Public Sector Industries

– in the House of Commons at 3:59 pm on 21 July 1980.

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Photo of Dr David Owen Dr David Owen , Plymouth, Devonport 3:59, 21 July 1980

Dr. David Owen (Plymouth, Devon-port): I beg to move, That this House, recognising the major contribution that publicly owned industries and firms have made and can make to the development of Britain's economic strength and to the retention and expansion of employment, deplores the Government's damaging policies which seek to fetter and reduce public sector activity to the disadvantage of the British people.

This debate is taking place on the eve of an announcement which is expected tomorrow and which will demonstrate the extent to which the Government's policies have already led to the most serious and damaging unemployment figures in this country's history since the 1920s and 1930s. It is, perhaps, one of the most serious situations facing our industry that we have ever debated in this House.

In the previous two debates we dealt in detail with the Government's overall financial mismanagement and with policies for alleviating unemployment. In this debate we wish to concentrate predominantly on the public sector. As everyone knows, the public sector and the private sector interweave. The figures for the second quarter of this year show the highest number of liquidations ever listed in the United Kingdom. The number of bankruptcies grows every day. There is not one hon. Member who is not faced in his or her constituency with an announcement every day about lay-offs, short-time working or closures.

The profitability margin of manufacturing in commercial companies is thought to be down to 2 per cent. this year. The percentage increase in fixed investments in the United Kingdom was 2-8 per cent. down last year, against a rise of 31 per cent. in France and 8-3 per cent. in West Germany. Despite a world economic recession, the United Kingdom is facing not simply a recession but a deepening slump. It is part of the charge against this Government that the situation is far worse in the United Kingdom than in any other Western industrialised country.

The Treasury's index, compiled by accounting for unit labour costs, plus changes in currency levels, shows that the competitive position of British goods has declined by almost 30 per cent. over just one year. Export prices are rising quickly. Manufacturing goods are being priced out of the market. It is the contention of the Opposition that the public sector, properly managed, with a full-hearted commitment from the Government, can make a positive contribution to helping with employment and to easing some of the inflationary pressures that are building up on our industry.

The Government have set out their figures for cutting public spending over the next few years. Those figures critically depend on an extraordinary turn-round in the financial position of the nationalised industries. Such a turn-round has never been achieved before in this country. It is a tall order to expect such a turn-round when the nationalised industries have to face the same problems as private industry—high interest rates, very high if they are borrowing from the National Loan Fund, and high exchange rates—and, with inflation having been doubled within a year, all those extra costs are added to their bills. Most nationalised industries are already operating under extremely tight cash limits. It is a tall order in any circumstances and one which few independent commentators believe will be possible to achieve. Certainly, it is impossible to achieve that turn-round without the most savage increases in prices, further fuelling of inflation and a dramatic cut in investment and in services, all creating further unemployment.

In their expenditure projections, the Government do not give forecasts for individual nationalised industries after 1980-81 but give simply the aggregates for all nationalised industries. The House should be given some idea of the size of the turn-round that is expected. In 1979-80 the Government lent the nationalised industries £ 1,900 million. By 1983-84 they expect £ 553 million in repayments. In 1979-80 the total external financing of the nationalised industries was £ 2,300 million. By 1983-84 they are expected to be contributing £ 400 million to national revenues—a total turn-round of £ 2,700 million. That is dependent on the Government's forecast of a massive upsurge in nationalised industries' profits overall over the next two years to finance that turn-round from their own internal resources. Like so many things that the Government claim, that is no doubt arithmetically achievable, but at what price? In our judgment, it will be achieved at an unacceptable price.

It is not only the Opposition who pour scorn on the Government's strategies. A few weeks ago The Economist said that the nationalised industries feel lost in a confusing maze of policy contradictions… There is more than a touch of soap opera about the continuing story of this Conservative Government and its nationalised industries.

Soap opera indeed, but this is not entertainment. This is a tragedy, a social and human tragedy, with unemployment on a massive scale. In British Steel we have already seen the prospect of over 50,000 jobs being lost. In shipbuilding about 10,000 jobs will be lost. Soon unemployment will be felt in many more of the nationalised industries and the private sector industries that are dependent on Government support.

What is more, standards of service will fall. We have now had another miserable statement from the Secretary of State for Industry on monopoly in the telecommunications industry, coupled with a statement on monopoly in the Post Office. Does the right hon. Gentleman have any understanding of what public service is about? We have virtually reached the stage when to talk about public services is to indulge in an attack on what public service is all about. It is a fundamental part of the country's economic health that there should be a mixed economy. The monopoly that the Government attack so frequently is a feature of most other Western mixed economies, such as those of France and West Germany. It is a striking feature that, in practically all the industries that we are likely to discuss in this debate, our main Western industrialised competitors do not have an attitude of spite to the public sector. They support it, they invest in it and, when they feel it is strategically necessary, they subsidise it.

The issue that is now before the House is whether Conservative Members even believe in a mixed economy. They seem to be able to extol only the merits of the private sector, and they are now claiming that the private sector is laid out on its back. Having witnessed what the Government have done to the steel industry, we fear the same sequence of events in many other industries. In retrospect, the steel industry has been a tragic example of mishandling and incompetence. No one can look back over the events of the last year and believe that what was conducted in the name of the Government was anything other than a shambles of industrial policy.

Sir Monty Finniston described the rundown of the steel industry as "ridiculous". Criticising those who said that capacity must be slashed because of the world recession, he said: Where is this recession? Last year the world produced 800 million tonnes of steel, the largest amount in the history of mankind. The Japanese produce 120 million tonnes a year. Are they cutting back capacity to 80 million tonnes? They export 40 million tonnes against our total planned capacity of 15 million tonnes.

Now there is some question whether we shall be able to hold to 15 million tonnes. Sir Monty Finniston put it down to marketing. [Interruption.] If Conservative Members think that this is funny, they should go to some of the areas facing unemployment in the steel industry. It is a great shame that the Secretary of State for Wales cannot be present. He is responsible for the present situation in South Wales, where not only the steel industry but the mining industry is facing a rundown. I cannot believe that any hon. Member, whatever his view on this debate, can find this a laughing matter.

It is because we have seen the application of cash limits administered with doctrinal spite on the steel industry that we fear the cash limits that have been imposed on the coal mining industry, which we shall debate later this week. It is because we believe that the Government are not prepared to support the new technologies—the microelectronics industry has been a major example —that we are fearful of the consequences of the Secretary of State's statement.

A month ago it appeared that the Secretary of State was at last admitting that some industrial aid schemes were necessary when he told NEDO that some of them probably bring higher productivity and newer technology than would have been achieved had the subsidy been left in the citizen's pocket and handbag.

We saw the first U-turn of the Government's industrial policy, or at least the glimmerings of it, in the statement over British Steel. Even then, the Secretary of State could not admit that it was a U-turn. His new definition is that It is a delay in achievement. It is not the giving up of an objective.

The whole House and most of industry now know that the Secretary of State will have to find more money for British Steel.

Photo of Mr Roy Hughes Mr Roy Hughes , Newport (Monmouthshire/Gwent)

Does not my right hon. Friend agree that it is particularly reprehensible that during this debate, which is so much about the steel industry, no Welsh Office Minister is present on the Treasury Bench? Is not that an indication of the way in which Wales is being treated?

Photo of Dr David Owen Dr David Owen , Plymouth, Devonport

I fear that it is, and I fear that Wales is suffering and is likely to suffer even more deeply over the next two or three years.

Photo of Mr Kenneth Carlisle Mr Kenneth Carlisle , Lincoln

When the right hon. Gentleman refers to our parsimony towards the steel industry, is he not prepared to admit that over the past few years Governments have already given £ 3,000 million to the steel industry and that in the coming year the Government are pledged to give nearly £ 500 million? Surely that is generosity.

Photo of Dr David Owen Dr David Owen , Plymouth, Devonport

The Government faced steel industry unions which had a long history of moderation in pay claims. The Government made a ludicrous offer of 2 per cent. They ended up paying 16 per cent. The financial losses arising from that strike have been absolutely savage. No one with any experience of industrial relations does not believe that that strike was avoidable.

The question that we have to face now concerns telecommunications and attitudes to the Post Office. The telecommunications industry in the United Kingdom is massive. It constitutes the third largest telecommunications network in the world. The Secretary of State for Industry, who, having made a statement, could not even bother to stay to listen to the debate, did not answer one question about the cash limit that is currently being applied to the Post Office. One of the questions that needs to be answered in the debate is what is happening now to the Post Office. It is unable to live this year within its cash limit and has asked for an easing of £ 150 million in order to carry out the investment to which my right hon. Friend the Member for Deptford (Mr. Silkin) so rightly drew the attention of the Secretary of State for Industry. We believe that investment programme to be vital.

We further believe that the Government must take a leaf out of the books of our main industrial competitors. France is currently investing annually some £ 3 billion in telecommunications—twice the United Kingdom's investment. The Japanese Government's support for their microelectronics industry is about £ 500 million. The Japanese have switched from being almost totally reliant on the United States to being a major exporter to the United States. The Secretary of State for Industry made great play of the fact that the United States was a private enterprise economy. He put its success down to the freedom given to the entrepreneurs. The United States has been making a massive outlay on electronics—£ 10 billion in 1979 alone. In West Germany the components industry was being supported by £ 100 million in 1978, with £ 150 million to £ 200 million being provided for the two-year chip support programme. In addition, £ 300 million is being put into research and development, matching Government grants.

The Italian Government have pumped into this area more than £ 600 million over a four-year period—including £ 80 million on chips and £ 70 million on rationalisation. With these vast figures, our industrial competitors recognise the significance of the industry. Where do we stand with the British Government? We have been waiting for over seven months for a decision from the Secretary of State for Industry on whether he can find £ 25 million as a second tranche to invest in Initios. Even if one believes that he ought not to invest in Inmos, surely even Conservative Members agree that a decision should have been taken long since.

The Financial Times commented of the Government: It is unfortunate that they have taken so long to make up their minds; a decision appeared to be imminent towards the end of last year. The uncertainty has been unfair to the founders of Inmos and its employees.We read every day in our newspapers about the "indecisiveness" and "agony" of the Secretary of State for Industry. He appears to regard himself, they say, as "the guardian of the Government's non-interventionist conscience. As he argues with his conscience, we are seeing the effects of his indecisiveness as the unemployment queue lengthens. His decision on steel is seen widely outside as making his policy of forcing businesses to live in the market with the consequences of their actions look somewhat limp.

There is now major concern that because of a fear that there would be jibes if he did not continue with his doctrinal policy, the next problem we shall see arising is with British Shipbuilders. At any moment we are expecting a decision from the Government to take the three major naval shipyards—Yarrow, Vosper Thornycroft and Vickers—out of British Shipbuilders. If that were to be done it would have a devastating effect. Once again, it is not just the critics from the Labour Benches who are making themselves heard. The Financial Times says of the right hon. Gentleman: One fear is that he may attempt to rebuild credibility… by calling for further major cuts in the state-owned shipbuilding industry. Senior Industry Department civil servants seem to be preparing for such an eventuality even though it would further cut demand for the products of the British Steel Corporation. Last Sunday, The Sunday Times said: Within Whiehall the yo-yo attitude towards selling off chunks of British Shipbuilders suggests some of the shrewder Ministerial spirits have grasped that shipbuilding privatisation could involve a short stroll down a rather unpleasant plank. The only trouble with that is that it will not be the Secretary of State for Industry who strolls down the plank. That stroll will be taken by thousands of people whose jobs in British Shipbuilders will be put at risk.

We fear the Government's doctrinal dogmatic attitude to anything that is in the public sector. It is not as though British Shipbuilders has not been able to point since vesting day to a proud record of achievement. A major reorganisation of wage bargaining has occurred, reducing more than 180 procedures to a single bargain. Industrial disputes have been massively reduced with days lost down by a factor of 10. A 7 per cent. self-financing productivity deal has been achieved. These improvements in productivity and manning levels are having their effects in other parts of the industry.

The spite against the industry also attaches to the shipbuilding sector that is within the Government's control. They are cutting down the dockyards. They have just taken out 630 jobs in the Devonport dockyard. That is the equivalent in terms of male employment of the three modern factories that recently were eventually persuaded to come to the West Country. Every person is seeing the effects of all this.

It is not just the nationalised industries that are being hit. As Sir Michael Edwardes said of British Leyland in May, We employ 155,000 people with another 455,000 dependent on us in suppliers and support industries. He went on to explain that there were around 600,000 families—2 million people—who watch BL with anxiety". What do they see? The Secretary of State appears on television saying that he would find it "very, very hard" to persuade Ministers to provide extra funds. Has anyone on the Conservative Benches any idea of the consequences and the knock-on effects that would be felt if British Leyland were to be placed in the situation of no longer continuing to operate? Most of us would accept that important efforts are being made to improve productivity and efficiency in British Leyland, but it is struggling against a wholly unrealistic exchange rate. Sir Michael Edwardes said: The United Kingdom is now the most profitable market in which to sell vehicles —that is, if one is making one's products anywhere else and shipping them here.

BL is battling with high interest charges, and to put it within rigid cash limits, to drive it out of business, would be an act of savagery which surely even this Government could not contemplate.

Then we come to the Secretary of State for Energy and his responsibilities, which are of crucial importance for industry itself. Once again, we see a doctrinal attitude—for example, on British Gas. The Government have told British Gas that they want to see industrial gas prices kept in line with gas oil. That means that industrial gas prices will increase very substantially over the next year. Some industries will face a contract price increase of about 60 per cent.

Photo of Mr David Howell Mr David Howell , Guildford

The right hon. Member has made one misstatement of fact which I would not like him to keep in his mind for longer than necessary. It was the last Government of whom he was a member that endorsed the policy of keeping British Gas's industrial gas prices in line with gas oil. This Government have recognised that that policy should have to continue, but we have urged that it should not be pursued with precision in the light of the very sharp rises in oil prices. In fact, gas prices to industry today are running, even on renewed contracts, at 25 per cent. below gas oil prices. Therefore, the right hon. Member should turn to those who were his colleagues in the previous Labour Government if he intends to talk that sort of language.

Photo of Dr David Owen Dr David Owen , Plymouth, Devonport

I have never denied that that was a policy that was fixed when the increases in gas oil were very much below their present level. They are now running at a massive cost, including VAT, of £ 173 a tonne—the equivalent of 40p a therm. I welcome the degree of flexibility that the Secretary of State now seems to be showing. That is new, and we shall wish to pursue that opening. Many people on both sides of the House now feel that it is time that Britain, which is energy-rich, was showing some way of trying to ease the industries that have very high energy costs in their unit costs and trying to show some selective discrimination, as is done in many EEC countries.

If one talks to many of our big international companies, one finds that they will say that for gas they are priced much higher in this country than are companies in other countries. The European Council of Chemical Manufacturers' Federation has just conducted a survey which shows that in April this year United Kingdom chemical companies were paying between 67 per cent. and 112 per cent. more than their West German competitors. If the Secretary of State is telling British Gas that it should price at a lower contract price, no one will be happier than British Gas itself. However, it finds it a little difficult to accept that on the one hand the Secretary of State puts it in a strait-jacket, saying that it must price at market or realistic prices, and on the other hand the Government encourage the chemical industry to complain about the gas monopoly.

This inability to co-operate with the nationalised industries has been shown by the same Secretary of State who told the Central Electricity Generating Board to stock in coal for last winter because he was expecting a miners' strike. When the bill of £ 300 million was presented—a bill that overshot the board's cash limits—the Secretary of State refused to support the CEGB or back it in any way at all. In fact, he referred it to the Monopolies and Mergers Commission. That is the way that one gets rewarded if one sticks with Government policies.

We saw the same sort of thing happen to poor old Sir Charles Villiers. We may not have agreed with every policy that he had, but at least he stuck assiduously to the policies of the Secretary of State for Industry. Then, in his last few days, he was kicked in the teeth for all that he had done in the past year.

If the Secretary of State for Energy were now looking at energy pricing, we would be delighted that that had come about. Last Sunday The Sunday Times said: The economic pricing of oil and gas in this country, much favoured by the Government, is a deceptive piece of jargon. Its effect is merely to bring our energy prices in line with a going rate set by the most powerful and irresponsible cartel of recent history. There is a very strong case for shielding some industries from the effects of energy pricing. That goes for electricity. We have already seen British Steel, in Sheffield, unable to meet the electricity charges of £ 40 million. It also goes for coal. If coal is to expand into the industrial market its prices must be held, and we hope that the Secretary of State will accept that British Steel must never again be put in the situation in which it has to buy coking coal from abroad purely and simply because of the effects of cash limits running completely against the £ 50 million investment that only a few years before had been agreed with the NCB and British Steel in order to expand the coking industry. It is this type of economic madhouse that brings this country—not just the public sector and the Government—into discredit.

We are now told that British Rail must sell off its assets. One of the most striking features of the Conservative Government of 1970-74 was the way in which they brought asset stripping into private industry. When we look back on the asset stripping of private industry during that period, we must widely acknowledge that that was one of the most debilitating influences on British industry. It led to a synthetic property boom and to money being poured into property and speculation in the City, and to a grave weakening of our industrial strength. I doubt whether anyone would want to live through that period again.

What have we got from this Government? We now have asset stripping in the public sector. There is not a single public sector activity in which we do not hear of some form of asset stripping. No doubt the Minister for Transport, who is to reply to the debate, will seek to justify some of the arrangements that he has arrived at with British Rail. Of course, British Rail has had to agree, but it is a shotgun marriage. It is living under extremely tight cash limits, and Sir Peter Parker has already warned of a possible £ 50 million overshoot. However, the Minister must not argue the case as being in the interests of free enterprise or competition. Who is likely to purchase these assets, or shares in these assets? Trafalgar House is tipped to bid for Sealink. Trust Houses Forte and Grand Metropolitan are tipped to bid for the hotels. There is hardly likely to be an increase in competition as a result. Profitable assets, which could have eased British Rail's financial position over a period of years, will be sold off, and the problem that—

Photo of Dr David Owen Dr David Owen , Plymouth, Devonport

No, I shall not give way. The hon. Member can make his speech in his own inimitable way.

We object to the doctrinal attitude that all assets that happen to be publicly owned must be sold. We believe that if this country is to continue a polarised debate between the public and private sectors, its economic health will be gravely weakened.

The Secretary of State for Energy would carry a great deal more conviction with his new-found espousal of monetarism if we did not all know that at one stage he never believed in it at all. One of the most remarkable statements that he made was when he was Minister of State for Energy under a different Administration. At that time he was toeing the line of his then Prime Minister, and in an eloquent statement in "Crossbow" in 1974 he said: In just the same way it was technically impossible for there to be cost inflation or for wages to be unaffected if unemployment rose or for demand not to be curbed if the red liquid in the tube called 'money supply' began to fall. Happy days. How simple it all seemed. And what ludicrous nonsense it now all appears—except in one or two quaint comers of the political and journalistic world where such familiar objects from the economic nursery are still hugged lovingly. For, of course, while the coloured liquids flow dutifully, real life has maddening imperfections. It just is not like that. Do these aggregates really exist? Does anyone truly know what the 'money supply' is? We are human beings living in human institutions and not pink liquids in glass tubes. I should be only too delighted to hear an explanation from the Secretary of State. But the right hon. Gentleman does not qualify for any of the classifications that are around at present in his own Government. He is not a wet, because he nominally believes in monetarism. He is not a monetarist, because clearly he has only just been converted, but at least he has the zeal of the convert. I am afraid that history will say of the right hon. Gentleman that he is a drip.

However, there is a much more serious jibe to be made about this Government. They have in their power the sensible handling of the public sector without doctrine or dogma. They have the power to invest, to create new jobs and hold them. They have the power, where it is sensible, to intervene in order to hold down savage increases in prices and to have an effect on the inflation that is being pumped into the system. Where it is sensible, it is reasonable for a Conservative Government, with different views from us, to rein back some parts of the public sector.

Our charge is that the Government's reigning back of the private sector owes nothing to logic and everything to prejudice. It owes nothing to a sensitive handling of human affairs but is contributing day by day to the economic disarray of Britain. If the Government were to use their responsibilities in the public sector with more intelligence and sensitivity, they could at least alleviate some of the worst hardship that is about to fall on the British people.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Mr. Speaker has asked me to say that he has selected the amendment in the name of the Prime Minister.

Photo of Mr David Howell Mr David Howell , Guildford 4:30, 21 July 1980

I beg to move, in line 1, to leave out from "That" to the end of the Question and to add instead thereof: 'this House welcomes the Government's policies of restoring a proper balance between the state sector and private enterprise, and encouraging greater efficiency and a more competitive climate within such industries, to the lasting advantage of the British economy and the British public.'. By any standards, the motion moved by the right hon. Member for Plymouth, Devonport (Dr. Owen) is a bizarre one for the Labour Party to put forward at such a delicate stage in its affairs and at such a fluid stage in its so-called policies on the public sector. The truth is that the motion and a great deal of what the right hon. Gentleman had to say are in the high Bourbon tradition—from a party that has learnt nothing and forgotten nothing about the pitfalls of excessive State expansion.

Behind the motion lies the amazingly durable myth that the secret of jobs and prosperity lies in more and more nationalisation. We are being told that again today. There is nothing in post-war experience, and nothing that any levelheaded observer could find, to support that view. There is everything to suggest that, while we all want to see good and efficient public services, it is mistakes in the handling of the public sector and its over-extension which have done the most severe mischief to our economy, to jobs and to the prosperity of Britain. I shall come later to some of the ways in which we are tackling the enormous problems of the nationalised sector as they confront us today.

First, I wish to ask the right hon. Gentleman whether he fully realises what he is doing when he puts his support and his eloquence behind such a motion. Is it really possible that his sort of Labour Party—whatever the pottier ideas on the Benches behind him—wants to wish further nationalisation on Britain after all that has occurred? Are he and the right hon. Member for Stepney and Poplar (Mr. Shore), who is to reply, wholly oblivious to the warnings of their leaders in the 1950s and 1960s who wrote about the dangers of insisting on more and more public ownership and nationalisation? Does the right hon. Gentleman remember the late Tony Cros-land, who warned of the dangers of nationalised leviathans? Does he recall the struggles in his party to get rid of all that nonsense? Yet here we are again today with the same arguments being peddled. On, off, and now on again, the Labour Party has peddled those doctrines not for five but for 35 years, right up to the pathetic fiascos of the last Government for which we have never received a full account, such as British Tanners, another brilliant coup by the National Enterprise Board. We have seen the Labour Party learn and relearn again and again at the nation's expense. Now the doctrine has reached its apogee of absurdity with the recently published draft manifesto, with its proposals for massive new State ownership. The idea is not only alive and well; it is thriving more strongly than ever.

The right hon. Gentleman makes an appeal to the anti-doctrinaire. But when the whole mood of our times is away from dinosaur collectivism, when people are searching for a chance to live life on a human scale, how can those on the Front Bench of the Labour Opposition—whatever may happen on the Back Benches—remain hooked on that sort of philosophy? Nor is it as if the Labour case can plead the excuse that I have heard the former Prime Minister, the right hon. Member for Cardiff, South-East (Mr. Callaghan), indulge in from time to time, namely, the excuse of idealism. That was true 30 years ago. I heard the hon. Member for Liverpool, Walton (Mr. Heffer) say recently, with his usual engaging candour, when he was asked why the Labour Party spent so much time discussing the constitution and so little time discussing policy, that Labour Party policy was settled 20 years ago. At least, 30 years ago the Labour manifestos of 1945 and 1950 were interested in the customer and in efficiency, items which hardly received a mention in the right hon. Gentleman's speech. The 1945 manifesto, which the former Prime Minister will remember well, said that antisocial restrictive practices would be prohibited in the State industries. But the right hon. Gentleman did not say a word about that today. In relation to steel—about which the right hon. Gentleman had something to say—the manifesto stated: Private monopoly has maintained high prices and kept inefficient high-cost plants in existence. Only if public ownership replaces private monopoly can the industry become efficient. That was the offering in 1945. If Labour Party policy was stuck in the 1940s, 1950s or even the 1960s, we could understand the integrity of that position. But now we have a document the whole tone of which is entirely different. It is more authoritarian and a mile away from the idealism of the Labour Party of 30 years ago.

Photo of Mr Harry Ewing Mr Harry Ewing , Stirling Falkirk and Grangemouth

Is the Secretary of State aware that we are grateful to him for mentioning the 1945 Labour Party manifesto? That manifesto was instrumental in establishing the National Health Service in Britain. If he is so much in favour of what we said in that manifesto, why is he now so much in favour of dismantling all that that manifesto achieved?

Photo of Mr David Howell Mr David Howell , Guildford

I was pointing out that at least the manifesto seemed to have some interest in the customer, the consumer and the ordinary taxpayer of Britain—an interest that appears to have vanished out of the widow with the modern consideration, in the Labour Party, of the place of nationalised industries.

Photo of Mr William Homewood Mr William Homewood , Kettering

On a point of order, Mr. Deputy Speaker. I see nothing in the motion about a further expansion of public ownership. I cannot understand why the Minister has been allowed to continue talking for so long about that point, which does not appear in the motion.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

The Secretary of State has only just started his speech. I have heard nothing out of order yet.

Photo of Mr David Howell Mr David Howell , Guildford

I have only just started my speech. I have yet to come to the meat, and to some of the nonsenses that have been put forward by the Opposition, before coming to the Government's efforts to put matters right.

The Opposition have done a service intabling the motion. As Supply day debates provide a valuable opportunity not only to hear what the Government think and intend, which I shall spell out in a moment, but also what the Opposition have to offer, I invite the right hon. Member for Devonport and the right hon. Member for Stepney and Poplar to answer some questions. That is only right. We are entitled to know where we stand on some of the generalities that the right hon. Gentleman trotted out in the past half an hour. For instance, will they say which of the policies in the draft manifesto they accept in their capacity as official spokesmen?

Which of the policies on the energy sector does the Shadow energy spokesman accept? I imagine that the motion was tabled to enable Opposition Members to discuss that—as they clearly wish to do. Does the right hon. Member for Devon-port believe that North Sea oil should be taken into public ownership? Does he remember that when a previous Labour Opposition pledged the same it had rapidly to go into complete reverse? Does he believe, as the draft manifesto proposes, that BP should be transformed into a public enterprise instead of an independent company? If he does, will he explain what effect it would have on BP's worldwide position operating, for example, in the United States? Does he believe in bringing into public ownership as a single unit the power plant industry"? That proposal is made in the draft manifesto.

If he agrees with its proposals, how much does he think that they will cost? The public are entitled to know. If the right hon. Gentleman does not have the figures or has not bothered to work them out, it is my duty to the House to give the estimates which I have worked out. Nationalising the oil companies' offshore oil assets would cost £ 13 billion at today's prices. Buying out the downstream oil activities would cost a further £ 5 billion. Buying out the power plant companies would add further hundreds of millions to the bill—I estimate about £ 500 million. I shall not attempt to estimate the cost of nationalising dock and cargo-handling facilities and extending State control in the road haulage industry, let alone establishing a significant public sector stake in each important industrial sector, including… pharmaceuticals and medical equipment". The bill for that would be a minimum £ 20 billion.

Where is the money to come from? Is it to be a levy on workers' taxes? Is that what right hon. Gentlemen mean when they talk about an irreversible shift of power and wealth to the workers? Alternatively, is the money to be found by using the printing press? If that is how they intend to finance their proposals, it would cause the inflation in the Weimar Republic to look like a children's tea party. If the right hon. Members for Devonport and Stepney and Poplar say that the policies in the draft manifesto are not their policies, perhaps they will explain what part they will play in the redraft. I suggest that the right hon. Member for Devonport takes his courage and has a go, as did the right hon. Member for Stockton (Mr. Rodgers) against some of the defence nonsense in his party. If the right hon. Gentleman has a go, I wish him well.

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

Is my right hon. Friend aware that many Labour Members who normally sit below the Gangway fled at the mention of the mixed economy by the Opposition spokesman? Their answer is simple. They would confiscate the assets without any compensation.

Photo of Mr David Howell Mr David Howell , Guildford

The issues must be clarified. We have had no such clarity from the right hon. Member for Devonport.

I shall outline some of our plans and explain the Government's thinking about the State sector. I shall begin with our general approach, which was not merely parodied but distorted beyond reach of the facts and figures by the right hon. Member for Devonport. The Conservative Party and the Government have consistently thought in terms of a balance between the State sector and private enterprise in our economy. That is reflected in our amendment. It is true that our presumption is in favour of private enterprise. We do not wish an activity to be performed by the State unless there are evident and compelling reasons. That does not mean that we have not over the years, in a number of instances, found circumstances where a State presence was justified.

We are right to approach proposals for nationalisation sceptically, well aware of the disadvantages that will follow. We an; right to demand certain and careful proof of the benefits claimed. What is more, we are right to go on questioning. I do not accept that because an industry was taken into State ownership 30 years ago at the high noon of the Morrisonian era, for whatever reasons, we should be content for its status to be set for all time by divine order. Its status is set by Parliament for such time as Parliament chooses. One of the most clear expositions of that argument was made by Mr. Edmund Dell, the former right hon. Member for Birkenhead, who has now left the House. The right hon. Member for Devonport used the word "doctrinal" about 40 times. Let him not believe that the word describes Conservatives. It describes people who have constantly pleaded for more and more nationalisation without balance and without proper consideration.

The Government are practical but they are right to question the State sector. We think that it is over-extended and we intend to reduce its size. That is our duty. We must provide the best arrangements for our people and, in particular for the customers who buy the products and services of our State sector industries.

I turn to the situation that we found last May in the State industries and in the nationalised sector on which Opposition Members claim to be such experts. Certainly there was a time when the Labour Party, early in its last period of Government, preached and tried to practise financial responsibility and price realism in the State sector. However, by the last election the virtue was not in them. The effects of the IMF health farm cure wore off and they were well and truly back on the bottle.

The last Government established the idea in theory of cash limits. The right hon. Member for Devonport branded cash limits as the work of Satan, but they were the work of his right hon. Friend the Member for Leeds, East (Mr. Healey). They were more frequently breached than honoured, and that is almost as bad as having no financial discipline. In a way, it is worse.

In all. the nationalised industries taken together were responsible in 1979-80 for a net addition to the public sector borrowing requirement of £ 2-3 billion or 19-5 per cent. of the whole PSBR. Not only did the losses make an immediate and heavy demand on the taxpayer, but they greatly increased the Government's need to borrow, so making the task of controlling the money supply much more difficult.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East

The right hon. Gentleman has a short memory. Was it not a Conservative Government led by the right hon. Member for Sidcup (Mr. Heath) who insisted that in the fuel industries' prices should be held constant, thus forcing the electricity supply industry, for the first time, into the red? It was left to a Labour Government to return to realistic pricing.

Photo of Mr David Howell Mr David Howell , Guildford

The present Government have been castigated for the last half-hour for doing just that. The memory of the right hon. Member for Devonport seems to be short. He made considerable play of the proposed turn-round of £ ½ billion in nationalised industries over the four-year period. That is less than the turn-round of £ 3 billion which was achieved between the heady days of 1974-75 and the crunch period when the IMF told the Labour Government how to behave. A realistic pricing policy has been followed before on a larger scale. To say that this is being done for the first time in history is factually and statistically incorrect.

The situation could not be changed overnight. In 1979-80 we were severely limited by time in the extent to which our policies could influence well-established and existing trends. Some of the truly ugly and appalling results of those trends are still working through. Opposition Members try to ascribe those results to policies undertaken since we came to power, but they spring from policies and efforts made during their last chaotic days in Government.

From this year our policies will begin to provide the opportunity to shape matters more decisively. Above all, we are convinced that the cash limits system can work only if cash limits are adhered to. Of course, there will be difficulties and changing circumstances. We are always prepared to talk to the nationalised industries' chairmen about their problems If there are genuine difficulties which require a modification, we are prepared to consider each case. An example was the electricity industry's cash limit for last year, to which the right hon. Member for Devonport referred inaccurately. The industry put to me that the fall in electricity demand and unexpected costs, including the build-up in its stock, made achievement of its cash limit impossible. After having agreed certain rigorous offsetting economies, I was prepared to make an alteration in that cash limit. The right hon. Gentleman has the story wrong.

We have set the nationalised industries' financial targets for a period of three years ahead. I am the first to concede that that is not easy to do. It is so difficult that, while paying lip service to the principle of three-year financial targets in their 1978 White Paper, which they produced with a great flourish, the previous Government found it too much of an effort, certainly in the energy industries, where they set them for no more than a year.

Photo of Mr Harry Cowans Mr Harry Cowans , Newcastle upon Tyne Central

Will the right hon. Gentleman also draw to the attention of the electorate the fact that most public sector industries are failed private sector enterprises? That was the reason why the Government took them over. The Government are only hiving off the sectors of nationalised industry that appear to be making a profit. How will the taxpayer pay for the rest?

Photo of Mr David Howell Mr David Howell , Guildford

I am dealing with the major problems posed by the existing nationalised industries. I shall come to those parts that could attract private capital or just as easily be in the private sector. My right hon. Friend will have more to say on that matter.

It is important to set three-year financial targets. Industries that fall within my responsibility have had such targets set. Compared with the one-year ad hoc targetry of the previous regime, which was a significant handicap in planning their business, the changes have been of benefit to the industries and enabled them to plan sensibly for a dangerous and uncertain energy future, where huge investments will be required to meet the turbulence created by the 145 per cent. increase in world oil prices in the past 11 months.

We are also pledged to establish performance targets, which will be of significant help to the industry, satisfy the Government and the taxpayer and help the customer to judge the standard of service that he is receiving.

The nationalised industries chairmen's group has put certain arguments to the Government about the working of the cash limit system, particularly over the way in which investment is treated. My right hon. and learned Friend the Chancellor of the Exchequer told the House that the Government were ready to consider with the nationalised industries chairmen possible modifications, and we are doing so.

Another important and overdue change that the Government have made in handling nationalised industries is the provision in the Competition Act which, for the first time, makes it possible to refer nationalised industries' activities to the Monopolies and Mergers Commission for investigation. That power has already been used over computer rail services, the Severn water authority and the Central Electricity Generating Board. In other areas, such as telecommunications, about which my right hon. Friend made an excellent speech this afternoon, and the postal services, we are widening exposure to competition, which will be of great benefit to the public, customers and the industries. I am glad to confirm our intention to remove the statutory prohibition on the generation of electricity as a main business as soon as a suitable legislative opportunity arises.

In all those respects we are determined to make nationalised industries more efficient, more responsive to the needs of the taxpayer and the customer and more able to run their businesses within the strict financial and performance criteria that the Government must set.

I have said that the Government are firmly of the view that the public sector is over-extended, and we want to restore the balance. The right hon. Member for Devorport became obsessed with the word "doctrine". The imbalance and the tilt towards massive over-extension of the public sector has arisen as each Labour Government have rushed with renewed enthusiasm into further and more disastrous ventures of public ownership. We are committed to reducing the extent of State activity. My right hon. Friend will go into the detail of the progress that we have made in restoring the balance and rolling back the extended frontier of the public sector and the plans we have for the future.

I wish to draw the attention of the House to one project in the energy area that constitutes a milestone in the journey onward from the stale principle of nationalised everything—the gas-gathering pipeline proposed for the North Sea. As proposed by the Government, that scheme will involve the first private sector utility in this country for many years. It offers a major opportunity for sources of private finance to step in and take the burden off Government borrowing and the taxpayer. It should be welcomed on all sides of the House, although, needless to say, there has been a deafening silence from the right hon. Gentleman.

The right hon. Gentleman returned understandably to his concern over unemployment, which we all share. As far as I understand his remedies and the proposals in the motion, they would make an ugly situation far worse. Everyone who bothers to stop and think knows that the bellows approach—puffing up demand by monetary inflation—is useless. In his more courageous days, that was the firm view of the previous Prime Minister and the right hon. Member for Devonport, although he tends to keep his views on these matters to himself. It was also the view of the right hon. Member for Leeds, East for a brief Camelot period, until he reverted to a damp neo-Keynesianism, which had nothing to do with the views of the late Lord Keynes.

Everyone knows that nations like ours must look to smaller and newer enterprises, providing products and services that may not have been even heard of or categorised in Whitehall officialdom, for the jobs and prosperity of the coming years. It is hard to envisage anything less appropriate for Britain than lumbering us with the reactionary centralism offered by the Opposition in their motion, which has nothing to do with the needs of the economy in the 1980s.

The nation wants no more nationalisation. It wants less. I suspect that the right hon. Member for Devonport and some of his friends want no more of it either, although they need to fight quickly and courageously if their views are not to be swamped. What we have heard today from the Opposition is the intellectual flotsam of the past. It has no place in a creative and better future. The right hon. Gentleman and his right hon. and hon. Friends continually express fears for the future, but I suspect that they are fears not that we shall fail but that we shall succeed—as we shall.

Mr. David Wafkins:

There is not a single publicly owned industry in the country that is not under attack and being damaged, perhaps irreparably, by this Government's policies. Among the welter of damage and destruction, no industry is more severely under attack than the steel industry. Perhaps one omission in a speech notable for the omission of anything remotely relevant to the debate is hardly surprising, but it is interesting to note that the Secretary of State made only a passing reference to the condition of the steel industry in 1945.

My constituency is heavily dependent upon the steel industry. It will be more affected by the Government's damaging policies in closing down large sections of the industry than any other place where closures are proposed. I am not minimising the serious effects of steel closures wherever they take place.

I note that the Secretary of State for Industry has not graced or troubled us so far in the debate. The right hon. Gentle- man constantly wrings his hands about what he says will be the terrible effects of the shutdown of the Consett steelworks, yet he acquiesces in the unjustifiable closure of Consett and does everything he can to encourage it. Indeed, the whole Government seek to encourage the closure with all the means at their disposal.

This policy will be socially disastrous. It will put 3,700 steel workers out of jobs plus many hundreds in dependent occupations. My right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) said in his able opening speech that there is an inevitable linkage and interaction between the publicly and privately owned sectors of industry. Many of the hundreds of additional jobs that will be lost as a result of the shutdown at the Consett steelworks will be in private firms that depend for their existence on contracts with the BSC works at Consett.

The shutdown of the steelworks will devastate an entire community and send shock waves of increased unemployment through, for example, coal mining and transport throughout the North-East of England, a region that has already been savagely hit by the Government's policies.

If the policy is disastrous on social grounds, it is deplorable on economic grounds. We are not talking of an old rundown plant that is working at a loss. It is a modernised, efficient and profitable plant with one of the best productivity records in Europe. The productivity of the Consett steelworks is about 240 tonnes of liquid steel per man year. The BSC average is 140 tonnes and its target is 180 tonnes. Consett is already performing well above the corporation's target figure, at a level that compares favourably with that of Germany, which has one of the most productive steel industries throughout Europe.

Consett is meeting all the criteria that have been laid down by the Government for survival, but, seemingly, that has not been welcomed by the Government. The Government appear to be doing their best to discredit Consett's success in meeting their criteria. In reply to me in the House the Prime Minister has made great play of the fact that the Consett plant was unprofitable between 1975 and 1979 and that it became profitable only in the last quarter of 1979. Nobody is disputing that. How on earth could it become profitable until the loss-making sections were eliminated? All those sections have been eliminated. The last of them, the plate mill, was closed in October 1979, with the negotiated loss, which was accepted by the trade unions and the community, of over 400 jobs.

Since then, steadily increasing profits have been made at Consett. In September of that year there was a profit of £ 24,000. In October the profit increased to £ 110,000 and in November to £ 340,000. At that stage the monthly figures suddenly stopped being published. Then came the steel dispute, which lasted for three months. What a classic example of the damaging effects of the Government's policy upon nationalised industries! The dispute in the steel industry was deliberately provoked by Government policy and deliberately prolonged as part of the Government's policy towards the industry.

Following the ending of the dispute, the workers set up new production and productivity records practically every week. All that we have heard from Ministers while that has been going on is vague claims that the plant is making losses. Those claims have not been substantiated.

In the week ending Saturday 12 July—the week before last—9,000 tonnes of liquid steel were produced at Consett. That was an all-time record in the history of iron and steel-making at Consett. It has been leaked that a profit of £ 187,000 was made at the works in June. The monthly figures for Consett are being suppressed because they would destroy the spurious case for closure if they were known generally.

My constituents have been repeatedly told "Make the works productive and profitable and they will survive." They have made them productive. They have made them profitable. They did everything that they were asked to do. In that process they sacrificed about 2,500 jobs in an already badly hit community with high unemployment. However, they have been betrayed; they have to listen to their achievement being belittled and misrepresented.

On 10 July, during the very week of all-time record production, the Prime Minister said that Consett was again in a loss-making position."—[Official Report, 10 July 1980; Vol. 988, c. 757.]I hope that the right hon. Lady will check the facts and even consider making a personal statement to the House. I have concentrated my remarks upon my constituency and the consequences there of the damaging nature of the Government's policies towards publicly owned industries. Although Consett is the most extreme example of the Government's damaging approach to the steel industry, it represents only a fraction of the damage that is being done to the industry generally. If the Government's present proposals are implemented in their entirety, they will cripple the steel industry and make Britain dependent in due course on imported steel.

More than one carefully researched forecast of the world steel market prophesies a growing demand for steel from 1981 and conceivably a world shortage by 1985. Against that background, it is not surprising that no other steel-producing country is cutting back its steel industry in such a manner. France, Germany and Italy are all planning to increase their output—no doubt with a view to taking over the markets that Britain proposes to abandon.

Photo of Mr James Johnson Mr James Johnson , Kingston upon Hull West

Just like the fishing industry.

Photo of Mr David Watkins Mr David Watkins , Consett

Exactly. Those countries are proposing to take over the markets that Britain apparently plans to abandon, including the home market.

By 1985 the Government's proposal to build a new force of nuclear submarines will presumably be well advanced. If present policies continue, the British steel industry will not then be able to supply the steel. Irrespective of the merits or demerits of the Government's armaments policy, there is every possibility that we shall have to rely on imported steel. Nothing could be more ridiculous. Will we have to rely on imported steel from the expanded industries of France, Italy or Germany, or perhaps the United States of America? We may have to rely on imported steel from American companies in which Lazard Freres of New York has financial involvement.

The Government stand condemned by their policies towards the publicly owned steel industry, public enterprise and everything that concerns the public interest—let alone by the the motion, which I shall be supporting.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham 5:09, 21 July 1980

I fully understand and sympathise with the hon. Member for Consett (Mr. Watkins) about the redundancies that will occur in his constituency. I am sure that all hon. Members will agree with that expression of sympathy. However, when he has taken stock of the situation, I am sure that the new chairman of the BSC will make his views clear on Consett. Given the figures that the hon. Member for Consett has provided, I hope that serious consideration will be devoted to Consett's future.

It is difficult for anyone with objective ideas about industry to understand how one can maintain an industry that is vastly over-producing for several years because of the possibility of greater demand many years hence. How can it be kept at full production in the meantime? It is difficult to over-estimate the dangers of bankruptcy that would follow such a course.

The right hon. Member for Plymouth, Devonport (Dr. Owen) did little to justify the nationalised corporations. He was full of excuses for them. He spoke a great deal about doctrinaire attitudes and dogma. It is the Labour Party that holds doctrinaire attitudes and uses dogma in relation to industry. It said that the State, or the community at large, should own or control land and the means of production for the common benefit of the people. That is the basis of Socialism. I was in the Chamber in the early days of nationalisation. I remember the glee with which it was embraced by the Labour Party. The leaders of the Labour Party led the public to believe that nationalisation would result in greater industrial efficiency. They said that it would be a pacesetter in innovation. They also said that nationalisation would keep down prices, improve the economy, advance living standards and, above all, improve industrial relations beyond belief.

In the manifesto of February 1974 the Labour Party said that it would take over shipbuilding, ship repairing, marine engineering, ports, the manufacture of airframes and aero engines, sections of the pharmaceutical industry, road haulage, construction and machine tools. It said that it had the takeover of banking, insurance and building societies under active consideration.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

The hon. Gentleman has been bobbing up and down like a yo-yo. I may give way later, but I have no doubt that he will make his own speech.

Statements were handed out to the public and the nation soon after the end of the war about the advantages of nationalisation. If nationalised industries have not matched up to the obligations that were clearly stated by the Labour Party, the case for further nationalisation must be suspect. In 1974 there was no reason for the Labour Party to take over such enormous areas of industry, including banking, insurance and the building societies. What benefit would the public and the country gain from such takeovers? It is interesting that the Labour Party made the following statement: We intend to socialise existing nationalised industries. In consultation with the unions, we shall take steps to make the management of existing nationalised industries more responsible to the workers in the industry and more responsive to their consumers' needs. In view of what happened during the winter of discontent, that is a very suspect statement.

The consumer did not benefit greatly from nationalised industries; nor were the workers of those industries overwhelmed with satisfaction. When compared with similar industries in other major European countries, our nationalised industries are the least efficient.

Photo of Mr Stuart Holland Mr Stuart Holland , Lambeth Vauxhall

The hon. Gentleman has made a very interesting claim. Would he care to cite the source? If he looks at the European Centre for Public Enterprise in Brussels, he will find that British industry is often more efficient than its European counterparts.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

The hon. Gentleman can make his own speech. I shall come to that point shortly. He may be surprised to hear what I have to say. Between 1961 and 1977 the nationalised industries lost a total of £ 15,302,000,000, or about £ 2-5 million every day of every week. At the beginning of last year the economist Walter Eltis wrote an article in Lloyds Bank Review. He commented on those losses and said that not a single year between 1961 to 1977 had shown a surplus.

From a loss in the nationalised industries of £ 273 million in 1961, the deficit rose to £ 2,728 million in 1975. As my right hon. Friend the Secretary of State pointed out, that figure remained about the same in 1978. The public corporations have never been able to cover interest on accumulated debts in addition to wages and salaries. They have had to borrow increasing sums to pay the interest that they could not cover from sales revenue. That is only part of the story.

Between 1968 and 1975 £ 2,652 million worth of debts, including interest charges, was written off by the Government. The corporations had no resources to finance capital investment. All money had to be borrowed. That increased the Government's borrowing requirement at a faster rate. Ultimately, the taxpayer has to stump up, because Governments have no money. The Government therefore funded the large deficit that had arisen from overmanning, continued operation of inefficient plant, restrictive practices and the need to keep the unions happy. They did so in the interests of the unemployment figures. The Financial Times contained a report—as I am sure the hon. Member for Vauxhall (Mr. Holland) will be interested to know—in the summer of 1975 that compared the performances of European industries. The values were converted to the existing exchange rates. It is little wonder that Britain was at the bottom in every case. Germany was top in steel, and Britain was bottom. That was in terms of production per man—[Hon. Members: "What was the measurement?"]. This was measured by man output and by the cost per unit produced. It is no good Labour Members shaking their heads. These are the facts. I know that they are unpleasant and unpalatable, but they are facts.

Photo of Mr David Watkins Mr David Watkins , Consett

Will the hon. Gentleman give way?

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

No. I am sorry, but I have quite a lot to say.

The National Coal Board was at the bottom of the list with regard to coal. The Netherlands was top with regard to railways, and British Rail was bottom. The same sorry story applies to the National Bus Corporation. It was second from the bottom, and, not surprisingly, London Transport was bottom—[Hon. Members: "On what?"] On production per unit per man—[Hon. Members: "What does that mean?"]. Hon. Members will be able to make their own speeches.

Steel is an important subject today. Britain was once the greatest steel producer in the world. We led the world in both quality and output. But now the German steel worker produces about five times the amount that is produced by his British counterpart.

Photo of Mr David Watkins Mr David Watkins , Consett

Mr. Watkins rose

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

I am sorry, I have given way once. I know that Labour Members do not like these facts, but they are facts.

Photo of Mr David Watkins Mr David Watkins , Consett

I am grateful to the hon. Gentleman for giving way. Surely he must be aware that there has been no competition in the steel industry since 1936, when the old steel masters carved it up. He has referred to productivity, which is a correct and fair way to judge the industry. How does he justify a policy of shutting down the most profitable and productive works in the country—Consett—which is equalling the best German levels of productivity?

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

The hon. Gentleman is quite wrong in saying that there is no competition, because even in this country private steelworks are making a profit. If they were not, they would have been driven out of business. Sheerness steelworks is one example. It is essential that the BSC competes in price and quality with overseas suppliers in order to enable Britain to produce products, in which steel is a main ingredient, which are of a quality and a price that enable it to operate in world markets. Many Labour Members would argue that we should keep all the steel mills open irrespective of production.

We shall be interested to hear in the Opposition reply exactly what action they would take in order to estimate exactly what they would do with the British steel industry. I shall be interested to hear how many plants they would keep open. Many Labour Members say that they should all be kept open in the interests of full employment. Is that so or is it not? If it is not, why not admit it, as well as admit that there will be considerable redundancies and unemployment in the steel industry? Why do the Opposition continue to maintain that this is all due to the present Government when they would probably have to do the same themselves?

Production in competition with overseas countries is also lacking in respect of coal. In 1977-78, it fell for the fourth year in succession from 63-6 cwt. to 434 cwt. per man-shift. At the end of 1978, Joe Gormley estimated that only 3-7 out of five shifts were actually worked because of absenteeism. Those are not my words but the words of Joe Gormley. I am merely reminding hon. Members of them. Now, of course, Mr. Scargill and the wild men are demanding an enormous increase in wages, which will inevitably increase the price of coal very much more. Already, as we have been told—and it has never been denied—it is possible for British consumers to import coal from Australia and America more cheaply than it costs to buy it on the home market, which has such enormous reserves.

If the wages of the miners go up so substantially, so will the price of coal, and if the steelworks have to buy the coal from Britain instead of importing it, so will the cost of steel. That will affect many of our goods that are sold on the world market. It will also exacerbate our employment situation.

Photo of Dr Maurice Miller Dr Maurice Miller , East Kilbride

I draw the hon. Gentleman's attention to the terms of the amendment, which I presume he is supporting. It asks that: this House welcomes the Government's policies of restoring a proper balance between the state sector and private enterprise". Does not he agree that what the Government have done is totally to destroy the public sector? Will he apply his mind to that?

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

I shall apply my mind to that. Everything that I see leads me to believe that the Government are absolutely right to take such a critical view. Large wage increases in the coal industry will not only increase the price of steel but will increase the price of electricity and cause considerable hardship to the domestic user in this country, unless—and this is always a possibility—there is a considerable increase in coal purchases from countries where it is cheaper.

In addition to the large increases in wages which Mr. Scargill and others are asking for, do the miners still receive free coal? Perhaps my right hon. Friend can tell me. If they do, and if it is in any substantial quantity, it adds considerably to the value of their overall wages. That should be known as well. Apparently the right hon. Member for Devonport does not know. I invite him to tell us.

In an article entitled "The true deficits of the public corporations", Walter Eltis, the economist, stated: In 1972, 1973 and 1974, they did not even earn enough to cover wages and the salaries of employees. The final surpluses have at no point been sufficient to cover the interest cost or accumulated debt in wages and salaries. They have, therefore, been increasing borrowings in order to pay interest that they are unable to cover from sales revenue. The result is that the total debt and interest which they had to pay have both risen rapidly. He went on to state that this was especially disturbing, because official interest costs are an understatement of real interest burden. A total of £ 2,602 million of debts of public corporations was written off between 1968 and 1975 and the central Government absorbed them, but that was never shown. The nationalised industries borrowed much money overseas. All that must be paid back in foreign money. They even understated the interest costs, which made it clear that the borrowing of the nationalised industries has increased. The accumulated debt had increased the whole time in the nationalised industries. They have had no money to finance capital investment.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

They have had no money to finance capital investment. They have had to borrow it or it has been a subsidy.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

I have already given way to the hon. Gentleman once. It has been a subsidy from the Government. They have never earned it from their revenue.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

All the money that they required had to be borrowed. That increased their total debt and the Government's overall borrowing requirements still further. No responsible Government can allow that situation to continue.

The economic strains imposed on the previous Labour Government by the demands of the nationalised corporations played a considerable part in forcing them to go cap in hand to the IMF. I should like to know what advice the IMF gave to the Labour Government on their handling of the nationalised industries in future. I suggest that the IMF told them to look at them objectively and to evaluate cost accountability.

If Opposition Members doubt the critical financial situation that arose, why did the Labour Government go to the IMF? Why were they unable even to pay old age pensioners their Christmas bonuses in 1975 and 1976—[Interruption.]—which this Government have now restored? That is a fact and I suggest that hon. Gentlemen look it up.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East

On a point of order, Mr. Deputy Speaker. What have old-age pensioners to do with the organisation of the nationalised industries?

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. I think that the hon. Gentleman must make his own speech.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

I was very careful to link it with the financial situation that caused the Labour Government to go to the IMF. I illustrated the need for them to go to the IMF when they were not in a position to honour their obligations to the old-age pensioners for their Christmas bonuses in those years.

I am convinced that if another Labour Government were elected the pressures from the Left wing to carry out the suggestions which were made in the February 1974 Socialist manifesto to take over the financial organisations and to extend nationalisation right accross the board would be enormous. I am also convinced that if the previous Labour Government had been returned last year they would have had to look with a critical and objective eye at the situation of the nationalised industries. They would have had a great deal of opposition from practically every Labour Member if it meant cutting back, making redundancies and so on. It would have been complete anathema and would have been called treachery by many of the extreme Left-wing members of the Labour Party and they would have opposed it bitterly.

I believe that this Government have taken the correct course. They have pointed out where the nationalised industries have failed, and they have failed in many areas. The greatest indication of the sense of the Government as a whole and of my right hon. Friend the Minister of Transport, who is to reply to the debate, was shown clearly last week when he made his statement about the railways. I remind the right hon. Member for Devonport that the chairman of British Rail was appointed by the Labour Government. He appeared to be no friend of the Conservative Party. Presumably he was appointed by the Labour Government because he was a man of integrity, knowledge and experience. The greatest tribute to the move towards rationalising and improving British Rail came from the chairman of that organisation when he admitted that he wholeheartedly accepted the proposals put forward by my right hon. Friend last week.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

No. I have given way several times.

Photo of Mr Gordon Bagier Mr Gordon Bagier , Sunderland South

I know the chairman of British Rail better than the hon. Gentleman does.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

If the hon. Gentleman knows the chairman of British Rail, perhaps in his speech he will tell us more about him.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

The hon. Gentleman will be able to confirm it.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

I am not giving way. I have almost finished. I have given way quite a lot. I have given way more than anyone else in the debate. The right hon. Member for Devonport would not give way to me at all.

There is no doubt whatsoever that the nationalised industries need to be looked at in the light of the conditions of the 1980s and the experiences that they have gone through since becoming national corporations.

I am sure that in the long run the measures taken by the Government will not only make the nationalised industries more effective but will improve the prospects and prosperity of the people working in them, will improve industrial relations and, above all, will ensure that consumers get a better deal from many of the nationalised industries than they are getting now.

Photo of Mr Raymond Powell Mr Raymond Powell , Ogmore 5:36, 21 July 1980

I am surprised at the suggestion by the hon. Member for Gillingham (Sir F. Burden) that miners should not receive free coal.

Photo of Mr Raymond Powell Mr Raymond Powell , Ogmore

My father was a miner. I should not mind betting that Conservative Members pick up more in expenses in one day than any perks that my father had in the whole of his life. It is a disgrace that hon. Gentlemen should suggest that those who go to the bowels of the earth to extract energy for the country should be deprived of the small concession of a ton of coal six times a year when business men and company directors are taking perks which are bleeding some of their companies dry.

I want to concentrate on some of the rubbish to which we have listened since about 4 o'clock from the Government Benches.

Last weekend the Prime Minister, despite my warning at Question Time last Tuesday that there was no welcome for her in Wales, turned up. There were 2,000 police, supported by just as many members of the Special Patrol Group, I suppose, to protect her from 10,000 protesting workers in Wales. I see the Under-Secretary of State for Wales looking to try to correct me. Are my figures correct, or have I given an underestimate?

Photo of Mr Wyn Roberts Mr Wyn Roberts , Conway

The hon. Gentleman overestimates very considerably when he talks of 10,000. I understood that it was between 2,000 and 3,000 at most.

Photo of Mr Raymond Powell Mr Raymond Powell , Ogmore

The Minister was inside the pavilion listening to the Prime Minister, whereas I was outside counting. My counting and my arithmetic are far better than the Under-Secretary's.

Despite the fact that it was raining, when my friends and I marched the streets of Swansea protesting with placards we were protesting genuinely. Because of what the Government had done in 14 months—the desecration of the Welsh economy, industry, steel workers and the theat to the miners—we felt that it was necessary for some of us to stand up and start shouting.

When I gave the Prime Minister that warning last week, I knew of the uprising that is taking place in Wales. I know of the numbers who have been deprived of jobs—not only men in the steel industry but women in the textile industry in my constituency. When they marched in Swansea, they were protesting in a proper manner to the Prime Minister.

I stayed up late last night to watch the television programme on the Tory conference. My hon. Friends continually complain abount the coverage that the Labour Party receives from the BBC, but the coverage of that Tory conference highlighted the collapse of the ridiculous, mad monetarist policies that the Government are pursuing.

If the Government are right, why was the Prime Minister not prepared to go to the people in Wales and to listen to the objections? Why did she have to be escorted in and out of the back door of the conference? Those waiting to protest did not even see her. Indeed, it could have been her double at the conference.

The 10,000 trade unionists who were protesting at the Prime Minister's policies did not see her and she could not have seen much of them, except through the windows of the conference hall, but she said: From what I have seen of them, I do not want them on my side. That was not what she said when she conned them into voting for her 14 months ago, and that phrase will live in the minds of the people of Wales for a long time.

The Prime Minister told an over-enthusiastic audience, consisting mainly, I am told, of bankrupt business men and out-of-work civil servants: Does anyone really suppose that any party, having won a great victory, would actually want to send unemployment figures up? I tell you this. No Government deliberately increases unemployment. The Prime Minister denied that the Government's policies were depriving people of jobs. It is, therefore, reasonable to request the Minister who is to reply to the debate to explain why the unemployment figure, which is to be officially announced tomorrow, is 1-85 million after 14 months of the Government's period of office. Can he explain why there have been 30,000 redundancies in the steel industry, that at least 2,000 people are losing their jobs daily, that there are 100 to 150 bankruptcies every week and that the unemployment figure is far higher than in the 1930s?

My right hon. Friend the Leader of the Opposition issued a challenge to the Prime Minister before she spoke in Swansea, but she did not reply or refer to it. Is it true that the Government are seriously considering the closure of one or other of the main steelworks in South Wales—Llanwern and Port Talbot—or, indeed, that they might consider the closure of both? If such a move took place, it would seriously affect the continuation of our coking coal-producing collieries in Wales.

What will the Government do when industries of that magnitude are closed and redundancies escalate in areas such as my constituency, where we have 4,000 to 5,000 steel workers still working at Port Talbot and 4,000 to 5,000 miners producing coking coal? What will the Government do to find jobs for my people? It is reasonable for us to expect a reply on those aspects of two of the major nationalised industries which are suffering as a result of the Government's policies.

The Prime Minister suggested on Saturday that if unemployment escalated in Wales, the best plan for the workers would be to move. She admitted that that might be painful, but it was her only suggestion. The right hon. Lady deliberately ignores the economic consequences of moving for working-class men. Where should they move? Many people have been put out of work in areas that have always been considered to have plenty of employment.

If those who lose their jobs move to London or the East Coast, where unemployment is increasing, they will be faced with the need to purchase properties that cost twice as much as those in South Wales. The cost of moving and reestablishing their families is far too great for them to contemplate a move. It is even more difficult to move into industrial areas than it was in the 1930s.

Photo of Dr Maurice Miller Dr Maurice Miller , East Kilbride

Does my hon. Friend agree that the coal industry is vital to the economy of the country and that, encompassing, as it does, energy that we can take from the ground for the next 300 years, it should be expanded and not contracted in the way that the Government propose?

Photo of Mr Raymond Powell Mr Raymond Powell , Ogmore

I agree that the industry should be expanded. I could go on at length about the energy value of the coal industry. I was born in the Rhondda valley, where numerous collieries were closed in the mid-1960s. I do not put all the blame on the Conservatives. We were just as responsible for the closure of collieries at that time. A number of people objected strongly.

Nov/ that those valleys are closed in the Rhondda, the coal will never be brought from the bowels of the earth there because water has seeped in and soaked the whole of the seams. We shall not recover the energy that is now buried in the collieries of the Rhondda. I thought that the nation had learnt the lesson. If we have emergencies and need energy, the usual source is coal.

Time is passing, and a number of other hon. Members wish to speak, but I should like to make one or two points about Saturday's statement by the Prime Minister. Because of the complacency of Conservative Members, because they will not stand up and be counted, the message is not getting through to her. Conservative Members know as well as Labour Members that the people want to see the Government change their policies. People who supported the Government 14 months ago, people who helped get them elected—the business men, the CBI and other people—are warning them to change their policies before we slip too far down the slippery slope.

When I listened to the Prime Minister on television last night saying that people should move, my first thought was that the best idea for the people of Wales, if they had to move, was to look for accommodation in Finchley, which is the Prime Minister's constituency.

Photo of Mr Wyn Roberts Mr Wyn Roberts , Conway

Has it occurred to the hon. Gentleman that my right hon. Friend the Prime Minister might have been thinking of people moving within Wales? Surely he is aware that 47 per cent. of the Government's United Kingdom factory-building programme is to be located in Wales and that no less than £ 48 million is being spent through the Welsh Development Agency and other Government agencies on remedial measures in connection with the steel closures.

Photo of Mr Raymond Powell Mr Raymond Powell , Ogmore

What the hon. Gentleman says may be correct. I heard him say exactly the same on television last night, when he talked about the £ 48 million and the percentage that is being sunk in Wales for economic recovery. It is not enough.

Only two years ago in Wales, in Ogmore, in Bridgend, we were jubilant. We were a growth area, with the Ford engine plant coming in at a total cost of £ 180 million to give jobs for an estimated 2,500 people. What has happened? Ford now says that it will employ no more than 1,500 people in the engine plant at Bridgend, and 500 of them will be redundant Ford workers from Swansea and other areas. As I have said, that plant is to cost £ 180 million. The figure of £ 48 million to try to solve our problems in Wales is ridiculous.

Photo of Mr Donald Dixon Mr Donald Dixon , Jarrow

How does the Prime Minister, who seems to want to turn Britain into a country of industrial nomads, expect people to move? Does she expect them to take their schools, old people's homes and hospitals with them when they are put into other areas? In my constituency we have had migration for many years. The young and active are leaving, and there is an increasing burden on those who stay. The Secretary of State for the Environment is cutting public spending. Who will keep the old people in their homes, who will keep the hospitals going, who will pay for the schools, if the young and active move at the Prime Minister's behest to find employment? Would it not be easier to tell the employment to go where the workers are, instead of the workers being industrial nomads?

Photo of Mr Raymond Powell Mr Raymond Powell , Ogmore

I thank my hon. Friend for that intervention. What he says is true. If the Government are not prepared now to spend money on public services, they will not spend it when people move into areas.

I have referred to Rhondda, and my hon. Friend speaks of Jarrow. Both areas sent most of their population marching to London over the problem of unemployment. I see areas of the Rhondda derelict as a result of the closure of collieries and of people being asked to go away. I see streets of homes empty, playgronds not being used and schools that are under-used as a result of Governments' past economic policies. It is wrong to talk about people moving when it is just as easy in the 1980s, when we are passing through a technological revolution, to move industries back to Wales and to particular areas of Wales.

The Government's policy is to create new jobs in soundly based and competitive industries. The CBI, the Stock Exchange and all the Government's other friends entirely reject that argument, fundamentally because the soundly based and competitive industries of 12 months ago are going to the wall That is happening consistently. Only last weekend a firm in my constituency, soundly based and very competitive, established in 1945—Christie Tyler Limited—was compelled to close four factories, throwing 300 people out of work. The firm was renowned as a good employer and had excellent trade union relationships. Production was always on target.

What is to blame for that closure? Government policies are at fault. Consumer demand is strangled. Warehouses are full and order books are empty. The unions cannot be blamed for that. It seems that as a result of Government policies the only work that is becoming available is work for the Official Receiver.

I have taken well over my time. I conclude by telling the smug and indifferent Members on the Government Benches, those with majorities of 27, 2,700 or even 12,700, "Ask your constituents whether they would vote for you now." If the feedback from the Tories in other constituencies is anything like the response from the Tories in Ogmore, we shall never see a Tory Government again. I warn Tory Members "You either change your policies or your leader or you change your profession, because you have only a short time here."

Photo of Mr Mark Wolfson Mr Mark Wolfson , Sevenoaks 5:59, 21 July 1980

I shall start by addressing myself to some of the points made by the Shadow energy spokesman, the right hon. Member for Plymouth, Devonport (Dr. Owen). I am sorry that he is not present now. The right hon. Gentleman said that he regarded the debate as fundamentally important to the economy and as being of concern to people in Britain. I agree, and I am a little surprised that on a Supply day attendance on the Opposition Benches is rather thin.

The right hon. Gentleman suggested that the Government's policy towards the nationalised industries was one of spite and that this was in contrast to the policies of Governments in other indust-trialised countries where the mixed economy was accepted. As a supporter of the Government's policies, I have to say that nothing in my experience of the industrialised industries or in the contacts that I have had with management or workpeople in those industries, would make me feel any attitude of spite towards them. They are a crucial and important part of the British economy, and the people who work in them do a crucial and important job. It is vital that this point should be made often from the Government Benches.

The right hon. Gentleman went on to particularise steel, shipbuilding and today's announcement on telecommunications as examples of where the Government's policy was spiteful towards nationalised industries. These are unfortunate examples.

We have heard examples of how the current problems of the steel industry are deeply affecting the lives and future of people in steel-making areas, and I have much sympathy with them. Nevertheless, in the steel industry there was huge overinvestment at a time when it was not realised that the demand for steel worldwide would fall. In addition, that overinvestment was in some cases not effectively used. That is an example of the danger that occurs with nationalised industries, because they are large and inflexible, and when Governments get behind them things can either go very well or, equally, they can go very badly.

The shipbuilding industry has a long history of really difficult labour relations, and an old history—now mercifully less apparent—of demarcation disputes which hold back productivity. Over the last 10 years, British shipbuilding has been falling badly behind.

Photo of Mr Donald Dixon Mr Donald Dixon , Jarrow

I agree with the hon. Gentleman when he talks about shipbuilding having had bad industrial relations for a considerable time. I was a shop steward in the industry for many years. Does the hon. Gentleman accept that, since vesting day, British Shipbuilders has a record second to none in this country for good industrial relations? Indeed, my right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) mentioned that from June 1977 until this year the number of wage bargaining units for manual workers and staff had been reduced from 182 to one. There has also been a tenfold reduction in the number of industrial disputes. The hon. Gentleman's point about industrial relations does not, therefore, apply to the British shipbuilding industry.

Photo of Mr Mark Wolfson Mr Mark Wolfson , Sevenoaks

I am very grateful to the hon. Gentleman for making that point. I agree with him that there has been a dramatic improvement in industrial relations in that industry. Whether it has been due to nationalisation or to a realisation by those working in the industry that unless industrial relations were improved they would not remain even at a low level of competitiveness is not yet clear.

The point should also be made that shipbuilding is one industry that is benefiting considerably from the Government's policy of strengthening our Armed Forces. Money from the Government is benefiting those working in the industry and, at the same time, improving their job security.

The example of telecommunications, again, was not a very good one to take, because the postal services to the customer have come to be of an acceptably low standard. The moves that the Secretary of State for Industry has made in this area to free the industry will, I suggest, be of benefit to the consumer.

One of the mistakes that the Opposition make—they made the same mistake when they were in office—is to place tremendous emphasis on the retention of jobs in industry whether or not those jobs are helping to meet a market need. I accept that there is a balance to be drawn between market need and the needs of the customer, and that is exactly the policy in which the Government are involved.

I should like to consider briefly the history of the nationalised industries and the reason for nationalisation. First, there were the political reasons, which were elaborated for us by my hon. Friend the Member for Gillingham (Sir F. Burden). One of them was to control the commanding heights of the economy. Conservative Members are unlikely to agree with that reason. Indeed, as my hon. Friend rightly said, there are now many Labour Members who would not favour an expansion of that political role, although equally there are others who are very much in favour of it and who would be likely to go for it when the next opportunity arises. The country should be aware of that alternative.

Secondly, there were the economic reasons, relating to those public services which could no longer attract private capital in order to modernise. The coal mines and the railways were two examples.

Thirdly, there was the great idealism and the hope that, when nationalised, the industries concerned would provide a better working life for the people in them.

It is extremely sad that in the steel industry in particular the hope of long-term job security has been dashed. In the context of economics and security for employees, therefore, the history of the nationalised industries is not encouraging. Indeed, they have not been able to deliver the goods over the past 30 years in the way that was hoped.

The right hon. Gentleman said that if the nationalised industries were properly managed and had the full-hearted support of the Government, they would be effective. That takes me to my next two points.

The problem of running nationalised industries is twofold. First, they have no final accountability. Governments are always in a position—often assisted by pressure from their own Back Benches—to bail out the nationalised industries when they get into difficulties. It requires the most immense strength of mind and sense of long-term responsibility for that pressure to be resisted.

Photo of Mr Gordon Bagier Mr Gordon Bagier , Sunderland South

Will the hon. Gentleman agree that, particularly in the case of the energy industries, they have got into trouble because successive Governments have used them as economic regulators?

Photo of Mr Mark Wolfson Mr Mark Wolfson , Sevenoaks

I thank the hon. Gentleman for that intervention. I agree that this is the danger in many of the nationalised industries. I do not, however, believe that the policies of the present Government are being directed in that way.

The next problem is that management is always in danger of being interfered with in the nationalised industries. As a result, the industries have become increasingly inflexible, because they are unable to respond sufficiently enough to market forces.

The steel industry is a good example of that. The industry was prepared to slim down early, but there was resistance from hon. Members and from the Government of the day to that slimming down, at a time in the world economy when it could have been more easily achieved and with less human difficulty and social problems than now. I illustrate my point by quoting the example of the unrealism of there never being final responsibility and accountability in the nationalised industries. Soon after he took office, the general secretary of the National Union of Railwaymen, Mr. Sidney Weighell, said: It is no problem of mine whether the British Railways Board are able or not able to meet my members' pay claim. My job is to get the same level of settlement for my members as other nationalised industries have already achieved. Is not that an unrealistic view for a senior trade union leader to take if he is concerned about the long-term security of his members' jobs? I appreciate the work that he has to do for them, but it is not in the long-term interest of the preservation of jobs to take that attitude.

The Government's policies on nationalised industries are neither doctrinal nor spiteful. There will continue to be a role for the Government in assisting the development of nationalised industries. Nothing that we have heard today from my right hon. Friend the Secretary of State for Energy suggests, and I doubt whether anything that we shall hear from the Minister of Transport in his reply to the debate will suggest, that there is not a role for the Government in improving the ability and productivity of nationalised industries within sensible limits. There is a role for the Government, which this Government are performing at present.

The Government's policies on the British National Oil Corporation fit that pattern. The result of freeing the BNOC's monopoly has been an increase in activity by private and smaller oil companies. We now have a wider spread and a less monopolistic approach in the development of oil licences. That is valuable for Britain, not only in the short term, in the creation of jobs, but also in the longer term. As North Sea oil resources run out, it will be advantageous for British companies to be in partnership with a number of other international consortia for development elsewhere in the world in the future, using our expertise in the long term. That would not have happened had the existing arrangements under which BNOC operated been allowed to continue.

Are any hon. Members satisfied when they compare the services given by nationalised industries with the services of private companies—for example, the Sealink services of British Rail compared with those of free enterprise on cross-Channel services? It is obvious that one service is run by British Rail—a nationalised industry—and others, which are cleaner, where service is more positive and where there appears to be a better espirit de corps among the staff, are run by free enterprise companies. Likewise, a private hovercraft company has been profitable for many years, but British Rail's operation is still unprofitable. That is a good reason why the Minister of Transport has taken steps in that direction. The Government have a continuing responsibility to work in partnership with British Rail for the improvement of rail services in Britain. The Minister has chosen to investigate whether other funding and a freer method of operation involving free enterprise can improve services that are not crucial to the mainstream operation of British Rail.

Government policy towards the public sector is positive, and the aim is clear.

It is not doctrinal but it is thoroughly practical. Mishandling in the public sector, which is so large and all-embracing, can bring disaster. There is a crucial need for a broader, less monopolistic base, in which some companies will develop and others will decline. These policies give that opportunity a chance of reality and achievement. That is why I support wholeheartedly the Government's amendment to the Opposition motion.

Photo of Mr David Penhaligon Mr David Penhaligon , Truro 6:16, 21 July 1980

If I were 30 years older, and if I had been elected to the House 30 years earlier, I should have argued at that time for an increase in the size of the public sector. I do not have a great deal of time for those who own land and industry in Britain, and I would not have done then. The evidence of the last 30 years suggests that the increase in the size of the public sector is not advantageous to the economy, and I see no argument now for any substantial or sustained increase in that sector. That does not mean that there is not a role for the State in running our economy.

Not long after I was elected to Parliament, the then Labour Government spent a substantial amount on bailing out Ferranti from its impending financial doom. That was right and proper. A few months ago this Conservative Government announced that they were to sell Ferranti back to the private sector. I believe that that was also right and proper. The irony is that if the Conservatives had been in power when Ferranti collapsed originally, they would have let it go. If Labour were in power now, they would keep Ferranti in the State sector. What happened was right but it was by pure chance. Ferranti was helped when it originally collapsed, and it is now to be returned to the private sector.

There is a role for the Government in industry, but it should not be in an ever-increasing section of the economy. I believe that the State sector is too big, and some of the moves by the Government to reduce its size will not receive any opposition from me. However, the Government are trying to go too fast. In modern politics a solution taking more than five years is of no interest to a politician. However, the Government have set industries financial targets that are totally untenable. The speech of the right hon. Member for Plymouth, Devon-port (Dr. Owen) had much to commend it in that respect. He spoke of the turn-round being requested in times of great financial difficulty. The Government have set targets of which industries will fall short, and they will have to face a U-turn of their own making.

For all that, some of the Government's policies on the nationalised sector make no sense. The Minister of Transport is here, so I shall refer to his area of responsibility. He is the only Minister present. At the Venice conference the Prime Minister announced that Britain, with the other Western Governments, would make a sustained effort to reduce the consumption of oil. That is obviously right. How the Government can possibly tie that with their current policy on public transport, however, I do not know. Public transport is being eroded—in my area past the point of no return.

Let us consider the position in the urban areas. London has a deteriorating public transport system, with rail fares permanently escalating. I do not see how the Government can possibly relate their objective of reducing the consumption of oil to their policy of, in effect, reducing public transport. That is not a coherent approach.

Britain is fortunate in having good, mineable coal deposits. We are about the only country in Europe that can claim to have plenty of coal. We also have great oil and gas reserves. But at a time when the rest of the world is trying to get away from oil and increase its coal output, the Government invest £ 10 billion to £ 15 billion in building pressurised water reactors all over the country. This massive sum is equivalent to £ 400 for every household—and yet our coal reserves are to be largely ignored. I fail to grasp the rationale of that policy.

Anyone listening to this debate will see what is largely wrong with the two-party system in Britain. One side praises nationalised industry as though it were the perfect solution. The other side pretends that nationalised industry is all bad and rotten. Each side claims that what the other does is wrong.

I see the hon. Member for Falmouth and Camborne (Mr. Mudd) on the Conservative Benches. The Falmouth ship repair yard is in his constituency, but it affects mine as well. The Labour Government closed it at a stroke, and he and I know why: it was the only part of that great nationalised industry that was not in a Labour constituency. We are seeing something of the same now with the Government taking their chance to get at the steel industry, which largely is located not in Conservative constituencies but in South Wales and other areas which, for Conservatives, are of little electoral consequence.

Far less dogma and far more pragmatism should be applied to the nationalised industries. I should particularly welcome a response from the Minister of Transport to say how he relates the Government's policy on public transport with the Prime Minister's declared determination substantially to reduce our consumption of oil.

Photo of Mr Roger Moate Mr Roger Moate , Faversham 6:24, 21 July 1980

I welcomed the first few remarks of the hon. Member for Truro (Mr. Penhaligon). I presume from those remarks that he will be supporting the Government amendment. His last remarks about the closure of steelworks in Labour constituencies resulting from some political plot by the Government were contemptible. If he believes that politicians on either side of the House act in that way, he has a low opinion of all human beings. I hope that he is not judging others by his own standards.

Photo of Mr David Penhaligon Mr David Penhaligon , Truro

I do not claim all knowledge, but I had considerable experience of the Conservative Party in Opposition trying to win back parts of the country which they thought were naturally and rightfully theirs—for example, Cornwall. For week after week and month after month, the Conservative Party in Cornwall kept saying that the Falmouth docks were being closed purely and simply because they were in a Conservative constituency.

Photo of Mr Roger Moate Mr Roger Moate , Faversham

I make no such judgment about the Labour Party; nor would I expect others to make it about the Conservative Party. If the hon. Gentleman alleges that steelworks are being closed because they are in Labour constituencies, he is debasing politics. I am sorry to say that, because generally the hon. Gentleman talks rather more common sense than he has this evening.

It is remarkable that on a day when the Opposition table a Supply day motion in extreme terms condemning the Government for their action on matters that are, presumably, dear to the Labour Party, the Labour Benches are an expanse of green, with hardly any Members present. When a Supply day motion is being debated, it is incumbent upon the Opposition to demonstrate the strength of their feeling. At this moment only three Labour Members are present—

Photo of Mr Roger Moate Mr Roger Moate , Faversham

Labour Members are outnumbered at least two or three to one by my hon. Friends who are present. I hope that those in the public sector industries who think that they are getting the support of the Labour Party will take note of the truth. The motion embodies a spurious proposition. If it were anything else, Labour Members would be here in massed ranks to argue the case. There are more than enough Conservative Members present to defend the Government's position, if it needed defending.

It is remarkable, given the problems of British industry, which we all acknowledge, that the Labour Party should choose, here and elsewhere, to launch a debate on nationalisation. The major problems facing our industry have been caused by the world recession, by technological change and by other developments in world trade. Even so, the Labour Party made proposals at the Wembley conference and in its draft manifesto for the expansion of public ownership. Such a proposal is likely to condemn the Labour Party to electoral oblivion. Labour Members do themselves a gross disservice by advancing this sort of proposition.

The debate is not basically between the Government and the Labour Party. It is between the Opposition Front Bench and hon. Members below the Gangway, the Tribune group—if only they were here.

Photo of Mr John Patten Mr John Patten , Oxford

They have a meeting.

Photo of Mr Roger Moate Mr Roger Moate , Faversham

Then it is a long meeting. They absented themselves as soon as the right hon. Member for Plymouth, Devon-port (Dr. Owen) rose to speak. I do not know whether he had been thinking evil thoughts and spirited his hon. Friends away, or whether he bored them out of the Chamber. If it were the latter, I have some sympathy for their point of view. His speech was one of the most unconvincing and self-righteous that I have heard for a long time. I use the term "self-righteous" deliberately. It is unconvincing for a party that was in office 14 months ago now to adopt the pose that everything that is wrong with British industry has been caused by the present Government.

I do not believe that Governments have the power that is attributed to my Government by the Opposition and by many commentators. It takes far longer than just over a year for policies to work through and have such an effect on the economy, whether for good or ill. Admittedly, current policies are having some effect, but by and large the present state of the country is more attributable to the inheritance left by the last Administration than to the actions of this Administration. That is why I find it totally self-righteous for Labour Party spokesmen to attribute the current problems of British industry to the events of the last 12 months.

Photo of Mr Donald Anderson Mr Donald Anderson , Swansea East

Does the hon. Member disagree with those Conservatives who trumpet long and loud that there has been a clear change of direction over the nationalised industries?

Photo of Mr Roger Moate Mr Roger Moate , Faversham

No, I am not saying that there has not been a change of direction. I hope that there has. But it has not yet had the major effect on the nationalised industries that was attributed to it by the right hon. Member for Devonport.

It was a little unfair of my right hon. Friend the Secretary of State for Energy to expect the right hon. Member for Devonport to announce policies on behalf of his party. After all, he is only its spokesman. How can he possibly know what policies will be enunciated by the Tribune group? In fact, I suspect that, rather like the shadow spokesman on defence, the right hon. Member is probably not consulted at all about these matters. Nevertheless, his contribution was pretty unhelpful in the context of the general performance of the nationalised industries and the private sector, faced with the problems of today.

Regardless of the party in power, there has been an inexorable decline over a long period in most of our public sector industries. It is foolish to attribute that to one party or the other. One has only to look, for example, at the coal industry. In 1947 nearly 750,000 people were engaged in that industry. That figure has now dropped to 235,000. That is a tremendous change—a revolution in coal mining. On the railways, on the same time scale, the number employed has dropped from nearly 700,000 to 244,000. That change is continuing inexorably, regardless of the Government and regardless of policy changes.

It is clear that the economic facts of life are steamrollering out of existence the commanding heights of the economy that the Tribune group is so determined to take over. It must be frustrating for the ardent Socialist to find that those commanding heights no no longer exist.

The nationalisation argument over the years shows that the tragedy for the taxpayer and the country is that the Labour Party has always managed to get into office and take over many of these industries at a time when they were facing a serious decline. As a result, the taxpayer has had to meet the costs of phasing out large sections of those industries, politicians and Parliament have had to carry the odium for the social changes that have followed and we have delayed the changes in efficiency that were desperately needed.

I have some sympathy for the ardent Socialists who see their case almost disproved because they have taken over industries at the wrong time. But that is their problem. It seems to happen almost every time. If one were trying to prove the case for Socialism, one would feel that it was an extraordinary time to take over the shipbuilding industry—when it is going into a massive decline, alongside enormous surplus capacity throughout the Western world. But that is just what happened. We had the classic example of the taxpayer carrying the massive burden of closures and small but efficient yards being damaged but nothing long-term being achieved for those who work in the industry.

This is my complaint about the Labour Party's posture on nationalisation. It is not helping those who work in the public sector if it tries to kid them that somehow nationalisation provides greater job security. It definitely does not. One only has to look at the steel industry and the record of the previous Administration to see that.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East

If a poll were taken of workers in the nationalised industries, does the hon. Member really suppose that they would vote for a return to private enterprise?

Photo of Mr Roger Moate Mr Roger Moate , Faversham

I suspect that, given the choice of closure or a return to private enterprise, the vast majority would opt for survival. If people in the private sector were asked whether they wanted to stay in the private sector or be nationalised, they would all opt for the private sector. Those are more significant points than the one that the hon. Member put. If, for example, the 60,000 people working in the private steel sector were asked whether they would rather remain there or be nationalised, they would resoundingly vote to remain in the private sector. The health and strength of the private steel sector should be studied more carefully by the whole nation as an object lesson in the operation of a mixed economy for the benefit of everyone.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flint West

Perhaps my hon. Friend would care to reflect on the example of Brymbo steelworks, which was originally bought rather forcefully from BSC by private enterprise. The transfer was welcomed by the employees. They have never ceased to bless the fact that the works was handed over to private enterprise, because they have done much better since.

Photo of Mr Roger Moate Mr Roger Moate , Faversham

That is a clear example of an open-minded, pragmatic approach to the question of public versus private sector. That is the lesson we should draw from all that has been discussed and done in the past decade. Let us be pragmatic. The Government are not being doctrinal, as they were accused of being by the right hon. Member for Devonport. We are taking a pragmatic and sensible approach. Where it is clear that certain sections of the economy have to stay within the public sector for practical reasons, we have adhered to a policy of taxpayers' support. I must remind the House that we are still talking about taxpayers' support; I believe that the State sector will receive taxpayers' support this year to the tune of £ 25 billion.

Surely, in an ideal economy we would want these major industries to support the taxpayer. We want those industries to make profits to build hospitals and roads. But that is not the way it is. Those industries are leaning on the taxpayer, rather than the other way round. That cannot be the right approach.

Pragmatically and sensibly, one can say that certain industries can be better managed, be more efficient and provide better job security if they are "privatised". It is simply a question of management.

I am pleased that my right hon. Friend the Minister of Transport is to wind up the debate, since I wish to put a number of points to him. I believe that his has done more than most other Government Departments to ensure the future efficient management of State assets where the consumer is paramount. The consumer decides whether he will travel by private enterprise or British Rail ships, whether he will stay in British Rail hotels, whether he will use private or public transport. The consumer has been determining the decline of public transport. We must somehow meet this need and not turn a blind eye to it.

The Labour Party pretends that we are damaging the railways by our current policies, but that is a myth. It is worth reminding Labour Members of the history of rail closures. They talk about the Tory Party and the Beeching axe, but in the last 10 years of Labour Government nearly 4,500 miles of railways were closed, compared with under 3,000 miles in the last 10 years of Conservative Government. The inexorable facts of life drove the Labour Government to make more rail closures than the Conservative Government.

The reality of life now is that there is a desperate shortage of investment capital for all our major public industries. That shortage would exist even if the Labour Party had won the election. If it was now in power it would impose tough cash limits on British Rail and other public sector industries.

The Minister of Transport has managed to persuade the Chancellor of the Exchequer—and I do not know how he did it—to keep up rail support, the PSO and other grants, to almost exactly the levels as applied previously. Given the problem of capital shortage and the desperate need for investment in British Rail and its subsidiary companies, does it not make sense to introduce private capital into those sectors of the railway community where private capital could work? The Labour Party has its head in the sand when it condemns the proposals to sell the subsidiary companies.

My right hon. Friend made it clear that the proceeds from the sales would go to British Rail. If the consumer on British Rail was asked "Would you rather have British Rail hanging on to its office blocks and hotels or having extra capital to electrify certain lines and improve commuter services?", the consumer and the taxpayer would say "Let British Rail stick to running railways and get out of those sectors where it has not been successful."

There is not an hon. Member in the House who can say that the record of BR hotels is good compared with the private sector. Judged by the needs of the consumer, the needs of British Rail investment, and especially job security and job opportunity, the hotels would be far better off in the private sector.

Photo of Mr Jack Dormand Mr Jack Dormand , Easington

Give us some evidence.

Photo of Mr Roger Moate Mr Roger Moate , Faversham

The evidence is all around us. The private groups have built modern and profitable hotels while British Rail has built only one new hotel since the war. It has made a profit of only £ 328,000 from 39 hotels. [An Hon. Member: "It has been starved of investment capital."] That is true. It has been starved of investment capital by successive Governments, as have Sealink and the hovercraft company, because it is within the public sector. If Opposition Members wish to do a favour for the people who work in those industries, they will say "Get as far away from any Government as you can." If I was a trade union leader thinking of my members in those hotels, I would want to get as far away from the public sector as possible, so that we could have an expansionist policy based on profitable investment and the satisfaction of consumer needs.

Photo of Mr Ioan Evans Mr Ioan Evans , Aberdare

What happened to Ferranti and the shipbuilding industry under private enterprise? The shipbuilding industry declined from producing 30 per cent. or more of the world's ships to about 4 or 5 per cent. under private enterprise. That was an absolute decline. It is succeeding under public ownership far better than it did under private enterprise. It is obtaining new orders that it could not achieve under private enterprise. Ferranti collapsed under private enterprise. It was rescued by public money, but it is now being sold again.

Photo of Mr Roger Moate Mr Roger Moate , Faversham

I should be happy to spend a long time explaining why I think that the whole of the Ferranti saga has been a dreadful error, but this is not the moment. I dealt with shipbuilding earlier. Perhaps the hon. Gentleman was not in the Chamber or did not listen.

I hope that Opposition Members will look at subsidiary companies a little more pragmatically. The Government have made a moderate and sensible proposal that will benefit everybody, whereas the present arrangement is damaging British Rail interests.

In other areas also the Minister of Transport has taken action—for example, by encouraging the introduction of new private capital into bus transport and by the sale of motorway service areas. I expect that Opposition Members are opposed to that, but it will benefit the taxpayers by bringing in cash and improving service to the consumer.

Another area where my right hon. Friend has made initial proposals which I greatly welcome, but about which we have not heard the final details, is that of the ports. As with British Rail's subsidiaries and the National Freight Corporation, my right hon. Friend has entered into an understanding with the British Transport Docks Board—which administers the industry and understands its true needs and best interests—for the partial or complete denationalisation of the industry and the introduction of private capital. Some time ago my right hon. Friend announced that he had agreed with the BTDB a scheme, in prin- ciple, to introduce private capital in some form or another. I welcome that as a major change of direction in the ports which will be of great benefit to the country.

As in other areas, the phasing down of many of the greater ports in Britain with their great concentrations of labour has proved that smaller and more efficient units are successful Many of those units are under private ownership, many are in the public sector and some are trust ports. It is not so much ownership that counts as the good fortune in location and the independence of management. That is why it is right that the BTDB should, of its own volition, get as far away from the Government as possible and become an independent private organisation.

It is a helpful trend that the ports are being told "You manage your affairs without Government interference and without even the burden of the National Ports Council". They do not need the Government to direct them. The more the Government direct them, the less efficient they are likely to be. I welcome the steps that my right hon. Friend has taken to introduce private capital for the benefit of the consumer. It would be helpful to hear whether he has yet decided when and how the BTDB will be allowed to introduce private capital.

As a party and as a Government, we say that the present mixed economy should continue. There are areas where we can introduce private capital for the greater benefit of industry, the people who work in it and the taxpayer. The Opposition will do a great disservice to Britain, and an even greater disservice to themselves—but why should we care about that?—if they advocate an even greater expansion of public ownership.

Photo of Mr John Golding Mr John Golding , Newcastle-under-Lyme 6:48, 21 July 1980

I speak as the political officer of the Post Office Engineering Union—a job that has never been easier as thousands more Post Office engineers are beginning to realise how damaging are the political decisions of the Government to their occupational interests.

For 20 years I have called attention to the inadequacy of Post Office investment. We are suffering today from under-investment in the past, especially on underground cables. Many faults are occurring because of past reluctance to invest in modern plant and equipment. The frustration of the telephone users has its origin in past public spending cuts. I have in mind the Barber cuts of 1973. Unfortunately, the customer blames the present Post Office staff rather than politicians who have long since been forgotten.

The Government's cash limits policy has been especially harmful. They have treated telecommunications—a vital part of our economy—as though it was a spending department rather than the profitable, vital, economic service that it is. In their attempt to cut the public sector borrowing requirement, the Government have undermined a sector that is vital to our economic growth. Of course, the Post Office should be subject to outside financial control. The Post Office Engineering Union accepts the 5 per cent. return target and the task of reducing costs in real terms by 5 per cent. a year. Which other business is set such a task at the present time?

The Post Office Engineering Union does not accept that over the past three years there has been a requirement to pay back £ 173 million, of which £ 110 million fell in the last financial year. It is no wonder that customers are irate because they cannot obtain telephones and that staff are upset at their failure to obtain the stores necessary to provide an efficient service.

The Post Office Engineering Union is also worried because restrictions on borrowing this year have led to reports of a cash gap of at least £ 200 million. It fears the consequence for the business and its members if management is forced to take decisions against their interests.

Limits on borrowing by businesses which are thriving do not make sense from the point of view of employment, the customer and the economy, which will become even more dependent on telecommunications and computers. The cash limits on the telecommunications business have led to higher prices, waiting lists for telephones and other equipment, a less efficient service and a significant slowing down of the technological development on which we shall depend so much. It is not surprising, given the crippling of telecommunica- tions by the Government, that customers complain and workers lose heart.

Barlow was able to blow his top and leave. Rank-and-file engineers who have devoted their working lives to the Post Office do not see why they should leave what could be a proud public service. The Conservatives have used public discontent to further their ideological opposition to profitable public enterprise. The proposals announced this afternoon will take substantial sums out of telecommunications, although they are needed to expand and improve the quality of services.

The Post Office needs at least £ 1,500 million a year—or £ 4 million a day—from its own resources or from others in order to invest. In a nutshell, the proposals will put money into the City at the expense of everyone else, particularly at the expense of the small towns and rural areas. Higher prices and a worsening service are the most likely consequences of the Government's policy.

Dividing the maintenance of telecommunications is bound to lead to a worse service, extra cost and maintenance difficulties. Can one imagine the arguments between the Post Office and other suppliers when a fault occurs originating either in the Post Office network or equipment or in privately supplied equipment? Post Office engineers maintain the entire network and accept responsibility for repairing any fault free of charge. They do not blame another source. They do not shuffle off responsibility. The television repair man can blame the aerial, not the set. He can disappear with the customer owing him money for calling at the house. There is no charge now for repairing a telephone fault. In future, it is likely that the customer will be told "It has nothing to do with me. The other firm is at fault." We should avoid that.

The Government say that they are opening up the business to competition. They know that if they allow private circuits to be used by all and sundry—to cease to be private—they will be creaming off. The creation of the subsidiary is a device which will make it more difficult for the Post Office than its competitors to operate. Will the Secretary of State insist that each of the competitors which creates subsidiaries follows the same rules?

The statement by the Secretary of State this afternoon is disappointing because it abandons an integrated telecommunications network. It is harmful to the development of our industrial structure, which will depend more and more upon the growth of data transmission and on the increasing use of an effective and efficient telecommunications system linked to data processing. Today's announcement will lower further the morale of Post Office engineers, who are already working under the strain of rapidly advancing technology. Through no fault of theirs, they are subject to public criticism. They feel insecure because of the technological explosion. Workers are worried that their training today will have little relevance in five or 10 years. They want job security.

Today's announcement will undermine the confidence of those workers. Their productivity record is first-rate. They have successfully reduced unit costs. Whatever has happened in the other sectors of public industry, in telecommunications manpower productivity has increased. The task is to lower unit costs in real terms by 5 per cent. It can be of no use to such an industry to undermine further the confidence of its workers.

The Secretary of State must think again before introducing his legislation, because it is harmful to the customers, staff and the economy. Post Office staff should be rewarded for their efforts and conscientiousness. They should not be punished, as it appears that they will be by the Government.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flint West 6:59, 21 July 1980

The hon. Member for Newcastle-under-Lyme (Mr. Golding) spoke up bravely for his union. I have much sympathy with what he said about the consistent underinvestment in the infrastructure of telecommunications under Governments of both parties. However, it is not an argument in favour of nationalisation, because during that period the Post Office was nationalised.

I welcome Members of the Labour Party to the debate. Although not many of my hon. Friends have been present, they have consistently outnumbered Labour Members by about 10 to 1. It is good to see Labour Members here, back from more congenial pastimes such as arguing about the various Labour Party policies. I welcome in particular Members of the Welsh Labour Party.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flint West

The hon. Gentleman missed a rousing speech by his hon. Friend the Member for Ogmore (Mr. Powell) in which he referred to the recent Conservative Party conference in Swansea. I have to tell the hon. Members for Swansea, East (Mr. Anderson) and for Aberdare (Mr. Evans), who were perhaps outside during the conference, that it was very successful. No doubt the Prime Minister would have welcomed an opportunity to have an exchange of views with the demonstrators outside, but they did not seem to be in much of a mood for an exchange.

On my way back from that conference I travelled up and down two or three of the industrial valleys of South Wales. I could not help being struck by the pace at which the old traditional industries of steel and coal are being replaced by relatively pleasant modern factories, producing a wide variety of products. As we heard from one of my hon. Friends in an intervention, no less than 47 per cent. of the advance factories being built in the United Kingdom are being built in Wales. That is no less than the urgent needs of the Principality demand.

I shall not argue whether that welcome development is a tribute to public or private enterprise. I wish to stand back from the great argument about public and private enterprise and consider the nation's long-term economic objectives. I do not believe that there is much doubt about where we want to get to. We want to reach a state of affairs in which a very small number of people in industry produce vast wealth, using the latest technological achievements—all the products of automation and the silicon chip—to the full. We recognise that that probably means that, at the end of the day, there will be a minuscule labour force working in productive industry, producing vast wealth.

It would be an environment in which innumerable small and medium-sized firms catered for the needs of a very wealthy society. Industry would also provide the resources to finance lavish public services, and here perhaps I join Opposition Members. We should have fine schools with small pupil-teacher ratios, well-equipped hospitals in which there was no waiting for treatment; in the public sector, transport with no waiting for buses, and in the private sector shops and banks where one did not have to queue. That society may be a long way away, but that is what we should be aiming for. It would entail short hours for those in industrial employment—a short week, a short year and, indeed, a short working life.

On the other side of the coin, it would mean an end to restrictive practices, having no truck with restrictive notions such as import controls and doing without subsidies. To enable small firms to operate profitably in that environment, there would have to be cuts in taxation. Additionally, the great increase in the social services is much more likely to come about if we accept the idea that they will not necessarily be financed for ever from the public purse.

That is the mirage that we should aim for. How do we reach those sunlit uplands? We have a magnificent atlas for that purpose, which has hardly been opened since it was recently issued. It is called the Brandt report. It involves advanced countries making a massive transfer of resources to developing countries so that they can build up their requirements to finance purchases from the developed countries and so get the whole process going. Although it is a magnificent atlas, it has smudgy road maps. The difficulty is to find our way in the medium term. I believe that the way there lies in closer co-operation within the Community, although I have to be more specific than that.

Photo of Mr Donald Anderson Mr Donald Anderson , Swansea East

I accept what the hon. Gentleman says about the Brandt report as an atlas, but does he agree that from the reports of the Venice summit it appears that the Conservative Government have thrown that atlas decisively out of the window?

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flint West

I might be prepared to listen to the hon. Gentleman if he could seriously claim that his party had more consistently advocated the policies set out in the Brandt report. However, the right hon. Member for Plymouth, Devonport (Dr. Owen), who made a clever speech, merely used the occasion to attack the Government's policies. At no stage did he indicate that his party was committed to such policies. The position is quite the contrary. With every day that passes, it becomes increasingly evident that the Labour Party's policies are to apply strict import controls, in particular to the products of the developing world. I do not believe that Labour Members are well qualified to speak on the issue.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar

The hon. Gentleman is being a little unfair. He has also been selective in the number of debates that he has attended. The House had a good debate on the Brandt report. If the hon. Gentleman was there, I apologise, but if he was I do not believe that he could possibly have made those remarks. We strongly urged the Government to make the most positive response in time for the Venice summit.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flint West

I was sitting on the far Benches listening attentively to every word that the right hon. Gentleman said. Although in general terms he spoke in favour of the ideas contained in the report, almost every subsequent Labour Member who spoke in that debate, as in all other debates remotely related to the subject, demonstrated that the Labour Party's primary interest is in pressing for import controls. They have not specified that those import controls should not be applied against developing countries. However, we are straying from the subject of the debate. We are supposed to be considering our attitude to nationalised industries.

Implicit in what I said earlier is the concept that there is no future for this country in trying to prop up by import controls or open-ended subsidies jobs in industries that are the industries of yesterday. We do no service to those in such industries by trying to pretend that any Government can safeguard their jobs. If one lesson has gone home to steel workers and coal miners, it is that nationalisation is no guarantee of continued employment. For a period, by subsidy Governments can attempt to prop up those jobs, but the reckoning when it comes is terrible indeed.

An Opposition Member spoke of the way in which our steel industry was being run down with an abruptness that was brutal in its consequences for those working in the industry. I agree that the abruptness is brutal. It imposes a special obligation on Governments to cushion the consequences. However, it is brutal solely because the Labour Government put off over and over again so many vital decisions within that industry. They left it in a hopelessly uncompetitive state, and it required such massive subsidies from the remainder of the economic system that it has imposed a real burden on other industries, which could be providing better, more secure jobs than those available in the steel industry.

Having said that, I must say that to whatever extent the steel industry in this country is slimmed down, Wales must remain a major element within that industry. The traditions of Wales, the equipment available and, above all, the skills of the workers give Wales an alienable right to remain a major element within the steel industry, however far the industry has to be slimmed down.

Photo of Mr Gordon Bagier Mr Gordon Bagier , Sunderland South

Bearing in mind also the Conservative Party's philosophies, would the hon. Gentleman advocate the same for Consett as for Wales?

Photo of Sir Anthony Meyer Sir Anthony Meyer , Flint West

I listened carefully to the hon. Member for Consett (Mr. Watkins), as did the hon. Member for Sunderland, South (Mr. Bagier). Anyone who listens to the hon. Member for Consett must be struck by the strength of the case that he deploys. On one or two occasions he departed from his normal high standard of fairness. However, I am here not to argue that case but to listen to it with great sympathy. It is a shame that a town such as Consett, with such a fine record of labour relations, should have been struck in such a way. However, that is the inevitable consequence of the failure to take the right decision at the right time.

Sometimes I choose the image of a group in a lifeboat that has long ago thrown overboard all unnecessary items. We have long ago thrown overboard all luxury, comfort and shelter. If we are safely to reach port, we shall have to throw overboard some of the fuel and supplies that we need to get us to port. That is a measure of the gravity of the short-term position with which we are faced. It is only by navigating through the immediate perilous waters, having thrown away essential items of equipment, that we stand any chance of surviving in the long run.

I do not believe that subsidies or import controls offer a way of enabling our traditional nationalised industries to survive. A much better way of enabling British industry to survive—this does not apply solely to nationalised industries—is to pursue a much more active procurement policy of buying British. We have had references recently to the PAYE computer. The argument in favour of buying a British-made computer, even if it does the job less well and is more expensive, is strong. My right hon. Friend the Secretary of State for Defence, when talking about Poseidon, emphasised strongly the amount of work for British yards that would be involved in the decision that he had taken. I was glad to hear him say that.

A conspicuous example close to my constituency is the European Airbus. I should like to see the Government—this applied also to the previous Labour Government—lean heavily on British Airways and strongly encourage it to purchase the A300B rather than the medium-range American Boeing aircraft that it has been buying. That would be a far better way of providing jobs within the sector which is part nationalised and part denationalised and which so badly requires jobs to be provided. It would be a far better way of making that provision than continuing to pour thousands of millions of pounds into the steel industry.

I have to recognise that, necessary though it is to limit the vast sums that British Steel is losing by way of operating losses, the idea of obliging it to break even within so short a period as 12 months is not the best way of achieving economic operation, even in the short term. I do not believe that it will be practicable to make the deadline work. If the bosses of British Steel are required to show a paper break-even position within so short a period, there is a danger that they will adopt policies and expedients that will turn out to be more expensive in the long run.

I should hate to see the Government behave as the previous Labour Government behaved when they announced that they had set a financial limit to the requirements of British Steel. When pressed, they said "We did not mean it. It was not a limit but a target." When asked what the difference was between a limit and a target, they said "We suppose that it would have been better to call it a pious hope." I should not like to see my right hon. Friend the Secretary of State for Industry behaving in that soppy way. None the less, it may be advisable to give the new chairman of British Steel a little more leeway lest, in order to comply with the strict guidelines, he rushes into decisions that he may subsequently come to regret.

I congratulate the Opposition on their motion. It encapsulates pretty well everything that has gone wrong over the past few years. The Labour Party has formed the Government for 11 of the past 16 years. We see it approving the overmanning and restrictive practices that have made the publicly owned industries and public services so vulnerable to foreign competition and have led to the inescapable need for cuts in Government spending.

We have the Opposition rejecting the policies that are being applied by the Government to make the same industries competitive and for cutting services, however painfully, to a size commensurate with what our impoverished economy can afford. At the same time the Opposition blandly ignore the fact that even under a Socialist Government nationalised industries and the public services were able neither to serve the public nor to save the jobs of their workers.

I wish that I could be as wholehearted and enthusiastic about the Government's amendment. I have no quarrel with its contents. However, I should like to see some reference to the issue that I have tried to develop—namely, that industry, whether public or private, is facing an inexorable decline in the number of employees for whom it can provide employment. It is to services, public as well as private, to tourism, banking, insurance, retail trade, hospitals, schools and transport, that we must look to provide the jobs that are so desper- ately needed, and nowhere more desperately than in the Principality of Wales.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East 7:17, 21 July 1980

The hon. Member for Flint, West (Sir A. Meyer) spoke in his usual moderate and mild way. However, the hon. Gentleman wandered rather wide. I hope that he will forgive me if I do not take up his remarks.

I am annoyed with those who talk all the time, especially on the the Government Benches, about the decline of Britain and British industry. They must not go on doing it for too long or else they will be held as mainly to blame. The truth is that there is not a great deal wrong with the economy that a 3 or 4 per cent. improvement in productivity would not put right. The issue is how we achieve that improvement.

I did not hear the speech of my right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) as I was at a meeting of the Select Committee on energy. However, I heard the speech of the Secretary of State for Energy. As one would expect, the right hon. Gentleman made great play about motions to be discussed at Labour Party conferences on the further extension of nationalisation. When parties have been defeated at elections, they have to think again about their fundamental principles. They usually end up, however by returning to a much more reasonable and middle position. That is likely to happen again.

There is no real contradiction between Socialist fundamentalism and accepting the need for a mixed economy. That is what we have and we are likely to have it for a considerable time. As I say, there is no contradiction in accepting the mixed economy and at the same time believing in an ultimate Socialist future. I suggest that it is far better to believe in a Socialist future than in a capitalist past, but if we have to live in what is to be a mixed economy for a long time, that must be our true position in our own time.

I have taken a close interest in the affairs of nationalised industries since I first came to the House. I have been especially interested in the administration of these industries and their practical working. I think that I have served on all Committees on electricity and gas supply during the time that I have been a Member of this place. I have played a part in Bills on those subjects at all stages in their passage through the House. I have never had a static conception of nationalisation. Evolution is a law of life. There is a danger that in parliamentary systems such as ours legislation can all too easily place nationalised industries in straitjackets. They are, therefore, unable to take advantage of changes in technique or of commercial exploitation. The relevant Act may narrowly confine an industry to its original aim. For example, if the electricity supply industry—the House knows of my interest in this industry and of my connections with it—had been able to acquire a share in the ownership and development of North Sea gas as a new primary fuel, it would not have been placed at such a disadvantage in relation to the gas industry, which has a monopoly by statute. That monopoly was granted by a Conservative Government.

Legislation is often hard to come by because there are limitations on parliamentary time. Things are not done when they should be done because time cannot always be found for Bills. One reason certainly why the Secretary of State has not introduced a Bill to implement, in whole or in part, the recommendations of the Plowden report for the reorganisation of the electricity supply industry—on which everyone worked so hard-has been the lack of time available for legislation. Changes that might have been beneficial to the country have been passed over in favour of more doubtful proposals, such as restrictions on trade union freedom, adverse social securty changes and so on. We have had a spate of such Bills. Most of them are reactionary in intention and they take time.

I hope that one of the first actions of a new Labour Government will be to give freedom to the nationalised industries to make changes in their powers, subject only to ministerial approval. They should be allowed to make changes by means of regulations, approved by the House. They should not have to wait for new legislation to be introduced. The aim would be to allow nationalised industries to diversify and, where commercially attractive, to expand their business into new fields, as the private sector does. Of course, that contradicts the point of view held by the Minister of Transport. He has told us that the profitable sections of the railway industry will be hived off and sold to private enterprise in order to get back cash. We should instead allow the railways to expand further into profitable areas, in order to find the revenue that will help them.

Both sides of the House appear to accept the need for a mixed economy. If they do not do so in theory, they at least accept that need in practice. There is no reason why a Conservative Government should reject such a view. At one time, Conservative Governments did not reject it. In the late 1950s, a Conservative Government enacted a measure that set up the centralised CEGB within the existing nationalisation framework. They gave that body the right to manufacture with ministerial approval. That was a sensible and pragmatic decision. One would not get such a decision from the present Conservative Administration. The aim of that 1950s legislation was to strengthen the nationalised industry by means of new forms of organisation. For that reason, the changes were not opposed by the then Labour Opposition.

But what have we now? Ministers and their supporters show open hostility not only to the merits of new public enterprise but to the existing nationalised industries. Trade unions in the nationalised industries firmly believe that to be the case. If one talks privately to the management of nationalised industries, one finds that it takes the same view. Given that there is a mixed economy that is part public and part private, why does the Conservative Party continue the long-running and old-fashioned debate of private enterprise versus nationalisation?

Last week I was in France on behalf of the Select Committee on energy. We spoke to French economists and administrators, to French industrialists involved in its nationalised industries and to French Ministers. The span of nationalisation in France is not dissimilar to that found in Britain. However, the French have never known such arguments as we have. That is a particularly British form of argument. Perhaps it is a survival from Victorian days, when we went further towards a pure free enterprise system than any other country in Europe. The French are not bothered about where the capital comes from, as long as it earns a proper return. The sooner, I suggest, that we get closer to that pragmatic French view, the better.

Britain's nationalised industries have done a fine job for the country. One must examine their finances carefully. The hon. Member for Gillingham (Sir F. Burden) spoke as if all the nationalised industries made losses. The coal industry, the transport industry and the railways have had difficulties, because new techniques have overtaken them. However, the electricity supply industry did not go into the red after it had been nationalised, until Conservative interventionists told the industry that it must hold its prices constant. Government subsidisation then began. The electricity industry did not ask for that, nor did the trade unions.

If one considers how much capital the majority of nationalised industries obtain from their own resources, one must conclude that by international standards their productivity and efficiency are as good as those of the large-scale private companies, such as ICI and Shell. At present, the nationalised industries are being restricted. That restraint applies to productive and up-to-date nationalised industries just as it applies to the coal industry and to the railway industry, where historical and technical changes have created difficulties for them in all countries.

If nationalised industries experience problems of expansion, it is because the Government have fixed artificial cash limits on investment. I cannot understand why productive nationalised industries which make commercially good investments should be subject to cash limits. It is said that it is good for ICI, Courtaulds and other companies to put money into new chemical plants, since that will benefit the country and bring a return. However, if the CEGB invests in new nuclear power stations as future technology, it is subject to artificial restraint from Governments.

I know that Labour and Conservative Governments have equally continued that practice, but it is about time that it was stopped. There should be a differentiation between productive investment, whatever the system of ownership, and expenditure, which normally comes out of taxation revenues. That would improve the look of the Government's own accounts, but apart from that it would be a good thing to do in itself.

I hold a view which many of my hon. Friends may not hold. I believe that intervention by Ministers in the affairs of the nationalised industries should be kept to a minimum. I believe that those industries should be commercially viable and be allowed to work in an economy which is reasonably free. Indeed, there is no real contradiction between socialised enterprises and the market economy. Some of the countries east of the Iron Curtain are moving fast in that direction anyhow.

However, what does the Secretary of State for Energy now propose to do with regard to electricity supply? It is Government interventionism run mad. Instead of carrying through the proposals that have been recommended to successive Governments by the Plowden committee and those associated with it, the Minister himself will, apparently for the future, to a great extent direct the affairs of the electricity supply industry.

I have in front of me a copy of Hansard for 15 July. It contains a long statement, which, incidentally, was not made from the Dispatch Box, as it should have been so that the right hon. Gentleman could have been questioned. It was done in the sly manner of slipping in an inspired written question almost at the end of the day. The statement took up columns of Hansard. It says that the right hon. Gentleman will not now give a new shape to the electricity supply industry so that it can look after its own affairs.

I do not want to be too long, but I should like to give one or two quotations. The right hon. Gentleman said: I have been assured by the council"— that is, the Electricity Counciland individual electricity boards of their commitment to my policy"— This is the party which believes in nonintervention. He continued: I will seek specific comments from the council before approving capital programmes". He went on: the council will advise me on the further development of physical, technical and financial measures of performance by the boards". —[Official Report, 15 July 1980; Vol. 988, c. 447.] He will also decide "whether changes are desirable" and will expect the conclusions to be reported to him. That is interventionism run mad. It is the kind of thing that I fear from this Government. There may be Socialist interventionists, but there is nothing so chaotic as a Tory interventionist.

I should like to comment on a sentence which was uttered by the Secretary of State earlier this afternoon. It seemed to slip out. As I have said, I am suspicious of the way in which he goes about our affairs. He said, I think, that he would end the existing monopoly of the CEGB with regard to industrial supplies. There is no real monopoly at present. I think that about 20 per cent. of electricity in this country used by industry is generated privately. That has been the case ever since nationalisation, for the simple reason that there are private generating plants on industrial estates or with large concentrations of industry, such as one gets at ICI at Wilton in North Yorkshire. I am familiar with that area. It has an industrial power station which supplies its own needs and also links in with the national grid. Therefore, there is nothing new in using private enterprise on private land for electricity supplies.

However, if that so called monopoly is to be broken, it means further changes. The House has a right to know whether the right hon. Gentleman is proposing that private electricity concerns will be given the right to break up the public highways in order to lay down duplicate mains to the public suppliers. If that is to be the case, I should point out that long before nationalisation electricity undertakings, from the 1882 Act onwards, always had a territorial monoply. That is the sensible way of dividing responsibility when large-scale capital expenditure is involved. Again, I feel that the Secretary of State is getting just too devious for words. In future, he must be much franker with the House. Those who are responsible for public electricity supplies will be concerned about this proposal and will rightly want to know what it means.

If new generating stations are to be erected privately, what about the fuel that will be employed? Will that come under control? There is a choice of fuel. It could be nuclear, coal or oil, although at present it would not be sensible to use oil. What about the strategic placing of these power stations in relation to the national grid? Great losses in the uses of energy can be caused if a power station is built just anywhere to suit a private developer and if within two or three miles there is a publicly-owned power station which could easily carry the load.

If that is to occur, we shall not just hit at the electricity nationalisation Acts of 1947 and 1957 but we shall hit at the proposals brought forward by the Baldwin Government in 1926, which set up the unified electricity grid. I ask Ministers to think a little about what they are doing. They should not too easily cast aside the wisdom of those who have gone before them.

Photo of Mr Thomas Benyon Mr Thomas Benyon , Abingdon 7:38, 21 July 1980

I intend to stick—I hope rigidly—to the promise that I gave you, Mr. Deputy Speaker, not to take more than 10 minutes. I am comforted by the thought that those who speak twice as long may catch your eye only half as often.

I should like to confine my remarks to the motor industry. I am sure that my constituents will receive comfort from the entire House when I point out that about 800 of them recently lost their jobs as a result of the closure of MG in Abingdon. In the last two weeks, we have seen the death of a unique car, which only a year ago celebrated its golden jubilee and is now in its fifty-first year. How hard it is to tell the work force, which has been loyal to British Leyland for so long and has had such a good strike record and tradition of excellence and of handing down responsibility for making these cars from father to son.

The irony is that if they had not been such good workmen and had such a reputation for high quality, the deal that was mooted between British Leyland and Aston Martin could not even have been thought of. It would certainly not have got off the ground as far as it did. It is a tragedy that the deal, worked at so hard by Alan Curtis of Aston Martin and supported by Michael Edwardes of British Leyland, failed to come to pass.

The reasons why the deal did not come to pass are complex. It is not as simple as to say that the city institutions or the Government have not done what they should have done. The first reason is that after the 1968 merger BMC and Leyland decided to put money into the TR range of sports cars. Secondly, the MG was regarded as so special a car that various parts—the gearbox to name but one—were unique and consequently could not be used in other British Leyland cars. Thirdly, the MG deal, like so much of the British motor industry, was caught badly by the high value of the pound. Next came the crippling interest rates, and £ 20 million was a great deal of money for Alan Curtis to raise. The world recession finally scotched the deal. The MG work force and car cannot insulate themselves from world conditions. Today in the Financial Times I see that tragically another 6,000 British Leyland workers, many of whom work on the TR range, are also on part time.

It is not the job of Members of Parliament to mislead their constituents into believing that there are easy solutions to their problems. It is no service to my constituents to tell them that they can be insulated from the world recession or that we can spend our way out. Nor is it a proper service to tell them that they can build an economic future for themselves out of a magnificent car which, for reasons beyond their control, has become a loss-maker.

I am pleased that a faint glimmer of silver in a very black cloud for the Abingdon work force is that, at the initiative of British Leyland, the management of that company, along with the town council, the district council and the trade unions, which have been enthusiastic about this idea, are to examine the Abingdon site with a view not to selling it off as a job lot but to seeing whether it can be divided into 1,000 to 2,000 units for other businesses in that area. I hope that this idea will bear fruit and will grow from the tragedy of the closure of the MG works. However bleak the present may look, inventiveness and resilience have not been suspended in Abingdon. I hope that this idea will shortly be examined by the authorities in Abingdon and the management of Leyland.

During the past ½ to 2 years Michael Edwardes has attempted to explain to the Leyland work force the problems that he and they as a company face in trying to sell cars at a time of world recession. Leyland's problems are manifold. Much of the message that Michael Edwardes has attempted to put across has been misunderstood—possibly wilfully in many instances, but perhaps not. He finds, as I am sure that many of those who head our large concerns find, that the difficulty of communication is extreme.

We are told "The two sides of British industry"—can there be a more arid phrase?—"met this afternoon." The gulf may be too wide. In trying to explain the problems facing his troubled company, Michael Edwardes appears to be calling across a chasm of distrust. The message never seems to reach the other side; it just echoes back to him. The message must be "If you cannot sell it you cannot go on making it. If there is no productivity, there can be no real pay increases. Unless unit labour costs and productivity are competitive, we export jobs, not goods."

I should like to hark back to an excellent speech made last week by my hon. Friend the Member for Carshalton (Mr. Forman). He said that the problem facing the Government, too, was that of communication—trying to bridge the gap of misunderstanding between the Government and the people about economic problems, realism on pay, production, inflation and the economy.

What are the problems we face? I should like the Government to implement one of our many manifesto statements: to institute a wider economic forum for explaining some of these problems to the people. It would help to build a bridge across the chasm of public misunderstanding. I should like that wider forum to be set up without delay.

There are some areas where the Government can positively help Leyland. An evil godmother was at the birth of British Leyland in 1968. She decided, instead of giving three or four blessings to the newborn babe that it should be plagued with the curses of strikes and management and union problems. More recently the plagues have come thicker and faster.

One plague is a high pound and a low yen. Since 1977 the pound's differential has reached 50 per cent. with the yen, 25 per cent. with the deutschemark, 20 per cent. with the French franc and 25 per cent. with the lira. The next plague would be a poor reputation on grounds of quality and delivery. Next would be the plague of the British disease of knocking. We are good at knocking this country and we have been knocking BL for too long. Lastly, we would be plagued, at a time when the company is teetering on the brink of survival or non-survival, with a world recession.

Times have now changed. Leyland has some new models and has instituted a programme of quality control on a par with anything on the Continent. The company has rationalised to a major extent. It is determined to turn itself round and get moving again. There is a sense of crisis not only in management but in the work force. Reality walks abroad at British Leyland now, but it is still in a crisis and it is teetering on the brink.

In the past, like an ageing heavyweight fighter knocked cold in many bouts—mainly by Japanese, Spanish and Eastern bloc contenders—Leyland had become a bit of a joke. But that fighter now has a new manager, a great deal of experience, training and preparation and a new style. It has lost a lot of weight, slimming down from a heavyweight to a light heavyweight, and it does not mind a fair contest in the ring, but it would like some help from its backers. It does not wish to go into the ring with one or even two hands tied behind its back.

The Government have given great help in many areas, but there are a few areas in which they should consider helping more. British Leyland is one of the largest employers in the country and the Government are a major shareholder, so all the help that they can give that company at this time must be welcome and wise.

Japan exports to the European Community 606,000 cars—that was the number registered in 1979—and the European Community exports to Japan 38,000 cars. In the first six months of 1980 Japan increased its EEC market share to 8 per cent. compared with 6 per cent. in 1979, yet unemployment is only 2 per cent. in Japan, while it is 8 per cent. and, tragically, rising in this country.

Why is this happening? First, for reasons beyond anyone's control, the yen has appreciated by about 20 per cent. in the past 18 months. It is difficult to sell cars in Japan, because the technical regulations are intense and the distribution system is hard to bust and is pretty well tied up.

The Government understand the Spanish situation, which borders on the intolerable. Spanish exports of cars to the EEC in 1979 totalled 50,000, while Spain's imports were only 300, because there is a tariff of 35-1 per cent. against imports into Spain, while it suffers only 4-4 per cent. in return. I know that my right hon. Friend the Secretary of State for Trade is aware of that matter and I ask him to consider it carefully to see what can be done to put it right as soon as possible.

The position in Eastern Europe is also intolerable. Those countries exported—let us call it dumped—39,000 cars to the EEC in 1979 and took only 400 cars in return. As far as I can see, there were no reciprocal sales. The result is that 6,000 British Leyland jobs have been given to Communist countries and our distributors face considerable problems. I am, of course, assuming that all those cars would be replaced by BL cars, which would not be the case, because we should have to fight hard against competition from France, Germany and elsewhere. Nevertheless, it is intolerable to have so many Eastern European cars imported into this country.

I am not asking for import controls. We should not follow the French in trying to find new ways of bending the rules but rather should press vigorously for the application of existing rules. It is intolerable that we appear to be the only country playing cricket by the rules. Our EEC compatriots will nick the wicket, bails and ball any day.

We have seen many examples of that. The French attitude towards us and the Common Market generally borders on the contemptuous. They have a history of bending the rules over for example, VAT on racehorses and the performance on lamb imports. The French have driven their foreign-made coach and horses through the Treaty of Rome so often that they make it look like the route nationale.

The French make our cars conform to their own type approval systems and to EEC directives, but inevitably we do not do the same. I ask the Government to support the European Commission in opening discussions urgently to limit imports of Japanese cars into Europe and the EEC. I also ask them to support, if necessary, voluntary restraint by the Japanese in the United Kingdom, which has already been agreed by the Society of Motor Manufacturers and Traders and the Japanese Auto Manufacturers Association, and to ensure that the Ministry of Transport obtains assurances that our EEC colleagues will accept our cars without the imposition of extra national type approval regulations, as we accept imported cars from those countries in the EEC.

I am not asking for protection from fair competition. Far from it. I ask that we stop playing our game of manufacturing cars when the players on the other side are using loaded dice.

Photo of Mr Gordon Bagier Mr Gordon Bagier , Sunderland South 7:54, 21 July 1980

I hope that the hon. Member for Abingdon (Mr. Benyon) will forgive me if I do not follow his comments too closely. I do not have a car industry in my constituency, but I sympathise with those who are being made unemployed in that industry. No one deplores the disappearance of MG more than those of us who are car lovers.

The Government's amendment to the Opposition motion includes the words: restoring a proper balance between the state sector and private enterprise". What does that mean? Where can we find evidence of what it means? We do not have to look far. The Secretary of State for Energy this afternoon made no attempt to reply to any of the allegations made by my right hon. Friend the Member for Plymouth, Devonport (Dr. Owen). Indeed, the Secretary of State started to give us a history lesson from 1945. Perhaps I shall be forgiven, therefore, if I look back to try to discover the philosophy of the Secretary of State and his friends.

The Conservative Government of 1953 denationalised the road haulage system. They did not denationalise the railway system and, as far as I am aware, the present Government have no plans to denationalise the railway system. The 1953 Government had a look round and asked "What are the most profitable sections of the public sector that we can get rid of?" They sold the road haulage sector at knock-down prices.

The Opposition of the day undertook that road haulage would be taken back into public ownership without compensation. Unfortunately, it was 1964 before a Labour Government were returned and at that time circumstances were such that it was impossible to implement that pledge.

The next practical example of what is meant by the "balance" referred to in the amendment came in 1970 when the then Conservative Government sold a couple of plums from the public sector. Thomas Cook was gathered up by the private sector. It was obviously a company with great growth potential and it was taken out of the public sector and handed over to the Government's pals for nothing but doctrinaire reasons.

The Carlisle State brewery was also sold. Those of us who were in the House at the time remember the gallant fight put up by my hon. Friend the Member for Carlisle (Mr. Lewis), who is a leader of the temperance movement and who believes strongly in public ownership. That brewery was smashed up for doctrinaire reasons and handed over to the Government's pals at giveaway prices.

We used to have two largely cooperative brewing businesses in the Northern region—the Federation brewery in the North-East and the Carlisle State brewery. It was no accident that that was where one could buy the cheapest pint. That is no longer so in Carlisle, but it is still true in the North-East, because the co-operative brewery continues there.

That is the background against which we must judge the Government's philosophy. Conservative Members will no doubt claim that the Government's current proposals for the public sector were included in their manifesto. They have claimed that all their misdeeds of the past year were included in the manifesto.

There is, however, a much more menacing significance about their proposals for the public sector. They will have a drastic effect on security, jobs and the long-term promotion prospects of those in the public sector. I declare my interest. I worked for 22 years in the nationalised railway industry and I am sponsored by the National Union of Railwaymen.

My hon. Friends have already referred to the proposals for the postal services and telecommunications. I should like to deal with the proposal for British Rail, and I am glad that the Minister of Transport is to reply to the debate.

I hope that the Minister will refute what one of his hon. Friends said that the structure proposed for the privatisation of the profitable sections of British Rail has the wholehearted support of Sir Peter Parker. My information is very different. It is that under the Government's original privatisation proposals there was no question of British Rail holding 100 per cent. of the holding company's shares. There has been a significant shift in the Government's approach in the past few months. Sir Peter Parker has welcomed it, because he is across a barrel in many ways. He runs a business in which the different parts are complementary. The railways side is complementary to hotels, to Sealink and to the property that British Rail owns. Everything interlocks.

Therefore, when proposals for finding cash for British Rail are made, Sir Peter is across a barrel. If the Government say that the cash limits must be held at a certain level, he often faces the choice of putting a coat of paint on the North British Hotel in Glasgow or having an extra couple of miles of long-welded track. The capital that he requires to run his main enterprise, British Rail, is denied him from Government sources. He has a tremendous problem.

If we are to take away from British Rail an income of about £ 40 million a year from the property services, hotel services and the like, how will that assist British Rail's main function? Will the Minister explain to many of his hon. Friends who live in the commuter belt down to the South Coast whether it will affect their fares structure? The balance will have to be found. Sir Peter Parker cannot give the money away and say that it is of no significance. He has to find it within the budget requirements of his own business. If that money is taken away from the income, the general money flow of British Rail's earnings, the Government must explain how that will help it do the job.

Some hon. Members—I say "some", because most are sensible—criticise British Rail, and indirectly the staff, for being overmanned and so on. I am sure that the right hon. Gentleman does not say that, but I see that the hon. Member for Enfield, North (Mr. Eggar) is nodding agreement with the allegation of overmanning. During the 16 years that I have been a Member, the British Rail staff has been dramatically reduced, with full agreement between unions and management.

The part of the industry with which I was connected—signalling—has been revolutionised. Hundreds of signalmen have agreed in consultation, because of the modernisation of the system, that their jobs shall be disposed of. All that has been done with co-operation and the spirit of maintaining a business, even throughout the difficult era of Dr. Beech-ing and the then Tory Government's policy of massively slashing lines. It was said to be done to make the system profitable, but that did not happen. What happened was what we warned would happen—that if one cuts the branches off the tree, the trunk will wither.

That is what worries those who are left in the industry. Sir Peter Parker said at the annual conference of the National Union of Railwaymen a fortnight ago, when he referred to his discussions with the Minister of Transport: There is common ground in these consultations, although each interest has a different approach to it. What I hope for from the Board's viewpoint is roughly this: that opportunities must be pursued to enable the railway subsidiary activities to expand and develop in open competition with the public sector. That is a very important request. I hope that the Minister will take it on board, because most of the nationalised industries are hamstrung in open competition with the private sector.

Sir Peter said: If there is to be, in the light of government policy, the introduction of private capital, then the Board's initiative in the development of collaborations can be crucial. In other words, Sir Peter was speaking about what would happen if the various sectors were to take in private capital and the board's holding went below 51 per cent. Most of my hon. Friends and certainly my trade union friends will fight to maintain 51 per cent. if possible. I hope that the Minister will ensure that the British Rail participation and shareholding in each subsidiary will be sufficient for it to have overall management control. It is crucial to the future of the railway's working.

It is not possible to run a Sealink system without the co-operation of British Rail. Everyone can see the reality of that. The work must be done in co-operation. There can be an argument about hotels, but British Rail is in the business of holidays and passengers. That is an integral part of its business.

In property, I see the money-grubbing fingers getting itchy. That is where the big profits are. That is the section that everyone is waiting to get his hands on. I hope to hear, though I very much doubt that I shall, an indication that the profits from the property side will be used to maintain the main trunk of British Rail.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

Would the hon. Gentleman care to reflect on the performance of British Rail hotels compared with, over the past 15 years, the performance of Trust Houses Forte or Grand Metropolitan?

Photo of Mr Gordon Bagier Mr Gordon Bagier , Sunderland South

Sir Peter Parker told the NUR conference and a meeting of hon. Members not long ago that, given the money, British Rail's hotels could be extremely successful, but starved of capital they could not; and they have been starved of it. The hon. Gentleman may well laugh, but British Rail's big success story in hotels because it concentrated all its hotel section capital on it, is the Caledonian hotel, which is now one of Britain's star hotels. The hon. Gentleman cannot laugh that off.

Photo of Mr Norman Fowler Mr Norman Fowler Minister of State (Department for Transport)

I think that the hon. Gentleman would be fair enough to acknowledge that British Rail hotels have been starved of resources not only for the past 15 months but for the past 25 years. The present Government are trying to do something about it.

Photo of Mr Gordon Bagier Mr Gordon Bagier , Sunderland South

I agree with the right hon. Gentleman about the hotels being starved of capital. I do not deny that. Unfortunately, the one option not open to British Rail is standstill; if it stands still, it will fall down. That is why in many ways I can understand Sir Peter Parker welcoming some opportunity of investment. However, I should like from the right hon. Gentleman an undertaking that if private enterprise goes into the hotel section British Rail will maintain a controlling interest. I suspect that it will not. I suspect that there will often be a sell-off inslead of an investment prospect.

I turn to an important constituency matter. There has not yet been an announcement about the shipbuilding industry, though we are warned that there will be a statement in the coming week. If, as is rumoured, the naval sections of shipbuilding are to be hived off from British Shipbuilders, that will crucify the merchant ship building section of the industry. We can say "Goodbye" to it for good. Its present structure is so cross-subsidised that one section could not survive without the other. That is the considered opinion of the whole British Shipbuilders board and of the Confederation of Shipbuilding and Engineering Unions.

Photo of Mr Robert Brown Mr Robert Brown , Newcastle upon Tyne West

No doubt the Government will claim that they had a mandate from the British people for such a statement. Does my hon. Friend agree that no one—not even the most diehard Tory—voted for persisting with a policy that would make sure that we did not have a British merchant ship building capacity in the future?

Photo of Mr Gordon Bagier Mr Gordon Bagier , Sunderland South

I am most grateful to my hon. Friend the Member for Newcastle upon Tyne, West (Mr. Brown). As he well knows, as a Member representing a shipbuilding town, the effect on Swan Hunter, for example, would be disastrous, because Swan Hunter is a mixed yard. It is a combination of five yards which do naval work as well as ordinary merchant shipping work. To separate it would kill it.

I warn the Government that there is absolutely unified condemnation of any proposal of this nature. It will be fought tooth and nail in this House and outside. If the Government have any fond ideas about appealing to the shipyard workers who work in the naval yards to separate from their colleagues in the merchant navy yards, they are living in a fool's paradise, because that will not happen.

British Shipbuilders deserves a first-call class pat on the back for its performance since vesting day. It has done this at a time of worldwide recession in shipbuilding. Even the Japanese have had to halve their capacity. Less than 10 months ago, British Shipbuilders said that in order to remain viable it needed 45 ships. There were horse laughs from Conservative Members and from people elsewhere. Yet British Shipbuilders has achieved its objective in nine months. It has done it because its representatives stumped the world to get the business. There has been Government aid as well; the intervention fund has been useful.

Here we have a success story. British Shipbuilders has a sales force that can go out to China and to any country in the world. It can say "What do you want—a merchant ship, a corvette or a submarine? You name it and we can do it, because we have a centralised sales force and we control the work."

That is the important factor. If that centralised sales force is broken up, it will be a crying shame and a great blow to the shipbuilding industry in Britain.

I want to mention one of the successful firms, Austin and Pickersgill. I say here what I have said outside to Mr. Kimber, the managing director, who frequently says that shipbuilding should be denationalised. He is the only person I know in management who says that, from the chairman of British Shipbuilders down. Mr. Kimber, of all people, should remember what happened to Austin and Pickersgill. It was taken into public ownership because of the crash of Court Line. It was part of a holiday firm empire, and because that part of the business fell down Austin and Pickersgill almost went to the wall.

It would have gone into the hands of the receiver if some of us had not appealed to my right hon. Friend the Member for Bristol, South-East (Mr. Benn), who helped to put through a measure taking Austin and Pickersgill into public ownership as a going concern. The Government of the day could have got Austin and Pickersgill at a knockdown price had they wished, but they did not do that. If it had gone into the hands of the receiver, every order on its books would have been lost. The work force at Austin and Pickersgill remember this, and so do the work force on the Wear. They will have no truck with any plans of the Government for denationalisation.

I have covered two industries in which I have an interest. I hope that the Government will take note of what has been said and that we shall have a reply from the Minister that is more detailed than the response from the Secretary of State for Energy to my right hon. Friend the Member for Devonport.

Photo of Mr Iain Mills Mr Iain Mills , Meriden 8:13, 21 July 1980

There is no doubt that in modern, sophisticated, industrialised countries there is a need for a mixed economy. It is difficult to imagine any other economic system that would allow at the same time the growth of the national product and a constant increase in disposable income and in life style and life standards.

It is perhaps a signal thought tonight that many of the problems that we are experiencing in the macro-economics of this country are influenced by our public expenditure requirements, which in turn are influenced by the size of our public sector, which again in turn is influenced by the number and the amount of subsidies needed to keep the nationalised industries afloat. Therefore, the amendment, which seeks to restore a proper balance between the State sector and private enterprise, is probably the most important part of the whole debate.

It would be useful to lay a few myths about nationalised industries. Having said that, I believe that we need a mixed economy, and I hope that hon. Members will allow me to look at some aspects of it. Nationalised industries seem inevitably to develop management structures which are complex, developing a cyclicly restrictive bureaucracy, which in the end is incapable of responding to outside stimuli and increasingly responds in a never-ending cycle of cost against price to its own internal problems.

I can think of very few areas in which it could be said that the management structures within nationalised industries have developed in the way in which most of us on each side of the House believe to be necessary in a highly competitive world, in which they need highly responsive customer-angled management, trade union officials and employees.

The responsiveness of organisations to outside influences and to the needs of their customers in terms of quality, delivery and supply must be the critical factor for any organisation, such as the coal industry, which is an extractive industry. Nationalised industries, because of this bureaucratic management structure, find it difficult to respond to innovation, to identify innovation or to see how innovation is needed.

There are notable examples which prove that nationalised industries can do it. Perhaps the hon. Member for Sunderland, South (Mr. Bagier), who has just spoken, will be pleased if I say that I am most impressed with British Rail's record of innovation. It is sad that the lack of funds within that organisation—because it is nationalised and because we are short of money—prevents it from capitalising on some of its advance concepts, particularly in export markets. I hope to be able to touch later on some ways in which the sale of British Rail subsidies may help to do just that.

Nationalised industries also find it difficult to demonstrate effectiveness in terms of cost and the accountability that comes absolutely from having to respond to the shareholder and private enterprise system within capitalism. The two systems diverge, and however keen, well-managed and good the workpeople may be, it is difficult to see how a nationalised industry can in the end achieve anything like the same rate of success as private enterprise in responding to cost pressures, efficiency pressures and customer pressures.

That is why I welcomed recently a number of changes in nationalised industries brought about by the Government's policies. I shall be grateful if my right hon. Friend the Secretary of State for Energy will mention this to my right hon. Friend the Minister of Transport, who has made a particularly well-marked, well-judged and effective contribution towards correcting the balance between private and public enterprise.

It was with full co-operation of the chairman of the board of the National Freight Corporation that the Transport Bill—now the Transport Act—allowed the Minister powers to create a new corporation from the NFC, a statutory corporation established under the Transport Act 1968. Its objectives were to take over and manage public sector road transport companies that were hitherto in the ownership of a British holding company,—National Carriers Limited and Freight-liners, which reverted later to British Rail. Seeing such familiar names as British Road Services and Pickfords returning to the private sector, with the co-operation of those who manage it, seems to Conservative Members to be an excellent achievement. The Government's intention is to achieve a substantial private investment in the NFC.

I em phasise to Labour Members that in this respect we are not talking about asset stripping. We are talking about restoring to the public the funds which are rightfully theirs. Hon. Members may laugh. Perhaps they will not laugh so much when we ask them how otherwise British Rail is to find the capital to electrify lines. How can it be done other than through private interest?

When the National Freight Corporation is finally floated on the market, the public and the nation will benefit. Indeed, this example, now embodied in the Transport Act, could be extended elsewhere with considerable merit.

Photo of Mr Ioan Evans Mr Ioan Evans , Aberdare

The hon. Member for Meriden (Mr. Mills) compares the public sector with the private sector. British Leyland failed under private enterprise, and it has now been taken into public ownership, where it is succeeding. However, it is having to compete with Renault, a publicy owned company. Is it the intention of the Government to return British Leyland to the private sector to compete with a company such as Renault, which is more successful because it has been publicly owned for longer?

Photo of Mr Iain Mills Mr Iain Mills , Meriden

I always appreciate the sincerity of the hon. Gentleman, but at the beginning of my discourse I made clear that I believe in a balance between public and private enterprise. There is no doubt in my mind that the vehicle industry across Europe involves substantial amounts of public ownership and public funds—not only Renault, which is largely owned by the French Government, but Volkswagen in Germany, and others. The Government recognise that fact and they do not look for a 100 per cent. private enterprise economy. We do not think that that is possible, and we shall not denationalise every single concern. However, we must look for opportunities whereby those who work within nationalised enterprises and those who benefit from their services will benefit from a return to private enterprise.

The sale of British Rail subsidiaries will be of enormous benefit to those who work within them. Just as the chairman and board of the National Freight Corporation welcomed its denationalisation because of the availability to them of private funds to allow them to develop their enterprises and to grow, denationalisation must be welcomed by those who manage the subsidiaries of British Rail, in that they, too, now have an equal chance with their competitors of access to funds to allow them to grow. It is a tragedy that the growth of British Transport Hotels, Sealink and other parts of British Rail has not been possible because of lack of funds.

I repeat the comments of my hon. Friend the Member for Faversham (Mr. Moate), who said that British Transport Hotels had built one hotel since the war and had lost £ 328,000 on a turnover of £ 38 million. That is a tragedy for the employees and the trade union officials. Should not they have the chance to see growth and new capital brought in, and to see the keen cutting edge of competition operating in their favour? My hon. Friend said that there are some excellent hotels in the group. Why should they not have access to private funds to allow them to achieve a successful commercial enterprise that will not only do well but will give a better guarantee of jobs? Are Labour Members saying that they will be happy with a policy that will lessen security and lessen opportunities for new jobs, which we badly need now?

If the track record in creating profits has been poor in the past, is it not right, if it is risky, for private enterprise to carry the risk? Why should it be risked out of the public purse? Is it not the job of British Rail to provide rail transport? Is it the job of British Rail to manage property, to build hovercraft or to run the Gleneagles hotel? The real job of those who are interested in transport is to improve rail services. If the funds that result from the privatisation of British Rail subsidiaries will allow more miles to be electrified, saving the nation energy and giving the passen- gers better comfort, we shall have done an excellent job.

In announcing the sale of British Rail subsidiary companies, my right hon. Friend the Minister of Transport said that he recognises that these subsidiary enterprises would not secure essential commercial freedom unless private capital was attracted in sufficient volume, thus maximising the opportunities for profitable services. We should not stop at the National Freight Corporation and British Rail—

Photo of Mr Donald Anderson Mr Donald Anderson , Swansea East

Where, in all the proposals for the subsidiaries, is there a promise of one extra penny for electrification of main lines?

Mr. Mills: If the hon. Gentleman reads the Minister's statement, he will realise that the moneys from the sale of these enterprises will be considered by British Rail. The Minister did not say that the money would be used for electrification, but if the proceeds of the sales go to British Rail it is up to the chairman of British Rail and his staff to decide how best to use them, and I know that one of their priorities is the electrification of lines.

I congratulate the Minister on his success, in the Transport Act, of releasing the forces of competition in British busways. I was horrified to read in my local newspaper that Midland Red, the Midlands subsidiary of the National Bus Company, was looking at 39 local services with a view to a package of economy measures. The introduction of private bus services is not only a good idea but will be essential if many of my constituents who live in rural areas are not to be marooned because of a lack of public bus services caused by the inevitable year by year decrease in services presented annually with increased fares, reduced services and fewer stops. The sooner that all those involved at executive level in the National Bus Company and in the trade unions who have criticised some aspects of this freeing of competition recognise that if we maintain the status quo there will be no status and no quo, the better. There will be fewer bus services. I urge my right hon. Friend to seek further opportunities to introduce better services through more encouragement of private bus services.

The same applies to the British Transport Docks Board. There is a further opportunity, on which my hon. Friend the Member for Faversham has already commented, and I urge my right hon. Friend the Minister to look at an organisation which operates 18 ports in Great Britain and handles over 20 per cent. of the ports' traffic. It is an ideal candidate for the introduction of private capital. I am not talking about asset stripping. I am talking about opportunity given to people who can see opportunities and attract the funds.

I also congratulate my right hon. Friend the Minister on the sale of motorway service areas and on the reduction of bureaucratic complexity in the road construction units, and on the transfer of many of the sub-units to private contractors. I also urge him to consider whether some of the funds and activities of the Transport and Road Research Laboratory can be moved from the public sector to private organisations. I know that the Minister is good at striking blows for the freedom of private enterprise and I am sure that he can see opportunities in that organisation.

It was encouraging to note that the Government have now grasped the realities of encouraging those who work in the coal industry. Labour Members have mentioned the coal industry. The morale of the miners in the Midlands must have been improved by the Government's statement of intent. One has only to look back at the miles of railway lines closed in the past 10 or 15 years—closures in which Labour Governments played a major part—and at the horrifying number of pit closures that happened directly under Labour Governments, to see that however tight the targets of the National Coal Board, the demonstration of skill, knowledge and belief in coal, backed up with enormous sums, is most encouraging. It is in terms of these enormous sums that we must grasp the hard realities.

One Labour Member said that he had spent 22 years in a nationalised industry. I spent 18 years in private enterprise. If only some of those companies for which I worked, which had close connections with the motor car industry, had had access to the huge sums referred to by Labour Members in respect of the nationalised industries, life would have been magnificent. However, private enterprise companies have to work hard. Their philosophy is a good example to follow—survival, gain, and growth through the use of private funds and through the identification of the right risks to take. Risks, opportunity and innovation often go together. I believe that we can, through further transfers from public to private sector operation, secure not only a better balance between public and private sectors but more security for the employees and better services for the customer.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington 8:31, 21 July 1980

The hon. Member for Meriden (Mr. Mills) referred to the possibility of our exporting rail products. A company in my constituency is in the forefront of such export trade. I spent this morning with Mr. Sullivan, who is an administrator for the federal railroad in the United States. He came to my constituency to see the new rail bus, a vehicle that has been produced by British Leyland at the Leyland National plant. It is hoped to export the vehicle throughout the world. Having sent a prototype already to America, we look forward to that product being sold throughout the United States.

Mr. Sullivan said this morning: What is more exciting is the potential this vehicle has for meeting the transportation needs of other smaller population centres throughout the United States. We have already been approached by the officials of several States DOTs, who expressed interest in operating Rail Bus transportation in their states. That is a success story, but there are other stories which are not so successful.

I want to consider tonight the effects of reductions in public expenditure on the publicly owned industries, particularly in the Northern region constituencies, and how that affects the creation of new jobs. All the constituencies in the region are littered with the dereliction of closed factories. The region is a depressing sight. In every town and community closed factories and long queues of unemployed only add to that depressed atmosphere.

We have to attempt to measure this decline in industry. To this end I quote a letter that was sent to the Secretary of State for Energy by Norweb, the electricity supply authority of the North-West. The letter is an adequate and eective indicator and yardstick of what is happening in the region. It gives the consumption of energy, and that portrays the measure of the problem. The letter states: When Norman Lamont visited us in April we emphasised to him the low economic growth of the north west of England… The Board asked me to bring this situation to your attention"— that is, to the Secretary of State for Energybecause electricity sales are a good indicator of the industrial vitality of an area… In 1955, 14.3 per cent. of electricity sold to industry in England and Wales was to Norweb consumers. By 1980 this percentage had fallen to 9.8 per cent. in a continuous downward trend. Total sales to industrial consumers were 7,885 million units in 1979-80, which was only marginally higher than the 7,835 million units achieved in 1970-71. During the same period the other 11 Electricity Boards have increased sales from 62,948 million to 72,343 million units. It is therefore not just a question of a lower share of a growing market, but a position of stagnation which is very worrying to everyone involved in industry in the northwest. My Board certainly share this concern at the deterioration over many years in the economic standing of the north-west, and feel that it would be helpful to have our views conveyed to the Government Why is this reduction in activity taking place? I can produce as evidence yet another letter sent by another industry—the BSC, Cumbria—to many of its customers and the local press and generally circulated to a number of interested bodies. This letter draws attention to a factor which is severely prejudicing the position of the British Steel Corporation and its ability to sell products at the right price in the world market. The letter says: BSC Cumbria, like all manufacturers within the public or private sector, are doing all possible to both cut their own internal costs and to absorb external price increases in order to continue to live in an increasingly price competitive world. This world is one in which price increases are either unobtainable for reasons of competition both in our United Kingdom and export markets, or where price increases, such as can be obtained, are at 5 per cent. maximum year on year. At this point the Secretary of State for Energy may wish to pay particular attention to these facts. And yet, our electricity and gas undertakings, knowing of the difficulties which we, their customers, are having to live with, notify us of price increases of 32 per cent. and 45 per cent. respectively from last year to this. There appears to be no possibility of negotiating with either of these undertakings and the commercial attitude is quite definitely one of 'take it or leave it'.". Hon. Members will be under no illusions about what "leave it" means. If one "leaves it", it means that one closes down, and in my constituency that means that 5,000 people will be out of work. The letter continues: In a full year the charges notified by these two undertakings will amount to over £ 550,000 and £ 560,000 respectively for BSC, Cumbria; an unbelievable increase in total of £ 1-2 million. That £ 1-2 million, attributable in just this year to energy price increases, is equivalent to the profits of the British Steel Corporation in Cumbria for the year before last. That is the magnitude of the increases that this Government require the nationalised industries to introduce.

The letter goes on: It is understood that what lies behind these appalling price increases is the policy of our Government's Department of Energy. But what sense can there be in pursuing a policy which imposes on industries already faced with enormous difficulties, price increases which they can neither discuss nor negotiate and which, at the end of the day, can only result in contraction both of their customer base and thus of their own business? Therefore, we have at present a problem for the British Steel Corporation which seems insuperable. On the one hand it has rising costs, particularly for energy, and on the other hand it has the rise in value of sterling and at the same time fairly constant prices world-wide for its products. Yet it is required to compete in the world market against companies that are exporting to us; importing from overseas in the case of the paper industry in America where energy is available at half the price that it is available at on the domestic United Kingdom market and in the case of Germany where subsidies in excess of £ 3,000 million a year are paid to the German steel industry. How is it possible for an industry in the United Kingdom to compete effectively on the world market when it is competing against countries that are willing, through political decisions, to implement, introduce and maintain subsidies on that scale? That is at the heart of the problem of many of the publicly owned industries in this country. It is also at the heart of many of the privately owned industries. They simply cannot afford to pay the price for energy and compete fairly and squarely on the world markets.

The Secretary of State for Energy should intervene now and tell us what is happening and whether his Government are willing to acknowledge that as a practical problem of manufacturing industries. If the right hon. Gentleman finds that difficult to absorb, let him consider the effect of the policy of high energy charges on BSC Cumbria and its plea of poverty over and above the so-called wise words of the former chairman of the BSC. I have a letter from BSC Cumbria to the Allerdale district council rates department, dated 10 June. It says: I would now like to refer to… the effects on BSC Cumbria of the most recent increase in rates which we calculate in total to amount to £ 167,000; this representing, across Allerdale, Copeland and Barrow Councils, an average increase of approximately 20 per cent the vast bulk of the rate burden being levied by your Authority. I explained to you at our meeting that this increase was outwith our capability to pay and that the reason for this was that we have no right to levy our customers for price increases and must live within the revenue which we can generate as a selling operation. I informed you that the market conditions in which we currently operate are as difficult as in the desperate recession of the early 1930s. Having commented that the total rates demand equates to a virtual levy of £ 210 on each employee within the Moss Bay and Chapel Bank sites, the letter continues: Therefore, and having failed to find a way forward via discussion to date, I am, on behalf of BSC Cumbria, who are the occupiers, for this purpose, seeking a major remission of Rates under Section 53 of the General Rates Act of 1967, on the grounds of inability to pay for the reason of poverty and would be grateful if you would formally put this application to your Council for a decision. The BSC, in national negotiations with Government Ministers, says that it does not want subsidies. The truth is that, in the constituencies, regional managers are going to local authorities and plead-ding poverty because they cannot afford to pay their bills. That is the measure of the impact of the Government's policy—the real measure, not the superlative intellectual talk of the House of Commons. That is the real effect on the publicly owned industries in the constituencies of hon. Members on the Labour side of the House.

It is the recognition of those problems in our constituencies that is determining the level of future unemployment. We know that if those publicly owned industries cannot afford to pay their bills, our people will lose their jobs.

Photo of Mr Allen McKay Mr Allen McKay , Penistone

Is my hon. Friend aware that, in my constituency the steelworks that Mr. MacGregor says is the jewel in the steel industry's crown is in difficulty because of electricity charges, part of which is in respect of the three months for which the steel industry was on strike and did not use electricity? That has increased the price per ingot tonne by £ 7. The rates that have to be levied because of the cost of the Government's policies on local government have increased the price of the ingot tonne by another £ 4, making a total increase of £ 11 per ingot tonne on last year's price.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

I hope that the Secretary of State heard that point. That is the problem, the case and the story that we are hearing from all parts of the country.

In 1972 a former Conservative Government introduced the Industry Act 1972. Section 7 (1) states: For the purposes set out in the following provisions of this section the Secretary of State may, with the consent of the Treasury, provide financial assistance where, in his opinion—(a) the financial assistance is likely to provide, maintain or safeguard employment in any part of the assisted areas, and (b) the undertakings for which the assistance is provided are or will be wholly or mainly in the assisted areas. The BSC plants are in assisted areas. I simply cannot understand why it is not possible to pay into the assisted areas and into the publicly owned indusries energy subsidies in line with that section of the legislation.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North 8:45, 21 July 1980

I apologise for not being in the Chamber earlier. I was involved in a Committee.

I shall restrict my remarks to two profitable industries in the energy sector—the British National Oil Corporation and the British Gas Corporation. Cash limits place constraints on capital investment by successful and profitable nationalised industries. The rationale for cash limits is clear: the Government wish to keep control over the PSBR. They also wish to put some pressure on nationalised industries to settle wages at reasonable levels.

Unfortunately, nationalised industries increasingly use up their cash limits by accepting wage levels that inevitably lead to a reduction in capital investment. The best example of that is the National Coal Board. However, the NCB has a significant advantage: it can increase its prices since effectively it is a monopoly supplier.

The danger is that nationalised industries will be forced by cash limits to take decisions that no similar private enterprise with the same turnover and capital investment decisions has to take. British Gas Corporation is an example. Its turnover amounts to thousands of millions of pounds. A change in the weather in winter can affect that turnover by hundreds of millions of pounds. Yet it is expected to react and act within cash limits measured merely in tens of millions of pounds. That is not practical.

The Government must devise a rolling cash limits system, preferably with a five-year projection, and take out of the cash limits as far as is possible that amount of expenditure which should be for capital investment and that which should be current expenditure. I recognise that that is complicated. Unless the Government examine that possibility, profitable nationalised industries will be forced to make uncommercial decisions because of the cash limits.

My second argument relates to the future ownership and structure of ownership of the BNOC and the BGC. It is an integral part of Conservative philosophy—a part of Conservative policy so eloquently portrayed in "The Right Approach to the Economy"—that ownership of nationalised industries should be spread directly to the people. "The Right Approach to the Economy" states Ownership by the State is not the same as ownership by the people. We have an opportunity to live up to that undertaking and pledge in relation to the oil and gas industries.

I am anxious about press reports. The Financial Times today and The Observer on Sunday suggested that the great Tory way forward was that the British National Oil Corporation was to sell £ 500 million worth of oil bonds. What possible purpose could that serve?

That operation will not spread ownership. We shall not have equity shares quoted. People will not be able to buy and sell bits of the North Sea or BNOC. The consequences are clear: people who would otherwise have invested in gilts, put their savings into the Post Office or bought national savings certificates will put their money into oil price-related stock with BNOC. Those who should benefit from North Sea oil or gas will not be able to buy that stock. The people who will invest will be those who have savings, people living in the South-East, the wealthy section of the community. When the scheme is announced, I shall not even be surprised to hear the cry repeated that it is Scotland's oil.

The proposals may be a face-saving exercise to make it appear that the Tory Party is changing the status quo. That is not enough. We have the opportunity to give shares to everyone in the country over 18, which would be a real way to spread ownership. Everyone could have the opportunity to participate in the wealth of North Sea oil and gas. My hon. Friend the Minister has studied the situation in British Columbia and Alberta. I believe that he, too, will have reached the conclusion that the administrative problems of such a scheme are not insuperable.

In a debate on the oil industry about two weeks ago, the right hon. Member for Plymouth, Devonport (Dr. Owen) made it clear that of the schemes that had come forward from these Benches for denationalisation or privatising or changing the status of BNOC, the option of giving shares directly to the people was the one that he found least objectionable.

It is not too late. We have the opportunity to give share ownership directly to the people. That opportunity should be seized with both hands. We shall greatly regret it if we let it go.

Photo of Mr Donald Anderson Mr Donald Anderson , Swansea East 8:53, 21 July 1980

A distortion of private investment in favour of the oil sector as a result of the policy that the hon. Member for Enfield, North (Mr. Eggar) fears can only be at the expense of private investment in industries and regions that desperately need such investment.

I make no apology for beginning with the Welsh dimension. Wales depends more on the public sector than any other area of Great Britain. The Government's negative attitude to the public sector causes more job losses and anxiety in Wales than elsewhere. All that the Prime Minister could say to us in Swansea last Saturday about the avalanche of job losses that has befallen us in the public and private sector in Wales was that the Welsh people should be prepared to move out of their own country, with all the echoes that that has of what happened in the 1930s. It is therefore hardly surprising that even at that Conservative assembly she had to slip out of a side door without answering questions, as if slipping out of a beleaguered garrison.

The steel crisis depends in part on the world recession but also on the Government's unreal cash limits and their timetable for breaking even. We in Wales fear that the measures of the success of the new chairman, Mr. MacGregor, will be a narrow profitability, which can result only in one or more of the two remaining bulk steel producers in Wales having to close.

The blows to the steel industry in Wales have a knock-on effect on the coal industry, with a number of pits being in jeopardy. It is an effect that will go through even to the rail industry as 80 per cent. of freight receipts in the region come from the passage of coal to the steel industry. That is bound to maken the Welsh valleys. It will be more difficult for the British Railways Board to maintain lines at the margin, of which there are many in Wales. The knock-on effect can only contribute further to the de-industrialisation of Wales.

Given the recession and BR's efforts to keep within its external financial limits, there is a danger that it will be forced to sell assets at knock-down prices. That will happen simultaneously with considerable pressure from the Government to keep down fare increases.

British Rail subsidiaries under the present financial structure are operating at a commercial disadvantage. I see no reason in principle why in certain areas private capital should not be attracted. For example, Sealink has bought from Harland and Wolff when commercial criteria might have persuaded it to buy from foreign yards.

Does the new commercial set-up that will result from the Government's proposals mean that it will make commercial but not national sense for it to refuse to go to a yard such as Harland and Wolff? That may be justified in the public interest, but I trust that the Government will not blame the public sector for the consequences.

Under present regulations, British Rail cannot operate "lease and lease back". However, that is achievable by simple statutory amendment. British Rail could have greater commercial freedom without going to the lengths that the Secretary of State is suggesting purely for dogmatic reasons.

The right hon. Gentleman says, as he told the House on Monday of last week, that the new subsidiaries—for example, Sealink UK Ltd. and British Transport Hotels.—will not have 51 per cent. public interest. He said that if there were that interest they would not be outside the PSBR; but there is already a precedent in the Government's proposals for the new British Airways and BP in its old manifestation before a portion was sold off. There was a 51 per cent. State interest, but BP was outside the PSBR. There are clear precedents for the Government if they want them. The money supply effect will be the same for the subsidiaries irrespective of whether they are within the public sector.

There is a real danger of the new proposals for privatisation leading to less competition. What is to prevent the competitors of Sealink, whether Townsend Thoresen or European Ferries, from buying into Sealink and thereby reducing competition on the Channel routes? It is even conceivable that B and I, a wholly owned Irish Government company, would buy into Sealink, which would have an adverse effect on British Rail's operation from Fishguard as B and I currently operates from Pembroke Dock.

Once the Government float the shares and make Sealink a private company, there is nothing they can do to prevent a "dawn raid"—namely, one of the commercial competitors of Sealink buying into the company and taking decisions that will have an adverse effect on the new company. Given the Government's proposals, that cannot be prevented.

British Rail's property holdings are the most glamorous part of the package. Why should the Government not allow those holdings greater freedom from ministerial control in incurring expenditure in the acquisition or development of property? The Secretary of State knows that under current procedures there are joint ventures. There is a hazy line between the operation of British Rail's property interests and the private sector. That could well be enhanced; the Government's proposals involve that glamorous incentive to encourage private sector capital into the new companies. In the 1960s, British Rail was forced to sell many of its property interests at knock-down prices. There is a danger that the Government will force British Rail to do that again.

I hope that the Secretary of State will answer my next point. In the debate on 14 July he said: The proceeds will go to British Rail. We have made that absolutely clear."—[Officiul Report, 14 July 1980; Vol. 988 c. 1056.] Does that mean that any receipts will immediately go to British Rail? Will part go and the remainder be deferred? Will they be used by the Treasury to reduce British Rail's total debt, when the oldest debt has the lowest interest rate? Will the receipts obtained by British Rail as a result of the sale of assets be used to reduce the external financial limit on British Rail? If so, they would not be available for electrification and other urgently needed investment outlets. British Rail would have no incentive to maximise the profitability of those subsidiaries.

This financial year, British Rail's property holdings will contribute about £ 50 million to its general coffers. Will the Secretary of State give an assurance that under his proposals no less than that amount will be available to British Rail from property interests? He knows that British Rail desperately needs capital. Lately, the levels of investment have been the lowest of any railway undertaking in Europe. British Rail needs capital for its inter-city business, to maintain the network and for main-line electrification.

What trade-off will compensate British Rail for the loss of those interests in terms of extra cash for investment in the main-line business? In the proposals to assist British Rail, is the motive to compensate the community fairly or to give the private sector a quick buck? Are the Government following their ideological wish to roll back the public sector so that they can raise a cheer at the Tory Party conference? The Government have been playing with fire. In the past few years substantial industrial harmony in the railway industry has been carefully built up by the present chairman. As a result of the Government's dogmatic exercise, there is a danger that that will be lost. The proposals are irrelevant to British Rail's needs. The Government have no policy for the railways. They have concentrated on the subsidiaries at the expense of the investment needs of the 1980s—namely, electrification, the Channel tunnel and the opportunities that public rail offers in an energy-hungry world.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar 9:04, 21 July 1980

In winding up for the Opposition, I, too, must remind the House that this is the third in a series of Supply days in which we have sought to focus attention upon the major economic problems of the country and the main defects of the Government's economic policies. There can be no doubt about the gravity of our situation. It has been referred to by many of my hon. Friends, who spoke from their direct constituency experience. However, hardly a word about the economy escaped the lips of the Secretary of State for Energy when he spoke earlier in the debate.

As we know, unemployment last month leapt to the post-war record of 16 million—an increase of about 350,000 over what it was when the Government took office. The whole country, and I believe even the Government, are bracing themselves for the shock of tomorrow's figures. The British economy was at first sluggish in response to Government measures; difficulties were heaped upon it in the summer of last year. It tottered along until about March, when the collapse really began. Industrial output in the March to May quarter has fallen quite dramatically. As we all know, the output of manufacturing industries was down some 8 per cent. in May compared with what it was a year ago. Nowhere in the economy is there at present a gleam of light. Output is down, but investment, particularly in manufacturing industry, is falling more steeply. The trends suggest that we shall experience a contraction of 8 to 12 per cent. in crucial investment in manufacturing industry. Exports are falling as well.

How can it be otherwise when we have a rising exchange rate and when we are busy pricing ourselves out of the world market? It would be difficult enough to hold our own in the world market if world trade was buoyant, but it is not. As the House will recall, according to the latest OECD survey the world economy is now expected to grow by less than 1 per cent. in the period 1980-81. The prediction is for a growth of unemployment in the OECD area from just under 20 million to more than 23 million in mid-1981.

In her weekend speech at Swansea, the Prime Minister said that some part of the difficulty was due to the world recession and that the other part was self-inflicted. I do not quarrel with that. What she did not point out in relation to the world recession was the negative part which she herself played in the Venice summit of Seven—those countries which collectively dominate world trade—in making sure that no significant new action was taken to deal with the menacing problems of global recession. Wounds have been inflicted upon the whole British economy, but nowhere has the attack been more vindictive and absurd than on the public sector of industry, which is the focus of today's debate. That is a sector of British industry whose success is indispensable to our economic health.

We know of the Government's general approach to the nationalised industries. After 10 minutes of almost total triviality, the Secretary of State for Energy had the gall to claim that the Government had a balanced approach—practical and questioning—to the nationalised industries. That was a theme which a number of his hon. Friends developed. I do not believe him. I take as a rather stronger and better guide to the Government's approach the Prime Minister, who declared that it was her major purpose to roll back the frontiers of the State, and I take even more seriously the remarks of the Secretary of State for Industry, who I am delighted to see in his place. It was he who last week reminded himself and us that nationalisation was, as he once described it, one of six "poisons" which were circulating in the bloodstream of the nation. So much for a balanced approach.

When I listened to the right hon. Gentleman, I was reminded how in medieval physiology the four chief fluids of the body—blood, phlegm, choler and melancholy—were, according to their particular mix, held to determine a person's physical and mental qualities. We recall the prescription that followed from such primitive medical analyses—the leechings, the bleedings, the starvings and the amputations.

The attack on the nationalised industries has been hardly less crude and ill informed. Not a week passes without some fresh statement on how the Government intend to injure or reduce the prospects of those industries. Only today the Secretary of State for Industry made his statement on how he intends to break the telecommunications monopoly. We had a statement, a half statement or a hint from the Secretary of State for Energy about new measures in electricity supply which I hope his right hon. Friend the Minister of Transport will amplify in the course of his remarks later. Last week we had statements from both right hon. Gentlemen about what they intended to do with the British Rail subsidiaries, on the one hand, and the Post Office proper, on the other.

The pattern of attack is entirely clear. First, the nationalised industries are being arbitrarily severed from all the ancillary activities and enterprises that they have developed, and developed for sound operational reasons often long before they were nationalised. But, as we know, these subsidiaries are profitable, and it is the doctrine of the Conservative Party to dispose of everything that is profitable and to return it to private ownership.

Secondly, the Government are forcing the sale, in part or in whole of those public corporations which are in surplus. The National Freight Corporation is to be disposed of and British Airways and British Aerospace are to be turned into companies and forced to dispose of roughly half their shares. The Minister and his colleagues are still dithering about how they can best dispose of property represented in the British National Oil Corporation.

Thirdly, the nationalised industries are being subjected, wherever possible, to increasing competitive pressures: in the Post Office; in British Airways with, above all, the operations of the Civil Aviation Authority and its changed directives about licensing private airlines; and in the National Bus Corporation and municipal bus services with the new licensing policies in the Transport Act. All that has been done when the Government know full well that to supply a wide public service—air, bus or post—it is essential that cross-subsidisation takes place so that the profitable traffic can sustain the inevitably unprofitable services which are of benefit to so many people.

The fourth and still more serious point of attack—my right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) referred to it earlier, so I need say very little about it—is that the Government have put the nationalised industries into a financial straitjacket. On the one hand, they are reducing their lending to the nationalised industries and, on the other hand, they are imposing cash limits based on totally unrealistic inflationary forecasts—a point made by the hon. Member for Enfield, North (Mr. Eggar) a short time ago.

Over the Government's five-year period we are to have a massive turn-round in the borrowing position of the nationalised industries—a turn-round of about £ 23 billion. This turn-round in nationalised industry finance can be achieved only by sending a wave of deflation through the economy. Prices, charges and fares will rise steeply and both industrial and domestic consumers have to carry the load.

I have confined myself to the nationalised industries, the public corporations, and the damage that has been inflicted upon them, but I want to turn to the crucial area of public enterprise and the manufacturing sector of industry. The Govenment's basic, negative approach was made plain by the Secretary of State for Industry as long ago as 6 November on Second Reading of the Industry Bill. He said: There should be no need for public sector investment finance in manufacturing industry."—[Official Report, 6 November 1979; Vol. 973, c. 240.] The fact that there is such a need is an entirely different matter, but there should not be. The first instruction of the new Act is to place on the National Enterprise Board the duty of disposing of, not acquiring, investment in the manufacturing sector.

What is happening now was entirely predictable. The NEB is selling its most profitable holdings. Ferranti, ICL and others have been disposed of. Alfred Herbert's has simply gone to the wall. That is a nonsensical policy. As the new chairman of the NEB—the Secretary of State's personal appointee—pointed out in his annual report in April; The present form of financial duty laid down by Government can only make sense if the NEB maintains profitable investments as a means of supporting its new projects during their start up and loss-making years. Clearly, the policy of forced disposal of profitable firms will make that task impossible.

The NEB has been allowed to retain one potentially important role in some areas of high technology where the capital market cannot be relied upon to supply the necessary risk capital. One is inclined to ask how that can be, and the Secretary of State for Industry's philosophical worries about that matter have left him virtually paralysed.

The new board decided in December to back the Inmos project with a second tranche of £ 25 million. In April, the chairman said in his report: We took this decision conscious of the risks inherent in such a bold innovative venture… At the time of writing, three months after our decisions, we await a decision by Government… This is a worrying delay to a project where success depends on bringing satisfactory products to the market at the right time in the face of strong foreign competition.' Another three months have passed since then and still the Secretary of State for Industry wrestles with his conscience and dithers with his decision.

We should be clear about the main thrust and purpose of Government policy. It is, at best, to halt the expansion and, at worst, to enforce a major contraction of the basic industries and public services provided by public corporations. Secondly, it is to drive public enterprise out of the manufacturing sector of British industry.

We could take each of the nationalised industries and firms and judge its performance against the purpose of its original acquisition or establishment. I believe that we should find, as we have in the past, that the case for retaining those industries in public ownership and assisting them in their activities is overwhelming. If they are damaged or hobbled, services will suffer. If they are destroyed, there will be no serious possibility, certainly among the main nationalised industries, of private enterprise taking them over.

There has always been a wider economic case for public ownership. Nationalised industries collectively account for between one-quarter and one-third of total investment in plant and machinery in British industry. They can, and do, take a long-term view of national needs. Indeed, they have to do so, because the time scale of their investments often stretches for a decade or more.

With few exceptions, private corporations, however large, are unable to take so long a view. It follows that nationalised industries are relatively free from the damaging effects of the business cycle. With public finance they are able to sustain their investment programmes, to the great benefit of the whole economy. I repeat "the whole economy", because a large part of nationalised industries' equipment programmes sustains the order books of private industry. The contraction of nationalised industry programmes has a directly damaging effect on the private sector. In terms of economic management, when private industry is depressed the expansion and bringing forward of nationalised industry expenditure can act as a major counter to deflation.

The programmes of nationalised industries have given a basic stability to the British economy and have helped to sustain full employment and economic growth through most of the post-war period. They are being denied the opportunity to play that role today. I find that particularly odd, bearing in mind that the Prime Minister came back from the Venice meeting with a commitment to break the link between growth and shortage of oil, which is holding back the economies of the Western world.

The Prime Minister came back with policies agreed to double the supply and use of coal by 1990 and to carry out other major projects for energy production and energy saving in the economies of the West. There is no reflection of any of that thinking or objective in the Government's programme. Not only in Britain but in many other parts of the world the expansion of energy supplies will have to come about through the expansion of publicly owned industries.

Not to recognise this is a major defect in the Government's thinking.

My second main point concerns what I call the new role of public enterprise in the manufacturing sector of British industry. Like others, I am concerned—and the Secretary of State for Industry has frequently addressed himself to this question—about the relative failure of Britain's manufacturing' industry in terms of output, competitiveness and share of export markets over the past 20 years. It is in this sector that we shall win or lose the battle for our future.

The question that I ask myself, and that the right hon. Gentleman has asked himself, is why the decline over the past 20 years has taken place. The Secretary of State addressed himself to the question at his party's annual conference, when he said that, whatever else was the cause, it was "not the failure of private enterprise".

As no one but private enterprise has until recently entered manufacturing, it is difficult to see who else can be blamed. So the right hon. Gentleman had to widen the explanation, to assert: For decades and generations private enterprise has not been given the climate in which it can produce its beneficent results". I repeat "decades and generations", including, presumably, the 13 years of uninterrupted Conservative rule from 1951 to 1964, when the Conservatives "set the people free" and "invested in success"; including, presumably, the inter-war years, when the balance of industrial, social and political power was massively tilted in favour of industrial and commercial interests.

The facts of our manufacturing decline are not in dispute. In 1963 our exports exceeded our imports by about 100 per cent. By 1970 they exceeded imports by only 50 per cent., and last year by only 5 per cent. This year we expect there to be no manufacturing surplus at all.

We in the Labour Party have drawn very different conclusions from this relative decline. Above all, we have noted the reluctance to invest in Britain and the willingness and facility to invest overseas. For the past 15 years direct investment overseas by United Kingdom manufacturing companies has increased two and a half times faster than their investment at home.

We have noted, too, the persistent undervaluation of the engineer in British industry, the point so strongly made in the recent Finniston report. We have also noted the various policies pursued with insufficient success in the post-war period. We invested immensely in higher education. We transformed Britain's road, rail, air and sea communications. We made our investment incentives in industry among the best and most generous in the world. After all this had been done, who will forget the cri de coeur of the last Conservative Prime Minister, the right hon. Member for Sidcup (Mr. Heath), in his interview with The Director magazine in June 1973? He said: The curse of British industry is that it has never anticipated demand. When we came in we were told there weren't sufficient inducements to invest. So we provided the inducements. Then we were told people were scared of balance of payments difficulties leading to stop-go. So we floated the £. Then we were told of fears of inflation: and now we are dealing with that. And still you aren't investing enough. There is a fundamental weakness, a weakness on the supply side. That is why as a party we made the historic decision in the 1970s not to wipe out the private sector in manufacturing industry but deliberately to cross its frontier with public enterprise on a substantial scale. It is here that the ideological folly of the Government is so clearly demonstrated. They believe that public enterprise is wrong in principle and bound to fail. Where it succeeds, they insist on selling it off. Where is has yet to succeed, they wish to deny it the possibilities of rescue or success. All the time they have failed to recognise that the great simplicities that govern their own economic thinking—the spur of profit, the incentive of great reward, the virtues of competition—are largely irrelevant today to the great private corporations which conduct the main part of our manufacturing business.

Let me jog the memory of the Minister of Transport, who is to reply to the debate. Does he really think that Rolls-Royce lacked competition before 1970? Does he really think that what motivated the management of Rolls-Royce—before the Government decided to rescue it from collapse by nationalisation—was the dividend to be paid to its shareholders? I doubt whether any of the directors or managers ever owned more than a handful of shares. They were motivated, narrowly, perhaps, by managerial perks and rewards, but more broadly by their wish to see success for what was, and is, a great British engineering enterprise. So what led to the downfall of Rolls-Royce? It was lack of investment, overstretched finances and management mis-judgment.

Again, was not British Leyland, before the rescue in 1975, a major private business, managerially controlled? Would even this Government really have accepted its collapse, with the direct and indirect loss of half a million jobs and the loss of perhaps £ 2,000 million on the balance of payments? Does the Minister really think, like his right hon. Friend the Secretary of State for Industry, that free enterprise is not only the best way yet invented towards full employment and rising standards of living, but it is the only way to secure these conditions in freedom"? Has Renault, wholly owned by the French State since 1945, not only expanded employment and expanded output but in some mysterious way avoided tyranny in France?

Do not the Minister and his colleagues understand that in a world of increasingly complex and expensive technology even large private corporations are dangerously slow to innovate and often unable or unwilling to take the necessary risk?

I do not want to add unnecessarily to the Government's difficulties, but the more vehemently they assert their total commitment to their present policies, the more that ruin spreads in British industry, the more obvious it is that doubt—indeed, major doubt—is seeping in. There is doubt about the whole economic strategy that the Government are pursuing, and beyond doubt there is fear that the social and political consequences will be catastrophic.

Faced with the virtual collapse of the steel industry, the Government have this year doubled the assistance that the Prime Minister had sworn not to give. Worse still, from the Government's point of view, the great economic gurus of the present Conservative faith have now confessed to recent and terrible doubts. I know that the Prime Minister is sensitive about these gentlemen, Professors Milton Friedman and Von Hayek. She went out of her way in Swansea on Saturday to say: Our opponents say that the Government is deliberately depriving people of jobs in obedience to some fanatical and obscure economic doctrine invented by columnists. Yes, that is precisely what they are saying. But now what does Professor Friedman have to say? Money supply, of course, is still the ark of the covenant, but the PSBR is a different matter. That can and should be relaxed, as my right hon. Friend the Member for Leeds, East (Mr. Healey) has frequently urged. So what happens to the Red Book forecast and the commitment to the virtual elimination of the PSBR by 1984?

Then, even worse, there is the case of Professor Von Hayek. He is still in favour of monetarism but, as he revealed in his letter to The Times last month, it takes time, and there may not be enough time. So, after all that has been said about free collective bargaining, about the sheer impossibility of inflation so long as the money supply it sightly controlled, the Government must, according to the professor, at once rescind all the special privileges which have been granted to the trade unions by law… only this can make it possible for the beneficial effects of such a money supply policy to manifest itself in time before the term of the present Government runs out. Finally, and most damaging, we had the speech of the Chancellor of the Exchequer of 15 July to the Coningsby club. Up to that moment, whatever the short-term planning and however improbable the way ahead may have seemed, the phoenix of free enterprise was destined to rise from the ashes of our industrial collapse. But now, after that speech, we are asked to face the fact of a permanent contraction of manufacturing employment.

The possession of North Sea oil, so the Chancellor tells us, means a permanently high exchange rate for the pound and a consequential inability to compete over a wide range of manufactures. Thus, under the present Government's mismanagement, the very possession of oil, which should enrich us, has been turned into an instrument for our own impoverishment. That is the economics of bedlam and of failure.

What we are experiencing is basically an appalling intellectual recidivism by the Conservative Party—a return to free market dogmas of the most extreme kind; an expunging from its memory of the whole post-war experience which, in spite of its setbacks, more than doubled the standard of living of the British people: a lurch back into the exhausted economics and fallacies of the inter-war years, into the terrible political fatalism and absurd belief that economic regeneration was the consequence not of Government action but of Government inaction; the belief that if only inflation can be defeated all will be well—just as if from 1924 to 1939 we did not have a decade and a half of stable, even falling, prices and along with with it the waste and misery of industrial decline, endemic unemployment and unacceptable poverty. To support today these outdated cliches is nothing less than an intellectual disgrace.

I am reminded of the words of John Maynard Keynes of some years ago. He said: Practical men who believe themselves to be quite exempt from any intellectual influence are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I leave it to the House to decide, as hon. Members survey the Government Front Bench, who fall into the category of practical men… the slaves of some defunct economist and who are the Madmen in authority… distilling their frenzy from some academic scribbler of a few years back. I tell the Government to open their eyes, get rid of their dogma and recognise that our major problems have now become a lack of effective demand and that great resources of wealth and output lie idle now and must be brought back into use. They must recognise, too, the crucial need to improve the supply side of the economy, and that that will need more than the motor of private enterprise. It will need the strong thrust of the engine of public enterprise as well.

Finally, let them recognise that they will get nowhere by attacking one half of the nation. Rather, success will require a joint effort of both our productive classes—the working class and the middle class—the earning classes who, with their different traditions, skills and virtues, made us prosperous in the past and, with the right policies, will make us prosperous again.

Photo of Mr Norman Fowler Mr Norman Fowler Minister of State (Department for Transport) 9:34, 21 July 1980

I shall seek to reply to as many of the points raised in the debate as I can. Clearly, one of the central themes of the debate—and I, perhaps unlike the right hon. Member for Stepney and Poplar (Mr. Shore), have listened to most of the debate—has been the balance between the public sector and private enterprise. It has been dealt with by my hon. Friends the Members for Gillingham (Sir F. Burden) and Seven-oaks (Mr. Wolfson), who stressed the importance of public sector staff. I agree with their remarks. It has been stressed by my hon. Friend the Member for Faversham (Mr. Moate) in an impressive speech and by my hon. Friend the Member for Flint, West (Sir A. Meyer), who pointed out that nationalisation in itself is no guarantee of the future or prosperity of an industry. I also pay tribute to the speech of my hon. Friend the Member for Abingdon (Mr. Benyon) on the provision of labour.

We also heard speeches from the hon. Members for Ogmore (Mr. Powell), Newcastle-under-Lyme (Mr. Golding) and Consett (Mr. Watkins). We heard a further variation from the right hon. Member for Plymouth, Devonport (Dr. Owen), who talked, in passing, about the mixed economy, without stopping to define his intention. I shall return to the right hon. Gentleman's remarks in a moment.

It is that balance between the public and private sectors that lies at the heart of this debate. The introduction of private capital was touched on in several speeches, and there was a ludicrous charge of asset-stripping from the right hon. Member for Devonport. The Government's position is clear: we are introducing private capital into State-owned industries when it is in the interest of the industry and the public to do so. We see no advantage to the economy, the consumer or the work force in keeping businessses in the public sector when they can survive better outside, with access to private capital and with freedom from controls and Government interference. Surely, the whole characteristic of this approach is an industry-by-industry examination of the position and solutions geared to meet the particular and specific needs of those industries.

My hon. Friend the Member for Faversham and my hon. Friend the Member for Meriden (Mr. Mills) welcomed the Government's provisions for the National Freight Corporation and British Rail subsidiaries. They asked further about the position of the British Transport Docks Board. The ports operated by the British Transport Docks Board were originally owned and controlled by the private railway companies of the last century. Following rail nationalisation in 1947, the railway ports were administered as part of the British Transport Commission, and, following the Transport Act 1962, with a few exceptions, they came under the control of the British Transport Docks Board. The boad now operates 19 ports, including Southampton, Hull, Birmingham, Cardiff and Lowestoft. They handle about a quarter of the total port traffic in Great Britain.

In March I told the House that I had asked Sir Humphrey Browne, chairman of the British Transport Docks Board, to explore ways of introducing private capital into the board's undertaking, in consultation with the trade unions and others concerned, and to report to me. The chairman has now reported, and I have consulted a merchant bank. I am glad to be able to tell the House—

Photo of Mr Donald Anderson Mr Donald Anderson , Swansea East

Is it not in the normal tradition of the House for a statement of this importance to be made at the end of Question Time?

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Ministers choose their own moments to make statements.

Photo of Mr Norman Fowler Mr Norman Fowler Minister of State (Department for Transport)

What I am now saying follows my statement to the House in March. I intend to respond to the request of my hon. Friends and to set out my intentions.

I am glad to tell the House that the Government have decided to proceed with plans to introduce private capital into the board. I propose to proceed with the preparation of legislation to make the necessary changes in the board's constitution in order to transform it into a company and give me the powers to sell shares in it.

I wish to make two essential points about this proposal. First, the plans that we have set out envisage that the board's undertaking will be maintained as a single management unit. In other words, there will be no break-up or disposal of individual ports. Secondly, although the Government will take a 51 per cent. holding, this will not involve any intervention in the running of the business, and existing controls under the 1962 Transport Act will be removed. Legislation will be needed and I intend to introduce the proposals to the House at the earliest opportunity.

The advantage of this course—I add that the chairman of the BTDB accepts this—is that it will give full commercial freedom to the board. The board will no longer be subject to intervention and interference from the Government. This is a course that recognises the success of the management and work force and it means that they will be responsible for their own future without Government controls on investment.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar

The right hon. Gentleman must realise that there is a great deal of resentment at what he is doing now. The British Transport Docks Board, with its extensive dock facilities, enters into the constituencies of many hon. Members. I do not see why the Minister should not come to the House and make a proper statement in order to give hon. Members on both sides the chance to question him properly.

Photo of Mr Norman Fowler Mr Norman Fowler Minister of State (Department for Transport)

I was about to give way to one of the right hon. Gentleman's hon. Friends who wants to ask a question about this subject. In the time that I have done the job of Transport Minister, I have, in total contrast to my predecessor, come to the House and made statements. I have made a statement previously on this matter. If the right hon. Gentleman wishes to compare my record with that of my predecessor, I suggest that he does so.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Treasury)

Since the Minister is abusing the House in making a statement during a winding-up speech, will he come to the House again and give hon. Members a chance to ask questions after a statement in the afternoon?

Photo of Mr Norman Fowler Mr Norman Fowler Minister of State (Department for Transport)

If the hon. Member has only just woken up to the fact that these are the kind of proposals that we have for the BTDB, I do not know what he has been doing—especially as I made my announcement about this on the Floor of the House last March. The fact is that we are developing our policy. I take every opportunity to explain the development of our policies on the Floor of the House. I am doing that now.

Photo of Mr Gordon Bagier Mr Gordon Bagier , Sunderland South

Is not what the Minister has just said in this context a distinct abuse of the House? As the senior Minister replying for the Government on behalf of all nationalised industries, will he agree that to take up this amount of time is litile short of disgraceful and is dodging away from the cross-examination that he would otherwise receive?

Photo of Mr Norman Fowler Mr Norman Fowler Minister of State (Department for Transport)

I repeat what I said a moment ago. On the question of taking up time, I have given away five minutes so that another hon. Member from the Opposition Benches could get into the debate. I have been here listening to the debate from beginning to end, unlike the light hon. Member for Stepney and Poplar.

Above all, our proposal recognises that there is no need for the British Transport Docks Board to remain in the public sector under the restrictions and threat of restrictions that that involves.

Again, that underlines the Government's determination to have an industry-by-industry examination. For that reason, we have not chosen a single standard way to introduce private capital. It is no part of our intention to move from the inflexibility favoured by the Opposition to a different inflexibility. We have deliberately chosen different courses to introduce private capital into, for example, the National Freight Corporation—where the Government do not seek a shareholding—or into British Rail subsidiaries—where, ultimately, the subsidiary companies will have a minority British Rail interest—or into British Airways and British Aerospace. That those courses are different is a matter of strength, not weakness.

The subject of British Rail subsidiaries was raised by a number of hon. Members, including my hon. Friends the Members for Gillingham, Sevenoaks and Faversham. It was also raised by. the hon. Members for Swansea, East (Mr. Anderson) and Sunderland, South (Mr. Bagier), who spoke of the menace that it posed. I hope to persuade him that his fears are wholly misplaced. I agree entirety with those who argue that the interests of the public must include the interests of those who work for British Rail subsidiaries, and also those who have an interest in seeing those businesses develop.

The position is clear. For years companies such as British Transport Hotels and Sealink have been starved of investment. Until recently they came low, if not bottom, for management attention within the railway industry. Today, there is no serious figure inside the industry who believes that things should continue as they are, that the status quo should be preserved.

There is no serious figure inside the industry who believes that the problems of the subsidiary businesses have appeared in the past 15 months. They have been evident during the past 20 years. As we know to our cost, for more than half of those 20 years the Opposition were in Government. There is no serious figure inside the industry—or inside any other industry—who is satisfied that one of the nation's leading hotel groups is producing £ 300,000 profit on a £ 38 million turnover. I say to the right hon. Member for Devonport that there is no serious figure inside the industry who believes that the chairman of British Rail is party to an agreement which he does not feel is in the interests of the railway industry. There are enough men on the Opposition Front Bench who know the truth of that.

When the plans were announced, the chairman of British Rail said in a press release that the British Railways Board welcomes the announcement by the Minister of Transport today… that private capital is to be introduced into its main non-rail subsidiary activities and plans, using its existing powers, to set up a holding company". Sir Peter Parker said: Railways are a creative business. The introduction of private capital should increase the scope and unlock the great potential of the subsidiary businesses. Investment has been limited and because of the thin spread, the subsidiaries have been starved. The proposed changes should also result in benefits to the main rail business. The right hon. Member for Devonport quoted the Financial Times at every point during his speech. But the Financial Times also said: The plan for bringing private capital into some of British Rail's non-railway activities which was outlined yesterday… is a victory for commercial good sense.

Photo of Robin Cook Robin Cook , Edinburgh Central

Will the right hon. Gentleman give way?

Photo of Mr Norman Fowler Mr Norman Fowler Minister of State (Department for Transport)

No. The Opposition motion claims that our policies are against the public's interest. It makes sense to seek opportunties for these businesses, to see them grow and not decay and to give managements the freedom that they should have.

The standards for judging the performance of a nationalised industry are the same as for any other industry. Performance must be judged by the standards of goods and services, by the prospects that they bring for their work forces and by their ability to generate wealth and contribute to national resources. Our complaint is that all too often nationalised industries have failed on those counts.

That failure is not necessarily the result of the management's action. It might be because of long-term lack of investment. That is one of the reasons why we are introducing private investment. Alternatively, it might be the result of bad productivity that has made goods uncompetitive. I agree with what the hon. Member for Bristol, North-East (Mr. Palmer) said about that. It might have resulted from a lack of normal competitive forces.

One of the main thrusts of the Government's policy is to do what we can to make the nationalised industries more accountable to the public and more responsive to the needs of the consumer. I say to the right hon. Member for Devonport that that is the characteristic of our approach. For too long the customer has taken second place. Surely the customer's needs should come first, whether they are served by public industry or private industry.

The best way to make the nationalised industries more responsive is to expose them to fair competition with the private sector. We have been reviewing the areas where the nationalised industries have been unnecessarily protected from the rigours of the market place.

The Transport Act will open up bus services to exactly such competition. My right hon. Friend the Secretary of State for Industry made an announcement in the House today about the relaxation of the British telecommunications mono- poly and the post monopoly and the development of new services. That is an example of the action that we are taking and intend to take. The last thing that we want to do is to be drawn into the day-to-day management of the nationalised industries.

In addition to financial control, some mechanism is often essential to act as a substitute for the disciplines of competition which apply to the rest of the economy. Without that, it is too easy for a monopoly industry to meet its financial target simply by raising prices. That is why we have taken power in the Competition Act to subject the nationalised industries and other bodies protected by some degree of statutory monopoly—such as the water authorities—to investigation by the Monopolies and Mergers Commission. The Act gives the Secretary of State for Trade power to refer to the Commission the efficiency, costs and standards of the services provided by nationalised industries. That must be the right approach for the Government.

Already British Rail's London and South-East commuter services and the CEGB have been referred to the Commission. The Commission has been asked to look in particular at the reasons for the decline in the quality of commuter services and the scope for reducing costs by improvement in productivity and efficiency. The Government have announced their intention to refer the Severn and Trent water authority to the Commission in the autumn. Investigations by the Monopolies and Mergers Commission will help to establish areas where improvements in efficiency and service can be made.

Photo of Mr Gordon Bagier Mr Gordon Bagier , Sunderland South

Will the right hon. Gentleman give way?

Photo of Mr Norman Fowler Mr Norman Fowler Minister of State (Department for Transport)

We welcome the opportunity of this debate to set out our policies and explain them further.

However, having listened to almost every speech from the Opposition, I remain puzzled as to why they chose the subject for a Supply day debate. The implication of their motion is that they have something better to offer. However, as Opposition Members themselves have pointed out, a solution was not offered when Labour was in power, and nor are we any clearer what Labour policy is now that Labour is in Opposition.

Photo of Mr Gordon Bagier Mr Gordon Bagier , Sunderland South

Will the right hon. Gentleman give way?

Photo of Mr Norman Fowler Mr Norman Fowler Minister of State (Department for Transport)

Is the Labour Party policy that of its national executive committee? That, surely to goodness, cannot be an unfair question, but nothing was more typical than the reaction—

Photo of Barry Sheerman Barry Sheerman , Huddersfield East

On a point of order, Mr. Speaker. Surely, it is an abuse of the House to spend 20 minutes of a 30-minute wind-up speech on transport when the debate concerns nationalised industries.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. The Minister must make his own speech.

Photo of Mr Norman Fowler Mr Norman Fowler Minister of State (Department for Transport)

I do not believe that the hon. Gentleman can have been listening to the debate or my speech. The reaction from the Opposition Front Bench was typical when my right hon. Friend quite fairly raised the question of whether the national executive committee of the Labour Party was supported. The right hon. Member for Stepney and Poplar studied the skylight with such intensity that one would have thought that a message was about to flash up giving the date of the retirement of the Leader of the Opposition.

The issues raised in the document are of fundamental importance. The document has not been produced by whatever body is thought to be conspiring against the Labour Party. It is written and issued on the authority of the national executive committee of the Labour Party. It sets out a radical programme. It promises the extension of public ownership to banking and insurance, pharmaceuticals and medical equipment, construction and building materials and ports and road haulage. It adds: We shall give a Labour Government the powers to take individual companies into public ownership by Statutory Instrument. That pledge comes just before the section on democracy at work.

I say one thing for the Left: its policies may be absurd, foolish and misguided, but at least they are clear. Its proposals may be hideously expensive and hopelessly impractical, but no one doubts their meaning. The tragedy is that from the beginning of the debate to the end we have heard not a murmur of policy from the official Opposition Front Bench.

Hon. Members:

Give way.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

It appears that the Minister is not giving way.

Hon. Members:

Give way.

Photo of Mr Norman Fowler Mr Norman Fowler Minister of State (Department for Transport)

I ask my right hon. and hon. Friends to support the Government amendment tonight.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 248, Noes 322.