§ The Minister of Technology (Mr. Anthony Wedgwood Benn)
With permission, I should like to make a statement about the computer industry.
I am pleased to be able to inform the House that, with the backing of the Government, the commercial and scientific computer businesses of I.C.T. and English Electric Computers are to be brought together into one company to be called International Computers Limited. I.C.L. will be by far the largest company outside the United States of America specialising in commercial and scientific computers. Plessey, a major manufacturer of telecommunications equipment, will participate in the new group, and will also form a joint development company with I.C.L. to study and develop the convergence between computers and communications.
In pursuing our objective of a strong independent British computer industry, and recognising I.C.L.'s need for heavy expenditure on research and development and for securing a strong financial position, the Government propose, subject to the approval of Parliament, to participate in the financing of the new Company's operations to the extent of £17 million over a period of five years.
Of this total amount, the Ministry of Technology has agreed to provide £13½ million over the next four years as grant towards I.C.L.'s research and development expenditure. The remaming£3½ 608 million is to be subscribed for ordinary shares of £1 each, which will be issued to the Government at par; 2s. per share will be payable on issue, and the balance in 1972. The current market value of these shares substantially exceeds the amount to be subscribed for them. These terms have been designed to make a high proportion of the Government's contribution available as support for the research and development programme chargeable against revenue, while giving the Government a substantial participation in the future prosperity of the Company which this programme is designed to achieve. I have in mind making use of the powers for which the Industrial Expansion Bill makes provision, subject to the enactment of the Bill, and the necessary affirmative Resolution.
As a result of these arrangements the Government will hold initially 10.5 per cent. of the ordinary shares, and the other shares will be held: 53.5 per cent. by the former I.C.T. shareholders, 18 per cent. by English Electric, 18 per cent. by Plessey.
It will be the policy of I.C.L. to continue to manufacture, market and service the present I.C.T. 1900 and English Electric System 4 ranges of computers, with enhancements. It will also sell and service the Elliott 4100 range. The know-how and experience of I.C.T. and of English Electric Computers will be pooled to develop for the 1970s a new range of computer systems, as competitive as any available in the world markets at that time. The new range will be designed to enable both 1900 Series and System 4 users to transfer their work to it without difficulty.
In the light of the Government's intention to place orders for large computer systems, I.C.L.'s research and development programme will include the development of such a system to meet the expected demand at home and overseas.
The Government will have a director on the board of the new company, but do not intend to intervene in the day-to-day management. To safeguard the public interest, the Government and the company will enter into an agreement the text of which, when completed, I will make available to the House. There will be a revision of the existing arrangement between the N.R.D.C. and I.C.T., 609 which will bring forward the repayment of the money advanced by the N.R.D.C.
My right hon. Friend the President of the Board of Trade has indicated that he does not intend to refer the proposed arrangement to the Monopolies Commission. Neither English Electric nor Plessey will enjoy a preferential postion in the supply of components to I.C.L. which will seek its supplies from the most competitive sources.
§ Mr. David Price
Is the right hon. Gentleman aware that the House will need some time to study his detailed statement before commenting on it and that we would like to have a fairly early opportunity of debating it? I do not think that in his statement he told the House what would be the total capital available to the company. He referred only to the extra working capital to be added.
§ Mr. Benn
On the latter point, I think it would be better if the hon. Gentleman were to await the publication of the figures, which are very complicated; but they will be made available by the companies later this afternoon.
As to the question of a debate, there will be opportunities for a debate on the affirmative Order which it will be necessary to bring forward under the Industrial Expansion Bill procedure, and there will be opportunities during the later stages of the Bill for the House to discuss it.
§ Mr. J. T. Price
I believe that many of us on this side welcome the announcement of this new consortium arrangement, in which the Government are a participating partier, in one of the industries of the future, but will my right hon. Friend enlighten me on the status of the original £25 million placed at the disposal of his predecessor in the Ministry of Technology for encouraging the development of the 610 computer industry which was administered by his Department? Is this £17 million of public money in addition to the £25 million originally placed at the disposal of our late lamented friend, my right hon. Friend's predecessor, or is it supplementary to it?
§ Mr. Benn
I think that my hon. Friend may be misunderstanding the £25 million. The N.R.D.C. made available £5 million to I.C.T., of which about £4 million has been taken up and the repayment of which, with interest, will be accelerated under the arrangements which have been concluded tentatively with the three companies. As regards other support for the computer industry, there has been the establishment of the National Computer Centre, the Advanced Computer Techniques Project, the support for university computers, the computer-aided design facilities at Cambridge, and a number of different projects, but they do not add up to £25 million which my hon. Friend mentioned.
§ Sir G. Nabarro
With regard to the 10½ per cent. equity which the Government propose to hold, a small minority equity, what possible justification can there be for this heavy public expenditure when the whole of this money could have been raised without undue difficulty by 1972 through normal channels on the London Stock Market?
§ Mr. Benn
The hon. Gentleman is wrong in supposing that this is simply a financial deal. It is not. The discussions between I.C.T. and English Electric have been going on for about three years, and these arrangements were made possible only after some detailed technical discussions in which my Department played a full part last year, and which proved that it was possible to bring I.C.T. and English Electric together in a technical convergence for a new system in 1970. If the hon. Gentleman looks at the statement again, he will see that the heart of it, in the short run, is research and development money which is not available from the City, and this is why my Department is involved.
§ Mr. Dalyell
I congratulate my right hon. Friend on his action, which will save the computer industry for this side of the Atlantic. Who is to be the Government director, and what part did the I.R.C. play in this operation?
§ Mr. Benn
I am grateful to my hon. Friend for what he has said, because the credit for this goes to those in my Department and outside who worked very hard to bring it about.
No decision has been made about the Government director. The I.R.C. was kept fully informed, but, for the reason which I gave the hon. Member for Worcestershire, South (Sir G. Nabarro), it was not an appropriate matter for the I.R.C. This was research and development money in effect being converted into an equity.
§ Mr. Lubbock
Ls the right hon. Gentleman aware that his statement will be widely welcomed as putting the computer industry on a stronger basis to compete with the Americans? Could I ask about the large computer system to be developed by I.C.L. and whether, as has been reported, it will be substantially more powerful than anything the Americans have on offer at present; and whether the Government will place orders for equipment as well as development, and what proportion of the new company's investment programme will be on softwear associated with the new system? Further, is he aware that the Post Office have not yet even begun to understand the need for data transmission facilities associated with present generation computers, and will the new company be able to make the strongest representations to the Post Office on the matter?
§ Mr. Benn
This is really a matter for my right hon. Friend the Postmaster-General, but the data transmission services of the Post Office have been developed, and I have no doubt will be developed, on a scale adequate to cope with the new requirements. So far as the Government need for computers is concerned, over the last seven years the computer power available to Government has been doubling every 15 months; and this is an enormous amount of growth which provides a sound market foundation on which the new company expects to develop itself.
As far as the new system is concerned in the 1970s, this will be brought about by the convergence of the two systems now used and sold by the companies, which will continue to be used and sold. As far as the large computer project is concerned, there have been a number of discussions with I.C.T., but now that the 612 merger is to take place I think it is right that they should take advantage of what will become available through the addition of English Electric. This will be part of the same process.
§ Mr. Benn
The reason for these arrangements, which are extremely complicated, is that it was necessary to provide substantial sums of money for research and development purposes during the period when the new company will be developing its new computer system and by the arrangements which have been reached after long and detailed negotiations in which we have had access to independent expert advice. The arrangements suggested under which 2s. will be paid in the first instance and the remaining 18s. will be paid later, were thought to be the right way of proceeding. In addition, I should add that there will not be dividends accruing to the Government shares for the first two years and, even after that, there will not be a full divident payment until the full payment has been made for shares at par.
§ Mr. Maudling
Could the right hon. Gentleman say to what extent the new organisation will represent a monopoly in the normally accepted meaning of that word?
§ Mr. Benn
It will be a concentration of the business and scientific computers in this country, but, of course, with I.B.M. at 100 the new corporation will be only five. It is still very small as compared with the large international computer companies. In fact, I.B.M., Univac, Honeywell and Control Data are still bigger. Then we shall have I.C.L., but it is significant that the new I.C.L. will have a bigger computer capability than the Radio Corporation of America, American General Electric, Burroughs or National Cash Register. We have now succeeded—and this is a product of work done over many years—in ensuring that this country remains in the computer industry.
Sir J. Langford Holt
Has the right hon. Gentleman's attention been drawn to the fact that there was a considerable and exceptional rise in the value of I.C.T. shares on the Stock Exchange this morning, which would seem to indicate that at 613 least somebody was aware of what was taking place before the House of Commons?
§ Mr. Benn
The problem of security has caused a great deal of anxiety to myself and those negotiating on the part of the Ministry of Technology and the Government. I only signed this on Tuesday last and two days had to be allowed for the printing of certain documents; so that Thursday was the first day on which it could be announced. The security arrangements today have been extremely close on our side because of the amount of money the Government are putting into this particular operation. But it is also true that there has been a lot of speculation in the Press about this, much of it totally inaccurate, but mostly necessarily following from the fact that discussions on the matter have gone on for such a long time.