§ Order for Second Reading read.
§ 4.30 p.m.
§ The Minister of Aviation Supply (Mr. Frederick Corfield)
I beg to move, That the Bill be now read a Second time.
While I am anxious not to take up too much of the time available to the House, it may be useful if I try to summarise from the start the background to the events which have led to the necessity for this Bill.
In April, 1968, the right hon. Member for Bristol, South-East (Mr. Benn) announced the then Government's decision in principle, subject to a satisfactory contract, to provide launching aid for the Rolls-Royce RB211 engine which had been adopted by the Lockheed Corporation for its Tristar jet civil aircraft. After negotiation of the launching aid contract, the right hon. Gentleman announced in October, 1969 that the aid amounted to £47 million, which was 70 per cent. of the estimated £65 million launching cost at that time.
Last year, after an investigation of the Rolls-Royce Company by the I.R.C., there was a loan of £10 million, and some changes were made on the company's management, including the appointment to the Board of Mr. Morrow and Lord Beeching and the creation of a new post of financial controller.
In the late summer of last year, the Government heard from Rolls-Royce of a substantial increase to £135 million in the estimated launching cost of the work on the RB211, and there were also very substantial anticipated losses on production engines. As the House will recall, this situation led the company to ask for an additional £60 million. The Government then decided, after earnest consideration, to help meet the increased cost by providing a further £42 million in launching aid as part of a joint operation in which the banks were to contribute a further £18 million, the production of this extra aid being expressly made conditional upon a further check of the figures by independent accountants. 815 As I said in the House on 11th November,On the question of an independent accountant, I took the view, which I sensed to be the view of the House, that the magnitude of these figures was such that it was right that they should be checked and it was right that any Government support should be subject to that check."—[OFFICIAL REPORT, 11th November, 1970; Vol. 806, c. 406.]There were also some further changes in the company's management, including the appointment of Lord Cole as chair man.
However, before the accountants' investigations were completed, Lord Cole told my Department on 22nd of last month that he thought that the RB211 development and production programme could not be met. On 26th January, the Rolls-Royce board decided that, subject to consultations with Lockheed and the Government, the company should not continue with the project.
The losses already incurred and those likely to arise on termination of the company's work would, the board later concluded, exceed the company's assets. Therefore, on 4th February, it decided to ask the trustees of the debenture holders to appoint a receiver. This, I repeat, was the decision of the Rolls-Royce Board, though it is only fair to say that, in the light of its position in regard to Section 332 of the Companies Act, I do not see that it had any alternative.
As I said in my announcement that day, the Government then decided to acquire those assets of the company essential for maintaining continuity in Rolls-Royce's work for our defence programme, for our international collaborative programmes, for other countries' air forces, for civil air lines and for other operators throughout the world. The Bill before the House is designed to authorise the acquisition of such assets and their operation by a publicly-owned company.
Since that announcement, my colleagues and I have been in constant touch with the receiver, Mr. Nicholson, and my Department is making arrangements with him for maintaining or resuming Rolls-Royce's work on British defence programme contracts, including those for international collaborative projects.
The receiver for the Rolls-Royce debenture holders has notified me that he has 816 now decided not to continue the company's contracts with the Lockheed Air craft Corporation for the supply of RB211 engines. To enable Lockheed to consider, in consultation with the United States Government, whether it wishes to negotiate a new contract which would be carried out by the new Government-owned Rolls-Royce company, Her Majesty's Government will indemnify the receiver against expenses reasonably in curred during a period of up to four weeks from 5th February, 1971, in carrying on such RB211 work as the Government may decide is necessary to keep open the option to continue the programme. We have also kept informed the other Governments who participate in collaborative projects for which Rolls-Royce is doing work, to explain our intention of ensuring continuity of operation.
We now need the authority of Parliament——
§ Mr. Anthony Wedgwood Benn (Bristol. South-East)
We are extremely grateful for that statement. Will the four weeks period of support that the Government are making available to the Receiver to carry on with the work on the engine allow it to continue at the pace necessary to overcome its difficulties and continue as if it were going into the Lockheed aircraft?
§ Mr. Corfield
Our intention is that it a satisfactory contract should be concluded no time will have been lost in executing the order.
We now need the authority of Parliament for the acquisition of the appropriate Rolls-Royce assets and their transfer to a publicly-owned company. The company will carry out work for the defence and civil aviation requirements that I specified on 4th February. The Bill does not attempt to define these, because it would be impossible, without a long period of close study, to determine exactly what we would need and to cover them expressly in suitable terms for a Bill, with he necessity of neither omitting anything significant and essential nor embracing anything not essential.
I am sure that the House will appreciate that, since the principal object of the exercise is to restore confidence in continued supply and maintenance, speed 817 is of the essence of the operation. The very general scope of the Bill in this respect is accordingly necessary to permit us to define, when we can, the particular assets to be acquired. But they will be selected only from among what Rolls-Royce already owns.
It has already been suggested on the one hand that the Government should acquire all the assets of Rolls-Royce Ltd. and on the other hand that, if the assets are needed to serve some customers, including Governments and air lines, we could safely rely upon private industry to come forward to the receiver with a bid for them.
We have rejected both those courses of action. The first we rule out on the ground that the Government should not intervene when private enterprise can meet the market. In the case of those assets not covered in my statement, there is no reason for attempting to make them publicly-owned.
The second suggestion, unconditional immediate reliance on the private sector, is simply the converse of the first. I suppose that it would be attractive if it were satisfactory. But could we really be sure that a bidder would come forward at once, bearing in mind that speed is essential in this matter, for all the assets needed to help complete work essential to our own and other countries' defence programmes?
Here, Rolls-Royce plays a central and crucial part in meeting the Air Force's requirements and a not dissimilar rôle in meeting substantial parts of the Royal Navy's, not to mention the whole of the power plants for B.E.A. If we could not be sure of those, the course suggested would have meant leaving the receiver in doubt, to negotiate with anyone who offered as a bidder, and under a duty to save expense by stopping work where none was in prospect and perhaps dispersing some of the relevant assets.
We must, of course, recognise also the dependence of the Anglo-French Jaguar, the Phantom aircraft, the Harrier aircraft and many others on Rolls-Royce development, production, repair and servicing facilities. We should almost certainly have found that many of the aircraft were delayed in production or grounded by absence of essential maintenance facilities, and that the work of development, 818 production and maintenance became significantly more expensive. In addition, there would have been large increases in overseas purchases with a continuing drain on our balance of payments and a formidable problem of securing approval for new quality assurance schemes.
All this would be in relation only to our own defence programme. But other Governments have air force requirements of which Rolls-Royce is, in some cases, an almost equally essential supplier. A serious disturbance of the engine work for these projects would necessarily have followed from a receivership at Rolls-Royce, if there were no Government arrangements for assuring as continuous working as possible. In that event the overseas governments in question might well have felt justified in turning elsewhere to help meet their essential requirements, and such a course of non-intervention could, I believe, only increase the damage that has already been done to the name of Rolls-Royce.
§ Mr. Jeremy Thorpe (Devon, North)
The House accepts, of course, the need for speed and that no other form of Bill could have been published at this stage. But surely the receiver is still left very much in doubt which sections the Government intend and do not intend to take over? Could the right hon. Gentleman let us know by what means the House will be informed, whether it will be by Statutory Instrument setting out which sections it is intended to take over, and will that be subject to debate? Can he say what will be the basis of the take-over compensation, will that be in the Statutory Instrument and subject to debate, or are we asked to give a blank cheque?
§ Mr. Corfield
Clearly, concurrently we are studying carefully the various assets. I expect—and it is right I should be frank with the House—that the major assets to be acquired will become fairly obvious fairly quickly; but there may well be others on which it will not be possible to take a final decision at a very early date. But I can assure the House that I will inform it at any rate ultimately, or, if the House desires, at various stages, exactly what is proposed. Perhaps I should leave the question of price, to which I shall come later. We believe, on the other hand, that the 819 course of action we propose has every chance of enabling us to restore the reputation and profitability of these great national assets.
§ Mr. John Morris (Aberavon)
Since the right hon. Gentleman, as I understand it, is leaving the question of projects, could he assist us with regard to the M.R.C.A.? Have there been consultations with our partners? Will there be any change in the contractual arrangements and an increase in price following this arrangement? Could we have a statement fairly soon, since the last one was on 22nd July?
§ Mr. Corfield
I believe the right hon. Gentleman is wrong on that. I answered a Question on this about three days ago. I am afraid it is much too early to give the kind of detailed information for which he asks. We have, of course, been in close touch with the German Government. The Vice-Chief of the Air Staff visited them, and we have assured them of our desire and ability to continue with this engine.
§ Mr. Tam Dalyell (West Lothian)
Has the Minister had discussions about subcontractors? What has he to say about that?
§ Mr. Corfield
I must be allowed to get on with my speech if there is to be any chance of the large number of other hon. Members who wish to speak succeeding in doing so. We believe we can expect to achieve an equitable settlement with the receiver; that is to say, one which will represent a fair and reasonable return for his trustees and the Rolls-Royce creditors at large as well as for the Government and the taxpayer; and. of course, I emphasise that it will be a negotiated price, because the Bill does not contain compulsory powers and, if it did, it would be difficult to write into a Bill the way in which we should assess compensation.
That will be the aim, to arrive at a price acceptable to both parties as fair and reasonable by direct negotiations. But, in the event of disagreement, provision will, of course, be made for arbitration, which seems to be the only fair way in which we can handle this matter. The Bill does not of itself seek to limit the 820 scope of Government purchase of assets, but in practice we shall find ourselves acquiring only those which meet the definition of my statement on 4th February. As I then said, to ensure continuity of those activities of Rolls-Royce which are important to our national defence, to our collaborative projects and to many air forces and civil airlines all over the world, the Government have decided to acquire such assets of the aero-engine and marine and industrial gas turbine engine divisions of the company as may be essential for these purposes.
This will mean that, at least in relation to the legislation now in question, we shall not seek to stand in the way of the Receiver's sale to any acceptable bidder of the assets, which we decide not to acquire. The method we have chosen for securing continuity within the area defined in my statement—namely, a negotiated purchase of assets for transfer to and operation by a publicly-owned company—will readily allow us to seek participation from the private sector when that is appropriate. The new company will have all the normal powers to dispose of its assets, and, of course, the Crown can do so without needing specific authority in the Bill. The company equally will be able to raise working capital on the market, in parallel with other Companies Act companies.
There are also, of course—and to this I attach some considerable importance—possible opportunities of closer integration with European aero-engine concerns. Under certain circumstances, and, of course, subject to the views of our French and other friends abroad, it might, for example, be appropriate to consider some kind of merger in future between Rolls-Royce and S.N.E.C.M.A., a firm virtually owned by the French Government. In that event it would be necessary to consider whether the French Government's holding should not be balanced by some continued participation by Her Majesty's Government. At the same time we do not seek to rule out collaboration with firms in the United States.
§ Mr. Maurice Edelman (Coventry, North)
Would the right hon. Gentleman make an important distinction between European co-operation with European aero-engine companies and integration with those companies into European companies in which the identity of the 821 British element would be lost? Would he bear in mind that in some of those proposals for integration the idea is simply to "milk" British technology.
§ Mr. Corfield
I do not think I agree with the hon. Gentleman on that. I believe if we are to make any progress at all in collaborative programmes, using that term in its widest sense, we really have to get away from what I would call the nationalistic "Buggin's turn" theory. [HON. MEMBERS: "0h."] I believe that until we can get really integrated management we shall not get the full advanttages of using the resources and skills of both countries.
§ Sir Harmar Nicholls (Peterborough)
My right hon. Friend gave the impression, perhaps, that he was holding back from allowing acceptance of a private bid became of following his principle of a possible merger with the French company.
§ Mr. Corfield
I had in mind that if this proves possible it probably would not be sensible to dispose of all the Government shareholding in the new company if that were in the offing. I want to keep that option open. I am sure it is right that we should do so.
§ Mr. Peter Emery (Honiton)
This is a point of some considerable importance: for how long would my right hon. Friend want to keep his option open as far as S.N.E.C.M.A. is concerned in order to do what he wants? If he is going to preclude private bidding for a given period the House ought to know exactly for how long he wants to do it.
§ Mr. Corfield
My hon. Friend realises that in matters of this sort the British Government, and myself in particular, are not the only parties. My forecast, if that be a safe word to use, is that it will take at least a year to weld the pieces which we do take over into a really efficient unit and to ensure that it really has the capabilities and is restoring its prestige in the way which we all want to see. I just do not believe that one will do that overnight.
If, unhappily, it is not possible to make a new negotiated contract with Lockheed, it is abundantly clear that, for the immediate future, the overheads of what is left will be very substantial, and until they can be sorted out it will be difficult, 822 I think, to put one's hand on one's heart and say that what remains will be immediately profitable. This will not happen overnight, but——
§ Mr. Corfield
I have been generous in giving way, and I must now get on.
As to private participation in the new company and the possibilities for closer European integration, perhaps on the lines I have mentioned—there can be no certainty on this—it is my intention to consider matters of that sort as soon as it is appropriate, bearing in mind the factors which I have mentioned. I hope that the House will understand that, while it is not the Government's intention that Rolls-Royce should remain indefinitely in Government ownership, it is, in my view, essential to keep open, at least for the immediate future, the sort of possibilities in relation to Europe to which I have referred.
It follows from the decision to establish a limited liability company that the relationship of the new public organisation to Ministers and to Parliament will be somewhat different from that of an ordinary nationalised corporation. The exact degree of Ministerial and Parliamentary control over the affairs of the company will be determined largely by the provisions of the memorandum and articles of association of the new company. I shall be looking at these carefully in order to achieve, or try to achieve, the right balance between the need for control over public expenditure, on the one hand, and the need to develop a proper commercial approach to the company's trading activities, on the other. The memorandum and articles of association of the new company will be made available in the Library, and so will the annual report and accounts of the company.
I have explained the impossibility of defining for the purposes of the Bill the assets to be acquired from Rolls-Royce and, hence, the price to be paid for them. 823 I propose to keep the House informed of developments by making a statement on the subject at the appropriate time and by ensuring that sums required in the Estimates for my Department, including any Supplementary Estimates, shall be separately identified, with corresponding arrangements in the Appropriation Accounts. The Select Committee on Expenditure and the Public Accounts Committee will have open to them the Ministry's Estimates and Appropriation Accounts, respectively, for the sums of money relating to the acquisition and the use of the assets in question.
As I said on 4th February, it is most certainly not the Government's intention to take over the relevant parts of Rolls-Royce merely to run down the business by simply retaining work on existing engines until they become obsolete. On the contrary, I am determined that this should be a viable and enterprising undertaking. Without research and new projects, wherever appropriate, there could be no long-term future for the company or for our aero-engine industry, nor do I think that there could be very much prospect of attracting the participation of either the private sector or our European partners.
There will be no one in the House or the country who will not deeply regret the events which have necessitated the Bill. In the circumstances, however, I am confident that it represents the right and, indeed, the only sensible course of action, and I commend it to the House.
§ Mr. Dalyell
Before the right hon. Gentleman sits down, will he say something about the position of the subcontractors? Does he intend to say nothing whatever?
§ Mr. Benn
On a point of order, Mr. Deputy Speaker. The House is in some difficulty today. The Minister, quite properly, wants the Bill to go through all its stages today. For our part, we wish to facilitate that, and it is not our intention to delay the proceedings. Indeed, it is my intention formally to move the Amendments which we propose to table after the Second Reading, the debate being taken at this stage. But this means 824 that, without the usual Committee stage when the Minister would be asked questions, my right hon. and hon. Friends who are concerned about their constituencies and about firms which are faced with difficulty, will be put to a serious sacrifice unless the right hon. Gentleman is prepared almost to have, so to speak, a question time at the end of his speech. I very much hope that he has not finished all that he has to say.
§ Mr. Corfield
I appreciate the anxieties of hon. Members and their constituents in regard to sub-contractors and redundancies, but, with all due respect, this is not part of the Bill. [HON. MEMBERS: "0h."] My hon. Friend who is to wind up has fully taken on board that there are those matters of concern. It seemed to me right to listen to the concern first and to respond to it afterwards.
§ Mr. Benn
Further to that point of order, Mr. Deputy Speaker. With great respect, that is not sufficient for the House. [HON. MEMBERS: "Hear, hear."] There are hon. Members on both sides who have been approached by sub-contracting firms and creditors who are now faced with immediate decisions under the same Section of the Companies Act——
§ Mr. Benn
—to which the right hon. Gentleman referred in relation to the board of Rolls-Royce. The debate today is exceptional in many respects. I very much hope that the right hon. Gentleman—as it were, formally on the basis of, "Before the Minister sits down …"—will allow some hon. Members to put points to him which they would like him to answer, apart from other points which his hon. Friend will deal with in winding up.
§ Mr. Corfield
If I may make what, I hope, is one final remark, I am sure that the right hon. Gentleman and the House realise that these matters are at the moment the responsibility of the Receiver——
§ Mr. Deputy Speaker
Order. Whatever the feelings of the House may be, it clearly cannot help the debate to take attitudes such as are being taken up at this stage. [HON. MEMBERS: "Why not?"] I have, perhaps erroneously, allowed two points to be put to the Chair which, though expressed as points of order, were no concern of the Chair. The Minister was good enough to reply to them, and I have permitted that.
§ Mr. Eric S. Heffer (Liverpool, Walton)
He said absolutely nothing. Thousands of jobs are at stake.
§ Mr. Deputy Speaker
I hear what the hon. Gentleman says from a sedentary position, and perhaps he will allow the Chair to take it as a point of order, which it was not. It is for that reason, I should have thought, the wish of the House, the whole House, that the debate should proceed.
§ Mr. Benn
On a point of order, Mr. Deputy Speaker. My point of order relates to the nature of our proceedings today. The House deliberately provides that the Committee stage of a Bill shall occur after an interval following Second Reading so as to allow hon. Members to hear the Minister's speech and to table Amendments, and this provides, in the normal way, that a Minister is in a position to answer questions put to him.
Under the procedure today, arranged with the good will of both sides—the usual channels reopened today for one day—we have accepted the need to facilitate the Bill in the national interest. The right hon. Gentleman is fair in a purely legal sense when he says that he is presenting only the Second Reading of his Bill. But he knows full well that the viability of the company he proposes to acquire depends upon the viability of component manufacturers which are now faced, literally, in some cases, today or 826 tomorrow with bankruptcy and the unemployment of their staff.
We are in a genuine difficulty. It could be met if the right hon. Gentleman said, "Before I sit down, I yield to one or two hon. Members." But if he has finished his speech and has nothing to say to the boards of directors and trade unionists up and down the country whose position is totally uncertain, and who will not be helped by the Bill, because we do not know what price he will pay for Rolls-Royce, then, quite candidly, the proceedings today are an absolute nonsense.
I do not know whether you can help us in some way, Mr. Deputy Speaker. We are genuinely anxious to help the Government, but there must be some response, which there has not so far been.
§ Sir Harmar Nicholls
Further to that point of order, Mr. Deputy Speaker. Would it help to meet the legitimate point being put to the House if the Minister responsible undertook to obtain the leave of the House to reply to the debate, and then we should have an authoritative reply to the points raised from the Minister responsible?
§ Mr. Thorpe
Further to that point of order, Mr. Deputy Speaker, and in support of what the right hon. Member for Bristol, South-East (Mr. Benn) said, we are in great difficulty. The Minister is commending a Bill to the House, and in a Second Reading speech has quite properly outlined the general principles involved. That is the traditional formula for the introduction of a Bill. But unless we can know the likely impact of the Bill we do not know whether this is an honourable salvage operation or a very shabby legal stripping device to enable the Government to take what they want and to let many other firms go bankrupt in consequence. If it is the latter, the opposition to the Bill will be very considerable. But if it is an honourable holding operation and the Government can try to help us by telling us the position of the sub-contractors, 112 of whom are very seriously affected, but, as I see it, can get no priority in ranking as creditors—they are in exactly the same position as Lockheed, being all ordinary creditors—then we may well want to look again at the whole ethics behind the Bill. 827 For that reason, I hope that at the inception of the debate on Second Reading the Minister will be able to respond to the entreaties and try to help the House on this matter.
§ Mr. Deputy Speaker
Order. I know the concern of the House on this matter, but the House will also consider the difficulty of the Chair. Clearly, the Chair cannot know what may have happened between the usual channels. It is obvious that the debate which will follow at this stage will give full opportunity to debate the points. I should have thought it reasonable that on the wind-up which a Minister must conduct there will be replies to the satisfaction or dissatisfaction of those who raise points. This is quite usual procedure. Although I greatly appreciate the concern, I very much hope that the House will now feel that it is competent to have the Second Reading debate, when those points can be put.
§ Mr. Benn
Further to the point of order, Mr. Deputy Speaker. I am sorry to pursue this matter, but this is not an ordinary Bill. The Minister's mistake was that he presented it as just a Bill to acquire some assets, and presented it in the ordinary way. The truth is that it is being debated against a background of acute anxiety. Many boards of directors are now asking themselves the same question: "Can we continue to trade legitimately under Section 332 of the Companies Act?" This is not just a matter of putting a question in debate and a Parliamentary Secretary, however good. giving a reply. The truth is that something must be said by the Minister today with the authority of the Minister, which can be reported in the Press to the boards of the companies involved, giving them some indication of the receiver's attitude towards the liabilities which Rolls-Royce owes them, so that they can decide whether to go on.
The Leader of the House has entered the Chamber. No doubt he has had whispered to him what the difficulty is. It is that many of my hon. Friends and many right hon. and hon. Members opposite have come to the debate having had representations made to them by firms affected by the collapse of Rolls-Royce. They wish to put points to the Minister, and the Minister has not felt able to give answers to meet the legal difficulties 828 arising from the collapse. Perhaps it would be possible to adjourn the debate for half an hour to consider the position. We are ready to facilitate the Bill, but we cannot facilitate it if it means that we fail in our responsibility as Members of Parliament to see that our constituents' interests are properly cared for.
§ Mr. Tom Boardman (Leicester, South-West)
Further to that point of order, Mr. Deputy Speaker. There is equal concern on this side of the House for the position of the firms involved but the problem is that my right hon. Friend cannot deal in the Bill with the point of so much concern. The Bill does go part of the way. It goes to the extent of providing immediate action to enable the continuation of those parts of the business that it is in the interests of these small firms to be continued.
I have been speaking today to small firms that can now continue with their orders because of the decision to introduce the Bill. But for the Bill they would not have been able to do so. The Bill does not meet the point raised by hon. Members about the past liabilities and the grave concern about them. Surely, the starting point must be to get the Bill through—[HON. MEMBERS: "No."]—to give the Receiver the authority to negotiate with someone who can continue those parts of the business. Then I hope that we shall very quickly hear from my right hon. Friend what can be done on the other very urgent problem. But we cannot ask him today to distinguish between the many cases which cause us great concern and the other cases where there may be less reason for the Government to be generous or to make ex gratia payments. Therefore, I believe——
§ Mr. Boardman
I am on the same point of order. Whilst sharing to the full the feelings that have been expressed by hon. Members opposite, I believe that the best way to respond to them is to support the Bill.
§ Mr. John Morris
On a point of order, Mr. Deputy Speaker. Will you allow the right hon. Gentleman to assist the House to get out of this difficulty by saying whether he has completed his speech?
§ Mr. Deputy Speaker
Order. I think that it must be plain to the whole House that the Minister had completed his speech. I do not think that it serves the purpose of the Bill, those concerned with it, or the House not to get on with the Second Reading, which is why we are here this afternoon. I ask the House to accept the situation and to agree that I should call the next speaker in the debate.
§ Mr. Thorpe
On a point of order, Mr. Deputy Speaker. If my recollection is correct, when the Minister for Aviation Supply was in a seated position—I use that term in a neutral sense—you called the hon. Member for West Lothian (Mr. Dalyell). I did not believe that the hon. Member for West Lothian was being called to make the Front Bench speech for the Opposition. I therefore deduced that you were calling him to put a Question to the Minister, from which I inferred that it was your view at the time that the Minister had not resumed his seat at the conclusion of his speech but was either having a breather or was prepared to give way. I say quite sincerely that I am certain that the Minister wants to help the House out of its difficulty if he can. Would he now be prepared to answer the question put to him by the hon. Member for West Lothian and possibly answer further questions which may be put to him?
§ Mr. Corfield
Of course I want to help the House. I am aware of the anxieties but the situation really is quite plain. The moment I knew of the impending collapse of Rolls-Royce I put in hand a study of the problems of the sub-contractors. That, for obvious reasons, could not be carried out very thoroughly before the receiver was appointed. The receiver having been appointed, we have very little locus until we get this Bill.
The second problem, which again I thought the House was fully apprised of, 830 is that we really do not know what the situation is going to be—and we have only arranged this morning with the receiver to carry on the RB211 programme to keep it going—until we know the future of that programme. With the best will in the world, I could not give any general answer on this subject today, but I anticipated people's anxieties and, indeed, had hoped that I would get suggestions to take away and consider, because this is a very difficult problem. That is what I promise to do.
§ Mr. Barnett
Further to that point of order, Mr. Speaker. There is a way in which the hon. Gentleman can help. He has told us that he felt that Rolls-Royce was obliged, under Section 332 of the Companies Act, to call in the Receiver. The firm had at the time some £200 million net assets. By the same standard, the sub-contractors, though with very much less, will in the doubt in which they are now left almost certainly have to do the same thing. He has not told us—and this is where we are in a difficulty—what sort of price he is likely to pay. I appreciate that he cannot specify it under the terms of the Bill, but it would considerably help the sub-contractors to be able to say that under Section 332 they are not carrying on trading with intent to defraud if he could tell them that he was planning to buy not at break-up prices but at going-concern prices. If he could say that, it would help a lot of sub-contractors out of difficulty.
§ Mr. Corfield
I am sure that the hon. Gentleman realises that one's power to give judgments on Acts of Parliament are limited. My right hon. and learned Friend the Attorney-General is, unfortunately, sick, but I will ask my hon. and learned Friend the Solicitor-General what are his views on the general subject. The total assets available depend enormously on whether or not there are claims by Lockheed. This is one of the reasons why it is so important to negotiate with Lockheed, which I am trying to put in hand as soon as I can.
§ Mr. Benn
Further to that point of order. The Leader of the House has come into the Chamber. May I ask him, through you, Mr. Deputy Speaker, whether he can help? There is no difference between the two sides of the House on this. Hon. Members on both 831 sides are equally concerned on behalf of the firms and people in our constituencies. What the Minister of Aviation Supply has just said is moving towards something rather more helpful. The position of the firms and their boards of directors is conditioned in their minds by the Companies Act and its provisions. I appreciate that the hon. Gentleman cannot know what the Government will do with a company until he knows whether the RB211 will go on, because that affects the position of sub-contractors. But if he could give an assurance that the Solicitor-General will intervene in the debate and say something, it would help our constituents if they could read an authoritative statement. I know that it is a difficult thing to ask him to do because, candidly, it may be not only the Law Officers but the Treasury who will be concerned in ensuring that no apparent assurance is given about the acquisition price that in the event may not turn out to be what happens.
Something must be done, and it would help if the Leader of the House could tell us that at the end of the debate, in addition to the speech by the Parliamentary Secretary, to which we look forward, we shall hear the Solicitor-General. [HON. MEMBERS: "It should be earlier."] Very well then, as soon as possible during the debate, may we have a statement by the Solicitor-General with the support and approval of the Treasury? This would go a long way to helping us.
§ The Lord President of the Council and Leader of the House of Commons (Mr. William Whitelaw)
Further to that point of order, Mr. Deputy Speaker. Naturally, I am most anxious to help the House in what I recognise to be an extremely difficult problem. As the right hon. Gentleman will appreciate, matters concerning receivers are very complicated legal matters and it is right that the advice of the Law Officers of the Crown should be sought and should be available to the House. I accept that point. It is also very important that my hon. and learned Friend the Solicitor-General should have a chance to consult and ensure that the advice he gives is absolutely accurate and correct in law. He will do that as quickly as he can.
I regret, as my hon. and learned Friend does, that my right hon. and learned 832 Friend the Attorney-General is, unfortunately, ill, for otherwise he would certainly have been here today. But I undertake that the Solicitor-General will come to the House and make a statement setting out the legal position during the course of the debate, and he will do so as soon as he can. But it would be wrong for me to give an assurance as to the point of time at which he will do so, because the House will wish to have the answer correct in law after proper consideration.
§ Mr. Cranky Onslow (Woking)
Further to that point of order, Mr. Deputy Speaker. It might be acceptable to the House if it were made possible for my hon. and learned Friend to give us this very necessary advice on the question, "That the Clause stand part of the Bill", because otherwise we are going to be in the greatest possible difficulty, since many hon. Members are going to be denying themselves the opportunity of putting all the points we are so anxious to make.
§ Mr. Deputy Speaker
I think that the House has now had an assurance. The case has been well put from both sides. An assurance has been given that the best possible advice will be made available to the House during the debate. I now ask that we proceed with the Second Reading debate.
§ Mr. Dalyell
On a point of order, Mr. Deputy Speaker. The implication of your Ruling—and I do not bear any grudge—was that in raising this issue I was being fractious. I agree with the Leader of the House that, of course, these are extremely complex issues, but many of us have to go to our constituencies where sub-contractors are owed millions of dollars, and we have to go to Americans, who are not nationals of this country, and attempt to explain what British law is. That is why we did it.
§ Mr. Whitelaw
Further to that point of order, Mr. Deputy Speaker. I absolutely accept what the hon. Member for West Lothian (Mr. Dalyell) is saying. That is why I am most anxious to ensure that my hon. and learned Friend, when he makes his statement, gives an authoritative statement of the law. That is what is required, and that is what he will do. It is what I am seeking to get him to do. 833 I hope that the House will give him the chance to get proper consideration before doing it.
§ Dr. John Gilbert (Dudley)
On a point of order, Mr. Deputy Speaker. I am grateful to you for being so liberal in allowing us to put points of order. This is more than a legal question. The Minister said that there would be a fair and reasonable return for Rolls-Royce creditors——
§ Mr. Corfield
The hon. Gentleman is putting words in my mouth. That part of my speech was addressed entirely to price.
§ Dr. Gilbert
—the price would produce fair and reasonable terms. He will not know what the full amount owing to the unsecured creditors is until all the law suits consequent upon this re-organisation have sorted themselves out.
§ Dr. Gilbert
My point is that if the Government do not keep these sub-contractors alive, the whole point of the Bill is totally vitiated. Can the Minister give, just as an order of magnitude, what return in the pound there will be? [Interruption.] Will it be 5s. or 15s., for example?
§ 5.20 p.m.
§ Mr. William Rodgers (Stockton-on-Tees)
In the exchanges which have taken place the failings in the speech of the Minister have been narrowed too much. His shortcoming was not that he failed to discuss matters raised by my hon. Friends concerning the sub-contractors, or failed to discuss what was meant by a fair and reasonable price; it was that he wholly failed to discuss the background to this Bill and to give us any further information in addition to that provided on Monday. This is a Second Reading, and we shall be proceeding in due course to detailed consideration. The House has a right to know a great deal 834 more this afternoon from the right hon. Gentleman about the prospective negotiations with Lockheed and how he sees the future of the RB211.
The plain fact is that we are being asked today for a blank cheque, to pay an unknown amount at an unspecified time in conditions of almost total obscurity. I say now that unless we obtain a great deal more information during the debate—and we need more than the presence of the Solicitor-General to ensure that—we shall certainly move for a Select Committee to inquire into the handling of the whole affair. We have been very tolerant over the problems in which the Government find themselves. We are deeply concerned for the future of Rolls-Royce. We feel greatly for those whose jobs are in danger and for the future of British technology.
To that extent, although we have not been convinced that the Government had made their case, we were willing to facilitate the passage of this Bill. But it would be a neglect of our duty as an Opposition to allow the passage of this Bill without a great deal more of the information which has so far been denied us. I will do all that I can to ensure that the debate takes such a form and time as to enable the House to know what it has so far been denied.
There are alternative explanations for the position with which we are faced. Either the Government made their decisions in ignorance and did not know any more than we do, or they made their decisions on the basis of information which they are now concealing from the House. The Government can choose. If it is the first, they are condemned for a botched-up job; if it is the second, they have a duty to the House and the country to put before us today the information which we do not at present have.
My right hon. Friend the Member for Bristol, South-East (Mr. Benn) asked for a White Paper on Monday. It was reasonable for us to expect that a White Paper might have been forthcoming. We were forbearing. We recognised the problems with which the right hon. Gentleman has been faced. It has been a tiring and exhausting time, and we have some understanding of his rý;le.
In those circumstances, if there was to be no White Paper, at least we should 835 have had a full explanation of the position as it now stands. We are in total ignorance of the course of events since Monday and the negotiating position in which the right hon. Gentleman finds himself.
§ Mr. Corfield
I am sure that the hon. Gentleman appreciates that the mere fact that we are trying to negotiate means that we do not want to give certain matters maximum publicity.
§ Mr. Rodgers
We fully understand that, and had the right hon. Gentleman made the speech which we anticipated he would have made, I would have been prepared to say that we did not wish unreasonably to press him on matters which affected his negotiations with Lockheed. But we are in total ignorance not only of detailed matters such as those raised by my hon. Friend the Member for Dudley (Dr. Gilbert) but of the whole present stance of the Government.
On Monday the right hon. Gentleman gave the impression, not only to hon. Members on this side of the House but to the whole House and to the country, that he had no interest in saving the RB211. This was the impression he gave on Monday whether or not it was his intention. Since that time we have been led to believe by what he has said, in public and in private, that this is not his view, that he genuinely wishes to see the RB211 saved. Which is the case?
Surely the right hon. Gentleman should have taken the opportunity this afternoon to put the record perfectly straight and to make it clear whether the Government hope to save the engine or whether they would prefer to see it go under. There are, of course, issues here which are common to both sides. We recognise that there is a grave danger in being wise after the event with the RB211 contract. The plain fact is that at the time the House rejoiced that it had been achieved, and this was the view not only among people in the country but in the technical and expert Press too.
It is also common to both sides of the House that Rolls-Royce has been a remarkable company with a fine record of technical achievement and also, by and large, industrial relations. No one rejoices that the company has been brought low, 836 and that is one reason why it was our intention to facilitate the passage of the Bill, on the understanding that we would be given adequate information on which to judge both the Bill and the Government's position.
It is also common to both sides that Britain must seek to have a future in advanced technology, if necessary together with European partners. These things are, I think, agreed. There are very grave human consequences flowing from this course of events and this is why many of us felt the right hon. Gentleman's speech was inexcusable. The hon. Member for Belfast, East (Mr. McMaster) and my hon. Friend the Member for Derby, South (Mr. Walter Johnson), in their different ways, talked of the grave human consequences of this course of events on Monday. Today the right hon. Gentleman did not talk about these consequences. There was no word of comfort, no word of concern.
Nor did the right hon. Gentleman say anything either about the future of Britain's commercial relations. Everyone is surely agreed that one of the tragedies—and perhaps if we look at today's trade figures we should reflect upon this—is that it is not only the name of Rolls-Royce and least of all the name of the RB211 which is at stake here but the whole future of Britain's commercial relations and her word in international trade. Why did the right hon. Gentleman not have a word to say about this and show that he recognises the problems and shares the concern of everyone else about this grave situation?
§ Mr. Rodgers
I turn now to some of the lessons in this. I had hoped that today we would have been able to establish an understanding over a wide area and recognise areas where we could agree to differ. My regret is that the whole mood of the House has changed and the prospect of that measure of agreement and the prospect of showing to the country that we were seriously and fully debating this issue have been lost through the totally inadequate speech of the right hon. Gentleman.
There is, first, the whole problem of the future of the aircraft industry, a point 837 touched on very briefly by the right hon. Gentleman. There is the question of our co-operation with Europe and our partnership. There is, in addition, the question of the future relationship of Government and taxpayer with the aircraft industry. There must be lessons here for us all. Secondly, there are the problems concerning the management of large technologically-advanced companies. We know, in the broadest terms, that Rolls-Royce has failed because engineers were in charge. But some of us would not want to see accountants in charge either. Somewhere in the middle there must be a solution to this problem, and it has nothing to do with the problems of ownership. It is a question of the organisation and management of large companies.
Thirdly, it is right that we should ask some questions about the rôle of the banks and the City in this matter. I am not saying that I want to pursue it today, and I am not drawing firm conclusions, but I wonder what is the rôle of a merchant bank such as Lazards, which was financial adviser to Rolls-Royce during the whole of the period leading up to November and which spoke for Rolls-Royce in the City. I wonder also what is the position of the joint stock banks, which made large sums of money available, and, surely, should have conducted some inquiry at that stage into the viability of the company.
These are not primarily questions for the House, but I hope that in quiet moments those outside will reflect upon them because I think the nation is entitled to an answer.
§ Mr. Christopher Tugendhat (Cities of London and Westminster)
There are many features of the Rolls-Royce case on which the House will want more information as time goes on, and many of them affect people the hon. Gentleman has mentioned. However, it is only fair to say that the primary responsibility in this matter lay first and foremost with the Government which encouraged Rolls-Royce to enter into the contract and which provided the launching aid. It has become clear as a result of the recent events that nobody knew what was going on in Rolls-Royce partly because the management of Rolls-Royce did not know. The hon. Gentleman should not 838 cast aspersions on the City until much more is known about the situation.
§ Mr. Rodgers
If the hon. Gentleman will read carefully what I said—and he may not have noticed that a number of his right hon. and hon. Friends were nodding agreement with my remarks—he will see that I said that this was a matter which the City should look into. I will go no further than that.
§ Mr. Frank Tomney (Hammersmith, North)
The position regarding Lazards and Rolls-Royce is even more acute than the hon. Gentleman realises. Lord Kindersley was on the board of both companies and Chairman of Rolls-Royce through a vital period when the company was losing money from 1961 onwards. These are the sort of points which must be made. The rôle that the City is playing by stock share operations and by adjustment of balance sheets amounting almost to fraud has led to the situation. These things must be inquired into.
§ Mr. Rodgers
I am trying to keep the record straight and to be totally fair.
There are, fourthly, lessons for Governments and, fifthly, lessons for Parliament.
My right hon. Friend the Member for Bristol, South-East (Mr. Benn), who made a very fair and candid statement on Monday which was listened to with respect and, I think, a large degree of acceptance on both sides of the House, mentioned that when the contract was concluded his Department did not have the facilities to inquire in more detail into Rolls-Royce. No Government Department has had, and no Government Department has today, facilities to examine the position of a large private company in which it chooses, for good reason, to put money.
The plain fact is—and those of us with experience of Government saw this—that when the Government are dealing with industry and civil servants are dealing with businessmen it is a question of gentlemen among the players, amateurs among professionals. I am sure that there is a lesson here that we must endeavour within Government to develop the facilities and acquire the men which enable Government in all its aspects to know more of what it is doing when it decides to spend money in this way. This is a 839 universal conclusion which deserves further examination.
§ Mr. Peter Hordern (Horsham)
On a point of order, Mr. Deputy Speaker. It would be useful if the hon. Gentleman who intervened just now——
§ Mr. Deputy Speaker
Order. That is not a point of order. The Chair will rule on that point if and when it thinks it necessary. But I hope that the House will listen to the speeches. Interventions simply make it less likely for many hon. Members who wish to speak to take part in the debate.
§ Mr. Hordern
I am sure that the House would wish to consider the matter calmly. I thought that the hon. Member for Hammersmith, North (Mr. Tomney) mentioned Lord Kindersley and the word "fraud" together. I hope that I am wrong. If he did, I am sure that he would wish to withdraw in the spirit in which the House is examining the Bill.
§ Mr. Tomney
I referred to the position of Lord Kindersley and Lazards, the operation of the City in company take-overs, the manipulation of share accounts, adjustments across share bridgings, and so on. I said that the House would have to look into the operation of the merchant banks in particular, which are not fulfilling the function for which they were set up with regard to the commerce of Great Britain on issues affecting the life blood of the industrial nation. I did not directly or indirectly charge Lord Kindersley with fraud.
§ Mr. Rodgers
We must look at the rôle of Parliament in these matters.
On Monday my right hon. Friend the Member for Bristol, South-East said correctly that neither the RB211 contract in its original form nor, for that matter, the Olympus 593 contract was ideal. We know of the investigations carried out by the Public Accounts Committee from time to time and by the Estimates Committee into the aircraft industry. We know of the rôle of the new Public Expenditure Committee. But I am not satisfied that Parliament yet has enough information about what is happening to money which Governments put into industry.
Some time ago the right hon. Gentleman, when in opposition, pressed for a 840 relaxation of the confidentiality which is the excuse used by all Governments from time to time to conceal from the House information which they should give it. I was glad on at least one occasion to be able to make information available which the House would otherwise have been denied. I hope that in future all Governments, of whatever party, will believe that they have a duty to this House to give information to it and not to hide behind the excuse of confidentiality on every possible occasion. When the time comes, either through a Select Committee of inquiry or in some other way, I hope that one of the results will be that we shall have a far more open system of Government in all these matters than has generally been the case in the past.
However, we are now faced with a situation in which it is far from clear what the Government want to do and how they intend to go about it. But for the moment I will assume that what the Minister said yesterday in reply to a question from my hon. Friend the Member for Leeds, South (Mr. Merlyn Rees) about whether the RB211 was worth saving-namely, "Yes, I think it is"—stands on record and that we can assume that the Government will seek to renegotiate a contract for the RB211. If so—and the right hon. Gentleman made some remarks to this effect today—this is progress and we are very glad to know that he has in mind that the development of the engine shall proceed through the next four weeks and there shall be no attempt to prejudice the final outcome of the negotiations in this way.
On the best information available to us, it looks as of it should be possible to renegotiate, because those who have been closely concerned with the development of this engine say that an engine somewhat derated but with acceptable thrust can be available within six months, and this would mean that the airlines could be flying with it commercially by May, 1972. They also say that on present evidence there is no reason to believe that the research and development cost need exceed £170 million, the figure so far quoted. Thirdly, they say—and this is precisely the sort of matter which we would have wished to investigate at greater length—that some of the expenditure on research and development of the RB211 could be attributed to the whole family of quieter, new technology engines. 841 Therefore, if the research goes forward, it would be wrong to attribute it all to the RB211. Some of it can rest upon other engines which we hope that Rolls-Royce will build and sell abroad.
Here I ask a specific question about the figures which we were given on Monday. There was a reference to the unit cost of the engine becoming £460,000. The Chancellor of the Exchequer referred to £170 million as the development cost. I hope that we shall be told today whether any allowance is made in the selling price for development costs, because, if so, we shall be counting the same sums twice over. In other words, if we are allowing for the escalation of development costs in an escalated selling price, the figure is coming in on both occasions. We do not know, we have not been told and we should certainly have this information before the end of the debate.
§ Mr. Onslow
I share the hon. Gentleman's desire that we should have this information. I will put to him a difficulty which he should appreciate. He will be familiar with the second paragraph of the statement made by the company when it announced that it could not continue trading. Has he evidence to suggest that the Government, the Receiver or the general public should believe any of the consequences which the company summarised as being inevitable in that statement, on the basis of independent checking of what can be ascertained to be fact?
§ Mr. Rodgers
I agree that there are problems here, and, in the absence of a White Paper and of further information we must rely partly upon what the right hon. Gentleman says, but it is perfectly reasonable for any hon. Member sitting on whatever bench to put together such information as he has and try to draw tentative conclusions. If the hon. Gentleman is saying that we should not do this, he is asking us to give a totally blank cheque and not to fulfil our proper responsibilities.
The right hon. Gentleman will have in his mind some formula, and I hope that he will recall the extent to which we must not aggravate the damage already done to Britain's commercial reputation abroad. I mentioned this earlier, but the right hon. Gentleman has not referred to it. I hope 842 that either he or one of his hon. or right hon. Friends will say that if Lockheed comes up with a proposition which might, for example, include waiving its claims for delay and contributing in part to the escalation of the engine costs, he will not hold back from making substantial sums available so that a reasonable bargain can be struck. My view—and I put it tentatively because I do not want either to prejudice the negotiations or to draw conclusions in the absence of information—is that it would be reasonable for the Government to bear, say, half the increased cost of the engines and to meet the whole of the development cost, if Lockheed were prepared to meet the difference between the original and the now anticipated cost of the engines and to waive all claims arising from delay. I simply ask for an assurance that the Government are prepared to spend more than the £42 million committed in November if it is necessary to do so to conclude a deal. That is a simple question, and I do not believe that an answer to it will in any way prejudice the negotiations.
I will briefly ask a number of other questions. I say "briefly" because I am anxious that the House should fully debate the issue. The right hon. Gentleman has said that he will keep the House informed of developments. I take it that he will make a statement at each stage and not leave us to rely upon secondhand and newspaper reports of the stages of the negotiation and the decisions of the receiver. I ask him again, pending a decision on a Select Committee, to consider whether a White Paper would help us.
Secondly, I hope that we shall be told today how many sub-contractors are affected. I ask only for the best available figure, because he may not know for certain. is the figure in excess of 2,000, and is the amount of money involved something like £75 million? I hope that the right hon. Gentleman will be able to say that it is not as much as that, but this is a figure which has been talked of widely in the City. I hope that we shall be given more information about the subcontractors and what the Government are prepared to do to help. If the development of the RB211 goes ahead, and if the development of the family of engines goes ahead, it will be necessary to have sub-contractors with the experience and 843 the experienced labour force to fulfil the requirements so that there shall be no further delay. If the sub-contractors go out of business now and let off their men, they will not be able to respond when it becomes necessary to do so.
Thirdly, I understand that normally under company law the Revenue would have a first claim on the assets, together with other preferred stock holders. If this is so, will the right hon. Gentleman ask his right hon. Friend the Chancellor of the Exchequer to consider waiving the Revenue claims if by so doing he could help those who will bear the worst brunt of the collapse?
Fourthly, will the right hon. Gentleman confirm what is generally understood, that Lockheed in its rôle as a creditor would be on a par with the other creditors, many of whom are in a small way of business? Will he bear in mind that in any negotiations with Lockheed it would be right and just for Lockheed to be urged to waive part of its claim if this would help small men who would otherwise be driven to the wall to get something out of the assets, if there are any to be disposed of?
Fifthly, are there any obligations still outstanding in the area of redundancy payments or pensions, and what claim will they have on the assets? I assume that the pensions of those employed by Rolls-Royce will have been taken care of in a separate pension fund, but we do not know; nor do we know how that pension fund was invested. Many people who have worked at Rolls-Royce will want an assurance on this and an indication of the Government's concern, and practical help should that be necessary.
§ Mr. F. A. Burden (Gillingham)
The hon. Gentleman is asking that a declaration should be made that the pensions are inviolate and not in any way affected by the failure of the company.
§ Mr. Rodgers
I am not going quite as far as that, but the hon. Gentleman has taken the sense of what I am saying. I am anxious, as I am sure the whole House is, that the people whose lives and livelihoods are tied up with Rolls-Royce will come out of the with some dignity. It is a tragedy that the Government, the House and merchant bankers should make a mistake about Rolls-Royce, but if they 844 can do so, how much more excuse is there for the ordinary man or woman who in good faith believed that Rolls-Royce could not collapse and are now in a position of acute insecurity.
Sixthly, I ask the right hon. Gentleman to confirm, or to take note of the possibility, that in the event of the failure of negotiations with Lockheed and a subsequent action in the American courts it would be possible for all goods imported into the United States by an heir to Rolls-Royce to be sequestered if Lockheed had a legitimate claim. I have been told—and I ask only for confirmation or denial—that the heir to the present Rolls-Royce company which markets Rolls-Royce cars to the United States might be unable to continue its export business to the United States because Lockheed would have a claim on every export landed there. This is the sort of information the House is entitled to have, and I assume it is within the competence of the Solicitor-General when he appears before us.
I ask one or two simple questions, and I hope I shall not be told that these are matters for the Receiver. First, is it not the duty of the receiver acting on behalf of the debenture holders to sell at the best price to anybody who offers to buy? Are there any provisions in the Bill which remove the legal obligation resting on the Receiver to do precisely that? If there are no obligations in the Bill and the receiver is presented with an offer from the United States or from some other country for the assets of Rolls-Royce, is there anything to prevent the sale of those assets to the United States or any other country?
If the answer is that there is nothing in the Bill to prevent it and the receiver has a legal obligation to sell to the highest bidder, where do the Government stand if somebody bids for Rolls-Royce more than the Government are prepared to pay? The right hon. Gentleman has referred to a "fair and reasonable" price, which he has not defined, but if the receiver believes that the fair and reasonable price offered by Her Majesty's Government is exceeded by a price offered by another manufacturer in another country, is there anything to stop Rolls-Royce falling under foreign ownership? I hope that the right hon. Gentleman will in all these matters have 845 most in mind the best interests of the country.
§ Mr. Dalyell
Would my hon. Friend hazard a guess at what is meant by the Government's statement "any acceptable bidder", because the definition of the word "acceptable" is crucial?
§ Mr. Rodgers
I find that in these circumstances it is impossible to hazard a guess at what the Government mean by much of the language they use, and I would not usurp the function of the hon. Gentleman who is to reply. I hope he will feel it his duty to give an answer to my hon. Friend's legitimate question?
The Bill itself is unique in the experience of many hon. Members who are more knowledgeable of this House than I am. It has a remarkable Financial Memorandum. In the whole of my ministerial career I never managed to persuade the Treasury to accede to a Financial Memorandum of that kind. It is totally open-ended, and if I am to congratulate the right hon. Gentleman on anything, it is in persuading the Treasury to allow him a freedom which others have so often been denied. I am reminded in looking at the Bill of a phrase which was used in different circumstances by Sir Winston Churchill. He once referred toa riddle, wrapped in a mystery, inside an enigma".I believe that that would be a fair summary of the Bill set against our experience and the inadequacy of the explanations given this afternoon.
I do not know how much time we shall now have to spend on the Bill. We have a duty of public scrutiny, and I hope that in the public interest that duty will be fully fulfilled today by hon. and right hon. Gentlemen on both sides of the House. When we reach the Committee stage we shall take the view that the Bill is defective in two main respects: first, that it does not involve taking the whole of Rolls-Royce into public ownership, which we believe to be right, nor does it prevent the selling back of parts of Rolls-Royce to private enterprise. These are deplorable shortcomings in the Bill and in due course we shall seek to amend it.
We find ourselves in a thoroughly murky situation. I wonder whether there is not a dereliction of duty on our part 846 as an Opposition in allowing this Bill to pass, and this is a matter upon which we must reflect. If we allow it to pass, it is not because we believe the Government have made their case. It is out of concern for all those whose lives and livelihoods have been gravely affected by the course of events, and out of concern for the anxiety throughout the world over Britain's commercial standing, that we shall allow the Bill to pass. We have a public duty to enable something to be rescued from a sad, sorry and deplorable situation.
§ Mr. Dalyell
On a procedural point, there is a genuine difficulty on the part of some of us who had hoped to catch your eye, Mr. Deputy Speaker, for brief speeches but who would not wish to do so until they have heard what the Law Officers of the Crown have to say.
§ Mr. Dalyell
May I ask a quick question? When is it likely the Solicitor-General will be able to give us the benefit of his answers to some of the questions?
§ Mr. Deputy Speaker
Order. The hon. Gentleman heard the answer, as did the Chair. It is not a point of order for the Chair. Mr. Gorst.
§ 5.57 p.m.
§ Mr. John Gorst (Hendon, North)
I very much regret that I should be making my maiden speech on an occasion such as this, arising from the sad and tragic events for the whole of the nation and for the many people whose livelihoods are at stake. I can certainly number many of my constituents among those who are employed by Rolls-Royce.
I feel that it is not inappropriate for an hon. Member from Hendon, North to wish to make a contribution to this debate, since Hendon for a very long time has been the home of one of Britain's earliest airports. Nor is it inappropriate that on this occasion I should be appearing in this House having succeeded in my constituency Sir Ian Orr-Ewing who, on matters of defence, made so many devoted contributions to discussions in this place and elsewhere. 847 Inevitably, I regret that on this subject—which is not one of my choosing but which, in a sense, chose me—inevitably a measure of controversy must creep into what I have to say. I shall hardly be surprised if hon. Members opposite have difficulty in extending to me the normal indulgence. This matter cannot be considered in isolation. The context in which the Bill is to operate will have repercussions which undoubtedly will rumble down through the ages in various ways.
I wish to make it clear at the outset that I am not against the proposal that the Government should step into Rolls-Royce as temporary trustees. I fully accept the vital military and civil projects which must be kept in being. However, that does not mean I accept that the House should give the Government what has already been referred to as a blank-cheque. It is a cheque which is undated, which has written on it no sum of money, which has nothing on the counterfoil to say to what the payment relates, and, above all, there is nothing to say on what the money is to be spent. No Conservative Government ought indefinitely to allow thmselves to be involved in the supply, manufacture, or indeed the further development, of items which hitherto have been generally accepted on this side of the House as more appropriate for private industry. Nor should any Conservative Government be granted an open-ended, unconditional opportunity to remain in a risk-taking enterprise requiring the discipline and experience of free enterprise commercial judgment.
For these reasons, however long the Government remain in sole control of those parts of Rolls-Royce which it is proposed to acquire, no Government—either this or any future Government—should be allowed to channel any new contracts or projects into this temporary holding company so long as there is no free enterprise element within it.
§ Mr. Gorst
If this new Rolls-Royce creation is allowed to undertake new ventures, be they Government contractual work or other self-initiated commercial projects, this must only be done if private capital has already been subscribed to the new company. However minimal this private capital may be, however minimal the private interest in these ventures, they ought to be on the basis of there being a private risk-taking share in them, with, of course, appropriate board representation to match it.
If the Minister is unable to accept a gradual and continual infusion of private capital into the new Rolls-Royce right from the start, I shall find it extremely hard to support the Bill during its later stages.
If the Minister is unable to give an assurance that, if available, private capital will be allowed to be brought into the new company right from the start, then I urge him to revise his plans to sell off this venture at some future undefined date.
I urge the Minister to see that no new ventures, no new contracts, no new undertakings, are permitted or contemplated. I suggest that in due course this Mark II Rolls-Royce Company be run down, wound up, and dissolved as the essential defence and civil aviation requirements make this possible.
If people say that such a course of action will release on to the market vital engineering resources and skilled design teams, I concede that it is quite clear that determined action will have to be taken to ensure that they are absorbed by alternative free enterprise organisations, and it is clear that such firms must be progressively encouraged to bid for a new Government or other commercial ventures which might otherwise have gone to Rolls-Royce.
The State must and should not involve itself in commercial risk-taking. It must not do this, not because the State must not make profits—indeed, it ought to make profits wherever this is humanly possible—but because it is certain to be the first to make losses wherever they are going.
I wonder whoever heard of Paul Getty, Henry Ford or Lord Nuffield exercising their entrepreneurial skills, talents and 849 judgments from behind a desk in Whitehall. Of course we have never encountered such an occasion; nor are we likely to in the management of Rolls-Royce Mark II.
When the private sector of industry takes big risks, when they fail and those enterprises go to the wall, it is the shareholders who suffer the financial consequences. But when Government enterprises fall down flat on their faces there are no immediate crashes because the taxpayer bears the brunt of the disasters through one public subsidy or another.
If we allow 100 per cent. Government shareholding in this new Rolls-Royce company, if we allow Government agency, using the resources of taxpayers' money, to take on new and possibly risky enterprises, we shall be exchanging the long stop of bankruptcy and liquidation, which we have seen invoked recently, for a stupendous folly over which the impotent taxpayer will have no control.
As I have said, the Government are asking this House to pass a Bill which will be a blank cheque. We are told that no sum of money is or can be written into the Bill. I am perfectly prepared to trust this Government to protect our interests, as taxpayers, on this score.
It is said that no date for the departure of the Government from these activities can be written into the Bill. On this point, I am indeed prepared to trust implicitly the sincerity of those assurances which may be given—namely, that the Government will expedite the sale at the earliest possible moment. But, despite any such assurances which might be given, I am not convinced that we, as taxpayers, are adequately safeguarded for the future.
Last night I had a gigantic, monumental nightmare. The whole Government, including those who are not at the moment on the Front Bench, were run over by a proverbial bus. Our Conservative majority was decimated, and, most disquieting of all, right hon. and hon. Gentlemen opposite had changed places with us and were sitting on this side of the House.
But my nightmare got worse—[An HON. MEMBER: "Impossible!"] The 850 Pergamon Press had collapsed, and I watched how these new Labour Government Members set about implementing our newly established precedent. In the national interest, they said, they were setting up a public service publishing company. Then a leading daily newspaper went bust. What happened? The newly formed Government rushed into the creation of a new Bill entitled the Daily Mail (Purchase) Bill, and immediately there was created a public service newspaper.
Nor was this all, because my nightmare got even worse. One after another, British Leyland, I.C.I. and Unilever all crashed, too, and there were roars about the public interest. Even a giant insurance company—perhaps it was Lloyds—went bust. Throughout this nightmare there was a constant murmur about the national interest, the job security of workers, and the fulfilment of overseas commitments.
Eventually, I found myself contemplating the ultimate Socialist state in which, to the tune of the Red Flag, I heard perpetual chants of, "This is a Tory Measure, This is a Tory Measure, This is a Purchase Bill".
When I was elected last June, I told my electors, in the words of the Conservative Party manifesto, there has been too much government and there will be less. Time after time I told my electorate, also in the words of our manifesto, that an increasing use of private capital would help to reduce the burden on the taxpayer. I meant what I said then and I mean to stand by what I said now.
As I see it, two options are open to the Government in the present situation. The first is that provision can be made for the infusion of private capital into the Rolls-Royce rescue operation just as soon as such private capital is willing to come forward. This ought to be done at the outset.
The alternative is that the whole of This undertaking which is to be acquired must be run down and wound up and not extended for the purpose of a future sale.
I just do not believe that when the private enterprise Rolls-Royce, which failed to be a commercial success recently, is replaced by a public enterprise 851 Rolls-Royce, this particular undertaking will fare any better. Indeed, the whole commercial history of this and other countries proves exactly the reverse.
§ Mr. Raphael Tuck (Watford)
On a point of order, Mr. Deputy Speaker. There are many right hon. and hon. Members who want to get in on this debate because they have constituency interests. For example, I have 4,000 workers in the small engine division of Rolls-Royce at Leavesden, Watford, who want me to ask where they stand, whether they will get their wages, and what the future holds for them. At our present rate of progress, it looks as though I shall not get in to the debate. Is it possible to get agreement for right hon. and hon. Members to limit their speeches to 10 minutes at the most?
§ Mr. Deputy Speaker (Miss Harvie Anderson)
I am sure that that is a pious hope shared by the Chair and by all hon. Members present, but perhaps the best way to accomplish it is to allow hon. Members uninterrupted opportunities to speak.
§ 6.11 p.m.
§ Mr. John Stonehouse (Wednesbury)
I am sure that the House has taken note of the request made by my hon. Friend the Member for Watford (Mr. Raphael Tuck) and I, for my part, will do my best to ensure that my contribution does not exceed the stipulated 10 minutes which he has laid down as the rule for the day.
I am sure the House will agree with me when I say that we have listened to the quite extraordinarily interesting maiden speech from the hon. Member for Hendon, North (Mr. Gorst). It is a compliment to the hon. Gentleman that as he proceeded we lost consciousness of the fact that it was a maiden speech, so much so that one of his hon. Friends sought to intervene. That is a rare compliment, and it shows the ability with which the hon. Gentleman can argue his case. Although we do not agree with him, we admire his courage in putting forward his point of view with such force.
The hon. Gentleman paid tribute to his predecessor, Sir Ian Orr-Ewing. I am sure that we all want to endorse what 852 he said, and wish Sir Ian well in his political retirement, because we remember his contributions to debates in this House.
The hon. Gentleman has come here with a reputation as a fairly seasoned campaigner. Some of us, in other contexts, have learned to appreciate the force of his campaigns, but we are glad to see him in the House now where we can cross swords with him across the Floor of the Chamber, and we look forward to his future contributions to debates, when we can do just that.
We have in the last few days witnessed a tragedy which is of such dimensions that very few of us can realise at this stage the full implications of it. I had the responsibility about three years ago of conducting the negotiations with the Lockheed Aircraft Corporation when I was the Minister of State at the Ministry of Technology. I recall how delicate those negotiations were, and it is with that kind of hind sight that I propose now to make a few observations on the way in which the Government have handled the present state of affairs.
I agree with the Governmental statements that there can be no question that the Government can take on an open-ended commitment in any deal which they have with a private enterprise firm. If they were to do that, it would mean that any loan or assistance given to any company would involve the Government in backing that company's commitments to the absolute limit—and that is virtual nationalisation—whilst allowing the shareholders to continue their share in the business without any risk, and I believe that that would be very wrong.
At the time of the negotiations with the Lockheed Aircraft Corporation there was no question that the Government were entering into an open-ended commitment, but there was an implied undertaking that if Rolls-Royce was unable, from its own limited resources, to see the RB211 contract through—because it was a formal contract—the Government would look extremely sympathetically at providing assistance to see it through.
What has happened is that the Government have not seen the total collapse of Rolls-Royce. The whole purpose of the Bill this afternoon is not to preside 853 over the funeral of Rolls-Royce, but to ensure that the major part of Rolls-Royce's business continues, because the company will be viable, it has a future, and there is no question of total collapse.
In those circumstances, I believe that it is utterly deplorable and despicable of the Government to pick out one contract among the many which Rolls-Royce negotiated and say that it is only this one foreign contract on which we are not going to fulfil all our commitments. The Minister said this afternoon that the whole purpose of the Bill was to honour international collaborative agreements and to see that our responsibility to foreign civil airlines was fulfilled. He went out of his way to say that. Why, then, make an exception for one major aircraft company and several very important airlines in the United States which were relying on Rolls-Royce's seeing this contract through?
§ Mr. Norman Tebbit (Epping)
The right hon. Gentleman has used the expression "our commitment" on several occasions in relation to this contract. I am sure that that was inadvertent, and that he means the Rolls-Royce Company's commitment, as he has been involving himself rather in his former capacity.
§ Mr. Stonehouse
I am not in the debate this evening making a legalistic interpretation of the responsibility. What I am saying when I use the word "our" is this country's responsibility to honour a commitment which Rolls-Royce took on, supported by the Government at the time because the Government believed that the Rolls-Royce contract was one which the company could honour and fulfil, following the assurance which the company gave.
The point that I wish to come to is that the commitment which we should go on with, the Lockheed contract, is not an open-ended commitment in the sense that there is no limit to the amount of money that would be expended on it. All the discussions that are going on now, and the discussions in the financial columns of the newspapers, are about money, not about capability, and the Rolls-Royce Company, as everybody accepts, has the technological capability to see its contract through.
It is a question of the price at which this can be done, and I have been fascina- 854 ted to read in some of the City columns in the last few days some prognostications about the actual price which the Government would have to pay to ensure that a contract to build the RB111 went through. They are far from the figures of £300 million and £400 million which have been bandied about so far. They are substantially less than that.
The Guardian of a few days ago, after a fairly long analysis of the situation. concluded with this paragraph:Comparing one solution with the other, the saving is not £400 millions but £30 millions to £130 millions plus a deferred £56 millions. The reader can determine whether this is a high or a low price for the possible damage to Britain's commercial reputation. And the creditors, who will lose almost what the State saves, can compose their own comments.That, I think, is a fair commentary on the situation.
This is not a question of an open-ended commitment but of how much money the Government were prepared to allow Rolls-Royce to have, so that it could see its contract through. I believe that the Government have made a deplorable mistake in allowing Rolls-Royce to collapse in this way.
What would have been the position if the boot had been on the other foot? Suppose that Rolls-Royce had had a marvellous contract, with no technological problems with carbon fibres and suppose that it could produce the engines at a price consistent with its previous negotiations. Suppose, then, that the Lockheed Aircraft Corporation was in trouble, went the way of Penn Central, was allowed to collapse, and the American Administration took over the company to protect essential defence interests—but allowed only the contract with Rolls-Royce and with Britain to collapse. We would be up in arms as a nation complaining about this ignominious behaviour, and that is now the Americans feel about us today.
We have taken a dishonourable course which would not have been worthy of John Bloom in his worst days. I believe that the Government will live to regret this despicable Measure, which they have embraced, not in the interests of saving a great sum of money but in the interests of saving a comparatively paltry sum—less than 10 per cent. of the annual defence budget. But what is the point of having a defence of this nation unless we protect 855 our essential commercial integrity and future technological opportunities?
This Measure which the Government have perpetrated on the nation is their economic Suez. The effect on the industrial life of the nation will be felt for many years. Every negotiator, private or public, going abroad to negotiate on behalf of Britain in the future, will have the name Rolls-Royce flung in his face. He will be asked, "Can we trust you any more? What is the value of the Government's endorsement of your proposal, when they let down Rolls-Royce on a contract like the 211?" The Government have been condemned for this whole business, and I bitterly regret that they are, apparently, having no second thoughts about their actions.
On the Bill itself, grave misgivings have been expressed already about the position of the sub-contractors. I endorse those fears, because many of my constituents will be directly affected. I hope that the Government will at least be able to say that the sub-contractors will have a certain percentage of their liabilities met. Whatever percentage can be put, I hope that something can be said, so that these companies can continue in business during the next few weeks, when so many important decisions are being made.
I entirely endorse what my hon. Friend the Member for Stockton-on-Tees (Mr. William Rodgers) said. There are many lessons to learn from this episode. The one which we have learned is that, where so much public money is involved and it involves a major part of the support of a company, it is right not only in the interests of public accountability but also in the interests of efficient management of the taxpayers' money which is put into this business, that there should be public control, through nationalisation.
I regret that, in those days when we were considering what support we should give Rolls-Royce for various enterprises—not only the 211—we as a Government did not make a decision to nationalise Rolls-Royce so that it could be subjected to full public control. I hope that, when this side returns to that side of the House and the nightmare, or shall we say the dream, of the hon. Member for Hendon, North is realised, we will take steps to ensure that the lessons of the Rolls-Royce 856 affair are really learned and that we have public accountability and control where public funds and public commitment are involved.
§ Mr. Speaker
Order. It is obvious that nearly 30 right hon. and hon. Members want to take part in this debate. I hope that they will keep their speeches as short as possible.
§ 6.25 p.m.
§ Mr. Robert Adley (Bristol, North-East)
Before I comment on the remarks of the three former Ministers who have spoken, I should like to congratulate my hon. Friend the Member for Hendon, North (Mr. Gorst) on what must have been a nerve-racking maiden speech, since he was called after the Front Bench spokesmen in such an emotional and highly charged debate. He performed very well, and I know that I echo the opinion of hon. Members on both sides when I say that we look forward to hearing from him frequently in future.
It is also difficult and perhaps nerve-racking for a new back bencher to have to speak in this debate, certainly someone who was not a Member on 1st April, 1968, and who has to follow three former Ministers. I do not want to start taking up time with a long rhetorical discussion of what has been said, but I believe that the remarks of the right hon. Member for Wednesbury (Mr. Stonehouse) go absolutely to the kernel of the problems which we face. The problem is a direct result of a contract negotiated with the connivance of the last Government, and in which that Government's rôle has never been clearly and fully explained to the firm understanding of all the parties concerned—not only those in this country, but, of course, the parties overseas.
§ Mr. David Waddington (Nelson and Colne)
Has my hon. Friend ever discovered when it was that the Rolls-Royce contract with Lockheed first came into the hands of the right hon. Member for Wednesbury (Mr. Stonehouse), when he was responsible for these matters? Would it not be interesting, in order to find out how much concern they had for the nation's interests when they were in office, to know when that happened?
§ Mr. Adley
I am grateful to my hon. Friend. If my hon. Friend the Member 857 for Hastings (Mr. Warren) catches your eye, Mr. Speaker, I hope that he may be able to deal specifically with that important, if not vital, point.
The right hon. Member for Wednesbury used phrases like "implied undertaking" and "sympathetically" to describe the relationship between the last Government and Rolls-Royce, and, presumably, between the two of them and the Lockheed Corporation. This is our problem today; this is why Rolls-Royce are in this position. It is because the contractual relationship between the last Government, Rolls-Royce and Lockheed was never fully and clearly understood. When the right hon. Gentleman said that he did not want to enter into a legalistic argument, I thought that it was a pity that there was not a little more concern to enter into a legalistic contract at the time, so that Lockheed, Rolls-Royce and the Government knew exactly where they stood.
In the last few days, the name of Rolls-Royce has been on everyone's lips. There has been an assumption that perhaps Derby bore the brunt of the troubles which the RB211 could bring upon the Rolls-Royce empire. I have no intention of making a constituency speech, but my constituency of Bristol, and the surrounding area, is more than passingly interested in this situation, because—I make this point with no frivolity—while right hon. and hon. Gentlemen have expressed concern about the sub-contractors, the British Aircraft Corporation's major subcontractor is the Rolls-Royce company itself. I cannot emphasise this point too strongly. This is my reason for speaking in this debate. My constituents want to know why the jobs and the future which they thought were secure last week have now perhaps been put at risk, or certainly in some doubt, because of what has happened at Rolls-Royce.
I am in a delicate position, because I believe that blame attaches to a number of right hon. Gentlemen opposite, and I have no wish to become involved in any slanging match. I think however that, sometimes, the enthusiasm of the right hon. Member for Bristol, South-East (Mr. Benn) might have been better tempered had it been matched with the same attention to detail and real depth of knowledge of the subject which has been shown by the present Minister—my right hon. 858 Friend the Member for Gloucestershire, South (Mr. Corfield)—in the way in which he has attempted to get out of a very difficult situation.
§ Mr. Benn
The hon. Gentleman fought the last election on a manifesto signed by other members of his party saying that the Labour Government showed no enthusiasm for the aircraft industry. That was his charge. He and his colleagues repeated it throughout the campaign. Throughout the whole period of the last Parliament Tory Members attacked the Labour Government for failing to support the aircraft industry's projects. In those circumstances, the hon. Gentleman, as a new Member, should consult the record and see that such a charge is totally incompatible with everything that was said during the time we were in office.
§ Mr. Adley
The right hon. Gentleman might on his next visit to Preston talk to certain people who were involved in the TSR2 project and see what they have to say about the Labour Government's attitude to that project. On his next visit to Filton he might mention the name of the late General de Gaulle who, with the greatest respect to the right hon. Gentleman, is probably held in more respect at Filton than either the right hon. Gentleman or I, as the person who prevented the Labour Government from cancelling the Concorde project.
The enthusiasm of the right hon. Member for Bristol, South-East—I say this in all sincerity; he is a man whom I greatly admire, because his enthusiasm is a guiding light to many of us in the way that he seeks to promote the fortunes of the aircraft industry; I do not say that in any way disparagingly—is something for which we can all be grateful. But discretion is the better part of valour.
The right hon. Gentleman has described the decision on the RB211 asthe most important industrial decision announced in the House since the war."—[OFFICIAL REPORT, 8th February, 1971; Vol. 811, c. 61.]Few of us would dispute that. It falls to Governments to make decisions in one of two categories. One is a decision when legislation is introduced based on deliberate, thought-out policy. The other is a decision which has to be taken dictated by circumstance. 859 As regards deliberate policy decisions I can think of the present Government's Industrial Relations Bill and their east of Suez policy as things which were worked out beforehand, presented to the electorate, and brought to the House. As examples of legislation dictated by circumstances I can think of the U.D.I. situation in Rhodesia which faced the last Government—I will not comment on that—and the Rolls-Royce situation with which the present Government are faced.
This Bill is the product of a decision dictated by circumstances. My constituents and the country want to know who created these circumstances. This is not idle recrimination. It is a question to which an answer is required. The hon. Member for Stockton-on-Tees (Mr. William Rodgers) touched very nearly on the point which concerns so many of us when he spoke of the need for clarity of understanding of Government responsibility and Government attitudes towards Government business and contracts in which Governments are involved.
It is fairly obvious that without launching aid the RB211 engine would never have been launched. If we had had no engine, we would have had no contract. If we had had no contract, Rolls-Royce would now be a normal, solvent company.
§ Mr. Adley
I can say it and I do say it. Many people better informed than I are saying that the sole cause of the present troubles at Rolls-Royce is the RB211 engine. I should have thought that this was not a particularly contentious statement. The Government, by interfering—I use the word in a market sense—in a relationship between two commercial companies have accepted responsibility to a greater or lesser degree for the contract with which they were concerned.
The right hon. Member for Bristol, South-East has said recently that it was not the contract that was wrong. I contend that it was the contract that was wrong. If the Government did not think that it was the contract that was wrong, why did they send in the I.R.C. to investigate the circumstances of the contract? If the I.R.C. did such a good 860 job, why at the end of its visit to Rolls-Royce did simply produce another £10 million and not do something much more drastic—a step which has been forced upon the present Government in the circumstances in which we find ourselves today?
Right hon. Members opposite have mentioned the difference between the Concorde contract and the RB211 contract. Adverse comments are frequently made by opponents of the Concorde about its contract. The Olympus 593 contract and the Concorde contract has one over-weaning merit, in that nobody is in any doubt that the British Government are responsible, with the French Government, for the conclusion of the contract. This is a situation in which the RB211 contract has never been. There has never been that certainty about the responsibility that is associated with the Concorde project and the Olympus 593.
Shall we ever know just what was the responsibility of the last Government towards Lockheed, and shall we ever know just what Lockheed thought about the previous Government's involvement in that contract?
I submit that Lockheed's position in contractual arrangement with Rolls-Royce alone would have been fair and clear, but Lockheed, in contractual arrangement with Rolls-Royce plus a British Government is unfair, unless the British Government at all times make their relationship, their commitment and their financial contributions crystal clear to all the parties to the contract.
I believe that Lockheed may have been misled. Whether it was by mistake, by misunderstanding or by misdeed I know not, but I believe it possible that Lockheed was misled into believing that the previous Government were prepared at all costs to pick up the tab for anything which may or may not have gone wrong with the RB211 contract.
To prove that point I give the House three particular illustrations. First, on 1st April, 1968 the right hon. Member for Bristol, South-East, answering a question in the House, said this:… this is an interesting example of a partnership between Government and industry which has made this possible."—[OFFICIAL REPORT, 1st April, 1968; Vol. 762, c. 45.]861 The use of the word "partnership" surely implied that there was indeed a depth of relationship between the previous Government and Rolls-Royce on that contract, something which appears to be refuted now.
The Air Holdings deal, about which more will no doubt be said, is a second example of a quite clear British governmental involvement to back up Rolls-Royce in that contract.
Finally, the launching aid, for the first time exceeding 50 per cent. on that contract, was a third crystal-clear indication of how the last Government were backing up Rolls-Royce in their efforts to see this contract through.
My aim is not to recriminate, but my constituents are entitled to know these facts. I therefore suggest that the words of the hon. Member for Stockton-on-Tees be taken seriously to heart by the Government in a bid to ensure that we do not have any more government by hint and government by implication, because that is what has got us into this situation.
§ Mr. E. S. Bishop (Newark)
I am sorry to embarrass the hon. Gentleman, but I ask him, when he has a few minutes to spare—he need not hurry, because the Bristol Evening Post has gone to print—to go to the Library and look at Early Day Motion No. 226, which was signed by 64 of his right hon. and hon. Friends and which congratulated Rolls-Royce Limitedon the magnificent outcome of their sustained efforts to capture for Great Britain such a major share of the United States aero-engine marketand commendedthe co-operation of the financial institutions of this country"—there was no mention of the Government at that time—which assisted so materially this British triumph.I might add that five members of the present Government were signatories of that Motion. As the Motion then gave no credit to the Labour Government, surely there can be no blame at this point.
§ Mr. Adley
To mention that the Bristol Evening Post have gone to print is rather cheap. Unfortunately, the hon. Gentleman failed to read out the Motion in 862 his name which mentioned the previous Government and left even more confusion amongst anybody who might have read both Motions to which he has referred.
§ Mr. Onslow
May I remind the hon. Gentleman that neither he nor any other signatory to either Motion knew that the contract on which this whole deal turned had not in fact been seen by his right hon. Friend at the time when the statement was made?
§ Mr. Adley
I am grateful for the interventions of hon. Gentlemen on both sides of the House. One has to look to the future. In the Bristol Evening Post of last Friday, the right hon. Member for Bristol, South-East was quoted as saying:Looking back on the decision taken in March, 1968, I am certain that any Government would have done what we did then.I do not think that to be a true statement of the attitude of the present Government towards the expenditure of public money on a contract. The present Government intend to look much more closely before they commit any large sums of public money for any contract.
My concern is for Concorde. On that basis I want to refute the suggestion that the RB211 decision will adversely affect the future of Concorde. This is not true. The British Aircraft Corporation do not believe it to be true. Anyone who suggests this possibly misunderstands the mentality of American business men, and those responible for the American airline industry, towards this great aircraft or any aircraft. The Americans will not buy or fail to buy Concorde because they feel that we are nice chaps. They will buy Concorde because they believe it to be a first-class aircraft, and primarily because B.O.A.C. and Air France will buy Concorde and the Americans cannot be left out of a competitive position.
I almost unreservedly support the Bill, in the belief that it is in the best interests of Concorde.
§ Mr. Raphael Tuck
On a point of order. May I repeat my entreaty to your deputy, Mr. Speaker, earnestly to ask hon. Members to limit their speeches to ten minutes.
§ 6.43 p.m.
§ Mr. William Whitlock (Nottingham, North)
I shall make what is almost wholly a constituency speech. I make no apology for that. It is evident that it is completely unclear what charges on the public revenue would be made by the Bill and what assets and undertakings of Rolls-Royce would be taken over. All is uncertainty. Involved in that uncertainty are the wives and families of employees of Rolls-Royce, and others who are now haunted by doubts and fears about the future.
Without the human assets the financial and physical resources of which we are speaking are of little use. During last weekend all hon. Members will have had the opportunity of seeing in their constituencies just how profoundly shocked were the public by the events of last week. In my experience, people everywhere have been saying that something must be done to restore Rolls-Royce to the pinnacle from which it has fallen. The nation finds it difficult to accept that this famous company is, in the phrase of the right hon. Gentleman opposite, a lame duck. To many people it is a powerful eagle, temporarily incapacitated because just once it has aspired to reach heights which are for the moment beyond its strength. That single error of judgment in a long history of brilliant achievements has brought it down, but with proper support it can aspire to heights to which others only lift their gaze. It must be given that support.
If members of the public received the news of the company's fall with a sense of profound shock, what of the employees of the company? In Monday's debate my hon. Friend the Member for Derby, South (Mr. Walter Johnson) spoke very movingly about the impact of the news upon the employees at Derby. During last weekend I spoke with Rolls-Royce employees at Hucknall, in my constituency, where the flight testing establishment of the company operates. At Hucknall, many of the problems of the RB211 have been overcome, and there the engine has been flight-tested on the VC1O flying test bed. I have always found that the men who work at Hucknall believe with a quiet confidence in their skill and craft. They have always shown a consciousness of being guardians of a reputation which has been Britain's pride and the envy of 864 the world. They are numbed and shattered by what has happened, and even now they find it difficult to believe that the company to which they are so loyal has been brought so low. They are asking day in and day out, "What can we do to help?" If faced with a problem in the ordinary way, they are the kind of people who will solve it. If they could they would certainly bend all their efforts to overcome the present great difficulties of the company. That is why it was so unfair of the Prime Minister, in a television broadcast last weekend, when he spoke to a Conservative meeting, to imply that wage inflation had been partly responsible for the troubles of Rolls-Royce. There have been no great wage increases at Rolls-Royce in the last three years during which the RB211 has been in the process of development.
Industrial relations at Rolls-Royce are excellent. Negotiations took place in a very responsible way over nine months last year to produce a job evaluation payments scheme, under which every job in the factory was evaluated on 27 characteristics. The employees are only just beginning to feel the benefit of that scheme. That is why they are very upset by the Prime Minister's remarks. They feel that the increased costs seem mainly to have come about from the failure of Hyfil—the use of carbon fibre for the RB211's turbine blades—and the switch to titanium, together with the large world increase in nickel prices.
It has often been pointed out that many of the troubles of the British aircraft industry date from the late 1950s, when another Conservative Government produced a White Paper which shifted the defence emphasis from aircraft to rockets. Dr. Alexander Smith, a former Rolls-Royce executive in charge of the aero-engine advanced research programme, pointed out last week that certainly Rolls-Royce's problems began at that time, when the company decided as a matter of policy to ensure its survival with civil engines. Dr. Smith said that Rolls-Royce crashed because it was run by technical men and not by financial men. In an industry which has the difficulties of ever advancing technologies and the problems of selling in a market so much influenced by international politics, there are exceptionally high risks. But always in the past the imagination and 865 know-how of technical men at Rolls-Royce have brought achievements which the financial men would not have achieved. They would not have achieved it because, in most cases, they would not have attempted those achievements. The pay-off is always in the uncertain future and success can never be guaranteed.
In the case of the RB211, because the faith of the technical men has proved too great, they have failed financially; yet by all accounts the engine is a great success technically. On Monday, the Minister of Aviation Supply suggested that it was behind engines of equivalent power and performance. But that is not a view that I have read or heard anywhere else, and it is not one which the employees at Hucknall have gained. In my view, the right hon. Gentleman did Britain a great disservice when he made that remark.
§ The Parliamentary Secretary to the Ministry of Aviation Supply (Mr. David Price)
I am sure that the hon. Gentleman does not intend to misquote my right hon. Friend, who made it clear that where the engine was behind was in time and delivery dates—[HON. MEMBERS: "No!"]—and he was pointing out the consequences commercially.
§ Mr. Whitlock
Whatever the right hon. Gentleman intended, what he said was quite different, and it has had an enormous impact round the world.
§ Mr. Whitlock
No, I must not give way any more I want to keep my remarks brief, because I know that a number of hon. Members wish to speak.
I have here the house journal of the Lockheed staff. It is dated 19th November, 1970, and it says:TriStar's first flight perfect",and goes on:L-1011's quiet, clean performance only 25 minutes after time forecast 2½ years ago …Then there are the reported comments of people who were there. Someone said:If I'd had my back to the runway, I wouldn't have known it went by.There were comments about the quietness of the engine and about the fact that 866 there was almost no smoke from it. Someone said:It must be burning alcohol—there's practically no exhaust emission.If time permitted, I could go on down the list of eulogies which appear in Lockheed's magazine.
The engine is late, of course, and that is the cause of a lot of the trouble.
§ Mr. Whitlock
But, so far as I can gather, it has had no development problems to be solved which are not of a nature normally to be encountered in the development of a new engine of this character, although, in an engine so large, the problems are on a larger scale. Because it is a great engine, the faith of the technicians should be underwritten. The RB211 should continue. It is more sensible to see that it does than to pursue the senseless east of Suez policy so beloved by right hon. and hon. Gentlemen opposite.
Repeatedly, the failure of Rolls-Royce has been described as a tragedy. Involved in it is the threatened tragedy of the break-up of the teams which have made the name of Rolls-Royce a synonym for technical perfection. One of the teams is the one at Hucknall where the company's flight testing establishment is situated and where engineers, specialists and experts in a number of fields carry out their research and development in an atmosphere of sustained enthusiasm and dedication. That unique team must be kept together. It is important to the nationalised company and to Britain that it be preserved.
When the Government come to decide the full scope of operations to be undertaken by the nationalised Rolls-Royce concern, I hope that they will ensure that the Hucknall team remains as a body of men who will keep Britain in the forefront of aero engine technology.
§ 6.55 p.m.
§ Mr. Ian Lloyd (Portsmouth, Lang-stone)
I hope the House will forgive me if I am unusually brusque and do not conform to the normal courtesies in congratulating my hon. Friend the Member for Hendon, North (Mr. Gorst) on his maiden speech.
Few hon. Members are here very long before they realise that the gulf which 867 separates the two Front Benches is a variable factor. There are times when it seems as wide as the Atlantic. There are others, like this evening, when appropriately it seems as narrow as the Derwent. There are even times when the banks almost touch. I am sure that everyone who has spoken or who intends to speak will feel the most profound concern about what has happened, what is being done by the Government and what we as a nation should be doing.
I must first declare my manifold interest in this debate. The first is an unusual one in that, a long time ago, I spent three or four years writing a history of this great company. During that time I developed a profound respect not only for the management and administrators but for everyone concerned with this very great British company. That respect has never left me. My second interest lies in the fact that I have a considerable branch of Plessey in my constituency, an aerospace firm which is bound to be affected by what is happening. Then, in a miniscule way, I am a shareholder in the aero company, and, finally, I have a remote connection with Air Holdings.
Some years ago, the American Army was in the greatest difficulty, retreating from Korea. George Kennan wrote to the then Secretary of State Dean Acheson and said:… almost everything depends from here on, on the manner in which we … bear what is unquestionably a major failure and disaster to our national fortunes … if we try to conceal from our own people or from our allies the full measure of our misfortune, or permit ourselves to seek relief in any reactions of bluster or petulance or hysteria, we can easily find this crisis resolving itself into an irreparable deterioration of our world position and our confidence in ourselves.I suggest that every word that Mr. George Kennan used on that occasion can be applied today to this company, because we are concerned basically with this question of confidence.
Have we the confidence that we should have in the decisions that have been taken over the last eighteen months? First, let me clear away one piece of doctrinaire trench warfare. We are not really talking about private or public enterprise. I discovered long ago that Rolls-Royce is a peculiar type of firm which I would describe as an aero-space hybrid, and that is more true today than when I first 868 realised it. More than half its gross revenue from 1934 onwards and much of its investment has been derived from the State. That does not devalue the important functions that it has exercised in its private enterprise capacity.
I suspect that some decisions were taken in that firm in 1940 which, had the firm been a national dependency, would not have been taken. Had those decisions not been taken, we would not have produced the upgraded Merlin, we would not have won the Battle of Britain, and we would not have been sitting in this House today.
I turn now to the reasons given for the actions of the last few days. It seems to me that these have to be explored in depth. First, I would like my right hon. Friend to define the term "insolvency", with which the whole House has had difficulty.
What has been quantified? What can be quantified? We are dealing with a situation which has been created by judgments about one form of unquantifiable amount and another form of unquantifiable amount. My right hon. Friend said that the insolvency was caused by debts already incurred and likely to arise. I am sure that the House wants to know and must know where the dividing line between the two amounts lies.
§ Mr. Tomney
In this country, there is not and never has been an efficient force of cost control accountants in specialist industries like this one. A remarkable feature of this contract is that, taking into account the penalties, and so on, the price now works out to within a few £s of the original tender of the General Electric Company of America. Does not that prove that American cost accountants are more efficient in their job than people in this country? Surely that is the kernel of the problem, and it has been the trouble in the aircraft industry for 25 years.
§ Mr. Lloyd
I find myself very much in agreement with what the hon. Member has said, and I am coming very precisely to this point. May I return for a moment to the question of the unquantifiable, because it seems to me that this whole decision has been based on an assessment of RB211 costs plus Lockheed plus airline claims versus an estimate, whatever it may be, if it has been 869 done, of the whole of the Rolls-Royce range of technological expertise, goodwill, etc. The Government may quantify the first item at £300 million or something of that size, and I can certainly quantify, subject to many disagreements, the latter at a figure of the order of £500 million. But both, I suggest, are purely speculative figures and this decision has arisen from a purely speculative assessment of this kind.
I ask therefore—and the Minister must inform the House and the country—was this insolvency caused by an immediate cash-flow problem or was it not? The second point I would like to put very directly to the Government is whether the legal advisers to the Crown advised directly and specifically on the American legal implications of the contract? If they did the Minister should advise the House on precisely what advice was given.
May I turn briefly to what is known as the "exceptional" RB211 situation. I believe I am going to be of help to the House in this matter. How exceptional is it? We have had considerable British experience of cost overruns as hon. Members on both sides of the House will know. Those who follow these matters will be familiar with the Elstub Report and the Downing Report, both of which have dealt with the problem and uttered grave warnings which successive Governments have in some instances ignored.
I will ask the patience of the House while I turn briefly—because the experience is broader though equally relevant, and much more documented—to American experience.
I would like to quote American cost data on comparable contracts. We have Minuteman where the estimate was 2.69 billion dollars and the actual cost 5.36 billion dollars. We find for the C-5A, a major Lockheed aircraft, the original contract was 2.6 billion dollars The final figure at the moment is 3.9 billion dollars. For the F15 the 1970 estimate for research and development alone was 1.1 billion dollars and the 1971 estimate for research and development is 1.77 billion dollars; and so we go on. For the B-1 bomber the 30th June estimate was 1.8 billion dollars and the June 1971 estimate is 2.3 billion dollars. So we are not 870 talking of an "exceptional" situation at all. The production cost for 200 plus aircraft was 7 billion dollars.
In evidence to the Committee on Armed Services in the United States the following statement was made by a very senior official from the Department of Defence:The actual performance on major aircraft programmes has averaged about 85 per cent. of the performance proposed by the contractor.… Under conventional contracts actual costs of major defence systems exceeded original estimates by very wide margins—often by several hundred per cent. and rarely below 100 per cent.Overruns reported to the United States Congress on 29th December, 1969, in the total defence field totalled 20 billion dollars. That was the escalation the United States Congress had to approve in 38 major defence systems.
Turning briefly to the question of contract "over-optimism" to which the hon. Member opposite has referred, Dr. Forster, a senior official of the Department of Defence, had this to say to the United States Congress on this problem in talking of firms which had been forced by their own contract mistakes to the point of insolvency:Whether to go beyond that point and force him into bankruptcy is a much harder question. We would have to determine very carefully who was at fault and to what degree. Further, we would have to understand what the Department of Defence would gain and what it would lose if we were to pursue our legal position to the bitter end.Going to another piece of evidence, which, again, I believe will interest the House, Mr. Preston in evidence to the same Committee said:Since the now famous letter from Lockheed requesting financial relief from its connection with the C-5A, how many other development contractors have contacted the Department of Defence … to request some measure of financial relief for themselves?He suggested the figure was of the order of 400. Following a typical American Congressional procedure, this was read into the record and the number of cases was 1,105. So we are not talking at all of an exceptional situation but of something which is absolutely typical and essential to the problems of major aerospace hybrid companies of which Rolls-Royce is an example. May I come now to evidence given by the Assistant Secretary of State, Mr. Charles, on this very point. Perhaps hon. Members opposite 871 will not like this very much, but it is nevertheless essential to the case:Contracts which are devoid of financial risks are standing invitations to massive cost overruns and less-than-promised technical performance. Experience indicates that these invitations are rarely declined. And this makes rational defence planning almost impossible. It makes choices both among defence programmes and among national programmes erratic to the verge of irrationality. It is utterly unacceptable as public policy—economically, socially and morally.Finally—and I hope this will interest the House more than anything else—Mr.Haughton, the Chairman of Lockheed, himself gave evidence to the Armed Services Committee. He said—and I believe the House would like to know this:The issue is this—do the people of the U.S. need the kinds of produce we produce. If they do they should procure them from the most efficient companies available. If procurement on that basis excludes Lockheed, then we will have deserved it.This is an interesting insight into the philosophy of the Chairman of Lockheed:We should be subjected to the most searching examination of our performance … but … the report of such examination should be objective, balanced and above all, true.Certainly, we would ask for that in the case of Rolls-Royce. On this particular project which committed his company for an eight-year stretch he said:This risk (over eight years) would have been far beyond the resources of any aerospace contractor in the country—this is the United States—if the contract had not provided some means of adjustment for actual but unpredictable changes in the economic or technological environment.This is the fundamental situation about which we are talking, not about public or private enterprise but about something absolutely new. Mr. Haughton continued—and this is the main conclusion I would draw:The work should be undertaken by private enterprise but the technological/inflation risk must be underwritten by governmentbecause it cannot be underwritten by anyone else. Again, referring to a point made by my hon. Friend, Mr. Haughton himself dealt with the essential difficulty which he felt both the Department of Defence and the Chairman of Lockheed himself were facing in dealing with this this problem. He said:The Government needs procurement techniques that can protect its interest, maximise 872 competition and yet be flexible enough to permit strong technological advances, minimise cost surprises and improve its fiscal planning.Industry needs such improved techniques to permit it to do sound work, deliver top system performance and yet not fall under public suspicion because of unavoidable costs that cannot be anticipated …It is becoming increasingly apparent that there is an extremely delicate point of balance in the procurement of effective weapon systems.The RB211 is indistinguishable from a major component of an effective weapon system.
I propose to finish with a number of questions which I would like to put directly to the Minister because I believe they should be answered. Did either Lockheed or the airlines at any stage ever talk of invoking penalties? My information is they did not. What advice did the Government take on the operation of New York law? Were Rolls-Royce's American lawyers consulted at any stage? My information is that they were not. Was there a cash flow problem? Had the banks warned either the Government or Rolls-Royce that its overdraft limit had been exceeded or was likely to be exceeded? My information is that they were not.
What information have the Government now on the cost over-runs on the most profitable aircraft, the JT9D? In the interests of British technology and British reputation, this should be known. This is no isolated case, and the comparisons must be made on a much broader front. [HON. MEMBERS: "Hear, hear."] On the morning of 3rd February, was there by any chance a leak from the White House which precipitated this débacle? There is a suggestion that that took place. We ought to know. What estimates, if any, have the Government made of the goodwill and the know-how of Rolls-Royce? They may have been made, but we have not been told. Again, we should know.
As the RB211 has, I understand, run at 43,000 lbs. thrust and 100 degrees temperature penalty, and at 38,000 lbs. thrust meeting the full specification in the contract, and since the estimate of completion to full specification without temperature penalty is a matter of four months off, do the Government accept that, and are they proposing to extend their period, perhaps, from one month to four? 873 Finally, to what extent has Rolls-Royce's whole management policy in the last few years been inhibited by Government policy in the widest possible sense from the type of rationalisation which that company is now being asked to undertake over the broadest possible front?
I consider that we are entitled to have answers to those questions.
§ 7.11 p.m.
§ Mr. Bruce Millan (Glasgow, Craigton)
We have just heard an extremely interesting and courageous speech from the hon. Member for Portsmouth, Langstone (Mr. Ian Lloyd)—[HoN. MEMBERS: "Hear, hear."]and I congratulate him on it most sincerely. In particular, I endorse his call for the Government to be a good deal more frank about all the circumstances leading up to the receivership last week. I entirely support the hon. Gentleman in all the questions which he put to the Minister, and my contribution to the debate will be very much in line with what he said.
I shall not go over the long history of the RB211, but I wish to take up the story as from 22nd January when Lord Cole approached the Government and informed them that there was difficulty about the RB211 contract from the point of view of Rolls-Royce. We have yet to hear from the Government a coherent story about what happened between 22nd January and the announcement by Rolls-Royce on 4th February that it was calling in a receiver on behalf of the debenture holders.
On Monday the Chancellor of the Exchequer said that when Lord Cole gave the bad news to the Government, there were only two choices open to them—this is c. 57 of HANSARD—either the Government could have decided to enter into an open-ended commitment to keep the RB211 going, or they could have entered into an open-ended commitment to meet the run-down costs in the event of the RB211 contract being cancelled.
In fact, there were several other courses open to the Government as from 22nd January; the two posed by the Chancellor by no means represent the only choices which they had. For example—this is the most important question of all, I think—the Government could have taken up the question whether the Lock- 874 heed contract could have been renegotiated in the period after 22nd January. First, we want from the Government an explanation of why that was not done.
The only sort of explanation we have had so far has come from the Minister of Aviation Supply, who said that after 22nd January the directors would have been in default under Section 332 of the Companies Act if they had carried on the business of Rolls-Royce. I state as dogmatically as I can that that is absolute nonsense. Any suggestion that the directors would have been liable under Section 332 if they had attempted genuinely to renegotiate the Lockheed contract does not bear serious examination. [HON. MEMBERS: "Hear, hear."] Section 332 refers in terms to "intent to defraud creditors". Does anyone seriously suggest that if Lord Cole and his colleagues had attempted to renegotiate the contract they would have been attempting to defraud the creditors of Rolls-Royce? The proposition is absolute nonsense.
That is true even if the directors had tried to renegotiate the contract on their own, but a fortiori it must be true if the directors had attempted to renegotiate it with the assistance of the British Government, because then it would be imposible to argue that Section 332 of the Companies Act could in any circumstances apply.
The Minister of Aviation Supply plainly does not understand Section 332. When my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) quoted from the Section words relating to intent to defraud, the Minister said that the question of intent to defraud did not enter into it at all. But Section 332 deals with exactly that. It does not deal with the carrying on of one's business temporarily when one is not able to meet one's immediate requirements; it deals only with carrying on a business with intent to defraud creditors. So that excuse is very thin, and I shall be interested to see whether the Solicitor-General substantiates what Ministers have so far said about it.
One can draw only one conclusion from this strange history between 22nd January and 4th February. The Government told the directors that in no circumstances would they put additional Government 875 money into Rolls-Royce unless Rolls-Royce called in the Receiver. That is why the decision was taken to call in the Receiver—because the Government made clear that they were not willing either to put in additional money or to enter into any renegotiation of the contract unless the receiver was called in. The purpose of calling in the receiver was to enable the Government, along with Rolls-Royce, to renege on their obligations to Lockheed.
Again, the suggestion that this was done to protect the creditors does not bear serious examination. Where do the creditors stand now that the receiver has been brought in? None of us knows what the exact figure is, but at 31st December, 1969, there were £62 million worth of trade creditors shown in the Rolls-Royce balance sheet. The figure must be considerably more now, and many of them are the sub-contractors about which so much concern has been expressed today. How do the creditors and sub-contractors come out of the present position. What sort of settlement will be available to them from the receiver?
It depends, first, on the Government's purchase price for the assets of Rolls-Royce. We have heard absolutely nothing about that today, and the Minister has been only too anxious to avoid any kind of commitment.
Second, it depends on whether the RB211 contract is cancelled. If the contract is cancelled, what will damage the creditors most of all will be the very substantial claim by Lockheed for cancellation charges. Figures of £50 million or £100 million have been mentioned in this respect. One does not know what the figure will be, but this is why it is very much in the interests of all the creditors and sub-contractors, whether they have been involved in RB211 work or not, that the contract should go on and that the Receiver or the new company should not be responsible for cancellation charges to Lockheed.
Incidentally, it is not just a question of the extent of the Lockheed claim. What matters also is the legal complexities likely to be involved. I forecast that if the contract is cancelled and there is a substantial claim from Lockheed. it will 876 take a long time to sort out the legal consequences, and the sub-contractors and creditors will be likely in that situation to receive no payment whatever because the receiver will have no idea how much money he will have available to meet the various claims made upon him.
The history of the last fortnight is utterly discreditable to the Government. They put the company and have now put themselves in an extremely difficult situation, not only prejudicing the position of our leading aero-engine company but prejudicing also the existence of many other firms in this country which entered into financial commitments with Rolls-Royce over the years. I look forward with interest to hearing from the Solicitor-General tonight, but I do not for a moment imagine that he is very happy that the Leader of the House committed him to make a statement during this debate.
Why did the Government act in this way? Why did they contract out of any kind of financial obligation? I think that it is partly for the reason given by my right hon. Friend on Monday, that they were more interested in sixpence off the income tax than in any other factor in the situation. It may also have been because the Government felt in some peculiar way that if they acted tough it would improve their negotiating stance when eventually they had to deal with Lockheeds, the United States Government and the United States airlines. This is a miscalculation. It does not seem to have occurred to the Government that if in foreign policy or anything else we base our policies on the principle that we look after British interests and to hell with everybody else, there is no reason why other Governments and outside interests should not deal with us in exactly the same way.
Why should the American Government help to bail out the British Government when we have acted in such an unprincipled way? Why should Lockheed be willing to help out the British Government in this situation, when they have been dealt with with such a lack of candour and so shamelessly by the Government over the past two or three weeks? Unfortunately, the Government's so-called defence of their attitude irretrievably weakens their position in the negotiations that we shall now have to enter 877 into with Lockheed, the United States Government and the airlines in the United States.
Therefore, I am sorry to say that I am not optimistic that we shall be able to get out of this situation an acceptable renegotiation of the Lockheed contract, although I hope very much that we shall be able to get a suitable renegotiation.
It has been said already in the debate that, technically, there are no problems with the RB211 engine which could not be overcome. The hon. Member for Portsmouth, Langstone pointed out that the escalation of launching costs and the various technical difficulties in the project are no different from what has happened with very many other defence and civil contracts in the aerospace industry both in the United States and in Britain over the past 10 or 15 years. The problems are not technical but are basically financial.
We have had very little frankness from the Government on what exactly is involved in the way of finance. In view of the Government's handling of the situation and the bitterness they have caused in American circles in particular, if we are to have a successful renegotiation of the contract the British Government will have to accept that they will have to bear a substantial part of the financial burden.
It is no use saying that we shall enter into the negotiations on the basis of driving the toughest and hardest bargain that we can with the Americans. It goes without saying that we should try to do that. But to go into the renegotiations on the basis that the Americans will bail us out and bear the main financial burden would mean that we have no prospect that any renegotiation will eventually be agreed. Therefore, we must have from tonight's debate at the very least an assurance from the Government that the £42 million and, for that matter, the extra £18 million talked about by the Government last November, remain at a minimum commitment by the Government when they enter into the renegotiation of the Lockheed contract. Unless we have an indication that there is such a minimum commitment I do not believe that the renegotiation will be any more than a squalid farce partly at the expense of Rolls-Royce workers and sub- 878 contractors. If we do not get a renegotiation, the effect of direct and indirect redundancies in very many firms throughout the country will be absolutely disastrous.
It is realised that the main RB211 effect will be on Derby and the Derby area, but if there is not a satisfactory settlement of the RB211 and a satisfactory arrangement for creditors and subcontractors the damage will spread over all firms—whatever the work they have been doing for Rolls—Royce which have been engaged in Rolls-Royce work over the last two or three years.
Indeed, one of the really frightening features of the present situation is that some of the earliest redundances have been declared in firms which were not involved in RB211 work at all but are declaring redundancies because they now find themselves so financially overstretched that they cannot carry on business.
§ Dr. Gilbert
Does my hon. Friend agree that the situation is even more serious, that the whole attempt to rescue Rolls-Royce could be totally vitiated if the sub-contractors go under?
§ Mr. Millan
My hon. Friend is on a very good point, and I hope that he will be able to elaborate it. The situation is a good deal more serious than the Government have been willing to admit, and certainly a good deal more serious than they expected when they allowed the receivership to take place last Thursday.
There will be a serious effect in my own area in Scotland and all over the country unless something is done about rescuing the RB211 contract. More than that, there will be a considerable loss of confidence in the British aero-engine industry. Even if we come out of this situation with a reasonable amount of credit—and I am sorry to say that I see very little sign of that at present—the blow to Britain and Rolls-Royce may very well lead to a gradual running down, a gradual decline, of the Rolls-Royce organisation. It is very important that the Government should restore confidence as much as they can and as quickly as possible.
The Minister's speech today was disgraceful. He spent more of his time 879 trying to placate some of the backwoodsmen on his own benches than in dealing with the real issues. Unless we receive satisfactory answers in the winding-up speech some of us on this side of the House will, I hope, carry on the debate into the Committee stage. Of course we accept the Bill; we cannot do anything other. But before allowing the Bill to pass today we shall have to obtain clearer and franker explanations from the Government on all these matters than we have had so far.
§ 7.28 p.m.
§ Mr. Norman Tebbit (Epping)
Like every hon. Member who has spoken or who wishes to speak, I feel most strongly about the fate of Rolls-Royce. I was a user of Rolls-Royce in my previous career. I think that I have been supported in flight by Rolls-Royce for over a year of total flying time. One gets to be fond of a company and its products, but we must look critically at the company and its products, too. I believe that is what is being done today.
I am glad that there has not been too much talk of personal responsibilities, particularly of the personal responsibility of the right hon. Member for Bristol, South-East (Mr. Benn). He did what any Socialist planner would have done. It was a copy book exercise in State intervention, and it came to a copy book end. He provided Rolls-Royce with the means for the self-deception to be carried on to its ultimate. It is no good now his hon. Friend the Member for Stockton-on-Tees (Mr. William Rodgers) talking about the balance on the board of Rolls-Royce between accountants and engineers. Those words received some approval from hon. Members behind him. I am sorry that he did not use the word "entrepreneur" as well. Perhaps that, too, would have got some support.
We cannot blame the former Minister, either, for failing to see the technical weaknesses that have shown themselves in the RB211. I think that it was entirely a matter on which he had to rely on advice, and he accepted the advice. But he ignored some small warnings which were offered. In April, 1968, my hon. Friend the Member for Woking (Mr. Onslow) asked him whether he was satisfied that sufficient financial and physical resources would be available to Rolls- 880 Royce to enable the RB207 to be de. veloped. The Minister's reply was to the point. He said:We are confident—and indeed it was our duty as the sponsors of the 207 engine for the European airbus to be confident—that Rolls-Royce can do the 211 for the Lockheed airbus and the 207 for the European airbus within the time scale. But if the hon. Gentleman says that this will mean a supreme effort by Rolls-Royce, there i3 nothing new about that, and we are confident that Rolls-Royce can make it" —[OFFICIAL REPORT, 1st April, 1968; Vol. 762, c. 47.]The right hon. Gentleman was warned.
§ Mr. Onslow
I am grateful to my hon. Friend for reminding the House of the question which I put at that time and which I would have been too modest to mention now. Before the right hon. Gentleman seeks to ride off on the ground that my question did not refer to the RB211, is not the implication that he must have been confident about the first in order to have been confident about the second?
§ Mr. Tebbit
One cannot again blame the right hon. Gentleman for accepting his advisers' advice to back Rolls-Royce on this contract, although there is some doubt now as to the exact degree of knowledge that he had of the contract. Until this evening I was sure that he would not have accepted on behalf of the Government any form of open-ended commitment in the contract, but then I heard the quite remarkable speech of the right hon. Member for Wednesbury (Mr. Stonehouse) in which he implied that, whatever his master may have said, there was an understanding between the Government, Rolls-Royce and Lockheed that there was some other form of commitment that Rolls-Royce would not be allowed to fail whatever happened and that this project would go through. We have not heard until this debate the positive assertion that there was a commitment to which the Government were in honour bound.
I think that there is just a chance that we may be able to see this contract re-negotiated. My understanding is that, technically, the engine can be got to the right state. I understand that it will involve considerable delay and considerable expense. But Aviation Week, in this week's issue, estimates the cost of adapting the 10-11 to the Pratt and Whitney or General Electric engines as about 881 £30 million or £40 million, with a delay of a year. That offers some hope for the RB211.
What is very much less hopeful is the news in the same issue that another major airline has backed out of its order for DC 10s, the very competitive aircraft to the TriStar, which means that Douglas has open places on its order book from airlines which have backed out of DC 10 orders. We have cause to doubt very much, whether or not the RB211 crisis had blown up in this way, whether the 10–11 customers would have gone on with an aircraft which was going to be late in delivery because of the engines when there was the possibility of going into another aircraft which was on time.
Finally, I want to refer to the interests of the employees of Rolls-Royce. We should think about them very deeply. But we should also recollect the sums of money involved. The suggestion is that the engine is now going to cost £170 million plus in launching aid, with probably about £60 million loss on production costs for 540 engines. There is not much prospect of engines beyond that number being ordered, for the TriStar is not looking like the success of all time, and there is no British airframe on which to hang the RB211. I think also that General Electric and Pratt and Whitney would be loth to let Rolls-Royce get a foot in again.
We have the possibility of penalty clauses. We have over £300 million at stake. Even to put it lower and suggest that only £200 million is involved and set that against the number of jobs involved, would any Minister, in all seriousness and rationality, come to this House and propose a scheme for creating jobs at £10,000 or £20,000 a head unless there was another very substantial benefit?
The only other very substantial benefit that one can see is the continued existence of a high-technology Rolls-Royce. The Bill provides—and it is for this reason only that I support it—that Rolls-Royce's main functions in the aero-engine division will be kept together as a single unit. I do not think that that depends absolutely upon the existence of the RB211. I believe that there is a viable future for Rolls-Royce without this. I think we all have to face the fact that we 882 can over-stretch ourselves in this sector of technology and that, as I have put it on another occasion, if building cathedrals is unprofitable it may be more prudent to bid for the concession for the Coca-Cola stand on the building site and make a profit out of that than to go bankrupt building cathedrals.
I hope that this is the view of the Government. I believe that it is. I am unhappy to see a great company go into public ownership but I will support the Bill the more happily because of my feeling that the Government intend that, if it is possible, the company should be returned to private ownership and because I believe that this company is absolutely vital to our national defence.
§ 7.37 p.m.
§ Mr. Phillip Whitehead (Derby, North)
The whole House will appreciate that this is a debate in which party lines have not been strictly followed. The glum faces of some hon. Members opposite when listening to the hon. Member for Epping (Mr. Tebbit) sharply contrasted with the enthusiasm aroused on both sides of the House by the speech of the hon. Member for Portsmouth, Lang-stone (Mr. Ian Lloyd). The searching questions which he asked, with which I want to associate myself—as do many of my hon. Friends—point directly to the kind of answers we hope to get later both from the Minister and from the Solicitor-General.
I particularly commend what the hon. Member for Langstone said about the rôle of public investment and accountancy to the hon. Member for Hendon, North (Mr. Gorst), whose maiden speech we heard earlier. It is my pleasant duty to add my own congratulations to the hon. Member for Hendon, North on his speech, since he has now joined us again. I knew him in my professional life before coming to this House in his rôle then as a highly successful lobbyist in broadcasting. It seems from the gap he has already opened up between the Government and himself on this issue that he is emulating other members of his family, and he may start a Fourth Party again. I hope that we shall hear him again in future.
When I made my own maiden speech a few months ago, I made less than the 883 conventional references to my constituency in Derby. I did so deliberately because it seemed to me that the virtues of Derby were largely self-evident and that Derby was associated with a whole range of advanced and excellent engineering design and technology which did not need reiterating. The position is rather different now.
Over the last week my hon. Friend the Member for Derby, South (Mr. Walter Johnson) and I have seen a town facing a catastrophe. Derby is the headquarters of Rolls-Royce, and a labour force of about 25,000 people are faced with massive redundancies if the RB211 project fails. There is at the moment taking place in Derby a meeting of one hundred firms of unsecured creditors who have not been paid by Rolls-Royce and who are owed sums ranging from millions to £10,000 or £12,000. Many of those firms cannot see their way to paying their bills to the end of this month, in some cases even to the end of this week. That is why my hon. Friend the Member for West Lothian (Mr. Dalyell) justifiably pressed the Minister at the beginning of the debate for some kind of assurance for these firms that they could continue trading and their bills would be met. Such assurances must be forthcoming from the Solicitor-General later.
§ Mr. Whitehead
I have come here to vote for the Bill. Like most of my hon. Friends, I would like to see this Bill amended to take in "all" the assets of Rolls-Royce and not merely use the word "any". That is now the view of most people who work for that great company. It seems ludicrous wilfully to break up the assets of this company just to have something that can be given as a sop to the more doctrinaire back-benchers opposite.
The whole of Rolls-Royce should be brought into public ownership now. Nevertheless, our first concern is to see that this Bill goes through so that in the next few days the shadow of the Receiver is lifted from Rolls-Royce, so that bills can be met, so that necessary materials for the completion of contracts can be bought in, so that all the difficulties and doubts about the payment of pension schemes, the position of workers' shares, 884 the claims for industrial accidents taking place in the firm even now—because it is continuing in business—may be resolved.
I very much regret that we had no assurance—indeed, no mention—of any of these doubts and worries in the speech of the Minister. It has been rightly said by several of my hon. Friends that the whole question of the value of Rolls-Royce as the receiver will find it, and the value to the country, depends largely on the future of the RB211 contract and the skilled design teams who have worked for years or this contract. Rolls-Royce is a very unusual company in that its assets cannot be quantified in simple terms of money, materials, factories or new plant. Its basic asset, apart from a reputation which has now been somewhat tarnished by this course of events, forced upon it, has been the collective skills of the design teams who have worked upon its advanced aerospace programmes.
If these design teams are broken up they are irreplaceable and the major assets of the company will be lost. It is mainly for that reason that I say to the House that the continuation of the RB211 and its renegotiation is one of the first things with which we should be concerned. The hon. Member for Epping told us that we should go into business contracting for whelk stalls and picking up tenders for Coca-Cola stands. If we have any future at all as a nation, with our tradition of aerospace technology, of advanced engineering design, that future must lie in projects like this.
We were sorry to hear the Minister of Aviation Supply say in the House on Monday that the RB211 was inferior——
§ Mr. Whitehead
Perhaps if I read the right hon. Member's remarks it may become clear why there is such indignation not merely among the people who have worked upon the project but on many others who have its well-being at heart. The right hon. Gentleman said:we must ask ourselves what can now be the prospect of such an engine being available in time to compete with versions of the CF6 and JT9 which are already in production and which are to all intents and purposes equal, if they do not exceed, the estimated performance of the RB2119"—[OFICIAL REPORT, 8th February, 1971; Vol. 811, c. 99.]885 The right hon. Gentleman can now, if he wishes, withdraw any imputation that this engine was in any way inferior to the American engines, which I would submit are at the very end of a long and successful design run, in the case of both General Electric and Pratt and Whitney.
The Minister chooses not to answer. The RB211 is at the beginning of a 20 to 30-year development period. It is the first of a family of engines incorporating a revolutionary three-shaft design, incorporating the kind of qualitative changes for which we should be looking in the new generation of the aero-space engines.
§ Mr. Tebbit
This is the point I had hoped I had made—that this engine, which clearly is a most remarkable technical achievement, has nevertheless, other than the 10–11, no other airframe on which it can be hung. The point I was trying to make in my reference to the perils of going bankrupt and failing to achieve a high technology was precisely that—that it can frequently be better to aim for something within our compass and do it successfully.
§ Mr. Whitehead
The hon. Member must realise that the adaptation of this engine to the Lockheed 10–11 basic design is only the first stage of what is possible with this airframe company alone. Many of the Rolls-Royce technicians have assured me—and the Minister—that tests taking place upon versions of the RB211 show an achievement of thrust far greater than was originally estimated, coming very close to the long-range high-performance version which Lockheed has in view for the future. If this is true it materially alters the prospect for the sales of this engine.
§ Mr. Ronald Brown (Shoreditch and Finsbury)
Is it not the case that the Government have taken the view, as the hon. Member has suggested, that the only thing they are fit for is selling Coca-Cola?
§ Mr. Whitehead
The RB211, unlike a Coca-Cola stand, can be altered, improved and fitted to various new concepts. Work is already proceeding at Rolls-Royce on another engine, a smaller one, 25,000 lb. thrust which would power a double-engine short-haul airbus jet of the future. I do not see how we can opt out of this whole range of technology, how we can turn this company back to a 886 repairing shop, a reconditioning shop, turning out an ever-diminishing number of Spey, Conway and Dart engines until even demand for those falls off.
With the passing of this company there is more involved than the loss of 40,000 jobs, as Mr. Nigel Lawson put it in the Evening Standard yesterday—a mere 0.2 per cent. of the employed in this country. If those 40,000 jobs are concentrated in one place, as they are in my constituency, then it is a very serious matter. However, we are talking not simply about 40,000 jobs but about the cumulative effects of what this decision might mean. We are talking about unemployment coming to perhaps a quarter of a million, directly or indirectly related to the failure of hundreds—I do not exaggerate—of small sub-contractors, firms dependent on this project and this company. That is why we should look seriously again at the prospect of renegotiation with Lockheeds.
It is true that Lockheed Aviation is a tough company. It is true that going to it and appealing for a renegotiation of the contract is like asking a stone for a blood transfusion. It is, nevertheless, true that Lockheed Aviation always treated us, and my right hon. Friend when he was Minister of Technology, with more courtesy than it has been treated over this matter. I believe that Lockheed might say that the three main American airlines which have ordered this plane are in a position to come to it and renegotiate the terms, but they will do that only if there is not a persistent denigration of the project and the prospects of this engine on the part of Her Majesty's Government.
The three American airlines concerned all know that they face three options. Firstly, they can take the engine after delays of five months, six months or perhaps nine months. Secondly, they can go to the bottom of the queue for the McDonnell Douglas DC10. That would be a longer delay. Thirdly, they can say to Lockheed, "Take a year, two years, and readapt your plane; redesign the entire airframe to accommodate either the GE6 or the GT9B." My belief is that the airlines, with the hope that we shall not again behave like a "banana republic", as my hon. Friend the Member for West Lothian (Mr. Dalyell) said earlier, and with the financial backing of 887 the United States, could come to us to renegotiate this deal.
This has been a sad and sorry business throughout; a number of hon. Members on both sides of the House will agree with that. The House may accept these lines of Kipling on the Boer War as an apt summary of the situation:Let us admit it fairly as a business people should, we have had no end of a lesson and it will do us no end of good.We have had a lesson, and we are a business people—I use that phrase in a non-capitalist sense—in that we live by the skills and ingenuity of the working people of this country, particularly those at the cutting edge of our technology, design and engineering. Our entry into Europe, if we go in, or our competitive position if we stay out depends very largely on how our technology can be sustained. We are told frequently in speeches by the Prime Minister that we must stand on our own feet and that there must be no more subsidising by the State of great enterprises. We can stand on our own feet as manufacturers of cuckoo clocks or toy soldiers without the exercise of the power of the State, but not as great enterprises of this kind.
This firm, which for many years has been the pride of this country, is now the possession of the people. I hope that it will go on to great things. I urge the Government to do all they can to ensure that it is sustained by the renegotiation as soon as possible of the RB211 contract.
§ 7.51 p.m.
§ Mr. Peter Rost (Derbyshire, South-East)
I regret that the debate seems to have developed into a post-mortem, for those of us who represent Rolls-Royce constituencies know that what our constituents are concerned about is not who is to blame but what is to happen today, tomorrow and in the future. Members representing Rolls-Royce constituencies cannot fail to feel deeply disturbed about the anxiety, despondency and atmosphere of despair which exists in and around Derby.
I should like to emphasise a point which I do not think has been made. The loyalty for Rolls-Royce among many people—not only employees or families connected with the company but in the 888 area around the Rolls-Royce concern—is deeply rooted. It is part of the life of the people, particularly in Derbyshire, and one cannot easily discard or ignore it.
I wish to give a brief example of that deep-seated loyalty. During the last war, when the Germans were trying to bomb Derby, they missed the target and one night dropped bombs on an area of glasshouses in a small town in my constituency called Melbourne, just south of Derby. The local inhabitants, many of whom were at that time and still are employees of Rolls-Royce, felt that this was such a fine opportunity to save the company, even at the risk of losing their own lives, that they decided to move themselves into nearby barns for their nights' accommodation and deliberately to encourage air raids on their own homes and the glasshouses. This was a measure of the deep-rooted loyalty which they felt about preserving Rolls-Royce.
I welcome the Bill because I regard it as a caretaker-trustee arrangement. I do not believe the Government had any alternative but to introduce it. I particularly welcome the four weeks' extension which is to be granted on work on the RB211. I want to make three pleas to the Minister and to have satisfactory answers to them before I can wholeheartedly give my support.
First, I plead desperately that we do everything we can to re-negotiate the RB211 contract. I wholeheartedly support the hon. Member for Derby, North (Mr. Whitehead). On the basis of the up-to-date information which I received from top technical people, some of whom have been in the Chamber all day today, I believe that this engine is more advanced than any other in the world; that the three-shaft principle is a major technical break-through; that the engine has developed greater qualities of silence than those of any other engine developed; that the delay in deliveries and progress on the engine have been exaggerated and that they may amount to only four to six months.
I believe that there is evidence that the production costs of the engine, once it gets under way, may be considerably less than some of the figures which have been bandied about. One quote which is worth repeating is that those involved on assembling the engine on the shop floor say that it is the easiest engine 889 they have had the privilege to assemble. Most important of all, evidence is beginning to accumulate that the performance is not only up to specification but is in excess of it. The evidence suggests that the thrust performance of the engine may be well above 42,000 and may be in the 45,000 range, which would put it within the category of a further development engine with relatively limited cost and time scale for development.
Secondly, I want to make a brief plea on behalf of the shareholders, particularly the loyal 10,000 shareholders who are employees of the company. They own worker shares and they have paid for them with their own savings. People have come to me over the last week with real cases of hardship among these employee shareholders. There is a special case here for consideration. The shares of the shareholder employees have been frozen since last November because the arrangement whereby they could sell finished last November. This means that they have not had the opportunity, even if they wanted it, to realise the investments, and they do not have it now.
I wish to put one thought to the House and to the Minister. If we nationalise and the company becomes prosperous, as we naturally hope it will, and we inject free enterprise capital into it again in due course, as we shall do, what will those shareholder employees think about not having the opportunity of participating in the rebirth of the company? Some special arrangement must be made for them to continue to participate as employee shareholders in the rebirth of the company.
My final plea is made on behalf of the suppliers and sub-contractors in the Derbyshire area. The hon. Member for Derby, North has reminded the House that a meeting of, he said, 100 firms is going on at this moment in Derby. I understand that the figure is 130. These are suppliers and sub-contractors who are creditors. I am convinced—and I hope that I am not alone—that the Government have a moral obligation to help. I know that many of those firms believed, rightly or wrongly, that they were in partnership with the Government and that Rolls-Royce was being backed by the Government on the RB211 project and. therefore, many of them have extended 890 credit to Rolls-Royce which they would not have done if they had believed it to be a purely commercial transaction.
One firm that has been left in a serious situation said:We would not have given this sort of credit to any other organisation, other than the Bank of England.Another firm said:We felt that this company was safe because it was backed by the Government.Hon. Members have spent the last four hours making just this point. The Government have an obligation. The previous Government backed the development of the engine, and therefore, it is easy to understand why many suppliers and subcontractors assume that there was a Government guarantee in the background.
These sub-contractors and suppliers not only extended more credit than they would have done on purely commercial considerations, but undertook work at much lower profit margins than in normal commercial practice, and I have evidence of that. They were given to understand that there would be a build-up of business, and, because of long-standing mutual trust and the feeling that they were participating in a national product sponsored by the Government, they extended credit beyond normal commercial practice.
For these reasons, there is a moral obligation on the Government to help to prevent the further bankruptcies and further unemployment which will result if these suppliers go down. I suggest that help could come in the form of an indemnity by the receiver in the same way as the indemnity is being offered for the continuation for the time being of work on the RB211 contract.
Evidence has come to me from one bank that credit facilities are being extended to suppliers, but the opposite appears to be happening. A squeeze is being put on simply because the suppliers are left with debts to Rolls-Royce. This squeeze is being applied also to the supplier's own suppliers and trade customers, with the result that credit is coming to a stop and, unless we take immediate action, there may be serious consequences.
§ Mr. Will Griffiths (Manchester, Exchange)
Many of my hon. Friends are sympathetic to the objects which the hon. Member is seeking to achieve. He said 891 that when the company was prosperous again it might be returned to private ownership. Is there not a certain incongruity in solving the problems which he puts before us on the basis of public expenditure and then, when the firm is rescued, handing it back again to private capital?
§ Mr. Rost
I and my hon. Friends regard this as a caretaker, emergency operation and support it entirely. There is no alternative. We must accept the realities of the situation. The company is insolvent and this is a fact which we must accept. I am pleading for the worker-employee shareholders and for the suppliers who have helped the organisation and whose continued prosperity we shall need if we are to rebuild Rolls-Royce and the aviation industry.
In the last week I have had many meetings with my constituents and with Rolls-Royce employees. If I sum it up by saying we feel that this has been a big let-down, I am putting it modestly. Many families, after a lifetime of loyalty, are extremely concerned about their future, their livelihoods and the mortgages on their houses. The whole infrastructure of society and the area's industry, trade and commerce are in grave danger of being broken down. In supporting the Bill, I urge that the nation and the Government should accept a moral responsibility and not regard this entirely as a normal commercial liquidation transaction.
§ 8.6 p.m.
§ Mr. Raphael Tuck (Watford)
Like all hon. Members, I am deeply concerned at the tragic national calamity which has befallen us. I am, however, particularly concerned about the fate of Small Engines Division of Rolls-Royce at Leavesden, Watford, where 4,000 are employed. The division produces, inter alia, the 360 engine for French helicopters and the Gnome engine for many other helicopters. My constituents are worried because the division's bank credits are frozen, and the banks will not issue money unless the Government gives the go-ahead. The employees, therefore, are in suspense, for they do not know whether or not they will receive their wages, and they ask the Government to underwrite the wages bill while negotiations are going on.
892 My constituents also want to know about their own fate. They say that this division could be a viable, independent unit. It has been, up to now, making a profit. It was formerly the engine division of De Havilland, and probably the only part of the company that was making a profit. It went on making a profit when it became Hawker-Siddeley, then Bristol-Siddeley and later Rolls-Royce, despite bad management, for at every change—from De Havilland to Hawker-Siddeley to Bristol-Siddeley to RollsRoyce—there was a corresponding change in procedures, in specifications, and in paper work generally. There were too many changes at once, and more managerial staff began to make the whole concern top heavy. There were managers, assistant managers and assistants to assistant managers, all injected in the last two years. There are too many non-producers in this Rolls-Royce division. With good management, the division could make a bigger profit than it is making now with bad management.
There are about 500 technicians on the staff, and the technicians' union would like to be listened to and wants to point out the weaknesses that exist. The unions want to contribute towards strengthening the organisation, which at present is weak. They would be happy to do this, because something must be wrong. After all, the Americans are paying three to four times a s much per hour on labour as we are, and we should therefore be able to undercut them, but we do not. They succeed where we fail. What is the reason for this? I know that hidden subsidies and protected markets play their part, but the important factor is managerial expertise in the United States, and this we have not got. We must get ourselves better organised.
If Rolls-Royce and this division are allowed to sink, there will be violent repercussions elsewhere. For every tool designer in the Rolls-Royce Small Engines Division, Leavesden, there are about two working in other companies. These are the companies which are making a profit. Therefore, they are contributing to the national welfare. They have sub-contractors of all kinds making instruments and manufacturing parts. There are forging firms, casting firms, and a host of others linked with Rolls-Royce and the Small Engines Division. 893 From the point of view of the nation, Rolls-Royce is a vital national interest quite apart from its prestige value. Therefore, in my view and in the view of many of my hon. Friends, it is only right that at this stage the Government should take it over. But it should not be spread around with parts of it being given to private enterprise. The whole community has an interest in its survival and it should therefore be taken over lock, stock and barrel.
We should not drop the RB211. Let us act like men and honestly and openly approach Lockheed to find out whether it is possible to re-negotiate the contract, instead of playing Lockheed a shabby trick by wriggling out through what is merely a legal loophole. And once it is taken over by the Government and made into a healthy and viable organisation with public money, I repeat, with the taxpayers' money—let us not hear anything about turning over the organisation to private enterprise. First of all, that would be stealing public money—and as such, it would be a criminal act. Secondly, it would also be self-defeating.
Private enterprise as failed once. If Rolls-Royce is turned back to private enterprise, why should it not fail again? Let the Government remember the lesson of S. G. Brown, Watford. That company was making a good profit until it was turned over to private enterprise in 1959. Thereafter, it made loss after loss until it fizzled out a short while ago. Let the Government show their mettle, for once in a while, if they have any. I hope that I shall receive answers to the two questions I put to the Minister.
§ 8.12 p.m.
§ Mr. Cranley Onslow (Woking)
I shall be brief. I speak with a powerful constituency interest since many B.A.C. workers live in my constituency and the constituency contains many sub-contractors engaged on Rolls-Royce work. I also speak as someone who has watched this crisis develop with some sense of inevitability over the years.
I do not want there to be any misunderstanding about my opinion. I regard this situation as being industrially the equivalent of the fall of Singapore. Nothing will ever be quite the same again and we shall bear the scars long after the wounds have healed. We shall, of 894 course, survive this situation, but we shall always be left with a sense of incredulity as we discover more and more of the reasons, and see what elementary mistakes were made and perpetuated by the men who took the original decisions from which these tragic consequences inexorably flow.
I shall say a little about that matter in due course because I regard this as stemming wholly and totally from events which took place in the lifetime of the Labour Government, specifically in the Spring of 1968. I hope that if my hon. Friend the Member for Hastings (Mr. Warren) has the opportunity to address the House, he will be able to contribute some evidence on the industrial side which the House has not yet in its possession.
I should like to say one general thing before I make any attempt to attribute blame. I do not go any way with those who believe that the fortunes of Rolls-Royce are so unimportant to the future of the country that it does not matter into whose hands that company falls. I support the Bill as a desperate Measure to be taken in a desperate situation. I entirely disagree with those who say that what happens now does not matter, and would be content that Rolls-Royce should be bought by the Kamikaze Aircraft Corporation if it comes forward with the biggest amount of ready cash.
What has happened should also mark the end of launching aid. We must, of course, look to the future, and we must now develop some new forms of partnership between entrepreneurs, technologists and financiers. We must work in joint ventures as between public and private industries and as between British and European industry. This must be one of our main preoccupations in the months ahead. For the rest, I endorse the Bill to the full, and I wish my right hon. Friend all success in carrying it through.
I must now turn to the responsibility of the right hon. Member for Bristol, South-East (Mr. Benn); and I am sorry that he is not now in the Chamber. On previous occasions I have had hard things to say about him when he was a Minister. He went through the painful experience of the collapse of Beagle Aircraft. I believe that he bore heavy responsibility for that collapse, but I believe that in this matter his responsibility is 20 times 895 heavier. I have studied the statement he made to the House on 1st April, 1968, his speech on 23rd November last year, and his speech last Monday, and nowhere do I find any evidence that my view is wrong.
The right hon. Gentleman will have to answer certain questions. Did he encourage the contract? The right hon. Member for Wednesbury (Mr. Stone-house) said he did. Anybody who looks at columns 39–42 of HANSARD on 23rd November will see there the encouragement offered by the right hon. Gentleman to these activities. There are details of the special and extraordinary help given to the company. Moreover, anybody who remembers the background to the negotiations on the European airbus will know how our European partners were convinced that one reason why the British Government would not put their heart into that project was that all their heart and weight was in the RB211 deal with the United States.
§ Mr. Onslow
If it could be shown that I was to blame, I would accept the blame. I wish the same could be said of hon. Members opposite.
§ Mr. Onslow
That is not true, and if the hon Gentleman had been listening he would know it. Did the right hon. Member for Bristol, South-East ever envisage and investigate the possibility of failure? He told the House that he was confident and thought his confidence was well founded. It is worth reminding the House that he also said that Rolls-Royce understood the consequences of this contract. The Government had discussed all this with Rolls-Royce, and that company was in no doubt about them. By the same token, if the discussion was a full one then the Government, too, should have been in no doubt what was at stake.
I would refer the House to what the right hon. Gentleman said on 8th February. He said that Rolls-Royce and Lockheedclearly understood what was at stake in launching the aircraft under those conditions, because we had discussed that with them 896 beforehand."—[OFFICIAL REPORT, 8th February, 1971; Vol. 811, c. 64.]Should not the right hon. Gentleman, who was the responsible Minister, also have known that there was reason to be doubtful about the calculations of Rolls-Royce. He told the House in column 66 of HANSARD of 8th February that the Government had. no expertise to check these calculations. But we know he had evidence that should have made him doubtful about these calculations. He knew of the escalation that had gone on with the Olympus contract, and also of the escalation in regard to the Spey engines for the Phantom.
We should bear in mind the comments of the Public Accounts Committee in its report for 1967–68, and the right hon. Gentleman, or certainly his Department, should have known what the findings were likely to be even if their actual publication post-dates the underwriting of the RB211 contract. The Public Accounts Committee said in paragraph (59) on page xxix:Your Committee have no wish to question the decision to continue with the Spey-engined Phantom … but they regret that the earlier decisions, and in particular that made in 1965, to purchase the United Kingdom versions should have had to be made on the basis of totally unreliable estimates and before the costed technical programme for the engine was received.
§ Mr. Onslow
My hon. Friend the Member for Portsmouth, Langstone (Mr. Ian Lloyd) reminded us that there has been no shortage in recent years of evidence to indicate that financial calculations made by aerospace companies, must be suspect until all the costing has been gone through.
The fact that the right hon. Member for Bristol, South-East, who underwrote the contract and made the announcement to the House on 1st April, 1968, did not actually see the contract between Rolls-Royce and the Lockheed Corporation until August that year is a condemning indictment of his responsibility. The right hon. Gentleman committed this country, Rolls-Royce, the jobs, the savings, the reputation, and all that goes with it, to 897 what was, in effect, a monster gamble. [Interruption.] I hold no brief for the management, but the Minister was in to the tune of £47 million. Is that nothing?
I dare say that the right hon. Gentleman in his own defence would remind the House of what he said on 16th April, 1969, when he told us that he was not prepared to find money for the A300B. The right hon. Gentleman said:I have always made the Government's view quite clear that if a firm comes to us with a proposition we will evaluate it, but that it is not for the Government to tell firms what to produce or how to do it, because then we would get into the most unfavourable position of all when the firms come later and say, 'we are building this project only because you asked us to. Now, will you bail us out?' That would be utterly destructive and unsound investment in advanced technology."—[OFFICIAL REPORT, 16th April, 1969; Vol. 781, c. 1127.]That was when the alarm bells were beginning to ring and it was becoming clear that things were going wrong at Rolls-Royce. If the attitude of the right hon. Gentleman had really been that in April, 1968, we should have been spared disaster now. The right hon. Gentleman bears a heavy burden of blame. I hope that he will accept it with humility and own it to the House.
§ 8.22 p.m.
§ Mr. Maurice Edelman (Coventry, North)
The hon. Member for Woking (Mr. Onslow) has made a most lamentable partisan speech in a desperate and tragic situation.
I shall go into the Lobby in support of the Bill with a heavy heart, not only because of the disaster which the country has suffered by reason of the Rolls-Royce crash, but because, instead of nationalisation being a constructive action on behalf of the country, we are to entrust the nationalisation of this great industry to those who have no faith or belief in nationalisation and who will in the end, I am sure, ultimately seek to sabotage the mechanism of nationalisation. Therefore, it is with great reluctance that I shall support the Bill.
Last November—a date which I shall show later to be extremely significant—together with a large number of my hon. Friends I put down a Motion calling for the nationalisation of Rolls-Royce in the interests of efficiency and public accountability. If the debate has any theme, it 898 should be that of public accountability not only for the past but for the future as well. If we are to put this industry in the hands of those same people, whom the hon. Member for Woking did not mention, who, as financial controllers, failed the industry and the country, then indeed, in the absence of public accountability, we are merely laying the ground for new disasters and for the downfall of the aircraft industry.
I believe that for our future guidance it is necessary to examine the causes of the Rolls-Royce bankruptcy and the process by which this great company was brought to its knees. The only way that can be done is by a Motion calling for a Select Committee to inquire into all the stages by which this disaster occurred.
I agree with one thing in the speech of the hon. Member for Woking. This is indeed our Singapore. One of the great bastions of the country has fallen. To allow it to happen as if nothing had occurred, merely to try to sweep under the carpet something the reverberations of which will probably last to the end of this century, would be to fail in the task before us. I hope, for a start, that a Select Committee will be set up to inquire into what went wrong.
§ Mr. Michael McNair-Wilson (Waltham-stow, East)
Does the hon. Gentleman agree that it is a great pity that the report of the I.R.C. has never been made available to this House so that hon. Members might have had a chance so many months ago to have some idea of the disaster which lay ahead?
§ Mr. Edelman
I agree. I believe that that report should have been published so that we could have added data on which to come to a conclusion. We have not got the material on which to form a firm judgment and decide who are the guilty men and where responsibility lies. I say this in no spirit of acrimony. I do not wish to condemn anybody for the sake of condemnation. This matter affects the destiny of the whole country. Therefore, I believe that a Select Committee should be set up to find where responsibility lies.
I must speak about the RB211 and the contract. I regard the RB211 as potentially a great engine. I declare my admiration of the skill of the Rolls-Royce 899 workers in Coventry, many of whom I have known for 25 years, but we cannot disregard the nature of the contract. My right hon. Friend the Member for Bristol, South-East (Mr. Benn) made clear in the debate in November that there were questions which could and should be asked about the nature of the contract.
Was a fixed price contract a good thing? Was it desirable to enter into a contract using an inadequately tested material, the carbon fibre, the costs of which were unknown? Was it a good thing to enter into a fixed price contract of that kind at a time of escalating costs, the outcome of which could never be known?
The hon. Member for Portsmouth, Langstone (Mr. Ian Lloyd) was right to draw attention to the fact that in the United States there had been a massive escalation in the costs of aircraft. That has certainly happened. That should have been a reason for not entering into a fixed price contract, whose outcome could only be disaster.
The hon. Gentleman attacked my right hon. and hon. Friends for neglect and for their shortcomings, but he said nothing about the shortcomings of those in financial control of the company. That is one of the fundamental reasons for the collapse. Consider, for example, the history of a firm taken over by Rolls-Royce—Bristol Siddeley—which nobody has so far mentioned in this debate or in the emergency debate of last Monday. That company not only over-charged, but hung on to the over-payment for a long time. I do not know whether the money has been repaid, but that company certainly used the Exchequer as a kind of mulch cow. It used public subsidies in ways which were never publicly accounted for. That is why I believe we are today holding an inquest on what happened with Rolls-Royce.
Rolls-Royce slid into a humiliating bankruptcy. Why did right hon. Gentlemen opposite find it necessary to permit a bankruptcy of that kind?
I said before that last November was a critical date, and present tonight are hon. Members who will recall some of the speeches made in that debate. They may recall my speech in which I spoke about the need to renegotiate the con- 900 tract for the RB211 on the ground that it was a contract which was misconceived in the circumstances of our time and could only lead to financial disaster. I said then:… just to continue blindly perservering with the RB211 in a kind of vacuum without direct contact or relationship with the United States is something which is bound to lead to increasing loss, and … to increasing demands for subsidies from Her Majesty's Government." —[OFFICIAL REPORT, 23rd November, 1970; Vol. 807, c. 75.]To that submission the Minister of Aviation replied that renegotiation would be "devastatingly expensive".
Four months ago it might have been possible to renegotiate that contract in dignity and honour, but instead the Government permitted this catastrophic movement towards the abyss—the bankruptcy of the company, the losses to many shareholders—the unhappiness of so many workers and, indeed, the dishonour which our country is facing.
It is true that the contract was a crippling burden for the company. It was crippling to the extent that, it would have to be supported by the injection of colossal sums of public money, equivalent perhaps to at least one-tenth of our national reserves. What has astonished not only Britain but the whole world, our friends as well as those who are hostile to us, is that without any warning, almost overnight, the Government permitted this great company to go into an irreversible bankruptcy. What has happened is indeed irreversible. Tonight we are engaged in a salvage operation, not in a productive reconstruction.
Today we are dealing with a salvage operation, an operation which has begun under the curious mystique of the receiver. One of the most degrading aspects of the situation is that for simple purposes it is necessary for the Minister to go to the Receiver for permission to spend, literally, a penny. I have great sympathy with the Minister in his difficulties. Only the other day I told him that a Rolls-Royce factory at Parkside in Coventry was being kept minimally above the heating level permitted by the Factories Acts, and that that was being done in the interests of economy. I asked the Minister to take steps to ensure that the factory was properly heated so that the morale there, already at a low ebb, could be maintained in proper conditions 901 of warmth so that men could work with as much enthusiasm as they could command. The Minister said that he would do something about it. He said that he would talk to the receiver as soon as possible. I say that not flippantly, not as a laughing matter, but to illustrate the humiliation that we are facing today.
I should like to touch briefly on some of the magic incantations being used by hon. Members, especially those on the opposite side of the House. One of the chief incantations is the phrase European integration. I have always been strongly in favour of the Concorde aircraft, and of co-operating with France and other countries on the Continent in a system of functional co-operation, but this idea of having a joint engine company with S.N.E.C.M.A., an integrated company, is one which I oppose and reject, and I shall explain why.
I oppose and reject it because it has been the constant endeavour of many countries abroad to seek, in these enterprises, to milk British technology, to draw from it the maximum benefit, and to make the minimum of contribution. If we entered into joint European companies—companies, incidentally, which have no legal or formal status—the next thing that would happen especially if these companies were concerned primarily with defence, that we would no longer be in command of our own defence policy. We would no longer be in command even of our defence sales. We would no longer be in control of, for example, the sale of arms to South Africa, to the Middle East or to the Soviet Union. If we were to enter these integrated companies, we would lose our freedom of manœuvre, and the very purpose for which the Bill is introduced tonight, to maintain our defence capability, would thereby be limited. I hope that hon. Gentlemen opposite will not advance that idea as some sort of panacea which will cure our ills, and something which will get us off the hook. I am sure that it will not.
There are many sad people, and families, waiting for the outcome of this debate. Whatever we do, we must not give people false hopes, for there will be a day of reckoning and retribution. I reject the idea of European companies, as a passing thought to redeem the situation. I reject even the idea that the RB211 in the present situation, can be saved 902 simply by our saying that we will save it. Let us not get "hooked" on that one, because we must reckon with our hosts, who are the United States administration, the Lockheed Corporation and so on.
It is not just a matter of our having the will to go ahead with the RB211. We must urge the Government, I hope unitedly, to renegotiate the contract. I know that that phrase, which trips lightly off the tongue, could easily become a catch phrase, but I do not believe that Lockheed itself wants the project to collapse. Of course, in the heat of debate, people say foolish things, and the Minister of Aviation Supply said something foolish the other day when he appeared —I put it no more strongly—to undervalue the RB211. We now have a common purpose, which must be to affirm that the RB211 is a good engine.
We have some of the most enthusiastic and dedicated workers in the world. I say this not out of any interest in constituency flattery but because that is my experience. Time after time, shop stewards from Coventry Rolls-Royce and Bristol-Siddeley have come to see me. The purpose of their visits has never been to obtain more money or to threaten a strike. It has always been because they have been afraid that some aspect of the aircraft industry would collapse and leave them out of work. They have sought to work. Our duty tonight is to provide them with the means of restoring the greatness of Rolls-Royce and, through it, the greatness of our country.
I have already charged hon. Gentlemen opposite with not having their hearts in the idea of nationalisation, and for one reason above all—that there cannot be true nationalisation, in a Socialist sense, without participation. Today, we have seen the participation of the workers at Rolls-Royce. They have come here to make their case, to ask to play their part in their industry and to seek the opportunity to restore Rolls-Royce to its former greatness. I hope that the House will give them support and encouragement in order to do so.
§ Mr. Dalyell
On a point of order. Three and a half hours ago we were promised the Solicitor-General would intervene and there was an indication that hon. Members would have the opportunity to question him on this vital issue on which only he, apparently, can pass 903 any judgment. I have twice been to the office of the Lord President. On each occasion we have been told that he was just coming. I hope that he is coming very soon.
§ The Lord President of the Council and Leader of the House of Commons (Mr. William Whitelaw)
Further to that point of order. The Solicitor-General is walking into the Chamber and will now deal with the point.
§ 8.39 p.m.
§ The Solicitor-General (Sir Geoffrey Howe)
It is not often, Mr. Speaker, that I am fortunate enough to catch your eye quite so quickly after my arrival in the House.
My right hon. and learned Friend the Attorney-General would, of course, have liked to be able to explain the position to the House on this matter himself, but, as the House knows, he is and has been for some days unwell.
§ The Solicitor-General
I will convey the hon. Member's sentiments to my right hon. and learned Friend.
As the House will appreciate, I have not had the advantage of hearing what has taken place in this debate so far, but I will do my best to help the House with an explanation of the legal position.
The anxiety about which I have been asked to say something arises on the position of those who have been supplying Rolls-Royce, in light of the collapse of the company and, in particular, in light of the provisions of Section 332 of the Companies Act. Obviously I cannot be expected to deal, and it would not be right for me to deal, with the varied positions that could arise in respect of particular suppliers, because those will depend upon a consideration of the facts in each case. Obviously they will depend in each case upon the overall position of each of those suppliers and upon the scale and nature of their involvement with Rolls-Royce.
These are the words in which my right hon. Friend described to the House how the position arose:As the Board of Rolls-Royce have stated, the loss of resources already committed to the project combined with the losses which will arise on termination are on such a scale that 904 they are likely to exceed the net tangible assets of the company. In the light of this situation the board have decided that they have no alternative but to ask the trustees of the debenture holders to appoint a Receiver and Manager."—[OFFICIAL REPORT, 4th February, 1971; Vol. 810, c. 1922.]At that point the board was itself complying with the provisions, in effect, of Section 332 of the Companies Act. The substance of that is that a person may not carry on the business of a company, nor be party to its carrying on business, with knowledge that there is no reasonable prospect of its creditors being paid. That identifies and defines the problem which is now said to face the Rolls-Royce suppliers.
§ Mr. Barnett
Obviously the Solicitor-General would not want deliberately to mislead the House, but he did not use the words in Section 332. The relevant words are "with intent to defraud". Clearly not within the realms of imagination could it be said that the directors and the Government, if they had attempted to carry on, were intending to defraud the creditors. Indeed, it would be the very reverse—they would be attempting, in the best possible way, to ensure that the creditors would be paid in full, whereas now the sub-contractors and the creditors clearly will not be paid in full.
§ The Solicitor-General
The words that the hon. Gentleman quotes from the Section are right, but the case law on the point—I hope the House will forgive me for not having all of it accumulated about me at the moment—is to the effect that one must apply the judgment of ordinary commercial men to such a situation. If the directors of a company know that they are carrying on business with no reasonable prospect of the creditors being paid, that is the test as to whether or not the intent to defraud is fulfilled.
§ Mr. Deputy Speaker (Sir Robert Grant-Ferris)
Order. I should like the House to realise that I will, when the learned Solicitor-General has finished his statement, be prepared to allow a certain number of questions to him. It will probably be in the best interests of the whole House if the hon. and learned Gentleman is allowed to continue his 905 statement and then I will do my best afterwards to satisfy as many hon. Members as I can, consistent with the orderliness of debate and the proper finishing of the debate, because we have much to do before the night is out.
§ The Solicitor-General
I shall try to steer a middle course between insisting on completing what I have to say and giving way to interventions which are to the point. I gladly give way to the hon. Member for Ashton-under-Lyne (Mr. Sheldon).
§ Mr. Sheldon
The whole question of intent to defraud could have been established only if the company had made serious efforts to renegotiate the contract with or without the Government's assistance. As this was not done, how could anybody claim that there was intent to defraud?
§ The Solicitor-General
I do not follow how that is put. If the board came to the view, which they did, as my right hon. Friend stated, that there was no reasonable prospect of their creditors being paid, and in the course of arriving at that view they have to take many factors into consideration——
§ The Solicitor-General
I cannot give way too often, otherwise we shall not make progress. I am seeking to confine myself to a statement of the principles that apply in the first instance. The position of the suppliers, in the situation now existing, is the same as that which faces any suppliers of a company that ceases business or collapses and finds its affairs in the hands of a receiver or liquidator. Each of the suppliers, according to the test which I have tried to formulate, has to ask himself, amongst other things, the questions which arise under Section 332. That is why it is plainly not possible or right for me to generalise about the position of suppliers in this case.
The House will accept that it would be quite wrong for me to try to advise, from where I now stand, over a wide range of different problems. The question is, do they know, as and if they trade, that there is no reasonable prospect of their creditors being paid? That is a question which faces companies in many situations apart from this one. For many such 906 suppliers, the degree of their involvement with Rolls-Royce will obviously be so small in relation to the whole of their business that——
§ The Solicitor-General
I am not seeking to over-generalise or over-state the position, but it must be plain talking in these terms that there must be many or some people—the House may choose the word—who are supplying Rolls-Royce like any other company, for whom the scale of their business relationship with Rolls-Royce is so small in comparison with the rest of their business——
§ Mr. Dan Jones
Is the Solicitor-General aware that firms in Burnley are involved to the extent of £7 million?
§ The Solicitor-General
That is why I used the words that I did. I have tried to choose my words reasonably. I used the words "some or many". I know that the hon. Gentleman's interest is serious and genuine. It would be wrong for me to try here and now to advise about the position of any given company or supplier. If one looks at the position of those who may be involved in this way, it depends in the first instance obviously on their overall financial and trading position, and, as I have said, on the scale and degree of their involvement with Rolls-Royce. It may depend, in any given case, on the extent to which any payments are outstanding to them from Rolls-Royce. I have no detailed information about that in respect of any given supplier, but for reasons which I shall try to explain, I doubt if there are any in the present uncertainty of whom it could now be said that they must know, as a result of what has happened to Rolls-Royce, that there are no reasonable prospects of their creditors being paid. Their position arises in this way, as it would in relation to any company whose assets have been placed in the hands of a receiver.
When the assets of a company are placed in the hands of a Receiver by secured creditors, as has happened in this case, the Receiver is obliged to protect the interests of the preferential and the secured creditors, in this case the debenture holders. He must do that by preserving and realising the assets of the company to the best advantage. He is 907 not bound by any pre-existing contracts, and parties to any such pre-existing contracts which he does not continue are able instead to claim damages against the company and, in respect of those damages, to rank as unsecured creditors in the winding up. That means that the Receiver is under no legal liability to pay such unsecured creditors in respect of existing debts, and the value of their claims will depend upon how much is available after the secured and preferential creditors have been paid. How much then will be left for unsecured creditors in that way will depend on how much the Receiver is able to obtain for the assets.
§ The Solicitor-General
I cannot in this case, any more than in any other, give a definitive reply. I cannot even speculate about that. But the Receiver is under a duty to realise those assets as advantageously as possible. For that purpose, he is continuing the activities with a view, wherever possible, to disposing of them as going concerns. Any liabilities that he incurs for that purpose, for example, in respect of current suppliers, he is obliged to meet. Such current suppliers take priority over preferential and secured creditors.
I have tried to set out the general principles affecting the position of the Receiver and affecting the suppliers in the situation that now exists. The position of individual suppliers will have to depend upon a consideration of the facts in each case.
Now, if I may, I will try to answer questions within the limits that they are put to me.
§ Mr. Benn
I am sure that the whole House is grateful to the Solicitor-General for coming into the debate without having heard it and trying to help us. He will appreciate that his statement is a very general one. The fact is that his right hon. Friend the Minister of Aviation Supply announced in introducing the Bill an entirely new element, which I welcomed. It is that money is to be paid to keep the RB211 going for four weeks. In view of that, the hon. and learned Gentleman cannot be right when he says that a creditor of Rolls-Royce is 908 in the same position as if the company of which he was a creditor had gone bankrupt without Government intervention.
§ Mr. Benn
I have to explain my point. The Solicitor-General did not hear his right hon. Friend's speech. The hon. and learned Gentleman said that creditors are in the same position as they would be in any other bankruptcy. However, since the Government have intervened to say that at least for four weeks they will preserve a flicker of hope for the RB211, does that of itself constitute for the creditors grounds for believing that there is a reasonable prospect that if they carry on they will not fall foul of the Companies Act?
The second point which arose in the debate and to which the hon. and learned Gentleman made no reference is whether, in American law, Rolls-Royce's assets in the United States are likely to fall forfeit to Lockheed so as to alter the situation as we understand it. Did the hon. and learned Gentleman advise the Cabinet on that matter?
§ The Solicitor-General
Dealing with the last point first, the required range of knowledge of the Solicitor-General is ample, but I am afraid that it does not extend to the position under New York law—[Interruption.]
§ The Solicitor-General
If I may continue, I understand hon. Members would wish me to say something further on that, but I would hope they understand the circumstances under which I rise to intervene in this debate.
§ The Solicitor-General
Perhaps I may deal with the second point put to me by the right hon. Gentleman. The position of the Receiver is precisely the position in which a receiver would find himself who had been appointed in the same way in 909 respect of any other company that had been obliged to make the announcement Rolls-Royce made on 4th February, and his liabilities are as I explained them.
One of the matters which is within the range of assets of which he has to try to dispose is in relation to the aircraft activities of Rolls-Royce as to anything else; and he is, within the limits of the statement made by my right hon. Friend this afternoon, able to continue those activities. But the fact that he is doing that which enables him, perhaps, to preserve more effectively the assets of which he may dispose, as he disposes of them in the course of his duties, does not in law make any difference to his liabilities, rights or obligations in respect of preexisting debts which he is entitled to avoid under the provisions of the Companies Act; and that fact makes no difference.
He might have been able for a whole range of reasons, and indeed may be doing so, to continue the activities of the company with a view to their more profitable disposal, because obviously in the interests of everyone he disposes of them as advantageously as he can and is entitled to seek such help as he can to do so. But the fact that he does so to the advantage of everybody does not affect his obligations in respect of pre-existing debts.
§ Mr. Benn
To clarify this point, nobody asked the Solicitor-General to advise the House on American law. I want to know whether the Cabinet was advised on American law at the time they decided. Secondly, is the re-entry of Government money into the bankrupt company not a new factor which creditors could take into account?
§ The Solicitor-General
On the last point, again, the re-entry of Government money does not, in the way my right hon. Friend has defined it, affect the position. I have tried to deal with the reasonable prospect as it affects the position, and if hon. Members will allow me I will answer questions as they are put. The re-entry of Government money is one of the factors relating to the future of the Rolls-Royce undertaking and what may emerge therefrom which suppliers are entitled to take into account. But the re-entry of Government money is limited to that which was stated by my right hon. Friend 910 today; and to that extent and end it is a factor to be taken into account. [Interruption.] To that extent, if I may return to a point I made for the assistance of the House and of people outside, I would say on the present position, although I cannot possibly be expected to give blanket advice or a blanket undertaking, it would be surprising if any supplier was obliged as a result of what has happened in relation to Rolls-Royce to conclude that by reason of that he was faced with a situation in which he had no reasonable prospect of paying his creditors. It is for that reason I cannot go beyond that. I have given my advice in answer to the House to the limit of my ability.
As regards American law, the party to the contract was the Rolls-Royce company, and one must assume that it was advised about its position when it reached the conclusion which it announced on 4th February.
§ Mr. Millan
On the issue of the position of the directors of Rolls-Royce under Section 332, is it not clear that the only basis on which the board could have decided that there was no reasonable prospect of paying their creditors was that the Government had informed them that, in the light of the changed financial circumstances, the £60 million aid promised last November was being withdrawn and, what is more, the Government would not help the board to renegotiate the RB211 contract? Does it not follow that it was the attitude of the Government which forced Rolls-Royce into the hands of the Receiver?
§ The Solicitor-General
The board of Rolls-Royce were parties to a contract, about which the House knows, in respect of which they were in a position to receive, and did receive, their own legal advice, apart from the other advice which was available to them. The directors of Rolls-Royce had to assess how they stood in relation to that contract and in relation to all their other creditors, debtors, assets and liabilities. It was upon that assessment that the directors of Rolls-Royce took the decision which they announced on 4th February.
§ Mr. Barnett
The important point here is that there are many sub-contractors now in the same position as the board of Rolls-Royce in relation to 911 Section 332. At the time when the directors of Rolls-Royce decided that they had to call in the Receiver, they knew that at least some 12 months earlier in the last balance sheet net tangible assets stood at about £200 million, plus property valued at about £18 million.
With respect, all these sub-contractors are not being helped by the Solicitor-General tonight. Tomorrow, they will face wage bills and other bills. They have outstanding debts from Rolls-Royce. They have to make a decision, as the Solicitor-General said, on whether there is a reasonable chance of their being paid. Nothing in what the hon. and learned Gentleman or the Minister said can make them feel that there is a reasonable chance of being paid. In those circumstances, what the Solicitor-General is saying, in effect, to all these hundreds of sub-contractors——
§ Mr. Deputy Speaker
Order. Will the hon. Gentleman—[HON. MEMBERS: "No."] I am sure the House realises that I am only trying to help it. To help me in calling other hon. Members to speak, will the hon. Gentleman come as soon as possible to his question?
§ Mr. Barnett
I had some difficulty in hearing what you said, Mr. Deputy Speaker, but, with respect, we have all night if need be.
These sub-contractors are now placed in the same position as Rolls-Royce are said to be by the Solicitor-General and the Minister under Section 332. I do not accept the Solicitor-General's interpretation on Section 332, but what he has said means that hundreds of sub-contractors will, very likely tomorrow, have to take a decision in the same way as Rolls-Royce did. The responsibility rests on the Government to make a political decision. This is what it amounts to—[HON. MEMBERS: "Hear, hear."]—a political decision to say that they will pay an adequate price to the Receiver for the assets, on going market rates, not break-up value, in such a way as to pay the creditors in full. If they do not say that tonight, they will be responsible. They will be responsible for thousands of people being unemployed.
§ The Solicitor-General
The position of Rolls-Royce as it faced the company on 912 4th February was precise and distinct. It was in a position to make an assessment of its own position in the light of its assessment in face of a particular contract, and the facts and factors which faced it were clear. The company formed its own judgment as to what conclusion it should reach, and it announced it, in the light of Section 332.
The position of the suppliers, with which I have tried to deal, has to be looked at quite distinctly and separately in the case of each of them. One of the factors, certainly, as I have tried to explain, is the extent of their previous commitment to or involvement with Rolls-Royce. But there are also the factors implicitly and explicitly referred to by the hon. Gentleman, namely the extent to which the receiver secures the most advantageous terms for the disposal of the assets. As I told the House before, in my judgment, though I cannot deal with every case and would not seek to do so, the present position is not such that any supplier need reach any conclusion adversely. The hon. Gentleman takes a different view. I have tried to enunciate the test which applies. It is for each supplier to face it in that situation.
What does seem to be clear is that the uncertainty about the future of Rolls-Royce, and about what the Receiver can take into account in assessing the prospects as he discharges his duty, will surely be abbreviated by an early conclusion of the debate about the matters before the House. There can be no dispute about that.
§ Sir Harmar Nicholls
Is my hon. and learned Friend aware that both sides of the House are genuinely disturbed about the position that many sub-contractors will find themselves in? But will he take it that those of us who are concerned think that some of the questions so far have been irresponsible? [HON. MEMBERS: "Oh."] His statement that the sub-contractors need not take the words he has used as being adverse to the possibilities of their getting their recompense should be underlined. Can I take it from him that the fact that we are prepared to finance the four-week investigating period means that the Government, as far as political leanings come into the matter, will do their utmost 913 to keep the major part of Rolls-Royce as a going concern? Does not my hon. and learned Friend think that that is the best way in the long term of helping the sub-contractors?
§ The Solicitor-General
Of course one is aware, speaking on this matter, as indeed one would be speaking here or anywhere else, about the position of suppliers of a company that has this fate overtake it, of the difficulties that must face them. I entirely share my hon. Friend's sympathy for the suppliers. I have said what I have tried to say about the position of those companies, and I say it subject only to the point that I cannot express a concluded opinion in respect of any one of them.
My hon. Friend asks me about the extent to which a Government decision affects the position of the suppliers. All that I can say about that in the context of the present discussion is that it is plainly to the advantage of the suppliers, as it is to the advantage of everyone else, that the Receiver should be able to dispose of the company's assets as advantageously as possible.
§ Mr. William Rodgers
May I take the Solicitor-General back to an earlier question about American law? I am sure that he will not be satisfied with his statement that he is not competent to give a view, because he must have advised the Government on a matter which affects the negotiations with Lockheed. Is it not the case that in the event of a failure to renegotiate the contract with Lockheeds an action in the American courts would mean that the whole of Rolls-Royce's exports to the United States, including the exports of any company which was the heir to the present Rolls-Royce company, would be subject to sequestration by the American courts, in the absence of a renegotiated contract and a settlement of the legal difference of opinion?
§ The Solicitor-General
The contract was made by the Rolls-Royce company. The question of the proper law of contract and matters of that sort would be a matter for that company and in respect of which it will no doubt itself have advice. I cannot advise the hon. Gentleman on the effect of the proposition he 914 puts about any contracts entered into by any new company which may continue any or all Rolls-Royce's activities.
§ Mr. Leslie Huckfield (Nuneaton)
Can I revert to the question of the sub-contractors? I am sure that 1 speak on behalf of many hon. Members on both sides. Many of us have in our constituencies sub-contractors the bulk of whose work is for Rolls-Royce, but not only on the RB211. These people have still not been paid. They have been going round all this week trying to get in money, trying to get credit elsewhere. They cannot get additional credit from the banks. They were acting in many cases on the understanding that the Government were already guaranteeing the additional £42 million to Rolls-Royce, and it was on that kind of understanding that they took on additional work for Rolls-Royce. They feel that the Government have a moral responsibility to guarantee the undertakings they have given to Rolls-Royce. What are the Government going to do about it?
§ The Solicitor-General
The hon. Gentleman has talked about the commitment of the Government in respect of £42 million, which was of course not related, so far as it went, to the matters about which he asks—namely, suppliers undertaking activities that, as he said, were unconnected with the RB211 activities. If one takes the position that the receiver is concerned to secure the most advantageous return on the assets of the company, including those which are unconnected with the RB211 and whose profitability and prospects are, therefore, quite different, then the relationship of the suppliers with those activities can be judged by reference to the likely future of those activities, which are quite distinct. One of the matters affecting the prospects of the company over all must be the extent to which the receiver is able to maximise to the greatest advantage the assets of the company. One of the factors in that is this legislation.
§ Mr. Speaker
Order. If we could get back to the debate, there would be time for one short speech before the right hon. Member for Bristol, South-East (Mr. Benn) speaks.
§ Mr. Denis Howell (Birmingham, Small Heath)
Is it not clear that the House has been put in a monstrous position? Is it not the case that we have wasted most of the debate because of the incompetence of the Minister of Aviation Supply in his opening speech in being unable to answer any of the quesitons of policy? Is it not clear, with every moment that passes, that it is not the Solicitor-General that we want to hear, grateful to him as we are for coming? The position is that after the opening speech, which raised very serious legal questions about the American situation and American law and about the position of sub-contractors and so on, we were bought off from our questioning by the statement that the Solicitor-General would make a statement later? His statement has proved totally inadequate to deal with the very real questions that we have. Is it not clear that the whole of this matter comes down to a political decision taken by the Government in respect of the Bill? Will the Solicitor-General advise the House whether, before we knew even the name of the Receiver, it was intended to sell off the Rolls-Royce motor car division as a separate entity? Will he tell us what advice in that situation he offered to the Government, as the Bill has serious implications in American law, about such a course taking place?
§ Several Hon. Members rose——
§ Several Hon. Members rose——
§ Mr. Sheldon
There is the crucial question of the £42 million promised by the Government in November and the £18 million promised by the banks to the Rolls-Royce company. This, it was stated in the House, would be made available to the company, and if it had been made so available that money would be part of the value of Rolls-Royce which would be available for creditors. Subsequently in a letter to my hon. Friend the Member for Heywood and Royton (Mr. Barnett) a correction was made, which the credi- 916 tors of Rolls-Royce were not in a position to receive or to be informed of. They could well have made a decision to have carried on supplying goods to Rolls-Royce on the basis of a statement made in this House and countermanded by private letter. This is an important matter, and the Minister or the Solicitor-General must state to the House what they intend to do.
§ Mr. Speaker
My judgment is that it would be better to allow a little more time for the winding-up speeches. Mr. Wedgwood Benn.
§ Mr. Benn rose——
§ Mr. Dennis Howell
moved,, That the debate be now adjourned, but Mr. SPEAKER, pursuant to Standing Order No. 28 (Dilatory motion in abuse of rules of the House), declined to propose the Question thereupon to the House.
§ Mr. Barnett
On a point of order, Mr. Speaker. On this very important matter of the finance for this Bill, the Minister of Aviation Supply in answer to a Question by me in November said the £42 million would be available regardless of the accountants' report. He then wrote me a letter—it is in HANSARD—in which he said that he had made a mistake. I wrote back and said that this was a very important matter and asked him to make a statement to the House correcting his original misleading statement in the House. It now turns out to have very serious consequences——
§ Mr. Speaker
Order. This cannot conceivably be a point of order. It is a point of argument which no doubt the Minister will have noted. I think it is best to give the House more time for the winding-up speech from the Opposition Front Bench now and then for the Minister to reply.
§ Mrs. Judith Hart (Lanark)
On a point of order, Mr. Speaker. I do not want to delay the House, because it is very important that we should proceed to carry the Second Reading of this Bill. Nevertheless. the replies that the Solicitor-General has given, particularly in their relationship to the intention to defraud creditors and the Receiver's disposal of the assets in relation 917 to this Bill, which involves the Crown's acquisition of assets, is so unsatisfactory that I wonder whether the Leader of the House would say that after Second Reading we could have a further statement and another opportunity for questioning the hon. and learned Gentleman.
§ Mr. Speaker
Order. We must proceed. I will call the right hon. Gentleman who is to wind up for the Opposition and then the Minister can reply to the debate. Mr. Benn.
§ 9.18 p.m.
§ Mr. Anthony Wedgwood Benn (Bristol, South-East)
In beginning my winding-up speech, which I want to keep brief so that the Minister may have time to answer further questions, 1 am bound to say that 1 cannot recall a debate on a Bill which has been handled in such an extraordinary way by the Government. I do not use that form of words which is sometimes used when there are great party arguments about a Bill because, as the right hon. Gentleman knows very well, we have made it clear over the last few days that we wish to facilitate this Bill although we have the gravest doubts about some of its provisions.
Throughout the debate there has been a remarkable degree of unanimity of view on both sides, based upon certain simple things, namely, that the demise of Rolls-Royce was a tragedy, that the workers involved were among the most skilled in the country, that the good name of this country was involved and that we wanted to try to remedy the position as quickly as we could. I pay tribute to the hon. Member for Portsmouth, Langstone (Mr. Ian Lloyd), who gave a most realistic account of what he called the "aerospace hybrid" we were discussing which greatly contributed to an understanding of the problem we have to face.
However, it was a fantastic lapse in imagination by the Minister of Aviation Supply to suppose that he could present a Bill to the House as if it were just an interesting new experiment in relations between Government and industry. At no point in his prepared speech—the right hon. Gentleman will know that I am being fair—did he even turn his mind to the plight of companies and their workers who were faced this weekend by the same decision with less well-equipped 918 legal advisers than Rolls-Royce had about what they should do in the circumstances which faced them.
It was good of the Solicitor-General to walk into the House and, without sitting on the Front Bench, speak to us from the Dispatch Box, but he could not add much more than a Penguin guide to the citizen on his rights because this situation is not like any other situation. It is quite unlike any other situation. When a company does business with another company which goes bankrupt, it is not normal for the Government to say, "We are going to buy bits of the company which has gone bankrupt". It is not normal, if there is to be an act of public ownership, for the Government to say, "We do not know what we will buy or what we shall pay for it until later". It is not normal for the Government to say, "Meanwhile, we shall keep bits of the company we propose to buy going for four weeks to see what happens". We wanted the advice of the Solicitor-General or the Minister to give us some guidance so that the companies involved would know where they stood.
1 do not blame the Solicitor-General for not being able to say things which would help those creditors who will be reading HANSARD, but I hope—and I am not a lawyer—that they will read something in what he said to suggest that "reasonable prospect" has been varied in a way which is beneficial by the Solicitor-General's intervention and that in so doing they will not feel that they are legally obliged, because of their dilemma and problem, to go bankrupt.
For many years the favourite word of the Prime Minister has been "incompetent". He has thrown the word "incompetent" across from this Dispatch Box time after time. I can only say to the Leader of the House, who today has been as helpful as any Leader of the House could have been, that the Government's handling of the consequences of their own decision to let Rolls-Royce go bankrupt has been absolutely incompetent. [Interruption.] I am talking about the handling of the decision to bring about a bankruptcy and the fact that in the House today no proper answers were given to legitimate questions put by hon. Members on both sides of the House on behalf of their constituents. That is my first charge. 919 The reason why the Minister and the Solicitor-General could not say anything was that the Chancellor of the Exchequer has laid it down quite clearly that sufficient funds are not to be made available to meet the problem. We are paying in advance the price of the popularity of the Budget tax cut to come at the end of March.
The Minister of Aviation Supply must surely have argued for the RB211 engine because all the advice given to him by the engineers and others in his Department cannot have shifted so much in the months since he took office. He must have argued, as any Minister for the British aerospace industry would be bound to argue, that Rolls-Royce should not go bankrupt, that that should not be the method chosen to carry through the Government's economy measures. He is not a member of the Cabinet. He is the first Minister of Aviation for three or four years not able to sit through the Cabinet discussions but presumably called in when the issue is discussed. He has been put by the Cabinet, and presumably by the Prime Minister and the Chancellor of the Exchequer, in the position of having to present to the House a situation in which the consequences of the Cabinet's decisions had not been properly thought out.
§ Sir Harry Legge-Bourke (Isle of Ely)
Will the right hon. Gentleman consider just this possibility, that what my right hon. Friend has insisted upon doing is not raising hopes falsely as the right hon. Gentleman did?
§ Mr. Waddington
Will the right hon. Gentleman recognise that some of us have been appalled over the last few days at his reluctance to accept any responsibility at all? Will he perhaps answer this question, so that we can begin to assess his responsibility for this disaster? How long was it after he first put up the money that he saw the contract?
§ Mr. Benn
The hon. Gentleman did not hear the debate on Monday. If he had he would have heard me say-and everyone who heard my speech will recall 920 it—that I accept full responsibility for my part in this, and I demanded a Select Committee inquiry in which it would be possible for this matter to be dealt with. If there are investigations—as there must be—to be made into that period, they should be done by a Select Committee with—so far as I am concerned—evidence taken in public. As I said on Monday, what is wrong is not the contract but the failure to estimate the cost of development.
I come to the question raised by the hon. and gallant Member for Isle of Ely (Sir H. Legge-Bourke) about bankruptcy. Many hon. Members on both sides of the House, including the hon. Member for Langstone, probed the question; why was bankruptcy chosen as the instrument for Rolls-Royce? When Rolls-Royce was faced with a further escalation and reported to the Government that it would find it difficult to meet the date without further investment in research and development, why did not the Government tell Rolls-Royce to go to Lockheed and try to renegotiate, and say that they would have discussions with the Americans? Why did the Government, by their decision to do nothing, force Rolls-Royce into bankruptcy? We have heard absolutely no answer to that question, and that is the nub of the question of credit.
Lest anyone should think that this is a matter of party difference, let me read the words that appeared in the Sunday Times written by Nigel Lawson, the Conservative candidate for Eton and Slough at the last election. He paid a tribute to the Minister of Aviation Supply, and this is what he said:Thank goodness, however, for Captain Corfield (yes; another lawyer). Not only has he handled a delicate situation with consumate skill. More important, the device of allowing Rolls to bankrupt itself and then taking over pretty well everything except the Lockheed contract has plainly saved the taxpayer an inordinate sum in compensation to the American company. I am left wondering whether it was prescience or luck that led Mr. Heath to appoint as his Minister of Aircraft Supply the relatively little-known author of that authoritative work, 'Corfield on Compensation'.I am not suggesting that the right hon. Gentleman recommended the course of bankruptcy, but it was that comment, which was reported widely in America, that destroyed the confidence of the 921 American Government, the American aircraft industry and the American airlines in the word of this country. I say "this country" because it was a contract between British industry and American industry. Nobody had doubted that. But it was also the credit of this country that was at stake.
Mr. John Wilkinsons (Bradford, West)
§ Mr. Benn
No, I am not giving way. We must save time. I must pay tribute to the hon. Member for Hendon, North (Mr. Gorst), who made a controversial maiden speech, but a speech which was enjoyed by all who heard it. He expressed his great faith in the Government, but even so we enjoyed listening to what he had to say. I hope we shall hear him in the House again. No doubt we shall because he is in the communications business.
Every Member who spoke has no doubt been approached not only by companies and creditors in connection with the bankruptcy, but also by the workers of Rolls-Royce and the supplying companies. These are the most skilled men to be found anywhere in British industry. They are synonymous with craftsmanship and excellence. As I said on Monday, some of these people have been reduced to their basic by the Receiver. It must not be forgotten that the Receiver is not obliged to implement the contract with the union any more than he is with Lockheed. To think that we have been debating the legal enforceability of contracts when under bankruptcy any firm can escape from its obligations to its workers.
Many individual workers' cases have been brought to my attention. They may be put on a lower rate of pay for a couple of months, then sacked, and therefor lose hundreds of £s in redundancy payments, in addition to losing their workers' shares. This surely marks the final death knell of co-ownership. These are not workers with no outlets for their products. I have been to many factories which have lost their markets, and I have spoken to miners who have been put out of work through technical change. But these men have worked in this company for many years. One man has worked in the company for 42 years and he will lose his job because of a miscalculation 922 about a particular development project. That man is told by the right hon. Member for Wolverhampton, South-West (Mr. Powell) that the way to deal with this problem is for a Japanese firm to come in and buy the company. Foreigners cannot come here to live, but if they come here to buy up our industry it is all right. The right hon. Gentleman has been round the country for a couple of years waving a phoney Union Jack to keep the foreigners out. But he does not mind if they come in in pursuit of international market forces and in the process acquire the skill of British engineers and designers who for many years have built up Rolls-Royce to be the best engine company in the world.
§ Mr. J. Enoch Powell (Wolverhampton, South-West)
I do not mind them bringing their money and investing it in this country.
§ Mr. Powell
What control has attached to the enormous investment by this country in, for example, South America?
§ Mr. Benn
The right hon. Gentleman knows that it is foreign money that has created the revolutionary situation in South America which is now going to sweep that continent. If the right hon. Gentleman does not understand the Cuban situation in terms of foreign investment, he is not a very good politician. The trouble is that the right hon. Gentlement has admitted frankly, because he is a very honest man—he says what he really thinks; that is why people listen to him—that he would not mind this technology developed in Britain being transferred abroad with the possible consequence that factories here would close because the licences were being developed in other countries.
We believe that the RB211 engine should go ahead. We believe that it is the future of the aero-engine industry. 923 I shall not go over what the right hon. Gentleman said on Monday night. It may have been clumsy, but it was very damaging for all that. The RB211 is a quieter engine. When we debate the environment it will have a price tag on it. The RB211 has a family of engines associated with it—the RB220, which is smaller with a 25,000 lb. thrust, and the lift fan engine which comes in that general family as well.
We believe that it is right for the RB211 to be supported in part because of the original contract, because that original contract was the launching pad for the technology upon which all major aero-engines will develop in future.
The difficulty is that the Americans have now been told by the Minister that the 10-11 is perhaps not quite as good as the Douglas because Douglas has a long range version available. I spent many hours with Rolls-Royce considering whether it should help to launch a long-range Lockheed, but it was not agreed because there was no market. That is part of the problem which Lockheed has had to face.
At the end of the debate we shall table two Amendments. The first says that we think the whole company should be taken into public ownership. When we table that Amendment it will be in the words "all the engineering divisions", because the Money Resolution has been drafted in such a way to make it impossible for us to put down the whole, but we mean the whole of Rolls-Royce.
There are two ways of arguing this matter. One is the political argument, in which I profoundly believe. But there is perhaps immediately, to retain some measure of agreement across the Floor, a strong technical argument for not trying to dismantle Rolls-Royce at a time when the management has a major job of reconstructing the company and getting it going again.
§ Sir Harmar Nicholls rose——
§ Mr. Benn
Perhaps the hon. Gentleman will allow me to finish what I want to say. Another consequence of the bankruptcy was the putting in of a Receiver. The job of a Receiver, as the Solicitor-General said, is caution—saving money. To put into the heart of a company, which lives on its view to the future, 924 somebody whose sole responsibility is to save and sell, and to add to that the job of selling off bits regardless whether the components are made in one factory for another, will gravely handicap this company in its return to profitability.
§ Sir Harmair Nicholls
Does the Amendment mean that the right hon. Gentleman is calmly prepared to accept all the obligations under the contract?
§ Mr. Benn
I am talking about the decision to acquire. I said on Monday—there is no question about it—that after the bankruptcy it had to be renegotiated. I am talking about the decision to acquire —[Interruption.] Of course it has, because the act of bankruptcy has occurred. 1 said on Monday that I thought that we should try to reach an honourable settlement with Lockheed.
The first Amendment is to the effect that there should be an acquisition of all the engineering divisions. The technical arguments for not adding these management problems to Rolls-Royce at the moment are, in my judgment, absolutely overwhelming.
The second Amendment which we shall table is about keeping Rolls-Royce in public ownership. We shall table that Amendment by putting in the words "on a permanent basis". These Amendments will be circulated after 10 o'clock.
I find it very unattractive, when the Lobbies of the House are full of anxious men who have the greatest skills available, that the main concern of the right hon. Gentleman in his speech today should be to find a form of words which will reassure those who are concerned to see how much can be got back into private hands in a few years' time. It is very unattractive. And it is not only unattractive but it is a nonsense, because there is nobody in the whole House who believes that: if the right hon. Gentleman buys the aero-engine division, makes it profitable and sells it back, what is sold back will be able to survive for five minutes without public money after it has gone back into private hands.
We do not have to say on this side of the House in this case that we would acquire Rolls-Royce back without compensation. All we have to say is that a private Rolls-Royce would not get launching aid again because of the experience of the last few years, and it is 925 a nonsense to say—[An HON. MEMBER: "Disgraceful."]—it is not disgraceful. If the hon. Gentleman, the right hon. Gentleman, or anybody else thinks that he will acquire Rolls-Royce to save it and then, when he has got it going, sell it back to repeat the same arm's length relationship of high risk contracts of the kind with the RB211, he needs to have his head examined.
I promised that I would give the Minister a good quarter of an hour to make his points and answer questions. Some of the speeches tonight by hon. Gentlemen opposite show that they see this is a caretaker operation. It is a curious phrase to use, because they are talking about a caretaker operation for the most advanced industry in Britain and the two words do not go together.
One right hon. Gentleman talked about merging with Europe. I.R.C. goes in Britain, but some huge new agency to merge with S.N.E.C.M.A. or M.A.N. is to be brought into being. This is no way to approach the immediate problems of Rolls-Royce, which are simple, and known to everyone who is in the industry.
The company must be set up as quickly as possible as a going concern, with its eye on the future, going out for contracts. That will work only if the RB211 renegotiation can be brought off. The funny thing about the aircraft industry is that it is a high risk industry, but it is an industry which, above any other, attracts a high degree of dedication from the people who work in it. If every industry in Britain had working in it people who care as much about what they did as do those in the aircraft industry, with all its faults, there would be no problems of productivity, or exports or anything else.
To be charged with excessive enthusiasm, which was one charge made against me, is a curious charge coming from the spokesman of an industry which has lived and worked on its enthusiasm.
§ Mr. Tom Boardman rose——
§ Mr. Benn
I shall not give way.
I am coming to the end of what I have to say, and I want to draw the attention of the House to what we are debating. We are not debating technology, if by technology is meant lumps of metal, however cleverly designed, and however fast 926 they move. We are talking about people who build technology, and the people who build technology are the workers in Rolls-Royce, B.A.C., Hawker Siddeley, component companies such as Lucas, and others. We are talking about the most valuable skills in Britain today, skills for which there is a market, skills which have a time-scale to develop which lasts well beyond the life of a Minister, or a Parliament or a Cabinet, which lasts ten or 15 years from first conception to full fruition. Concorde began in 1962, survived the Conservative Government, the Labour Government, and now another Conservative Government, and will not enter service until the end of the present Parliament, and I say that this nation and this Parliament have to recognise that the time-scale of industrial development exceeds the time-scale of a Chancellor with his Budget to get right, or a particular Government with their own ideology.
Whatever arrangement may be made between the Government and Rolls-Royce, it is necessary that a nation which lives by its skills should get from this Government the degree of co-operation and intimacy in working within industry which will allow these skills time to develop and to bring the nation the living standards that it requires.
§ 9.45 p.m.
§ The Parliamentary Secretary to the Ministry of Aviation Supply (Mr. David Price)
I would certainly agree with what the right hon. Member for Bristol, South-East (Mr. Benn) said in his peroration, particularly about two points—the importance of the people involved in this situation and the time scale involved in all these projects.
I have only a short time to answer, so I cannot answer every point made in the debate, but I would start by congratulating my hon. Friend the Member for Hendon, North (Mr. Gorst) on his maiden speech. He chose a singularly unusual debate in which to make his maiden speech. I admired his confidence and his assurance, though I cannot say that I agreed with every point he made.
I should like to deal first with some of the major charges made in the debate, because they have reproduced charges which have been made on various occasions in the last few days outside the House, particularly in the United States. 927 The hon. Member for Ashton-under-Lyne (Mr. Sheldon) suggested that it was the Government which withdrew financial support from Rolls and that, in consequence of that action, Rolls-Royce found itself in the financial position which we all know of. I wish to make it clear to the House beyond further argument that the Government never had withdrawn any financial support committed to Rolls-Royce.
The £47 million of launching aid, that committed by the right hon. Gentleman, had been paid to the company, the £10 million had been made available to the company by the I.R.C., and the additional £42 million launching aid proposed last November in replacement for the second £10 million I.R.C. loan was expressly made subject to a report by independent accountants. As a result of the work of these accountants and its own reappraisal, Rolls-Royce itself decided to discontinue the RB211, in the knowledge that even the additional £42 million would have left the company in the position of trading without the prospect of meeting its commitments——
§ Mr. Barnett rose——
§ Mr. Sheldon rose——
§ Mr. Price rose——
§ Mr. Barnett rose——
§ Mr. Barnett
On a point of order. I would submit to you, Mr. Speaker, that the hon. Member is misleading the House—
§ Mr. Sheldon rose——
§ Mr. Sheldon rose—
§ Mr. Speaker
Order. The Minister has now only 12 minutes left to reply. [Interruption.] The hon. Member must contain himself.
§ Mr. Sheldon
The situation was quite clear in this House, that £42 million was earmarked for Rolls-Royce and £18 million from the bank, so any sub-contractor, seeing that and knowing that that was undertaken, could well have concluded that the company was credit-worthy by that increased amount, and so have continued trading with the company. As a result of the withdrawal of this only in a private letter to my hon. Friend the Member for Heywood and Royton (Mr. Barnett), companies would not have been aware of this and would not have been aware of the liabilities.
§ Mr. Price
The hon. Member simply is not getting his facts right. This was launching aid. It was tied to the RB211 engine. It was not general finance for Rolls-Royce as a whole. As I said just now, it was the decision of the board of Rolls-Royce that it was unable to carry on with this engine even taking into account the —42 million. So the question does not arise.
I must also make it clear that the Government had not given and could not give an unqualified assurance to dowhatever is necessary to support the programme through to a successful operation over the next twenty years",which is what has been said by the President of the Lockheed Company.
The suggestion has been made—I noted this particularly in the speech of the hon. Member for Glasgow, Craigton (Mr. Millan)—that the Government were responsible for terminating the RB211 contract. I want to make it absolutely 929 clear that that is not true. I remind the House of what the Rolls-Royce board's statement said:These factors give rise to additional costs and liabilities which are wholly beyond the financial resources available to Rolls-Royce. In these circumstances it is not feasible for them to proceed with the RB211 under the present contract.I want to reply to some of the points made by the hon. Member for Stockton-on-Tees (Mr. William Rodgers). As my right hon. Friend told the House, the Government are prepared to renegotiate the RB211 deal. The actual contract will lie between Lockheed and the receiver, acting in close accordance with our views, and subsequently the successor company.
Let me make clear what we mean. The receiver would naturally require, to protect his own responsibilities to the debenture holders, indemnity from the Government. This he would get. I make it clear that the Government will stand wholly and unambiguously behind the new company. That is a clear undertaking.
The hon. Member for Craigton asked about possible terms for renegotiating the contract. With the best will in the world, I cannot indicate to the House what these might be, as it would put us in a hopeless negotiating position. I repeat that we are ready to renegotiate.
The hon. Gentleman also asked what would be the position of the receiver if he received a higher bid from a foreign source for all the assets which the Government are intending to acquire under the Bill. The Government are determined that the company shall remain in British ownership. So, if the unlikely event of a foreign bid occurred—a foreign bid that was higher than seemed to be the negotiated price between ourselves and the receiver—the Government would have to raise their old price to a level which would enable the Receiver to fulfil his obligations to the debenture holders—[Laughter.]—taking all the circumstances into account.
§ Mr. Roy Jenkins (Birmingham, Stechford)
Before the hon. Gentleman moves on, we must give him the opportunity to tell the House—because we can hardly believe it—whether his statement a minute or two ago is or is not the position of the Government. [An HON. MEMBER: "High finance."] Is what the hon. Gentleman told the House, in fact, the case, or did we mishear him, or did he inadvertently make a mistake—that if any foreign bidder puts in a bid the Government will automatically beat it?
§ Mr. Price
Possibly in the noise the right hon. Gentleman did not hear me. I was saying that the Government are determined that the new company which will result from the Bill shall be British owned, but the Government cannot give orders to the Receiver. This is a point of law, and, therefore, the Receiver is—[Interruption.]
§ Mr. Frederick Wiley (Sunderland, North) rose——
§ Mr. Price
I am trying to respond to the right hon. Gentleman. The Receiver is under a duty to get the best return for the debenture holders taking all the factors into consideration. For instance, I understand that if there was a higher bid from a company whose purpose was simply to put the Rolls-Royce assets out of business—to buy out a competitor, as it were—the Receiver would not at law have to accept that higher bid., [An HON. MEMBER: "What if it, is a genuine bid?"] If a bid came from abroad, as I understand it, the exchange control does not operate on this. It operates only on stocks and shares and not on the transfer of assets. There would have to be a negotiation, which might have to involve other bidding.
In all the circumstances I regard that as a highly hypothetical situation. I have made it perfectly clear what happens in 931 law. Do I take it that the right hon. Gentleman would allow a foreign bidder to take over the company? If he does not want a foreign bidder, this is the consequence.
I greatly regret the necessity for the Bill. Having accepted the grave and disagreeable circumstances which made it necessary, I can commend it to the whole House with conviction and expectation. I commend it with conviction because it is the only right way open to us to secure vital national interests. I commend it with expectation because the new and reconstructed Rolls-Royce will have the opportunity to be heir to all that is best in the traditions and achievements of the old Rolls-Royce aero-engine business.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House.—[Mr. Clegg.]
§ Committee this day.