§ 8.40 p.m.
§ Mr. Michael Marshall (Arundel)
I shall begin my remarks with a protest about the way in which the House is once more being kept in the dark about the provision of capital for the National Enterprise Board. The chance of discussing the matter has arisen only because we have been fortunate in the Ballot which determines the subjects that we discuss. But the whole principle that is at stake goes wider and deeper. We are concerned with the sum of just under £15 million, and the only entry in the Estimates is the increase of public dividend capital to the NEB from £1,000 to nearly £15 million. That is typical of the breathtaking way in which the activities of the NEB are being foisted upon the House without proper scrutiny.
I have made an informal check on what this £15 million covers, and I am grateful to the Minister's Department for the advice I have received. It is wrong that the House should have to rely on that type of scrutiny and informal inquiry. I understand that about two-thirds of the sum is intended for Rolls-Royce and the next largest sum for Brown Boveri, both of which are subsidiaries of the NEB. I understand that the balance is to be divided largely between administration and contingencies.
1654 Will the Minister say in more detail how this £14,999,000 is to be allocated? It seems wrong that we should have to extract this information from the Minister at the Dispatch Box, and I have some sympathy with him in having to pick up the threads in this way. But that does not lessen my criticism of the Government's system. For what precise purpose is this amount of public dividend capital earmarked?
My hon. Friends are seeking assurances because there are a number of companies in the NEB portfolio. I shall concentrate mainly on Rolls-Royce, which I understand is likely to receive the largest amount within the ceiling of just under £15 million. The affairs of Rolls-Royce since the NEB came into existence have made a sorry tale. What guarantee can the Minister give on the effective monitoring and use of the capital sum which is intended for Rolls-Royce? That brings me to the heart of the problem. We cannot discuss the provision of capital to the NEB without in turn considering how the NEB allocates that capital to its subsidiaries. The relationship between the NEB and Rolls-Royce has had a public airing through the Press, but for all we know there has been no effective dialogue between the Department of Industry and the Treasury, and certainly there has been none with this House.
What has been shown is the total folly in failing to resolve how the National Enterprise Board should use the powers which it possesses of manipulating the purse strings once these block sums are made available to it. This has brought into the open what has been at the heart of all the fears that so many of us had in Committee and all the way through the Industry Bill, as it then was. Indeed, our worst fears have been confirmed. Companies like Rolls-Royce, which are operating in the highly competitive international field of aero-engines, must have commercial freedom to operate. I shall certainly look to the Minister of State tonight to show whether he is accepting that view, as I believe the Department of Industry should accept it, that the maximum degree of autonomy and flexibility ought to go to the subsidiary companies within the National Enterprise Board, whereas the question of scrutiny of the National Enterprise Board itself is a matter in which our reservations and 1655 worries require much closer parliamentary examination.
Taking the whole argument between the National Enterprise Board and Rolls-Royce, I would quote from the Financial Times of 12th February, which, in a very pungent article, gave a perfect case history of how this system which the Government have foisted upon the country is already seen to be going wrong. It stated:The responsibility for the public row between Lord Ryder and Sir Kenneth Keith over the control of Rolls-Royce 1971 rests entirely with the Government".The article went on to say:No thought appears to have been given to how the relationship between the three parties—the management, the National Enterprise Board and the Government itself—would be handled.It continued:If the National Enterprise Board is to control it"—that is, Rolls-Royce—as tightly as Lord Ryder seems to want, he would need to have his own experts to appraise and monitor the company's own programme".In other words, we are here facing one of the classic examples of duplication which the present Government seem to perpetuate with almost every piece of legislation they bring forward in the field of industry.
As the article asks, what purpose does this duplication serve? This is a question which has not been answered by the Government. The net result is, as the article concludes:To allow the present quarrel to continue will not only make the participants look even more ridiculous, but will cause unnecessary damage to both Rolls-Royce and the National Enterprise Board".In one very well-known and clear case, we have seen the way, I fear, in which the National Enterprise Board is to go ahead in the future. We shall see a sort of management by confrontation, and this is a matter to which the Government must address themselves. When the Minister of State comes to reply, I look to him for some answers from the Government, particularly as we are now already long enough into the life of the National Enterprise Board to take a reasonable view.
I ask this question also in the context of the uncertainty which still obtains with regard to the Treasury's vetting of the 1656 National Enterprise Board's programmes. We know that the National Enterprise Board can engage in loans, guarantees and joint ventures up to £25 million without seeking approval from the Secretary of State. Similarly, we know that it can indulge in share purchases of up to £10 million.
It is part of my contention that what we are discussing tonight is typical of the way in which the National Enterprise Board, as opposed to its subsidiaries, is-wide open to any kind of empire-building, because these sums are substantial amounts.
Question Time on 1st March highlighted many of the problems that we face, particularly in regard to the question of Treasury scrutiny. On that occasion my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) asked the Secretary of State:
Who is responsible to the Comptroller and Auditor General for ensuring that public funds voted to the NEB and, through it, to its subsidiaries are spent in the way Parliament was informed they would be spent?
The Secretary of State said in part:
My short answer is that the accounting officer in my Department, the Permanent Secretary, will be responsible to the Comptroller and Auditor General. I know that there is some controversy about that matter, and I shall be looking into it further."—[Official Report, 1st March 1976; Vol. 906, c. 888.]
§ How far has this matter been looked at further? This important question vitally affects our judgment of the proposal presently before us. The Minister must give us some assurance, otherwise yet again the taxpayer will get the impression that, late at night, his purse is being milked without proper accountability.
§ A number of times the Government have said that these amounts are merely small sums which we can consider later. We are always being told that scrutiny will be possible later, but the £15 million is part of a sum of £49 million generally devoted to support for industry. That brings me to the whole question of parliamentary accountability. I shall cite only two recent examples to show the real fears that I have about the way in which these matters are not only considered now, but, so far as I can see, will be considered in future, unless the Government admit to the House that they have got their basic systems wrong and put forward alternative proposals.1657
§ The first example of trying to gauge the way in which the NEB is discharging its duties in the expenditure of taxpayers' money came up in November last year, when my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) said, on a point of order, that he had been unable to get answers about the numbers and grades of staff employed by the Board. On 18th December 1975, in a statement, the Lord President accepted that the basic point required an answer, but he did not give one. Instead, he talked a great deal about how it was impossible to set up the kind of control which seemed to be implied in my hon. Friend's question.
§ What is significant, however, is that these anxieties were reflected in all parts of the House. The hon. Member for Bristol, North-East (Mr. Palmer) asked whether the NEB would be subject to the scrutiny of the Select Committee on Nationalised Industries. The Lord President said that he would look into the matter and let his hon. Friend know.
The hon. Member for Newcastle-upon-Tyne, East (Mr. Thomas) said that it was only through Questions to Ministers that these matters could be dealt with, which was not satisfactory because the information was often presented
in the form and manner and with the omissions and additions that the industries decide, with the Minister concerned often unable to add any gloss or factual content of his own.
They were fair criticisms. The burden of the Lord President's case was simply:
Perhaps the best course of action would be to see how it goes. If difficulties arise, we can look at the matter again."—[Official Report, 18th December 1975; Vol. 902, c. 1660, 1658.]
§ We were assured by the Prime Minister that the White Paper would be the "bible" for the activities of the NEB. That assurance was reiterated many times in Committee, but since the Act was passed there has been more and more prevarication of the kind I have cited.
§ I should like finally to cite from my own experience ways in which this frustration and lack of information is continuing. I have found three months later, in trying to get some indication of 1658 whether or not Ministers are undertaking a proper scrutiny of the way the National Enterprise Board operates, that it is totally impossible to get full and frank answers. I raised this subject some time ago in Questions which I put to the Secretary of State for Industry, the Chancellor of the Duchy of Lancaster and the Prime Minister.
I asked a very simple question: on how many occasions since the Chairman of the NEB had taken up his office had those three Ministers met him? The answers I got were revealing. The Secretary of State for Industry said:
On a number of occasions."—[Official Report, 1st March 1976; Vol. 906, c. 889.]
§ I am bound to say that his answer was one of accuracy and courtesy of the highest order compared with the answers I got from his colleagues.
§ My Question to the Chancellor of the Duchy of Lancaster produced one of the classic bits of Whitehall gobbledegook which should be enshrined in the Official Report, and I intend to make it so. The answer which I got was that he had not held any non-bilateral meetings with the Chairman of the National Enterprise Board. We on this side of the House are able occasionally to manage to unscramble some of these double negatives.
I put down a further Question to the Chancellor of the Duchy of Lancaster asking how many meetings he had had which were not non-bilateral meetings, and today I received an answer which tells me that:
The Chairman of the National Enterprise Board and I have been present at internal Government meetings and at one meeting of the National Economic Development Council.
§ We are making progress. Perhaps if I can keep this up we may be able to establish in another three months whether the Chancellor of the Duchy of Lancaster is as effectively exercising the kind of veto as he managed to exercise on British Leyland.
§ These are crucial matters which affect our judgment, not only of the kind of expenditure that we are now considering but of the whole future of Government strategy towards industry itself. This is why I particularly highlight the rôle of the Prime Minister in this matter. I realise the sensitivity on the Government Benches on this matter. I look across at 1659 the Minister of State, who has been remarkably shy so far in putting forward his candidature, because he is well aware from some of the comments on this side that we have been pushing for some time for a place for him in the Cabinet, and I do not see why he should not pass in one fell swoop through the door marked "No. 10".
§ We cannot understand why the Prime Minister himself, who is in many ways the guarantor of the whole concept of the NEB via the White Paper, should be so evasive. I want to get firmly on the record the attitude of the Prime Minister, since I look to his successor to take up this same underwriting of the NEB's activities, whether he be the minister of State or one of his colleagues.
I shall therefore quote again from exchanges I have had with the Prime Minister. In a Written Question on 23rd February, I asked him on how many occasions he had met the Chairman of the National Enterprise Board. His answer was:
It is not the practice to list the number of my meetings with the chairmen of statutory bodies. Any Questions about the operations of the National Enterprise Board should be directed to my right hon. Friend the Secretary of State for Industry."—[Official Report, 23rd February, 1976; Vol. 906, c. 54.]
§ I felt that that was evasive on this issue once more, so I put down a further Question for 23rd March, asking the Prime Minister when he next expected to meet the Chairman of the NEB. I received a note telling me that that Question had been transferred to the Secretary of State for Industry. I cite this as another example of the kind of classic double-thinking that goes on in Whitehall. I asked the Prime Minister when he was to meet the Chairman of the NEB. I did not ask that Question of the Secretary of State for Industry, and I should like to have an answer to it.
§ In order to obtain an answer, I wrote to the Prime Minister on 15th March to ask him whether he did not regard the whole saga as totally unsatisfactory. I regret to tell you, Mr. Deputy Speaker, that he was so appalled by the confusion in his own midst that he resigned the next day.
§ I do not want to leave the matter there. I look to the Minister of State to make it abundantly clear that he recog- 1660 nises the way in which hon. Members are frustrated in trying to establish how scrutiny in this place, through Ministers, is being exercised. It is typical of the veil of secrecy which surrounds not only scrutiny by Ministers but the policy of Ministers towards reporting to the House.
§ On Third Reading of the Industry Bill on 3rd July 1975, I had the opportunity to refer to submissions that were made in Committee on behalf of the Institute of Directors. Labour Members were disposed to make light of those submissions, yet the institute had singled out as the one most important point for the Industry Act, as it now is, that there should be the need for specific approval by the House of major National Enterprise Board capital expenditure. Its view has been amply confirmed.
§ It is by pure chance, having been lucky in the Ballot, that we have the opportunity to discuss a matter which would otherwise have gone through "on the nod". Unless the House is able to exercise the sort of scrutiny that I have suggested, I fear that the Government will continue to put things through "on the nod ". We must not allow this occasion to pass without seeking an assurance from the Government that some rethinking is going on.
§ The present situation cannot be a satisfactory way in which to proceed. The Government are in a massive six-sided box. The Minister will know my interest and appreciation in these vast mazes involving different and conflicting parties. The Minister must agree that we have a six-sided box in which the NEB and its subsidiaries are battling against the Secretary of State and the Treasury while the House—and the Select Committees, if the Committees are to be brought into this whole pattern—are being kept totally in the dark.
§ I do not mean any disrespect to the Minister when I say that he may be partly in the dark. I know that this is not a subject for which he has prime responsibility. However, I ask him to tell the House and the country that the Government are not meandering in a total maze. I hope that he will tell us how the NEB can be more accountable not only to Ministers but to the House. If he can tell us that, I believe that we shall be making some progress and obtaining 1661 some answers to those which have been frustrated so far.
§ 9.04 p.m.
§ Mr. Michael Grylls (Surrey, North West)
I am delighted to take up the points raised by my hon. Friend the Member for Arundel (Mr. Marshall). It is unfortunate that our concern is not reflected in the interest shown by Labour Members. It is disappointing to see how few Labour Members are present. After all, the NEB is their child. It is supposed to be the great regenerator of British industry. It appears that Labour Members have regenerated off home. Be that as it may, we are delighted to have the presence of the Minister of State. He is a most courteous Minister. Given the ample array of support that he gets from the Box, I am sure he will be able to answer us in his usual way. I mean that as a compliment.
First, I am curious to know who inserted the figure of £1,000 in the massive tome of the Supplementary Estimates. It seems that it has now grown to £14,999,000. It is extraordinary that anyone should have made that error. No doubt the Minister of State will be able to correct me if I am wrong.
§ The Minister of State, Department of Industry (Mr. Gregor Mackenzie)
I know that the hon. Member studies these matters with great care, so he should know that it is the normal pattern to put down £1,000 merely as an indication of one's attitude. This is the normal practice, which has been followed by both sides for a long time.
§ Mr. Grylls
That may be true in other areas of policy, but we are breaking new ground with the NEB. It is a new body, with a lot of expensive manpower. It has an office in Grosvenor Gardens—not one of the cheaper parts of London—and a lot of people to get the figures right. Yet they do not seem to be able to do so. It is very odd.
I am concerned about the part of the Estimates devoted to administration of the Board. Presumably the marketing people within the Board know its policy on competition. Is the Board to subsidise subsidiary companies so that they can enter into unfair competition?
1662 In recent months there has been a feeling in industry that because the Board is backed by the Government, it is in a preferential position. This is an understandable feeling.
I am sure that the magazine The Engineer is required reading in the Department of Industry. No doubt it is studied very closely by Ministers. The issue of 4th March says:Varley wants the NEB to determine prices for products and services in accordance with the requirement to earn an adequate return on capital".That is fine. The article continues:It should not show 'undue preference' and should arrange that its subsidiaries do so too.But how are we to define an adequate return on capital? "Adequate" can mean anything, and we suspect the word has been used to cover a multitude of sins. There is talk about not showing undue preference, but preference to a business man is unfair competition using taxpayers' money to steal a march over the rest of industry.
I would be delighted if the Minister of State could shoot me down in flames with a categoric assurance to the contrary, but I suspect he has let the cat out of the bag and that the words "undue preference" have been used to leave room for manoeuvre and that subsidiary companies such as Leyland and Brown Boveri will be able to go in for unfair competition against private industry.
Sometimes I feel that in our debates about industry we talk too much in generalisations. It is perhaps more important to get down to specifics.
Coventry Climax, a well-known subsidiary company of Leyland, makes fork-lift trucks. Since the British Leyland drama, it has been entering into what many people in the business claim to be an uncommercial sales drive. It has been one of the more successful parts of British Leyland. It has not, I understand, made a loss. In the past it has never, as far as I am aware, been in great difficulties. But it is giving £1,000 discount on a fork-lift truck worth £8,000, despite the fact that previously it was getting the business perfectly easily.
On of the very biggest of the other companies in the fork-lift truck business is in the constituency of my hon. Friend the Member for Beeston (Mr. Lester). 1663 That company is now finding that in a very competitive business Coventry Climax is selling its fork-lift trucks at these enormous discounts. This is really not necessary. Coventry Climax has sold two fork-lift trucks to Rolls-Royce, Derby, at a total discount of £2,500.
I know that the Minister of State does not have direct responsibility, but this is our trouble with the National Enterprise Board. If the NEB is allowed to do this sort of thing it is not really helping British Leyland. It is only making life more difficult for the rest of British industry. It is a crazy situation.
Perhaps Coventry Climax is trying to pick up a trick or two from the Japanese, but it ill behoves a nationalised company—salvaged by the British taxpayer in a quite involuntary contribution to British Leyland—to go in for dumping, causing other companies in the country to suffer in the process.
I make these comments in a positive sense and not by way of trying to hit the NEB on the head. I hope the Minister of State will be able to give the answer tonight to this question about Coventry Climax. If he cannot, I hope that instructions will go out very quickly from his Department to Coventry Climax, telling it to stop this sort of practice, because the taxpayer does not subsidise firms in order to enable them to put others out of business.
My hon. Friends and I are deeply co-cerned about the employment situation in these other firms in parts of the country where today there are already severe unemployment difficulties. I hope, therefore that the Minister of State will be able to assure us on this aspect.
One of the sub-headings relates to Rolls-Royce. Apparently some of the money is being transferred to Rolls-Royce. Many people wonder what is happening to the Rolls-Royce company, which was nationalised under the previous Conservative Government, and therefore held as a Government company, and which was transferred on 25th February to the National Enterprise Board. There has been a good deal of Press comment as to the price at which it was transferred to the NEB.
It is rather curious that in an answer to a Parliamentary Question at the end of last year the value of Rolls-Royce 1664 was put at £123 million, yet three months later it was transferred to the NEB at £137 million. I do not necessarily criticise that, because I do not have access to the figures or calculations, but it rather looks as if Lord Ryder is not winning the argument. He wanted to have Rolls-Royce transferred to the NEB at a knock-down price. It looks instead as if the price has been raised considerably. I hope that the Minister of State will be able to give an answer on this matter.
My hon. Friend the Member for Arundel referred to the somewhat quaint situation resulting from having an enormously important company like Rolls-Royce which at one moment is owned by the Government and the next is transferred to the NEB. From now on, will the NEB assume responsibility for financing Rolls-Royce? There have been comments in the Press to the effect that Rolls-Royce will need another £100 million this year. I looked again at the Supplementary Estimates to see provision for that amount, but having seen that provision has been made for only £1,000 and that £15 million is needed I was not surprised that there was no provision for Rolls-Royce.
We know that the aero-engine business is very expensive, in terms of new developments and research and development costs. If it needs a further £100 million it will presumably come from the ever-shrinking NEB kitty. Here we have the key to why there are not many Labour Members present.
The Members of the Tribune Group, who no doubt are campaigning for other causes at present, will be bitterly disappointed, because when we first had the NEB floated in front of us by the then Secretary of State for Industry—the present Secretary of State for Energy who is also otherwise engaged at present—we were told that the NEB would be the great interventionist tool and that a massive amount of money would be available to it. Last week we debated the public expenditure White Paper, which referred to £950 million—and that, incidentally, has shrunk by 25 per cent. because of inflation, and at constant prices. Already £300 million of that is pre-empted for British Leyland, and I have already mentioned £100 million for Rolls-Royce. One wonders what there: 1665 will be left for the great regeneration of British industry. The whole thing appears to be a farce, because the vast proportion of NEB money has already been pre-empted for Rolls-Royce and British Leyland, and I believe that a certain amount is going to Chrysler.
We must not forget the Left Wing. I should like to tempt the Minister to comment on his friend, colleague and comrade, Mr. Ron Hayward, who is a great expert on industrial matters and who apparently speaks for the Labour Party. In a newspaper article the other day he said that he believed that the NEB should stop being on the defensive and go on to the offensive. It is rather frightening that just as we begin to pick up and recover from the Benn era we find ourselves entering the Hayward era. Ron Hayward will make industry lose confidence.
What will the NEB do to attract industry's interest? Will it be a source of cheap money? Apparently not, because there will not be much money and it does not look as if it will be cheap—that certainly was the experience of the IRC. The IRC was able to attract people only by offering a special cheap rate of money because it was involved in the Government. Yet Mr. Ron Hayward tells business to invest and to provide new jobs.
I hope that the Minister of State, who is an honest, practical and sensible Minister, will use his considerable skills and powers of persuasion as a Minister in the Department of Industry to say to his colleagues in the Government "Never mind about the NEB, we have it and it will carry on, with not very much money and not a very exciting future." If he can persuade his colleagues in the Government to set the right framework for industry, to encourage industry to make decent profits and therefore to expand and to provide new jobs he will be doing a really useful job. I believe that Lord Ryder could have a similar rôle, instead of charging around industry like a rogue elephant trying to take over companies when he has no money anyway.
I make no apology for raising this matter tonight; rather the reverse. My hon. Friends and I hope that we have done good in debating the question of the NEB. This modest error in the Supplementary Estimate we shall leave to one side, but the future of the NEB will be 1666 debated frequently in the House. Our main complaint is that it has not been debated sufficiently frequently in Government time to be given proper consideration.
I hope that the Minister will be able to answer the questions I have asked and give some satisfaction and encouragement to industry to feel that there will not be unfair competition. I stress the main point I raised about Coventry Climax. If the Minister can assure me that the company will not be allowed, as part of a nationalised industry, to offer absurd discounts which will result in people in other competing companies losing their jobs, the debate will have been worth while on that score alone.
§ 9.22 p.m.
§ Mr. Anthony Nelson (Chichester)
My hon. Friends the Members for Arundel (Mr. Marshall) and Surrey, North-West (Mr. Grylls) have already eloquently expressed their deep concern about the figures contained in the Supplementary Estimate. I wish to emphasise my concern at seeing the original estimate of proposed public dividend capital for the National Enterprise Board increased from £1,000 to £15 million. We were told by the Minister that this was a preliminary estimate and that as the arrangements were firmed up it was appropriate to come forward with a supplementary requirement of £14,999,000. However, I feel strongly that when the original estimates were set out there were sufficient grounds for making a more realistic estimate of PDC requirement of the National Enterprise Board. It is bad financial management to have to come back to the House for nearly £15 million in this way.
More amazing, however, are the overall figures for general support for industry, which show a similar leap from an original estimate, in 1974–75, of £312 million, to £956 million. This is symptomatic of the way in which this profligate Government have expended public money and drawn down loans on behalf of taxpayers, not to provide employment and sustain companies which are in temporary difficulty but to provide money for companies which do not need it, which are profitable and in which, by the Industry Act and through the tentacles of the NEB, the Government seek a controlling interest.
1667 What is to be the proposed structure of the NEB? The estimates give the PDC estimate as £15 million, but the Industry Act allows for an expenditure of £1,000 million by order of the Secretary of State, and this may be substantially larger where the Secretary of State, by direction, orders the NEB to acquire certain holdings. On the face of it that seems to be a very high debt/equity ratio. The Minister will be aware that we have had some previous discussion on the question of the proper debt/equity ratio for public sector bodies. May we have an indication of the pro forma balance sheet and the application of funds in the NEB?
I want to know the total amount that the National Enterprise Board has drawn down and spent so far on acquiring the holdings which were set out and itemised by his right hon. Friend in answer to various Parliamentary Questions. Of that total, which is the total of the balance sheet or the liabilities of the National Enterprise Board, how much is made up of loans drawn down from the National Loans Fund and how much is the proposed or existing equity element? It would appear that the £15 million is the sole amount of equity or public dividend capital and, therefore, one assumes that the acquisitions undertaken by the NEB have been financed over and above that capital element entirely by loans. That is a substantial amount of debt, as I shall hope to indicate.
I want to know specifically how much has been borrowed from the National Loans Fund. That will be an important indication of the extent to which the NEB can be self-financing, because we have been told that when the NEB borrows from the Government for investments on its own initiative it will be charged the current rate of interest for loans from the National Loans Fund.
Secondly, I want to know in greater detail than has been made available to the House so far what are the costs of the holdings acquired by the NEB. That is particularly relevant to the figures set out in the Supplementary Estimates. If we are to sanction and approve an element of risk capital which taxpayers pay up to this body, it is proper that we should know the debts and liabilities on the same side of the balance sheet which have been used to pay for the substantial 1668 holdings and acquisitions which the NEB has made so far. The holdings which the Board has so far acquired are set out in a Written Answer to my hon. Friend the Member for Henley (Mr. Heseltine) on 8th March this year. They were a 95 per cent. holding in British Leyland Ltd, a 100 per cent. holding in Rolls Royce (1971) Ltd, a 12.3 per cent. holding in Brown Boveri Kent Ltd, a 2.6 per cent. holding in Dunford and Elliott Ltd, a 62.5 per cent. holding in Ferranti Ltd, a 100 per cent. holding in Herbert Ltd, and a 28.2 per cent. holding in Cambridge Instruments Ltd. Yet I have searched in vain to obtain figures for each and for the total cost of these acquisitions by the National Enterprise Board.
On the occasion when the Minister of State answered my hon. Friend the Member for Henley about the price at which any shares now owned by the NEB were acquired, he said:The National Enterprise Board has acquired the publicly-owned shareholdings named in the two statements which my right hon. Friend laid before Parliament on 27th February … In addition, the Board has acquired publicly-owned shares in Dunford & Elliott Ltd. for a consideration of £122,111."—[Official Report, 8th March 1976; Vol. 907, c. 69–70.]That seems to indicate that there are still a number of holdings which have been acquired by the NEB from the Government for which acquisition figures are not available. I hope that on this occasion the Minister can enlighten us at least if not in part then as to the total cost which the NEB has incurred.
I have estimated that on the basis of the cost and current market values given in the answer to my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) on 26th November last year, and on the basis of a valuation defined under the Industry Act 1975 in Schedule 2, paragraph 6, the cost of the holdings in the NEB must be between £350 million and £400 million. How is the NEB financing this? If it has already acquired shareholdings to this cost value and it has a public dividend capital of about £15 million, are we to assume that it has a debt element of about £385 million? I hope that the Minister will enlighten us on this matter.
Thirdly, I share the grave concern of my hon. Friends about the price at which 1669 these acquisitions were struck and, therefore, the cost—whether it be in the equity or the debt element—that has been incurred by the NEB. If the price at which the NEB acquire shareholdings from the Department of Industry is substantially below the original cost that the Government incurred in acquiring those shareholdings, I believe that this is nothing less than a sleight of hand, which is much to be regretted by hon. Members. It should not be possible, in my view, to pass shareholdings from one State body to another State body and somehow, by an accounting process, show that they have been acquired at a lower cost and, therefore, that the loss incurred to the taxpayer, or indeed, the potential profit—should they be disposed of later—is lesser or greater, as the case may be. I do not feel that it is proper to write off public debt in this way. It is behoven on the Minister to come clean about the basis of which shares are transferred. I appreciate the difficulties that arise in cases where these are not publicly-quoted shareholdings, but a firmer indication of the basis of valuation for those already passed and potential transfers is required before the House should sanction or approve this sort of payment.
Following up the point made by my hon. Friend the Member for Surrey, North-West, I must also ask this question: if we are to have a public dividend capital of about £15 millon, and if the NEB is able, under the Industry Act, to spend, in the near term, about £950 million, just how much is now left for Lord Ryder to spend? We were told in the White Paper on expenditure that the finance available for the NEB until 1980, some four years hence, has now been reduced to a maximum of £950 million. We also know that this is a money-terms cash limit, which even now is worth 25 per cent. less than the exactly same amount last year, when the Bill was in the course of discussion in the House.
We also know, as my hon. Friend mentioned, that £300 million of British Leyland's financing requirements will come from the NEB and that this will probably be a cost incurred in the shorter-rather than the longer-term Rolls-Royce will need £100 million of working capital this year. Chrysler—one must be realistic—has prospective losses of about £40 1670 million, which the NEB will have to stand, as well as the cost of a loan to that company of about £55 million.
If one adds up these figures including the acquisition costs, one finds that Lord Ryder has really been sold something of a dead duck and that all he has left under this magnificent Act to regenerate British industry is probably less than £100 million, which is an amount substantially less than that invested by many major public companies and certainly substantially less than his friends in the Tribune Group would like to have seen.
It seems to me that the NEB has certainly been a flop in terms of the Government's intentions, and that it has had to cut back very considerably on the proposed initiative which it was intended to make. Indeed, Dr. Stuart Holland, who was one of the NEB's original designers in 1973, has described it as 'a sell out'. Lord Ryder has approximately £500 million to play with, but I have suggested that after the acquisition costs the real amount that he will be able to spend on acquiring shareholdings in industry and trying to regenerate industry will be a substantially smaller sum. Therefore, how can one realistically look for a financial objective for the NEB? How can one say, for the public dividend capital which is itemised in the Supplementary Estimates, that the NEB will seek to make an adequate return?
One appreciates, therefore, the problems that the Government have had in devising a suitable objective for the NEB, and why the matter is still under negotiation. It seems to me to be the height of idiocy to set up a body, to promise it £1,000 million, to place requirements on it which mean that it will have to spend that money on acquiring loss-making concerns, and then to attach to it financial objectives that it cannot possibly achieve.
One can readily appreciate the chagrin of Lord Ryder and the members of the Board, who set out with such great hopes and whose affiliations with and loyalty to the Secretary of State for Energy—the former Secretary of State for Industry—have been dashed by a Government who have spent far more than the country can afford.
I hope that on this occasion the Minister will come clean and give us a proper breakdown of the costs and 1671 application of funds by the National Enterprise Board. I hope that there will be no false hopes or promises in future. We need a greater element of reality and prudence in public expenditure on behalf of our constituents, whose interest we are here to serve.
§ 9.36 p.m.
§ The Minister of State, Department of Industry (Mr. Gregor Mackenzie)
I am grateful to hon. Gentlemen on the Opposition side for the way in which they have put forward their arguments on a number of points.
First, I apologise for the absence of my hon. Friend and fellow Minister of State. As hon. Members know, he is engaged upstairs in Committee, not, as perhaps others might be, on other activities. I know that he will read the comments which have been made tonight. If I am not able to take all those points on board, I assure hon. Members that my hon. Friend will note them and will write to the Members concerned.
This is the first time since the establishment of the National Enterprise Board that we have had an opportunity to discuss its role. I welcome this opportunity because it gives us a chance of looking at NEB's role and the importance we attach to it in our industrial strategy.
The speeches by hon. Gentlemen have been reasonable, and I shall endeavour to reply in the same vein. I am puzzled when I hear hon. Gentlemen opposite say that they would like to scrap the Industry Act 1975, because I recall that they abolished the Industrial Reorganisation Corporation some time ago. I think that some of them later regretted that decision. Perhaps during their years in Opposition they will have an opportunity to reflect on the attitude that they are adopting towards the Industry Act and will adopt a new line towards it.
§ Mr. Michael Marshall
It is important to put on record that we have not suggested at any stage that we seek to abolish the Industry Act 1975. Our view is simple. We wish to see it amended to revert to the Industry Act 1972.
§ Mr. Mackenzie
I was thinking in terms of speeches made not tonight but during the passage of the Bill in Committee and later on the Floor of the House. The NEB has been in operation 1672 for only four months, but it is worth while looking at its record so far. I shall then deal with some of the questions which have been posed by hon. Gentlemen.
The NEB has made proposals, after consultation with the Machine Tool Trades Association, for a scheme under which the Board can provide finance on commercial terms to companies for building machine tools for stock. This proposal will benefit the industry, employment and, in view of the Board's expressed intention that its operations will be on commercial terms, the NEB. It will also benefit the economy as a whole as we move into a better economic climate by helping to avoid a bottleneck in the supply of machine tools. I am glad to tell the House that the industry has not been slow to respond to the Board's initiative and a number of proposals are already being accumulated.
It has been announced that the NEB is taking part in consortia which are seeking to secure major export contracts for this country. I am sure that nobody in this House, including Opposition Members, will wish to challenge the need for increased exports or the jobs that these produce.
It is far too early to assess the Board's record in its capacity as an industrial holding company. But I am sure that all Members of the House will welcome the announcement yesterday that, after its £125 million loss last year, British Leyland over the last five months has broken even. This is a tribute to both workers and management in British Leyland, to the efforts of the Board, in particular to its late Chairman, Sir Ronald Edwards, and to the excellent working relationship that the NEB has established with the company.
§ Mr. Grylls
Will the Minister go beyond British Leyland to the point about joining the consortia to help to obtain an export deal in the Middle East. Has that initiative—a new departure for the NEB—been successful, and will he say something about the present situation.?
§ Mr. Mackenzie
Perhaps, having reflected upon it, I will write to the hon. Gentleman on that topic. This might not be the time to go into too many examples.
I do not expect the Opposition to agree with everything that the NEB does, but the record of the Board to date justifies 1673 what the Government have said about the concept of the NEB as a new dynamic in the economy to complement and forward what is described as the macro-economic approach of Keynes.
Over the years our competitiveness as a nation, under successive Governments, has been undermined by a total inadequacy of industrial investment to create capacity and to increase efficiency and industrial competitiveness. We see the NEB as a major instrument for advancing the national interest in this area.
Against that background, I turn to the main subject under debate tonight—namely, the NEB and its relationship with its subsidiary companies. As foreshadowed in the White Paper "The Regeneration of British Industry", a number of Government shareholdings have been vested in the NEB. My right hon. Friend the Secretary of State for Industry announced on 1st March that we had authorised under Section 3 of the Industry Act the transfer of the Government's shareholdings in seven companies, including British Leyland Ltd. and Rolls-Royce (1971) Ltd. This transfer has now taken place and as a result the NEB now has a controlling shareholding in companies that between them employ a quarter of a million people.
In any debate on the National Enterprise Board it is right to say something about the guidelines. When my right hon. Friend the Secretary of State for Industry published the guidelines on 1st March, the hon. Member for Surrey, North-West (Mr. Grylls) said that the Opposition regarded them as reasonable. I am glad that at least on that matter we are in accord.
§ Mr. Grylls
We have not sought to raise the question of guidelines specifically today. We are now talking about the Supplementary Estimates for the NEB and its capitalisation. No doubt we can discuss guidelines on another occasion.
The Minister said that several companies were transferred to the NEB in terms of Government shareholdings. In the notice deposited by the Secretary of State under Section 5(5) of the Industry Act 1975, he referred to British Leyland Limited, Rolls-Royce (1971) Limited and Brown Boveri (Kent) Limited—all companies transferred from Government hold- 1674 ings to the NEB. No price has been disclosed and, therefore, we are not in a position to know the cost at which those companies have been transferred. It appears that a number of extra shares have been issued in respect of Rolls-Royce. There may be a simple answer to all this. But the taxpayer is entitled to know, if shares are transferred from one hand to another, especially out of the Government's hand to a body like the NEB, at what price the transactions are being effected.
§ Mr. Mackenzie
I do not think that it would be proper to comment on that at this stage. It is a matter which can be raised at a later stage. I have in mind the state that the discussions have reached. In any event, I promised the hon. Gentleman earlier that I would write to him on these matters.
I wanted to discuss the guidelines because they are a matter which have concerned Opposition Members, especially the hon. Member for Chichester (Mr. Nelson). It is important to remember in this respect that the hon. Member for Arundel (Mr. Marshall) asked me a number of questions, with which I hope to deal, especially about the relationship between the Government, Parliament and so on. We also gave assurances during the passage of the Industry Bill that we did not want to shackle the NEB. In view of the importance of it, however, it is right and proper that there should be a considerable measure of public accountability.
I was asked the number of times that the Chairman of the NEB was likely to meet the Secretary of State. I can assure hon. Members that there is no lack of contact between my right hon Friend and the Chairman of the NEB. They meet from time to time to discuss matters of common interest, as one would expect.
Another matter raised in this short debate was the answering of Questions in the House, in Select Committees, and so on. These are very much matters for my right hon. Friend the Leader of the House, and he will have taken note of the remarks of hon. Members. But I can tell the hon. Member for Arundel that the statement by the Leader of the House pointed out that it was an accepted practice of the House that Ministers did not 1675 answer Questions on the day-to-day business of such bodies. My right hon. Friend said categorically that the Secretary of State would be answerable as appropriate for the activities of the NEB in its capacity as a holding company and that he would be answering in the case of any directions to the Board in accordance with his powers to grant selective assistance, for example under the Industry Act 1972. If specific difficulties arise, we can look again at this matter.
The hon. Member for Arundel also asked for a breakdown of the £15 million proposed in the Estimate. By far the biggest single item is the payment of £7 million of public dividend capital to Rolls-Royce. In addition, a £3 million loan has been made to Rolls-Royce, but since this comes from the National Loans Fund it does not count against the Estimates provision.
Other items include the purchase of shares in Brown Boveri (Kent) and the administrative expenses of the NEB Organising Committee and of the NEB itself. A small sum is also needed for a company of which the NEB is a member to oversee the export project about which we talked earlier. Finally, there is an allowance for contingencies.
The NEB will publish and present to Parliament its annual report and accounts, as required by the Industry Act.
§ Mr. Grylls rose—
§ Mr. Mackenzie
I have been very reasonable in giving way, and I now wish to continue my speech because other Members wish to take part on later debates.
The hon. Gentleman also asked me about the autonomy of NEB subsidiaries. I agree that they must have the authority to do their jobs. The House will have welcomed the clear statement in the document setting out the relationship between the NEB and Rolls-Royce (1971) that the NEB has no intention of usurping the responsibilities of the board of Rolls-Royce (1971) or of intervening in its day-to-day management. A reading of the document, copies of which we have made available to Parliament, will show that the arrangements between the NEB and Rolls-Royce provide a workmanlike relationship between the two boards.
1676 The hon. Member for Surrey, Northwest asked me about undue preferences, and he particularly mentioned Coventry Climax. The NEB guidelines make clear the Government's intention that the NEB companies should not be given an unfair competitive advantage. They also say that the NEB is to avoid undue preference in its trading relationships, but it cannot keep its hands tied behind its back. Its companies must have proper commercial freedom. I am not in a position to deal totally with Coventry Climax, but I do not think anyone would say that commercial discount should be ruled out for companies just because the NEB has a shareholding in them.
The House will have welcomed the recently-announced improvement in British Leyland results—
§ Mr. Grylls rose—
§ Mr. Mackenzie
I have not been unreasonable in giving way, and the hon. Gentleman's last intervention was very long. I have no intention of giving way again.
§ Mr. Grylls
On a point of order, Mr. Deputy Speaker. I am not a very experienced participator in Consolidated Fund Bill debates, but I believe that we are fairly early and no great pressure is building up for many other debates to follow.
§ Mr. Deputy Speaker (Mr. Bryant Godman Irvine)
That is not a point of order. The Minister has not given way.
§ Mr. Mackenzie
I have given way to the hon. Gentleman several times, and his last intervention was almost as long as his speech. Therefore, I believe that I am entitled to carry on without further interruption and answer the questions that have been put.
§ Mr. Robert Cooke (Bristol, West)
Surely the length of interventions is purely a matter for the Chair. It would not worry me if my subject did not come on for debate for a long time, if my hon. Friend wishes to intervene.
§ Mr. Deputy Speaker
I am much obliged to the hon. Gentleman, but the Minister was on his feet and will remain on his feet.
§ Mr. Deputy Speaker
The last matter that the hon. Gentleman raised was not a point of order. I am not prepared to consider alleged points of order which are not points of order.
§ Mr. Grylls
This is a fresh point of order, Mr. Deputy Speaker. The Minister referred to my point, and I wanted to make a short response.
§ Mr. Mackenzie
I thought that I had been not unreasonable in giving way. I have no intention of giving way again after the interventions we have already had. I want to answer the questions.
The hon. Member for Chichester asked me about the capital structure of the NEB. We have not yet settled it. It will need to reflect the progressive development of the NEB's activities. It will be a balance of loans and public dividend capital for Rolls-Royce, and current practice is a ratio of 70 per cent. dividend capital and about 30 per cent. loan capital.
The hon. Gentleman also raised a number of detailed financial questions about the NEB. I have not been able to take all his points on board. I shall write to him about these matters.
§ Mr. Nelson rose—
§ Mr. Mackenzie
The hon. Member for Arundel raised the whole question of relationships with Rolls-Royce and so on. The arrangements which govern the relationships between British Leyland and NEB have already been worked out. The NEB is responsible for reviewing British Leyland's annual operating plans and approving its capital investment programme. This embraces the financial performance of the company and of the separate business groups which comprise it, and also various key aspects of the company's actual performance. Naturally, the NEB will be reporting regularly to the Government on all these points.
The NEB will be receiving the long-range plans of both British Leyland and Rolls-Royce in the near future. The Board will discuss them with the company in the first instance. They will then be discussed with the Department. The NEB has made arrangements to receive information from these and its other subsidiary companies for monitor- 1678 ing purposes on a monthly basis. Matters arising from this will be discussed quarterly with the Department. This arrangement accords with good managerial practice.
§ Mr. Deputy Speaker
Order. We have had a number of points of order which are not points of order. I hope that the hon. Gentleman has in fact got a point of order—
§ Mr. Nelson
Mr. Deputy Speaker, it is your responsibility to protect the rights of Back Benchers, and we greatly respect it, on occasions during the Consolidated Fund, to raise specific points of which the Chair and the Minister have notice, and we reasonably expect some replies. May I ask your decision on whether we can continue this debate until we get some satisfactory replies from the Minister? I have not received a single answer to a question.
§ Mr. Deputy Speaker
One of the matters which are not my responsibility is the content of a Minister's speech.
§ Mr. Mackenzie
The hon. Gentleman may not like the replies, but he is getting them as I am going to give them to him. He has raised a number of points and I have replied to them, as I have replied to the points made by the hon. Member for Arundel and by the hon. Member for Surrey, North-West.
May I carry on by saying that the Government for their part will have to determine, after consultation with the Board, appropriate financial duties for the assets and activities of the NEB.
Paragraph 23 of the guidelines states:The Industry Act 1975 authorises the Secretary of State, with the approval of the Treasury, to determine different financial duties for the different assets and activities of the NEB. The Government will settle with the NEB separate objectives of its main categories of holdings, including individual objectives for the holdings in the very large companies such as Rolls-Royce or British Leyland, and will determine, in consultation with the NEB, into which category each holding will fall.The Government will set these objectives in the light of the discussions with the NEB and will take into account the Board's views of prospects of the individual companies. Parliament will be informed of these objectives.
1679 I have outlined the broad arrangements which will form the relationship between the NEB and its subsidiaries. The Government believe that they reflect the best managerial practices and that they allow for the right degree of public accountability, without the need for oppressive intervention on the part of the Government.
1680 It is not for me to ask hon. Gentlemen on the Opposition side of the House to recognise the progress which the NEB has made. It has been operational for only a very short time, some four months. I believe they should consider the achievements of the NEB on their merits. They have a right to consider this very seriously, as we all do, and to ensure the success of the NEB in the future.