HC Deb 28 February 1968 vol 759 cc1408-20

3.31 p.m.

The Minister of Technology (Mr. Anthony Wedgwood Benn)

Today the report of the Committee of Inquiry under the chairmanship of Sir Roy Wilson into the pricing of certain contracts made with Bristol Siddeley Engines, Ltd., is being published. The House will want to study the Report very carefully and, no doubt, to debate it. The Government accept the general conclusions reached. I will quote those which deal with the more important issues.

First: on the excessive prices for engine overhauls for the years 1959–63, the Report of the Inquiry states: During the period under review Bristol Siddeley Engines budgeted for, and achieved, exorbitant profits on their overhaul contracts with the Department. The approximate extent of the profitability of these contracts was, at the time, known to the company at all levels of management. We do not accept that the overcharging has been justified by any of the arguments put forward by the company". The conclusions of the Report go on to state: In relation to the overhaul contracts the conduct of the company's estimating and price-negotiating representatives amounted to intentional misrepresentation, by which the Department's representatives were deceived". Second: a factor which contributed to the excessive profits was double charging by the company for certain work and the Inquiry investigated this aspect in great detail. On this the Report has said: It was not just a simple matter of Bristol Siddeley Engines, Ltd. sending in duplicate bills for the same items: what happened was that they sent in individual bills for the repair of spare parts and that some of the amounts charged in those bills were for work which had already been taken into account in fixing the composite price which had been agreed for the overhaul of an engine as a whole. It concluded: The fact that in relation to a number of sub-assemblies there was double charging at Coventry as between the overhaul contracts and the repair of spares contracts was known to Bristol Siddeley's estimating staff from about the dates when in each case it first occurred, and to certain of their superiors at later dates. Third: the Report examines in detail the part played by Ministry staff who were deceived by the company and considers whether the staff concerned could have prevented this deception. It has concluded: The main reason why the Department failed to prevent excessive profits from being made on the overhaul contracts was that the estimates of man hours made and accepted by the Directorate of Technical Costs were too high; and in this respect the Directorate of Technical Costs fell seriously below a reasonable standard of competence. I should inform the House that this lapse was the subject of a full Depart- mental enquiry in 1966 carried out in accordance with standard Civil Service procedures, and appropriate action was taken at that time with the officers concerned.

Fourth: on organisational matters the Inquiry recognised that these events took place several years ago at about the same time as those of the Ferranti case and that, in the intervening years, improvements have been made in the organisation and staffing of those areas of the Department which were involved. The conclusion of the Report on this aspect states: There was in general a lack of adequate system and co-ordination as between the various Directorates of the Department which were concerned in one way or another with the overhaul contracts. We note that the Department have already introduced some measures to deal with this problem, and that they are keeping it under constant review". Fifth: the Inquiry also dealt with repair of spares contracts for 1959 to 1964. It is fair to say that in the body of its Report the Inquiry states that the knowledge of these profits within the company was not so precise as in the case of the overhaul contracts, nor was the company's conduct in securing these profits so deliberate. Its main conclusion was: The profits on the repair of spares contracts were in all the circumstances excessive. They should be reviewed jointly by the Department and the Company. Sixth: the House will recall that in February, 1967, after long negotiations, Bristol Siddeley Engines, Ltd. agreed to refund a sum of £3.96 million in respect of excessive profits made on the engine overhaul contracts. The Report says: In considering whether this settlement was a good one or a bad one it is essential to bear in mind that negotiations would in all probability have taken a very different shape if the Department had been aware of all the facts which we have discovered in the course of our inquiry. It further says: In all the circumstances we do not think that the amount for which the Department agreed to settle can reasonably be criticised. Seventh: in addition the Report deals with a number of other subjects. The question of Press statements over the Easter weekend of 1967 was examined and has been reported in sufficient detail to enable the Inquiry to be satisfied that no impropriety was involved.

Eighth: an important conclusion of the Inquiry reads as follows: Greater emphasis should in future be placed on the duty of contractors to quote fair and reasonable prices. I have already taken action to draw this to their attention.

Ninth: the Inquiry also came to the conclusion that: The Department will be at a serious disadvantage in negotiating fixed prices so long as 'equality of information ' is withheld. On this point I would refer to the statement made on Monday by my right hon. Friend the Chief Secretary to the Treasury, on the arrangements to secure equality of information and post-costing.

The House will be aware that in October, 1966, long after the occurrence of the events with which we are concerned, the business of Bristol Siddeley Engines, Ltd. was acquired by Rolls Royce Limited who have always enjoyed an excellent world-wide reputation. The Report indicates in clear terms that Rolls Royce was in no way implicated in these events, but it is clear that further consideration must be given to the situation; involving as it does Rolls Royce, as the new owner of B.S.E.L., and the Government; and to all the financial issues raised by the Report, including the engine overhaul contracts and the repair of spares contracts, in relation to the general high level of profit achieved by Bristol Siddeley Engines, Ltd. on Government contracts as a whole for 1959–63.

The Government not only accept the conclusions of the Wilson Inquiry, they also accept the seven recommendations of the Second Special Report of the Public Accounts Committee, with only one reservation. This relates to the basis for settling the appropriate size of the refund if any similar case should arise. Since the P.A.C. report was made, as my right hon. Friend the Chief Secretary to the Treasury announced on Monday, it has been agreed with industry that a Review Board should be set up to deal with this question.

The House will wish to consider carefully the grave implications of the conclusions reached by the Wilson Committee. We for our part shall look sympathetically at any request for an early debate. At this stage therefore, I do not want to comment beyond saying that the Government must be able to rely upon the word of contractors with whom they deal. However conscientious civil servants or Ministers may be, and however vigilant the Public Accounts Committee, there can be no guarantee that the taxpayers' money will be safeguarded unless contractors themselves accept this as part of their duty to the community. We are dealing with public money. The thousands of contracts, large and small, signed by the Government each year must be negotiated on the basis of confidence on both sides.

Finally, I should like to express my appreciation of the great care and expert attention which Sir Roy Wilson and his colleagues, Sir Leslie Robinson and Mr. C. J. M. Bennett, have devoted to this task.

Mr. Corfield

Since the Minister's statement and his quotations from the Report contain very grave allegations, which are bound to reflect on individuals as well as upon the firm, I would very strongly submit that the right course for the House is to study the Report and to take advantage of his suggestion about debating it later. I feel very strongly that until we have seen the Report, as he has and no one else has, it would be unfair to embark on a debate.

Mr. Benn

The matter of a debate is, of course, for the Leader of the House and the usual channels, but I thought it right to say that the Government would expect that the House would wish a debate and that we would want to have it as soon as possible.

Mr. Ellis

Does my right hon. Friend accept that, as a result of his statement, a very grave situation now exists, and that this House has been seriously misled in that the settlement which was reached was on the basis that, whatever else could have been said about inefficiency, the firm's actions had been inadvertent? This is now exposed, and I would ask whether my right hon. Friend has considered making the papers available to the Director of Public Prosecutions, because this standard cannot be tolerated and we must take some action?

Mr. Benn

As far as the—

Mr. Kenneth Lewis

On a point of order. The Minister has made a very grave statement—

Mr. Wilkins

He did not make it: he quoted it.

Mr. Lewis

He has the advantage of the House, since we have not seen the Report. I have just been to the Vote Office to try to get a copy of the Report. Not only is it not available, but I am told there is no indication as to when it will be available, [HON. MEMBERS: "Oh."] Therefore I should like to ask, through you, Mr. Speaker, whether it is possible to put questions for answer on this without the Report being available?

Mr. Speaker

It has been possible for a long time for hon. Members to put questions, even if they were not in possession of information.

Sir Ian Orr-Ewing rose—

Mr. Benn

May I answer the question of my hon. Friend the Member for Bristol, North-West (Mr. Ellis), Mr. Speaker? In fact, the Report is to be available this afternoon in the Vote Office, but it was not made available to anyone—to the Press or anyone else—in advance of my statement, for reasons which I think will be obvious to the House. To answer my hon. Friend—the Attorney-General, after consultation with the Director of Public Prosecutions, has decided that the evidence which has been disclosed does not justify proceedings.

Sir Ian Orr-Ewing

Would the right hon. Gentleman not agree that successive Governments have been anxious to strengthen the Technical Costings Department of his Ministry and that this is wholly in the interests of the tax payers? I hope that it will continue. He has frequently mentioned his desire to create a partnership between his Ministry and the aircraft industry. Now that the Ferranti case is out of the way—I hope that in due course this case will also be debated—will he try to build bridges of understanding and trust with industry, because, in the interests of our country, we wish to see trust on both sides? Otherwise, we shall not get the relationship between industry and Government which is essential to the prosperity of our country.

Mr. Benn

I know that the hon. Gentleman is concerned with this matter, but he will be aware of the dates on which these events occurred and also that the basis of trust must be that Governments can trust the word of contractors with whom they deal. Nothing that I have said today in any way invalidates the desire of the Government to establish sound relations with the firms with which we deal. The very long negotiations which my right hon. Friend the Chief Secretary has had with industry about equality of information and post-costing indicate the great anxiety which we have had to see that these matters were handled as far as possible by agreement. But these are separate issues from the matters in the Wilson Committee's Report, to which I have referred.

Mr. Sheldon

is my right hon. Friend aware that the scandalous state of affairs which has existed between the Department and the aviation industry must now finally be settled once and for all, and that, despite the statement of the Chief Secretary about post-costing and the way in which we will ensure that we get value for money, no certainty will be possible until we get the Department's men into the factories concerned and can learn from the experience both of the firms and of his Department?

Mr. Benn

I agree with my hon. Friend's intention in putting that question. In fact, the Wilson Committee has looked at the recommendations of the Lang Committee, which reported following the Ferranti case, and is satisfied that all those which were practicable have already been implemented. At the same time, there has been a strengthening of the appropriate staff in the Department and there is now better co-ordination. The Public Accounts Committee recommendations are, with the one reservation which I mentioned, being implemented. I must tell the House, however, that even with all these things and equality of information it is not possible to guarantee that this sort of thing will not recur unless the figures of man-hours worked by the company are those actually worked and not, as in this case, figures greatly in excess of those actually worked on the job.

Sir C. Osborne

In view of the right hon. Gentleman's very serious statement and the reflection upon the directors of the company concerned—although he said that it would not cause the Attorney-General to pass the papers to the Director of Public Prosecutions—has this statement been made available to the directors of the company? If so, what comment have they to make on it, and could it be made available to the House?

Mr. Benn

I should correct the hon. Gentleman. If he looks carefully, he will see that the statement which I made, on all material points, was direct quotation from the Wilson Committee's Report. I made a general comment at the end, but my statement was built around the final conclusions of the Report. My statement was not, of course, made available outside the House, but an opportunity has been created at about this time to inform the company about the statement. It will receive the Report at the same time.

Mr. Murray

Could this question of the Director of Public Prosecutions being put in the picture be considered again, because these are grave allegations and one feels that those concerned will get away with them nevertheless? Would my right hon. Friend not agree that the only answer to the scandal of the aircraft industry over the past decade is public ownership?

Mr. Benn

The question of prosecution is not, of course, a matter for me, and I have said that the Attorney-General has already consulted the Director of Public Prosecutions. The inquiries are not complete on some of these matters, as the House knows, and I think that I should say no more about that. I do not believe that the issue of public ownership should be involved in the discussion which we are having on this Report. I should say one thing which I should have mentioned before in answer to the question of the hon. Member for Louth (Sir C. Osborne), that although the company was given no advance information, one person has been given the Report already—Sir Reginald Verdon Smith—for a reason which, I think, is known to the House.

Mr. Lubbock

Is the right hon. Gentleman aware that, from the quotations he gave, very grave allegations indeed have been made against certain of the Bristol Siddeley Engines staff? If the advice of the Attorney-General is that this matter should not be referred to the Director of Public Prosecutions, would the right hon. Gentleman at least consider whether a civil action for damages lies against those responsible? Second, in relation to the Public Accounts Committee, in view of the fact that, in this matter, it has obviously played the role of a watchdog which cannot bark until after the burglar has been arrested, would he consider recommending to the Cabinet that its role should be widened so that these matters can be considered earlier?

Mr. Benn

To take the last point first, it would be inappropriate for me to recommend to the Public Accounts Committee what action it wishes to take in the light of the Wilson Committee's Report. Therefore, I should say nothing about it. On the hon. Member's point about the Director of Public Prosecutions, I am afraid that he cannot have heard me aright. The case has been referred—

Mr. Lubbock

I mentioned a civil action.

Mr. Benn

Yes, but the Director of Public Prosecutions would not be involved in the civil action. He has been consulted by the Attorney-General.

As far as the possible civil action is concerned, there is a number of considerations here which require special attention, one of which, of course, is the very nature of the inquiry itself. As in the Lang case, I believe that the same practice was followed and there was an agreement as to the way by which this inquiry should be conducted in regard to those who might give evidence. When the hon. Gentleman reads the Report he will see that no names are mentioned in it, although the positions occupied by certain people are referred to by the positions they occupied. The evidence will not be published and all these considerations, therefore, lead to rather more complexities than might appear at first sight.

Mr. Heffer

Might I again appeal to my right hon. Friend to reconsider the question of some legal action being taken? We have been told this afternoon that Ministry officials were deliberately deceived. Is my right hon. Friend aware that if the people of this country believe that there is a double standard, one for the local thief around the corner and one for somebody involved in large private enterprise, our whole legal system will be regarded by the people with cynicism?

Mr. Benn

My hon. Friend really should address remarks of that kind to the Attorney-General. I do not think that it would be appropriate for me to answer him, except to say that the statement which I made and the answer which I gave to the question about a prosecution indicate that these considerations have been very carefully looked into.

Mr. Crowder

Is there any opportunity for these men to put forward a defence to these allegations; that is, if there is to be no prosecution despite the allegations?

Mr. Benn

The position is that this is a published Report, published by command of this House—and, on a published Report, it is open to people to make such statements as they think right. What action the Public Accounts Committee will take following the Report, which reaches conclusions which are different from the conclusions it reached—particularly on the extent of knowledge of upper management as to what was happening—may provide another opportunity.

Mr. Dalyell

How and when did it first come to light that the number of man-hours worked was significantly less than the company claimed?

Mr. Benn

When my hon. Friend comes to read the Report he will find that in one of the passages—I am not sure that 1 would be able to identify it immediately—the number of man-hours put in by the company as having actually been worked, and accepted as having been worked, was not at all in relationship to the hours that had been worked.

Sir A. V. Harvey

The right hon. Gentleman rightly absolved Rolls Royce from any connection with this matter. However, as this great concern is involved in large sums abroad on export orders on behalf of this country, can he say if Rolls Royce were indemnified against any future claims when it acquired the Bristol Siddeley Company?

Mr. Benn

The hon. Gentleman has raised a matter which Rolls Royce will, no doubt, wish to consider. As I understand it, Rolls Royce was aware that some claim lay against Bristol Siddeley at the time of acquisition; but it was no more aware at that time of the nature of the situation revealed by the Wilson Committee, nor was it aware of information of a kind that might have enabled it to reach a decision on this. However, this is a matter for Rolls Royce and not for me.

Mr. Whitaker

Since the sum offered to be repaid by the company was found by the Wilson Committee to be justified in the light of the information which the Ministry had previously, but before it was aware of the deliberate misrepresentation, how much money does this company now owe the Government?

Mr. Benn

My hon. Friend will, I think, have noted from what I said about the future that it is clear that further consideration must be given to the situation involving Rolls Royce, as the new owners of Bristol Siddeley, and the Government, and to all the financial issues raised by the Report. I suggest that it would be best to leave it like that, remembering that there are further inquiries now in progress on the subject of the repair of spares.

Mr. Hastings

Whatever the facts in this matter—[Interruption.]—will the right hon. Gentleman, as the sponsoring Minister for this industry, do his best to ensure that his hon. Friends do not use this as yet one more stick with which to belabour the aircraft industry as a whole, particularly in view of the foreign earnings for which this industry is at present responsible?

Mr. Benn

In the light of the findings of the tribunal—[HON. MEMBERS: "Answer."]—the hon. Gentleman used the phrase "whatever the facts in this matter"; there have been these allegations—I have reported to the House the findings of the tribunal in the matter. The other considerations which the hon. Gentleman has in mind do not arise on the Report itself, although I made a special point in my statement of indicating that Rolls Royce was in no way implicated and that its worldwide reputation was well understood and accepted.

Mr. Mendelson

Following my right Friend's reply to the question asked by my hon. Friend the Member for Hampstead (Mr. Whitaker), does he recall that when the Minister of State made a statement to the House about the original settlement, he assured hon. Members that a fair agreement had been reached? In the light of the new information, will my right hon. Friend give a categorical assurance that the Government will make a further claim on the firm or on the new parent of the firm so as to fully make up the losses which the country has incurred? With regard to the problem of a prosecution, will he bear in mind that if an old-age pensioner fails to put down as much as £2 additional earnings beyond the disregards, he is threatened with a criminal prosecution? Is not this the same measure of pressure that should be applied to this firm?

Mr. Benn

To answer the latter part of my hon. Friend's question, I have told the House that I think it right that such questions should be put to, and answered by, the Attorney-General. To answer the first point—about the statement made by the Minister of State when the original announcement was made—that statement was, of course, made by him in the light of the information which was available to us at that time. It did not differ in substance from the Public Accounts Committee's Report later. As to the question of further refunds, this is dealt with in the statement which I gave to the House and to which I referred just now in relation to further consideration being given to all the financial implications.

Mr. Brooks

Would my right hon. Friend consider an important and, perhaps, unprecedented aspect of this case; the fact that the Public Accounts Committee has already submitted a report to Parliament which has been debated and which involved drawing evidence from a number of those people against whom certain charges now appear to have been made by the Wilson Committee?

May I ask him whether, when the advice of the Attorney-General was sought, as I understand it was, the possibility that the evidence which was submitted to Parliament via the Public Accounts Committee by members of the Board was considered, and, if so, was it regarded as accurate and reliable and not misleading to the House?

Mr. Benn

My hon. Friend has now raised a different point. The question of a prosecution in the courts is as I have described it. The question of whether or not, in the light of the tribunal's findings, the Public Accounts Committee or the House were to conclude that further action was required by them because of any differences that might have been revealed on the evidence submitted would not be for me but for the House. The House may wish to take the advice of its own authorities in the matter.

Mr. Hogg

I wonder if the right hon. Gentleman could confirm in principle—I do not want to say anything about the facts until I have read the document—that to give deliberately false evidence to a Select Committee of this House is a contempt of this House?

Mr. Benn

The right hon. and learned Gentleman is much more skilled in these matters than I am, but I take it that if the Public Accounts Committee and the House were satisfied, in the light of what has now been revealed, that such a thing had happened, then it would be open to the House to deal with it in its own way. This would be for the House to deal with and not for the Government; and that is why I made no reference to it.

Mr. Rankin

Would my right hon. Friend agree that, despite this very serious Report, the confidence of Parliament in the British aircraft industry must not be shaken in any way whatever, particularly in view of the statement which he made yesterday showing that public funds are to be increasingly invested in this industry?

Mr. Benn

My hon. Friend is now on a point which has been raised before. I tried to clarify it, first of all by saying what I did about Rolls Royce and, secondly, by making it clear that the thousands of contracts which are signed by my Department every year must be negotiated on the basis of confidence between the two sides.

Several Hon. Members rose—

Mr. Speaker

Order. We must move on.