HC Deb 17 June 1965 vol 714 cc900-2
The Minister of Aviation (Mr. Roy Jenkins)

With permission, Mr. Speaker, I should like to make a statement.

On 28th July, 1964, my predecessor informed the House that Ferranti Ltd. was prepared to refund to the Government a total of £4¼ million of the profit on its production contracts in respect of the Bloodhound Mark I missile and that discussions would take place with regard to the discharge of this liability.

Agreement has now been reached on the method and timing of the refund and Ferranti Ltd. has today entered into a formal undertaking. Tax has already been paid on this sum and will be retained by the Government. The agreement is designed to achieve repayment of the balance of approximately £2 million by September, 1969, in five annual instalments, with a proviso that no annual instalment shall exceed one-third of the consolidated net profits of the company during the preceding year.

In the event of any arrears arising from this limitation these will attract interest and will be added to the sum due in the next year.

Mr. Maude

Is the right hon. Gentleman aware that there will be satisfaction that the arrangement made with the previous Government has now been worked out in detail?

Mr. Jenkins

The previous Government left us a good number of details to work out.

Mr. Frank Allaun

Is my right hon. Friend aware that there will not be satisfaction with this arrangement, and that it is intolerable to give such latitude to this firm, which has treated our country in such a way? Is my right hon. Friend further aware that a week ago this firm added insult to injury by what it said before a very important gathering?

Mr. Jenkins

I took note of what Mr. de Ferranti said last week, but having had a good number of dealings with him over the preceding weeks and months I was not disposed to take it—or, indeed, anything that Mr. de Ferranti says—too seriously. But I have no doubt that this firm is of great technical value to the economy, and I had to bear this in mind, together with the position at which we had arrived as a result of this unfortunate incident. In all the circumstances, bearing in mind, too, that until today there was no legal obligation on Ferranti Ltd., I think that this is a fair arrangement.

Mr. William Hamilton

Can my right hon. Friend say whether the firm will be paying at the current rates of interest on the money to the end of the repayment, and can he assure the House that he tried—and presumably failed—to obtain repayment over a shorter period than four years? Can he give an assurance that Ferranti was given to understand very definitely, either by this Government or by the last, that if this sort of thing occurred again something serious would be done with the firm?

Mr. Jenkins

Interest on arrears will be at 1 per cent. above Bank Rate, or 5 per cent., whichever is the higher. As for the position that I was left to deal with, Ferranti understood—I think quite falsely—that as a result of its discussions with the previous Government it was to be allowed to repay over 10 years with tax instalments accounting for the first five of these instalments. I think that it was wrong in believing that. But the present arrangement is a great improvement on that, and I hope that as a result of what has happened Ferranti and everybody will be determined to see that no repetition of this sort of incident occurs.

Mr. Lubbock

Is the right hon. Gentleman really saying that in this agreement that he has arrived at with Ferranti there is no provision for speeding up repayments, whatever the firm's net profits might happen to be over this five-years period? Is it not rather anomalous that he should have agreed that the firm should not pay more than one-third of its consolidated net profits in any of these five years, when there is no corresponding minimum proportion of net profits which must be exceeded in any one repayment year?

Secondly, does not the right hon. Gentleman think that it is infinitely more important for the Government to refine the methods of contract negotiation so that this kind of mistake is not repeated? Is he satisfied that everything possible has been done, in the light of the two reports he received from Sir John Lang, to prevent a repetition of this sort of mistake?

Mr. Jenkins

I agree that the second question that the hon. Member referred to is the more important aspect of the matter. I have already given the House some indication of what we are doing to carry out the recommendation of Sir John Lang. We are considering further measures, and we shall do everything possible—there can be no absolute certainty in these matters—to ensure that there is no approach to a repetition of this kind of thing.

On the first part of the hon. Member's supplementary question, I had to consider what, in the absence of any direct legal obligation, was the best arrangement at which I could arrive, and I believe this to be it.

Mr. Shinwell

Although the arrangement appears to be somewhat generous, is it not likely that if Labour had not won the last election we might have had no refund at all?

Mr. Jenkins

It is certainly the case that although, as the hon. Member for Stratford-on-Avon (Mr. Maude) said, I only filled in the details, the details required a great deal of filling in and a great deal of extremely difficult negotiation.

Sir Frederic Bennett

Will the right hon. Gentleman clarify two points? First, on the question of the interest on these repayments, when he mentioned arrears I presume that he meant future arrears arising from year to year under the five-year agreement. It was not clear from his supplementary answer. Secondly, what is the position if, at the end of five years, due to the fact that profits have not reached the necessary minimum point, there are still arrears left over with the interest due on them—which is possible?

Mr. Jenkins

The interest applies to arrears under the terms of the agreement that I have announced. If there are arrears at the end of five years they will be treated in the same way as arrears at the end of any one year within the five years.