§ 3.36 p.m.
§ Mr. Frederick Lee (Newton)
On 25th June last year, the Committee debated the future ownership of the publicly-owned company S. G. Brown, Ltd. I recall that on that occasion I tried briefly to review the company's history from the time when it was a small struggling concern under private enterprise, through the period of public ownership, and so on. I do not intend to go through all that review again, but I think that I am entitled to say that, after I had reviewed that history, and asked why the company should not be retained in public ownership, no answer was given to that case at all.
Suffice it to say that, because the private owners of S. G. Brown were failing the nation in time of war, it was taken over by the Admiralty and did a very good job during the rest of the critical years of the war. At the end of the war, the Labour Government, then in power. were requested by the workers of S. G. Brown to retain the company in public ownership. My noble Friend Viscount Alexander of Hillsborough. who was then First Lord of the Admiralty, agreed and, as a result, a first-class organisation came into being in which management and workers combined most harmoniously to produce instruments such as the famous gyrocompass now used in our supersonic aircraft, submarines, and so forth. This Government, who confess that they are quite unable to produce such devices as 1149 Blue Streak, are not interested in the production of scientific instruments of the kind to which I have referred.
There has never been any dispute, strike or anything of that kind in the company, and extremely useful profits have been made for the nation. I recall that, in collaboration with the Royal Aircraft Establishment, at Farnborough, the Brown master reference gyro was produced and earned a reputation for quality second to none in the world. All this, I remind the Committee, was done entirely on public money and at public initiative.
When we look back now—I suppose that these are almost the valedictory remarks about S. G. Brown—at the performance of the company, we can say that whether we judge it on solvency, quality of product and its team work, its value in the national interest, or in any other way, it passes every test that we may care to apply. Indeed, this was the meat of the debate which we had twelve months ago, and not a single point which I made then has since been denied. The whole case was, in fact, conceded by the Government.
We have since seen the application to this firm of the disgraceful formula laid down a year ago by the Chancellor of the Exchequer in answer to a Question which I asked. The right hon. Gentleman's Answer was:… to justify a firm remaining in public ownership the onus of proof must be that it is required in the national interest and that the firm will prosper under public ownership but would not prosper under private enterprise."—[OFFICIAL. REPORT, 16th June, 1959; Vol. 607. c. 244.]I recall pointing out at the time that the meaning of that was that we have to prove not only that public ownership has been a success, but that private enterprise would fail. At the time my right hon. and hon. Friends were shocked at that reply, but not only we on this side thought that that was bad enough. There has been adverse comment on this formula in many sections of the Press which are by no means associated with this party. Now that we know that when the right hon. Gentleman gave us that formula he meant that the firm would prosper under British public ownership, but would not prosper under foreign private enterprise, it becomes even worse than we thought at that time.
1150 I ask the Civil Lord of the Admiralty, who is to make the case, if one exists, for the Government, what incentive there can possibly be for men and women employed in the nationalised industries, whether they be members of the management or on the factory floor, to seek either profits for the nation or to give their energy, skill and devotion to the nation if the price to be paid for it in the end is denationalisation? I should have thought that this policy was as irresponsible as ours would have been during 1945–50 if we had nationalised industries merely because they were making profits and refused to touch those which were not. If we had done that there would now be no railway system and no coal industry in Britain. Instead of it being the case, as we hear so often in the publicity of the party opposite, that publicly-owned industries fail to make profits because they are nationalised, the fact which is now emerging is that they remain nationalised only because they fail to make profits.
Let me now turn to the announcement which was made the other day. We should like to know from the Civil Lord why it was necessary to announce the sale of S. G. Brown on Monday, 13th June, during a Parliamentary Recess, when Parliament was due to return within seven days of that date. I think that we are entitled to believe that this was a deliberate attempt to prevent Parliament functioning at all, so that when we returned we would be faced with a fait accompli. I believe that such an action shows the complete contempt in which the Tories hold the Parliamentary institution unless it happens to serve their particular purpose. [Laughter.] Yes, this is not the first illustration by a long way.
We now know that S. G. Brown is to be sold to a combination of de Havilland Holdings and the American Bosch Arma Corporation on a 51–49 per cent. basis. I should like to ask the hon. Gentleman how many bids were made for this firm by British concerns and why they were found unacceptable. The Civil Lord said during Question Time the other day:… this was the best offer which we received."—[OFFICIAL REPORT, 22nd June, 1960; Vol. 625, c. 417.]1151 What does that mean? Does it mean that the eventual price which was accepted of £775,000 was the highest offer, or that other considerations, such as the licensing agreement which existed with the Bosch Arma Corporation from 1957, was taken into account as well? I became a little frightened when the hon. Gentleman said what a shame it would be to break up such licensing arrangements. But the Atomic Energy Authority has many licensing arrangements with private enterprise in other parts of the world than Britain. What is to happen here we must wait and see.
If this disgraceful arrangement represents the best offer, the others which were received must have been deplorable. It would appear that if this was the best offer which was received the others must have been based not on the value of the firm, but on the knowledge that the Government, for purely political reasons, were prepared to sell merely to get rid of the principle of public ownership in S. G. Brown. We know from that infallible source the hon. Member for Kidderminster (Mr. Nabarro) that, even before the House debated this issue a year ago, 42 applications had been made for S. G. Brown.
In the debate of a year ago I asked the Civil Lord about the position of the Bosch Arma Corporation. I asked him whether the Bosch Arma Corporation was interested in the sale of S. G. Brown. I said:Has the Bosch Arma Corporation any further interest in the affairs of S. G. Brown? It seems peculiar, with the tie-up of the full resources of the Arma division of the American Bosch Arma Corporation, that the corporation is now agreeable to this firm becoming the property of people who may well be competitors but who have done nothing in the development of this very successful enterprise.In reply, the then Civil Lord, who is now a Joint Under-Secretary of State for Scotland, said:We are determined, too, that the purchaser should not be under foreign control"—The Government have just managed that by 1.1 per cent., as far as I can make out—and to ensure that the purchase is not financed in such a way that the firm might be brought under foreign control. Before agreeing to a sale, therefore, the Government will assure itself of these points. There is one other feature which we intend to safeguard. As the House knows … S. G. Brown has 1152 acquired the right to manufacture under licence equipment developed by the Bosch Arma Corporation of America. This work holds considerable promise for the future, and therefore in assessing the desirability of any possible purchaser who might have some American connections the Admiralty would assure itself that this would not damage or prejudice the existing arrangement between S. G. Brown and the Bosch Arma Corporation."—[OFFICIAL REPORT, 25th June, 1959; Vol. 607, c. 1403–4 and 1421.]The Government have assured themselves of that all right. Examining the matter now, and going through the whole detail of what happened, I am utterly convinced that even a year ago they had decided not only to sell S. G. Brown, but to sell it to the Bosch Arma Corporation before that debate took place. The conditions which were read out in that debate were enforced because we insisted on debating the issue in 1959.
We have heard the conditions, both in 1959 and, with some amendment, this time. What value should we ascribe to those conditions? The Civil Lord, during Question Time the other day, pointed out that no foreign concern can hold more than 49 per cent. of the shares without the permission of the Government. What sort of guarantee is that? The Government have no objection to their holding more than 49 per cent. As I have said, that was a condition which was forced on them in the 1959 debate. I should be very surprised if the Bosch Arma Corporation would be interested in S. G. Brown under permanent conditions which laid down that it should hold only 49 per cent, of the shares.
I should like to ask the Civil Lord to do two things. Will he give a solemn assurance that the Government will not agree, if they are approached by the Bosch Arma Corporation, to its having more than 49 per cent. of the shares? When he has told us that, perhaps he will also tell us how he can enforce it when there is a further sale or sales in the course of the next few years. In reply to a Question the other day, the hon. Gentleman changed the wording a little. "Conditions of sale" became "considerations of sale". There is a vast difference between hard-and-fast conditions of sale which are enforced, and considerations of sale which cannot be enforced. Again, I should like to ask the hon. Gentleman whether he realised that he was saying this, whether he intended that there was a different emphasis as 1153 between conditions "and "considerations", and, if so, whether he will today go back to the 1959 point and use the term "conditions of sale".
When we discussed the question of employment there in 1959, when we said that we wanted guarantees that the men and women employed by S. G. Brown would be as secure in their jobs when the change of ownership took place as they are now, and again the other day, the hon. Gentleman told us that existing levels of employment would be maintained, but that is no guarantee to the people in S. G. Brown now. Of course, there may be an existing level of employment which does not ensure the people now there their jobs at all. Therefore, I submit that the employees have lost the guarantee which we achieved in 1959, and I should be grateful if the hon. Gentleman would reiterate that the present employees of S. G. Brown will be maintained in their jobs when the firm changes ownership.
As to the selling price of £775,000, with the proviso, as I understand it, that the new owners will take over the overdraft, can the hon. Gentleman explain why it is such a small selling price? I believe that if we look at the balance sheet, we find that the net assets of S. G. Brown and its subsidiary are valued in the consolidated balance sheet at £1,172,760 at the year ended 31st March, 1959, which is the latest balance sheet that Somerset House has, and that this figure allows for setting the bank overdraft against the assets.
I should have thought that under these conditions this is a very inadequate price to accept for this organisation. I know that, if we take the trading profits after tax, we find that in 1956–57 they were £87,694 and, in 1957–58, £64,917. I understand that this year the profits are very low indeed, and that the profit on S. G. Brown is £9,143, while the subsidiary's losses were £4,447. Has this in any way affected the sale of this firm? We should like to know the details of that build-up. Indeed, we should like to know why this profit has fallen at all. I wonder whether we could suggest that it may be because it has been starved of capital in the knowledge that it was to be sold.
1154 The Civil Lord told us last June thata net total of £546,000 has been provided for the company from Navy Votes, with another £250,000 in hand for this year."—[OFFICIAL REPORT, 25th June, 1959; Vol. 607, c. 1416.]Was that £250,000 ever paid over? My feeling on the matter is that it has never been paid, and that this is the reason for the overdraft going up to £440,000. Indeed, it is a most remarkable thing that while the Government are appealing to the bankers to keep down the overdrafts of their customers, the Government themselves are building up this overdraft in their own establishment.
The hon. Member for Kidderminster, who, I regret to say, is absent from his place, for a reason which I have not yet managed to learn, pledged the full support of the Tory Party for this sale when we discussed it the other day. That hon. Gentleman concluded his own speech in June of last year by telling us that the selling price should be between £1½millon and £2 million. Perhaps this explains his lamented absence from his usual place. I wonder if he is now not quite so enthusiastic about the sale of S. G. Brown as he was when he pledged the full support of the Tory Party for it the other day. The fact is that it is not being sold—
§ Mr. Godfrey Lagden (Hornchurch)
I should like to place on record that the hon. Member for Kidderminster (Mr. Nabarro) has no more right to pledge the entire Conservative Party than the present Leader of the Opposition has to pledge his party.
§ Mr. Lee
It would be a great improvement, as my right hon. Friend says.
I am trying to find out what is the explanation of the low profit last year. My understanding is that the firm has been allowed to run down quite a bit during the last year or two. I wonder whether the Government found it convenient to allow that kind of thing to happen so that they can now report that they are selling a declining asset. Or is it the 1155 other way round? Having allowed the firm to run down with rapidly falling profits as a consequence, I wonder whether they panicked and sold at roughly the amount of Government money that had been put into it. Bad as this position is, the actual position is even worse.
I recall that in the course of the speech that I made on the last occasion when we discussed S. G. Brown I quoted the Daily Telegraph, which was very rightly protesting about the large sums of public money being handed out to private firms. I recall this because it is rather remarkable now. This was the quotation that I used from the Daily Telegraph:In the queue for State aid at the moment stand the following vast private undertakings: the entire cotton industry; Colville's steel works;"—and we know what happened there—the Cunard Line; the de Havilland Aircraft Company;",—[OFFICIAL REPORT, 25th June, 1959; Vol. 607, c. 1410.]Is it not remarkable that since the last election the right hon. Gentleman who is now the Minister of Aviation has been busy shovelling out public money into the great aircraft corporations, including de Havillands? Now we have a firm which has been in receipt of large amounts of public money being allowed to use that money, or comparable money, to buy from the British public a British asset with the money which the British public have already provided to de Havillands. We now have these strange circumstances in which a firm which is receiving public money can use it to buy a public asset of this type. It would seem, if I am right about this, that all that the public get out of this is the amount to be paid by the Bosch Arma Corporation.
May I ask the Civil Lord a further question about de Havillands? Does it own any companies in the United States of America? Is the arrangement which we are now discussing the only tie-up that it has with the Bosch Arma Corporation, because if it is not, and if there are further tie-ups in the United States or anywhere else, the whole question of control at Watford is involved again?
I have said that we should like some explanation about the rate of profit, but I will tell the Civil Lord this. Nobody 1156 in S. G. Brown's is surprised that the profit is so small. Everybody there knows that the amount of work going through the firm recently has been falling rapidly. Indeed, a number of highly skilled men have been leaving the firm. A number of them left because the earnings that they could get at S. G. Brown's were lower than they could get elsewhere in the same district.
That is a great advertisement for Government employment. The shop stewards attempted to negotiate better earnings for the men, but were refused on the ground that this would entail an alteration in the terms of the sale. Apparently, nothing must interfere with the terms of the sale, even if it means that men are being underpaid as against what they can get for comparable work elsewhere in the same district.
I understand that a long time ago, when we had a 7 per cent. Bank Rate, the firm decided that it could not afford to carry a great deal of stock. At that time, in one of the departments which is relevant to this argument, the night shift was stopped and all overtime work was discontinued. Instead of long runs—hon. Members who know the engineering industry will know what I mean, a large number of components upon which men can get up greater speed—the men had to work on short batches, which, again, cut back production. I understand that travellers sent out by the firm all over Europe for orders for the gyro were instructed not to take further orders. I should not have thought that the Government were too happy about our trading position in Europe, but when we reach a situation of that sort it is fantastic.
All this resulted in the number of master reference gyros that were going through the firm totalling 11 per month. I am a great believer in coincidence and that kind of thing, but how remarkable it is that last Monday the night shift started work again in the appropriate department and the objective is now 25 gyros per month. I suppose that we will hear in the future that this transfer to private ownership has resulted in an enormous increase in the productivity of the people at S. G. Brown's.
§ Mr. Farey-Jones (Watford)
Will the hon. Gentleman make clear to the Committee that the reason for the point he 1157 has made was that a scientific modification was made to the gyro as a result of technical information from across the water?
§ Mr. Lee
I said a year ago that the Mark It gyro was then being developed, but no case has been deployed in S. G. Brown's. that the travellers must not take orders because of any modification of the gyro. It was simply because the firm was starved of capital that it could not carry the stock necessary to take larger orders.
The Government, I take it, are worried about our trading position. They have reason to be, even if they are not, especially in view of the huge import bill for raw materials for our industries, about which we had a word or two yesterday. I thought that we were all agreed that the only method of obtaining a permanent solution of this problem is to concentrate our effort on the production of the types of goods which contain the largest element of highly skilled labour and the smallest proportion of raw materials. I cannot think of any product which fulfils that formula better than the scientific instruments produced by S. G. Brown, containing, as they do, the results of concentrated scientific research over many years and on which some of the most highly skilled personnel in Britain are employed.
I put it to the Government: how can we convince the world to buy from us while we advertise the belief of our own Government that we need American participation as a condition of our ability to succeed in production? I am not objecting to the principle of American or any other capital being put into British industry where British capital is not available. We know, however, from the Answers of the Civil Lord, that the question of British capital not being available does not even begin to arise in this case.
The case makes it obvious that the only interpretation we can place on the Chancellor's formula, which I have quoted, is that the nation is best safeguarded by robbing the British people of their own assets and selling them to foreigners whose interest is merely the profit motive. I object to the slur on the public that it is of greater advantage to the nation for their assets to be handed over even to British private enterprise 1158 firms, but when we reach the position in which those assets are sold over the heads of British firms for foreign capital it is a shocking insult to the whole nation. Why do not the Government get up off their knees and set about the job of putting Britain across in world markets? It is no wonder that we have such a shocking record of production as distinct from so many European countries when we see this kind of policy from the Government.
I want to pay my deep and sincere respect to, and to express the thanks of the whole British Labour movement to, the shop stewards and the other workers who serve so well at S. G. Browne's, and, indeed, to the management, who have been wise and big enough to meet them half-way. I sympathise with both in not having a Government possessed of half their sense of responsibility.
To the many people who have been misled into believing that the British trade union movement is irresponsible and selfish, I commend the story of S. G. Brown. Under public ownership, in both war and peace, it is a credit to every one of us. I should be very surprised if, during the whole period I have been covering, the word "patriotism" has ever been mentioned in the firm. I merely comment that the facility to slobber this word from Tory election platforms is not necessarily the best method of displaying love of country.
I have tried to examine as many of the questions connected with this sorry business as I can, but there is one question to which I can never find the answer: why do the Tories hate the British people so much?
§ 4.8 p.m.
§ The Civil Lord of the Admiralty (Mr. C. Ian Orr-Ewing)
The hon. Member for Newton (Mr. Lee) has made his usual vigorous, rumbustious speech, not quite in the same key that he achieved yesterday, but perhaps that we because his material on this occasion was even weaker than it was yesterday.
The hon. Member asked, first, whether I would make an explanation about the date of the announcement. The sale agreement named 30th June as the vesting date. We were ready to make an announcement on 10th June. My noble Friend and I felt that it was in the interests of the employees of the firm 1159 that the earlier possible announcement should be made. Speculation had, naturally, risen in the factory. After careful thought, we concluded that it was most important to stop the circulation of rumours, which might be inaccurate and which certainly would be unsettling for the people who worked there.
I therefore wrote to the hon. Members most concerned, including a personal letter to the hon. Member for Newton and also to my hon. Friend the Member for Watford (Mr. Farey-Jones), on 10th June, and we made the announcement in the factory on Monday, 13th June. The very fact that we are having the debate today before the final vesting date surely suggests to any fair-minded, objective person in the Committee that this was not in any way a discourtesy; nor have we inhibited discussion in the House of Commons. If we had, we should not be having the debate today. I feel that it was right to take into consideration and put first and foremost—and I am surprised that I have not the agreement of the hon. Member for Newton in this—the feelings of those who were working in the firm and to try to stop any unsettling or inaccurate rumours at the earliest possible date.
Just a year ago we debated whether S. G. Brown should be retained in public ownership, whether the taxpayers should be called upon to contribute yet again, or whether the firm should be sold. The House of Commons first decided that it should not remain nationalised and the House then endorsed the Government's decision on that point. In the year since our last debate quite a lot has happened. The country has endorsed the Government's policy and their administration. The country showed that it had absolutely no love for nationalisation. The General Election voting at Watford where S. G. Brown had been made a main electoral platform by the Labour Party in the area, showed more than the average United Kingdom swing towards the Government and my hon. Friend the Member for Watford. I think that this is a double endorsement of our decision.
§ Mr. Sydney Silverman (Nelson and Colne)
What does the hon. Member for Watford (Mr. Farey-Jones) think about it?
§ Mr. Orr-Ewing
No doubt my hon. Friend the Member for Watford will have an opportunity of catching your eye, Sir Gordon, and of expressing his views later.
After the General Election, the Labour Party, properly assessing the average person's views about nationalisation, immediately tried to exorcise this ghost—Clause 4—from its constitution. We are not, therefore, debating today the decision to denationalise S. G. Brown. That decision was taken, and has been thoroughly endorsed. We are debating, first, whether the considerations which the Government outlined to the House of Commons have been met and, secondly, whether the price obtained for the taxpayers was reasonable.
Without going over the whole of last year's debate, perhaps I might be allowed to recapitulate briefly the reasons for the sale. We believe that it is no function of a Government Department to run a limited liability company trading on commercial lines and competing with other public companies. Secondly, in a nuclear age, the war potential argument which was the "official" reason—and I underline "official"—for retaining it in 1946 no longer holds water.
§ Mr. H. Wilson
Since the hon. Gentleman has enunciated a general principle which seems to apply to the Government's attitude, does this apply to other limited liability companies operating on commercial lines at present held by the Government?
§ Mr. Orr-Ewing
Perhaps the right hon. Member will put down a series of Questions. I am not prepared to answer that now. No limited liability companies are still held by the Admiralty. I am not, therefore, concerned with the question. Perhaps the right hon. Member will put a Question to those of my right hon. Friends who are concerned.
§ Mr. Wilson
As I had to remind his predecessor, the hon. Gentleman is surely replying for the Government and not the Admiralty. He has enunciated a general principle. Does that apply, for example, to Short Brothers?
§ Mr. Orr-Ewing
It was exactly for that reason that I used the words "Government Department". I should be perfectly prepared to answer for any other 1161 private firms remaining in Admiralty ownership, but there is none. I cannot, therefore, answer at the Dispatch Box for them. The right hon. Gentleman knows this perfectly well.
The third reason for the sale was that if the firm was to progress a considerable amount of extra capital needed to be injected. The hon. Member for Newton has admitted this. We could not see Why the taxpayer should be called upon to foot the bill. It was no longer necessary to carry on at the taxpayer's expense What the hon. Member for Southall (Mr. Pargiter) called in last year's debate "this experiment in Socialism."
I come now to the considerations which the Government had in mind when negotiating the sale. I think that these are best dealt with before the price, because, obviously, these considerations must have some effect on the number of companies interested and the price we secured. I can summarise them best as follows. The business was to be kept as a going concern, using the Watford premises and its precision machinery. It was to carry on with existing projects and retain the highly skilled manpower Which had been built up. The sale had to avoid the danger of creating a monopoly in S. G. Brown's field of work. The firm must not come under foreign control. Lastly, the Admiralty would assure itself that the sale would not damage the licensing agreement estabblished in 1957 between S. G. Brown and the American Bosch Arma Corporation.
These, then, were the four considerations governing the negotiations. I can hest reassure the Committee on these four aspects if I describe the sale procedure. Originally, about 50 or 60 firms—not 42 firms—asked for details of the company. These were supplied. Owing mainly to the difficulty in the valuation of the considerable amount of very specialised work in progress, audited accounts were not available for them till December last. Offers were invited in January, 1960, and about 15 firms and individuals appeared to be still interested at that time. These 15 firms and individuals received audited accounts.
Three firm offers were received which were discussed in confidence with the bidders, without, of course, disclosing 1162 the number or identity of the other bidders or the prices they had offered. I can say, in parentheses, that the other two firms were wholly British firms. As a result, three final bids were received of which de Havillands Holdings was the best in real terms. Moreover, we preferred the de Havillands bid because it seemed most surely and thoroughly to meet the considerations of sale. De Havillands offered the best prospect of fully employing S. G. Brown's capacity not only in the short term, but in the long term, both of which we had to take into consideration. It seemed to offer the best prospect of carrying on the precision work with Which Browns are long familiar.
§ Mr. Ellis Smith (Stoke-on-Trent, South)
So that we may judge correctly, would it be fair to ask the names of the two others who made offers? If it is not fair, I do not press it.
§ Mr. Orr-Ewing
I do not think it is. I said this once before about the price, and because of the special circumstances I gave way, but I do not think that in negotiations of this kind one gives the names of the other people. They may want to make other approaches. By revealing their names I might undermine their position. There are confidential considerations.
Throughout the negotiations our main consideration was to keep the staff and the engineers and the skilled manpower together, and we paid meticulous attention to this point during the whole of our deliberations. The hon. Member for Newton did not challenge me on monopoly, but I would underline that the assurance which he gave last time on this is clearly and thoroughly watertight under the new provisions. By the sale to de Havillands we shall avoid creating a monopoly in the main gyro-compass field, because de Havillands is not connected with the Sperry Gyroscope Company which is the only other English firm, though American-owned, making the marine gyro-compass.
The hon. Member for Newton seemed to make a great deal of play of the question of British control. The considerations of sale provided, as I have already said, safeguards against foreign control, which were agreed with de Havillands and the Bosch Arma Corporation. Agreements were reached on amended articles 1163 of association providing against the transfer of more than 49 per cent. of the total capital—present capital and future issues. These prevented more than 49 per cent. of the voting rights being transferred to foreign or foreign-controlled interests. There was also an undertaking not to alter the relevant articles without the consent, in writing, of Her Majesty's Government.
The hon. Gentleman asked me—I think that this was his suggestion—whether I was committing future Governments. I cannot do that, but as I have given this undertaking it would be open to any future Opposition, presumably, to challenge any future Government as to whether the conditions had so changed that it made it necessary to change this aspect.
§ Mr. Lee
The hon. Gentleman says that within the conditions of sale is the point about the 49 per cent. which cannot be raised. He said that only with the permission of the Government could it be altered. I would ask him to say that the Government, if they are approached, will not agree to the percentage being altered.
§ Mr. Orr-Ewing
I would not stand at this Dispatch Box and commit a future Government if, in ten, twenty, thirty or forty years' time, it became in the interests of the firm, its employees and the nation to make a change. All I am saying is that there is no intention at present and that if a change were made the Government of the day would have to justify it.
§ Mr. John Morris (Aberavon)
The hon. Gentleman referred to the special articles of association. Surely they could themselves be altered next year by the ordinary company procedure?
§ Mr. Orr-Ewing
—that it cannot be done—both Bosch Arma and de Havillands have agreed to it—without reference to and the permission of Her Majesty's Government. That is why we have a second line of protection. I think that with these very special measures for British control—they are continuing measures—British control is safeguarded far more surely than in any normal commercial practice.
The last consideration of sale—the continuation of the association with Bosch Arma—will, I think, in this agreement be not only continued, but strengthened. In the long-term interest of the firm, we are sure that extra money and effort was needed behind the research and development programme of S. G. Brown Ltd. Those who know the firm know that, although it was good, it was on a rather modest level and has been for some years. Extra strength for the research and development side is most easily accomplished by an agreement on the present lines.
I think that it is only right that the Committee should have some details about the American Bosch Arma Corporation. It is a public company employing not 950 people, as does S. G. Brown Ltd., but 8,500. Its turnover is not £1½ million, but £40 million. It employs in its laboratories not 20 people, as does S. G. Brown Ltd., but more than 1,000 people. Its research and development manpower is not 2 per cent. of the total employees, but more than 20 per cent.
Surely, that shows the technical strength which this firm will put behind S. G. Brown Ltd. But even those figures are minute compared with the strength in research, development, management, sales staff and finance now available to S. G. Brown Ltd. through de Havillands and the Hawker Siddeley Company. I should have thought that any unprejudiced person would see that S. G. Brown Ltd. is likely to benefit from such an association.
It was in 1957 that the management of S. G. Brown Ltd., realising the necessity of building modern techniques into its gyro-compasses, found that the Bosch Arma Corporation was so much in advance that it entered into a licensing agreement. The Arma division of the company—it has two divisions, the Bosch and the Arma—has for many 1165 years designed and manufactured gyrocompasses using the 2° of freedom flotation principle. This compass has the added advantage of not needing so much insulation against shock. It is also small. It is, therefore, suitable for use in tanks and other vehicles as well as ships.
The company designs and manufactures control, navigation and other systems involving advanced electronics, and it has developed inertia guidance systems for land, sea and air. It developed the guidance system for the Atlas intercontinental ballistic missile, and the fact that that missile has successfully completed trials over 5,000 miles speaks well, I think, for the Bosch Arma development work.
Under the existing licence agreement—there is an existing agreement with the American Bosch Arma Corporation—S. G. Brown Ltd. has the sole right to manufacture and sell the Bosch Arma miniature gyro-compass throughout the world except for military requirements in North America. The association of S. G. Brown Ltd. with the American Bosch Arma Corporation and that corporation's great technical and financial resources will now be much closer than it has been in the past. This new relationship holds out the possibility of an expansion of the present limited arrangements between the two companies to enable S. G. Brown Ltd. to manufacture and sell on a similar basis other precision equipment developed and manufactured by American Bosch Arma. This must be to the mutual advantage of the firms.
Nor is a licensing agreement of this sort in any way unique. The hon. Member for Newton seemed to attack us on this issue. But every major firm in this country in the gyro-compass or gyro field has a tie-up with a United States partner. Sperry is linked with Sperrys, in the United States. Elliots is linked with Bendix and North American Aviation. English Electric is linked with Minneapolis Honeywell under a licensing agreement. Ferranti is linked with Kearfott.
Having grown up in the electronic and engineering world, I hope that every hon. Member of the Committee who has a knowledge of these things will agree that this is the sort of agreement which produces healthy co-operation and scientific progress and that it must be in the long- 1166 term interests of every single person who is associated with and works with S. G. Brown Ltd.
I now come to the question of price. The Committee has to decide whether we have received on behalf of the taxpayer a reasonable price. Opinions expressed during the last debate varied rather widely. The right hon. Member for West Bromwich (Mr. Dugdale) put up the bottom bid when he said:How anybody thinks that the firm will be sold after this debate, I cannot imagine—The hon. Member for Gloucester (Mr. Diamond) interjected:It will be given away.The right hon. Member for West Bromwich replied:Yes, it will be given away."—[OFFICIAL. REPORT, 25th June, 1959; Vol. 607, c. 1427.]That was the bottom bid, but it was totally wrong.
At the opposite end of the scale, my hon. Friend the Member for Kidderminster (Mr. Nabarro), who admitted during the debate that he was not a chartered accountant, produced a very much bigger figure—£1½ million or even million. Indeed, it became a dutch auction. We seem to lose reality when we have a scale from 0 to about £2 million.
§ Mr. J. J. Mendelson (Penistone)
Will the hon. Gentleman explain the peculiar attitude of his Department to the firm in starving it of capital when preparations were being made to sell it?
§ Mr. Orr-Ewing
How anyone could say that the firm was starved of capital when it had a bank overdraft of £440,000 beats me. I concede that it will need more, but I shall come to that point later. It has not had any difficulty with working capital to date. I shall show in a moment what the taxpayers have put behind the firm in successive years.
Our declared aim was to sell the company as a going concern, which means that we were concerned not with the break up value of assets, but with the profits. In this instance, with the considerations which I have outlined already, we are more concerned with the average net profit. For the sake of the record and for the information of the Committee, I think that it might be useful if I gave briefly the net profits before deducting tax during the last ten years. 1167 I have rounded the figures to the nearest £1,000. The figures are, beginning with 1950, £48,000, £74,000, £101,000, £142,000, £201,000, £132,000, £126,000, £158,000, £115,000 and—the figure fell last year—£6,000.
The average net profit for the past ten years was £114,000. Last year's profit fell alarmingly, partly because of the slump in the shipbuilding industry and, therefore, fewer orders for the marine gyro.
§ Mr. James H. Hoy (Edinburgh, Leith)
We must be fair about this. The hon. Gentleman's own accounting officer, in reporting to the Public Accounts Committee, said that the amount of profit which the firm earned was strictly limited by the decision of the Government, including the Admiralty itself.
§ Mr. Orr-Ewing
I think that the hon. Gentleman means that the amount of dividend which was paid was limited, but not the profits, and this comes out in the accounts.
Last year's profits fell off for three reasons. First, there was the slump in the shipbuilding industry, and orders from there fell. Secondly, the increased engineering wages could not be passed on without losing business to competitors. Thirdly, there was uncertainty about the prices on certain other very large orders, prices which were being negotiated at the time. The directors' estimate for the year ended March, 1960—the last financial year—is that net profits seem more likely to recover to about £90,000. This information was given in confidence to those who were most interested.
We achieved a price of £775,000. There are many different ways of estimating whether this was fair. We took the opinion of a well-known firm of accountants—Messrs. Thomson McLintock and Company. The accountants said that they felt that this price placed a fair and reasonable value on the undertaking as a going concern, taking into account that the settlement was in cash immediately and that the offer was the best submitted.
§ Mr. John Diamond (Gloucester)
Could the hon. Gentleman tell us the date of the valuation and of the certificate given?
§ Mr. Orr-Ewing
Not without notice. I will get the information for the hon. Member and pass it to him if it will help him with his speech later.
§ Mr. Mendelson
Was the final offer received not influenced by the low profits made in that year? Was it wise procedure for the Government, being the custodians of the public interest, to put the firm on sale at that time?
§ Mr. Orr-Ewing
For the information of the hon. Gentleman the Member for Gloucester (Mr. Diamond), I am told that the valuation was in April this year.
In reply to the hon. Member for Penistone (Mr. Mendelson), of course there was some influence, but the fact that I came to say that the directors' forecast that they would recover to £90,000 suggested that this was a temporary dip and, therefore, that the buyers would not be unduly influenced by a fall, since that fall would clearly, in the coming years, be recovered. It was thought that about £90,000 was a fair measure of profit in that year which had concluded and possibly for the future.
Bearing in mind the bank overdraft of £440,000—which the buyer has taken on—it will be generally agreed that the price is satisfactory. In last year's debate the right hon. Member for West Bromwich recalled his service at the Admiralty—I believe that he was undertaking half my present job, since he was Parliamentary and Financial Secretary and not Civil Lord. He said that in taking… the decision to retain the firm … we were also influenced by the fact that to retain the firm would not cost the Admiralty anything at all."—[OFFICIAL REPORT, 25th June, 1959; Vol. 607, c. 1425]I will show that since that date the Admiralty, or, rather, the taxpayer, through the Admiralty, has been called on to furnish £485,000. It was a bad forecast by the right hon. Gentleman in 1946, and it was as wrong as his forecast of the price last year.
In 1946–47, £180,000 was furnished in the form of ordinary shares; in 1948, 3½ per cent. debentures of which there is outstanding £555,000. In 1956, ordinary £1 shares worth another £90,000 were put into the firm and there was also an unsecured loan of £160,000. Thus, the taxpayer has been called upon throughout the years to put considerable sums of money into this firm.
§ Mr. H. Wilson
The hon. Gentleman is giving figures of the loans made by the Admiralty to this firm. He found that this was costing the taxpayer—through the Admiralty—something. On that basis, is not Colvilles costing £50 million? How much is de Havillands costing the taxpayer?
§ Mr. Orr-Ewing
De Havillands has development contracts, but I know of no Government help other than Government contracts. Practically every firm in the engineering field has Government contracts. It is a canard to suggest that they are in receipt of vast public funds other than development contracts. These sums for S. G. Brown, Ltd. came out of the Admiralty Votes and therefore, ultimately, from the taxpayer, and they have not been repaid.
§ Mr. Wilson rose—
§ Mr. Orr-Ewing
I have given way several times. The right hon. Gentleman will make his speech later. I do not want to keep other hon. Members out of the debate.
§ Mr. Wilson
On a point of order. The hon. Gentleman says that he is answering for the Admiralty and not the Government in giving us some figures on the Admiralty Vote. We are on the Admiralty Vote in Committee. Is the hon. Gentleman answering on the Admiralty Votes and, if so, can he say whether the figures in them are above the line or below the line?
§ The Temporary Chairman (Sir Harry Legge-Bourke)
It seems to me that the right hon. Gentleman was addressing that question to the hon. Gentleman the Civil Lord of the Admiralty. I thought that he was raising a point of order. It cannot be a point of order if the only person who can answer it is a Minister.
§ Mr. Wilson
Surely it is a fair point of order to ask, Sir Harry, since we are on Supply, whether this is a Supply Vote or a below-the-line contribution by the Government?
§ Mr. Orr-Ewing
This was on the Admiralty Vote and, therefore, came directly on the taxpayer. That is correct and I have tried to keep the Committee 1170 as fully informed as possible. There was provision in last year's Navy Estimates for a further £250,000. If the firm is to develop and expand and keep pace with modern developments—and deal with its overdraft—more than £250,000 of new capital will be needed.
In settling this sale we feel that we have thoroughly followed the conditions which were outlined to the Committee last year. We have effected a sale which is in the greatest interest of the taxpayer and, above all, one which must be in the long-term interest of all those who work or are associated with S. G. Brown, Ltd.
§ Mr. Diamond
Before the hon. Gentleman sits down, would he answer one point which he has so far failed to answer? Why did the Government decide to sell now?
§ Mr. Orr-Ewing
I shall answer that.
The Committee voted on this matter on 25th June last year and we had a majority of 49. We then started negotiations as soon as the accounts of the preceding year were made available and we interested all these people. It was the decision of the House of Commons and of the electorate that we should go ahead with this. We were also affected by the fact that if we were not to sell now there would only be further injections of the taxpayers' money into the firm, and this is not necessarily in the interests of the taxpayers. We would not necessarily have received a better price by injecting further capital over and above that which had already been injected. Those are the considerations which prompted the sale.
§ 4.40 p.m.
§ Mr. John Dugdale (West Bromwich)
The Civil Lord has taken the place of another hon. Member who spoke for the Government on this subject last year. I am not certain that the change has benefited S. G. Brown Ltd., or that the Committee has been given any more information than it had before.
The most remarkable thing that the Civil Lord has told us was that he considered that any money invested by the 1171 Government was a loss, a drain on the taxpayer. For someone who is not only Civil Lord, but Financial Secretary to the Admiralty, that is a most extraordinary confession of ignorance. Is it a loss when de Havilland's invests more money? Is it a loss when Imperial Chemicals invests more money? Of course it is not. Why does the hon. Gentleman not consider a Government firm in exactly the same way as he considers a private firm? Why does he not consider that, far from being a loss, further investment might be a sign that the company was doing well and that it was better to put more money in it?
§ Mr. Dudley Williams
It is important. In certain circumstances I accept what the right hon. Gentleman has said, but will he not agree that when the profits of a company have fallen from £200,000 in 1954 to £5,821 in 1959, money which has been invested in the company has probably been lost?
§ Mr. Dugdale
That is quite different from the point which the Civil Lord made, but perhaps more valid. I will answer that, too.
When I made the remarks which the Civil Lord quoted, I was referring to the time in 1946 when the question of whether the firm of S. G. Brown should be sold first arose. I said that at that time the company was doing well and was not losing money. What the situation is today is quite another matter. We have had the Admiralty run by a Conservative Administration for ten years and it may well be that the firm is not doing as well as it was.
Much more information should be given to us, because it has clearly come out today that the Admiralty has been considering the sale for some time, and it appears that it allowed the affairs of the firm to run down in the knowledge that this sale was to be made. That is most astonishing and it is a matter to which I shall return.
I was intimately concerned with the original decision to retain S. G. Brown, which was retained for reasons which 1172 Sir John Lang, Permanent Secretary to the Admiralty, stated to the Public Accounts Committee:We came to the conclusion at the end of the war that the right course to follow was to keep S. G. Brown, because the war potential of a high precision engineering firm of this kind, particularly one manufacturing compasses, was very important indeed.That was what we thought then, but things have apparently changed, because last year the then Civil Lord made the most extraordinary statement that:… in recent years the advent of the nuclear weapon has altered thinking about the nature of a future war and the need to preserve future war potention. … This is the crux of the argument. Nowhere are we retaining capacity because we might require it in wartime."—[OFFICIAL REPORT, 25th June, 1959; Vol. 607, c. 1413.]Presumably, that also applies to the Army and the Royal Air Force and apparently all the forces are being kept in being not from any consideration of their effect as war potential, but entirely for the limited business which they now have to undertake. That is what appears from that speech. It was an extraordinary remark and it is now, presumably, out of date, because the Government's policy towards nuclear armament appears to have somewhat altered since that time.
When we were considering the sale of the firm, we had various considerations to bear in mind. At no point did we consider selling it to an American firm. That never entered our minds, but apparently it entered the minds of the Government at a very early stage. Let me deal, first, with the question of price. We were told that three other firm offers were made. It has been made abundantly clear time and again, and it was made clear in the hon. Gentleman's speech today and in his earlier statement, that nobody was likely to make an offer if it was known that there was a definite tie-up with the Bosch Arma Corporation, and that the Admiralty would not sell to any firm likely to break that tie.
Such a knowledge cripples any sale and it is impossible to conduct a sale in those conditions. It is obvious that in those conditions only the Bosch Arma Corporation could buy the firm, and the Government must have known that a long time ago. As my hon. Friend the Member for Newton (Mr. Lee) said, the 1173 Government had decided long ago to sell the firm to the Bosch Arma Corporation. I agree that the Civil Lord cannot admit that in public, but everyone will come to the conclusion that the Government must have decided to sell the firm long ago.
The hon. Gentleman spoke of the size and knowledge of the Bosch Arma Corporation. Obviously, a firm of that size has great knowledge, but on that basis the more small firms are sold to big firms, the better. The whole of his argument was in favour of more and more mergers and fewer and fewer firms so as to get the benefit of the big firm's greater knowledge. It is useful to know that the Government have that interesting idea even though they have been talking about the desirability of free enterprise and of having many small firms. Apparently, the large firm with great knowledge is the firm to which the Government think it most desirable to sell a company such as S. G. Brown.
The Civil Lord said that S. G. Brown was instructed not to take any further orders and the hon. Member for Watford (Mr. Farey-Jones) made the interesting observation that new orders which recently came to S. G. Brown came from the other side of the water.
§ Mr. Farey-Jones
I know that the right hon. Gentleman would not like to misrepresent me. I referred not to new orders coming from the other side, but to modifications of the compass as a result of scientific information from the other side.
§ Mr. Dugdale
I am sorry. I thought that I had taken down the hon. Gentleman's words accurately. I gather that a great deal of knowledge came from the other side and that by that time the Bosch Arma Corporation had obviously concluded that the deal was finally on. The information which came to S. G. Brown came, therefore, only when the corporation was certain of the deal. In other words, as soon as it was known that the Government were determined to sell to the Bosch Arma Corporation, the affairs of S. G. Brown began to look up. The value of the firm stayed down until then, but afterwards it began to rise higher.
I want now to refer to American ownership in general. We are told that 1174 there is only a 49 per cent. American interest in de Havillands. An interest of 49 per cent. is not control, but it is very near it. [Laughter.] I can only say that if the Civil Lord had a firm in which I had a 49 per cent. interest I think that he would have to pay at least some attention to what I said, especially when that firm was linked with another firm which I owned.
What is the policy of the Government on this matter? It is that British private ownership of industry is best, that American private industry is second-best and that British public ownership comes last. Not only S. G. Brown is in the hands of a firm which is partially American-controlled. In a very interesting book which is in the Library, a book called "Who Owns Whom?", we are told that in May, 1960, nearly 500 American firms together had 650 subsidiaries in the United Kingdom. That is an extraordinary position which the Opposition view with considerable disquiet. S. G. Brown is now to be added to that list. It would, therefore, seem to be in keeping with the general policy of the Government to increase the number of American firms which have a controlling interest in this country.
§ Mr. A. E. Cooper (Ilford, South)
The right hon. Member has disclosed the number of subsidiaries of American firms in this country. Will he also give the Committee the number of subsidiaries of British companies in the United States?
§ Mr. Dugdale
I will not pursue the matter further, except to say that I am convinced that it is nothing like the figure that I gave a moment ago for American subsidiaries.
§ Mr. Dugdale
We know that the Government are determined to sell out any industry which is being run at a profit by a Government Department. The Civil Lord gave the whole case away in reply to my right hon. Friend the Member for Huyton (Mr. H. Wilson). So far as I could understand from that reply the policy of the Government is to sell out any firm which is now being run by the 1175 Government, or in which the Government have a large interest. Short Bros. and other firms have been referred to, but the Civil Lord rode that off by saying that they are not directly the concern of the Admiralty.
As my right hon. Friend explained, the hon. Member is speaking not for the Admiralty alone, but for the Government, and it would therefore appear to be the policy of the Government that firms which are run by the Government and are a success are from now on to recognise that they are to be sold to private interests—and without any tribute being paid to the workers in those firms. My hon. Friend the Member for Newton paid a glowing tribute to the workers, but I did not notice one worth-while tribute from the Civil Lord.
§ Mr. Orr-Ewing
I must correct that. When the hon. Member reads HANSARD I hope that he will rescind that statement. I went out of my way to say that throughout the negotiations we paid the greatest respect to the conditions and the continuity of work, and to the importance of keeping the skilled team together. We underlined that fact in our announcement. This announcement, which has been criticised, was made out of consideration for the people who work in the firm, although I recognised that I should have to answer for that in this House. That was the case from start to finish. We showed special consideration far the workers.
§ Mr. Dugdale
The Government could best show their consideration for the workers by retaining the firm. They are, instead, willing to give it away at a price which is obviously no reflection of the work being done by the workers in the firm, but is a reflection of the tie-up with the Bosch Arma Corporation. If the Government had not made that tie-up there would never have been that relatively low price. There would have been free competition when they decided to sell. It is the tie-up with the Bosch Arma Corporation that has kept the price down.
Unlike the party opposite, we place British public enterprise above American private enterprise as being desirable for this country. We would like to see more British public enterprise and not less. 1176 We condemn this sell-out because it is against the interests of the Admiralty; it is against the interests of the Royal Navy, and it is against the interests of this nation. I am surprised that the hon. Member, representing the Admiralty, should have taken action so contrary to the interests of the Admiralty and the Royal Navy, and disgusted with the party opposite for taking action of a kind which is so inimical to the good of the entire nation.
§ 4.54 p.m.
§ Mr. John Arbuthnot (Dover)
I am glad to have the opportunity of following the right hon. Member for West Bromwich (Mr. Dugdale), because I think that the Committee will be disgusted with the slimy speech he has made. He has cast aspersions against people and organisations without rhyme or reason. He has tried to slur the Bosch Arma Corporation by suggesting that only after the Government had shown that they were determined to sell out to that company did it provide the "know-how" to S. G. Brown, Ltd., with which it had been in partnership for some time, which enabled profitable modifications to be made to the gyro.
He cast aspersions on American investment in this country. At the same time, his party has expressed surprise and pain when American investors decide to invest on the Continent rather than to come here to help boost British production and employment.
§ Mr. Dugdale
I did not say that I do not welcome American investment; I object to American control.
§ Mr. Arbuthnot
There is no American control in this case. The right hon. Gentleman was talking about American investment. In this case control is exercised by de Havillands and, as my hon. Friend has made quite clear, firm arrangements have been made to ensure that control by the Bosch Arma Corporation will not come about but that the firm will remain in British hands. The right hon. Gentleman also said that at no stage did he consider selling to an American firm. We have not considered selling to an American firm, either. We have made sure that the control will remain in British hands.
From the speeches to which we have listened from hon. Members opposite, 1177 I can find no valid reason against this sale of S. G. Brown. In fact, from what has been said so far I think that the sale has been an excellent thing. There are many reasons why I think this, which I propose to develop in a few moments.
The Government are being taken to task by the Opposition for selling this firm, one of whose functions—and a minor function only—is to supply gyroscopic equipment to the Admiralty. I came into the matter at a much earlier stage, when there was criticism of the Admiralty, and I was one of the critics, but my criticism was from the opposite point of view to that taken up by the Opposition. I felt 'that the public money being spent in increasing quantities on this firm was being provided under conditions which the Admiralty could not justify, and that it was no part of the duty of the Admiralty to own and run a firm the majority of whose activities were purely of a commercial nature.
My criticism of the Admiralty, if I have one now, is that it did not sell S. G. Brown five years ago, rather than keep the taxpayers' money at risk in a commercial enterprise in a highly competitive field. If we look at the profits made by the firm, after deducting all expenses, we find that they have never been so high as they were in 1954. In fact, the Government would probably have been able to obtain the highest price for the firm if it had sold in 1954, instead of waiting until now. Then it could have been sold at the top of an increasing crescendo.
I came into the matter as a member of the Public Accounts Committee. In the Report of the Comptroller and Auditor General on the Navy Appropriation Account, 1955–56, we were told, in paragraph 24:The firm's post-war Government orders were likely to be small, but it was well equipped for commercial orders and the Admiralty, whilst retaining general control sufficient to secure the national interest, gave the directors full authority to operate the firm as a commerical entity. For this purpose the Admiralty provided the firm with additional share capital amounting to £180,000 and also advanced £165,000, secured by a debenture, for the purpose of acquiring new premises.The Comptroller and Auditor General also told Parliament thatthe company's overdraft on 31st March, 1956, stood at £183,052.1178 The accounting officer was examined before the Public Accounts Committee—Report of the Public Accounts Committee Session 1956–57. In answer to Questions 2,892–3 and 4 he said that the Admiralty had told their director on the board of S. G. Brown that in order to assist the firm in seeking a loan from its bankers, the bankers might be told that it was the intention of the Admiralty so to adjust the capital structure of the company that the firm would be asking the bankers for temporary accommodation only. In other words, when other companies in a similar commercially competitive field, and run by private enterprise, were having to go to the market for money, this firm was able to shelter under the umbrella of being assured that whatever finances it needed could be obtained from the taxpayer.
§ Mr. Charles Loughlin (Gloucestershire, West)
I think that the hon. Gentleman should be fair. Is he suggesting that the people of this country are taking an unfair advantage in the ownership of this firm if they secure money at lower rates than they would obtain it in the market? Does he deny the right of the people to get an advantage by their collective efforts, bearing in mind also that the Government are in receipt of a 5 per cent interest on the profits made by this company, which amount to £1,084,000 on the incomplete figures supplied by the Civil Lord?
§ Mr. Arbuthnot
I do not deny any right of the people of this country, but it seems to me to be totally improper that the Admiralty should have been using public funds in order to carry on what really amounts to an ordinary industrial company. That is not what the Admiralty is there for. In point of fact, the Admiralty, as I have said, should have got rid of S. G. Brown a very long time ago. If the company had been sold in 1954, the Admiralty might well have obtained a higher price than the present price. Not only that, but public money would not have been at risk for such a long time. As was pointed out by my hon. Friend the Civil Lord since 1954, during which period public money has continued to remain at risk, the profits of S. G. Brown have never begun to achieve the figure of £200,627 which was attained in that year. It was this situation which led me to suggest in 1957 that it 1179 was quite wrong that the Admiralty should remain responsible for S. G. Brown. Therefore, I am very glad that the company is being sold now, and I congratulate my hon. Friend on the action he has taken.
We are told by hon. Members opposite that the price of £775,000 is too low for an enterprise for which the Government gave £55,750. That does not seem to me to be such a bad bargain on the part of the Government, particularly when one bears in mind the additional bank overdraft of £440,000 for which the purchasers of S. G. Brown are making themselves responsible.
§ Mr. John McCann (Rochdale)
Considering the fact that the original purchase price was only £55,750 and the company has made over £1 million which has been ploughed back, is it not a fair assumption that £775,000 for something which cost £55,000 is a very good bargain indeed?
§ Mr. Arbuthnot
I think the real criterion of what a company is worth is its earning power. On the basis of earning power the company's annual earnings would seem to be reasonably assessed at £90,000 to £114,000. Suppose we take the higher figure of £114,000 as the prospective earning power, it means that the purchasers of the company are buying it on a 7¾year purchase basis. That does not seem to be a bad basis at all particularly when one bears in mind that it would be reasonable to expect that Government contracts in the future are likely to be less than they have been in the past.
We are also told by hon. Members opposite that the Government should be participating in the profits of this firm which is depicted by hon. Members opposite as being "a money spinner." If the firm is "a money spinner" the Government will certainly reap a benefit in the form of Income Tax and Profits Tax. It seems to me that they would be well advised to let other people take the risk while they are reaping the benefit in that way.
We are also told that it is wrong that there should be American participation to the extent even of a minority interest in the consortium which is taking over the company. I welcome American capital coming to this country. I wish 1180 to see more of it coming here. We live in a capital-hungry world and the more American capital which comes here the more British capital will be freed for other worth-while enterprises. I believe that cross-fertilisation of capital from one country to another is a good thing. I think it an excellent thing that British capital should venture abroad, but we cannot expect British capital to be welcome in the United States if we jib at American capital coming here.
The more American capital that comes to this country, the more will it help to maintain full employment. Prejudice against American capital and the injection of American know-how" which will naturally come with it and is coming in this case—the sort of prejudice displayed by hon. Members opposite—does immense damage to our prosperity and national well-being.
§ Mr. Arbuthnot
I probably know more about that than does the hon. Member for Newton (Mr. Lee).
Listening to the speech of the hon. Member for Newton, one would have thought that the party opposite felt that Britain could "go it alone" and have a policy of isolation, a policy of drawing a cordon sanitaire round this country and not allowing American capital to come in. I should have thought that the defence policy of the party opposite, once it has been formulated, ought to recognise that Britain can no longer "go it alone", and the greater co-operation there is between enterprises here and in the United States the better it is for the mutual defence of the free world. It is, therefore, astonishing to me to find the hon. Gentleman making a speech such as he made about American capital coming into this country.
§ Mr. Gordon Walker (Smethwick)
If the hon. Member is so unreservedly in favour of American investment here, would he be in favour of majority American holding in this company? If not, why not?
§ Mr. Arbuthnot
It would be out of order if I were to yield to the temptation to go along the garden path down which the right hon. Gentleman invites me.
For all these reasons, I feel that this is a splendid thing that the Government are doing. I only wish that they had done it a little sooner.
§ 5.11 p.m.
§ Mr. John Diamond (Gloucester)
The hon. Member for Dover (Mr. Arbuthnot) made one of his main points that, according to his philosophy, it was not the job of the Admiralty to run a commercial business on behalf of the nation. I want him to get his ideas up-to-date.
I do not want him to live in the past. I would point out to him—subject to my history being accurate, which it never is—that it is at least eleven hundred years since this Department was nationalised. It was the first nationalised organisation of the Realm so far as I am aware, and we should be proud of it. The Civil Lord is suddenly waking up to the fact that he is running a nationalised organisation. Why does the hon. Member for Dover say it is not the job of this Department? It has been the job of the Admiralty for eleven hundred years to do this very thing—to organise its activities, with money paid by Her Majesty's subjects, on behalf of the State.
§ Mr. Arbuthnot
Is the hon. Member suggesting that Her Majesty's Government should take over Woolworth's?
§ Mr. Diamond
I am suggesting that it is a matter of opinion whether the Admiralty should or should not continue to run an important commercial firm in the interests of the nation. I am suggesting that it is not within the power of the hon. Member to say that, as a matter of edict and of law, it is outside the province of the Admiralty to do these very things. In fact, the normal and historic view of the Admiralty's rôle is that it should do all the things connected with it. This was one of the main reasons why the Admiralty retained this firm in private ownership. Now we have got to the stage when the Government have to justify the action taken at this time.
I am not at all satisfied with the way in which this matter has developed. I had no intention of burdening the Committee with a speech after having spoken 1182 in the debate yesterday and I apologise for so doing, but it will have been observed that competition was not of the highest and, therefore, I am not keeping many of my hon. Friends out of the debate. The Government say they have the authority of the House to deal with this matter as they have done. The Civil Lord said that we had a debate last year and, curiously enough, the Government got a majority; therefore, they are entitled to do what they are doing. I challenge that, even with the Government's majority.
I deny that many hon. Members opposite who voted with the Government on that day, as sensible business men acting as honest trustees of the nation's purse would have voted for disposing of a national asset at the worst possible time for doing so if they knew that a loss was being made. Not one of us was told this fundamental point. Not one of us was told anything but that this was "a money spinner". The hon. Member for Watford (Mr. Farey-Jones), in whose constituency this firm is, told us that this was "a money spinner", or something to indicate that it was a highly profitable firm.
All we knew was that it was at the height of its profits and was continuing to make profits. Now we are told that, at the point of time when the debate was held, the company was running into serious difficulties and could reasonably expect losses. Yet the Government have the impudence to suggest that, because they deliberately misled the House into believing that this was a profitable firm, it was being sold while making profits and we would get a benefit by selling it at the worst possible time.
§ Mr. Farey-Jones
It is important for the clarity of the record to say that my reference to "a money spinner" was not to the administration of the firm as a whole, but to a particular gyro which will be in constant demand all over the world. That was the reference to "a money spinner", I am sure the hon. Member will accept what I say.
§ Mr. Diamond
Of course, I accept that the hon. Member is most accurate about what he said, but my memory also was accurate that part of the general impression we all got was that the company was doing jolly well, here was a money spinner and this was the time to 1183 sell it. I am not saying that it would have influenced us on this side of the Committee, for we voted against it. I am saying to hon. Members opposite that they would not have been inclined to sell an asset of which they were trustees at the time which was the worst possible conjuncture of events for selling. So I say to the Civil Lord that he did not get the authority of the House. I use the term precisely and advisedly. The House was misled into giving a vote for the sale of this company at the worst possible time.
I also say to the Civil Lord that surely he is misleading the Committee into believing that he with his limited powers can control or prevent this company from becoming an American-owned company. Let us be clear about that. My hon. Friend the Member for Nuneaton (Mr. Bowles) will correct me if I am wrong. Of course, if the Government had financial powers—which I do not think they have any longer—to prevent the sale of a company and retained those powers which they inherited from the Labour Government to prevent the transfer of securities from an English resident to an American resident, the Government could use those powers. That is the law of the land, but for the Civil Lord to say that he can incorporate in a particular deal powers which are extra-statutory is surely quite wrong
It is quite wrong to say that one can incorporate in a company's articles powers to prevent the company altering its articles. We cannot alter company law by saying that powers in the articles are greater than the law itself. That is an impossible proposition. The fact is that this is done by good will. If the hon. Gentleman had contented himself by saying that in this transaction the likelihood of the company passing to American control was less than in the case of any ordinary commercial firm—that the likelihood was less because it would incur the of the Government, there would be bad blood and these things are not done among pals—we would have accepted it.
I am not now on the point of whether it is wise or unwise that there should be American control. My hon. Friend the Member for Newton (Mr. Lee) has dealt with that fully. I am saying to the Civil Lord that he, for the second time, 1184 has misled us by suggesting that, in the agreement he stipulated between the parties on the sale of the assets, or shares of the company, he can incorporate something beyond the powers of the Companies' Act and make it impossible for the company to change its articles in order to permit this to happen. As everyone knows, the first essential of any public company is that it does not restrict the right of shareholders to transfer any of their shares. That is what the word "public" means. It does not mean that it is owned by the whole of the public, but that every shareholder has the free and unfettered right to transfer his shares.
§ Mr. Frank Bowles (Nuneaton)
Are not the articles of association a contract between the shareholders? I remember a case a long time ago when it was said in the articles that a solicitor's services would be held for life at a certain salary, but that was held not to be binding because the solicitor was not a shareholder. No change could be prevented, because the Government are not shareholders in this company.
§ Mr. Diamond
I am grateful to my hon. Friend. I am sure that he was not the solicitor in question, because no firm would dream of getting rid of such an eminent and able solicitor. He is quite right. This is a contract between the shareholders, and any two adults who enter into a contract can amend that contract at a later stage.
§ Mr. Cyril Osborne (Louth)
The hon. Member said that many of my hon. Friends would not have voted for the sale had they been aware that the company was making a loss, and that we were led to understand that it was making a big profit. Surely it depends upon the price which is being obtained for the company. If a good price is being obtained for a company which is making a loss, surely that is a better bargain than if the company were making a big profit.
§ Mr. Diamond
Yes, if we were living in a world of fantasy in which people will pay a good price for a so-called profitable company which in fact is not a profitable company. I said to the hon. Member specifically that he himself, as a trustee, would not dream of selling trustee assets at the worst possible time. 1185 He replies, "If I got the same price as at the best possible time, I would". Of course he would, but neither of us is a child, and we are not living in wonderland but in the hard world as it is. I shall deal with the question whether the price was based on the figures, and that will relieve the hon. Member's conscience, because he will then know that he would not have voted for the sale at this time.
There is one further question which I wish to put before I deal with that. We have not been given a satisfactory answer to the allegation that the firm was starved of capital. The Civil Lord has indicated that it was with the greatest regret that the Government allowed further moneys to be loaned to this company, and I can only assume from his attitude that he begrudged any money which the Government let this company have. He called it all out to us in a biased way. He talked about "giving" the company money on loan. He does not talk about "giving" it when the firm of Colvilles is loaned money at a much lower rate of interest than it can obtain anywhere else.
This is consistent with an attitude of mind in which one regards the giving of it as unnecessary. I am not sufficiently aware of all the details, but my hon. Friend the Member for Newton, who no doubt has adequate evidence on which to base his statement, has told us that this company has been starved of capital. The Civil Lord, in effect, told us that he begrudged the amount of money which the company had. I must therefore assume, until we are told precisely and authoritatively to the contrary, that this company was starved of capital at this moment in time.
§ Mr. Arbuthnot
The opposite seems to be true, because the Admiralty director on the company was told that he could say to the company's bankers that the money would be required for a comparatively short time, because the Government would make the necessary arrangements for a reorganisation of capital. Thus, the bankers could afford to let the company have the additional money with no qualms. The hon. Member will find that on page 258 of the Minutes of Evidence given before the Public Accounts Committee, Questions Nos. 2892–94.
§ Mr. Diamond
I am grateful to the hon. Member. I shall have to explain to him what starvation means. Starvation, as I am using the term, is in relation to one's appetite. It is no use putting a meal which would satisfy me in front of a large elephant and saying, "There you are. There is steak and chips. You be satisfied with that." He requires more. A company which is advancing may require much more capital than a company which is not. It is nonsense to say that the fact that it was given some capital proves that it was not starved.
§ The President of the Board of Trade (Mr. Reginald Maudling)
An increase in the bank overdraft by £250,000 in one year for a company of this size is not evidence of capital starvation.
§ Mr. Diamond
That means absolutely nothing by itself. Every businessman and every accountant knows that to talk of the overdraft itself as indicating anything at all is utter nonsense until one knows what has happened to other things. I do not know what happened to the company. It may have had some debentures which it paid off or some rearrangement with the creditors or with the debtors, or it may have had to pay for some plant. There are a thousand-and-one reasons why the state of the overdraft by itself is utterly irrelevant. Nobody other than an extraordinarily stupid person would attempt to say that by itself it proves anything. It is, of course, indicative if we take all the other factors into account.
We have not had an answer to this question. If it is clear that the company has not been starved of capital, why was my hon. Friend the Member for Newton able to say, on evidence, that it has been starved of capital? Why did not the Civil Lord reply, "We were in touch with the company and said to them, 'Do you need any more capital in appropriate form? If you do, here it is'." Why did the Civil Lord say, "Look at all this money which we have given away", when it was loaned on interest? I am by no means satisfied that this company was not starved of capital.
I come to the most fundamental point. Why choose this moment to sell? I say seriously to hon. Members opposite 1187 that they have done themselves enormous damage yesterday and today. [Laughter.] They can laugh this off here; hon. Members are in their seats today to laugh it off. They have done themselves enormous good hitherto by showing themselves to be flexibly-minded and to a certain degree progressive. Yesterday and today they have shown that they made a political decision some time ago, based on their political philosophy, and that, come what may, irrespective of the country's interest, they intend to drive that decision through at the worst possible time. This was the essence of our complaint yesterday, and it was proved—not in the Division Lobby, for we are much too sensible to be misled by that; but proved up to the hilt by the lack of argument from the Government Front Bench in the opening and closing speeches. We had to have a slap-dash finish to the debate yesterday.
I will not proceed further with that point but will return to today's debate. The point is exactly the same. The Government have said that, because they reached a political decision about denationalisation and confirmed their decision about a year ago in relation to this firm when it was making profits, then, notwithstanding that this is clearly the worst possible time at which to carry out that decision, they have nevertheless decided to do so and have let the interests of the State go hang. That is what they have done.
§ Mr. C. Osborne
Yesterday the Minister made it perfectly clear that, because of the condition of the stock market, the sale which was contemplated would be held up until conditions were good. That is how I understood it. It is, therefore, wrong of the hon. Member to say that we intend to sell at the worst possible moment. The policy will be carried out at the best possible moment.
§ Mr. Diamond
The hon. Member is quite wrong. I have HANSARD here and I will turn up the passage if he wishes, but he can rely on my recollection, for I listened most carefully. The Minister said that the Government would have to weigh in terms of priorities the need to get rid of all debentures and loan capital of the various companies which had been partly denationalised compared with the 1188 need to dispose of the equity capital in Richard Thomas and Baldwins. That is precisely what the Government said, and it was reaffirmed when I put the point to the Minister yesterday. He would not go as far as to say that they would await the best time. How could he, with all his back benchers on his tail, urging him to get rid of the firm at the earliest possible minute, slobbering in anticipation of the wonderful stocks which are about to come into their hands. The hon. Member for Kidderminster (Mr. Nabarro) could hardly keep quiet at the thought of the wonderful stock. "Hear, hear, capital gains", he said. "Free of Income Tax", he said—and Surtax, which he did not say.
Do not let us be misled into thinking that the Government gave the slightest indication that they would act as a responsible trustee of the nation's purse and have regard to the best possible time for sale. Indeed, they are doing it again and having regard to the worst possible time. They have a chartered accountant's certificate, which I am sure is an absolutely valid certificate based on the facts put before the chartered accountant. I happen to be a member of that profession. Chartered accountants do not look to the future; they look to the facts as shown by the balance sheet. The balance sheet put to the chartered accountants, on which they based their valuation and said that it was a fair price, were accounts showing the worst possible situation in this company's history.
It is no use the Civil Lord waving his hand at me. He has to show me a letter from the accountants saying that they did not have regard to this loss of £6,000. [HON. MEMBERS: "It was a profit."] I am sorry. I mean profit, but it does not make much difference; the difference, all told, is only £12,000. He has to show that they did not have regard to this falling-off of profits, the worst profit that the company had made in the last ten years by a mile.
The Civil Lord has to show me that the accountants had regard to somebody's estimate—I do not know when; perhaps in January of this year—that if the company went well and the Government did not make a change in the Bank Rate—indeed, provided that the Tory Government did not continue in office—S. G. Brown would make £90,000 profit in the 1189 future. A fine firm of chartered accountants which is likely to have its decisions affected by some problematical future event of that kind! Of course not. The accountants very properly based their certificate on the hard facts put before them. They are not to be criticised. The Government are to be criticised and condemned once more for disposing of the State's assets at the worst possible time.
§ 5.32 p.m.
§ Mr. Farey-Jones (Watford)
I am particularly happy to have an opportunity of entering this discussion, if for only one reason—and that is to clear up the muddle-mindedness, malicious and even malevolent thinking of the Opposition on this matter. [HON. MEMBERS: "Oh."] Yes. If hon. Members opposite will extend to me the courtesy that I extended to the hon. Member for Newton (Mr. Lee), I will make my case very clear indeed.
After all, I am the Member for Watford. I am closer to these people, S. G. Brown, than is any other Member in the Committee. I am familiar with the company's administration, with its shop stewards and with the people working on the benches because I have been in and out of that factory in war and in peace—and by that I mean before the election, during the election and after the election—and I shall be in and out of that factory during the next election and after the next election with perhaps an even doubled majority as a result of what I am about to say.
I am sorry that the hon. Member for Newton is not in his place. I can quite understand it, because he has probably been waiting for me to be called and I have not been called until now. Listening to the hon. Gentleman, one would have thought that we had come here to bury Caesar, not to praise him. Listening to other Opposition speakers, one would have thought that we had come here for the burial obsequies of S. G. Brown instead of having regard to the true fact, that S. G. Brown is today at the beginning of a very remarkable future because—and I beg every hon. Member of Her Majesty's Opposition to listen to this—this firm on 30th June becomes part of a family spread all over the world, completely peerless in its own field, and if its administration, personnel and 1190 workers rise to the opportunity now presented to the company their future will be far more assured than a dozen Government Departments could ever make it.
In case I should forget, let me make clear at once that I am second to none, not even to the hon. Member for Newton, in paying my tribute to the very remarkable crew which runs this company. I use the word "crew" because it covers everyone, from the captain to the cabin boy. My approach to the whole of this problem from the very beginning has been completely consistent. The decision whether the company was to be bought or to be sold was arrived at, and fought out immediately prior to the last election. There were even Members of the Opposition, many of them, as well as Members of my own party, who deeply sympathised with the Member for Watford in the situation in which he was placed immediately before the election, because had the 1,000 or so workers in S. G. Brown, with their families, taken the violent opposition to the measure which we have heard from the Opposition Front Bench today, they could have put me out of business.
§ Mr. Farey-Jones
I told them the blunt truth. The blunt truth which I told them, and, which I told the House in the last debate, was this. I invite the hon. Member for Nelson and Colne (Mr. S. Silverman) to look up what I said in that debate. No hon. Member and no constituent of mine is under any misapprehension as to where I stand or where I have stood from the very beginning. I repeat this to new hon. Members, as well as to the hon. Member for Nelson and Colne.
First, I do not believe that—the hon. Member for Nelson and Colne asked for it, so I am giving it—either this or any other Government, or even if hon. Members opposite ever form a Government in my lifetime again, should engage in any kind of business in peace time. That is a fundamental tenet of my belief. Secondly, it is the bounden duty of a good Government to create a climate in which business can prosper and thrive, native genius can develop and expand, and the fruits and rewards of hard work can be kept by the people who have done that hard work. [Interruption.] I 1191 beg hon. Members to listen to me because they will get some wisdom at least if they do. That does not mean that I accept that the Government should abrogate that responsibility to provide a minimum standard of living—and that a very just one for all concerned—and a standard below which no one should be allowed to go.
Further, I regard—it may be that I am alone in the Committee in thinking this, but I hope that I am not alone—all taxation as inherently evil. I do not think, as I believe one of the leading Members of the Opposition Front Bench does, that it is a virtue. I believe that good government consists in keeping taxation at the absolute minimum. I shall not dilate on this point, but I think that I have given the hon. Member for Nelson and Colne an adequate answer to his question.
I want to clarify the position as regards S. G. Brown, Ltd. From the very beginning my sole concern in this matter was to preserve the employment of the labour force and to retain the skills and techniques so prevalent and prominent in the firm. Any truthful Member of the House of Commons will remember perfectly well the fight that I put up, both inside and outside the Chamber, to achieve that end.
The hon. Member for Gloucester (Mr. Diamond) should bear in mind what I achieved from the then First Lord of the Admiralty, the Earl of Selkirk. He was at that time in another place and is now carrying out a very hard responsibility in his inimitable way in the Far East. This company, on the conditions that I obtained from the Admiralty, could not be sold on what I call a chartered accountant's valuation. In view of my particular interest in my own people, I obtained these undertakings from the Government:(i) The business should be kept as a going concern under efficient management and not allowed to disintegrate.(ii) The Government will not sell to a purchaser unless he can convince us that he will be able not only to maintain but to develop to the full the potentialities of the high-precision manufacturing capacity which already exists in the firm.The hon. Member for Gloucester will know full well that thirty offers could be received for such a firm, but even that one 1192 condition would cause the Government seriously to consider whether to reject or accept an offer.
Further guarantees were obtained:(iii) Whoever purchases the firm will be required to make full use of the premises at Watford and to assure us that they will carry through as far as practicable projects already under development by S. G. Brown.Further, the Government pledged that they regardedfuture development in the firm as of the greatest importance and will consider as possible purchasers only firms which can assure us of their ability to provide continuity of employment of the same highly skilled type.It is not my intention to weary the Committee, but I think that it is important to state this further condition:The Government intend to examine each possible purchaser and to assure themselves that there is no danger of the establishment of a monopoly even in a particular branch of the work at present carried out by S. G. Brown.Another point, which all hon. Members have heard, was the determination that the company should not, either now or in the foreseeable future, fall under foreign control.
§ Mr. Diamond
The hon. Gentleman said that the company could not be dealt with on the basis of what he called a chartered accountant's valuation because of the various conditions he obtained. There are two answers to that—first, I have not heard a single condition which would prejudice the purchase price, and, secondly, the Government's case is that this is based on the certificate of a most eminent firm of chartered accountants called Messrs. Thomson McLintock & Co.
§ Mr. McCann
Did the agreement contain any reference to the recent statement by the Civil Lord that the Admiralty would assure itself that the sale would not damage or prejudice the existing arrangements between S. G. Brown, Ltd., and the Bosch Arma Corporation, because every other firm engaged in this competitive field has an American tie-up and would be a competitor to the Bosch Arma Corporation?
§ Mr. Farey-Jones
I see the point. I referred to it in the conditions I read out and I intend to refer to the point shortly.
I assure the hon. Member for Gloucester from my long experience—perhaps 1193 my experience is as long as his—that, if I were taking over any firm under the conditions I have read out, I would think very long and seriously before I paid the price which I congratulate the Admiralty on having achieved. I warmly congratulate the Admiralty, because I think that it has carried out a marvellous negotiation.
I said that I was from the beginning interested in the continued employment of my people, as I called them, just as the hon. Member for Nelson and Colne would be interested in his. I have that guarantee, but I have still more.
§ Mr. S. Silverman rose—
§ Mr. Farey-Jones
Perhaps the hon. Member would allow me to make this point. I have still more, because who in Great Britain could better fulfil those obligations than the de Havilland Aircraft Company, a company of which everyone on both sides ought to be, and I am sure is, proud? The story of the contribution this company is making not only to the development of aviation in this country, but in the development of the type of aviation we are bound to use in the future in the exploration of outer space, is not yet half told.
§ Mr. Silverman
The hon. Member for Watford (Mr. Farey-Jones) makes his case fairly, and lucidly. He has said that all that he was really interested in was the future of the workers employed in the industry as defined in the conditions he read out. That is a very laudable and admirable concern. Perhaps he will tell me which of those conditions they did not have already and which of them would not have been safe if the company had not been sold.
§ Mr. Farey-Jones
Yes. That is quite easy to answer. The hon. Member can check it by going to the management of S. G. Brown. Sixty-five per cent. of the external sales of S. G. Brown were in the commercial market and were not directly sent either to the Admiralty or to the Navy. They remained that way, and the company was making even more sales that way. It is not the duty of any Government Department to run a commercial undertaking for the Armed Services.
The answer to the hon. Gentleman's question is that the possibility of the continuance of those conditions was 1194 dependent on whether the Admiralty would continue to support and underwrite the money for S. G. Brown, a question on which the House of Commons came to the very opposite conclusion. That is why I stand where I do and why I have reiterated the beliefs which I hold. I do not believe that the Government should be in any business in any industry, because wherever it applies there is automatically a diminution of personal responsibility and little by little the industry goes down until it becomes a drag on the nation as a whole.
§ Mr. Silverman
My hon. Friends and I can follow the hon. Gentleman if he is saying that, as the Government or the House of Commons had decided to sell the concern, there was nothing he could do about it except make the best of it, and that is what he has been doing. However, that is not a reason for supporting the Government in reaching that decision.
§ Mr. Farey-Jones
That might not be a reason for supporting the Government in the hon. Gentleman's mind.
§ Mr. Farey-Jones
In my mind it certainly is, because I am a dyed-in-the-wool Conservative. I believe that the less the Government interfere in the ordinary running of any business the better it is for mankind. I was saying how much better these conditions could have been fulfilled.
§ Mr. J. T. Price (Westhoughton) rose—
§ Mr. Farey-Jones
I implore the hon. Member for Westhoughton (Mr. J. T. Price) to listen to what I am about to say.
§ Mr. Price
If the hon. Member for Watford gives way I shall be able to make my point in a more orderly fashion than I was making it. If that is the real extent of his belief in the political life of this country, why does he not become perfectly rational and advise Her Majesty's Government to sell the Post Office next week and close down British Overseas Airways Corporation, British European Airways and the Atomic Energy Authority? That would be the logical 1195 conclusion. It is quite irrational for the hon. Member to say what he is saying as a serious contribution to a debate in the House of Commons.
§ Mr. Farey-Jones
The hon. Gentleman may be surprised to know that I would gladly put the Post Office in private hands tomorrow. I would love to put the telephone service in private hands, and see what happens—[HON. MEMBERS: "Why don't you?"] I am not yet entrusted with the task.
To return to the point that I was making, what better company could we have then than the de Havilland company to take charge of this stage of this company's affairs—
§ Mr. Farey-Jones
Let the hon. Gentleman wait a moment.
I was one of the very earliest customers of the de Havilland Aircraft Company, about thirty years ago. I have seen that company grow from its very tiny beginnings—led by Captain Geoffrey de Havilland, whose name will remain forever in the minds of people who love aviation—to what it is doing now. It has factories employing thousands of people in this country, in Canada, in New Zealand, in Australia and countless places all over the British Commonwealth. If ever a company was peerless in the acceptance and fulfilment of its obligations, it is this one. I have yet to hear of a better. That is why I would rely on the word given on behalf of that company more than I would on any law argued by chartered accountants or legal luminaries from now till Christmas.
In addition to that, the company has, in its British Arma division—let us be quite blunt about it—a company peerless in the field of astronomical, aeronautical and general engineering research.
I was very distressed to hear from certain sections of the Opposition this kind of doubt, this creation of some kind of an element of fear in the participation in British industry of American firms. Here I should like to say something to hon. Members opposite who represent divisions in the North-East. Two or three years ago, I was instrumental, in a way, in getting a very large American company—in its own sphere. 1196 the leader in the world—to take a minority holding, with British partners—and those British partners are known all over Northumberland, Durham and Yorkshire—in the creation of a factory, new of its kind, not far from Newcastle.
Today, that factory is the finest of its type in the world, and will, over the next fifteen or twenty years, be a godsend to British industry—but the American minority capital has never for one moment created even a minor rift in the lute. We go forward happily and peacefully, and in faith together, and I am quite sure that that is what will happen in the case of S. G. Brown, de Havilland and the Bosch Arma factory.
I would therefore say to any member of the Opposition: "Do not create any sense of fear that cannot be justified in the light of all the circumstances"—
§ Mr. Farey-Jones
No. If I did, I would be cutting across Parliamentary decency or something like that. If the hon. Gentleman wishes to know, I will tell him privately.
To the hon. Member for Gloucester, I must say that I appreciate that accountants have a certain value in a well-organised society, and the fact that I personally regard them as barnacles on the keel of commerce has nothing to do with it. Modern business is far more a matter of judgment. It is not a question of whether one is getting one's pound of flesh, neither a little above nor a little below, but whether one is creating an organisation with the team spirit—not a series of accidents going somewhere to happen, like the Opposition Front Bench, but an organisation able to carry out a job that the world wants it to do.
There is something far greater in the issue involved in this negotiation, and I beg the Committee to listen to these last few sentences. I have recently completed a very lengthy journey on the other side of the Atlantic, during which I have seen and examined for myself the scientific conclusions, the results of the spending of literally billions of dollars in research on all kinds of efforts—and in some of those kinds of efforts the firm of S. G. Brown will have to play 1197 a leading part on this country's behalf in the future.
Therefore, behind this negotiation, behind this sale, are matters of very deep significance. So deep are these matters that, even though the then hon. Member for Epping made certain statements in 1937, I shall make similar statements about the position in the world today. Against the sombre background of the reality of the world as it is today one can only deduce certain specific necessities. Without a new philosophy, a new approach, it will be exceedingly difficult for the free world to survive. That is not said in any party political spirit. Neither this country nor America—nor America—nor all the countries of the free world can afford the endless dissipation of their resources in separate schemes of research and development.
On an international scale, we must have complete political, scientific, strategic and economic integration—and the operative word is "integration". That must be the key word of our work for the next ten years because, at the very best, the free world has to face an economic life-and-death struggle of paramount, tragic importance. Already we are losing the battle for the entire Continent of Africa, with all that that means, and with all the responsibility it puts on every Member of the House of Commons. At its worst, the other side of the picture warns us of the awful danger that hangs over the entire human race.
The type of arrangement which the Admiralty has succeeded in producing in relation to S. G. Brown is one that I think should be followed in all the other industries, and particularly those concerned with defence, with the air, with the exploration of outer space, and with the provision of equipment for our Armed Forces. On both sides of the Committee all honest men know perfectly well that this country cannot afford the continuance of crippling taxation and we have somehow or other to go into a common pool, both financially and strategically, with our allies and with the United States.
Why cannot we build under licence in this country products which are the result of billions of dollars worth of research in the United States and the western world, and why cannot the Americans do likewise by building in 1198 the United States the masterly products of companies in this country like Decca which provides on the oceans of the world the finest safety equipment known to mankind? Those are the issues.
§ Mr. McCann
Those are not really the issues involved. We have followed the hon. Gentleman with tremendous interest in his tour of the world, and I do not think anyone on either side will disagree with the peroration which he has just delivered, but surely the issue is really this. Can a contract tie down the company—the hon. Gentleman used the word "integration"—and ensure that S. G. Brown will be kept open and not be absorbed into the great empire of Bosch Arma and de Havilland? In other words, will this so-called small firm be absorbed, and will the work-people be offered employment somewhere else where it will be impossible to take full advantage of their skills? Also, what did the hon. Gentleman do during the one year when the profits shrank from £180,000 to £6,000?
§ Mr. Farey-Jones
I have already told the Committee what I did about it during that period. I will try to answer the hon. Gentleman in this way. I cannot speak for all the lawyers in Christendom, but, to the best of my knowledge and belief, there has never yet been a contract signed in any part of the world in which some adroit lawyer could not find a flaw. In matters of this kind, it is a question of faith. My father never signed a contract in his life. He gave his word and he never broke it. That is the kind of thing, good faith, which we must create internationally.
Between ourselves and the United States, a momentous decision has to be reached. As I was saying, I want to see an organisation, a composite organisation, if one likes to call it that, developing outer space with the results of American research, with participation by Australia and Canada, by de Havilland, S. G. Brown, and many other companies. Unless we can go into the future free from suspicion and the dread of American participation in our industry, to which reference has been made from the Opposition Front Bench this afternoon, we shall never succeed. We participate far more in American industry than hon. Members generally realise.
1199 We are told that Queen Mary, the lady who was known as Bloody Mary, said that when she died the name "Calais" would be found imprinted on her heart. I am quite sure that, when the present Member for Watford dies, there will be written on his heart the name S. G. Brown. I say to all the people now working in S. G. Brown that they must not listen to the prophets of gloom. They are at the beginning of something which is as much in their hands as their patriotism was during the years of war. The people of Watford, a magnificent constituency, whether they agree or disagree with what one advocates, have a sense of fair play, and they are wonderful sportsmen. I am quite convinced that they will rise to the inspiring opportunity which is theirs today.
§ 6.4 p.m.
§ Mr. J. J. Mendelson (Penistone)
I always listen with respect to the hon. Member for Watford (Mr. Farey-Jones) when he speaks of his interest in the economic well-being of his constituents. We all know that he is sincere in what he says and we appreciate his anxiety for them. He will agree at once, I am sure, that the particular anxieties he has suffered during the last twelve months were produced by his right hon. Friends on the Government Front Bench. It was their action which started it all and, in fact, it was the initiative taken by the Government which brought on the debate last year.
When the hon. Gentleman tells us what he told his constituents just before the election, he should take the matter further. He gave us some nice general principles, but it seemed to me that what he said to his constituents amounted to no more than, "I am against sin". That is not an answer to the question which was put to him. He was asked what he said to his constituents about the position of this particular firm, and he never told the Committee what he said about that.
§ Mr. Farey-Jones
I told them quite bluntly. During the election campaign, I went into the factory and I told them that I was all in favour of the sale of S. G. Brown. Some of them gave me an exceedingly rough ride. Later, when the Prime Minister made his great speech—
§ The Temporary Chairman (Dr. Horace King)
Order. I hope that hon. Members will keep their interventions brief. I am trying to give as many hon. Members as possible an opportunity to take part in the debate.
§ Mr. Mendelson
I was rather disturbed to hear one hon. Member who is not here at the moment—I do not complain; we cannot all be here all the time—criticise the Opposition for probing into the details of the scheme the Government are putting forward. It is quite wrong to assume that the House of Commons has not a duty to probe very carefully into any such sale which the Government may undertake. We have been told many times that the electorate has made certain decisions. Several interpretations have been put upon that which are not borne out at all, but the Government's case is that they have decided, on doctrinaire grounds, that they wish to get rid of a number of things which belong to the nation. Therefore, the least that the House of Commons can do is to probe very deeply the way they are doing it.
There are certain questions which should be answered before the debate concludes, and those questions are the reason which led us to the view that it was important to debate this matter. We have not yet received any answer to the very important question about how the company has been directed during the two years preceding the offer of sale. The Civil Lord should, I think, clarify that matter for the Committee and the country and explain why there has not been an all-out active selling campaign to improve the position of the company during the two years before the offer of sale was made. Whatever decision the Government might take about dates, it was surely in the best interest of the nation, if the company was to be sold, to make quite sure that it was encouraged to obtain as many orders as possible both at home and abroad and to do the best it could to improve the position in the balance sheet against the time when the offer of sale came.
§ Mr. C. Ian Orr-Ewing
It ought to go out from the Committee that the insinuation made earlier is absolutely untrue. Some hon. Members have suggested that the salesmen were instructed not to get 1201 orders. I have it from the directors of the company that this is absolutely untrue and that their salesmen are very anxious to work to get orders. It may be that in some particular instance they might have said, "Do not promise delivery within the next few weeks or months", but they are most anxious to get orders and they have been working flat out to get them during the intervening period.
§ Mr. Mendelson
That still leaves the point that, for several months, for reasons indicated by the hon. Member for Watford, because there was a holdup and a waiting period which happened to coincide with the two years preceding the offer for sale, the company was not in the best selling position. Therefore, the charge that the company was influenced by doctrinaire issues is surely made out and, in that situation, when there was a hold-up, it could not put its best foot forward. The best thing to have done would have been to keep quiet about it and, as I say, carry on and wait for a more favourable moment to come forward with the offer of sale. That is sound commercial common sense.
The next point concerns the interests of the workers. Proper tributes have been paid on all sides to the people who worked this remarkable partnership, but we have not yet heard a full declaration of intention from the Government. We have not yet been told about what guarantees they have received from the new joint owners of the company, and we have not yet heard about safeguards for the particular skills which a great many of the work people in the firm have developed over the years. It is all very well to say that there will be continuity of employment. Anyone who knows anything about industry knows that continuity of employment in a general sense often ends in the punishment of those who develop a particular skill over the years. What we need to hear in much more precise detail is how in the negotiations with the new owners the interests of the employees have been safeguarded. I hope that the President of the Board of Trade will make that point clear to all the people concerned.
Finally, I turn to what I consider is a very important point. It has been slurred over so far. To encourage a company to use more capital is often decisive, 1202 and it affects the long-term plans of people directing and controlling the affairs of the company. We have not been told whether, concerning an enterprise which needed a great deal of additional capital to develop its industrial and scientific potential, a long-term decision has been taken by the Government which contradicted any intention to allow the company to do the best it could. This is a more important point than saying that money was made available which could be drawn on. Was it as a result of the decision on the part of the Government to sell back this firm to private enterprise that the proper encouragement was not given to the company to go ahead and use what potential capital it might have?
I have an informal understanding with another hon. Member who wants to speak and, therefore, I have confined myself to those points. They are practical points, and I hope that they will be replied to by the President of the Board of Trade.
§ 6.12 p.m.
§ Mr. Dudley Williams (Exeter)
I, too, will have to speak rather rapidly, because I have an understanding with a right hon. Member opposite on when he wishes to start his speech.
I should like first, to refer to the remarks of the hon. Member for Gloucester (Mr. Diamond). I found his suggestion that there was great danger in this transaction of control of the company eventually passing into United States' hands rather extraordinary. We have been told by a responsible Minister that it has been agreed between the de Havilland concern and the Government that there will be no transfer of the shares to foreign hands without the agreement of the Government. If it is not possible to make an agreement with a company as responsible as de Havilland, I do not see how it is ever possible to make an agreement with anyone. I do not think that there is any doubt that the agreement will be honoured.
I should now like to refer to one or two points made by the right hon. Member for West Bromwich (Mr. Dugdale). He referred to the increase in capital investment in this country by United States firms. He referred to a publication which disclosed that there were 650 companies or subsidiaries in this country owned by United States interests. I 1203 do not think that there is anything wrong in that. I am informed by responsible people in the City that the amount of capital people in this country have invested in the United States is roughly equal to that invested in the United Kingdom by citizens of the United States. As we are about one-third of the size of the United States, I should not have thought that it would be to our advantage to suggest that this movement should be discouraged.
For months the Opposition have been attacking the Government in the House and, I believe, outside, saying that if we do not have a more realistic approach to the problems of the European Common Market we shall find the Americans investing in the Common Market. Here we have an encouragement to a United States company to invest in the United Kingdom. Right hon. and hon. Members opposite cannot have it both ways. Either they want us to attract investment from the United States or they do not. They have been saying for a very long time that we are in danger of losing it to the European Common Market.
I do not think that what we have heard today has been anything more than shadow boxing. The real criticism of hon. Members opposite to this proposal to dispose of this firm stems from the fact that they are Socialists. This was said by the hon. Member for Southall (Mr. Pargiter) in the debate last year. He said that the people in this factory believed in their work as an experiment in Socialism. I do not think that they believe in Socialism any longer. My hon. Friend the Member for Watford (Mr. Farey-Jones) was returned at the last General Election with a majority which showed a swing to him that was greater than the national swing to the Conservative Party. I think that we should be grateful for the discussions which have taken place in this House for enabling the electorate to do that.
§ 6.15 p.m.
§ Mr. Harold Wilson (Huyton)
In one sense this has been a continuation of yesterday's debate and in another sense a continuation of the debate that we had a year ago. The issues are very similar to those which we were discussing yesterday, namely, the pillaging of 1204 national assets for the benefit of a relatively small group.
It may be said that this is a much smaller act of vandalism than that which we were debating yesterday, but in certain aspects it is even worse, because this is—and there can be no doubt about it—an asset built up by State management and by the willing co-operation of workers who were conscious that they were working for the State and not for private shareholders. This is a valuable asset not only in financial terms. Under public ownership it has developed a product which the hon. Member for Watford (Mr. Farey-Jones) himself last year described as a world beater.
The speech of the Civil Lord was extraordinary in many ways. First, he referred to the timing of the announcement. He said, "We timed it in the middle of the Recess to avoid unsettling the workers. We thought that it would please them". If the Government had really been considering what would please the workers best, they would have scrapped the whole programme for selling this firm.
The hon. Member went on with one of the most fantastic arguments that I have ever heard. He gave a list of reasons why the Government were doing this. He said that a Government Department should not hold a limited liability company operating on a commercial basis. I thought that the hon. Gentleman was speaking for the whole Government, but it transpires that we have a new system whereby someone gets up at the Dispatch Box and speaks only for the Admiralty, as though it were a separate sovereign State with a separate sovereign Government. I should have thought that when a Minister says, "No Government ought to do this", he was speaking for the whole Government.
Presumably, the hon. Gentleman was anticipating the announcement that the Government propose to sell Short Bros., which would be a threat to the problem of full employment in Northern Ireland. This raises questions about their intentions in relation to their holding in the British Petroleum Company, first taken by the right hon. Member for Woodford (Sir W. Churchill). I have never heard the suggestion that the Government ought to have been getting rid of their shares in the Suez Canal Company. That 1205 was done for them in another way. But this new ideology proclaimed by the Civil Lord seems to me to raise some big questions which we shall have to probe.
The other point with which the Civil Lord tried to deal referred to price. A year ago, the eminent industrialist the hon. Member for Kidderminster (Mr. Nabarro), after a very elaborate calculation, said that he thought that this firm was worth between £1,500,000 and £2 million. But we find the whole business disposed of for a very much smaller figure, and I thought that the Civil Lord was very perfunctory in justifying the figure accepted. It is bound to lend support to the suspicion mentioned by my hon. Friend the Member for Newton (Mr. Lee), when he asked whether the market had been rigged by letting the firm run down.
We were glad to have the assurance from the Civil Lord that neither the directors of the firm, nor anyone else, have never given instructions to the salesmen when in Europe to abstain from accepting new orders. But nothing has been said about the other allegations that this firm has been prevented from expanding as rapidly as it might have done. We have been told that it was starved of capital and did not have enough capital to hold the necessary stocks of very costly components to enable it to expand production. This, combined with the slump in the shipping industry last year, has apparently led to a falling-off in profits and activity.
I now turn to a serious aspect of this affair, which was raised by my hon. Friend the Member for Newton. The consortium—the buyers—are, as to 49 per cent. of the capital, American. It is not merely that this is a powerful corporation—the Bosch Arma Corporation—but in terms of the "know-how" of this specialised kind of work which the American management will bring to the transaction, and in terms of the control, which, de facto, if not de jure, they will have, it will, I think, mean at the very least the loss of valuable "know-how" so far as this country is concerned, because Bosch Arma will be sending home any ideas it gets from this firm. It means the subordination of this project to American interests.
1206 The Civil Lord worried all of us on this side when he said that the Government had no intention at present—at present—of varying the requirement that the British company must have a majority holding. That is a very frightening remark. Of course, the Government have the last word, and they could always stop it, as I think the President of the Board of Trade will agree, not merely under the terms of the agreement, but probably under the Exchange Control Act. What worries us is not their power to do it, but their willingness to insist that it should remain in British hands.
Several hon. Members, including the hon. Member for Exeter (Mr. Dudley Williams), have said that there is a great deal of British investment going on in the United States, but I wonder whether any hon. Gentleman opposite can tell us the name of one American defence industry in which a British firm has got control to anything like the extent of 49 per cent. Can any hon. Gentleman tell us of any American firm in which a British firm has a substantial interest of that kind, and particularly as high as 49 per cent.? The American Government would not for a moment contemplate a British firm coming into a vital defence industry of this kind, and there is no reason why we should be doing it.
It is a fantastic argument which the Government are putting up. We know that the Civil Lord is speaking only for the Admiralty, but the President of the Board of Trade, presumably, will be speaking for the whole Government. What underlines this is that, because of their ideological views, or ideological spite, if we like to call it that, they say that it is wrong for the British people to own this firm, but that it is all right for an American one, to a substantial extent at least, to own it. This is one more example of a fact which I first underlined in this House four years ago. The Conservative Party preaches patriotism through its lips, but when private profit is involved its patriotism melts like the snows of yesteryear.
We had it four years ago with the Trinidad oil sell-out, when the Prime Minister defended this sort of behaviour. We had it with the refusal of the Government last year to interfere with Wall Street interests buying up shares, even to the point of a controlling interest, in 1207 important British firms. The only time when the Government stood firm was when American interests tried to take over the Angostura Bitters producers. They were very firm about that, and I commend them for their action. The argument is that the Americans could have our oil, they could have our vital defence firms, but our "gin and bitters"—never.
There is another issue raised by this debate. Here we are denationalising a part—a small part, it is true, but a vital part—of our defence industries, and we are denationalising this part at a time when all the arguments of recent events should be pushing us the other way—not to denationalise defence industries, but to extend our control over them. Hon. Members, instead of riding their doctrinaire hobby horses, should be addressing themselves to the very real problem of the relations between the Government and the defence industries.
There was a time when, with the defence industries, it was simply a question of placing a contract, whether for a gun, a tank, a shell or a ship. Contract procedure was followed, and if the cost outran the estimate the Public Accounts Committee produced a blistering report and someone was called to account. Today, defence contracts are not for identifiable pieces of military hardware; they are cost-plus contracts vaguely aimed at achieving a supersonic or stratospheric objective, and almost unlimited money is voted to produce something at the end of the year or in five or ten years. Being on cost-plus, there can be very little control of expenditure and no check on the success of the research or production programme.
So we have millions, hundreds of millions of pounds, spent, vastly exceeding the original approved Estimates—and this matter has already been raised in the House—with all too little to show for it, in one cost-plus defence contract after another. Indeed, I would doubt whether some of these projects, initiated as they were in Government research establishments, have made anything like the same progress under private hands that they did under direct Government control.
In any case, I put this to hon. Members opposite who are concerned about the level and growth of public expendi- 1208 ture. It is no good complaining about candle ends, in the good old Gladstonian fashion, or proposing cuts in the social services when tens or hundreds of millions of pounds are spent on generous cost-plus defence contracts with no real check on what is produced at the end of the day. To protect the taxpayer, there is everything to be said for nationalising the defence industries, not, as in the case we are debating today, for denationalising part of them.
What did the Government put before us? I know that the Civil Lord will not understand this argument, because he speaks only for the Admiralty, but some of these arguments affect the Government as a whole, which he will not appreciate. The Government put before us a scheme to sell off, partly to American interests, partly to de Havillands, an important public asset. There is no argument about that. I have dealt with the American aspect, as did my hon. Friend, but what about de Havillands?
A year ago, referring to S. G. Brown, Ltd., the Chancellor of the Exchequer, in words which must have rumbled ominously through the Royal dockyards, said:I certainly do not think that because a firm is expanding or well managed, that justifies it remaining in public ownership."—[OFFICIAL REPORT, 16th June, 1959; Vol. 607, c. 244.]On that argument, we would be denationalising a much wider range than we are. The whole argument a year ago was on the merits of this firm being run by private enterprise. Last night, the Chancellor of the Duchy of Lancaster said, with great frankness:The plain answer is that as a party we believe that industry should look for its finance to the private investor, who takes the risk and collects the rewards or bears the losses."—[OFFICIAL REPORT, 27th June, 1960; Vol. 625, c. 1093.]This is the good old Tory philosophy put forward so clearly and frankly by the right hon. Gentleman last night.
Does that high-sounding phrase really apply to de Havillands? Do de Havillands take the risk and bear the losses of its various enterprises? Of course not. The Minister of Aviation, who has been subsidising the firm in private for years with cost-plus contracts, has just come along with proposals for open subsidies from the public purse for aircraft constructors. In other words, de Havillands will now be subsidised twice over, 1209 first, from a succession of cost-plus contracts, on which it is impossible to lose money, and, secondly, by these more open subsidies now coming from public funds via the Ministry of Aviation. If S. G. Brown makes profits after the sale, de Havillands collect. If it makes losses, any loss which de Havillands has to bear as its share will be more than made up by payments from the Minister of Aviation's "Special Aircraft Industry National Assistance Board."
Of course, behind all the debate and the argument, the real reason for this decision, as yesterday, is that this is Toryism. It is the old cloven hoof coming out again. Here is a successful piece of public enterprise, so it has to be handed over to the money-makers. Nothing that has been said today, least of all by the Civil Lord, shakes the view I expressed a year ago, when we last debated the question, that the motive here in one word is loot, as it was the motive yesterday.
The Chancellor of the Duchy last night made no bones about it in the quotation which I have just given. Frankly, I am amazed that the right hon. Gentleman had the nerve to show his face in such a debate last night. He was the first to hire Mr. Colin Hurry to fight a nationalisation project—indeed, the greatest act of public ownership of the lot—the National Health Service, which, however much they may erode it, the Government have not dared to denationalise. Perhaps it is because there is no money in it, though there is plenty of money to be made out of it; but that is made by the pharmaceutical suppliers. Hon. Members opposite owe a lot to Mr. Hurry. Some of them might not have been here but for his activities, although I should think that he himself made quite a bit out of it. I hope, however, that hon. Members opposite will recognise that he learnt his job when he was a lackey of the right hon. Gentleman the Chancellor of the Duchy of Lancaster.
It is when the Government have an, even for them, unusually bad case to develop that they send for their intelligentsia. Last night, it was the Chancellor of the Duchy of Lancaster. Tonight, it is the President of the Board of Trade. The Chancellor of the Duchy of Lancaster no doubt thought that he was answering the formidable case put 1210 up by my hon. and right hon. Friends in yesterday's debate when he created a diversion about Clause 4 of the Labour Party's constitution. The right hon. Gentleman should not be surprised that, after an election defeat, there are arguments. They are nothing to what the Conservatives had after 1945, and nothing that my hon. Friends have said in the past few months could compare with the statement of a Tory back bencher, in 1946, when he demanded that the Tory Party should change its name, because, he said, the word "Conservative" stank in the nostrils of the electorate. That statement was made by the then hon. Member for Wallasey, who is now Minister of Transport "and Urban Congestion." I have no doubt that a photographer was around even then.
If hon. Members opposite tried to agree on their party objectives, they would not get to first base unless they were really honest. If they were honest about their party's objectives, as we have seen illustrated again by today's debate as well as yesterday's, their own Clause 4 would be to ensure to the landlord, the speculator and the company promoter the full fruits of their labours on the basis of the private exploitation of the means of production, distribution and exchange. We can argue about our Clause 4, but, as between our Clause 4 and that of the party opposite, if hon. Members on the Government side had the guts to enunciate it publicly, as between them there could not be much doubt which is in the national interest.
It is that spirit of private exploitation of the means of production—in this case, a publicly-owned asset—which is underlying the sell-out which we are debating today. It is part and parcel of the philosophy which says that publicly-owned basic industries are to be stunted and made unviable while private enterprise, or private unenterprise, whichever it might be, is encouraged to milk the Exchequer, a philosophy which says that the economy can be endangered by any amount of luxury building, vast office blocks and the rest while roads, education and hospitals are once again to be cut, as we know they will be following the Chancellor's announcement last week. It is a philosophy which says that the take-over tycoon can make a million pounds on a financial manœuvre 1211 and that it does not harm the economy, but which then goes on to say that if the railwaymen were paid a decent wage the whole economy would be wrecked and something must be done about it. That is the philosophy of the party opposite.
What we are debating today is the application of that philosophy to a small but vital firm which, under private ownership, was found to be failing the nation during the war, which, under public ownership, has been built up into a real national asset and which now, to satisfy the dictates of the acquisitive society, has to be handed over to private interests. It is against this application of that philosophy that we shall divide the Committee tonight.
I beg to move, That a sum, not exceeding £9,914,900, be granted for the said service.
§ 6.35 p.m.
§ The President of the Board of Trade (Mr. Reginald Maudling)
The debate today has been largely about the affairs of S. G. Brown, Ltd. and the sale of the company to de Havilland and the Bosch Arma group. The principle was debated in the House of Commons almost exactly a year ago. Today we have been mainly concerned with the detailed application of those principles. I say "mainly concerned" because for the last ten minutes or so we have been wandering into wider, rather lusher pastures. I was not quite sure what the right hon. Member for Huyton (Mr. H. Wilson) was trying to do. He seemed to be trying to fight again both the last election and last night's debate. I warn him that this raking over of the embers of old defeats is an unprofitable way of going about things. Certainly the right hon. Gentleman did not gain much from it.
What we are discussing is the action in selling S. G. Brown. When we discussed it a year ago I remember saying that there were three parties mainly concerned. The first is the company and its employees, of whom my hon. Friend the Member for Watford (Mr. Farey-Jones), who is so closely connected with these things, has spoken so eloquently today. The second party is the Admiralty, and the third is the taxpayer.
1212 I said on the last occasion that in every case benefit will come to the three parties from the sale of the company. That is happening on this occasion. The defence requirements of the Admiralty will be met just as well with the firm in private hands as they were with the firm in Admiralty ownership. The right hon. Gentleman said that all firms working for Defence Departments should be nationalised. Is this, at last, a definite statement of what Clause 4 is all about? In this case it is clear that the Admiralty defence requirements will not suffer in the slightest from the sale of the company. Where the Admiralty will gain is that it will be freed from the substantial sums which it has had to find, and would have to find, out of its voted sums from the House of Commons for the financing of the company. This is a burden which it is right to take off the shoulders of Admiralty finance.
From the point of view of the taxpayer, he has got a good price for the asset, a price that represents a substantial capital profit over the amount of taxpayer's money put into the business. In addition, from the taxpayer's viewpoint it means that no longer will he be called upon to provide further capital requirements for the expansion of the company.
One or two people have asked whether the price is a fair one. I am content to rest on the evidence of the accountants, who are members of an eminent firm of accountants and who have said that the price offered places a fair and reasonable value on the undertaking as a going concern. As the hon. Member for Gloucester (Mr. Diamond) knows better than he indicated in his speech, the accountants would not say that solely on the basis of one year's experience. It is on the basis of their full knowledge of the affairs of the company, its assets, its profit record and the forecast of profits made by the directors for the purposes of sale. The Government are quite content to rest on the confirming opinion of this firm of accountants that the price for the company was a fair one. Therefore, the taxpayer has received a fair price for his asset and a price which represents a substantial capital profit over the period of years in which it has been in Government ownership.
1213 To turn to the third party—the company itself and its employees—there can be no doubt that to an unbiased observer, if one can be found, the sale is very much in the interests of everyone who works for S. G. Brown. The company's profit record last year showed quite clearly that trading conditions are getting more difficult. It is not a question of inhibiting the salesmen and telling them not to sell the product. Of course it is not. It is not a question of starving the company of capital, because, with due respect to the hon. Member for Gloucester, a company of this size which has increased its bank overdraft from £180,000 to £430,000 in the course of one year is surely not starved of capital. An increase in bank accommodation of £1 million in one year for a company of this size cannot be regarded as evidence of starvation of capital.
The fact is that the market for the company's products has been becoming more competitive, and particularly the market for marine equipment with the falling off in shipbuilding throughout the world. There is more competition in other ranges that the company produces and there are increasing costs of production which the company has not been able to absorb. All these things led in the last accounting year for which we have figures to a substantial fall in profits, though, as my hon. Friend the Civil Lord said, it is expected that profits will show a substantial recovery to £90,000 or so in the next year.
One or two hon. Members have talked about guaranteeing employment. We must be realistic about this. No one—Government or private employer—can guarantee permanent employment for the people now working at S. G. Brown. The only thing that can provide that employment is the company continuing to produce competitive equipment and selling it at the right prices in a highly competitive market. The only possible guarantee of employment to the people in this firm is what the firm produces. It is the strength of the firm as a commercial unit that matters to them, and it is the only thing that matters.
In three respects the company's strength will be greatly enhanced by the sale to de Havilland and Bosch Arma. In the first place, the company will have access to risk capital from a very large 1214 source of capital, from this large group which is concerned. We on this side of the Committee still hold the view that the provision of risk capital for commercial ventures is a proper function of private enterprise and not of public enterprise.
§ Mr. G. A. Pargiter (Southall)
Does the right hon. Gentleman think that the capital of a firm, resting as it does on Government security, is risk capital?
§ Mr. Maudling
I say that money provided for the expansion of S. G. Brown is risk capital. It could not be anything else. It is equity capital and therefore should come from private sources.
§ Mr. Maudling
The Colvilles loan is not an equity loan, and that is the point.
The second thing that will help the company will be the tie-up with a large sales organisation. The linking with de Havilland and other associates will provide a much bigger selling organisation than this company on its own could possibly have. As the company's products become more and more commercial products, so the problems of selling throughout the world will become more serious. This link-up will certainly provide a much better sales outlet for S. G. Brown's products.
The link-up with Bosch Arma will also give the company contact with a firm which is making a complementary set of products in the same range as S. G. Brown, and this is very important. With the development of modern industry and increasing specialisation in business, no firm can produce the whole range of products. A link-up of this kind where one firm is producing one part of the range and another firm is producing another part is of great value to both companies.
There is a good case for further working arrangements between British and American firms engaged in the production of scientific and precision equipment. On a visit to California I saw opportunities for selling British components to American manufacturers just as there are opportunities for the selling of American components to British manufacturers. These link-ups would be bound to bring greater strength to the firms concerned and the two combined 1215 would have a greater commercial standing than they could have had individually.
§ Mr. Loughlin
The argument now being advanced of the linking up of a small firm with a large sales organisation and of co-operation with each other envisages the desirability of all small firms becoming part of a large organisation. Is the right hon. Gentleman now arguing that the Government want to see vertical monopolies in all industries?
§ Mr. Maudling
That point was made earlier, but it is not a good one. What I am saying is not that small firms should be absorbed but that working arrangements made between firms, small or large, in this business are good for all the firms concerned. In this case it takes the form of absorption. It need not take that form, but such working arrangements are a good thing.
Another important point is the access provided for S. G. Brown to the very large research and development facilities of Bosch Arma. S. G. Brown has done a fine job of research and development and is still doing it, but in this respect its strength in personnel is 20 compared with Bosch Arma's 1,000 to 1,200. It cannot but be to the advantage of Brown's to have this link-up with this large American business which has such enormous research and development resources.
There can be no doubt that the firm of S. G. Brown will prosper more under the ownership of de Havilland and Bosch Arma than it could possibly do in the continuing ownership of the Admiralty. The reason for disposing of it is that the firm will do better, and the people employed in it will do better, and from the point of view of the Admiralty and the taxpayer this deal will provide a satisfactory arrangement.
Hon. Members raised several other points. The question of the possibility of monopoly has been raised, and I think reference was made to this in the debate a year ago. In fact, this sale, so far from encouraging it, will prevent monopoly by giving added strength to the competitors of the Sperry Company, which is the firm in the strongest position in this field. There was a good deal of discussion about American control and investment. I agree very strongly with 1216 my hon. Friend the Member for Dover (Mr. Arbuthnot) who spoke about the cross-fertilisation of capital. [Interruption.] If the hon. Member cannot understand a point like that, he should not take part in these discussions.
Nothing but good can come of the investment of British capital and know-how in America and the investment of American capital and know-how in Britain. It is a fact, as my hon. Friend the Member for Exeter (Mr. Dudley Williams) said, that, roughly speaking, the balance is about equal. As far as we can judge, the amount of American capital invested in this country is about the same as the amount of British capital invested in the United States. Surely, this is an excellent thing for both sides and the more it goes on the better we shall be pleased.
I am afraid that more speeches of the type delivered by the right hon. Member for Huyton will do a great deal to discourage investment in this country. We ought to know where we stand on this with the party opposite. Does it or does it not want to see American firms coming here and setting up in business? Did they want American capital invested, for example, in Scotland?
§ Mr. H. Wilson
Yes, and we were more successful than the right hon. Gentleman in getting it here, especially in Scotland. The right hon. Gentleman will find the full answer to his question if he will do me the courtesy of reading a speech which I made on 30th June last year when I answered these points very fully. I still maintain, and I am sure that most hon. Members on both sides of the House, whatever our views about attracting American investment and "know-how" into this country, will maintain that we deprecate the idea of a firm in this country passing into American control even to the extent of a 49 per cent. holding.
§ Mr. Maudling
The right hon. Gentleman just dug himself out of that in time. If he says that an American firm should not have a 49 per cent. holding in a company in this country, how can he say that he is welcoming American investment? I agree that a good case might be made out if there were a question of American control of a vital defence industry, but that is not the case here. 1217 There is clear provision that the American capital holding will be less than 50 per cent., and there is an undertaking from de Havilland that it will not alter the articles of association. I agree that it is not legally binding, but it is an undertaking from the company which the Government gladly accept.
We believe that we should accept undertakings of this kind. We believe it is impossible for government in this country to be carried on unless one can have dealings of this kind with important British industries. Therefore, the undertaking by de Havilland not to alter the articles of association without Government agreement is one which we fully accept, and, though it is not legally binding, we believe that in practice it will be entirely binding.
§ Mr. Diamond
If the Civil Lord had said to begin with that it was not legally binding we should have been saved all this argument.
§ Mr. Maudling
As far as I can make out, the time has been taken up by the hon. Gentleman arguing with himself on this point. Anyway, the position about this is perfectly clear at the present moment.
As I said, the complaints that have been made about the transaction on the practical side are, first of all, the possibility of creating a monopoly, which I say will not take place, and, secondly, the possibility of American control, which, again, will not take place because the undertaking, which is now accepted by the hon. Member, will prevent that from happening.
§ Therefore, I find it difficult to see what shred of case the Opposition have left against the action of the Government in selling the company. They have not been able to provide any argument against the terms on which the company has been sold. They have produced some vague stories, which have been completely demolished, about the deliberate holding back of the company by the Government. Those stories did not need much demolition, because the Government would not solemnly set about deliberately depressing the value of the company in order to sell it for less money than could otherwise be got. That sort of argument might go at a street corner during a by-election but it is not worthy of the Opposition Front Bench in the House of Commons.
§ The fact is that the Labour Party has decided to make this another occasion for one of its ritual war dances in which it indulges every now and then. The only difference between this debate and a war dance is that a war dance stimulates enthusiasm for attacking the enemy whereas this type of debate reduces the enthusiasm for attacking one another.
§ Certainly in terms of a party battle, we have enjoyed the remarks of the right hon. Gentleman. We note that, like his hon. Friends, he has produced no arguments on the substance of the case, and we are therefore confident that the Opposition's arguments will be rejected by the Committee.
§ Question put, That a sum, not exceeding £9,914,900, be granted for the said Service:—
§ The Committee divided: Ayes 225, Noes 322.1223
§ It being after Seven o'clock, The CHAIRMAN left the Chair, further Proceeding standing postponed until after the consideration of Private Business set down by direction of The CHAIRMAN OF WAYS AND MEANS under Standing Order No. 7 (Time for Taking Private Business).
§ Mr. DEPUTY-SPEAKER resumed the Chair.