Industrial Expansion Bill

Part of the debate – in the House of Commons at 12:00 am on 1 February 1968.

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Photo of Mr John Osborn Mr John Osborn , Sheffield, Hallam 12:00, 1 February 1968

Hitherto, in debates on this subject, I have tried not to make political points but to concentrate on the agreement between the parties, but the Minister tonight made little reference to the political background to this Measure. Not only does industry now appear to be involved in politics but its future is subject to political design and interference, and the Bill is no exception. We must accept that the industrialist and the businessman come from a background in which the trader should not take sides during wars, or support one political party against another.

In spite of the observations of the C.B.I., the majority of management in industry accept the Bill as one more Measure in the process of legislation during the last three years which may not be desirable but to which they must adjust. This is one of a number of Measures forced through Parliament to provide our present political masters with more and more domination over our industrial society, regardless of whether it increases the wealth which will be to the benefit of the people. These Measures are leading to massive stagnation.

The Minister spoke lightly of Government intervention, but hon. Members opposite will remember their debates in the early 1960s on Clause Four. In March, 1961, they reached conclusions on the ownership by the State of production, distribution and exchange. The Prime Minister wrote in the New Statesman at the time: Labour's social and economic objectives can be achieved only through an expansion of common ownership substantial enough to give the community power over the commanding heights of the economy. That is a phrase well known to hon. Members opposite. The unresolved question is, what are the commanding heights? In the context of the Plan, the commanding heights which should come into public ownership will clearly be those industries, or undertakings, which require to be publicly owned if the Plan is to be fulfilled. The Prime Minister and the present Secretary of State for Economic Affairs, who was then a director of the Labour Party research department, wrote: We must consider what may well be the most important contribution which public ownership can make to the nations economic revival. We have already called attention to the menacing growth of private monopoly and the consequent concentration of economic power into irresponsible hands. Perhaps the right hon. Gentleman will elaborate on those ideas and how they are being put into practice. He has gained some practical experience of office since then.

It is a fact that a large industrial group has immense powers, and in these cases we must have adequate monopoly legislation, which in fact has come about, but other legislation has accelerated this process, including the Restrictive Trade Practices Act. Our concern tomorrow should not be the power of private groups but the control of the powers of the public sector. The Conservative Government tried to lay down guidelines and to interfere with industry to the absolute minimum.

The latest dictum of recent years is that in "Signposts for the Sixties", which said: To achieve these different purposes, the forms of public ownership will, of course, vary widely. We have seen plenty of this in the last few years. Already we can see it developing in various forms—nationalisation of a whole industry or firm, State participation in industrial companies on a partnership basis, the establishment of State-owned undertakings … The Bill is one more manifestation of political doctrines hammered out by the Socialists in the early 1960s and in that document. We cannot ignore the fact that the implementation of these doctrines has stifled industry and is one reason for devaluation and the cuts which face the nation today.

January was not only a month for unnecessary cuts. In January, the Government committed themselves to more expenditure, much of it in the pursuit of political dogmas, than they cut out, even at the expense of their sacred cows. On the day of the announcement, we considered the £70 million Transport Holding Bill and the next day saw the publication of the Industrial Expansion Bill, which will cost £200 million. This week Supplementary Estimates have amounted to £357 million. My hon Friend the Member for Twickenham (Mr. Gresham Cooke) said of the Estimates: Government expenditure is completely out of control. We are saddled with the most extravagant Government we have ever had. The electorate are beginning to realise this."—[OFFICIAL REPORT, 30th January, 1968; Vol. 757, c. 1099.] Little did he know that, in the newspapers today, we would see the verdict of the National Opinion Polls—an 18 per cent. Conservative majority. Thus, we are debating this important subject against a background of extreme political and economic uncertainty.

The Second issue which concerns me is the Bill's scientific and industrial background. It is essentially a financial Measure, giving the Government powers to invest in industry, for example by buying shares, but its real purpose has been wrapped up in this package of science and technology. On 26th April, 1960, nearly eight years ago, I moved that Mr. Speaker should leave the Chair so that the House could consider a Motion to the effect That this House, aware of the need to encourage well-directed Government investment in industry, welcomes Government support for scientific and technological research. Hon. Members opposite, supporting the Government, welcomed that then and they we-come it now, but in the Second Reading debate on the Industrial Reorganisation Corporation Bill, I reminded hon. Members: In the last few years the Socialist Party has turned completely head over heels in its attitude towards the desirability of rationalisations and mergers."—[OFFICIAL REPORT, 19th October, 1966; Vol. 734, c. 271.] We accept that rationalisation is desirable and we accept these amalgamations, but we are bringing into being yet another agency, and a Government agency, with even greater powers than the I.R.C.

This brings me to the parallel between the, Industrial Reorganisation Corporation and the proposals of the Bill. I asked hon. Members on the Front Bench a number of questions about how much money was being spent and on what projects. We have had reports on the telecommunications industry and its relationship with the Post Office and we have had reports, with very little information, about aluminium smelting. We have been advised that the I.R.C. has committed £18·8 million: nearly £3·2 million to Rootes—as we have already debated that, why was this necessary? —another £15 million for the merger between English Electric and Elliott Automation—we may wonder why the money came from the I.R.C. and not the normal organisations—and the rest to the amalgamation between E.M.I., Elliott Automation and Nuclear Enterprises. This is where the money has gone. Is this worth-whole activity? What is the relationship of this activity to the Bill?

The breakdown is referred to in an article by Michael Shanks in The Times on Monday. Referring to the Bill, he said: My own view all along has been that the Bill will prove in fact to be a comparatively minor affair, capable of doing a number of useful as well as some silly things, but that it would certainly not transform the economy … But the I.R.C. has changed. I do not believe that the Minister of Technology commented on the fact that we changed the managing director, whom we pay £20,000. We lost a very good man in Mr. Ronald Grierson, who wrote of this type of Bill in the Spectator of 10th November: The idea of a statutory instrument to enable government to meddle in the affairs of individual companies has always had a fairly strong appeal to left-wing theorists. However, the main impulse behind the new measure probably comes from another and more recently conceived economic doctrine: that the way out of industrial stagnation is not by general reflation but by selective intervention in support of specific industries and chosen companies.… It is here that the question of how to use the taxpayer's money arises. The state could take the view, as in the United States, that provision of public funds for selected industries (computers, aircraft, etc.) is a justified charge to the public purse … Today's debate is about the very issues which Mr. Grierson raised so ably in this respect.

We must consider, particularly this week, the problems which the take-over boom is introducing. It is interesting to note, that, writing in the Financial Times recently, Mr. Christopher Tugendhat said: The Government's active participation in the consolidation of industry into large units is bound to create problems. It is likely to be most acute in those cases where there is only one British company involved in a particular industry. Later he Wrote: In the circumstances, the Government will take on a position almost akin to that of a large shareholder, even when it does not have any equity, simply by virtue of its ability to alter the level of tariffs. Many issues are raised by these important matters, and the third aspect I will concentrate on, is that of the principles involved. We are now trying to discuss, in the House and elsewhere, the relationship between the Government and industry—a relationship which is bound to become more and more important. This very subject has been a theme which has received my active consideration for many years, even before I came to the House. Assuming that a Conservative Government will shortly be in power—indeed, one need not assume that; it is inevitable—one must consider what will happen if that Government wishes to decentralise and devolve control. Conservatives have supported the concept of planning. After all, if planning is essential within a single company, it is essential within industry generally.

Three or four years ago my hon. Friends and I supported the idea of setting up an agency, in which Government Departments would be represented, to examine the capacity requirements of an industry and to ensure that, when new capacity was required, it could be developed. We thus supported the concept of the little "Neddys". After the last debate, it was pointed out to me that a number of those engaged in the work of the little "Neddys" regretted that they might be wasting their time. I hope that now their time is not being wasted and that it is proving more productive.

If a project is worth while—whether it is rationalisation within existing industries or the creation of new ones—it is desirable that it should be financed by the market; by the traditional institutions and particularly by international money. The nationalisation of the steel industry has, I am convinced, deprived that industry of vital international money at a time when we must cut import expenditure. The E.E.C. and E.C.S.C. have always been able to draw on international money for rationalisation purposes.

Under the type of legislation being introduced by the present Labour Gov- ernment, we are obliged to use Government money, which is national money, obtained from the taxpayer.

One of our greatest tragedies is that money available from industry for investment has been curtailed; the amount of industrial money going into investment has been halved in recent years. If risk, courage, ingenuity and energy by industry were better rewarded, we would have greater production and more development and research. If industrial money of this type were easier to come by, industry would spend more of its own money on this type of investment. We have reached the point when British industry is being deprived of the wherewithal to finance new ventures and to take advantage of some of the opportunities which are available in the world.

I have met many people who are faced with solving this problem and I have been associated with the problem myself. The trouble is that we are in an industrial and economic environment in which industry must come cap in one hand and begging bowl in the other. This is why the present element of stagnation exists and why there will not be as much hostility to the concept of Government money as there otherwise might be. The honey pot, as Mr. Grierson said, is bound to attract people if money is available. The Government must provide the climate and environment in which industry can create its own opportunities with its own money.

Certainly the Government can help to create these opportunities, but we object to the wide executive powers which the Government are taking—spending powers which are not subject to the scrutiny of the market, spending powers which are directed by civil servants—excellent, able people, but in many cases without the sort of industrial experience that is necessary—spending powers that may result in taxpayers' money being used to help too many lame ducks and spending powers which, while being subject to Parliamentary control, are too great because we in Parliament do not have the mechanism to provide that scrutiny which is so essential.

It would be interesting, as the fifth point I was to raise, to know how the Bill was conceived. Hon. Gentlemen opposite have spoken, particularly when we have been debating steel and the about the I.R.I.—the Istituto Per La Ricostruzione Industriale—perhaps the most well written about industrial organisation in Europe. The history of as, no doubt, appealed to hon. Gentlemen opposite as a basis for State intervention in industry at this time.

I recently took part in a visit to Italy and, on that occasion, I visited the I.R.I. have a copy of I.R.I.'s Annual Report with me and I gather, from the documents I see in the hands of hon. Gentlemen opposite, that some of them also have this Report. I suggest that the I.R.I. has been the originator of this Bill. It should be remembered, however, that I.R.I. grew out of a Fascist régime and out of debilitation after the last war. Its articles allow for an endowment fund, and this provides 12 per cent. of its investment. By this machinery, there is control by the Government, yet industrial activity is subject to normal criteria which industry has to meet. Indeed, only 12 per cent. of its money comes from its endowment fund. When I was in Italy and saw I.R.I. I noticed an article in the Economist of 7th October, 1967, which stated: The formula has found its admirers abroad, not least among left-wing British M.Ps., pressing the Government to intervene in private industry through the creation of a State holding company". That article was not welcomed by the heads of I.R.I., as it pointed out: By British standards, I.R.I. is bafflingly secretive about its targets and its real performance is bafflingly obscure". I suggest that I.R.I. is not a model which justifies this Bill but that it is, in fact, a model of what might be done in an effort to provide a solution to the tangle which is growing among our already nationalised industries.

In another place yesterday Lord Beeching called for an end to nationalised industries being used as political shuttlecocks between the Conservative and Labour Parties. He complained that the nationalised industries would be lucky if they did not find themselves unable to discharge all their responsibilities within the resulting straitjacket.

The problem of aluminium smelting has been greatly discussed. It should be, because this is the first example of Government intervention, and I agree that it is desirable in this case. However, today it is being handled by I.R.C. Tomorrow, there may be powers in this Measure by which it will be handled. I was suspicious when the Prime Minister had to provide a gimmick at the last Scarborough conference to keep the delegates optimistic about the future. The right hon. Gentleman said: But let me tell you this morning of a proposal for the establishment of new science-based industries in development areas". I call that his Scarborough No. 2 speech. In October I wondered to what extent the Prime Minister in particular and Socialism in general were jumping on the scientific bandwagon. I wondered if that was being done merely to placate a large number of discontented rebels at the annual party conference. To what extent was the Prime Minister jumping the gun and assuming that cheap electricity was here before it had actually arrived? After all, the fast breeder reactor is 10 or 15 years off. Do we yet know at what price it will generate electricity?

On the other hand, bearing in mind that cheaper energy and fuel prices will be with us, the Government cannot be condemned for planning how to introduce energy consuming industries, to meet the time when cheaper energy is available. Certainly the Government have a rôle to play, but in my view it is a question of how little, rather than how big, that rôle can be. On October 4th there was an enormous Press release—put out by the Ministry, no doubt; it was also in the OFFICIAL REPORT in answer to a Written Question I tabled this week—appeared on this subject. I will not read it, although in it the right hon. Gentleman referred to the financing of electricity generation. There was considerable comment in the national Press about the difficulties involved and the fact that not only the Minister of Technology, but the Minister of Power and also the President of the Board of Trade would be faced with making the final decision. There has been the undignified scuffle between the Chairmen of the Steel Corporation and the National Coal Board about the price of coal for industry.

During the debate on the Coal Industry Bill, the sum of £45 million was mentioned for subsidising sales to the Gas Council and the Central Electricity Generating Board. When we discussed the Supplementary Estimates early yesterday morning this matter was also raised, during debates on the Second Reading of the Consolidated Fund Bill. In the latter debate I summarised a number of Parliamentary Questions which I had tabled to the Minister of Power and the Answers I have received.

I pointed out certain outstanding facts which had to be borne in mind. For example, the cost of electricity generation in Norway, Canada and Switzerland is 0·25d. per unit. Press reports a month ago indicated that the cost of 0·37d. per unit might be acceptable to the Rio Tinto Zinc Company. The cost of electricity to area boards is 1·28d. per unit and the average cost to consumers—I am referring to the final cost—is 1·78d. per unit. In other words, the cost is six to eight times what it will be to existing aluminium smelting units. How can this vast differential be bridged by the Government without subsidisation?

My hon. Friend the Member for Louth (Sir C. Osborne) was quick off the mark in raising this matter. He asked a Question about subsidies on 14th November and received an assurance from the Prime Minister that there would be no subvention or increased cost of electricity to other users. Our European friends, as well as our friends in E.F.T.A., will want to know how this differential is to be bridged.

Without elaborating on this Government saga of interventionism, I must point out that if an aluminium smelting industry, which is commercially viable, can be established in this country and can give an adequate return on capital—and can create employment, save on our balance of payments and, even allowing for a transitional phase, can be viable—then it is to be welcomed. My inquiries indicate that the Rio Tinto Zinc Company, with its wide international experience, was willing to finance its own project with international money and buy its own power station. However, the whole basis of our nationalisation legislation would make that impossible. On what basis was the Rio Tinto Zinc Company not allowed to establish its own nuclear power station, while, according to Press reports, Alcan is apparently being allowed to set up its own coal-fired power station?

Why was the I.R.C. invited to join the act? Why should the Government act as assessor and start a Dutch auction? Will they offer to provide money for what might turn out to be a viable project, irrespective of Government intervention? If not, and if it will not be a viable project, will money be committed for this purpose from this Bill?

The ramifications of the first case of Government intervention into a science-based activity are an ill omen for the future. Why should the C.E.G.B. have a monopoly of power generation and why cannot it hire its transmission facilities? If an existing industry can obtain preferential terms for electricity on realistic industrial tariff rates, why should not this be made available to other industries? This is an example of the sort of selectivity about which my hon. Friends and I have been speaking.

In Yorkshire, where I live, we have a new coal-fired thermal power station alongside cheap coal. This is not a development area, although there is rising unemployment. Recently I have read a report issued by the Sheffield Shipbuilding and Engineering Federation—it was providing evidence for the Hunt Report on grey areas—stating that no major industry had been brought into South Yorkshire in recent years. In this area we have a conventional power station, but, according to an Answer which I received recently from the Minister of Power, it is possible to generate electricity at the same price as a nuclear power station.

These are the ramifications and these are the problems into which the Government have moved. In cases of this type how should the Government intervene? How would a Conservative Government intervene? Major new industries involve Board of Trade industrial certificates, town and country planning and provisions about housing and labour, all of which are the responsibility of Government. Unfortunately, the Prime Minister at Scarborough made a political issue out of a decision which could have been dealt with with the minimum of publicity rather than the maximum.

If the Industrial Expansion Bill provides opportunities for unnecessary meddling by Government, it should be rejected outright. If it becomes law a future Conservative Government should repeal it forthwith. I welcome the statement which was made by my right hon. Friend the Shadow Minister.