§ 7.23 p.m.
§ Mr. James Boyden (Bishop Auckland)
I beg to move,That this House takes note of the Eighth Report from the Expenditure Committee Session 1975–76 (House of Commons Paper No. 596) on Public Expenditure on Chrysler UK Limited, and of the relevant Government observations (Command Paper No. 6745).This report is the result of six months of very intensive work by the Trade and Industry Sub-Committee of the Expenditure Committee. It worked extremely hard. It held more than 50 sittings, examined 150 witnesses and received more than 100 memoranda. There was a special feature about the way it operated. It took a great deal of its evidence on site. It visited all the Chrysler United Kingdom Limited manufacturing operations in Great Britain. It talked to the workpeople and to the management. It toured the factories and it took formal evidence ft om witnesses against their own surroundings—the factory, the company office and the works canteen.
My experience of the Defence Sub-Committee has shown me that witnesses are often a good deal more forthcoming when they are examined in their home territory. The Defence Sub-Committee has found this to be so particularly in relation to Service chiefs who have been examined, for example, in Germany or Hong Kong. The Trade and Industry Sub-Committee has now discovered that this is a very effective way of getting the best evidence.
There is, however, one small technical hitch. It did not apply in this case but it should be mentioned. This is the archaic custom of the House which enables the Shorthand Writer to the House to control how shorthand writers are deployed overseas. I have given evidence on this to one of the Houses's Committees and I hope that before very long what I suggested to it will be seriously considered by it and adopted by the House. It is an archaic custom, smacking a little of the eighteenth century, and to some extent it impedes the taking of evidence overseas. However, that did not apply to the Trade and Industry Sub-Committee's work for this report. I merely thought 119 that it would be useful to put the point on record at this stage.
The Trade and Industry Sub-Committee's inquiry was also somewhat unusual in the sense that, instead of taking a fairly broad subject, as many Sub-Committees do, it made a detailed and intensive study of one particular case. This exposed the members of the Sub-Committee to particular burdens—for example, of travel and very heavy sessions. They were extremely well served by the specialised advisers they co-opted.
§ Mr. Boyden
I am glad of the hon. Gentleman's endorsement. Those advisers included economists, accountants and management consultants, and this has become a very good feature of Sub-Committee work. Nearly every Sub-Committee these days has one or more expert advisers, and one of the striking things is that the leading experts in the land are prepared to act as special advisers to our Sub-Committees in the different subjects, taking very modest pay and suffering considerable personal inconvenience. This is a suitable occasion for me to pay tribute to the whole range of specialist advisers who have helped us over the last year or two.
From our point of view the system is both economical and flexible, and no one can say that the Expenditure Committee is extravagant with public funds when making its studies and reports. There is certainly no feeling that we should try to imitate the Congressional style of having elaborate staffs and perhaps producing what is, I should think, a somewhat conservative impasse from time to time simply because the staffs are there and have to be employed. At the moment, many of our Sub-Committees are making excellent investigations with extra assistance to our own very good staff. I must emphasise that I am not making any criticism of our Clerks in the House, who service our Committees on the procedural side and are devoted. The combination of permanent staff and temporary advisers has been most effective.
This inquiry needs to be considered against the background of previous in- 120 quiries by the Sub-Committee. The Expenditure Committee for some time has had an interest in the spending of public money in the private sector and has looked at a number of matters there. The major inquiry which, in a sense, led to this one was into the motor industry as a whole. The Sub-Committee began it in 1975. Its main interest then was British Leyland. The Sub-Committee was particularly worried about some of the procedures that the Department of Industry had followed and was critical of some of the ways in which the money in relation to British Leyland was spent. It turned with a certain sense of anticipation to the investigation of the Chrysler financial transactions, rather in the hope that the Secretary of State had taken some notice of its previous investigations and recommendations. The Secretary of State, of course, will answer for himself, but the Committee is inclined to think that the Department has taken notice of the British Leyland recommendations and investigation. The Committee is much more pleased with several things about the right hon. Gentleman's reception of this report and his reaction to it.
The Committee thinks that there has been much greater cost-effectiveness in relation to the Chrysler subsidies. It makes a marked distinction between the slight and rather dismissive reply which the Government made to the report on the motor vehicle industry as a whole and the careful and detailed reply to this report. That is one of the bases on which the Committee thinks that the Government have taken notice.
However, on behalf of the Expenditure Committee as a whole, I must say that it is not good enough to take eight months to make a reply. The only crumb of consolation is that, when it was announced that this debate would be held today, the Department hurried up and has produced the White Paper which we have before us rather more quickly than it would otherwise have done. That, however, is a small thing compared with the eight months' delay.
I make this general statement. We have just been debating a report on which the Department of the Environment made its answer in three months. I do not suppose that that led members of the Committee to throw their hats in the air, but three months is much better 121 than the time that many other Government Departments take in making their replies.
§ Mr. Maxwell-Hyslop
Before the hon. Gentleman leaves that point, I think we should notice that the eight months that it took to produce the Government's response to the motor vehicle industry worse than the much-criticised time of five months taken to produce the response to the motor vehicle indsutry inquiry. So response time seems to be lengthening rather than, as we might have hoped, shortening.
§ Mr. Boyden
I am grateful. As a general comment, if the Department is having some difficulty in covering the whole of a Committee's report, it would be more courteous and helpful if the Department issued an interim reply, producing the full reply later. In any case, eight months was far too long for producing a main reply.
I pay tribute to the Chairmen of the Committee, originally my hon. Friend the Member for Sheffield Attercliffe (Mr. Duffy). Until his ministerial appointment, he was Chairman of the Trade and Industry Sub-Committee when it was inquiring into the motor industry and British Leyland, and he chaired half the inquiry which we are now discussing. He was an ebullient Chairman who worked his Committee very hard, but I am delighted to say that its members responded very well to his drive and hard work and that they have done a substantial job over the last two years or so.
My hon. Friend the Member for Goole (Dr. Marshall), who I hope will catch your eye later, Mr. Deputy Speaker, then took on the chairmanship of the Committeee and also followed with very hard work and penetrating analysis all the material which came before it.
Perhaps I might repeat in the presence of many of the Trade and Industry Sub-Committee something that I said in the last debate. One of my objectives as Chairman of the Expenditure Committee has been to develop good relations between the Sub-Committees and the Secretaries of State with whom they deal. At the end of the day, if a Secretary of State is not satisfied that the Committee is doing good work, or if he refuses to give evidence, or gives very limited evidence, there is little that the Committee 122 can do. We can have a row in the House, but at the end of that the Whips usually deal with the situation or the row runs into the sand.
It is not the intention to make the Committees lackeys of the Departments. No one who has read the last few reports could think that that has been so. But is it very important that a Committee should have the confidence of the Secretary of State and his senior officials, and vice versa. Although there has been some acrimony over British Leyland and Chrysler UK, I think that at the end of the day much better relations have been established. I think that the Committee has helped to push forward the proper expending of public money, and I thank its members for what they have done. I hope that the Secretary of State will feel inclined to say the same.
§ The Secretary of State for Industry (Mr. Eric G. Varley)
§ Mr. Boyden
I see that my right hon. Friend agrees.
This is unrewarding work in many aspects. Few of our constituents, I should think, care a damn whether we are on the Expenditure Committee. There is little publicity in the sense that many hon. Members want it, and it is hard work. At the minimum hon. Members meet once a week, and they are then called to meetings of the main Expenditure Committee to consider the reports of other Sub-Committees. I am grateful that there are in the House not quite 49—there are one or two backsliders—but a couple of score of hon. Members who give their attention, their brains and their energies to these matters and who forward the cause of good government in the process.
§ 7.36 p.m.
§ The Secretary of State for Industry (Mr. Eric G. Varley)
I hope that it will be convenient if I indicate at this point the Government's view on the Eighth Report of the Expenditure Committee. My right hon. Friend the Minister of State will wind up the debate if there is time. We do not have much time, so I shall try to keep my remarks to the minimum.
I agree with my hon. Friend the Member for Bishop Auckland (Mr. Boyden) that the Committee worked extremely hard and did a thorough investigation. 123 We found it helpful and useful, although the House will not expect me to agree with every criticism that the Sub-Committee has made.
I take full personal responsibility for the delay in replying. Detailed work went into responding to the Committee's criticisms, conclusions and recommendations. I am glad that my hon. Friend was able to welcome our response. I shall look into the possibility, in future, if it is practicable of my Department issuing an interim reply. I certainly intend to establish good relationships with the Select Committees that call the Department of Industry to give evidence.
I am certainly glad that the Sub-Committee did not dissent from the decision which the Government had to take in December 1975. The report and our reply deal with past decisions. Although I shall say something about the past in a moment, I should like to say a little about how important it is to consider what has been achieved since January 1976 and what the prospects are for the future.
It is now 15 months since the House gave its assent to the Government's plans for assistance to Chrysler United Kingdom. The company undertook an unprecedented reorganisation; substantial changes were made and they were accomplished rapidly. The management and work force developed a detailed and invaluable dialogue about future plans and proposals; this has provided the material for the planning agreement between my Department and Chrysler which was signed last Wednesday.
While all this was going on my Department developed a working relationship with Chrysler, which is giving a real and effective insight into the company's operations. I myself have met the management of Chrysler United Kingdom frequently to review progress and I keep in touch with the Chairman of Chrysler Corporation, Mr. Riccardo. There can be few companies in which the Government, management and workers are so well informed about what is going on or are so closely in accord about what must be achieved. Eighteen months ago the future of Chrysler United Kingdom was very uncertain, and the livelihood of many thousands of workers was in jeopardy. In many ways the progress since then has been considerable.
124 A great deal still remains to be done, and neither the Government nor the company are complacent, but a great deal has been done to build a solid and reliable foundation on which the restructuring of Chrysler's British operations can move forward. The new production line to produce Alpines at Ryton for the domestic market was installed in record time. It came on stream on schedule, and the cars have been well received in the market. They are rapidly establishing a high reputation for quality. A new foundry has been installed at the Stoke engineering plant, which makes all the power trains for United Kingdom produced cars, including now the Alpine, as well as other components, including some for French production. A major face-lift has been carried out on the Avenger and production transferred to Linwood. A new car has been designed, and production will commence at Linwood in the summer for introduction later in the year. Arrrangements have been made to increase the supply of kits to Iran and the integration of the United Kingdom operation into Chrysler Europe has proceeded.
These are solid achievements. No less important, however, is the improved industrial relations climate, even taking account of current problems. In 1976, Chrysler lost 80 per cent. less working hours through industrial disputes than in the previous year, despite the upheaval of physical reorganisation. These encouraging improvements stem from the company's realistic approach to communications and a genuine and sustained effort to inform the workforce and to take its views into account.
The present problems at Linwood are a set-back. It is essential that the dispute should be solved very quickly, because Chrysler has the market demand for its products and success depends on satisfying the customers.
The House has been concerned about Chrysler's financial progress. The House will recall that the maximum potential commitment to the company was £162½ million by way of loss subvention, loans and guarantees, but already it is clear that the Government's actual expenditure will be substantially less. Of the total sum, up to £50 million was available to cover 1976. Subject to final audited accounts, just over £41 million will be 125 required. That is more than the estimate of £40 million made at the beginning of last year, but, if we take into account the effects of the depreciation of sterling and other factors which could not have been anticipated in January 1976, we see that financial performance has been in line with the expectations of the turn of the year 1975–76.
I must say that the failure to achieve production targets on the Avenger at Linwood and to a lesser extent the Alpine at Ryton have contributed to the losses. A lack of cars to sell has affected penetration of the United Kingdom and export markets. Even so, Chrysler sold more cars in Britain last year than the forecast in the Government plan. But, against that, more of these cars came from France than was planned. Export figures were much more disappointing, largely as a result of delays in re-introducing the Avenger in Europe. Commercial vehicles performance was not in line with expectations. This was due partly to the demand situation and partly to the loss of confidence at the time of the difficulties. All this has obviously influenced the financial position.
Comments have been made about the profits for 1976 announced by the Chrysler Corporation a few weeks ago. But I find that the attacks on the Government make a change from the suggestions made in January last year that we had taken a lame duck as a partner. I remember being cross-questioned very closely on this point when I went to the Sub-Committee. We believed at the time we came to the arrangement with the company that it would be able to meet its obligations. The recent figures serve to confirm that we have a viable partner, willing and able to play its part in turning Chrysler United Kingdom round.
§ Mr. David Madel (Bedfordshire, South)
The Secretary of State mentioned that what had been expected of the commercial vehicle side had not quite been reached. Can he say anything about possible Post Office orders for Chrysler commercial vehicles?
§ Mr. Varley
I have the commercial vehicle figures somewhere in my notes. There has been a substantial order for the Dodge van manufactured in the United Kingdom. Perhaps I may say more about that a little later.
126 I was making the point that the Chrysler Corporation has sold more cars than it expected within the terms of the 1976 agreement with the Government, but has not sold quite as many commercial vehicles as expected, because of the matter of confidence and other factors which are well known to hon. Members and which were examined by the Committee.
§ Mr. Kenneth Clarke (Rushcliffe)
Does the Secretary of State agree that the reason for the Government's having to step in with the necessary finance last year was that the Chrysler Corporation's financial position was such that it could no longer be the main provider of money to Chrysler United Kingdom? Now that the Corporation is making record profits, is there any reason for the Government to continue to be in a position where they will underwrite with taxpayers' money losses which may be made by Chrysler United Kingdom over the next two or three years?
§ Mr. Varley
We hoped and expected the Chrysler Corporation to recover when in 1975–76 we made a deal with the corporation, details of which were laid before the House. We must stand by that deal, and we do. We do not envisage that the agreement will be renegotiated by either side. A substantial subvention has been paid for 1976, but we hope that the agreement to share losses in 1977 and 1978 will not have to be put into effect—it may, but we shall not know until later in the year. We hope that Chrysler United Kingdom will start to make profits this year, but we shall have to see how matters develop over the year. But I do not envisage that the Government will change their plans. As a result of the Chrysler Corporation's activities and the turn-round of its fortunes—
§ Mr. Varley
I had better continue, because I can now give some precise information to the hon. Member for Bedfordshire, South (Mr. Madel), who asked about commercial vehicles. The Post Office has ordered 1,600 vehicles from Chrysler, at a cost of £2¾ million. If the hon. Gentleman would like more information, I shall see whether I can obtain it for him if he drops me a note.
127 We see a profitable Chrysler Corporation giving strength to its counter-guarantee to our underwriting of the £35 million loan provided by a consortium of clearing banks and to our guaranteed loan of £28 million. More especially, the strength of the Chrysler Corporation will enable it to give greater support in the long term to the foundation on which we are helping to build. We are trying to secure this and to make a sound arrangement for Chrysler United Kingdom.
I am sure that most hon. Members will agree, as I think the Trade and Industry Sub-Committee agreed, that the success of Chrysler in Britain depends upon successful integration with the company's European operations.
Over the past months real progress has been made in this direction, both organisationally and in products. The new small car from Linwood, the 424, will be in the showrooms of Europe later this year. This will mark an important step in this integration, and the Europeanisation of the commercial vehicle range is well under way as well. This integration would not have made sense if Chrysler Corporation had not demonstrated that it was a viable and prosperous partner.
A feature of European integration is, of course, cross-sourcing of parts. The Sub-Committee examined this carefully in connection with plans for the Alpine. Good progress has been made towards the target of 57 per cent. United Kingdom sourcing for this car. Final decisions on the possibility of complete United Kingdom production will be taken towards the end of the year. If this course is taken it will clearly make a worthwhile balance of payments contribution. In my view it would not go against the principle of integration, taking into account the likelihood of sourcing components for French Alpines from this country.
The success of Chrysler United Kingdom in getting a proper share of the overall European market will, of course, depend upon its ability to meet demand. This cannot be achieved without continuity of production. Much of the work of the last 15 months could be wasted if targets are not achieved, productivity is not improved and dealers need to look elsewhere for products to sell. This is not 128 just a matter of avoiding disputes or strikes and stoppages; it involves consistent performance and good management as well.
Integration is not simply a question of organisation and finished products. Components have an important rÔle and the sourcing of Alpine parts in Britain provides opportunities for supplying the same parts to France. As I have said, this is already happening with components from Stoke and I am sure that the component industry will not be slow to recognise its opportunities.
Another helpful development has been the special effort which Chrysler has made to draw the attention of United Kingdom component suppliers to opportunities which exist in the Corporation world-wide. This is further potential benefit stemming from the closer integration of Chrysler United Kingdom in Europe and within the corporation as a whole. That is the situation of car production.
I would say a few more words about the commercial vehicle situation. As I have pointed out, this is less satisfactory. Confidence in Chrysler as a supplier was badly eroded in 1975 and restoring it is proving more difficult than was expected at the time of the Government agreement with Chrysler. But the re-organisation of the commercial vehicle operation and the model programme has gone ahead according to plan and United Kingdom built vehicles will form an essential part of the company's European range.
The Chrysler management has demonstrated to me that it is tackling the problems here as urgently and energetically as it can. In this sector demand is the problem. With cars we can sell more than there are available, so we have a different problem altogether.
§ Mr. Madel
I am sorry to interrupt a second time. Will the Secretary of State remember that much depends on the uninterrupted supply of components into Dunstable not only from Chrysler but from others, such as Rubery Owen? Will the right hon. Gentleman bear in mind how vital it is to have peaceful industrial relations among the component suppliers?
§ Mr. Varley
I do not disagree with that at all. Interruption in supplies badly 129 affects not only Chrysler but other major car manufacturers. I hope that the situation with regard to some supplying companies can improve. But the components industry, as hon. Members recognise, has a very good record not only with regard to supplying the home market but also supplying export needs.
The key to the success of the rescue lies in meeting production targets and satisfying dealers and customers at home and abroad that their requirements will be met on time with reliable vehicles. I am encouraged to learn that Chrysler has got this arrangement with the Post Office. I had better make this correction straight away. I said earlier that Chrysler had secured orders from the Post Office to supply 1,600 vehicles. It is slightly smaller than that—1,300 British-made Dodge vans—but the value of £2¾ million is the same.
The capital investment programme agreed under the Government plan has gone ahead well. The House will appreciate that it is not possible for me to reveal commercially confidential information. But I can say that the long range plans up to and beyond 1979 envisage the possibility of even greater investment in Britain than was forecast in January 1976. These plans will depend upon performance, and they will not involve any additional demands on the taxpayer. All this will of course mean more jobs in the future.
At present about 19,000 people work for Chrysler with a further 1,500 to come in Linwood from April when a second shift is introduced. This is especially welcome in West Central Scotland and provides the creation of new opportunities there. Apart from capital investment and management, the wholehearted co-operation of the work-force is obviously essential to good results. The discussions leading up to the planning agreement are a significant step towards creating a better understanding.
Workers representatives in Chrysler know in detail what the plans, constraints and targets are. They have been told that again and again within the planning agreement discussions and the joint consultative procedures that exist in the company. Their representatives have stated in public that suspicions have been allayed and the basis for future relation- 130 ships established. When I say "their representatives" I mean the trade unions' representatives. Chrysler's efforts, and those of its workers representatives, are to be commended.
It goes without saying that a well-informed work force is seen by everyone in Chrysler as a prerequisite to success. The progress so far achieved by Chrysler since January 1976 has been real and encouraging. The company now has good new or updated products on sale or on the stocks and markets that want these products. The first objective of our assistance has been achieved. There is still a long way to go. Losses of production for any reason could undermine the prospects of long-term success and the situation can rapidly change if there is a loss of production for a sustained period. The Government have established machinery which ensures that we are fully informed of progress and difficulties. Our understanding with the company's management and workers' representatives enables free discussion in an atmosphere of what I believe to be trust.
§ Mr. Grylls
Will the Secretary of State try to answer the question of my hon. Friend the Member for Rushcliffe (Mr. Clarke) about the losses of £40 million under-written by the Government for 1976? Does not the right hon. Gentleman now recognise with the benefit of hindsight that he was taken for a ride by Mr. Riccardo? It would have been much better to have written into the agreement a clause saying that in the event of the Chrysler Corporation making a huge profit—it did, of £251 million—we the British taxpayers would not have under-written the losses? Surely, with the benefit of hindsight that would have been sensible.
§ Mr. Varley
I am afraid that I do not agree with the hon. Gentleman. I do not agree with any hon. Members on either side of the House who say that. Clearly they have not read the report of the Select Committee which said:… the fact that Chrysler Corporation were fully prepared to withdraw—and indeed, as the Secretary of State for Industry told us, it became clear during the negotiations that withdrawal was the course of action Mr. Riccardo had actually recommended to his Board—meant that the pistol was certainly loaded.131 Those are not my words, but the words of the Select Committee chaired by my hon. Friend the Member for Goole (Dr. Marshall) and on which there were distinguished Opposition Members.
§ Sir Keith Joseph (Leeds, North-East)
I hope that before the right hon. Gentleman sits down he will give some attention to the formidable criticism of the Committee and refer at least to the conclusion of the advisers to his Department that Chrysler United Kingdom would not be viable—a conclusion which the Sub-Committee of the Expenditure Committee adopted as its own. Surely in a debate on the Expenditure Committee's report and the Government's answers to it the right hon. Gentleman will refer to these basic isues between the Government and the Committee.
§ Mr. Varley
I have referred to that. I said at the beginning that I was glad that the Sub-Committee did not dissent from decisions that the Government had had to take in December 1975. I could have quoted chapter and verse for the Expenditure Committee's conclusions and our response to them and how they coincided with our views and the views that we took at the time.
The right hon. Gentleman said that the Committee made serious criticisms and reached different conclusions. I want to conclude my speech so that others can take part in the debate, but I want first to quote from paragraph 276 of the Expenditure Committee's report. The Committee said:On the basis of Chrysler United Kingdom's progress so far, and of our examination in Chapter VIII of the prospects for success, we regard the Secretary of State's views of the company as being substantially justified.The Committee said in paragraph 295:It could be argued that the Government concluded the right agreement for the wrong reasons.I accept that that is what the Committee said, but it also said that, given the facts at the time, there was no alternative but to go ahead with the agreement that we made. We could go over the ground in great detail, but I do not think that that would necessarily advance the case for taking the action that we did.
Last year, when I recommended our proposal to the House, and which it 132 accepted by a fairly large majority, I was cautiously optimistic. I am glad to see that the Committee found that view justified. I am not pretending that Chrysler United Kingdom is out of the wood. It depends on getting continuity of production to satisfy the markets and making sure that it gets its operations fully integrated with Europe. That, really, is the key to the matter.
The House backed the Government's decision in January 1976. Substantially, the Committee has examined the situation and come to the conclusion that the Government had to reach the agreement that they did. When I made that recommendation, I was cautiously optimistic about Chrysler's future. I concede that by no means could we say that the operation has been an entire success—for all the factors that I have given—but I remain cautiously optimistic. I hope that Chrysler United Kingdom will succeed for all those who work in the company, and I hope that that view is shared by the House.
§ 8.4 p.m.
§ Mr. Robin Maxwell-Hyslop (Tiverton)
I think that the major function of this sort of Expenditure Committee debate is not to argue whether a decision which is irrevocable should or should not have been taken, but to see what lessons ought to be learned, and whether those lessons should have been learned earlier.
It is in that context that I start by expressing great disappointment that after the considerable criticism to which the Department of Industry was, in my view quite rightly, subjected for taking five months before it produced a truly pathetic response to the Committee's report on the motor vehicle industry, it has now taken eight months to produce its present response, and it did that only when the threat of a summons to bring the Permanent Secretary before the Committee to explain the Department's dilatoriness was in the offing, not to mention the debate that was coming on in the House.
It is in that context that the reality of parliamentary discussion becomes relevant. The House will remember that the day before the climactic Chryslerevents on the Floor of the House the Government, who had long promised the House the CPRS report and had it ready so that it could have been produced, said, under pressure, that they would place one 133 copy in the Library in the next day, four and a half hours before the debate was due to begin. It was only when the Speaker was asked to arrange for the Librarian of the House to produce several hundred copies of the report so that Members could see it before the debate that, with ill grace, the Government agreed to release the CPRS report. Even so, as the report ran into more than 140 pages it was not possible for the House to digest it properly before the Secretary of State asked the House for its considered opinion.
One can only come to the conclusion that the Government intended deliberately to deprive the House of the information, and the comment that appears on that subject in the Government's response is almost insolent. It is that the House was very lucky to get it at all and should be grateful, not that it should be critical of the Government's deliberately withholding information that it needed to do its duty to the country and to itself. I hope that we shall not again have a similar paragraph in a Government response to an utterly justified criticism in that context.
Another lesson that we should learn is about the relevance of forecasting, because one of the matters that the House had to consider in that climactic December was whether the Chrysler operation would jeopardise the British Leyland operation. It will be remembered that the CPRS report, which the House had so little opportunity of studying, had identified the great problem of over-capacity, particularly in the volume car section of British output.
It was in that context that the Secretary of State told the House on 15th December that if the Chrysler rescue operation went through Chrysler car production capacity would be reduced by 25 per cent. What the Select Committee found was that, far from capacity being reduced by 25 per cent., it has been increased by nearly 15 per cent. This is relevant because the fear that the Committee had that we might be robbing Peter to pay Paul is manifestly true in the case of British Leyland.
It is undoubtedly the case that the reason for British Leyland's pathetic sales is industrial troubles. It is not able to produce the cars for which there is a 134 willing market. Nevertheless, it is a serious matter when a Secretary of State, having deliberately deprived the House of information until the very last moment, gives information that is not just misleading in quantum, but is totally in the wrong direction—a reduction of 25 per cent., instead of an increase of about 15 per cent. That was specifically misleading to the House, and it is at least possible that some hon. Members might have taken a different view of the right hon. Gentleman's proposals had they known that the Chrysler rescue would produce an increase of 15 per cent. in its car-making capacity.
The Government's response is a considerably weightier one than the triviality which greeted the report on the motor vehicle industry, and I should like to acknowledge that progress. However, what a pity it is that paragraph 31 of the Government's response indicates that the most important matter of all—the financial consequences of the agreement—either is not understood by the Government or the Government are incapable of reading three paragraphs of the Select Committee's report. There is no other alternative, because it is said in paragraph 31 of the Government's response:In contrast the cost to Government is said to be £72.5 million, but this assumes that CUK make losses in 1977–79 to the full extent covered by the Agreement and losses in 1976 reaching £60 million.That is not what the Select Committee said in its report, which is why I say that it is a pity that the Government either do not understand the financial consequences or are incapable of reading the three paragraphs on the subject—188, 189 and 190—in the Select Committee's report, because the Select Committee said in paragraph 189:If CUK shows the small profits forecast in 1977–79, and if losses in 1976 do not exceed £40 million, then the reorganisation of CUK will effectively have been achieved at an expense to the company of only £10–£12 million (for the Alpine)".That is a true statement of fact; it is absolutely undeniable. We now know that the losses have exceeded £40 million, so the 50 per cent. share comes in on top of the £40 million.
If we take this in conjunction with the failure of the Government—which is acknowledged in their response—and of Chrysler to cost the effect of a fall in the 135 sterling exchange rate on the profitability of importing cars and a large proportion of the components from France, it will be seen that the taxpayer is providing a disincentive to Chrysler to enter stages 6 and 7 of the Alpine C6 programme which would be totally sourced from Britain.
It would appear from Chrysler's interim statement that the company attributes part of its losses to the falling exchange rate causing greater expenses than it expected on importing a large proportion of the Chrysler C6 from France. However, under the loss-splitting arrangement for the £20 million above the initial £40 million loss, the whole of which is funded by the British taxpayer, if there is an extra loss above that £40 million the taxpayer pays half of it. We do not know the figure—we have no means of knowing it—but it may well be that if Chrysler had been able to source the whole of the C6 Alpine in the United Kingdom there would not have been the extra £2.8 million loss, of which the British taxpayer will have to pay £1.4 million.
To continue with the Government's failure to understand the financial consequences, the Select Committee went on to say in paragraph 189:However, unless Chrysler Corporation defaults on its £63 million liability, HMG's total financial commitment is the loss funding of £72.5 million. CUK assets secure the remaining £27 million".The Government comment that that is misleading. They say in paragraph 31 of their response:On the former assumptions about profitability the cost to Government would be £40 million in 1976–79 not £72.5 million".The Committee never said that it would be £72.5 million. The paragraph continues:on the other basis CC's costs would be £42.5—£44.5 million, not £10—£12 million".The Committee never said that they would not be. The Government add:Furthermore CC bear responsibility for all losses in excess of those specified in the Agreement".Indeed, the corporation does, and the Select Committee's report said nothing to the contrary. This is what makes me suppose that whoever drafted this unhappy, would-be riposte either did not under- 136 stand the Government's contract, or had not read the Select Committee's report.
I conclude by referring to the comments in paragraph 296 at the end of the Select Committee's report because, as I have said, it is important to learn the right lessons—that is what an Expenditure Committee should be about. The Select Committee stated:However, by no stretch of the imagination can the events leading up to the agreement with Chrysler be said to form a glorious chapter in the history of the Government's industrial policy. There are three main elements involved in avoiding a repetition of these events: the use of sound and precise criteria (including the quantification of social factors—which is an element lacking in the present criteria) before decisions are taken; the anticipation by Government of the imminence of an application for assistance, with its corollary that all the relevant information to enable a rational decision to be taken should be available in good time; and the timely provision of such information so that Parliament can exercise proper judgment on the basis of known facts".What militates against those three recommendations? First, a ludicrously slow response by the Government to Select Committee reports militates against them. If the Department were incapable of producing its response for eight months, surely it must have been because it had not studied the report adequately. Otherwise we must assume that it was capable of replying to it or of issuing its response, but merely unwilling to do so.
Secondly, on the question of anticipation, the Select Committee's last report on the motor vehicle industry should have put the Department on notice that Chrysler was in danger. Despite the Department's protestations, it is amply clear that the Department did not read the danger signals in time. Moreover, to conduct an exercise of that kind when the exchange rate was already falling rapidly should have alerted the Government to extrapolating movements of the exchange rates both ways and ascertaining what the effect was likely to be on Chrysler's fortunes, as the taxpayer was underwriting its losses.
There are two aspects of the interrelationship with exchange rates which are, to an extent, unique to Chrysler. First, 50 per cent. of its exports were tied to the Iranian contract in such a manner that alterations in exchange rates adverse to Chrysler could not automatically be recouped. Secondly, as at last year, the 137 only new model for the immediate future, the C6 Alpine, was to be largely manufactured in France. Both factors were known to the Department before the crisis descended, before the moment of decision arose, and yet their relevance clearly was not appreciated by the Department until the Select Committee highlighted them in its examination of Chrysler's witnesses, which occupied more than 90 questions.
In that context it is quite clear that Mr. Hunt and, to a lesser extent, other Chrysler leaders did not realise the potential effect on their own profitability that the movement in the exchange rate would incur. They had assumed that the dollar parity would remain at $2.02 cents, but it certainly was not that when the agreement started to bite.
These are the lessons that we should learn, but they depend on the willingness of the Government to co-operate with the House of Commons. I quote once again:The timely provision of such information so that Parliament can exercise a proper judgment on the basis of the known facts.It was within the Government's power to publish the CPRS report in good time for it to be adjusted. The Government chose not to do so. The proper -course of action would have been to apologise to the House, not to say that the House was lucky to have had the report at all.
Before I sit down I pay tribute to the specialist advisers who gave generously of their time at considerable personal inconvenience. I also pay tribute to the competence, hard work, and flair of the Clerk who served our Committee, his assistants, his secretaries and typing staff.
It was unfortunate that one complete morning's evidence was lost for ever because the authorities of the House decided to use tape recording equipment rather than a stenographer. As the equipment was never turned on to record what was said, the whole of one morning's evidence was entirely lost. I mention that because it should be borne in mind when the House considers whether apparent economies of that kind are really worth making.
I am glad that, however belatedly, eight months after the full Committee offered this report to the House, time has been given to debate it.
§ 8.23 p.m.
§ Dr. Edmund Marshall (Goole)
The hon. Member for Tiverton (Mr. Maxwell- 138 Hyslop) in the course of his speech made some characteristically pugnacious remarks. Hon. Members listening may wonder how the hon. Member and I, as senior member and Chairman, respectively, of the Trade and Industry Sub-Committee, get on in the proceedings of the Committee. Let me say straight away that membership of the Sub-Committee, however versatile and diverse, still provides a very remarkable exercise in House of Commons harmony.
The report before the House is the unanimously agreed report of the Sub-Committee and each of the members of that Committee has made his own very effective contribution to the report. I echo the kind words of my hon. Friend the Member for Bishop Auckland (Mr. Boyden) about my predecessor as Chairman of the Committee, my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy), who for many years served as a member of the Sub-Committee and gave greatly of his particular expertise.
Similarly, I pay tribute to two other hon. Members who took part in the inquiry into Chrysler and who have since left the Sub-Committee—the right hon. Member for Bournemouth, West (Sir J. Eden) and the hon. Member for Devizes (Mr. Morrison). Both gave to the Committee over many years of their particular experience and talent in the course of our investigations. The other hon. Members who served are listed on the Order Paper tonight and the House will appreciate that we covered the whole spectrum of political thought in the House and worked together extremely well as a team.
This harmony in the Committee was assisted by the very hard work done by the Clerk of the Committee, Mr. Rogers, whose efforts held the work of the Committee together. Without his work and that of his assistants and specialist advisers, our efforts would have come to nothing. The names of the specialist advisers are listed in paragraph 7 of the report, and during the Chrysler inquiry we were able to draw on new expertise not previously engaged. We are grateful for that help.
I will not go into all the salient features of the report, which includes 296 paragraphs, at length. But I will reinforce what has been said: the Committee came to the conclusion that the Government had no other option than to reach the 139 agreement they did with Chrysler in January 1976.
In the course of our inquiry we looked at all possible alternative course of action, and every one revealed particular difficulties or stumbling blocks. This meant that the course taken was the only feasible one, however much it has been criticised and however much some hon. Members may regard it as undesirable and second-best. It was the only decision that any reasonable person could take when faced with all the complexities of the situation.
Despite the Committee's general agreement about the final decision, it was very critical of the way in which the whole crisis around Chrysler arose and how the negotiations were conducted. We do not think that during the years 1967–75 either the Chrysler Corporation or Chrysler United Kingdom did much to strengthen the company's position in this country. The potential to achieve integration with Chrysler's operations in Europe was in no way realised, and we did not think that any attention was paid to this. Long before 29th October 1975, Chrysler should have given the Government more warning of the real extent of its difficulties in the United Kingdom. This meant that when the final crisis arose, and following the Press conference held by Mr. Riccardo in Detroit, the Government inevitably were taken by surprise. Therefore, they were at some disadvantage in the negotiations that followed.
It is interesting to examine the Government's reply, which has just been published. We have heard a good deal in this debate about the time taken for that reply to be published. I shall confine my remarks to saying that the reply is a good one, since it deals thoroughly with the content of the report. The House owes the Department a debt of appreciation on the fact that its reply is a great improvement on the last reply issued by the Department following our earlier inquiry.
The Department accepts some of the criticisms and points made by the Committee. In other respects the Committee stands corrected, because it did not have the full information when it reached its decisions. We have now at least established a proper dialogue between the 140 Committee and the Department which, I hope, will benefit both in the national interest.
There are some new pieces of information provided in the response from the Department of Industry. It is encouraging to note that in paragraph 3(e) of the response we are told that the Iranian National Industrial Manufacturing Company has now decided to invest a further £25 million in facilities for the assembly of Chrysler United Kingdom cars in that country. That information gives encouragement on the overall position of Chrysler United Kingdom.
Paragraph 9 of the Government's reply contains an astonishing sentence, which reads as follows:In early 1974 the Department recognised the likely problem of future over-capacity in the United Kingdom car industry structured as it was at that time, and Chrysler's weak position in such a situation.If that happened in early 1974, almost two years before the publication of the CPRS Report—which we were given to understand was the first time that the problems of over-capacity had been thoroughly analysed and studied—why did the Government take that line in respect of British Leyland, whose crisis intervened between the beginning of 1974 and the later period in 1975? There is something a little strange about that sequence of events.
I move to paragraph 18 of the Government's response, in which the Department defends the length of time taken in the negotiations with Chrysler following the announcement at the Detroit Press conference. The Government defended the fact that they had taken so much time. As the Chairman of the Sub-Committee, I feel that the Government have missed the main point of our criticisms. These criticisms relating to the progress of the negotiations were not just as to the length of time taken but related to the way in which the negotiations were almost conducted in semipublic.
I wish to refer to paragraph 114 of the report. We are told that my right hon. Friend the Secretary of State for Indusry told the House on 15th December 1975 that the negotiationsmust take place in a confidential atmosphere".141 The Committee's report then statesIt was clear that this did not happen. The Government were in an embarrassing position at the start of the talks. The length of the negotiations, and the lack of security which attended them, did nothing to retrieve the situation.I turn to the last sentence of paragraph 155:The Government's declared intention to keep the negotiations private and confidential was in practice not achieved, with the result that it was from the media that both the House of Commons and the work force first learned of the outcome.Those were the criticisms made by the Committee about the course of the negotiations. I think I am right in saying that the Department's response contains no reference to that line of criticism. That was perhaps understandable, because undoubtedly the officials who helped to compose the response were in no position to comment on leaks which may have occurred in the negotiations.
I move on to paragraph 37 of the Government's reply, to which reference has already been made. I think it was the hon. Member for Tiverton who spoke about this. In the first sentence of that paragraph the Government say:In his statement to the House of Commons on 16th December 1975 the Secretary of State for Industry referred to a reduction in CUK's capacity of 25 per cent.Please note that it refers to capacity being reduced. Later in the same paragraph, however, the last sentence reads:The investment at Linwood in paint facilities has removed certain restraints and the total capacity for cars and commercial vehicles is now greater than it was prior to the implementation of the SLT/C6 Plan. This capacity has not of course been wholly utilised and there has been a reduction in output of the magnitude referred to by the Secretary of State.In that paragraph there is total confusion between capacity and output, and, therefore, the criticism of the Sub-Committee in that respect still stands.
The Secretary of State has said that the important thing—following the agreement between the Government and Chrysler—is to consider how far there has been progress that will improve the future prospects of Chrysler United Kingdom. In the Sub-Committee's report some doubt was cast upon the future viability of the company, but at least we now have the planning agreement that was finalised last week—an agreement that both the Gov- 142 ernment and the Committee hope will carry the real commitment of those engaged on all sides of the company's operations.
I also note the arrangements that have been made for continued monitoring of the company's problems by the Department. I particularly note, in paragraph 39 of the Government's reply, the arrangements that have been made for professional accountants to scrutinise whether Chrysler United Kingdom is being subjected to adverse transfer pricing within the Chrysler Corporation. The importance of this aspect of Chrysler's activities was underlined by the recent publication of the figures to which reference has been made tonight—namely, that in 1976 Chrysler United Kingdom made a loss of £42.8 million while Chrysler Corporation made a profit of $423 million. Considering that it was the poor performance of Chrysler Corporation in 1975 that precipitated the whole Chrysler crisis in this country, the latest figures provide at least food for thought. The Sub-Committee intends to seek further information about those figures.
The Sub-Committee regards itself as having a continuing rÔle in these matters. We do not intend to slave away at a report, to publish it and to put it on the shelves and then look back with pride at what we have done. The work of any Select Committee, particularly the Expenditure Committee, must be one of continuing monitoring and continuing influence on public policy, a rÔle in which the taxpayers' interests are defended throughout. In order to be effective in this, the Sub-Committee intends, though it will mean a tremendous burden on our members and staff, never to leave any subject alone. We shall never let matters drop. We hope that in pursuing this course we shall be able to perform the rÔle of this House in relation to the government of this land more effectively.
§ 8.40 p.m.
§ Sir Keith Joseph (Leeds, North-East)
I join with other hon. Members in congratulating the Sub-Committee on an excellent report. I am encouraged to learn from the hon. Member for Goole (Dr. Marshall) that the Sub-Committee intends to keep its teeth in the subjects that it has taken up. That is good news, but I suggest that the Sub-Committee will 143 have to develop not only its analytic skills, but its capacity to pin Ministers, of whatever party, against the ropes when it has legitimate criticism.
It is because of the failure of the Government's devolution Bill that we have this opportunity to discuss the Sub-Committee's Report a mere eight months after its publication. The House should not kid itself: if the devolution Bill were still going through, we should probably not have had the chance to discuss the Report for many months. It was only because of the imminence of the debate that the Government were persuaded to bring before the House their inadequate answer to the formidable analysis of the Sub-Committee.
§ Mr. Boyden
That is not correct. The Department had agreed to publish the Report on 16th March. It did not know at that time about this debate. The Report was brought forward by a few days, for which we are grateful, so that the House should have the papers in time for the debate.
§ Sir K. Joseph
Then I withdraw that part of my criticism. The hon. Member for Bishop Auckland (Mr. Boyden) is Chairman of the Expenditure Committee, the value of whose reports lies not only in the analyses contained within them, but in the degree to which those analyses can be brought home to Ministers in subsequent debates.
The Secretary of State, whom we all like, gave a bland reply to this excellent report. He wrote off the criticism with what was virtually a public relations exercise for Chrysler as it is today. We all understand the right hon. Gentleman's problem. He was in favour of a quite different solution to the Chrysler crisis, but he was overridden in Cabinet and now has to defend the consequences of a decision with which he did not agree. It is wrong for the Secretary of State to suggest that the Sub-Committee concluded that the Government had no alternative but to rescue Chrysler United Kingdom in the way that they did.
The report is a well-drafted document and Chapter XI, which is headed "Conclusion", is succinctly and incisively written. At no point is it possible to adduce that the Sub-Committee agreed 144 with the Government's decision. The report says that it could be argued that the Government came to the right decision, but the Sub-Committee does not make that argument or come to that conclusion itself. Indeed, I shall come later to a crucial point on which the Sub-Committee and the Government reached totally different conclusions.
The debate gives us an opportunity to look even wider at Chrysler than did the Sub-Committee in its report. There is some common ground between the Government and the Opposition and between the Government and many hon. Members opposite. I think that we all agree that this country will not prosper and have high levels of employment unless industry and services are competitive. The Prime Minister emphasised this in his brave spech to the Labour Party Conference in Blackpool last year. There was also sanctified by the Government at the Chequers meeting last summer the view, which we share, that there is a need to encourage industrial and commercial success.
The argument that many of us wish to add to those of the Sub-Committee is that the habit of rescuing companies that are in trouble is extremely damaging both to the competitiveness of our businesses and to the encouragement of success. Rescues are enervating and debilitating. If there is no prospect of rescue, companies are forced in their own interests to put their own houses in order. If they cannot do that, it is possible, through the well established mechanism, for the resources used in those companies to be redeployed as humanely as practicable into a use that the public will welcome and employ.
§ Mrs. Audrey Wise (Coventry, South-West)
The right hon. Gentleman appears to be saying that in the course of this operation many thousands of people will unfortunately be put on the dole. Presumably it is not practicable to be humane and to keep such people in work.
§ Sir K. Joseph
No fewer than 376,000 people joined the unemployment register in September 1976. In that same month 367,000 people left the register, ceased to be unemployed, and became employed. In other words, there is an enormous torrent of people changing jobs, some voluntarily and some involuntarily. We 145 deceive ourselves if we think that by the occasional dramatic rescue we alter this redeployment of labour, which must go on if standards of living are to be raised, for both pensioners and those at work.
The habit of rescue enervates and it is that habit which this Government are constantly encouraging. In a recent Adjournment debate the hon. Member for Keighley (Mr. Cryer) spoke of rescue as normal. The habit of rescue blocks the improvement that firms will carry out for themselves, with the help of those who work for them, if they do not have the hope that they will be rescued by the taxpayer. Rescues can create what the Sub-Committee vividly described as pensioner firms that become dependent upon the taxpayer.
Last week in the debate on Leyland I said that I thought that British Leyland needed rescuing from the British Leyland rescue. I said that the British taxpayer needed rescuing from British Leyland. Today I go further and say that Britain needs rescuing from rescues.
This is not—or should not be—a party issue, because rescues are not Socialism and nor are they capitalism. They are opportunism. The Chinese might call them capitulationism. They are a weak response to a crisis. They are not necessarily the constructive response that the well-meaning believe them to be, because of the debilitating and wrong expectations that they create.
I should like in this general chorus of approval of the Sub-Committee's work, a chorus with which I agree, to make one small criticism. It would have been an even more powerful report had the Sub-Committee asked itself one additional question, which is "Where is the money for the rescue to come from?" The moment one inquires into the source of the money one is led to realise that every penny that the Government will provide comes in one form or another, directly or indirectly, from the taxpayer. That money is taken from the taxpayer, either directly by raising taxes higher than they otherwise would have been, or by borrowing, with a consequent increase in interest rates and service charges, and the consequent pre-emption of resources away from the private sector.
146 Then, somewhere, invisibly and unnoticed by newspaper reporters, people are being thrown out of jobs. I put it as strongly as I can by saying that in order to save Peter's job it is almost always necessary to sack Paul. Peter is rescued only at the expense of Paul. Peter is generally in a firm or industry with strong trade union muscle, and Paul is in some small firm with no headline-creating capacity. Peter is rescued often in a precarious job that will not last, and Paul is sacked from a job that would have been sustainable if only taxation, interest rates, or inflation had not been so high.
Until recently I was practically alone among politicians in making this argument. However, I see in this month's issue of the National Westminster Bank Quarterly Review a scholarly article on just this subject of the unemployment consequences of employment subsidies. I venture with diffidence to suggest to the Sub-Committee that when it follows up this inquiry it examines where the money comes from.
I turn against this background to Chrysler United Kingdom, which I am sure is a well-managed part of a well-managed world operation. But however well-managed it is, its European activities are small in a world of giants. Its market share is bound to be crucial. Its sales per model and its sales per employee will count very seriously. It is with this in mind that we have to take account of the CPRS judgment that this country already has an over-capacity in car making and an overmanning in car production.
It is in this market, which is also the slowest growing market in the EEC for cars, that the Government have spent taxpayers' money to prop up Chrysler United Kingdom. We must ask ourselves, as the Sub-Committee asked itself, whether the initiative was sensible or stupid, whether the money was well spent or whether it was money down the drain.
§ Mr. Maxwell-Hyslop
I quite follow and substantially agree with my right hon. Friend's argument in terms of the economic effect on other industries. However, may I draw my right hon. Friend's attention to paragraph 164 from which he will see that the Sub-Committee 147 looked quite deeply at the cost to the taxpayer of the alternatives? The Committee did not ignore that aspect.
§ Sir K. Joseph
That is a separate point. My hon. Friend is right in saying that the Sub-Committee considered what would be the apparent costs of not rescuing, but it did not consider the implications of the cost of rescuing.
On the point covered by paragraph 164 I venture to suggest that the Sub-Committee swallowed whole the arguments of the Treasury and the Department. They regarded the unemployed man as being bound to remain unemployed for an average of a year. Even at this moment the average period of unemployment for those who are unemployed is, I think, six months. It is a fallacy to think that labour released from one employment is, as it were, a lump of labour that remains permanently unused. There is an intense and constant redeployment taking place.
When redundancies were invited at Linwood, 50 per cent. more men volunteered to be redundant than were required. That is evidence that the men themselves do not feel that they are doomed to longterm unemployment if they lose their job or choose to be redundant.
§ Dr. Edmund Marshall
Does not the right hon. Gentleman accept that if there had been mass redundancies in Chrysler they would have been concentrated geographically around the areas of Luton, Dunstable, Coventry, and West Central Scotland, already areas of high unemployment? Their opportunities for alternative employment would thereby have been less than the average national opportunities.
§ Sir K. Joseph
It follows from the concentration of labour in a vulnerable firm that more people will have to travel to other firms, just as they travel to their present firm. One possibility that the Government should consider most seriously is easing the housing situation so as to facilitate mobility. The housing situation in Scotland is made far worse than it need be by the fact that so many houses are in the possession of local authorities rather than private landlords, and thus, because of the subsidised rents, they are occupied by families for an infinity of time. This 148 is a situation to which both parties have contributed.
The Minister of State, Department of Industry (Mr. Alan Williams)
Is the right hon. Gentleman aware that in a place like Rhondda 80 per cent. of houses are owner-occupied, but this does not seem to help to cure the problem of unemployment?
§ Sir K. Joseph
There is a special problem when owner-occupiers live in a company town and the company, in this case a coal mine, ceases to need their services. That is a problem that should be met by imaginative Government policies to help owner-occupiers in such towns.
The crux of the issue before the House is whether the money will prove to have been well spent. For that it is no good just looking at the present position. The Government's pledged contribution from the taxpayer towards the new model looks after the next couple of years or so, but what happens when the taxpayers' funds come to an end? What happens if there is not enough profitability or cash flow, or if productivity has not risen to the necessary levels for there to be sufficient cash in Chrysler United Kingdom to sustain the heavy investment necessary to keep the company viable in the 1980s?
I draw the House's attention to paragraph 293 of the Sub-Committee's report. When considering whether the company would be able after 1979 to finance a continuing model programme as well as repaying the loan, the Sub-Committee stated without qualification:We do not think that Chrysler United Kingdom will be able to generate such funds.The Sub-Committee went on to ask whether it was not very likely that the Chrysler Corporation would again turn to the British taxpayer. That is the question to which the House has to turn its attention. It is the question on which the Government, after overruling the Secretary of State, came to a positive conclusion and the Sub-Committee of the Expenditure Committee was sceptical to the point of coming to a negative conclusion.
We are in an even better position than the Sub-Committee, because after a few more months we can see more of the performance of Chrysler United Kingdom. We can welcome the fact that for some 149 months there appear to have been better labour relations. It looks to a sceptic—I am a sceptic about rescues—as if the psychological effect of the real risk of closure altered industrial relations for some time. It looks as if that happened. I have read tributes by the management to the changed relationships. However, I fear that the climate is changing before our eyes and, although I know that productivity has crept up, I must ask the Minister whether productivity is yet anywhere near what it needs to be to generate the volume of output and the cash flow to provide the profit on which Chrysler United Kingdom is counting.
We have been told in the evidence that what Chrysler Corporation and Chrysler United Kingdom need to maintain a viable operation in this country is no miracle in connection with productivity, but simply steady, continuous output, the same as they tend to get from their other spheres of operation. What is the trend in cars per man per year—that is, in productivity—and in the steadiness and continuity of output apart from the particular problem affecting Linwood at present?
I turn quickly to the question of the planning agreement which the Secretary of State announced only last week. I myself am not in favour of planning agreements. I think that an attempt to freeze forecasts and plans in a turbulent and incessantly changing world market is a mistake. However, the planning agreement is a chosen instrument of this Government, and I must ask the Minister to answer two questions.
First, granted that the planning agreement is not to be published, because it is said to contain confidential information, why is it that the newspapers seem to have seen it? Why is it that The Times, for instance, and other papers that I have seen purport to publish details from the planning agreement? Why, if newspapers are to see the planning agreement, should not Parliament see the planning agreement?
The second question that I hope the Minister will answer is this. What is the relationship of the trade unions to the planning agreement? We are told that they have been given and have welcomed a great deal more information. That is a positive benefit. The Secretary of State said today that the planning agreement 150 "is closely in accord with what the trade unions know has to be achieved". That is fine, too, as far as it goes, but I have read in the newspapers that, far from the trade unions being committed in any way to the planning agreement, they not only refused to take any part in the signing of it—I am not quite clear whether they were meant to be involved in signing it—but, when asked questions about the degree to which they were committed to the productivity targets in the planning agreement, they said that they were not committed at all, that productivity was entirely a matter for negotiation.
I am one who recognises the very legitimate self-interest of trade unions and trade union members. I acknowledge that self-interest as one, and one only, of the major motives at work in any society, but one hopes that the self-interest is enlightened self-interest. I believe that we can hope that the trade unions will see the improvement of productivity as being in the enlightened self-interest of themselves and their members.
The fact is that, unless productivity improves, unless profitability is good—and these realities, these imperatives, are blurred by rescue operations—we shall, at the Government's instigation, be bleeding healthy companies in order to go on feeding what may prove in Chrysler United Kingdom to be a lame duck. I would argue that the Government are on the wrong tack in their habit of rescue. I would argue that the lessons of British Leyland, and perhaps the lessons of Chrysler, are lessons that ought to be learned by the Government. Ministers have bitten off far more than they can chew in their industrial strategy. That explains in part the delays and the incompetence. Ministers are overstretched. Taxpayers are overtaxed. Industry is overmanned.
We know that the Government changed their mind. We know that they rejected the advice of their industrial advisers who warned them that Chrysler United Kingdom would not be viable. We know that the Cabinet overruled the Secretary of State, and we know that the Government ignored their own criteria for industrial intervention. We only hope that they will learn the rapidly emerging lessons of their own failures and reconsider their own rescuing policy.
151 Finally, we ask that the Secretary of State should use sternly and firmly the power that he still has, that is, not to release taxpayers' money to Chrysler United Kingdom unless and until he is satisfied that the trends of productivity and profitability are on the lines that were laid out in the agreement. The least that the rescued can do is to try their best to become viable. But those who work in companies that are rescued will not think it necessary for them so to behave if they believe that the money from the taxpayer will come automatically however they behave. We say to the Secretary of State that, even if a wrong decision has been made, much can still be saved for the taxpayer if he uses his powers firmly.
§ 9.6 p.m.
§ Mr. Richard Wainwright (Colne Valley)
The Secretary of State made the welcome claim that the work force of Chrysler United Kingdom is now conspicuously well informed about the nature of the company's business and the important factors in it. The Secretary of State's correct claim was a great tribute to the work of the Trade and Industry Sub-Committee in producing the report, because it is largely from the report that the information was first made available to the work force and to the public. The Sub-Committee is to be congratulated on that.
I thought that the hon. Member for Goole (Dr. Marshall), who was Chairman of the Sub-Committee, perhaps reduced its credibility when he claimed that it worked and reported in total harmony. To deny what I detected as a splendid tension running through the concluding paragraphs, and to make the unlikely claim that, for instance, the hon. Member for Tiverton (Mr. Maxwell-Hyslop) in the end was in harmony with the hon. Member for Goole, rather detracts from the credibility of this splendid Sub-Committee.
§ Dr. Edmund Marshall
Perhaps I did not make myself clear. I should have said that there was unanimous agreement that this should be our report. There were many moments of debate within the Sub-Committee about exactly how the report should be worded, but the final wording was totally agreed.
§ Mr. Wainwright
I entirely accept that the report was unanimous, but the hon. Gentleman went a little too far by suggesting that the report in some way endorsed the rescue operation, although criticising the manner of it. I do not find that endorsement in what I describe as the admirably tense and extremely well-argued concluding section of the report.
I hope that we shall have some enlightenment from the Minister about the Secretary of State's claim that the Government are now extremely well-informed about Chrysler. The Secretary of State was admirably strong today, much stronger than he has ever been before, on the matter of integration. This was a welcome development. But if his words are to have any meaning, surely the Government must ask themselves whether they are sufficiently well informed about the financial state of Chrysler Europe as well as Chrysler United Kingdom.
"Integration" is a strong word. If Chrysler United Kingdom in, say, a couple of years is looking for funds to develop new models, which will then be essential to Chrysler Europe, it is of immense importance that the Government should be informed of the financial affairs from quarter to quarter of Chrysler Europe. So far, there has been no indication that they are. It is a difficult subject, because Chrysler Europe does not exist as a corporate entity. I raise this question at the outset. When discussing such a vital aspect, we must be told by the Government just how they view Chrysler Europe and hope to encourage its development as a corporate entity.
Time being short, I shall confine myself to two concepts which I regard as of immense importance to this rescue operation and which I do not think are in any sense clarified by the long-delayed response from the Government—the concepts of viability on the one hand and of integration on the other.
The Government use the world "viability" in the most elastic fashion to meet any particular situation which they think it happens to fit well. The Sub-Committee, in its splendidly-written report, which has not elicited the same standard of prose from the Department, has given a clear lesson in the meaning 153 of "viability". In paragraph 293, the Sub-Committee recommends thata profitable operating position must not be confused with long-term viability. Chrysler United Kingdom must be able not only to show profits, but to be able to generate sufficient funds after 1979 to finance a continuing model programme as well as repaying their loan.I would like to hear how Ministers respond to that striking statement. They should also indicate whether they are going to be caught napping again. As the hon. Member for Goole made clear, they were caught napping by the pressure that Chrysler United Kingdom was so skilfully able to put on them, pressure which precipitated the rescue operation. Are the Government to be caught napping again in 1979? As I said in the original debate on the proposition for a rescue operation, I do not believe that Chrysler United Kingdom will be in a profit-making situation in 1979. They will not be truly viable.
On the question of integration, the Government have been quite inadequate in their response to the pointed question posed in the report. The Secretary of State's concept of integration, even after his stronger words today, which were welcome, still seems to dwell upon the receiving end as though integration was of great importance to Chrysler United Kingdom because it would mean that it was receiving technological, design, tooling and marketing help from the rest of the worldwide Chrysler operation. But to me, and still more to those whose jobs depend on Chrysler United Kingdom, the most important consideration in integration is to make it a means whereby Chrysler United Kingdom becomes an indispensable locked-in unit of the world-wide Chrysler operations.
If integration merely means that Chrysler United Kingdom benefits from and is aided by the world-wide organisation, it will be a continuing lame duck. We have heard nothing today to indicate that integration is proceeding in a way which gives the United Kingdom operation an indispensable position in the whole Chrysler world-wide scheme.
The Sub-Committee was right to point out that the continual boasting that it was hoped that eventually the Alpine would be made wholly of British components and from sources entirely in the United 154 Kingdom seemed on the face of it to conflict with the object of integration and did nothing to ensure that Chrysler United Kingdom became such a locked-in part of world-wide Chrysler that it could not possibly be ditched or neglected by the parent company, as happened in the past. I hope that the House will be enlightened tonight on those two matters.
I do not accept that the report endorses the rescue operation, but in the most useful way it shows points at which the Government may be helped to make the best of a very bad job.
§ 9.15 p.m.
§ Mr. Ivor Clemitson (Luton, East)
There is a sense in which the Chrysler rescue deal was a shotgun marriage. It was born out of crisis. In the words of the Select Committee, it was hardly the most glorious chapter in the Government's industrial strategy. It may well be true that Chrysler International got a pretty good deal. But those of us whose constituencies contain Chrysler plants or small firms which rely to some extent on Chrysler contracts—the Under-Secretary and I visited one in my constituency only last week—had to support the rescue, for the straightforward reason of employment.
It may be true, as the right hon. Member for Leeds, North-East (Sir K. Joseph) said, that rescues are enervating and debilitating. But unemployment is an enervating and debilitating alternative, and that is what would have been in store for many people in Chrysler and the other companies.
§ Mr. Clemitson
I will not give way, if the right hon. Gentleman will forgive me, because time is short. I realise that he would not accept that argument but would also talk about redeployment of labour. But if Chrysler had disappeared, there would have been one fewer car producer and it is debatable whether those remaining would have filled the gap. The chances are that the gap would have been filled largely by the foreign car makers, which have already captured 40 per cent. of our market.
Too much government is reactionary in the proper sense of the word: Governments of all complexions spend far too much time reacting to crises. That is the nub of some of the Select Committee's 155 criticisms. But we can react constructively only if we have certain structures. That is another point at which I would part company from the right hon. Member for Leeds, North-East. The market, whether it is the labour market or any other, is far from being perfect: it does not work.
It is far to early to make a definitive judgment on whether the rescue has been successful, but there have been some hopeful signs in the first year. We have seen a financial performance in percentage terms not that far off target. Chrysler has been the first in the field with a planning agreement. We on this side have been pressing the Department for long enough about the lack of planning agreements.
Here again I part company from the right hon. Gentleman. As I understand planning agreements, the idea is to have not a frozen, rigid plan but a rolling plan, which is constantly being reviewed. The trade unions should be involved to the maximum in this process, and I welcome the involvement which I understand they have already had in the formulation of the Chrysler planning agreement.
There appear to be hopeful signs on the employment front. There has been a vast improvement in the industrial relations record, as measured through days lost because of strikes. There are hopeful investment signs.
But I want to raise one or two questions. First, there is the problem of supplies, mentioned by the hon. Member for Bedfordshire, South (Mr. Madel). The commercial vehicle side of Chrysler, with which I am particularly concerned, was badly hit by the Rubery Owen dispute. That side has been hard hit over the years—although, to be honest, not in recent months—by the failure of Perkins to supply enough diesels. I should like my right hon. Friend to say something about the problem of supplies.
There is a need for longer-term planning and thinking. I gather that the company has made the point that as part of their side of the planning agreement the Government should provide more detailed and more frequent economic forecasts. What has my right hon. Friend to say about that?
156 There is also the problem of how we fit a planning agreement with one company with planning agreements with other companies in the same industry. How do we have planning for the industry as a whole? That raises an enormously complex issue.
Companies are becoming more integrated over national boundaries. As this is happening, particularly in the tie-up with other European countries, how do we ensure that we in this country gain as much as we lose, whether in quantity of work, skills, design work, or whatever? This is a significant matter in my constituency, where we have not only Chrysler but Vauxhall, with similar problems arising there.
The agreement was not the one which might have been worked out if there had been more time or more favourable economic circumstances, or if we had had certain structures by which the Government could deal with such problems. But a number of my constituents directly or indirectly depend upon Chrysler for a living, and their hope is that the company will not only prosper economically but that the start which has been made in planning for the future on some kind of joint basis will develop and grow.
§ 9.24 p.m.
§ Mr. Hal Miller (Bromsgrove and Redditch)
I shall be brief, as I am sure that the hon. Member for Coventry, South-West (Mrs. Wise) wishes to speak before the Minister winds up the debate. In the time available I shall try to deal with two aspects which have been touched on already and to deal at greater length with the question of the Government's rôle.
My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) referred to the fact that the Secretary of State's disagreement with the Chrysler rescue was obvious at the time. He did not go on to speculate why. I wondered whether it had anything to do with the fact that Chrysler was a privately owned, American, multinational company.
There are some significant aspects to what I have just said. First, the Iranian contract would not have been continued unless the Chrysler Corporation itself in America had been willing to guarantee the performance of the contract. Secondly, there is the multinational 157 aspect. At least this evening the Secretary of State admitted that the success of Chrysler was wholly dependent on its integration into Chrysler Europe.
I have a great deal of sympathy with what the Liberal Party spokesman said about the lack of Government information or control with regard to the fortunes of Chrysler Europe which, in fact, has no independent existence as such. But the fact remains that the success of Chrysler in this country stands or falls with the success of the European operations as a whole.
It is not without significance that the Economist Intelligence Unit report refers specifically to the fact that that success would be largely based on the success of the French company which had provided most of the basis for possible advance. But the Government have not so far given any indication of the future viability of Chrysler Europe or of the possibility, which must have been examined, that sufficient funds will be forthcoming to produce the next generation of models, and whether these funds will be generated internally for Chrysler Europe to produce the plan. Both the Economist Intelligence Unit and the CPRS agreed that there is serious overcapacity in Europe and that by 1980 we must look forward to several further changes in the structure of the motor industry in Western Europe. Indeed, many of us would think that such a change in structure is about to take place in British Leyland.
The Sub-Committee's report and the Government's document on industrial strategy both mentioned planning agreements. We had a great deal of discussion about the nature of planning agreements, the possible benefits and disadvantages and the rÔle of Government when the Industry Act was being considered in Standing Committee. I have been in discussion with the company about the planning agreement which has been signed, as the White Paper tells us, by both the company and the Government. May we be told the significance of the fact that the agreement was signed by the Government? To what are the Government committed? The industrial strategy refers to commitment on both sides. Does that mean both sides of industry in that company, or does it mean the company and the Government?
158 It is the lack of confidence in the Government, to which I shall return, that has reached right down to the shop floor and made things so very difficult in British Leyland. The hon. Member for Luton, East (Mr. Clemitson) pointed out the difficulty of reconciling planning agreements between companies in the same sector. In its report the Sub-Committee pointed even more to the apparent difficulties should the company's plans not conform to those of the Government.
During the debates on the Industry Act I made it plain that I thought we should be providing the means for sectoral plans rather than individual industry plans. There was already the basis for this in the work of the little NEDCs. What was so unsatisfactory about the little NEDCs—the one on the motor industry reported long ago—was that even when the NEDC had been set up there was a Government and industry departmental working party. Governments of both complexions have significantly failed to do any of the things agreed to be necessary for industry in this country. Above all, they have failed to provide as stable an economic environment as possible.
I come to the third part of my remarks. What is the Government's input into this planning agreement? Have they been considering with the company the strategy for the motor industry as a whole in view of the over-capacity in Europe and the probability of structural change to which I have referred? Have the Government been discussing with the company the question of new mini models? Here I agree with my right hon. Friend. Is this a case of the Peter and Paul principle? Is the Chrysler Mini to be successful on the basis of Government money, merely at the expense of a possible failure of the Ford Fiesta, privately invested, or perhaps even the Leyland Mini, if that is to be produced, also financed by the taxpayer? What is the Government's view, and was it made available to the company?
I now come to consider what the company has been asking for from the Government in this planning agreement. This refers to the need to bring down interest rates and to have some stability of exchange rates. There must also be some stability of domestic demand and some reduction in taxation to provide the incentive which the Government have so far 159 failed to provide, particularly in British Leyland. Are we to take it that the Government are committed to providing some incentive for people by means of a reduction in taxation and by allowing differentials? As we understand it, those are the things that are provided for in this planning agreement.
Just what is the extent of the Government's commitment? What is meant by the Government signing this agreement? Those are the real questions that must underlie the success of any enterprise in this country. We are not concerned with just the motor industry in these actions of the Government, although it is significant that in this planning agreement it is the Chrysler company that is calling for things to be done, just as thousands of people in British Leyland have been calling for action, without being heard. We wish to know what response the Government will make.
The case for a planning agreement being needed is not proven. My right hon. Friend referred to leakages. Indeed, the Financial Times on Monday of last week was uncomfortably specific. I was informed by the company that it was suspected that the leak came not from the unions, I am happy to say, but from the Minister's Department. Perhaps the right hon. Gentleman would like to confirm how leaky his Department has proved to be.
§ 9.33 p.m.
§ Mrs. Audrey Wise (Coventry, South-West)
The right hon. Member for Leeds, North-East (Sir K. Joseph) made it clear that his alternative to the Chrysler rescue and, indeed, to the British Leyland operation would have been to allow them to fold up, in the hope that in the course of time, and "as humanely as possible", as he said, both the labour and the resources would be redeployed There is a certain logic in the right hon. Gentleman's case. The only trouble with it is that in real life things do not work that way.
In real life, the market economy is not a system of perfect or even adequate competition. In real life, also, consumers cannot express their needs and requirements entirely through their individual operations as customers. There is a need to have a means for the community to 160 express a choice as to how resources should be deployed. I am not saying that in any spirit of posing the community against the individual, but rather as an expression of individuals joining together to express communal needs.
My constituents working at Chrysler will not be very impressed by the hope expressed by the right hon. Member for Leeds, North-East that their period of unemployment would have been relatively short. It is completely irrelevant to say that the average length of unemployment is six months. That is bad enough; but I shudder to think what the situation in Coventry would have been if British Leyland and Chrysler had been allowed to go to the wall, as the Opposition wished.
§ The Under-Secretary of State for Industry (Mr. Bob Cryer)
And Alfred Herbert.
§ Mrs. Wise
Yes, and Alfred Herbert. The average length of unemployment in Coventry would have been far longer even than the year on which the calculations were based. Therefore, although what the right hon. Gentleman said was logical—he and his party opposed the Chrysler rescue—my constituents would not have been well served had the Opposition been successful in opposing it.
However, that does not mean that I regard rescues as being desirable in themselves. There I agree with the critics. To shudder from crisis to crisis and hastily pick up the pieces is not an adequate rôle for government to play; nor does it lead to satisfactory results. That is why we must find different structures in a different economy with different motive forces. It does not mean that the Government's actions in this case are to be condemned.
The Select Committee chose a particular line of criticism with which I completely disagree. Dealing with the question of confidentiality it said that there was too much leaking. It stated in paragraph 115 on page 57 of its report:There was clearly understandable resentment among the work-force at the fact that while the Government and Chrysler had agreed to keep their discussions secret the progress of those discussions, and, more reprehensibly, the Government's own deliberations, received wide publicity.I do not think that that was the cause of the apprehensions among the work 161 force. The work force objected not because there were leaks, but because nobody properly and officially consulted it. The Government negotiated with management. The Government were willing to speak to Back-Bench Members. The company was willing to speak to Members. It seemed to the work force throughout a large part of the proceedings that nobody was prepared to talk to it. Ultimately, the Secretary of State met the shop stewards and some discussions took place, but that was at a quite late stage.
The disgruntlement of the workers had nothing to do with any demand that the negotiations should be more secret but rather was the expression of a demand that the workers should be involved in the negotiations. That is quite different from what the Sub-Committee said. Here I support the workers' criticisms and not the Sub-Committee's criticisms. Government and negotiation by leak clearly are undesirable, inefficient and wrong in many ways, but the proper substitute is not more secrecy or tighter security but openness and proper consultation with all those involved. I think that ignoring the workers was a legitimate complaint that could be levelled at both the company and, at least in the early stages, at the Government.
The Sub-Committee asks that the criteria for rescue should beSound and precise, including the quantification of social factors.I am not quite sure what the Sub-Committee wants. Judging from the statement on page 23 it seems to think that commercial factors are subject to precise quantification. I challenge that.
The report says:The concept of 'social benefits' of assistance is one which is not capable of such precise definition as is the case with the commercial factors involved in an assessment of viability.I do not believe that commercial factors are capable of precise quantification. I think that inspired—or uninspired—guesswork is a much more accurate description of commercial judgment. If the desire for quantification leads to an unwillingness to give full value to the importance of social factors, that would be a step backwards.
162 The Sub-Committee also says on page 24:However, other costs (in the Chrysler case such things as the political importance of the Iranian contract, and the need to secure the acceptance of A New Approach to Industrial Strategy) will frequently be a matter of wider political judgment, and in such cases there will be the suspicion that short-term expediency has overruled commercial judgment.I hope that in considering these matters the Government will not take the view of the Sub-Committee that commercial judgment is to be God in such a situation. Commercial judgment is just as subject to error and just as much influenced by short-term expediency as is political judgment. I deny that there is anything inherently better or more worthy in commercial judgment than in political judgment, or that it is more capable of being measured correctly. In that issue I am more on the Government's side than on that of the Sub-Committee.
I notice that the Government's response to the report includes a specific reference to transfer pricing. I welcome that. I welcome the fact that the Department of Industry has asked that particular attention be paid to this as part of the monitoring arrangements for the agreement. I wonder whether the Minister is satisfied that adequate methods of assessing the danger or occurrence of transfer pricing have been worked out. I wonder how close an eye the Department has kept on this matter, because there are genuine difficulties in assessing whether transfer pricing is taking place.
In the very nature of things there can be no true price discipline between two subsidiaries of the one organisation. They are not buyer and seller in the normal terms of the market, and the discipline to which they would otherwise be subjected does not exist. This is a very important issue. Can the Minister indicate how it is being tackled? It seems to be absolutely essential in considering the national interest.
I wish finally to refer to the subject of industrial relations. The Committee's report quotes a management spokesman as saying:The change in attitude by our unions was a complete revelation. I cannot praise them too highly. They are playing an active vital rÔle in all the changes now going on. The result is that we are right on target with all our programmes.163 The Committee's report added that it welcomed the change in attitude on the part of the work force,which may in some quarters be the result of a genuine fear that Chrysler Corporation may still withdraw from the United Kingdom.I regard the inclusion of that statement in the Report as, to say the least, a great pity. It appears to give credence and credibility to those who think that workers respond most of all to threats, particularly to threats of unemployment. There was no justification for including such a comment in the Sub-Committee's report.
The management's tribute to the work force, although gracious, takes a liberty in the sense in that it assumes that the need for a change in attitude lay on the side of the workers. My constituents certainly would say that the need for a change in attitude lay particularly with management. I am glad to see in the report and in the Government's reply a number of references to the increased amount of communication now taking place. I believe that good communications, and certainly the exchange of information, are necessary. But I hope that it will go much further and will mean real involvement in decision-making, and not simply the idea that workers should be passive recipients of information.
I am very critical of the Sub-Committee's report which is fair neither to the Government nor to the workers. Although I am also critical of the Government's reply, I must say that if these matters had been left to the Conservatives Coventry would now be a desert.
§ 9.48 p.m.
The Minister of State, Department of Industry (Mr. Alan Williams)
Although we have had a somewhat truncated debate this evening, I do not believe that our discussion has suffered because of brevity. Hon. Members have made many points in concise terms. My problem lies in seeking to reply to all those points in the limited time that remains to me between now and 10 o'clock. I can only tell the House that if there are any points of detail that remain to be dealt with I shall attempt to deal with them with hon. Members in correspondence.
The hon. Member for Tiverton (Mr. Maxwell-Hyslop) said that the Government should have known that Chrysler 164 was in danger. In a sense, that is at the heart of the communications between Government and industry. I shall come a little later to the point made by the right hon. Member for Leeds, North-East (Sir K. Joseph) about planning agreements. These considerations raise the question of how far the Government should be able to rely on the advice and information received from industry, particularly when the Government go to industry and pinpoint problems. In many cases they are given information which at a later stage is proved to have been complacent. Questions about this should properly be put not to the Government but to the company in terms of the rôle that it played at the time.
If we examine the record, we see that the Government made every effort to focus the company's mind on the problems as we saw them. The fact that we failed to do so may not be entirely the fault of the Government. Indeed, all this has focused attention on the need for planning agreements and the monitoring of the operation that is now under way. My hon. Friend the Member for Goole (Dr. Marshall) referred to this point in his speech. Indeed, the hon. Member for Colne Valley (Mr. Wainwright) said that he wanted to be sure that the Government would not be caught napping again. The Government want to be sure of that too, because it could be a rather expensive operation. In this sense, monitoring is a useful aid to the Government.
We monitor against performance criteria and not only with our own expertise. We also use outside consultants, and we have Coopers and Lybrand, an eminent firm, supporting us. We receive monthly statements, in absolute terms and in terms of variation of plans. The statements cover such categories as sales, production, exports, capital expenditure and finance. In addition there is a constant flow of management information and our departmental monitoring team has virtually daily contact with Chrysler management. Therefore, there is now a very different relationship in terms of communication between the Government and the firm The details must remain commercially confidential, but I am sure that hon. Members understand why this is so My hon. Friend the Member for Coventry, South-West (Mrs Wise) referred 165 to the problem—which is recognised internationally as being difficult—of transfer pricing. Under clause 7 of the agreement with the firm there is a requirement that transfer pricing should be conducted on the accepted arm's-length basis, but I recognise the accounting difficulties of determining exactly what that is. The basis that is used must be disclosed to the Government, and the company must explain the way in which it arrives at pricing. For example, we have had an investigation carried out by Coopers and Lybrand into the way in which the components for the French Alpine cross the borders and the financial arrangements for that. On this analysis, we are satisfied that proper and acceptable accounting procedures are being applied. The aim of the monitoring, as of the planning agreement, is to avoid putting the company into a sort of straitjacket.
To some extent the right hon. Member for Leeds, North-East pin-pointed not only his own worry but that of industry about Government participation. There is an idea that the Government are asking industry to be locked into an unchangeable situation. That would be utterly unrealistic, and we recognise it as unrealistic in the monitoring and the planning agreement. Therefore, in our monitoring of the company's plan we accept that circumstances change and that, in the light of circumstances, modifications may be required, but we expect to have the case demonstrated and proved to us.
The right hon. Member for Leeds, North-East went out of his way to state his not surprising opposition to the whole concept of planning agreements. The hon. Member for Bromsgrove and Red-ditch (Mr. Miller) said that we should not go further than sectoral planning. This is a real quandry for Governments of either political complexion. Up to now both parties have, in various forms, indulged in national planning or national assessment of industrial and economic trends, and we have both gone through to the sector via the NEDC. We now have sectoral working parties, but our attempted planning and industrial guidance has foundered at sectoral level because decisions are not taken at that level. One can set a framework, but one must break from the sector to the key firm that can make a decision that can 166 lead to implementation—or partial implementation—of the recommendations of the sector working parties. That is the rÔle that we wish for the planning agreement. That is the next stage ahead.
I recognise that there are doctrinal differences between the two sides of the House on this matter, but I am trying to explain why we regard it as a logical extension of the attempts by various Governments to have greater communication between industry and Government. We are trying to get that communication through the sectors down to the decision-making points.
The right hon. Member for Leeds, North-East said that he was also against planning agreements because a firm which entered into an agreement was frozen into a particular situation. It is not our intention that agreements should be unchangeable. It would be irrational for us to make such a condition.
If Opposition Members consider the basis of the planning agreement, they will appreciate that, although it outlines parameters for 1980 and beyond, the detailed work is for this year, and it recognises that we have to roll the process forward in the light of experience and conditions at the time.
§ Sir K. Joseph
I trust the Minister will make sure that he answers the questions about leaks and the trade union attitude to planning agreements.
Time is short, and I was going to make those points. To my knowledge, there has been no leak from the Department. If there were, the Secretary of State and I would strongly disapprove, because we place a high value on confidentiality.
I know that the right hon. Member for Leeds, North-East has only just moved to his job as Opposition spokesman on industry, but if he looks at the original White Paper dealing with planning agreements he will find that trade unions were not to be parties to agreements. The provisions dealing with the passing on of information were designed to improve communications and ensure a consensus of approach for the future within industries.
The right hon. Member made some rather strange statements. He suggested that companies should be allowed to put 167 their own houses in order and he implied that it did not matter if they failed to do that and, therefore, collapsed, because resources would then be gainfully employed elsewhere. That is an interesting philosophy, but it differs from the philosophy followed by the Cabinet of which he was a member when it saved Rolls-Royce and Govan Shipbuilders. The right hon. Gentleman may dissociate himself from those decisions now, but he was a member of the Cabinet which took them and they are decisions of the same type as that taken on Chrysler.
The right hon. Gentleman said that a torrent of people are changing jobs every month. He is correct, but many people change their jobs because they want to do so, and that is rather different from having to change a job or having no job at all. Many people change jobs because they have been employed in seasonal occupations or in temporary jobs in, for instance, the building industry. There are many reasons for people changing their jobs, but they are all quite different from cutting off job opportunities in a wide area which is implied in the type of operation in which the right hon. Gentleman would indulge.
Clearly, the Opposition would have allowed Chrysler to collapse, and if they were in power and the situation occurred today they would still allow the company and all the firms that supplied it to collapse. They would be willing to accept all the difficulties and repercussions that would result in the Midlands. I suggest that the people of the Midlands should ask themselves how they would fare if the right hon. Member for Leeds, North-East were administering industrial policy now.
§ Question put and agreed to.
That this House takes note of the Eighth Report from the Expenditure Committee Session 1975–76 (House of Commons Paper No. 596) on Public Expenditure on Chrysler UK Limited, and of the relevant Government observations (Command Paper No. 6745).