Lord Howell of Guildford
Main Page: Lord Howell of Guildford (Conservative - Life peer)
Lord Howell of Guildford
That this House takes note of the case for private ownership of industries and institutions in the United Kingdom.
Lord Howell of Guildford (Con)
My Lords, as this is my first proper opportunity, I wish at the outset to pay my personal tribute to the late Lord Howe of Aberavon, who was my friend, mentor and inspiration for many years. His role in our nation is not unrelated to the subject that we are debating in this Motion, since he brought sense and moderation to the great issue of unravelling Britain’s overcentralised and socialised industrial structure and saw the future in strictly practical, rather than ideological, terms. Speaking of balance and moderation, I very greatly look forward to the maiden speech of my noble friend Lord Young, whose almost proverbial balance of common sense and moderation will undoubtedly be a great asset to this House in dealing with this kind of subject and many others.
I suppose that, if I was a die-hard, last-ditch, put-the-clock-back, old-school Tory I would be on the side of Mr Corbyn, the leader of the Labour Party, who clearly wants to return to the past and is, I understand, firmly committed to the renationalisation of the railways and, as far as I know, maybe much else as well—I am not quite sure about that. However, as I belong to neither that wing of the Tory party nor, needless to say, Mr Corbyn’s circle either, I will be taking a different view, and one that I hope that, in this House at least, is fairly uncontroversial. After all, at about the last dinner and discussion I had with the late Baroness Thatcher while she was still well, she repeatedly warned me that life would be difficult for us as Conservatives because Mr Blair had pinched all her best policies, notably her commitment to privatisation of large swathes of British industry. She thought he had carried on with and taken one of her best ideas.
Of course, the seeds of privatisation go back long before that, and were really planted back in 1970 under the Heath Government, when we attempted to bring in for the first time systematic questioning of whether every programme and function of central government should be in the public sector at all or organised in different ways. However, 1997 was one of the defining moments in the privatisation story, because it was the recognition that a modern social-democratic, forward-looking party, as Labour then was, could live with, and actually carry forward and develop, the privatisation programme idea. My theme in my comments will be that the continuing privatisation trend of the last 30 years or so, both here and around the world, including incidentally in Russia and China, has been basically technological and the inseparable child of the digital age and the information revolution, rather than ideological.
There may have been instances where it has gone too far and too fast, or where the results have been disappointing. I do not disguise that I wanted a different pattern of railway privatisation from the one that was actually adopted, and if I am told once more on the telephone when trying to contact a privatised energy utility that my call is important to them and to hang on for 20 minutes and then be told I have five choices, none of which works, I shall go berserk. None the less, I believe that going back to the alternative of state ownership of the main utility industries would be a much bigger disaster, if indeed it could nowadays be done at all.
For me, the apogee of the old lumbering, non-innovative, hopelessly overcentralised state ownership—so called public ownership, but of course the public and the customer had virtually no say at all—came when I assumed responsibility for the then Department of Energy in 1979. There I realised that I was entering a colossal and overloaded ministry, the department at the centre of just about everything, covering more than 20% of British industry and the most vital parts at that. It was the department of oil shocks, the Shah having just fallen; the department of militant miners, with Arthur Scargill itching to have a go at the new Tory Government; the department of colossal investment programmes in mammoth nationalised industries; the department of booming North Sea oil, with a state oil company owning and trading one of the largest volumes of oil on the planet; the department that had to keep alongside rising OPEC power; the department of nuclear energy; the department of the vast British Gas empire, under its formidable boss, Sir Denis Rooke; the department of the Central Electricity Generating Board and all its 12 or 13 area electricity companies; the department of the National Coal Board; the department that had relations with all the international oil companies; the department that owned 51% of BP; the department of global energy turmoil, soaring oil and gas prices, and threatened oil shortages, which were rocking the whole world’s economy. In short, it was a department of Soviet proportions, supposedly presiding over a huge socialised sector employing millions of people, a consumer of billions of pounds, in a world that was, in fact, coming to the end of its time.
Looking back, I can see that we were poised on the pivoting moment of the 20th century, as state mega-ownership and centralisation was finally choking itself to death and the digital era of decentralisation, denationalisation, privatisation and the rising market state was about to begin. Nothing like that immense departmental empire, with the fate of the whole government and economy on its plate and almost with its own foreign policy, would or should ever exist again. It was unmanageable, uncontrollable, impossible and fascinating.
That brings me to my first point, about why and how privatisation took off: it was the realisation that state ownership was not only hopelessly overcentralised but was not even a good means of control. On the contrary, private ownership with proper regulation stood a far better chance. Nationalised industries had their own empires, far removed from the accountability that the world wanted, the pressures of the market and, indeed, the pressures of the customer. That was our first motive.
Our second motive was embodied by the word “innovation”. We could see that, because no competition with nationalised industries was allowed—that was by law, and so we had to change the law—the incentive to innovate was minimal. That was the case for a whole chunk of British industry, and that had to change.
Our third motive was that the public sector just could not deliver the capital that these industries needed to modernise. The investment needs of these vast industries was constantly being undermined by short-term budget needs, which were eating away at their programmes.
Finally, and in my case primarily, some of us wanted a bit of genuine public ownership—not the bogus sort, where a few Whitehall bosses ruled the roost, but the truly public and widespread ownership of a capital-owning democracy turning earners into owners. We thought that privatisation was the road to that. That is what the Chancellor was talking about the other day, with his plans to build a share-owning democracy and sell Lloyds Bank shares to retail investors. Actually, in those days, we were going to go even further, and I still think we should, and build a society in which as many as possible, at all levels, have some form of ownership of capital or property or other form of savings—a really widespread stake in the capitalist process, giving security and dignity to as many people as possible rather than total wage dependence.
Employee share ownership was also part of that story. In fact, one of the most successful privatisations of the early days, which I personally presided over and which was initiated by my noble friend Lord Fowler with great foresight when he was Transport Secretary before me, was the National Freight Corporation sale, which enormously benefited all its staff and employees.
So what are the lessons for today from this initial wave of privatisation and its continuation through the whole decade under a Labour Government, as well as in many countries around the world, regardless of their types of government?
First, as I have suggested, the public interest, in the sense of defeating monopoly tendencies and protecting the customer and consumer, often stands a better chance through the good regulation of private industry rather than old-style state ownership and control. I could not help laughing when, the other day, I heard a union leader saying that the nationalised industries would be run,
“in the interests of passengers and the taxpayers”.
He clearly had a very short memory.
Secondly, there was that famous phrase about privatisation from Harold Macmillan—that we were selling off “the family silver”. It always seemed a funny kind of silver if it was costing £2.5 billion a year, as it was in 1979, to hold on to and upkeep. Yet, 10 years later, it was paying back £60 billion to the Exchequer in taxes alone. That does not make sense of the silver analogy; I think the great Harold Macmillan was wrong there.
Thirdly, one ought not to be too dogmatic about different types of privatisation, including models where the state retains a degree of ownership. There have been some very interesting post-privatisation models around the world. When I was working as a banker, I was asked to advise a country, which will remain nameless, on privatising its gas industry. I thought I had got the message over to Ministers in that country but, when I went back a month later to see how they were getting on, the Minister told me proudly that he had put his brother in charge of the industry. So it was privatised and that was all right, was it not? I did not succeed there. On another occasion, when I was visiting Václav Havel at Hradcany Castle, the lady who took the coats called me aside urgently. She said she had heard that I was an expert on privatisation, and could I get her father’s pub back from the communists who had stolen it? She was dissatisfied when I said that I could not do much more than mention it to Mr Havel. I do not know whether she ever got it back or not.
I also declare an interest as an adviser to by far the most efficient, safest and advanced railway system in the world—the Central Japan Railway Company’s Shinkansen system. This is a private company with a large, residual government shareholding. Incidentally, its safety record is much better than the more recent Chinese high-speed system. Japan seems to be a country which, with their current Chinese enthusiasm, our Government have temporarily forgotten. We depend just as much on Japan for our economic strength, especially for a successful nuclear future, as ever we will on China.
It has to be accepted as well that a privatised electricity industry, which we now have, was never going to be able to build nuclear power stations on the scale of the giants being constructed 30 years ago in the 1970s and 1980s. We are still, of course, constructing one of these giants—at Hinkley Point C. It should come as no surprise that it needs a French state company, a Chinese state-owned company and the British Government, plus eye-watering price penalties on all industries and households for years to come, as well as endless government guarantees of risk-free returns to the investors, to keep a project of this size and design going forward. I suspect that this will be the last of its kind in the line.
Although the debate about privatisation has regrettably now become polarised, I have concluded that the benefits have definitely outweighed the failures. More importantly, forces were at work from about two-thirds of the way through the 20th century which made privatisation inevitable. Asking whether privatisation is good or bad is rather like asking whether evolution is a good thing. It happened and was bound to happen.
Technology is marching on. The digital age is on the march. The nature and role of the state are changing. With immense people empowerment, a huge impulse to localisation and entirely new relations in many industries between the consumer and the producer, I believe that the modern information revolution will take this process forward far faster than most people realise, breaking down whole monopolies, both public and private. If we are going to see the transformation of the world’s energy mix, as many desire, this will depend on the flexibility and openness of our former energy and utility companies. Freezing them back into state monoliths is the very last way to help that process.
We need not a return to ideology—on the railways or anywhere else—but an advance to continuing innovation of every kind. That is what privatisation has enabled and it is what the market and the private sector, harnessed by skilled regulation, can and will provide. Nationalisation belongs to yesterday. I fear, too, although it will be resisted, that the great Labour Party in its present state belongs to yesterday. It is all rather sad and not a little dangerous. I beg to move.
Lord Howell of Guildford
My Lords, it remains for me to thank very warmly all noble Lords who have taken part in this debate. In a way I am quite gladdened that it has been a low-key debate and your Lordships’ House has not been infected with too much of the frenzy from outside and nobody has made blood-curdling speeches about returning to the commanding heights of the economy and all that, or blood-curdling speeches about the need for unbridled capitalism. In fact, in my view, all capitalism should be, and always will be, bridled and that is really the answer to the ideological battles of the past. The market has to be regulated and work in a framework of control; if the framework is right the market works and if it does not then the Government begin to carry the can.
I am grateful for the support of the noble Lord, Lord Wrigglesworth, who broadly supported my view that technology and the technical wonders of the past 30 years have driven us away from the idea of the great state industries of the past or the state industries of other countries such as Russia as they simply became undesirable, unnecessary and unworkable. Some 30 years ago in the Department of Energy I was told by engineers, scientists and civil servants that it was impossible to privatise the utility industries because it was absurd to imagine there could ever be two telephone wires to a house or two electric cables or two gas pipes. It could not be done so we might as well forget the whole idea. Indeed, I remember that in India people said it was impossible to privatise the telephone industry because there were 9 million villages that had to get a cable to them. Well, we know what happened. Technology simply leaped all over that and transferred the argument into a completely different world in which, particularly with digitalisation and the computer, it became possible to operate a vast variety of diverse services within an overall organised framework.
I am very grateful to my noble friend Lord Young—he lived entirely up to my personal, and all our, expectations in that he spoke a lot of common sense and I think he will add to the common-sense resource of this Chamber, which is more and more difficult to maintain sometimes in a very tumultuous world. As he said, our job is to scrutinise legislation. We will go on doing that thoroughly. In addition, through debates such as this one we have a stabilising role in the frenzy outside. Although, I just put in a slight reminder that in our present condition where the Government keep losing the vote in the end they must be allowed to get their business. If that common-sense view about this Chamber is thrown away then we are heading for a really disastrous period in which the basis on which the House of Lords is able to contribute will be undermined.
I am very grateful to my noble friend Lord Cavendish with his wisdom on localism and the need for strong local authorities with expertise. We want to see more of that. If we are going to go for northern powerhouses we need northern powerful and intelligent regulation and administration in local government, and that must come back in a way we have not seen before.
I thank the noble Lord, Lord Stoneham, who made interesting points about ownership. I am not sure I agree with him about it not mattering. It was Anthony Crosland’s idea that it did not matter. He told the old Socialist Party that you should not have to nationalise everything. In the end it does matter. If you do not think about who owns and organises and competes in the great resources of this economy, disasters follow. I thank the noble Lord, Lord Stevenson, for pointing out that, of course, in the end the Government always do have a role, particularly in all the vital services and where the investor will not invest. Where it is too long-term, as we have seen—we mentioned nuclear power—Governments have to step in. It is as simple as that. They become political decisions. The taxpayer and the consumer will have to be ordered to pay up if an investor is not willing to do so.
My only disappointment, if I may end on this note, is that there was no further comment on wider ownership and some attempt to calm down and overcome the eternal alleged ideological battle between capital and labour which has gone on for most of my lifetime. I believed in the 1970s and I believe even more strongly today that, where wealth is being created, resources must be spread so that everyone in the community who wishes to be involved—there are always some who reject participating—benefits from the growth of wealth and resources in the economy. To put it in crude terms, where there is butter it must be spread to all corners of the toast. I think that is the answer to past battles. If all share in prosperity then all will feel that they have a stake and will contribute. That must be the ideal not only of one-nation Conservatives but of the social democrat Labour Party as I have worked with it and understood it in the past and, indeed, the Liberal Democrats as well.
I thank again your Lordships for a very interesting passing comment, in a way, on the storms outside. Let us hope that we continue to be an oasis of stability, quietness, calmness and common sense in a very difficult and chaotic world.