Government Economic Policies

Part of Opposition Day – in the House of Commons at 6:51 pm on 20 January 1987.

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Photo of Mr Edward Heath Mr Edward Heath , Bexley Sidcup 6:51, 20 January 1987

I greatly respect my hon. Friend's experience, but not everybody would agree with his assessment of what happened to Dunlop. I was reading today an account in the financial press which says that Dunlop is but a pale shadow of what it was as one of our major tyre producers. I do not trust any such organisations, because their purpose is to gain the money which is in an existing firm.

That brings me to the second aspect of this, which is that it is the short-term view which is being taken, not the long-term view. People want to get their hands on a firm, above all, a family firm, which takes a long-term view and sets aside money for investment. They do not want it for further investment, but so that later on they can, if they get the opportunity, sell it off and use the money for profit dispersal. That is what they want and that is what they do. One has seen that in the United States to an extent to which it has damaged United States industry, and one sees the frailties of United States industry. I have great anxieties that the same thing is happening here, and there is every reason to be anxious about it.

I come now to the decision of my right hon. Friend the Secretary of State for Trade and Industry. I have the utmost sympathy for my right hon. Friend, and I understand his position. It was difficult for him. He is not in any way at fault because he is governed, apparently, at the moment, by the Tebbit guidelines of 1984. Those cannot take the place of the Fair Trading Act 1973 which insists on the public interest. The Tebbit guidelines say that competition is almost the only thing that matters. No Secretary of State has a right to change the law in that way. I suggest to my right hon. Friend the Secretary of State for Trade and Industry that his first task should be to change the guidelines to enable him to get back to the public interest.

Now we are told that we have competition because it is competition which considers the public interest. That is obviously not the case and never has been. That is not what competition is about. Nor is it the business of shareholders to decide the public interest on a merger. Shareholders are not in a position to decide the public interest. Can we blame a shareholder if he seizes a sum that he is being offered which it appears unlikely he will be offered again? There may well be a completely different attitude in a family business because the family will want to continue the business and will resist the short-term view and take the long-term view for the sons and grandsons. But that is not the case in a competitive firm such as we saw trying to take over Pilkington.

However, I must say that BTR has shown far more sensitivity, common sense and understanding of the political situation in Britain than General Motors did. If General Motors had done that, we would have been spared much of the agony and harassment which went on over that case. BTR should be given credit for having recognised the political climate on both sides of the House and for having acted accordingly.

Here I suggest that we immediately get back to the public interest. It can be referred and then come forward. But the Government of the day are the only body which can consider the public interest. It is the Government of the day who are responsible for doing that. The Government must not abdicate that responsibility by saying that they will leave it all to competition or to the market. I hope that, now that this incident has occurred and public opinion on Merseyside and in the House has made itself so clear, my right hon. Friend the Secretary of State for Trade and Industry will move back to the official terms of the Act and get away from the Tebbit guidelines. Then he will be able to make a judgment in the public interest as a whole, which is the Government's responsibility.

My third point relates to the City. Because of the internationalisation of monetary institutions and the position of the City, official regulation is inescapable. I do not believe that the City is any longer capable of self-regulation. It is not an interest to declare, but I was brought up in the City in merchant banking. At that time, it was possible for the City to regulate itself. There was no legislation on insider dealing because nobody imagined for a moment that there would be an orgy of insider dealing. [HON. MEMBERS: "Come on".] With great respect, I was there before my hon. Friends and I know the philosophy and ethic of the City at that time. The City did not reckon to involve itself in that. I see the faces of all my younger hon. Friends. That is not something that they can ever visualise, but I am sorry it happened.

If something was believed to be irregular or was likely to cause trouble, the Governor of the Bank of England just sent for the senior partner. When that happened we waited to see what the Governor had said. If he said, "I think that you are getting a bit low. You are under your 12 per cent.," one knew that that was the end of the matter and one had to get back quickly. If one did not, there was trouble. That is no longer possible today. Therefore, instead of trying to find a halfway house, we must face reality and recognise that there must be official regulation of the City.

The Securities and Exchange Commission has great powers. Under the Reagan Administration those powers have not been used because appointments to the SEC have been along the lines of President Reagan's own thoughts about capitalism and its operation. But now the SEC is coming back into its own. It is having to do so because of the present scandal. I think that my hon. Friend the Member for Tayside, North (Mr. Walker) takes the view that he brought the scandal to the Government's notice, whereas most of us thought that it was because the SEC dealt with it. However, I am prepared to give credit to both.

The SEC dealt with the matter in three or four months [HON. MEMBERS: "Four years".] With great respect, it dealt with it in three to four months. A slight financial penalty of $100 million was imposed and there was the knowledge that all the other scandals would be revealed.

The problem that we have always had to face—I hope that when my right hon. and learned Friend the Paymaster General replies he will deal with this—is, and I think that this is the truth of the inquiry being made at the moment, that the inquiry has no powers to enable it to follow with a prosecution. Therefore, everything which is done must be duplicated by those who can then make the prosecution.

In my experience, which is some time ago when we had the Rolls Razor case and Mr. Bloom, we set up an inquiry immediately. That is all right, but it is not the real point. The real point is how quickly action will be taken on an inquiry. If one is trying to give the City a lesson on how it should behave, it is no use that happening many years hence. That lesson must be taken with prosecution in the immediate future. In the particular case that I am mentioning, the inquiry took two and a half years, and then, in order to have a criminal prosecution, there had to be a replica of the inquiry by those with powers to take evidence in a form which could then be used in a criminal prosecution.

The question is whether this inquiry has the power to bring about a criminal prosecution or whether it will wait and then refer the matter to the Director of Public Prosecutions who will then have to get the evidence for the criminal prosecution. That means that there will have to be a replica of the hearings which have been held. That is an important point. If the situation involves duplication, then as a practical point I suggest to my right hon. Friend the Chancellor that the new body that he is setting up to inquire into fraud should have that power and should start at the beginning and not duplicate something that is already being done. That is my third practical point.

My fourth point is that constantly we seem quite incapable of getting Government and both sides of industry to work together on a problem. For a long time I have found that the most disturbing aspect of our national life. One sees it constantly. We saw it in the case of Nimrod and we see it in the Government's use of new technology imported from other countries. We have heard about the increase in imports. What is it in our national character that prevents us from doing what the Germans, the Japanese and the Americans can do? As a result, Germany and Japan have a much more successful industrial base than we have.

Only the Government can give a lead and the people who can follow are the Confederation of British Industry, the Institute of Directors, the trade unions and finance. Finance ought to be the servant of national life, industry, agriculture and production. As we have seen in the last few months, more and more it is becoming the master of national life. Finance takes the short-term view and allows three months only. If the results after that time do not seem satisfactory, the management is changed and somebody takes over the firm. There is no interest whatever in the long-term point of view.

For those who are working the markets, it is not even a three-month view, it is three seconds, and if the answer is not up on the screen in front of them in three seconds they must do something about it. We cannot have a successful industry or a successful national life on the basis of a purely short-term view, yet that sort of view is becoming more and more common and the City is giving a lead. Those are my four practical points.

There must be an overall development policy and in the public interest the Government must take the ultimate responsibility for amalgamations and mergers. Competition is not in the ultimate public interest. In terms of the City, we have moved into an entirely new sphere of financial operations and financial life, in the same way as New York and Tokyo have moved. We must face that and it is much better to take clear and firm action now than to have it dragged out of us later.

Lastly, we need much closer working co-operation between Government and industry if we are to move forward and recreate the industrial base which is so badly needed to provide the employment that our people need. I hope that the Government will advance that view and say that they want to see these problems worked out jointly. We need to help one another if we are to solve the problems that exist.