HC Deb 24 April 1975 vol 890 cc1742-62
The Prime Minister (Mr. Harold Wilson)

With permission, Mr. Speaker, I should like to make a statement about British Leyland.

Mr. Rost

Where is the Minister responsible?

The Prime Minister

This is a serious statement and it should not be trivialised by members of the Opposition.

The House will recall that on 18th December 1974 it gave approval for a guarantee to British Leyland's bankers for short-term working capital required over and above the then existing facilities while the company's longer-term investment requirements were examined.

In order that they should be comprehensively advised, the Government commissioned an expert overall assesment of British Leyland's present situation and future prospects covering all major aspects of the company's organisation and activities, under a team led by the Government's Industrial Adviser whom I appointed last year, Sir Don Ryder, and comprising Mr. R. A. Clark, the Deputy Chairman of Hill Samuel and Company, Mr. S. J. Gillen, formerly Chairman and Chief Executive of Ford of Europe Inc., Mr. F. S. McWhirter, a senior partner of Peat, Marwick, Mitchell and Company, and Mr. C. H. Urwin, Assistant General Secretary of the Transport and General Workers'Union. To confirm the authority of this body, Mr. Clark is also Chairman of the Industrial Development Advisory Board and Mr. McWhirter and Mr. Urwin are two of its members.

The team undertook its task with great vigour and submitted its report to the Government on 26th March 1975. I am sure that the House would wish me to express its gratitude to Sir Don Ryder and his colleagues for the speed with which they completed their task and to pay a tribute to the willingness with which the company and its employees have co-operated with them. The House was warned that it would, of course, be necessary to delete before publication those sections of the team's report containing sensitive information of value to competitors at home and abroad. Copies of the abridged version of the report are now available in the Vote Office.

I do not intend to summarise the report in detail but I think the House will wish me to outline its principal recommendations and to give a firm view of the Government's proposals for the future of British Leyland. There will be an opportunity for debate on these and other issues later on when hon. Members have had time to study the report.

The report recommends that the vehicle production industry ought to remain an essential part of the United Kingdom economic base, and that British Leyland should, therefore, remain a major vehicle producer. But urgent action would have to be taken to remedy the weaknesses revealed in world markets. In order to bring this about the report proposes that there should be a capital investment programme leading to the introduction of new models and an immediate and massive programme to modernise plant and equipment. The report also says that the present organisational structure has harmful effects on the efficiency of British Leyland's operations and is likely to impede its future development. The report proposes that within the overall corporate structure British Leyland's activities should be organised in four separate businesses dealing with cars, trucks and buses, special products and international activities. There would be the maximum delegation of authority and responsibility with the new structure from the chief executive of the corporation to the four managing directors of these main units. It recommends various measures to improve the efficiency of British Leyland's operations in, for example, its product range, marketing and its engineering and production facilities. It also recommends changes in British Leyland's top management but—and this is particularly re-assuring—commends the quality of British Leyland's second-rank management on whom a crucial responsibility will rest, following the restructuring of the company.

The report stresses that British Leyland's success would depend most of all on the skills, efforts and attitudes of its employees, and that there is an urgent need to improve industrial relations. More productive use must be made both of existing and of additional capital investment. There must be more realistic manning levels and more mobility and inter-changeability of labour.

The team proposes that the progress of the capital expenditure programme and the injection of new finance by the Government should be staged and that each stage should depend on a tangible contribution by the management and work force to the improvement of industrial relations and productivity. To this end a new structure of joint management and union councils, committees and conferences is suggested in which British Leyland's shop stewards, and particularly its senior shop stewards, will have a major rôle. As the report itself says means must be found to take advantage of the ideas, enthusiasm and energy of British Leyland's workers in planning the future of the business on which their livelihood depends ". The report estimates that the investment programme would cost about £1,500 million at constant prices over the next seven years. This is equivalent to £2,800 million on the Ryder team's assumptions about inflation. [Interruption.] It has not told me what kind of Government it expects for that period, Labour or Tory. The team considers that half this money could be generated from within the company, but £1,400 million—also calculated on its estimate of current prices—would have to come from outside sources and £900 million of this would be required up to 1978, of which £200 million should be found by continuation of existing temporary borrowing facilities, £200 million by a new equity subscription, and £500 million by long-term loans. An estimated further £500 million in long-term loans would be needed in the period 1978 to 1982. The team concludes that the new equity subscription of £200 million should be by way of a rights issue underwritten by the Government. At the same time it proposes that the Government should offer to buy out existing shareholders at 10p per share. In addition, it proposes that as part of the financial reconstruction the Government should be prepared to provide the whole of the further £500 million to British Leyland between 1976 and 1978, should no part he available from other sources.

The Government accept the Ryder report as a basis of future policy towards British Leyland and have already started upon discussions with the board of British Leyland with the aim of putting these proposals into effect. The Government agree with the proposal that they should offer to buy out existing shareholders and underwrite a new rights issue. In this way the shareholders will be given a fair choice between selling their shares at 10p each or retaining them and, if they wish, taking an additional stake in the company at the same price. The Government also accept that they may be required to provide £500 million of extra capital to British Leyland between 1976–78 if none is available from other sources; the question of funds beyond that date will be a matter for later consideration. In return for this massive investment of public money, the Government intend that they should have a majority shareholding in the reconstructed company.

Meanwhile, British Leyland will need further working capital, and my right hon. Friend will shortly be laying before the House a draft order seeking authority for an increase of up to £50 million in the guarantees already approved by the House. At the same time he will inform the House about the Government's pro- posals for providing the longer-term financial support, a substantial part of which will come from the provision already made in the Industry Act 1972 and in the Industry Bill now before the House. The Government will then introduce any legislation which may be necessary to give effect to these proposals.

I would like to make it clear from the outset that, following the initial injection of equity capital in 1975. the release of further stages of Government funding will be determined in the light of the contribution being made to the improvements in the performance of British Leyland by better industrial relations and higher productivity. This is a condition to which the Government attach great importance.

The company will, therefore, be required to put forward annual business plans before further funds are provided covering improvement in industrial relations and productivity and putting forward precise investment and operating programmes for specific Government approval within the new system of planning agreements. The Government-owned majority shareholding in British Leyland will come under the National Enterprise Board once this new body has been set up, and arrangements for scrutiny will be worked out with the board. The aim will be to satisfy the criteria for the provision of public funds on such a vast scale while at the same time allowing the company to operate on an effective commercial basis without day-to-day Government intervention.

The improvement in the company's performance will require the full co-operation of the work force. The trade unions have already been consulted in the preparation of the report, and the Government will expect the management of the company—the new management—to discuss with all employees arrangements for setting up the consultative machinery as recommended in the report. It will be the Government's objective to secure the joint effort of everyone involved in making a success of this new departure in the field of public ownership in manufacturing industry as part of the Government's broad industrial strategy.

The Government have not come lightly to these decisions: vast amounts of public money are involved, representing one of the greatest single investments in manufacturing industry which any British Government have ever contemplated. There are bound to be great risks that in an industry where there is fierce competition, and at present over-capacity, even the best-founded forecasts will be proved wrong by events.

But the House should be in no doubt about the significance of this company to the national economy and the importance of putting it on to a sound basis. British Leyland is our biggest single exporter. [Interruption.] I ask hon. Members to take me seriously. We did not wish for this situation. The hon. Gentleman should not be frivolous about it. [HON. MEMBERS: "Geton."] I am getting on.

Last year British Leyland's direct exports from this country amounted to almost £500 million. The company employs over 170,000 people directly in this country, and the livelihood of several hundred thousand more is dependent upon it. I must tell the House that in this decision a million jobs are at stake.

The choice before the Government was stark but unavoidable. If we had let events take their course and allowed the company to slide inevitably into receivership, or if we had permitted savage reductions in its size, so that its production would have been effectively confined to a specialised range of mainly luxury vehicles plus some buses and trucks, there would have been a major loss of confidence, at home and abroad, not only in British Leyland but in British industry as a whole.

There would have been, too, a risk of massive increases in imports and in redundancies on a very large scale, a good number of them in areas of high unemployment.

The choice facing the Government on receiving the Ryder Report, the choice now facing the House, is this. Is Britain to have a major indigenous automobile industry, or should we have decided that British Leyland could survive profitably on a diminished scale, selling up-market cars together with trucks and buses? Are we, through a lack of courage in responding to a tremendous and costly challenge, to endanger a million jobs, and at the same time to see a shrinkage of exports, and vastly greater imports for the home market, which would be bound to affect our balance of payments disastrously?

The Government have decided that Britain must remain in the world league so far as a British-owned automobile industry is concerned.

We are giving British Leyland an opportunity, through this massive investment, to overcome the weaknesses of the past and to play its full part as a leader in world markets.

The Government have made their decision. It is now for Parliament.

Mr. Heseltine

May I say how much welcome the fact that the Prime Minister himself has made this important statement? Would I be right in assuming that he has done so under the guidelines he recently laid down for the transfer of ministerial responsibility, and that he can now confirm that in view of the aid he has made available to British Leyland there are no restrictions from the European Commission on the sort of support we can give under British industrial policy?

Does the right hon. Gentleman understand that we shall need time to consider his statement and to see the Ryder Report, which we have not yet had a chance to see? Therefore, I ask him just four questions.

First, will the monitoring procedures be made public, and will the House receive details of the necessary assurances from the unions and management before the next tranche of £50 million to which the Prime Minister referred is made available to the company?

Secondly, does the Ryder Report include a long-term world market assessment to show how Britain is to earn a return from the investment?

Thirdly, what is the actual increase in public expenditure over the period covered by the expenditure White Paper and what compensating cuts will the Prime Minister now have to make?

Finally, what are the Ryder assumptions on inflation, and does the Prime Minister agree with them?

The Prime Minister

Before I answer the three serious questions among the four questions, I must refer to the hon. Gentleman's opening remarks. The hon. Gentleman trivialises everything he touches. This Ryder Report, this Leyland crisis, which is no doing of this Government—[Interruption.] The Opposition will find that one of the major factors was the effect on Leyland of the three day working week. [HON. MEMBERS: "Oh."] That is what I was told by Leyland. The Opposition may not like it, but they should take these matters more seriously.

I made the statement because this is a transcendental question, affecting all Departments, and because Sir Don Ryder, whom I appointed, is the Industrial Adviser to the Government at No. 10.

Since the hon. Gentleman thought it relevant to raise these points, he must expect a little more. Even though the Leader of the Opposition is away today, the Deputy Leader is here and there are one or two serious figures on the Opposition Benches. [Interruption.] I am answering a silly point made by the hon. Gentleman. I regret that the Deputy Leader did not respond, and I regret that he did not recognise that this is not a "lad's" job. It is a very major issue. Not only he but the Opposition have shown their frivolity this afternoon in their response to this report.

On the first question, the monitoring will be done by the National Enterprise Board, which will, of course, become the titular owner of the British Leyland majority share holding after the passage of the legislation before the House. It is making arrangements for the monitoring. It would be right that when it receives and considers the annual programme prospectuses of the company, its comments on these, which it will make to the Government, should also be made available to the House. The hon. Gentleman was on a good and serious point. [Interruption.] We discussed this before he asked the question which is why I knew the answer.

Dealing with the hon. Gentleman's second question, naturally the Ryder Report became available only a few days ago. He will find a serious treatment of the world market and the British market in it. The committee has taken a great deal of trouble with this. Its view is that we could, provided we could better guarantee delivery—this is not only a question of interruptions in working, it is very much a question of lack of modern investment capacity—meet world orders, some of which are being turned away at the moment, and that we could get a higher proportion of the European market, certain parts of the Commonwealth market, and I certainly believe, as we have heard from recent missions, some Middle East markets for Land-Rovers and Range-Rovers as well as commercial vehicles. The Ryder Committee believes that we could have a much bigger market for the vehicle industry.

That is why we are confident that if the recommendations of the report are implemented it will lead to no lasting loss of job opportunities, and that the Leyland workforce at the end of the programme, in the early 1980s, will be as great as it is today but be producing much more productively and selling considerably more abroad. That is the basis of the report.

On the third question, part of this will come out of the existing Industry Act proposals. That is why I am able to promise an early debate on these matters. The House will be asked to approve an order covering the £50 million at an early date. So far as public expenditure is concerned, the Bill before the House, on which the hon. Member himself is working, provides for an allocation to the NEB. Should that, because of the enormous pre-emption by the Leyland crisis, be insufficient, the Government will not hesitate to come before the House to strengthen the funds of the NEB to make up for it. Some of it will come from loan capital, which might be raised in various ways. It is a little early at this stage to look ahead on this.

Finally, on the question about the Ryder assumptions on inflation, I would refer the hon. Member to the report by Sir Don Ryder. Despite the fact that the Opposition treat this as a political matter, he did not even forecast what sort of Government might be in power. If he had thought that the Tories were coming in, knowing that they regard inflation as no problem, he would have had to increase the percentage.

Mr. Edelman

Is my right hon. Friend aware that the recommendations of the Ryder Report will be warmly welcomed in Coventry, the Midlands and elsewhere? In the meantime, and in the interests of general confidence, will he make it clear that the company is not bankrupt and that its products. to which he did not refer, are absolutely first-class? Will he also undertake that the Government will underwrite, if necessary, the continuity of supplies from outside suppliers and the payment of outstanding loans?

The Prime Minister

I thank my hon. Friend. He represents a considerable number of Leyland employees, as do other hon. Members. I represent quite a lot, but nothing like as many as he does. I am sure that the Ryder recommendations will be welcomed by the employees at every level, including middle management, to whom I have referred and who now face a great challenge, to which I believe they are capable of responding.

The company is not bankrupt. However, within a matter of days there would have been no alternative—in spite of the Government's ploughing in of help last year and the promise to do more—of its going into liquidation or a receiver being appointed. I am sure that this is the last thing the whole House would have wished. [HON. MEMBERS: "No."] I am interested to hear that response. I am quite sure that this would have been a situation which Labour Members and the Conservative Front Bench would have deplored. I notice that there is a silent response from the Opposition Front Bench.

There is great potential here. We believe that British Leyland can be one of the biggest and most successful industries on the basis not of restrictive production but of the whole range that it undertakes today, with new models. We are determined to ensure this, and also that employment will be as great as it is today, perhaps greater, at the end of the programme, but on the basis of much more output and many more exports.

I did not get a note of the hon. Member's third question.

Mr. Edelman

I am concerned that the continuity of supplies should be maintained to British Leyland by outside companies, which are concerned about British Leyland not being able to pay for its supplies. There might be an interruption, with disadvantages to the employees.

The Prime Minister

There is no question of that. That was ensured by what we did in the autumn and it should be further ensured by the further £50 million we are making available. I want to reassure my hon. Friend that British Leyland will be a continuing proposition and entity. The board is now considering its response to our proposals, about the Government's offer to take shares at lop a time and about the rights issue. I shall not go into all the complications. The House can work this out for itself. It is a very fair proposal. There is no question of the company being unable to meet its payments for essential supplies, raw materials and other costs during the period when the restructuring takes place.

Mr. Richard Wainwright

The Prime Minister has said that the legislation is now before Parliament. Does he agree that Parliament will be faced with the most acute problem of national industrial priorities owing to the vast capital requirement of British Leyland in relation to present national resources? In other words, if British Leyland's requirements are met in full, what will be left for the many other struggling industries? Will the Prime Minister, therefore, undertake to provide, in good time before the debate, a comprehensive public investment budget covering the whole industrial sector, so that there may be a proper context in which to consider the Ryder Report?

The Prime Minister

The hon. Gentleman's point is perfectly fair. He is absolutely right that in terms of the allocation of funds which we are asking the House to approve, there will obviously be a very heavy pre-emption over coming years. [Interruption.] I have given the figures —I shall address myself to the hon. Gentleman through you, Mr. Speaker—of how much we shall need to provide in each year up to 1978 and our estimate thereafter. It is certainly a heavy preemption on the amount of funds available for industrial regeneration and saving jobs.

The hon Gentleman will be aware that sometimes one faces a crisis of this kind at short notice. The previous Conservative Government nationalised Rolls-Royce in a single day. We have had other problems, some of which have looked as though they might give us very heavy expenditure requirements. One or two of those on which anxiety has been expressed now look like being solved indeed, by Sir Don Ryder and those working with him. Although it may be that money will be required, it is absolutely impossible in this situation to forecast the total requirement over the years either for job saving or for industrial regeneration. But Keynes said years ago that we must provide Government investment to save jobs. This, as some of us have argued—means that we, through the NEB, are ploughing investment where it is most needed—for jobs, for export and in the country's interest.

Mr. Carter

I welcome the Prime Minister's statement which confirmed that if the Government had not decided on this course of action the private sector would have stood idly by and watched not just the collapse of the industry but millions of people going into unemployment as a result. Will my right hon. Friend confirm that future investment plans, to which he has referred, will enable the company to expand its productive capacity and thereby meet the intense foreign competition it is currently facing. and that the trade unions will be involved in all those plans? Finally, what will be the position of Lord Stokes, John Barber and the rest of the current board within the context of the new arrangement?

The Prime Minister

My hon. Friend is right. If we had not acted, this firm would very quickly have gone under or been only a shadow of its former self. It is a fact that the massive investment programme it requires would not have been possible from private sources. On a subject of this scale—and we remember one, the Rolls-Royce case—it must be Government intervention, or it means the whole business going under. Whatever happened with Rolls-Royce, hon. Members of the Opposition cannot claim that the problem could have been solved according to the canons of their philosophy. There was no alternative to what we are doing. If hon. Members oppose what we are doing, they are saying that they would have condemned I million to lose jobs. As far as this is concerned, the investment plan envisaged which means investment expenditure in real terms of eight or nine times as much per annum into British Leyland than we have had over the past few years, is essential, as my hon. Friend has suggested, for the expansion of the corporation. A lot of the investment is not so much to expand capacity as to modernise capacity, because that is where so much British industry has fallen behind its competitors abroad.

Finally, with regard to the board, my hon. Friend will see the proposals in the Ryder Report. He is proposing that there should be a general change in the board because it is necessary to have the restructuring to which I have referred in my words on the Ryder Report.

Concerning Lord Stokes, I join with my hon. Friend in paying tribute to what Lord Stokes has achieved over the years. I believe—and I take my share of the responsibility—that the merger with BMH, as it turned out, proved to be very expensive, because the price paid for BMH was very much higher than was justified by the actual out-turn of the BMH component

Nevertheless, Lord Stokes has been a great leader of the firm and the industry. He has been particularly successful in his overseas visits and his ambassadorship, not only for Leyland but for British industry and our exports. I am very happy to feel that Lord Stokes will be willing to continue, I think, as an honorary president of the company, specialising in overseas visits. His ambassadorial role, which he has performed so well, will be welcomed, if not by the Opposition Front Bench with their twittering, by the export markets in which we hope to sell the cars.

Mr. Peter Walker

As the Prime Minister has said, this is one of the most major investments that has ever been made by a British Government. What are the Government's estimates as to the decreased exports and the increase in imports that would have taken place if this Government investment had not been made?

Secondly, as the Prime Minister has said that the top management of the company should be changed, is he certain that he has the available people to provide a better management in the future than in the past and, if so, will he tell us who they are?

Finally, did the Ryder Committee recommend that the Government should have the majority shareholding?

The Prime Minister

As regards the future management, yes, I am satisfied that there will be the right management here. I am not in a position to make announcements at present. The board has responsibilities in these matters. It is being extremely co-operative with Sir Don Ryder and his team and the Government. It would be premature for me to begin to make announcements. But it is not so much, perhaps, a question of better management. It is a question that the whole of British Leyland has been built up on a particular management philosophy, which the Ryder team and the Government think to be wrong. It needs fundamental restructuring, and we really need people in management who believe in that kind of restructuring—as a very wide sector of middle management there does, but not the top board.

I wish that I could give the answer to the right hon. Gentleman's first question because I am sure that he is on one of the most important questions which has to be decided. I shall see whether some kind of calculation could be made in addition to what he will find in the report. But in terms of recognising that this is Britain's major export of £500 million in value, if that or a substantial part of it were to be lost, the House can consider what would be involved in replacing it. It is a major supplier to the home market, which would have to be supplied from abroad with medium-sized and luxury cars and, above all, minis. The right hon. Gentleman has put his finger right on the situation.

As regards the other question, yes, this is the full implication of the Ryder Report, the sense of it. The recent Stock Exchange value has been about £40 million. We are talking about a Government injection of up to £1,400 million. Clearly, that should not be on the basis of having a tuppenny-ha'penny minority shareholding. The whole House must agree with that. This will come about in accordance with the Ryder recommendations, first, to the extent that existing shareholders accept the Government's offer of 10p a share for any shares they wish to sell; second, on the rights issue underwritten by the Government. To the extent that the rights issue is not taken up in full by existing shareholders, the Government will take it up in full. Should that not give the majority participation which is absolutely necessary in our view, then when we come to the £500 million loan capital, part of that could be in the form of either equity or convertible stock. I am sure that the House will insist without exception on majority Government shareholding.

Mr. Atkinson

Does not my right hon. Friend agree that in reality and over the first five years of the investment programme, this represents not so much an investment in British Leyland but an investment in the British machine tool manufacturing industry and in capital equipment manufacturing? Therefore, will he now announce that British manufacturers will have preference over anyone else in the world? Will he also now announce his support for British engineers and British capability in producing this capital equipment and declare that it is not our purpose to go abroad for the equipment that British Leyland now needs?

The Prime Minister

My hon. Friend touches an important point when he makes clear that the kind of figures we are talking about, not the £1,400 million of Government injection but the £2,800 million I referred to as being required, will provide a major boost to investment in machine tools, the electronics industry, the components industry and the rest. We know that owing to what has happened in past years and for all sorts of reasons our machine tool industry and other capital investment industries have been terribly depressed. At times when their products were needed they did not have the capacity to provide them.

My right hon. Friend the Secretary for State for Industry has already told the House of some of his plans. We have had to deal with Alfred Herbert. There are other plans. It is certainly our hope that the maximum possible amount of orders will be placed with British industry. In its turn it will have to reorganise to meet the challenge which the Leyland investment programme presents to it, just as Leyland is having to reorganise.

Mr. Baker

Will the right hon. Gentleman accept that every forecast concerning the sale and production of cars worldwide in the next 10 years is lower than it has been in recent years? Will he also confirm that the palmy days of the motor industry are over and that this means, sadly, that there will inevitably be substantial redundancies? Would it not be better at the beginning of this venture to admit that frankly and say that there will be fewer employment opportunities in the motor industry in the future? Is the right hon. Gentleman aware that if he does not now admit this frankly he will give credence to the view that this report is basically a political report, designed for politicians?

The Prime Minister

I do not accept what the hon. Member has said about the future of possible demand for automobiles. I would prefer to rely on the Ryder Report rather than on the hon. Member's gloomy prognostications, which would seem to be a prescription for doing nothing except allowing I million people to lose their jobs.

Mr. Baker

I did not say that.

The Prime Minister

If I were to accept the hon. Member's view, although I would rather accept Ryder, about general world demand I would certainly believe, as does the Ryder Committee, that we ought to be meeting a higher share of that world demand. All of us in different parts of the House can produce reasons why we think the British motor car industry has not been making the impact in world markets that it could. This report is designed above all to deal with that.

When the hon. Gentleman considers what he has said about the report being a political report for politicians—[Interruption.] That is what he said. When the hon. Gentleman considers that —we shall be happy if he wishes to qualify his statement—he ought to remember that the chairman of this inquiry was Sir Don Ryder. The members included the Chairman of Hill Samuel and Company—not noticeably a fully paid-up member of the Labour Party; indeed it makes regular contributions to the Tories—Mr. Gillen, formerly Chairman and Chief Executive of Ford of Europe, Mr. Mcwhirter, a senior partner of Peat, Marwick and Mitchell and Company as well as Mr. Urwin, of the Transport and General Workers'Union, which does on the whole support us. In addition, Mr. Clark was appointed by the previous Government as Chairman of IDAB. In the light of that I am sure that the hon. Gentleman would want to withdraw anything which might suggest that he was saying that this was a political report for politcal reasons.

Mr. Jay

On this occasion may I ask the Prime Minister also to pay tribute to the foresight of the right hon. Member for Knutsford (Mr. Davies) who, in his first Industry Act, so rightly pioneered the policy of rescuing important firms in this fashion?

The Prime Minister

That was absolutely right. A tribute to the right hon. Member is long overdue. The Industry Act, which is being invoked in this case and has had to be invoked in other emergency cases, is due in great measure to the right hon. Gentleman's foresight. That is why, with recent changes, he is in the dog-house on the back benches.

Mr. John Davies

Perhaps it might be remembered that the primary force of the Industry Act was as a regional weapon and as such it has proved effective. I hope it will prove to be so in the future. May I ask the Prime Minister whether his right hon. Friend the Chancellor took these figures into account in arriving at his assessment of public borrowing need? Secondly, will he please tell us whether in view of the extensive anticipatory comments in the Press it is his impression, as it is mine, that there was no leak of papers and that this has been an exercise in that unfortunate sport of kite-flying by the newspapers?

The Prime Minister

I agree with what the right hon. Gentleman has said about the Industry Act. The motivation for that Act, supported by all parties and going beyond anything that had been done previously, was regional. There are enormous regional implications in this whole question of the future of British Leyland. We are glad that while waiting for other legislation, we are able to use the legislation which the right hon. Gentleman commended to the House. When we think of Leyland's direct employment in Scotland, Wales, Merseyside and other development areas we can see the relevance of the Act and we are glad to be able to invoke it.

To deal with the right hon. Gentleman's question about the public sector borrowing requirement, my right hon. Friend did take into account the likely requirements of Leyland. He already had the Ryder Report at the time he drew up his Budget Statement.

What was the right hon. Gentleman's last question?

Mr. John Davies

About the Press.

The Prime Minister

Oh, yes. Absolutely I agree with the right hon. Gentleman. There was a certain degree of Press speculation but not very much. It was less than I would have expected. There were allegations of leaks but as far as we can tell there were no leaks. When the House reads the Ryder Report. I think it will agree with that assessment. I believe that some of the evidence given to the Ryder inquiry, including some evidence given by various sectors of middle management, did get into the Press. Some newspapers treated that as being a likely foreshadowing of what the report would say.

But there was, for example, no possible anticipation of the way in which under these proposals Leyland shareholders will have the right to decide the future of the company in respect of the offer to sell shares to the Government or take on more shares through a rights issue. There has been relatively little leakage and a great deal of tribute is due to the Ryder team for the way in which this has been kept confidential.

Mr. Tomlinson

While I welcome the Ryder Report and the debate we are to have to discuss its detailed proposals, may I ask my right hon. Friend whether the Government's investment in British Leyland is in any way contingent upon the self-generation of new investment from within British Leyland? Second, may I ask whether we shall have any opportunity to discuss consequential decreases in the public sector borrowing requirement, which many of us think ought to come because we are already in danger, with high rates of inflation, of exacerbating that inflation? If that is the priority can we consider other areas where cuts can be made? May I also ask what degree of confidence Sir Don Ryder expresses in the proposals for the future rising demand in the world car industry?

The Prime Minister

To take up that last point, my hon. Friend will find it worth while to study the report which is now available. As for debating the matter, we shall shortly be putting before the House an affirmative resolution to enable us to make a further transfer of shares—

Mr. Skinner

A tranche?

The Prime Minister

That is how British Leyland likes it. Anyway, there will be a further injection of necessary investment capital. This will be debatable, and the House may consider it desirable on that occasion to debate not just that particular tranche but also the policy I have announced this afternoon.

To deal with my hon. Friend's question about whether the injection of Government capital is dependent on the self-generative saving, the answer in relation to the £2,800 million is "Yes". Over the long term it must be. We cannot contemplate dealing otherwise with £2,800 million of Government money. We believe the £1.4 billion will be available. When my hon. Friend studies the proposals in the Ryder Report, and what I have said, he will see that there will be a continuous injection over a period of years. Obviously, we must make our decision in respect of the middle and later years, dependent on the progress made in the self-generation of internal finance and on the whole success of the new board in meeting requirements.

On the question of the PSBR and the Budget, I hope that my hon. Friend, who has a long record of studying these matters, will agree that we need more investment in British industry. Even though the PSBR is so anxious a matter, at a time when the world is lurching into depression it is more than ever important to increase investment. An example such as this, I should have thought, and the NEB proposals mean that investment will be injected directly into where it is most needed for employment and exports.

Mr. Heath

Will the Prime Minister accept that this is one of the gravest statements affecting our country's international affairs that has ever been made to the House, involving as it does massive sums of investment and 1 million jobs, and taking a substantial consumer manufacturing unit into public ownership? This ought not to be a matter of party political considerations.

The real consequences ought to be brought home to the country. To suggest that £2,700 million worth of investment, which could turn out to be more, is a consequence of the three-day working week is an irresponsible statement by the Prime Minister. The problems of British Leyland have been discussed for a long time and go much deeper even than the Prime Minister said. Will he accept that mere public control through a majority shareholding will not produce the answer for British Leyland? What is required is a complete reappraisal of attitudes by management and trade unions not only in the motor manufacturing industry but throughout the rest of British manufacturing industry, which is suffering to a large extent from a similar problem and is finding similar difficulty in getting investment funds or even cash liquidity.

Will the Prime Minister accept that mere public ownership will solve nothing? The Department and the NEB, which will be too overloaded to cope with this, will inevitably produce day-to-day intervention, which will have had effects. Therefore, what we must bring home to the country is that priority has to be given to investment, as against claims of consumption and excessive wage demands.

The Prime Minister

I agree with a good part of the right hon. Gentleman's approach. He is right in saying that this is one of the gravest decisions that any Government have had to make on industrial matters. He is right to draw attention to the fact that, almost for the first time in the arguments about public ownership which successive Governments have had to consider, this is a substantial manufacturing industry rather than a basic public service one, and so on. There is a strong case for extending public ownership in this area, but this was forced upon us for urgent consideration by the crisis last autumn.

The last thing I want to suggest is that the £2,800 million investment is due to the three-day working week. It could not have had that impact, but we have been told that the company was pushed over the edge into the danger of receivership by the loss of markets and substantial cash flow during that period.

The right hon. Gentleman would be fair if he were to say that it also suffered on liquidity and cash flow because of successive industrial disputes which I condemned a number of times in the specific Austin-Morris Cowley context earlier this year in my constituency. I think the right hon. Gentleman and could agree that the £2,800 million is due to the long-term failure to invest in this and other basic British industries over the period of successive Governments of both parties. I am sure we can agree that this has been a deep-seated problem over many years. It has become endemic, and it has been highlighted by this sensational event.

I agree with the right hon. Gentleman that there are many problems to be solved here. When he studies the Ryder Report he will see that they have been fully tackled. There is an investment problem not only in quantity and quality but in direction. There is the question of new models, designs and labour problems, which we both agree are important.

I agree with the right hon. Gentleman when he says that mere public ownership is not the answer. Public or private ownership may be the form, and we can argue about which is the best form in this or that situation, as we do in this case, but the only hope now is to get large new investment, restructuring and a totally different attitude by both sides to labour relations and productivity. Whether it is private or public ownership, we have to judge its success or failure by the extent to which it can contribute to those basic and essential criteria.

Several Hon. Members


Mr. Speaker

Order. Mr. Short—Business Statement.