§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Varley.]
§ 9.5 p.m.
§ Mr. Norman Atkinson (Tottenham)
I am grateful for the opportunity of raising what I believe to be one of the most important political issues this year. It is a tragedy that we have to debate it on the Adjournment, but we nevertheless recognise its importance. The G.E.C.-A.E.I. take-over bid has been the biggest since I.C.I. offered £200 million for Courtauld, and, because of the chain reaction, the present G.E.C.-A.E.I. merger may well make even that operation look like a penny bank operation. The chain reaction to which I refer includes not only A.E.I. and G.E.C. but also Standard Telephones and Cables Ltd., which is bound to be part of the whole developing process, English Electric, and Parsons, who are concerned with the manufacture of heavy electrical engineering. Similarly, the C.E.G.B. may come into this and possibly, even the company which was proposed in the Report of the Select Committee on Science and Technology. That may also be a part of the emerging pattern which we shall see in British industry. For, taking the whole pattern, there is a profound and complex development taking place on the British industrial scene, and nothing that we say should underestimate the importance of that development.
I support entirely the rationalisation process now taking place. Because of that, and because I look upon this merger as a part of the process of rationalisation in industry, I welcome it. I also want to support the Ministry of Technology and the Minister of Technology, particularly in the remarks which he made today. I entirely support the comment which he made on the whole process of rationalisation and technological advance as it relates to our economic position. I also support—and possibly this is the most important—the comment of the Chancellor of the Exchequer, when winding up the debate last night, when he referred to the potentially sinister group now known as the Industrial Policy Group led by Sir Paul Chambers. I want to deal with 1607 that in relation to this merger, because it is an extremely important and significant development.
Perhaps I may, however, set the scene as it concerns the Labour Party and the British Socialist Movement. It is true that constitutionally the Labour Party are committed in the long term to the creation of a classless society. But, while we state that as a long-term aim, we also recognise that there will be a fairly long transitional period and that during that transitional period the whole future development of our economy will depend upon the situation known as a mixed economy. Within that, because of the development and the extension of public enterprise, we see the situation as a contest between public and private monopoly—and that is a very important aspect of the whole of this political development.
In a contest of that kind, if we see it as a struggle between private and public monopoly, the whole question of the managerial society emerges. A great deal has been written about the managerial revolution, particularly as it applies to the emergent British society—a society partially created by Labour Party policies. What we mean by a managerial society is that this is a society governed in the main by professional managers—managers who are not accountable to the public, to Parliament, to the shareholders or to the employees. They are a completely detached professional class emerging in this kind of managerial society. One of the important features of modern development is the fact that shareholders are represented by institutions and that the major developments in industrial complexes in this society are mainly controlled by institutional shareholders. The institutional shareholders are managed by professionals and we see emerging in British society a new managerial phase, which is represented in this way and which offers tremendous power to those who control these institutional shares.
In this merger of G.E.C. and A.E.I., we have seen the faceless men—the faceless managers, as it were—of this society coming together to take a decision. We have seen their power assembled in this way, and we have seen the small number of people who are able to take a decision of this kind. It is not unrealistic to say that, in this sort of society—transitory 1608 though it may be—we have professional managers controlling institutional shareholdings and a powerful force in this great industrial complex.
If these professional managers can come together in this way, under whatever banner they may use, they are constituting a tremendous force in our society. This is something which is happening today, and it is taking place in the context of a managerial society. We see emerging from this struggle between public and private monopoly a further struggle; that is, a contest between those who represent managerial democracy—which is the Labour Party's aim during this period—and those who represent a potential managerial dictatorship, something of which is showing signs of emerging under the leadership of such groups as the Paul Chambers Industrial Policy Group. This concerns us most.
We recognise that the Chancellor of the Exchequer, in his statement last night, could not spell out in detail to whom he was referring. It is possible, however, for some of us on the back benches to say so, without committing other people. We should, therefore, during this debate have a look at the implications of what the Chancellor was saying and tell the country what may have been in his mind or to what he was referring.
In considering this question of a managerial democracy or a managerial dictatorship, it is relevant that Parliament should be concerned about people coming together—particularly those people who have this enormous institutional power, power given to them because of the impersonal process of shareholding collectivisation—which is what is happening in the G.E.C.-A.E.I. merger.
Not only are these sort of things potentially sinister. They are also potentially managerial dictators. In this context, consider the question of accountability. There is no accountability in this House for the publicly-owned industries. The nationalised industries are not accountable here. We see emerging a process in which these other managerial groups are not accountable. They are something beyond the control of this House.
I wish to consider some other aspects of the G.E.C.-A.E.I. affair. About £160 million was offered by G.E.C. for A.E.I. 1609 It is worth noting that, in this managerial revolution, this operation has cost about £¾ million. The circularising of shareholders cost £9,000 and acres of Press space was taken to influence shareholders one way or the other. The total Press space to ken by A.E.I. has been larger than the total amount taken by the Labour Party during the last General Election—taken on that occasion for an electorate of about 36 million people and not, as in this case, for an electorate of about 60,000 people. One can, therefore, deduce that enormous monetary pressures and power are beginning to come together to work for the creation of this new form of society.
There are some 140,000 shareholders—but who are they? I have tried to find out. I know of one or two but, apart from them, we have no great knowledge. I therefore asked the Board of Trade and our own research department who the first 15 institutional shareholders were on both sides. I was told that the information could not be supplied as it would take at least 14 man hours and £350 to provide it. I asked the Board of Trade because I thought that it would make inquiries in connection with the Monopolies Commission. We now know that the Minister concerned instructed the Monopolies Commission not to investigate the merger, so the information was not available from that source.
We therefore have no clear information on that point but, being a suspicious sort of character, I felt that those shareholders were more or less the same people; that when the institutional shareholders of G.E.C. went along to the A.E.I. to find out how the offer was going it, was merely a question of their swapping from one side of the road to the other, or changing hats. But we are not able to find out with certainty because of the enormous cost involved.
The Times said that a group of shareholders, some nine men, controlled 46 per cent. of the shares. The Board of Trade said that there is no shareholding of more than 5 per cent. and that most of the institutional shareholdings were far less than 3 per cent. The evidence seems to point that way, but we have this lack of information about who the shareholders are.
There are those who say that the industrial revolution should be a process of 1610 workers becoming shareholders in the companies in which they are employed; that that would give them democratic control. This merger has proved what utter nonsense that is—
§ Mr. Reginald Eyre (Birmingham, Hall Green)
Since the Industrial Reorganisation Corporation sponsored the actual take-over operation, did the hon. Member ask whether it knew the share ownership?
§ Mr. Atkinson
It had no idea whatsoever—in fact, it did not look—whether the shareholders were the Church Commissioners, the Prudential, the Britannic, the Royal London, or any of the other 14 insurance companies who have money in A.E.I. The I.R.C. did not come into it, so it was not able to tell us. It was concerned with the overall pattern that would emerge in British industry as the result of the operation.
But let us get on to the bonanza of all this, because there are important comparisons to make. We find that anyone holding A.E.I. shares worth £100 during the previous 12 months now has £185 as a result of the takeover. In the rationalisation or modernisation of the industry, A.E.I. shareholders are now better off by some 85 per cent. It may be good to grease the slides to encourage these people to rationalise the industry—because we agree that it is necessary to have a modern industry—but an 85 per cent. gain to those shareholders to encourage them voluntarily to undertake this amalgamation or take-over must be compared with the present policy of offering the railway-men, the dockers, the engineers and other workers 3 per cent. if they will rationalise their industries. We are talking in quite a different language in the context of this new emergent managerial society when we discuss how much people are to get to rationalise their own industry, to change jobs, to be flexible, and so on—85 per cent. for shareholders; 3 per cent. for workers.
I want now to mention briefly some of the effects of the merger on this industry. First, I want to refer to the question of redundancy. It is interesting to note that A.E.I. said that if the merger did not go through it was willing to ask Lord Beeching to be managing director or to take a prominent part on the board. 1611 Lord Beeching is a notorious professional manager of industry, but he is a butcher by nature in terms of industrial return. He has been used in various places as a chopper. One assumes from this announcement that A.E.I. felt that it was carrying too much fat and wanted to get rid of it and that employing Lord Beeching would reduce the number of employees, cut down the firm and reduce its capacity.
But Mr. Weinstock, the Managing Director of G.E.C., has a reputation built up on the axing of employees and the streamlining of the whole process. If we put these two factors together, one can assume that A.E.I. was far too large, that many employees did not know what to do with themselves and that here was the obvious remedy—Mr. Weinstock or Lord Beeching. Whichever it was, the axe would fall. That is what we are concerned about in thinking in terms of organisations of this size.
There are many questions as to what is to happen with a potential 6 per cent. growth rate in the economy. Here we had one of the largest companies, a leader in our exporting, saying that it had too much capacity and wanted to reduce and streamline. This may be the millenium for the shareholders, but it is not in accord with the economic needs of the country when now we need a much more modernised and increased capacity in this kind of manufacture. Therefore, we have some pertinent things to say about the merger and how it is likely to work out.
First, comparative costs. As a result of the merger, it would seem, judging by my own researches and comments made by others, and allowing for further mergers to take place, which will undoubtedly happen, that unit costs within the new group are likely to come down. That is good and to be welcomed. It is something that the economy needs. As a result, we are likely to see wages and salaries go up because we can compare what is happening in G.E.C. with the situation as we knew it at A.E.I., pre, Weinstock or pre-Beeching.
If the G.E.C. pattern is followed through, whereas at the moment A.E.I. wages and salaries account for about 33 per cent. of every £ of income, raw materials about 41 per cent. and operational costs and profits a further 26 per cent., 1612 we are likely to see, as a result of the merger, a significant shift of these figures, and we welcome that because, as we have argued on the whole of the wages issue, once industry modernises and becomes dynamic and new machinery is brought in to give much more horse power to the workers, wages can go up while unit costs can come down.
Now, apprentice training. In this House and in our political movement are many people who have been trained industrially and politically by A.E.I., and we are grateful for that. For many years A.E.I. has had an extremely progressive apprentice training scheme, both for college apprentices, university graduates and trade apprentices. I see one or two hon. Members here who are products of A.E.I.—perhaps not very good examples but far better than others. There are also people in the other place with similar backgrounds. There are ex-A.E.I. apprentices there, but perhaps they are not very good examples. There is one among us at least who is a product of A.E.I. and the leadership of A.E.I. has nearly always been provided by A.E.I. trainees. We also have an A.E.I. director in the House and we are very sorry that he is not here this evening to tell us something about possible redundancy.
None the less, the A.E.I. is tremendously influential and has produced an enormous quality of political and trade union leadership. I hope that as a result of the merger A.E.I.'s traditions of apprentice training and its attitude towards graduates generally will not be overtaken by the views now prevailing in the G.E.C. The A.E.I. has a tremendous amount of ideas to offer industry, ideas which it has created over the years since the early days of Metropolitan Vickers. There are other sections of A.E.I. which also have had progressive apprentice schemes and I hope that we shall not see any diminution of those ideas as a result of the merger.
I end as I started: these are significant moves. This merger is likely to have a tremendous impact on the British economy. It is not something which can be seen in isolation; it is the start of a tremendous change. Following on what was said by the Chancellor yesterday, there are important political lessons to be gained. I think that the Chancellor was absolutely correct to sound the warning 1613 about what was happening. I hope that I have given some explanation of how we see the mergers and why these forces are there, recognising that if this kind of society has to choose between a managerial democracy or a managerial dictatorship, then the House will take note of what is happening and will beware of the possibilities and the dangers inherent in that situation.
We are therefore grateful to the Chancellor for having mentioned it, but let us nevertheless say to these managers in society that we are conscious of the development and of the rôle that they are playing. I hope that the House will conclude that there is an overwhelming demand for accountability by these people if our democracy is to survive.
§ Mr. Speaker
At the moment I propose to call only those hon. Members who wish to speak on this topic.
§ 9.27 p.m.
§ Mr. Alfred Morris (Manchester, Wythenshawe)
I warmly congratulate my hon. Friend the Member for Tottenham (Mr. Atkinson) on the manner in which he has opened the debate. The matter which we are discussing is an industrial event of profound and enduring importance. My hon. Friend referred to the clash between public and private monopoly and I should like briefly to refer to both.
Many of the problems of the nationalised industries are the problems of size and some of the problems of industrial relations are the same whether an industry is in public or private ownership. But with the growing size of industrial units in the private sector, I commend to them the example of the nationalised concerns in the field of industrial relations.
In putting through the legislation which nationalised electricity, gas, coal and other basic industries, the House instructed those whose job it was to manage these industries to institutionalise their respect for working people. In many of these enterprises, industrial relations are as advanced as they are anywhere in Europe or, indeed, in the world. Joint consultation in many nationalised industries as well as procedures for the 1614 negotiation of wages and salaries and conditions of employment are extremely detailed and meet the legitimate interests of both employees and trade unions.
With a measure of this kind it is vital for those who will be managing an industrial giant to study what has been done in industrial relations in the nationalised industries. My hon. Friend the Member for Tottenham referred to apprentice training. He was also concerned about the problem of redundancy. I know that his background is that of a person who has worked in A.E.I. My interest is not that of a shareholder but that of a Member of Parliament who represents many thousands of people who have been employed by A.E.I. for the whole of their working lives.
It will do no harm for this House to emphasise its concern for the welfare of those who will work in the new undertaking. This should be a matter of the first importance. My hon. Friend the Joint Under-Secretary of State for Economic Affairs, who is to reply to this debate, has worked for a large private industrial undertaking. I hope that he will agree with me that the welfare of those who work in large organisations must be the first concern of any manager.
Many of us who have worked for the largest organisations have frequently heard complaints about their soullessness. Size is a very severe problem indeed. The problems of communication between employer and employee are far more important in the large organisation than in the small. It is something of a scandal that, in a debate of this kind, not one hon. Member representative of either the Conservative or the Liberal Party is present.
The only Members present are my hon. Friends who are deeply concerned about the future welfare of those who work by hand and by brain in the organisations which have now merged. Many of my constituents have already expressed their anxiety about the future, and I hope that my hon. Friend will emphasise his concern for the security of the jobs of the people we represent, and for their future prospects. I hope it will also be recognised that good industrial relations are nowhere more important than they are in the large organisations, whether private or public.
§ 9.35 p.m.
§ Mr. Stanley Orme (Salford, West)
We are indebted to my hon. Friend the Member for Tottenham (Mr. Atkinson) for raising the question of the G.E.C.—A.E.I. merger, which is a matter of great public interest. This is one of the largest industrial complexes in Britain, representing a large section of our manufacturing industry, in heavy engineering, electrical development, turbines and many other facets of engineering, including nuclear development. This is a combine representing not only these sections of British industry, but also large sections of British workers.
I should like my hon. Friend to explain why he felt that the I.R.C. should not be directly involved in this take-aver. Why are large sections of industry not accountable to the Government publicly or to Parliament? Here was a takeover which involved tens of thousands of £s—indeed millions of £s in relation to the benefits gained by the shareholders. No prices and incomes policy operated for them. The shares went up, and it is estimated in some quarters that as much as £35 million was gained at the time of the takeover. This is an extremely serious point.
The other interesting thing is that, while there were many thousands of small shareholders, the people who played the largest part were the insurance companies and the Church of England which was proved to be a large block shareholder in this industrial complex. We saw an industrial battle taking place at a time of economic crisis, when we wanted industrial efficiency and increased output. It took place to resolve the matter in the interests not of the economy but basically of the profit motive. We must ask ourselves: can that be the sole criterion in one of the major manufacturing industries of this country? That is a very pertinent question.
As a result of the takeover, a gentleman by the name of Mr. Arnold Weinstock is now in control of this huge industrial complex. To whom is he accountable? As my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) said, it is strange that no hon. Member opposite should be present for a debate such as this which is taking place earlyish in the evening. We on this side of the House are showing a 1616 public interest in and drawing public attention to this matter.
Like the constituents of my hon. Friend the Member for Wythenshawe, many thousands of my constituents work at one of the giant A.E.I. plants in the Trafford Park area. I know that they recognise the need for industrial output and industrial efficiency, and to produce the goods which this nation needs. They are not talking about it; they are producing the wealth which this country so desperately requires. They are concerned whether when Mr. Weinstock talks about removing some of the fat, that means removing their jobs. Does this slimming down mean that their employment will be in jeopardy? They, and not just the shareholders, are entitled to be consulted and told about developments which may affect their livelihoods. These people create the industrial wealth of our society. We need efficient management and planning, but when the pinnacle is the profit motive rather than the good of the nation innocent people sometimes suffer.
My right hon. Friend the Minister of Power is involved in a very difficult job concerned not with an expanding industry but with a contracting industry, namely, coal. My hon. Friends on this side of the House have shown great concern about this matter. Heart searching and discussion are going on. My hon. Friends are, however, able directly to discuss the matter with the Minister concerned, because it is a public industry and because account can be given and taken of what the slimming process can bring about. This is an important lesson to be learned. That is where the problems of the A.E.I. workers arise.
A number of my hon. Friends wish to speak and I shall take only a minute or two more. The points which my hon. Friend has raised about this take-over—the problems of industrial management, the industrial autocracy of tomorrow which has been created and its accountability to society, where Parliament comes into this and where a Labour Government comes into the question of planning of industry and of unemployment—are the issues which must be discussed and debated in the House of Commons. I am more than grateful to my hon. Friend the Member for Tottenham for raising this matter. I hope 1617 that my hon. Friend the Joint Under-Secretary at the Department of Economic Affairs can give assurances on the questions which we have asked, because this is not the end of the road. It is obviously only the beginning in industrial take-overs and expansions. I assure my hon. Friend that we shall watch these developments keenly.
§ 9.42 p.m.
§ Mr. Arnold Gregory (Stockport, North)
I agree with my hon. Friend the Member for Salford, West (Mr. Orme) in thanking my hon. Friend the Member for Tottenham (Mr. Atkinson) for introducing this debate. My hon. Friend the Member for Tottenham referred to the whole range of issues which the merger has brought to light. We are concerned with not simply one aspect of industry, but the entire broad scale of a fundamental and basic economy.
Bearing in mind the debates that we have had this week on fundamental questions of the economy, it is appalling that there is nobody on the benches opposite to contribute tonight on an aspect of industry which involves a whole range of fundamental economic questions.
It was mentioned in the Financial Times, for example, that there is a full range of undertaking between A.E.I. and G.E.C. in basic technological industries which not only shape the rôle of other industries, but shape the policies of large nationalised undertakings. There is, for example, the whole field of telephone equipment, in which A.E.I. and G.E.C. are market leaders. There is their rôle in switchgear and transformers, on which statements have been made by the Chairman of the Central Electricity Generating Board about the kind of industrial contribution which is made on this front. They are also leaders in process control, defence equipment, domestic appliances and consumer electronics.
If we are to discuss an industry with a vast effect not only on power and electrical industry itself, but on a wide range of modern communications and industrial systems, we should ask whether this was a calculated move. Was it a basic contribution to the economy of the country? We find that, staggeringly enough, it was not. Was this a calculated move by those who control this 1618 vast empire of industrial interests? When The Times on Friday, 29th September, asked through their correspondent, Mr. Philip Jacobson, of Sir Charles Wheeler, the Chairman of A.E.I., what the nature of the bid was, he said,This was pretty much of a surprise.He said he had had a frantic lunchtime telephoning around to get his board together, and they finally sat down at 4 p.m. We here do not know, although we are dealing with a vast industry, of any calculated approach to the rôle of A.E.I. in relation to G.E.C. and precisely what their contribution will be as a combined force.
My hon. Friend the Member for Tottenham raised the question of size and efficiency. Opinion on this would seem to be rather divided.
Since the original move on a merger between A.E.I. and G.E.C. was taken we learn through The Times from Sir Charles Wheeler that it was not so much a question of realising good management in the national interest but that, quite clearly, the concern was something apart from the national interest at that stage. The concern was purely and simply to weld together these vast financial interests, rather than concern about the kind of industrial contribution which could be made by the combine to the affairs of the country, and making the industry accountable to the nation.
On the question of size, Sir Stanley Brown, Chairman of the C.E.G.B., has said already that in the transformer industry he would like to see four companies operating in the supply of transformers and not six. We could argue just here the question of efficiency. If a reduction in the size of the industry would help towards greater efficiency, then the industrial leaders of that particular section of the industry now being combined did not realise before 29th September that this would be the case. The Times on this point said, about two or three manufacturers dropping out of this field, that the problem in the industry is that it is still far more overcrowded than it is in the rest of the world, except in Italy, where chaos still reigns with two or three firms and not the four which Britain would be left with. So here it would seem that the 1619 consideration was not the efficient running of industry through any firms dropping out, but that the concern was to accommodate the financial interests of the companies concerned.
My hon. Friend mentioned, in passing, the comparison between this and what happened with the I.C.I.-Courtaulds takeover bid. That failed. What we saw on that occasion was a large chemical combine trying to impose its policy on the textile industry, and to determine the shape of the textile industry. Again, the failing was not because this was adjudged by the country at large neither as a move for efficiency nor one which would give the industry a magnitude to make both the chemical and textile industries competitive. In both industries we are still struggling to realise a competent and efficient way of operating, with low prices, and a consumer rôle which would accommodate British labour efficiently and intelligently. That was a struggle where I.C.I. failed in the bid. I.C.I. was the bigger operator. I would say that it fortunately failed, because that allowed a company in the shape of Courtaulds to assume a rôle within the British textile industry to carry out an efficient overhaul of the industry and provide people with basic opportunity for work. But we did not get that from good leadership. This was a failure on the part of one big company to combine.
§ Mr. Gregory
I am sorry, Mr. Speaker. I will come back to the point whether this is in itself a good move in the interests of British industry.
Having had this merger imposed upon us, the challenge is how we can move on with a new organisation to realise both efficiency and unit sizes which can do the job. We know that there was an argument both inside and outside the Science and Technology Committee for standardisation of equipment for the supply of power through the C.E.G.B. and to sell nuclear reactors abroad at competitive prices. We never doubted our efficiency, but G.E.C. and A.E.I.—A.E.I. directly 1620 as part of a consortium—could play a part.
The challenge to both A.E.I. and G.E.C. is how they can contribute efficiently to the policy of standardisation to bring down product costs in a domestic and world market. On this score, we look forward to the kind of rôle that A.E.I. can play, probably on a revised consortia basis, in the struggle to sell nuclear reactors abroad and bring down the cost of electricity at home.
The point remains that a marriage between two companies in this manner is not of itself a calculated approach to deal with the problems of British industry, particularly those of a fundamental electrical power industry, in tackling a job of that sort. We are wide of the mark.
I hope that my hon. Friend the Joint Under-Secretary of State will try to tell us precisely what his Ministry hopes to do, not simply waiting for things like this to happen but meeting them halfway and ensuring that, whether it be in the development of telephone systems or in shaping the British power industry to sell reactors abroad, with the participation of the General Electric Company and A.E.I. as a combined force in future, we are not left with a situation where it surprises the chairman that this kind of thing is to happen.
Instead, we should anticipate the needs of a productive industry which can go out and challenge the world, and bear in mind many of the points which have been stressed by my hon. Friends. Can we have an assurance from my hon. Friend on behalf of his Department that, in future, we shall have a blueprint for British industry which is not related to the snap take-over, but is a calculated approach to make the industry durable and, furthermore, a challenge to the world in terms of what it produces in the interests of the country.
§ 9.54 p.m.
§ Mr. John Ryan (Uxbridge)
Several speakers have paid tribute to my hon. Friend the Member for Tottenham (Mr. Atkinson) for introducing this important debate on the Adjournment. I repeat that tribute, and I do not think that it grows stale by repetition. In raising this matter, he has done a real service to the House.
1621 I want to comment on what I consider to be Lt narrow but important issue. It is the rôle of the I.R.C. in this and future mergers in the British industrial process. I do not take the view that the present pattern of industry should be static or is sacrosanct. I recognise that mergers will take place. However, I want to consider the criteria by which they take place, the way in which they take place, and the influence which the I.R.C. and other Government agencies have on the shaping of those mergers.
My hon. Friends have paid tribute to A.E.I., its training policies and its management policies. I have no constituency interest in this matter, but I would ask my hon. Friend the Joint Under-Secretary of State if he would care to consider the rôle of the I.R.C. and the way in which it tried to impose its concept of the public and industrial benefit upon this merger.
In any consideration of a market economy, there are great difficulties for efficient firms in the market place. This is a firm which has a dividend policy which is less than generous to its shareholders, and which puts aside a larger proportion than normal for research and development and lays down capital for the future. Such a firm can put itself in a difficult and vulnerable position in the market for a takeover.
I know that the prices of shares reflect future income and by and large on average a balance will be struck. Nevertheless, we have seen situations where firms, which have been more progressive and which have put down higher capital investment and looked more to the future, have been in serious danger of a takeover because at any point in time the owners of the firm were unable to control the private shareholders who wanted a quick killing. In this situation we have some shares rising by 85 per cent., as my hon. Friend the Member for Tottenham said. It is a curious comment, at a time when the country is facing serious economic problems and when there is a rigidly enforced prices and incomes policy, that people can take an 85 per cent. profit. I know that my hon. Friend will refer to Capital Gains Tax and so on and so forth, but there is a substantial profit to be made which stands in stark contrast to the electricity supply workers and other low-paid workers who have had 1622 wage increases of only a few shillings a week held up for 15 months because of the Government's policy. This is a responsibility that the Government cannot shirk.
I know that this is getting wide of the mark in this situation, but I would like my hon. Friend to comment on the way in which this merger took place.
My hon. Friend the Member for Tottenham said that it would be difficult to find out exactly the ownership of the firms concerned. This is a situation where the ownership was diffuse and where large and amorphous corporations held large blocks of shares for purely investment purposes. One cannot argue that insurance companies are necessarily enthusiastic about which particular company or industry they have their holdings in. They are enthusiastic about the returns. The holdings and investment policy which they pursue at any point in time is purely financial criteria and not on productive or industrial criteria.
If one of these partners had a better record of research and development, including distributing less dividends, its shares may be an unattractive part of the portfolio of the insurance company holding them and a prospect of an 85 per cent. increase may not be an unattractive consideration. I would like my hon. Friend to comment on this aspect when he replies.
Another thing which struck me about this merger was the amount of Press advertising which took place. We know that the actual shareholders of both companies probably add up to no more than 140,000 individuals. It seems curious in that situation that one should see this vast expenditure on advertising when they were locked in the struggle. It seems unjustifiable, if one accepts the present situation, that mergers should be carried out on entirely capitalist criteria.
One could hardly justify some of the advertising which has taken place. It seems legitimate to point to one's record of achievement in the past, and to point to the amount of money the firm has put by for the future for capitalisation and to provide for the management of the firm, but some of these advertisements merely said, "A.E.I. says No", right down a full page in certain newspapers. This does not seem to be an intelligent 1623 or convincing approach. It seems unjustified that this kind of money should be spent at a time of austerity throughout the country when one is only speaking of 140,000 or 150,000 people.
One also knows the kind of editorial mention and prominence that is given to the state of a particular argument is sometimes based on the volume of advertising spent on behalf of the combatants. In this case the editorial mentioned was about equal with the advertising. That is a way of keeping the battle alive. Most people expected G.E.C. to get A.E.I. quicker than it did.
I wonder whether my hon. Friend would comment on the position of the I.R.C. in future. When it sees things like this, will it be able to exercise some control over the mergers and how much expenditure takes place? At the start of such a process will it find out who the shareholders are, why they are shareholders, for how long they have been shareholders, and whether they are large companies with holdings in competitors and so forth? Will it try to add a bit more dignity and intelligent structural alteration to the merger? If it does not, and if we again see the undignified squabble, which takes place at great cost to the consumer and the public in terms of the money spent on the merger, then it will cheapen the public life of the country. It would be a great disappointment if the I.R.C. were prepared to see that happen again.
§ Mr. Stan Newens (Epping)
I am glad that this matter has been raised by my hon. Friend the Member for Tottenham (Mr. Atkinson), and—
§ It being Ten o'clock, the Motion for the Adjournment of the House lapsed, without Question put.
§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Gourlay.]
§ Mr. Newens
I am sure that many workers in A.E.I. and G.E.C. will be grateful for what my hon. Friend has done. It seems to me that this take-over illustrates very well the relationship which prevails in modern society between the development of the economy and politics. If this had been the take-over of a firm or an industry by a public authority 1624 such as the steel industry, we should have had waves of protests, last ditch speeches, and all-night sessions, but until the hon. and learned Member for Buckinghamshire, South (Mr. Ronald Bell), and the hon. Member for the Cities of London and Westminster (Mr. John Smith) walked in to the Chamber, one might have thought that an epidemic had hit the other side of the House, judging from the emptiness of those benches.
The takeover of a private concern by another private concern is accepted virtually without a word, except on the Stock Exchange, where it produces a tidal wave. It is very important that we should note how this must be interpreted. We must take it to mean that the interests of consumers and the interests of the workers are regarded in this society, certainly by hon. Gentlemen opposite, as completely subordinate to the interests of shareholders. I think that all hon. Members will agree that rationalisation is very desirable, but we have to ask ourselves in whose interests it is desirable? I think that we on this side of the House have shown by our presence here this evening that we believe that the workers and consumers should at least be of some account.
I have a denfinite constituency interest in this, because I represent Harlow New Town, where there is an important A.E.I. factory, an establishment at which redundancy has not been unknown in the past. It is well known that a policy of rationalisation will mean closures, the removal of work from one locality to another, and redundancies, possibly both in G.E.C. and A.E.I. It is important to remember that this is something which concerns not merely shop floor workers, but also scientists and technicians who have spent many years acquiring their qualifications.
If, for example, as a result of this merger A.E.I. establishments were shut down either in total or in part in Harlow, it would mean a vast waste of resources, and not only resources in private hands but much that is in public hands, because Harlow New Town has been built with public money and houses have been provided for workers who have come to the town specifically to work in industries such as those provided by A.E.I. Vast amounts of capital have been expended on recruiting the work force for factories such as that in Harlow and 1625 on recruiting teams of technicians and scientists to work there. The loss of public money involved when a shutdown occurs may be concealed to some extent from the public by rises in prices which will cover the losses, but they are nevertheless real losses of our national resources, and this is something which we should not underestimate.
If the A.E.I. establishment in my constituency were subjected to considerable redundancy, it would pose a serious problem in Harlow, a new town which was built with the objective of providing employment for workers who severed their connections with their own areas so that they could come to work here.
Whether or not this sort of redundancy takes place, the takeover bid has created in the minds of the workers a fear of redundancy which is extremely damaging for the prospects of the industry. I hope that my hon. Friend will give us some assurances on this issue. I have no doubt that Mr. Weinstock is a very able man, but we must remember that his primary concern is not with the workers or consumers but with the shareholders. This is a very sad commentary on society. It is a sad fact that rationalisation should take place virtually only by consent of those who stand to gain from increases in profits. As my hon. Friend the Member for Tottenham (Mr. Atkinson) pointed out, the prices and incomes policy, and norms for increases in incomes, do not apply in this case.
I represent hundreds of people who tore up their roots to come to Harlow New Town. No threat has been voiced, and I do not wish to create a scare, but the Government have a responsibility to ensure that wherever closures or redundancies occur, whether in my constituency or in any other, alternative work will be provided so that we do not idly anticipate a work force which has been built up at considerable public expense.
It seems to me that as the Government gave support for this merger they have a responsibility not to stand by if closures and redundancies occur. I am all for rationalisation, but it should be carried out in the public interest and not in the interests of a minority of people. Full consideration should be given to the interests of the consumers and the 1626 workers. Sooner or later we must recognise that industrial giants and monopolies should be brought into public ownership where they will be fully responsible to the public instead of to the present minority of shareholders and those who claim to represent their interests.
I recognise that this would be Socialism—
§ Mr. Newens
The question of Socialism for A.E.I. and G.E.C. might well be mentioned in this debate, in order to point out that there is an alternative to what we have seen taking place during the past few weeks.
I realise that not only is there opposition to this among hon. Members opposite but that some hon. Members on this side of the House are also lukewarm. Nonetheless, I hope that my hon. Friend will give some assurances this evening which will not only deal with the points that have been raised but also with the interests of and fears expressed by the workers in A.E.I. and G.E.C.
§ 10.10 p.m.
§ Mr. John Smith (Cities of London and Westminster)
I had not intended to intervene in this debate, and had not indeed realised that a debate would develop at all; but I should like to deal with three points which have been raised. The first was the very good point of the hon. Member for Uxbridge (Mr. Ryan) about Press advertising. The Press advertising in connection with this merger was extremely unedifying, and it would do the Press and all of us good if we examined which company advertised in which papers and why. The hon. Member did well to raise that point.
The second aspect was the mention of nominee holdings—of shareholders in the two companies being unidentifiable because their shares were in the names of nominees. I entirely deplore this. It should be manifest to all who the shareholders are, and if any measures are brought in to make it possible to see through nominee holdings, I will support them.
The third point was whether putting these two companies together is in the interests of their workers, and I believe,
1627 emphatically, that it is. It is sad that these two companies should lose their separate identities, but we must recognise that the world scale of industry is far larger than that in this country, that a single American company may have a turnover larger than the expenditure of the British Government.
Regrettably, if we are to compete in the world, we have to arrange our industry in much larger units. If we do not, we cannot compete and there will be no jobs for those in this industry. I am sure that, in the long run, this merger, which has the support of the Government, will undoubtedly be in the interests of all those, management and workers, concerned with both firms.
§ 10.12 p.m.
§ The Joint Under-Secretary of State for Economic Affairs (Mr. Edmund Dell)
I apologise to my hon. Friend, but I have been asked so many questions that, unless I reply now, I will not be able to cover them.
I pay tribute to my hon. Friend the Member for Tottenham (Mr. Atkinson) who has raised some important questions about the implications of G.E.C.'s successful bid for A.E.I. I know that my hon. Friend is one of a powerful phalanx of ex-A.E.I. Members in the House and I was moved by his expressions of loyalty to his old company.
He spoke about the managerial society. There are many characteristics of our company legislation which require fundamental reconsideration, and this must include all those long-debated questions relating to industrial democracy. I am sure that the Labour Party and the Government must give further thought to these matters, and particularly to the important question of public accountability of these large companies.
We all want a stronger and more competitive economy, with a rate of economic growth permitting a still higher standard of living and further improvement in social conditions. If we are to succeed, we must make full and efficient use of our resources and British industry must compete still more effectively and vigorously in world markets. It is to this 1628 end that the Government's industrial policies are directed, and we shall not realise our aims unless we take full account of the limitations of the industrial structure which has evolved here.
I welcome the fact that my hon. Friend emphasised the importance of industrial rationalisation, which is a view increasingly shared by businessmen and economists. Of course performance ultimately depends on the quality of management and employees, but the opportunities open to them depend to a great extent on the resources at their disposal. There are, for instance, in most sectors of industry, many things which larger firms can do by way of marketing, research and development and the installation of the very latest equipment which are just not within the capabilities of small firms, particularly if they have to compete with much larger concerns overseas.
My hon. Friend the Member for Uxbridge (Mr. Ryan) questioned that to some extent, but I assure him that the vast majority of industrial research and development in this country, and indeed in all industrialised countries, is done by large firms. That is why the Government have given such a high priority to industrial reorganisation, because it is fundamental in improving the performance of our industry.
I am not one of those who equate bigness with efficiency and considers small firms obsolescent. Small firms are often highly efficient and enterprising. They may sometimes be able to react more quickly to market opportunities. They have sometimes been world leaders. As my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) said, they may sometimes be more comfortable places in which to work, with more intimate relations between management and labour. But smallness can also be a handicap, for example in competing in the world market, and it is in the export industries that the structure of British industry appears most defective as compared, for example, with German industry.
The hon. Member for Cities of London and Westminster (Mr. John Smith), who made his speech and then immediately left the Chamber, made a comparison with the United States. I often feel that a more enlightening comparison 1629 is that with Germany another industrial country in Europe. Germany's competitive strength has undoubtedly been helped by the fact that in the major export trades German companies are much larger than British companies, especially if one leaves aside the chemical industry; and that German plants supplying the export market are much larger and appear to be much more productive than, on average, are British plants supplying the export market, and this, again, is even more true if chemicals are excluded.
Now that international trade is freer than before, more and more markets are becoming international in scope. This and the increasing pace of technological development weighs the scale more and more in favour of large firms capable of research and development, production and marketing on a truly international scale. This applies particularly to the electrical engineering industry, the subject of the debate tonight.
It was for this reason—and my hon. Friends will remember the debates which took place a year ago—that the Government established the Industrial Reorganisation Corporation with financial resources of £150 million to stimulate and help forward industrial rationalisation. It has already had a very useful first year of operation examining the structural problems facing various industries, including micro-electronics and telecommunications and working in concert with many firms in a wide range of industries to hasten reorganisation. Its rôle in the G.E.C.-A.E.I. merger received a magisterial accolade in a leader in The Times. The controversies of a year ago about this institution are forgotten—or almost forgotten—and I am sure that the Corporation will play an extremely important part in making British industry more efficient and profitable in the future, particularly where schemes of rationalisation and modernisation offer good prospects of early returns in terms of increased exports.
At a time when the level of unemployment is temporarily higher than any of us would like to see, it is important to place reorganisation and rationalisation in their proper perspective. Now that the £ has been devalued, British industry has been given a tremendous opportunity to 1630 sell more goods abroad, and rationalisation is all the more necessary if our industry is to meet this challenge in world markets and to remain in the forefront of technological progress.
A point which my hon. Friends have mentioned and which causes concern—I will refer later to one assurance given to the Government by the G.E.C.—is that rationalisation may well mean concentration and the closing down of uneconomic units, and there may be some transitional unemployment where that takes place. It would be unwise to resist that process. I entirely agree, however, that the process must take place in close consultation with the trade unions. What we want from companies is what responsible firms already give—co-operation in ensuring that the necessary redeployment is orderly and planned. What we must then do is to see that people released from jobs by rationalisation are helped by redundancy payments and retrained through industrial training schemes so that they can then make the switch, without hardship, to other jobs where their skills are needed. As production for export grows, all those skills will be very much needed, and we must make sure that they are not mistakenly hoarded in one firm when they would be put to better use in another.
In the next year, we are more likely to face shortages of skill than surpluses of skill. My hon. Friend the Member for Epping (Mr. Newens) said that alternative work should be made available, and I entirely agree that there should be planning to that effect. This is as much a point for the development areas as anywhere else.
We believe that it will be beneficial to the economy if the re-grouping of manufacturing activity resulting from mergers is concentrated in the development areas, whenever this can be achieved without significant loss of efficiency. It would be incompatible, of course, with the Government's overall strategy for strengthening the structure of British industry to maintain that no rationalisation scheme should ever lead to redundancies in a development area. The Government would be very concerned, however, at rationalisation measures which led to a transfer of jobs from the development areas to the congested and more prosperous areas.
1631 This does not, of course, mean that the existing pattern of employment must be rigidly maintained, but the Government would expect firms to take due account of the special needs of, and long-term opportunities in, the development areas when planning their rationalisation measures.
Thus, there is no conflict here between our industrial and our regional policies. The economic salvation of the development areas will come, as our regional policies recognise, from the introduction of the dynamic new industries of the future which can look forward to growing world markets in the years to come, as well as from the expansion of existing industries. It is in the best interests of all concerned—trade unionists and management alike—that the pattern of industrial activity in any area should reflect the challenge of the future and not the distant achievements of the past.
So much for the Government's general policy. My hon. Friend the Member for Stockport, North (Mr. Gregory) suggests that this merger and process of rationalisation is entirely unplanned. In the particular case of electrical engineering, the Government accept the widely held view, shared by those within the industry, that the industry would benefit from rationalisation. The National Plan specifically mentioned this industry as one where reorganisation might lead to increased competitive efficiency, and a good deal has happened since.
Following a study organised by the Electrical Engineering E.D.C., the number of manufacturers of distribution transformers has been reduced by half, to about 20 firms and the E.D.C. is now promoting a similar review of the possibilities in the electric meter industry. Discussions are taking place between the firms which manufacture power transformers and, according to Press reports, the industry may well eventually consist of about half a dozen firms. Since 1965 there have been only three firms manufacturing turbo generators. Throughout the electrical and allied industry, a number of other mergers, in addition to the one which we are discussing tonight, have already been announced this year.
In considering the structure of the U.K. electrical engineering industry, one must 1632 not forget the part played by the C.E.G.B. as the largest single customer. They naturally welcome any prospects for rationalisation which may lead to greater efficiency, particularly in commissioning plant on time and improved availability thereafter.
Given the fiercely competitive international environment in which the industry operates, these developments are clearly a continuing process. Seen in the world context, even the G.E.C.-A.E.I. merger will not create a unit as large as many of its principal overseas competitors. Indeed, the combined turnover of the G.E.C.-A.E.I. group will rank ninth in the world league table of electrical manufacturing companies, behind five United States, one Dutch, one German and one Japanese firm. Those who say that the efficient operation of firms of this size makes considerable demands on management must remember that many foreign companies, and indeed some British companies, have already shown that these demands can be met. I know that the I.R.C. has well in the forefront of its mind the fact that the success of grouping depends ultimately on the quality of management.
Reference has been made to the export effort of A.E.I. The electrical engineering industry is making a major contribution to the national export effort. In the first half of this year, British exports of electrical and allied goods were running at an annual rate of £418 million compared to £344 million for the whole of 1964, an increase of 21.5 per cent. This is an excellent achievement, but we should not ignore the rising trend of imports during the same period from £148 million in 1964 to an annual rate of £288 million in the first half of this year, an increase of 54 per cent. in imports, as against 21.5 per cent. in exports. Thus, during the last three years or so, the industry's overall net export position has deteriorated.
Some sectors have fared better than others. The value of exports of heavy electrical plant increased by 38 per cent. since 1963, and the net export position in the telecommunications sector has also shown a marked improvement. In other sectors, particularly electronics and domestic electrical appliances, the net export position has deteriorated over this period. Despite this industry's undoubted 1633 export achievements in recent years, against extremely strong overseas competition, it remains true that the German electrical manufacturing industry exports 25 per cent. of its output while ours exports only 17 per cent.
My hon. Friend the Member for Uxbridge referred to the rôle of the I.R.C. As is well known, the I.R.C. gave its full support to the G.E.C. bid. The Corporation had been investigating for some time the possibilities for rationalisation in the heavy electrical plant industry and had had discussions with all the firms concerned. As was made clear in the published exchange of letters between Sir Frank Kearton and Sir Joseph Latham of A.E.I., the I.R.C. supported the G.E.C. bid because of a strong practical conviction that the large tasks of reorganisation facing the electrical manufacturing industry could be more powerfully undertaken by G.E.C.and A.E.I. jointly than by either company acting alone. The I.R.C. was impressed by the need to create a single British electrical manufacturing company which would be more in line with the size of the principal foreign companies in this competitive field.
My hon. Friend the Member for Salford, West (Mr. Orme) asked why the T.R.C. did not take part financially. G.E.C. did not need or ask for financial support. The I.R.C. made no comment on the terms of the offer; it merely made a judgment—which, I believe, was influential—that the merger was of national benefit.
The Government welcome this merger. I recognise that there may be concern about the effect on employment. The House will wish to know that the Government have already written to G.E.C. to ask it to take account of the requirements of the Government's regional policies when considering further rationalisation moves which may stem from this merger, and it has agreed to do so.
I recognise that some people may be worried about the possibility that the creation of a company of this size—it will be one of the largest in Britain—may make it unduly dominant in some sectors of the market. It is always right in respect of any large merger for the Government to consider the possibility of detriment to the public interest as well as the advantages that may accrue.
1634 To take that attitude in no way conflicts with the Government's policy of pres sing for the reorganisation of industrial structure. The Board of Trade considered this merger most carefully in the light of its responsibilities under the 1965 Monopolies and Mergers Act and concluded, on the evidence available, that the merger did not raise such questions of potential detriment to the public interest as would justify an investigation by the Monopolies Commission. The Board was concerned about the possibility of detriment to the public interest over the supply of electric lamps, but satisfactory assurances were given by G.E.C. on this aspect.
May I say how much I agree with my hon. Friend the Member for Tottenham about the importance of the merged company keeping up the A.E.I. tradition in the training of apprentices. This is certainly a most important matter, and I am sure that the merged company will pay due attention to it. I also agree with what he said about the benefits which can accrue from the merger depending on the achievement of successful industrial relations within the company, but I cannot this evening go any further in making any judgment about the detailed advantages likely to flow from G.E.C.'s acquisition of A.E.I. This merger between two great companies with interests in electrical engineering, electronics and telecommunications covers many sectors of industrial activity. The full benefits of the merger will become apparent only over a period of time when the new company has decided its policies. We believe, however, that the rationalisation following the merger will strengthen the electronics industry and is likely to be of considerable benefit to other parts of the electrical engineering industry as well.
This merger is an important step in a major British industry, and has created a company better able to match the resources of its overseas competitors.
§ The Question having been proposed at Ten o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at half-past Ten o'clock.