The Investment Programme

Bank-rate, reduced to 2 per cent after the crisis which forced the finał abandonment of the gold standard by Great Britain on Septem-ber 17th, 1931, was temporarily increased on the outbreak of war. Two per cent was soon restored and the rate of interest deliberately kept Iow throughout the war to cheapen the cost of government borrowing. A "foreign transactions advisory committee" had been appointed by the Chancellor in the nineteen-thirties, in order to regulate foreign issues and placings of foreign stock in London. The committee, renamed the Capital Issues Committee, was given a legał sanction on the outbreak of war under authority of the Defence 1 449 H.C. 45-6. g 2 475 H.C. 187. Regulations;1 and the cost of war finance was still further reduced by the control which this Committee were able to exercise over capital issues. Competing (private) demands for capital were virtu-ally ełiminated and the market kept in the most favourable condition for Government issues. The Capital Issues Committee has sińce been constituted a part of the permanent machinery of government by the Investment (Control and Guarantees) Act of 1947.2 The Act also established a National Investment Council and empowered the Treasury to guarantee loans up to an annual total of £50,000,000. These provisions were intended to supplement the facilities for the encouragement of private investment in industry already made avail-able by the officially sponsored Finance Corporation for Industry and the Industrial and Commercial Finance Corporation. The objects of the control to be exercised over the capital market after the war were set out in a "Memorandum of Guidance" ad-dressed to the Capital Issues Committee and published as a White Paper in May 1945.3 These were two— to ensure (a) that. . . the order of priority of capital issues is determined according to their relative importance in the national interest, having regard particularly to current policy in respect of physical investment and (b) that... the time of raising capital is settled with a view to pre-serving orderliness and avoiding congestion in the capital market. The first of these objects was later reaffirmed by the Chancellor of the Exchequer (Dr. Dalton) when moving in February 1946 the second reading of the Investment (Control and Guarantees) Bill. He pointed out that in the absence of control, the order of priority might be determined, not by the relative importance of any piece of invest-ment to the generał national interest but "by other criteria, namely, their relative appeal to profit seekers and the relative plausibility of their presentation to a credulous public by company promoters and others".4 The Memorandum of Guidance advised the Committee that con-sent should normally be given to issues intended to renew or replace existing obligations about to fali due or to convert existing securities into an appropriate class of security at a suitable rate of interest. The Committee were also asked to limit the value of permissible issues where the amounts proposed appeared to involve obvious over-capitalisation or excessive working capital. Issues to finance 1 S.R. & O. 1939, No. 1620. 2S.R. & O. 1947, No. 945. 418 H.C. 1552-1554. Report of Committee on Intermediaries, Cmd. 7904, Section 15. 'Cmd. 6645. 4 418 H.C. 1552. schemes of hire purchase were generally to be refused and so were bonus issues to shareholders. Consent was not normally to be given to issues for entertainments, investment trusts, unit trusts and other finance companies not intended directly to promote industrial activ-ity. Issues arising out of proposals for the acquisition, amalgamation or absorption of existing undertakings were not to be permitted unless the Committee were reassured that the operation did not require the raising of any new money and was consistent with Government policy. The Committee had no control over issues by local authorities nor of overseas issues, both of which came within other jurisdictions. Applications to the Committee for permission to raise money for industrial purposes by an issue of capital had to be sponsored by the appropriate Government department; and the department might also be asked to advise the Committee not only on the application itself, but also on the prospect before the applicant of obtaining, within a reasonable period (say twelve months) any scarce physical resources which might be required such as buildings, home-produced machinery and other controlled materials. Issues for purposes necessary to defence were generally to be allowed and also, though subject to the circumstances of the time, issues of securities required to finance properly sponsored activities included within the following list: exports; development of industry in those areas which can be held to further the policy of a balanced distribution of industry; public Utilities and housing associations; agriculture, fisheries and the extraction of raw materials in the United Kingdom; transport and storage; catering and the domestic distributive and retail trade in so far as these are essential to the main-tenance of food supplies and other essential services; and any other productive and constructional purposes which may be notified to the Committee from time to time by the Treasury after consultation with the appropriate Government department. Within this list, the Com­mittee were asked to give especially sympathetic consideration to issues for undertakings producing and selling for export, to issues required to establish, restart, convert or expand undertakings in the development areas; and to issues for undertakings which had been requisitioned or concentrated as a part of wartime policy or which had suffered damage as a result of war. The Memorandum has been amended in detail. The instructions have been revised and the rules of guidance have reflected from time to time the changing emphasis of Government policy.1 1 Capital Issues Control: Memorandum of Guidance to the Capital Issues Com­mittee, Cmd. 6645, Cmd. 7281. 463 H.C. 262, 470 H.C. 295, 486 H.C. 152. Few capital goods are bought with borrowed money raised by new issues of stock. Much the greater part of the annual addition of investment goods using that term to mean the formation of real capital—new construction, the installation of new equipment and so on—is provided without recourse to the market for new capital issues. Investment by private persons and privately owned under­takings is, in these days, financed principally by funds accumulated by companies and other industrial and commercial undertakings which make the investment. The programmes of capital expenditure undertaken by Government and other public bodies are provided from taxation or moneys directly authorised by Parliament. A big scheme of expansion undertaken by a nationalised industry might have to be financed by an issue of new capital—the British Electricity Authority issue of £150,000,000 in May 1950 and the modernisation programme promised in 1954 by the British Transport Commission are examples. But the considerable annual investment reąuired for rehabilitation, maintenance and day-to-day improve-ment of private business is found from sources which, being interna! to the firm concerned, lie wholly outside the jurisdiction of the Capital Issues Committee. Cheap money was continued until 1947 as an act of deliberate policy in order to make sure that no unnecessary obstacles such as high rates of interest and difficulties of raising money should stand in the way of reconstruction and new capital development. Under that benign influence and in the generał atmosphere of high and constructive endeavour in which civil servants and businessmen in Britain lived in those first post-war years, plans for investment both public and private outran resources. The dollar credits nego-tiated in the United States and Canada in 1945 were exhausted by 1947. In the ensuing crisis of the exchange imports had to be reduced, exports increased and "the volume of new investment . . . brought into proper relation with the reduced supplies of materials, in­dustrial capacity and manpower that we (could) afford to make available for this purpose".1 Government at the time were not prepared wholly to abandon cheap money. High bank-rate and generał restriction of credit had, for one thing, horrid associations with slumps and depressions. A rise in bank-rate, for another, could be expected (and indeed would have been intended) to induce a rise in all other rates of interest, thus leading in turn to an increase in the cost of carrying that part of the National Debt raised on obligations, such as Treasury Bills 1 Capital lmestment in 1948, Cmd. 7268, paras. 4 and 5. and Exchequer bonds, which had regularly to be renewed. The Capital Issues Committee continued to control issues reąuiring the raising of new money according to the instructions contained in the Memoranda of Guidance; and the commercial banks were invited to exercise a selective restriction of credit when passing on applica-tions for advances. The decisive step of raising the bank-rate was not taken, but the attempt to hołd down the long-term rate of interest was abandoned. The rate of interest paid on long-term loans, measured by the yield on Consols and on 3^ per cent War Loan, had been brought down to 2 and 2| per cent in 1946 and 1947. The prices of Government and good industrial securities were then allowed to fali and long-term rates of interest rose steadily and rapidly from 1948—as fast indeed (as it subsequently appeared) and by at least as much as at any other time during the past century, except possibly between 1914 and 1918! But in the autumn of 1947, that rise was still in the futurę; and even if it had been expected, the generał discouragement to all capital expenditure, no matter for what purpose, which might have been imposed by a deliberate in­crease of a sufficient magnitude in the cost of borrowing would not have been considered by Government appropriate to the needs of the times. Resources nevertheless had to be concentrated not on the best paying propositions, but on those types of investment which would most quickly enlarge British capacity to export and on those which would buttress the basie industries, "the sources of industrial strength". More effort had to go into exports to earn the foreign exchange needed to pay for imports. House-building, then being pressed for reasons of social policy, was a great consumer of soft-wood. All this had to be imported and paid for—in dolłars—thus adding, though indirectly, to the burden on exports. Capital develop-ment in home industry, in exports and the requirements of defence, all competed for coal, steel and manpower and all made claims on the capacity of the engineering trades. Given fuli employment of labour (and all other resources), there could be no expectation of an adequate increase of output. The resources reąuired for exports could "only be obtained to any significant extent by postponement of certain investment projeets. The size, scope and number of these projects must therefore be reduced not so much to save money as to save scarce labour and materials for diversion to even more urgent uses." The building of new houses was limited by deliveries of tim­ber, much the scarcest of the materials employed. Some constraints on supplies of capital goods for the home market were being exercised, as long as the shortages persisted, by allocations of raw materials, particularly, of course, of steel. But plant and machinery, with few exceptions, were otherwise free from direct control; and Government in 1948 were "reluctant to reintroduce licences to acąuire on a large scalę". They preferred instead to "rely for the present on the good sense of private industry following a policy lead",1 and to reinforce that lead by the control, still being tightly exercised, over industrial building. The instrument for the control of building was provided by De­fence Regulation 56(A). This regulation prohibited any new building or work on the expansion of existing premises (other than dwellings) exceeding a certain limited value (then £1,000) unless a licence was first obtained from the Ministry of Works. No licence was reąuired by Government departments, by local authorities nor by contractors working for departments. But local authorities, as much as any private applicant, had to convince their sponsors of the importance and priority of any works they proposed, if expected to cost more than £1,000. House-building occupies (or did, at the time when the reductions in the capital programmes were first being discussed) between 500,000 and 550,000 men. Another 200,000 were employed on industrial building sponsored by the Board of Trade, the Ministries of Supply, Fuel and Power, and Agriculture and on other miscellaneous building licensed by the Ministry of Works. The remainder were engaged on work controlled by other departments, including transport, education and the health sendces. Houses and other accommodation to let were (and still are) being built on the direct authority of the Ministry of Health (sińce the Ministry of Local Government and Town Planning and now the Ministry of Housing). Local authorities were permitted to issue licences for the building of dwellings for private ownership. But no local authority until the trade was freed in 1953 and 1954 could be reąuired to issue licences for this purpose and some granted none at all. A licence from the local authority was also reąuired before existing privately-owned house property could be repaired; but work not costing more than a certain limited sum—at first £10, later raised to £100 and £2,000—could be done without this formality. A private business, wishing to reconstruct, extend or build new premises estimated to cost more than £1,000 had first of all to seek the support of the department sponsoring the industry. This was the most important step. Once the application had been accepted 1 Cmd. 7268, paras. 6 and 16. by the appropriate sponsor, the applicant became, in a very real sense, the department's client. The sponsoring department guided the application, pressed the claim upon other departments and, in generał, acted as agent and advocate for the building projects which it had accepted. All applications from business to build were made in the first instance to the regional orlice of the sponsoring depart­ment. The applications were examined by the local staffs in order to ascertain how the purposes for which the new buildings were in­tended stood in relation to the current order of priorities. The following are some of the more obvious points which were looked at from time to time: Would the new buildings have helped to improve the industrial efficiency of the firm and raise productivity by allowing a better layout, saving on internal transport, handling and so on; or were they needed to house new and better machinery? Would the buildings have increased the capacity of the firm to produce goods commanding a market in hard currency areas; or permitted economy in dollar or other hard currency imports by making do with home-produced raw materials or with materials which could be bought with soft currencies?1 Would the buildings have enabled the firm to comply with the Factory Acts, or helped it to provide those amenities and improve-ments in working conditions essential if labour was to be attracted to the firm? Was the proposed new building properły located in the area in ąuestion or should it, in conformity with the policy expressed in the Distribution of Industry Act, have been set up elsewhere, in a development area, for example? These criteria were not laid down in detail by headąuarters and communicated to regional officers as orders or directions. Guidance was certainly provided but it was left to the responsible officials to make their decisions and to interpret any instructions which they may have received in the light of local circumstances and what they understood to be the current needs of the country. It was also, of course, the business of the applicant to assist the officials by showing them how his project came within their interpretations of priority, supposing the connection should not be immediately elear, or failing that, to persuade them that his purposes constituted a claim on scarce resources of at least an equal urgency! Applications not expected to cost more than a certain limited 1 The distinction between "hard" and "soft" currencies is explained below, pp. 117 and 118. sum (£10,000 in 1949) were (usually) decided by the regional officer of the department without reference to headąuarters unless the client on a refusal demanded it. Statements of the value of projects accepted, ąuantities of scarce materials, building labour used and so on were periodically returned to London; and regional officers might not, without consent from headąuarters, exceed the limited total allocations allowed for these smaller applications. Applications amounting in any one period to a sum total in value or ąuantity greater than that which the regional office was permitted to grant were accepted only after a close review at headąuarters by the sponsoring department. Individual applications to a sponsoring Ministry for licence to build exceeding the regional officers' limit were forwarded to London for decision, together with a report on the project from the regional office. These larger schemes were considered, not only in relation to the priorities of the time, but also in relation to the type of indus­trial eąuipment which the proposed investment represented. The sponsoring department had to be satisfied that an increase of industrial capacity for the purposes specified in the application was really necessary; and the appropriate production branches of the department and other Ministries were generally consulted in order to make sure that there was not already available elsewhere in the trade eąuipment suitable and adeąuate for the purposes proposed. The applicant, assured of a sponsor, next asked the Board of Trade to certify that the projected development could, consistently with the proper distribution of industry, be carried out in the area chosen. This enąuiry demanded detailed examination of the firm's connections in its own district, in order to determine whether in fact the business, or part of it, could be moved without serious dislocation either to its sources of supply (including labour and other staff) and to its markets. Those firms, for example, which make through all stages a finał product ready for market can sometimes be moved without difficulty; and at the other extreme those working on com-ponents or processing materials put out by prime contractors in their immediate neighbourhood obviously cannot. A firm, unless for some good private reason, rarely consents to move to some new and distant situation except with reluctance. Businesses generally hope to remain and expand where they are. The better the case therefore for new construction (on the score of improvement to industrial efficiency, of greater capacity to earn or save dollars, or whatever might be the current ranking of pri­orities) the greater the ability of the applicant to resist pressure from the Board of Trade to move into a development area. In this contest the applicant normałly expected to have the support of the sponsoring Ministry. That department did not want to have the projects which it had sponsored unduly delayed nor would it want to jeopardise their success by agreeing to moves which its clients were unwilling to undertake. The Distribution of Industry Act, 1945, does not define the proper distribution of industry, nor is the intepretation to be placed on that phrase governed by any elear and accepted principles. Regional officers of the Board of Trade conseąuently were not well placed to refuse applications from firms to build or expand in the area of the applicanfs choice. If a Regional Controller finally decided that, in conformity with what he conceived to be the policy animating the Act, a firm desiring to build or extend ought to be moved elsewhere, to a development area for example, there were no commonly received or well-understood grounds on which to found his refusal. His con-clusion was just a matter of opinion—one regional officer's concep-tion of what the Act might intend by the words "the proper distribu­tion of industry". Few administrators would risk a challenge on so slender a case; and most applicants for building licences, once assured of the support of their sponsoring Ministry, could also expect the Board of Trade to accept without serious objection the proposal to build on the chosen or agreed site.1 Fortified with the Distribution of Industry Certificate, the appli­cant next sought the permission of the county, or county borough, acting in its capacity as planning authority under the Town and Country Planning Act, 1947, to use the site selected for the purpose intended, and paid any development charges assessed by the Central Land Board (or did until these provisions of the Act were repealed). Finally, he applied to the regional officer of the Ministry of Works for a building licence. The acceptance of an application committed the sponsoring de­partment to include the project in its regional building programme and to charge the building labour which would be oceupied, the scarce materials which would be consumed and so on, against the allocations made to that department by the inter-departmental com­mittee responsible for the distribution of these supplies. The regional officer of the Ministry of Works naturally had to be assured before issuing a building licence that the application had been properly 1 Town and Country Planning Act, 1947, Section 14 (4): Second Report from Select Committee on Estimates: Session 1955/56 (Sub-Comrnittee E) "Develop-ment Areas", particularly paras. 9 & 10; Questions 55 to 58 and Appendk I. sponsored; and it was also his duty on the specification and bill of ąuantities before him, to satisfy himself that suitable substitutes and alternative methods of construction had been proposed in every case in which building labour could be saved and any other resources conserved which at the time happened to be the objects of a special economy. But the priority of the proposed construction and the legitimacy of the claims for labour and materials were not them-selves matters for the Ministry of Works. Both were the direct re­sponsibility of the sponsoring department and the real decision before the Ministry of Works on an application for a building licence was finally reduced to a ąuestion of the date on which the work could be started, given all the other claims, present and foreseen, on the local building trades. The regional officer of the Ministry of Works was assisted in his decision by a regional building committee. This was an official body consisting of the regional officers of the Ministry of Works, the Ministry of Labour, the Board of Trade, and other inter­ested departments. It was their duty to decide among themselves the relative priorities of all projects in their region. Starting dates for work expected to exceed (in 1949) £25,000 were fixed by the com­mittee. Starting dates for works of lesser value were to be left to the regional officers of the Ministry of Works alone. Particular attention had to be paid, of course, to the state of the market for building labour in the district in which the building was to go up. The number of men reąuired was compared with the numbers likely to be released from jobs now reaching completion. The numbers occupied by pro­jects already onhand were considered; and of course the ease or other-wise with which labour could be got to the site. Labour becoming available in one district, for example, could not cause a starting date to be fixed for a building to be erected in a neighbouring district. The builders just released might prefer to go to another and closer job. In these circumstances the Ministry of Works and the regional building committee would clearly have no option but to give the earlier starting date to the second site ąuite irrespec-tive of the relative priorities. Big and important schemes have an obvious priority accepted by all the Ministries principally concerned; and the priority of smaller projects, primarily of regional interest, could usually be decided within the regional building committee. Conflicts of priority thus occurred much less often than might be imagined, mainly for the reason just mentioned—the relative immobility of building labour. A dollar-earning project in one town, for example, might have come before the regional building committee at the same time as a scheme for a new school in a town twenty railes off. There would neverthe-less have been no real clash if the building labour, released from some other job nearing completion in the neighbourhood of the school, could not be induced to travel to the district in which the dollar-earning factory was to be erected. The refusal of a licence for a project already sponsored, or the undue postponement of the starting date for works already licensed became, in fact, a dispute between the Ministry of Works and the sponsoring department. The latter, having committed a part of their (limited) allocations of scarce materials to the projects they had sponsored naturally wanted them completed as soon as possible. Differences between the sponsoring department and the Ministry of Works about the issue of a building licence or the award of a starting date and conflicts between sponsors about relative priorities, if they could not be finally settled by the regional officers in the regional building committee, were referred to London to a building priorities committee sitting at the Ministry of Works. There, regional officers and headąuarters staffs of the disputing departments had their say and the committee, if they chose, could seek guidance from other departments and from the planners. The investment for which a department was responsible was com-posed of the usual three elements. There was first, work officially authorised either by the department itself, by local authorities and by any other bodies acting for the time as public agencies. There were second, the capital schemes which the nationalised industries attached to the department might have wanted to carry out. And there was third, construction sponsored by the Ministry, but undertaken by private business under licence. The first and second constituents were obtained direct from the appropriate branches of the depart­ment or other government agencies and from the boards of publicly-owned industries; the third came up from regional offices. Larger schemes sponsored after reference to headąuarters were taken into the departmental programme as specific additions to the reąuire­ments for this or that ąuantity of materials and resources. But each department was also responsible for the many smaller applications which were accepted by regional offices and sponsored without fur­ther examination at headąuarters. These applications were satisfied from bulk allocations made by the department to its regional offices to be used for this purpose at the discretion of these officers; and provision was made for these contingencies by including in the departmental programme a reąuirement, expressed in value and in physical ąuantities, intended to cover the grand total to be allowed during the period under review to all regional officers for all those applications which came within their discretion. These three elements were brought together as the departmenfs programme for capital investment to be undertaken during the fol-lowing period—generally a year. Each department, after consulta-tion with the Central Economic Planning Staff, laid its proposals before a smali inter-departmental committee known as the invest-ment programmes committee. Reąuirements, drawn up in the pre-scribed form, were expressed not only in terms of the value of con­struction, but also in terms of the building labour, the steel, timber, dollar imports and any other scarce resources which would be con-sumed. The committee were informed upon the capacity of the building industry and of the supplies of steel, timber and so on, by the production branches of the appropriate departments. The Minis­try of Works advised on the building trade, the Ministry of Supply (assisted till their dissolution, by the Iron and Steel Board) on the supplies of steel and the Board of Trade on the prospects for materials still subject to control. The Ministry of Supply and the Board of Trade were ready when occasion demanded to inform the investment programmes committee upon the domestic output of this or that class of machinery or other eąuipment, upon the share re-maining for home investment after the demands for export had been met and upon the imports which had been licensed. The Ministry of Labour estimated the number of operatives likely to be available and the expected division between housing and industrial building.1 As a result of these (often protracted) deliberations with depart­ments the committee was eąuipped to compile a comprehensive national investment programme. This set out, for all sectors of the economy, the total of construction which central departments, other organs of Government and nationalised industries proposed to undertake; and it included an estimate of the value of industrial building for which private business was expected to seek licences. No larger volume of work can be undertaken than the resources allo­cated will allow. It became conseąuently the function of the commit­tee to prevent, in so far as they could, the demands arising out of the combined capital programme from outstripping the capacity of the construction and capital goods trades which had been allocated to home investment and the value of the foreign exchange allowed by 1 Some hint of the procedurę before the investment programmes committee was dropped in the course of the evidence given by the Ministry of Transport before the Select Committee on Estimates—Sub-Committee D Fifth Report 1952/53, Qu. 52 to Qu. 151 and Qu. 834. the Treasury to finance the import of materials and eąuipment which have to be bought from dollar or other hard currency sources. The committee could not reąuire a department to amend or modify its programme however firmly they (the investment programmes com­mittee) might be convinced that, in relation to all other capital pro­grammes, the scarcity of resources and the national needs, this particular department was asking too much both for itself and for its group of nationalised and private industries. The committee could (and did) attempt to persuade the department that its programme was too ambitious and they might also suggest which particular proposals should be reduced, in order to bring about, within the current scheme of priorities, a balance between reąuirements and supplies in respect of each particular scarce materiał. But that was the limit of their competence. The committee had no executive powers; when per-suasion and suggestion failed, they could not instruct. Neither the allocation of resources to investment as a whole nor the distribution of those resources between the several parts of the capital programme are decisions which can or should be finally entrusted to any official or body of officials. Civil servants can advise —their advice was contained, for example, in the report of the in-vestment programmes committee—but the making of the decision itself, what to invest and what not to invest, is one of those functions which, from the naturę of the case, must be left to Ministers and determined as part of the grand strategy of the times. No body of officials, however august, could have imposed on a departmental official measures which his department were reluctant to accept. An official whose departmental claims were refused, wrongly as he thought, at the investment programmes committee could always have enlisted the support of his Minister. A Minister, fearing that he may be frustrated in a piece of business which he considered or had been persuaded was important to his department, can, if he chooses, carry the ąuestion to the Cabinet. Only Ministers could finally admit, or rather refuse to admit, any part of a department's investment programme. Thus it was with the Cabinet generally that the responsibility for deciding the size and composition of a planned programme of national investment finally lay; and it was to them that the draft programme had to be submitted for a finał decision. An allocation of resources to one purpose, for example, to invest-ment, cannot be made except in relation to other claims upon those resources; and the choice of the particular projects which should be included in the capital programme also imposed limits, sińce par­ticular projects consume particular resources which, at the time, might be extremely scarce. The sum total of the capital expenditures which the national resources would allow was thus determined as much by the particular projects which were admitted into the invest-ment programme as by other claims on those resources and by the scarcity of the resources themselves. The distribution of the national resources, particularly in years of inflation when all means were scarce, between capital investment and the rival uses to which those resources can be put is a choice between a number of urgent and im-portunate claims upon those resources and that capacity which appear most scarce at the times when the programme is being drafted. That choice may be deliberately made as an act of conscious policy by planners who have weighed all the choices and compared each with the other in the light of current national needs; but the "alloca­tion" of resources to investment between 1945 and 1950 was just as likely to have been the result of an inter-departmental compromise reached by able and conscientious civil servants on the information before them and in a situation forced by a number of unrelated decisions already taken piecemeal and more or less at random! Each such concession engrossed a part of the national resources. Each helped to narrow the limits within which investment now had to be confined, and the greater the concessions the less the area within which the year's investment could be said to have been deliberately planned. The investment programmes, amended in accordance with Cabinet decision, were sent back to the departments. Reąuire­ments, reduced if necessary by Ministerial direction, had been brought into a balance with the forecast of resources available for the purpose; and the dangers and difficulties arising from particular shortages should have been eliminated. Each department, knowing the size and composition of the investment which had been allowed, proceeded with the applications for the scarce materials needed if those projects were to be carried through. Those claims, together with applications for other purposes, were pressed upon the materials committee as the reąuirements for steel, softwoods and so on, arising out of the investment projects sponsored by the department and admitted into the national programme. The problem of co-ordin-ating the decisions of all these committees was not perhaps as serious as it might appear. The committees were all guided by decisions of the Cabinet. Detailed preliminary discussion before the investment programmes committee had helped to form a consensus of official opinion. Agreement was generally reached with the departments about the adeąuacy of the programme as a whole and the generał order of priority in which the several parts should be ranked. After all these deliberations, there rarely remained any serious differences between the officials principally concerned about the detail of the estimates and ąuantities. The materials committee followed the lead of the investment programmes committee. Both committees were advised on available supplies and capacities by the same group of officers. The departmental representatives who made up the materials committee were often the same persons who appeared before the investment programmes committee to defend the investment pro­grammes prepared by their department. Responsibility for dividing the departmental claims finally allowed into the programme between work authorised by the department itself, work to be undertaken by nationalised industry and work by private business permitted under licence, rested upon the depart­ments, advised as necessary by the programmes committee. Private business was not represented in person before any of these com­mittees. Neither businessmen nor their representatives were present at the meetings at which the investment programme was determined nor at those in which departmental allocations were subseąuently distributed. There was certainly the danger that private business might have been allotted, in competition with official and semi-official claims, only that residue of scarce capacity and materials which remained after the demands of departments and publicly owned undertakings had been met. It was certainly one of the func-tions of the investment programmes committee to put up an effective resistance to this pressure and thus to save an adeąuate allotment of resources for capital investment in private industry; and that function may have been among the most important performed by the committee. A first review of the national investment programme was put together after the crisis of 1947, and published in December 1947 as a White Paper entitled Capital Imestment in 1948 (Cmd. 7268). It was repeated, though in a revised form in the Economic Survey for 1948 (Cmd. 7344, pp. 38-41). The second review appeared in the Economic Survey for 1949 (Cmd. 7647, pp. 48-63). The third review, begun in the summer of 1949, was interrupted by devaluation in September. Certain. immediate reductions in current programmes of capital investment were announced by the Prime Minister in October 1949; and the finał programme for 1950 was published in the Econ­omic Survey for 1950. Subseąuent programmes had to be considered in the shadow of the claims imposed by war in Korea and rearma-ment. The retrenchment proposed in 1947—£200 million subseąuently reduced to £187 million—did not appear large in proportion to a total programme valued at over £2,000 million in the first place; but it is not easy to stop work on industrial building by withdrawing licences once the job has been started and other parts of the invest-ment programme, housing for example, were notoriously difficult to reduce for political reasons. Very little was known at the time of the value of the annual capital formation and still less of the division of the whole between the several categories of investment. Expenditure upon buildings and construction, plant, machinery and vehicles—fixed investment— was then put roughly at three-quarters of the total. Later research, made possible in part by the information gathered in the course of administering the control, amply confirmed the high proportion of fixed capital—the figurę in fact according to recent estimates in the national accounts now seems to lie between 85 and 90 per cent.1 New houses form one-quarter of the annual addition to fixed capital. Construction other than industrial, accounted for some at least of the remainder. Industrial building was left, by difference, at something less than a quarter. The value of machinery, and hence the gross investment in plant, is only remotely related to the buildings in which it is housed and there is some equipment—vehicles (them-selves a substantial part of the whole), ships and aircraft—which needs no buildings at all. Allocation of steel, particularly for the manufacture of engineering products for the export market, imposed some limitation on domestic investment in plant and equipment. But the licensing of industrial building was perhaps an exiguous base from which to bring new investment into a "proper relation with the reduced supplies of materials, industrial capacity and manpower"; and the efficacy of the control over steel and timber, even when most strictly exercised, must have suffered from the incapacity of con­trollers to direct the uses to which materials acquired under licence should be put.2 1 Central Statistical Office: National Income and Expenditure, 1946-53, Tables 42 and 43. 2 Below, Chapter VII.