§ 3.25 p.m.
§ Lord Taylor of Gryfe rose to call attention to the problems which beset the relations between Her Majesty's Government and the nationalised industries; and to move for Papers.
§ The noble Lord said: My Lords, the purpose of this debate is to discuss the difficult problem of Government relations with the national industries—like Sir Peter Parker, I prefer that definition to the description "nationalised industries"—to identify the weaknesses in the present situation and to suggest improvements. This is an area of politics in which the Social Democrats and their Liberal allies can make a special contribution, as they are not prisoners of the ideologies of the Labour and Conservative Parties. The former regard state industries as essentially virtuous while the latter regard them as an evil which must be liquidated as quickly as possible, irrespective of whether that makes good sense or is in the best interests of the nation.
§ Let me quote an example of this ideological madness. Wytch Farm is Britain's biggest onshore oilfield, in which British Gas has a 50 per cent. stake which was valued recently at £500 million. The Minister has instructed British Gas to sell off quickly, and according to the Financial Times a figure of between £200 million and £260 million is being discussed with a private consortium. In the present state of the energy market it is almost criminal to sell off asserts like Wytch Farm. The British Gas Board and their chairman know that, but the Minister insists.
§ To give another example, I am a member of the British Rail Property Board. We contribute about £80 million a year to help the British Rail cash flow; our 196 gross rental income last year was £62 million. Yet we are instructed by the Minister to sell off these assets, which include sites and properties with substantial growth potential, thereby denying British Rail future funds which are essential for the maintenance of a modern railway. Instead, they will accumulate for the advantage of private property development.
§ There is another charge against the Government. It is that when they dispose of national assets they are far from skilful in doing so. I know this is sometimes a difficult area, but the Amersham issue was seriously underpriced, was 20 times over-subscribed, was offered at a fixed price of 142p and overnight reached 189p—it was a stags' bonanza—and in 1982 had reached 293p. Cable and Wireless was a similar story, and Britoil erred embarrassingly on the other side. So it goes on.
§ According to the Economist of 5th March, the Minister for Industry has the following programme ahead. There is a new chairman of Rolls-Royce whose contract tells him to prepare the company for privatisation. At British Leyland, privatisation of mainstream divisions is still on the cards, but no sale is likely before 1984, for obvious reasons. First choice will be the Unipart components business, followed by Jaguar and Land Rover. The British Technology Group, which is a catalyst for new technology in Britain, will be forced to wind up its NEB (National Enterprise Board) holdings, and the top management of BTG is likely to be replaced. The new chairman of British Shipbuilders is charged with selling off the naval yards and getting out of ship-repairing, the only profitable parts of the business. Privatisation plans for British Telecom are currently before Parliament.
§ Does anyone believe that all of this programme is in the national interest? Are these decisions made on the basis which would normally guide the board of directors of any holding company with responsibility for protecting the best interests of the shareholders?—keeping in mind that several of the companies on the Government hit list were rescued from collapse under private enterprise and very large sums of public money have been poured into them. The Minister is a reasonable man. I must ask him this. What is the impact on the morale of the management and of the work force in a business where you have the constant threat that if you make any section of the business profitable it will be sold off and you will be left in the company with a lump of loss-making activities? This could be the case with the plans for British Shipbuilders and for British Leyland.
I commend to the Government the study of Michael Edwardes' recent book, Back From the Brink, where on page 242 he says:
Confidence is the key—confidence of customer, supplier, bankers, dealers, potential partners in collaboration; and there can be no confidence in BL's future if there is constant sniping and pressure for disposals".
The Labour Party, in turn, has declared that any activities hived off during the Conservative Government will be taken back into public ownership by the next Labour Government. I must say to my Labour friends that if it ever comes to pass that they are in Government they will certainly be busy, alongside the other commitments in the manifesto. Because here is the list so far: British Petroleum,
British Aerospace, British Sugar, Cable and Wireless, Amersham International, National Freight, Britoil and Associated British Ports. That is a fair programme for a Government on top of their other social programme.
§ Does anyone seriously believe that this kind of politics in Britain, dealing with major industries, will contribute one whit to our national economic recovery? Will the shadow of these threats on both sides encourage management to make the long-term plans and investment decisions which are essential? Will these prospects attract the first-class management which is necessary if these industries are to succeed? There are businessmen on both sides of this House who must know in their hearts the answers to these questions. The trouble is that we are caught up in a debate about ownership when we should be discussing efficiency; and the first requirement for efficiency is to get the structure right so that we may recruit the best people to manage the industries, and then permit them to manage.
I should like to quote again from Michael Edwardes' book, from page 246:
The Secretary of State"—
the Secretary of State in the present Government—
(although otherwise good about leaving employee relations to us), sought to influence the company at the crisis point of our November 1981 pay dispute; he intervened in our commercial negotiations with British Steel; he twice rejected our proposal to appoint an additional non-executive director to the BL board; and he queried the company's right to take proposed legal tax avoidance action! The latter episode (which was to cost the Treasury some millions of pounds), provoked me to write a letter inviting him to ponder on the fundamental principles of the Government/BL relationship. I pointed out that whenever the Government intervened in commercial matters, it made it far more difficult to attract and hold first-rate managers. It caused entrepreneurial managers to eschew the public sector".
§ Recruiting the best people is not a matter of paying extravagant transfer fees. I have a high regard for Ian MacGregor, whose abilities I respect. He is a good friend of mine. But the Government have established a very dangerous precedent by paying this ridiculous fee and it will mean that in future recruiting the Government will have to pay similar fees to British and other companies to attract top management. I know we have to pay the rate for the job; but there used to be an element of service to the nation in accepting these appointments, and this has been diminished by these arrangements with Lazard Freres.
In any satisfactory structure we may create there are three cardinal principles: first the right to manage is the first requirement of the heads of state industries, once the strategy has been laid down by the Government; secondly, the strategy must be clearly set out, the objectives defined. Here again we come up against Sir Peter Parker's dilemma in the Dimbleby lecture, in which he stated:
I have never been in a job where no-one could tell me what winning means. In the absence of clear objectives and consistent Government policy our national industries are subjected to government by public inquiry".
Thirdly, the decision-making process requires to be rationalised.
§ Let me give you my experience as a member of British Rail board. Management prepared their budgets and investment proposals and submitted these 198 to the board. These were considered and passed. The plans then go to the Minister of Transport, whose team of economists and experts question and check them, frequently asking for more information and further options for the Minister. Since large sums are involved, the proposals go to the Treasury, whose experts "double guess" once more and come back with their queries and frequently ask for other options to take to Cabinet Committee. The affairs of the industry are then submitted to the Monopolies and Mergers Commission to carry out a detailed management audit. I have always assumed that it was the duty of non-executive directors on any board to check or monitor the performance of the management. On top of this, we had examination by the Public Accounts Committee and the Select Committee covering nationalised industries. In addition we had exhausting and exhaustive examination by theTreasury and Civil Service Committee on the financing of state industries, with the Serpell Committee thrown in for good measure. On top of all this Mr. St. John-Stevas, who, I suspect, is more at home with theology than with management, is seeking to add access by the Auditors-General to the documents and accounts of state industry, with a view to reporting them to the Public Accounts Committee. There is, of course, on top of this, a statutory professional audit.
Sir Peter Parker speaks for all his colleagues in the Nationalised Industries' Chairmen's Group when he argues:
Still more investigations will only dim our spirit of enterprise. Already we look up in wonder at a swirling constellation of Star Chambers and it passeth all our understanding why we need yet another.".
All of this absorbs management time. Officials prepare endless briefs and reports while highly paid chairmen spend their hours waiting in corridors and arguing about the detail of their business with politicians when they should be in the board room or on the shop floor managing their affairs. In a recent book entitled Controlling Public Industries by two distinguished authors we read the following:
No Government has been able to resist the temptation to second-guess boards of managements and at times to use pricing policy and investment programmes as part of an overall package of economic measures. This in turn has provided a reason or an excuse for unsatisfactory performance by the industries as the arm's length relationship between Government and industry has broken down.".
§ Our other main problem in dealing with nationalised industry is the problem of the method of financing. There are three sources of financing. First, there are the internally generated funds in the industry and perhaps I might point out that in 1979–80 42 per cent. of the £4.7 billion investment programme for nationalised industry was raised by internally generated funds, and last year the figure had risen to 65 per cent. of a £5.4 billion investment programme. That is a considerable achievement on the part of the national industries. Then there is borrowing, the bulk of which is from the National Loans Fund. I am glad that since 1981 there has been some flexibility with variable rates and a different maturity pattern.
§ However, all the expenditure of the national industries is limited by the external financing limit which covers the total recourse to Government funds from any sources. It is an overall figure and does not distinguish between capital and revenue. While the 199 EFL does establish certain financial disciplines, it is strictly related to the annual PSBR and does not permit long-term planning or long-lead investment. The Government should pay some heed to the report of the 100 Group of Chartered Accountants, whose independent report in December 1981 stated that the methods of financing state industries in this country need radical review. The industries should have normal commercial freedom appropriate to major trading bodies, and should be financed with debt/equity capital structures similar to the private sector companies. The industries should also be permitted, like private companies, to raise project finance and have leasing and other facilities which are available to the private sector. Such freedom could be exercised within a recognised strategic guidance and would not cause serious problems of "crowding out" in the market, which is the usual objection made by the Treasury.
§ The experience of France is very interesting in this connection. Their industries meet the bulk of their financing needs by borrowing in their own names without explicit Government guarantee. The Government treats the State-owned competitive industries as if they were in the private sector and their borrowing is treated as if it were private sector borrowing. With regard to the present system, the application of the EFL, in their report on financing state industries the Treasury have accepted that there is no bias in the EFL system against investment expenditure, but in practice the system may tend to reduce investment programmes. This year, due to the present economic climate, this has not been a problem but frustrated investment in the state sector in 1980–81 totalled around £500 million.
§ One area of Government initiative which is welcome is in relation to performance targets, which are now a feature of annual reports of the national industries. I should like to see this extended not only with regard to financial and productivity objectives, but also in relation to a social audit which would include reference to employee and consumer interests—a subject which will be dealt with by my noble friend Lady Burton. This is now done increasingly by progressive private companies, which include an element of a social audit in their annual reports; and it is something which should be incorporated in the nationalised industries.
§ This afternoon we are discussing the relationship between the Government and the state industries and I have tried to identify some of the weaknesses of the present system. I have always felt that any Government should regard themselves as the custodians of the nation's assets represented by these great industries with a total turnover of £41 billion and responsible for 14 per cent. of the nation's fixed investment. It is a heavy responsibility, for indirectly important private sector companies, such as Plessey, BICC, Anderson Strathclyde, GEC and others, are dependent on a healthy state industry, particularly in the depressed engineering sector. Increased investment in state industry could contribute to economic recovery. How much better it would be to employ men on great and useful capital projects than to pay them to be idle and create no wealth.200
§ I have tried this afternoon to put this House in the position of an annual shareholders' meeting, for we are in fact the shareholders in this great business and it is the duty of shareholders to try to assess the performance of the elected board—in this case the Government—and I believe they deserve censure on a number of counts.
§ First, they have created a climate of uncertainty and even hostility in this area. Secondly, they are selling off the nation's best-performing assets. Thirdly, they have mishandled the timing and pricing of disposals to the disadvantage of the nation. Fourthly, they have failed to provide an adequate framework for financing these industries. Fifthly, they have failed to provide a structure which lends itself to an efficiency in decision making comparable with well-run private enterprise companies, with consequent difficulties in attracting the best top management.
§ These are not easy problems to solve. These industries cover a wide and diverse range; but I must say that, because of the diversity of the industries, as Sir Peter Parker has said, it is only an idiot who generalises about them. Yet the two main parties tend to deal with these industries with generalisations, slogans and blanket solutions like privatisation or more nationalisation. It would be the duty of an Alliance Government to deal with these matters quite pragmatically, free from dogma and uninhibited by ideological commitment. We believe in a mixed economy. This nation has to walk on both legs, public and private, and they must be strong.
§ There are certain industries which should remain in the public sector. These we would endeavour to make less bureaucratic, less centralised, more efficient and with greater flexibility in financing. There are other activities which should be hived off. There are many examples of that. There should be opportunities for partnerships and for the introduction of private capital alongside public capital on certain project financing. We would also look at the possibility of extending the workers "buy-out" arrangements, which have been so successful in the National Freight Corporation. We would prepare a fresh approach, and that is what we mean by breaking the mould in British politics. I beg to move for Papers.
§ 3.48 p.m.
§ Lord Beswick
My Lords, we are indebted to the noble Lord, Lord Taylor of Gryfe, for giving us this opportunity of discussing some of the problems attached to public ownership. My only regret is that it is still a "limited over" debate. I shall support much of what he said and overlook what he plugged in for the Alliance. First, however, I would put my contribution in a wider context. The question of ownership, public or private, is a matter of means and not ends. The important end is the society we want or the society we think it possible to achieve, and if we come to decisions about that, then decisions about the scope and structure of the public sector more easily follow. The present Government, as the noble Lord, Lord Taylor, said, are disposing of public assets—industries, oilfields, council houses, refuse collection equipment—at discounts of up to 50 per cent. of the market value because they believe that the ownership does not fit into their concept of tomorrow's society.
201 In a lecture given at St. George's House, from which he agreed I could quote, the noble Lord, Lord Harris of High Cross, spelled out this underlying philosophy with a clarity and a force that I could but admire. He said that:Society needs some general magnetic force that will bring individual efforts into line.With that I agree. He went on to discuss the possibilities of providing that force. There was, he said, affection, sense of duty, altruism, public spirit or the threat of punishment. He dismissed all those in favour of self-interest as overwhelmingly the most powerful motivation. He supported this view with a quotation from the 1662 Prayer Book, where it states:Man is very far gone from original righteousness and is of his own nature inclined to evil.If we all left it at that, then privatisation, every man for himself, would be, and must be, the order of the day. But I wonder whether we ought to leave it at that. I learned at church, and in life outside, that there is good as well as bad in mankind, and it follows, in my reasoning, that the economic structure we devise should patiently aim at encouraging the warmer, hopeful values of human nature.
I shall say how I think that this should work out in the structure of socially-owned enterprise, but I would first assert that, in terms of hard economic results, the self-interest society credentials are scarcely impeccable. It is the self-interest society which leaves nearly 4 million people without work. It is the self-interest society that has so developed the techniques of usury that international indebtedness now amounts to over 900,000 million dollars and has brought the banking system near to collapse. It is the self-interest society which has given us the gutter press, a plethora of TV and the promise of 30 more cable channels, and all at a time when a National Health Service patient in my district has to wait five weeks for an X-ray examination.
On one point I am in entire agreement with the noble Lord, Lord Harris of High Cross. He emphasised in his lecture the dangers of over-centralising power. Avoiding that danger must take priority in any planning. Some of the proposals of the noble Lord, Lord Taylor, for funding could help in that avoidance and I shall come back to that. But we should not make the mistake of thinking that social ownership is synonymous with centralisation. Some of the most successful and imaginative publicly-owned enterprises, the medium-sized companies, such as Amersham International and International Aeradio, have no direct contact with central Government. More widely dispersed power is seen in the co-operataive societies. And I was pleased to see that the policy document of the Labour Party provides for increased practical encouragement and financial support to this form of social enterprise.
Of course, some decisions and overall economic strategy must be made centrally by Government after proper consultation. The national energy policy must be one. Where services are to be provided for social reasons, and Government subventions are made—for example, one thinks of some rail services—then, again, central Government must take responsibility. But once these major decisions are taken and relevant targets or criteria are agreed, then we have to reverse 202 the thinking that extra effort can be stimulated by more and more checks and controls. The noble Lord, Lord Taylor, gave us an account of his experience at British Rail.
Noble Lords may have seen a recent letter to The Times from the chairman of the Gas Board. In it, Sir Denis Rooke described the machinery which now seeks to ensure that he and his workforce do their job properly. There is an internal audit staff, external auditors are appointed by the Government and there are 13 consumer councils. The corporate plan is reviewed by officials from the Department of Energy and from the Treasury. It is reviewed also by the Secretary of State. There were phased appraisals of capital expenditure, inquiries by Parliamentary Select Committees and investigations by agencies such as the Price Commission and the Monopolies Commission—and all this, I would add, attaching to an organisation which took nothing out and, in fact, paid into the national Treasury. The fact that enterprises in the public sector surmount all this says much for the dedication of men like Sir Denis Rooke and Sir Derek Ezra, as he then was; and I, for one, pay tribute to them.
It is possible—in this I speak from first-hand experience, and maybe the noble Lord, Lord Ezra, would agree—to have a friendly and constructive relationship with a sponsoring department; but the Treasury is a different thing. Wholly admirable and conscientious characters as they are, collectively I do not think that they are now fitted for the role of financiers to commercial enterprises in the public sector. The time-scale within which the Treasury must work is too limited. The budgetary criteria which they must apply are not necessarily appropriate. The present application of the PSBR will, sooner or later, be regarded as plain silly. The idea that investment in a new coalfield or a new power station should be counted as a Treasury expense, like the subsidy for the Arts Council or the expenses claimed by your Lordships, cannot easily be reconciled with economic common sense.
Initially, this Government told the Gas Board to hold back domestic prices for the good of the RPI. Then, last year, they told them to push them up 10 per cent. above inflation to fit in with some new Treasury theory. In 1979, the Chancellor told the public sector chairmen that it was vital to cut back capital spending for PSBR reasons. Then, a few months ago, the Prime Minister—no doubt realising that an election was looming, and probably recalling what the noble Lord, Lord Ezra, had said earlier, that 95 per cent. of public sector public spending went to United Kingdom suppliers and thus provided employment—went to the same public sector chairmen and asked them to spend more. I understand that she was told—politely, no doubt—that capital investment was not a tap to turn on and off like that. Some different methods of funding need not, and must not, slacken financial disciplines, but they could mean—and I agree with the noble Lord, Lord Taylor, about this—a profound psychological improvement, which in turn could yield significant economic benefit.
I have spoken in earlier debates about the useful role which can be played by a parliamentary Select Committee, but I should like again to emphasise two other elements of discipline in the present pattern 203 which I believe can be developed positively and could take us toward that higher quality society. I refer to the consumer council idea and to employee participation. If an organisation can pay its way and satisfy the customer on the one side, and the producer on the other, I do not easily see who is left to complain.
We have not yet fully developed the potential of the consumer council. Independent, informed and authoritative such councils must be, but also they could be a constructive force in partnership. There are companies in the private sector which would love to have the same kind of machinery as partners in a sales drive. Of course, in some cases—Aerospace is one—the consumer council concept is inappropriate, and there competition is a spur. Where we have a national monopoly and less obvious competition, there could well be a case, in my view, for breaking that monopoly without damage to the economics. I have myself never been convinced that all the benefits that were promised from the merger of BOAC and BEA have ever actually followed. But I make it clear that the rivalry between public enterprises would be different from the present policy of picking out profitable bits for the benefit of the private entrepreneur.
As for industrial democracy, we all have much to learn if this is to make its full contribution to industrial effectiveness and to that enhanced quality of life which we seek. I told a left wing audience at an Easter conference that one requirement for further progress was a clearer recognition that the term "democracy" could not be limited to the shop floor. If a worker acquires extra qualifications and accepts extra responsibilities, he remains a worker, for all that. I was gratified to find how well this message went down. But having made that plea for a genuinely integrated workforce, it is only logical to go on to say that if we seek a satisfying sense of partnership, progress is not helped if somebody, however brilliant, is brought in from outside at a crudely disproportionate cost. A proper career structure—of growing one's own timber, as a former colleague of mine put it—must be part of that better society of the future.
I should like a Select Committee of this House to study the kind of structural problems and financing of which the noble Lord, Lord Taylor of Gryfe, spoke. But no amount of structural change will avail unless the spirit which breathes through that structure is right. I have spoken before of the damage done to that spirit by sweeping criticisms from people who ought to know better.
I saw another example of that blanket condemnation of public enterprise in an article last month by the noble Lord, Lord Blake. He is highly respected for his recording of researched fact. The noble Lord wrote—and I told him I was going to mention this:It is another matter whether those in work actually do any work, a question particularly relevant to the public sector which is larger, slower, more torpid, more inefficient than in any other major industrial country".I wonder on what research the noble Lord based that statement. It is typical of some of the generalised remarks that come from the Conservative Benches. I wonder if the noble Lord, Lord Blake, would go down a pit and tell the men at the coal face that their trouble 204 was torpor, or whether he would tell those who planned and executed the conversion to natural gas in this country that they were slow, or whether he would tell those friends of mine who worked in Airbus Industrie that they were one whit inferior to their German, French or Spanish counterparts. Or I wonder what exchange rate the noble Lord used to prove that our postal system was inferior to or dearer than that of every other industrial nation.
More generously, I say to the noble Lord, Lord Harris, that I respect his views about human motivations but I believe that history will show that the self-interest society, the selfish society, carries the seeds of its own destruction. To those who look to an alternative and more hopeful future of public ownership (or social ownership, as I would call it) I say that they will have a part to play. I, for one, however, accept that much fresh thought is needed to ensure that such a part is made progressively more effective.
§ 4.4 p.m.
§ Lord Orr-Ewing
My Lords, the House owes a debt of gratitude to the noble Lord, Lord Taylor of Gryfe. He is one of those who have friends sitting in every part of the House. If I am critical it is not because of him or of the way that he moved the Motion. It is because I feel that both the SDP and to a great extent the Labour Party are a little vague in trying to find solutions to the problems which beset Britain's public industries.
I have been studying—here is a "plug" for the Alliance Party—the SDP's Industrial Strategy. Much of it is common to the Government's policy. Much of it is also a little vague. But I cannot go along with their proposal that the financing requirements of our nationalised industries should be excluded from the public sector borrowing requirement. It seems to me that it does not make sense. One might have a rogue public corporation unaccountable to Parliament, as they would wish, unaccountable to the Government and, above all, free to pile up debts with state credit, which means taxpayer's money standing behind such debts or such profligacy. I cannot believe that that is in the interests of the taxpayer or the future efficiency of our nationalised industries.
"By their fruits ye shall know them" should also apply to the SDP. When one looks at how they are dealing with the privatisation measures coming forward, it is a little difficult to see where their loyalties lie. The Telecommunications Bill, which will be coming to your Lordships' Chamber next Monday for its Second Reading, had its Second Reading in another place on 29th March, 1982. It is quite interesting to see where the SDP leaders stood on that issue. Mr. Roy Jenkins and Mr. Will Rodgers did not vote for the Bill and they did not vote against the Bill. In fact, they did not vote at all. When one turns to the other leaders, Mrs. Shirley Williams, Mr. David Steel and Mr. David Owen all voted against the Government. According to the introductory speech of the noble Lord, Lord Taylor of Gryfe, he is against any renationalisation. But he also seems to be against, or his party seems to be against, any measure of denationalisation such as this Government stand for and are carrying out. I have no doubt that my Front Bench will deal with the main points and will underline the achievements of this 205 Government and the good relations which they have with so many of the public sector industries.
Since we are going to discuss shortly the Telecommunications Bill, perhaps I should point out that Sir George Jefferson said recently that he thought that these privatisation measures will invigorate and enhance the innovative processes within British Telecom. He looks upon it as a good measure, not as a handicapping measure. After those wise words from the man running the outfit, the SDP might be persuaded to back the Government's policy in that field and in a number of other fields as well. The trouble is—and it is known to all three parties on the Opposition side and to the party which I represent—that we have the largest public sector in the free world. It is too large for the health of the private sector, which is a diminishing part of the total. It is the private, wealth creating sector which has to carry the losses of the public sector and which has to carry all public expenditure, whether it be the educational service, the health service or local authority services. All have to be carried on the back of the private, wealth creating sector. All politicians, wherever they may sit in this House or in another place, have got to tackle this problem.
It is strange to see what a tremendous change there has been in the last 30 years. I refreshed my memory by rereading the manifesto—called Let us Face the Future—put out by the Labour Party in 1945. When you read some of the stuff now, in the light of the experience of 30 years, and more, of nationalisation, you feel that it ought to be included in a Marx Brothers' film; it would have the audience rolling in the aisles. Listen to this section about coal:Amalgamation under public ownership will bring great economies in operation and make it possible to modernise production methods and to raise safety standards in every colliery in the country. Public ownership of gas and electricity undertakings will lower charges.I had my quarterly electricity bill this morning. I see that the unit cost of my electricity is now the equivalent of 5p. It was about one-twentieth of that 30 years ago.
§ Lord Jacques
My Lords, surely the noble Lord ought to address his complaint to his own Government and not to the electricity industry. It is they who are using the electricity industry as a means of raising taxes.
§ Lord Orr-Ewing
My Lords, I do not feel that I am in a position to answer such a question. All I am saying is that the price of electricity, which we were promised was going to be reduced, has not been reduced in real terms. The electricity industry, of course, has to pay the very high price of coal in this country. It could buy that coal at half the price if it was allowed to import other coal. I agree that to do so would be anti-social; but coal could be bought at a lower price—and no doubt the noble Lord, Lord Ezra, will deal with that point when he speaks later. The 1945 manifesto goes on:Public ownership of iron and steel. Private monopoly has maintained high prices and kept inefficient high cost plants in existence.Is not public ownership doing exactly the same with some of our mines? I believe that the noble Lord, Lord 206 Ezra, himself wanted to close some unproductive mines at one stage in South Wales as his predecessors, quite rightly, had been closing inefficient mines before him. The document goes on:Only if public ownership replaces private monopoly can industry become efficient".There is not one single place to which one can point—at least, I have never been able to find it—where public ownership is more efficient than a private sector operation. Finally, the document states:Anti-social restrictive practices will be prohibited.You can tell that to some of the people who suffer from closed shops. You can tell that to clients of the water workers and to patients of the hospital ancillary workers, and ask whether they have suffered from antisocial practices—they certainly have. I have no doubt that the Labour Party have learnt from that experience.
I had a terrible thought the other day. Perhaps it was a dream—or maybe it was a nightmare. It was that I would have to go out and campaign in the forthcoming general election some time in the next year for further nationalisation, which is presumably what the Labour Party are going to do. How would I explain why productivity in the ports, in the steel and coal industries, and on the railways, has been notably below the increase in productivity in the private sector despite huge capital expenditure, because they have not been denied capital? How would I explain why it is that after £100 millions have been spent on electrifying the King's Cross to Bedford railway line, the rolling stock has for many months been sitting in grass covered sidings, and has not been allowed to be used?
How would I explain why, with huge losses, labour costs have risen in most nationalised industries? How would I explain seven out of every 10 days lost in strikes in 1980 and 1981 were lost in the public sector and not in the private sector? How would I explain that prices in the nationalised industries have risen by 82.9 per cent. since the last general election, whereas the Retail Price Index has risen by only 55.8 per cent? Incidentally, when this Government came to power, we were faced with £1,000 million in subsidies which had been dressing up the position in order to keep the inflation rate down.
Above all, how would I explain that the total cost of the nationalised industries since those great days of 1945 in capital write-offs and grants has been £40,000 million at today's prices? That figure is shown in Hansard in an Written Answer given in another place on 9th November 1982.
§ Lord Beswick
My Lords, if the noble Lord, Lord Orr-Ewing, will allow me to intervene, I can remember 1945 as well as he can. I wonder what would have happened to the coal industry of this country if it had been left to the private owners, who were then running it down. Does the noble Lord believe that we would have had any kind of railway industry at all if it had been left in private ownership in 1945?
§ Lord Orr-Ewing
My Lords, I am not suggesting that we go back to breaking up the railways. I believe that there are many ways of decentralising railway organisation which would be of benefit. No one has 207 ever suggested that all those pits should be closed down, yet pits are closed down regularly as they age and become non-productive or difficult to mine. This has been the policy of successive leaders in the Coal Board, as it was in the days of the private sector.
§ Lord Beswick
My Lords, will the noble Lord, Lord Orr-Ewing, answer my question? Does he really think that we would have had an industrial nation in Britain if rail, gas and electricity had been left in private ownership in 1945?
§ Lord Orr-Ewing
The answer is, Yes, my Lords. One can look all round the world and find many countries which have not thought it necessary to nationalise their electricity and all their infrastructure. Yet they are very successful and are competing very efficiently against our own products, because their costs are lower. One has only to look at other countries to see that infrastructure organisations and industries do succeed in the private sector and have succeeded in other parts of the world. I return to the point that there is no explanation for the fact that there have been £40,000 million of losses and grants, loans and capital write-offs in the nationalised industries. Just think what could have been done in this country, not only for social benefits but also in the creation of wealth if only half that money had been saved.
The Labour Party have actually revised their thinking because I have been studying their policies for the future. I have their 1982 programme and their 1983 programme which was published last month. Their current policy, spelt out in greater length in the 1982 document, is:We have to demonstrate the practical benefits of common ownership"—my goodness! that is true; it will be difficult to sell that to anybody—showing how public enterprises can be a spearhead for innovation and new investment …It is a pity that I was reading that just after I read that Inmos—one of the so-called selected high technology public companies—had lost £110 million already of taxpayers' money. The programme goes on:making clear the benefits to both workers and consumers and exploring the best forms of organisation and different forms of common ownership.At least that is a slight backing down from those heady days of 1945 when the Labour Party thought that by doing these things, everything would come right.
The Government have been right in the action they have taken. No one has yet shown how to stop a monopoly power, backed up by the taxpayers' money, from pounding private sector competitors into bankruptcy. That is the problem this Government also have to solve. If one takes the case of ship repairers, the last nationalisation measure of the Labour Government was the nationalisation of aerospace and shipbuilding; and within the shipbuilding sector, there were a number of ship repairers. For many years I was a director of a conglomerate company, which was involved in ship repairing. Since nationalisation, not only have British Shipbuilders lost £700 million in a relatively short period but they have been quoting prices for repairs which are half the actual costs. Who 208 is propping that up? Who is paying for that? The answer is, the taxpayers of this country. So we have not solved the problem of fair and equitable competition between the private and public sectors, even when we have privatised a portion of this huge and inflated public sector.
We shall see soon the de-nationalisation of parts of British Telecom. I wish to say, although this is probably not germane to the Bill we shall be debating next Monday, that after 100 years of Post Office monopoly it will be very difficult for small private sector companies to compete with this huge monopoly. As Sir Freddie Laker discovered, it is very difficult to compete fairly with British Airways and other huge powerful operators and to prosper in the private sector. That is a problem which the Government have to solve.
I feel sorry for the Labour Party. It cannot be easy to stand on doorsteps and try to sell nationalisation, re-nationalisation and further nationalisation to the people of our nation. Every Gallup Poll that is taken shows quite clearly that the people of this country realise the disadvantages and want somebody to solve this problem. This Government at least have a programme and a plan and I only wish that the SDP and Her Majesty's Official Opposition will be a little more explicit as to how they would overcome the problems which they have created over the past 35 years.
§ 4.19 p.m.
§ Lord Harris of High Cross
My Lords, I join other speakers in thanking the noble Lord, Lord Taylor of Gryfe, for bringing this Motion before your Lordships' House. Whatever our differences, we might agree that the issue he has raised is central to the economic welfare of this country. I believe it is also subject to a good deal of misunderstanding and, just occasionally, of misrepresentation—of which we have had a faint echo from the opening speeches. I thought that the view of the noble Lord, Lord Taylor of Gryfe, was generally rather complacent. It would be only slightly to parody what the noble Lord said if I were to present him as saying, "If only the Government will keep out of the way, all will be well." He certainly said we should not make a fuss about ownership but should concentrate on management, as though a responsible owner need not be most meticulously concerned with the use to which his property is put. The new truth on which the Social Democratic Party seems to operate is that the publicly owned industries belong to nobody, and the implication is that the boards should be left pretty free to do much as they please.
I thank the noble Lord, Lord Beswick, for his advertisement of my humble efforts in a published lecture. I thought on the whole that my view suffered by compression, though I do not charge the noble Lord with having wilfully selected from my views. However, I think he will recall that whenever I used the word "self-interest" I tried to disavow the notion that it meant selfishness and tried to explain that it means much more the self-chosen purposes of individuals, the argument being that people will apply their talents and efforts more zealously on behalf not just of themselves but of their families, their local causes, their churches, their region—on occasions their 209 country. They will pursue their own self-chosen purposes more conscientiously than you can easily get them to work for something declared, if I may say so, by party politicians to be in the "public interest". My case was that benevolence and zeal for others is much to be desired but is on the whole a scarce resource, like beauty or eloquence, and must be reserved for those activities where you cannot easily use self-interest or self-chosen purposes to achieve your objectives. So I argued there that we must harness the self-chosen purposes of millions of people to achieve the economic progress which in the end is the source of all benefits to the consumer, the worker and to the community.
The tragedy of Lord Taylor's Motion on relations between Government and the nationalised industries is that it has come a bit late—like half a century too late. If the early pioneers of what is fancifully called "public ownership" had grasped the conflict inseparable from involving politicians in the management of vast industries, they would never have displayed such a touching faith in their essentially ideological nostrum. Indeed, an extensive search of the mostly arid early literature on the subject reveals little more than a vague aspiration that getting rid of the private capitalist would transform human nature and with it transform society.
The dubious theoretical basis was provided by the Marxist mirage of surplus value: profits would vanish and the workers, in Hugh Gaitskell's words, "will at last enjoy the full fruits of their labours". We are halfway there; profits have certainly vanished. But we may ask where are the fruits. We all have our different versions of figures. Mine are as follows: in the 10 years from 1970 to 1980, the net revenue of the nationalised sector taken together was about £25,000 million less than its total payroll. Yet over that period the average prices of nationalised output rose 25 per cent. faster than the general price index, and since 1979 public sector prices have consistently risen twice as fast as prices in the private sector. Whatever social benefits may be claimed for this experiment, there can be no dispute that they have been bought at a very high economic cost.
The implicit question posed by the noble Lord is whether Governments or the nationalised industries have been mostly to blame for these deplorable results. Back in the 1930s when Herbert Morrison was inventing the Labour Party's policy on nationalisation, he seized eagerly on the unique example of the British Broadcasting Corporation, as though it were a generalised model for the management of mammoth and complex productive undertakings. It was thus imagined that the artefact of a public corporation would insulate Government from involvement in detailed management. The familiar incantation, your Lordships will remember, was that Parliament would retain ultimate control over policy, leaving the boards with full responsibility for day to day administration.
However, Herbert Morrison's native cockney shrewdness asserted itself in a passage from his Socialisation and Transport which I would particularly commend to Mr. Kenneth Livingstone exactly 50 years later. Then Morrison, the founder of the London Passenger Transport Board, was unhappy about the idea that the Government should give a state guarantee for finance, which he thought— 210might well have encouraged a spirit of slackness or even recklessness on the part of the Board in matters of management, on the part of the travelling public in demanding lower fares and uneconomic facilities, and on the part of the work people in asking for big concessions as to conditions of labour. All might be tempted to say 'Well, after all, we have the Treasury behind us'.".Morrison added:As I have shown from the Russian experience, this is a dangerous frame of mind".That really said it all. Yet, after 1945 the Labour Government perpetrated the fundamental folly of giving the nationalised boards for coal, transport, gas, electricity and steel, precisely these state guarantees for finance. Is it really any wonder that complaints about restrictions on capital for development go back long before Sir Peter Parker or the noble Lord, Lord Taylor, to Walter Citrine at the Central Electricity Authority in 1948?
The question I want to pose is whether such criticisms were ever well-founded. If all these vast public corporations were vested with monopoly powers, if they were further shielded by Government guarantees against the threat of bankruptcy or takeover, what discipline was left to prevent financial mismanagement or irresponsibility? What remains, except the assertion of the power of Parliament? This power rightly starts from the appointment of the boards; but it must inevitably extend to control over capital investment and even to the regulation of prices. The fatal flaw is that for all its power, Parliament is impotent to control the efficiency and costs of nationalised industries. Indeed, in the absence of competition there is neither an objective test of efficiency nor an effective incentive to minimise costs.
Recently, most devastating evidence has been published by Dr. Richard Pryke of Liverpool University, who was once a leading defender of nationalised industries. From detailed comparisons in civil aviation, channel ferries, and the retailing of gas and electrical appliances—in all of which there is competition between public and private suppliers—Dr. Pryke concludes that the public suppliers are inefficient, overmanned and generally badly run. He supports this with a good deal of impressive statistics.
Over the years Governments have vainly sought to find some control mechanism to impose efficiency on the nationalised industries, first with test discount rates, then target rates of return, followed by required rates of return, and now, as the noble Lord, Lord Taylor, told us, the external financing limits. But all of these devices remain inferior to the discipline of competitive markets. Whatever reservations we may have about market pricing, it at least provides a framework which enables us to compare the alternative uses of capital and labour. However much more sensitive souls may mock the takeover system, it provides a method of displacing failing managements for which the hawking around of chairmanships of great boards offers no good alternative. Whatever the theoretical limitations of control by shareholders, in practice the pressure of institutional investors and Stock Exchange valuations provides a spur to slack management for which parliamentary debate and ministerial telephone calls are a poor substitute.
211 I agree with the noble Lord, Lord Taylor of Gryfe, that we should all read and re-read the recent book by Sir Michael Edwardes entitled Back From the Brink. From my reading, I derive two key lessons from British Leyland's precarious survival. The first is that Sir Michael shows that Government intervention again and again was based on political rather than commercial and economic motives—as when Eric Varley stopped British Leyland from closing the Prestcold plant at Hillington because it happened to crop up just before the 1979 general election.
The second lesson is that his success depended absolutely on convincing both management and men that he would not call on Her Majesty's Government to guarantee British Leyland against bankruptcy and, ultimately, liquidation if they failed to meet their targets.
I must tell your Lordships that I believe nationalised coal, railways, airways, gas, electricity and the rest, exhibit—behind a sometimes respectable cloak—many of the defects and deficiencies of British Leyland before Sir Michael Edwardes, or British Steel before Ian MacGregor. The sooner we can expose them to competition, remove Government financial guarantees, break them up, sell them off or give them to their workers to run without subsidy, the sooner will we all rid ourselves of the otherwise insoluble problem to which the noble Lord, Lord Taylor of Gryfe, has once again called our weary attention.
§ 4.32 p.m.
§ Lord Ezra
My Lords, I should like, as have other noble Lords, to express appreciation to the noble Lord, Lord Taylor of Gryfe, for introducing this Motion. I am only sorry, like him, that this matter should have been the subject of a short debate, because I feel that we are tackling one of the fundamental aspects of our industrial economy. I should also like to express my personal appreciation to the noble Lord, Lord Beswick, for the kind remarks he made on my account.
I stand to speak to your Lordships as someone who served for a very long time in a nationalised industry—in fact, no less than 35 years. I joined the coal industry in 1947, shortly after it was nationalised. I served largely in a central position, and I left it only last year. Therefore, I have had experience of virtually the whole of the period of nationalisation, and I should like to speak to your Lordships in that capacity of someone who has had experience on the other side of the fence.
I must say, more in sorrow than in anger, that I feel that after 35 years we are no nearer a solution to this problem. One would have thought that over that time-span a society such as ours could at least have found some way of reconciling itself with the concept of public ownership—whether to have it or whether not to have it; and, if we do have it, how to run it more effectively.
I cannot help comparing our performance in that field with the performance of Austria, a small country at the other end of Europe, which started under the worst conceivable auspices at the end of the war, with Russian occupation and apparently left to its own 212 devices by the Western allies. It reorganised its industry and ended up with an industrial structure which proportionately has more under public enterprise than we have in this country. But that has never been the subject of public political debate in Austria. In other words, they try to make it work.
I must say that what worried me as a manager—and I felt that I was a manager employed to produce the best results—was that the owner of the business kept on changing his mind on what we were meant to do. I believe, and I sincerely put this to the House, that we must try to find some way of ending this permanent argument. But it has been not only an argument about ownership. It has been an argument about all sorts of things.
We have heard the very fluent speeches from the noble Lords, Lord On-Ewing and Lord Harris of High Cross, in which they have roundly criticised public enterprise and compared it with private enterprise much to the disadvantage of the former. May I, however, humbly suggest to them that they are not comparing like with like. If one wants to criticise, for example, the coal industry of this country it is no good comparing it with a multiple store. One must compare it with the other coal industries in Western Europe; in other words with coal industries in like situations, some of which happen to be publicly owned and some privately owned. One aspect about all of them, however, is that they suffer from a similar problem of geological difficulty in mining the coal and a similar problem of making sure that the labour force is as efficient as possible and is motivated as effectively as possible, and of finding markets for their products in times of difficulty.
To take the British steel industry, the proper comparison to make is with steel in Belgium, Holland, Germany, the United States and elsewhere and then see how we compare. The fact is that publicly owned enterprises generally happen to be in the basic sectors. They generally happen to be at the heavy end of the industrial economy. Everyone who studies these things knows that there is a structural change going on in the world and a move away from the basic industries. However these industries may be owned, regulated or operated they face a problem. The challenge is not to keep on playing around with what I consider, as a manager, to be the superficialities but to recognise the reality of the problem. We must recognise that there is this structural change and ask what we should do about it and how we should face it.
The sad thing is that not only has there been this major argument about ownership but there have been, through successive Governments, continued quiet interventions throughout the piece. Let me mention three areas of relevance to any enterprise: prices, investment and wages. These are three crucial areas in the operation of any industrial or commercial enterprise which are normally left to the management to decide. The management then have to stand up to their shareholders at the end of the year, whether they have performed well or not. But I regret to say that in nationalised industries this clear-cut distinction between the owners of the business and the managers of the business in respect of these three crucial aspects has virtually never been observed.
213 During my period as chairman of the NCB I was the target of attack by Ministers either for putting prices up by too much or not enough. Indeed, one of the most unfortunate arguments I had with a certain Minister not so very long ago was precisely for not putting the prices up high enough because the Treasury felt that is what should have been done. What amazed and slightly unnerved me was that in the newspapers the very next day I saw a massive attack by a leading member of the Government on the high prices of nationalised industries; and I must say that I was left in some degree of confusion.
Let us take investment. The noble Lord, Lord Taylor of Gryfe, referred to this question. Many was the time when, for reasons of public expenditure, we were asked to curtail our investment. But there have been times when we were asked to increase our investment, with no regard being paid in those requests from Government—indeed they were rather more forceful than requests—as to whether that was relevant to our situation at the time as commercial enterprises.
I do not want to quote a recent occasion when we were constrained on investment and then asked to invest more. I shall go back to the early 'seventies, when the Nationalised Chairmen's Group, of which at that time I was a member, was amazed that six months after we had received formal instructions to cut our investment, we were told to do the reverse. I remember the noble Lord, Lord Marsh—who the other day spoke to us so eloquently about the Serpell Report—saying "The only way in which on the railways I feel that I could meet the wishes of the Government would be to instruct my people to paint all railway stations another colour, so that we can quickly spend some money that way". We cannot in the nationalised industries vary the investment plans at the drop of a hat for purely external reasons; and so some continuity needs to be achieved in this important area.
When it comes to wages, it is also an unfortunate story. I have had quite a lot of experience in this difficult field, and in my opinion wage negotiations need to be left as a matter to be settled between management and unions. If there is any intervention from Government, that is bound to lead to difficulty. I do not wish to draw undue attention to this particular point, because it can be brought to mind in the memory of this House, but there have been times when Government overtly intervened in wage negotiations. In my own industry there was a time when the negotiations were actually taken over by Government. There was a time when I received visits from my good friend, the noble Lord, Lord Gormley, in which he told me—this was some years ago, and is not relevant to the present Government—"We have settled everything. It is all signed, sealed, and delivered". We had not been present at the discussion. So I rang the Secretary of State, and said, "We have been told by friend Joe that all has been settled. Is this correct, or not? We should like to know". I was told, "No, it is not correct". So what kind of situation were we left in?
I mention these matters based on my experience; I feel that we must learn by experience, and that we must try to run these organisations in some different way. As long as there is a public enterprise sector—and 214 I believe that in certain areas of the economy it is unavoidable—we must work out ground rules as between the owners of the business (represented by the Government) and the managers. We must work out ground rules which are consistent, which are clearly defined, and which make sense. So I would plead for that kind of approach.
But, of course, there have been other ways in which the management of nationalised industries have been demotivated—for example, in the financing of the enterprise. The noble Lord, Lord Taylor, referred to this point, and so did the noble Lord, Lord Orr-Ewing. Up to the time that I left the Coal Board last July, we were not trying to say that we should have recourse to unlimited private finance on any hare-brained scheme; that was not at all what we wanted to do. We were trying to say that within the limits of capital investment agreed with Government, we should like to be as free as any other enterprise to borrow the money in any of the markets available. But in order to ensure that nothing that we did would upset Government funding in any other direction, we would be ready to advise the Treasury in advance of what we were doing. We said, "Please give us the chance of exercising our commercial expertise in the way in which the agreed amount of money should be raised".
At the time that we were discussing the matter we in the Coal Board, at any rate, were bound to raise money on a 15-year basis, at fixed interest rates, as they applied at the start of the funding. At a time when people expected interest rates to increase, one might have said, "That's fine"; but at a time when they were expected to decline—which was in fact the situation—this was madness. So we said to the Government, "Why can't we be free to exercise our commercial judgment like any other firm within the limits of investment laid down and agreed with you, and, subject to advising you in advance, borrow short, if we feel that it is the thing to do? If we make a mistake, you can hold us to task for it". But that, I regret to say, was not agreed, and to this day I still cannot understand why. I do not see what harm we would have caused to the financial structure of the country. These days I am fairly familiar with the City, and the noble Lord, Lord Taylor, is a colleague of mine in the City. We know that our City friends would be all too happy to co-operate in that kind of arrangement. So we must ask these questions.
The other matter to which one must draw attention is the quixotic (to say the least) manner in which the chairmen and members of boards are appointed. We really ought to try to devise a better system of doing this. I do not know whether perhaps there should be set up a body of eminent personalities, who could at least publicly recommend to Government the kind of people who ought to be appointed for such jobs. One would then know that some rational approach was made to their appointment. As it is, names appear. At the moment they appear by way of what seems to be deliberate leak. Some of the names that are deliberately leaked are suddenly "unleaked", and disappear. It is not quite clear whether or not these gentlemen were ever approached, or whether they leaked it, or whoever approached them leaked it.
I do not think that this is a rational way to operate in respect of those people who are meant to lead these 215 very important enterprises. Certainly such a situation does not apply in the private sector, and I fail to see why it should apply in the public sector. So I make that plea.
The basis on which the wages and salaries paid to board members is established passes all belief. On many occasions in the NCB we appointed to our board the top officials of our industry, which was perfectly right and proper. At the time of their appointment they were given to understand by those who appointed them that this was preferment, that they would in fact be earning more as a result, in recognition of their contribution and eminence. But in fact what happened was that invariably within a couple of years these people ended up by earning less. Every time the Top Salaries Review Board made a recommendation the Government of the day would not apply it. Then we were told that the matter was to be dealt with on a flexible basis as between individual nationalised industries and the sponsoring department, but when the recommendations were put in they, too, were not accepted. I am talking here about my experience. I believe that we need to have a rational approach relating to those boards which are appointed by Government.
So we come to the question of how we sort out this whole question of the nationalised industries. I accept that it is going to be difficult. I believe that there are certain sectors which, from any party's point of view, are likely to remain publicly owned. Could we not agree that at least in those cases we have some continuity of policy, that we try to put right some of the things that have gone wrong over the past 35 years, that we try to attract the people from within to do of their best—work people and management alike?
This is an issue which goes way beyond party barriers. It is an issue that relates to the success of the industrial economy of our country. It will be a very long time before we can say that the vast bulk of industry will be either publicly or privately owned. I believe that we shall remain a mixed economy for many years. There is a hard core that will remain in the public sector. I should like to recommend to your Lordships that the aim should be to make sure that those sectors which remain publicly owned are run as efficiently as possible, and that they should be enabled to do so by the manner in which the Government deal with them.
§ 4.51 p.m.
§ Baroness Burton of Coventry
My Lords, my noble friend Lord Taylor of Gryfe has called attention mainly to the financial side of the problems that beset Government and the nationalised industries. That is obviously a continuing problem. I wish, however, to deal with a different one that goes back a long time. I refer to the problem of consumer relations. Government has never been as receptive to consumer relations in nationalised industry as both common sense and realism have demanded. This is not a party issue: those of us working on consumer affairs come from all sides of the House. On seeing the list of speakers for today, I looked up my files and I drew 216 comfort from the fact that going back to July 1971 the noble Lord, Lord Sandford—I think of what he did last night—and the noble Lord, Lord Beswick, both supported me on consumer councils. I also go back to 1962 when, as chairman of the Domestic Coal Consumer Council, I had the great benefit of having as a colleague Mr. Derek Ezra, as he then was, the accountant to the National Coal Board. I remember in what fear we always sat of him and his knowledge of the financial side. The names of Lord Ezra, Lord Beswick, and last night Lord Sandford, bring me up to date.
I had the privilege and the opportunity in January 1975 of opening a debate on the consumer interest in public monopoly and private corporation, and again, in April 1978, on consumers and the nationalised industries. As all those who speak in this House realise, it is a great privilege when one receives support from all sides of the House. But where did the opportunity get us? My answer would be, not very far. Five years ago, in our debate on 5th April 1978, I said that this had been a long trail for me, going back to 1950 in another place and moving on, in 1962, to your Lordships' House. I thought that it might well have seemed rather a long trail to some of your Lordships, too. From 1950 to today is, indeed, a long time—33 years. Why has it been necessary to keep on and on?
The trail in both Houses has been concerned with the right of the small person, the individual, to be heard by commerce, by industry and by Government. The aim throughout has been to give real influence to consumer representation and to improve relations between Government, nationalised industry and the consumer. In order not to weary the House with tedious repetition, I might leave the long-ago years by saying that I have always believed in the public interest and that I do not believe it to be incompatible with commercial good sense. I think that your Lordships will agree. Why, then, has it been necessary to keep on and on? In our debate of five years ago I had five suggestions to make which I thought might usefully be considered. Those suggestions concerned independence, imbalance, monopoly as judge, the question of size and the question of resistance. Are these now outdated? I wonder. Lord Taylor's Motion today provides a valuable vehicle for examination.
The Motion that we are considering provides me with at least two opportunities. The first is to ask the House to consider whether the five points of 1978 are still problems today in consumer relations. The second opportunity is to say what we, on these Benches, think should be done. Are the problems still relevant? I take first independence. Yes, this is still relevant. Any consumer body recognised officially by the Government must be seen to be completely independent of the industry concerned. Imbalance? Yes, this is as relevant as ever. I shall return to that issue. Monopoly as judge? Yes, this remains relevant to a greater or lesser degree, although not always as blatant as the example that I shall never forget. The House will, I am sure, forgive me if I say that this acting as judge-in-its-own-affairs arose at the end of July 1973 over the saga of the West London air terminal, when this House defeated both the Government and British Airways by a substantial margin. On 24th January 217 1974 Miss Eirlys Roberts wrote a short letter to The Times summarising the affair, and said:The disquieting thing about the check-in facilities at Cromwell Road is the way in which a nationalised industry failed to consult the public about what it was doing, failed to explain why it was doing it and refused to listen to protests while it was being done.I shall come back to the question of imbalance. I take next the question of size. This, it seems to me, will always be relevant. Sheer size seems to have defeated ordinary contact. That is why good and effective consumer councils are essential. People are reduced to despair, and sometimes I wonder if those at the top really know. I believe that size is part of the problem and that many of those at the top, who sit at a desk, honestly have no conception of what it is like to be elsewhere. The question of resistance will, I feel, always be with us. No one knows better than I the almost impenetrable wall that is put up when Government, department and nationalised industry decide to get together to impede progress or even inquiry. Against this, we shall all just have to persevere and refuse to give in. So, my Lords, I maintain that my five points, unfortunately, are relevant today.
What do we, on these Benches, suggest should be done? We start from the assumption that consumer affairs and consumer interests affect everyone. We have in the nationalised industries a series of monopolies which are often in control of essential services that people cannot do without. The prices charged are a crucial part of everyone's budget. Do we get good service? If not, what can we do? There is no choice of taking our custom elsewhere. Should we then look to the Government for help or should we try to help ourselves?
According to official statements, the output of the nationalised industries accounts for nearly 8 per cent. of gross national product while their bills cost the consumer almost 11 per cent. of his expenditure. Yet the consumer interest has never been recognised as one of the estates of the realm. Surely the consumer interest should be equated as the public interest—one no less important than any other in public monopoly and private corporation. For many years, I suggest, industry has made the error of thinking that the consumer wants only to complain. I go back to the Civil Aviation Bill on 29 July, 1971, when the noble Lord, Lord Beswick, at column 748, supported the statement and, indeed, supported a remark I had made on Second Reading of the Bill to the effect that there are many consumer matters affecting travellers that are not complaints. Obviously, to anyone with any common sense at all the user can have valuable comments to make on any product or service.
In the past the consumer side has been inadequately informed, and there is only one way in which to correct that imbalance: the secretariat of the responsible consumer council or committee must be the equivalent of the counterpart in the industry concerned. I would go along with the noble Lord, Lord Harris of High Cross, if he were to say that that suggestion could have been made many (I shall not say 50) years ago. It certainly should have been done.
Any official consumer body must have funds of its own enabling it to employ the services of experts and consultants. Those funds should be provided by Government. Only in that way will possession of facts 218 and information all round the table make it possible to argue and present a case. Consumer councils should have the right to make representations and recommendations to the relevant Minister, and should these be rejected the Minister should make public his reasons. I do not know whether I can ask the noble Earl, Lord Gowrie, to comment on that, because it is probably too short notice. However, it is something about which we on the consumer side feel rather strongly.
No recent Government have succeeded in creating a system whereby consumers can influence public policy continuously, first, where it begins, then as it develops, and, finally, at the top where it becomes law. We believe that consumers must have these opportunities if they are to be listened to as industry and trade unions are listened to now. I would call in aid the remarks made here yesterday by the noble Lord, Lord Sandford, at column 102 of the Official Report, where, when speaking of Clause 7 of the Water Bill, he said:It is the clause which sets up consumer consultative councils in order to ensure that the consumers of the regional water authorities' services can have their complaints, their anxieties and their interests safeguarded and properly catered for. That is something which is not generally done to anybody's great satisfaction in any nationalised industry, and we must exert ourselves to see, if we possibly can, that in this case it is done properly.So, widening the aspect, we on these Benches suggest that consumer interests are the common interests of the individuals who make up our society. They are far more than mere shoppers' interests. I hope and believe that most people would accept that any improvement in our economy, in our social conditions and in the health and happiness of our whole society must be based on consumer interests. Laws for protecting consumers are futile unless they are enforced. This means that there must be both enforcement authorities and cheap, simple, decisive legal procedures whereby individuals can defend their own rights. This does not mean more bureaucracy; it means cutting through the maze of legal jargon that it is almost impossible to understand, that takes far too long to reach a decision and the prospective cost of which is terrifying to the ordinary citizen.
I am hoping that what I have been saying forms a background to the problems which beset government and the nationalised industries in the wide area of consumer affairs. I would suggest that what I said earlier really is indisputable—namely, that we have in the nationalised industries a series of monopolies which are often in control of essential services that people cannot do without. If a change is to be made, it must be made by political means—by a political party committed to securing the interests of people in general particularly where there is some injustice, where something needs to be put right, where bureaucracy needs puncturing.
In offering, obviously, the strongest support to the Motion of my noble friend Lord Taylor, I would conclude by emphasising that we believe that the small person, the individual, has a right to be recognised and, indeed, to be heard by commerce and industry, by Governments and all Government departments. We believe that the individual should be recognised. We hope that what has been said from these Benches today shows that the SDP intends to bring this about.
§ 5.6 p.m.
§ Lord Wilson of Langside
My Lords, I did not at all grudge the noble Lord, Lord Harris of High Cross, his fun at the expense of the Social Democratic Party. Indeed, it was good natured and, here and there, there may have been a point which all of us up here might well take to heart. I was a little disappointed, on the other hand, when he suggested (if I did not misunderstand him) that we should be moving further in the direction of denationalisation and should be less concerned with the issues which, as he put it, Lord Taylor of Gryfe has drawn our weary attention to. Of course, we are much indebted to the noble Lord, Lord Taylor, for moving his Motion, and, although Lord Harris is apparently weary of those issues to which his Motion refers, we here certainly are not. And why? It is because it deals with the problems of the relations between Her Majesty's Government and the nationalised industries, and if we did not know before we surely know now, having listened to the speech of noble Lord, Lord Ezra, that there is a problem, that it is a perennial problem and that if we do not get it solved, and solved soon, it will become worse rather than better. So let us not be weary about it.
I wonder whether, in the few minutes of your Lordships' time which I shall occupy, I could usefully engage in two rather elementary historical reflections, because it may throw some light on the issue of this debate. It may be that 50 or 100 years ago the idea propagated by socialists, and perhaps by others, that production should be for use rather than for profit, then had something to commend it. Some may think that it still has. But, surely, nationalisation today is neither good nor bad. Even in peacetime a certain measure of nationalisation may, may it not, be a matter of national survival, of economic and industrial survival? Was that not the case with, for example, the Act passed by the Government of Mr. Stanley Baldwin, as he then was, nationalising the generating side of the electricity supply industry? Whatever may be said about the structure which he or his Government adopted for the generating board of those days, I should have thought that industry could not have given us what we needed to win Hitler's war if we had not had the national grid. What is more, I should have thought that, after Hitler's war was over, if the Government of the day had left the supply side of the electricity industry in the hands of the 596 or so companies who were then on the job, we would not have had the electricity to achieve industrial and economic recovery.
It may be that the board was not an ideal set up. It may be that there has been bureaucracy, shortcomings and so on. But in politics it is a matter of alternatives. Of course, in war it can be a matter of national survival. It may be that some of your Lordships here were in the wartime Government; I cannot recall offhand. But my recollection is that when industry was required to supply the weapons of war and was not achieving the job, the first thing the Govenment did during the war was to put in a controller. My recollection is that more often than not it did not work. What they had to do then, in the conditions of war-time—I am not suggesting we should do it in peace-time—was to take over ownership as well as control. This was one of the arguments that was used by Sir Stafford Cripps when in 1949 the Labour Govenment was 220 nationalising—wisely or unwisely, as you chose to judge—the iron and steel industry. That is my first historical reflection.
My second one derives from the gospel according to Karl Marx. I never much liked him; I found him a great bore, perhaps because I could not understand him, although the Communist manifesto has a rich political flavour that one can still enjoy. But my recollection is that for him and his immediate followers the millenium was not a state of affairs in which the nation state was in full control of everything; the millenium was to be the glorious socialist day when the powers of the state withered away and we were all going to live in a state of what he called "happy anarchism". When I listen to the Prime Minister—in fact, I do not think that I am allowed to say the Prime Minister because I think we must keep it impersonal—but when I listen to her, I often think she has something in common with the late Karl Marx. History is frequent in her desire for the withering away of the powers of the state. What is funny about that? This is deadly serious. History often makes strange bedfellows, but I should have thought that if there were entries in the Guiness Book for such matters, the fellowship of the Prime Minister and the late Karl Marx would probably achieve an insertion.
Quite seriously, the attitude of Ministers towards the nationalised industries, as it appears to those of us outside Government, seems to be dominated by party dogma. I do not say political dogma, because I think that politics ought to be an honourable calling. Indeed, it is only in relatively modern times that it has become something of a dirty word—and when I say "relatively modern times" I mean over the last 300 years or so. So I say party dogma. They do not seem to be able to stand back and look at the problem in any other context—in the sort of context which was presented by the noble Lord, Lord Taylor of Gryfe, when he opened this debate, for which we are in his debt.
§ 5.13 p.m.
The Minister of State, Northern Ireland Office (The Earl of Gowrie)
My Lords, I am more than conventionally grateful to the noble Lord, Lord Taylor of Gryfe, for causing us to debate this afternoon this topic of the relationship between Her Majesty's Government and the nationalised industries. Give or take a month or two there must be a general election within a year. Our constitution is, of course, a free one, and it allows the political parties the chance to compete in offering clear choices to the public. Nowhere is the choice clearer, surely, than over this issue of the right approach to the nationalised industries by Government. In my view, the Social Democrats, whom the noble Lord supports, are ambivalent in their approach. On the one hand, they recognise that all is not well with the industries, and here they are quite close to the Government. On the other hand, they make great play, as the noble Lord did, of the need for continuity and stability, and they shrink from making changes. Their motto seems to be, "Don't shoot the pianist—he is doing his best". That is not an unreasonable policy, and I shall try to deal with it in a little more depth in a few moments, but it is not one which is liable to give us much in the way of a concert.
221 The official Opposition, by contrast—the Labour Party—are quite unambivalent. The mother tigress suspects that her cubs are being snatched from her, not realising that they have grown up and need to go their own ways. She also wants to bear a lot more cubs, not realising, sadly, that the same passage of time has seen to it that she is rather past it. By contrast, the Government are quite clear about the need for present policy to continue in the next Parliament. We believe that the nationalised system has proved itself a failure overall, and even the noble Lord, Lord Ezra, admittedly from a different perspective, said that after 35 years of his experience at the heart of the nationalised industries we are no nearer finding a solution to the relations between Government and nationalised industries than when he started his immensely distinguished career.
But now, for the first time since the war, the size of the publically-owned sector of industry is being reduced on a significant scale, and that surely hardly strikes an uncertain note, as the noble Lord, Lord Taylor, accused. Make no doubt about it: the return of the Government at the next election will see this process continue. That is not because we are doctrinaire or governed by dogma, as the noble and learned Lord, Lord Wilson of Langside, suggested: no, but because, as I shall illustrate, examination of the record of the nationalised industries and analysis of their effects for the rest of the economy argues the case for us.
I am also grateful to the noble Lord because Parliament has continually maintained a close interest in nationalised industries; and, of course, this is right. The 17 or so nationalised industries dominate the energy, transport, communication, steel and shipbuilding industries. Overall, they account for about a tenth of the United Kingdom's gross domestic product, roughly a seventh of total investment in the economy, and around a tenth of the RPI. They employ about one and half million people out of our total labour force of some 25 million. Their performance has an important impact on the United Kingdom economy, and directly affects every individual in the United Kingdom. I am glad to say that they also attract the talents and abilities of some of our most outstanding people. Whether in Northern Ireland, where I have a particular interest, in Scotland, where the noble Lord who introduced the debate has his particular expertise, or elsewhere, the industries are by any measurement major features of our national economic scene.
If we are to see the way ahead, it is worth reminding ourselves of the background to the existence of the nationalised industries. One of the great early enthusiasts for the concept was Herbert Morrison—and here I am following in the footsteps of the noble Lord, Lord Harris, in going back to this fountain of nationalised wisdom. If the noble and learned Lord, Lord Wilson, can talk of Cripps and Marx, I think that I may talk about Herbert Morrison. No one would dispute the honesty and integrity with which Mr. Morrison set out in the 1930s the principles that should govern nationalised industries; but in the light of experience since that time, who now believes that the theories held dear in those days have turned out successful in practice?
In his book, Socialisation of Transport, published in 1933, Herbert Morrison set out what he saw as the 222 chief theoretical benefits of nationalisation, and they included the following:The quality of service will tend to advance and the price charged will tend to fall.The industry itself will be more efficiently and economically conducted.The board [of the nationalised industry] and its officers must regard themselves as the high custodians of the public interest".Unfortunately, experience over many years shows that the industries, left to their own devices, cannot be relied on to react in the way that Herbert Morrison described. This is not a matter of party doctrine but is based on considerable evidence. In the real world, where the United Kingdom has necessarily to compete with other countries, where productivity counts for more than idealism and competitiveness more than theory, can we honestly say that Herbert Morrison's ideals have worked to the benefit of the consumer, or caused the nationalised industries to act in the most efficient way in their own or the national interest?
Any impartial observer is bound to say that the performance has been disappointing. Even the Labour Party, who are not, of course, impartial about the institutions they created (why should they be?), said in a policy document of last year, as my noble friend Lord Orr-Ewing reminded us:We have to demonstrate the practical benefits of common ownership".Nearly 40 years since their programme of nationalisation got under way the practical benefits still need demonstrating!
Since the mid-1960s the industries' total return on capital employed has been significantly below that of the private sector, even allowing for subsidies. The cost of capital written off and grants since 1945 has been £40 billion at today's prices, and £8 billion in the last seven years alone. This burden has to be borne by taxes and borrowing, thus helping to drive up wage dfemands, helping to drive up interest rates, and creating the inflation which the previous Prime Minister, Mr. Callaghan, may I remind the House, and not just the present Prime Minister, reminded us was "the mother and father of unemployment".
Since the early 1970s—nearer our own day—the industries' aggregate returns on investment have not been significantly above zero, and in some sectors well below. Of course, a large part of the problem has been poorly chosen investment inadequately used, and there have been many examples of this. I know it is easy to be wise after the event, but such strategic decisions have become a perennial problem in many industries. Again as my noble friend Lord Orr-Ewing reminded us, we have the largest public sector in the free world—a scale that has to be paid for.
Then there is the nationalised industries' record on prices. Over the past 10 years or so prices have run significantly ahead of retail prices generally. Between January 1970 and January of this year nationalised industry domestic prices rose by about 500 per cent., compared with a 360 per cent. increase in the retail price index. I am not saying that the blame for these increases can altogether be laid at the industries' door. Oil price increases, for example, have had a knock-on impact on other energy prices. But the most important underlying factor has been the industries' own performance. If an industry's current costs cannot be 223 contained in the way of private sector companies, either the consumer or the taxpayer has to pay. It is gratifying, and a reflection of the emerging success of our policies, that in this fiscal year 1983–84 we expect nationalised industry prices to increase less rapidly than the overall RPI. I am delighted to be able to tell my noble friend Lord On-Ewing, who alas is having trouble with his electricity bills, that there is to be a standstill in 1983–84, and that this standstill is not imposed by the Government but by a proper appraisal by the industry of their current costs.
In the same way, on both productivity and manpower the performance has been disappointing. I do not want to belittle the great improvements in productivity which the capital-intensive industries have made in recent years, including, of course, the industry until recently so ably headed by the noble Lord, Lord Ezra. All credit to them, even if such improvements are to be expected of industries in a favourable technological position. But inevitably the older, labour-intensive industries have shown a poorer productivity performance well behind the national average, and inevitably changes have to take place. I say "inevitably" because, as the noble Lord, Lord Ezra, reminded us, a great change is taking place in the old primary industries.
The recent reports of the Monopolies and Mergers Commission on the retailing of domestic gas appliances, British Rail's London and south-eastern commuter services, the Severn-Trent Water Authority and the inner London letter post make interesting but immensely gloomy reading. I would remind the House that these reports were not written by doctrinaire Conservatives. On the inner London letter post, for example, the commission noted that productivity had declined by between 20 per cent. and 25 per cent. from 1968 to 1979, and observed numerous practices which had contributed to this and caused an associated decline in the service.
Although it cannot be justified by productivity, most of the large industries' employment costs per employee increased faster than the national average over the period 1970–71 to 1981–82, and in many cases much faster. For example, employment costs per employee in the gas industry rose 34 per cent. more than the national average; in the coal industry by 20 per cent.; and in the telecommunications and electricity industries by 14 per cent.
Faced with these facts rather than with the dogmas, what is the Labour Party's response to such performance? It is easily stated. Not only are they committed to wholesale renationalisation of all the industries which we have transferred to the private sector over the past four years, but, to quote their latest campaign document, they want to,establish a significant public stake in electronics, pharmaceuticals, health equipment and building materials, and also in other important sectors, as required in the national interest".What an extraordinarily response to electronics and to the new technologies—to nationalise them!
§ Lord Beswick
My Lords, the noble Earl has been very helpful; he has been very factual. If, as he said, the gas prices were so high, would he say why the Government insisted that they be put up an extra 10 224 per cent. above the inflation rate? When he is talking about postal prices, would he not leave the average at 1979 but tell us what it is up to date?
The Earl of Gowrie
My Lords, I would have to have notice of the second question, but the first I can easily answer. The fact is that, as the noble Lord well knows, energy prices are linked with the price of oil, over which the Government, sadly, have no control. But it is incumbent on the industries to compensate for those costs in international oil prices by looking to their own internal costs. That is what we have urged them to do, and I am glad to say that in the main they have successfully done just that. I do not consider that that campaign statement bears much relation to the national interest. It is true to what I have always felt is the fascinating conservatism which informs the Labour Party on these matters, the way it continues to cling to a belief in the theoretical benefits of nationalisation expressed by the late Herbert Morrison.
What will the cost of these policies be? My right honourable friend the Chief Secretary has estimated that the cost of the nationalisation, renationalisation and energy programmes might be some £20 billion. Does anyone anywhere, quite outside the confines of my own political party, honestly believe that such sums would be well spent?
May I come now, by contrast, to the SDP/Liberal Alliance. As the noble Lord, Lord Taylor, told us, they regard the efficiency of these industries, not their ownership, as the important issue. That sounds reasonable until you notice that they do not discuss the obvious link between the two. They admit that no-one is happy with the present arrangement. They divide the nationalised industries into two categories: first, the category in which the market also operates, which they want to privatise; and, secondly, those, mainly utilities, which are regarded as natural monopolies and cannot be easily made subject to market disciplines. They should be exposed to competition wherever possible, and be subject to more effective monitoring by a special audit commission; their management should be appointed by supervisory boards independent of Ministers, and their financing excluded from the PSBR.
In all except the last respects, this policy is similar to the Government's. But the suggestion that Ministers should have no control over the management or financing of these public charges raises the awful spectre of public corporations unaccountable to Parliament or the Government and free to pile up debt on the state's slate. That does not sound like Mr. Roy Jenkins—he of the admirably balanced Budgets—to me. We must take the sensible bits of policy with a pinch of salt when we remember that the SDLP and the Liberals voted with Labour during last year's debate on the Address on a Motion,regretting that the gracious Speech contains proposals which, in putting private profit before public interest, strip the nation's North Sea oil and gas assets".That does not sound to me like the indifference to questions of ownership of the noble Lord, Lord Taylor, and it surely falls into the old trap of believing that ownership of shares of companies, whether by individuals or institutions on behalf of individuals, is 225 in some curious way less patriotic and less public than ownership by state corporations. That does not sound to me like the liberalism of Mr. Grimond, either. Nor can I find any evidence that allows me to feel, with the noble Lord, Lord Beswick, that state corporations somehow encourage, in his words, the "warmer and more hopeful" side of human nature.
If we want to improve things, we must ask the harsh question why industries' performance has been so disappointing. The heart of the matter, it seems to us, is that, left to their own devices, the industries have no real incentive to improve their performance or strive for greater efficiency. In many cases there has been an absence of competition and market disciplines. If the Government stand behind the industries and are viewed as possessing a bottomless purse, it is no wonder that inefficiencies flourish and market responsiveness does not stand high in an industry's scale of priorities. The consumer and taxpayer have both suffered from this, as indeed has the whole community.
Although performance in the past has not been all that it might have been, I am not pessimistic about the future. The noble Lord referred to problems between the industries and the Government. Of course, tensions are liable to exist, and it would be unnatural if there were not genuine differences of view. The differences must be resolved through discussion and consultation. I listened to the Dimbleby Lecture, and Sir Peter Parker had some interesting suggestions on this subject. No one is looking for acrimony, but I am sure all noble Lords would acknowledge that, in the final analysis, Ministers and Parliament, not the chairmen, must be the guardians of the public interest.
It has been clear to the Government since taking office that the wind of competition must be allowed to blow through the public sector and that we must ensure that the nationalised industries are subjected to the kinds of financial disciplines that are commonplace in the private sector; and here, with the EFL philosophy, we have been following in the footsteps of the previous Government.
The most substantive point I wish to make at the conclusion of the debate is that I have no doubt, with the noble Lord, Lord Harris, that in the end the most effective discipline to apply to the nationalised industries is the discipline of the market place. Our struggle to exert effective pressure on the nationalised industries has reinforced our conviction that competition, the introduction of market forces and, wherever possible, ownership by the public rather than by the state should be encouraged.
That last point is most important, not because we entertain a doctrinaire, irrational prejudice against publicly owned industry but because we believe that the whole economy—which means the taxpayer and the consumer; I was interested in the remarks of the noble Baroness, Lady Burton, in that regard—will benefit because competition means consumer choice and consumer choice means better service.
I hasten to add that I am talking about the operation of the industries themselves, not the provision by them of specific services to the public. Of course, public services must be maintained; for example, in transport, subsidies may need to continue. There is 226 nothing damaging about subsidies in that sort of instance, where the Government, as it were, on behalf of the public, act as client to the industry, as contractor. But overall, how much better value it would be to be able to pay subsidy to an efficient competitive company, whether or not in the state sector, than to a monolith much less responsive to the needs of the consumer.
Public ownership in itself contains no guarantees that consumers will benefit, and all recent opinion polls I have seen acknowledge that, including the majority of sections of opinion tested loyal to Labour. Again, all the evidence suggests that we are talking of perceived realities rather than doctrine. Your Lordships may be interested to learn of just two examples of contracting out privately of local authority services. The Borough of Malden saved £50,000 on its £187,000 refuse collection budget by contracting out; and Southend saved £400,000 out of its £2.2 million budget for street cleaning, refuse collection and lavatory maintenance. And what large job opportunities there would be for young people or people at the bottom of the earnings ladder if more local authorities would only follow suit.
Through our programme of privatisation, we have reduced the burden of the public sector on the rest of the economy. We have achieved this 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 PSBR. By the end of 1982–83, the programme of special asset sales will have brought in receipts of about £2 billion, and we are expecting at least a further £2½ billion over the next three years. All these receipts directly reduce the public sector borrowing requirement, with all that implies for inflation, taxes, interest rates and employment.
The noble Lord, Lord Beswick, gave the game away by saying how much better it would be if nationalised industry funding did not show up on the PSBR. Indeed, how nice it would be, but so long as there may be a call on public money, that money must be budgeted for. Blaming the Treasury for this fact of life is rather like blaming the postal system for delivering your bills. As for the point made following Lord Beswick's remark by the noble Lord, Lord Ezra, the problem again is that the City and money markets, nationally and internationally, view borrowing by public industries as being on all fours with borrowing in the public sector generally. Again, the answer to that difficulty would seem to be: where possible, privatise the corporations.
§ Lord Ezra
My Lords, I still fail to see what harm would be done so long as public enterprises were limited in the amount of money they could borrow, were controlled as to their investment, which they are, and were then left to borrow that amount as best they could and, before going outside the National Loan Fund, were to advise the Government that they were doing it. That would be one small way in which they could operate more commercially without any conceivable harm to the national economy.
The Earl of Gowrie
They could do just what the noble Lord suggests if they were in the private sector, 227 my Lords. The difficulty is that when they are in the public sector, it is not that they lose the need to borrow money but that the money markets judge the Government as being behind them. Therefore, their borrowing in the long run is not commercial borrowing; it is measured in with state borrowing and totted up with the other kinds of paper which the Government are issuing. That is nothing to do with Tory dogma. That has been the case with successive Governments over the years and no one has been able to change it. If the noble Lord should find himself—as would, I am sure, be desirable in any future Government—as a Treasury Minister, he will run up against that fact of life just as much as previous Ministers have done.
I have an exciting catalogue before me of the Government's achievements in privatisation. They are well known, so I need not go over them. When we have transferred ownership in this way, either to individuals or to institutions investing moneys on behalf of individuals, it seems quite extraordinary to look on that as some kind of stripping of national assets. Those assets have been returned to the nation from corporations which have so far been running them. I see nothing wrong or unpatriotic in that, and it gets over many of the difficulties, not least in financing, which have been mentioned in the debate.
I should say that our drive for efficiency is not restricted to privatisation. The public utilities and so-called natural monopolies cannot be allowed permanently to remain unchallenged. We agree wholeheartedly with the noble Baroness, Lady Burton, on that. It is a vital part of our policy to foster competition in the industries wherever monopoly powers exist. We have already taken steps to encourage competition in telecommunications, in energy supply, in transport and in postal service. We will not hesitate to take further action where this is necessary. Exposing the industries to the full vigour of competitive pressures in the market is vital to the economic resurgence of Britain. We cannot leave industries containing one-tenth of our productive capacity to be feather-bedded either by monopoly powers or by the knowledge that the public purse is always open to them. We are proud of the success that we have had in this area and again it will come as no surprise to noble Lords to know that we intend to press on with renewed vigour in the next Parliament.
So far as financial disciplines are concerned—and these have been raised—differences between the Government and the industries are minimised if the Government set a firm framework within which they must operate and give consistent signals to what is required from industries. External financing limits, financial targets, performance aims and regular external scrutinies, for instance, by the Monopolies and Mergers Commission have all put pressure on industries to put their own house in order. We are introducing clear objectives for each industry and trying to put our own house in order, too, by increasing the business expertise of those who serve in the sponsoring departments.
I believe that the noble Lord, Lord Taylor, was too pessimistic when introducing the Motion. Of course, there have been, and always will be, problems and 228 tensions in the relationship between the Government and the nationalised industries. That is principally, in our judgment, because it is a fundamentally unnatural relationship. That is why we believe that a greater injection of competition and market disciplines including the transfer of ownership wherever possible are the best solutions. In the meantime, there have been a number of evolutionary changes introduced over the last four years which I hope will be of lasting benefit.
If I were to take the opportunity of leaving a last message with your Lordships, it would be that inefficiency is no good whether it is in public or in private industry. In due course, inexorable market forces assert themselves and the cure for these effects is very painful indeed. Other Governments have tried to conceal inefficiences by subsidy or by looking the other way. I believe that we have faced up honestly to the competing requirements and needs of the economy, the consumer, the taxpayer and the industries themselves and have struck a difficult but realistic balance and one appropriate to national and international conditions as we go towards the end of our century.
§ Baroness Burton of Coventry
My Lords, before the noble Earl sits down, may I ask him a question, not because of any self-importance on my part? I wonder whether the noble Earl realises the unfortunate effect it has when it is left to the House and to organisations outside to gather, in regard to the brief prepared for him today, that it had not occurred to the people preparing it that on a matter of Government relations with the nationalised industries questions affecting the consumer might arise. I do not blame the noble Earl, but I wonder if he feels able to ensure that some answers are given to the points which I have raised, so that they can remove the impression which has been given outside.
The Earl of Gowrie
My Lords, two points: in my remarks—in a section which I wrote myself, if I may say so—the needs of the consumer were taken up. If the noble Baroness refers to Hansard tomorrow she will see that. As to the specific point that she puts, the Treasury Box did send me down an answer but I am aware that this is a short debate, time is running out; so, if I may, I will write to the noble Baroness.
§ 5.45 p.m.
§ Lord Taylor of Gryfe
My Lords, I should like to thank all who have participated in this debate this afternoon, and particularly my colleagues, who supported me. I much welcome the balanced statement on behalf of the Labour Front Bench by the noble Lord, Lord Beswick. I am delighted that my argument was strengthened very forcibly by the contribution of the noble Lord, Lord Ezra, drawing on his vast experience in this field. If I may say so, I am a great admirer of the noble Earl, Lord Gowrie. He speaks with wit and wisdom; but I must confess that on this particular occasion he has hardly dealt with the issues which were raised. The issues raised were about the organisation and structure of the Government with the nationalised industries; and there is general agreement that all is not well in this field.
229 The solution of the noble Earl, Lord Gowrie, seems to be to sell them off, to subject them to market forces and all will be well. That is not really facing the problem in a responsible way. That is an exercise in dogma which has no reality; because some of the nationalised industries will remain in the public sector because there are no takers in the market. It will be an interesting exercise to try to sell off British Rail or British Steel or some of the other nationalised industries. What I have sought to do today and what the House has sought to do today is to inquire into whether the structure is right in the relationship between Government and these industries, which must remain, irrespective of dogma. I must say that the noble Earl has not really dealt with that problem.
He says that in the financing of the industries, which is a crucial area, it would not be possible to release these industries into the market because the Government would lose control. But the noble Lord, Lord Ezra, has pointed out that the total borrowings could still be within the agreed strategic total of agreed investment plans and that what these industries are seeking is the right to go into the market, as private industries do, and enjoy some of the sophisticated financial arrangements provided in leasing and other project financing which might help them.
Nor is the noble Earl clear on the challenge when he says that there is nothing wrong with selling off the profitable parts of the public sector because it reduces the PSBR. I invite him to look at the illustration which I gave of British Rail, in which you are selling off sites which have a potential development value with a growth factor feeding into British Rail; and that if you sell off these sites, or if you sell off the profitable parts of British Leyland, it will make a greater claim on the PSBR on behalf of the industries concerned. He is not facing the fact that there is asset stripping on a very large scale by the Government, to the detriment of the continued welfare and operation of the industries for which they have responsibility.
I know that this is a short debate. I should hope that the airing of these difficulties would enable the Government and other Members of this House to look at the serious problem we are trying to highlight. It is unfortunate that the Government's reply was a dogmatic reply—"Sell off!, Sell off!", without facing the real difficulties mentioned in the various contributions made. While I now beg leave to withdraw the Motion for Papers, I should hope that some of the things that were said this afternoon will get serious consideration, because it is a continuing problem.
§ Motion for Papers, by leave, withdrawn.