KIRKBY MANUFACTURING AND ENGINEERING COMPANY

HC Deb 12 December 1978 vol 960 cc346-406

8.48 p.m.

Mr. Nick Budgen (Wolverhampton, South-West)

I am most grateful for the opportunity to raise the subject of the Kirkby co-operative under Class IV, I of the Civil Estimates dealing with regional support and regeneration.

I wish to deal with this subject more in sorrow than in anger. The story of the Kirkby co-operative, referring back to the period of the second General Election of 1974, is a classic example of the way in which the Government have tried by State subsidy to preserve jobs. In addressing myself to this problem I wish to express my sorrow for the 700-odd people who since 1974 have been so unhappily misled into believing that State subsidy is an alternative to profitable employment in the private sector.

I also add to my sorrow an element of sympathy and support for the Government. There is no doubt that the present Government have learnt by their mistakes. First, 1 pray in aid the Hansard report of yesterday's proceedings, where it is plain from the answers given by the Under-Secretary of State for Industry, the hon. Member for Nuneaton (Mr. Huckfield), to my hon. Friend the Member for Rushcliffe (Mr. Clarke) that the interim assistance given to Kirkby Manufacturing and Engineering Ltd has ceased. It is further plain from the full report in The Guardian of today that the Minister of State faced the workers in KME yesterday in a very firm though sympathetic manner. Indeed, so admirable was his attitude towards the workers, and so firm his resolve to explain to them the inexorable movements of markets and economic forces, that he had the misfortune at one stage to find, as the fourth column of the report says, that In contributions from the floor, Mr. Williams was accused of being a Tory and there was loud applause for claims that the Government was no longer Labour. Workers stressed that their prime concern was jobs. The present Administration have come a long way since the high and happy days of December 1974, but I hope that I shall not be considered to be crowing over past mistakes if I invite the House to consider for a brief moment this graveyard of reputations.

The first grant of just under £4 million was made at the end of 1974. The House will recollect that it was a controversial grant. It was given against the express advice of the Industrial Development Advisory Board. It gave rise to the senior civil servant who was then in the Department of Industry letting it be known that he had filed a minute to the effect that he, too, disagreed with this discretionary grant. Most important of all, it was expressed to be a once-for-all grant.

Indeed, on 4th August 1975 my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) asked the Secretary of State for Industry whether it is still the case that the grant to Kirkby Manufacturing and Engineering Ltd. of £3.9 million announced on 1st November 1974 is aid that is strictly once and for all."—[Official Report, 4th August 1975; Vol. 897, c. 7.] He received a written reply from the then Minister of State, Department of Industry, who said very firmly in reply to that Question "Yes ". Therefore, it was strictly once and for all.

One would have thought then that the Government's credibility in the sensitive and difficult area of discretionary grants to industry would be very much on the record as a result of those promises. Unhappily, however, it did not work out that way and a second substantial grant of £860,000 was made in April 1977. Again it was a grant which was made against the express advice of the IDAB.

The matter does not end there. The workers' co-operative has had £680,000 of temporary employment subsidy. In the hope that either Steelrad or perhaps Worcester Engineering would at some time take this embarrassing problem away, an interim subsidy of about £200,000 was paid until yesterday's announcement.

If there is any hope for the Government's industrial strategy, if State intervention is any substitute for profitable private industry, the unhappy 700 workers in the Kirkby co-operative can congratulate themselves on having had every support from this Administration. The fact is that State subsidy is no substitute for profitable private industry.

The disagreeable pasting that the Minister of State must have had yesterday—I dare say that a lot will be said tonight, admittedly mainly for the consumption of local newspapers —is an indication of how sadly the Government have learnt from the pressure of events. Unhappily, there is no alternative now to allowing the assets of Kirkby Manufacturing and Engineering Ltd. to be taken over by the receiver.

Mr. Robert Kilroy-Silk (Ormskirk)

Of course there is an alternative. There are many choices. No doubt some will be pressed upon the Government today by myself and my hon. Friend the Member for Keighley (Mr. Cryer). But let me take the hon. Gentleman up on his earlier point, when he said that a co-operative was no substitute for private enterprise. The co-operative was and has for the past five years been just that. If the hon. Gentleman had taken the trouble to look at the background he would have found that there had been no fewer than five previous owners of that factory, all of whom failed. They had substantial experience behind them, but none of them could provide the continuity and permanence of employment necessary in that area, and out of that situation grew the cooperative.

Mr. Budgen

I am sure the hon. Gentleman will speak in the debate later and make his point more fully. I do not intend to give way often in what I hope will be a short intervention. What I said —I must underline it—was that State subsidy was no alternative to profitable private industry. I am neutral on the question of co-operatives. If people wish to form their own co-operatives and to carry on trading in that way that is splendid. It has absolutely nothing to do with the State what people do in setting up partnerships or limited companies with which to trade. I was not trying to cast any doubt upon the co-operative organisation or principle.

In passing, it should be pointed out that although this was described as a cooperative it could hardly fairly be described as a co-operative in the sense that the share capital was both owned and provided by the workers. Only a nominal amount of the share capital was provided by the workers. Over 99 per cent. of the share capital was provided by the State.

Perhaps I put the argument somewhat firmly in saying that there was no alternative. There are impractical, unsatisfactory alternatives. But, to put the matter more accurately, I suggest that there is now only one satisfactory and honest alternative.

Unhappily, the receiver has to do his business. I say "unhappily", because he is an official of the court who has to act according to clearly circumscribed discretions. He is not subject to political pressure. He cannot be subject, as can the NEB, to pressure here in Parliament. His guidelines are not even subject to discussion, as the NEB's guidelines are. He is subject to the law and must carry out the law. That does not mean that the company's assets, or even the work force, will be dissolved. The receiver's desire will be to obtain the best price for the assets. But his overwhelming obligation towards the work force and the company will be to try to sell it as a going concern.

Of course, after the unhappy way in which the 700 or so men have been so grievously misled, partly by the present Government, but partly by their constituency Member of Parliament, it is very much to be hoped that the receiver will be able—

Mr. Kilroy-Silk

The hon. Gentleman has made a serious allegation. I have no doubt that it was a slip of the tongue, but it was the kind of thing he habitually does. Perhaps he would like to think again about his statement that the constituency Member of Parliament—I am he—misled the workers. That is a serious allegation. If the hon. Gentleman can back it up with evidence, perhaps he will do so now. If he cannot, perhaps on reflection he would like to withdraw it.

Mr. Budgen

I used carefully and advisedly the word "misled", because the work force has been led to believe that State support will be forthcoming and will provide them with continuity of employment. It demonstrably has not provided them with continuity of employment.

The alternative of possibly attempting even to order the NEB to make an investment is not open. The NEB has made it plain that it does not have the managerial resources to manage any investment in the company. Further, it has made it plain that it has the gravest doubts as to the viability of this commercial operation. Most of all, although it is admittedly asking for a vast increase in its funds, the NEB is trying to run its business as a good picker of commercial situations. Therefore, if through political interference the NEB were forced to make an investment, that would go against the whole philosophy that has currently evolved within the NEB.

It is also plain that the two previous companies which have suggested that in certain circumstances they might take over the assets and work force of Kirkby Manufacturing and Engineering Ltd. have backed off, because they say that unless and until the receiver does his work there is not the necessary calm situation and co-operation from the work force. If the receiver does his business, Steelrad or Worcester Engineering may well come forward with further offers.

I conclude as I began, on a note of considerable sorrow for the 700 men who have been—I do not resile from this—so grievously misled. They have chased a myth, the myth that State support can be their support indefinitely. The present Government are courageously biting on the bullet and explaining to them that State support cannot go on for ever.

In heaven's name, enough State support has been given to this co-operative. If the present Government are ever to be able to tell any firm "This is the end. This is once and for all ". they must, unhappily, say it in this situation. If they cannot say it now to this co-operative in Kirkby, and perhaps later to Meriden and even to British Leyland after that, they will never be able to say it.

9.5 p.m.

Mr. Robert Kilroy-Silk (Ormskirk)

I have never heard a more unconstructive, unhelpful and unhappy speech than that delivered by the hon. Member for Wolverhampton, South-West (Mr. Budgen). He said that he was not crowing, and yet that was precisely the tenor of his speech.

We have a serious problem here. It is not a matter for crowing or criticism. We are dealing with 700 men and their families. Their livelihood, and in many cases the livelihood of an entire town, is at stake. This is an extremely important and sensitive issue. It ill behoves the hon. Gentleman to come here to make party points. I hope that the hon. Member for Rushcliffe (Mr. Clarke) will not follow his hon. Friend's example, as he has done in the past. I hope that he has learnt his lesson.

I have lived with this problem almost on a daily basis for nearly five years. My right hon. Friend the Minister of State has done the same for the past 18 months. I have been in virtual daily contact with the two senior shop stewards, Jack Spriggs and Dick Jenkins. I pay tribute to what they have done. They have played a significant role in the events of the past five years. It is largely as a result of their efforts that 760 men and women have remained in employment. I have the authority of Jack Spriggs and Dick Jenkins to say that we are extremely grateful for what the Government have done. That may not tie up with what I shall be saying later, but it is important to get on the record that I, as the constituency Member, the workers at the factory, those in local government and many other local organisations in the town are grateful for the £3.9 million once-for-all grant given by the then Secretary of State in 1974.

The then Secretary of State, now my right hon. Friend the Secretary of State for Energy, embarked upon what many of us regard as a revolutionary, courageous and imaginative experiment. We in Kirkby owe him and the Government a great deal of gratitude. We are thankful for the additional amount of temporary employment subsidy which the cooperative received and for the £860,000 given on the authorisation of the present Secretary of State for Industry in 1977.

Although it may not look like it from today's vantage point, we were appreciative of the Government's decision—reluctant as they were—to accept the suggestion made by Jack Spriggs and Dick Jenkins that a working party be set up to look into the available options open to KME. That was a suggestion made in September and one which I know the Minister of State was initially reluctant to accept.

As the Opposition never tire of pointing out—no doubt they will do so tonight—we have received a great deal of money. But we have to put that alongside the money that would necessarily and inevitably have been spent by the Government had the co-operative not been saved in 1974. I refer to the figures given by the Minister of State, which are slightly larger than those which I would have quoted. He said that if the co-operative had not been in existence there would have been a total of £9 million to £10 million paid out of public funds in unemployment pay and social security benefits for the 700 people, on the assumption that they would not have found alternative employment.

Given the high level of unemployment in Kirkby and on Merseyside generally, it is unlikely that many of those people would have found alternative employment. The long-term unemployment figures for Merseyside demonstrate that. Even if all the workers had found alternative and immediate employment, that would have reduced the limited number of jobs available on Merseyside, so that the total number of unemployed would have remained the same and the amount of money expended would have been identical.

Having said that, however, it is also fair to point out some of the background and the history of the co-operative. It is not true to say, as the hon. Member for Wolverhampton, South-West said and as has been said on many occasions in the press, that the co-operative has failed. That is not true. It has not failed. Even if it goes into liquidation or receivership tomorrow or next week—which God forbit—it will not be a failure which can be attributed either to the worker-directors or to the work force, or, indeed, to the concept of a co-operative.

The problems that it faces are not a criticism, and should not be taken as implied criticism, of the validity of the co-operative ideal. The workers at Kirkby, at KME, have demonstrated quite clearly, through five very hard, long and difficult years, that they can run a factory and that they can take unpalatable and unpopular decisions. Without the benefit of any training, experience or adequate managerial expertise, guidance or advice, and thrown into the front line at a moment's notice, they proved that they can take the kind of decisions that are necessary and run a factory in a way that many people, particularly those on the Tory Benches opposite, have always denied was possible. What the workers at Kirkby have demonstrated is that there is a willingness and a capacity to involve themselves in the running of industry and, therefore, in the working of industrial democracy in the real sense.

They have kept in employment more than 700 people who would not otherwise have been employed. In the context of a 20 per cent. unemployment rate in Kirkby and a 13 per cent. unemployment figure on Merseyside as a whole, that is no mean achievement. Indeed, it is a very significant and honourable contribution that those worker-directors, the Government and the workers themselves have made.

There were enormous obstacles faced by the co-operative from the beginning. Given the obstacles that were in the way, and which have continued to be encountered throughout the existence of the co-operative, it is remarkable, to say the least, that it has survived for so long. To begin with, it was under-financed. Much has been made, and no doubt much will be made during this debate, of the £3.9 million once-for-all grant given in 1974. Yet, if we look at the evidence given by officials from the Department of Industry to the Public Accounts Committee on 17th May 1976, we find that the then permanent secretary, Sir Peter Carey, admitted that the initial grant was not sufficient for its purpose. I quote from paragraph 2673, in which he says, in an answer to a question from myself as to whether the £3.9 million was enough: It was what we calculated at the time was a reasonable figure to provide". Yet a senior official from the same Department, on the same day and in the next paragraph but one, a Mr. Lippitt, said: It was in practice the figure that the cooperative put forward. The Department did draw attention to the fact that insufficient allowance had probably been made for inflation in arriving at this figure. Therefore, in the circumstances when the co-operative was starting up—and we knew that there would be very heavy losses at the beginning—the provision of working capital was probably insufficient.

There seems to be some conflict of evidence there. On the one hand we have the permanent secretary to the Department of Industry, Sir Peter Carey, saying that it was what had been calculated as a reasonable figure at the time, and then Mr. Lippitt, a senior official in that Department, 10 seconds later on the same day, saying that they had understood that they had made insufficient allowance for inflation and for heavy losses right at the very beginning.

In other words, the Department accepted, even when it was negotiating the grant to be paid to the co-operative, that the £3.9 million would not be sufficient to form the basis of a viable enterprise and permanent employment at the site. It is therefore not surprising that the cooperative ran into financial difficulties. It was, rather remarkably, allowed to go ahead on too narrow a financial base. There is an important lesson in that for the Department and the Government.

The co-operative faced other obstacles apart from the admitted and accepted under-financing and under-capitalising. From the beginning it started life with a major handicap. Some of the other obstacles have been pointed out in the report of the working party on KME which was published in November this year. The large and embarrassing size of the factory was one obstacle. It has an extremely impressive site. The working party pointed out that it is the same area as five football pitches.

The working party and the officials giving evidence to the PAC pointed out that there would always be large and crippling overheads which the co-operative had no way of dealing with effectively or eliminating. Mr. Lippitt told the PAC: it would be better for the co-operative if they had a smaller plant more suitable for this kind of work rather than a very large plant for heavy press work. It was suggested to him that that was not an option open to the co-operative. He replied: They inherited it in just the same way as they inherited the fruit juice and the radiators. They inherited the plant. It is important that all this should be placed clearly on the record. The Department's official went on to pay tribute to the workers. The House should remember that this was in May 1976 and that the co-operative had effectively come into existence early in 1975. I asked Sir Peter Carey whether he would accept that the work force had shown in the previous two years a dedication, enthusiasm and entrepreneurial spirit that had been a great credit to the work force and to the idea of a co-operative. Sir Peter replied: Yes. I think that I did pay tribute to that in my initial remarks about it. I asked Sir Peter whether he would pay tribute to the way they had searched for new markets, introduced new products and even been more ruthless than a trade union in reducing its manpower. He answered: Yes, I think we accept all that. I suggested that the problems that the cooperative faced were inherited and that it had made its own successes. I asked whether Sir Peter agreed, and he replied "Certainly."

It is important that those comments should be put on the record because at that time there was none of the criticism of the co-operative that we hear rumoured and leaked from various sources and repeated by the media and the enemies of any radical or innovatory idea, particularly one which helps the unemployed. There was certainly none of the criticisms that we are likely to hear from the Opposition tonight. There was no criticism of the co-operative, the worker-directors and the way in which they had worked or of the work force.

Indeed, the whole tenor and tone of the evidence given by people who knew exactly what was going on in the co-operative and who were monitoring it on a more or less daily basis was related to the difficulties that the work force faced. The emphasis was on the difficulties—which were not of the workers' making —involved in the inhibiting, hostile environment which made the success of the venture difficult, if not unlikely.

Mr. Kenneth Clarke (Rushcliffe)

The hon. Member rightly stresses the insuperable difficulties which the co-operative faced from the beginning. He has mentioned the under-capitalisation and the over-large premises with excessive overheads. Perhaps he will talk about the bizarre product range which was never rationalised. Those matters are well known and they were good reasons for explaining to the work force that the project was ill based from the beginning.

The hon. Member and other advocates of the workers' co-operative, including the worker-directors, have spent the last five years waving these difficulties aside. It ill befits the hon. Member now to say that the workers have achieved a remarkable amount, given the insuperable difficulties which they faced. The hon. Member is largely responsible for dismissing the advice that was given and for money being invested because these difficulties were ignored.

How does the hon. Member answer the charge that he misled the workers by playing down the difficulties in the last five years? Only now does he discover those difficulties, when the end has come and £5 million of taxpayers' money is invested in a doomed enterprise.

Mr. Kilroy-Silk

The hon. Member is wrong. I have not just discovered those difficulties. We all knew about them from the beginning. The quotations that I have just given were over two and a half years old. They were remarks made in reply to my questions. That does not mean that we run away from difficulties. We have faced the difficulties and have attempted to overcome them.

If the hon. Member for Rushcliffe represented a constituency such as mine and he occasionally saw some of the ravages of unemployment, he would also feel that, even when facing the impossible, every conceivable measure to protect and preserve unemployment should be taken. That is so even when the situation is difficult and the prospects of success are slim. It is important to take the chance. I do not minimise the difficulties. I was as aware of them as anybody else.

Tonight is the first opportunity that I have had to put the facts on the record. One of the handicaps under which I, the work force and the two worker-directors have constantly laboured in the last two and a half years or more, when we have known ourselves to be in difficulties, is that we have had to be content, when trying to bring in other companies and trying to achieve additional assistance from the Government, to operate behind closed doors. All this has had to be done in a discreet and quiet fashion. Had there been a public hint of any problem or difficulty, or had I or any of my colleagues mounted a "Rescue KME" campaign, the creditors would have been at the door and the company would have moved to receivership and liquidation.

I am well aware of the problems. I have lived with them daily. I have tried to operate strategically in the interests of the co-operative. I defy either the hon. Member for Wolverhampton, South-West or the hon. Member for Rushcliffe to substantiate the claim that either I or the Government have in any sense misled the work force. One cannot be accused of misleading people who have been in employment for four years and more who would not have been in employment if it were not for the decision taken by the work force and the Government then and since. Tonight is another story. Perhaps we shall hear the story later.

The hon. Member for Wolverhampton, South-West talked about the amount of State money involved. The expression, "State money" is a "big brother" ideal which often lurks behind the hon. Member's innuendoes and nuances. He complains that public money is used to prop up such industries. He did not refer to the £12 million a day which allegedly is being poured into the so-called profitable sector of private enterprise.

It is all very well for the hon. Gentleman to complain about the amount of public money that has gone into my constituency to preserve jobs. However, he does not turn the same critical gaze on the larger amounts of public money —his money, my money and everybody else's money—that go into his allegedly profitable private enterprise.

The co-operative faced the difficulties that I have enumerated. It was not the first to face those difficulties. If it is to go into liquidation for receivership, it will not be the first to fail to overcome the difficulties. The hon. Gentleman's much-vaunted private enterprise has faced the same sort of difficulties. There were other concerns before the cooperative with far more capital behind them, far more industrial, commercial and financial experience and far more management ability at their disposal which failed, and failed dramatically, at the same site after producing the same sort of products.

The factory was built in 1960 by Fisher Ludlow. It made a loss and it was sold to Parkinson Cowan Limited in 1968. Further losses were made and Parkinson Cowan sold it to Thorn Electrical Industries in 1971. After further losses, the site was sold to International Property Development Limited in 1972. After that concern had made losses, it went into receivership in 1974. Therefore, the track record of private enterprise on the site is not a testimony to the efficiency, entrepreneurial flair, spirit of adventure or managerial competence of private industry.

Mr. Budgen

The hon. Gentleman must understand that private industry aims for success but that failure is an inevitable part of the entrepreneurial system.

Mr. Kilroy-Silk

That is a callous, hard-hearted and ruthless attitude. It is not an attitude that I share. There are too many of my constituents on the dole for me to take the hon. Gentleman's attitude and to say that everything has to be balanced in the books of profit and loss. I have never accepted that sentiment or ideology. If I did, I should be sitting in the same part of the House as the hon. Gentleman. I have not accepted that attitude, and neither has the hon. Gentleman's party when it has been in Government.

The Conservative Party may make certain noises when in Opposition, but more than half of the employment in my constituency depends upon Government grants, subsidies and loans. That employment has been so dependent during not only the lifetime of the present Government but during the lifetime of the previous Conservative Administration and the two previous Administrations.

The hon. Gentleman is advancing an easy political argument but it is not one that his party has carried out in practice. A significant proportion of employment in assisted and development areas exists only because of public money and Government intervention.

It may be that I am being over-sensitive and that criticisms may be made of the co-operative. All I am saying is that we should not blame the co-operative, the ideal of the co-operative or the work force for what has gone wrong and for what has been generally endemic to the site because of its size and location.

Mr. Budgen

The hon. Gentleman, who understands the market argument, surely appreciates that no blame necessarily is attached to failure within a market system. For the sake of argument, the ostlers who ran the coaches were not to blame because their form of transport became unfashionable. I am making no allegations against the co-operative. I am sure that the workers made an honourable attempt to succeed. No moral opprobrium attaches to them in failure. All that has happened is that reality has eventually caught up with the co-operative.

Mr. Kilroy-Silk

It will catch up with the hon. Member, and it will be a very sad and sorry sight when it does.

Not only did the co-operative lack adequate finance at the beginning and labour under insuperable difficulties throughout its existence. It also lacked proper advice and guidance from the outset. No advice was given to the work force on the setting up of a co-operative. No help came from the trade union movement. In that sense, perhaps the hon. Member has a point. If he is being contrite about the cooperative and talking about men there as "honourable ", I would have welcomed his support during the past five years. But to be fair to him I must be fair to my colleagues, and it is true that the co-operative has only now, when it is in the news, become a bandwagon on which people quickly jump for whatever motive. Only now are we getting the support that should have been expected all along from the trade union and Labour movement.

Let it be said, however unpopular it may be and however many people it may offend, that the workers at Kirkby, facing enormous problems, have never received from the so-called international brotherhood of the trade union and Labour movement the kind of support in financial terms or in advice that they normally would have expected. It does no credit to the Labour and trade union movement generally that it has stood very largely on the sidelines when its help was needed most. I speak specifically about the offer of financial assistance which could and should have been forthcoming from some of our larger trade unions, many of whose members work at the company.

It would not have hurt a lot of our richer companies or the co-operative movement itself to have helped with some financial assistance. Had this been done at the appropriate time, it is possible that we would not be having this debate tonight and that the co-operative would not be in dire straits.

Mr. Leslie Spriggs (St. Helens)

Is my hon. Friend aware that he has more friends in the House than he appreciates? Some years ago when private enterprise failed at the factory, a number of my constituents who were employed there appealed to me to support some form of Government grant to keep the factory going. I agreed because the Merseyside area had suffered from the growing disease of unemployment. When faced with constituents without an opportunity for alternative employment, one is prepared to try as hard as they are to retain the employment. I gave all the weight I could to the setting up of the co-operative. I am proud of the support that we got, and I am proud of the Minister who put it into operation. I hope that the Government will offer the same kind of money to the co-operative as they were prepared to offer to private enterprise to take over the firm.

Mr. Kilroy-Silk

I am glad that my hon. Friend the Member for St. Helens (Mr. Spriggs) is here. It is true that he and other Merseyside colleagues have assisted enormously on this project. Over the years he has certainly spoken vigorously with Ministers on many occasions in putting the case for the Kirkby co-operative. Certainly my hon. Friend is not a Johnny-come-lately.

I was referring to organisations outside the House, Unfortunately, it is a fact that there are many trade unions and trade union leaders who have not given the help for which they were specifically asked. Perhaps now that we have a new general secretary of the Transport and General Workers Union he will be more helpful and charitable than were others in the past.

It is also true to say that we have not had the kind of help we expected from many of our other colleagues in the Labour movement on Merseyside—not in the House. My hon. Friend the Member for St. Helens well knows that there are many of our colleagues outside the House whose support we would have expected but who have quietly, behind the scenes, been some of the co-operative's most vociferous critics. The co-operative, its work force and its worker-directors have, right from the beginning, been very largely left to their own devices and told to get on with the job as best they can, without any adequate background experience or advice.

I know that it is not the job of the Department of Industry to go round setting up co-operatives. I know that it may not have the facilities and the resources to provide the kind of skill and professional ongoing assistance and advice which are necessary in a case such as this, but my right hon. Friend the Minister of State will surely agree that one cannot set up a co-operative, in the circumstances of a sit-in, without then going on to provide a fine back-up of facilities, advice and guidance in terms of how a co-operative should be set up and function, and also—in many ways much more important—the managerial aspects of the enterprise.

Yet in spite of all those difficulties the co-operative still exists. There are 760 people still employed, and they have a 10 per cent. stake now in the United Kingdom market for central heating radiators.

There are several options before us which the hon. Member for Wolverhampton, South-West did not seem to know about. There is the option which was put forward by the co-operative sometime in September, and put to the Government, based upon the report of PA Consultants, asking for an injection of a further £2.9 million of Government aid, on its estimate that the co-operative would become viable within two to three years. PA Management Consultants is an eminently respectable organisation and is frequently used by the Government, not least recently in conducting a survey of employment prospects on Merseyside, ironically. PA Management Consultants clearly believes—although I know that the Government disagree—that the co-operative could become viable and profitable certainly within two to three years, with an injection of £2.9 million of Government money and with improved management. That option was turned down.

We then had the working party, which was the suggestion of the worker-directors. The working party reported that Worcester Engineering should take over the co-operative. That company has now walked away from the specific proposal. Worcester Engineering was recommended as being the most appropriate private firm, with a substantial amount of Government assistance, to take over the co-operative and run it as a private enterprise concern. It has now decided that it should not involve itself in that enterprise.

Again, it has been said—perhaps it will be said tonight—that the working party recommended Worcester Engineering and that the workers at the co-operative had agreed in advance to accept the recommendations of the working party, whatever those recommendations might be. It could therefore be argued that the cooperative had a moral obligation to accept that Worcester Engineering would be taking over.

But, given all that, I do not think that one has therefore necessarily to go on and say that the work force at KME must accept every single condition or, indeed, any of the conditions or a major part of the conditions that Worcester Engineering laid down for taking over the factory. There are still matters for negotiation, whether it be over who is to be made redundant, at what time and on what terms, or what hours are to be worked. There are a number of other factors which are of legitimate concern and matters for negotiation between the work force and the putative new owner of the factory.

The fact that the two sides could not come to an agreement is perhaps unfortunate and regrettable, particularly given the alternative which may face a co-operative and its work force. But it should not be said that the 'workers, because they are facing a bleak future, have to lie on their backs with their legs in the air and say "Hail, Worcester Engineering ", regarding it as a great saviour and accepting every single condition that the company wishes to impose upon it. Clearly, that would not be acceptable, either to me or to the work force. Although the working party put that forward as its favourite option, its implied favourite option was really a takeover by the National Enterprise Board.

Paragraph 4.19 of the working party's report states: We note that the Secretary of State for Industry has powers under the 1975 Industry Act to direct the NEB on matters which include ' the maintenance and development of any industrial undertaking.' However, given our own reasons for opposing the provision of further funds by the Department of Industry and the doubts of the NEB, we are advised that the Secretary of State for Industry is most unlikely to use his powers of direction in this matter. It goes on to say: Nevertheless, we believe that KME can survive and become profitable, despite all the difficulties. The end of paragraph 4.21 states: We did, however, feel that, even if a private sector company took a controlling interest in KME, there were considerable advantages in maintaining the cooperative at Kirkby in some form. I would have thought that it was fairly clear to anyone making a close reading of the report that the working party was precluded by the intimations that it received from the NEB—we know what those were—and by the advice that it received from the Secretary of State. In fact, the members of the working party have said privately that their preferred option was for the NEB to take over KME. But they could not adequately consider that because it was made clear to them that even if that was what they recommended it just was not on.

To me, that is one of the depressing aspects of this whole affair. The NEB has not done very much for Merseyside. In fact, compared with its equivalents the Scottish and Welsh Development Agencies, and given our employment problems, the NEB on Merseyside is a very shabby, shoddy enterprise indeed.

Here was one area where it could have done something imaginative and constructive, where it could have taken over a company in one of the three areas of highest unemployment in Great Britain—Sunderland, Skelmersdale and Kirkby. Here we have a co-operative which needs exactly the kind of resources which I thought the NEB was created to provide and which it certainly has at its disposal. Here we have 700 jobs which are threatened in an area where there is 20 per cent. male unemployment. One would have hoped and expected that the NEB would take a more radical posture in this instance and show a commitment to Merseyside and Kirkby which it has not shown so far. Yet it failed to do so.

It is also distressing that the Secretary of State feels that he is unable to instruct the NEB to take over the co-operative. It is no good the Minister of State saying tonight, as he may do—because he has said it on other occasions—that the NEB does not have the managerial competence. I accept that. But PA Management Consultants has, and in its submission in September of this year PA Management Consultants offered to provide requisite and appropriate management for KME either if the Government put in £2.9 million or, indeed, if the NEB took it over. Therefore, the management is there. What has been lacking has been the political will actually to continue with this very important, vital and, in employment terms, crucial experiment.

The enterprise, under Worcester Engineering, could go ahead with £4 million of public money. Yet we heard not one word about that from the hon. Member for Wolverhampton, South-West, who has disappeared into the mist having made his little speech. Presumably, we shall hear nothing about it from the hon. Member for Rushcliffe, yet the Conservatives were prepared to put in £4.9 million and sell the co-operative to private enterprise in order to make it profitable rather than make it profitable as a cooperative at a cost of £2.9 million.

In all the discussions that I have had with KME and at the numerous meetings and deputations which Ministers and worker-directors have had over the last four or five years, the guiding principle has been very clear. It is certainly my guiding principle and it has been that of Jack Spriggs and Dick Jenkins. That is, that our major objective shall be to maximise the number of jobs that are preserved and maintained at the co-operative. This has been our view consistently since 1974 after the work-in. Indeed. given the employment problems of Kirkby, no other course of action would have been reasonable. It is my view that the number of jobs comes first rather than the concept of the co-operative. It is the view of Jack Spriggs and Dick Jenkins. It is the view clearly of the work force as a whole.

It does not matter all that much—this needs to be said—who actually owns the company. That is what the work force says and what the worker-directors say. They have said it not only to me but to the Minister, as he will testify, on numerous occasions.

The most important need—it has to be the most important—is to maintain the maximum number of jobs. We would all prefer that those jobs were maintained under the auspices and within the context of a co-operative. That is highly desirable, something we all want and have always worked for. But jobs come first. It is not unnatural given the high unemployment levels of Kirkby and Merseyside.

We do not need to lose the 700 jobs provided at Kirkby. We certainly cannot afford to lose those jobs. We have a chance of saving them if the Government will reconsider their decision not to provide the £2.9 million that was asked for. They now have a chance to save those jobs by providing the £2.9 million and putting in PA Management Consultants. It would certainly cost far less than the cost to the Government and to the Exchequer of unemployment pay and social security benefit for the 700 and more who will not have any real prospect of finding a job tomorrow, next week, next month or next year. Hundreds of them will be condemned to being on the dole for long periods. If we have saved £10 million in the last four and a half years, we will save more than the £2.9 million for which we are asking in the next four years. That in itself makes good sense.

The Government got a very good bargain with KME in the past. They could get a very good bargain in the future. I therefore impress that point upon my right hon. Friend, the Minister. The price is cheap. It is a cheap price to pay to avoid the misery that would be inflicted on individuals if KME were to go down. It is a cheap price to pay to avoid a terrible knock for Merseyside's morale, which, as my hon. Friend the Member for St. Helens will acknowledge, is already suffering through redundancies and closures. We have experienced them almost on a daily basis for the last five years and more, long before the lifetime of this Government.

People on Merseyside are extremely distressed and apprehensive. They constantly fear any industrial moves because all industrial moves have been had industrial moves. There is little on the horizon that looks enterprising, popular or likely to bring jobs to the area.

We cannot afford the continuing sapping of confidence and morale which is occurring through redundancies and closures. We cannot afford the closure of the co-operative at KME. Certainly the price for the Government to keep this vital and imaginative experiment alive is cheap. It is cheap even to prevent the inflow of permanent imports to replace the lost production of the co-operative if it is allowed to fail.

My preferred option, apart from the proposal that I know the work force is submitting to the Minister tomorrow, is that the NEB should take over the Kirkby co-operative and that management should be provided from other sources. We accept the need for a strengthening of management and the need for a new management team. There are many problems which I have not mentioned but which are acknowledged. There are many faults. and failings. There have been many wrong decisions within the co-operative. That is accepted—it certainly cannot be denied—but it is important, having. accepted that, that we attempt to keep this vital experiment in being, not simply as, an experiment but because it is keeping in work 700 people who otherwise would not have work.

Mr. Spriggs

If a dog is given a bad name, it sticks. The Merseyside area has been given a bad name from a labour point of view with industrial disputes. Yet, compared to other parts of the country, Merseyside has nothing like the industrial problems that people would have the rest of the country believe. If a parliamentary deputation from both sides of the House were to visit industry in the area and see the quality of work turned out by men and women, I believe that Ministers would change their minds about the Kirkby co-operative.

Mr. Kilroy-Silk

My hon. Friend is right about the image that Merseyside has and to say that the reality is nothing like the image. My hon. Friend may have read the articles that I wrote for the Liverpool Echo—;and, indeed, The Daily Telegraph, although I hope that he wilt not tell too many people about the latter. Both showed clearly from the Government's own figures that Merseyside has a better record of industrial relations than most other comparable regions, such as the West Midlands, Scotland and Wales. We lose far fewer hours, fewer man days, in strikes than most other regions. At any time 98 per cent. of Merseyside is totally strike-free. Yet Merseyside has two of the most strike-prone industries anywhere located there—motor manufacture and the docks. No other area has the two together.

But that leads me from the point. One of the problems for me and my hon. Friends who have represented Merseyside constituencies in the past is how to explain to our constituents and Merseyside as a whole why the Government have been able to do nothing about redundancies a Plessey and the closure of Thorn or Courtaulds. We have had to raise our hands in despair and say that we do not have the powers to do anything about GEC-AEI, Lucas, Tate and Lyle, Albright and Wilson, or Pilkingtons in St. Helens. Every time, we have had to sympathise and say that the Government do not have any powers, there is nothing we can do and we live in a free society, in which people can buy and sell companies over the heads of their workers without informing them. They can close down a factory in Kirkby, Liverpool or Skelmersdale with little thought for those concerned or the area, and there is nothing that we can do about it.

But in this case we can do something about it. With the co-operative, the matter lies within the Government's hands directly and immediately. We cannot explain to our constituents why our Government refuse to act. We can do it, but they do not believe us, when we talk about Plessey or anywhere else. We cannot do it when talking about this cooperative. Here, the Government have a direct and immediate responsibility.

They should forget about IDAB and the permanent secretary to the Department of Industry and his accounting officer note. We must take account of our social responsibilities. We are not prepared to tolerate—nor can we, nor should we do so—the consigning of thousands of our constituents to the dole queues. In this case, we do not need to do it. The Government have the powers and the resources and they can make the decisions. On social grounds alone, I ask the Government now to decide in favour of Kirkby.

The men and women at that factory have demonstrated by their actions that they want a job. They have fought for their jobs. They fought for them by welding the gates together in the sit-in in 1974. They have fought continually since then for the right to work, and I appeal to my right hon. Friend the Minister to give my constituents in Kirkby no more than they ask—the right to work.

9.55 p.m.

Mr. Bob Cryer (Keighley)

I am grateful for the opportunity to speak briefly in the debate on KME, because it involves an important matter of principle. This is not just a question of one area and one constituency. The matter that divides the two sides of the House is one of ideology.

I find it distasteful that well-heeled Tories receiving public funds as MPs and drawing money from elsewhere—the hon. Member for Rushcliffe (Mr. Clarke) is the spokesman for the Pharmaceutical Society of Great Britain—should talk about putting people on the dole. I hope to see the day when Tory MPs talk about putting people on the dole but head the queue themselves. It would be more fitting if they were prepared to do that, instead of always telling other people to do so.

We on the Labour side would naturally have preferred KME and every other cooperative to start off on the best possible footing. Much has been made by my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk), who represents the Kirkby area, of the difficulties that KME faced. Of course, we would prefer not to have to support a co-operative which started off in crisis. However, we face an economy which is dominated by private enterprise capitalism, and in those circumstances private enterprise capitalists are not likely to give their profitable plums to workpeople who want to investigate the possibility of a co-operative endeavour. In those circumstances, we are dealing with the scraps, with the discarded marginal items of capitalism. That was the case with Kirkby. It was a scrap of capitalism that failed on at least four occasions on the same site. Its orginal aim was to bring work to an area of high unemployment.

There is in KME a determination to keep jobs. It is led by the former shop stewards and conveners Jack Spriggs and Dick Jenkins. Less than £5 million has been spent on this project, temporary employment subsidy apart. We know that when the grant was orginally made the accounting officer, the permanent secretary in the Department of Industry, under the Exchequer and Audit Departments Act of 1866, wrote a note expressing concern. I think that that, too, represented an ideological attitude. We are talking about a Department that financed the development of Concorde, and I cannot accept that the expenditure of around £700 million, with aircraft costing £36 million each, was at no time the subject of some sort of scrutiny. I should be interested to know just how many statements the accounting officer has made under that Act about some of the lavish chunks of private enterprise expenditure that have taken place.

There are good signs about what KME has done. Paragraph 2.15 of the working party report said: Following the loss of over £1.0 million in 1975, Kirkby had reduced the loss in 1976 to same £400,000 on a turnover of £6.8 million. So something of value was achieved. As my hon. Friend said, 750 jobs were preserved and the co-operative gained 10 per cent. of the radiator market. The workers had taken over a fairly complicated technological process. It is worth saying in response to my hon. Friend the Member for St. Helens (Mr. Spriggs) that it has not been the subject of industrial disputes and that the workers have been working in harmony.

We must point out that co-operatives are not simply some slightly different form of undertaking. They represent a qualitative difference in the organisation of the means of production. People are working together instead of against one another. That is something that the Opposition cannot or will not understand. That is another reason why they do not want co-operative endeavours to succeed. They want them to fail so that they can point to what they would claim as the vaunted success of private enterprise.

Losses were being made at KME, and consultants who were employed to report on the co-operative spent a good deal of time examining the position. They reported in March 1978 and suggested a number of improvements in conditions. For example, they suggested a reduction in the total of 744 employees to 639. The subsequent working party report said: On this basis PA predicted that KME would at least break even on its trading in 1978–79. Although this represented at best a very small return on its investment, it did represent a very significant turn-round compared with a loss of £1.24 million in the 10 months to January 1978. KME accepted the conditions in the report and applied for f2.9 million of the grant aid. That figure of £2.9 million represented the cost of closure, redundancy payments and dole for 740 or so employees for a year. The dole for a year is a likely condition for anybody who is declared redundant in Kirkby at present.

The PA Consultants' report was a massive and comprehensive document. The firm of PA Consultants, as my hon. Friend the Member for Ormskirk pointed out—I am sure that he read my article in Tribune—is not an obscure organisation. It was concurrently employed by the Department of Industry to carry out an other massive review of job opportunities and inducements on Merseyside. Therefore, that firm had the imprimatur of the Department of Industry. In other words, the Department of Industry did not hold that organisation in low regard, otherwise the Department could not have justified the expenditure on employing it in that area of activity. I know that the Civil Service checked every question and point raised by PA Consultants and assessed the application in a private committee and recommended to the Industrial Development Advisory Board that the application should be turned down.

I wish to point out that IDAB, which was chosen by the Labour Government, has seven captains of industry with 35 directorships spread among them, as opposed to three trade union representatives. If we are seeking to change society by virtue of our election manifesto, that surely represents an inexplicable choice by the Secretary of State.

We recognise that we must consult experts, but it is strange that IDAB should contain so many who represent private enterprise philosophy and attitudes. The Board is not subject to personal representation, or, indeed, to representation by Ministers. It is part of the pattern of influence of the Civil Service. I have no knowledge of this, but I imagine that the Civil Service would recommend appointments to the IDAB.

One of the difficulties which Labour Governments always face is that senior civil servants have clear views of their own about industrial policy. They believe in closing down all unprofitable factories and in investing only where profits are high. They tend to ignore the impact on jobs or on Britain's economy. They tend to support strongly—and this is a general comment—the authority of accountants and managements against trade unions and shop stewards. They believe that it is mainly workers who are to blame for Britain's industrial failure. They hold these views because they are in day-to-day contact with the City and with top executives of British and foreign companies, to whom they look for support and an exchange of views, attitudes and ideas.

It is important that our Ministers in a Labour Government are prepared to make political decisions. These decisions are often difficult to make but they should be made because, whatever the views of civil servants, it is political decisions that are important and accountable to this House, no matter how tough they might be.

The working party suggested that further public funds could be provided subject to conditions. It said, in paragraph 4.17 of its report: Our view is therefore that two basic conditions would have to be met if KME were to be provided with further public money, while continuing as a co-operative. First, its management would have to be strengthened. Second, the body providing funds would have to agree a detailed plan for ending KME's losses within a short period. Therefore, it did consider that the cooperative should continue provided that two basic conditions were fulfilled.

Mr. Kenneth Clarke

A few moments ago the hon. Gentleman made a rather thinly veiled personal attack on senior civil servants, civil servants in his former Department and individual members of IDAB, and he began his speech by trying to make a personal attack upon my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) and myself. So far as I can see, the only thing that we have in common is that we all disagree with him. Is it his case, on getting down to it, that people holding these positions should abandon commercial criteria or profitability and markets when investing public money? Is he really saying that political and not commercial criteria should decide where taxpayers' money is invested?

Mr. Cryer

I shall come to that matter because I want to relate the position of KME to the public guidelines both for 1972 Industry Act assistance and the NEB guidelines, because it is important that these comments should be marshalled against our publicly expressed views.

I continue briefly with the points from the working party report. It said that there would have to be very close monitoring and No monitoring process of the type that we envisage could be used… We therefore take the view that KME should not receive further funds directly from the Department of Industry. However, one of the factors of the report, which I think is a serious matter, is that it was indicated to the working party that the Secretary of State would not use his powers under section 3 of the Industry Act 1975 to give the NEB a direction to require it to become involved in KME. As has been pointed out, the question raised by the NEB of not having the day-to-day management expertise was not really a valid one. PA Consultants had offered—it does so as a matter of course—to provide the management expertise, to ensure that the conditions that were laid down were carried out and that its reputation—which was placed on the line by its public commitment to KME and its resolution that the position of KME could be reversed so that it could hold its own—should be safeguarded by some form of assistance in the day-to-day management.

I believe that that alternative should have been considered by the working party, and I am sorry that the Secretary of State was not prepared to use his powers —powers that were given to him by this House but which, unfortunately, have not been implemented.

When the working party reported, IDAB sweetly and swiftly agreed to provide £4.3 million to Worcester Engineering Limited. I know that there have been a number of strange stories in the Financial Times, a paper which seems to have many stories of an initimate nature, shall we say, from the Department of Industry, although it could be pure speculation on its part. It was suggested at one stage that Worcester Engineering would in fact offer two consultancies to the leaders of the co-operative.

I understand that my right hon. Friend the Minister has said that he was anxious only to provide some sort of cushion from the harsh realities of the dole queue for the two leaders concerned. I know that he would agree with me that the harsh reality of the dole queue would apply to Jack Spriggs and Dick Jenkins and all the other people at the co-operative who were faced with unemployment. The main solution is not to think in terms of dividing the leadership, say, from the work force, but to recognise that the main aim is to preserve the co-operative endeavour and the number of jobs as vigorously and as rigorously as the Government can.

Failure to support KME is not simply a question of a particular co-operative in a particular area; it represents an ideological victory for those civil servants who believe purely in the profit motive and who are giving that advice, which, unfortunately, is being accepted. It represents a majority of the private enterprise view on IDAB, and of course it represents a victory for the Opposition Members who have initiated this debate and mounted this attack on public expenditure.

I am extremely surprised at the Opposition's view. They are always prepared, on ideological grounds, to attack comparatively small amounts of public money being given to co-operatives such as KME and Meriden, but I never hear them protests about the £11 million or so a day that goes largely to private enterprise. In 1976–77, for example, we spent about £719 million on regional development aid alone, yet there has not been a peep out of the Tories about that sort of expenditure.

Mr. Budgen

The hon. Gentleman thinks that he smokes me out. I want to make it plain that whenever I have had the opportunity I have always made it clear that I am opposed to all forms of regional aid. I am opposed to the "stick" policy of regional aid, in the form of the necessity to get various forms of licence or permission from the State before one can develop in areas that were once prosperous, such as the West Midlands. I am also opposed to the various forms of grant that are made, which again distort the economy.

Mr. Cryer

I have not noticed the hon. Gentleman opposing the massive chunks of aid that the Government have given to the West Midlands area.

Mr. Budgen

I have.

Mr. Cryer

The West Midlands would have been allowed slowly to become an industrial desert had it not been for the present Government. Nearly £1 billion has gone into the West Midlands. If we had not rescued firms such as Chrysler UK and Leyland, for instance, about 10,000 small companies would also have gone under. Presumably, the hon. Member would object to that.

Mr. Budgen

I cannot remember every vote on Leyland that has taken place in this House. However, my recollection is that I and four of my colleagues voted against the first handout to British Leyland. As far as I can recollect, I have voted on every possible occasion against any form of handout. I see the Under-Secretary of State nodding. If I have missed any vote, it has been by mistake.

Mr. Cryer

I am grateful to the hon. Member for confirming my view of him and for confirming the view that he is prepared, callously and coldheartedly—

Mr. Budgen indicated dissent.

Mr. Cryer

Yes, indeed. The hon. Member is in a comfortable position. He is getting a livelihood as a lawyer and a livelihood as a Member of Parliament, yet he is quite callously prepared to put thousands and thousands of people on the dole for political, doctrinaire reasons. He cannot give me the name of one organisation of significance that could replace any of the jobs that he wants to throw out of the window in the West Midlands. I cannot think of a colder or more vicious attitude to the working class of Britain than the attitude that the hon. Member has displayed.

Also, when I am mentioning public expenditure and the Opposition raising the issue of the expenditure on KME of a comparatively small amount, perhaps I may ask where Opposition Members were last night—not 1,000 miles away and not in the past, in the dusty pages of Hansard, but last night. The House was debating regional expenditure—Northern Ireland expenditure—and the £55 million to be spent on the De Lorean car. If Opposition Members are so concerned about public expenditure on industrial matters, where were they last night? Their Front Bench spokesman did not even mention the £55 million, the£26,000 per job or the risky nature of the venture.

Let me make it quite clear that welcome the number of jobs for West Belfast, but I am pointing out that the debate concerned a significant chunk of expenditure, about which hon. Members claim that they are concerned, and they were not even present. I am not having it both ways. What I am pointing out is that the De Lorean car venture represents massive support for a private enterprise venture. We shall see whether or not it succeeds. The reason why Opposition Members were not present was not that they are opposed to public expenditure but that they are opposed to public expenditure when it goes to a form of organisation that is different from the ones to which they are committed. When expenditure goes to private enterprise, they seem complacent and do not arrive in the Chamber. However, must say that the hon. Member for Newbury (Mr. McNair-Wilson) attended the debate and said: If I add here that I am in no sense wishing to knock the project, I hope the Minister will recognise that I am trying in some small way to produce some of the scrutiny that I think should have been made available following a ministerial statement at the very beginning of this Parliament."— [Official Report, 11th December 1978; Vol. 960, c. 155.] I wish that the Members here today would make the same kind of comment about KME. They could make reasonably constructive statements in the exercise of their jurisdiction as Members of Parliament. But, no. We have had one criticism from the hon. Member for Wolverhampton, South-West (Mr. Budgen) of this matter. No doubt we shall have comments also from the hon. Member for Rushcliffe indicating his total opposition to this co-operative and the Meriden Co-operative, because both he and the hon. Member for Wolverhampton, South-West raised that matter as well. They express their patriotism by wishing to see "Japan" writ large in every area of active endeavour. They are opposed to Meriden, which is the largest seller of 755 cc motor cycles in the United Kingdom. Indeed, it has had a 35 per cent. increase in productivity. It is the largest seller, Japanese machines apart, after Harley-Davidson in the United States. Nevertheless, both hon. Gentlemen want to see another vestige of British manufacturing industry wiped out after yet a further failure of private enterprise.

I want to make one or two brief points about what the Secretary of State needs to do. First, I hope that he will consider sympathetically the KME application, which is due to be handed in in the near future. I hope that it will be especially linked with the Department of Industry through the English Estates Corporation, which is the advance factory side of the Department, purchasing part of this vast factory. Running throughout the whole of the reports that have been made is the indication that the overheads are too heavy, by virtue of the fact that this huge factory—the size of five football pitches —is not being fully utilised by any manner of means. If the application contains some form of leasing of parts of the factory to other users to provide more jobs, I hope that it will receive sympathetic consideration.

If there is any kind of impasse, I hope that it will be possible to reconvene the working party. I understand that Professor Hague, the chairman, informed the KME directors at a meeting on 5th November that he was unhappy about the way that things had gone and would welcome fresh terms of reference. I think that the Secretary of State should be prepared to issue a section 3 order under the Industry Act 1975 to the NEB—

The Minister of State, Department of Industry (Mr. Alan Williams)

That is news to me and, I suspect, to my officials. I have no knowledge of any such statement on 5th November. On what is that based?

Mr. Cryer

It is based on information that I have received. I understand that statement was made to the directors of KME. Those were the general terms in which I was informed that statement was made. I know that my right hon. Friend wrote to the directors of KME saying that Professor Hague would not wish to follow the NEB direction. All I am pointing out is that there seem to be various views, depending on who is in whose company at which time. My view almost certainly is that if the chairman, saw the opportunity of re-examining the position he would willingly take it up and have a fresh look at it.

I was making the point that the Secretary of State should be prepared to issue a section 3 order to the NEB and that PA Consultants could be asked to come in and exercise day-to-day management. I believe that that would be within the published guidelines.

The guidelines—" Criteria for Assistance to Industry "—under the Industry Act are governed by a number of published paragraphs, but there are two in particular that are worth quoting, because they apply very well in these circumstances. Paragraph 9 states that There are circumstances in which company profits and losses are not a wholly accurate measure of resource costs and benefits, because there are costs (e.g. pollution or congestion or unemployment) and benefits (e.g. getting a better-balanced regional distribution of industry and employment) which accrue to the community as a whole and not to the individual enterprise. In these situations there are grounds for setting out to redress the divergence between money costs and benefits and social costs and benefits, whether by taxation, planning controls or subsidies. Paragraph 21 says that In considering an assessment of viability along with an assessment of the social costs and benefits involved, the Government have always been more prepared to give proposals for assistance the benefit of the doubt as to the prospects of viability where the social cost of withholding assistance would be particularly high "— I do not suppose that anyone would argue that the social costs in an area of high unemployment when more people are put on the dole will be low— in particular in areas of persistent high unemployment where the creation of new employment is specially difficult. Nobody would deny that Kirkby precisely fits that category. The paragraph continues: In doing so, particular attention should be given to the assessment of risks, and those uncertainties which are the most dominant. Therefore, there is an argument that the case is within the guidelines.

What about the NEB? It is supposed to have a regional dimension. It was to be not a merchant bank chaired by an ex-merchant banker, using the criteria that the ordinary commercial private enterprise merchant bank would use. According to our election manifesto, it was supposed to be a thrusting institution that would extend into the profit-making side of private industry.

Paragraph 24 of the NEB guidelines, published in 1977, says that The White Paper ' The Regeneration of British Industry stated that the NEB was to be an instrument through which the Government would operate directly to create employment in areas of high unemployment. The Industry Act 1975 reflects this by providing that one of the NEB's purposes is the provision, maintenance or safeguarding of productive employment in any part of the United Kingdom. Nobody can deny that KME is productive employment. It has 10 per cent. of the radiator market. It has suffered recently because of the Ford strike, but it does a great deal of contract press work.

One of the ironies of the present situation is that hon. Members have talked about State support. If people go on the dole, State support does not stop. The Government have quite properly produced many job creation schemes. Therefore, even if KME were closed, the people who were put on the dole would almost certainly be put into Government training schemes and job creation schemes of one sort or another.

It is true that the cost would come under a different departmental Vote. People in the Department of Industry might well say "We have exercised our function in this way ", whereas people in the Department of Employment might take pride in the fact that in the first year they had got 300 people on to some sort of training course—all at public cost.

It makes total nonsense to close down a productive factory and put people on the dole and on to training courses at the public expense, particularly when there is a strong likelihood that if KME closes down the shortage of radiators will be so great that its 10 per cent. market share, or a large chunk of it, will be immediately taken up by imported radiators from Italy or elsewhere. I understand that large wholesalers have already been abroad looking for alternative sources of supply in case KME closes down.

Paragraph 25 of the NEB guidelines says that The NEB's main help to the areas of high unemployment will come as a result of their own initiatives. But the NEB will also discharge these responsibilities in pursuance of directions made by the Secretary of State to provide assistance from time to time to companies in financial or managerial difficulties. Therefore, according to its guidelines, the NEB's argument about not having managerial expertise is not valid anyway. That is a function that it must fulfil.

The paragraph continues: The Government will provide incentives to development by the NEB and their companies in areas of high unemployment through the use of the existing powers of regional assistance under the Industry Act 1972 in accordance with the guidelines and criteria for this assistance and within the provision approved by Parliament ". But the guidelines already provide for this situation, so that in terms both of the NEB guidelines and of the guidelines set out in the Industry Act 1972 assistance to KME would be perfectly justified. Of course, it would be an area of high unemployment, an area of social deprivation. That is what we are concerned with here. We are committed, whether in Kirkby or anywhere else, to getting people off the dole. That is one of our important commitments.

Conservatives who argue about closing down KME and putting people on the dole are the very people who ran a £500,000 campaign saying "Labour isn't working" with pictures of Saatchi & Saatchi employees standing outside a mythical dole office. Unemployment is a reality. We understand that unemployment is too high. This is one of the ways in which we can bring it down.

I was not prepared to justify or to defend the decision to hand over KME to private enterprise at a cost of £1½ million more than the sum for which the cooperative was asking. It is time Labour's policies were adopted with more pungency and vehemence by the Department of Industry. Ministers should cease yielding to siren voices which might be within their hearing from the Conservative Benches. I hope that they will not take any notice of IDAB or the Civil Service.

We now have a Property Development Agency. Unfortunately, it has no money. At least it could help fill the gap in management and expertise. It has no money because the Conservatives opposed such a move on an ideological basis. They did not want this body to have any money, because it might then have been too effective. Like my hon. Friend the Member for Ormskirk. I believe that this is a matter of important principle. My hon. Friend said that the Labour and trade union movement had not, perhaps, given Kirkby the priority that he felt it deserved. I remind him that an emergency motion was tabled at the annual conference of the Labour Party—a motion that was neatly sidestepped by the setting up of the working party. The emergency motion was withdrawn.

Mr. Kilroy-Silk

Perhaps I should explain to my hon. Friend that I was not talking about the type of help, although we could do with more than we have been getting since September. I was talking about help going back to 1974 and the frequent representations that I, Ministers, and Jack Spriggs and Dick Jenkins made to individual trade union leaders, trade unions, co-operative movements, and so on, for help of all kinds, which was not forthcoming.

Mr. Cryer

At the Labour Party conference the emergency motion was withdrawn. It would have sailed through conference with a massive majority if it had been put.

Since my resignation from the Department of Industry I have received a stream of letters from individuals all over the country and from constituency parties. KME clearly represents an important symbol. This is working men and women doing something which previously has been the prerogative of the executive suite. That is the ideological difference between us. The Conservatives think that it is not the place of working men and women to usurp the executive suite. They think that working men and women should keep their place on the shop floor. KME represents a different form of organisation, a better form of organisation, because it is men and women working together to help one another. That is the sort of principle that I am prepared to stand by. I know that it is the sort of principle that the trade unions and the Labour movement are prepared to stand by, too.

10.29 p.m.

Mr. Kenneth Clarke (Rushcliffe)

I begin by congratulating my hon. Friend the Member for Wolverhampton, South- West (Mr. Budgen) on raising an important topic, although the interest that it arouses is strikingly different as between my hon. Friend and myself on the one hand and the hon. Members for Ormskirk (Mr. Kilroy-Silk) and Keighley (Mr. Cryer) on the other.

My hon. Friend the Member for Wolverhampton, South-West began by speaking, as lie said, more in sorrow than in anger. He expressed fully his concern about the position of the 770 men facing unemployment at Kirkby. His opening provoked prolonged diatribes from the hon. Members for Ormskirk and Keighley, both of whom based their attack upon their apparent belief that all Conservatives are indifferent to unemployment and that Labour Members have a sole prerogative in terms of trying to provide jobs in areas such as Merseyside. I accept that they believe that, but I cannot understand why. Conservatives are very concerned about the position of more than 1 million people who are unemployed because of the Government's industrial policies.

We believe that providing employment for people means providing a climate in which a firm can be set up to manufacture competitively goods for which there is a market. It is essential that those goods should be marketed effectively to produce the necessary capital to pay the work force and generate further funds for investment to modernise the plant and keep the company abreast of its competition—real jobs in real firms surviving in the real world of the market place, which, as a trading country, we must face and accept.

The alternative that, in the name of full employment, the previous two speakers have put forward, is anarcho-syndicalist gobbledegook, which passes for industrial policy on the Left wing of the Labour Party, which has been very powerful and was powerful when the Kirkby cooperative was first backed. The arithmetic that they use to justify ever greater demands for more taxpayers' money for Kirkby could be used to justify keeping open every bankrupt venture throughout the country which is producing goods uncompetitively. It is impossible to pour millions into enterprises that have lost their markets or lost the place in the market that they could hold profitably, competitively or effectively.

As my hon. Friend the Member for Wolverhampton, South-West said, it is misleading for Labour Members to put forward these extraordinary propositions and persuade people to commit themselves to ventures that, as the hon. Member for Ormskirk seemed at one stage to concede, are doomed to failure.

Mr. Kilroy-Silk

The hon. Gentleman is talking a load of nonsense. He says that we have persuaded the workers at KME to commit themselves to the work force. He has no notion of the industrial reality on Merseyside. Those people had no alternative. They did not commit themselves in the sense that the hon. Gentleman uses those words. They had no other option in employment terms.

The hon. Gentleman alleged that my hon. Friend the Member for Keighley (Mr. Cryer) and I claimed that Conservatives are opposed to the co-operative movement. The hon. Gentleman said that there was no evidence for that claim, but there is plenty of evidence. The hon. Gentleman is providing it now—

Mr. Speaker

Order. The hon. Member for Ormskirk (Mr. Kilroy-Silk) spoke for 50 minutes. He is not entitled to argue his case again in an intervention.

Mr. Clarke

If the hon. Member wants to make lengthy interventions every five minutes, he will prolong my speech to 50 minutes. I do not propose to give way every time that he seeks to intervene.

The hon. Gentleman attended some of our debates on worker co-operatives and he should know that many Conservative Members, including myself, are enthusiastic about the potential in developing those co-operatives and backed the Cooperative Development Agency, and so on.

The argument about Kirkby is not, in essence, anything to do with the issue of worker co-operatives. There is room for more anger than my hon. Friend the Member for Wolverhampton, South-West put into his speech, because Kirkby is connected with an ideological battle over industrial policy which the Left wing of the Labour Party was winning a few years ago.

We shall not forget that KME is one of the survivors of the first two years of the Government when the present Secretary of State for Energy was Secretary of State for Industry. It is part of the disgraceful trio—Kirkby, Scottish Daily News and Meriden—which were so-called workers' co-operatives set up after sit-ins supported by the Labour movement and granted taxpayers' money on terms that were deliberately more favourable than would have been made available to their private enterprise alternatives.

The Scottish Daily News has gone bust and about £2 million of taxpayers' money will not be recovered, Meriden is due to come back again next year, we hear, for another £1 million to keep it going for another year, if the Government can be bullied into allowing that, and Kirkby has reached its present crisis.

A total of £5 million of taxpayers' money has gone down the drain in a little over four years. That sum cannot be dismissed lightly. When I was dealing with social security policy I came across many worthwhile projects that could have been financed with £5 million of taxpayers' money. That £5 million has been paid to the Government by people who work in profitable enterprises and pay their proper tax. It is disgraceful that the money has been spent for the ideological reasons described so cogently by the hon. Member for Keighley.

We do not know exactly how much public money has been lost on this project. I am not talking of the company's trading losses. It seems to have traded at a loss of about £3 million. I am talking about the taxpayers' money which has been invested in that enterprise by the Government.

Only yesterday, at a meeting addressed by the Minister of State, was the full extent of Government aid to the firm in the last five years revealed. We knew of the repeated applications under section 7 of the Industry Act. In November 1974 £3.9 million was involved on a once-for all basis. In April 1977 the sum was £860,000. In November this year the sum was said to be £150,000 to cover continuing losses whilst the working party made its report.

Those are the figures that have been given to the House, but according to newspaper reports yesterday the Minister of State revealed a little more. He said that in the 10 weeks since the working party was set up £200,000 had been spent to cover the financial obligations of the enterprise. The Minister also gave a figure for temporary employment subsidy paid out in 1976. This totalled £680,000.

Mr. Alan Williams

Those figures have been given before.

Mr. Clarke

Perhaps the Minister of State can say when they were given. In Hansard on 13th November a reply was given—ironically by the hon. Member for Keighley, who was then a Minister—to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). My hon. Friend asked what was now the total amount of public money lent, promised or given to the Kirkby co-operative. I shall not read out the answer, but it sets out the £3,900,000, the £860,000 and the temporary assistance of £150,000. It does not mention other public funds. It is a less than adequate answer to the Question.

Mr. Williams

My hon. Friend the Member for Keighley (Mr. Cryer) did not mislead the House. He was answerable only for the actions of his own Department. He begins his answer with the words "My Department ", and he emphasises the assistance given by the Department for which he was then Under-Secretary of State. He was not answerable for payments made by the Department of Employment. There was no attempt by him to mislead.

Mr. Clarke

I am grateful to the Minister for explaining how his hon. Friend was able to get away with that answer. I accept that it is the truth, in that it reads "My Department has made ". However, it is not the whole truth. It is not a complete answer to the total amount of public money lent, promised or given. I cannot believe that it is an accident that the answer contained no hint of or clue to the complete answer.

Mr. Williams

May I reassure the hon. Gentleman?

Mr. Clarke

In a moment. I ask the Minister to consider the terms of my hon. Friend's Question. It reads: what is now the total amount of public money lent, promised or given to the Kirkby co-operative."—[Official Report, 13th November 1978; Vol. 958, c. 47.] The use of the words "My Department" in the first sentence enables the answer to be accurate to itself. However, it is not a full answer to the Question. The answer that one receives depends much on the Minister who responds. The work force at Kirkby was told the full figure, including the £680,000 of TES, but the House was given a smaller figure. Some hon. Members have misused the TES figure when talking about the extent to which the profitability of the company was improving in recent years. The apparent profitability of the company was improving only because it was not revealed how much was going into the company by way of TES to improve the books.

Mr. Williams

I do not intend to be patronising, but the hon. Gentleman has never had the experience of government. If Ministers of any party refused to answer every sloppily worded Question that was submitted, Hansard would be a much thinner document. Instead of facing the allegation from hon. Members that we are refusing to answer Questions, we give as much information as we can within our competence within our own Department.

Mr. Clarke

The Minister did not confine himself to answering for his own Department at Kirkby yesterday ; he gave the full figures. I do not believe that the Question of my hon. Friend the Member for Cirencester and Tewkesbury was sloppy. It was precise and terse. It received a less than full reply. We talk about £5 million having been lost but it is difficult to discover the full extent of the loss. We have only recently discovered the full extent of the loss.

Were the losses unexpected? The Government did not lack for advice, and sound advice, about the difficulties that were being faced. From the word "go", everybody but the hon. Member for Ormskirk who inspected the firm recognised that it faced considerable difficulties. The hon. Member for Keighley suggests that the hostility to the co-operative is based on ideological bias on the part of the Opposition. There is the belief that because rich bankers and lawyers were not involved we objected to workers entering the executive suite. If the hon. Gentleman believes that, he will believe anything.

The criticism of the Kirkby operation from the beginning was that it had repeatedly found itself in financial difficulties over some years. It was occupying premises that were too large and consequently was carrying out-of-proportion overheads. Its capital base was extremely insecure, even given the amount of money that it was proposed to make available. It was in a competitive market with its radiator products. It was in a crowded and difficult market. The firm was continuing to make a bizarre range of products ranging from orange juice to radiators, and the co-operative's managers would not revise its operations.

Those are not my opinions ; I have summarised the advice that the Government received and overruled. The Industrial Development Advisory Board is an independent advisory body designed to give the Government advice on the application of the Industry Act criteria to proposed grants. It is the Industry Act criteria that the IDAB applies. IDAB has always advised against the grants that have been made under the Act to the co-operative, for sound commercial reasons, but for political reasons that advice has been rejected.

A Committee of the House turned its attention to the three co-operatives—the Benn co-operatives—and produced a report. That was the report of the Committee of Public Accounts, probably the most prestigious Select Committee of the House. I refer to the sixth report, for the Session 1975–76. It contains a good analysis of the problems that were faced by the workers' co-operatives, and in paragraph 24 states that Your Committee recognise the aspirations and efforts of the workers engaged in these cooperatives. Nevertheless, we are seriously concerned that £10 million was committed in support of projects on which there were such serious reservations on viabiilty and thus on their ultimate employment potential. I shall not quote any further examples, as I do not want to be too long. The Committee was reassured in the end, after it had made severe criticisms, that the Department intended to apply its revised criteria for assistance to industry strictly to these applications as to others. That assurance, given to the Select Committee, was not followed by the Government. Every time the Government got into a political storm they carried on giving money to Kirkby for ideological reasons rather than sensible or commercial ones.

The prospects for the company were never any good. It would always need constant injections of public money, and in those circumstances there must come a stage when that public money is too expensive and has to stop.

I shall deal with the general issues in case what I say is taken as a general attack on workers in management or on worker co-operatives. Many Conservative colleagues are keen supporters of the idea of workers' co-operatives. Among the keenest are my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) and my hon. Friend the Member for Oswestry (Mr. Biffen), who has just rejoined the Shadow Cabinet. Perhaps we could have an ideological debate with the hon. Member for Keighley, because we see workers' co-operatives as a valuable form of private enterprise. We see no reason why a body of people who wish to do so should not put their capital into a worker-owned enterprise, and we hope to see many of them thrive.

We object to particular workers' cooperatives being regarded as the favourite sons of the trade union and Labour movement and getting their money on favourable terms that would not be available to small private enterprise competitors.

It is only the hon. Member for Keighley and the hon. Member for Ormskirk who regard Kirkby as a workers' co-operative. Many in the co-operative movement, including many of those working in the Co-operative Development Agency, would not recognise in Kirkby a particularly striking example of a workers' co-operative. It is not worker-owned. There is an extremely small commitment of worker capital. What pleases the hon. Members about Kirkby is that two of the local union leaders are the managers. It is a union-run workers' group, which has local influential people in the AUEW and TGWU backing it. That is the attractive ideological aspect.

Many people in the traditional Cooperative movement refuse to recognise Kirkby. Certainly many people in the co-operative movement would agree with our position that constant harping on the need to support such co-operatives gives all co-operatives a bad name.

Mr. Stanley Newens (Harlow)

It is true that the Kirkby co-operative does not conform with some of the objectives laid down by the original co-operative movement, but is the hon. Member aware that he is distorting the facts when he says that people who are associated with the official co-operative movement do not believe that this sort of enterprise should be given full Government support? I speak as a member of the cooperative group in the House and I am associated with the London Co-operative Society. Many sections of the movement are very anxious that this experiment should be given full Government support to enable it to go ahead.

Mr. Clarke

I did not say that there were not some sections of the co-operative movement that agree with the hon. Gentleman. I said that many sections did not. They do not feel that Kirkby is a good example of a worker co-operative. I am grateful to the hon. Member for Harlow (Mr. Newens), with his authority and knowledge of the co-operative movement, for his initial confirmation that in many ways Kirkby does not comply with the accepted definition of a workers' co-operative.

On the issue of unemployment on Merseyside, there have been attempts at various times to interpret our criticisms as some sort of attack on the employment prospects on Merseyside. Again, I shall not labour a point that I made earlier. The future of Merseyside, as with every other depressed area—and in the present appalling climate, depression is spreading into the West Midlands and parts of London, where it was not present before —lies in getting real jobs in real industries making products for which there is a market in a competitive way.

When people talk about Merseyside getting a bad name—as I think that the hon. Member for St. Helens (Mr. Spriggs) did when the matter was raised earlier—I have the feeling that one or two of the Merseyside Members in this House, by their particular political views and their pronouncements on industrial policy, help to worsen the bad name of Merseyside by alarming prospective employers as to the kind of political nonsense that they might find to be influential in that area if they were to move into it I do not say that these Members do it deliberately, but there are Merseyside Members who are positively counter-productive in the good that they do for their constituents.

Mr. Robert Parry (Liverpool, Scotland Exchange)

Will the hon. Gentleman give the names of those lion Members to whom he refers?

Mr. Clarke

I would hate to have another one on his feet, so I will not. I made the general point about the position on Merseyside and its future, as we see it, in creating a climate there where we can get some real jobs in really competitive industries.

Mr. Spriggs rose—

Mr. Clarke

I shall not give way. I shall close with a final illustration of the falseness of the proposition that this kind of approach, the Kirkby approach, is somehow saving jobs. What hon. Members often overlook when urging unlimited subsidy to a firm of this kind is the effect on jobs elsewhere in other companies which cannot obtain the same level of subsidy.

The Minister may laugh, but the answer is in his own Department. He should look at the Welsh Office, which was for a considerable time trying to subsidise Penrad, making radiators in Cardiff and competing with Kirkby. Penrad was subsidised by the Secretary of State for Wales and Kirkby was subsidised by the Secretary of State for Industry at one and the same time, in a declining market. Penrad had the best part of £1 million through the Welsh Office, but there was not any real muscle behind it. It did not have the hon. Member for Ormskirk and the Left wing of the Labour Party insisting on unlimited amounts of subsidy, and so Kirkby received more. It was largely as a result of the subsidised competition from Kirkby, and partly as a result of the preferential purchasing policy, with Labour-controlled local authorities buying Kirkby products, that Penrad went into liquidation in May 1977 and the jobs in Cardiff were lost.

In January 1978 the Welsh Development Agency invested another £600,000 in the same factory in Cardiff for a group known as the Myson Group Limited, also making heating, ventilating and air conditioning equipment. If the Government carry on pouring money into Kirkby to maintain its subsidised part of the radiator business, they will be in part giving Kirkby a preferential subsidy compared with another struggling private enterprise firm in another part of the market.

Mr. Spriggs rose—

Mr. Clarke

In giving way, I say that I wish Labour Members would not be so obsessed in their belief that they have a monopoly of interest in worker co-operatives and in unemployment. They speak interminably themselves and then constantly seek to intervene when they are challenged.

Mr. Spriggs

I want only to raise some very relevant matters. First, has the hon. Gentleman assessed what it would have cost, had he had the authority to say "No" four years ago, to maintain 750 men and women on social security?

Mr. Clarke

I thought that I had dealt with that already. It is nonsensical arithmetic to bandy about this figure of £9 million, as hon. Members have done. That is based on the plainly absurd proposition that all these 775 men would have been out of work throughout the five years. I know that the hon. Member for Ormskirk tried to put a gloss on it, because when he saw me trying to intervene at one stage he anticipated that I would make this point to him. Of course he knows that 775 people would not have been out of work for five years. If we made that assumption about every proposed factory closure, we could make a case against ever closing a factory anywhere, regardless of what it was doing. The hon. Member tried to make the case that somehow there were lost job opportunities. I have answered that in part by referring to the job opportunities lost in Cardiff by keeping a subsidised competitor in being.

I want now to deal with the serious business, which I do not regard as answering the kind of nonsense which we have heard so often over the years from the hon. Member for Keighley and the hon. Member for Ormskirk. What have the Government to do to get out of their present embarrassment? First, we were alarmed to see that at one stage the Government seemed prepared to go to very great lengths to get rid of the embarrassment, which might have involved some rather reckless use of public money. Admittedly, among the lengths to which they were prepared to go was apparently an attempt to get out of their present positions the two worker-directors, Mr. Jack Spriggs and Mr. Dick Jenkins. I am sure that the truth of all this is a matter that concerns the hon. Members for Ormskirk and Keighley as well as myself.

I rely on an article in The Sunday Times of 19th November 1978 by a Mr. Rob Rohrer headed Ministers in secret deal to sack leaders of workers co-operative". This was an attempt to achieve the Stelrad takeover, which we certainly know Ministers were anxious to try to facilitate. The article, which I have no reason to doubt is based on a sight of the document referred to, says—

Mr. Alan Williams

Is the hon. Gentleman actually accusing me of being involved?

Mr. Clarke

Well, the article says: A minute sent to two other Government departments—Energy and Employment—also discussed at ministerial level the possibility of finding other jobs for the two KME leaders, Jack Spriggs and Dick Jenkins, possibly public sector 'Quango ' appointments, after they were sacked. It goes on to describe how the Stelrad takeover plan, on which the Government were quite keen, foundered because of opposition from within KME itself.

I now move on to the Worcester Engineering deal, which was based on the working party's advice. I do not want to challenge that advice, because we all hoped that the working party would come up with a sensible compromise which would enable the enterprise to continue and some employment to be maintained.

So far as one can gather, the Government were certainly prepared to offer over £4 million—£4.3 million was being envisaged—to facilitate the takeover by Worcester Engineering and to follow the recommendations of the working party. That would have involved only 260 jobs being lost and, inevitably, some rationalisation of the company with some employment being maintained.

Worcester Engineering has now retired from the arena and the negotiations have broken down. It is important to have some indication why they have broken down. Mr. Cecil Duckworth, Worcester's managing director, appears to be in no doubt why they have broken down. In his statement to the Financial Times on Friday, 8th December, he said: I don't believe that KME is a willing seller and I don't believe we can overcome the sort of resistance we have been facing. I do not know whether he wanted the workers to abandon their 35-hour week, to argue over redundancy levels, and so so on. I can only imagine the reaction that he got when I listen to the hon. Member for Ormskirk say "Of course, when we are offered more money and a takeover, it is not for the workers to lie on their backs and kick their feet in the air. We want to have a clear view precisely as to how the co-operative will continue ", because what they have done is to drive away Worcester Engineering and the offer of £4.3 million worth of public money—no doubt encouraged by the ideological nonsense that we have heard from hon. Members who supposedly represent the workers.

We also now find that the £200,000, which the Government were putting forward in order to continue paying the bills while the working party report was considered, has gone. What is the position now? As I understand it, yesterday at Kirkby, as today in the House, the Minister is facing straightforward demands for more taxpayers' money to keep the enterprise going for yet another indefinite period.

The National Enterprise Board has been mentioned. Apparently it is being argued by some that the NEB should be obliged to take over an enterprise that the Board itself plainly regards as not viable and not one that it could bring round and revive. One thing on which I think the Minister and we are agreed is that it is not the proper role of the NEB to be a kind of receptacle for this kind of company. The NEB must be allowed to make decisions about the commercial viability of the firms into which it puts its money. We Conservatives congratulate the NEB on its firmness on this matter, and on the way in which it has stalwartly resisted political pressures to make it follow the role that the Government adopted five years ago and take on a non-viable enterprise.

Having congratulated the NEB, I make the same constructive and realistic suggestion—the only possible one—that I made yesterday. I do not know whether the Government are still paying out emergency funds to meet the bills, but the time has come for the receiver to be placed in charge of the assets of this company. That will not necessarily mean the loss of 775 jobs. The receiver's first action will be to study the viability of the company. No doubt he will eventually dispose of its assets to a willing purchaser on suitable terms. They could be acquired by an enterprise which will provide alternative employment in Kirkby. That is the only realistic way to rescue something from the shambles.

Mr. Parry

Who are the alleged Left-wing Labour Members for Merseyside to whom the hon. Gentleman has referred? Do the Right-wing Tory Members for Merseyside support his attitude in respect of assistance to firms on Merseyside, with the area's high unemployment?

Mr. Clarke

The hon. Gentleman does not know my attitude towards assistance to firms on Merseyside. I have not mentioned it tonight, although I have set it out in appropriate debates on many occasions. There is no question of anyone on the Opposition Benches wanting to cut off all aid for jobs on Merseyside. It is a parody of our position to claim that.

The Kirkby co-operative has reached the end of the road. It is one of the worst examples of the kind of Bennite nonsense that we had five years ago, which, if the national executive committee of the Labour Party had its way, would be the case again if a Labour Government had a majority in the House. I hope that the Minister will accept that in the present political circumstances, before the Government have a majority that would allow them to return to Left-wing follies, the time has come to save the taxpayers' money and call in the receiver.

11.2 p.m.

The Minister of State, Department of Industry (Mr. Alan Williams)

First, I thank the hon. Member for Wolverhampton, South-West (Mr. Budgen)—whatever his motives in asking for this debate—for providing the opportunity for the record to be put straight. There has been considerable misleading speculation in articles and comments in the media. The hon. Member talked of what he saw as the failure of the Kirkby co-operative. My hon. Friends drew the inference from that that he is therefore opposed to the principle of co-operation and feels that it could never succeed.

I trust that that is not the hon. Member's position, because my Department has a regular queue of private firms outside our door.

Mr. Budgen

Perhaps the Minister did not hear the passage in which I made it plain that the fact that it was a co-operative was neither here nor there. If people like to form themselves into co-operatives and succeed, it is a matter of great delight to me.

Mr. Williams

I am glad of that clarification.

My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) and I have been involved in the difficulties of this cooperative for a long time. I pay tribute to the way in which he has represented his constituents and fought always for their interests and their jobs. He has drawn the same conclusions as I drew when I came to this Department fresh from the Department of Prices and Consumer Protection. I was immediately confronted by the difficulties of another cooperative, followed by the difficulties in which we have both been so involved.

That is why I ensured that the Cooperative Development Agency was set up. I felt that it would have been advantageous if such facilities had been available when the co-operatives were established. Perhaps many of the problems could then have been anticipated and avoided.

In order that the hon. Gentleman, in asking the Government to put in a receiver, should not be under any illusion, let me say that it is not a situation that we have contemplated or that is open to us even if we wished to do so. A receiver can be appointed only by a secured creditor, and in this case the only secured creditor is the bank. I hope that that will head off any further requests for such action on the part of the Government.

Mr. Kenneth Clarke

Are the Government giving any guarantees to Barclays that are causing it to withhold putting in a receiver?

Mr. Williams

We are not giving guarantees to the bank, and at this moment no Government financial assistance is being paid to the co-operative. Under section 7 we do not have powers, in the absence of any proposal from the co-operative.

Yesterday, I visited the co-operative. I do not think that many Ministers have visited it since it was established. We had a frank, robust and valuable meeting, in which I was left in no doubt about the fears and worries of the workers. Having encountered similar situations in my own area I fully understand the genuineness and depth of those feelings.

I take this opportunity to deal with various misconceptions about the situation that has developed throughout the life of the co-operative. We are living in a world of allegations of plots, threats and conspiracies—but plots threats and conspiracies that I do not think existed. There may have been miscalculations. Matters may not always have been handled in the most appropriate way by various people, but I do not think that there has been a wilful attempt on anyone's part to create difficulties for the co-operative.

For example, when the co-operative was set up with the £3.9 million by my right hon. Friend the Secretary of State State for Energy, it was set up, as was indicated by one of the civil servants in his evidence to the Public Accounts Committee, with what was thought to be the appropriate sum. I am sure that all my hon. Friends will accept that neither my right hon. Friend the Secretary of State, nor his then Minister of State, my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), would deliberately have allowed the co-operative to have been set up under-funded. I hope that my hon. Friends will accept that there was no malevolent attempt to start it off underfunded, and I defend my right hon. and hon. Friends against any such suggestion.

It has also been alleged, perhaps in the article to which my hon. Friend the Member for Ormskirk referred, or perhaps in an earlier article, that at the time when the co-operative was established the two directors were forced by the Department personally to undertake the responsibility for the rental and for the lease. That is absolutely without foundation. It was not until three months after the establishment of the co-operative that the Department discovered that such undertakings had been entered into.

One of the officials referred to by my hon. Friend wrote to Jack Spriggs saying that the Department had just heard that on the advice of the co-operative's legal advisers he had entered into this undertaking. We urged him to investigate whether he could extricate himself from it. That was the first occasion on which we were aware of it. It was not done on the advice of the Government ; it was done out of the best of motives by Jack Spriggs and Dick Jenkins, because they wanted to remove what they saw as the final obstacle to getting support for the co-operative. It would be a malicious misinterpretation to suggest that the Department had put them in that position.

My hon. Friends who know the Secretary of State for Energy—the then Secretary of State for Industry—will know very well that had any official endeavoured to impose so unreasonable a condition upon the two directors they would only have had to talk to my right hon. Friend and he would have ensured that such action was not pursued. I hope that that answers the nonsense argument that we have seen in certain newspapers.

As the hon. Member for Wolverhampton, South-West said, and as has been repeated from various sources, the financial assistance was given on a once-for-all basis. In 1976, the Department of Employment—as it did for so many companies, mainly private, and throughout the private sector—gave financial support under the temporary employment subsidy. That was the £680,000 to which the hon. Gentleman referred. To be honest, I cannot remember when the matter was first raised. The hon. Gentleman asked when it was first mentioned. I can remember its being discussed—I think that my hon. Friend the Member for Ormskirk will confirm this—quite freely on the day of the publication of the working party report. I have a suspicion that it had been referred to even earlier than that in the press. I cannot swear to it without having a chance to check back on the files.

Then, in April 1977, we broke with the once-for-all principle. I accept that. We gave KME a further £860,000. Again perhaps I may tell those who have suggested that my right hon. Friend the current Secretary of State for Industry and myself are in any way ill disposed towards the co-operative that we gave that knowing that we would lay ourselves open to this sort of criticism from hon. Members, we did it willing to accept the consequences, and we did it, we think, for reasons that are defensible. Hon. Members may not approve of them, but we felt that they were defensible.

We were conscious of the evidence that had been given to the Public Accounts Committee, which suggested that the initial once-for-all assistance had not been properly assessed at the outset, and we were willing to recognise that the Department had, perhaps, been faulty in its calculation, as was suggested by one of the officials. We also accepted that there had been an unduly sustained and deep recession in the central heating sector of industry.

Mr. Budgen

Does the Minister agree that if at some stage his Department says "This is a once-and-for-all grant ", and then for some very special reason makes a supplementary grant, if it goes on making grant after grant after grant—after all, even after this supplementary grant a third grant has now been made—no one will ever believe that any grant can ever be described as once and for all? It will be thought that the money bags are always open.

Mr. Williams

I tried to explain that there were special circumstances, with official evidence to the PAC suggesting that there had been possible under-funding at the outset, and we felt that this was an exceptional situation. We also had to take into account the grave social situation in Kirkby—but, in fairness, that was taken into account the first time and when TES was given.

When that financial support was given by my right hon. Friend and myself, we had an assurance from the directors of the co-operative—it was volunteered, not sought—that they would never again ask the Government for further financial support. I am not sure whether my hon. Friend the Member for Ormskirk was present at that meeting. I see that he is confirming that situation. We gave this third tranche of Governmen money, taking it up to virtually £5½ million, and the directors gave us a catgoric assurance at that date—April 1977—that they would not again come back for money. Yet the fact is that in the September-October period they were asking for further finance. Between then and now, they have come back, I think, on six or seven occasions asking for further financial support.

In between times, we had also negotiated—I do not believe that this was at KME's request—that KME should become accepted tenderers for defence contracts, so in May of this year that option was also opened up for the co-operative as further evidence of our wish to give it the opportunity to survive.

Throughout the various occasions on which the directors said that they would not come back again, I must be fair to them and in part to my right hon. Friends in Government in emphasising one point. My hon. Friend the Member for Ormskirk has on several occasions heard it said by the directors that, while they would prefer the company to remain a co-operative, that was not more important to them than saving jobs. Time and again, to their credit, they said that the important priority was to save jobs. Equally, they said—again to their credit —that if anyone felt that in the course of trying to save jobs their being there represented any obstacle to the jobs being secured, they would gladly stand aside. They have said that to my hon. Friend, and it is to their credit that they have said it. Hon. Members must bear in mind that what has been said to the Government on many occasions has been that the form of the co-operative was desirable but not imperative.

Other than the various attempts to interest the National Enterprise Board—and the NEB on every occasion has said that it did not want to get involved in the co-operative—the most notable attempt to put forward a proposition—this is the basis on which a whole series of propositions have been mounted dur- ing the last six months or so—was the PA Management Consultants' report.

That report wanted £2.9 million from the Government, but it was turned down by the Industrial Development Advisory Board on what I think were valid grounds. First, even if it succeeded on the £2.9 million, it would make only a minute surplus, if any surplus at all. It would need only a slight loss of performance in the market or in production for the surplus to disappear. That slight surplus depended on more optimistic assessments of the development of a national market for radiators than we were able to find confirmed anywhere else. It also depended on a highly optimistic assumption of the co-operative's share of that expanded market. Of course, the Department knew what investment programmes other companies were bringing forward and what competition would be presented during the next 12 months.

Mr. Cryer

Will my right hon. Friend give way?

Mr. Williams

When I have completed this point, I shall gladly give way to my hon. Friend. Even if the co-operative made that surplus—I put this question straight to PA Management Consultants and was given a blunt answer—it was such that PA Management Consultants would not recommend it to a private client. It admitted that even if that surplus were earned it would not be adequate to provide for future capital equipment and product development.

Mr. Cryer

Does my right hon. Friend accept that PA Management Consultants specifically said that it was prepared to put its reputation—which is considerable, as he will agree, because the firm was employed by the Department of Industry—on the line with its report and declaration that KME could be made free of public funds?

Mr. Williams

Yes. As my hon. Friend knows, many people are willing to stake their reputations on Government money. I should have been more impressed if the firm had told me that it was able to find some financial support to back its confidence. It is interesting that the PA Management Consultants' representative on the working party did not select its project.

On Thursday 7th September the two directors came to see me at short notice. We met in the middle of a Thursday afternoon. Timing is important, because it explains certain other matters which have given rise to ill feeling. They said that they had to be able to tell their bank at a meeting on the following Monday what their financial situation was likely to be. They had no firm project to put before the Government at that time. There we were in the middle of a Thursday afternoon—

Mr. Kilroy-Silk

Morning.

Mr. Williams

My hon. Friend says that it was in the morning. I accept that correction. It could have been in the morning. But it was very late in the week, and they wanted a decision by the following Monday.

Only then did I draw to their attention an option that had been put to the Department some time ago and that we had never pursued with the co-operative—an option that a private company had put to us. We had heard that it was possibly interested in obtaining extra capacity, and we approached it about possible support for the Kirkby operation. It was in no way interested in it as a going concern, and would take it only out of a receivership situation and only if, as is normal in such a situation, it could put in its own directors. A third condition, which we have honoured right up to this moment, and which I shall continue to honour, was that we never publicly name the company concerned.

I put that option to Jack Spriggs and Dick Jenkins, not as a happy solution but in the context of having one and a half working days left to try to devise a financial solution. I pointed out that the company had said that if it accepted the proposition 250 to 300 jobs would be saved, whereas my reading—and I think everyone's reading—of what we were being told on that day was that unless something came up at very short notice the whole co-operative could collapse. Only when faced with that as a possible final position did we even float the suggestion of a receivership. It certainly was not a preferred solution in the Department's view.

Towards the end of the meeting Jack Spriggs told me—I paraphrase, but I am pretty certain that this is virtually correct —" That is an offer that no responsible trade union leader could refuse." That was not because he wanted it but because he, like us, thought that the only other option was the possible loss of every job. He was concerned at that stage to save the 250–300 jobs rather than lose the whole 700. No one was doing anything dishonourable. I accept criticism if what I did was wrong.

I contacted my right hon. Friend, my fellow Minister of State in my own Department, and other ministerial colleagues. I did not spell out the circumstances, because they were still confidential, and we were not at a stage where the matter would be going to Ministers. I did not ask them to create jobs; I asked whether there were suitable vacancies that they might wish to draw to the attention of the two directors, in the event of either of them becoming available.

Hon. Members may think that that was wrong, but that is very different from a newspaper report that suggests that the Government conspired to dismiss the directors. We were faced with an ultimatum from that company that there was no way in which it would take on the directors. Far from seeking to see them unemployed, we tried to establish whether their abilities—Conservative Members may differ from Labour Members on an assessment of their abilities—could be used.

Mr. Kenneth Clarke

I am grateful to the Minister for being so frank with the House. I accept that what he did was done for the best and most honourable of motives. But does not he accept, upon reflection, that circulating other Ministers and looking for suitable appointments for two worker-directors about to be made redundant is not a proper way of making appointments to any quango? I do not want to use that as an emotional word, but I assume that he is confirming that he was looking for a political appointment to an extra-governmental body that would have helped deal with the problem of those two worker-directors. Does not that confirm all the things that are wrong with the quango situation, and the kind of temptations that Ministers fall into?

Mr. Williams

I wish the hon. Gentleman would not indulge in this sort of thing, which is all too common in a KME context. Everyone is trying to build up a scandal about the most obvious of situations. The hon. Gentleman has never been in Government. I do not say that disparagingly. I hope that some time in the long-distant future he may have such an experience, even if it must be in another country.

The fact is that lists of names are created. Opposition Members write in and ask us to consider people for public appointments. Members of Parliament write in. Names are circulated throughout Whitehall. That does not mean that they are accepted or that people are appointed. All that happens is that the attention of Ministers is drawn to the availability of certain people with relevant experience. No one says that such people have to be appointed. That is why I emphasised the words "suitable experience." I did not ask for such people to be found appointments merely for the sake of who they were. No Minister would appoint them on that basis, and they would have been insulted by such a suggestion. I hope that that disposes of the idea of a deep-laid plot.

On the Friday morning Jack Spriggs telephoned the Department and said that he had had time to think the matter over on the train. He had discussed it with Dick Jenkins, and they felt that they could not go any further unless they knew the name of the firm. I asked the firm whether we could reveal its name. The firm said "No "—it had to insist on confidentiality. It said that it did not want to get into a negotiating position, because it felt that negotiations should be with the receiver.

I went back to the firm later and said that if the negotiating point troubled it I would be willing to chair a meeting, because what the co-operative directors wanted was information. That was understandable, because they were considering a big step. I said that I was willing to ensure that the meeting was kept on an information exchange basis. Again, for reasons perfectly credible to the company, it said that it had to insist that its name should not be revealed and that there should be no meeting. I did try to bring the two sides together, to sit between them and enable them to talk over the implications of the project. Within a short time KME suggested that there should be a working party. It is absolutely essential that it is clearly understood that the working party was never a Government suggestion. We did not ask for it. It was asked for by the co-operative, in particular by Jack Spriggs. My hon. Friend the Member for Ormskirk will confirm this. He expressed some surprise that I was willing to contemplate it. I agreed to the suggestion. There were several options available at the time, some of them not very well formed. At that stage Worcester was not on the scene. It emerged during the working party process. Because the alternatives were so ill-formed and because it was difficult to find jobs for 700 people in Kirkby, I agreed to a full-time working party which could spend several weeks analysing the projects, interviewing those putting them forward, and making recommendations.

The terms of reference were agreed with the working party. It was agreed that one member would be nominated by each side. The firm nominated a representative of PA Management Consultants, and I nominated one of my officials. There was to be an impartial chairman. On the Sunday morning I phoned Jack Spriggs and told him that we had come up with the name of Professor Hague. I told him that I did not want an answer from him then but that I wanted him to have time to consult whoever he wanted to see whether Professor Hague was acceptable. He phoned me later in the day to say that he had had consultations and had been assured that Professor Hague was a fair-minded and objective man. He was willing for him to be chairman.

The working party was the idea of the co-operative. Its membership was jointly agreed, and we both selected the chairman. We both agreed to abide by its decision. The firm wanted the working party and was willing for it to go beyond the co-operative context in its terms of reference. It agreed to abide by its decision.

When the working party was established, I refused to see the chairman on his own because, I said, if I did that somebody might say that I had nobbled him before he had even started. I said that I would see the whole working party together so that Jack Marsden, the PA Management Consultants' representative, would hear everything that I said. I spelt out to the members of the working party that within their terms of reference they were absolutely free men in the way they behaved and in the recommendations that they made.

It has been suggested also that we then tried to rush the process. An agreed date of 31st October had been decided for the report of the working party. Although we were paying the losses during this period, I actually extended the time of the working party for a fortnight into November. Far from rushing it, I wanted to ensure that it was able to analyse all the options fully to its own satisfaction.

The working party then reported, and the recommendation was unanimous, including the co-operative's own representative, a member of PA Management Consultants. It unanimously recommended the Worcester solution. The Government did not recommend it. It was not the Government's choice. We had agreed to abide by the decision of the working party, and the co-operative had agreed to it.

KME then held a works meeting, which accepted the recommendation, but at the press conference, as my hon. Friend will confirm, from the very first moment the directors indicated that they intended to use the time of the negotiation to campaign for an NEB solution instead of the recommendation of the working party. with the press present. I made an appeal to everyone at the press conference not to say or do anything which would create an atmosphere which would make successful negotiations impossible, since this seemed to me to be such an important opportunity for KME because it offered the chance of saving 460 jobs, as against the 510 that its own proposition would have saved, but in the view of the working party it offered that prospect with greater security in the long term.

We know that that opportunity has collapsed. One can judge what sort of atmosphere gradually developed during the period of negotiations. I was asked to reconvene the working party to look at a mandatory direction to the National Enterprise Board. I spoke to the chairman of the working party, who said that he felt—he wrote to me emphasising this —that he saw no point in reassembling it since his view was that whoever went in with KME, be it in its co-operative form or in private form, needed to be fully committed. That is why the chairman of the working party was opposed to the PA Management Consultants' formula for putting some of its people in. He felt that whoever went in should not go in on a one-year or two-year basis, with a feeling of transience, but had to be fully and firmly committed to the wellbeing and survival of the co-operative. That is what he said, and I believe—I am speaking from memory—that he even said it at the press conference that was held.

I provided finance during the period of the working party and also during the negotiations. During that period I paid £155,000 to facilitate what I thought would be a successful outcome to the cooperative's own formula of a working party. I am sorry that it eventually collapsed.

It has to be borne in mind that despite its full order book the co-operative is still losing £1 million a year, and one has therefore to accept that there is something fundamentally wrong in the way in which it operates.

I was told that I should have a project from the co-operative on Monday. I have no idea what form this will take, because it did not arrive on Monday. I am now told that I shall get it by six o'clock tomorrow evening. Obviously, under the Industry Act there is a statutory obligation on the Government to consider all meaningful applications that come forward. The Government will, of course, fulfil their obligations in that respect and will consider the application on its merits, but the aim of everyone, I suggest, must be to save the maximum number of jobs for the longest possible time. It is longterm viability that matters, and that is what any project should be judged by.