HC Deb 07 February 1977 vol 925 cc1056-64
The Secretary of State for Industry (Mr. Eric G. Varley)

With permission, Mr. Speaker, I will make a statement about the Meriden Motor Cycle Co-operative.

On 10th January I told the House that, whilst the Government had turned down the application for assistance from the co-operative in the form in which it presented it shortly before Christmas, we were exploring other possibilities; and I had asked my right hon. Friends the Chancellor of the Duchy of Lancaster and the Minister of State, Department of Industry to undertake a study of the possibilities of keeping the co-operative in being.

I am now able to tell the House that, as the result of a helpful proposal from the General Electric Company, they have been able to come forward with a scheme to do just that. The co-operative will improve its cash resources through having available up to £1 million from GEC, which will take over motor cycles until they are sold and will also provide some technical assistance and some management and marketing advice. The Government welcome this company's willingness to assist the continuation of this important experiment in industrial organisation.

For their part, the Government recognise that the co-operative is handicapped by its lack of a marketing organisation under its own control. The Government have therefore decided, subject to the approval of the House and to the completion of the appropriate arrangements, to provide the co-operative with up to £½ million to purchase the marketing organisation and related assets from Norton Villiers Triumph Ltd. The price to be paid for the organisation and assets will be subject to valuation. In turn NVT is prepared in principle, and subject to the necessary legal requirements, to return the money to the Government as soon as possible as payment for the redemption of an equivalent value of its preference shares held by my Department.

The Government will also defer interest payments due from the co-operative in the period up to 31st December 1978 and subordinate this and the existing Government investment to all other creditors of the co-operative. My right hon. Friend the Secretary of State for Trade is instructing the Export Credits Guarantee Department to transfer the existing £6 million facility for Meriden motor cycles from NVT to the co-operative.

On the production side the co-operative has made a promising start, but it has not yet been able to demonstrate its ability to create the necessary conditions for long-term viability without further support from public funds. The Government believe that this valuable and interesting experiment should be given a fair opportunity to demonstrate this, and the scheme worked out by my right hon. Friends with the help of GEC should help to provide that opportunity. For its part, the co-operative has told me that the scheme will provide it with an opportunity to determine its own success and offers an adequate basis to tackle the immediate future.

I am pleased to say that Lord Stokes has agreed to act as a consultant to the co-operative on North American and other international sales.

The Industrial Development Advisory Board has considered the scheme and has advised that on balance, recognising the inherent risks, the proposals merit support provided that the Government's commitment is strictly limited. I shall bring the necessary motion under Section 8 of the Industry Act 1972 before the House for approval as soon as possible, and that will provide opportunity for detailed discussion of the scheme.

Mr. Biffen

Is the right hon. Gentleman aware that we on these Benches believe that there are circumstances in which worker co-operatives and industrial common ownership can be wholly consistent with the principles of a market economy? Therefore, does he realise that there is much fascination that Sir Arnold Weinstock, an unabashed apostle of capitalism, should be providing support for the Meriden Co-operative? Can the Secretary of State indicate what considerations led Sir Arnold to provide support which the Department of Industry was unwilling to provide in December?

What is the cost of deferring the interest payments in respect of funds loaned to the co-operative to 31st December 1978? Does the right hon. Gentleman recall that on 10th January the Opposition indicated that their reaction to the investment of further public funds would be substantially influenced by the comments of the Industrial Development Advisory Board? Will he, therefore, indicate how the Government intend to ensure that they comply with the advice of the Board that their commitment should be strictly limited? Finally, is he aware how much we will welcome an opportunity for detailed discussion of the scheme when the motion is presented to the House?

Mr. Varley

As the hon. Member acknowledges, many of his questions will be covered at greater length when we have what I hope will be an early opportunity of debating the motion. I think that the commitment by GEC arises out of the real progress that it believes that the co-operative has made, which I acknowledged on behalf of the Government in my statement on 10th January. I think that the new factor in all this is that GEC will be able to help the co-operative financially. It will be a sales partner. It is equipped to deal with the various technical and marketing problems. It is well known, of course, that NVT was anxious to break the marketing link, while the co-operative was very anxious to have it. On the specific question about the deferred interest, I can tell the hon. Gentleman that it will be deferred up to the end of 1978. That means deferring five instalments, and they would amount to £1.05 million.

Mr. Robinson

Is my right hon. Friend aware that his statement will be greeted with widespread satisfaction in most parts of the House? Is he further aware that this has been a most difficult negotiation? We express our thanks to his Department, but I am sure that my right hon. Friend will feel it appropriate to pay tribute also once again to the financial ingenunity and the intellectual brilliance of my right hon. Friend the Chancellor of the Duchy of Lancaster. Certain of these characteristics may be shared by another gentleman who is helping in this matter, unlike a certain studiously offensive Member on the Opposition Benches.

Is my right hon. Friend aware that we feel that the co-operative deserves this further support to enable it to acquire what it vitally needed—and what any business vitally needs namely, control of its own selling? Is he aware that we shall tackle the tasks ahead of us with the same vigour and determination to succeed as we tackled the negotiation we have just come through? May I finally pay tribute to the men of Meriden, who have pushed up productivity by 50 per cent. since they took over the business and who are confounding their critics by having done that and having secured other achievements?

Mr. Varley

My hon. Friend asks me to confirm that my right hon. Friend the Chancellor of the Duchy played an important part in these negotiations. I acknowledge that. On behalf of my Department I should like to thank my right hon. Friend for what he did, along with thanking my right hon. Friend the Minister of State. These have been difficult negotiations. My hon. Friend the Member for Coventry, North-West (Mr. Robinson) has also played his part in all this. We hope that as a result of these new arrangements the co-operative will be able to succeed.

My hon. Friend is right. Since the co-operative came into existance there has been great flexibility in the internal utilisation of labour. Productivity has increased by more than 50 per cent. I think that this new opportunity will give the co-operative the sort of assistance and support that perhaps some of us thought it should have had from the beginning.

Mr. Eyre

Is the right hon. Gentleman aware that any enterprise which seeks to achieve production and to win exports and profits on a competitive basis is to be welcomed, particularly in the dire state of unemployment today in the West Midlands? Does he agree that the latest development at Meriden emphasises that productive effort is dependent upon marketing, business and similar entrepreneurial skills if it is to succeed in world markets? Would it not have been better for the Minister to take adequately into account those points when they were put to him in the summer of 1975?

Mr. Varley

They were taken into account in the summer of 1975. I agree with the hon. Gentleman that the success of any enterprise depends upon marketing, design and products and upon whether those products will sell in world markets. I hope that the new arrangements that have been entered into will allow the co-operative not only to succeed but to expand.

Mrs. Wise

Were not the troubles of the motor cycle industry originally caused by capitalism, private financiers and their frequent bad management? Has not the industry been rescued by the efforts of the workers? Is my right hon. Friend aware that many hon. Members are concerned that this new agreement might put those workers back into the clutches of private capitalism, and will he confirm that that will not happen? Will he tell the GEC that it would be advisable for it to show concern for the welfare of its workers and to use some of its substantial profits for the welfare of those workers, many of whom are my constituents, as are many of the Meriden workers?

Mr. Varley

I want to make it absolutely plain that the Government welcome the involvement of GEC in the enterprise, and so do all the workers at the co-operative. They accept the problems of involvement. My hon. Friend referred to the history of the industry and said that its problems resulted from the failure of capitalism. When the Government looked at the motor cycle industry in 1975 and asked the Boston Consulting Group to look into it, the consultants confirmed that a lack of investment and the pursuit of short-term profits had helped to bring about the situation in the industry.

Mr. Hal Miller

Will the Secretary of State tell the House what conclusions were reached in the report made by my right hon. and hon. Friends about new motor cycle design by the Meriden Co-operative, in view of the age and imperfections of the Bonneville design? Cannot the Minister understand the feelings of workers at Small Heath and Wolverhampton who believed that they had a motor cycle of a superior design for which the Government were unwilling to give assistance?

Mr. Varley

The long-term success of any enterprise depends upon marketing, the product and product design. The importance of a new design for the future is very much in the mind of the co-operative, but it is for the co-operative to decide how to proceed. I am not in a position to compare the relative designs of the Bonneville and the Norton that was being manufactured in 1975 at Small Heath and Wolverhampton. It would not be appropriate for me to comment.

Mr. Pardoe

Is not the hon. Member for Oswestry (Mr. Biffen) too cynical by half? Is the Minister aware that some of us are grateful to Sir Arnold Weinstock, GEC and Lord Stokes for the help they have given? Has not Meriden been a success story so far, and does it not offer better hope for future equality between capital and labour than even the Bullock Report? Will the Minister say something more about the necessary conditions for long-term viability, because the long-term viability of Meriden and the motor cycle industry cannot depend upon the Bonneville—which is a marvellous bike—but depends upon the industry producing new bicycles? Is the Minister confident that finance will be made available to enable the co-operative to develop new bikes?

Mr. Varley

We have helped the co-operative to acquire marketing assets. The help from GEC will particularly help the co-operative in continuing in business and in manufacting the Bonneville motor cycle. I do not know to what extent the co-operative will be able to update that cycle. The hon. Member for Cornwall, North (Mr. Pardoe) is, however, right in that the long-term success of the co-operative will depend upon its bringing forward at some time proposals for the future. If the Government's advice is sought by the co-operative, we shall be prepared to give it. I can only confirm that so far the co-operative has been a success.

Mr. Speaker

Hon. Members will kindly make their questions brief and not argue the case.

Mr. Ioan Evans

Is my right hon. Friend aware that his statement will be welcomed throughout the country? Will he consider the possibility of giving the National Enterprise Board, and the Scottish and Welsh Development Agencies, power to assist workers' co-operatives? Is it not part of the Labour Party manifesto to set up a co-operative development agency, and could not such an agency have helped in this case?

Mr. Varley

The setting-up of a co-operative development agency is a matter that concerns many people. The Government have not yet been able to move forward on the lines that my hon. Friend and his colleagues in the Co-operative Party would like, largely because the proposals need further consideration, as does the matter of resources. I hope my hon. Friend will acknowledge that in the support given to the Bill of my hon. Friend the Member for Consett (Mr. Watkins) we made a step in that direction. The Government are anxious to see experiments in workers' co-operatives because, as has been said this afternoon, they are an important experiment in industrial democracy.

Mr. Tebbit

May I, as a friend of the concept of worker-owned enterprises, ask the Secretary of State whether the Lord Stokes to whom he has alluded is the same Lord Stokes who was responsible for the cobbling-up of the British Motor Corporation, which subsequently came grovelling to the Government for substantial sums of money to save it from bankruptcy?

Mr. Varley

It is that kind of question that endears the hon. Member to the House. This Lord Stokes is the same Lord Stokes who came to the Government, and as a result of that the Government were able to take British Leyland into public ownership and save not just 700 jobs—as at Meriden—but hundreds of thousands of jobs in the West Midlands. If Conservatives had been successful in their votes in the House on that matter, the unemployment position in the West Midlands would now be catastrophic.

Mr. Skinner

Is the Minister aware that during the period when the Meriden-Weinstock venture has been taking place there have been some other intriguing aspects arising in the matter? Can he shed any light on the rights issue of £163 million that GEC was recently able to obtain? Can his Department shed any light on the possibility of a connection between the proposed merger, the delay at the Drax B power station and other events in the power station construction industry? Can it be said that the Weinstock involvement in the Meriden affair was a sprat to catch a mackerel?

Mr. Varley

The shares issue and the other matters that my hon. Friend mentioned, such as the heavy electrical power industry, were not the subject of discussion during talks on the Meriden Workers' Co-operative.

Mr. Speaker

I shall call only those hon. Members who were on their feet when the last questioner was called.

Mr. Rathbone

Since the Secretary of State has paid such well-deserved praise to the need for, and effect of, marketing skills, will he now start talks with the Secretary of State for Prices and Consumer Protection in order to obtain greater relief for the cost of those skills within the Price Code?

Mr. Varley

I am not sure how that question arises out of my statement, and I fear that I might incur Mr. Speaker's wrath if I sought to answer it. When we sought to make certain changes in the Price Code, the Conservative Party, and presumably the hon. Gentleman, voted against us and prevented the changes being made.

Mr. Newens

Bearing in mind the vast amount of money which is paid to private industry, can my right hon. Friend assure us that the Government will continues to give full backing to the Meriden Co-operative and will not allow it to become dependent on private capitalism for its survival? Does not this case show the urgent need for the introduction of a co-operative development agency to provide funds not only for Meriden, but for many other such ventures?

Mr. Varley

My hon. Friend will acknowledge that it is not only a question of funds. Success also depends on having a financially secure sales partner and on marketing, organisation and the management skills involved. As I understand it, GEC will assist in all these activities with the willing co-operation of those who work at Meriden.

Mr. Grylls

Does the right hon. Gentleman recollect the Public Accounts Committee's report which said that the lessons to be learned from the original set-up were the lack of marketing and professional management? Is he satisfied that the new arrangements will fill that obvious need? Will GEC earn commission on motor cycles which it sells?

Mr. Varley

The last point is a matter for commercial discussion between the co-operative and GEC. It is commercially confidential, and I am sure that the hon. Gentleman will accept that it would be wrong for me to reveal the details. When the co-operative was originally set up, NVT had a large stake in the motor cycle industry and it was thought proper at that time that the marketing arrangements should continue through that organisation. NVT has now ceased motor cycle production and is anxious to relinquish that obligation. The Meriden Co-operative is happy to take it over with the assistance of GEC, and I hope that all goes well.