The State in Business 1945 to the mid-1980s
MODERN ECONOMY AND SOCIETY General Editor: Professor B. W. E. Alford, University rif Bristol Published William Ashworth THE STATE IN BUSINESS: 1945 to the mid-1980s In preparation Charles Harvey BIG BUSINESS IN THE TWENTIETH CENTURY Maurice Kirby INDUSTRY AND TRADE 1870~l970 Roger Middleton ECONOMIC POLICY AND ECONOMIC THEORY IN THE TWENTIETH CENTURY Series Standing Order If you would like to receive future titles in this series as they are published. you can make use of our standing order facility. To place a standing order please contact your bookseller or. in case of difficulty. write to us at the address below with your name and address and the name of the series. Please state with which title you wish to begin your standing order. (If you live outside the United Kingdom we may not have the rights for your area. in which case we will forward your order to the publisher concerned.) Customer Services Department. Macmillan Distribution Ltd, Houndmills. Basingstoke. Hampshire. RG21 2XS. England.
The State in Business 1945 to the IIlid-1980s WILLIAM ASHWORTH M MACMILLAN
William Ashworth 1991 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 33-4 Alfred Place, London WCIE 7DP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1991 Published by MACMILLAN EDUCATION LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world British Library Cataloguing in Publication Data Ashworth, William The state in business: 1945 to the mid-1980s.-(modern economy and society). I. Great Britain. Nationalised industries, 1945- I. Ti tie Ir. Series 338.0941 ISBN 978-0-333-46874-6 ISBN 978-1-349-21529-4 (ebook) DOI 10.1007/978-1-349-21529-4
Contents Editor's Introduction to Modem Economy and Society List oj Tables }Jr~ace Abbreviations vu Vlll IX xu 1 Introduction 1 2 The Sequence of Nationalisation 17 The Programme of the 1945-51 Labour Government 17 A Period of Adjustment 26 The Later Extension of Nationalisation 31 The Retreat from Nationalisation 40 3 Objectives 42 The Original Version 42 The New Stress on Commercial Purposes 50 The Submergence of Business Aims 54 The Reimposition of the Profit Motive 56 4 ~eans 59 Institutional Structures 60 Staffing 67 Finance 75 Managerial Independence and Its Political Constraint 83 5 Perfor~ance 90 Co~ 91 Electricity 103 Gas III Inland Transport 117 Steel 129 Post Office and Telecommunications 138 Some Others 144 The Nationalised Sector as a Whole 151 v
VI Contents 6 Critique 164 7 Conclusions 186 Chapter Notes 209 List of Warks Cited Index 229 234
Editor's Introduction to Modern EconoIllY and Society This new series is designed to make the growing bod y of research in economic and social history accessible to students studying in the fields of history and social sciences and to the general reader with an interest in the historical aspects of economic and social affairs. In recent years a great deal has been written on twentiethcentury history, especially on the very modern period following the Second World War. But much of this research exists in the form of specialist articles and monographs. There is thus an obvious need for the broad, thematic surveys offered by this senes. Each book is an original contribution to the subject itself and not just an historiographical survey. Authors develop major themes within the central topic based on a wide coverage of the literature and on their own specialist research. Where necessary, specialist analytical techniques are explained in straightforward terms. Whilst the focus is primarily on Great Britain, a number of the books explore comparative evidence in relation to Europe and the wider world. A number of the subjects covered incorporate major historical debates. Not least is this true of the post-1945 period as a result of orthodox views being challenged in the light of new evidence continually becoming available from official records under the thirty-year rule. Authors aim to contribute to these debates both in terms of their own ideas and in ways which will stimulate interest and further enquiry. B. W. E. ALFORD Vll
List of Tables 5.1 NCB financial reconstructions and comparable financial reliefs, 1947-1983 96 5.2 NCB statistics, 1947-1987/8 100 5.3 NCB operating profits (losses), 1947-1982/3 101 5.4 Sources of NCB deficits before the financial reconstruction of 1965-1966 102 5.5 Electricity sent out from public sources in Great Britain, 1950-1985 104 5.6 Generating plant for British public electricity supply, 1948-1985 105 5.7 Gas consumers and sales, Great Britain, 1950-1985 115 5.8 British Steel Corporation: production, manpower and energy consumption, 1974/5-1981/2 136 5.9 Communications statistics, 1967-1987 139 5.10 Postal and telecommunications services: profits (losses),1964/5-1982/3 141 5.11 Public sector employment, 1961-1986 156 5.12 Gross domestic fixed capital formation by public corporations, 1948-1985 156 5.13 Gross trading surplus of public corporations, 1964-1985 157 5.14 Subsidies to public corporations, 1975-1985 160 5.15 Public corporations: revenue surpluses and capital expenditure, 1975-1985 162 VIll
Preface This is a book about British nationalised businesses while they remained nationalised. Privatisation sets a terminal period to the study, but the terms and methods of privati sat ion are outside the scope of the book. So there is no attempt to evaluate the claims made for privatisation, though it is hoped that readers will have been helped to judge the reliability of what was said about nationalised undertakings that were coming to the end of their time in public ownership. It should be noted also that the book does not concern itself with government policy towards private business or with the business aspects of the activities of some high-spending government departments. Because it is a short book a good deal has to be omitted, or mentioned only incidentally, which some readers would doubtless have preferred to be given greater attention. All the major nationalised enterprises are covered and the criteria for the omission of some of the smaller or less central are set out in Chapter 1. The final section of Chapter 5 summarises quantitative material for the nationalised sector as a whole. The guiding rule in deciding what aspects of the subject should receive the fullest attention has been to concentrate on what was rather than on what might have been, except where the distinction between the two reflects a deliberate choice between feasible alternative policies for the nationalised undertakings. This is the reason for what some may regard as the neglect of a great deal of controversial economic argument. Much has been written by economists about the pricing of energy and of transport and about policy devices to secure the optimal allocation and use of resources in each of these two sectors. Some of this would undoubtedly deserve discussion in a book not subject to the word limits of a particular series, and would enhance it. There is, however, much in this body of literature that is not specific to nationalised undertakings, and much which, though explicitly directed to nationalisation, is on lines IX
x Priface which had little or no practical influence on policy. This was sometimes because it was confronted by irreconcilable political conditions, sometimes because it over-simplified the economic complexities of current situations or based itself on assumptions about the unknown which were not widely regarded as sound. There is also little attention to the experience of nationalisation in other countries. This is the exclusion that I most regret. But a few scattered references here and there would not be representative. For comparisons to be revealing they need to be in an integrated form and on a substantial scale, and there is no room for that. What is included is what I judge to be most important and most accessible to a non-technical reader, whether a student or simply an interested citizen, who wants to know what happened in the nationalised sector and how it affected the public. Nationalised business is a favourite topic for the more expansive utterances of politicians of all persuasions. One service which a book such as this can render is to offer their audiences a protective armour of reality. The purpose of the book is to show what was nationalised and why and how; what the nationalised undertakings were told to do and how well or ill they succeeded in doing it; how they measured up when they came to be judged by other criteria (especially those of profit and loss in the narrowest sense) with which experience made them familiar but which differed from their original terms of reference; and what explanations can be suggested for the observed results. The book does not seek to promote any particular political or economic doctrine and may be thought equally deflationary to the rhetoric of the nationalisers of the 1940s and that of the privatisers of the 1980s. It uncovers no inherent reason why a publicly owned business is likely to operate less efficiently (or more efficiently) than one privately owned. But certain political problems with a history of decades of controversy refuse to be wished away into a limbo of universal consensus: whether there are some goods which are so basic to the collective functioning of the whole community, to its very coherence, that their supply needs to be retained in public hands; whether there are inescapable elements of monopoly in the supply of basic goods, which must be controlled, be it by statutory regulations or by
Priface Xl the prescription of appropriate terms of reference to a public owner; whether there are publicly desirable benefits which will give the producer no revenue through the market, and for which some form of public participation needs to be devised. Interested citizens will want to reach their own conclusions about these and some other matters. They will still not all agree; but they are likely to be better equipped if they have looked as objectively as they can, free from the customary atmosphere of myth and preconception, at the history of the nationalised undertakings. In the writing of this book I have had the benefit of discussion with Professor Bernard Alford, who has enabled me to make a number of amendments and has been equally helpful in stimulating me to think hard again about some other points on which, in the end, he has not persuaded me. For these services, he has my sincere thanks. WILLIAM ASHWORTH
Abbreviations AGR BEA BOAC BP BRB BSC BTC CEGB DCF Econ. Hist. Rev. ECSC HC HMSO ICI LMS NBPI NCB PO R&D SC SSEB TUC Advanced Gas-cooled Reactor British European Airways British Overseas Airways Corporation British Petroleum British Railways Board British Steel Corporation British Transport Corporation Central Electricity Generating Board Discounted Cash Flow Economic History Review European Coal and Steel Community House of Commons Her Majesty's Stationery Office Imperial Chemical Industries London Midland and Scottish Railway National Board for Prices and Incomes National Coal Board Post Office Research and Development Select Committee South of Scotland Electricity Board Trades Union Congress Xll