That is one of the myths it suits the Left to believe. The cyclical investment pattern of the early 1970s was that investment bottomed out in about 1971 and then began to rise steeply. We had the biggest annual increase for many years in 1973–74, but then we went back to the point which investment reached in the early 1970s. [HON. MEMBERS: "In-vestment in what?"] Investment in manufacturing industry. The Department of Industry's figures show the position.
The coming of the oil crisis and the world commodity explosion destroyed industrial confidence—and who can blame industrialists for that? They would not have survived if they had not drawn back at that moment when they had such devastating problems with their cash resources. We can argue about the way in which money flowed between 1970 and 1973, but investment did recover as a direct consequence of the upturn in confidence and profitability in the early 1970s. So the analysis is not as the hon. Member for Gloucestershire, West (Mr. Watkinson) would have us believe.
Backing winners has been the theory behind a range of similar assessments by Government and people outside Government in recent years. It was, for example, the assumption behind the gross over-optimism of industrialised housing. Exactly the same attitude led the electricity generating industry to believe that there would be a massive upturn in the demand for transformers after the National Plan of 1964. Exactly the same concept created a world capacity of 20 million vehicle units in a world market in which there was a demand only for 12 million cars. It is symptomatic of Government that, whereas more prudent and cautious investors are wondering whether there is a future for long-term investment in the automobile industry in the Western world, the Government have decided that it is likely to be the biggest winner of them all and have put £2·8 billion worth of taxpayers' resources behind the success of one company. It is to be seen whether that judgment is right or wrong, but, my word, it is a massive risk to run to assume that complete dominance by one company will produce what the spread of a similar amount of money amongst a range of companies might have been able to produce.
Then we have the Bill to nationalise the aircraft and shipbuilding industries. At any time the possibility of the transfer of control of manufacturing production from the private to the public sector would fill me with grave concern. I see no evidence anywhere in any nationalised industries to give me faith that it is more likely that we can manage our national resources better in public ownership than in private ownership. There is no historical evidence to suggest that the problems of industry will be overcome by public ownership, either in terms of industrial performance, employee relationships or a more coherent industrial strategy. Those are the arguments that I would deploy in theory on any occasion, but at this moment, when the whole nation is supposed to be undergoing a massive economic crisis and we are all expected to respond to the national need, to introduce a Bill of this sort is divisive and wholly wasteful.
Perhaps the most revealing sentence in the Chequers statement was the one that explained that while we might have to sacrifice the economic ends of the Government and while the social improvements which the Labour Party wishes to make may have to be put on one side, the one sacrifice the Government are not prepared to make is their political obsession with public ownership. At whatever cost, their party dogma must be served to the last. We shall be debating the Bill on Second Reading, which, I understand from the Whitehall-leaked rumours, is to be in the not-too-distant future. Therefore, it will be appropriate to wait till that moment.
As we have heard so much from The Sunday Times, I do not believe that the House would wish me to refrain from quoting from The Times of today. [Laughter.] I can understand the laughter from the Under-Secretary of State for Industry. I am not sure what other defence he has got. I should like to quote from the first leader in The Times. [Laughter.] Yes, I know it hurts. The Times says:
The first and perhaps the worst is the Bill to nationalise the aircraft and shipbuilding industries. Almost all the nationalised industries at present are in a state of managerial disorder, grotesque over-manning and huge loss. The shipbuilding industry has serious problems which nationalisation will no doubt manage to make worse, since they are just the sort of problems nationalisation has in fact made worse in other cases. The aircraft industry, though heavily dependent on Government orders, is fairly efficient and fairly profit-
able. It is wicked to propose now to nationalise these two industries when there has been so total a failure to make a success—or avoid the disastrous failures—of those industries which are nationalised already. A Government which pushes ahead with doing so loses its claim to be concerned with the merits of public issues. The whole thing becomes just a political job of the most contemptible kind.
And so say all of us.
I come back to the theme to which the Minister has referred so often, the concept of the winners and the best chance of success. I suggest that the winners with which he ought to be most concerned are those companies which have a proven track record of profitable activity. Those are the companies which, by their energy and judgment, have proved their ability in practice to achieve what the Government claim they want in theory. Unfortunately, these are the companies which, because of their success, become the most heavily taxed. Year after year, the more successful they were the more the present Government took from them. Instead of wondering how to spend the taxes supporting less effective companies, why do not the Government apply the logic of their own arguments and consider ways of giving back to the profitable companies some part of the excessive tax burden which they have imposed? That really would be backing success. Of course, to do so would need compensating reductions in public expenditure, but that is necessary anyway if resources are to be shifted, as the Goverment recognise has to happen. If such a proposal were linked to investment carried out within a tight timetable, not only would it have a job-creating potential but it would advance the investment cycle.
If a genuine attempt is to be made to rekindle confidence in investment the Government will have to grasp the nettles within their own counter-inflationary policy. It is quite pointless for the Secretary of State for Industry to talk about encouraging profits and the Secretary of State for Prices and Consumer Protection to set about the tightening of profits and prices control. It is unacceptable to expect the owners of investment funds to pour them into manufacturing investment if, in real terms, dividend restraint reduces the rate of return on their money every year, unless the money is injected into industry as loan capital where the rates of return are not subject to the same controls. But to encourage loan capital is to debilitate the balance sheets of British industry and its borrowing powers. In all the dialogue about the activities of the National Enterprise Board, which has, perhaps, £1,000 million to spend over five years, it should not be forgotten that even in the depressed markets of today 157 companies have raised £1,000 million this year on the London Stock Exchange.
It is not enough to warn of the dangers of inflation and then fail to recognise the urgency with which the Sandilands Report on inflation accounting should be dealt. It is no use expecting people, from those on the shop floor to the most senior management, to watch their differentials being eroded by supposedly equalising pay controls, which in practice either destroy incentives and encourage caution or on an increasing scale lead to a growing number of people now leaving this country for higher rewards overseas.
The industrial performance of this nation has been inadequate for two decades. However unpalatable it may be for us to acknowledge that, no one outside this nation would question it for a moment. The danger now is that we have fallen, or are rapidly falling, so far behind that, regardless of the vagaries of the investment cycle, we shall always lag behind our more effective competitors.
There are only two ways that offer a solution. The centrally-directed controlled economy provides at least one theory, even if, on any available evidence, it is unlikely to provide economic growth and it is certain to destroy political freedom. The one alternative is to recognise that the capitalist system offers the only tried method of meeting the material wants and needs of society combined with a freer political system. What cannot work is what the present Government seek to create, a system that is a combination of erratic central control and restricted enterprise. That system will grow progressively weaker, fostering increasing resentment, till in the end it is replaced by a society tired of excuse and failure.
After 22 months of lamentable indecision and misjudgment the Government say they want another chance. Rather like St. Paul on the road to Damascus, they have seen the light. The trouble is that there is no evidence that they know from which direction it is coming.