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Nationalised Industries

Volume 892: debated on Friday 23 May 1975

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11.49 a.m.

I suggest that we allow a half hour for this debate, since Mr. Speaker had allowed for its conclusion at 12.15 p.m.

I am obliged, Mr. Deputy Speaker. I wish to raise, in a relatively calm atmosphere, an extremely topical subject—the relationship of Ministers to nationalised industries and especially, perhaps, to their chairmen. The issue has been brought to the boil by recent events, but it has been simmering for quite a long time. Indeed, a voluminous report produced by the Select Committee on Nationalised Industries for 1967–68 went into the topic in some detail. Words were used in part of this enormous report which today appear very topical. It says, in paragraph 874,

"this lack of clarity about purposes and responsibilities has revealed itself in a lack of understanding and in some cases, a breakdown of mutual confidence between Boards and Ministries."
It goes on in the next paragraph to say:
"Lying still deeper than this lack of clarity, this confusion of responsibilities and this breakdown of confidence remains a failure to understand and to work towards the fulfilment of the basic purposes of Ministerial control in respect of the industries."
So this is, in a sense, not a new topic, though, as I say, it has been brought to the boil by recent events. The more that industries and services are nationalised, the more urgent and difficult becomes the definition of the relationship not only between the nationalised industries and the sponsoring Ministers but between the socialised economy as a whole and the formal institutions of parliamentary democracy. The House of Commons, I suppose, evolved originally, in the words of the old song, to
"pass laws and put down crime".
It can, I believe, cope reasonably well with three or four nationalised industries, as there were in the 1930s, and with eight or so nationalised industries as existed in the 1940s. But once the number moves into double figures and beyond, many complications arise.

No doubt the NEB is intended, in part, at any rate, to get over this difficulty, as was the Morrisonian public corporation in an earlier time. Nevertheless, all experience shows that when there is a freely-elected parliament responsible for public funds and investment, Ministers cannot be insulated from the inquiries and the natural curiosity of Members of Parliament about the nationalised industries. In turn, of course, the chairmen of the boards of nationalised enterprises cannot be insulated from the intervention of Ministers.

Parliamentary questioning has been theoretically restrained by the "day-to-day running" provision in statutes, but parliamentary pressure has broken that down in part by the setting up of Select Committees—I think quite properly—by Adjournment debates such as this, and by the subtle and clever way in which hon. Members have succeeded in phrasing Questions to Ministers. Such Questions have succeeded in getting past the Table. The real problem is that what nationalised chairmen regard as an internal management question, to be discussed with the trade unions, the Government, with Parliament to answer to, regard as a matter of vital public interest.

An example of this has been the redundancy threat to staff in some nationalised industries which has occurred recently. It is a question which obviously goes much further than the industry itself. It becomes a social matter which comes on to the Floor of the House. As a fairly recent example of that, my right hon. Friend the Secretary of State for Energy was faced with a request from the electricity boards to raise off peak prices to an economic level and thus to escape from the unwanted dependence on public subsidies which, curiously and quaintly enough, were introduced by a Conservative Minister who had been formerly Director General of the CBI. I am sure that in those circumstances my right hon. Friend would have preferred to leave this matter to the Electricity Council, but such were the charges of broken faith showered on him from both sides of the House that he beat a rapid retreat and asked the Electricity Council to stay its hand, which it did for the time being.

Of course, in pure Morrisonian principle—and a statutory public corporation is a considerable monument to that great parliamentarian Mr. Herbert Morrison—the Electricity Council should have stood its ground and asked for ministerial direction or, at any rate, formal exercise of ministerial powers under the emergency fuel and power legislation, but it did not.

Another recent example was the bizarre case of the defiant steelman. Here my right hon. Friend the Secretary of State for Industry achieved the remarkable feat of appearing on both sides of the fence at the same time. But by standing perfectly still—and I was told as a child that that was in the best tradition of unarmed travellers when faced with ferocious lions—I suspect that Sir Monty Finniston, the steelworkers' union and the British steel industry came out of their ordeal fairly well. In the event the lion went away. Once again, however, the Morrisonian balance between day-to-day responsibility of the board and the reserve power of the Minister to give a direction in the national interest was not in evidence.

I seriously put to the Government that this situation should not be allowed to continue. The Government should not wait for a club of board chairmen to tell them what to do, even when that club is led by a former Minister. If the nationalised industry statutes do not correspond to present custom and practice they should be amended accordingly. After all, 25 years have passed since some of these industries were nationalised. Governments today intervene in the affairs of industry, including private industry, in a way which would not have been accepted 25 years ago, not only in the United Kingdom but in all the advanced industrial societies, including our partners in the EEC. The Brussels Commission is very good itself at intervention.

For myself, although I know that it was recommended by the Select Committee when it reported in this vast volume in 1967–68, I do not believe in a Minister for nationalised industries. Industry remains industry, whoever owns it or controls it. There is a much more natural affinity between, for example, the nationalised electricity supply industry and the privately-owned oil industry than there is between the Post Office Corporation and the waterways board. Therefore, I suggest that if we keep the normal responsibilities of the sponsoring departmental Ministers, new demarcation lines should be drawn up between the powers of the Ministers answerable to the House and the responsibilities of the relevant nationalised boards towards their consumers and employees.

I would divide the present nationalised enterprises into two broad groups, although there might be an argument about the group into which a particular nationalised industry should fall. The first group would include those industries or public services which are utilities in a broad sense, such as electricity, gas, water, the Post Office, the railways and buses. That would be a fairly comprehensive group of industries falling under the description of public services and utilities. The second group would include all industries proper, such as coal, steel and the airways. Some hon. Members may argue that airways should come into the first group, but nevertheless they are an international industry and have to compete internationally.

In my judgment it would be possible, under this kind of arrangement, for the demarcation line between ministerial powers and the boards' powers to be drawn differently for the two groups. Of necessity, subsidisation would have to be permitted, in certain circumstances, especially for the first group, which includes railways, but where there is subsidisation it is essential that the line should be distinctly and clearly drawn between that part of the industry's business which is subsidised for social or political reasons and that part which is commercial.

I have made several assumptions. I assume that once we get this country through the present inflation we must return to an agreed return on capital assets commercially used, as was argued by the Select Committee on Nationalised Industries some years ago and adopted. For quite a period that system worked remarkably well, and provided commercial guidelines by which to judge the performance of the industry in question.

I also assume that a mixed economy means a market economy. I have never taken the view that there was anything inconsistent about having Socialist enterprises operating in a market economy. This is a view that is increasingly being taken by the Marxist economists of some of the Communist countries, for instance, Hungary, and certainly Yugoslavia.

My third assumption is that there should be in these industries the rate for the job for all employees, including the board chairmen. I declare my interest because my union, the Electrical Power Engineers' Association, which negotiates the salaries of managerial and technical staff in the electricity supply industry, is at present engaged in delicate discussions with the Electricity Council about a pay claim. I shall not say anything about that; it would be inappropriate to do so. Nor shall I go into what should be the proper social or moral level of reward in industry for those who hold the top management responsibilities. I do not know whether a leading executive should be paid £20,000, £10,000 or £70,000 a year. However, I am certain that there should be no discrimination whatsoever between the agreed rate for the job in a publicly-owned industry and the rate for the same job in a privately-owned industry in a mixed economy.

The Government were completely wrong in not applying the principles of the Boyle Report to the salaries of nationalised industries' chairmen and members of nationalised boards. The principles were applied to higher civil servants and to senior officers in the Armed Forces—generals, admirals and air marshals. Their salaries were adjusted as were judges' salaries. But it was decided for the time being not to adjust the top range of salaries in the nationalised industries. I do not understand why fish was made of one and fowl was made of another. Judges are necessary, and under some circumstances I suppose that generals and admirals can claim to be necessary. We have a vast Civil Service, and someone must be at the top. But when all is said and done all the occupations that I have just mentioned are secondary to occupations which are productive, in that they are closely connected with the efficient running of industry and wealth production.

This matter has caused concern to my union, as I am sure it has to other unions in the nationalised industries. The General Secretary of the Electrical Power Engineers' Association, Mr. John Lyons, wrote a letter to my right hon. Friend the Prime Minister about the matter. In his reply my right hon. Friend stated:
"I said quite explicitly that the Government rejects the doctrine of discrimination against the public sector".
We should be glad to hear that, but certainly there has been a postponement. This postponement of a proper adjustment, as laid down by the Boyle Committee—which has looked into this matter in which hon. Members have also an interest—has had a most depressing effect on the morale of staff in nationalised industries. This has not been caused because the staff in those industries are not anxious to make sacrifices on behalf of the country. Of course they are, but they believe that such sacrifices should be made on a fair basis and should apply to everyone. We should not, just because it is convenient to do so, and because Ministers have great control over nationalised industries, make fish of one and fowl of another, as I said just now. This kind of discrimination rankles.

I realise that the time which had been allotted earlier for this debate has now been shortened by the questions raised on the Prime Minister's statement on the textile industry. Therefore, I shall put forward just one final observation.

I have been for all my parliamentary life an advocate of nationalisation and a defender—if critical at times—of the nationalised industries. I believe that the nationalised industries have rendered a fine service to the country. They have given a secure basis and an anchor to the economy, for which we should be glad. They deserve respect, and they deserve understanding. Those who manage these industries should be left to do their job without too much fussy interference. If interference or intervention is necessary because of the political responsibilities of Ministers to this House and to the country, the areas for legitimate intervention should be clearly separated from those which remain under the direct everyday responsibility of the chairmen and the members of the boards. There is no time in which to discuss consultation with the unions, important as it is. That is a vast, separate issue.

In short, I believe that the Labour Party, which has advocated and introduced the principle of nationalisation for good social and industrial reasons, should, above everybody else, behave according to its own beliefs after industries are nationalised, and support all those who have the responsible task of operating them.

12.12 p.m.

I should like to have spoken at greater length, but there is no time, and I am sure that we want to hear the Minister. I shall confine myself to two observations. The first, following the hon. Member's very experienced commentary, is that there is nothing new in Government interference in nationalised industries, or in the worry about it. What is new now is the widespread nature of the losses—despite the end of price compensation, of which we on the Opposition side fully approve—the deep disillusion of the management of nationalised industries with their status, which is more ambiguous than ever, and the recent performance of the Secretary of State for Industry, which has clearly confused rather than clarified the situation.

The key to this—I am sure that the Minister of State will repeat it, because it is the only answer—is for Government to be more systematic and clear about that part of costs to which the Government are going to contribute, that part which is social—or political—as opposed to economic. A firm and lasting decision has to be made on what to subsidise and what to protect, and on the size of the subsidy in cash terms. Once that decision is made, we have to stick to it. Above all, it is necessary, having decided on a chairman, to back him rather than sack him. Those are the only recipes which can succeed. It is the framework in which they should be formulated that is the key, and it is a key which successive Governments have sought to find and have so far failed totally to find. I look forward now to hearing the Minister's reply.

12.14 p.m.

Unfortunately I have only five minutes in which to reply. I make no complaint about this, because I am sure that the whole House learned very much more from my hon. Friend the Member for Bristol, North-East (Mr. Palmer), with his great expertise in this area, than I might be able to add to the debate from my own knowledge of these matters.

Before dealing with the points that have been raised I must mention to the hon. Member for Guildford (Mr. David Howell) that the previous Government interfered to an extent that had not been seen before.

My hon. Friend made three important points. He said, first, that if the statutes are not in accord with the spirit in which they were made we may have to change the statutes. There are always subtle changes which take place over a period of time. I will endeavour to show that the interpretation of the statutes that we have undertaken, as have all Governments, is in accord with the workable way in which they were first produced.

My hon. Friend divided the nationalised industries into two broad groups. It was a very useful division, showing how different some are from others, and how we might approach them in a rather different way from that adopted in the past, if at some future stage we wished to make the sort of changes he mentioned.

We would all, I am sure, agree with what my hon. Friend said about the final discipline—the rate of return on assets. This, as he rightly said, is of extreme importance. Nobody dealing with nationalised industries will want to revert to a situation in which the rate of return on these assets is not in accord with the best principles of their efficient use.

My hon. Friend dealt with the origins of these nationalised industries. I shall deal briefly with their origins, because they provide a clue as to how they eventually evolved. The industries that were nationalised after the war were mainly the public utilities or services, or the semi-monopolies, and the statutes on which they were based were derived from Herbert Morrison's concept of the public corporation. Ministers were to be given powers for the oversight of these industries and for making sure that they took account of the national interest, but at the same time the boards themselves were to have clear and direct managerial control. Obviously great difficulty has been found in putting that simple proposition into practice.

All Governments since then have sought to redefine the national interest within the context of the policies they have tried to operate. Some interpret it as implying less intervention in the affairs of the nationalised industries. Some take a completely opposite view. Some of these differences have been seen over the past few years. The tendency has been towards closer and more detailed ministerial investigation and control than was envisaged when the industries were first set up. This has been true of both Conservative and Labour Governments in recent years.

Those who have looked for less intervention have tended to develop their argument to the point of claiming that the relationship between the Minister and his Department on the one hand, and the nationalised industries with which they are concerned on the other, should be that of a holding company to its subsidiaries. The simplest argument would be that the chairman appoints the boards of the subsidiary companies, which are then left to run the businesses themselves. If they do this successfully they are left alone, and if they do not they are sacked. The discipline underlying the solution is a simple one. But I do not think that this analogy really does justice to the rather subtle relationship always found to exist between the chairmen of most holding companies and the chairmen and managing directors of their subsidiaries. I am sure that whatever the reality of that relationship it is not particularly helpful in trying to evolve a way in which Ministers should deal with nationalised industries. They have a legitimate concern, reflected in the statutes and expected of them by Parliament.

The most important aspect is that these nationalised industries are major users of economic resources, currently responsible for about 15 per cent. of total annual investment in this country, and the Government cannot be immune from looking at levels of investment, with the economic importance that they have.

Secondly, the Government expect the nationalised industries, in their purchasing policy, to look for the best value for money. This, again, is a simple concept, but how does a nationalised industry look for the best value for money when its purchases may need to be made in certain areas of the country which are seeking economic assistance, with the implications involved for employment, balance of payments, and manufacturing industries.

Finally, nationalised industries have responsibilities as major employers themselves, and their decisions on location of sites, and so on, have big implications for particular regions and communities.

These are among the very many problems with which the Government have to deal, and which inevitably, in an interventionist age such as we are living in, are bound to involve the Government more and more.

I have drawn attention to these developments because I think that it is worth reminding the House that although these problems exist progress is being made and there are some improvements. We look for further valuable improvements in the years to come.

Perhaps I may best sum up the Government's attitude by saying that what we consider a good relationship has been called
"Arm's length but not hands off".
Although I do not approach this debate as an occasion for a new policy statement, there is no doubt that this relationship is major and complex. It is one to which the Government will give continuing attention and thought.