ROLLS-ROYCE (LAUNCHING AID) (Hansard, 30 November 1970)

§ Mr. Speaker
I understand that the Secretary of State for Trade and Industry wishes to answer Question No. 121.

§ Mr. John Davies
With permission, Mr. Speaker, I will now answer Question No. 121.
As I informed the House on 23rd November no public funds are included in the £18 million to be made available to Rolls-Royce from sources other than the Exchequer.

§ Mr. Sheldon
On a point of order, Mr. Speaker. I hesitate to raise a point of order when the Question is being answered, but I put down on Thursday evening Oral Question No. 7 for answer today. One sees from today's Order Paper that for some reason I cannot comprehend it is put down as an Oral Question transferred as a Written Question. Since it seems that the Oral Question is now being answered, a matter of which I had no previous information, it places me at some disadvantage.

§ Mr. Speaker
I understand that the hon. Gentleman had three Oral Questions down. Two of them remain Oral Questions, and the third becomes a Written Question.

§ Mr. Davies
I repeat that as I informed the House on 23rd November, no public funds are included in the £18 million to be made available to Rolls-Royce from sources other than the Exchequer. Since, in the absence of any more detailed explanation, there is some risk of misunderstanding, I have obtained the permission of the Bank of England and Rolls-Royce to tell the House that the £18 million included a facility under which banking advances will be available to the company from the Bank of England as well as additional facilities from the company's private bankers.

§ Mr. Thorpe
I thank the right hon. Gentleman for that statement, but is he aware that some ambiguity remains? First, what are the facilities involved to the value of £18 million? Second, what hat was the Bank of England wearing—that of a private banker acting at the request of clients or that of a nationalised institution acting on the instructions of the Governor? Can he say whether this sum—or, indeed, any other sums advanced—has been guaranteed by the Bank of England and, if so, from what 899 resources? Would it not have been more helpful if the right hon. Gentleman had been a little more forthcoming about this matter on 23rd November?

§ Mr. Davies
On the date in question I was in the difficulty that I had no authority from the concerns involved to reveal anything and these are matters that are in confidence with them. I fear that for this self-same reason I cannot define the precise amount of the facility: this is a matter of confidence between any company and its bankers.
As to the second part of the right hon. Gentleman's question, the Government certainly did not put pressure on the Bank at any time to make a loan itself. The question of guarantees is primarily a matter for the Bank of England, but I understand that it has not guaranteed the facilities from the private bankers.

§ Mr. Thorpe
The right hon. Gentleman has been kind enough to answer a question I did not put to him, so I repeat my second question. What hat was the Bank of England wearing? Was it that of a private banker acting at the request of clients, or was it that of the Bank of England acting in its capacity as a nationalised institution, with or without Government instructions, on the instructions of the Governor?

§ Mr. Davies
It is difficult for me to say exactly in what guise the Bank saw itself acting, but it was acting as a banker. It was therefore not drawing upon its public institutional character in this particular operation.

§ Mr. Sheldon
Will the right hon. Gentlemen say what conversations the Government had with the Bank of England prior to this loan being made? Will he accept also that the fact that it was stated that the backers were private must have had some impact on shareholders who would have been wrongly assured by the fact that private money was available for this operation, and that it would be a material factor in their deciding their own interests? Will he see that when he next comes to the House he is rather more forthcoming than he was on this occasion? In these matters the House of Commons has a right to know who are the partners of the Government and their names and the terms should be made 900 known before public money is allocated in this way?

§ Mr. Davies
As to the first part of the hon. Gentleman's supplementary question, there were frequent encounters between some members of the Government and the Bank of England—HON. MEMBERS: "Oh."]—largely with a view to trying to mobilise the forces of the City within this whole field. I cannot accept that I was not as forthcoming as I could be on the day in question, because the hon. Gentleman does not seem to realise that the degree of confidentiality which extends to affairs between a private company and its bankers is very real.

§ Mr. Emery
I accept immediately that my right hon. Friend and his Department were having frequent discussions on the financial factors between the Bank of England, the City and Rolls-Royce, but can he tell the House whether or not, when the Bank decided to make this money available to Rolls-Royce, the Government were then consulted and gave their permission?

§ Mr. Davies
The question of permission was not involved because the Bank was not, as I have said, acting as a public institution in this particular case. Permission was therefore not involved. Agreement clearly was, because that involved the question of a total amount going towards the support of this project.

§ Mr. Harold Wilson
While thanking the Secretary of State for being more helpful to the House on this occasion—indeed, quite helpful to the House—may I ask him whether he is aware that in the statement made to the House by his right hon. Friend the phrase was used that the money was put up by "the banks", and that this was understood widely, both in the House and outside, as meaning the joint stock banks and the merchant banks? There was no question of the Bank of England being involved.
Is the right hon. Gentleman further aware that last week he confirmed Press reports that he himself referred to private banks and, manifestly, the Bank of England is not a private bank?
Further, will he say, since it appears to be the policy now to scrap the I.R.C. and to use the Bank of England instead, what discussions there were with the 901 Bank of England on the initiative of the Government, and which Ministers put pressure on the merchant banks to put up money which, being refused, led to the Bank of England putting up the money?

§ Mr. Davies
When the expression "the banks" was used it would cover a very wide field—[Interruption.] I think that, in fairness, the right hon. Gentleman would agree that in answering the question, which I think he had himself put, I was not prepared to undertake that no public institution was involved. That was the reason therefor.
The position of the Bank of England is something of a borderline question when it operates in the private banking field. When it operates in this field it is acting not as a public institution. As to who was consulted, a very large number of private bankers and the Bank of England were consulted in the City.

§ Mr. Wilson
I thank the right hon. Gentleman, but I do not think that he has answered the last part of my question—though I agree that it consisted of two or three questions. I asked which Ministers put pressure on the consortium of merchant banks to lend money, the result of their rejection being the Bank of England itself being pressed to put up money. Will the right hon. Gentleman say which Minister spoke to those banks?

§ Mr. Davies
The right hon. Gentleman has it wrong. The contact of Ministers was with the Governor of the Bank of England who was asked to exercise what seems to be a very appropriate function, which was to contact the banking community.