HC Deb 31 July 1975 vol 896 cc2059-73
The Secretary of State for Industry (Mr. Eric G. Varley)

With permission, Mr. Speaker, I would like to make a statement about the motor cycle industry.

In July 1973 the previous administration was instrumental in the creation of Norton Villiers Triumph, which absorbed the motor cycle activities of the earlier BSA company. Under Section 8 of the Industry Act 1972 assistance of £4.87 million was provided. Subsequently NVT decided to close its Meriden factory.

My predecessor announced in July 1974 that the Government would be prepared to make available £4.95 million towards the formation of a co-operative at Meriden subject to certain conditions, including the necessary arrangements and agreements being negotiated with NVT for the purchase of assets and marketing.

Last March the House approved export credit guarantees on a long-term basis for NVT under Section 8 of the Industry Act for £8 million, to which an additional facility would be available of £4 million from ECGD under its normal commercial arrangements. In addition, a special guarantee facility of £6 million was authorised for the Meriden output.

However, NVT's sales abroad have fallen dramatically. The export guarantee provided against its long-term needs has in the course of the past three months almost been used up. Substantial stocks of unsold motor cycles have accumulated.

In these circumstances, the Export Credit Guarantee Department concluded that it would not be justified in guaranteeing further financial to increase stocks which are unlikely to be sold for some time. This situation has nothing whatsoever to do with the setting up of the Meriden co-operative, which has not yet entered the North American export market. Even after this guarantee had been withdrawn, nearly £24 million of public money has been spent or committed to the motor cycle industry in the past two years.

To enable the Government to form a view of the long-term prospects for the industry, my predecessor commissioned a study by the Boston Consulting Group. I have now received its report, and have considered its conclusions, together with representatives of the management and the work force in the industry. I have decided that, apart from commercially confidential material, the full report should be published. Copies will be available in the Vote Office.

The consultants were not asked to make a specific recommendation but to evaluate possible development strategies. The consultants characterised the history of the industry during the 1960s as one of a progressive loss of market share, a failure to introduce competitive new models and a concentration on the larger motor cycles through a managerial preoccupation with short-term profits. In the event, this policy turned out to be mistaken and contributed to the financial difficulties of BSA.

The main market for our motor cycles is now in North America. Total sales there increased at a rate of 15 per cent. a year from 1968 to 1974, but our share fell dramatically during that period.

After full consideration of possible future courses, the consultants identified three which appeared to hold the best prospect. One was for a much smaller industry. The second was for an industry employing about the same work force as at present. The third was an intermediate strategy.

Additional Government funds required range from a minimum of £15 million for the first strategy to £50 million and more if the work force directly employed on motor cycles were maintained at its present size of about 3,000—without provision for contingencies.

All three courses called for the rapid development of new models, the installation of new equipment, and concentration of production in at most two factories.

All would involve high risks, and at best employment on making motor cycles would be no higher 'than at present—if everything worked out right.

Even if everything did go right and all the risks could be surmounted, the consultants' report indicates that the industry would have cash flow deficits which would not be recovered at the very best until the late 1980s.

In addition to the options identified by the consultants, the Government have weighed very carefully other proposals and possibilities for a further investment in the industry, enabling it to recapture markets from which it has successively withdrawn.

In view of the importance of the subject, I have consulted the Industrial Development Advisory Board as recently enlarged. In its opinion, none of the strategies identified by the consultants offered an adequate prospect of viability. The board looked for an alternative option, but was unable to recommend one.

One of the factors that the Government had to take into account when considering the large scale of support that would be required under the options identified by the consultants was the many other calls on Government money in other spheres of economic and social policy, and the need to ensure that our limited resources are used to the best advantage.

The management of NVT has pressed me for an urgent decision about the provision of further funds.

In the light of our most thorough consideration of all possibilities, the Government have concluded that this request for funds must be refused.

I want to make clear that we have given full weight to the skill and enthusiasm of the work force and the employment situation in the Midlands.

My right hon. Friend the Secretary of State for Employment will be asking the Manpower Services Commission to do everything it can to help the workers affected to find new jobs.

We have not taken our decision lightly, and if I had felt that any more favourable decision was a practical proposition we would, of course, have chosen it.

Mr. Heseltine

Will the Secretary of State for Industry' recognise that this is a sad day for all involved in the British motor cycle industry—not least for those who work at the Small Heath works in NVT who, on 6th November 1974, were told by the Secretary of State for Energy that

the Government is fully committed to securing the future of the motor cycle industry in this country, and of course this involves the success of NVT no less than the co-operative. Will the right hon. Gentleman understand that today's statement is a total repudiation of that commitment? Will he recognise that there is a fundamental contradiction between his view that the problems of NVT have nothing to do with the Meriden co-operative and the advice consistently given to his right hon. Friend the Secretary of State for Energy and supported by today's report, that a three-factory solution was not credible? Thirdly, will he say what consequences he foresees for those employed in the industry and whether he expects the jobs, which his statement today will prejudice, to be lost in Wolverhampton, Meriden or Small Heath? Finally, is it not clear that there has been a major ministerial blunder and that there must now be a full public inquiry so that those responsible can be held publicly accountable?

Mr. Varley

The hon. Gentleman asked a series of questions, many of which refer to history. If he wants to delve into history, he should go back a little further. He will know that the situation in NVT did not begin when the Labour Government came into office. Mr. Christopher Chataway, the then Minister for Industrial Development, announced to the House that he would be instrumental in setting up NVT, and, indeed, he told hon. Members from this Dispatch Box that he was most optimistic and was establishing a proven entrepreneurial team, yet the Boston Group's report shows that one of the problems of the motor cycle industry is the mismanagement which has occurred and the great failure of British management in the industry over the years. Furthermore, the Conservative Government never announced to the House that the only solution was a two-factory industry. That was never said. I do not know what was said in private by the NVT management to Mr. Chataway, but it was never said from this Dispatch Box by any Government spokesman in 1973.

The hon. Member for Henley (Mr. Heseltine) should stop pursuing his vendetta against my right hon. Friend the Secretary of State for Energy and using these matters as a stick with which to beat him. My right hon. Friend the Secretary of State for Energy fought like a tiger to establish the motor cycle industry. We take no pleasure, nor does my right hon. Friend, from the situation which has arisen.

Mr. Les Huckfield

Is my right hon. Friend aware that this is a sad day for the whole British motor-cycle industry? Is he also aware that the real reason why these valuable markets in the United States have been lost is not due to any action by my right hon. Friend the Secretary of State for Industry, as he then was, or through the setting-up of the Meriden co-operative, but arose through the procrastination and failure to sign agreements by Mr. Dennis Poore? Is he aware that ever since 1973 there has been a succession of agreements proposed by Mr. Poore which would have enabled all three factories to continue to supply spares and to service the markets, but Mr. Poore, having proposed these agreements, failed to sign them? Is my right hon. Friend able to say anything at all about the future production and marketing arrangements at the Meriden co-operative? Above all, is it not about time that somebody asked Mr. Poore whether he sincerely wants to make or sell motor cycles?

Mr. Varley

My hon. Friend the Member for Nuneaton (Mr. Huckfield) has a great knowledge of the industry, and I know his involvement in, and his work on behalf of, the Meriden co-operative. The Meriden co-operative is a separate legal entity. It has a marketing arrangement with NVT, and it will be up to the co-operative to pursue the point with NVT.

My hon. Friend is right to say that this involves a question of markets. There has been a collapse of the United States market, which is a dominant market. There are some 13,000 NVT motor cycles stockpiled throughout the world and no prospect of sales. I am sure my hon. Friend realises the seriousness of the situation.

As for withdrawing support, I would point out to my hon. Friend that that is not the case. Since December 1974 about £19 million of Government money has been committed to the industry.

Mr. Hal Miller

Will the Secretary of State now say what compensation or remedy is available to those in the work force who have lost their jobs, and to shareholders who have lost their money? Will he do anything about the injustice sustained following maladministration by his predecessor, who wilfully established a third factory in contradiction to the advice of his own advisory board and blackmailed—that is the word used by the shop stewards at Small Heath—the work force and management into agreements which he announced with the Meriden co-operative? Finally, when they came to sign the agreements, those concerned were worried about whether the Government would make finance available for the third factory to be viable and were given the assurance which was referred to by my hon. Friend the Member for Henley (Mr. Heseltine) as to the Government's commitment. What compensation or remedy is available to those people?

May I end by saying that they have asked me to refer the matter to the Ombudsman?

Mr. Varley

The hon. Gentleman has wholly misrepresented the views and actions of my right hon. Friend the Secretary of State for Energy. Nobody could have done more than my right hon. Friend to try to help this industry. That is absolutely plain, and when the evidence is examined closely that will be seen. The hon. Gentleman suggested that advice was given by the then Government not to set up the Meriden co-operative. There is not a shred of evidence to suggest that that was done by anybody, and I say that speaking from this Dispatch Box on behalf of this Government.

The hon. Gentleman suggested that my right hon. Friend gave guarantees. I have been looking at the Press reports of my right hon. Friend's visit to the NVTs Birmingham factory at Small Heath on 8th November last year. He is reported as having said that he would be deceiving Small Heath workers if he gave the guarantee they sought, five years free of redundancy … with world business in its current state …". Then again, in the Birmingham Post of 9th November it was reported that 'One thing the workers are demanding is five years without redundancy. I have not got the power to guarantee anyone a job', said Mr. Benn.

Mr. Heffer

Is my right hon. Friend aware of the fact that when the Labour Government came in the problem of Meriden was firmly placed on the desk of Ministers in the Department? The matter had not been resolved by the previous Government. The discussions in relation to the Meriden co-operative were going on, the previous Tory Minister had had discussions with Mr. Dennis Poore and with the Meriden workers, and before we went in there were discussions about the establishment of a co-operative. The position was very clearly one which we endeavoured to resolve. Unfortunately, we inherited a situation which was very complex indeed.

Is my right hon. Friend aware of the fact that it was quite clear that we were faced with the total failure of private enterprise in the motor cycle industry? Any solution to the problem of the motor cycle industry must have meant the injection of public money. That is precisely what happened, even under the previous Government, as well as this Government.

Will my right hon. Friend accept that there was an alternative—which, unfortunately, we have not pursued—of taking the industry under public control? I am of the opinion that the answer, even at this stage, is to reconsider this question and to take the NVT under full public ownership, and to reorganise the industry on that basis.

Mr. Varley

I thank my hon. Friend. I know that he was dealing with some of these matters when he was the Minister of State in the Department of Industry, and that he considered some of the representations made at that time. His understanding is my understanding—that the previous Government did not rule out the possibility of a co-operative at Meriden. That is how I understand it. The question of public ownership of the industry depends on being able successfully to manufacture motor cycles and sell them in world markets. That is the real issue, and even that would involve, in my view, disproportionate public funds at this time, especially when we consider the call on public funds by all the other socially desirable and economic projects that my hon. Friend and I hold dear to our hearts.

Mr. Eyre

Will the Secretary of State say what consultations took place with trade union representatives at BSA before this devastating blow was struck, at a time when unemployment in Birmingham is at the highest level since 1940? Does the Secretary of State understand that specific assurances were given to the men at BSA by the Secretary of State for Energy, and that, as those assurances have been broken, working men in Birmingham will never trust that Minister again?

Mr. Varley

We take no pleasure, of course, out of the situation which has arisen in this industry. We deeply regret it and are sickened by it. It is not a matter of levelling charges against my right hon. Friend. One needs to look at the whole history of this industry.

On the question of specific assurances, my right hon. Friend did not give specific assurances. In fact, the hon. Member for Henley, who leads for the Opposition on this matter, has just waved in front of me a letter dated 6th November 1974. I suppose that he is referring to the third paragraph of that letter, but in the second paragraph my right hon. Friend said: … I am not today in a position to give you firm undertakings about possible investment on the basis of the long-term plan just presented by the management of NVT. I hope that he will read that, and the commitment—[HON. MEMBERS: "Read on."] If hon. Gentlemen would like me to continue, rather than shout me down, I will do so. The commitment referred to by the hon. Gentleman is the commitment that was given, first, to carry through the public funds that had been allocated to NVT by the previous Government, the commitment of public money to the Meriden co-operative, and the £8 million under the Industry Act in export credit. They are the commitments referred to by my right hon. Friend.

Mr. Robert Edwards

Is my right hon. Friend aware that his statement today will cause widespread despair and disillusionment among the whole community in Wolverhampton? The closure of the Wolverhampton factory involves not merely a few thousand workers but over 60 different establishments which do the work for the motor cycle industry.

Is not my right hon. Friend also aware that the consultants could not have viewed the three new models, which the experts insist are competitive in any market in the world against the Japanese?

Is my right hon. Friend aware that there are only 6,000 motor cycles in stock in America, and that they are already being sold very rapidly indeed?

Is my right hon. Friend also aware that surely we have to call a halt to Japanese competition that is penetrating British industry and closing down basic industry, and has he considered restrictions on the import of Japanese motor cycles, which in my view are heavily subsidised by the Japanese Government?

Mr. Varley

I can well understand my hon. Friend's concern. I know that he has been closely involved in this matter. He has raised some very fundamental points. It is not a question really, in regard to the motor cycle industry, of restricting Japanese imports to this country. It is a question of international markets for the motor cycles that NVT, and eventually Meriden, will produce. There is a capacity in Britain at the moment for producing 20,000 to 30,000 motor cycles a year. The British market for the motor cycles we produce is only about 10,000 a year, and British motor cycles have about half that market at the moment.

If the whole of the British market were allocated by the method suggested by my hon. Friend, it really would not help the situation, because the international competitiveness of NVT and British motor cycles comes into the matter.

On the question of stocks, my hon. Friend is right that there are just over 6,000 motor cycles stocked in the United States. There are nearly 2,000 stocked in Canada, and the remainder, making up the total 13,000, are in other parts of the world.

Mr. Heseltine

May I read the passage that the Secretary of State for Industry was pressed to read after the paragraph that he quoted? It reads: I can, however, give you my firmest assurance that there will be no discrimination by the Government in favour of the Co-operative to the detriment of the Small Heath or Wolverhampton workers. The Government is fully committed to securing the future of the motor cycle industry in this country, and of course this involves the success of NVT no less than the Co-operative.

Mr. Varley

The commitment referred to in this letter is the one I outlined earlier today, which was a carrying forward of the commitment of funds allocated by the previous Government in regard to NVT, the funds allocated to Meriden and the £8 million. It must be read in connection with the second paragraph, where my right hon. Friend made it absolutely plain that he was not in a position to give firm undertakings about the possible investment on the basis of a long-term plan. That is clear and explicit.

Mr. Edelman

Despite the relish with which some Opposition Members have greeted this news, is my right hon. Friend aware that his statement will be greeted with dismay in the Midlands, where unemployment is already so high? Does he agree that the tragedy of the motor cycle industry is that large numbers of motor cycle workers will feel that they have been led up the garden path by successive Ministers and have now been left competing with each other for jobs? In those circumstances, will my right hon. Friend take into account the suggestion made by my hon. Friend the Member for Liverpool, Walton (Mr. Heller) that there should now be a State holding company both for NVT and for the Meriden cooperative, so that together they might work out with the workers concerned a policy for the industry's survival, and not rely simply on the advice given by a professional company of management advisers?

Mr. Varley

I know that right hon. and hon. Members have not yet had a chance to look at and consider the consultants' report. It was a commitment given to all parties—the NVT workers, the management, the Meriden co-operative and the Government. I hope that my hon. Friend will consider it.

The sums of money required under any of the strategies outlined—or any others—are truly enormous. If we wanted to maintain the present work force, which is between 3,000 and 3,500 workers, it would involve Government expenditure of about £50 million, and there are suggestions that even that would not be sufficient. The cost per job would be about £17,000. One has to consider that sum of £17,000 in relation to other support; for example, the rescue cases under the Industry Act. The average rescue case for 1972-73 was at a cost of £582. In 1973–74 it was £731. In 1974–75 it was £740. That is the difference. Truly enormous sums are involved, and we have to bear in mind other calls on public expenditure for other projects.

Mr. Alexander Fletcher

When does the right hon. Gentleman next expect to come before the House to try to explain away yet another misjudgment on the part of the Secretary of State for Energy?

Mr. Varley

The hon. Gentleman is totally wrong and very unfair in saying that about my right. hon. Friend, who tried his hardest to get a secure future for the motor cycle industry. No one could have done more. Instead of scoffing at my right hon. Friend, the hon. Gentleman would do a great deal better to pay tribute to him.

Mr. English

Is my right hon. Friend aware that Steyr-Daimler-Puch, which has its British headquarters in Nottingham, is an Austrian company and not a Japanese one? It can manufacture cycles efficiently in a country where labour costs are high and it can absorb the resulting transport costs and still sell them efficiently in this country. Does not that fact conclusively prove my right hon. Friend's remarks about bad management in Britain and that he and the Government are right in the decision that my right hon. Friend has announced today?

Mr. Varley

I thank my hon. Friend for his remarks and for that information. It is true, as the report brings out, that the industry has a history of troubled and inefficient management.

Mr. Lawson

Is the right hon. Gentleman aware that many Opposition Members will wish to congratulate the Secretary of State for his wisdom in taking the expert advice of the Industrial Development Advisory Board in this matter? Will he now take the board's advice on the Meriden co-operative?

Mr. Varley

I am not looking for congratulations. This is a very sad day for the motor cycle industry and for this House. I am disturbed by the fact that so many Opposition Members are taking so much pleasure out of this.

As for the Industrial Development Advisory Board, it is the enlarged board which considered the various strategies and other possible courses. I have to take very seriously the advice which it has given me.

Mrs. Renée Short

I ought to say first for the record that hon. Members most concerned with this problem—and, of course, I include myself—have found it impossible to get the précis of the report from the consultants, either from my right hon. Friend or from his Department, despite frequent requests. I should have thought that if this had been put to the management and the shop stewards, Members of Parliament should at least have had it at the same time.

My right hon. Friend will be aware that this will be grim news for Wolverhampton, because large numbers of families rely on the success of the NVT operation. My right hon. Friend can try to pass it off, but there is no doubt that the letter from his predecessor dated 6th November has had a wide circulation in the Wolverhampton factory—and, as far as I know, in the other one. Certainly it was given to me by my shop stewards, and they have pegged their belief in what this Government intended to do on the undertaking given in that letter—

Mr. Heffer

Why blame him? He has been moved, has he not?

Mrs. Short

There is no doubt that they will be very concerned when they read in the Press tonight the statement made by my right hon. Friend, his successor. Is my right hon. Friend aware of the enormity of the situation that he has announced, not only in terms of jobs in the West Midlands, where unemployment is higher than it has been for almost half a century, but in terms of the fact that there is now no British motor cycle industry if this one goes down? It means that the whole world market is left open to the Japanese and, to some degree, the Italians and Germans and that our own market is left open to the Japanese so that anyone in this country who wants to buy a motor cycle of whatever size will be compelled to buy a foreign machine, adding to our balance of payments difficulties. He will have no choice in the matter at all. I should have thought that my right hon. Friend would bury his head in shame at the prospect of such a situation, making our economic position even more difficult. I wonder whether my right hon. Friend—

Mr. Speaker

Order. I have given the hon. Lady a great deal of latitude—

Mrs. Short

I am asking a question.

Mr. Speaker

It did not sound like it. Will the hon. Lady please conclude quickly?

Mrs. Short

My right hon. Friend has given figures of the cost of taking this firm into public ownership, which the workers in NVT certainly want. Has he also considered the cost to the nation of the unemployment pay, the social security benefits, the rent and rate rebates, the free school meals and the other payments, let alone the loss of tax revenue resulting from making 20,000 people unemployed in the West Midlands? Is it not time that he thought again and decided to take the industry into public ownership, as his predecessor intended to do?

Hon. Members


Mr. Varley

The statement which I have made today is made on behalf of the whole Government, and I resent very much the implications of my hon. Friend's remarks. My hon. Friend referred to the "Checkley" letter of 6th November. The interpretation which I have put on that letter has been agreed with my right hon. Friend the Secretary of State for Energy. My right hon. Friend interprets the question of the future of the industry in the way that I have interpreted it today. I do not take any pleasure from this. It is a very sad situation.

I am very sorry, too, that my hon. Friend did not receive a copy of the précis of this report. The workers have not had the report, which is in the Vote Office now. They have had a précis. I was committed to consulting the workers in a confidential way. They asked my predecessor to do that through the tripartite system, so I am committed to it. My hon. Friend should not take me to task for carrying out that promise.

Mr. Eyre

I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration; namely, the flagrant breach of specific assurances given by the present Secretary of State for Energy in the course of his duties as Secretary of State for Industry as a consequence of which large work forces in the West Midlands will be losing their jobs from tomorrow onwards.

Mr. Speaker

In the circumstances I could not have expected the hon. Member for Birmingham, Hall Green (Mr. Eyre) to give me notice of his application, because it has arisen out of the statement that has just been made and the exchanges that have taken place in the last few minutes. It would be quite inappropriate for me to allow the debate today in view of the fact that there has not been time to read the documents. I am not prepared to disrupt Monday's business, but for once I shall have some time at my own disposal on Thursday. If the hon. Gentleman makes an application for this matter to be one of the topics to be raised on Thursday on the motion for the Adjournment of the House, I shall certainly see that reasonable time is given to debate the matter.

Mr. Ashton

On a point of order, Mr. Speaker. A few moments ago the hon. Member for Bromsgrove and Redditch (Mr. Miller) accused the former Secretary of State for Industry of blackmailing the workers at NVT and the management. Is it in order to use such expressions in the House about a right hon. Member who is not present, particularly in view of the fact that my right hon. Friend the Secretary of State for Industry at that time had a tape recording of everything he said at the factory and has listened to that tape recording and can back up any statement he made on that day?

Mr. Speaker

As I understood it the hon. Member for Bromsgrove and Redditch (Mr. Miller) was quoting what somebody else had said, but I do very much deprecate exchanges of this kind across the Floor of the House.

Mr. Peyton

May I ask that those most interesting tapes should be laid on the Table? After all, it is time that we got in on an act like that.

Mr. Speaker

It does not lie within my power so to order.