The letters explain the Government's views on the basis for setting the industries' cash limits for 1980–81. It is not customary to publish correspondence between Ministers and nationalised industry chairmen.
I wrote the letter because the Government, in carrying on the practice of their predecessors, are imposing limits on the external financing of the nationalised industries. It was necessary to warn nationalised industries' chairmen that these limits were being set earlier than usual this year in order to give them the maximum opportunity to keep within them.
Does my right hon. Friend agree that the phrase, which the letter apparnetly contained, inviting the chairmen of the nationalised industries to make sure that wage increases did not exceed the growth in, the RPI made nonsense of the whole concept that there might be some State industries, such as the British Gas Corporation, which could justify substantial wage increases, and others, such as British Leyland, the British Steel Corporation and British Shipbuilders, which should not grant any wage increases at all? Whoever put that phrase into the letter ought surely to be moved into a rather less sensitive position as soon as possible.
That would be I, since I wrote the letter. However, without going so far as to publish the letter, I can disclose that it emphasised that the actions of the various nationalised industries in connection with pay would possibly be very different one from the other, especially taking into account the different supply and demand positions, the market situation, the scope for higher productivity and all the other factors that I am sure my hon. Friend would agree to be essential. There was no reference to earnings as such being below any particular level. There was, however, a recognition that labour costs are an important factor in total costs and that if the cash limits were to adhere it would be essential for real factor costs, including labour costs, to trend downwards.
Is my right hon. Friend aware that I asked for a copy of this letter simply because I wanted to know whether the Government were inviting the nationalised industries to peg too much? I wanted to know whether there was an incomes policy, which, although not present in the private sector, is, I believe, necessary in the public sector.
The private sector is constrained by the need of each individual firm to avoid bankruptcy. The nationalised industries are not subject to bankruptcy, and therefore were subjected by my predecessor and the previous Government to what were called "cash limits", which we now call "external finance limits". That is the nearest, although perhaps inadequate, way—but it is the best available—of bringing to bear upon nationalised industries' management something faintly, but only faintly, approaching the constraints that exist in the private sector.
Since the right hon. Gentleman has told us that he has not the slightest intention of interfering in the management of any industry, nationalised or otherwise, does not a letter which, while discussing cash limits by whatever name, points out that wages should be held down—because that is the effect of the letter—mean total interference in that management?
Perhaps we are wrong in this one particular to follow the practice of the previous Government of setting some restraint upon the external financing requirements of the nationalised industries. However, I do not think that it is wrong. As for an attempt to hold down wages, the right hon. Gentleman totally misinterprets what the Government seek to do. What we are interested in on this subject is unit factor costs, including unit labour costs. Earnings are welcome to rise, provided that the company concerned in the private sector can afford it and that the company in the public sector keeps within its external finance requirements.