BRITISH LEYLAND (FINANCE) (Hansard, 25 July 1977)

§ The Secretary of State for Industry (Mr. Eric G. Varley)
With permission, Mr. Speaker, I should like to make a statement on finance for British Leyland.
On 26th May in my statement on the Mini replacement, I said that if progress was sufficient to justify the provision of further funds this summer, I would provide the House with a report by the National Enterprise Board on British Leyland's performance.
I have placed in the Vote Office copies of the NEB's report to me which includes figures on British Leyland's performance up to the end of June. It gives a full account of the key aspects of performance. The House will note that production has been maintained at high levels over the last three months of this period.
The report also gives NEB's considered views on progress towards achieving a radical improvement in industrial relations. It concludes that solid progress has been made, although it emphasises that much remains to be achieved. It recommends that it should be authorised to release further loan funds up to £100 million—subject to the NEB being satisfied at each stage that progress on industrial relations reform is being maintained. The Government accept the NEB's recommendation.
The Government have considered how these funds should best be channelled to British Leyland. The House will recall that, when we debated the subject of British Leyland finances on 3rd August last year, I said that there was a case for all public funds for British Leyland being provided directly by the NEB. I received a recommendation to this effect last summer from the Industrial Development Advisory Board. The Government have not taken a final view on this but have decided that, for this tranche at any rate, British Leyland's requirements should be met from NEB's funds. This arrangement will emphasise the NEB's responsibility for satisfying itself that sufficient progress on industrial relations reforms is being maintained at each stage at which the company seeks to draw on the new tranche.
49 The House will note that the NEB's report anticipates a further requirement for funds before the end of the present financial year. Tits is, of course, in line with the original expectation in the Ryder Report that a total of £200 million would be needed this year. I shall inform the House when I receive a recommendation from the NEB about the remaining part of this year's requirement. By then the NEB will have reported further to me on its review of British Leyland's forward plans and I shall keep the House informed of the outcome.

§ Sir K. Joseph
Is the Secretary of State aware that we welcome such improvement as there has been but regard the three months since the strike as a very short period on which to judge progress, and that we shall need to study the NEB report with care?
I have three questions for the right hon. Gentleman. First, now that the taxpayers' money is being spent, is he satisfied that the new Mini will be a more profitable investment than the car that it replaces and also a better investment than a new middle-range model or models? Secondly, does the Government support for the 12-months rule mean that British Leyland will be prevented from moving to a common negotiating date, as it wants?
Thirdly, is the company providing from its own earnings the 50 per cent. of the investment cost set by the Government and endorsed by the company as a condition for contributions from the taxpayer? Without such a contribution from the earnings of the company, it is very hard to justify further money from the taxpayer.

§ Mr. Varley
The Mini replacement programme and policy are the programme and policy that the British Leyland Board recommended to the NEB and that it accepted. The NEB says that it is certainly better than any other options, and it expects it to be profitable.
The question of the common negotiating date is a matter for further discussions following the arrangements that were agreed after the troubles earlier in the year with the toolmakers, and it remains the objective of the work force of British Leyland and British Leyland management.
The answer to the right hon. Gentleman's third question is that it is a condition that a major part of the investment 50 programme will have to come from British Leyland, earned from its own profitability.

§ Mr. Loyden
Is my right hon. Friend aware that the delay in bringing for-ward the long-term options for British Leyland is counter-productive to good industrial relations? Does he not agree that if good industrial relations, about which he is concerned, are a prerequisite for his being able to make a statement on the long-term review, the very industrial relations that he wants to bring about could be endangered by any further delays? I urge him, therefore, to give full consideration to this point.

§ Mr. Varley
I shall give full consideration to it. I know that delays are un-satisfactory to some people. It was the NEB's decision that it should review the situation further following the troubles earlier in the year. I am pleased that we have been able to go ahead with the first tranche of the £200 million that was envisaged when I made my statement last year.

§ Mr. Hal Miller
Will the Secretary of State assure the House that he understands the need for confidence amongst those working in British Leyland, those selling the cars and those who will buy them? Will he, therefore, tell the House whether there has been any change from the Ryder plan on which the House originally agreed to the giving of these funds, changes in particular in the organisation of British Leyland and in the financing of British Leyland, to which my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) referred? I did not find the right hon. Gentleman's answer clear on the 50 per cent. question or on the question of the model policy. Are we going ahead on the basis of the Ryder plan or are we waiting for a new plan? Will the House have a full opportunity of debating any new plan which is proposed?

§ Mr. Varley
The broad plan that was first laid before the House is still basic-ally the policy being pursued by the NEB and British Leyland. Of course, from time to time there will be modifications to it, and when those modifications are agreed suitable steps will be taken to inform the House. The question of organisation is a matter for the NEB. It has not made recommendations to me 51 about the management or anything of that kind.
I thought that I had made it clear, on the question of British Leyland's own contribution to the investment, that it is still the intention that the bulk of the investment necessary will have to come from British Leyland's own profitability.

§ Mr. Conlan
If the Government are now satisfied that there will be no further investment from them to finance this project, is my right hon. Friend satisfied that the financial resources of the NEB will be sufficient to finance it?

§ Mr. Eyre
Is the Secretary of State aware that one of the essential requirements for British Leyland is sustained successful production? Will he confirm that pay agreements to be negotiated will realistically take account of the need for differentials and incentives—differentials for those exercising skill and responsibility, and incentives by way of a shop-floor bonus for production actually achieved?

§ Mr. Varley
It is necessary that there should be sustained and continuous production by British Leyland if it is to be the success of the hon. Gentleman and, I think, the whole House want to see.
The question of pay during the period after 31st July is a matter for British Leyland in discussions with its work force. I understand that good progress has been made following the two working groups that were set up after the toolmakers' dispute. But we shall expect the NEB and British Leyland to have in mind the guidelines explained to the House on 15th July by my right hon. Friend the Chancellor of the Exchequer.

§ Mr. Richard Wainwright
Is the Secretary of State aware that the decision that the £100 million should be made available entirely from the funds of the NEB rather than any new demands upon the taxpayer will give great satisfaction in some quarters, and I hope in many quarters?
Secondly, with regard to the very important matter of the time saved for 52 future consideration by limiting this allocation to £100 million, can the Secretary of State confirm that the NEB is entirely free to explore alternative courses to the detailed Ryder plan—for instance, massive development of specialist vehicle manufacture rather than re-equipping to try to keep up with other powers on volume car manufacture by all sectors?

§ Mr. Varley
The NEB, as the agency monitoring the performance of British Leyland, has the responsibility and freedom to explore all kinds of alternatives open to that company. No doubt it will do that.
As to the question of providing all the funds on this occasion from the NEB, I know that, in addition to the Industrial Development Advisory Board, which so advised the Government, the hon. Gentleman has on many occasions expressed the view that that would be the best way to go about it.

Several Hon. Members
rose—

§ Mr. Speaker
I propose to call the four Opposition hon. Members and the two Government hon. Members who are standing. I hope that they will be as brief as they can be.

§ Mr. Skinner
Does not my right hon. Friend agree that it would be much better if the car workers were treated as, say, workers in other nationalised industries, such as the miners, ensuring that they have sufficient money over an extended period and not on a short lease, as suggested in this case?
Will my right hon. Friend confirm that it is cosing the Government, and thereby the taxpayers, £10 million a day in grants of one kind or another and tax relief to prop up private industry? Will he see that he does not fall victim to the Tory propaganda from the Opposition Benches and the Tory Press moguls earning £50,000 a year, who suggest that people who are working from nine to five and beyond are not pulling their weight, especially as the Tory Chief Whip talks about its being time they did some work, when he is trying for the whole of every week to get a few Tory hon. Members in the House for a few hours to vote?

§ Mr. Varley
The method of financing British Leyland has been recommended by the National Enterprise Board. It 53 wants to see progress on performance, an improvement in industrial relations and the development of the plan. Opinions on all these things have been expressed in this House on many occasions. I am not saying anything new.
When the Government originally decided that it was in the interests of the country to acquire 95 per cent. of the equity of British Leyland, the then Prime Minister made it plain in April 1975 that funds would be made available on the basis of improvement along these lines. I do not think that my hon. Friend, or any hon. Members, need complain about the support that the Government have given to British Leyland—£246 million to acquire the equity of British Leyland, and £100 million on this occasion and a previous occasion, plus the fact that we have given the go-ahead to the Mini programme.

§ Mr. Emery
Will the Secretary of State tell the House how this £100 million is to be staged and supervised by the NEB? In how many stages will payment be made? Obviously with Lord Ryder leaving the NEB, there is a major void in the continuation of the programme. When will Lord Ryder's successor in British Leyland be known to the public?
On 26th May I asked the Secretary of State whether he would pay particular attention to the profit-making and overfull order books of the successful lines of British Leyland and press for these to be maximised. I found his answer unsatisfactory on that occasion. Is he taking any action on this matter?

§ Mr. Varley
The hon. Member has referred to the more profitable enterprises of British Leyand. It is the view of both the company and the NEB that everything should be done to make these enterprises more profitable—the bus and truck, and special products divisions. I hope that this is the case and that further progress will be made.
I have made a statement that Lord Ryder's successor will be Mr. Leslie Murphy, who will take over on 1st August. At present he is the Deputy Chairman of the NEB, and he has already been very closely associated with the British Leyland programme.

§ Mr. George Rodgers
This statement is obviously very welcome. Does my right 54 hon. Friend think that sufficient tribute has been paid to the trade unions and the work force generally for the areas of co-operation that have been achieved and the changes that have taken place in the working and practices of the company? Will he agree that there is a distinct danger that if the Government play this card too often—dangling funds in front of the work force but suggesting that these will not be paid unless certain severe conditions are met—this will prove counter-productive? Will he make a statement on the release of funds to the bus and truck division in Lancashire for the provision of a foundry that was intended in the original programme?

§ Mr. Varley
A statement was made last week about the foundry and the bus and truck operation in my hon. Friend's constituency. I shall see whether any further information can be made available to him.
On the question of the way in which the funds are allocated to British Leyland, I think I made the position very clear in the answer that I gave to my hon. Friend the Member for Bolsover (Mr. Skinner). It was decided two years ago that the money should be made available in this way. No amount of public money in itself can secure the future and success of British Leyland. It depends on the overall operation and whether production is sustained. I agree that progress over the last few months has been very encouraging and I want to see that progress continued, not just for three months but over the whole period of British Leyland's operations.
I am sorry but I did not answer the first part of the question put by the hon. Member for Honiton (Mr. Emery). He asked about the £100 million and whether it would be paid in stages. What I have done today is to authorise the payment of £100 million. It is for the NEB to decide how this money goes into British Leyland. I understand that the Board will make funds available as necessary. Any sum over £25 million must have my approval.

§ Mr. Ian Lloyd
Is the Secretary of State aware that a leading designer in the motor vehicle industry who saw a film on computer numerically controlled machine tools that was shown to the 55 Select Committee on Science and Technology said that it would be seditious to show such a film to British Leyland? In the light of that, can he confirm or deny the allegation that because of the unions' unwillingness to accept modern tooling, British Leyland is being saddled with a design of engine which is 20 years out of date?

§ Mr. Varley
I do not know of this incident and if the hon. Member could let me have details I shall look into it. British Leyland needs the £100 million, as I understand it, for modern equipment and investment so that its engines will be just as good as those of any others of the volume car producers.

§ Mr. Alan Clark
Is the Secretary of State aware that the majority of British Leyland workers are engaged not in making the Mini or its replacement but in making obsolete models in the middle range, for which no design is on the books and no significant funds have been allocated for development? Is he not leaving it rather late to explain this predicament to the House and to seek a further enormous tranche of taxpayers' money to cover such a problem?

§ Mr. Varley
Resources are being made available to British Leyland in accordance with its developments and the advice received from the NEB. I do not accept that British Leyland's models are obsolete. What we are talking about is a company which did achieve profitability 56 but which can do better—[Interruption.]. If the hon. Member is not interested in the question, I shall not reply.

§ Mr. Michael Marshall
Will the right hon. Gentleman confirm that this is taxpayers' money, whether it is money from the Government or from the NEB? Does the Secretary of State realise that he cannot divorce the future of British Leyland from the Government's commitment to Chrysler? When will he come to the House with a statement on Chrysler, and when will he go in to bat again for his muddle-headed colleagues in the Cabinet and get them off the hook for subsidising both sides of a competitive industry?

§ Mr. Varley
The question of Chrysler does not arise out of this statement.