HC Deb 17 March 1965 vol 708 cc1258-61
19. Mr. Burden

asked the Minister of Aviation what action he will take to ensure that in future there is no possibility of overcharging by firms contracting with his department for the supply or development of ballistic missiles.

20. Mr. Fisher

asked the Minister of Aviation what steps he proposes to take within his department to ensure that there can be no unreasonable profit in future in contracts for the supply of ballistic missiles.

51. Mr. William Hamilton

asked the Minister of Aviation if he will make a statement on the progress he has achieved in ensuring that unduly high profits are not made in future contracts for the development and supply of missiles.

Mr. Roy Jenkins

The only sure way of preventing the possibility of excessive profits on production contracts would be to price them all on actual costs. This would reduce the incentive to efficient production and might well lead to an overall increase in the prices paid. I am sure that it is right to continue to seek fixed prices at an early stage, provided my Department has adequate costing information. The Government accept the recommendation in Sir John Lang's second Report that the Department should have equality of information with its contractors up to the time prices are fixed.

Sir John Lang's Report has made recommendations for improving organisation and procedure in order to ensure better assessment of prices. As I informed the House on 9th February, a number of these recommendations are in line with views already formed in my Department, and action on them is in hand. The others are being studied.

So far as development contracts are concerned, it is normally impracticable to price them other than on actual costs. There is accordingly little danger of overcharging.

Mr. Burden

Would not the right hon. Gentleman agree that Sir John Lang's Report and the statement that he has just made make nonsense of the criticisms which were levelled at my right hon. Friend the Member for Preston, North (Mr. J. Amery) when he was Minister of Aviation, regarding the unfortunate Ferranti affair—and we are all agreed about that—which arose largely because it is not possible to assess the cost of new projects in which there is no previous standard of costing, and which take in an entirely new range of scientific knowledge?

Mr. Jenkins

I should not like to say that any answer of mine could make nonsense of all the criticisms levelled at the right hon. Member for Preston, North (Mr. J. Amery), but I hope—though no one can feel certain in this respect—that we might avoid this unfortunate situation in the future.

Mr. Hamilton

Can my right hon. Friend spell out in some detail what improvements have been made in this field within his Department since the Ferranti affair? Can he spell out precisely what stage negotiations have reached with Ferranti in connection with the immense profiteering in which the firm engaged?

Mr. Jenkins

On the first part of the question, we are endeavouring to strengthen the whole of the staff concerned with price fixing. A director of administration is being appointed, one of whose tasks will be to improve the administration of the contracts division as a whole, and in particular to ensure that there is the fullest collaboration between contracts, technical costing, and accountant staff.

On the second part of the question, I hope that it may be possible to bring this negotiation to a conclusion in the fairly near future. It is not an easy negotiation.

Mr. Fisher

Would not the right hon. Gentleman agree that as the Lang Committee has been quite unable to recommend any way of ensuring that in future profits are not excessive, this really exonerates both his Department and my right hon. Friend the Member for Preston, North (Mr. J. Amery) from any blame in the past, and makes a nonsense of all the Labour Party criticisms of the previous Administration at the time of the General Election?

Mr. Jenkins

I have already dealt with that question. The Lang Committee has not been able to guarantee a way in which excessive profits are not made, but I hope very much that under the new Administration we will have no repetition of the Ferranti position.

Sir A. V. Harvey

Where it is not possible to arrive at a fixed price in the contract in the early stages, will the right hon. Gentleman consider putting independent cost accountants acting on behalf of his Ministry into the firm?

Mr. Jenkins

Yes, Sir. I will consider that.

Mr. Emrys Hughes

Did my right hon. Friend read the article in The Times on Monday in which it was stated that one of these missiles used by the Navy costs as much as £8,250? This is the cost of three to four houses. Does not my right hon. Friend think that he can do something to reduce this cost?

Mr. Jenkins

I think that my hon. Friend will appreciate that that is a different and wider question.

Mr. Marten

In view of the point made by my hon. Friend the Member for Surbiton (Mr. Fisher), may I ask the right hon. Gentleman whether he will invite his right hon. Friend the Paymaster-General to read again his speeches during the debate on the Ferranti affair, and perhaps make some appropriate apology for some of the things that he said about my right hon. Friend?

Mr. Speaker

I do not understand this. It cannot be the Minister's responsibility to perform these antics.