Industrial Expansion Bill

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

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Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton 12:00 am, 1st February 1968

The speech of the hon. Member for Isle of Ely (Sir H. Legge-Bourke) had one thing in common with those of his hon. Friends. The whole of it lacked any constructive comment, like that of his right hon. Friend the Member for Leeds, North-East (Sir K. Joseph). That right hon. Gentleman's speech will have been notable for only one thing, the irrelevant passage dealing with corruption. It was as disgraceful as the last comments of the hon. Gentleman for Isle of Ely.

The first question that should be asked about the Bill is whether it will help to achieve the objectives set out in Clause 2. But for the Opposition, who have shown themselves, as ever, to be the most doctrinaire party in this country, that is not the first question. Their first question is not what are the objectives of the Bill and whether we can achieve a better state in industry. They ask will it give some of the fruits of expansion to the people of this country through the Government's investing in equities. If so it is wrong. In other words, they are not interested in the real problem.

Presumably, they would not mind so much if the Government were to invest in fixed-interest stock. They apparently agree for example that it is all right, under Clause 8, to lend £24 million to Cunard at 4½ per cent., which seems to me to be equivalent to a subsidy to the company. At present, interest rates are very high, but even assuming lower average interest rates, it is a subsidy of at least 2 to 2½ per cent. per annum. As the purpose of the money for Cunard is to repay a loan which the company took at ½ per cent. above Bank Rate. I cannot see how it fits the criteria of the Bill.

Incidentally, the Chairman of Cunard told us in his annual report last year that the company does not receive any Government subsidy. All I can say is that I wish that I could receive money at 4½ per cent. interest today. Call it a subsidy or not, I shall be very happy to have the use of it. The Opposition are right about Cunard in the commercial sense, in that I would rather invest in it on a secured fixed-interest basis than have a share in the proceeds. But why is there the subsidy, and why have we not been told by the Government the justification for it? It is not a loan from the Government to do a particular job, but is simply to repay another loan. It cannot be any credit to British prestige to have the "Queen Elizabeth 2" sailing the seas of the world and exposing to the world the losses which it seems inevitable it will make.

If, on the other hand, it is a commercial proposition, why on earth are the taxpayers being asked to subsidise Cunard's shareholders and the passengers on these luxury jaunts? I should make it clear that I have no objection to people making those sort of trips. I should be delighted to try one if I had the time—and the money. But there is no valid argument for taxpayers being asked to subsidise these people. I should like to be told by the Government why we are doing it.

Another small matter in the Bill concerns Clause 11, under which we are giving retrospective power to the Minister to produce civil aircraft. Apparently he did not have this power when he bought Beagle. I have no objection to giving him the power to produce civil aircraft, but we are entitled to know what we are getting for the £1 million. For example, I hope that before we reach the Committee stage we shall have an opportunity to see the balance sheet. I tried to get one, but it is a private company and one cannot obtain it. What net assets are we getting for the £1 million? Are we paying anything for goodwill? If so, I wonder why, when I imagine that nobody else wanted the company. It may well be that we are getting a bargain, but perhaps we are getting a dud. Even though the sum concerned is a mere £1 million in the context of the many thousands of millions of pounds spent in a year, we should know what we shall get for that money.

I now turn to the main question of whether the Bill will help to achieve the objectives of Clause 2. I assume that most hon. Members, even the Opposition, would approve of the Bill's objectives, although at times one wonders. I certainly support the Government's objectives and want to see them achieved. I believe that it is right that we should make a direct intervention in industry, and I am sorry that we are not using to better advantage the £700 million that we have committed under the regional employment premium for seven years in this kind of more direct intervention.

I am in favour of the Bill's objectives because of the sort of problems that we all know face the Government and industry. As I said when I intervened in the speech of the right hon. Member for Leeds, North-East, he knows that the major problem is shortage of capacity. Every time we try to increase production we come up against the fundamental problem; there is a flood of imports and a balance of payments crisis, and we must return to deflation. Despite the obvious and inevitable demand for additional capacity, manufacturers have not gone ahead, and we are entitled to ask why they have not produced the extra machine tools and other types of plant and equipment which the country desperately needs, and which we shall need even more as soon as we want to increase production.

There are a number of reasons why industry has not gone ahead. Money is one reason, but not the major one. I entirely agree with Lord Shenfield, Chairman of the Industrial Commercial Finance Corporation, when he said that for normal commercial purposes money is generally available. Money may be one reason why industry has not gone ahead, but it is not the major one. It seems to me that the main reason is the ultra-cautious approach, and the perhaps understandable fear that future demand will not be there for the goods that industry is required to produce. A Minister can and should take a rather longer-term view. He should be able to persuade industry of the need to increase capacity and at this stage, when he is trying to persuade industry to move in a particular direction, the finance is useful, although not fundamental to the exercise.

Those are the reasons why the Government must have power to intervene at selected points, for if, despite the persuasion of the Government, industry will not go ahead, the Government must act. Governments are constantly criticised for the failures of our economy and the failures of industry, when they do not have the power to intervene.

However, despite my general agreement on objectives, I wonder whether the Bill's proposals form the best vehicle to achieve what the Government and I want to see achieved. How would it work in practice? I am very concerned about the conglomeration of boards and companies and Ministries to deal with various aspects of the same problem. Each serves a useful purpose but there is a grave danger that they will get in each other's way. There is the I.R.C., the N.R.D.C., the I.C.F.C., MinTec, the D.E.A., the Board of Trade, merchant banks, finance houses and other institutions.

One must ask whether what we are trying to do could have been done by one of the existing bodies, perhaps by a revised I.R.C. We would not need to revise the I.R.C. very much. The main Clauses of the I.R.C. Act and the Bill—incidentally and interestingly, both Clause 2— have almost identical wording. There would not need to be much change to enable the I.R.C. to do precisely the same task which we are to ask the board and committees to do under the terms of the Bill.

On can conclude only that the I.R.C. did not want to do the job, and I think that that is what has happened. I understand the reason—the I.R.C. feared that it would be using both the stick and the carrot and would therefore ruin the relationship which it had, or thought it had, with industry. It could be argued that the carrot used alone by the I.R.C. since its formation has had some useful results. From the information available to me it is not possible to say just how much the I.R.C. has done specifically to bring about some of the mergers of the last 12 months and the great spate in recent days. I hope that it has had a great deal to do with them, but even if the efforts of the I.R.C. had been substantial, it seems to me, and apparently seems to the Government, for they would not otherwise have brought in the Bill, that there is room for something more to be done to get the expansion which we need.

Presumably, a new body is needed because the I.R.C. did not want to do the job, but is that a reason which should satisfy either the Government or industry? After all, industry will know what this is all about, and it seems therefore that we are creating an additional and unnecessary body. Both the new boards and the I.R.C. will be supervised by two separate Ministers, and at the same time we have another Ministry, the Board of Trade, with B.O.T.A.C. and all the other grants and loans, running quite separately. There are, therefore, three Ministries and three separate organisations all doing a very similar job.

My view is that the fears of the I.R.C. are largely unfounded. Managing directors and company chairmen have many faults; they are certainly not babies. They know the score and certainly know what help the Government are able to give them and what benefit they get from co-operation with Governments. But, of course, in the last resort, Governments must govern. They are held responsible for the faults of industry and, if they do not get co-operation, they have to intervene.

So, while I accept the need for intervention and the idea behind the Bill. I am not satisfied that what it proposes is the best set-up. It is not good enough just to include the N.R.D.C. and the I.R.C. on the Advisory Committees, as Clause 5 proposes. The Board to be set up under the Bill should take over and make subsidiaries of the two other organisations, the I.R.C. and the N.R.D.C., with one Minister, and at the same time it should take over the functions now performed by the Board of Trade which are exactly complementary to those other functions. There would then be one Minister with one group responsible for the whole problem, rather than three Ministries, three Ministers and three different types of Boards.

Ultimately, the success of such a set-up depends on the men and women in the industry at all levels, but the organisation and the men running the sort of board which we set up will also be important. In the debates on the I.R.C. my right hon. Friend who was then the First Secretary said that the I.R.C. would be in a better position than merchant banks to be persistent with industry. I hope that I am not doing the I.R.C. an injustice—and I repeat that I have not seen enough to be able to know how much it has done in the spate of recent mergers—when I say that it is my impression that it has not been persistent enough under the previous management.

Given a more persistent approach, there are men in industry who are willing to respond. If the Bill will help to get the sort of management which I have mentioned, it could provide a vehicle, not to change the structure of industry overnight, as my hon. Friend the Member for Salford, West (Mr. Orme) would like and which is an entirely different matter, but to make a contribution to the vital task of increasing the industrial capacity which we so desperately need.