Published in The Economist May 27, 1978
(1) The Conservatives intend to demand that each nationalised industry achieve a set rate of return on (variously defined) “capital employed”. This rate of return, once laid down, would be “totally inflexible”. If managers did not achieve it they would be replaced. They would, however be supported in whatever action they had to take to achieve it even if this “might mean that men would be laid off, or uneconomic plants would be closed down, or whole businesses sold off or liquidated”. The report sees no other way to restore financial responsibility. “Nevertheless”, it adds, “there is no point in undertaking it if we are not prepared to go through with it.”
(2) After issuing this call to battle, the document then prepares the way for what could be constant, surrenders at Appomattox. Uneconomic activities would be costed and separately paid for by subsidy on the vote of the minister who felt they had to continue.
(3) Investment control by government would continue through five-year rolling corporate plans with a government commitment to a decreasing proportion of the investment, as follows: year one, 100%; year two, 90%; year three, 75%; and year four, 50%. The industries should be required to borrow from the exchequer at market rates of interest. Investment control should be used to restrict industries to their mainline activity. The report believes the corporations should not compete with private industry, but also that it is not worth fighting a major political battle to oblige them to divest themselves of current “extra-mural activities” (eg, electricity and gas showrooms).
(4) No direct government control of prices or wages in nationalised industries. The only control would be by insisting on the rate of return on capital being met, even if this involved the industry concerned raising prices, or selling off surplus land or assets or closing uneconomic activities. The concept of wage comparability is rejected: the criteria for wage payments should the manpower situation in the industry and the vulnerability of the nation to a strike.
(5) In choosing which strikes to fight, the team has classified industries into three categories of vulnerability with: (a) sewerage, water, electricity, gas and the health service in the most vulnerable group; (b) railways, docks, coal and dust men in an intermediate group; and (c) other public transport, education, ports and telephones, air transport and steel in the least vulnerable group. It rejects the proposal to make strikes illegal in industries where they are not illegal, and also any idea of having a strikebreaking corps of volunteers to run mines, trains or power stations. Where industries “have the nation by the jugular vein the only feasible option is to pay up”.
(6) Managers should be much better paid than at present, and ministers should no longer usurp the day-to-day responsibility of management by replying to parliamentary questions on such matters.
(7) The present boards of nationalised industries would be made supervisory boards with most members part-time. The full-time management should be devolved into smaller subsidiary companies into which the industries should be split. The holding boards would have power to hire and fire management and to fix pay. There could be worker directors on nationalized industry boards, provided these were an insignificant minority. Pay of successful top managers would be supplemented by public honours.
(8) The only legislation that the Ridley report proposes (and itself refers to as “a nasty little bill”) would be an end to statutory monopolies in the public sector. This bill would: (a) transfer licensing of private mines from the National Coal Board to the minister and restrict conditions of licence to safety considerations only. Coal royalties would be transferred from the NCB to the state; (b) give private generators of electricity the right to sell to the grid; (c) split letter-post from telecommunications and end the telephone monopoly at the subscribers “front door”; (d) remove ministers power to stop private-sector investment in steel plant.
(9) The group considered the scope for denationalisation. It believed that it would be easier, and more permanent, to fragment the industries rather than try to sell off whole corporations. It concluded that there was least opportunity for this in the “true utilities” (gas, electricity, railways, water, ports and telephones). The greatest opportunities are in coal, shipbuilding, docks, airports, motor car manufacturing, buses and freight. Specific proposals: (a) form worker co-operatives at coal pits wherever possible; (b) separate ports, and either sell them off or make them into worker co-ops; (c) make each airport independent and either sell it or hand it over to local authorities; (d) the assets of the British National Oil Corporation should be sold, preferably to the public at a 50% discount on value with a maximum holding prescribed for any individual.
So, far this report has not been to the shadow cabinet. But it has been discussed by the powerful economic reconstruction group under Sir Geoffrey. Howe and is now before a group under Sir Keith Joseph, the Tory industry spokesman and general policy overlord. Its general thinking seems to be accepted, but its detailed proposals are likely to be modified. They will be reflected in the Tory manifesto only in the most general terms.
In an annex to this report, Mr Ridley and some of his co-authors have been pondering how to counter any “political threat” from those they regard as “the enemies of the next Tory government”. They believe that in the first or second year after the Tories’ election, there might be a major challenge from a trade union either over a wage claim or over redundancies. They fear it may occur in a “vulnerable industry” such as coal, electricity or the docks and have the support of “the full, force of communist disrupters”. Behind the scenes, they would like a five-part strategy for countering this threat:
> Return on capital figures should be rigged so that an above-average wage claim can be paid to the “vulnerable” industries.
> The eventual battle should be on ground chosen by the Tories, in a field they think could be won (railways, British Leyland, the civil service or steel).
> Every precaution should be taken against a challenge in electricity or gas. Anyway, redundancies in those industries are unlikely to be required. The group believes that the most likely battleground will be the coal industry. They would like a Thatcher government to: (a) build up maximum coal stocks, particularly at the power stations; (b) make contingency plans for the import of coal; (c) encourage the recruitment of non-union lorry drivers by haulage companies to help move coal where necessary; (d) introduce dual coal/oil firing in all power stations as quickly as possible.
> The group believes that the greatest deterrent to any strike would be “to cut off the money supply to the strikers, and make the union finance them”. But strikers in nationalized industries should not be treated differently from strikers in other industries.
> There should be a large, mobile squad of police equipped and prepared to uphold the law against violent picketing. “Good non-union drivers” should be recruited to cross picket lines with police protection.