HC Deb 17 April 1972 vol 835 cc190-200

11.34 p.m.

Mr. Walter Johnson (Derby, South)

I wish to draw attention to the issue of workers' shares in the old Rolls-Royce company. It will be recalled that just over 12 months ago the House heard the very unpleasant news that Rolls-Royce, a company famous in the history of this country, was to go into liquidation on the advice of a receiver put in by the Government. This was a crisis situation for one of the most famous companies which had ever existed in Britain and was clearly a shock to the House and to the nation.

It is pleasant to see new faces on the Front Bench. I congratulate the hon. Member for Woking (Mr. Onslow) on his appointment as Under-Secretary of State. I pay tribute to his predecessor in that office and also to the previous Minister for Aerospace. I am sorry that they have departed. They did a very good job. They were also very helpful, courteous and understanding of the human problems resulting from the collapse of Rolls-Royce. I make that statement without reservation having been one of their most severe critics on detail over the past year.

The collapse of Rolls-Royce resulted in serious hardship for many people, in particular to the worker shareholders, other shareholders, unsecured creditors and creditors generally.

Hon. Members representing Derby and and surrounding areas have from time to time questioned the Minister and tried to get some satisfaction on the question of worker shareholders. I have tabled a series of Questions almost weekly to the Minister over the past 12 or 15 months asking when he could give general advice to the House on the question of workers' shares. What is so unfortunate is that although the Minister had indicated that there could be a possibility of something being done for those who had invested their lives and life savings in workers' shares, on 31st January of this year, in reply to a Question tabled by me, the Minister said: I have written today to the Chairman of the Derby Group Rolls-Royce Shareholders Action Association to inform him that the Government have reluctantly concluded that no special treatment can be afforded to the holders of Rolls-Royce Ltd. workers' shares."—[Official Report, 31st January, 1972; Vol. 829, c. 5.] The Minister then explained in some detail why this could not be done.

For decades Derby has been recognised as the home of Rolls-Royce. Men who have worked with the company for years have, on their retirement, moved to other parts of the country; so those affected by the problem to which I draw attention do not come only from Derby. I have received, as many of my colleagues from the area have received, details of many tragic cases of people who have not only invested their lives by working for the company for 40 to 50 years but who, on the advice of their foremen, invested their savings in the company that employed them.

This situation has existed since 1955 and these employees, who, as I have said, have served their apprenticeship and have worked in this famous company not only in peacetime but throughout the war, on the advice of the company and in particular of their immediate supervisors invested their life savings in the old Rolls-Royce workers shares.

I have known of some tragic cases, as I am sure have other hon. Members. I have with me three letters out of 230 which I have received on this subject. They tell the tragic stories of men who have invested their life savings in this company and have then found their investments almost worthless.

In one letter, the writer says: I retired from the company in October, 1967, and last June, 1971, was in hospital due to heart trouble and now have to sleep downstairs. The money I have saved through the old Rolls-Royce workers shareholding, and also taking up other ordinary shares as well, were my life's savings. They could have helped me to buy a bungalow and to have been used for holidays. That is one example. There are many others. In another case the man says: I was relying on the pension that I got not only from Rolls-Royce but my workers' shareholding to enable me to put aside money with the half yearly dividend to pay bills and arrange for holidays and to take account of all sorts of additional little luxuries which make the differences between living a full life and just existing in retirement. Obviously I could go on quoting from many more letters like that.

I ask the Minister to think again about the whole question of workers' shares. I am aware of the reply that has already been given—a very full reply—that it is almost impossible under the present set up for workers' shares to be treated differently from ordinary shareholdings. But I should like to draw attention to a number of issues. One cannot sell a workers' shareholding like a normal shareholding. Workers' shares could be sold only when the company gave permission, and even then could be sold only to other employees in the company. It was clear to many who had been in the employ of the company for a number of years that Rolls-Royce was in some difficulty. I know that many of these folk would have liked the opportunity to sell their shares, but they were not permitted to do so under the deed setting up workers' shares. This seems to me to be a very good reason why the Government should give special consideration to this problem.

Some months ago I put down a Question to the Secretary of State for Trade and Industry, asking that the Government should give special consideration to workers' shares and suggesting that they should introduce legislation to make workers' shareholdings in any company a first charge on that company, in the same way as is a preference share, whether it be debenture stock or something of the sort. This seems to me to be necessary and fair.

There is a precedent for dealing with shareholdings when a company runs into difficulty. I need not remind the Minister that, in the years immediately after the last war, it was clear that the mining industry and the transport industry, notably the railways, were in a state of bankruptcy. They had got along reasonably well because they were necessary to the war effort, but one recalls that a very famous Member of the House many years ago described the railways as a bankrupt industry, and mining was in the same state.

In respect of both those industries, arrangements were made to deal fairly and reasonably with those who had invested their savings in some form or other, particularly in ordinary shares, in the companies concerned. For example, I am advised that, although one of the principal railway companies had paid no dividend at all for very many years prior to nationalisation, under the terms of the nationalisation shareholders were guaranteed 3 per cent. interest, although the nation was taking over a virtually bankrupt company.

I put it to the Minister in all seriousness that Rolls-Royce is a similar case. The Government decided to allow the company to go into liquidation. All right. We could have a long discussion about the White Paper, whether that decision was right, and whether in the long run it has cost the nation more to save Rolls-Royce by nationalising it, in view of the loss of confidence in the company. But this is not the occasion to go into those arguments.

There is a special case for the workers' shareholdings to be reconsidered by the Government along the lines I have suggested, by some grant in aid or by writing in something in relation to the assets of the new Rolls-Royce company. That has not yet been determined, and I understand that it is a big problem. When the nation is paying about £200 million to bolster the RB211—I am 100 per cent. behind that, as I have been throughout, in company with my hon. Friend the Member for Derby, North (Mr. Whitehead) and the hon. Members for Derbyshire, West (Mr. Scott-Hopkins) and for Derbyshire, South-East (Mr. Rost)—I feel that something should be done for the worker shareholders. To leave certain people out on a limb seems to me to be a shabby way to treat people who have invested not only their working lives in the company but their life savings as well.

I ask you, therefore, in all seriousness——

Mr. Deputy Speaker (Miss Harvie Anderson)

Order. The hon. Member will not ask the Chair, I hope.

Mr. Johnson

I ask the Minister, in all seriousness, to reconsider the answer which he previously gave to me and to look again at the problem in the interests of everyone concerned. This is not a political or party issue. We are trying to get justice for people who have done a jolly good job in the service of the nation. In that spirit, I ask the Minister to respond to my plea.

11.50 p.m.

The Under-Secretary of State for Trade and Industry (Mr. Cranley Onslow)

I am grateful to the hon. Member for Derby, South (Mr. Walter Johnson) for the tone which he adopted throughout this necessarily short debate. I assure him that not only am I grateful for his complimentary remarks about me but that he and I are agreed that one of the most unfortunate consequences of the collapse of Rolls-Royce and the difficulties which led up to it was the effect on the holders of the company's shares, particularly the company's workers' shares.

I am grateful to the hon. Gentleman also for the way in which he recognised the humanity and understanding with which my right hon. and hon. Friends who preceded me in this office approached the matter. He will, I hope, take it from me that the Government have every sympathy with the worker shareholders and for all those affected by the collapse of Rolls-Royce. I fully understand the feelings which led the hon. Gentleman to raise the matter on the Adjournment tonight, but I have to stress that I cannot accept the strictures which he has levelled, albeit moderately, at the Government.

The fact is that the whole problem arises because of the collapse of the company, and, as has been repeatedly made clear, the responsibility for that collapse rests with the old company, not with the Government. The Government did not nationalise Rolls-Royce, nor did they appoint the Receiver. In this whole affair the Government stand as the custodian of the taxpayers' money and the public interest and a balance has to be struck between this and any other considerations that might arise.

The basis of the workers' shares scheme, which was established in 1955, was that the employees were entitled to purchase from trustees a limited number of workers' shares at par, which was 10s., the entitlement depending upon the employee's length of service. The maximum possible holding was 1,600 shares, the par value of which was £800. For most of the period during which the scheme was in operation the market value of the company's ordinary shares was substantially above par. Since the workers' shares were on the same footing as the ordinary shares as regards dividends, scrip issues, voting rights and participation in ordinary share rights issues, they were, while the company was prospering, an attractive investment. Many holders of workers' shares enjoyed attractive dividends much in excess of dividends payable to shareholders who had bought their shares at market price.

I am told that in 1967 the return on workers' shares which were bought before 1958 was some 26 per cent. In these circumstances they seemed an attractive investment. On the other hand, because of the constitution of the scheme workers' shares could be disposed of only to the trustees at par.

The history of this is well-known to all those who followed it. Rolls-Royce shares fell below par early in 1970 and between January and November of that year some 20 per cent. of workers' shares were sold back to the trustees. It is interesting to note that most of these sales were made on the part of those with a larger holding of shares. Amongst those who held between one and 50 shares sales were as small as 3 per cent. whereas in the top bracket sales were as high as 30 per cent.

In November, 1970, the trustees took advice about the legal position and were told that the company could not lawfully advance further funds for repurchases from worker shareholders. The holders of workers' shares thus became locked in as they could not dispose of their shares even at a loss. This situation continued until the appointment of the Receiver and applied to a total of 9,335 holders, holding shares worth about £1.9 million in all, an average holding of about £200. The problem of being "locked in" did not apply to the company's ordinary shares, dealings in which continued up to the date of the receiver ship and for a short time thereafter, although at a very low value.

In this situation, there seemed to the Government to be a case for consider- ing whether the position of workers' shares could properly be distinguished from that of the ordinary shares, many of which were held by small investors, and afforded special treatment. In the debate on 11th February, 1971, immediately after the collapse of Rolls-Royce, my right hon. Friend the Member for Gloucestershire, South (Mr. Corfield) undertook to consider whether anything might be done on these lines. Since then, the Government have carefully and thoroughly considered ways in which this aim might be achieved. As part of the study there were consultations with the Receiver of Rolls-Royce and with the board of Rolls-Royce (1971) Limited and my right hon. Friend had two meetings on 25th March, 1971, and 24th January this year with a delegation from the Rolls-Royce Employees' and Ex-Employees' Shareholders Action Association. These delegations were accompanied by my hon. Friends the Members for Derbyshire, South-East (Mr. Rost) and Derbyshire, West (Mr. Scott-Hopkins), both of whom I am glad to see here tonight. My right hon. Friend also received a number of individual representations.

In examining the possibilities, the Government felt that they should weigh against the disadvantages of the locked-in situation the countervailing advantages that in earlier times the workers' shareholders had had over Rolls-Royce ordinary shareholders. The former benefited particularly in terms of effective dividend by being able to buy their shares at par when the market price of ordinary shares was substantially higher. Against this background, the Government reluctantly concluded that it was not possible to devise any scheme whereby workers' shareholders could be directly compensated which would avoid unfairness to other shareholders and creditors of the Company. My right hon. Friend has had representations from small shareholders of Rolls-Royce ordinary shares making this very point.

Mr. Johnson

I am making the request to the Minister, which has been made in the House before, that he should transfer some of the workers' shareholdings and give them rights in the 1971 company, because they have a special right in the matter. The hon. Gentleman mentioned their relationship with other shareholders. But the point is that they were not able to sell their shares in the same way as were other shareholders. That is the main issue.

Mr. Onslow

The matter the hon. Gentleman raises is one which comes to be considered later. If there is to be any scheme for preferential treatment of the former shareholders in the old Rolls-Royce company, it would need to be applied equally to the holders of the ordinary shares and to those of the workers' shares.

Mr. Peter Rost (Derbyshire, South-East)

On the question of preferential treatment, can my hon. Friend say whether Rolls-Royce shareholders, including workers' shareholders, will be given a preferential allocation when the Rolls-Royce Motors new issue is sold to the public shortly?

Mr. Onslow

I cannot answer that. I would hesitate to hold out any such hope.

The Government therefore considered whether it was possible to devise any other scheme or arrangement which would help the worker shareholders. All possibilities were considered, but it became clear that there was none which would be both practicable and equitable. Consequently, my right hon. Friend announced on 31st January this year, in answer to a Question for the hon. Gentleman, the Government's reluctant conclusion that no special treatment could be afforded to the holders of Rolls-Royce Limited workers' shares.

In his Early Day Motion of 3rd February this year, the hon. Gentleman spoke of the Government having now decided that the workers' shares are worthless. I need hardly say that no such decision has been made. It is not one for the Government to make. Whether the shares have any value depends upon whether the Joint Liquidators realise enough from the sale of the old company's assets to pay the creditors in full. If they do, any surplus will be available for distribution between the shareholders, and in such distributions holders of workers' shares will rank equally with holders of ordinary shares. I cannot say whether there will be any such surplus, and it would be wrong of me to speculate on the prospects of it.

The hon. Gentleman asked that the Government should look at the matter again. I regret that I cannot undertake to do so. The arguments which the hon. Gentleman advanced were fully taken into account in the Government's consideration of the matter, and I have been over the papers again with care. No new matter arises from what he said to night. I do not believe that it would be of service to the worker shareholders to raise false hopes.

However, I agree with the hon. Gentleman in one thing. In retrospect it is clear that the workers' shares scheme had a major flaw. My Department is considering whether the difficulties revealed make necessary any amendment of company law. The basic defect in the Rolls-Royce scheme seems to have been that whilst provision was made for holders of workers' shares to sell them back to the trustees, no action was taken to ensure that the trustees would have the funds to enable them to make such repurchases. This clearly needs to be looked at, and I can assure the House that it will be looked at.

Meanwhile, I repeat that I am sorry not to be able to accept the hon. Member's request for reconsideration of the Government's decision on the treatment of these shares. I hope that what I have said has done something to make it clear to him that the Government spared no effort in exploring all the possibilities open to them and reached their conclusion only with very considerable reluctance.

12 midnight.

Mr. James Scott-Hopkins (Derbyshire, West)

I am disappointed by what my hon. Friend said, although I had little hope, unless the Government were prepared to grant a special subsidy or special extra-curricula aid to the worker shareholders, in which case it would have been slightly unfair to the small holders of the ordinary shares.

But my hon. Friend must take it from the debate that my hon. Friend the Member for Derbyshire, South-East (Mr. Rost) and the hon. Member for Derby, South (Mr. Walter Johnson) and I are worried about the effect on the holders of these shares. It is difficult to differentiate between ordinary small shareholders and worker shareholders. There is, however, a feeling of having been hard done by among these people and what my hon. Friend said will not satisfy them.

My hon. Friend and I and the hon. Gentleman have been asked for further meetings in the House with them and perhaps this may lead to a meeting with my hon. Friend the Under-Secretary of State. Although he now has nothing more to say, and we have no new evidence to give him, I ask him to be kind enough to receive a deputation if it wishes and to listen to its arguments sympathetically.

Mr. Onslow

I assure my hon. Friend that I am most willing to meet him and any other hon. Members concerned with this matter so that we may discuss it together. I share their concern, but it does not necessarily lie within the Government's power, bound as they are by Statute and duty to the taxpayer, to give redress to these shareholders. If there is to be redress, it can be sought only by other means. But I shall be happy to discuss this matter with hon. Members at any time.

Question put and agreed to.

Adjourned accordingly at two minutes past Twelve o'clock.