Epilogue the Second Fifteen Years of Nationalisation (1963-79)1
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EPILOGUE THE SECOND FIFTEEN YEARS OF NATIONALISATION (1963-79)1 . .. The exercise of undue pressure by governments and their failure to treat public enterprises reasonably would be bound to call forth countervailing power. Governments must consider them selves lucky that the responses to what at times has been a pretty dirty game have been so reasoned and well ordered. John B. Heath, 'Management in the Nationalised Industries', Nationalised Industries Chairmen's Group Occasional Paper No.2 (1980) pp. 1-2. In 1963 the Scottish Boards could look with a greater confidence than they had felt for some time towards their future. In England and Wales, too, the engineers and managers in the electricity supply industry could view their future optimistically, as they surveyed past achievements and recent changes on the fifteenth anniversary of nationalisation, 1 April 1963. Nor was this purely bloated pride. In February 1963, their senior men had finished a gruelling period of intermittent examination over more than a year before the Commons Select Committee on Nationalised Industries, which for the first time was showing its teeth seriously.2 The Committee's report, published in May of that year, was generally complimentary about the industry's achievements, and gave support to the general direction of policy on which they were embarked, even supporting the industry's views against that of Ministers on some issues where the two differed.3 The industry's presentations to the Committee had been an accomplished public relations achievement in the best sense of the word: they did not skate over difficult issues, but confronted them logically, so that their doubts and hesitations could be shared and their priorities rationally appraised. 4 Objective grounds for optimism about the future were, then, 279 280 Epilogue present. Managerially, the difficulties of the South of Scotland Board and the insecure interregnum at the Electricity Council were ended with the appointments of Elliott and Edwards. Technically, the experience with larger, more thermally efficient sets of 120MW and 200MW had lived up to most of Brown's expectations. Capital costs on stations recently completed were considerably below those of the postwar decade, and thermal efficiencies significantly higher. A ver age construction times were lower than at any time in the previous two decades. Moreover, their planned future standardisation on 500MW sets seemed likely to extend the benefits of replication and speed in construction. In the nuclear field, the over-optimism of the Atomic Energy Authority had been disciplined, and a good deal of expertise had been built up, which it was expected would soon be needed. The later Magnox stations, then being built to maintain this expertise, were expected to be considerably less uneconomic than their predecessors. The pricing issue at both wholesale and retail level had been resolved in principle, and commercial policy was now being tackled in a more discriminating way, with the emphasis on positive efforts to sell the off-peak load. Financial disciplines had been established, both internally and through clearer guidelines from government in the 1961 White Paper. Although the Cabinet had then resisted Treasury pressure to commit Ministers openly to a proposed White Paper statement promising less interference, by 1962 senior civil servants were emphasising that less intervention was one corollary of their new policy. 5 The industry's leaders very much welcomed that prospect, even if they were rather sceptical about the political will to keep to it. For all the force of the new financial disciplines, moreover, the industry had lost none of its spirit of buoyant expansion, which, between nationalisation in 1948 and 1963, had raised their share of final energy markets in Britain from 14 per cent to 29 per cent. The auguries for the future now were good, with the Government pressing them to expand investment in both distribution and genera tion. Despite disagreements with government on pay policy, more over, the managers in the industry were by 1963 more hopeful about developments in labour relations matters, which promised well for the future of productivity and the status of workers. The confidence generated by new policies and new management arose primarily from the feeling that the Electricity Boards were now fitted to overcome the problems they had experienced in the recent past. This perspective on the future derived from the past is, of The Second Fifteen Years of Nationalisation 281 course, a necessary part of the human condition; but that is not to say that their new management and changed policies would necessarily serve as well in facing the problems of the 1960s and 1970s. Experience was in fact to reveal new problems, as well as old flaws in new light, and the optimism of 1963 was, in the event, not always justified. In many cases, however, it was. One of the significant success stories of these years was labour relations. Productivity improved, partly as a consequence of technical progress (the operation of a typical large station with four 500MW sets required 600 men; the same capacity in 60MW sets required 2000 men). There were significant new initiatives to reduce overtime in return for adequate pay for standard hours. By October 1965 average hours of overtime were down to 1.7 hours: essentially the same work was done for the same pay but in a significantly shorter time. Work measurement was extended,6 and the South of Scotland Board, in particular, pioneered productivity yardsticks in the industry. The union leadership, particu larly the Electrical Trades Union under Les Cannon, now supported these schemes as a means of improving their members' living standards. By the early 1970s the electricity supply workers were again among the leaders in the earnings league, as before the War. On the CEGB's initiative, status differentials between manual and non-manual employees (on matters such as holidays and sick pay) were also reduced in the hope that this would increase the commit ment of the workers to the industry. The tougher management policy and government incomes policies led to some labour disruption on a short-term basis, but the short-term sacrifices were a small price to pay for these significant advances. 7 These meant that for more than a decade the rate of productivity increase in British electricity supply matched that achieved abroad (an equality few other British indus tries could claim), though the absolute level of labour productivity in Britain remained low. Policies on pricing and financial targets also initially developed well. The off-peak storage heater sales compaign, combined with the increase in the incremental price in domestic tariffs, enabled the industry more closely to equate prices with costs. A 'white meter' tariff - essentially the Eastern Board's time-of-day charging system - was introduced generally from 1969 in an imaginative marketing scheme. As a result of these changes the industry was able to hold the undesirable (and still probably underpriced) unrestricted space heating load to its 1964 level or below, with all the growth in sales for 282 Epilogue space-heating purposes now coming in off-peak hours. The load factor of the supply system rose from below 50 per cent in the early 1960s to over 55 per cent in the 1970s,8 a level nearer to that achieved overseas than had been typical in Britain in the past. Yet, despite earlier fears by the area chairmen, the new policies of more realistic domestic pricing did nothing to blunt the commercial edge of the industry, which throughout the 1960s continued to win a larger share of the domestic energy market. In appliance sales too, despite the abolition of resale price maintenance in 1964 (which the industry opposed), they were commercially successful. Their market share of appliance sales actually rose initially, in common with that of other multiples; though in the 1970s, their market share declined again, despite the vigorous promotion of their new 'Electra' brand name. The financial policies of the 1960s White Papers, in which realistic pricing played an important role, were initially developed encourag ingly. Gaps which economists pointed to in the published version of the 1961 White Paper were plugged by the industry voluntarily, before they became government policy in the subsequent White Paper of 1967. 9 The industry was also increasingly able to persuade Ministers to pay explicit financial compensation when they asked the industry to follow policies judged uneconomic. However, adherence to this ideal, promoted earlier by Edwards, was decidedly patchy. 10 The financial surpluses made by the industry were less than those targeted in 1961-3, partly because of cost increases, and, in later years especially, partly because of increasing government interven tion in pricing. The political commitment to non-intervention on this issue had always been equivocal; but, in the 1970s especially, the gains of the previous decades were all but thrown away. Thus, whereas between 1960 and 1969 costs went up by 7 per cent and prices by 28 per cent (enabling a healthy increase in surplus); between 1969 and 1974, with the general rate of inflation accelerating markedly and government trying to hold it back by controlling public sector prices, costs rose in money terms by 118 per cent and prices by only 57 per cent. The result, inevitably, was that the industry went into deficit, and it is only recently that economic pricing has been generally restored to the energy sector. One recent study has found that, in the years after the supposed attempt to impose market financial disciplines on the Boards in 1961, their actual investment behaviour in fact conformed less closely than earlier to the models of private sector behaviour,u Even in their best years, moreover, the nationalised Electricity Boards had a rather lower rate of return on The Second Fifteen Years of Nationalisation 283 their capital than electric utilities in the United States, though the gap was by now small.