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Industry and Education

Part of the debate – in the House of Commons at 3:58 pm on 21st November 1994.

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Photo of Mr Michael Heseltine Mr Michael Heseltine President of the Board of Trade 3:58 pm, 21st November 1994

The hon. Gentleman has heard my right hon. Friend the Prime Minister explain the Government's view on that many times. My right hon. Friend has said—and the Government believe—that it is necessary to exercise restraint. Restraint can be exercised by the market or by the shareholders, but the fact is that any increases in remuneration above inflation must be paid for by productivity and rising profitability. What the Labour party cannot face is the fact that British Gas has been turned into a world-class company, winning in the marketplaces of the world, has held down its prices consistently over the years and, since privatisation, has been transformed.

The Gracious Speech refers to two specific matters of direct concern to my Department. Before I deal with them, however, let me address the wider issue of privatisation itself. A decade or so ago, the commanding heights of the economy were owned by the state: that was the consequence of different post-war Labour Governments carrying through the doctrinal commitments of clause IV of their party's constitution.

Everyone knows that the organisations that those Governments created were monopolistic, producer-driven and subjected to the most intense Treasury control. By and large, they were denied access to the world marketplace and heavily subsidised; they became the plaything of politicians and trade unions. They also had the effect of concentrating power in London at the expense of the provinces, on a scale without precedent in our industrial history.

The 1980s saw a transformation in the relationship between those organisations and the national economy. Losses and subsidies were turned into profits and tax receipts; loss-making monopolies became world-class competitive companies; trade union power was replaced by consumer choice; and state ownership was converted into millions of individual and corporate shareholders. The essence of the policy, however, was the pursuit of competitiveness. In many cases productivity leapt, investment shot ahead, new markets were opened and new competitors emerged.

What the Labour party cannot understand is that there is a fundamental contradiction between a state monopoly and a genuinely competitive marketplace. Labour cannot realise that allowing Government-owned companies to raise money with the overt or implied guarantee of taxpayers' support undermines the essential disciplines within which private sector companies must trade and account.

To add to Labour's problems, hardly a country in the world is now prepared to defend the discredited theories of nationalisation. It took the courage of this Conservative Government to confront those theories, and to reverse them by placing companies in the private sector, but every time we took a step in that direction it was resisted by the Labour party. Labour Members recognised that we were right only when they realised that they had been rejected so often by the electorate that they would have to abandon their own convictions to have a prospect of winning power.