HC Deb 19 July 1979 vol 970 cc2005-16

4.2 p.m.

The Secretary of State for Industry (Sir Keith Joseph)

I am now able to make a statement, Mr. Speaker, about the Government's policy towards the National Enterprise Board.

Over the last few weeks I have carefully reviewed the full range of the NEB's activities. My colleagues and I have had several discussions with the chairman and the NEB board. I have, too, met the board's regional directors when I visited Liverpool and Newcastle. I pay tribute, as I have before, to the sense of public service and the energy of all concerned with the NEB.

But the House knows that we opposed the Industry Acts of 1975 and 1979, and, in our manifesto, we promised to reduce the NEB's powers. We favour the encouragement of private initiative and enterprise, not the promotion of public ownership. But it will take time to restore the full vitality of the private sector.

In the meantime, the NEB will have a continuing role for those companies which have been in difficulties and for which it now has a responsibility, as long as the business concerned has a prospect of viability and no solution based on the private sector is available. If other cases arise where the private sector is unable to provide a solution to a company's difficulties, receivership will normally be the right course. In a wholly exceptional case, circumstances could arise in which the NEB might—but only on the Government's initiative—provide temporary and tapering support, with the aim of restoring the company to commercial health as quickly as possible.

Given that the NEB has this role, I have considered whether there is any other activity that it could undertake consistent with our policies. I see no public benefit in enabling the NEB to act as a general merchant bank, and its powers to promote businesses, or buy shares in them, will be restricted within very clearly defined limits. Our policy, as the manifesto envisaged, is that the greater part of the NEB portfolio should be sold as circumstances permit, having regard to the interests of the taxpayer and the companies. I look to the NEB to make disposals to the value of £100 mil- lion in the current financial year, as foreshadowed in my right hon. and learned Friend's Budget Statement. However, I do not think that it is in the public interest, or in the interest of the companies concerned, to identify them now or specify the timing of their disposal by the NEB. I shall also be requiring the NEB to make a substantial reduction in its expenditure in the current year and in the following years.

I exclude, however, the investments that the NEB has made in a dozen or so newly established high technology companies, chiefly concerned with computer software, microelectronics and their applications, which I believe justify special attention. The market has been discouraged in recent years from supporting such ventures. Time will, anyway, be needed for these companies to evolve before the NEB can sell them.

In the light of this, it seems sensible to use the NEB as one means of familiarising the market with new technologies. For my part, I see this role as being necessary only until the market is clearly strengthened, and I would not wish to put a term to the role now. The budget for it will be limited but clearly defined. The objective will be to secure, in each case, the maximum amount of private investment, with a view to full private ownership in each case as soon as practicable. The NEB will be able to reinvest some of its receipts from disposals of these companies in new high technology ventures, but only in partnership with private capital. A market that has met the huge risks of North Sea exploration should find no insuperable difficulty here.

The Government are also much concerned with the problems of the areas of high unemployment. An element of that regional policy is that the NEB should continue to exercise an industrial investment role in the North and North-West and with small firms, seeking always to maximise private investment and with the objective of transfer of full ownership to the private sector as soon as possible. The NEB's regional role will be very similar to the industrial investment activities of the Scottish, Welsh and Northern Ireland Development Agencies in Scotland, Wales and Northern Ireland respectively.

We shall introduce a Bill as soon as possible to give effect to these policies.

We shall sharply reduce the financial limits laid down by the 1979 Industry Act and amend the powers of the NEB set out in the 1975 Act, in accordance with the policies that I have just announced. New guidelines will follow, which will set clear objectives for the NEB to achieve. Within that framework the NEB will have my full support.

Mr. John Silkin

I recognise that the flogging-off of assets to the tune of £100 million is a further contribution to the tax relief of the very rich and will be paid for by the nation, but will the Secretary of State say why, if he takes so strong a view about the need to give help to the regions—it is one of the ways in which he maintains that he will use the NEB—he also requires the NEB to make a substantial reduction in its expenditure in the coming year and in the following years? Does he not realise that a proper means of dealing with the regional problem is not a cut in expenditure but an increase?

Most hon. Members are concerned with today's jobs. Is not the prime need of British industry to invest for future growth? Why, then, is the right hon. Gentleman destroying a major and, in some cases, the only means of providing for it? On tomorrow's jobs, the right hon. Gentleman admits, in his own words, that it will take time to restore the full vitality of the private sector. The private sector has failed to take full advantage of the opportunities in many fields, for example, as he says, in microelectronics. It has been left to the NEB to fill the gap.

I realise that the right hon. Gentleman wishes the NEB to conduct an experiment in adult education, but to what extent will the existing schemes—the industry support scheme, the applications programme and Inmos itself—be allowed to continue?

Sir K. Joseph

The former Government so discouraged the private sector that the capacity of private enterprise needs a new economic climate for it to be properly revived. I think that the right hon. Gentleman has totally mistaken the position in respect of public education. The microprocessor applications—

Mr. Russell Kerr

This is absolute rubbish.

Mr. Speaker

Order. It is very unfair for anyone to have to fight for a hearing.

Mr. Faulds

That is what the House is all about.

Mr. Speaker

Order. Even when hon. Members do not like what they are hearing, they must be prepared to listen.

Sir K. Joseph

The microprocessor applications project has nothing whatever to do with the NEB. With Inmos there is a contractual obligation on the NEB to spend up to £25 million. Of course, future expenditure will depend upon a review when that money has been committed.

Mr. Gryils

Does my right hon. Friend recognise that all of us on the Conservative Benches will welcome his statement as a first step towards cutting down to size the spendthrift NEB? However, will he think again about Inmos? It seems that few people in the electronics industry think that it will succeed. Is it wise to let it go on spending its money when there is already plenty of activity in the microprocessor industry through other firms in this country? Can my right hon. Friend give the figure for the new budget for the NEB in the curent year?

Sir K. Joseph

The NEB is contractually committed to spend £25 million on Inmos. There is bound to be a review before any further money is committed. The amount of money available to the NEB in this year or future years will depend upon many factors, particularly upon the constraints in public spending. However, the level will be very modest compared with present expenditure.

Mr. Richard Wainwright

Bearing in mind the burdensome and intractable responsibilties that the Secretary of State is leaving with the NEB, how does he expect to maintain the extremely high standard of its board and staff when all that he can offer them is, in his own words, a " temporary and tapering " future?

Does not his stubborn insistence that within nine months the NEB must liquidate no less than £100 milion of its investments at a time of uncertain and depressed markets carry the risk of a very bad bargain for the taxpayer, through forced sales?

Sir K. Joseph

I do not think that the latter proposition is true. It is true, however, that the NEB has on its shoulders responsibilities for some very intractable inheritances from previous Governments. That is why it seems to make sense that we should use in a very limited way the board and the staff, who have to be there anyway while the responsibilities remain upon then to carry out the two very modest but significant roles that have been identified for the NEB.

Mr. Benn

May I thank the right hon. Gentleman for giving us a new definition of an entrepreneur as someone who familiarises the market with new technology, and for saying that that is best done by public enterprise? That will be studied and appreciated by those who follow the right hon. Gentleman's pronouncements. However, is it not the case that under all Governments, notably the one of which he was a member—which brought Rolls-Royce into public ownership—Alfred Herbert, British Leyland and Ferranti had to be supported by public enterprise because the market would not invest in basic British industries? Is he aware that every advanced country pours public money into private enterprise, not least Germany, which puts £3 billion a year into its privately owned mining industry? Is it not a fact that the only effect of the right hon. Gentleman's statement will be that there will be a temporary and tapering future for British manufacturing industry, upon which this country's standard of living depends?

Sir K. Joseph

The success of British investment and British participation in North Sea oil gives the lie to the right hon. Gentleman's comments. He constantly confuses subsidies to industry with what he calls the support provided by investment relief for business houses and stock relief that was provided by the Labour Government. We are cutting the subsidies to industry while leaving the investment allowances and stock relief in place.

Mr. du Cann

In order to keep the House informed, will my right hon. Friend now instruct the NEB—as recommended more than once by the Public Accounts Committee and endorsed more than once by the House—to open its books to the Comptroller and Auditor General?

Sir K. Joseph

We intend to proceed with the review of the Comptroller and Auditor General's functions, and the question of access to the NEB's books will be considered against that background.

Mr. Kaufman

Is the right hon. Gentleman aware that 2,500 workers at the ICL factory in my constituency, and my constituents who work for Fairey Engineering and Ferranti, will be profoundly dismayed at the prospect that their factories, their jobs at which they owe to rescue by the taxpayer, are to be sold off in order that they can be looted by the private speculators who let them down in the first place? Before proceeding with these damaging forced sales will the right hon. Gentleman come to Manchester and meet the representatives of the workers in the factories to discuss the matter with them?

Sir K. Joseph

The right hon. Gentleman has an odd view about what he describes as the private speculators. Perhaps the Opposition do not realise that the main investors in this country are the pension and insurance funds of the working population. I hope that when this Government have gone further in their proposals for encouraging ownership and enterprise there will be many more private investors. My right hon. and learned Friend the Chancellor has made a start, but those who work for Ferranti and ICL have a much better chance of expansion, vitality, progress and secure jobs under private enterprise.

Mr. Hordern

Will my right hon. Friend say what rate of return on its capital the NEB is expected to make, in view of its signal failure to meet that rate in recent years? Since he has said that the market is not particularly familiar with high technology, will he recognise that some of us feel that the NEB could be rather more familiar with high technology?

Sir K. Joseph

I agree with my hon. Friend, but the fact is that the NEB, as a result of the last Administration's work, has in its ownership about a dozen high-technology companies that it cannot sell because they are not sufficiently developed. It is therefore necessary for the NEB to continue to manage these companies until they can be sold wholly or in part. The return on capital is one of the factors that we shall have to take into account in the necessary legislation.

Dr. McDonald

Will the right hon. Gentleman be more specific about future plans for Inmos once the £25 million is exhausted? Will he then expect private investment to take over in order to support Inmos? Will he also bear in mind that our competitors in Japan, America, Italy and France pour immense public funds into microtechnology and other areas of high technology, and that if we fail to do so we shall simply be buying it from them in the 1980s?

Sir K. Joseph

To be fair, I think that the NEB will welcome private participation in Inmos. As for microtechnology, it is true that our rivals, either through taxpayers' money direct or through defence or other arrangements, support a number of high-technology projects.

Mr. Hal Miller

Will my right hon. Friend be a little more specific about the NEB and British Leyland? Is he aware that Sir Michael Edwardes has stated that the future of the new medium car is dependent on Government support plus demanning at Cowley and agreed working practices in terms of productivity? If those two agreements are reached, will the support be forthcoming?

Sir K. Joseph

The House can be confident that Sir Michael Edwardes and his colleagues and the NEB will take a realistic view about the viability of British Leyland before making any requests for more taxpayers' money.

Mr. James Callaghan

Is the right hon. Gentleman aware that his hon. Friend the Member for Bromsgrove and Red-ditch (Mr. Miller) has exposed some of the uncertainties to which his statement will give rise and to which we shall have no chance of addressing ourselves in the next few weeks? The Secretary of State has been asked about British Leyland. May I ask him about another important company—Rolls-Royce? Do the Government propose to continue to give their support by financing the RB211 and the other activities of Rolls-Royce?

Sir K. Joseph

I have tried to remove uncertainty by saying that the NEB will have a continuing role for those companies which have been in difficulties and for which it now has a responsibility—that includes Leyland and Rolls-Royce—so long as the business concerned has a prospect of viability and that no solution is based upon the private sector.

Mr. Dykes

I congratulate my right hon. Friend on proceeding cautiously, on taking time to think about the situation, on making his first proposals, and avoiding over-hasty action. Are there some high-technology areas to which he did not refer in his statement in which the NEB might take some interest in the next few years?

Sir K. Joseph

That is conceivable in the immediate future—but within a limited budget and involving partnership with the private sector.

Mr. Meacher

Will the Secretary of State state more clearly what he means by " exceptional cases " and " giving temporary and tapering support "? Would he include UCS, Ferranti and Rolls-Royce in that category if they needed that support now?

Sir K. Joseph

My gift of prophecy is strictly limited. I talked about wholly exceptional circumstances and the possibility of very unusual circumstances. I cannot predict what those circumstances may be.

Mr. Ian Lloyd

Some hon. Members on both sides of the House consider that there is no more important single decision facing the country than whether we should seek to compete in large-scale integration and microtechnology. When considering the role of the NEB, was my right hon. Friend aware of a conference some weeks ago at the Stamford Research Institute, at which the American leaders, endorsed by the Japanese presence, indicated that the entrance ticket to that technology was at least $1 billion? Does my right hon. Friend think that that sum can be found either in the public sector or in the private sector? Does he set that as a major technical aim for Britain?

Sir K. Joseph

That figure could be misleading. There are a number of investment projects for very large-scale integration technology which may be coming into action in Britain at figures far below that level.

Mr. Hooley

Is the Secretary of State aware that, shorn of all its gobbledegook, his statement amounts to saying that the taxpayer will take all the risk in high technology so that private interests can cash in on the subsequent profits?

Sir K. Joseph

The hon. Gentleman has not grasped the modesty of the NEB's dowry from the taxpayer for developing its dozen or so high-technology companies which are not ready for sale to the private sector.

Mr. Hill

Is my right hon. Friend aware that ICL shares—of which the NEB holds 25 per cent.—are valued at over £500 million and that the management and staff welcome the chance to involve themselves in share purchasing? Is he aware that their only fear is that the company may issue the shares in one block to be sold to one of our overseas rivals? Will my right hon. Friend ensure that the shares are put on the private market in small portions?

Sir K. Joseph

We shall have to take that into account in the legislation and in our discussions with the NEB about the disposal of shares.

Mr. Harry Ewing

Is the NEB's investment role in British Leyland, Ferranti, Rolls-Royce and other companies in Scotland to continue? However small the dowry to the NEB in order to make high technology companies profitable, does the Secretary of State agree that that dowry is bestowed upon the NEB by the taxpayer? What ethics are involved when the taxpayer, having bestowed that dowry, is denied the profits from it?

Sir K. Joseph

We did not create the situation. The last Government gave the NEB the right to embark upon these ventures. We believe that those rights were too excessive. The hon. Gentleman misunderstands the position. The NEB has no direct activities in Scotland other than through subsidiaries of national companies in Scotland.

Mr. William Clark

May I ask my right hon. Friend about the £100 million sell-off? Will the legislation cover the possibility of employee participation in the sell-off of shares?

Sir K. Joseph

I imagine that the NEB, which will be responsible for that, will consider that possibility.

Mr. Cryer

Does the Secretary of State accept that his statement shows a lack of confidence in the NEB? Does he agree that his statement will lead to a loss of jobs and may turn parts of the industrial manufacturing base into an industrial desert? Will he place in the Official Report a list of those companies which are not affected in any way? If he does not do that, there will be a question mark over every aspect of the NEB. Will he provide a list of those entrepreneurs who are heading to the regions to replace the jobs?

Sir K. Joseph

I hope that each region contains its own ration of entrepreneurs. My hon. Friend the Member for Southampton, Test (Mr. Hill) was right to suggest that those who work for ICL and Ferranti will not think that their prospects are dismal, even if the NEB decides to sell some of the shares. They have packets of self-confidence.

Mr. Gummer

Will my right hon. Friend consider again the suggestion made by the right hon. Member for Manchester, Ardwick (Mr. Kaufman), who had some responsibility for industry when he was in Government? Did the right hon. Gentleman not phrase his question to show exactly why it was so difficult for private enterprise to work under the previous Government?

Sir K. Joseph

I agree.

Mr. Wriggiesworth

Has the Secretary of State had an opportunity to examine the NEB's proposals for building a titanium plant on Teesside? Does he regard that proposal as being of the utmost national importance to Rolls-Royce and other similar industries? Will he give permission for that project to go ahead?

Sir K. Joseph

It is an urgently needed project, and the possibilities are being considered.

Mr. Budgen

Does my right hon. Friend agree that the dilemma in relation to Britsh Leyland is that the more it is believed that taxpayers' money will be available, the more difficult it will be to persuade the company and employees at all levels to accept different practices in work?

Sir K. Joseph

Yes, but the present management has achieved a change of atmosphere to some extent in some places, and particularly in one or two places.

Mr. Dalyell

I return to the answer that the Secretary of State gave to the hon. Member for Bromsgrove and Red-ditch (Mr. Miller) about British Leyland. As a person who represents 7,000 people in the truck and tractor division of British Leyland, what should I say the Secretary of State means by " realistic arrangements " and " viability "?

Sir K. Joseph

He should say exactly the same as my predecesor and the Prime Minister said—that the future of Britsh Leyland depends upon the effectiveness of the performance of those who manage and work in that company.

Mr. Marlow

Is my right hon. Friend aware that the Britsh electorate will be delighted that this antediluvian engine of back-door nationalisation is about to be cut down to size?

Sir K. Joseph

There will be some relief that subsidised competition is to be brought to an end.

Several Hon. Members


Mr. Speaker

Order. I propose to call four of the hon. Members who have been rising to ask questions. I should tell the House that I have a longer list of right hon. and hon. Members who wish to speak in the main debate of the day than I have had since I have been Speaker. They will not all be called in any event.

Mr. James Lamond

How can the Secretary of State assert that the many thousands of Ferranti workers who live in my constituency will welcome the policy that he has announced—he believes that it will lead to expansion and secure jobs for them—when they escaped from private enterprise only by the intervention of the NEB? Since that happened, they have made the company profitable. They have enabled it to expand and to look forward to continued expansion. They have more than quadrupled the value of the shares taken up by the National Enterprise Board when it rescued the company from annihilation.

Sir K. Joseph

I do not wish to set myself up as a judge of that which the NEB has achieved in any particular company. However, I assert that those who work for a company of the quality of Ferranti need have no fear for the future.

Mr. Ogden

Before the right hon. Gentleman reached the conclusions that he announced today, did he consult at least one Member of this place who has great experience of investment, disinvestment and reinvestment, namely, his right hon. Friend the Member for Sidcup (Mr. Heath)?

Sir K. Joseph

No, Sir.

Mr. Charles R. Morris

Does the Secretary of State appreciate that his statement will create alarm and despondency in the Greater Manchester area, especially among my constituents who work for Francis Shaw Ltd. and Ferranti? Will he consider the argument advanced to him by my hon. Friend the Member for Keighley (Mr. Cryer) and expand on his hesitation and reluctance to identify the companies and firms that will be at risk arising from his statement? Does he appreciate that his reluctance to identify the companies and firms will create the maximum embarrassment and anxiety among their workers?

Sir K. Joseph

There will be worry among workers only if hon. Members such as the right hon. Gentleman try to spread alarm and despondency. I have no reluctance to name firms. I did not give a list to the House of the 10 or 12 technology firms that are being kept by the NEB until they are in a state to be sold, but all the rest are subject to the procedures that I have outlined.

Mr. Leighton

It has been said this afternoon that Britain is in danger of becoming an industrial cemetery. Will the right hon. Gentleman tell us how long it will take under his policies—I use his words—to " revitalise the private sector "?

Sir K. Joseph

The House probably realises that we have been in relative industrial decline for generations. The pace of international competition is accelerating. It cannot be expected that full vitality will return overnight. The treatment of the private sector by the previous Government has made recovery more difficult. However, there should be results from the changed climate before too long.