Orders of the Day — Industry

Part of the debate – in the House of Commons at 12:00 am on 20th November 1975.

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Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry 12:00 am, 20th November 1975

This was the argument which the Prime Minister so admirably described as the initial argument of the Luddites. The Luddite was against machinery because he thought it destroyed jobs. That is why he broke it. The fallacy of the hon. Member's analysis, which, I have to concede, is much more honest than that which we get from the Government Front Bench, lies in the fact that in reality whenever inventiveness and ingenuity has been allowed to go forward it has gone on to accrete wealth after the initial use of the first investment. It is not the planned Socialist economies that go on to higher rising standards of living. It is the capitalist economies, because they allow ingenuity and entrepreneurial skills to seek ways of pushing the frontiers forward when a planned economy would be suffocated by bureaucratic control, planning agreements, unionisation—a whole range of components.

The daunting task of honestly educating public opinion to the responsible sacrifice that we shall all have to make is being studiously avoided by the Government. Two conditions are necessary to bring about that process of education. First, there will have to be rigid manpower controls on the level of employment in the public sector. Secondly, the Queen's Speech does not recognise that there will have to be a growing number of jobs available in the private sector and that, to achieve that, measures will have to be taken to stimulate such employment. Therefore, the danger is that the process of increasing job opportunities in the private sector will be left to the upswing in the economy which, as always in the past, will catch us with too little capacity.

The Government will argue that the National Enterprise Board and the planning agreements are designed to stimulate exactly this demand ahead of the normal cyclical upturn, but there is no prospect that the NEB will be able to achieve such stimulation on anything like the scale required. I see no reason why industrialists should take the advice of the NEB to do what they would not do on their own commercial judgment.

Industrialists are much more aware than are the Government of the danger of the British Leyland situation. Against the commercial judgment that should have been applied to the level of profits in that company, the company went on investing. The consequence was that, although it was still profitable, it went straight into the hands of the Government, but it was insufficiently profitable to carry the investment. Prudent management would have been forced to cut back on the level of investment or to have increased profitability. Because British Leyland did neither, it is now in the position with which we are all familiar.

I personally welcome—and I think you will, too, Mr. Speaker—the new focus of attention that the Government have placed on the development of the NEDC machinery. It was created in the early 1960s as a framework for a partnership between all sides of industry. It has never in this country—although it has in other advanced capitalist economies—been given the follow-through that the basic concept merited. But the basic concept never assumed that a dialogue in NEDC was a substitute for profit. The real motivation of investment is profit, and without that no dialogue with anyone will get dynamism in a capitalist economy. Nor did NEDC assume that, if the climate were unfavourable for investment, a dialogue with NEDC would become a substitute. The most that could be achieved was a situation in which the NEDC machinery could act as art overrider gear where the momentum was already well under way. There was never the potential that it could act as an engine for the economy, which is what the Government seem to think it can become.

We now have a new concept to which the Government continually refer—spotting winners, as though this were a skill in which Governments or civil servants were particularly qualified. It is as though, by discussing strategies with industries or with companies, by seeking a consensus about what is likely to happen, that consensus creates its own momentum. That is a dangerous and deluding assumption. If Governments, Ministers and civil servants could spot winners, the making of fortunes would be totally predictable. All one would have to do would be to measure a consensus of given views of industrial confidence at any one time and one would be on a winner. One could be certain that one's judgment would materialise and that the endeavour would succeed.

The Government have failed to recognise where the strength of the private sector lies. The private sector possesses the ability to back a vast range of enterprises and to produce a substantial number of different products, some of which will succeed, some of which will fail. The expertise of the private sector is in the ability to spot quickly enough those that will fail to enable it to draw back from a total commitment to them, and then to back those that have a prospect of success. That is the strength of a commercial system. It is the opposite to the strength of a political system. There is no flexibility within a political system. It is a whole range of imperatives. It is unable to change its mind quickly enough when it has made mistakes and is unable to withdraw the commitments it has made for fear of the political odium and political responsibility that will accrue. That is true of unions and of the Government.