MONEY The role of Big Brother
NICHOLAS DAVENPORT
In our recent Financial Survey I commented on Labour's avowed intention, expressed in he pamphlets of their national executive, to extend the public sector of the economy at the expense of the private. How would an in- dustrialist like it, I asked, if the frontiers of his private trading were to be continually en- croached upon by an aggressive and power- ful public corporation? That this is not a mere rhetorical question -I had proof on a recent visit to South Wales. I was interview- ing Professor Brinley Thomas, the chairman, of the Council of Wales, which has to deal with the re-deployment of labour made re- dundant by the Coal Board. I learned that there had been useful inquiries from Ameri- can and German industrialists who were thinking of setting up plants in South Wales but that the question was always being asked about the trading policies of the Steel Board which is the dominant industrial power in that 'development' area. It seems to me essen- tial that a clearer division between public and private trading should be laid down in prin- ciple.
And who is better able to draw up the working rules than Mr Harold Lever, the Paymaster General, the clever ex-business man and banker now in charge of the manufacturing, mining and energy industries at the super-Ministry of Technology? In the hope of inducing the Paymaster General to intervene in this debate I have sent him a new book on State Intervention in British In- dustry (Kay and Ward, 42s) by Frank Broad- way. a business and economic consultant, which came to me for review. To some ex- tent the book reads like a manual for Tory candidates who want to rehearse the mis-
kes made by the Labour government and
bricks dropped in ministerial speeches, but it does give a useful factual account of he legislative, steps taken since 1964 towards ate intervention in industry. As we all know he important new ministries with inter- tntionist powers are the Department of
mployment and Productivity (Mrs Barbara astle) an the super-Ministry of Tech- ology (Mr Wedewood Benn) which has just
bsorbed the ill-starred DEA, the Ministry f Power and important parts of the Board if Trade.
The powerful new agencies they ork through are—inter alia—(1) the Prices d Incomes Board and the Monopolies ommission, whiCh are to be brought to- ether into one board by Mrs Castle, and 2t the NEDC and its satellites and the .In- trial Reorganisation Corporation—all nder Mr Wedgwood Benn and Mr Harold ver—the latter set, up to promote the re- rueturing of industry through mergers and. keovers.
It is not an exaggerationko say that private rprise cannot make any major move un- these two ministries and their agencies Pprove of it. As likely as not the move will
directed by means of the regulatory 'seers they possess, such as building licences.
strial development certificates, invest- nt grants, SET differentials, regional em- 'yment premiums, (30s a week for each {Nicer) and directives for freight traffic under the Transport Act. This is not to men- tion the overall financial controls which are exercised through the taxation system of the Treasury—the corporation tax, with its restrictions upon overseas investment and trading, the 'close company' penalties, the capital gains tax, the selective employment tax, the imports deposit scheme, the export rebates and export credits, and finally the exchange controls of the Bank of England which govern investment overseas. Any foreign capitalist contemplating a manufac- turing plant in the UK must realise that he is investing in an avowed planned socialist state with a huge public sector of national- ised industries and that in spite of the lip- service it pays to a mixed economy the Government has so far given no guarantee that it will not extend the public sector still further at the expense of private enterprise.
Now, as Mr Broadway says, there is no clear statistical evidence that state interven- tion in private industry has so far helped towards the growth of the economy (but plenty that Treasury intervention has cut down growth!). It has had a marginal effect in reducing unemployment and increasing industrial building in the development areas, but at a cost of some £300 million a year in investment grants and SET premiums and the subsidisation of some inefficient firms. Mr Broadway would scrap the industrial De- velopment Certificates and concentrate on improving the infrastructure and training facilities in the development regions. There is muck to be said for such a policy. There is also no evidence, he says, that the Ministry of Technology and the inc have substantially improved the spread of technology in British industry.
The mergers they have backed would have been carried through by private enterprise in any case and the rescue they claim to have made of the computer industry has not yet produced a profitable industry which can compete seriously with the Americans. There is no evidence, I would add, that the Gas Council is more likely to find gas in the North Sea than the inter- national oil companies and plenty to suggest that if ilifixes too low a price for the product it will not get the gas fields properly exploited. In Mr Broadway's view—and I agree—a taxation policy which would enable the most efficient managers to retain personally a higher proportion of their earned incomes would probably pro- duce a greater management efficiency in British industry than would any state inter- vention. I am not, of course, suggesting that governments should never intervene in private industry but I agree with Mr Broad- way that so far the sort of intervention we have had has been a much less powerft•' and useful economic stimulus than th Labour party has supposed.
What I haw. long suspected is that whe. the state intervenes to rationalise an industr: or improve its technology or keep it fror going under it is really incapable of making i economically viable and profitable. It has no got the industrial expertise for the job. In thi first place, the Treasury will only allow th. intervening ministry concerned sufficient money to prevent a collapse although wha the imtustry probably needs is for private enterprise to go on pumping in money for years until it can stand on its commercia feet. In the second place, the state employ scientists and civil servants who have no in dustrial and commercial experience, who an not geared to do the job of the privet( entrepreneur. It may well be that when the authors of Labour's 'Economic Strategy declare that their policy is to 'push more am more of Britain's industries into public hands' they recognise the validity of this criticism and are really arguing in favour of an authoritarian. centralised and completely socialised economy. But is this the socialism the nation really wants? I recall that MI Richard Crossman in his brilliant introduc- tion to New Fabian Essays seventeen years ago said: 'The main task of socialism today is to prevent the concentration of power in the hands of either industrial management or the state bureaucracy—in brief . .. to enlarge freedom of choice'. How right he was and is!
I hope that when the Paymaster General has looked at the copy of Slate Intervention in British Industry which I have sent him. he will let us know what view he takes of the relations between the public sector and the private sector in this mixed—I nearly said muddled--economy. I venture to give him my own concept of a working rule of principle for his super-ministry, namely, that the state should not intervene in any region where private enterprise is capable, when not inhibited, of making full economic use of the available recources.
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