17 OCTOBER 1970, Page 31

Death of IRC


The demise of the Industrial Reorganisation Corporation has a certain ring of natural justice about it. Conceived in the Ministry of Technology during the first two years of Labour government, it was never mentioned in the 1964 election campaign. Equally, its death has come as a surprise to the City and industry. In pre-election speeches the Con- servatives appeared to have bowed to the wishes of many businessmen, including the Confederation of British Industry to see the IRC continue in a more limited form, with its spending power cut and stripped of its ability to buy shares on the stock market.

As it happened the Government's search for public expenditure cuts has borne very heavily on the Ministry of Technology and the IRC'S allocation of £150 million of tax- payers' money was an obvious candidate for the axe. Abolition of the IRC, however, will bring only comparatively small financial gains in the short run if the Government, as is mooted, allows it to honour existing com- mitments. This is because the Corporation operated with a minute staff and was nearing the limit of its £150 million, most of which had already been committed to industry. Among the main beneficiaries have been British Leyland (£25 million) and Rolls- Royce (£20 million). Still, the Government will be able to sell off most of the 'RCS share investments as the stock market improves and eventually will recover the enormous sums it has loaned out to industry for ra- tionalisation projects. Most of the benefits will probably come in the latter years of the 'Programme for a Parliament'. Neverthe- less it is worth pondering over two areas where the absence of the Corporation will leave something of a gap.

Firstly, investment funds for industry. The Corporation's life divides neatly into two periods; its first, and more controversial stage, was the organisation of mergers, sometimes against the will of some of the parties concerned which engendered con- siderable and heated opposition. The second stage was the provision of money for ap- proved investment projects at a time when the liquidity squeeze greatly reduced com- panies' ability both to finance expansion from internal resources and to borrow on the market. This was especially true of large companies going through difficult periods like Rolls-Royce and British Leyland. Mr Davies has made some strong noises about the Government not propping up private companies, but few people believe that Mintech could opt out of supporting Rolls- Royce with all that that implies. Similarly, British Leyland is our biggest exporter and badly needs to invest more to overcome its basic weakness of undercapitalisation before Britain joins the Common Market.