INDUSTRIAL REORGANISATION CORPORATION

HC Deb 08 July 1968 vol 768 cc61-121

4.25 p.m.

Sir Keith Joseph (Leeds, North-East)

I beg to move, That this House, while upholding the independence of the Industrial Reorganisation Corporation, deplores its action in intervening with public money on behalf of one bidder in a merger operation, and regards such action as a dangerous precedent for the future. In moving the Motion, we intend no criticism of either the management of the Industrial Reorganisation Corporation or of any of the managements of the firms involved in the episode to which we shall refer. We direct our criticism at the Government for the width of the legislation which they put through Parliament and the extent of the powers which they gave to the Industrial Reorganisation Corporation. We opposed that legislation because we feared that the powers given to the Corporation would enable it to compel mergers and to impose the dead hand and distortions of public control on some sections of industry.

We on this side admit that, during the first year or more after the Corporation was in action, we were reassured to some extent by its conduct. There seems little doubt that it carried out a useful task of easing mergers within the market mechanism. But what reassured us on this side evidently disenchanted the Government, since there were rumours in the Press of disillusion on the part of Ministers and of further legislation. The Industrial Expansion Act, as it now is, was brought to Parliament to give the Government powers to carry out what they had hoped the I.R.C. would achieve, but which the I.R.C. had been unwilling to set its hand to.

The achievements in the first phase of the I.R.C.'s life are listed in its annual Report, covering several pages. We cannot judge the degree of the contribution by the I.R.C. to each of the mergers mentioned in that Report, but, on the whole, at the time of the first Report, our fears were not realised.

We think that it is a clear gain to the nation that the Socialists now in Government have begun to realise that mergers, like most things in life, may be good, bad or indifferent, and there is nothing to be hysterical about in mergers as such. Since the Socialists came to power, there has been a veritable torrent of take-over bids. We hate to think of the uproar there would have been had such a torrent of take-overs occurred when the party opposite was on this side. It is a clear gain to the nation that the Socialist Party is now willing to judge take-overs on their individual merits.

Further, we reckon that the dialogue which the I.R.C. has been conducting confidentially with different parts of industry has probably been extremely useful. We recognise that the I.R.C. has, during its life so far, examined, among other sectors of industry, the firms making instruments and process control equipment. We recognise that this sector, or double sector, of industry comprises a wide range of inter-connected firms, and we know that within this double sector various negotiations were started and came to nothing.

The story on which we shall concentrate today began with the bid by the Rank Organisation for Cambridge Instruments, a bid which the Rank Organisation saw as a move to strengthen its already successful subsidiary Taylor Hobson. Cambridge Instruments, entirely legitimately and within its rights, opposed the bid both because it claimed that the price offered for the shares was not enough and because it preferred a partner different from the Rank Organisation.

It was then that Kent made its bid, which, like the Rank Organisation bid, was partly in cash and partly in shares. The I.R.C. then declared its support for the Kent bid. As I have said, the Corporation had certainly had discussions with different parts of the industry before. The I.R.C. then went into the market and bought Cambridge Instruments shares and Kent shares as well, which seems to have had the effect, to some extent, of raising the value of the Kent bid. After bids and counter-bids, and considerable share purchases by the I.R.C, Kent won control of Cambridge Instruments.

There seems little doubt that, but for the I.R.C., the Rank Organisation would probably have won control of Cambridge Instruments. We feared shot-gun weddings when the I.R.C. was introduced. What we had was the first example of a short-gun separation. The First Report of the I.R.C. on page 5 says that the I.R.C.'s aim is: … not to impose theoretical blueprints of its own on industry, But, surely, that is exactly what, I am sure with the greatest of good intentions, the I.R.C. has in fact done.

Mr. Joel Barnett (Heywood and Royton)

Would it not be correct to say that the real shot-gun wedding would have been if Rank had been successful in taking over Cambridge Instruments?

Sir K. Joseph

What is done by private capital within the law is one thing: what is done with public capital, we shall argue, is quite a different matter and, as I shall seek to persuade the House, leads to all sorts of distortions.

I now turn to a quotation from page 6 of the Report, which states: … the I.R.C.'s task is to seek out those sectors of industry where structural change should be happening but is not—to identify the obstacles and try to eliminate them. Precisely, but in this industry, the process control and instrument industry, structural change was just about to take place.

I shall comment on the bare facts which I put before the House, with which we are all familiar, but before I do so it would be fair to warn the Minister of the two questions with which I shall finish my speech. These are the two questions which we on this side hope that the Minister during his speech will clearly answer. Is it likely, in sectors of industry requiring, in the I.R.C.s view, structural change but where no such structural change is happening, that the I.R.C. will make a bid on its own behalf? Secondly, are we to expect that the I.R.C. is likely to make the same sort of intervention as it did in the Cambridge Instrument bid in a contested bid in the future? Those are the two questions which we hope that the Minister will answer. I bring this out part way through my speech only to give him the knowledge in advance.

I turn now to comment on the facts as I have portrayed them. We do not for a moment question the integrity and good intentions of I.R.C. We quite understand that the scientific instrument industry overlaps the process control industry, and we quite understand that Kent naturally wants to strengthen its process control capacity by marrying a creative scientific instrument company. We further understand that the I.R.C. is concerned to secure a British competitor for the great international companies like Honeywell and Foxborough. But there is no case here of an industry failing to regroup itself. Regrouping was taking place.

The Rank Organisation's bid was contested by Cambridge Instruments, which did not want a merger with the Rank Organisation, and the bid was contested by a rival bidder. The I.R.C. clearly did not intervene to save one company from a disasteful bidder. If that were the view of I.R.C. it could not possibly have intervened as it did in the G.E.C.-A.E.I. conflict. It is not the job of the I.R.C., and I am sure that they do not think it is their job, to rescue industrial maidens from distasteful captors.

The I.R.C. intervened because it thought that the Kent/Cambridge Instrument link would be better in the national interest than the Rank Organisation/Cambridge Instrument link, and we on this side of the House concede that it may well be so. On the other hand, no one, not even the I.R.C, can be sure that it will be so. No one can predict which grouping would be better. [An HON. MEMBER: "I would prefer to take the I.R.C.'s view, not the right hon. Gentleman's."] The hon. Gentleman says that he would prefer to take the I.R.C.'s view and not mine. I am not asking the House to take my view; I am asking the House to leave it to the market. The right hon. Gentleman the Member for Belper (Mr. George Brown) will have, I hope, his chance to catch the eye of the Chair.

The point we seek to make is that no one can be sure which grouping would be better in the national interest. Kent/Cambridge Instruments may make a huge success in process control; we hope it will. The Rank Organisation, rebuffed in one direction, may expand successfully on a parallel or a different tack. But if Kent had lost, perhaps Rank, with its marketing and financial as well as other strengths, would have enabled Cambridge Instruments/Taylor Hobson to have become an international leader, not in the process control industry but in the scientific and optical instrument world, and who can tell which would have been better for the national interest?

Who can be sure? If the Rank Organisation had been successful, Kent might have found a successful growth in another linkage altogether, not in the process control world. I have even seen it suggested that an ideal grouping would be Hilger and Watts, Cambridge Instruments and the instrument section of A.E.I. But for the I.R.C., two of these three would have been in one stable by now. Now, two of these three are locked out of each other's reach. I am not quite sure whether the Hilger and Watts/Rank Organisation bid is complete, but assuming that goes through—and that may be an assumption which I am not entitled to make—Hilger and Watts will be locked into Rank, and Cambridge Instruments will be locked into Kent.

Even supposing that one solution, the Kent/Cambridge Instrument solution, is preferable, much preferable or marginally preferable than the solution which the market would have achieved, the Rank/Cambridge Instruments solution, I ask the House and the right hon. Gentleman the Member for Belper as well as the Minister to consider, even supposing that, was it wise that the I.R.C. should fight for this solution, considering the ill-effects, because there will be ill-effects? The very fear of a petition of what the I.R.C. has done may distort future contested mergers. If I.R.C. enters the market in the future the battle will be virtually over. Who will go to the expense of bidding when such a potentate with such a purse enters the fray? The I.R.C. can not only buy shares in the company bid for, it can buy shares in the favoured bidder and so enhance the value of the bid.

The I.R.C. has had to inject finance into Kent by several ways, including the guaranteeing of deferred stock, but the I.R.C. will put a director on the board. What if all does not go well? The I.R.C. will find its money locked in and another firm will be subsidised with public money to compete unfairly with private enterprise. (The market solution would have produced none of these problems.)

The I.R.C.'s most important assets are, surely, confidence and the good will of industry. Suppose a man consults a family adviser about a girl and finds that the adviser helps a rival to carry the girl off. Will that man consult the family adviser again? It is most unlikely.

On the other hand, one must recognise that the fact that the I.R.C. has shown itself willing to back one of several bidders with public money may to some extent increase the queue of people seeking to get the I.R.C. on their side. One way and another we reckon that the Cambridge Instrument episode has damaged the I.R.C.'s standing with industry and has reduced its capacity to do good.

Mr. Austen Albu (Edmonton)

Will the right hon. Gentleman use arguments in support of his thesis that the market, which is not a specialised agency, is a better judge than an agency specially set up for the purpose, especially when it is itself operating within the market?

Sir K. Joseph

Yes. I am saying that it is not possible to tell whether one group is more likely to benefit the national interest than another, since we cannot tell what the other alternative would produce. I suppose that it is conceivable that there could be a bid which would be so flagrantly against the national interest that even I would have to concede that an outsider could judge, but this was certainly not one of them.

The I.R.C. has and has had distinguished and devoted management and membership. Vigorous, intelligent, honourable men will not always abstain from using powers that are given to them. Shakespeare's Ulysses describes in six words the exact slope that we fear that the Government's legislation has given to the I.R.C— Power into will, will into appetite". The I.R.C. was set up to help bring about sensible mergers. It was not set up to stop mergers which in its view are not ideal. The I.R.C.'s main weapons should be influence, confidence and good will. The I.R.C. is not a business. It is a public agency charged with the delicate mission which can lose more than it gains for the nation if it is clumsy, however good its intentions. If the I.R.C. forgoes or is legally denied the power to intervene by share purchase in a contested bid, no doubt there would be occasional second-best solutions or what would seem to be second-best solutions achieved by the market. Might not the occasional second-best solution be better than the errors, distortions, and lost good will of a fighting I.R.C?

Sir Frank Kearton is a redoubtable, determined and honourable man. Mr. Charles Villiers, the managing director of the I.R.C, is an outstandingly able man of wide experience and of the highest integrity. However, we still say that the Kent/Cambridge Instrument episode is a bad precedent. The resources and the power of the I.R.C. could in less honourable hands be instruments of dogma and damage. We condemn the Government for giving the I.R.C. powers that are too wide.

When we are the Government, if the I.R.C. is still performing a useful function, we shall reconsider the width of its powers very carefully. A facilitating I.R.C.—that is, facilitating the market mechanism—is one thing and may be useful. A fighting I.R.C. is another animal altogether, because it uses the taxpayer's purse to back its judgment on what, in almost every case, can only be a hypothetical and marginal difference in national interest.

I come back to the two questions that I warned the Minister that we shall look to him to answer. Is it likely that the I.R.C. will intervene again with share purchases on behalf of one of two or more rival bidders? Is it likely that the I.R.C. will make bids on its own behalf if mergers do not happen in sectors where it would like mergers to take place?

Because the I.R.C.'s powers seem to us to be too wide, I hope that my right hon. and hon. Friends will vote in support of the Motion. Meanwhile, we await the Minister's reply with great interest.

4.43 p.m.

The Secretary of State for Economic Affairs (Mr. Peter Shore)

When I first read the Motion before us today, I was struck by two things. The first was the obvious contradiction between the expressed desire to uphold the independence of the I.R.C. and the strong criticism of its use of its powers which, if I was to agree, would oblige me to reduce its independence. Second, I was struck by what looks like a significant shift in the Opposition's attitude to the I.R.C. itself. They have asked the House to uphold the I.R.C.'s independence, and this can only mean, as, I think the right hon. Gentleman's speech made clear, that the Conservative Party has come to the conclusion that the I.R.C. has a rôle to play in improving the structure and efficiency of British industry.

I was waiting, therefore, with considerable interest for the right hon. Gentleman's speech. I was hoping to hear from him how I could at one and the same time uphold the independence of the I.R.C. while intervening in its affairs, and as I would judge it, restricting its operational flexibility. I was hoping for a clear and candid account of the evolution of the Conservative Party's thinking about the rôle of the I.R.C.

On the first point, the right hon. Gentleman's speech has certainly not helped. He has made it clear that he wants me to reduce its independence in one very important area, and about that I shall have something to say a little later on. On the second point he has been a little ambiguous. Nevertheless, we are entitled to draw the important conclusion that the attitude of right hon. and hon. Gentlemen opposite towards the I.R.C. has changed, and I for one welcome it greatly. I note that it is in very sharp contrast to the unconstructive and negative approach that they adopted 18 months ago.

As the right hon. Member for Enfield, West (Mr. Iain Macleod) is sitting on the Front Bench opposite, I would remind him of his own attitude at that time, when he said: Our attitude towards the I.R.C. is that of a preacher about sin—we are against it."— [OFFICIAL REPORT, 15th February, 1966; Vol. 724, c. 1228.] Now, apparently, like many other good things that this Government have done, the I.R.C. has come increasingly to be accepted. The only thing now which is of concern is how it conducts itself and whether it may jeopardise the good will that it has already won in industry by being too assertive. As I see it, that is not a very formidable charge, although it is one that I shall try to deal with as my speech develops.

Before moving to the main point of disagreement, which is the rôle that the I.R.C. has played in the Kent-Cambridge merger, I would sketch out what I see as the common ground existing between us, and I would wish to put the LR.C.'s action in a slightly broader setting where it can be properly judged.

In the first place, I think that we are agreed that many sectors of British industry are in need of restructuring. Certainly this is now widely accepted in industry. More businessmen than ever before are thinking in terms of larger units. This is not a matter of size for its own sake—certainly I would not wish to make a fetish of size—but size in order to achieve economies in production and in marketing to enable more intensive research and development programmes.

In this age of increasingly rapid technological advance and fierce competition in world markets from giant foreign firms, we must seek energetically to overcome those disadvantages that arise from structural defects.

Secondly, while it is obvious that companies themselves will be the main source of initiative in promoting structural change, it is clear that public agencies have also an important part to play. Recalling in the past decade the reorganisation of the cotton industry, the aircraft industry, shipbuilding and steel, only doctrinaire believers in a market economy will still affirm that there is no place for public intervention in the promotion of structural change.

The I.R.C, with its broad remit, has two special contributions to make to the process of industrial reorganisation. First, it can help to bring about mergers which would not otherwise take place or which would take place too slowly. Second, it is able to view the need for reorganisation more widely against a national economic and industrial canvas and not simply in relation to the opportunities and constraints which happen to face individual firms at any one time.

When the idea of the I.R.C. was first mooted about two and a half years ago, there was considerable scepticism and indeed hostility, not only from the Conservative Party but from substantial sectors of industry. Indeed, as the hon. Member for Eastleigh (Mr. David Price) will re- call, he described the I.R.C. at that time as … this unwanted waif of instant politics."—[OFFICIAL REPORT, 22nd November, 1966; Vol. 736, c. 1241.] Since then, there have been encouraging and significant changes.

Over 400 companies have approached the I.R.C. in the 18 months since it was set up. It has supported two of the biggest mergers in British commercial history—the merger between G.E.C. and A.E.I., which has opened the way to the much needed rationalisation of the heavy electrical industry, and the merger between B.M.H. and Leyland Motors which has strengthened the British owned sector of the motor industry which is of key importance for the balance of payments. In the merger between English Electric and Elliott Automation, I.R.C. has supported the creation of one of the strongest European groups manufacturing automated equipment. If I may give one further example, I.R.C.'s support has enabled the Whessoe Company to secure more export orders and to save over 700 jobs in a development area—

Mr. John Nott (St. Ives)

Is the right hon. Gentleman suggesting that these very important mergers would not have taken place if it had not been for the intervention of the I.R.C?

Mr. Shore

I think that it is very probable that these mergers would not have taken place. However, I think that we would all accept that this is something about which there can be no absolute evidence. There cannot be an absolute demonstration of an assertion that a merger would or would not have taken place without the intervention of the I.R.C. But the evidence very strongly suggests that those mergers would not have taken place. It is these and other achievements which have earned the I.R.C. its present high standing with industry.

Thirdly, there is agreement that it is essential for the I.R.C. to be completely independent of the Government in its day-to-day operation. As this is in the terms of the Motion, the Opposition must agree with that. Of course, Government Departments contribute to the I.R.C.'s work. They can and do feed in suggestions about sectors of industry which prima facie may need structural change. The reports of the E.D.C.s and other independent bodies are also relevant. But the decisions are for the I.R.C. itself. Further, the confidentiality of its relations with firms, the skilled commercial judgment required and the speed with which decisions have to be taken all require that the I.R.C. should be left to exercise its commercial judgment in the light of its statutory obligations.

Mr. John H. Osborn (Sheffield, Hallam)

How is Parliament to comment on the expenditure of public money if it thinks that an organisation such as the I.R.C. is not spending that money wisely?

Mr. Shore

As the hon. Gentleman knows, Parliament has the opportunity to debate these matters, as it is doing today. It also has the opportunity to initiate a debate on the annual report of the I.R.C. and it can and does question Ministers about week-by-week conduct of the I.R.C.

While I emphasise the need for operational independence, I also accept that the I.R.C. must observe certain principles and guide lines. Some of these are set out in the Act. Others are provided in the I.R.C. White Paper and in the various undertakings given by the Government during the debates on the I.R.C. Act. I am myself in close touch with the I.R.C. and I have no doubt that it is fully aware of the importance which we attach to projects which offer good prospects of early returns in terms of increased exports or reduced imports and equally aware of the importance which we attach to regional policy. Under Section 2 of the I.R.C. Act, as the right hon. Gentleman knows, I have power to issue general directions to the Corporation, but I do not have the power to intervene in particular cases.

I come now to the area of disagreement: whether it is right for the I.R.C. to back its independent judgment in support of one party in a contested takeover bid. In reaching a conclusion on this there are a number of relevant considerations. First, has the I.R.C. acted within the powers which Parliament has given to it? There can be no doubt about the answer to that. In fact, the Act enables the I.R.C. to take the neces- sary steps for the fulfilment of its statutory functions, and these include the promotion and reorganisation of any industry in the national economic interest. In the words of the Act: The Corporation shall have the power to do anything whether in the United Kingdom or elsewhere which is calculated to facilitate the discharge of its functions … including the acquisition, holding and disposal of securities. We need not argue about that.

Secondly, were there good and substantial reasons for the I.R.C. to want to promote this particular merger? As the House will be aware, the instrument industry is not only important to the balance of payments, but important to general industrial efficiency. The I.R.C. judged that a merger between these two companies, Kent and Cambridge, would be of great benefit to British industry. The alternative, a take-over of Cambridge Instruments by the Rank Organisation, would not, in the I.R.C's judgment, have created a manufacturing unit with the comparable technical significance and value for the economy. The board of Cambridge Instruments also favoured a merger with Kent's, as the right hon. Gentleman has reminded us.

The I.R.C's judgment that this merger was in the national interest had the support of my right hon. Friend the Minister of Technology, who is responsible for the instruments industry. There are several reasons for this judgment. The industrial measuring and scientific instruments industry is a fast growing industry which has large opportunities for export earning and import replacement. Industrial measuring instruments are also of strategic technological significance because of their rôle in the development and application of automated industrial systems, which will be of increasing importance in our overall industrial performance.

In this work, the activities of Kent and Cambridge are strongly complementary. Kent is the largest British-owned firm making industrial control systems, while the strength of Cambridge is on the scientific side. The acquisition of Cambridge will give Kent a stronger research base for the development of future industrial control systems and should, accordingly, improve its competitive position both at home and overseas.

We can argue across the Floor of the House about this, about the merits of the rival groups. My hon. Friend the Joint Parliamentary Secretary to the Ministry of Technology who is to reply to the debate will, no doubt, say more about the advantages of this grouping as seen from the direct knowledge which his Department has gained in its dealings with this industry, but in the last resort I hope that it will be conceded that the Board of the I.R.C. is particularly well equipped to make the right judgment, and a disinterested judgment, in this matter.

The Board of the I.R.C. consists of men of wide and varied industrial and business experience. Their decision to support the Kent-Cambridge grouping was taken after a detailed examination of the industrial activities of the companies and against the background of considerable knowledge of the scientific instruments industry. Their conclusion was that the balance of advantage for the development of this extremely important industry lay decisively with the Kent-Cambridge rather than with Rank-Cambridge.

Mr. Peter Hordern (Horsham)

Does the right hon. Gentleman appreciate that a most important principle in this matter is that the I.R.C. should reveal its own reasoning for the decisions which if reaches? Will he not say what were the reasons for this decision, or is he to wait until the Joint Parliamentary Secretary winds up the debate? The House would prefer to have the reasons now.

Mr. Shore

I have given some of the reasons and my hon. Friend will be adding to them. As the hon. Gentleman will be aware, the I.R.C. issued a succinct but informative statement on Friday giving its reasons for its course of action.

Having reached this judgment, that the best development of the scientific instruments industry would be on the basis of a Kent-Cambridge rather than a Rank-Cambridge merger—and this is the crux of the matter—should the I.R.C. have abandoned its judgment when Ranks made a further bid for Cambridge instruments? This is the question. As Kent on its own had insufficient financial resources, the choice before the I.R.C. was either to abandon this attempt to restructure the scientific instruments industry, or to support Kent with its own resources. If it had chosen the former course, in the light of the judgment which it had already reached, it would have been open to the serious counter-criticism that it had failed to do its duty. It would have meant accepting the second best—and I use the right hon. Gentleman's word—merger simply because one company, the less suited, had a longer purse than the other company, the more suited.

Sir K. Joseph

Its opinion of the second-best.

Mr. Shore

I accept that. I said earlier that this was a subject in which one could not hope to be able to put forward overwhelming evidence. It has to be a balance of judgment.

In the first instance, the I.R.C. attempted to find an agreed solution acceptable to the parties, but when this was rejected, the question had to be faced and it was at this point that the I.R.C. decided, and rightly decided, to use its funds in support of Kent.

The fourth question which one would want to answer in arriving at a judgment is whether there is anything inherently unfair about an I.R.C. intervention in such a contest. I do not think so. The point is made that the I.R.C. has large resources—under the Act, £150 million—but this is far from being a bottomless purse. When one considers its resources in relation to the need for restructuring in British industry and the many reorganisation and development projects which have already come before it, they can be described only as modest. But, more important, the I.R.C. is expected to operate on a commercial basis overall. It has to service the capital provided under the Act and it cannot afford to subsidise companies or projects and therefore in making share purchases it cannot go beyond a higher price than could be commercially justified.

What I have said so far demonstrates that the I.R.C. acted within its powers in this case, had good and sufficient reason for the course that it took, that it was not operating from any special position of advantage and that it acted according to the general rules which are expected of financial institutions in these matters.

Against that background, let us see what the Opposition are asking. They are saying, apparently, that it is all right for the I.R.C. to act where there is no contest. They are also, I assume, saying that there is no objection to the I.R.C. expressing a view about a contested merger—at least, I heard no criticism from the opposite side of the House when the I.R.C. supported the G.E.C. bid for A.E.I. Apparently, therefore, what the I.R.C. must not do is to become involved financially in a takeover struggle. That is the right hon. Gentleman's position.

The Opposition have nothing against take overs or disputed mergers in general. It is perfectly all right for any company, British or foreign, with sufficient spare financial resources to engage in a takeover struggle. It is all right for everyone, that is, except the I.R.C. Such an exception would clearly need to be argued very convincingly before it could be accepted. It certainly has not been done today. The crucial difference between the I.R.C. and other financial bodies is that the I.R.C. is a statutory body with a statutory obligation to have regard to the wider economic interests of the nation. The Opposition argue that this requires the I.R.C. to have less freedom than a commercial company. My belief is that it argues the exact contrary—namely, that the I.R.C. should have more freedom. All that we are seeking to establish is that it should have equal freedom in its commercial activities.

Moreover, if I were to impose a limitation of the kind that the Motion suggests, the credibility and effectiveness of the I.R.C. would be seriously impaired. One could readily envisage a situation in which the Corporation has been working for months to bring about an important and agreed merger. Then a new party of takeover bidders with a longer purse appears and from that moment the I.R.C. would have to abandon the project and withdraw. It would, indeed, be a paper tiger. I am not prepared to skin it.

I have reached the point where I can answer the right hon. Gentleman's questions point blank. First, if I may take them in reverse order, I am not prepared to give a general directive to the I.R.C. to prevent it from taking part in contested bids of the kind that Kent/Cam- bridge illustrates. In reply to the first question, this is certainly at present a hypothetical matter and I would, obviously, consider very carefully the views of the I.R.C. upon it.

All I can say is that it is the job of the I.R.C. to get on with the task of promoting structural change. It will clearly always bear in mind the question of whether there are people who are willing and able to help to carry out the job in a certain industry. Quite clearly, however, the I.R.C. has the powers under the Statute as I have described.

To sum up, I am satisfied that the Corporation has responsibly exercised its judgment in this case and I do not see any reason to question its interpretation of the requirements of the public interest under the Act. I see no cause to limit the action of the I.R.C. in the way suggested for the future.

It is, however, right for me to stress one point. The I.R.C. itself prefers to proceed by agreement, and most of its work is in persuasion and in the search for an agreed solution. But there will be situations, however infrequent, when total agreement will be lacking but where the I.R.C. will need, in the national interest, to use its financial power either to promote changes which are desirable or to resist changes which are undesirable. It must, therefore, have the resources and the freedom to use them if it is intended to make its contribution to increasing the efficiency and competitiveness of our industries.

Mr. J. Bruce-Gardyne (South Angus)

I have not yet heard the right hon. Gentleman answer one of the most important points made by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph): that if the I.R.C. was to behave in the way that it has behaved in the Kent/Cambridge affair, many companies which might in the past have considered consulting it will decline to do so.

Mr. Shore

I understand that point, but this is precisely one of the matters on which one can expect that the judgment of the I.R.C, given its experience and its background, would be sufficient to enable it to form a view as to how best to conduct its own operations.

The I.R.C. is one of the pacemakers in the process of change and it would be folly, just when it is getting into its stride, to restrict the use of the powers already conferred by Parliament. Those who dislike change will dislike the I.R.C., but those who wish to see Britain become competitive in the modern industrial world will welcome its efforts and wish it every success.

5.6 p.m.

Mr. Peter Hordern (Horsham)

I listened with great care to the Secretary of Stale for Economic Affairs during what, I thought, was a very disappointing speech, but as the subject of this debate, which has been chosen by the Opposition, was to inquire into the rationale of the takeover by George Kent of the Cambridge Instrument Company, we on this side were more than disappointed that no meaningful evidence whatever was produced by the right hon. Gentleman in this respect.

The Motion deals first with the I.R.C. in the terms that it wishes to preserve its independence. I should like to say how strongly I support the sentiment. I wish the I.R.C. to be so independent that it withers away. I feel that the Industrial Reorganisation Corporation Bill as a whole when it was introduced into this House was based on ignorance of the market and prejudice against the operations of the market.

When my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) suggested that we might make a review of the I.R.C. when we on this side returned to government and that there might be a place for what he termed a facilitating I.R.C, I only remind him at this stage, to help him in his consideration of the matter, that we voted against the Bill both on Second Reading and on Third Reading. I hope that my right hon. Friend will take that into account.

There is, I suppose, a place for an I.R.C. which acts as a kind of talking shop. What I am against is an I.R.C. which acts in a direct and interventionist way. The Secretary of State has proudly acclaimed himself as an interventionist. That is what I object to.

There is nothing wrong with the market system, and, indeed, there is nothing wrong with the economy, that cannot be altered by other arrangements. We have just had the Brookings Report on the shortcomings of British management and the report of the Donovan Commission on the trade unions. There is nothing in either of those two documents so far as they affect the economy which cannot be put right by a reduction of tariffs, a tightening of monopoly legislation and a complete recasting of the taxation system.

There is no evidence whatever of any shortage of capital in the free market either for short-term, medium-term or long-term projects. This is in entire contradistinction with the position in other countries and certainly in all our competitor countries, with the exception of the United States. In France and West Germany there is an acute shortage of private capital for industrial ventures. It is noticeable that only in Italy is there any form of organisation which is comparable to that of the I.R.C. The I.R.I. was founded in the first place long before the war only because of the complete absence of capital from the private system.

I well remember that in the Committee on the Industrial Reorganisation Corporation Bill the Government did not quite know what the criteria of the I.R.C. would be. It was only because of pressure from this side that the word "profitability" was inserted into the Bill at all as one of the criteria on which the I.R.C. should act. We can but observe that in the course of this particular affair the I.R.C. is attempting to become directly competitive with merchant banks, and this is the point with which I wish to concern myself for a moment.

I should like to ask the hon. Gentleman who is to wind up the debate what were the terms on which the I.R.C. was able to raise the money not only for this operation but for any other current operations it may have. The Government will know that it is quite impossible for the Government to raise money at under 8 per cent. in the market at the moment. It is my belief that, in fact, the money has been made available to the I.R.C. at a substantially lower rate than this and I should like the hon. Gentleman to say exactly what the rate is.

Furthermore, the terms of repayment are certainly terms which would not be available to any private merchant bank in the City, for during this particular negotiation a structure of deferred capital was instituted on which no dividends will be payable till 1973. Therefore the I.R.C., in this operation and, I believe, in others, is borrowing money more cheaply than it would be available even to itself in the open market, let alone to other companies, and as regards repaying the money, it is borrowing on terms which would certainly not be available to outside bodies.

The right hon. Gentleman claimed ad nauseam that this particular operation was in the national interest. I must say that this is one of the terms which always make my heart sink whenever the right hon. Gentleman or the party opposite use it in terms of commerce or industry. This merger of George Kent and Cambridge Instruments was apparently in the national interest, but the merger between Cambridge Instruments and Rank's was apparently not in the national interest. It cannot have been absolutely in the national interest because quite clearly the Government and the I.R.C. would not have been prepared to pay in more money unless they were certain it was going to be brought within their control, and I do not think that would have been the position.

Suppose, for example, Rank's had made a higher bid. Would it then have been open to the I.R.C. to support an even higher bid from Cambridge Instruments? I cannot believe that would have been the case, and that is why I would again say that the term "national interest" cannot be an absolute term, but only a marginal term, if there was a preference between one solution as against another.

What is the national interest in this context? Surely the only context in which it can be reasonably described as the national interest is the context of profitability. In this particular case it happens that the Rank/Taylor Hobson group of instrument manufacturers has increased its profits at the pre-tax level from 1962 to 1967 from £184,000 to £1.2 million, whereas the George Kent position in the same period was that its pre-tax profit rose from £623,000 to £1.2 million; that is to say the Rank/Taylor Hobson group was certainly six times as profitable in that time whereas the Kent Group only increased its profit by twice during the same period. So we can only suppose, from this arrangement, that profitability was not a criterion which was operating for I.R.C. in this case.

Mr. Albu

Does not the market take account of that? Was not the Rank price based on over 40 prices-earnings ratio?

Mr. Hordern

I am sorry, but I do not quite follow the hon. Gentleman. All I am saying is that the Government were prepared through the I.R.C. to support a company whose profitability was much less than the other one, and on grounds of the term "national interest". That is the term which I am examining at the moment—"national interest".

Was the purpose, then, to save foreign exchange? Presumably, that is one of the criteria which the I.R.C. was using. It is perfectly true that imports of instruments are rising and rising very fast, and I think it is a matter of concern just as the increase in imports generally is one of concern; but, of course, it is true that imports of textiles and a host of other articles are rising, as is well known to the party opposite, and it is of great concern and trouble to the Government.

So the logic seems to have been that because two American companies, notably Honeywell and Foxboro, both make industrial and scientific instruments the solution was to find a scientific and an industrial instrument manufacturer and put them together, and then we would have a worthy competitor for those two American companies. In fact, both George Kent and Cambridge Instruments, as separate companies, have been very disappointing in their earnings records. The earnings on capital employed by George Kent between 1955 and 1967 was halved from 15.7 per cent. to 7.8 per cent., and the Cambridge Instrument record over the same period was even worse. Its earnings on capital employed fell from 31.3 per cent. to 13.5 per cent. I can really see no reason or logic for an amalgamation of two companies with a disappointing earnings record and for supposing that this is a guarantee of success in competing with Honeywell and Foxboro.

Now, of course, the position is changed, and George Kent has willy-nilly become a matter of national interest, and, whether it succeeds in competing successfully with those two large American corporations or not, it will have to get the support and backing of the I.R.C. or some other Government agency. I do not know whether the Government have made any estimate at all of the money which would be required if we are to compete with those two large corporations.

It must be asked, why this particular field has been selected when there are so many other fields which need subsidies. Is it to compete with American companies, or simply because imports are increasing to such a large extent in washing machines or socks or silk scarves all articles of which there are high imports? If the criterion is to save foreign exchange, then why should not any company which feels the faintest breath of competition from abroad also appeal for help? How, on this argument, can the appeal possibly be refused?

It will be said that the help can be given only if it fits in with the logical pattern devised by the I.R.C., and this is my second objection to this action because what is the evidence that this merger was in the national interest at all? What we have to ask is this. On the basis of information gathered by the I.R.C. a certain pattern was devised which I.R.C. considered to be in the national interest. We do not know who gathered this information. We do not know what the assessment was. Why not? Why is this information not being made available to the House? If this sort of action is taken in the national interest, why is it not being explained to the nation? All we have is what is vouchsafed to us by leak and by the Kent board in the reasons which it gave to its shareholders after the intervention of the I.R.C. This was most interesting because the Kent board said this: Kent, as already disclosed, is nearing the end of its expansion programme in the industrial field where market surveys suggest that demand will expand by 8½ per cent. a year over the next 10 years. The scientific, analytical and medical markets will have a much faster rate of growth of about 13 per cent. This is a cogent reason why an expansion-minded firm should look at scientific instrument manufacture. If Kent was looking so avidly at Cambridge Instruments for expansion on scientific instruments, that was the reason why Rank/Taylor Hobson was also looking at Cambridge Instruments. I therefore ask: what practical reasons were there for declining or refusing to allow the Taylor Hobson bid to go through? I understand that the Rank people were interviewed by the I.R.C. on 29th April when the I.R.C. showed an ignorance of the Taylor Hobson Group which was quite astonishing. According to information given to me, the Rank board was never properly consulted or allowed to give other reasons why its merger should not be allowed to go through. This can only mean that Kent sees its future profitability in scientific instruments just as the Rank organisation did. Why did the I.R.C. support Kent? Presumably because it sees industrial instrumentation as a declining sphere and wishes to prop it up as it does other declining industries and as it does in an industry in some difficulties, namely, the computer industry. I suggest that, once again, it is the fear of American competition. I think it is time that there was some clear thinking on this subject.

First, we ought to realise the size of this problem. Some £10,000 million a year is spent on research and development in the United States. The figure for this country is about £850 million. It means that over the whole field it is likely that there will be more scientific discoveries made in the United States and more development is possible because of the scale of expenditure. When one considers the size of some of these corporations—Honeywell, for example, is very much interested in this sphere—one must seriously consider what the total cost to the country is likely to be if George Kent is to be propped up in this way. For example, the Honeywell Corporation has a total stockholders' equity of 384 million dollars, of which some 180 million dollars is on control equipment. It is, in other words, between four and five times as large as George Kent. But the Honeywell Corporation, in its operations from this country, is a net exporter of control systems. Therefore, we have to recognise that we are shoring up one company as against another which is employing British people and earning foreign exchange for this country.

My third criticism of this intervention in the market is the method of operation. I waste no sympathy on the Cambridge Instruments' shareholders. Frankly, I think they have been extremely fortunate in the whole of this proceeding. But the Kent shareholders have found, in the process, that their share capital has been considerably watered down.

I come now to a most extraordinary feature of this bid, namely, the holding of the Royal Society of some of the Cambridge equity. It so happened—I do not know how—that the Royal Society had a holding of some 11 per cent. in the Cambridge equity. It is a fact—and I have checked it for myself—that, after the I.R.C. intervened, at no time was the George Kent bid as valuable as the Rank bid. For that reason one must ask why the Royal Society ever accepted the George Kent bid. It must have been extremely badly advised. I appreciate that this is a matter for the Royal Society, but one of the most amusing ironies of the whole situation is that the head of the I.R.C. happened to be a fellow of the Royal Society. The confusion of interests must have been extremely hard for him. I have no doubt that he kept out of the recommendations altogether. But, if he had to give a recommendation, he would have had to advise the Royal Society to accept the Rank bid.

As I have said before, what irks me about this arrangement is that the I.R.C. has used money which is not available on the same terms to outside sources. I have already asked whether we might be told what the rate is.

There is no doubt that Cambridge Instruments should have gone to Rank on the basis of it being a higher bid, and the chances are that Rank would have made Cambridge Instruments a more profitable affair than George Kent will ever do.

As my right hon. Friend the Member for Leeds, North-East mentioned, the whole tone of the I.R.C. has changed under its new managing director. When Mr. Grierson was there, in his interim report he said that he would not impose a theoretically conceived pattern. This is precisely what the I.R.C. is now attempting to do. There is no logical end to this form of intervention that one can observe, but we are not even permitted to see the basis of the logic. That is what is so insufferable about the whole arrangement and the activities of the I.R.C.

I have no doubt that other companies will be reluctant now to give information to the I.R.C. on a confidential basis. That is up to them. What is certain is that, unless the market and the country as a whole has a clear conception of what the I.R.C.'s basis of operation is, it will act on the understanding that an intervention may be made in the market at any time by a group, accountable apparently to nobody in public, drawing up its theories in secrecy and yet never allowing them to emerge except in direct action in the market. As I started off by saying—

Mr. Alba rose—

Mr. Hordern

As I started off by saying, I am certain that this kind of direct intervention in the market is wrong. Therefore, I hope that my right hon. Friend, when he gives the matter further consideration, will adopt what was a perfectly proper attitude in the first place, namely, to scrap the I.R.C. at the first opportunity.

5.27 p.m.

Mr. George Brown (Belper)

The interesting thing about the two speeches we have had so far from the Opposition is the difference of approach. The Motion has been carefully drafted to exclude the I.R.C. as such from criticism or censure by the Opposition. The right hon. Member for Leeds, North-East (Sir K. Joseph) was careful in his speech to do the same. The right hon. Gentleman said that they might look at its powers or the way it acted, but he pretty well gave it a certificate that, should the Opposition, unhappily, ever come back to power, the I.R.C. would stay in business. His hon. Friend—

Sir K. Joseph rose—

Mr. Brown

I will give way, but I should like to make one thing clear. The debate did not start until after twenty minutes past four. We have less than 2½ hours to discuss this matter and the first three speeches, including the two Front Bench speeches, have taken almost an hour and 10 minutes. If I am to be interrupted all the way through, this will preclude anyone else having a chance to speak. However, if I am allowed to go on—and I did not interrupt anybody—I can get through quickly.

Sir K. Joseph

I did add as a qualifying clause to our view of the I.R.C, "if it remains useful."

Mr. Brown

Then I shall look very closely in HANSARD tomorrow to see if those words are there, because I did not hear them. If they are there, then most of what the right hon. Gentleman said had no meaning at all. He was really making a speech facing both ways, like Joseph's coat of many colours, and he is back en accord with his hon. Friend the Member for Horsham (Mr. Hordern). In that case I will waste no more time on it, because it meant nothing. The right hon. Gentleman is telling me that he faced north and south at the same time.

The other thing that struck me about the Motion is that it is carefully drafted not to deal with the merits of the Com-bridge-Kent or the Rank-Cambridge tie-up. The Motion is carefully drafted to deal with the principle whether the I.R.C. should ever intervene in a disputed bid. We have, however, today been wholly concerned with a special piece of pleading whether Rank should have been the successful bidder or somebody else.

I know the Chairman of the I.R.C. I am associated with him in another capacity, and I am proud to be. When the hon. Gentleman referred to him being a distinguished Fellow of the Royal Society, I thought that that was really the sort of thing which disclosed the absence of any real case. Coming as it did from a Member of the party which contains two prominent Privy Councillors, one on the Front Bench who is not here today, and one on the back benches who is not here either, who were involved in this matter on the other side, I think that it would have been better had the matter not been introduced.

Mr. Hordem

I cannot see why that matter should not have been introduced.

Hon. Members

Apologise.

Mr. Hordern

It is relevant to the issue we are discussing, and I should not dream of apologising.

Mr. Brown

If the fact that Sir Frank Kearton is a Fellow of the Royal Society is to be introduced to cast doubt on whether he was acting wholly independently—[HON. MEMBERS: "NO."]—In that case I see no reason for bringing in that fact. Nevertheless, I think the House should know that the right hon. Member for Barnet (Mr. Maudling) acted as adviser to Ranks, and that the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) is a director of Ranks and Odeon and took an active part in the market in support of the Rank rate.

Sir K. Joseph

What is wrong with that?

Mr. Brown

I cannot give way. If the issue is to be discussed on that basis, let us have it both ways and not put up with the kind of snide remarks that were made.

I propose to be brief, and I shall therefore not go over the arguments and the philosophy which lay behind and were deployed in setting up the I.R.C. I urge hon. Members to read those debates again and to consider how many others in the world are now doing a similar exercise, and for much the same reasons.

In view of what has been said, and in view, too, of my association with the establishment of this body, I should like to pay tribute to it for what it has done in its opening period. I think that the members of the Corporation were very wise in their careful phasing of the development of their activities, and I pay tribute to them for their meticulous and patient examination of the projects and ideas put to them, and also for the fact that, having established themselves, they have taken specific and determined action.

The hon. Gentleman said that he wanted the Corporation to be "so independent that it withered away". We, on the other hand, want it to be independent of Government direction or veto, but nevertherless so determined that it becomes a vigorous and effective part of our business.

I commend to hon. Gentlemen opposite and others a careful reading of the I.R.C.s Report I should like others who operate in what the hon. Gentleman called "the market" to produce reports in the same kind of detail. There are many City institutions—and I am not referring to the leading merchant banks—about whose activities I should like to know a good deal more. If I knew as much about them as the hon. Gentleman does about the I.R.C. we could have a much more efficient debate about the operation of the City.

I suggest that hon. Gentlemen opposite should read the very detailed, very full, and if I may say so without being patronising very commendable accounts, by Peter Wilsher in the Sunday Times, by Mr. Anthony Bambridge in The Observer, and the reports in the Economist during the last few weeks. Despite what the hon. Gentleman said, there is no doubt among informed opinion, among informed commentators, and among those who are not so personally involved in the financial consequences, that the I.R.C. in its first year has done a tremendous job. It is interesting to note that hardly any informed commentator has come out even against the Cambridge-Kent arrangement. Questions have been asked about the future consequences of this. It has been asked whether this will make the I.R.C.'s job easier or more difficult, but there is very little support among informed opinion for the view that the I.R.C. was wrong to try to bring about a solution in this case.

I believe that what has been done reflects great credit not only on Frank Kearton, Ronnie Grierson, and Charles Villiers, but on all their associates, board members, and staff members. I feel that on the first occasion on which we debate their activities it would not be a bad thing to give them credit for a considerable effort of a new kind. I think that it also provides some justification for those of us who pushed this idea through against much prejudice and opposition only a short 18 months or two years ago.

We have here an illustration of the way in which the Front Bench of the Opposition has now notably switched its view. In 1966 the Motion was to "decline to accept". The right hon. Member for Enfield, West (Mr. Iain Macleod) was against sin. This was sin, and that was that. Now, by clear implication, the Motion accepts the existence of this body, but goes on to argue about details of how it works.

The argument appears to be based on two things, both of which are fallacious, and in some respects downright objectionable. The first—and I think the right hon. Gentleman put this clearly—is that the Corporation should not intervene—that is to say, it should not use its judgment where there is more than one bidder in a take-over operation. Secondly—and this is an extension of the first thought—it should not use public funds to bring about one particular merger rather than another. The basic fallacy in that seems to me to lie in the fact that the right hon. Gentleman was thinking that a merger, or mere size, would be good in itself, whatever the consequences, and that the Corporation should be concerned only where such a merger was not coming about.

That cannot be accepted, for a variety of reasons. It is not the fact of a merger. There is no virtue in size as of itself. If there is to be virtue in a merger, or size, it depends on other factors. It depends on the kind of merger: on who is merging with whom. It depends on whether the managerial levels and the technical competence which will emerge are worth while. It depends on whether we are getting an effective integration of complementary forces. The hon. Gentleman had a lot of trouble dealing with the phrase "national interest", but that is what we mean. The whole basis for the future development of the integrated organisation must depend on whether the project is sound and advantageous, not just the happening of a merger.

As was pointed out by Mr. Wilsher, the history of our industry over many years shows case after case of unsuccess being married to unsuccess as a result of the market's free operation and the creation of a bigger failure than the two we had before.

Our industry suffers from two problems. First, it is too fragmented. Secondly, much of it has come together without any rational basis for doing so. In my view, developments cannot be left to the forces of the market. They cannot be left to be decided merely on the basis whether something is immediately profitable for somebody. When I had something to do with the writing of the White Paper in the early stages—it was subsequently taken over by others—which led up to producing the Act, we carefully specified that it was part of the I.R.C.'s business to exercise its judgment. We gave it authority to act upon its judgment when it had made it. Far from its being, in the words of the Motion, "a dangerous precedent", I regard it as an absolute requisite.

The Opposition's attitude seems to stem from another and more basically doctrinaire view, which again is in two parts—first, that all good mergers will come from the operation of market forces, and secondly, that public activity and finance, if used at all, should be used only outside that area. This adds up to the view that what is profitable in the eyes of the finance market must be good and should be left to the market, and what is not profitable in the eyes of the market probably should not be carried out, but if it is, should be done only at public expense.

I cannot accept that in these days everything in respect of which somebody cannot make enough profit shall be unloaded on to the taxpayer. Nor can I accept that the Board should not deal with matters in respect of which somebody sees a good profit. There is no clear black and white distinction between what is profitable and what is not in this respect, even in money terms.

Many other factors must be taken into account. They affect the degree of immediate profitability and the longer-term considerations. The real argument today does not concern the minutiae of the merits of the case, on which the bulk of opinion comes down on the side of the I.R.C. The real argument which the Opposititon are advancing is that we should maximise immediate or short-term profit which will accrue to a few on a particular market operation, rather than, as my hon. Friends and I would do, subordinate that consideration to other wider and longer-term interests.

That is the issue on which the I.R.C. was bold enough to make a judgment and take a stand. That is the difference between us. The I.R.C. makes it abundantly clear in its statement that it has acted on the second basis—that is to say, it has subordinated the short-term, immediately profitable argument to other considerations. I have heard it argued that it should have put out the statement earlier. I do not regard that as a very relevant argument. It is naive to think that anybody operating in this field could put out a statement in the course of an operation. The statement makes it clear why the Board acted, and on what basis it did so—and I accept it.

Sir K. Joseph

The right hon. Gentleman is trying to wrench the argument to suit his party purposes. My hon. Friends and I believe that the national interest cannot be judged in the way that the I.R.C. presumes to judge it.

Mr. Brown

I have said clearly that that is the difference between us. The right hon. Gentleman, with his background and City experience, and the stockbroker who spoke just before me take a view that is different from mine. I have pointed what the difference is, but so long as we are clear that the I.R.C. acted on the second basis I can argue that in my opinion it acted correctly.

I applaud its acting in the way it did, and I shall be willing to defend it anywhere. Nobody except the right hon. Gentleman, in one slight intervention in his speech, has gone so far as to say, as I do, that one cannot doubt that the collective experience, expertise and background of those who make up the I.R.C. justify its claim to be able to exercise such a judgment. I think that it will be generally agreed that both on the Board and on the staff of the I.R.C. there is at least as much experience, expertise and background in private enterprise as hon. Members opposite can muster at any time. I see no reason to doubt the ability of the I.R.C. to make a judgment. That is why it was appointed, and that is why its individual members are so highly regarded in respect of their mostly-private enterprise activities.

I agree that any exercise of judgment involves a degree of risk, but believe no case has been made out anywhere and practically all informed comment suggests the opposite. But this is so here. If we are to refuse the Board any degree of judgment, there is no point in having it. If we say that it must never take a risk nothing will be done, although we know that somebody must get busy. I therefore congratulate the I.R.C. on its decision and upon its work to date. I hope that it will not be put off by any criticisms that might be made of it—much less by what I regard as self-evidently ill-considered Motions such as this.

As I said when we began the whole idea and brought in the original White Paper, I hope that industrial and financial interests outside—despite what may be said here this afternoon—will continue to recognise the value of the work that such a body can do. France and Japan are now embarking on the very same exercise, for the very same purpose. Sweden and Germany have not only been trying to do it but have been asking the I.R.C. to tell them how it is doing it. This is an area in which Britain was behind but in which she is now catching up and even going ahead. Nobody who knows the urgency of the need to restructure British industry can doubt the usefulness of the I.R.C., taken alongside other efforts to modernise our industry.

Let us not, because of prejudice that we find it difficult to get rid of—and this applies to all of us—halt this process now for reasons that will really be miserably prejudiced. This is a necessary part of our armoury for winning through, and I hope that the House will reject the Motion with contumely.

5.48 p.m.

Mr. Peter Bessell (Bodmin)

The right hon. Member for Belper (Mr. George Brown) has a sound reason for congratulating the Government and himself—if that is the right term—for the establishment of the I.R.C. We on the Liberal benches supported its inception, and nothing that has happened—not even the present emergency—has caused me, for one, to regret the advice that I then gave my colleagues, and which I believe the events of the last year have proved to be basically correct.

This is to be a short debate and I shall therefore confine myself to asking the right hon. Gentleman only two questions. I hope that I may have answers at the end of the debate. It was a serious decision on the part of the I.R.C. to use public money to prevent one merger from taking place and to enable another to occur.

Therefore the facts, however, confidential they may have been at the time of the discussions between the I.R.C. and the companies involved, should be the subject of a very full disclosure. I would like to hear from the right hon. Gentleman that, because of the nature of this action, and because it is virtually unprecedented for public money to be used in this way, we shall have such a disclosure. I hope that he will not refer me to the statement which appeared in the Daily Telegraph on Saturday because, although I have the utmost respect for the City Editor of that newspaper, whose words I often follow with great interest, and whose judgment I respect in all ways, I do not believe that the I.R.C. has given the kind of disclosure necessary to enable any of us to arrive at a sound judgment.

The second point which I wish to raise is one raised briefly by the right hon. Member for Leeds, North-East (Sir K. Joseph), when he rightly said that none of us could assess entirely the consequence of any merger or the creation of any monopoly in consequence of such a merger. We may not know what is the final outcome, and we do not know whether it will prove to be in the public interest. However good our judgment may be in one matter, it may be faulty in another, and the I.R.C. has no superhuman powers. I am sure that the right hon. Gentleman the Minister would not wish to ascribe such powers to it.

Therefore, I ask this second question, which I will divide into two parts. Would he not agree that there might be a case for extending the powers of the I.R.C, even though no merger created by it can create a monopoly, so that it is obliged, year by year, to discover and report in its annual report on the effects of the mergers for which it has been responsible? Secondly, in those mergers which virtually create a monopoly, might it not be wise for the Government to look at an extension of the powers of the Monopolies Commission, to see whether there should not be a continuous watch maintained upon any monopoly position which may be created, because of the possible dangers which might result to the public and private sector and the nation as a whole?

There is much more that I would have liked to have said, but we are forced by our time-table to a very limited discussion. I will confine myself to these questions and I hope give an opportunity to other hon. and right hon. Gentlemen who have not yet spoken.

5.52 p.m.

Mr. W. Howie (Luton)

Like the hon. Member for Bodmin (Mr. Bessell), I shall try to be as brief as possible, much briefer than I would otherwise have been, so that other hon. Members may have the chance to speak. This is, unfortunately, a very short debate. My interest in it arises from the general interest that we all have in the I.R.C., but particularly from the fact that George Kent is one of the more prominent firms in my constituency. My constituents stand to benefit from this merger and will be interested to note that the Opposition finds the action of the I.R.C. deplorable.

I am a little surprised at the way in which the Opposition has acted. I would have thought it sufficient for it to take the opportunity of this so far unique action on the part of the I.R.C. to seek information. To go out on a limb and to deplore it seems to go rather far. My right hon. Friend the Member for Belper (Mr. George Brown) drew attention to the fact that the Motion was in somewhat general terms. It is worth paying some attention to the specific matter and drawing some general conclusions from it. George Kent is an old-established firm with a high reputation in the industrial measurement and control sphere. It is the largest independent British-owned company manufacturing industrial and process control instruments and, as such, a fairly obvious base for a national industry.

It is worth paying some attention to the instrument industry for a moment. An important factor is the changes which have been taking place over the years in the industry. More and more industrial instruments are taking on the characteristics of scientific instruments, of laboratory equipment. They are becoming more sophisticated than in the past. This is a market in which George Kent has made minor invasions only over the years. It is predominant in industrial measurement. Although it operates in the scientific area it is a lesser concern there. It is a market in which Cambridge Instruments has been pre-eminent, with a strong reputation and good connections with the university world, and other institutions.

The two firms complement one another. The area in which one firm is strong is that in which the other is weak. Taken together they cover a broad range of the instrument world. If, as is sometimes said, the laboratory instrument of today is the industrial instrument of tomorrow—and this is true—the Kent-Cambridge merger is a natural and the newly-merged firm will be able to accel- erate this continuing process. If the merger is industrially desirable, and this is what the I.R.C. meant when it said that it was thought to be in the national interest, then the new company will form the basis for further development in industry.

This is where I revert to the "potted history" mentioned by the right hon. Member for Leeds, North-East (Sir K. Joseph). What he omitted to say was that the I.R.C. became interested in the Kent-Cambridge merger when it began to look beyond the immediate merger. When the I.R.C. began to look towards the future development of the industry, after the merger, it saw that the complementary functions of the two firms gave a basis for development stronger than that of their rivals.

Having reached that conclusion the I.R.C. first of all gave moral support to Kent, and then backed up its actions with public money. Should it have done so? There is no doubt that the intervention of the I.R.C. was crucial. It won the day. I think that it was right to do so, if only because the I.R.C. was set up to do exactly this kind of thing. It was established to intervene, and this was intervention. In this respect I was a little depressed by the speech of the right hon. Member for Leeds, North-East, because when I first entered the House he seemed to be a very forward-looking Minister of Housing and Local Government, with all the elements of the planner about him.

He has reverted to being a fairly ruthless kind of marketeer, and I am depressed and sorry to see that he is leaning so heavily on market forces. Incidentally, the hon. Member for Eastleigh (Mr. David Price), whom I much admire, and who hopes to speak later, went so far as to suggest during the Second Reading of the I.R.C. Bill, that the Government were pursuing the wrong means—means which he thought then were corruptive of the sort of market economy we wished to see in Britain. He will remember saying that I am sure. The whole point is that the operation of free market forces would in this case have produced the wrong answer, as it very often does. It would not have produced that merged company, a springboard, providing a basis for a developed industry, making it strong enough to face American competition.

A Rank-Cambridge merger would have had two major defects. First, it would not have had a wide enough range over the instrument sphere; it would have covered a narrower range compared with the Kent-Cambridge merger which has taken place. Secondly, the manufacture of instruments is not central to Ranks. That firm regards it as a peripheral operation. It is an important and profitable part of its operations, no doubt, but it is only one operation among many and is, therefore, peripheral. This is not true of Kent. The centre and core of Kent's operation is the instrument sphere, and the centre and core of the new merged firm is exactly that.

Some people have objected to the element of public ownership involved in the I.R.C. shareholding. I do not object, but welcome it. It seems that this is the best sort of public ownership; namely, the kind which is likely to be profitable and bring revenue to the public purse. Thus, the Opposition Motion is wrong and the I.R.C. action is right. By its intervention, the I.R.C. has obtained the right sort of merger for the future of the industry.

Nobody has criticised the type of intervention employed. Indeed, this intervention conforms to the take-over code and the new group is likely to be capable of fighting off American penetration of our market. For this reason I trust that hon. Members will support the I.R.C. and that the Motion will either be withdrawn or defeated.

6.2 p.m.

Mr. John Peyton (Yeovil)

If anything could have persuaded me to vote for the Motion, it would have been some of the intemperate remarks of the right hon. Member for Belper (Mr. George Brown). In contrast, my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) opened the debate in a temperate speech and, as one would have expected, he was exceedingly fair.

My right hon. Friend said that the Motion implied no criticism of the I.R.C. Later, he said that not for a moment were we questioning the motives and good intentions of its members, whom he described as vigorous, intelligent and honourable. I endorse those sentiments, but the Motion does not. It is critical of the I.R.C. and for that reason I do not feel, much as I dislike disagreeing with my right hon. and hon. Friends, able to support the Motion. I do not sympathise with it because, by implication, it asks the Government to interfere with the activities of the I.R.C. This is my main criticism of the Motion. It is a clear case of kicking the frying pan instead of sacking the cook, and I need not go much further in the process of identifying the cook who I wish to see sacked.

There are four prime reasons why I cannot support the Motion. The first is because I do not believe that the record of the Corporation merits censure. I was one of those who regarded its initial establishment with some suspicion, but my views have been influenced not only by the stature of the men appointed to the Corporation but also by the Corporation's record of achievement. I endorse the remarks made by the Daily Telegraph on 6th July, when it said that the Corporation had already proved an effective catalyst in the normal, slow processes of change in many industries. I believe that such a desirable development as the B.M.C.-Leyland merger would not have taken place except for the good offices of the Corporation.

The second reason why I cannot support the Motion is that while, in regard to Kent, it may be that the I.R.C. is open to some criticism for not having been sufficiently open, and while I regret that taxpayers' money should be invested on such vague terms from the return point of view, I see no reason for challenging the judgment of the Corporation that the outcome achieved is the best one for British industry.

My third reason for dissenting from the Motion is that if we are—as we surely are under this Government—to have official intervention in industrial affairs, then the more remote it is from Government the better. I would rather have men whose records and achievements in industry are beyond challenge controlling such powers than Ministers controlling them. I do not wish to lambast Ministers in this debate, except to say that they are too inclined to act from a background of unblemished ignorance and considerable prejudice. One battle honour which the Corporation can claim to its credit is the delicate compliment paid to it by the Government in connection with the Industrial Expansion Bill. The Government said, in effect, "We cannot trust our own creature, which is acting in an alien way"—in that it was acting with common sense and wisdom—"We must, therefore, have power to act on our own."

The fourth reason for withholding my support from the Motion is that I regard the choice of such a subject by the Opposition at such a time as something worse than whimsical. There are so many subjects on which this grotesque and awful Administration should be censured that it seems that the Opposition are themselves guilty of lowering the level of the argument in seeking to debate the frying pan rather than the cook. The Opposition are, therefore, losing opportunities of challenging on vital matters an Administration who have shown themselves responsible for many of the ills which now disturb the nation.

6.7 p.m.

Mr. Eric Moonman (Billericay)

The speech of the hon. Member for Yeovil (Mr. Peyton) showed the seriousness with which some hon. Gentlemen opposite feel about the whole question of the rôle and function of the I.R.C. Apart from the hon. Gentleman's final observations, he appeared to be saying, in effect, that there is a serious purpose behind the I.R.C, that it is doing a good job and that we should suspend judgment for some time.

The hon. Gentleman's speech was in contrast to the theme adopted by previous speakers from the benches opposite. I was reminded by some of their remarks of a passage which appeared in the Final Report of the Committee on Industry and Trade, in 1929. It said: … 'the adequate equipment of British industrial works with adequate plant and machinery may be obstructed by the conservative habits of mind which prevent many employers from pursuing an energetic renewal of plant' While the I.R.C. is not specifically concerned with the renewal of plant, it is concerned with changing motivation and people's minds and with the restructuring of industry. It is a pity that in debates of this kind, which follow the pattern of the debate we had on the Industrial Expansion Bill, there is still no recognition by hon. Gentlemen opposite of the importance of trying to under- stand the problems of contemporary industry.

Two main objections have been raised by hon. Gentlemen opposite, both inside and outside the House, to I.R.C. intervention in industry. The first is the fact that the Corporation uses public money for its activities. This argument is a non-starter, because public money is used by all nationalised industries, in various ways and for various reasons, but Parliament and the Government control neither. As the Economist recently pointed out: This freedom has widespread consequences—including some of the structure of British industry. If we are to bring some competitiveness and a thorough restructure to our industry we shall need a variety of ways of doing it. The concept of Government involvement in industry has not just happened in the last 10 or 15 years. It may be that because we now have a more articulate Government and industrial force the problem is seen more acutely, but the whole emphasis of Government involvement in industry goes back 70 or 80 years.

The logical consequence is for Governments to back up their ideas, which they have not always been prepared to do, and show sincerity in their beliefs by making money available; and one would expect support of that idea rather than criticism of it. While I had some reservations about the Industrial Expansion Act and the use of money in that connection, I hope that the Opposition can distinguish, as I have, between the two approaches. The hon. Member for Yeovil (Mr. Peyton) was able to show that there is an important difference in the way Governments can act.

The second objection runs rather on the lines that the shareholders in firms have had their interests overriden. That argument will not wash in the case of Kent-Cambridge Instruments, which has been the theme of this debate. The latter company was strongly influenced to accept the lower of two bids, but the fact is that without I.R.C. intervention the bidding would not have got as high as it did in any case. The George Kent shareholders might say that … their earnings have been diluted by the high price paid for Cambridge … but they should blame their own board for that. If the Corporation was twisting their arm they certainly have not said so.

There is an impressive list of mergers, and of work done by the Corporation in the last 12 months; of co-operation with firms and advice given. These are not even mentioned in the report. That is how we would expect the Corporation to work—without mentioning everything it does. Nevertheless, the report is there, and it has been referred to. It is an impressive list of work done whether one takes the telecommunications industry survey, Rootes Motors, A.E.C.—Elliott-Automation, G.E.C.—A.E.I., Dun-ford and Elliott (Sheffield)—Hadfields, the paper and board industry survey, Coats Paton—West Riding Worsted and Woollen Mills, or the British Oxygen Company—Edwards High Vacuum International.

In the case of Coats Paton it hardly looks as though the shareholders had their interests overridden because, as the report says: Both companies … wish to acknowledge the interest of the Industrial Reorganisation Corporation in securing an increased measure of rationalisation in the industry and of that organisation's separate approach to both companies on the subject. This action is a fairly serious indication of the way in which a number of companies have been able to approach the Corporation or be approached by it, and have acted on the advice given.

Let us look more closely at the Motion, and at the rôle of the Corporation. It has been referred to more than once, and particularly in what I suggest was a very fine speech by the right hon. Gentleman the Member for Belper (Mr. George Brown). The Motion states: That this House, while upholding the independence of the Industrial Reorganisation Corporation, deplores its action in intervening with public money on behalf of one bidder in a merger operation … It is an interesting and revealing form of words. On the one hand, we have the judicious use of the word "independence". On the other, the attack is towards one activity of I.R.C.—the Kent-Cambridge bid.

I shall give the Opposition the benefit of the doubt—and I hope that I am not being foolhardy in doing so—when I say that they are not wholly politically motivated in giving up some time on one of their Supply days for a debate on this subject. But if they are not politically motived, they are something else. It means that they simply do not know the facts of industrial management and industrial reorganisation.

In short, on this subject the Tory Party is schizo. The I.R.C. type of organisation meets the Tories' long accepted criteria—it is a commercially aggressive and efficient organisation, but that it is associated with and has been set up by Government is very difficult for them to accept. That it was set up by Socialists is even worse, and it is far too traumatic for them ever to understand.

What we have a right to expect from the hon. Member for Eastleigh (Mr. David Price) is that he will give us a little more insight into the Conservative Party conscience on this subject. We had some indication, and then a denial, of what the Conservative Party would do with the I.R.C. if returned to office. Frankly, I think that many of my hon. Friends and many hon. Members opposite were not clear about what a Conservative Government would do. That point wants clarification, not only for hon. Members but for many people outside the House who have shown interest in the subject.

An intelligent Opposition who lean so heavily on their business relationships and connections would have tackled the subject of I.R.C. rather differently. Here I disagree with the hon. Member for Yeovil, who said that there were other subjects of greater import. The I.R.C. is very important. The great pity is that we have taken only one very small part of its activities, and with this rather absurd wording of the Motion we have moved from what we should have been debating. I suggest that the issue should have been about the Corporation's long-term objectives. Its strategy, its rôle in the restructuring of industry are relevant and pertinent questions.

There are three areas of debate. The first is: should the I.R.C. hold on to the shares is acquires? When it was set up, the Government said that the Corporation would not act as a "holding" company. It has a modest share stake in Rootes, but, generally, it has avoided building up equity holdings in industrial companies. In the case of Kent-Cambridge, the profits of rationalisation will take a while to emerge. Will one of the I.R.C. directors act as a watchdog? This needs clarification. The "holding company "has an appeal which the I.R.I. structure in Italy has shown to be possible and successful.

Secondly, the Corporation is still hamstrung from going into industry and reorganising it. A very keen and enthusiastic executive who went to the Corporation with ideas about a particular industry would not be able to get a list of companies that would be willing to be taken over and merged into a substantial unit.

Thirdly, can the Corporation assist in the development of mergers across national boundaries in Europe? I realise that our own Government policy is evolved in European technological matters, but the Government should not be too humble tonight. They should say whether they believe that the Corporation has a rôle to play there. My right hon. Friend the Member for Belper referred to the fact that in a number of countries there is interest in the work of the I.R.C, and I believe that the way in which we look at the question of scientific and technological collaboration will not only depend on Government good will and desire, but also on the setting up of organisations and institutions like the I.R.C. so that they can move in quickly to the important work that needs to be done in industry in Europe.

I would urge both Front Benches, in their concluding speeches, to show that they have thought about these matters and understand what the I.R.C. is doing now—and is likely to do in the future.

6.19 p.m.

Mr. David Howell (Guildford)

I listened to the hon. Member for Billericay (Mr. Moonman) with care, and I agree with him in one respect. I believe that this debate, which is far too short, is important. It is concerned with questions of power and accountability which lie near to the heart of the free society and how it evolves, and relate closely to questions of freedom, competitiveness, enterprise and the strength and effectiveness of this country and the world. I believe that, far from being the peripheral issue that my hon. Friend the Member for Yeovil (Mr. Peyton) implied, it is absolutely central to the difficulties facing the country and the Government.

I go back to the analysis which the Secretary of State for Economic Affairs gave the rôle of I.R.C. as he saw it. I believe that analysis to be superficial and that this superficiality created the conditions in which the present difficulties and the present case have arisen. The I.R.C. is a new kind of public agency which lives on the horns of a dilemma. Those within the I.R.C. for various reasons have often argued vigorously that they are commercial and act commercially. They see nothing wrong in going to the market place and participating where some win and some lose.

That is the kind of background in which the Kent-Cambridge affair evolved. The I.R.C. went in and behaved like capitalists. It argued that it was doing so commercially on profitability criteria and behaving as a good commercial firm. This was understandable from its point of view in the absence of clear directives to the contrary. But the facts are that it is not so. The I.R.C. is not a commercial organisation but an instrument of Government. Whether it is a good or a bad instrument I shall argue shortly. The point is that I.R.C. exists because it is an instrument of government to bring about the rationalisation of industry, not to make money.

I listened with great care to the Secretary of State when he touched on the criteria by which the I.R.C. should intervene and talked about international competition. I believe some of my hon. Friends do not go along with this. But when there is foreign competition which is Government subsidised and backed by Government procurement policies based on national prestige reasons, there is little choice for this country if it wishes to retain certain industries but to intervene to obtain equally competitive conditions. To that extent, I personally go along with the view that the Government, through the I.R.C. or some other instrument, are entitled to adopt policies towards certain industries and to have particular objectives for certain industries. On the broader question of intervention allowed on the rather vague criterion of national efficiency this is more difficult and delicate. When we examine a particular case, such as the one we are discussing today the precise arguments sound very weak.

I now say a word on the question of the I.R.C. as an instrument to secure Government objectives towards certain industries, on its record, and the way in which it has evolved as an instrument. Its difficulties have been not so much in trying to achieve objectives as to persuade Government officials and other agencies inside the Government—many of whom have activities overlapping the objectives of the I.R.C.—to see sense.

It is on the question of co-ordination between the I.R.C. and other officials carrying out procurement policies—the D.E.A. and the D.E.P. and the Ministry of Technology—and the vast proliferation of instruments under this Government, that the real battle has had to be fought. It takes place behind closed doors with other officials and Ministers where efforts are made to persuade them not to pursue policies contrary to the overall rationalisation of a particular industry. I believe that the I.R.C, if properly brought into and co-ordinated within overall sensible Government policies to create industries which will be internationally competitive and will not be overwhelmed by foreign Government-supported competition, has a rôle to play, but it is a political, not a commercial, instrument. It should be seen honestly and straightforwardly as such. Because it is a political and not a commercial instrument it is naïve to claim that it should go into every situation on the argument that it should behave in a commercial way.

As my right hon. Friend the Member for Leeds, South (Sir K. Joseph) said, such an institution has to walk delicately, and in this case delicacy was certainly needed and it was lacking. That is why I go along with the Motion and argue that, while I.R.C. and its management have done well and could do well in future, yet with this background of lazy thinking by this Government about its proper rôle, and the Government's failure to grasp the real implications of this kind of new agency, in this case it has made a mistake.

6.25 p.m.

Mr. David Price (Eastleigh)

I am very conscious that this debate has been all too brief and the outcome will be immensely frustrating to hon. Members on both sides of the House who came with the intention of making a contribution and have not been able to do so. I would willingly give up my winding-up speech but that such a break with tradition I should find difficult to make, and I should like to clarify some of the points which have been made. Nevertheless, I, too, feel frustrated because I shall have to make my speech very much shorter. I should like to follow the interventions made by the hon. Member for Luton (Mr. Howie) and the hon. Member for Billericay (Mr. Moonman).

We can take comfort in the fact that this can be regarded as a continuing debate, for we debated the White Paper, we debated the Industrial Reorganisation Corporation Bill on Second Reading, in Committee and on Third Reading before the Corporation was set up. We had a debate on 1st February, 1967, on the Consolidated Fund Bill and now we have this short debate today. I have no doubt that we shall have others in the future on the key issue of the structure of British industry and how it should be changed. I hope that I shall be able to summarise certain of the facts in this case and that we shall agree on them across the House. I wish to make known some opinions on which I do not expect to get the same unanimity.

We are today talking mainly about the recent events of the Kent-Cambridge merger. The first fact is that this was a contested take-over. For the first time the I.R.C. has openly taken sides. In Mr. Charles Villier's happy phrase, we have put our money where our mouth is. I wonder what action the I.R.C. would have taken if there had been two suitors for the hand of A.E.I. instead of one. Would it have intervened? This is one of the major issues in the debate. The I.R.C. decided that it knew better than the market mechanism and it used its large resources of public money to ensure that its view was successful. The right hon. Member for Belper (Mr. George Brown) thought this a good thing and I think it a bad thing.

The second fact is that Ranks, not the I.R.C. or for that matter Kents, was the catalyst for this restructuring of the industry. Ranks made its first public offer for Cambridge Instruments on 9th April, On 15th May, Kent announced the terms of its proposed offer, but the Rank offer on 9th April certainly triggered proceedings off. Would anything have happened if Ranks had not acted? From the days when the I.R.C. was in a state of gestation under the midwifery of the right hon. Gentleman, the I.R.C. had been looking at restructuring and possible mergers in the British scientific and industrial instruments fields, but nothing came out of that period of gestation until Ranks made its offer.

The third fact is, if the I.R.C. had not supported Kents, Ranks would have succeeded in its bid. It cost the I.R.C. nearly £6½ million of public money to support Kents against Ranks. The question I ask hon. Members opposite who believe that it was right for the I.R.C. to support its judgment in this manner, is whether, in terms of priorities at this moment, so certain are they that the I.R.C. was correct in its judgment—remember some structuring would have taken place if Ranks had gone through with its offer—this is a top priority for £6½ million of public money to be used to support this particular method of regrouping the scientific instruments industry against all the other calls on public expenditure at this time.

Mr. George Brown

I apologise for interrupting, but the hon. Member used the emotive phrase, "It cost the I.R.C.". The I.R.C. has invested £6½million—I take the hon. Member's word for the sum—which shows that the managing director expects it to sell at a thumping great profit in the 1970s. No other merchant bank or city institution would regard its investment as a cost. Why does the hon. Member use that term in relation to the I.R.C?

Mr. Price

I can give the right hon. Member two answers. I will go on to say whether this is a good investment, but he will agree with me that even if it is ultimately a profitable investment it is a current call on public money. In terms of the current cash flow it is competing for the use of that £6,500,000 in this first post-devaluation year of 1968 with other current calls on public money and he cannot gainsay that.

The fourth fact is that no adequate reasons were given by the I.R.C. to either Ranks or the public for favouring Kents. Ranks played fair with the I.R.C, but the I.R.C. never played fair with Ranks. It did not tell Ranks why it preferred Kents to Ranks and nor did it make efforts to discover from Ranks what their corporate strategy would have been if the Taylor Hobson and Cambridge Instrument merger had gone through, and remember the Hilger Watts offer from Ranks was also pending.

On 16th June, the Observer, to which the right hon. Member for Belper paid some attention, said: Imagine how John Davies must feel. He was absolutely open with the I.R.C. in all the dealings prior to the bid for Cambridge, but now finds that the I.R.C. is using taxes he pays to help out a rival he has outpaced in the market place. Only last Wednesday was the first time the public were given the I.R.C.'s justification for preferring Kents to Ranks, and it was a thin justification. What it amounted to was that the I.R.C. said, "We are the I.R.C. and we know best."

As my hon. Friend the Member for Horsham (Mr. Hordern) pointed out, the whole position of Taylor Hobson has been dismissed very lightly. Taylor Hobson is not an incompetent company, as has been acknowledged by the Government, because in each of the last three years Taylor Hobson has been awarded the Queen's Award for Industry-, which does not suggest that it is precisely the slouch which the defenders of the I.R.C. have been suggesting.

The industrial logic which was the basis of the Secretary of State's speech is not at all clear to me. The I.R.C. claims that the Kent-Cambridge merger will provide a broad-based company covering industrial and scientific instruments and therefore capable of competing with American giants. On the other hand, Ranks takes the view that the best merger was that of the scientific instrument companies—Taylor Hobson, Cambridge and Hilger and Watts—without the added diversification into industrial products.

I understand the argument of the hon. Member for Luton, but the plain fact is that, on the information available, one can argue the case both ways. I put it to the hon. Member for Luton and to the Parliamentary Secretary that there are some questions which anyone would be asking if he were one of the parties to this sort of merger and were considering it. He would ask, "Am I buying products or market? Am I eliminating competition? Am I safeguarding a source of supply? Am I safeguarding a market for my existing or future range of products? Am I buying management? Am I buying technology? Am I buying as a defensive strategy to stop my competitor from increasing his strength? Am I buying into a different market or technology as a specific and well-thought-out policy of diversification?" I hope that the right hon. Gentleman has observed that the questions begin "Am I buying", not, "Am I forming a judgment about what other people ought to do?".

Having answered those questions, there are two other rules for mergers to bear in mind. The first is that one ought not to go into a merger without knowing one's maximum price exactly and one ought not to be lured beyond it, which is what happened to Kents. Secondly, one ought to have an outline integration plan prepared in advance, because if one's merger is to succeed, integration must be total. Nothing fails like the merger of two equal partners one, or both, of whom still wants to remain a separate business, but with a bit more security added. Those are the sorts of questions which ought to be asked. Nothing that the I.R.C. has published has convinced me one way or the other and I shall not be convinced today in the absence of answers to those questions.

I hope that the House recognises that four companies have been under discussion—Cambridge Instruments, Taylor Hobson, Kents and Hilger and Watts. I hope that the House appreciates that there are at least 14 combinations of merger and restructuring. There could be a merger of all four; there could be a merger of any three leaving out the fourth; there could be two mergers of any two and one merger of any group of two leaving out the other two companies on their own. That makes a possibility of 14 combinations. Why do the Government think that the I.R.C. is so competent to judge among those 14 alternatives so as to know what is best for British industry better than the market does?

The right hon. Gentleman quoted prolifically from the weekend Press. I quote from the Sunday Telegraph of yesterday, which said: How does one know who to back? The Restrictive Practices Court, with its staff and its judges, the Monopolies Commission with its Q.C.s and experts, both make very heavy weather of industrial judgments. The idea of the Board of the I.R.C, largely busy business men acting part-time, being able to sit as a tribunal of judgment makes me laugh. Those who hold that the I.R.C. is competent to judge must remember that this judgment involves the use of £6,500,000 of public money. What we challenge—and I know that the right hon. Gentleman accepts this, because this is what the argument is about—is the whole theory of the I.R.C. as an active interventionist body and we challenge that theory—

Mr. George Brown rose—

Mr. Price

I have given way once to the right hon. Gentleman. The Parliamentary Secretary must have time to reply and I do not have time to give way again. We challenge the theory that the Board of the I.R.C. knows what is best for British industry.

Mr. George Brown rose—

Mr. Price

The next fact is the question of the legality of the I.R.C.'s action. Let us make it clear that that is not in question, because of the very wide powers which the Government gave the I.R.C. in the Act and which we bitterly opposed in Standing Committee.

The sixth fact is that the I.R.C. has said that it follows its mouth with its money. This has involved the I.R.C. in open market operations in support of Kents against Ranks and it has involved the use of public money in support of one contender against another.

Mr. George Brown rose—

Mr. Price

I know that the right hon. Gentleman knows little about patience, but I hope that he will wait patiently for a little longer.

As Mr. Villiers has said, the I.R.C. is a new organisation; "there is nothing like it elsewhere and new organisations do new things". What has it done? It has used the taxpayers' money to favour one bidder against another, and, in an economic sense, the I.R.C. is an irresponsible organisation.

Mr. George Brown

Nonsense.

Mr. Price

Of course, it is legally—

Mr. George Brown rose—

Mr. Speaker

Order. We are working against time.

Mr. Price

Of course—

Mr. George Brown rose—

Mr. Speaker

Order. The hon. Gentleman has not given way, so the right hon. Gentleman must resume his seat.

Mr. Price

Of course, the I.R.C. is legally responsible for not misusing the money entrusted to it and nobody suggests that it would be otherwise, but when it puts its money where its mouth is, its action is not comparable to that of a merchant banker or industrial firm following the same injunction, and I will tell the right hon. Member for Belper precisely why not. It is because its money is at risk—

Mr. George Brown rose—

Mr. Speaker

It is for an hon. Member to decide whether to give way.

Mr. Price

I have undertaken to give the Parliamentary Secretary time to reply. If the Parliamentary Secretary will give up his time, I will willingly give way to the right hon. Gentleman.

The money of an industrial firm or merchant bank is at risk in two ways—loss of investment and failure to earn. Failure to earn is of no relevance to the I.R.C, because it has no statutory duty to make a profit. Loss of capital might be mildly embarrassing, but it would not have the same significance as for a merchant bank or an industrial company. Therefore the I.R.C. is in a position to back its judgment against a. competitor without the financial disciplines to which its competitor is subject.

I have three points to make about the future. The I.R.C. has now made its position clear—it knows best what is best for British industry. Right hon. and hon. Members opposite agree with that view. We on this side do not, and increasingly the country will come to agree with us about it. Second, no company can now trust the I.R.C. implicitly. It can no longer trust it because the I.R.C. has ceased to be a catalyst and become a judge, and trust, I remind the House, was one of the original ground rules for its existence. Third, no company can now proceed with a bid without fear that a counter-bid will be supported by the I.R.C, with the knowledge that the I.R.C. has virtually unlimited resources behind it and is bound to win.

The action of the I.R.C. over Cambridge Instruments has given a particular meaning to the penultimate paragraph of its first annual Report: The hope is that nationalisation can be by agreement, but if this provies impossible, the I.R.C. will not flinch from exercising its collective business judgment in supporting positive action. As we have seen in the Kent-Cambridge case, supporting positive action means, "Heads I win, tails you lose". No doubt, such an attitude is entirely in tune with the Prime Minister's philosophy of politics, but it is in a very different key from the dulcet tones of the Financial Secretary to the Treasury when he replied to the last debate which we had on the I.R.C.

On 1st February, 1967, the hon. Gentleman said, about the I.R.C.: The Corporation competes with nobody. It threatens nobody. It compels nobody. It offers its connections, knowledge, advice and access to information to serve the purposes which I have outlined. There is no compulsion in its working. All this talk of threats or anything of that kind is quite beside the point."—[OFFICIAL REPORT, 1st February 1967; Vol. 740, c. 659.] The Financial Secretary's speech stands in absolute contrast to the new behaviour of the I.R.C, and our Motion today stands on his evidence.

6.41 p.m.

The Joint Parliamentary Secretary to the Ministry of Technology (Dr. Jeremy Bray)

We shall have to read HANSARD carefully tomorrow to find out exactly what the Opposition think about the I.R.C. We had one view from the right hon. Member for Leeds, North-East (Sir K. Joseph), another from the hon. Member for Yeovil (Mr. Peyton), and yet a third from the hon. Member for Eastleigh (Mr. David Price), the second Opposition Front Bench speaker.

In considering the Motion, the first question is whether the I.R.C. was right to intervene in the way it did in the Kent -Cambridge merger. The I.R.C. had a strong technical argument for supporting the Kent-Cambridge merger in preference to the Rank-Cambridge merger.

The instrument industry in the United Kingdom has suffered from excessive fragmentation, with firms unable to maintain the research and development, marketing or technical service effort needed to make a sufficiently powerful impact in the home and export markets. At the same time, it is an industry which depends pre-eminently on the skill and professionalism of its staff. Questions of structure and control, therefore, are necessarily delicate matters. They have to be handled carefully. It is not unknown for a company to acquire the shell of a company and to find that it has lost all its staff.

We see in the nucleonic instrument sector a good example of how, I am sure, hon. Members on both sides would like to be able to proceed, if possible, in every case. Here, by agreement, Nuclear Enterprises, a small progressive Scottish firm founded by a nuclear physicist, was able to acquire the activities of E.M.I. and Elliott in the nucleonic instrument field with the help of an I.R.C. loan, thus setting up an independent and powerful nucleonic instrument company with the resources needed for growth and competition in world markets.

Elsewhere in the instrument field, however, progress has been disappointing. Efforts to bring about a grouping of several of the major scientific instrument companies, including Cambridge, did not produce results. So the reaction of both Mintech and the I.R.C. to the initial Rank bid for Cambridge Instruments was far from hostile. Any company has to be taken seriously if it is able to show the technical and commercial success of Rank Xerox and Rank/Taylor Hobson in their different fields. However, the board of Cambridge Instruments strongly opposed the bid from Rank and held discussions with Kent which resulted in the agreed bid from Kent. The I.R.C., with Mintech knowledge and agreement, then attempted to arrange a compromise by bringing together Kent, Cambridge and Rank/ Taylor Hobson, and eventually other instrument companies, too, into one group wholly concerned with instruments. But this was not acceptable to Rank.

At this stage, it was open to the I.R.C. to support Kent and disappoint Rank, to support Rank and disappoint Kent and Cambridge, or to drop out altogether, which would amount to leaving the field to Rank with its greater financial resources. Obviously, the matter needed very careful consideration against the background of the state of the industry as a whole.

The instrument industry covers a diverse range of activities. At one end, the products include industrial control instruments which have to be rugged enough to work continuously, with very high reliability, in industrial conditions of vibration, corrosion, dust and extremes of ambient temperature in the general rough and tumble of a factory. At the other end of the scale, it includes scientific instruments which may be switched on for only a few minutes a day, instruments working in laboratory conditions and involving a totally different kind of technology in their creation. The techniques used in both industrial instruments and scientific instruments span optics, precision engineering, electronics and physical chemistry.

The state of the instrument industry reflects Britain's past emphasis on pure research rather than industrial application, a bias which we are now trying to correct by many different policies of this Government. Britain's scientific instrument effort has been a good deal stronger than its industrial instrument effort. It is absolute bunk, if I may so put it, to suggest that the industrial instrument sector is declining, contracting or in any way likely to be a failing industry in the future.

Mr. Hordern

Will the hon. Gentleman refer to the George Kent report, which itself refers to the slow growth of the industrial instrument industry as compared with the scientific instrument industry?

Dr. Bray

Yes, and I shall refer to figures in a moment, if the hon. Gentleman will be patient.

Perhaps the most significant indicator is not just domestic production but the trade figures. With all the difficulties of the classifications—I freely acknowledge that we often do not know exactly what the Overseas Trade Accounts mean—one can say that for instruments in Class 861.97, that is, the more conventional measurement and control instruments, imports rose between 1964 and 1967 by 89 per cent. and exports, though rising, rose by only 21 per cent., a story which is all too common in a wide range of engineering products. But this does not mean that we can contract out of the whole field of engineering in which this sort of thing happens.

On the other hand, for the far more complex analytical and other instruments—Class 861.98—imports fell between those same years by 8 per cent., but exports rose by 78 per cent. That is a splendid trade performance by any standards. It is almost unique among engineering products., and paralleled only by other advanced products, as in the recent trend in computers.

Our industrial strategy as a nation, therefore, not only on instruments but generally must be to bring advanced products and techniques more closely to the support of our basic and still much larger engineering activities.

Cambridge offers in the range of techniques which it employs precision engineering and electronic capabilities in the medical and scientific instrument and the industrial control fields. Kent offers precision engineering and electronics and total systems capabilities mainly in the industrial process control field.

There are clearly mutual advantages to Kent and Cambridge in having outlets in the industrial instruments field for new developments coming from the scientific instrument industry. Rank had no such use for Cambridge. Rank Taylor Hobson are not in the industrial control sector to any significant extent, but they offer optics and the highest precision engineering capabilities in lens manufacture and design and dimensional measuring equipment, in which they are pre-eminent. However, it is a completely different area from industrial process control, in which both Kent and Cambridge are active.

There is no substantial industrial process instrument activity within Rank. Rank has been investing its very substantial earnings from Xerox—for which it is licensed wholly from the United States as far as technology goes—with varying success in a very wide range of activities, including bingo halls, bowling alleys and motor ports, as well as industrial equipment; and there is nothing wrong with that. In industrial process control it would be virtually starting from scratch. By contrast, Kent has concentrated all along on instruments and stands or falls by operating profitably and maintaining technical superiority over their competitors in the instrument industry.

Against this background it is difficult to fault the argument of I.R.C. as to where the industrial logic and the national interest lay. As I understand Opposition speakers, they have not denied the force of the industrial argument. The right hon. Member for Leeds, North-East spoke of a possible Rank-Cambridge merger as if it might have been a second best, and he questioned whether it might not be better to accept a second best in this respect. In other words, the Opposition have questioned the industrial case but they have not denied it, and they freely accept that it could well be sound.

They question it for two reasons. First, because Rank disagreed, and it was for Rank to consider whether Cambridge would have been a profitable investment for them at the price which they offered. I would not dispute that the judgment that Rank made could well have resulted in a better use of our national assets than had previously been the case, and I readily concede this to the hon. Member for Horsham (Mr. Hordern), but that still need not make it as good a solution as the Kent-Cambridge merger. The Opposition are perhaps being a trifle idealistic if they expect the voice of reason instantly to command universal assent where it conflicts with the short-term interests of some of the parties involved.

The second argument of the Opposition is that the market would have shown who was right in its own good time—in the long run, when as Keynes said, we are all dead. Such masochistic pursuit of the purest Tory doctrine speaks well for the consistency of hon. Gentlemen opposite, but not well for their good sense and sense of priorities for the country in the position it faces and the needs of industry today.

The next opposition argument is that even if the right solution has been arrived at this time, it constitutes a dangerous precedent for the future. That is the hoary old argument that if right is done this time right may have to be done next time too. But, they argue, even with all the advice in the world from a wide range of people to whom they talk in private industry as well as in Government and research establishments, the I.R.C. is still not infallible. It will certainly make mistakes sometimes if it bids against other bidders.

We are all human, even the I.R.C., and I would be very sorry if, after a number of years, I could feel that it had never made a mistake, because it would mean that those at the top had gone to sleep. It must be that I.R.C. could err, and it is inherently more likely that it will make a mistake in the quiet of an uncontested takeover than under the arc lights of a contested one. If hon. Gentlemen opposite are anxious to see the I.R.C. maintaining penetrating standards of assessment, then they should welcome the entrance of I.R.C. into contested takeover bids, when it would have to argue its case and convince shareholders as well as the management of companies.

Opposition hon. Members have made the point, as have some sections of the Press, that if I.R.C. enters into a contested takeover bid it will forfeit the confidence of firms which have previously been prepared to confide in I.R.C. and open their books to the Corporation. There is no evidence whatsoever of this happening, either with firms who are already engaged in discussions with I.R.C., or with firms who are making fresh contacts with I.R.C. The House has heard this afternoon of the fishing industry. Only last week a firm which was anxious to talk was passed on to the I.R.C. from Mintech. There is no evidence, I repeat, that there is any failing or diminution of confidence. Indeed, in so far as there is any reaction, the effect of the Kent-Cambridge deal seems to have been to consolidate the view that I.R.C. is to be taken seriously as pursuing a constructive rôle in British industry.

I believe it was the hon. Member for Horsham who asked about the terms on which the I.R.C. can borrow. If he will read the I.R.C. Report and accounts he will find the terms fully set out there; it is broadly at the Government borrowing rate.

Other hon. Members, and particularly the hon. Member for Bodmin (Mr. Bessell), argued that the I.R.C. should justify its interventions, giving a reasoned case for its view, before backing it with public money. The I.R.C. has already gone a great deal beyond the usual practice in the City in this respect. It has not been exactly reticent, but I am sure that it will note the point that hon. Members have made and do its best to conform.

When it comes to public agencies handing out funds to private industry, the Opposition struggle valiantly to overcome their scruples about Government intervention. So long as they could regard I.R.C. as a placid milch cow they were ready, though somewhat surprised, to smile on its ruminations; but it never was a milch cow; it has a serious task to do and it is doing it energetically.

Perhaps the strongest reason for rejecting the Opposition Motion is not that it is doctrinaire, not that it is less than scrupulous in failing to seek value for public money, but in that the Motion is complacent. The Opposition when, in power, left this country in a state—and I quote from the recent report by the Brookings Institution—in which, by 1962, productivity in United Kingdom industry was already 14 per cent., below that of France, 12 per cent. below that of Germany, and 5 per cent. below that of the Netherlands and even below Italy. I hope that hon. Gentlemen opposite will read that report.

There is a need for action, and for urgent action. The instrument industry cannot wait while the Opposition overcomes another lot of scruples. We have heard from the speeches of hon. Gentlemen this afternoon the great diversity of view that exists on the Opposition benches about the activities of I.R.C. Meanwhile, the House cannot accept an inhibition on the long overdue and energetic work of the Industrial Reorganisation Corporation and, therefore, I invite the House to reject the Motion.

Question put:— That this House, while upholding the independence of the Industrial Reorganisation Corporation, deplores its action in intervening with public money on behalf of one bidder in a merger operation, and regards such action as a dangerous precedent for the future.

The house divided: Ayes 233, Noes 307.

Division No. 269]	AYES	[7.0 p.m.
Alison, Michael (Barkston Ash)	Gower, Raymond	Nicholls, Sir Harmar
Allason, James (Hemel Hempstead)	Grant, Anthony	Noble, Rt. Hn. Michael
Astor, John	Grant-Ferris, R.	Nott, John
Atkins, Humphrey (M't'n & M'd'n)	Gresham Cooke, R.	Onslow, Cranley
Awdry, Daniel	Grieve, Percy	Orr, Capt. L. P. S.
Baker, Kenneth (Acton)	Griffiths, Eldon (Bury St. Edmunds)	Orr-Ewing, Sir Ian
Baker, W. H. K. (Banff)	Gurden, Harold	Osborn, John (Hallam)
Balniel, Lord	Hall, John (Wycombe)	Osborne, Sir Cyril (Louth)
Barber, Rt. Hn. Anthony	Hall-Davis, A. G. F.	Page, Graham (Crosby)
Batsford, Brian	Hamilton, Lord (Fermanagh)	Pearson, Sir Frank (Clitheroe)
Beamish, Col. Sir Tufton	Hamilton, Michael (Salisbury)	Peel, John
Bell, Ronald	Harris, Frederic (Croydon, N.W.)	Percival, Ian
Bennett, Sir Frederic (Torquay)	Harrison, Brian (Maldon)	Pike, Miss Mervyn
Berry, Hn. Anthony	Harrison, Col. Sir Harwood (Eye)	Pink, R. Bonner
Biffen, John	Harvey, Sir Arthur Vere	Pounder, Rafton
Biggs-Davison, John	Hastings, Stephen	Powell, Rt. Hn. J. Enoch
Birch, Rt. Hn. Nigel	Heald, Rt. Hn. Sir Lionel	Price, David (Eastleigh)
Black, Sir Cyril	Heath, Rt. Hn. Edward	Prior J. M. L
Blaker, Peter	Heseltine, Michael	Pym, Francis
Boardman, Tom (Leicester, S.W.)	Higgins, Terence L.	Quennell, Miss J. M.
Body, Richard	Hiley, Joseph	Ramsden, Rt. Hn. James
Bossom, Sir Clive	Hill, J. E. B.	Rawlinson, Rt. Hn. Sir Peter
Boyle, Rt. Hn. Sir Edward	Hirst, Geoffrey	Rees-Davies, W. R.
Braine, Bernard	Hogg, Rt. Hn. Quintin	Renton, Rt. Hn. Sir David
Brewis, John	Holland, Philip	Rhys Williams, Sir Brandon
Brinton, Sir Tatton	Hordern, Peter	Ridley, Hn. Nicholas
Bromley-Davenport, Lt.-Col. Sir Walter	Hornby, Richard	Rippon, Rt. Hn. Geoffrey
Brown, Sir Edward (Bath)	Howell, David (Guildford)	Robson Brown, Sir William
Bruce-Gardyne, J.	Hunt, John	Rodgers, Sir John (Sevenoaks)
Bryan, Paul	Hutchison, Michael Clark	Rossi, Hugh (Hornsey)
Buchanan-Smith, Alick (Angus,N&M)	Iremonger, T.L	Royle, Anthony
Buck, Anthony (Colchester)	Irvine, Brynant Godman (Rye)	Russell, Sir Ronald
Bullus, Sir Eric	Jenkin, Patrick (Woodford)	St. John-Steavas, Norman
Campbell, B. (Oldham, W)	Jennings, J. C. (Burton)	Sandys, Rt. Hn. D.
Campbell, Gordon (Moray & Nairn)	Jopling, Michael	Scott, Nicholas
Carlisle, Mark	Joseph, Rt. Hn. Sir Keith	Scott-Hopkins, James
Carr, Rt. Hn. Robert	Kaberry, Sir Donald	Sharples, Richard
Channon, H.P.G.	Kerby, Capt. Henry	Shaw, Michael (Sc'b'gh & Whitby)
Chichester-Clark, R.	Kershaw, Anthony	Silvester, Frederick
Clark, Henry	Kimball, Marcus	Sinclair, Sir George
Clegg, Walter	King, Evelyn (Dorset, S.)	Smith, Dudley (W'wick & L'mington)
Cooke, Robert	Kirk, Peter	Smith, John (London & W'minster)
Cooper-Key, Sir Neil	Kitson, Timothy	Speed, Keith
Cordle, John	Knight, Mrs. Jill	Stainton, Keith
Corfield, F.V.	Lambton, Viscount	Stoddart-Scott, Col. Sir M. (Ripon)
Costain, A.P.	Lancaster, Col. C.G.	Summers, Sir Spencer
Craddock, Sir Beresaford (Spelthorne)	Lane, David	Tapsell, Peter
Crosthwaite-Eyre, Sir Oliver	Langford-Holt, Sir John	Taylor, Sir Charles (Eastbourne)
Crouch, David	Lewis, Kenneth (Ruthland)	Taylor, Edward M. (G'gow, Catheart)
Crowder, F. P.	Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)	Taylor, Frank (Moss side)
Cunningham, Sir Knox	Lloyd, Ian (P'tsm-th, Langstone)	Teeling, Sir William
Currie, G. B. H.	Lloyd, Rt. Hn. Selwyn (Wirral)	Temple, John M.
Dance, James	Longden, Gilbert	Thatcher, Mrs. Margaret
d-Avigdor-Goldsmid, Sir Henry	Loveys, W.H.	Tilney, John
Dean, Paul (Somerset, N.)	McAdden, Sir Stephen	Turton, Rt. Hn. R. H.
Deedes, Rt. Hn. W. F. (Ashford)	MacArthru, Ian	van Straubenzee, W. R.
Digby, Simon Wingfield	Maclean, Sir Fitzory	Vaughan-Morgan, Rt. Hn. Sir John
Dodds-Parker, Douglas	Macleod, Rt. Hn. Iain	Vickers, Dame Joan
Donnelly, Desmond	McMaster, Stanley	Waddington. David
Coughty, Charles	Macmillan, Maurice (Farnham)	Walker,Peter (Worcester)
Doughty, G.B.	Maddan, Martin	Walker-Smith, Rt. Hn. Sir Derek
du Cann, Rt. Hn. Edward	Maginnis, John E.	Wall, Patrick
Elliot, Capt. Walter (Carshatton)	Marples, Rt. Hn. Ernest	Waters, Dennis
Emery, Peter	Marten, Neil	Ward, Dame Irene
Errington, Sir Eric	Maude, Angus	Weatherill, Bernard
Farr, John	Maulding, Rt. Hn. Reginald	Wells, John (Maidstone)
Fisher, Nigel	Mawby, Ray	Whitelaw Rt Hn William
Fletcher-Cooke, Charles	Mills, Stratton (Belfast, N.)	Williams, donald (Dudley)
Fortescue, Tim	Miscampbell, Norman	Wills, Sir Gerald (Bridgwater)
Fraser, Rt. Hn. Hugh (St'fford & Stone)	Mitchell, David (Basingstoke)	Wilsaon, Geoffrey (Truro)
Galbraith, Hn. T.G.	Monro, Hector	Wolrige-Gordon, Patrick
Gibson-Watt, David	Montgomery, Fergus	Wood, Rt. Hn. Richard
Giles, Rear-Adm. Morgan	More, Jasper	Woodnutt, Mark
Gilmour, Ian (Norfolk, C.)	Morrison, Charles (Devizes)	Worsley, Marcus
Glover, Sir Douglas	Mott-Radclyffe, Sir Charles	Younger, Hn. George
Glyn, Sir Richard	Munro-Lucas-Tooth, sir Hugh
Godber, Rt. Hn. J. B.	Murton, Oscar	TELLERS FOR THE AYES:
Goodhart, Philip	Nabarro, Sir Gerald	Mr. R.W. Elliott and
Goodhew, Victor	Neave, Airey	Mr. Reginald Eyre.

NOES
Abse, Leo	Fernyhough, E.	Luard, Evan
Albu, Austen	Fitch, Alan (Wigan)	Lyon, Alexander W. (York)
Allan, Frank (Salford, E.)	Flectcher, Raymond (Ilkeston)	Lyons, Edward (Bradford, E.)
Alldritt, Walter	Flectcher, Ted (Darlington)	McBridge, Neil
Anderson, Donald	Fooley, Maurics	McCann, John
Archer, Peter	Foot, Rt. Hn. Sir Dingle (Ipswich)	MacColl, James
Atkinson, Ronald (Preston, N.)	Foot, Micheal (Ebbw Vale)	MacDermot, Naill
Atkinson, Norman (Tottenham)	Ford, Ben	Macdonald, A. H.
Bacon, Rt. Hn. Alice	Forrester, John	McKay, Mrs. Margaret
Bagier, Gordon A. T.	Fowler, Gerry	Mackenzie, Gregor (Rutherglen)
Barnes, Michael	Fraser, John (Norwood)	Mackie, John
Barnett, Joel	Freeson, Reginald	Mackintosh, John P.
Baxter, William	Galpern, Sir Myer	Maclennan, Robert
Beaney, Alan	Gardner, Tony	McMillan, Tom (Glasgow, C.)
Bence, Cyril	Garrett, W. E.	McNamara, J. Kevin
Benn, Rt. Hn. Anthony Wedgwood	Ginsburg, David	Mahon, Peter (Preston, S.)
Bennett, James (G'gow, Bridgeton)	Gordon Walker, Rt. Hn. P. C.	Mahon, Simon (Bootle)
Bessell, Peter	Gourlay, Harry	Mallalieu, E. L. (Brigg)
Bidwell, Sydney	Gray, Dr. Hugh (Yarmouth)	Mallalieu, J. P. W. (Huddersfield, E.)
Binns, John	Greenwood, Rt. Hn. Anthony	Manuel, Archie
Bishop, E. S.	Gregory, Arnold	Marks, Kenneth
Blackburn, F.	Grey, Charles (Durham)	Marquand, David
Boardman, H. (Leigh)	Griffiths, David (Rother valley)	Marsh, Rt. Hn. Richard
Booth, Albert	Griffiths, Eddie (Brightside)	Mason, Rt. Hn. Roy
Boston, Terence	Griffiths, Rt. Hn. James (Llanelly)	Maxwell, Robert
Bottomley, Rt. Hn. Arthur	Griffiths, Will (Exchange)	Mayhew, Christopher
Boyden, James	Hamilton, James (Bothwell)	Mendelson, J. J.
Braddock, Mrs. E. M.	Hamling, William	Mikardo, Ian
Bradley, Tom	Hannan, William	Millan, Bruce
Bray, Dr. Jeremy	Harper, Joseph	Miller, Dr. M. S.
Broughton, Dr. A. D. D.	Harrison, Walter (Wakefield)	Milne, Edward (Blyth)
Brown, Rt. Hn. George (Belper)	Hart, Rt. Hn. Judith	Mitchell, R. C. (S'th'pton, Test)
Brown, Hugh D. (G'gow, Provan)	Haseldine, Norman	Molloy, William
Brown, Bob (N'c'He-upon-Tyne,W.)	Hattersley, Roy	Moonman, Eric
Brown, R. W. (Shoreditch & F'bury)	Hazell, Bert	Morgan, Elystan (Cardiganshire)
Buchan, Norman	Healey, Rt. Hn. Denis	Morris, Alfred (Wythenshawe)
Buchanan, Richard (G'gow, Sp'burn)	Heffer, Eric S.	Morris, Charles R. (Openshaw)
Butler, Herbert (Hackney, C.)	Henig, Stanley	Morris, John (Aberavon)
Butler, Mrs. Joyce (Wood Green)	Hilton, W. S.	Moyle, Roland
Callaghan, Rt. Hn. James	Hobden, Dennis (Brighton, K'town)	Mulley, Rt. Hn. Frederick
Cant, R. B.	Hooley, Frank	Murray, Albert
Carmichael, Neil	Horner, John	Neal, Harold
Carter-Jones, Lewis	Houghton, Rt. Hn. Douglas	Newens, Stan
Castle, Rt. Hn. Barbara	Howarth, Harry (Wellingborougn)	Noel-Baker, Rt. Hn. Philip (Derby,S.)
Chapman, Donald	Howarth, Robert (Bolton, E.)	Oakes, Gordon
Coe, Denis	Howell, Denis (Small Heath)	Ogden, Eric
Coleman, Donald	Howie, W.	O'Malley, Brian
Conlan, Bernard	Huckfield, Leslie	Oram, Albert E.
Corbet, Mrs. Freda	Hughes, Rt. Hn. Cledwyn (Anglesey)	Orme, Stanley
Crawshaw, Richard	Hughes, Emrys (Ayrshire, S.)	Oswald, Thomas
Cronin, John	Hughes, Hector (Aberdeen, N.)	Owen, Dr. David (Plymouth, S'tn)
Crosland, Rt. Hn. Anthony	Hughes, Roy (Newport)	Owen, Will (Morpeth)
Crossman, Rt. Hn. Richard	Hunter, Adam	Page, Derek (King's Lynn)
Cullen, Mrs. Alice	Hynd, John	Paget, R. T.
Dalyell, Tarn	Irvine, Sir Arthur (Edge Hill)	Palmer, Arthur
Darling, Rt. Hn. George	Jackson, Colin (B'h'se & Spenb gn)	Pannell, Rt. Hn. Charles
Davidson, Arthur (Accrington)	Janner, Sir Barnett	Park, Trevor
Davies, Ednyfed Hudson (Conway)	Jay, Rt. Hn. Douglas	Parkin, Ben (Paddington, N.)
Davies, Dr. Ernest (Stretford)	Jeger, George (Goole)	Parkyn, Brian (Bedford)
Davies, Harold (Leek)	Jeger, Mrs. Lena (H'b'n&St.P cras, s.)	Pavitt, Laurence
Davies, S. O. (Merthyr)	Jenkins, Hugh (Putney)	Pearson, Arthur (Pontypridd)
Delargy, Hugh	Jenkins, Rt. Hn. Roy (Strechford)	Peart, Rt. Hn. Fred
Dell, Edmund	Johnson, James (K'ston-on-Hull, w)	Pentland, Norman
Dempsey, James	Jones, Dan (Burnley)	Perry, Ernest G. (Battersea, S.)
Dewar, Donald	Jones, Rt. Hn. SirElwyn (W. Ham, S.)	Perry, George H. (Nottingham, S.)
Diamond, Rt. Hn. John	Jones, J. Idwal (Wrexham)	prcntice, Rt. Hn. R. E.
Dickens, James	Judd, Frank	pric,chriStopher (Perry Barr)
Dobson, Ray	Kelley, Richard	price, Thomas (Westhoughton)
Doig, Peter	Kenyon, Clifford	Prjce, William (Rugby)
Dunn, James A.	Kerr, Mrs. Anne (R'ter & Chatham)	Pursey, Cmdr. Harry
Dunnett, Jack	Kerr, Dr. David (W'worth., Central)	Randall, Harry
Dunwoody, Mrs. Gwyneth (Exeter)	Kerr, Russell (Feltham)	Rankin, John
Dunwoody, Dr. John (F'th & C'b'e)	Lawson, George	Rees, Mertyn
Eadie, Alex	Lee, Rt. Hn. Frederick (Newton)	Reynolds, Rt. Hn. G. W.
Edelman, Maurice	Lee, Rt. Hn. Jennie (Cannock)	Rhodes, Geoffrey
Edwards, William (Merioneth)	Lee, John (Reading)	Richard Ivor
Ellis, John	Lestor, Miss Joan	Roberts, Albert (Normanton)
English, Michael	Lever, Harold (Cheetham)	Roberts, Rt. Hn. Goronwy (C'narr'n)
Emals, David	Lever L. M. (Ardwick)	Roberts, Rt. Hn. Gwilym (Bedfordshire, S.)
Ensor, David	Lewer, Arthur (W. Ham, N.)	Robertson, John (Paisley)
Evans Albert (Islington, S.W.)	Lewis, Ron (Carlisle)	Robinson, Rt. Hn. Kenneth (St.P'c'a.)
Evan, loan L. (Birm'h'm, Yardley)	Lipton, Marcus	Robinson, W. O. J. (Walth'stow, E.)
Faulds, Andrew	Loams, Kenneth	Rodgers, William (Stockton)

Roebuck, Roy	Storehouse, Rt. Hn. John	Wells, William (Walsall, N.)
Rogers, George (Kensington, N.)	Strauss, Rt. Hn. G. R.	Whitaker, Ben
Rose, Paul	Summerskill, Hn. Or. Shirley	White, Mrs. Eirene
Ross, Rt. Hn. William	Swain, Thomas	Whitlock, William
Rowlands, E. (Cardiff, N.)	Swingler, Stephen	Wilkins, W. A.
Ryan, John	Taverne, Dick	Williams, Alan (Swansea, W.)
Shaw, Arnold (Ilford, S.)	Thomas, Rt. Hn. George	Williams, Alan Lee (Hornchurch)
Sheldon, Robert	Thomson, Rt. Hn. George	Williams, Clifford (Abertillery)
Shinwell, Rt. Hn. E.	Thornton, Ernest	Williams, W. T. (Warrington)
Shore, Rt. Hn. Peter (Stepney)	Tinn, James	Willis, Rt. Hn. George
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)	Tuck, Raphael	Wilson, William (Coventry, S.)
Short, Mrs. Renée (W'hampton, N.E.)	Urwin, T. W.	Winnick, David
Silkin, Rt. Hn. John (Deptford)	Varley, Eric G.	Winstanley, Dr. M. P.
Silverman, Julius	Wainwright, Edwin (Dearne Valley)	Woof, Robert
Skeffington, Arthur	Wainwright, Richard (Colne Valley)	Wyatt, Woodrow
Slater, Joseph	Walden, Brian (All Saints)	Yates, Victor
Small, William	Walker, Harold (Doncaster)
Snow, Julian	Wallace, George	TELLERS FOR THE NOES:
Spriggs, Leslie	Watkins, David (Consett)	Mr. J. D. Concannon and
Steal, David (Roxburgh)	Weitzman, David	Mr. Ernest Armstrong.
Steele, Thomas (Dunbartonshire, W.)	Wellbeloved, James