Speeches, etc.

Margaret Thatcher

Speech at the Carlton Club

Document type: Speeches, interviews, etc.
Venue: Carlton Club, St James’s, central London
Source: Thatcher Archive: CCOPR
Editorial comments: Embargoed until 2130.
Importance ranking: Major
Word count: 838
Themes: Economic policy - theory and process, Monetary policy, Privatized & state industries, Labour Party & socialism

Almost every day brings new signs of the Government's incompetence and inability in managing its affairs.

Wherever the Socialists are in control, something seems to be going wrong. Record local authority rates, enormous postal charges and rail fares, yet more staff in local authorities and, at a time of great personal hardship, the frightening growth in Government spending and borrowing.

At the end of last week it was the Price Commission's turn to add to our worries with some alarming news about the nationalised industries.

It has been clear since their report in July that all has not been well. They showed then that over the 2-year period of price control, prices in those nationalised industries which come under the Commission rose faster than prices in private enterprise firms. Nationalised industries contributed more to inflation than the rest of the economy. Furthermore, the Commission said the position was getting worse, because, in the six months up to May 1975, the increases were twice the size of those in private firms.

That news was bad enough. But the latest report brings us up to date with a still more alarming account of what has happened between May and August. [end p1]

Nationalised industry prices have actually risen faster since May than they did before—five times faster than they did in the private sector.

In fact, in private industry the growth nearly halved over the same period.

No wonder the Commission reported that—

“The urgent necessity is that increases in costs in public sector industries should now be restrained within the limits required to keep increases in prices within tolerable limits.

“This situation must be a matter of grave concern” . For what the Commission are saying in the tactful language of the official world is that inflation and costs are out of hand in nationalised industries, and something has got to be done about it.

In Parliament last Thursday I asked the Harold WilsonPrime Minister if he would take action on the Price Commission's Report. He totally failed to answer my question. On top of that, he put forward a curious explanation of the high nationalised price increases, suggesting that they were caused by the need to reverse the losses caused by price restraint in the past. This is a bogus alibi, and he must have known that it was bogus.

For the Commission's Report is quite clear about the true causes. The high price increases are due, it says, to the growth of costs. Elimination of deficits is no explanation, it says, since the deficits are not being eliminated.

In those public firms the Price Commission controls, the annual losses totalled about £70 million before price control began. But this is only a quarter of the losses which the Post Office and Railways expect to run up this year. [end p2]

Indeed, if now the losses were fully made good, the prices of nationalised industries would have increased by even greater amounts. So we must all of us, including the Government, face the conclusion the Price Commission has reached.

The truth is that inflation is getting worse in the areas for which the Government is responsible. Private business is tackling inflation better than Government controlled industry.

Private enterprise is a better bargain for the consumer and the tax payer than nationalised industries. Throughout private industry managements will be forced to make a superhuman effort to keep costs to the minimum as their survival may depend on doing so. In contrast, in the public sector the pressures to cut costs are very weak. Losses are met by subsidies from the tax payer.

So it is now more important than ever in the interests of the consumer to find effective ways of ensuring that the public sector is run efficiently: to devise a procedure which subjects nationalised industries to disciplines and pressures similar to those which competition imposes on private enterprise.

The country must therefore seek three things from the Government. First, an assurance that it recognises the gravity of the high and rising costs and prices in the nationalised industries.

Second, a statement setting out what steps it proposes to take to remedy the situation in the longer term.

Third, prompt action in the short term to deal with the immediate crisis of costs and efficiency.

No dramatic initiative is needed to provide the swift action now needed. One simple solution would be for the Government to require the Price Commission to investigate the costs, efficiency and commercial performance of the nationalised industries, and to publicise its findings. [end p3]

This would have the double advantage of developing the work of an existing body rather than creating yet another, and of exposing the problems of the industries to prompt, independent and objective public scrutiny.

This proposal should be taken in conjunction with other policies to ensure economy and reduce inflation in the public sector, such as the introduction of “cash ceilings” .

In that context it would do much to re-establish proper restraint of costs and to impose some of the disciplines of competition where they are most urgently needed.

The question is now, as so often, how long will we wait before the Government takes any action?