misleading to say, as is often done, that our public sector is much larger than that of our partners and friends in Europe. That is not so. Most countries like our own have just about the same range of public ownership industries, state railways, state fuel and power, state posts and telephones, state airlines, state broadcasting and social services as we have in this country. So it is quite wrong to say that somehow or another we are way out on the left and in a strange and alien position. We are not in a strange and alien position—and I speak as one of the ancient inhabitants of this country.

What must be pointed out in this debate is that we fall behind some countries in a constructive appreciation of some industries; for example, in subsidies to maintain a first-class railway system. I personally think that Peter Parker and his colleagues, who are making an imaginative effort to give us a railway that we can be proud of, have been treated disgracefully from time to time. It is in this context that we must consider the words of the Secretary of State for Energy regarding the Government's policies; namely, that they are seeking sensible candidates for release from state ownership. Those are the words of Mr. Nigel Lawson.

It is appropriate to ask what is meant by sensible candidates for release from state ownership. The sensible candidates are those which make a profit. You do not need to be a prophet to draw up the list. Any accountant will do it for you, just by looking at a profit and loss account. So as this unworthy process gathers pace, some will make a great deal of money, the public will be worse off and the public sector which remains will have an even more difficult struggle. The selling off of a profitable, or a potentially profitable, part of British Rail, namely, Sealink ports and shipping services, is a classic example of this miserable policy. I think my noble friend Lord Davies of Leek mentioned this point.

For 150 years in, for example, the ports of Dover, Holyhead, and Harwich the ships and the railway have been inextricably related to each other. For the first time the Government propose to cut off the ships. We have only one or two ships running in Holyhead. The Government are going to cut them off and sell them to a private concern which will have no interest in Wales or Anglesey, or in the future of Holyhead or the people who work there. It is monstrous that this should even be contemplated. The Government are not acting in the public interest. They are the captives of dogma. What they should be doing—what we should all be doing at this time—is conducting the most searching inquiry into this whole area in an unprejudiced spirit.

Here are some questions. What should be the balance between the public and the private sector? What role should the state play? What have been the achievements and shortcomings of public enterprise, and what are the obligations of private enterprise to the public? What can we learn from other countries? And, finally, what should be our objectives for the future? Instead of that, we get bits and pieces of legislation which undermine public morale.

The problems of our country are complex and profound. We all wish to see them resolved, whichever Government are in power. What are these problems? They are unemployment, to which my noble friend Lord Molloy referred, lack of investment, slow or nil growth, inflation. The question in this debate is whether privatisation will help to solve those problems. They are fundamental problems with which the Government should be grappling. Will the Government's hostile attitude towards the public sector ease our difficulties? Of course not. They will become more intractable. What we need to do is to increase confidence in the public sector and the confidence of those who work in it. A little inspiration and a little vision would not come amiss.

Sixteen days ago a great fleet was assembled in a few days. The spirit of the men who sail in her shows what public enterprise can do. It was not private enterprise which assembled the fleet. The fleet is public enterprise. The great achievements of our men, here and abroad, have been publicly stimulated and inspired. If we could infuse industry on both sides with the spirit which assembled this fleet and which inspires the men who sail in her, our community would be transformed in a very short time.

7.15 p.m.

Lord Bellwin

My Lords, this is the first speech which I have made in three years at this Dispatch Box—the first, of, I think, several thousands if you count each amendment in legislation as one—on behalf of the Department of Industry and the Treasury, and I must say it is a very rough scene in which I find myself. I think I ought to go back to quiet, gentle matters such as rent, rates, housing and things of that kind. They seem to me to be a much easier ride than we get here.

I thank the noble Lord, Lord Beswick, for introducing the topic. I found his speech interesting and I shall read it carefully. I shall try to respond during this speech to a number of the points which he made, as I will to a number of points made by other noble Lords who have spoken. The topic has certainly proved to be a very lively one. The Government do not in any sense disagree with the second sentiment in the Motion of the noble Lord, Lord Beswick. He said much about atmosphere. I wish, though, he had said rather more about the efficiency part of his Motion. No doubt he will expect me to respond to that part of his Motion in a little more detail. The fact is that we see privatisation—I agree entirely about the word "privatisation", but I am waiting for somebody to come up with a better one, and when they do I shall be glad to use it—in its widest sense as part of a positive policy to secure maximum efficiency in the public sector and an improved use of resources in the economy as a whole.

Let me therefore deal with the Motion in two parts, and consider first the need to secure greater efficiency in the public sector. The need to improve performance is self-evident and the problem must be faced. There is much room for improvement. Much of public sector spending is manpower related. In fact, pay accounts, I understand, for some 30 per cent. of total public expenditure. The need to keep the wages bill under control is therefore critical, and this year the provision for total public sector pay has consequently been held to 4 per cent. There is also an essential need to keep down the number of public employees. In this respect we have had marked success. I do not intend tonight to go into the detail, but if any noble Lord wishes me to do so I will gladly give more information about it.

Within Government we are continuing our reviews and scrutinies of the cost effectiveness of Government activities. Sir Derek Rayner is continuing to give valuable assistance to us. As a result of work already done by him, the Government have taken firm decisions which will secure £110 million a year in recurrent savings and £28 million in one-off savings. In addition, we are continuing our efforts to improve financial management in Government, which is closely linked to increased efficiency. In particular, we intend to strengthen internal audit, to extend work on output measurement and to develop and extend the use of management accounting. These are themes which are taken up in the context of the trading public sector, particularly the nationalised industries.

It has to he said that, looked at in aggregate—and I shall qualify that in a moment—the recent performance of the nationalised industries in terms of the return they have earned on their investment or their productivity and wage costs has not been good. The noble Lord, Lord Taylor of Gryfe, wants us to be proud of the nationalised industries, and where they are retained in the public sector I entirely endorse that. We, too, want the same thing. But we shall all be more proud of them the more efficient they are. I have not heard any speaker among the many who have spoken today say other than that he wants there to be a more efficient form of operating in the nationalised industries. There is no quarrel about that. Therefore I want to say a little more on that subject, because I think it is constructive and important.

I say straight away that it would be wrong to see the nationalised industries as a homogeneous group when in fact they are very varied in their nature. Some are monopolies; others operate in highly competitive international markets. Some are in the forefront of new technology; others serve traditional and shrinking markets. Some are in manufacturing. Some are in service industries. Some are highly capitalised; others are labour intensive. If their nature has been varied, so has been their performance.

For most nationalised industries, employment costs per unit of output rose significantly faster than the national average, and it is no good our not wanting to know of these figures if we are serious (as I believe everyone who has spoken is) about wanting things to be done better. We must be prepared to look at the statistics; they are not the whole story and the philosophies I will come to in a moment. The statistics show that employment costs per unit of output rose significantly faster than the national average over the period 1970 to 1981. They rose by 14 per cent. in telecoms, 27 per cent. in coal, 33 per cent in gas, and 18 per cent. in electricity. For public corporations as a whole, pay in 1970 was roughly in line with the national average, but by 1981 had risen to 15 per cent. above the norm for manual workers and to 8 per cent. above for non-manual workers.

Where productivity is concerned, some of the major nationalised industries achieved relatively fast increases in labour productivity compared with the United Kingdom economy as a whole during the 1970s. But, in most cases, this improvement occurred because the industries were capital intensive or because, being network industries, additional demand could be met by the existing fabric without a proportionate increase in labour input. In labour-intensive industries, on the other hand—and here, surely, is the test—productivity increased less than the national average.

That the industries have had a chequered performance goes without saying, but let us look at the implications of events. First, there is the extent to which the industries have placed burdens on the Exchequer. There is no doubt that this has been a heavy burden to bear. Total external finance for the nationalised industries since external finance limits were introduced in 1976–77 has been no less than £141/2; billion; that is nearly £21/2 billion a year. Not all of this was paid in grant. Some was borrowing on commercial terms, but, nevertheless, it still has to be financed at a cost to the PSBR if not to the taxpayer. Over a longer period, total nationalised industry capital write-offs and grants since the Second World War have been no less than an astonishing figure of £40,000 million when revalued to current prices. The noble Lord, Lord Oram, and other noble Lords spoke proudly of the 1945 Government and how it moved us into this direction. Much of it I understand and do not disagree with, but certainly there has been a price to pay in financial terms of the kind I have just mentioned.

Of course, I would not deny that some of this burden on the Exchequer has been the specific result of the policies of successive Governments—for example, the maintenance of uneconomic services or, on occasions, price subsidies. But the figures are an uncomfortable reminder that with nationalised industries, as elsewhere, it is an illusion to suppose that uneconomic services can be provided without cost. They do not come free and the industries must realise that their own performance has been at least partly responsible —and let me put it at no more than that.

Lord Beswick

My Lords, before the noble Lord leaves that point, will he at least be good enough to give some figures of the returns which have been paid by the publicly-owned industries on the capital so invested?

Lord Bellwin

My Lords, I wonder if the noble Lord, Lord Beswick, will allow me to continue. I have listened patiently for four hours to every word that has been said. I would like to continue and to pick up any points later. If I miss any point and the noble Lord would like me to comment upon it at the end of my remarks or later, I will try to do so.

Lord Beswick

My Lords, I must say to the noble Lord that he gives a completely wrong picture if he just totals up investments without giving the return on that investment.

Lord Bellwin

My Lords, I will cover that ground later. The fact is that there is a clear responsibility which rests on the Government to foster maximum efficiency in those industries which it "owns" on behalf of the nation. I was glad to see that the noble Lord, Lord Beswick, was concerned about this in the phrasing of his Motion. I entirely agree on the need for a positive policy to secure maximum efficiency. So what are we doing?

We believe that the key is to help the industries help themselves. Over the past year or so the record of British Steel shows what management and workers can achieve. My noble friend Lord Boardman referred to this. Other industries are now facing up to their problems in the same way. The tools we are using are a mixture of the old and the new. On the one hand, like our predecessors, we have continued with the framework of financial control set out in the 1978 White Paper on nationalised industries. This includes external finance limits (first introduced in 1976–77), investment approvals, financial targets and performance aims—all of which were the policy of the previous Government and remain the policy under this Government. We have continued to subject investment programmes to careful scrutiny in the light of the requirement that they should earn at least a 5 per cent. real rate of return—again, as set out in the 1978 White Paper. On the other hand, we are introducing improvements in the handling of our relationship with the nationalised industries, in the extent of external scrutiny and, at the same time, opening them up to market forces.

This brings me to a number of points made by the noble Lord, Lord Beswick. He advocated, in particular, a more radical development of employee participation. The Government fully agree that this has an important part to play in encouraging communications between management and workforce in both directions. Benefit in terms of improved understanding on both sides can be considerable. In this the Government have, for example, given their full support to the work of the Rail Council which was set up by British Rail management and which comprises both management and workforce. Indeed, it has occasionally been attended by Ministers. We regard this as a worthwhile and helpful development. But arrangements for improved participation and communication are bound to vary according to the circumstances of the industry concerned. It would not therefore be right to seek to impose a uniform system on all industries—nor indeed did the noble Lord suggest that it would be.

We entirely share the view that nationalised industry consumer councils should be as effective as possible. To this end we issued a consultation document at the end of last year, seeking comments by the middle of March. It put two options for reform; a strengthening of the councils within the existing statutory framework and a reduction in the number of councils and bringing them together on a sectoral basis. The Government are now considering the responses they have received.

Let me say a word about the vexed question of relations between the Government and the nationalised industries which was referred to by a number of noble Lords. On 15th March, the Secretary of State for Industry made an announcement in another place about the improvements in handling the relationship with the nationalised industries. There is no need for me to repeat the details of that announcement now, but the general emphasis was the need for improved understanding of industries as commercial enterprises and on reinforcing the pressures within the industries for efficiency.

In particular, the Government will be working with the industries on stated objectives; to provide a clear framework for their operations on broad structures to place maximum stress on the need to secure improved efficiency. For its part, the Government will be strengthening business understanding in Whitehall. This is not to say the Government are attempting to "second guess" the industries' business judgment; there is an important distinction to be made between monitoring the industries in their expenditure of public resources and interference in their commercial management. I am talking of the need for scrutiny rather than intervention.

I hope that the noble Lord, Lord Beswick, will accept that assurance in answer to his criticism that the nationalised industries are suffering too much interference from within Whitehall. We cannot ignore that both the taxpayer and the Government are bound to have an interest in the nationalised industries' use of public funds and in their consumption of national resources. That interest is bound to be all the greater where industry makes heavy demands on the Exchequer and where competitive forces are weak. But it is in no sense our policy to attempt to run the industries as businesses from Whitehall. On the contrary, we fully accept that responsibility for day-to-day commercial decisions must lie with the managements of the industries themselves.

This leads me on to two further points raised by the noble Lord, Lord Beswick. First, I was grateful for his welcome for the principle of part-time non-executive directors. As my right honourable friend the Secretary of State for Industry made clear in another place on 15th March, such directors should help to bring in a wider degree of experience, and secure an improvement in the overall efficiency of the business. We shall be discussing the question of board composition with the chairmen of the industries with these thoughts in mind. But it would be difficult to carry this principle further, as the noble Lord suggests, by proposing, as a matter of Government policy, greater use of part-time workers in the labour force. There may well be a case for this in some industries, but this is a good example of an issue which needs to be left to the managements of the industries concerned. While board appointments are made by the Secretary of State, this is not of course true of other appointments. A centralised Government guideline would be regarded by the industries as interference of just the kind the noble Lord has properly deplored.

The noble Lord also referred to the progress that has been made in following up the policies announced by my right honourable friend on 15th March, drawing attention to an article in the Financial Times. In fact, I think the same article was referred to by a number of noble Lords; it was dated 7th April. This was in connection with the analytical staff of the Treasury and other departments to expose the industries to regular efficiency audits and to subject them to more monitoring and performance assessment. They have all been cited as examples of a greater Whitehall desire to take over the running of the nationalised industries. But this is the wrong interpretation, and if I heard the noble Lord correctly I would have to disagree with him about this. Whitehall will only be able to take a broader and longer-term view of the industries as businesses if it can succeed in improving its understanding of how they operate. That must require more expertise on the part of the Government and the provision of more information on the part of the industries. So this two-fold approach provides, I submit, by far the best guarantee against short-term ad hoc decisions which damage the industries' business interests, and which I would have thought everyone would deplore.

The noble Lord, Lord Beswick, mentioned in particular the new public enterprise analytical unit to which I have just referred, and he endowed it with sinister objectives. I hope he will feel somewhat reassured by what I have said. The unit will consist of a small number of economists and accountants, but, I stress again, to scrutinise and advise on issues related to the nationalised industries, and it is being paralleled by a number of moves to strengthen business expertise in other departments.

Lord Beswick

My Lords, if the noble Lord will allow me to intervene, I think he is misunderstanding what I said. I was not attributing any sinister motive to the unit. I was, in fact, welcoming the possibility of it doing a useful job. I was asking for an assurance that this would be instead of, and not in addition to, the other monitoring mechanisms.

Lord Bellwin

My Lords, I am grateful to the noble Lord for that. If he feels, as I certainly do, that this is a good thing, then I welcome what he says. If he wants me to go more into what their function will be, I will have to come back to him on that on a later occasion.

I think I should mention here, if I may digress briefly, a point raised by the noble Lord, Lord Taylor of Gryfe. He expressed concern that this unit would duplicate the work of the proposed new non-executive directors. Quite the opposite is the case. Strengthened business expertise within Whitehall is something that we surely ought to welcome. I think it will improve understanding of the nationalised industries. But I do assure him that this is not in any sense an alternative to improved concern with efficiency matters. The two are, in my submission, complementary; one is not a substitute for the other. Might I also say this to him on his point about improving the succession for chairman, which I thought was a very interesting comment. The Government are very well aware of the importance of this, and we hope to see procedures for planning succession improved in the future. I think this is something everyone would want to see. It has to be done differently from the way it is done now. We are very seized of this point.

While the industries remain in the public sector, cushioned from the full impact of market disciplines, there will always be a need for an externally imposed discipline, a review of efficiency, which forms something of a surrogate for market forces. The Government, therefore, believe that regular and thorough efficiency audits are essential. We legislated in 1980 to provide the Monopolies and Mergers Commission with the powers to do this job. Their scope is wide. They can appraise, and have appraised, the effectiveness of management, the adequacy of planning and control systems, and the use of resources of the business. These are the factors which ultimately determine the performance of any industry, whether in financial terms, or in terms of the quality of service provided to the customer.

While scrutiny is important, it may not always be sufficient to provide a direct incentive to management. Much of that must come from within the industries themselves. The Government can, however, set the right conditions, and that is what we are embarked upon doing.

In the field of communications, last year's Telecommunications Act included major powers to reduce the statutory monopoly enjoyed by both British Telecom and the Post Office. On the telecom side in particular, competition will provide by far the best environment for new technology to flourish, to the benefit of both the consumer and the economy as a whole. Project Mercury, set up by a consortium of private sector companies, has now been licensed as art alternative network, while we are opening to competition the area of attachment to telecommunications systems. The Government are committed to removing statutory constraints on private generation of electricity as a main business. Private generation as a secondary business already makes an important contribution to the supply of electricity, in particular to industry. And we intend to build on the considerable progress that has already been achieved, with further measures of this kind aimed at injecting a degree of competition to statutory monopolies.

The efficiency of the public sector is a prime focus of concern and will continue to be. But your Lordships must recognise that, however good the arrangements, it is still very much more difficult to set conditions conducive to efficiency in the public sector than in the private. The public sector will always be influenced ultimately by Government backing, implicitly or explicitly. This is why a cardinal tenet of the Government's policy is to return public sector activities to the private sector wherever possible.

I clearly understand the considerable ideological difference that exists on this issue. I have to smile when I hear noble Lords opposite always referring to the Conservative beliefs as being those of dogma and obsession whereas their own beliefs they refer to as ideology. Well, that is just another way of putting it. The fact that there are differences on this matter is clear, and I accept that; I think we all do.

I want to turn now to the question of returning whole industries and activities to the private sector. This is a policy which, as has been said, has been exemplified by the recent sales of shares in British Aerospace, Cable and Wireless, Amersham and the National Freight Company. In doing so, I shall try to deal with the points raised by the noble Lord, Lord Beswick, in particular, as they relate to the objectives of privatisation and the means by which assets are sold. The primary objective is to open up new areas to the full impact of market forces, to increase the power and responsibility and absolute ability of management to ensure that the customer receives value for money. In the context of industry it means that they are free to choose their own strategies and to make the decisions necessary to put strategy into effect. Their responsibility for failure is sharpened, but so also is their freedom to reap the benefits of success. The promotion of efficiency and responsibility is the most important effect of exposure to market forces by privatisation.

There are three important subsidiary objectives. The first is wider share ownership. In one sense this can be achieved by the sale of shares, whether it be to individual investors or institutional investors. Either has the effect of widening the basis of financing away from the Government. But privatisation also provides an opportunity for employees to take a role in their own company. A great deal has been accomplished in this respect. Since 1979 no less than 90,000 employees have so far taken up shares under preferential arrangements introduced when publicly owned shares have been offered for sale. In addition, the Government have sold, as has been said, the whole of the National Freight Company to a consortium of managers and employees.

Secondly, let me point to increased consumer choice. The monopolies and consumer interests are not necessarily consistent, and it is an important part of the Government's thinking that customers should have the freedom to choose their products rather than be presented with little choice. I have already described what we have done in this respect.

A third subsidiary strategy is the reduction in the burden of expenditure on the public sector, and this acts in two ways: both through the proceeds from sales of assets—which reduce the public expenditure planning total—and through the removal of any future borrowing requirements from the PSBR. Both are important to our policy of restraining monetary growth.

The means by which privatisation is achieved is bound to vary from case to case. I have already referred to one aspect when talking about contracting out in local authorities, not so much today as in the past. I have referred to that matter quite frequently at this Dispatch Box, as I am sure your Lordships know. In industry, in the majority of cases—BP, British Aerospace, Cable and Wireless and Amersham—it involves the sale of shares by means of a public issue, where necessary turning statutory corporations into Companies Act companies beforehand. To date, all sales have involved fixed price issues, but the Government do not rule out sale by tender where the circumstances are right. Elsewhere, management has purchased the company—as with the National Freight Company. But there may also be circumstances where placement with institutional investors offers the best option—as, for example, with the sale of the Government's minority shareholding in the British Sugar Corporation.

I think that I should comment on one or two other observations made by the noble Lord, Lord Beswick, and in particular the price at which assets have been sold. He claimed that the Government have been underselling these assets. To the extent that his argument was based on the net asset value of the companies concerned, then, as I think he would expect, I would disagree with him. Company net assets are not directly linked to market price, as the noble Lord knows, and it is by no means unusual for shares to be sold at below the net asset value to which they correspond. British Aerospace shares were sold at a price corresponding to roughly half the company's estimation of its net asset value. But at the time of the British Aerospace flotation GKN's market value discount, for example, on company net assets was 71 per cent; Lucas's was 66 per cent. and Tube Investments 58 per cent.—all higher than the British Aerospace market price discount.

The noble Lord, Lord Beswick, of course also argues that assets have been sold below their market price. There have, indeed, been over-subscriptions for each of the main share sales so far—British Aerospace and so on. The shares have also been traded at a premium. However, I should point out two matters. First, it is by no means unusual for new private sector share issues to be over-subscribed. The recent examples include Cambridge Electronics in June 1981, which was six times over-subscribed, and Exco International in November 1981, which was 62½ times over-subscribed. Secondly, it is easy on pricing questions to be wise after the event, especially where a company's shares have not previously been traded at all. I would respectfully submit that it is wrong to take the price at which a relatively small volume of shares have been traded as an indication of the price at which a major shareholding could have been sold.

I am tempted—but I do not think that with the passage of time I should—to go into a great deal more detail. The noble Lord, Lord Davies of Leek, was, I think, somewhat carried away by at least the volume of Lord Molloy's speech. I think he tried to out-Molloy Molloy.

Lord Davies of Leek

My Lords, will the noble Lord give way? I do not want that ridiculous answer. I object to that. I asked a serious question. As regards the selling of the oil assets of this British nation, was there a discussion with the Defence Committee before such action was taken? It is a real question for both sides of this House and it is not to be dealt with in that flippant way.

Lord Bellwin

My Lords, I am sorry that the noble Lord feels that I am being flippant with him. He would surely agree that he is frequently as flippant as anyone in your Lordships' House although in the most good-natured of ways which I, for one, always respect. I am sorry that he feels upset by what I have said. Certainly I did not wish that. If I upset him, then I apologise unreservedly. That was not the intention of what I was saying and I am sorry about it.

However, what I was trying to say—moving to what the noble Lord has said—as regards British Aerospace is that he would not expect me, I am sure, to agree with him in any way when he said that the sale could lead to the collapse of British avionics. I disagree with him entirely, and that he must accept from me. The fact is that British Aerospace was the first nationalised industry to be privatised by an offer of shares to the public. The process was novel and complex and the details took some sorting out and we had to be fairly cautious. The noble Lord, Lord Beswick, smiles. I am sure that he knows the history of that better than I do, and probably better than most people do.

In the event, the disposal was a success and British Aerospace has prospered since the flotation. Pre-tax profits last year were £71 million compared with £65 million forecast in the prospectus. The company has had considerable success in winning contracts and launching new products. Its selection as the largest sub-contractor on the Intelstat space project, and in winning the development contract to supply the United States Navy with a new trainer aircraft, are just two examples, and I am sure that the noble Lord, Lord Beswick, will be as pleased as anyone about that.

I would be the first to say that this success cannot be attributed to privatisation alone. But we are convinced that the fact that ownership of the company has been returned to the private sector will lead to a more efficiently managed enterprise as time goes by. The need to keep up dividend payments and the company's market reputation is a rather better incentive to the company's management and workers than Government financial targets.

I am tempted to refer to other situations, but I think that I shall not do so in view of the time. I have spoken long enough. However, I should like to make some observations on the comments made by individual noble Lords. Referring again to the noble Lord, Lord Davies of Leek, certainly this Government never said at any time—no one has ever said and no one could expect—that we could turn round, certainly in the time that we have been in office, an economic scene and situation of the kind that we took on when we came to office. We never said that. I do not want to become as political as some of your Lordships opposite have become in today's debate. However, the fact is that we never said that. What we did say, and what we continue to say, is that as time goes on the correctness and the success of the policies that we espouse and are practising will be shown very clearly in all the categories to which noble Lords have referred.

As regards the remarks of the noble Lord, Lord Wynne-Jones, who I see is not in his place, I shall not rise, as I was so tempted to do while he was speaking, to the reasons he gave for being a socialist. I would differ entirely with him on his references to what leads to liberty, but then perhaps this is not the occasion for that, even though he obviously felt that it was.

I was deeply grateful to my noble friend Lord Boyd-Carpenter for what I think everyone said was a really splendid speech which was thoughtful, reasoned and fair. Let me just say to him that when he talked about accountability, and the fear that there is sometimes in what we are trying to do to encourage and bring about more openness in accountability, I can only say that my own experience from many years of working in the public sector in the way in which I did, is that I never at any time have had the slightest inhibitions about anything and everything being open and available to everyone concerned. If anyone wanted to come in and create new rules to make it more so then that was fine because that is what it is all about. We said that we would not only be happy to do that but we would learn something as well. Therefore, I am pleased that he referred to that point and am grateful to him for what he said.

I also want to thank my noble friend Lord Boardman for his support. Frankly, I felt rather sad about the contribution from the noble Lord, Lord Molloy. I do not want to be as abusive as he was—I am bound to say that—but it was certainly not the kind of speech that I have heard in three years in your Lordships' House. It was more notable for its volume than for the constructiveness of its content. But I shall, perhaps, be more charitable than the noble Lord and say nothing more about it. I think that that is the best that I can say of it.

I hope that the noble Lord, Lord Beswick, will forgive me for not going into detail. Before I conclude perhaps I should comment on his point about the return on investment. For nationalised industries as a whole the rate of return on investment has been significantly below that for the private sector since the mid-1960s, and has not been significantly above zero since 1972. The coal, steel and rail industries in particular have produced negative rates of return throughout the period since 1972, even after allowing for subsidiaries. If the noble Lord would like me to expand on that and to give more detail, then, as I think he knows, I shall certainly do so. He will tell me when he winds up in a few moments. He knows that I will do that, as I always try to do in every case.

I thank the noble Lord, Lord Beswick, for introducing the debate. It is right that we should talk about these things. As the noble Lord, Lord Cledwyn, said at the end—and I very much appreciated his speech—I, too, think that we are looking here for a balanced approach and we are not seeking, on the grounds of dogma or anything else, to take a particular line. We believe that we shall achieve much more by going down the road that we have set down in our policies of privatisation. But we are not saying that this applies to everyone. I entirely agree with my noble friend Lord Boyd-Carpenter on that. We are looking for the best way of doing things in the interests of the people we are all serving. That is where the Government stand on this whole matter.

7.52 p.m.

Lord Beswick

My Lords, the House has been discussing a problem which is of some considerable importance for the country, and it is one which, in a democratic nation like ours, we shall have to consider very carefully—I hope we shall consider it carefully—before decisions are taken about the constitution of the next Government at the next general election. I do not propose to make another speech. I should just like to thank the noble Lord, Lord Bellwin, for his reply. I have a reservation as regards his final figures. I must say that I thought they were an exercise in uselessness. I refer to the total returns on total investment. If we are to treat these matters seriously, of course, things must be broken down much more than that. But I accept that he was just reading out the piece of paper that he had been given. I thank the noble Lord for the speech he made.

I should like to thank all other noble Lords who have taken part in this debate and for the kindly personal references which some felt they were able to make. My Lords, I beg leave to withdraw my Motion for Papers.

Motion for Papers, by leave, withdrawn.