MONEY UCS and the mixed economy
NICHOLAS DAVENPORT
MR HEATH'S 'quiet revolution' has come up against the unquiet grave of the Clyde shipyards. It could be a serious clash but for the intervention of Tony Wedgwood Benn who saw in it the start of the workers' revolution and so gave it a comic slant. Most people would welcome workers taking over a bankrupt plant provided they worked harder, increased their productivity and joined the management team. The trouble has been that if any of the men were to serve on the management board they would be immediately regarded as ' bosses ' men and shunned by their workmates. And they would be the more unpopular if they were to recommend two-shift working and other productivity gains.
In the case of Upper Clyde Shipbuilders it was a mistake on the part of the Government not to get the men somehow represented on the committee of inquiry which drew up the reorganization plan. Mr John Davies should have realized by now that he cannot run Great Britain Limited as if it were a member company of the CBI. There are human problems as well as economic. Indeed, Great Britain Limited has a deep psychological as well as a productivity problem. This is especially true when the subsidiary company is in Scotland which has been plagued with nationalism since the Union — or since Hadrian who failed to build a big enough wall to keep the Scots out of England.
This expert committee of inquiry — the four assessors — found that Tony Wedgwood Benn had saddled the company with an impossible trading position and an un workable structure. They recommended that shipbuilding work should be con centrated in the more efficient Govan and Linthouse yards and that Clydebank (John Brown) and Scotstoun (Connell) should be closed. This meant immediate redundancies of some 400 men and the ultimate loss of 2,500 jobs at Clydebank unless private buyers could be found. Mr Davies did promise to provide some of the initial capital if private investors came forward — we all realize that if Scotland had Home Rule we English would have to subsidize it — and he did undertake not to withdraw finance until existing orders had been completed but Clydebank is not an ordinary commercial problem and the Scottish national emblem is a very prickly plant. It needs a Greek like Mr Onassis to take it over and heal the nationalistic wounds.
The UCS case calls attention to the major weaknesses of Mr Heath's quiet revolution. The details have not been worked out. Mr Davies is fully aware of all the problems. When he was interviewed not long ago by the Evening Standard he said that the changes required by the quiet revolution were so big that they must not be rushed into without careful planning. He had been criticised for not making up his mind and explaining his programme for the nationalized industries but he was not going to do so until he had seen the results of detailed research programmes. It was easy to produce quick-flash reactions and solutions — in the Wilson manner — but that was not his way. I can understand and sympathise with his difficulty. He is trying to run a mixed economy and make it more efficient. It is not like running a communist economy where the rules are already worked out, where the central government makes all the decisions and puts its opponents in jail.
According to Mr Davies the essence of the quiet revolution is first, that private enterprise must stand on its own financial feet and maintain its profitability without government intervention, second, that the 'over-close involvement' of Government in both the private and public sectors must diminish and the public sector disengage itself from peripheral or other activities which could be effectively carried out by private enterprise. This is a slightly different version of the mixed economy from that held previously in Whitehall but as the left faction of the Labour party have never believed in a mixed economy and want to destroy it there is no reason why Mr Heath should not lay down his own concept of it. The question is whether the old capitalist rules fit the bill.
My complaint is that they do not. First of all, if you are private enterprise you will not be able to stand on your own financial feet and make a profit if you do not have thrusting and efficient management. But how do you get it? Through the vigilant eye of the board room? But very often the board room is asleep and the shareholders are not interested. The open capital market system implies that the savings of the people are gathered up by the life and pension funds, by the unit trusts and other financial agencies and are put into invest ment through the Stock Exchange in a most haphazard manner. Some of the in vestment leaks or spills over into Japan, Australia and God knows what off-shore funds. The financial managers are so busy trading in the market and trying to beat the FT index that they pay no regard to the management of the companies they invest in. So you suddenly find that here or there a company gets into trouble and the receiver's hands through sheer bad management. This antiquated and hap hazard system must be improved. The institutional shareholders — that is, the pen sion funds, life funds, unit trusts and merchant banks — must get together and appoint a sort of Ombudsman to watch managements, attend shareholders meet ings and give the board hell where necessary. These financial agencies now control savings which have reached the huge volume of £1,500 million a year. It is absurd that money on this vast scale is not able to talk—and call the tune on occasion.
In the second place, if Mr Davies wants to see the public sector disengage itself from peripheral and some other activities which could be more effectively carried out by private enterprise he must have an un derstanding with the managers of the
savings-into-investment system and be able to rely on a certain portion of their funds for government-directed investment. I am not suggesting state direction of their funds, which would be foreign to Mr Heath's quiet revolution, but an understanding which would enable Mr Davies's ministry to call on private funds to back public funds in a joint enterprise. The case of UCS is pertinent. It just cannot be left to a mere receiver who may or may not find private buyers, to keep thousands of angry Scots in employment. Mr Davies, you will recall, abolished the IRC because it was a pure state-grab institution. He should set up a new IRC as I have often urged, where the capital is jointly held by public and private funds.
The Stock Exchange is taking all this calmly but it is more serious than it imagines. The market should come back on second thoughts from its recent heights.
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