HC Deb 20 November 1979 vol 974 cc213-343

Order for Second Reading read.

3.40 pm
The Secretary of State for Industry (Sir Keith Joseph)

I beg to move. That the Bill be now read a Second time.

We are dealing today with a very successful and important national asset—the British Aerospace organisation. The purpose of the Bill is to enable that organisation to be even more effective and successful. The British aerospace industry has to operate in an intensely fierce international world of competition. Its success and the success of its future activity will depend upon first-class teamwork in which marketing, design, research, development, production and all the supporting skills of brain, vision and hand are under the leadership of people with drive and imagination and management of high quality.

It is a team operation and I pay tribute to its present board, the chairman, management and staff of British Aerospace, and to the fine record that they inherited from private enterprise and have continued during the period since nationalisation. The change that we propose in the Bill is in no sense a judgment, let alone a criticism, of those I have mentioned, as individuals or as a team.

We do not believe that nationalisation is the right framework for so intensely competitive and sophisticated an industry. That is why we make proposals in the Bill for a change that we hope we can persuade all hon. Members to accept. Our proposals are in the interests of the industry, of all those who work in it and of the country as a whole.

Mr. Bob Cryer (Keighley)

The Secretary of State has emphasised repeatedly that the present organisation is beyond criticism and that the Bill offers no criticism. Why, therefore, is he bringing in the Bill if the organisation is beyond criticism? Does that not indicate that British Aerospace is doing a good job?

Sir K. Joseph

The hon. Member is absolutely right. The Bill makes no criticism and I shall make no criticism whatever.

There is a momentum flowing from the pressures on private enterprise firms that was inherited in the early years of nationalisation. I ask the House to consider the effects of nationalisation on a competitive industry. I hope that the hon. Member for Keighley (Mr. Cryer) will find that my lack of criticism of British Aerospace or anyone connected with it is perfectly compatible with the argument that nationalisation is not the right framework within which it can maintain, let alone improve, its present performance.

The reason for that is that there is not in nationalised industries—inherently there cannot be—the unremitting pressures to serve the customer well and profitably that flow from the need for private enterprise to depend upon its own resources. In the last resort a private enterprise company lives under the sanction of the fear of bankruptcy. On the other hand, a nationalised industry, however good the people in it, is immune from many of the pressures which stimulate efficiency. I make no criticism whatever of the quality of the individuals engaged in nationalised industries; it is the framework within which they work that I criticise. The pressures which stimulate efficiency are to identify correctly what the customer wants and to adapt ceaselessly in the service of the customer.

A private sector company, be it what we confusingly call a public or private company, has no such immunity. In the last resort it can go bankrupt. It cannot look to the taxpayer to bail it out. Upon its own performance will depend its profits, which are the source of its expansion, investment and, in the ultimate, survival. A private sector company will also depend on its credit rating and the ability to persuade savers and savings institutions to invest in it.

Mr. Eric S. Heffer

(Liverpool, Walton): Would the right hon. Gentleman argue that prior to public ownership the coal mines were more efficient than they are now? Would he argue that British Railways were more efficient in the past than now? Would he argue that British Gas was more efficient than it is now? Would he argue that Rolls-Royce, which practically collapsed, was more efficient in the past than it is now? What about all the other companies that have had to be bolstered up and taken over? Of course there are problems with public ownership—no one would deny that—but the right hon. Gentleman's premise is totally wrong.

Sir K. Joseph

I am making an even more general point than that covered by the hon. Member for Liverpool, Walton (Mr. Heifer). Private enterprise companies are ceaselessly forced to adapt if they are to survive. I agree that some private enterprise companies do not adapt, but they do not survive. Some other organisation that is more efficient takes on part or all of that company's activities and adapts them or they vanish, and the human and financial resources engaged in those activities are deployed elsewhere.

In a nationalised industry the process of adaption is infinitely slower. One can see in the steel industry today the sad fact that delays in adaptation make that adaptation when ultimately it comes even more cruel than it would have been had that industry adapted more quickly. Therefore, I stand on the general principle that I have tried to articulate.

Immunity from pressures of the market—I am certainly not saying that this has happened in British Aerospace—can relax the dedication to customer service. We see, therefore, the movement of British Aerospace from nationalised to public company status as beneficial in every way to those who own it, those who work in it, those who supply it and those who are its customers.

The pressures of the market pervade a whole organisation, however big, provided that that organisation has not been given immunity by nationalisation. The pressure of the market and the pressure to satisfy the customer are the best ways of ensuring profitable competitiveness, which is the framework that will best ensure an expanding order book, an increasing number of well-paid jobs and satisfactory profits.

Mr. Arthur Palmer (Bristol, North-East)

Following the logic of the Secretary of State's argument, if British Aerospace is turned from a corporation into a company—which is the general intention—and that company gets into financial difficulties because of international competition, does the right hon. Gentleman seriously suggest that his Government, or any British Government, would allow it to collapse?

Sir K. Joseph

The logic of the argument I am spelling out is that the pressure to survive by its own skill is the best guarantee that British Aerospace will succeed in the face of fierce international competition. It is the Government's confident view that that will happen. I do not accept the assumption of the hon. Member's question.

Mr. Douglas Jay (Battersea, North)

The Secretary of State says that the doctrine of the pressure of the market is a general principle. Will he apply that to agriculture?

Sir K. Joseph

In this country we have what is probably the most efficient system of agriculture in the world. I wish that all business activities were as efficient. It has its own framework, as has agriculture in most countries. I hope that Labour Members will accept that, although I have a doctrine and a thesis, the action proposed in this Bill is not doctrinaire. [Interruption.] I ask hon. Members to suspend their judgment for a moment. If we were taking a doctrinaire view, we would not be offering to the public roughly half the shares in British Aerospace we would be offering them all. We are not doing that. We propose only such a change as will suffice to remove the immunity from the market which we see as a danger to the continuation of the success of British Aerospace.

At the same time, we intend to retain a large Government stake in the industry. It is our hope that the framework proposed in the Bill will provide a stable position for this important and successful industry. We are offering a pattern of ownership which follows the successful precedent of British Petroleum. In that case there was, for many decades, a very large public ownership of shares, coupled with a large private enterprise share, all associated under independent and highly successful management in a competitive international field. It is that precedent that we seek to follow in this Bill.

We believe that management will function best when it knows that its business is utterly dependent on pleasing not Ministers and civil servants, however well intentioned they may be, but customers and investors. In the aerospace industry the customers are intensely sophisticated. In this modern age, investors—individual and institutional—are also sophisticated. The biggest investors are the pension funds and the insurance companies, disposing of the savings of millions of our fellow countrymen for their retirement or against personal mishap. Satisfying these sophisticated investors is the surest guarantee that management will be of the highest quality and that the industry will be internationally competitive.

We wish to create a situation in which the spur to satisfy not only the customers but the investors as well will be a stimulus towards the success that we all want for this industry. That stimulus is the best way to ensure an expanding order book, an increasing number of jobs and good profits. Of course, British Aerospace in its new form will still have the Government as a substantial client. Perhaps the Government will be its most important client. However, the Government and Ministers will no longer be the masters.

The Bill will allow the Government on an appointed day to vest the existing business in a company, all the shares of which will be held by or on behalf of the Crown. The Government will have the power to sell those shares. British Aerospace Limited will be an ordinary company, subject to the Companies Act. Very soon after the transfer of business the Government intend to sell about half their shares. The Government will be a substantial shareholder and, as I have emphasised, a substantial buyer through the Ministry of Defence. The purpose of the Bill is to establish a stable partnership between public ownership and private ownership which we hope will endure over the decades ahead, whatever the Government of the day.

Mr. John Silkin (Deptford)

I thank the hon. Gentleman for giving way. It may cut five minutes off my speech. He has said consistently, both in his statement on 23 July and today, that the Government shareholding will be about half. He is not as ingenuous as he sometimes likes to give the impression of being, and he knows that there is some difference between the half being greater in the Government's holding or greater in the private holding. Which side of that line will the Government's share be? Will the Government have a majority or a minority holding?

Sir K. Joseph

I emphasise that, whatever the precise share of Government ownership, we do not intend to exercise control. The Government have not decided precisely on the share ownership at this stage. There is a factor which we cannot judge in advance. We propose to encourage employees to own some shares and until it is known—and it cannot be known until the event—what proportion of the shares will be taken up by employees, we cannot tell whether we will have a numerical majority in the share ownership. I emphasise that, whatever the precise proportion of shares that finish up in the Government's hands after the floating of the company, that proportion will not in any way diminish our determination not to use our shareholding to exercise control. That is why I am not being evasive when I speak of the Government's intention to retain, at the first stage, about half the shares.

Mr. Barry Sheerman (Huddersfield, East)

The Secretary of State has just said that this company will be built on the basis of the parallel with British Petroleum. Even so, the Government will have back-door or surreptitious control over the industry because they are the major purchaser of the product that British Aerospace puts on the market. Therefore, in a way, this is a less healthy situation because by the back door, by negotiating and by pushing and nudging, the Government will have control. Will the Secretary of State assure us that every contract will be put out honestly so that the Japanese, the Americans and the French can compete for defence contracts on the same basis? Or will this be a back-door method of Government control?

Sir K. Joseph

I assert that this is an intensely important national asset and we must preserve it from foreign control. The degree to which there is genuine international competition in providing defence needs is, of course, a matter for the House to judge. However, we do not in any way see this Bill as becoming a framework by which the Government, as a buyer of defence equipment, will control the industry. We shall be an important buyer, as Governments inevitably are. But there is no power to control simply because we are an important buyer. After all, the Government are an important buyer of avionics from many private enterprise companies. Is it suggested that as a buyer, the Government control the companies from which they buy? Certainly not.

The Government will be an important buyer, but we hope to establish a stable partnership between public and private ownership. There will be a substantial private sector equity capital, shared between individuals and institutions. We hope that a substantial number of individuals among those investors will come from the employees of British Aerospace Limited. British Aerospace Limited will raise its capital on the financial markets of the world, just as any other company does, with no privileges from the Government and no Treasury guarantees on loans. Any borrowing will not be counted in the public sector borrowing requirement and British Aerospace Limited will have to stand or fall according to its own efforts. The Government will be a shareholder like any other, except that they will be a large shareholder.

Mr. Jay

Will the right hon. Gentleman be more precise and answer the question that the Secretary of State for Trade could not answer yesterday? After the sale of shares, will the Government appoint some of the directors of the company?

Sir K. Joseph

The short answer is that the Government propose to have the power to appoint two part-time directors. I shall come to that matter shortly. The Government's general liability will be limited to that of any other shareholder and their liability will be limited to their equity investment. That truth must be recognised by all concerned—other shareholders, lenders, those who trade with the company and those who work for it.

In a wider sense, the company will fall outside the public sector. We do not intend to control the company and we shall have no powers to direct the company, nor do we intend to intervene in its commercial administration. The Bill will give the Government the power to sell shares in the new company to which the business of British Aerospace will be transferred. Very shortly after that transfer, the Government intend to sell about half the shareholding. We have deliberately eschewed any solution that would have involved selling all the shares to the public. We hope that a stable framework has been created for partnership.

The Government have not approached the Bill by trying to sell the largest possible proportion of shares, but have chosen to establish a partnership, continuing substantial private and public ownership.

Dr. M. S. Miller (East Kilbride)

The right hon. Gentleman has made a point several times that interests me. He said that the Government will never attempt to exercise control. However, that is the very point that worries British Aerospace at the moment. British Aerospace fears that a majority or dominant private holding will change the nature and national identity of the company.

Sir K. Joseph

I shall turn to the importance of preserving the national identity of the company.

Mr. Cyril Smith (Rochdale)

I seek an honest point of clarification. Will the Government be represented in some way at the annual meeting of shareholders? If they are represented, and if their shareholding amounts to more than 50 per cent., would they not control the appointment of directors?

Sir K. Joseph

I do not undertake that the Government will never vote its shareholding as regards the election of directors, but they will be a shareholder as any other shareholder. It is important to the future welfare of the industry and all who work in it that a stable framework is established.

Mr. Roger Stott (Westhoughton)

If the new company under the Companies Act will be independent of Government interference, and if the Government have no control of that company, what will happen to launching aid? Will the Government provide such aid?

Sir K. Joseph

The position of launching aid will be the same in future as it has been in the past and as for other high technology industries. There is a possibility that launching aid will be given—although with public spending in its present state, the prospects for launching aid or support for any new activities are pretty slim. That will not come as a surprise to the hon. Gentleman. However, the possibility remains precisely the same in theory. The Government wish to demonstrate, by the retention of a very substantial shareholding—

Mr. Heffer

He has gone mad.

Sir K. Joseph

Would the hon. Gentleman like to ask something?

The Government wish to demonstrate, by retaining a substantial shareholding, that, although they propose to sell a share of the ownership, they none the less have complete confidence in the industry's future. The retention of approximately half of the shares is an earnest of our confidence. Special arrangements will be made in the offer of shares for employees of the company. We intend to promote a significant employee shareholding. The Government will advance their proposals nearer to the flotation rate for the best means of doing that, taking advantage of those arrangements by which income tax relief is available on shares to employees.

The timing of the sale will depend upon suitable market conditions, but it could occur at any time after Royal Assent has been received.

I have explained the general principles that will guide the Government's behaviour as a shareholder: the independence of the company from Government control and the company's necessary reliance on its own resources. In practice, it will be for the Government, as sole shareholders of the new company in the first instance, to appoint the first directors of British Aerospace Limited. As an inevitable result of the transition, our aim will be to appoint an experienced and independent board of directors who will determine the business policy of the new company and ensure continuity of management, board and lower levels. The directors will be drawn from the present board members of British Aerospace and from others with relevant commercial and financial expertise.

The Government will not intervene in the commercial decisions of the company. I do not foresee circumstances in which the Government would use their shareholding in opposition to a majority on the board of directors. I shall make provision for Government directors— part-time directors—to serve on the board of the company.

The articles of association of British Aerospace Limited will give the Government the right to appoint two part-time non-executive directors to the board. Those appointments will serve at least two purposes. First, there is an increasing agreement among commentators on company affairs that a board is strengthened by external directors. Through their right to appoint those two directors, who will be chosen for their financial, commercial or industrial experience outside the aerospace industry, the Government will ensure that the board of British Aerospace Limited will have the benefit of two external directors.

The existence of two such men or women, well informed about the company's affairs but independent of its fulltime management, may provide a valuable addition to the Government's view of the company that would normally come from contact with the chairman. There is no question of those directors acting as the Government's agents, or conveying Minister's wishes and intentions. I have no doubt that the two directors appointed by the Government will discuss with the chairman any comments that they intend to make to the Government. I would expect and require those directors to inform the chairman before discussing the affairs of the company with the Government.

Mr. John Wilkinson (Ruislip-Northwood)

Would my right hon. Friend consider appointing non-executive directors from the field of aerospace—for example, from avionics or civil air transport? That kind of experience might be just as valuable as experience in commerce or in finance.

Sir K. Joseph

That is a valid point that can be discussed in Committee. Unlike the Government directors of British Petroleum, the Government directors of the company will have no power of veto, nor will they be able to issue directions to the company. In one important respect we propose that they should have fewer rights than other directors, since they will be precluded specifically from voting in board meetings on contracts between the Government and British Aerospace Limited. By that means we seek to avoid the danger to which reference was made in an intervention—that of dominating the company through defence contracts. We propose to preclude the part-time Government directors with their votes from entering into arguments on particular proposals for contracts between the Government and British Aerospace Limited.

These two directors will be non-executive and they will be prevented by the articles of association from serving as chairman or deputy-chairman of the company, but in other respects they will act as any other director. In particular, their responsibility, like that of all company directors, will be to the company that they serve and not to the shareholders to whom their appointment is due.

I intend that the articles of association of British Aerospace should contain a further special provision. British Aerospace Limited, like the present statutory corporation, is an important national asset of prime importance to our defence. The Government believe that it would be wrong to allow the company to fall under foreign control or influence. The articles of association of the company will therefore contain a provision limiting foreign ownership. I have not yet decided the appropriate figure, but the maximum figure that I am considering is 15 per cent.

We shall be prepared to use our own voting rights to ensure that this restriction remains in the company's articles, and we shall also be prepared, if we judge it necessary, to use our own voting rights if a single substantial foreign shareholding were built up and that shareholder sought to use his position to secure the appointment of a director to reflect his interests. We are confident that we shall in this way be able to ensure that a company central to our defence interests remains in British control. The Government believe strongly that it would be against the company's own interests, as it would be contrary to our concern for the defence of the realm, for it to be subject to foreign influence.

The Government will have the power not only to subscribe for equity shares but also to acquire them by purchase in the market. They will also be empowered to take up convertible securities. These powers are necessary if we are to be able to ensure that the Government are able, if they wish, to preserve their proportionate shareholding. They are designed to ensure that ii the Government wish to retain a particular percentage shareholding we shall be able so to do. Clauses 5 and 6 of the Bill give the Government this power. But, to prevent those powers being used in ways contrary to the Government's intention of separation from the company, clause 7 will limit the extent to which the Government, under this statute, can acquire shares in the company.

After the first sale of shares, the Secretary of State will be required to set a target investment limit for the Government, not higher than the proportion of the voting rights the Government then hold. Once set, such a target investment limit can be reduced, but it cannot, under the Bill, be increased. Thus, if after the initial sale of shares the Government held 50 per cent. of voting rights in the new company—I quote the figure only by way of example—the Government would thereafter be required to avoid owning a greater proportion than that. They will not be required to keep it up to that level and will be able, if they so decide, to reduce their proportionate shareholding and to set a new target investment limit at this lower level.

Whatever the value of the target investment level set at any time, it cannot, under the Bill, be increased. It is a downward ratchet, ensuring that the powers in the Bill are not used to increase the Government's shareholding.

I have described the change that the Bill will bring about in the status of British Aerospace. It is important to set out the full significance of the metamorphosis that is to occur. But it is equally important to recognise that change in status will go hand in hand with complete identity between the business of the corporation as it now exists and the business of the company. The existing liabilities and obligations, as well as the rights and property, of British Aerospace will all pass to the new company on the appointed day. In this, the most important of senses, British Aerospace Limited will be the true and complete successor to British Aerospace.

As the House knows, the Government have always favoured maintaining the present business of the statutory corporation intact. In my statement to the House on 23 July I indicated that that was the course we strongly preferred. I then said that we should reserve the option of selling just the dynamics business, and that the legislation would provide for a split between these two parts of the business. On further examination, we have decided to confine the legislation to that required to transfer the business to one company wholly owned by Government.

We have done so because the arguments which led us in July to prefer maintaining British Aerospace intact have been tested and found firm. I have been much impressed by the strength of feeling throughout British Aerospace for keeping together the present business. I have listened to a wide range of advice from those concerned with the industry and also from financial advisers. My colleague the Minister of State, who is in Brussels today, and my colleague the Under-Secretary—the hon. Member for Arundel (Mr. Marshall)—have consulted a number of people on this subject. We have studied further the advantages of complementary and mutually reinforcing aircraft and dynamics businesses. Our decision to maintain the present business intact ensures that the new company will provide complete continuity with the nationalised industry which it succeeds.

I stress, too, that vesting of British Aerospace's business in the successor company will have no effect on the position of employees in the organisation. Their contracts of service will continue. Time served which counts with British Aerospace will equally count with British Aerospace Limited. The emoluments, conditions of service and rights of employees will be unaffected by the vesting. There will be no termination of employment on vesting, since the contracts of employment will simply pass by law from the statutory corporation to the successor company. On the appointed day employees of British Aerospace will become employees of the successor company, to all intents and purposes as if they had always been employees of that company.

The prospects of employees in the new company, like those in the existing corporation, will depend on their ability to increase efficiency and compete successfully. Similarly, for pension purposes, any period of service which counts for the British Aerospace pension schemes will count with the new company. Any period of service with a wholly owned subsidiary of British Aerospace will be unaffected, since it is only the ownership of that subsidiary which changes to the successor company. British Aerospace's pension schemes, made under section 49 of the Aircraft and Shipbuilding Industries Act 1977, will continue.

There will be other essential elements of continuity. Where the Government have entered into specific agreements relating to contracts entered into by British Aerospace, they will, of course, maintain the agreements and honour their obligations in respect of contracts to be carried out by British Aerospace Limited.

In this context, I should single out the agreement entered into by the Government in respect of British Aerospace's obligations as a member of Airbus Industrie. The Government are committed, under the principles of co-operation agreed in 1978 with the other major partners in the airbus project, to support British Aerospace's participation in Airbus Industrie from 1 January 1979, and to stand behind the discharge by British Aerospace of its financial obligations to Airbus Industrie. I hereby reaffirm our commitment. The change in legal constitution and ownership of British Aerospace in no way weakens or alters the support of the Government for participation by the United Kingdom airframe industry in the airbus programme. Airbus is the most important civil aircraft undertaking which benefits from a specific Government commitment of support.

Mr. Barry Jones (Flint, East)

Does what the right hon. Gentleman has just said with regard to Airbus Industrie mean that he is guaranteeing, as the previous Government did, that there will be nearly 1,000 new jobs in the making of the wing of the airbus by British Aerospace, Chester, in my constituency of Flint, East?

Sir K. Joseph

I need notice of such a question, but I am sure that if I am given notice I shall say that Governments are not in the business of guaranteeing such things. It is entirely for the management of British Aerospace. In fact, a moment's reflection leads me to give that answer now—that it must be for the management to answer a question such as that.

There are also military projects, where the Government have given specific undertakings through memoranda of understanding. These undertakings will be maintained. The Bill specifically so provides. All agreements which refer to British Aerospace will, after the Bill has been passed, be taken as references to the successor company.

The Government also recognise that those who have traded with British Aerospace as a statutory corporation in the past have relied on the Government's assurance that British Aerospace, as a major nationalised industry, would not be allowed to default on its debts. British Aerospace, in whose finances customer advances figure prominently, has relied on this assurance in a way that distinguishes it from almost all other nationalised industries.

For the new company, no such undertaking can be given. It is a feature of any limited company that its liability is limited. In the ultimate it may default. In this unlikely event, however, the Government will stand behind any obligations which it or any of its wholly owned subsidiaries had inherited from British Aerospace or its wholly owned subsidiaries.

That is the effect of clauses 8 and 9 of the Bill. Through their provisions, those who entered into business with the statutory corporation have their position maintained in so far as is possible. This is, of course, quite without prejudice to new creditors of the company who will have to judge for themselves what security or guarantee to seek from the company. The fact that the Government will continue to honour these past commitments in no way implies that the Government will accept comparable commitments in the future.

It is clear from what I have said that the Government will continue to have many dealings with the new company. It is inevitable, in dealing with such a complex technology, and when defence interests feature so much, that this should be so. In addition, there are past commitments to the statutory corporation to be honoured, and agreements in respect of business transferred from statutory corporation to successor company to be maintained. The Government will be the company's main customer. The Government will continue to support, where appropriate, the company's overseas marketing efforts in exactly the same way as they support other private sector companies, and as they already support British Aerospace; and, as I have explained, the Government will be the largest single shareholder in the successor company.

We believe it important to separate the various ties between Government and British Aerospace. The specific relations will continue to be administered as before—the customer relationship through the Ministry of Defence; support for overseas marketing through the Export Credits Guarantee Department and the Ministry of Defence sales support activity; the normal relationship between industry and Government through my own Department. We intend to maintain these quite separate from the Government's relation with the company as shareholders. In particular, we intend that the Government shares be held by the Treasury Solicitor, thus signalling the separation of the Government's role as shareholder from that of, for example, customer.

I come to the end of what I tear has been rather a long speech on an important Bill. I have described the general policy we intend to adopt towards the new company. In so doing, I have explained the background to the Bill as well as many of its specific provisions.

It may assist the House if I now rapidly summarise the Bill's powers. Clause 1 is the fundamental clause of the Bill. It provides for the vesting of the whole of British Aerospace's undertaking in a successor company, on a day to be appointed after consultation with British Aerospace. The company is to be the universal successor of British Aerospace. Clause 2 provides for British Aerospace's liability to the Government in respect of commencing capital and public dividend capital to be extinguished. Clause 3 provides for shares in the successor company to be issued to the Secretary of State. In effect, therefore, the Government's investment in British Aerospace will be excanged for shares in the successor company.

Clause 4 is a technical provision, which provides that if the company's capital is smaller than the former Government investment in the corporation the balance is to be carried to a special reserve, with limited use only. Clause 5 empowers the Secretary of State to subscribe for or to acquire ordinary voting shares in the successor company and to take up or acquire securities which carry rights of conversion to ordinary voting shares. The shares may be held by nominees, by virtue of clause 6. These powers are subject to the target investment limit under clause 7. This will be set initially at the proportion of shares retained by the Government after the offer for sales of shares. The limit may subsequently be reduced but not increased. The Government's shareholding must not exceed the limit in force at any time.

Clauses 8 and 9 give effect to the principle I have explained—that the Government will stand behind the obligations of British Aerospace and its wholly owned subsidiaries which vest in the successor company. Clause 10 provides for certain provisions of the Aircraft and Shipbuilding Industries Act 1977 to cease to apply to British Aerospace on the appointed day. It provides for the eventual dissolution of British Aerospace by order, and makes provision for the transitional period until then. Clauses 11 to 14 contain supplementary provisions.

I have described the Bill as a simple Bill but also as one bringing about a fundamental change. It will allow the British industry to thrive subject to the stimulus of competition and the discipline of the market. It will allow men and women in this country to invest, directly and indirectly, in the industry. It will free Government and taxpayers from a significant contribution to the public sector borrowing requirement. It provides an opportunity for a new partnership between private and public sector.

I commend the Bill to the House.

4.25 pm
Mr. John Silkin (Deptford)

On 8 November, speaking to a press conference in 123 Victoria Street, the Minister of State said: I am proud to introduce this Bill, which will lead to the setting up of British Aerospace Limited The Secretary of State did not go quite as far as that today, and I fully understand his dilemma. It was a dilemma and a rather difficult one for him, because he had to start from the basis of the words of the Secretary of State for the Environment. On the Third Reading of the Aircraft and Shipbuilding Industries Bill, the Secretary of State for the Environment said: If the Bill reaches the statute book, hon. Members should have no doubt that when we come to power we shall return these industries to the private sector as fast as possible".—[Official Report, 29 July 1976; Vol. 916–1, c. 995.] The right hon. Gentleman, having preached havoc in Victoria Street, then went off to create mayhem in Marsham Street, but the promise was still there and, while one can say that a promise made by the Opposition three and a half years ago is liable by effluxion of time, when they reach a position of less freedom and greater responsibility, to be eroded, the Conservative manifesto in the last election, which after all is only seven months ago, stated: We will offer to sell back to private ownership the recently nationalised aerospace and shipbuilding concerns. So that was Conservative policy as recently as May of this year, and it was a Conservative policy that had, for various reasons, to be reversed by the present Government in some way as soon after the election as 23 July.

So there was the right hon. Gentleman's dilemma. How was he to reverse it and, at the same time, satisfy the impatience of his hon. Friends? What he decided to do, first—and he did it, and I congratulate him on doing it—very astutely was to raise in his statement of 23 July the possibility of hiving off the dynamic sector and then let that, as events unfolded, die its normal death, for it always was nonsense, and the right hon. Gentleman knew it was right from the start. Therefore, when he rejected it today, it all seemed to fit into a pattern of close examination and detailed study.

Mr. Michael Colvin (Bristol, North-West)

Does not the right hon. Gentleman feel that this somewhat pragmatic approach to British Aerospace is a good deal better than the approach of right hon. and hon. Gentlemen opposite which seems to be based entirely on clause four of the Labour Party manifesto?

Mr. Silkin

No. I may be dealing with that in rather greater detail later, and if the hon. Gentleman cares to interrupt again after that perhaps I will give way to him.

This was the position of the Secretary of State. He had got rid of the difficulty of hiving off, and I congratulate him on that. But how was he to get round the undertaking—since that was what it was—of his fiery friend the Secretary of State for the Environment? How was he to ditch the Conservative manifesto? It was suggested to him, I assume, that the correct method of doing that was to alter the framework of the ownership of the industry, so he moved from the idea of a State corporation to that of a public company. This is only a framework. There are 100 per cent. nationalised concerns already in existence which are already in the form of public companies. But the point about this one was that it was difficult to deal with if one was to maintain the basis of a denationalised concern. That is why the right hon. Gentleman brings forward today a Bill which provides for, roughly speaking, 50 per cent. Government-held shares and 50 per cent. privately-held shares.

The right hon. Gentleman says that the Government will not interfere in the effective control, and of course they will not interfere in management although they may have a couple of external directors. However, that is merely window dressing. It is not possible to do it that way.

As the right hon. Gentleman showed us, the Government are guaranteeing the completion of the contract on the Airbus. Will we make the wings? They are guaranteeing the military undertakings and all the surviving obligations. Is that an example of an arm's length transaction between the Government and one private or public company just like another? Of course it is not. It is a special relationships, and it has to be.

The right hon. Gentleman finds himself in this difficulty. He hopes to show that there cannot be any foreign influence in this company. We all know that there are strong and important national considerations involved. I am a little surprised that he has even allowed the limit of 15 per cent. to creep in. It seems a bit extraordinary. On that basis there could perfectly legitimately be a Soviet, Chinese or United States governmental holding inside the company. If he is right in saying that the Government will not exercise any control, what would they do about that?

What the right hon. Gentleman ignores is that, if there is a private shareholding and Government control and management is not exercised, the Government will not be able to stop the articles of association being changed. They will not have the majority to do that. Furthermore, the Government will not be able to exclude foreign influence and even foreign control. There will be nothing to stop any foreign company—indeed any foreign country—starting its own private company in the United Kingdom, having it as a domiciled United Kingdom company and letting that company take up the shares.

Dr. M. S. Miller

Will my right hon. Friend also postulate the possibility that directors of the company could have international connections with multinational firms or British international firms? By joining with other minority groups that have the same interests, it is possible that the minority interests could swing the direction in which the company goes.

Mr. Silkin

My hon. Friend is quite right, and that is what I was assuming. Clearly the control of the company will come via the board. My hon. Friend talked of a minority shareholding, but we have not been told whether it will be a minority or a majority shareholding. We have been told only that it will be about fifty-fifty. The right hon. Gentleman said only that the Government would have the largest shareholding. The directors will clearly have the effective control of the board and its appointments would be in the hands of the shareholders, which might be disastrous from a British national point of view.

Mr. Jay

I apologise for delaying my right hon. Friend, but is there not also this possibility? As I understand it, the Minister told us that it would not be possible under the Bill for the shares, beyond a certain point, to be sold to foreign interests. Is there anything in the Bill to prevent the assets of the company being sold by the board, which is no longer under Government control, to overseas interests? For instance, legally could the Government prevent the directors from deciding to sell the aircraft production business to a Japanese or other overseas company?

Mr. Silkin

My right hon. Friend's point is valid, but, as I tried to explain, even that is not necessary. After all, there is no reason why there should not be companies registered in the United Kingdom, such as KGB Limited or CIA Limited. The initials of course are purely coincidental.

Mr. Robert Atkins (Preston, North)

What is the difference between the convoluted logic argued by Opposition spokesmen, namely, the control that shareholders exercise over a company, as opposed to the control that the Government, by owning it through nationalisation, exercise through their directors?

Mr. Silkin

There is all the difference in the world. The Government are there to protect the national interest. The Secretary of State and I have had our differences and arguments over the years in various spheres, but we both know that when a Minister does something in connection with his Department he is accountable to this House. A private or public company may be accountable to Private Eye but not to this House.

I sympathise with the right hon. Gentleman in his dilemma—and it is a tremendous dilemma—but I am bound to say that he has not solved it very well. The truth is that he understands that governmental control is necessary, but at the same time he has to please his hon. Friends, and he has therefore chosen this method.

As I have said, the right hon. Gentleman is a shining example to us all of integrity and of a refusal to budge from unpleasant truths. When he realises that the truth counts, he usually gets there in the end, although it may sometimes take him longer than others. In a recent television interview he was asked whether the realities of office had changed his views, and he almost gloried in the acceptance of the fact that he had altered his mind because of the realities of office. This is a good example of that.

In a way the proposals are certainly pragmatic, and there is no question about that. It is not quite such an ingenious solution as the right hon. Gentleman thinks, but he has to get away from the pressing reasons why the industry was nationalised in the first place—and here I come to the question of the hon. Member for Bristol, North-West (Mr. Colvin), which I am afraid I answered rather monosyllabically.

The fact is that there are four good reasons why the industry should have been nationalised and should remain so. First, it was essential for there to be a merger of the competing enterprises. Private enterprise tried desperately hard to bring that about for a decade, and it failed completely. Incidentally, if the public company that the right hon. Gentleman postulates were as free as all that, there would be nothing to stop it, as my right hon. Friend the Member for Battersea, North (Mr. Jay) said, selling half of it off and we might again end up with two competing interests. That is something which nationalisation attempted to cure and something which even a Tory Government would wish to see preserved.

Secondly, private sector firms are simply not able to finance modern projects in the aircraft industry. They cannot finance the projects or the research and, as high technology plays a greater part, they will become increasingly less able to do so.

Mr. Colvin

That is not an argument. Throughout the world aerospace industries are dependent on Government funds for finance for research and development. The aerospace industry in the United States is no exception, but that is not a case for the United. States Government stepping in and nationalising that industry.

Mr. Silkin

If the Government are advancing the sort of sums that I think the hon. Member for Bristol, North-West and I might agree are necessary, there should be some measure of accountability to the person or Government producing those sums.

Thirdly, defence is the mainspring of our aerospace industry. It is an industry in which the Government are the main clients. Because defence plays such a large part, there is a spin-off for civil aircraft. A large proportion of the research and development in the industry is paid for by defence. Therefore, it is clearly right that research and development should come back into the general picture and back to the taxpayer, who pays for defence.

Mr. Cranley Onslow (Woking)

Is the right hon. Gentleman's argument that any industry which is significantly dependent on Government defence contracts for its business should be in public ownership?

Mr. Silkin

I was not saying that. I should be prepared to argue the case with the hon. Gentleman at any time he likes. I was devoting myself to this Bill and this method. We are dealing with something that is overwhelmingly a question of defence—my hon. Friend the Member for Whitehaven (Dr. Cunningham) says 70 per cent. We are dealing with something that is rather different from the examples which the hon. Gentleman might give.

The fourth reason, curiously enough, is that nationalisation on the basis on which I put it gives a much more flexible arrangement. It is not inflexible. The inflexibility comes in a private company—if that was the real basis of things but I do not believe that it is—which is short of money and does not know what to do about it. That flexibility enabled the Labour Government to give the go-ahead to the HS146. The hon. Member for Woking (Mr. Onslow) laughs. However, 7,000 people in Hatfield—who, I regret to say, later returned a Conservative Member, though I doubt whether they will at the next election if they lose their jobs, which they might well do—

Mr. Wilkinson

Will the right hon. Gentleman tell the House how many airlines have signed a letter of intent to buy the HS146?

Mr. Silkin

I shall not go into that point. The hon. Gentleman knows well that management has discussed the matter with many people. It is very much on the cards at the moment. It protected 7,000 jobs and it has a future. After all, it is a partnership. If the hon. Member for Ruislip—Northwood (Mr. Wilkinson) is advocating to his hon. Friend the Member for Welwyn and Hatfield (Mr. Murphy) that those 7,000 jobs should be lost, perhaps he would do better to address his remarks to that constituency rather than here.

The Government seek to do something totally different. The right hon. Gentleman said that it was a pragmatic solution. Therefore, he accepts that total denationalisation would be the wrong way to deal with the matter for some of the reasons—though not perhaps all—that I have given. The Government intend to save taxpayers' money. The way to do that is by cutting Government borrowing. The Secretary of State reiterated that today. However, I am confused about the matter. If it were true, it could only be on a one-off basis.

If the right hon. Gentleman believes that he will get rid of all the shares to private enterprise, he would have done so already. Is it such a saving to the taxpayer? Is it not much more of a tribute to the ingenuity of accountants? The right hon. Gentleman is coming face to fact with an ideology—a doctrine, he says—and meeting it by redefinition.

Mr. Onslow

The right hon. Gentleman said a moment ago that the Secretary of State was pragmatic.

Mr. Silkin

I was saying that instead of meeting the problem he redefines it. That is a different matter.

Mr. Onslow

It is often a good way to solve a problem.

Mr. Silkin

It may be a good way to solve problems within the hon. Gentleman's party. Perhaps the hon. Member for Woking is an expert on that. However, it is not the way to solve the problem itself.

Mr. Tristan Garel-Jones (Watford)

The right hon. Gentleman is making great play of what he regards as pragmatic decisions or convoluted decisions from this side of the House. How does he propose to resolve the apparent commitment that has been given by the Opposition to confiscate private shareholding taken up by members of the public? I am sure that many of his hon. Friends regard it as an acid test of a democratic party whether or not it is prepared financially to compensate for private property that is confiscated in this way.

Mr. Silkin

The hon. Gentleman takes me away from the drift of my speech. Nevertheless, if the House is interested in what I have to say, I should be willing to take up that point. The only occasion that I know of the House confiscating shares was when the Conservative Government confiscated the shares in Rolls-Royce. I was in the House at the time.

Mr. Garel-Jones

But they were paid. will the right hon Gentleman's party pay?

Mr. Silkin

That came much later and it was not true at the time. The hon. Gentleman does not appear to know how it was done. It was done by bankrupting the concern. I promise him that my right hon. and hon. Friends have no intention of bankrupting this concern. We will rationalise it—that includes all the shares. As for the terms on which the shares will be taken back, my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) made a full and clear statement yesterday in the debate on the Civil Aviation Bill. If the hon. Member for Watford (Mr. Garel-Jones) cares to look it up, it is at col. 60 of yesterday's Hansard.

The Bill meets an ideology by redefinition. Is it not true that all Government borrowing counts against the PSBR—against the taxpayer? Up until now, private borrowings by British Aerospace, until the Royal Assent was given, would also count. However, the moment the corporation becomes a limited liability company the same borrowings from the same source cease to count against the PSBR. I hope that the Secretary of State agrees with me on that point. I notice that he is nodding his head.

What we are seeing is not a vast saving for the taxpayer but an accountant's sleight of hand. If the name is changed from a corporation to a public company, all the borrowings from the PSBR will be wiped off. If that could be done more often we would not owe anybody anything. No doubt the Secretary of State and his colleagues are busy doing more magic along those lines. As I say, it does not alter the source, only the classification.

Is the new method—pragmatic, as the right hon. Gentleman says—to be successful from the point of view of the future of the industry? In his press conference, the Minister of State said that the Bill would ensure a healthy future for the business. On another occasion I pointed out how extraordinary it was that the Secretary of State, the Minister of State and even the Under-Secretary of State—not the hon. Member for Arundel (Mr. Marshali)—used the word "business" when they meant "industry".

Business is totally different. It is a trade, a profession and a commercial undertaking. Industry is an organisation that produces manufactured goods. There is all the difference in the world between the two. If we look upon it as a business and in balance-sheet terms, we look not at the end product but only at what the balance sheet tells us. That is how the business man works. It is irrelevant to him whether he is dealing in aircraft or cups of tea. It is the same thing to a manufacturer who is dealing in something of national concern and interest. There is a vital difference in outlook between the two.

The Secretary of State says he hopes that the business will continue healthily. On 23 July he said: I would also hope to secure continuity in management at board level."—[Official Report. 23 July 1979; Vol. 971, c. 29.] He reaffirmed that aim today. Today he said that he had every confidence in the board.

Let us be quite frank. The right hon. Gentleman, or whoever is in charge, will use his votes to see that the board continues. That is what he has told us. In that case, he must take some note of what the board has to say about his present antics. It said in the British Aerospace News in September—and this is worth listening to: Continuity of operation and concentration on the improvement of organisational efficiency would have been preferable without the uncertainty and distraction of changes effected by Parliament. That is a very good reply from a board in which the Secretary of State—[HON. MEMBERS: "Was it a chairman's statement?"] It was a board statement. One cannot have a statement from the board in which only the chairman states his point of view. The matter has to be resolved by the board. This was a board telling a Secretary of State, who had every confidence in it and wanted its management to continue, that he was doing the wrong thing. Perhaps the Government do not understand that they are dealing with a business rather than an industry. Perhaps they think that their job is to sell aircraft, not shares.

I turn to the question of effective control. I have dealt with the inability to prevent foreign interests from taking over unless the Government are prepared to have a majority shareholding and to use it quite ruthlessly. I believe that that is what they will be forced to do. The real attitude of the Government towards small shareholders was given this morning by the Under-Secretary of State in Standing Committee E. When I referred to small shareholdings in private concerns, I was told that I could not ignore "the almost non-existent rights of small shareholders". The shares will be offered to a group of small shareholders—to employees—who will hope to make a profit. After all, they are working in the industry and that attitude is perfectly understandable. Of course, they will not get a profit and they will have no rights. The pension funds will take over, not 50 per cent., but a large minority, and the Government will retain the existing controls as much as they can.

There is no finance available from private sectors that can possibly keep up with the enormous demands of this industry. That is why the question of launching aid is so important. Existing Government projects are likely to cost about £500 million. That is a great deal of money. We are talking about new aircraft on a large scale throughout the world. I notice that the Secretary of State said: The Government look to the company to obtain the external funds it needs from commercial sources"— and he went on to say, significantly: although it will retain the power to provide funds on commercial terms, if this proves necessary".—[Official Report, 23 July 1979; Vol. 971, c. 29–30.] If it proves necessary, does the right hon. Gentleman envisage that the money will be lent by the Government, or does it mean that it will come only in the form of equity funding?

The note to editors that accompanied the press notice of 8 November stated: A lasting saving in public funds will be achieved because the company will not borrow from the Government. That rather conflicts with what the right hon. Gentleman said on 23 July. Has there been a change of mind, or has it been put rather clumsily? If there has been a change of mind, and in no circumstances will money be lent by the Government to the company, does section 7 apply? I understand that section 7 states that any increase in funds coming from Government must come in equity form and that it must be matched by a proportionate increase in private funds.

Let us suppose that the £500 million is needed and that the Government have a 50 per cent. interest. Does that mean that they can put in only £250 million? What happens if the other shareholders are not willing to put in £250 million? Will that be the end of all new projects? I am not alone in worrying about the financial side of this matter. When dealing with the more favourable statement of the right hon. Gentleman, the Financial Times on 24 July—I do not agree with its conclusions, but that is not unusual; I agree with its analysis—said: Virtually all the United Kingdom's civil aircraft projects since the war have been un-commercial in the sense that the investment made by the Government, through launching aid and other support, has not earned a commercial return. It went on to state: If the Government follows a totally commercial policy in its attitude towards British Aerospace, then the British aircraft industry will almost certainly contract in size". It adds: This may or may not be a good thing"— I happen to think that it is a bad thing— but it is a strategic issue which cannot be ignored. These are rather important considerations.

All over the world airlines are about to undergo a major re-equipment programme. There is no question about that. I believe that in the early 1980s we shall be talking of about 3,500, perhaps more, new aircraft being used by the world's commercial air fleets. Are we opting out? Is that what the right hon. Gentleman is telling us?

Mr. Onslow

I am interested in what the right hon. Gentleman is saying. Is he suggesting that there are some aircraft, as yet unfunded, to which presumably the British taxpayer should be making a contribution and which world airlines will be buying in the quantity that the right hon. Gentleman mentioned in three or four years' time?

Mr. Silkin

Unlike the hon. Gentleman, I do not look at what may be on the drawing board in two or three years' time, or in three or four years' time. I should like to know whether we are deliberately preventing ourselves from engaging in that way, because we should not. We should not opt out.

Mr. Wilkinson

Is not the right hon. Gentleman aware that Airbus Industrie has a current order book for more than 300 aeroplanes, and that this is the biggest incursion into the world market that any European manufacturer has ever made?

Mr. Silkin

I understand that Airbus Industrie is not profitable and is not making any money at the moment. However, that does not alter my point. I asked whether we were opting out. If British Aerospace is to opt out of new models at a time when the rest of the world is re-equipping, we have a right to know. I hope that I shall receive an answer when the Minister replies. Either British Aerospace is opting out or it is not. If it is not, where will the money come from? That is the vital question.

I believe that Government funds will be needed to preserve a viable aircraft industry. I believe that the right hon. Gentleman well knows that that is so. I believe that a viable industry is also needed to protect our defence commitments. I believe that the right hon. Gentleman knows that also. The right hon. Gentleman has been fairly astute, although not as astute as he sometimes is, in devising something that looks to his hon. Friends as though it is total denationalisation. It is not. The Government will still have a good deal of control, and I believe that they will use that control as the years go by. In proceeding in this fashion, to get away from the commitment to his right hon. Friends and from the commitment in the Conservative manifesto, but at the same time to satisfy his party, he is obtaining for the British aircraft industry the worst of all possible worlds. He will achieve confusion, uncertainty and a good deal of anxiety among those who work in the industry. That cannot be good for morale or for the British aircraft industry. Therefore, let there be certainty.

We oppose the Bill and will oppose it violently—no, not violently but with our usual courtesy and efficiency—in Committee. When the time comes, we shall repeal the Bill and renationalise the industry.

5.2 pm

Mr. Christopher Murphy (Welwyn and Hatfield)

The right hon. Member for Deptford (Mr. Silkin) was kind enough to make reference to my general election victory. It was a victory that had much to do with the support that I received from the employees of British Aerospace. By their fulfilment of another election pledge here today, the Government will continue to enjoy that support.

I find it of great concern that Opposition Members may be unable to unlock themselves from their ball and chain of Socialist dogma and support this extension of public ownership. Public ownership is exactly what the Government are endeavouring to foster with the Bill—not the pseudo public ownership of the late unlamented Labour Government which nationalisation is falsely advocated as achieving, but genuine public ownership in which many individuals, especially employees of British Aerospace, will have the opportunity to participate

I find it of equally great concern that Opposition Members may be unable to escape from their self-imposed straitjacket of anti-Government thinking and support the Government's determination to provide this important industry with stability for the future. The BP type of partnership means that British Aerospace will not have to undergo a further period of uncertainty and upheaval such as resulted from the ill-starred attention paid to airframe and dynamics production by the previous Administration. Stability for British Aerospace will enable the management to get on with the running of the company without the political interference that has so often proved highly damaging when commercial decisions are needed.

The main objective of the Bill is clearly one of providing the industry with the best possible opportunities in the corning years. It means that British Aerospace will have made available to it all the financial resources of the capital market so that the company can protect existing jobs and create new ones. It means that British Aerospace will be secure in the knowledge that the present structure will be kept intact so that the company has a firm base on which it can develop its projects and maintain its production.

The consequence of the Government's action is to provide many sizeable benefits. The economy of our country will gain from a more efficient and viable aerospace industry in terms of the finance that is earned plus the military and civil equipment and aircraft which are created. Those involved in the industry—as in my constituency of Hatfield, where there is both the British Aerospace aircraft group and the British Aerospace dynamics group—will gain from the opportunities brought about by current successes and those which can be planned and brought to fruition in the future.

Private enterprise has proved to be highly successful in the aerospace industry, and how right it is to enable its advantages to be enjoyed once again. The partnership of British Aerospace and the A300 Airbus consortium, in which we secured the contract to build the wings, resulted from the commercial judgment of Hawker Siddeley Aviation. The development of the HS146 project, which has great potential for British Aerospace, also resulted from the initial confidence of that company.

A similar position exists in terms of the dynamics group, where collaboration between Hawker Siddeley Dynamics and previous Governments has produced new missiles and new systems vital to the defence of the United Kingdom and of crucial importance to our exports.

The Minister of State, Department of Industry said recently that he was proud to introduce the Bill. May I, in turn, say that I am proud to be in a position to support wholeheartedly this measure, Perhaps it is not too much to hope that Opposition hon. Members will realise that, when the British Aerospace Bill becomes law, it will be in the best interests of both the industry and those whose livelihoods are so closely linked with aerospace. If Labour Members oppose it tonight, it will be as a result of a purely partisan response from which they should have broken free.

5.8 pm

Dr. M. S. Miller (East Kilbride)

My younger son drew my attention to an article in The Observer last Sunday. I cut out that article although I did not expect to refer to it in the debate. However, as a result of the speech of my right hon. Friend the Member for Deptford (Mr. Silkin) in answer to that of the Secretary of State it has become clear that we are speaking today not about industry but about business.

The article in The Observer questions who is running the country. It reads: For it raises an interesting question: who has been running the country all this time: the Government, Beecham's Pills or Hill Samuel's bank? The article refers to situations which develop in industry and about the great tycoons who are, no doubt, the sort of people that the Secretary of State will be appointing, or will make sure are on the board of the new company. The article states: Watching the gyrations of those tycoons, one can only marvel at the ease with which they move in and out of nationalised industries, as brief sitting-places in the perpetual game of musical chairs, while Hill Samuel or Beechams plays the piano. As they move briskly from chair to chair, or to several chairs at once, how much of their success depends on their own toughness, how much on other people's feebleness? The article concludes by asking: are the problems of the airlines"— and here I shall incorporate the aerospace industry— really the same as the problems of the banks or Lucozade? Bills should be introduced for a useful purpose. I cannot see what use the Bill will be if and when it is enacted. It is interesting that the hon. Member for Welwyn and Hatfield (Mr. Murphy) is supporting a Bill which is at total variance with the manifesto on which he was elected. I hope that the hon. Gentleman understands that. Does the Bill meet the tests which should be applied when Bills are introduced? Will it increase the efficiency of the industry?

Mr. Onslow


Dr. Miller

That is not in keeping with the remarks of the Secretary of State. He paid tribute to the industry. Will it make the company more able to withstand the very considerable pressure which comes from competitors and which will increase?

Mr. Onslow


Dr. Miller

I must carry on as I have only started my speech. Will the Bill make research and development in the industry easier?

Mr. Onslow


Dr. Miller

Obviously Conservative Members would not be voting for the Bill if they did not believe that. At a time when the industry requires more and more Government participation and not less and less, surely it is the height of folly to embark upon the course that is advocated by the Secretary of State and his right hon. and hon. Friends.

It has been conceded that the construction of aircraft is becoming increasingly sophisticated, highly technological and costly. In such an industry the keynotes should be safety and reliability, not the necessity to make profits for shareholders. I suspect that it is the latter aspect which attracts the Government and leads them to take this step.

Who wants the Bill?

Mr. Onslow

We do.

Dr. Miller

But who wants it apart from the doctrinaire-ridden supporters of the Tory Party? The trade unions and the aerospace industry do not want it. That has been made clear through the Confederation of Shipbuilding and Engineering Unions. It expressed concern over the views contained in the Tory Party manifesto. At a recent conference of the CSEU it was stated: The record of the failure of private ownership in aerospace, the motor industry and shipbuilding can give no confidence that such doctrinaire policies will assist any of these industries or companies like Ferranti, which have been restored by public enterprise. The consequences in terms of job loss, failure to innovate and failure to invest that would arise from such policies would be entirely against the interests of the public or those of the workers directly affected. The board of British Aerospace is not putting out the flags at the prospect of the Bill being enacted. The board stated: We have stated already our views that the present corporate structure of British Aerospace is sound, and tribute has been paid to the progress made. Indeed, the Secretary of State has paid tribute to that progress. The board continued: Continuity of operation and concentration on the improvement of organisational efficiency would have been preferable without the uncertainty"— that has been mentioned repeatedly and it is important— and distraction of changes by Parliament.

Mr. Murphy

The hon. Gentleman has already mentioned the views of the unions and the board of British Aerospace. In both instances there has been reference to the stability of the organisation. Is not that exactly what the Bill is hoping to promote? Therefore, should not the hon. Gentleman be supporting the Bill rather than opposing it?

Dr. Miller

The hon. Gentleman would not be supporting the Bill if he did not take that view. However, I think that he is wrong. I am supported by the board of British Aerospace. It is the board's view that the present corporate base of British Aerospace is: best fitted for the internationally competitive business of aerospace. For good commercial and industrial reasons we believe that the spread of products covering military aircraft, civil aircraft, space systems and guided weapons is desirable. All our major competitors share this view and act accordingly. The board adds: A major private holding or a dominant private holding would change the nature and national identity of the company.

Mr. Onslow

The remarks of the board and the unions on which the hon. Gentleman has been relying so heavily are surely no longer relevant as it has been agreed that the aerospace company, as it is now, is not to be broken up into component parts. All the arguments and disagreements to which he has referred are under the bridge. They have long since faded. As a matter of interest, what is the date of the statement from which the hon. Gentleman is quoting?

Dr. Miller

I am talking about how the board would see the development of a future company. It has stated freely that it is not happy about the changes that the Government propose. The views that I am putting forward are not held by myself alone.

The Government's proposals will not make it easier but more difficult for British Aerospace to raise the necessary external finance as the Treasury will no longer be guaranteeing such loans. Furthermore, private capital will seek to maximise its dividends in the short term. It is the short term which attracts Conservatives. That view is in conflict with the necessity to take the long-term outlook. My right hon. Friend mentioned that. He said that the Opposition were concerned about the longer term aspects of the industry that are so important to the economy.

Clause 3(2)(a) states: Shares issued in pursuance of this section . . shall be of such nominal value as the Secretary of State may direct". If that is not a recipe for somebody being permitted to come in and make a killing, I do not know what is. The Secretary of State has total discretion to decide the nominal value of the shares. It will be a bargain for some, but it will be expensive when the industry is re-nationalised and we are faced with the possibility of paying compensation.

I was under some illusions about clause 7. I thought that there was a possibility of the Government retaining control of the new company. However, the Secretary of State has made it clear that the Government holding will be about 50 per cent. It could be less than 50 per cent. The size of the Government's holding does not really matter now. The right hon. Gentleman has made it clear that the Government will not control the company. That causes none of us any great feeling of happiness or joy.

I do not know how right hon. and hon. Members on the Conservative Benches feel about the part of the Secretary of State's speech that referred to foreign ownership, but I am not happy about it. I accept his good intentions, but if he intends to do what he has said this afternoon, I do not understand how we shall be safeguarded against the possibility of a powerful foreign influence, to say the least, a foreign Government or, as my right hon. Friend said, CIA Limited, KGB Limited or BOSS Limited. It does not fill me with any great happiness to know that there is a strong possibility that there could be foreign influence, and even foreign domination, of the aerospace industry, which is vital to us.

If the Bill is enacted, the consequences will be totally opposed to the statutory duties laid upon British Aerospace by the Aircraft and Shipbuilding Industries Act 1977. I do not believe that Conservative Members will be much worried about that.

The aero-engine part of the industry—namely Rolls-Royce—is linked to a strong airframe building sector. Rolls-Royce, as a nationalised company, could ensure Britain's position in the big league of aerospace. It is no secret that there exists a problem between the National Enterprise Board and Rolls-Royce. The Secretary of State for Industry would love to abolish the National Enterprise Board. He would also like, I suspect, to return Rolls-Royce to private hands. My right hon. Friend pointed out tellingly how Rolls-Royce was in dire straits under private enterprise. When it was nationalised it began to develop by leaps and bounds. Rolls-Royce is now meeting with considerable national and international success. However, I should like to know whether what Rolls-Royce is doing now ties in with what the Secretary of State feels that he should be doing for British industry. I accept that he has the entrepreneurial outlook, the free-booting attitude of the nineteenth century and perhaps of a period earlier than that. I should like to know whether the setting up of Rolls-Royce subsidiaries in Atlanta and Miami in the United States, instead of expanding in this country, is part of the set-up which the Secretary of State for Industry envisages for the whole of industry in this country. Yesterday British Airways was handed to the wolves. British Aerospace will be handed to the wolves today. Will it be Rolls-Royce tomorrow?

Mr. Colvin

Who is the hon. Gentleman referring to when he says "the wolves"? Presumably he means the workers in the industry.

Dr. Miller

I mean the people—I do not care who they are—who will be able to pick up shares at a nominal value set by the Secretary of State.

Mr. William Clark (Croydon, South)

Is there not a fallacy in the hon. Gentleman's argument? He talks about the nominal value of shares. There is nothing in the Bill that says that shares will be sold at their nominal value. The shares might be issued at a premium, on a valuation. It is quite misleading for the hon. Gentleman to talk about the nominal value of shares as though people investing in the new company will make an immediate capital profit. That is a long way from the truth.

Dr. Miller

I am sorry if I misled the hon. Gentleman. I make the point clear that the discretion of the Secretary of State is involved. I am afraid of how that discretion will be used. It is possible that the nominal value will be low. If it is not low, all right. I did not say that it would have to be low. However, I am worried about the power of the Secretary of State in that respect.

The Bill—simple, small and relatively unobtrusive, as the Secretary of State would like us to believe it is—is merely another indication of the kind of thinking which dominates the right hon. Gentleman and his colleagues. I am surprised that some Government supporters give it so much credence and feel that it is best for the country. They should know that that is not the situation that we have known in the recent past. The right hon. Gentleman, sincere as he is, is doing a disservice not only to British Aerospace—about which he had so many good things to say—but to British industry in general if he thinks that the only way to tackle the problems of British industry is to look at what previous Labour Governments did and decide, regardless of the principles involved, to do exactly the opposite.

5.24 pm
Mr. Bowen Wells (Hertford and Stevenage)

I welcome the Bill. Quite contrary to what was said by the hon. Member for East Kilbride (Dr. Miller), it begins to preserve the flexible future of the workers in Stevenage and throughout British Aerospace plants. It is to be welcomed because it keeps intact the management structure and the working force in all the plants of British Aerospace. It frees British Aerospace to evolve in the future.

When we refer to British Aerospace, we should remember that we are talking about a highly technical industry which is moving at great pace. It is underpinned by people of extraordinary technical ability and tremendous scientific achievement. The Bill will enable them to exercise their initiative, and to progress the industry far beyond the vision of those trained in administration and even that of our most experienced Ministers and civil servants. The industry possesses the work force and the technical ability to push Britain into the future.

Fundamentally, nationalisation makes absolutely rigid the organisation of an industry, and indeed of any company that it touches. For that reason, we have found ourselves with a backward and ill-equipped steel industry, unable to produce steel at a price that we can afford, so as to underpin the basic manufacturing ability of the country. For that reason, we are seeing our motor car industry basically going down and down, unable to compete with its competitors.

Mr. Stephen Ross (Isle of Wight)


Mr. Wells

I shall give way after I have dealt with this point.

We were faced with the nationalisation of a dynamic industry. We believed that its future was gravely imperilled by the fact of that nationalisation. As we were vehemently opposed to that, we had to find a way out of the straitjacket imposed by the pursuit of doctrinal objectives by the previous Labour Government. They were determined to pursue them regardless of the future prosperity of the industry with which they dealt. That is the problem with which we are faced.

In proposing the Bill the Secretary of State for Industry considered how he could damage the industry least in terms of changing it from its nationalised state back into private enterprise hands. In the Bill he has evolved an interesting formula for doing that. He has left the management and the work force untouched by another change. The change to nationalisation was traumatic to the industry. It was destructive of the industry, which did not know where it was. There were constant reorganisations so that the workers were not getting on with their job of producing missiles and aeroplanes. Their attention was diverted. We do not wish to repeat that experience.

We have had to look for a way in which to find our way out of that situation so that there is not nationalisation, renationalisation and denationalisation going on all the time, thus destroying the whole fabric of the industry. Members of both Houses should have learnt a lesson from the nationalisation, denationalisation and renationalisation of steel and bus transport. That is totally destructive of the basic structure of an industry. It is demoralising, and it takes years to recover from it. We cannot afford that in the case of British Aerospace. We are not proposing to do so.

I spoke about this issue to the shop stewards committee in Stevenage. The reason I gave for reorganising the ownership of British Aerospace was basically that it would give the workers a future. Under nationalisation they had little prospect of a future. I said that it would give them a flexible future, in which their jobs would be secured. Indeed we look forward to the expansion of the industry.

Contrary to what the hon. Member for East Kilbride said, the dynamics division of British Aerospace is not totally dependent upon British Government contracts. Indeed, over 50 per cent. of its products are exported. It expects to get the figure up to 60 per cent. as a result of the initiative and dynamism of its sales people and the ability to produce high technological products of great quality and accuracy at the manufacturing plant in Stevenage. I believe that that is the base on which we can expand. Under the dead hand of Government we can expect it to slide inevitably downwards until it becomes non-competitive and non-dynamic and until the number of jobs at Stevenage gradually diminishes. That would be its future under nationalisation. It is the effect of the dead hand of nationalisation that we have to deal with.

We must get dynamism back into British industry. We must regenerate British industry and not destroy it by nationalisation. That is why we must get the Bill through before nationalisation has a further chance to seep into the vitals of the industry and destroy its morale.

Nationalisation is destroying the morale of the industry and of those who work in it. What was the major piece of legislation that caused that demoralisation? By common consent of the board of British Aerospace and of the unions, morale was destroyed by the doctrinal pursuit of Marxist aims contained in clause four of the constitution of the Labour Party, as exemplified in section 2(8) of the Aircraft and Shipbuilding Industries Act 1977, which stated: In carrying out its functions under this Act, it shall be the duty of each Corporation to promote industrial democracy in a strong and organic form in its undertakings and the undertakings of its wholly owned subsidiaries". Nobody would quarrel with that, but subsection (9) provides: It shall be the duty of the Corporation to enter within 3 months of the relevant vesting date into consultation with the relevant trade unions as to the method which it would adopt for the purpose of carrying out its duty under subsection (8) above. It did not strike Labour Members, when they included that stipulation in their Bill, that the vast majority of those employed in British Aerospace have nothing to do with trade unions. By putting those subsections into the Act the Labour Government disenfranchised the whole of the technical, scientific, research and management staffs from participation in the democratic control of that industry.

Mr. Les Huckfield (Nuneaton)

I see from the reference information that we have before us that the hon. Member is an expert on the Commonwealth Development Corporation. It is quite obvious that he spends a lot of time abroad. If it were otherwise, he would know that the trade unions concerned, whether manual or staff, were particularly enthusiastic and energetic in promoting, and participating in, industrial democracy. They are very enthusiastic that the corporation should remain in its present form.

Mr. Wells

I must say that I have to contradict you immediately on this, although I am—

Mr. Deputy Speaker (Mr. Bernard Weatherill)

Order. The hon. Member is not contradicting me.

Mr. Wells

I refer of course, Mr. Deputy Speaker, to the hon. Member for Nuneaton (Mr. Huckfield). Thank you for your correction.

I have spent little time abroad since I left the Commonwealth Development Corporation in 1973. I spend a lot of my time in my constituency with the people who voted Conservative at the last general election. I meet them at British Aerospace, on their doorsteps, in the schools where their children are educated and in the colleges where they teach.

Contrary to what the hon. Member for Nuneaton asks the House to believe, everybody agrees that section 2 in the nationalisation Act of 1977 has produced, in spite of all the reorganisation, the maximum amount of dissent and demoralisation within the aerospace industry. Technical staffs have been busily organising their own union. Fighting among themselves has resulted in political polarisation. They have been talking about that issue instead of ensuring how best to produce missiles and planes and beat the competition. That is how the effects of nationalisation undermine the industry. Nationalisation politicises the whole company, not just in relation to the House, but among whole communities within the nationalised industry. That is a destructive element.

Mr. Wilkinson

The Act to which my hon. Friend so appropriately refers was specially pernicious. Unlike previous nationalisation Acts, it granted to relevant trade unions rights of consultation which were never inscribed in statute in any previous measure. It was that fact which was specially divisive and wrong.

Mr. Wells

As my hon. Friend says, it debarred the people who created British Aerospace—the technical staffs who provide the work, the brain power and the vision upon which the industry depends for its future—from consultation with management. That Act produced that lamentable position and that is why we must, in the national interest, find another way to run the industry.

The industry is in a peculiar position in that its major customer is normally the Government. Seventy per cent. of the sales of British Aerospace as a whole—not in the dynamics group alone—are the result of Government contracts. Such contracts have, and will continue to have, a major influence on the way in which the industry conducts its affairs. Nothing will change. It was the same when Hawker Siddeley, GEC, and English Electric owned a part of the industry. Nothing has changed. Opposition Members speak as if nationalisation had built up this industry. It did nothing of the kind.

Nothing was ever built up by nationalisation. This industry, built up by private enterprise, has damn nearly been destroyed by nationalisation.

Dr. M. S. Miller

It was built up by the workers.

Mr. Wells

I agree that it was built up by the workers, and among the workers I include management, which the hon. Member for East Kilbridge may not. It was they who created this industry under private enterprise.

The House must know that some of the most successful projects including the A300 Airbus were not supported by Government. The private enterprise company involved in the Airbus went it alone. That is why we still have a stake in the most successful civil air project ever undertaken in Europe. We would have missed that opportunity under nationalisation because nobody would have had the vision to initiate such a project.

Mr. Onslow

My hon. Friend is guilty—I put it to him gently—of understating the case. Not only was it Hawker Siddeley, a private enterprise firm, which took the risk in making the wings, but the then Minister of Technology, the right hon. Member for Bristol, South-East (Mr. Benn), did his utmost to make it impossible for the project to go ahead by withdrawing from negotiations with the French and German Governments upon whom it depended.

Mr. Wells

I thank my hon. Friend for reminding me of that. That is the sort of situation of which a nationalised industry would not be able to take advantage. That is why it is vital that the Bill goes through at maximum speed, so that we may know the future and can take advantage of these opportunities.

We are not only concerned with civil aircraft construction. The Vickers Viscount and the BAC 111 were both developed by private enterprise and the dynamics side of the industry has been developed in competition with the Americans and the French. We have developed weapons of greater potential and accuracy than any produced by our competitors and have managed to sell them abroad. We have made advances in design which the Americans cannot match.

The reason my constituents in Stevenage can look forward to a much more secure future, if the Bill goes through, is that we will achieve greater sales of Rapier, and greater sales from newly developing projects, because such projects will not be entirely dependent upon a nation impoverished by nearly 15 years of Labour government and unable to afford them. We are dependent upon customers whom we will find throughout the world. That will be given a tremendous dynamism under the new company.

We must also welcome the Bill because in consultation with the workers, management and trade unions we have responded, as a Government, to their request that we do not redivide the industry between dynamics and airframe. The most successful companies in this industry worldwide have a combination of dynamics and airframe. Boeing in America, Lockheed and McDonnell Douglas are obvious examples. They have combined both dynamics and airframe, whereas our industry, before it was nationalised, did not combine both. I hope that the new company, when it is formed, will take note that the profits at present come from the dynamics side—that is, from my constituents in Stevenage—

Mr. Stott

And from my constituents in Lostock.

Mr. Wells

I agree, but to a large extent they come from my constituents in Stevenage whom I represent in this debate.

In this House, one is quite often depressed and frustrated, but today I am elated that we are to put into effect legislation which will provide a future for expansion, and hope and anticipation for constituents. The company, when it is formed, will be able to start off on a new footing. I hope that the Minister concerned will make certain that he takes out any reference to the divisive industrial democracy clauses in the 1977 Act, and that he will make certain that the directors of the new company ensure that the dynamics part does not finance loss-making, Government-influenced airframe contracts. That does not mean that I believe that the HS146 may be a loss leader. I should like to see the former hon. Members for Welwyn and Hatfield and Hertford and Stevenage go into the world markets and be told to sell the HS146 and not come back until they have an order book for it. The previous Government's decision was a piece of political chicanery, undermining the electorate in a manner which is disgraceful in the annals of this country.

Dr. M. S. Miller

Is the hon. Gentleman aware that approximately 75 per cent. of industry in this country is already in private hands? Why does he not exhort these captains and princes of industry to do with their goods what he suggests should be done in this respect?

Mr. Wells

We hope that because of the new dynamism introduced into this country, the new hopeful prospects—[Interruption.] Labour Members may laugh, but they produced the deplorable state of depression and demoralisation. That is why they are not sitting on the Government Benches today. The Conservative Party is providing the economic framework to enable people to work and produce, and have a hope of a future for themselves. That is the purpose of the Bill.

Mr. Stephen Ross

Interest rates are now 21 per cent. Every time I write out a cheque, Lloyds Bank chages me 17½p. Will that create the dynamic country about which the hon. Gentleman is talking?

Mr. Wells

Of course not, and nobody regrets that more than Conservative Members, but we must first—as every housewife throughout the land recognises—put our economic framework into order so that we can begin to get back on to a proper financial basis. It astonishes me that you can make that remark—

Mr. Deputy Speaker

Order. I wish that the hon. Gentleman would not put thoughts into my head or words into my mouth.

Mr. Wells

I apologise, Mr. Deputy Speaker. I am surprised that the hon. Member for Isle of Wight (Mr. Ross) should make such remarks. The interest alone on the money borrowed by the previous Government amounts to £10 billion a year. Of course the horrible rate of interest does not produce the dynamism that we want, but when we have put our house in order—and the country realises that we are working towards it—we shall start to put right what has gone wrong. We shall then have a future with hope. If we were to continue down the path on which the previous Government had embarked, this country would finish up once more in the hands of the IMF, and once more with wages lower than any other country in Western Europe.

Mr. D. N. Campbell-Savours (Workington)

On a point of order, Mr. Deputy Speaker. What relevance have the hon Gentleman's remarks to the Second Reading debate? I realise, Mr. Deputy Speaker, that you allow some liberty and flexibility, but there are hon. Members on this side of the House waiting to speak.

Mr. Deputy Speaker

I do not think that the latter remarks of the hon. Member for Hertford and Stevenage (Mr. Wells) were relevant to the debate, but the hon. Member has been provoked, mainly by sedentary interventions.

Mr. Wells

The problems with which we are dealing, which range more widely as I speak, are basically and fundamentally concerned with whether the company should remain nationalised.

The Bill deals with a reorganisation of the ownership of British Aerospace. We need that reorganisation, and I believe that the Bill will enable it to be done in a manner that does not destroy the current management structure and which enables that business to continue without interruption and to provide a future that is flexible and permits the company to evolve. It also permits the involvement of other companies that might have an interest in promoting the expansion of the company, which under nationalisation, they could not possibly do.

That is why we are ranging so widely on the issue of nationalisation and the way in which further State ownership and public borrowing have led to the depression and slough of despond which we were in in January this year.

I have not spoken of one of the most important growth areas of British Aerospace—the space element. The space department has one of the most brilliant teams of scientists and technologists in the company.

Mr. Palmer

On a point of order, Mr. Deputy Speaker. Could you tell me at what time the 10-minute limit on speeches comes into force?

Mr. Deputy Speaker

The time limit is not being implemented today.

Mr. Wells

I wish to refer to the space industry, because it is most important to the consideration of the Bill. The space industry is about to launch into its most exciting developments for many years. Again, this needs the dynamism and cosseting of a privately owned company whose focus is totally on the success, and therefore the profit, of the company. That is another reason why the Bill should be welcomed.

I shall draw my remarks to an end in order to permit other hon. Members to speak. This is not because I do not have enormous enthusiasm for the Bill. I could go on speaking for many hours, but that would be impolite and discourteous to the House. It is with enormous satisfaction, which I express on behalf of my constituents, that I find the Government taking positive action to produce a dynamic company that can expand and provide a future for my constituents and so assist the regeneration of Britain that is badly needed.

5.50 pm
Mr. Cyril Smith (Rochdale)

I listened with great interest to the hon. Member for Hertford and Stevenage (Mr. Wells). It is a pity that he cannot enthuse the other Conservative hon. Members—all seven of them—who listened to his speech. I am sure that Conservative hon. Members are wildly enthusiastic about the Bill. That is evident by their absence.

I found the hon. Gentleman's speech extremely interesting, but, if he will forgive my saying so, in parts boring. I have heard it all before, from his side of the House and, based on different reasons, from the Opposition Benches. The hon. Gentleman argued, as Opposition speakers have already done, and will continue to do on all similar Bills, on the basis of political ideology. Hon. Members claim that if their approach is adopted everything will go well, but that if the other side has its way everything will go wrong.

The one part of the hon. Gentleman's speech that impressed me, and with which I agreed, was that containing his call for an end to party political bickering, dogma and ideology. That bickering occurred again this afternoon. The right hon. Member for Deptford (Mr. Silkin) declared what the Opposition intended to do when they returned to power. The response of Conservative Members should be "If they return to power" when I say that. That is the standard way in which this place conducts its affairs. So we go on, week in, week out, month in, month out, and year in, year out. When we have the next Bill to unscramble a nationalised industry or to sell off shares in an industry we shall be confronted by the Opposition saying that when they return to power everything will be put right by unscrambling all that has been done.

There is an interesting side to this Bill in terms of political ideology. I appeal to the official Opposition to be aware of this fact. A major reason why my right hon. and hon. Friends and I intend to vote for the Second Reading is the interesting suggestion that the Government should retain a major holding in the company but that it should not be a nationalised company. This is not a new approach, but it is an interesting development of a method that has been tried infrequently in the past.

I also commend to the official Opposition the Government's determination to give preferential treatment to workers in the industry who want to buy shares in the industry. That is worthy of commendation and of serious experiment in a major industry in this country. My colleagues and I await with interest an explanation, which I imagine will be forthcoming in Committee, of how the Government propose to give priority, or preferential treatment, to workers. The Secretary of State said that the Government's proposals would become more evident as the weeks wore on. We await that information with great interest, and, especially on the Liberal Benches, with some enthusiasm. This may be a way of creating not only new methods of financing industry but, more important, new methods of improving industrial relations within the industry. Improved industrial relations are necessary in all industries.

From that point of view, I commend the Bill. There is an element of a gamble, which is whether private industry and employees will invest the capital that the industry needs and that is needed if this mix of shareholding is to take place. It is certainly worth a try. I very much hope that it succeeds. Success will depend upon how the share capital is subscribed, and by whom. In that respect, I wish the Government well, and I wish the Bill well.

The Government should not overlook the fact that the major need of this industry, more than of any other industry, is always for vast sums of money to be invested in technical development and experimentation, with a view to creating new markets and new aircraft, and new ideas that can be sold not only in this country but throughout the aircraft industry abroad.

I do not profess to be an expert on the industry. That is why I have said little on the subject until now and shall continue to say little about it as the debate progresses. My information is that the amount of money needed to develop a new project is phenomenal. I have heard figures as high as £2 billion quoted in relation to the Airbus by a person who is highly knowledgeable about these matters.

The doubt of many hon. Members is whether this industry in private hands, or even with part of it in private hands, can attract and make available the amount of capital that it requires for technological development. That is why I say that this experiment may or may not succeed. As the hon. Member for Westhoughton (Mr. Stott) said earlier, launching capital is necessary for new projects.

It would help those who are prepared to support the Bill if an assurance were given at some stage of the Bill's passage that Government assistance will not be lacking. To be fair, the Secretary of State said in his opening speech that he had the right, by law, to make such capital available. The right hon. Gentleman went on to say that it was doubtful whether, in the present state of the nation's economy, capital was immediately available, but that, none the less, he had power to make capital available. I should like an assurance that the Government will not hesitate to use those powers if they can be convinced that to do so is in the best interests of the industry and, consequently, of the nation as a whole.

That is as much as I need, or want, to say about the Bill. It is an experiment. We are deciding to sell a major industry, or a large proportion of it, to private ownership. That is, in itself, not a bad principle. I am not keen on monopolies in industry, but this industry has a monopoly only in national terms. Internationally, it faces great competition. This is an experiment to see whether sufficient capital can be attracted to create a partnership between the Government and the wider public. More important, it is a partnership between employees, acting as shareholders, and the Government together with other shareholders, who may not be either employees or the Government, but who are anxious and willing to invest in an industry that we hope has a great future.

We shall support the Bill, although we are not certain that the experiment will succeed. We can form a view only when we see how share capital is subscribed. But we believe that the Bill is worth the effort. For that reason, we shall vote for giving it a Second Reading.

6 pm

Mr. Robert Atkins (Preston, North)

I make no bones about the fact that from the word "Go" I warmly welcome the Bill. Despite what Labour hon. Members have said, it honours a Conservative Party manifesto commitment, and we are proud to honour it.

Before nationalisation the aircraft industry was successful. I am convinced that the successor company to British Aerospace will be successful after the Bill becomes law. The right hon. Member for Bristol, South-East (Mr. Benn) once said, referring to the aircraft industry, that if every industry in the country exported half its production, we would have no problems at all.

The question that must be posed when we think about the Bill and about nationalisation of the aerospace industry is: has nationalisation improved the industry's performance, as was promised by the proponents of nationalisation? The answer is clearly "No". Nationalisation was simply an act of political spite, resulting from the ideological hand-ups of Labour Members.

When Labour hon. Members refer to trade union leaders and the work force, I remind them that at the time of the nationalisation proposals in Preston alone 2,000 or more shop floor workers signed a petition expressing their opposition to nationalisation of their industry.

I can speak as one who is in the same position as my hon. Friends the Members for Welwyn and Hatfield (Mr. Murphy) and for Hertford and Stevenage (Mr. Wells). The proof of the pudding is in the eating. Great election victories were gained in certain seats where aerospace played a large part, because of the views that we represented.

Mr. Stott

The hon. Gentleman has the wrong name.

Mr. Atkins

I am afraid that that canard was disposed of a long time ago. The hon. Gentleman does not have a great deal to crow about. He had one of the largest Labour majorities in the country, which was cut substantially. His is now a marginal seat.

I do not discount the labour leaders. They are part and parcel of any discussion about industry, but I like also to listen to the voters, the people actually working in the factories. Their view is not always quite the same as that represented by their trade union leaders.

I should like to deal with the argument that is advanced in relation to the Government's being the biggest customer of British Aerospace. When that argument was put forward during the original debate and discussions it was perhaps not dealt with as strongly as it should have been, and I should like to deal with it now.

The alternative to building aircraft in this country was to buy them from abroad, as had to happen as a result of the cancellation of the TSR2. Labour hon. Members might like conveniently to forget that cancellation, which caused a great deal of unease and annoyance, to put it mildly, in Preston some years ago. If we had continued with the TSR2, we should not have had to buy foreign aircraft at great expense to the British Exchequer. Having to buy abroad means a loss of employment. That does not happen if we build equipment in this country.

The popularity of the Tornado, which is soon to come into service with the Royal Air Force and the German and Italian air forces, is an indication of what productivity and ingenuity can provide through the military aircraft division, based in Preston.

Nationalisation ignores, and has ignored, the export achievements of the aircraft industry. I take for example two contracts that have brought and are bringing substantial amounts of foreign money into this country. The first is the contract with Saudi Arabia and Oman, worth nearly £1 billion in exports. The second is the contract to sell Jaguars to India, which should eventually bring in about £1 billion.

I should like to know when the Tornado will be made available for export. I have put a question to my right hon. Friend the Secretary of State for Defence, who has indicated that there is interest and that in due course we may be able to sell it. I hope that that will be so.

The benefits to this country of the achievements of the British Aircraft Corporation, as it used to be called and as I prefer to call it, are many and various. There are, for example, the worldwide technical prestige of the work that the aerospace industry has created; the technical fall-out, so called, that has resulted from developments; the contribution to defence and exports, and reduction in imports; the training and exploitation of engineering skills; the employment that the industry has created in various parts of the country. Above all, there is the contribution in direct and indirect taxation that has resulted from the activities of companies involved in the industry. All in all, they have been excellent value for money.

When nationalisation was proposed and argued there was much reference in a document produced by proponents of nationalisation to cancelled projects. The proponents said that they would produce a list of them as evidence for their case. No such list has ever been published. I wonder why.

I know that most Governments have been guilty of a lack of forward planning. That is one of the problems that democratic government faces. But BAC has shown recently, and in the more distant past, evidence that it is prepared to use brainstorming exercises to test the credibility of design, products and so on. At present, for example, work is going ahead on the design of carbon-fibre wings. There is already co-operation with overseas firms in this area. We have heard references to the Hawker Siddeley Aviation contribution to the Airbus wing, and rightly so.

Incidentally, the aircraft industry has sometimes had to face difficulties in its relations with the Government. I was not around at the time, but I understand that the manufacture of the Spitfire and Hurricane was not quite as popular at the time as we are led to believe by their place in history.

I want to emphasise, as did my right hon. Friend the Secretary of State for Industry in opening the debate, that there are no proposals to break up the company. That is a key point, a bull point. There is nothing to fear and everything to be gained. The shares will be made available to those who want to buy them. That means those on the shop floor, trade union pension funds and—I hope, in my constituency case—people in Preston, and perhaps even Members of Parliament. I hope that I shall be one of the first in the queue when the shares are made available, so that I may show that I am concerned about the company in my constituency and show faith in it.

One labour attitude is represented by the general secretary of the Association of Scientific, Technical and Managerial Staffs, of which I am a member. My trade union boss has shown himself to be a very silly man by his comments in his own journal and at the Labour Party conference. I suspect that I am not alone in that judgment.

It could be thought that the representatives of the work force in the companies generally, the supporters of British Aerospace, have more to fear from Labour hon. Members than from us. I can do no better than to quote from the Labour Party manifesto, which contains the following commitment: We shall continue with our plans to reduce the proportion of the nation's resources devoted to defence". It follows that if that were done other things would also happen.

Again, I can do no better than to quote from the right hon. Member for Stockton (Mr. Rodgers), then Minister of State for Defence, who told the House in 1976 that it is not possible to make massive cuts in defence without consequences on equipment, and it is not possible to make massive cuts in equipment without the loss of job opportunities."—[Official Report, 15 June 1976; Vol. 913, c. 300.] The effect upon the aerospace industry is clear.

The right hon. Member for Barnsley (Mr. Mason) said in 1974, when he was Secretary of State for Defence: Cuts in defence expenditure sound simple enough … but if tomorrow's realisation reveals you are unemployed, you won't then be so keen". That is the reality of defence cuts.

Mr. Les Huckfield

I hope that the hon. Member for Preston, North (Mr. Atkins) will read the next sentence in that manifesto, which says: A Labour Government would plan to ensure that savings in military expenditure did not lead to unemployment for those working in the defence industries.

Mr. Atkins

I can only say that that matter did not meet with a great deal of acceptance in Preston.

Perhaps I could refer briefly to what members of management have to say, because I have a number of them living in my constituency, as well as members of the work force. I have five points to put forward. When I refer to management I mean everyone above the shop floor, and not just the directors. Indeed, some of the directors are members of the Labour Party.

I know that management welcomes the fact that there will be no break-up of the entire corporation, which is now to become a company. It welcomes the maintenance of a total capability. Indeed, there are only four countries in the world with this total aerospace capability. Management welcomes the continuance of Government participation in British Aerospace Limited—as it will be—the opening up of commercial opportunities and the maintenance of stability within the industry. Equally, management welcomes the long-term commitment to projects such as those involved with the continuation of the development of the Tornado and, indeed, the probability of air staff target 403.

Finally, I can do no better than quote from the document that was referred to earlier in relation to the management of British Aerospace, which spoke of A minority shareholding"— which we have not yet decided— spread across a wide section of the nation, including the British Aerospace work force, could increase the involvement and interest of the British public generally. That seems to me to be a fairly clear welcome and acceptance for what my right hon. Friend has put forward in the Bill.

British Aerospace is a great company, has a great work force and is making great products. I hope that there is no difference of opinion in the House on that. I can speak specifically only for my constituency and the three factories in Preston. The industry is very successful in Preston, unlike some other areas. It is making substantial profits, and it always has done. I see no threat to its continuing to do so because of the proposals in the Bill. Indeed, quite the reverse. I look positively to the future.

During the recess I was fortunate enough to visit the United States of America where, with the assistance and co-operation of British Aerospace, I was able to meet some members of the work force and executives at the Grumman company. [HON. MEMBERS: "Freeloading."] I had better make no comment on that. My visit was at the behest of the British-American parliamentary group, of which I suspect hon. Members of both sides of the House are members. However, I was fortunate enough to visit the Grumman Corporation, which has an arrangement with British Aerospace about aspects of the development of carbon fibre wings, to which I referred earlier. I have also observed the continuation of Panavia, the trinational company which exists to build the Tornado.

That sort of development for the future assures co-operation, which ensures the maintenance of the work force and, we hope, more jobs. It also ensures that development of our defence capability is forward-looking, productive and as realistic as the present Tornado project. When talking to members of the Royal Air Force I have been made aware of how much they look forward to the Tornado coming on stream in due course, particularly the air defence variant.

The Bill poses no threat—quite the reverse. It is a positive and substantial step forward in the interests of the company, the products, the work force and the shareholders-to-be. It ensures employment for a large number of people, and I hope that it will continue to do so. The Bill is to be welcomed. I have no hesitation in welcoming its presentation and wishing it god-speed.

6.14 pm
Mr. Roger Stott (Westhoughton)

The hon. Member for Preston, North (Mr. Atkins) referred to my constituency. I should inform the hon. Gentleman that Westhoughton has had a Labour Member of Parliament continually since 1906 and will continue to have a Labour Member until the boundary commissioner does his worst. I have no doubt that my hon. Friend the Member for Preston, South (Mr. Thorne) will take up some of the other points made by the hon. Member.

I do not want to take issue with the hon. Member for Preston, North, but in my constituency I have a large—I suspect the largest—dynamics factory in the British Aerospace Corporation. Over the past six and a half to seven years I have made it my business to go to that factory on a regular basis, and I have an open and free dialogue with the work force and the management. I have meetings with them on a regular basis, the latest of which took place last Friday. Therefore, I believe that I can say without fear of contradiction that I have a fair idea of the views of the people whom I represent and who work at British Aerospace, Lostock.

In addition to my constituency interests, I had the pleasure of serving my right hon. Friend the Member for Chesterfield (Mr. Varley) in the Department of Industry throughout the period when the Aircraft and Shipbuilding Industries Bill went through the House of Commons. I, and 28 other hon. Members, found ourselves in the Guinness Book of Records.

Mr. Robert Atkins

Join the club.

Mr. Stott

We spent more time in Standing Committee—there were 58 sittings of that Committee—than anyone has done in the history of this House. Those hon. Members who were involved—I see that the hon. Member for Tiverton (Mr. Maxwell-Hyslop) has arrived, and he was one of them—in Standing Committee D and the debate that we had in the Chamber will readily agree that the debates were protracted, difficult and rancorous. It is in that sense that I can claim to have invested a good deal of my parliamentary life in getting the Aircraft and Shipbuilding Industries Bill on to the statute book. Naturally, I am concerned that all our efforts in the previous Labour Government to create British Aerospace will be tampered with today by the introduction of a Bill that does nothing more than give vent to the Secretary of State's ideological spasms. Let us consider the arguments—

Mr. Colvin

The hon. Gentleman has referred to ideological spasms. If he was on that Standing Committee dealing with the measure that became the 1977 Act, he will remember the statements by his right hon. Friend the Member for Mancester, Ardwick (Mr. Kaufman). He may have been surprised this afternoon when his right hon. Friend the Member for Deptford (Mr. Silkin), when giving four reasons why it was necessary for the nationalisation of the aircraft industry to proceed, omitted what his right hon. Friend the Member for Manchester, Ardwick stated in that Committee, namely, that one of the prime reasons was to forward the frontiers of Socialism. Is that a good idea, and does the hon. Gentleman support it?

Mr. Stott

Of course it was a good idea, and I supported it at the time. Indeed, what I was about to do before the hon. Gentleman interrupted me was to deploy the arguments that were advanced by my right hon. Friend the Member for Deptford (Mr. Silkin) in the Chamber and, indeed, by my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) during the debates in 1975 and 1976. My right hon. Friend the former Secretary of State—

Mr. Deputy Speaker

Order. Before the hon. Member does that, I think that he should bear in mind that we are debating this Bill and not that one.

Mr. Stott

Indeed, Mr. Deputy Speaker. I should not wish to incur your wrath, but I think that it is important for the House to recognise the validity of the arguments that were used at that time, so as to debate the merits of this Bill. If I do not stay within the bounds of order, Mr. Deputy Speaker, I am sure that you will tell me. What I want to do is to indicate to the House, or to those hon. Members who were not in the House while that Bill was proceeding, the reasons on which my right hon. Friend based his arguments.

My right hon. Friend said that if BAC and Hawker Siddeley were to combine this would further Britain's ability to collaborate with its European and American partners. In fact, he referred to the 1964 Plowden committee report. Even as far back as 1964 that committee suggested that it would be beneficial for the aerospace industry if BAC and Hawker Siddeley were to merge. That merger took place only as a consequence of public ownership. It did not happen of its own accord, and I suspect that it would not have happened had the industry been left to its own devices.

Over the past three years there has been clear and proven evidence that the Labour Government were right to bring British Aerospace into public ownership. There is overwhelming evidence to show that that was correct. Before nationalisation no major airframe development would have been possible without massive amounts of Government launching aid. I hope that the Under-Secretary will take note of this. As the hon. Member for Rochdale (Mr. Smith) said, we need to be satisfied on the question of launching aid. We shall probe this matter in Committee.

Mr. Colvin

The hon. Member referred specifically to Government aid for the industry. Will he accept that up to the period to which he has referred 90 per cent. of the aid that the Government gave to the aerospace industry went to the RB211 engine and the Concorde, both of which were Government projects?

Mr. Stott

If the hon. Member would only contain his impetuosity, I shall come to that point.

In the military field the two main companies, BAC and Hawker Siddeley, were in receipt of millions of pounds of public money, which was channelled through the Ministry of Defence procurement division. The case for the creation of a unified aerospace industry in public ownership was entirely logical not only on the ground of ideology—and that is often borne out by practical experience—but on the grounds of commercial viability, design, continuity of employment, corporate planning and job security. These measures were essential for an industry that was facing the enormousness of escalating design and production costs.

No aerospace company anywhere in the world today could embark upon a new generation of aircraft production on its own account. International co-operation is required and is now taking place.

There are international ventures between British Aerospace and the French, the Germans, the Italians and the Americans. Above all, British Aerospace needs to operate in art atmosphere of stability and continuity.

I was interested to read the press statement put out by the Minister of State when the Bill was first published. He said: By introducing the disciplines of the market place, and by ending the blurring of commercial objectives—whch is one of the inevitable consequences of nationalisation—the new company will be made fitter, more efficient and more capable of surviving profitably in highly competitive world markets. Those words by introducing the disciplines of the market place are strange and rather stupid. Is the Minister of State not aware that prior to vesting day the British aerospace industry had received £1,700 million of public money? The Spitfire, the Hurricane, the Canberra, the Hunter, the Lightning, the Jaguar, the Harrier and the Concorde were all developed under direct Government contract. That means that the Government paid the development costs. Other aircraft, such as the Comet, the Viscount, the VC10 and the Trident, were developed with Government launching aid. There seemed to be a strange absence of the disciplines of the market place when those projects were first being developed and produced.

If we read the speech of the present Secretary of State for Industry on the Second Reading of the Aircraft and Shipbuilding Industries Bill on 2 December 1975, we see that he said: The Bill will threaten decline to the industries concerned … Those two industries and all those dependent upon them will be made worse if this Bill goes through."—[Official Report, 2 December 1975; Vol. 901 c. 1572.] That Bill went through and the evidence that we have today shows that the right hon. Member was wrong. This is borne out by the 1978 accounts of the British Aerospace board.

The right hon. Member for Henley (Mr. Heseltine), when he was Opposition spokesman for industry, went a great deal further. He gave a commitment in Committee and on Third Reading that when the Conservative Government were returned to office they would denationalise British Aerospace and flog off its assets to the private sector.

Mr. Colvin


Mr. Stott

No, I will not give way again. If the hon. Member reads the Hansard reports for the 58 sessions of the Standing Committee he will find ample evidence of this denationalisation commitment by the right hon. Member for Henley, but this Bill does not do that. In fact, it is a pale, watered-down imitation of the Bill that the right hon. Member for Henley threatened us with on the return of the Conservative Government.

This Bill represents a U-turn on the part of the Secretary of State. It would appear that the realities of office have curbed the more idiosyncratic excesses of the right hon. Gentleman. The Bill keeps intact the structure of British Aerospace, and I welcome that fact. One can only conclude that the Secretary of State has been converted from his original thinking, which he made clear on 2 December 1975, to a more rational posture. By virtue of this Bill the Secretary of State concedes and accepts that our arguments were right and that we were correct in creating British Aerospace under public ownership. The right hon. Gentleman need not feel embarrassed about this. Many people have trod the Damascus road before him, and many will tread it again.

If the structure of the industry is to remain intact, the work force in my constituency is entitled to ask why the Secretary of State is creating unnecessary uncertainty. Why is he messing about with an industry that is functioning well and making profits in the national interest? The answer to that question is that the Secretary of State must prove to the Tory Party outside and to his hon. Friends on the Back Benches that he has not completely abandoned his stone-age belief in a free market philosophy.

Mr. Tom McNally (Stockport, South)

My hon. Friend has mentioned the opinions of the work force in his constituency. Is he aware that those views are shared by the British Aerospace workers at Woodford and by those who work in the other 16 British Aerospace plants?

Mr. Robert Atkins

That is not true.

Mr. McNally

From a totally recumbent position, the hon. Member for Preston, North (Mr. Atkins) seems to know about a different view.

Mr. Robert Atkins

I spoke when the hon. Gentleman was not here.

Mr. McNally

I suspect that if the hon. Gentleman were to check with his own workers he would find that the opinion to be found in the 18 British Aerospace plants is that the Government are causing uncertainty for no reason. I am interested in my hon. Friend's comments about that.

Mr. Stott

My hon. Friend the Member for Stockport, South (Mr. McNally) is right to defend the views of those whom he represents. There may be some misunderstanding about the information that the hon. Member for Preston, North has received.

Mr. Robert Atkins

I talk to workers, not just to trade unions.

Mr. Campbell-Savours

He may very well talk at them.

Mr. Stott

The Bill demonstrates to Conservative Members that the Government have not completely abandoned their stone-age belief in the free market. Instead of selling off all the assets of British Aerospace, the Government intend to sell only half of those assets—or so we are given to understand. We need more clarification about that.

The Government hold a fundamental belief that there should be less State interference in industry, and therefore the inclusion of clause 5 is quite remarkable. It states: The Secretary of State may at any time, with the consent of the Treasury —what an unholy pair the Secretary of State for Industry and the Chief Secretary to the Treasury make— (a) subscribe for or acquire ordinary voting shares in the successor company; or … take up or acquire securities of the successor company which are convertible into ordinary voting shares or rights to subscribe for any such shares … carry voting rights at general meetings of the company; and … carry a right to participate in any distribution (whether of dividends or of capital) without limit as to amount. If that is not direct Government interference in industry I do not know what the term means.

I believe that the Bill is unnecessary. It creates unnecessary uncertainty in a profitable industry that I am proud to represent in the House of Commons. British Aerospace has in my constituency a factory that employs a great deal of skill and a wealth of knowledge, and it does an excellent job for the country. The only reason for the Bill is to satisfy some of the more rampant members of the Tory Party by flogging off bits and pieces of national assets. We shall resist the Bill on the floor of the House and in Committee, because it does not make sense. No doubt shop-floor workers throughout British Aerospace will resist the Bill as well.

Several Hon. Members


Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

Mr. Michael Colvin.

Mr. Michael Colvin (Bristol, North-West)


Mr. Robert Atkins

My hon. Friend knows what he is talking about.

6.34 pm
Mr. Colvin

I would have thought that it was unusual to be interrupted before having said a word. I appreciate the noises made from the Opposition Benches because I have been on my feet several times during the debate. I hope that the contributions that I have made have been of some use. I think that Conservative Members will agree that it has been a good start to the week for aeroplanes and for all those who develop, design, construct, market, fly, maintain and repair them.

Yesterday the House took its first steps towards freeing the British civil aviation industry from too much Government interference and control and began the process of handing back to ordinary working people some of the wealth, power and responsibility collected at present in the hands of the State. Tonight we take yet another step towards freedom—this time backed by a specific manifesto pledge. We shall reverse one of the most dogmatic and doctrinaire pieces of legislation ever to be passed.

The Aircraft and Shipbuilding Industries Bill became law in 1977 after record sessions in Parliament and in Committee. I remember at least one case of attempted cheating by Labour Members in order to avoid defeat. That debate achieved a privileged place in the Guinness Book of Records and we do not want to see that record broken.

Yesterday the Opposition made much play of the fact that we had not mentioned our plans for British Airways in our general election manifesto. The same criticism cannot be levelled today.

The Secretary of State and the Under-Secretary of State my hon. Friend the Member for Arundel (Mr. Marshall) both know that the wording of that manifesto pledge went down like the proverbial lead balloon in my constituency, and in many others containing aerospace interests because it did not say enough. It did not say anything about how the denationalisation would be handled. It did not confirm that the recently reorganised structure of British Aerospace was to be preserved. We are delighted to say that now. If that had been mentioned in the manifesto, it would have spiked the guns of those scaremongers who said that the Tories would carve up the corporation and sell the more profitable bits to private enterprise.

The 11 most marginal Labour constituencies before the general election that contained substantial British Aerospace interests—such as my own constituency—were all won by the Conservatives. We then had the added bonus of my hon. Friend the hon. Member for Hertford and Stevenage (Mr. Wells). That seat was not marginal, but it became a Conservative one.

Mr. Palmer

I am sure that the hon. Gentleman is not suggesting that all aerospace workers live in Bristol, North-West.

Mr. Colvin

Certainly not, but if the hon. Member would let me continue he would understand my point. I am not a great believer in mandate politics, but if a mandate were needed those general election results provide one. If the ordinary working people in those constituencies wanted to prove that the proposals in our manifesto were correct, they have done so by returning myself and the majority of my hon. Friends from marginal constituencies.

The general election result was proof, yet again, that clause four of the Labour Party constitution is a vote loser in saying that the Government should take into public ownership the means of production, distribution and exchange. The Labour Party would not be facing the prospect of another 10 years in the political wilderness if it had had the sense to adopt the advice of the late Hugh Gaitskell and repeal that part of its constitution.

Mr. Sheerman

In the interests of social science and of pushing back the frontiers of this kind of inquiry, perhaps the right hon. Gentleman could stand down from his seat so that we could have a by-election to test the success of his Government's measures so far?

Mr. Colvin

I thank the hon. Member for the promotion that he inadvertently gave me. No doubt it was a Freudian slip. However, as he knows, it is a rather silly suggestion. He should bear in mind that perhaps a general election result does not specifically cover the point that he has made. Since the general election several opinion polls have been conducted, and they have shown conclusively that the people of Britain do not like nationalisation and, furthermore, that majorities of specific workers in industry, when asked whether they would like to see their particular firm nationalised, have said "No". Therefore, if there were a referendum on this item, perhaps that would give the House a much fairer idea of the public's attitude towards the nationalisation issue, and particularly clause four of the Labour Party's constitution, which I believe will be a millstone around the Labour Party's neck for many years to come.

I have been extremely pleased to see that British Aerospace itself has reacted most favourably to the Government's proposals. It has said: A minority shareholding spread across a wide section of the nation, including the British Aerospace workers, would increase the interest and involvement of the British public generally … we have made clear already our view that the present corporate base of British Aerospace is best fitted for the internationally competitive business of aerospace. … We were glad to learn that it was the Government's strong purpose to maintain the present structure of the industry. That statement was made by British Aerospace on 13 August 1979.

There is surely one man—I am glad that the hon. Member for Westhoughton (Mr. Stott) mentioned him—who must be more pleased than most by the Government's proposals. That is Lord Plowden, whose committee was set up to review the aircraft industry at a very difficult time, following the cancellation in 1964 of three major projects, including the TSR2, by the then Labour Government. I cannot believe that that cancellation was particularly good for the morale of the aerospace industry. Perhaps I should say "the British aerospace industry", because I am sure that it was extremely good for the morale of those workers in the United States who were then manufacturing the F111.

At that time Europe was emerging as a major competitor to our industry and we had to decide whether to co-operate with the Europeans in order to compete more effectively with the United States. We had the advantage of a large domestic civil aviation market, but I remind hon. Members that at least half of the civil aircraft flying in the world today fly within the United States on domestic routes. Also, the United States has the advantage of a mammoth defence industry, and both this and the civil side help to absorb the research and development costs of the United States aerospace industry.

The Plowden report came out eventually in 1965. It concluded that there was no predestined place for the aircraft industry in Britain and that Government support should be reduced. Almost all of the report's major recommendations have now been implemented. It recommended further European co-operation. That we now have, on both the military and the civil sides. The report also recommended a sustained export drive to the United States, particularly in military products. That we now have. I hope that the Rapier guided missiles which Iran will not now have because of the troubles in that country, will one day be sold to the United States. There is a ready market for them. The United States has found that the product which it is testing as a surface-to-air missile is not particularly effective. We look forward to opening up markets for British products in the United States now that the American Congress has done away with the "buy American" policy and has substituted instead the principle of what is known as the offset.

Plowden also suggested that we should consider buying defence systems from the United States only if the research and development costs of proceeding with our own systems in Britain were uneconomic. That again is something that now happens.

However, there was one recommendation in the Plowden report which was particularly important from the point of view of this debate. The report recommended the purchase by the Government of shareholdings in the British Aircraft Corporation, as it then was, and Hawker Siddeley Aviation Limited. This was to remove from the companies the heavy weight of technical and financial Government control, which was seen to prevent efficient and dynamic management. No size of shareholding was recommended by Plowden, although a majority of the committee wanted the Government to purchase over 50 per cent. Plowden, therefore, ruled out complete nationalisation. The committee was against it because it would prevent participation by private enterprise and capital. As the report stated: The ability to raise fresh capital from the market provides a test of sound management and commercial promise of projects.

Mr. Les Huckfield

If the hon. Gentleman reads the Plowden report very carefully—instead of only the summary of it, which he has obviously done—he will learn that a majority of the Plowden committee wanted to see nationalisation of the aircraft industry but realised that the solution that the hon. Member is describing would probably have to be the one decided upon because there would not have been time to get legislation through the House in time to save the British Aircraft Corporation.

Mr. Colvin

I am grateful for that interjection, but I do not think that I interpret Plowden in the same way as the hon. Gentleman does. I have read the report from cover to cover. We were in contact with Lord Plowden before the debate on the Aircraft and Shipbuilding Industries Bill. I feel that the recommendation that I have just put forward on the shareholding was fair.

The point is that Plowden did not go further on the shareholding but said that the Government should have a shareholding. What the committee could not agree upon was whether the Government should own over 50 per cent. of the shares, or less than 50 per cent. Plowden did not make a specific recommendation of a percentage of shares that the Government should hold.

Perhaps I may continue by referring to something else that Plowden said as the reason for the decision on a Government shareholding and a shareholding in the joint company by free enterprise. Plowden said that the commercial promise of projects would disappear under full State ownership and would be difficult to replace. It would be a mistake to forfeit the use of this test while there is any prospect of retaining it. The key to the Plowden report is contained in that last quotation. That is why I feel that Lord Plowden must be a happy man this evening to see that not just one of his recommendations has been implemented but most of the others as well.

However, to be fair to the Opposition, who will find me in these debates a most reasonable man, I think that there are some who doubt whether the two main aircraft companies, BAC and Hawker Siddeley, would yet have come together. Mergers have been discussed between them for many years, under Labour Governments and Conservative Governments, but nothing ever materialised. Therefore, the nationalisation Act of 1977 has brought about a shotgun marriage where a love match had failed.

The rationalisation and reorganisation that has followed has resulted in a corporation that is not only an international leader but is capable of contributing an enormous benefit to our economy, with exports running at well over £½, billion and saving considerably on Britain's import bill.

It is worth noting in passing that the conversion ratio of raw materials into finished products in the aerospace industry is one to 10. That means that for every £1 worth of raw materials that goes into the factory, £10 worth of finished product comes out. For a country like ours, which is poor in raw materials but rich in technological skills and inventiveness, this is precisely the kind of industry that we should be encouraging to expand.

During yesterday's debate the House spent some time discussing the effects of the British Airways sale of shares on the public sector borrowing requirement. Labour Members would probably like to have a re-run of that debate, but before doing so they ought to hear what their own shadow Chancellor, the right hon. Member for Leeds, East (Mr. Healey) had to say in September 1976 about the relationship between the Labour Government's nationalisation programme and the public sector borrowing requirement.

On Thames Television the right hon. Gentleman was asked what Labour's programme for Britain would cost. I believe that the Conservative Opposition at the time had put the Bill at £10,000 million. "No," said the right hon. Member for Leeds, East, that is absolutely ridiculously high. Whether he meant the Conservative estimate or the Labour estimate was too high I do not know. He went on to say: The speed at which we take over the industries which we are going to take over will depend partly on the problems of accommodation, the implications for the gilt-edged market and the Government's borrowing requirement … The central point about the acquisition of assets is that it can create problems for management of Government debt, and therefore the way in which you phase this in is a matter of greatest concern to the Chancellor with his responsibility for looking after the Government's borrowing requirements". Those are pretty sound words from the Shadow Chancellor of the Exchequer and I wish that hon. Members opposite would read them, because I think that they put the case as well as anyone on this side could have done for what we are trying to do with regard to the public sector borrowing requirement.

Perhaps I shall be forgiven for making a rather parochial plug, as other hon. Members have done, for the aerospace industry in and near my own constituency. The aerospace complex in Bristol encompasses both British Aerospace and Rolls-Royce Ltd. Now that the flight test facilities have been moved from Fairford to Filton, the Filton patchway complex is probably the most advanced and most comprehensive aerospace centre for the design, development and manufacture of aircraft and aerospace products in the world.

British Aerospace's civil aircraft works at Filton have been concentrated for many years on Concorde, and in spite of some rather disparaging remarks made yesterday about that project I point out to the House that the total net spending on Concorde by the United Kingdom will probably reach about £900 million by 1983, and that the United States of America has spent considerably more than that but has never got any further than the wind tunnel models. We have an aeroplane which is a leader in its field, which has pushed forward the frontiers of technology, and from which there have been considerable spin-off benefits to aerospace and to other industries.

Talks have been going on for some time between McDonnell Douglas and British Aerospace on an advanced supersonic transport, the AST, and an agreement has been signed covering co-operation on design studies. It is regrettable that the Government have inherited such an adverse economic situation that it is necessary for Ministers to say that they can merely take note of these preliminary studies that in future any Government spending will be concentrated on subsonic aircraft, and that no additional money will be provided by the Government for these super Concorde studies.

If that statement represents Government policy—and perhaps my hon. Friend the Member for Arundel (Mr. Marshall) could touch on this when he winds up the debate this evening—I feel that they have got it wrong. I see no reason why the Government should take any part in investing in development or research for subsonic aircraft, but I see every reason why the Government, in conjunction with both our European partners and the United States' aerospace industry, should take part in the research and development of new technology, such as a longer-range higher-capacity version of Concorde, perhaps in the same way as the NASA programme is conducted in the United States.

Mr. Wilkinson

My hon. Friend is raising an important point, apart from dealing with something that is of considerable constituency concern. If it makes sense for the Government to invest in research into supersonic flight, for example, it is equally good sense for the Government to support research into subsonic areas, such as laminar flow wings.

and new structures and developments which have an immense return but which perhaps would be too expensive for a private enterprise firm in terms of finance.

Mr. Colvin

My hon. Friend has a point. I have a constituency interest, as the House will understand, in a second generation Concorde, and I believe that any Government have to get the priorities right when considering any form of Government investment. As so much work has already been done on Concorde and the further studies, I feel that it would merit further investment in that project, but I do not think that the Government are in a position, because of the diabolical state of the economy when they took over from the Labour Government, to make any appreciable investment in research and development in the aerospace industry. If any pennies are available, further studies on Concorde would certainly merit an investment, and in due course would pay a handsome dividend.

There is no doubt that in the future there will be no competitor for Concorde from anywhere else. The Mark I Concorde, which now flies, was effectively barred from being an economic success by the activities of the aviation and aerospace industries and the political goings-on in the United States of America. That aeroplane would have been a commercial success had it been allowed to fly on the routes for which it was designed—from London to New York—at a much earlier stage in its career. I am afraid that it was handicapped from the start by the activities of the Americans, who saw in Concorde an aeroplane which could really take the pants off them. They were frightened of that competition and did everything in their power legally to stop it flying those routes for which it was designed.

I take the point that my hon. Friend has made. There is a place for the Government's injecting, occasionally perhaps, funds into new technology, pump priming, as it were, as they have shown in the way that they have invested £25 million in the Inmos silicon chip concern, which is again a Bristol investment. I look forward to the day when the Government decide that perhaps the second tranche of money should go into Inmos, which has proved to be a profitable and adventurous industrial undertaking.

All in all, the future of the British aerospace industry looks bright, but there is a major cloud on the horizon. British Aerospace is already short of the design staff required for the future programme. Lack of mobility within the company is not the only reason. Punitive rates of income tax under the previous Government and the erosion of differentials resulting from pay policies under various Governments have ruined morale, promotion prospects and recruiting.

The Government's tax cuts and moves towards restoring differentials must be welcome to the engineers, who are the lifeblood of the aerospace industry. In some cases their starting salaries are little better than those of the cleaners and sweepers in the same factory. It is high time that we started paying our engineers what they are worth and rewarding them with a status commensurate with their contribution to the economy. Their status should be comparable to that enjoyed by engineers on the Continent and in the United States. If we do not do that the brain drain will continue and increase. Our aerospace industry is a vital part of the country's economy and we should not let it waste away.

With that gloomy parting warning, I wholeheartedly commend the Bill to the House.

7.1 pm

Mr. Arthur Palmer (Bristol, North-East)

I am sure that the hon. Member for Bristol, North-West (Mr. Colvin) will not misunderstand me, because it is no fault of his, if I say that he has represented a Bristol constituency for only a short period. He must therefore not take unto himself the right to speak for employees at Filton and in the Bristol Aerospace establishments. Those of us in the Labour Party who have represented Bristol constituencies for a long time have also been to Filton on many, many occasions and talked to the skilled and unskilled workers and technical staff, and I like others, am connected with a union that represents the technical staff in the aircraft industry and elsewhere.

I was unfortunately obliged to be out of the Chamber for a short while but listened to the speeches until about an hour ago. Before I left, the hon. Member for Hertford and Stevenage (Mr. Wells) made a speech of quantity rather than of quality, and made one extraordinary point that I did not understand. The nationalisation statute gave the employees certain rights, in common with those in other nationalised industries to negotiate over wages, salaries and conditions, and to joint consultation on matters of common concern. That is no different perhaps from the practice of the best private enterprise companies, but the hon. Gentleman seemed to think that it should not be so. Was he arguing that, if the transfer goes through—and it can do so because the Government have a majority—the new aerospace company will not practise joint consultation with employees and there will no longer be negotiations over wages, salaries and conditions? The hon. Member will be able to read my words in Hansard. Was he suggesting that the new company, half State-owned, will take certain rights from the trade unions?

Mr. Wilkinson

I believe that I understood the point that my hon. Friend the Member for Hertford and Stevenage (Mr. Wells) was making. He said that the Aircraft and Shipbuilding Industries Act laid upon the board of British Aerospace a duty to consult relevant trade unions, but not others in the work force who were not trade unionists or members of staff associations. That was the burden of his complaint, and it was that element of discrimination that he was glad would be removed when the new Bill became law.

Mr. Palmer

I do not think that the hon. Member for Ruislip-Northwood (Mr. Wilkinson) understands the nationalisation statute. He used the words "relevant trade unions". If a trade union organises a substantial group of employees, whether staff or so-called work force, the corporation is under a statutory obligation to consult that trade union. It is perfectly true that there have been rivalries, differences and jealousies, but that does not remove the obligation from the corporation to consult every section of the employees through the relevant trade unions. If it is suggested that, as a result of the Bill, that will not be done in future, it is of some consequence and I should like to have the Minister's reassurance.

I do not propose to go into the detail of the Bill here. As the Government have the majority, I assume that the Bill will go to Committee, and we shall then be able to look carefully at every line of the measure. As my right hon. Friend the Member for Deptford (Mr. Silkin) said, there are many contradictions and examples of loose thinking in the Bill which will need to be cleared up in Committee.

Many of my hon. Friends have asked why the Bill is necessary. That is the real issue before the House. The only consistent reason given by the Secretary of State on 23 July was that the change was proposed in the Conservative election manifesto. Since then, today and at other times, he has gone into greater detail.

I have had several lives in the House. Curiously enough from some points of view, I represented Wimbledon from 1945 to 1950, and I can remember many of the debates of that time. Whole columns of Hansard contain speeches by Conservative Members stating that there was no such thing in British constitutional practice as the doctrine of mandate. If, when a party came to office, good sense showed that a suggested measure was no longer possible or wise and there were no valid reasons for it, the Government did not necessarily have to carry out that measure just because it was in the parliamentary programme. That view may not necessarily receive support from some quarters on the Opposition side of the House, but at one time the Conservative Party theoreticians argued strongly that there was no such thing as a doctrine of mandate.

What a change there is now from the Conservative Party of the immediate postwar period. Those empirical days are long since past. The present Government and the Secretary of State for Industry are far more committed than any previous Conservative Government—and that is the danger—to doctrine and the theoretical conception of perfect economic order, which has never existed and never will. They must be acting for reasons of doctrine or mandate because not other satisfactory reason can justify the Bill.

British Aerospace came into existence barely two years ago with the help of £27 million of public dividend capital and £17 million from other Government sources. The rest of the capital was with the companies that were taken over under the Act. The total assets employed on 31 December 1977 were £285 million. A year later, since nationalisation, their value was £322 million. I do not argue that that is all due to nationalisation. However, I would argue that the nationalisation of the industry has done nothing to prevent its progress, as is being argued by the Conservative Members.

In 1978, the profit after tax was nearly £29 million. That is not such a bad return on the assets. If the industry were left to get on with the job under the Act as it now stands it could well achieve the 21 per cent. return which the Ministers have recently imposed. That could be done just as well under the present organisation as under any new organisation I am sure.

The worst thing for the morale of employees in an industry—indeed in industries before and sometimes after nationalisation—is a constant atmosphere of change of organisation. The aerospace industry cannot be compared to the railways where we have to contend with changing times and modes of transport, or, in the private sector, with textiles, where the industry is struggling against declining fortunes. Aerospace is a high technology, advanced industry. Hence I cannot understand why Ministers suggest to the House that, less than two years since the previous Act, there should be another overturn—unless as I say it is for reasons of doctrine or mandate.

It was suggested that clause 4 in the Labour Party constitution compelled the Labour Party to undertake policies irrespective of their merit. I do not believe that for one moment, Of course I accept clause 4 as an ultimate ideal. It is not a bad thing for parties to have ideals and ultimate principles. There is more sense in the Labour Party believing in a Socialist future than the Conservative Party believing in a capitalist past.

But the people of this country have to deal with the present—this decade, and the decade afterwards. Argument about the ultimate ideal of a Socialist society is not relevant to what has to be done today any more than is a theoretical conception of a glorious capitalist past. We must face the facts as they are and deal with them on their merits as best we can.

Mr. Onslow

Will the hon. Gentleman remind me why these industries were nationalised by the previous Government?

Mr. Palmer

The outstanding reason was to carry through a rationalisation of the industry by amalgamation within the industry. That was why the Plowden committee was appointed but the industry seemed incapable of arranging amalgamation on its own. Without putting myself out of order, I should like to refer to an industry of which I have considerable experience—electricity supply. Before nationalisation there were 600 electricity supply undertakings in the country on paper. They had been boiled down in practice to about 250. For years there was talk about further rationalising the industry. It was done in the end in the only way possible—nationalisation under a public corporation.

Mr. Onslow

I am interested to hear that being offered as the prime reason. However, that purpose having been achieved—and there is no intention of disturbing it in this Act—wherein lies the hon. Gentleman's objection to returning the industry to private hands in the form which is suggested?

Mr. Palmer

I shall try to answer the hon. Gentleman's point in a moment, as I get on.

During our debates on the Second Reading of the nationalisation Bill and in Committee later it was conceded by opponents of nationalisation that the country could no longer afford the luxury of too much domestic competition. True competition today is international rather than domestic. Therefore, it was important for amalgamation to go through. It was necessary to form a single formidable British enterprise and, irrespective of party, we should be proud that British Aerospace entered 1979 with a £3 billion order book.

Lord Beswick, the chairman of British Aerospace, defined objectives of the enterprise as follows: To fulfil our commitments to our customers. To help Britain earn her collective living. To provide secure and satisfying employment for all our workforce. That is inscribed on the banner of the industry and it is a change from the sad and doleful comments that we hear continuously from the CBI and the Institute of Directors. Those two organisations tell us that there is no opportunity, in spite of the change wanted by them, of British industry livening itself up because world conditions are too difficult.

The aerospace industry is prosperous and hence I see no financial reason for making a change. Does the management of British Aerospace want a change? It does not. Of course, it is decently neutral about the matter because it will have to live under new masters. That is to be expected. My hon. Friend the Member for East Kilbride (Dr. Miller) quoted from the document issued by the board of British Aerospace which said that it would have preferred to continue: without the uncertainty and distraction of changes effected by Parliament. That is understandable. In the long run, the management and workers work for the industry, whoever happens to own it. That is the true continuity.

Like myself, many of my hon. Friends have close connections with the trade union movement. They will know that the movement is opposed to any change of this sort. Conservative Members often believe that they know the way into the minds and thoughts of employees independent of the trade unions. The trade union movement supported the nationalisation of the industry and it is opposed to its denationalisation. I do not think that the change will assist good labour relations, particularly if some of the speeches that have been made by Conservative Members are taken seriously by employees in the industry.

I have visited Filton many times. The hon. Member for Bristol, North-West goes there these days. The thing that worries employees at Filton is uncertainty about the future of the Filton works. There was a time of great uncertainty when the Concorde work was running out. There is now a pretty full order book which is well spread over the weapons and civil sectors. Some of us have had to try very hard to reassure those employees that Filton would not be made second best to other centres of the aerospace industry. I am quite certain that, within a short time, I shall have representations from the unions expressing worry about what the future of Filton will be under this new management. No doubt the unions will also communicate with the hon. Member for Bristol, North-West.

Mr. Colvin

In my talks with trade union representatives—by that, I mean the officers concerned in the unions—it seems that most of them were concerned about the risk of a carve-up of British Aerospace. I think that we have satisfactorily answered that fear with the proposals that are now before us. There will be no carve-up. Therefore, I believe that that removes the main objection of the trade union officers. Is the hon. Gentleman conscious of any ballot of the work force within British Aerospace aimed at discovering whether the ordinary rank-and-file member is in favour or against denationalisation in the way that is proposed?

Mr. Palmer

I know that such ballots are in fashion at the moment. There has been one at British Leyland that has attracted some attention. However, my experience is based on the normal, organised expression of views of the work people—by that I mean all grades—through the trade unions and other bodies that they have set up to represent them. I am merely saying that the work force is concerned about upset and disturbance that may interfere with job prospects. The hon. Gentleman said that their fears had now been removed. But who created those fears? It was the Conservative Party, by some of its earlier statements about returning profitable parts of the industry to private enterprise. It is no good the hon. Gentleman saying that there is no need for fear, because that fear should not have been created in the first place. The hon. Gentleman may have converted himself, but he has not necessarily converted the rest of us or the employees at Filton.

My conclusion like my beginning, is that the Bill is unnecessary. The Conservative Government have already done enough harm to the British economy by their doctrinaire financial policy—we can see evidence of that on all sides—without adding this piece of doctrinaire industrial policy to their overall folly. No parliamentary democracy can be successful in a difficult and threatening world by assuming that no middle ground is left between a centrally directed, collectivist economy and one inspired by the doctrines of Milton Friedman or Professor Hayek. There is a tremendous middle ground which is generally described in this country as the "mixed economy". Therefore, we must accept the concept of "the enterprise"—

Mr. Colvin


Mr. Palmer

Perhaps the hon. Gentleman will wait a moment. He is very impatient, but I am glad that I am interesting him. We must accept the concept of "the enterprise", whether nationally owned, privately owned or of mixed ownership.

Mr. Colvin

Surely, both in the case of British Airways which we discussed last night, and British Aerospace, we finish up with mixed economy companies, half owned by the State and half owned by free enterprise. That is precisely what the hon. Gentleman has been advocating.

Mr. Palmer

When I refer to the mixed economy—and I think that most people would agree—I mean an economy consisting of a considerable public sector, directly or indirectly owned by the State, a considerable private sector, and an area in between. I am saying that the aerospace industry has been fitted into one part of that mixed economy by the act of nationalisation and there is no good practical reason why a change should be made. The only reasons that have been given that can be taken seriously are that the Conservative Party feels that it must do this because it was in its mandate, and that it fits in with some of the theoretical economic concepts of the new Tory Party.

I turn to two final points relating to the appointment of directors. I did not follow the Secretary of State very well. He said that the Government would take no hand in the appointment of directors, even though they might have a majority shareholding. It was said that there would be two part-time directors, but with regard to directors generally the major shareholder would have no say. How exactly then are the names to be obtained? Is it seriously suggested that there will not be behind-the-scenes discussions between representatives of the groups of shareholders to find suitable people to sit on the board? I should have thought that that was quite obvious. Surely this will not be left to the chance of nomination at a shareholders' meeting. I cannot believe that.

The Secretary of State seemed confused on this point. I believe that is because he allows doctrine always to overwhelm his normal, rational thinking process. That is his personal difficulty. We should like to know how the names are to be obtained. I cannot believe that any British Government, much concerned with defence and the prosperity of the country, in circumstances where they have a majority or near majority shareholding, will not have some say in the appointment of directors.

Conservative Members seemed to argue that in the nationalised industries the chairmen and members of the boards were the creatures of Ministers. That is new to me. I should have thought that it was well known that the chairmen of the nationalised industries often take a very independent line. In fact, I once heard a Conservative Minister say that he found that the directors of private companies were more likely to listen to Government wishes than the chairmen of nationalised industries, because the chairmen of the nationalised industries could rely on their statute to buttress their independence.

To argue that by making this change we shall somehow give greater freedom of decision to those who have to run the industry is, I believe, a wrong and shallow assumption. This industry cannot be successfully run, however it is owned, unless there is freedom of decision on the part of those who have to do the job from day to day. My argument against the Bill is that it is unnecessary at this stage in the development of the economy. If the Government had any sense at all, they would leave well alone.

7.29 pm
Mr. John Wilkinson (Ruislip-Northwood)

At long last we have had a contribution from the Labour Benches that at least recognised the importance of stability in the industry. It also recognised that the future organisation of the industry should be as settled as possible from the point of view of the employees who work in it. The speech of the hon. Member for Bristol, North-East (Mr. Palmer) was just the sort of contribution that I would have expected from him. A number of years ago we worked together on the late lamented Select Committee on Science and Technology. I regret the passing of that Committee which was useful for the workings of the House.

The industry whose future we are discussing tonight is no ordinary industry. Since the Second World War it has produced such leaders as Sir George Edwards and Sir Arnold Hall, and designers as outstanding as the late Sir Barnes Wallis and Sir Sidney Camm. They were men of excellence and genius, unsurpassed in British achievement. Within the work force, that quality has been reflected at all levels. There has been, and still is, a devotion to the industry and its work and there is a creativity and pride in aerospace that are almost second to none.

In a different and poignant way it is an industry apart. I think, for example, of Russ Pengelly, who was killed a few months ago testing a Tornado. John Derry was killed displaying a Sea Vixen at Farnborough and Mike Lithgow was killed test-flying the BAC111. It is an industry which places special demands on those who work in it.

I am the only participant among Conservative hon. Members who speaks as someone who has worked in the industry. The previous speakers, who have made an important contribution to the debate, have been constituency representatives. I worked on the Jaguar project before the 1970 general election, and in 1975 I returned to my old firm, the British Aircraft Corporation, to work for the chairman, Mr. Allen Greenwood. I recall our preoccupation, not just with the job in hand, but with the Shipbuilding and Aircraft Industries Bill and its effect on the organisation and ownership of the industry.

The hon. Member for Westhoughton (Mr. Stott) reminded us that the Standing Committee on that Bill ran to no fewer than 58 sittings. I sat in as a link person between the industry and the Committee. I stayed in my employment for a short period under the British Aerospace regime.

Without being too subjective, I will tell the House what life was like under nationalisation. I had worked as personal assistant to the chairman of BAC—a similar position to that which was occupied by Frank Beswick under Sir George Edwards. As soon as nationalisation was in the offing, decisions and attitudes were evidently becoming more politicised. People were wondering how their behaviour, policies or views would affect their political mentors, and whether that might improve their chances of promotion. Those became important preoccupations.

What happened when vesting took place and the nationalised corporation was established—the corporation that we were told would enhance industrial democracy and participation? The car parks were laid out anew—new special places for the new bosses. The office occupied by my boss and Sir George Edwards before him was not good enough for the new chairman. He had to have somewhere a floor higher. Partitions were pulled down, thicker carpets were laid and all the paraphernalia of bureaucratic power installed—not the sort of measures that enhance industrial performances in any way, but the sort of measures that I, as a middle management type, noticed and resented.

I earnestly believe that the proposed measure will take aerospace once and for all out of party politics. It is a special industry, and I give examples of ways in which it is different from most other industries. The scale of investment is much vaster, and the time scale within which a return is to be seen on that investment is substantially longer. There is a technical complexity and a variety of disciplines that have to be embodied together to produce an end product which will have to meet demands and requirements stricter than in any other engineering industry, with the management of the variety of disciplines, skills and talents to bring that process about.

Because the cost is so great, and because a single nation no longer has the power and resources to do many of the more advanced projects, there is an international dimension. What an amazing and wonderful thing that is. For example, there is the European Airbus which has participating companies from Spain, Holland, Germany, France, United Kingdom and Sweden and can compete successfully in the world market with all its parts brought together from all over Europe. That is no mean feat of management.

There is the aspect of national power, prestige and national security which both civil and military aviation encompass. There is the most fateful area of all, that of decision making and the consequences of error in the decision-making powers. In 1971 a decision on one project, the RB211, led to the demise of Rolls-Royce. In Germany more recently there was the failure of the VFW-Fokker 614 project. From that failure we saw Fokker and VFW move apart. That was a significant event.

Mr. Palmer

The hon. Gentleman referred to a mistaken decision made concerning Rolls-Royce. That decision was made when Rolls-Royce was under private enterprise, and that is why it had to be rescued.

Mr. Wilkinson

I do not dispute that one iota. I am saying that the industry is one in which the consequence of error in decision making are horrendous. They are horrendous if the company is nationalised just as much as if it is in private hands. Aerospatiale, a nationalised France concern, is certainly not profitable, but Avions Marcel Dassault, a private company, is a highly commercial enterprise orientated towards the market, providing fighter aircraft that are second to none, and doing extremely well for its shareholders. Aerospatiale, with a whole range of activities and nationalised, is not in any financial sense doing so well. I accept the hon. Gentleman's point; and I am not trying to make any partisan argument.

I believe that the Bill, keeping together as it does the company in its present structure, should provide stability and should eliminate the shuttlecock effect of the partisan divide in aerospace.

The right hon. Member for Deptford (Mr. Silkin) made a highly interesting and original speech. Possibly we can excuse the eccentricity of some of his remarks, because he has not long taken an interest in industrial matters. He advanced four arguments showing why nationalisation was necessary for aerospace. First, he said that it was necessary to bring about a merger of competing groups. As my hon. Friend the Member for Woking (Mr. Onslow) said in an earlier intervention, there has been a steady process of rationalisation within the industry on purely commercial grounds. BAC is an amalgam of Bristol, English Electric, Vickers and, in the early days, Rolls-Royce. Hawker Siddeley Aviation was De Havilland, Hawker and Armstrong Whitworth. The process of rationalisation was already in train. Westland was an amalgam of Saunders Roe, Fairey Helicopters and Westland Helicopters. MBB is an amalgam of Messerschmitt, Bolkow and Hamburger Flugzeugbau. The process has taken place worldwide without nationalisation.

It is highly debatable whether eliminating the competing groups of Hawker Siddeley Aviation and BAC has been a step forward. Indeed, I think that it is highly questionable. I am able to say from experience that it is a more impersonal and unwieldy organisation. It is amusing to use as an example the Miss British Aerospace competition, in which appear Miss Hawker and Miss BAC. Those are the sashes that the girls wear even after nationalisation. Obviously old loyalties die hard!

Secondly, the right hon. Gentleman said that private firms could not finance high technology such as aircraft. No one has denied that. When the Bill is enacted there will be launching aid. That is sensible, reasonable, logical and right.

Thirdly, the right hon. Gentleman said that defence interests involving aerospace necessitated nationalisation. Many contractors worldwide undertake vital defence functions without having to be nationalised. I have already mentioned Avions Marcel Dassault, which is a supreme example.

Fourthly, the right hon. Gentleman said that nationalisation provided a more flexible arrangement. "Flexible" is a euphemism if ever I have heard one. The right hon. Gentleman cited the example of the HS146. I shall not comment on the merits or demerits of certain projects. However, since the HS146 has gone ahead, much less emphasis has been placed within British Aerospace on the BAC111. The BAC111 is still selling worldwide. Over 220 BAC111s have been sold worldwide. The Romanians have recently entered into a licence-to-build agreement with British Aerospace for the 111. However, over 100 persons in the 111 team have lost their jobs. We must take much of what the right hon. Gentleman says with a pinch of salt.

Although in my heart of hearts I wish the Government to assume a greater private shareholding than 50 per cent., I recognise that there is merit in providing a structure that will not be provocative and lead to renationalisation by a Labour Government.

We have also to consider foreign participation. There are already transnational groupings in Aerospace such as Panavia for the Tornado and Sepecat that produces the Jaguar. The groupings are rather ad hoc and are orientated towards single projects. Airbus Industrie, however, is producing a family of aeroplanes. It may be that by the end of the century we shall want to evolve a genuine transnational corporate structure. That is by no means impossible. I hope that the provision whereby 15 per cent. investment in the equity capital cannot be exceeded on the part of foreign holders will not make that an impossibility.

I welcome the fact that Her Majesty's Government have shown confidence in the existing board management of BAe. As I have said, it is a highly specialised and complex industry. It is the sort of industry that requires a lifetime's devotion if one is to assume a position of leadership in it and have any reasonable chance of success. I hope that that will continue to be borne in mind. I hope that my right hon. Friend and the Government will consider seriously the possibility of appointing non-executive directors—not necessarily financiers—with relevant experience in other aspects of engineering or high technology industries.

Many of our competitor nations are placing great emphasis on aerospace. For example, the Germans are hell-bent on building up a major aerospace capability, as are the Japanese. When the Government are able to devote more funds to aerospace when the economy is stronger, I hope that they will not hesitate to do so. I am sure that the successor company will be a good mechanism for putting Government funding in aerospace to good effect.

7.45 p.m.

Mr. Stan Thorne (Preston, South)

I cannot take up the remarks of the hon. Member for Ruislip-Northwood (Mr. Wilkinson) in terms of the level of his involvement in the British aerospace industry. I worked in aerospace for some years, but on the shop floor rather than among the upper echelons of the industry.

I have been interested by a variety of views that have been expressed, and I begin by referring to the speech of the Secretary of State. Among other things, the right hon. Gentleman referred to the Bill becoming law and the company becoming a Companies Act company. He said that that would be beneficial to those who owned it and to those who worked in it. To what extent was research undertaken by the right hon. Gentleman and his Department to enable him to make such a statement? British Aerospace workers in the Preston area have not been consulted by the Department of Industry on the likely benefits that could accrue from British Aerospace being returned to private ownership.

In the Preston area the 12,000 to 14,000 aerospace workers are involved in military aircraft production. The Secretary of State referred to satisfactory profits for those who buy shares in the industry. Clearly he means private profits. It strikes me as extraordinary that yet again we are talking about private profits from defence and military equipment. I believe that there is something immoral about private profits being made from the production of armaments in whatever form. It has been said that wars are terrible, but they are terribly profitable. I view with considerable regret the right hon. Gentleman's comments about profits.

It was against the background of profits that the Secretary of State spoke about fierce international competition. He implied that that competition might best be met following the passage of the Bill because an element of private ownership would be involved. However, the evidence of the past few years leads us to exactly the opposite conclusion. Private enterprise companies of international repute have had to call for Government aid, and millions of pounds of public money have been poured into private businesses to enable them to compete internationally.

The right hon. Gentleman has already made it clear that there will not be funds available for this type of aerospace industry because of reductions in public expenditure. He assures us that that decision is not doctrinaire. Of course, it is only Labour Members, who advocate public ownership, who are doctrinaire. It is not doctrinaire, apparently, to pursue private enterprise willy-nilly, irrespective of the circumstances. That—and I understand the point—is the natural position of the Conservative Party.

Reference was made to control being possible only if a majority of shares was held by the Government. That is absolutely right. The Government will not have control. They will not take powers to intervene. In effect, whether the private shareholders own 49 per cent. or 51 per cent. of it, aerospace will be in private hands. In my view, it is a doctrinaire measure.

There must be some interpretation, even by the Secretary of State, of the meaning of the word "private". If we sell half, or about half, the total shares, and do not interfere, and take no powers, it seems to me that to all intents and purposes British Aerospace will be in private hands. As was indicated in response to a question, there will be little or no prospect of gaining Government aid for launching projects.

How does that square, I wonder, with the earlier claim that the measure was to be beneficial to those working in the industry? I should have thought that the prospects of aircraft designers, engineering technicians and senior men in the toolroom in the aerospace industry, given this new measure, would be somewhat less than the security many of them feel they now have in working for a British publicly-owned industry. I question very much—frankly, I reject—the notion that the workers will benefit from this measure. Certainly in one field they will quite clearly not benefit.

Like my hon. Friend the Member for Westhoughton (Mr. Stott) and other right hon. and hon. Members, I sat for 58 sittings on the Aircraft and Shipbuilding Industries Bill. We argued long into the day in Committee and across the Floor of the House about industrial democracy. It is true that various hon. Members on both sides of the Committee had different notions of what industrial democracy meant. One thing is quite clear. This Bill will be a major setback to any growth of industrial democracy within British Aerospace. Private companies are not in business to promote industrial democracy. They are in a situation in which they purchase labour, if they possibly can, at the lowest price level necessary to ensure its continuity. They are not involved in giving the labour force the responsibility for production planning. For most private shareholders, who employ directors and managers to protect their interests, the worker's job is to carry out a set of orders given through various levels of supervision. To the shareholders that is holy writ. Most managers strongly protect their right to manage—which, for them, is beyond question.

The need to promote industrial democracy will fall in a situation where private shareholders are taking decisions in a British Aerospace company, particularly if we accept the view of the Secretary of State, who presented the Bill, that satisfactory profits are to be earned. Most of us are aware of the fact that to earn satisfactory profits in a situation of intense competition, directors and managers, to satisfy shareholders, must exercise a firm control over the work force in an attempt to gain the best return possible at the cheapest price. I say at the cheapest price—

Mr. Robert Atkins


Mr. Thorne

I shall not give way. I did not interrupt you when you were speaking.

Mr. Deputy Speaker


Mr. Thorne

I apologise to you, Mr. Deputy Speaker, as you have not yet spoken.

I return to the point that I was making: the best return for the cheapest price. Directors, managers and shareholders are forced to obtain that. I do not say that they are necessarily actuated by gross immorality. They are forced to do that to survive in a competitive situation. The cheapest way is obviously to lower the costs. The major part of costs is, of course, wages. To satisfy the thirst of private shareholders, a British aerospace company will inevitably force down costs—in other words it will attack wages and create a much less favourable climate of industrial relations than exists at present. No matter what Government supporters say about a publicly-owned aerospace industry, it is true, as will be confirmed by my hon. Friend the Member for Nuneaton (Mr. Huckfield) who is the Opposition Front Bench speaker, that industrial relations since the passing of the aircraft and shipbuilding industries legislation have been extremely good in the aerospace industry.

Mr. Les Huckfield

indicated assent.

Mr. Thorne

It is fundamental to Tory ideology, which has given birth to a not surprising Bill, that, given the power, the Government would give this industry back to private shareholders. However, their notions about control, which stem from Conservative ideology, I find somewhat puzzling.

Previous speakers alluded to directors. The hon. Member for Ruislip-Northwood was closely associated with a director whom I regret was ever appointed to the board of British Aerospace. Prior to the British aerospace industry becoming publicly-owned, he made a firm resolve that nationalisation would take place over his dead body, although the words he used were a little different from those. He made it absolutely plain that he opposed public ownership for the aircraft industry.

Mr. Wilkinson

The hon. Gentleman referred to someone with whom I have worked extremely closely. Mr. Allen Greenwood expressed his view about what he thought the Bill would do to the industry. He gave his judgment in public. I think that that was the right and proper thing to do. After Parliament decided to vest BAC and HSA into British Aerospace, a statutory corporation, he served—and serves—loyally and well as deputy chairman of British Aerospace. He was largely instrumental in securing the Romanian deal on the BAC 111 aircraft.

Mr. Thorne

I am sure the hon. Gentleman recognises that I was not in any way suggesting that the gentleman to whom I referred made a statement that he should not have made. I am merely indicating that, he having declared his opposition to public ownership, in my opinion it was a mistake for the previous Government to appoint him to the British Aerospace board. The hon. Member for Ruislip-Northwood indicated that in spite of that he did a satisfactory job as a member of the board. I am not attempting in any way to question that observation.

I am interested, particularly in view of the comments of the hon. Member for Preston, North (Mr. Atkins), in reactions to the Bill from outside so far as we are able to interpret them. The joint staff unions at British Aerospace, Preston and district, have made it absolutely clear to me that they oppose the Bill. They see no gains in it and they are highly apprehensive about the changes proposed. It is also clear, as a result of meetings I have recently attended, that the shop floor unions there are also completely opposed to the passage of this Bill.

The hon. Member for Preston, North, whom hon. Members will recognise as a poor substitute for the previous Member for that constituency, has claimed to speak with considerable authority on the subject of British Aerospace. He welcomes the Bill. I am glad that he has made his position clear because British Aerospace workers in Preston ought to be informed about how hon. Members view these questions. They were certainly aware of the facts in February 1974, in October 1974 and in May 1979 that I strongly supported the public ownership of the aircraft industry, and indeed of many other industries.

In his speech, the hon. Member for Preston, North referred to an ideological hang-up. Apparently this is the other side of the stamp referred to in other speeches as the doctrinaire views held by Labour Members. To indicate his own doctrinaire position, the hon. Member referred to a petition signed by 2,000 people employed at British Aerospace. He did not mention that that number was a minority of the work force employed at BAC. Of the 14,000 work force, 2,000 workers represent something like 14 per cent. In other words, 86 per cent. of the work force did not sign the petition opposing the public ownership of the aerospace industry. I wonder what are the views today of those who signed that petition.

I challenge the hon. Member for Preston, North to a public debate in Preston on the subject of the ownership of British Aerospace, before an audience of British Aerospace workers. We could then ascertain precisely who represents what views in this House. The hon. Member will have the opportunity at such a public debate of defending his claim that he will buy shares in British Aerospace and I shall have the opportunity to argue why I shall not be buying shares.

The hon. Member claims to speak on behalf of the constituency of Preston. I take a particularly dim view of that claim because it is impossible for any hon. Member to do that. I would certainly never claim to speak on behalf of the constituency of Preston. There happen to be two constituencies, anyway. How can any hon. Member know that he speaks on behalf of his constituency? I should be interested to know when the hon. Member last talked with the blue and white collar organised workers at British Aerospace. He did not tell us that.

Mr. Robert Atkins

On Saturday.

Mr. Thorne

When the hon. Member says "on Saturday", he forgets to tell us that he spoke to about 10 people then. I am talking about 14,000 workers in the preston district. Most hon. Members hear only a limited number of voices. The voices that I hear say "No" to the Bill and that is how I shall vote tonight. The hon. Member for Preston, North revealed that he is a member of ASTMS. He obviously knows that I am a sponsored member of that union.

I invite the hon. Gentleman to consider the views of members of that union, which he, with his ideological position, obviously believes to be irrelevant. If he seeks to claim his membership of ASTMS with, presumably, some honour, he should take the trouble to find out what the members of that organisation feel about the Bill. I can give him that information free, gratis and for nothing. They are opposed to the Bill.

I should like to refer briefly to the hon. Member for Bristol, North-West (Mr. Colvin). He is another poor substitute for the previous hon. Member for that constituency who put up a highly active participatory fight in the House on behalf of workers in British Aerospace. He, too, served for 58 sittings on the Aircraft and Shipbuilding Industries Bill. I very much regret the loss of an hon. Member who showed such tenacity in the face of considerable opposition, and in the face of some of the most objectionable people who were involved with that particular measure.

Mr. Colvin


Mr. Thorne

I shall not give way. I have not finished dealing with the matter. The hon. Gentleman may wish to intervene in a moment. He made references to public ownership, the last election, the late Mr. Hugh Gaitskell and clause four of the Labour Party constitution. I have no recollection that the last election was fought by the Labour Party on clause four. I ask the hon. Gentleman, since he wishes to intervene—and I shall give him that opportunity—to tell me which industry the Labour Party sought to take into public ownership.

Mr. Colvin

Mr. Deputy Speaker, thought that I was following the normal courtesies of the House in addressing my remarks to you, rather than to the hon. Member for Preston, South (Mr. Thorne). But he raised the matter of clause four and my insinuation that the Labour Party had it hanging round its neck like a millstone and that because of that it was deprived of victory at the last general election. It was there, but it was under the carpet, because the Labour Party published a pamphlet in 1976 which was described as "Labour's Programme for Britain 1976".

Mr. Deputy Speaker

Order. The hon. Gentleman has already made one speech. I thought that he was making an intervention.

Mr. Thorne

It is typical that the hon. Gentleman did not intend to answer the question I asked, but merely went on to his favourite tack. In doing so he has, in fact, answered my question. He knows, as I do, that in the Labour Party manifesto of 1979 the Labour Party proposed no single industry for public ownership. Unlike him, I view that with considerable regret. The last Labour Party manifesto did not contain the false promises about the economy that were contained in the manifesto on which the hon. Member for Bristol, North-West fought his election.

Mr. Wilkinson

On a point of order, Mr. Deputy Speaker. We are surely digressing very far on Second Reading. The hon. Gentleman has been on his feet for 25 minutes. We are now going into past history that has nothing to do with aerospace or anything that is before the House.

Mr. Deputy Speaker

Mr. Thorne.

Mr. Thorne

Thank you, Mr. Deputy Speaker. From the fact that you have called me again, I conclude that I was not out of order. People have yet again to suffer deprivations inflicted on them by the Tory Government to learn that the solution to our problems is not less Government planning, less State intervention in industry and less economic planning, but more Government planning, more economic planning and more attempts by Government to meet people's needs on the basis of utilising our resources through public ownership in the best interests of the people as a whole.

8.10 pm
Mr. Cranky Onslow (Woking)

I may return to the remarks of the hon. Member for Preston, South (Mr. Thorne), but, as he made such a boring speech, I may not remember much of it in a few minutes' time. I shall, however, comment briefly now on his peroration, which seemed as classic an example of dogma gone raving mad as we have heard in the House for some time. The hon. Gentleman no doubt believes it, but most of us know that if he hears voices and listens to that rubbish he is likely to be out of the House and we shall have a double victory to celebrate in Preston. I look forward to that day.

The right hon. Member for Deptford (Mr. Silkin), who opened the debate for the Opposition, made a revealing speech—revealing, mainly, of his own ignorance of the subject. I am sorry he is not here to hear me say so, because I should be happy to state my remarks to his face. The right hon. Gentleman showed little knowledge of, research into, and awareness of the subject matter of British Aerospace. If he is intending to hold on to that post and not aspire to something higher, I hope that he will do his homework. The industry will not thank him if he talks in a plausible way but talks nonsense.

Mr. Sheerman

Let us hear what the hon. Gentleman has to say.

Mr. Onslow

I shall be happy to oblige the hon. Gentleman, but I have not wholly finished with his right hon. Friend.

The right hon. Gentleman's distinction between what he called business and what he called industry was extremely interesting as an insight into his mind. He failed totally to realise that both these activities, if they are separate, which I would not accept, have in common one essential ingredient for success—good management.

In politics, success depends on good leadership. The human element was totally ignored by the right hon. Gentleman. The idea that industry was a purely mechanistic process and that business was simply oriented to profit, with no link between the two, showed a depth of ignorance that was surprising until we heard what the right hon. Gentleman had to say about whether industries which were major suppliers of the nation's defence needs should be nationalised. That is another subject on which he appears to have done little forward thinking.

When challenged, the right hon. Gentleman was evasive and did not seem to realise that, by his own definition, which he offered in all seriousness, Westland Helicopters Ltd, should undoubtedly be a prime candidate for nationalisation, as should the Martin Baker company, which makes aircraft ejector seats, for which there is not much civilian demand. That would also be news, I dare say, to the right hon. Gentleman.

The right hon. Gentleman seemed to be fully at home only in striking a happy vein of fancy about the formation of ingenious companies that would be able to conceal potential foreign bidders for shares in British Aerospace. He talked about "KGB Ltd.". I dare say that he has not been involved in the formation of any such company. It recalled to my mind a long succession of similar enterprises: OGPU Ltd., GRU Ltd., SMERSH Ltd, and KGB Ltd. It may be that in the archives—

Mr. Les Huckfield

What the hon. Gentleman is saying is most interesting. He clearly realises that the Government Benches are very short of speakers tonight. My right hon. Friend the Member for Deptford (Mr. Silkin) would be touched to hear so many references to what he said, but the House might like to hear a tiny bit of what the hon. Gentleman himself thinks—just a tiny bit.

Mr. Onslow

Just a tiny bit to oblige the hon. Gentleman, who spent most of the afternoon whispering urgently into his right hon. Friend's ear in an attempt to prevent him from making more and more crass mistakes. The hon. Gentleman is able to devote his attention to me now only because his right hon. Friend is not in the Chamber. He will have a chance later. If he wants me to devote a tiny bit of attention to him, I may do so presently, but I want to talk about some other matters first.

I want in particular to tell the hon. Gentleman, lurking behind that growth on his face, that no Labour Member has so far produced one good reason for opposition to the Bill. The hon. Member who came nearest to it was the hon. Member for Bristol, North-East (Mr. Palmer), who said—and it was a fair point—that there was a need to rationalise the industry, and that it was possible to do that only by nationalisation. It certainly was done in that way, and so in a sense the hon. Gentleman's point has proved itself by default. But, the rationalisation having been achieved, and there being no intention now to disturb it, the justification for retaining British Aerospace in public ownership seems to have been overtaken by events. Certainly, the hon. Gentleman could produce no beter and continuing justification when I taxed him with the matter.

The truth, as we can see clearly from Labour Back Benchers' speeches today, and such contributions as there may have been outside the House, is that the one overwhelming reason why Labour hon. Members are determined to oppose the Bill is the simple Socialist dogma of "What we have we hold". They are determined that the commanding heights of the economy, of which the aerospace industry is one, should remain in Socialist hands. It is nothing more complicated than that. It is as simple as that and as wrong as that.

We have heard mention today of an organisation called the Association of Scientific, Technical and Managerial Staffs. In the last election that body was responsible in my constituency for circulating a letter to electors. Like other hon. Members in the South-East, I have in my constituency a fair number of people who work in British Aerospace factories. Aerospace is a matter of as much concern to us as it is to the people of Bristol or Preston. I make no apology for reminding the House of that. The letter read as follows: Dear Colleague, RE: BRITISH AEROSPACE INDUSTRY AND THE FORTHCOMING ELECTION. No doubt many of you will have read a report of the Tory Election Manifesto, within which they are proposing to sell back to private industry the so called profitable sections of British Aerospace. This is Political prejudice gone mad, as there are now many people even in the higher echelons of British Aerospace Management who originally opposed Nationalisation, but who now, however grudgingly, accept that the only sensible way forward for British Aerospace is within Public Ownership. ASTMS members cannot be unmindful"— this is a touching bit— of the amount of time and effort put in by the Association's Officers and M.P.s over recent years, not only to secure the industry into Public Ownership, but equally important to establish a programme of work which would offer a large measure of Job Security to those working in the industry. These aims have been largely achieved. Surely our members and other Trade Unionists are not now prepared to put all this at risk. In short, we need the return of a Labour Government to ensure the continuing stability of Your Industry and Your Job. The letter was signed by the national officer of ASTMS, who lurks somewhere in Glasgow.

Unhappily, that touching appeal totally failed to convince the electors, because those of them who knew the industry at first hand knew that there was a great deal in the letter that did not stand up to close examination. Many of them know very well why the industry is going through a very good period, and why it was doing so at the time of the election. It is not because of nationalisation but because of the maturation of projects that have been developed by design staffs, research staffs and market researchers over many years before nationalisation.

I am sure that the hon. Member for Nuneaton (Mr. Huckfield) knows that this industry has a very long time scale between the inception of a project and its coming even close to the point of profitability. I hope that he will explain that to his right hon. Friend the Member for Deptford when he returns. It is extremely important that it should be understood, so that his right hon. Friend says nothing silly about the present success of the industry having anything whatever to do with nationalisation. Nationalisation did not produce the market-suited products which are now returning profits to the corporation involved.

Unhappily for us, I suppose, ASTMS is not an association to be persuaded by the loss of a general election, as we just heard from the hon. Member for Preston, South. Trade union voices are still being whipped up in opposition to the Bill.

My friend, Mr. George Elliott, who is chairman of the combined committee of shop stewards at the Weybridge factory, felt impelled to tell the local newspaper some time back: The Government's statement that it will sell off shares in British Aerospace is a near criminal attempt to undermine the future of the industry and our viability to compete in the future. I know Mr. Elliott and I am aware of his politics. I am not wholly surprised that he should say that sort of thing, any more than I am surprised to find that Mr. Hoyle, who was, until the last election a Member of this House—and I do not regret that he is no longer a Member—is quoted, in an article printed in the Morning Star as having certain things to say about the Bill. He sees the collapse of a thriving British aerospace industry if Tory plans go through, with the break up of major design teams, the loss of skills and morale destroyed. A human investment squandered. Mr. Hoyle goes on to say: We have now got to be determined to fight with every means available. We've got to build up the resistance of the labour force against Tory attacks. Tory patriotism doesn't extend to the public sector. They'd rather see a foreigner owning our industry if it means private enterprise, rather than us all owning it publicly.

Mr. Les Huckfield

Hear, hear; spot on.

Mr. Onslow

"Hear hear", says the hon. Member for Nuneaton. As a member of the national executive of the Labour Party, he no doubt feels that he has to say that. Perhaps we can discount those rather false cheers.

The central fact, which we understand well, is that politically-motivated men, if I may coin a phrase, will do their utmost to stir up the labour force in British Aerospace factories to resist the Bill and, in the process, undermine the continuity of their jobs.

Let us not suppose for a moment that any such suicidal action as the hon. Member for Nuneaton and his friends might try to embark upon would be good for our exports and sales of this industry around the world. I am not suggesting that they care about that, but I say it so that they should know it and have it said in their presence. If they would rather tear the industry to pieces, bring it to a dead halt and get the work force out on strike than see it being successful and meeting the export targets and sales, which are available to it, that is their responsibility. However, they should not think that the rest of the country is unaware of what they are doing or, indeed, that they have the support of the work force.

I have met constituents who work in British Aerospace and also trade unionists in the industry. I have discovered that their principal concern is now wholly out of date. They were concerned that there would be a break-up of the corporation and that the dynamics side would be hived off. We now know that that will not happen and, therefore, it need no longer concern them. The only possible remaining cause for concern—again, the hon. Member for Nuneaton probably knows of it but does not wish to admit it—is not so much centred on the launching aid and whether it will be available as on the availability of finance for the activities of the corporation as a whole.

As launching aid is confined to the civil side, and as the military side is directly funded by agreement from the Ministry of Defence Vote, the guarantee of essential public funds is much greater than any Opposition Members have so far suggested, particularly bearing in mind another fact that Opposition Members do not seem to have hoisted in, which is that in that sense there is no major civil project waiting for launching. We must allow Labour Members their little froth at the mouth, but certainly none of the financial anxieties they have sought to stir up corresponds to the situation in the real world.

The mood of employees in the aircraft factories that I know is primarily one of wanting to be left alone to get on with the business of designing and selling aeroplanes throughout the world. Employees want minimum interference in that activity. They want a considerable reduction in internal bureaucracy, and they want civil servants off their backs wherever this can be achieved. The Bill will have a powerful influence in that respect.

Naturally, we all want to see more people working in the industry. At a time when high unemployment is the great scarecrow before us, there are jobs going begging in the aircraft factories. The recruiting vans are out trying to get skilled workers to the shop floor at Weybridge, and I dare say the same is true of Preston. In fact, I doubt whether there is any factory in the entire British Aerospace group which at present could not use more skilled labour.

As a matter of national policy, we should give every possible encouragement to those industries which have work to offer. The best way in which we can encourage the aircraft industry is to pass this Bill and give the stability and certainty which it offers.

8.27 pm
Mr. James Hill (Southampton, Test)

This has been a most interesting debate. I put hon. Members who have attended it into three categories—the Front Bench and the Whips who have to attend, hon. Members with constituency interests—whether these are aviation or not is another matter—and Members such as my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) who is an aviation enthusiast. I like to think that I am in the third category.

The design, progress and perfection of the flying machine over the past 30 years has changed the whole concept of aviation. I remember many years ago when the design teams were designing the Princess flying boat and the Brabazon aircraft and there were no engines with sufficient power to move them through the air at sufficient speed.

My hon. Friend the Member for Bristol, North-West (Mr. Colvin) brought back nostalgic memories when he talked about Filton. I remember when the largest concrete runway in the world was created there for the Brabazon and I had the honour to be transferred from the flying boat fleet to the Stratocruiser and Constellation fleet to operate out of Filton. Therefore, I believe that the third category is right for me.

The debate today has made heavy weather of what is a small Bill. The debate has been broadened, with the permission of the Chair, so that we have talked about everything but the Bill. The Bill proposes that British Aerospace should in future operate within the framework of the Companies Acts. That will apply to several other nationalised industries, and the Government may wish to sell the shares on the open market. The ownership of the industry will therefore be transferred from the present statutory corporation to a company incorporated under the Companies Acts. Initially the shares will be held by the Government, who will eventually make them available to private ownership.

I welcome the Bill because it achieves something that all parties would agree with, namely, that employees in the industry should be given a special opportunity to buy shares. Other progressive companies, such as ICI, have in the past brought employees into those companies through share ownership. The Government have said that they wish to retain about half the shares. Will the Minister inform us whether that "about half" is 51 per cent., 49 per cent, or some lower figure? That question has been asked several times today.

Much of the Bill deals with the establishment of the new company. Clause 1 deals with the vesting of British Aerospace business and its property, rights, liabilities and obligations in a limited liability company to be called British Aerospace Limited. The Secretary of State will decide upon vesting day, but it is obvious that it will be shortly before the date upon which shares in the new company will be offered for sale. The Secretary of State mentioned that he hoped to secure continuity in management at board level, and I welcome that. When a company issues shares there is nothing more unsettling than the board being apprehensive about the future.

Clause 3 provides for shares in the new company to be issued by the Secretary of State. He will decide the nominal value of the shares that are issued, but he will not be able to dispose of them or give any directions concerning their disposal unless the Treasury gives its consent. However, clause 4 says that any excess of the amount that the Government invested in British Aerospace over the nominal value of the new company's initial share capital would be placed in a special reserve that could be used only for issuing fully paid up bonus shares.

In clause 6 the Secretary of State is required once again to gain the consent of the Treasury in appointing nominees to receive, subscribe for, or acquire shares in the company. The Secretary of State's power is thereby curtailed because he must have the consent of the Treasury.

The key to the scale and rate of disposal of shares in British Aerospace Limited, and to the balance between private and Government control within it, is provided in clause 7. That clause deals with the setting up of a target investment limit for Government shareholding in the company. Once the company ceases to be wholly owned by the Crown the Secretary of State will, by statutory instrument, fix the target that will relate to the shares that he, or his nominees, will hold. The Secretary of State must dispose of any shareholding that exceeds the new target limit.

Unfortunately, my hon. Friend the Minister of State is not present this evening. I am particularly concerned about one or two statements that he has made. I should have liked him to make clear that at the time the target limits had not been settled. In other words, there is no reason this evening for debating target levels. I am sure that I shall get clarification on the amount that the Government will retain in the new company.

We have had one or two references this evening to the statement made on 8 November by my hon. Friend the Minister of State. That statement was ridiculed by Opposition Members. Of course, once again, it was selective ridicule and hon. Members did not carry it forward to say that the statement continued, when talking of the shares, to the effect that the Bill would enable the public at large, and particularly the employees of the company, to take a more direct stake in the aerospace business for themselves rather than through the anonymous hands of the State, and that the national interest would continue to be represented by substantial Government shareholdings.

We have heard much this evening to the effect that this will mean the collapse of morale, that the board will probably wish to go against the Secretary of State in this matter and that the whole of the British aerospace industry is in peril. I do not read it quite like that. I think that this is an opportunity for British Aerospace to involve itself in more aid more private investment.

The right hon. Member for Deptford (Mr. Silkin) said that he was alarmed that perhaps pension funds or institutions might take over power on the board. I would welcome that. I realise that pension funds are in a general picture. It may even be a trade union pension fund.

Mr. John Silkin

Perhaps I might clarify what I meant. I agree with the hon. Gentleman that if such funds come in, and at any rate as long as they are in, there is no danger from the point of view of control. That is perfectly true, and that is their history. What worries me about pension funds and institutions—this may be within the hon. Gentleman's experience, too—is that they tend to stay in for a relatively short period and move into something else. I am much more worried, as I tried to point out, about the fact that there is nothing whatever to stop what really are foreign competitors from having a large say, if not entire control—although it depends upon the Government's holding—simply by the expedient of setting up companies in Britain. I can see how an attractive offer made to a pension fund for its shares might very well start that process moving. That is what I was concerned about.

Mr. Hill

I think that protection is well provided in the Bill. No more than 15 per cent, of the shares will be available to foreign investors. I should make the point that we must not always think that foreign investors will of necessity bring down a British company—quite the reverse. The distribution of sales of this giant industry is such that only 45 per cent, of its sales are in the United Kingdom; the remainder are throughout the world. To give only a couple of examples, 14 per cent, of sales are made to Europe and 26 per cent, to the Middle East. Therefore, obviously its export market is considerable. It may well be that any foreign interests that pick up shares will be the door through to more foreign contracts. Therefore we should not take too jaundiced a view of 15 per cent, of the possible share capital going to foreign investors.

There was some criticism earlier that this industry produces weapons of death. It was obvious from what was said by one or two of those with constituency interests that they were almost talking against the livelihood of their own constituents. It is interesting to note that in 1978 the total sales of British Aerospace were £231 million for civil aircraft, £284 million for military aircraft, £250 million for defence systems, £104 million for support systems and £15 million for space projects. It will be seen that of that total of about £900 million only £231 million could be seen to fall within the category criticised by someone who was objecting to weapons made for defence or attack. A constituency Member with one of those factories in his constituency may be faced with a dilemma, because if his view prevails the result might be considerable unemployment in his area.

Mr. Campbell-Savours

Will the hon. Gentleman accept that there is room for moral objection to some forms of industry and that Members have a right—indeed, a duty—to express that moral objection if they find that what is being done is offensive? Other Members may have a constituency interest, but there is room for both sides in this debate.

Mr. Hill

I think that by the moderate way in which I have approached the issue I have shown that I agree that there is room for a moral decision by a Member of Parliament. I have said that out of sales totalling £900 million last year only £250 million was from civilian aviation. Those who support this industry as a nationalised one have accepted that fact. However, this is a moral argument which I do not think will enter into the discussion of the Bill when it goes into Committee.

Those figures make clear the British Aerospace industry's dependence upon its ability to obtain and fulfil military and defence contracts. I have already said that they are worth so much more to the industry than anything that can be provided by civil aviation. Even the wonderful Jetstream 31 and the A300 Airbus, and all those projects which are so excellent, so progressive and so bright for the future of the aerospace industry, cannot compete with what happened last year, when we won an order for 50 Hawk training aircraft for Finland, and other export orders for Hawks worth £165 million. We had already supplied 81 of these aircraft to the Royal Air Force.

The Harrier has been spectacularly successful, and British Aerospace has a technological lead in this area. It is a pity that some of the pilots are not as highly trained as were the technicians and designers who originally designed the Harrier. Nearly 220 Harriers have been sold to the RAF, the United States Marine Corps and the Spanish Navy, and there are potential purchasers. Both India and China have expressed considerable interest in the aircraft. I sincerely hope that we shall get a trade contract with China to provide the Harrier. Production and modification work continue on the Buccaneer, the Phantom, the Vulcan and the Shackleton. India has also agreed to the purchase of the Jaguar international aircraft. That will be followed—and I believe that every hon. Member will agree with this—by the manufacture in India of these aircraft under licence, which will provide much sought-after employment in a continent that needs every ounce of help that it can get.

As with the civil aviation side, there is every reason to believe that opportunities to secure new markets will increase as long as high standards of competitiveness and technology are maintained. I make that point. Earlier the point was made that the demise of Rolls-Royce was a managerial decision, and nothing to do with the technology of providing that engine. We have a good future in the civil aviation world. That applies also to the dynamics group of British Aerospace, which produces air-launch missiles, Army and naval missiles, and space systems. Last year that group achieved a turnover of over £270 million. I suppose that the orders that were placed by Iran were a grave political risk at the time, and we shall now be looking for other markets.

The new company will be beneath the umbrella of the Secretary of State for some time. I do not think that any Conservative Member can possibly ignore the election manifesto. We are doing precisely what we said. We shall sell off shares and make them available to employees. The debate last night is almost a replica of this debate, but with different names.

The Secretary of State and the Under-Secretary of State are to be congratulated on bringing forward what seems on the surface to be a simple Bill in the form of debate, but which is a complex share issue. I shall vote for the Bill this evening. Anything that gains further for the public purse, cuts down the public sector borrowing requirement and relieves the pressures on our Welfare State has to be recommended by both sides of the House. The money from the individual shareholders—and I sincerely hope that there will be many thousands of them—will go into the Treasury to help support the Chancellor during this difficut time.

Mr. Campbell-Savours

The hon. Gentleman refers to the gains and savings for public expenditure, but it is my information that British Aerospace makes a profit. The reduction in the shareholding by the Government will be a loss to public expenditure and to the Treasury.

Mr. Hill

If it is a profitable company and shares are sold, one must lose that element of profit. However, high minimum lending rates and high borrowing percentages have been forced on the Chancellor, and the Government and local authorities will find it increasingly difficult to obtain money from the investment markets. If this is a good issue it will immediately bring in hundreds of millions of pounds, which I hope will offset the public sector borrowing requirement. In the long term it will certainly be an advantage. Within a short time—

The Under-Secretary of State for Industry (Mr. Michael Marshall)

My hon. Friend the Member for Southampton, Test (Mr. Hill) and the hon. Member for Workington (Mr. Campbell-Savours) have raised an issue that is perhaps helpful to the House. It is important to understand that, on the formation of the new company, existing debts will be extinguished. Those debts include £15 million to the national loans fund and £27 million public dividend capital. There will be that immediate opportunity to see a reduction in that part of the public sector borrowing requirement.

Mr. Hill

Once again the Under-Secretary comes to the rescue of a Back Bencher who may not have had a complete answer.

The gains to the company through the subjection of management decisions to the reality and discipline of the market, rather than to political interference, should ensure the health of the company in the face of stiff international competition. I hope that the board will take the Bill in the way that my right hon. Friend the Secretary of State intends it to be taken. There is no disturbance, and it should be looked upon as a normal share issue. We hope that it will bring health and prosperity to every employee of British Aerospace.

8.50 pm
Mr. Barry Sheerman (Huddersfield, East)

I have listened with great interest to the debate. I am somewhat surprised that the shape of the debate has been not about substance but about structures. I should have expected to hear a debate about the substance of private and public ownership, but the debate has developed to consider the sort of public ownership that is appropriate in the late twentieth century. Bearing in mind what the Government said in their election manifesto seven months ago in May, that comes as a surprise. As late as July, many of my right hon, and hon. Friends suspected that the Conservative Party would keep its promises in office to sell off the profitable parts of the aerospace industry to the free market—the private sector. That has not taken place. Today's Bill is a Conservative version of nationalisation, to use their word. Our term is public enterprise.

Today's fundamental debate has been about the appropriate structure for the aerospace industry. It appears that the Conservative Party has been won over to the view that some sort of public control must be maintained. We should not forget the sort of atmosphere in which the debate takes place. On Thursday I had a discussion at lunch-time with several industrialists from the textile industry in West Yorkshire. That was the day when the minimum lending rate was raised to 17 per cent. The look on their faces was something to behold. A well-known industrialist who was sitting next to me commented that it was easier to walk on water than to make a profit by borrowing money at 20 per cent.

In that context, we are discussing a Bill that will change the structure of British Aerospace. It is surprising that the Bill, if it has any guiding light, takes its structure from British Petroleum, which appears to recommend itself to the Secretary of State. BP is a successful company with a public stake which is not too oppressive and which allows commercial decisions to be made. It is a successful and profitable enterprise. Perhaps this soft sell of the Conservative Government is the way in which they can retain a public stake in large industries when they do not have the courage of their conviction to sell off to private enterprise. They know what a disaster that would be for the national interest, the future of employment and the future of the company.

Tonight we should ponder on the effects of this sort of public enterprise venture that is foisted on us by a Conservative Government. I suggest that it reaps the worst of both worlds. It has neither the advantage of the cut and thrust of the competitive sector, nor does it have anything to recommend it in terms of the British Aerospace Corporation that was set up by the Labour Government after that long travail in the previous Parliament.

I believe that we should seriously consider why the Conservative Government have not taken the free market as the simple answer. Time and time again the Secretary of State has proclaimed the advantages of free enterprise, the free market and the competitive ideal. What worried me most about the right hon. Gentleman was his reasonably simple nineteenth century devotion to competition. When he looks at the real problems of the British aerospace industry I believe that he will be confronted with the problems of his naive model of the world when viewed against the reality of complex industrial civilisations in this latter half of the twentieth century.

For example, there is the near monopoly position that is inherent in the aerospace industries of every sophisticated country. There is a difficulty, because enmeshed in that enterprise is the prominent place that national security must play. In addition, as my hon. Friends have said many times, there is the massive capital investment that so often deters private investment. In fact, it makes private investment on its own— unaided—impossible in every advanced country of the world. As a result, I believe that the right hon. Gentleman must come to terms with the real world. It will be a great relief to Labour Members and to the British public when the right hon. Gentleman comes to realise that naive beliefs in nineteenth-century laissez faire enterprise do not hold up when faced with something as sophisticated as British Aerospace.

What worries me is how that view is sold to the Conservative Party Conference and to Conservative Party members. Of course, Conservative Party members are the real extremists, although the national press may not point it out. For instance, very little real muck and brass exist in areas such as Surrey, and enterprise does not really flourish. One must visit my part of the world in Yorkshire to see where the real work is done. The right hon. Gentleman must sell his package. He must say "What we shall do is to make it like British Petroleum. We shall have a 50/50 share. We shall not have Government intervention or control." In fact, the right hon. Gentleman specifically said today that there would not be Government control.

I suggest that the question of responsibility to Government is so important in the case of British Aerospace that the right hon. Gentleman would be neglecting his duty as a Minister of the Crown if he did not accept that there was a clear responsibility on him, and on the Government, to have control of British Aerospace if it is to have an assured and decent future and if the national interest is to be preserved.

Many Conservative Members have talked about the spin-offs of technology. The spin-offs have been in industries in which many of them have a stake. It was ironic that the hon. Members for Woking (Mr. Onslow) and Ruislip-Northwood (Mr. Wilkinson) were ardent about the problems in British industry. Surely the problems were epitomised by the backgrounds of the hon. Gentlemen—namely, Eton and Harrow. They were proclaiming great knowledge of British Aerospace. They claimed to know the problems—and how to solve them—of British management and the British work force so that they might work competitively and efficiently. I suggest that the background of some Conservative Members militates against a real solution to the problems of productivity, efficiency and a successful aerospace industry.

When we have a tussle between pragmatism and ideology, as is typified by the introduction of the Bill, neither pragmatism nor ideology comes off very well. The result is that we slump somewhere between the two extremes. That means that there is no new start. There is merely the harming of a brave enterprise that started in 1977 when British Aerospace gained our industry a new start, a new future, a new hope. The Bill will destroy that hope. It will destroy that future. It will do so at the cost of a secure relationship between public enterprise and the national interest.

9.1 pm

Mr. John Browne (Winchester)

It is unfortunate that I shall be able to speak for only four minutes.

I consider that the essence of the Bill is ownership, whether it should be State ownership or genuine public ownership—in other words, ownership by us all as individuals or by pension funds, trade union funds, or other types of institution. My right hon, and hon. Friends feel that history has shown that nationalised industries tend to be inefficient and largely unprofitable, despite the huge monopolies that they have. They also tend to be slow-moving. That is something that we cannot afford if we are to be competitive in high technology industries such as aerospace.

Nationalised industries have access to funds, but sadly they do not have much access to market funds, which are looking for a profitable return. They have access to investment by Government, who are looking for a political rather than a commercial return. State-owned industries tend to have political decisions made within them that affect their profitability. An example is the production of the HS146, a short-haul 100-seater aircraft. Despite a complete lack of sales orders, production goes ahead at Welwyn-Hatfield and Bristol. Strangely enough, those are both marginal constituency areas.

Nationalised industries are major employers but they are hardly providers of profitable jobs. They are providers of unprofitable jobs in the short term. In the long term those are unprofitable jobs and lost jobs.

No Government have a duty to manage commercial companies. If a Government were to concentrate, as I believe the present Government are doing, upon their classic duties of defence, law and order, a sound economy, a sound currency and an effective social service, they would hardly have any time let alone wish to interfere in commercial enterprises.

Mr. David Lambie (Central Ayrshire)

What about Rolls-Royce?

Mr. Browne

History shows that Government, besides having no duty to be involved in the management of commercial companies, have no skill to manage such companies.

Professionally trained and skilled managers should manage commercial companies. They know how to test the markets.

Mr. Lambie

What about Rolls-Royce?

Mr. Deputy Speaker (Mr. Richard Crawshaw)

If the hon. Gentleman wishes to ask questions, he should stand.

Mr. Browne

Those managers have the professional skill to test markets, establish market needs and find market opportunities, assemble production teams, especially in the difficult areas of high technology, to motivate those teams to be profitable, and to ensure the high quality of design and production, good deliveries and good after-sales service. In short, they can ensure profits for companies such as this which will end up as profits for all of us in the country and provide a profitable form of job creation.

The Government have neither the duty nor the skill to manage commercial companies. In short, the Government have no legitimate role in the management of commercial companies.

I support the Bill, first because it allows for mixed ownership, Government and public—genuine public ownership by all of us in the nation. Secondly, it allows the Government time to get on with their own job and govern the country. Thirdly, it allows management to get on with its own job, which is to manage companies such as British Aerospace. Fourthly, it will allow British Aerospace to play a vital part in high technology research, production and sales, which will generate good long-term earnings for the company and the country. Basically it allows this country the chance of remaining a developed, technological nation.

9.7 pm

Mr. Les Huckfield (Nuneaton)

This has been an interesting debate—in spite of the fluctuation in the level of attendance—because of the quality of the speeches. The hon. Member for Woking (Mr. Onslow) spoke for nearly 30 minutes, and spent most of the time insulting my right hon. Friend the Member for Deptford (Mr. Silkin), hardly giving us one sentence of his own views. The hon. Member for Southampton, Test (Mr. Hill) went into one of his European monologues. There were some contributions made with feeling by my hon. Friends the Members for Bristol, North-East (Mr. Palmer) and for Preston, South (Mr. Thorne), who obviously know a great deal about the industry, having devoted a great deal of their parliamentary lives to representing the interests of their constituents.

Perhaps the most peculiar speech of the debate was from the Secretary of State. The most remarkable aspect of his performance was that he clearly did not know why he was introducing the Bill. He clearly did not know those arguments with which he should have been provided for the introduction of the Bill. Later on, there was an explanation, coming, I presume, from a brief from the Conservative Whips' office. The rationale, the reasoning behind the Bill, was that it was in some peculiar way supposed to take the industry out of politics. I can only say that that is not our view of the matter. It certainly will not be the view of the next Labour Government. If that is the only justification that the Government can bring forward for the introduction of the Bill, I can only say that it is yet one more example—only one of a continuing series—of publishing Bills and thinking of the consequences and implications afterwards.

The Secretary of State for Trade has referred to taking the whole operation of a nationalised industry out of the Government's balance sheet. I am not quite sure how we are supposed to do that. The hon. Member for Chingford (Mr. Tebbit)—who I am pleased has joined us this evening—has referred to avoiding investment programmes getting muddled up with the level of the rate support grant. Again, that is a peculiar justification for the two Bills we have considered over the past two days. I understand why the Government did not consult the unions.

Frankly, they would not have had anything to tell the unions. I can also understand why they did not go to the normal procedural lengths of issuing a consultative White Paper. I cannot imagine what they would have put into a White Paper.

With the Industry Bill and the Civil Aviation Bill, this is one more example of the technique of publishing now and, with a bit of luck, getting the Bill through by next March. Then, according to the Tories, the Bill will start making its contribution to the reduction of the public sector borrowing requirement. If there is any logic behind the Industry Bill, the Civil Aviation Bill or this Bill, it is that sort of logic.

The Bill is not designed to help the aerospace industry. I do not even think that it is designed to help the economy. The purpose of the Bill is to satisfy those PSBR fanatics in the Treasury and the Tory Party who think that at all costs we must reduce the proportion of national resources borrowed by the Government. All that is despite the fact that our public sector borrowing requirement is already proportionally lower than that of most European Governments. Nevertheless, that is the Government's rationale. They hope to reduce the PSBR by £1,000 million this year. The Bill is needed to help reduce the PSBR by £500 million—they think—in the next financial year.

I wish that the Secretary of State had given us that explanation. At least we could have understood it. We certainly did not understand the reasoning and the explanation that he tried to put forward. I hope that by the time the Government get the Bill into Committee they will have thought of the reason for it, after having published first and then tried to think out the implications later.

If the Government do not know much about the Bill, and the reason for it, they certainly do not know much more about the aerospace industry. Judging by the speeches from both Government Front and Back Benches, they might just as well be living in cloud-cuckoo-land. When the Secretary of State was launching this Bill at a press conference he said: The Goverment will not expect to intervene in the administration of the company as a commercial concern. When the Minister of State was pronouncing at the press conference, he said: By introducing the disciplines of the market place, and by ending the blurring of commercial objectives … the new company will be made fitter, more efficient and more capable of surviving profitably in highly competitive world markets. What "markets" do the Government mean? I know that there are lots of reading lists circulating in the Department of Industry and it is a pity that the Secretary of State was not furnished with a copy of the Financial Times aerospace survey of 4 June this year. The survey examined aircraft industries around the world and shed some interesting light on those industries, particularly in the context of the introduction of this Bill. The survey showed that in almost every other major aerospace industry throughout the world Governments are becoming more, not less, involved.

That is certainly the case in the United States, France, Germany, Italy and Japan. In all those countries, in which the so-called disclipine of the market place is supposed to be operative, Governments are becoming increasingly involved in the aerospace industry. Last year the United States Government were the aerospace industry's largest customer, accounting for no less than 71.5 per cent. of the industry's total sales. Seventy-seven per cent. of the sales of McDonnell Douglas went to the United States Government, as did 57 per cent. of the sales of Lockheed.

That is an example of the American Government becoming more involved, and not less involved. I am telling Conservative Members something about the industry which they ought to know, and to which they should have referred. Take the example of Boeing—a company which is an example of the free enterprise that Conservative Members are supposed to admire. Statements emanating from Boeing say that the company is now working hard on its 767 project and that it expects tough competition from Europe not least because it has the backing of the French and West German Governments who had been prepared to support a range of financial and political inducements which Boeing cannot match. That is a statement from Boeing in the United States about its competition from France and Germany, competition which this country has now joined. The pronouncements from Boeing, that bastion of American free enterprise, continue: In recent years, half of Boeing's sales have been made abroad and the test facing the company is the extent to which it can get its hold on the overseas market over the next five years in the face of stiff competition from Airbus Industrie. At the same time as that French-Government and German-Government sponsored—and now British-Government sponsored—effective competition is starting to improve and to threaten Boeing, our Government wish to pull out.

Mr. Wilkinson


Mr. Huckfield

I shall give way in a moment. I had to sit and listen to the remarks of the hon. Gentleman.

Although the Government have said that they will stand by the undertakings given by the Labour Government and that they will carry out the obligations adhered to by that Government, which was responsible for the inclusion of British Aerospace in Airbus Industrie, the fear will grow that although Airbus Industrie has the backing of the French Government, and certainly the backing of the German Government, the future backing of the British Government is in doubt.

Mr. Wilkinson

The hon. Gentleman will be aware that in the early days Britain was simply a subcontractor to Airbus Industrie on the wing, and therefore in no position to influence the policy of the board. But now it is a full partner, to the extent of 20 per cent., and particularly a full partner in the development of the new 310. In no way can Britain be said to be dragging her feet, and my right hon. Friend the Secretary of State has emphasised that.

Mr. Huckfield

British Aerospace has only become a full partner of Airbus Industrie, with negotiating rights with money provided, guaranteed and undertaken by the last Labour Government. That is why British Aerospace was able to join Airbus Industrie, and why it is now playing a more effective role in that organisation.

If the Government do not believe what Boeing says about the efficacy of French and West German State-supported competition, why do they not consider what the German industry says? I shall quote again from the same Financial Times survey. Presumably right hon. and hon. Members opposite read the Financial Times from time to time. It tends to take their point of view. That survey, speaking of the German industry, states: The industry has been resigned to the inevitability of a merger for several years now, acquiescing in the view of Herr Martin Gruener, the Economics Ministry State Secretary who is Bonn's co-ordinator for the aerospace sector, that West Germany needs the 'single voice' in aerospace that both Britain and France have had since the latest nationalisation measures in each country. That is the German industry giving its view of the way in which the French Aerospatiale and British Aerospace have been nationalised. The German view is that its industry will have to move towards precisely the same structure as the Labour Government set up [Interruption.]—

Mr. Deputy Speaker

The House listened to most of the speeches in reasonable silence. I hope that the hon. Gentleman will be allowed to make his speech.

Mr. Huckfield

We know who is causing the trouble for the British aerospace industry. Right hon. and hon. Members on the Government side will bring devastation to this industry through their fanatical dedication to the reduction of the public sector borrowing requirement.

If we review aerospace industries around the world—

Mr. F. A. Burden (Gillingham)


Mr. Huckfield

I am not giving way to the hon. Gentleman. He has only just entered the Chamber. He always comes in at this time.

If we examine aircraft and aerospace industries around the world, we find increasing Government involvement, Government funding, Government guarantees and Government participation. At a time when Government guarantees, participation and ownership are proving most effective, this lot wants to turn our aircraft industry round and go precisely in the opposite direction.

Mr. Geoffrey Dickens (Huddersfield, West)

On a point of order, Mr. Deputy Speaker. I am only a young Member, but when I used the expression "the rabble on the opposite side" Mr. Deputy Speaker called me to order. The hon. Gentleman says "this lot" when he surely means "hon. Members across the Chamber."

Mr. Deputy Speaker

I have heard the expression used frequently in the House. It is not one to which exception is taken.

Mr. Huckfield

The physical girth of the hon. Member for Huddersfield, West (Mr. Dickens) belies his political weight.

It is significant that when American manufacturers, those bastions of free enterprise and entrepreneurial ability, have most to fear because the German, French and Britsh industries are combining most effectively, and when competition starts to increase and Airbus Industrie starts to achieve success, this Government want to change the whole organisation, administration and financial setup of the British aerospace industry. Is it not significant that, just when things are going our way and British Aerospace is starting to turn into the success that many of us knew it would be, this lot want totally to undermine that organisation?

Mr. Bowen Wells


Mr. Russell Kerr (Feltham and Heston)

Sit down, Curly.

Mr. Huckfield

The hon. Member for Hertford and Stevenage (Mr. Wells) is but a fleeting participant in our affairs. The hon. Gentleman has only a temporary transient passage and a short lifetime in the House. Even given that, I cannot forget that he delayed the House for nearly half an hour this afternoon.

Mr. Wells


Mr. Deputy Speaker

Order. The hon. Member for Nuneaton (Mr. Huckfield) is not giving way. The hon. Member for Hertford and Stevenage (Mr. Wells) must resume his seat.

Mr. Huckfield

The electors of Hertford and Stevenage were sadly deceived.

Whatever happens to the industry in the long term, it looks as if it will pass from the control of this House. That should worry hon. Members on the Government side as well as on this side.

The Secretary of State said when introducing the Bill that Ministers were specifically eschewing responsibility—that is food for thought—and that the whole purpose was to remove the responsibility for decision making from Ministers, who were not equipped for the role, to shareholders and their management. That may sound great, but, while it means that the responsibility is being shifted from Ministers, it is being shifted from Members of Parliament as well.

What we should be concerned about is that over the past three or four years in decisions on Airbus Industrie, on the further generations of the Rolls-Royce RB 211 engine project and the Hawker Siddeley—as it was called—146 project, the industry has been engaged in taking manufacturing decisions that will seal its fate economically, politically and in employment terms for the whole of the next generation. If Conservative hon. Members are saying that the Government should not be involved in that kind of decision taking, let them tell the House now. Their constituents will not accept it, and the House will not accept it.

In the past three or four years we have been involved in the most momentous decisions, which will affect the capability of the British aerospace industry and of the British aero-engine industry to secure their proper share of at least 3,000 new aeroplanes. That will be the size of the market over the next generation. If the British Government do not have a right to be involved in that kind of decision, what decisions can they be involved in?

Mrs. Elaine Kellett-Bowman (Lancaster)

Running the country.

Mr. Huckfield

Under the kind of framework that the Government intend to assemble, the kind of structure that they intend to create, if we dare to put even a parliamentary question about that kind of thing, we shall presumably be told "That is not a matter for the Secretary of Slate; it is a matter for the management." I find that intolerable. When we are not allowed to ask questions even about that kind of decision taking, the House and the whole country will also find it intolerable. After all, it is taxpayers' money that we are talking about.

The other matter that we have not heard about this afternoon is what kind of targets the Government will set for the industry. The Under-Secretary of State for Trade, the hon. Member for Chingford, is very fond of profit maximisation. He used to ask me in Committee and on the Floor of the House, when I was a Minister, what kind of profit we thought we would make on the airbus and on what was formerly called the Hawker Siddeley 146.

But the hon. Gentleman knows, as I do, that if profit maximisation had been the main criterion, if making the biggest possible profit had been the main yardstick, neither British Aerospace nor the British aircraft industry would even be part of Airbus Industrie, and they would not have gone ahead with the Hawker Siddeley 146 project. That is because civil aviation projects, by their very nature, have a long gestation period and a very long profit-making period.

Even Airbus Industrie, which the hon. Member for Ruislip-Northwood (Mr. Wilkinson) told us this afternoon was so successful, will need as the hon. Gentleman knows as well as I do, sales of at least 700 copies before it even starts to wash its face—and it has not even got as far as 350 orders yet. Yet Conservative hon. Members talk about the need for British Aerospace to make a profit. I can only say that had that been the case under the last Labour Government, if we had insisted rigidly and dogmatically on profit maximisation, we would not now have much of an aircraft industry left. That is the truth.

I quote again the Financial Times—Conservative hon. Members' newspaper not ours; their readership, not ours. [HON. MEMBERS: "Does the hon. Gentleman read it?"] I read it daily. The editorial on 24 July this year said: As for the current workload, it is highly doubtful whether the BAC 146 feeder jet—and perhaps the investment in Airbus Industrie—could have been financed on a commercial basis. If the Government follows a totally commercial policy in its attitude towards British Aerospace, then the British aircraft industry will almost certainly contract in size. That is what this proposal is all about. That is the inevitable result of this kind of proposal. Short term profits are what the private shareholders will want; they will not want dividends in 20 years time. If the new company will not be allowed to borrow internationally with a Treasury guarantee, I predict that the only sure long-term result of the Bill will be the contraction of the British aerospace industry. That is what insistence on short-term profit maximisation, and having to borrow externally without guarantee, will mean.

If the new company will not be able to borrow so easily internationally, and is unable to borrow from the Government—we have had some pretty good indications from the Government that the company will not find obtaining finance from the Government very easy—it will have to start selling assets.

It is interesting that Government Members, particularly the hon. Member for Preston, North (Mr. Atkins), who will not be here very long, because the electorate got the name wrong—

Mrs. Kellett-Bowman

Yes, he will.

Mr. Huckfield

Government Members have been almost dogmatic in their insistence that the company will stay as a unified whole, which is why the Bill mentions only one company. How can the Government guarantee that? I predict that if the new company cannot obtain money from the Government or borrow internationally because it does not have a Treasury guarantee, it will probably be forced into selling off its assets. That is why some of the former owners from, dare I say, GEC are already buzzing round the dynamics group. Those who made a mess of the industry previously know that the dynamics group is where the profits are. The dynamics group had a turnover of £270 million last year and orders worth £1,000 million. With that kind of success, we can understand why former private owners are now buzzing around the dynamics group.

Is the right hon. Gentleman absolutely sure that he can guarantee that under that kind of commercial pressure assets will not be sold? I have heard nothing from the right hon. Gentleman this afternoon to assure me that assets will not be sold in future. We know the parts that will be sold. It will be those parts that make a profit, and not the parts that British Aerospace needs to ensure its survival in a difficult and internationally competitive industry.

If the Government do not believe us, perhaps they will read carefully the Plowden report. The Plowden committee was a domestically and perhaps internationally acclaimed body which certainly did not have a Left-wing majority on it.

The conclusions at page 95 of the report referred to the dichotomy of management structures in the Government and the industry. It reads: Of the possible means of remedying this situation, the balance of advantage favours the Government acquiring a shareholding in BAC and in the airframe elements of Hawker Siddeley, including their guided weapons interests. That is in the Plowden report. That committee was set up unpolitically and impartially, and certainly without a Tribune group majority.

The Economist, on 18 December 1965, said: Lord Plowden has given the idea of nationalising the aircraft industry, which has been bubbling on the tip of many Members' tongues, a sort of instant respectability. Again, I hope that Conservative Members read The Economist, because it seems to know more about the aerospace industry than they do. I am not even quoting a politically-biased source. On 8 July 1967 The Economist said: If the industry is going to be underwritten to this extent, then it must be in public ownership and answerable to public audit. In other words, nationalised. If the Government will not accept that from us, let them accept it from The Economist which supports their point of view far more often than it supports ours.

Many of us believe that the Government have already taken the decision whereby British Leyland can be allowed to go to the wall. Many of us know that many Conservative Members believe that Britain's basic steel needs should be imported and not manufactured in this country. Many of us also believe that this Bill is designed to enable the British aerospace industry to go in the same direction. The Government shall not have this Bill. I invite my right hon. and hon. Friends to join me in the Lobby, both inside and outside the House, to ensure that the Bill shall not pass.

9.36 pm
The Under-Secretary of State for Industry (Mr. Michael Marshall)

The hon. Member for Nuneaton (Mr. Huck-field) has given another of his usual performances—carping and unconstructive criticism coupled with selective quotations. He relied heavily on The Economist, and I remind him that that publication said a few years ago that we should not build the Concorde. I know that there are some hon. Members who think that that was the right attitude, but I do not think that the hon. Member for Nuneaton is one of them. Today the hon. Member has had a difficult job in whipping up enthusiasm for opposition to this Bill. The tone was set in a much more balanced way by his right hon. Friend the Member for Deptford (Mr. Silkin). I shall deal with his speech in a moment. Before I do I shall pick up a couple of the wilder inaccuracies of the hon. Member for Nuneaton.

He went into a great dissertation about the way in which the Airbus would be endangered by the Bill. In doing so he totally ignored what my right hon. Friend the Secretary of State said in opening the debate. The hon. Member for Nuneaton should remember better than anyone that it was his right hon. Friend the Member for Bristol, South-East (Mr. Benn) who pulled us out of the Airbus project in 1968. Hawker Siddeley stayed in, risking private capital and thus maintaining a connection, without which we would not be members of the consortium today. These are the facts which the hon. Member skirted over.

I make it plain that we stand behind the airbus. The Bill in no way weakens the Government's support for participation in the airbus programme. The principles of co-operation which lie behind the memorandum of understanding will be maintained under the proposals before the House. It is also important to understand in that context that we believe that there will be greater opportunity in future in projects such as the airbus.

I turn to the point that was made by several hon. Members about the structure of British Aerospace and the question of foreign ownership. This question deserves serious consideration. It was raised by the right hon. Member for Deptford in opening the debate when he suggested that our intended provision to limit foreign ownership to a maximum of 15 per cent. was in some way inadequate. On examination, his argument falls to pieces. He suggested that 15 per cent. was too high, but it is only right to remind him that if this is the case it is rather odd that the Labour Administration, in putting forward proposals for part II of the Industry Act 1975 saw no such limitation and envisaged 30, 40 or even 50 per cent. of foreign ownership as acceptable. If that is the case, why is 15 per cent. thought to be too high today?

Secondly, the right hon. Member for Deptford thought that the provisions would be evaded, for example through United Kingdom nominees or people acting in concert. Again, that ignores the fact that provisions restricting foreign ownership are a well-known feature of many companies such as Cable and Wireless and P & O. Several other British companies have found effective ways to deal with this part of their operations.

The articles of association of British Aerospace Limited, like those of other commercial companies, will allow directors to look behind and beyond nominee ownership. There is no question of United Kingdom nominees being used as a successful device to circumvent that provision. If the directors are suspicious about the real ownership of a share, they will be able to seek proof of British ownership. I have taken care in enunciating that point because it is important and the Government have given careful thought to it.

It has been suggested that the articles might be changed and that the Government would allow that to happen. However, as the Secretary of State made clear in his opening speech, the Government would not allow that to happen. That is the whole point of setting a minimum Government shareholding. It was also suggested that although a foreign shareholding could be controlled within the 15 per cent. maximum, there might be a possibility of influence being exerted. How can that be? The ability to influence a company can be achieved only through the appointment of directors. Should a foreign shareholder seek to elect a director, the Government would use their blocking mechanism.

Mr. Cryer

Is it not true that the Government have made such a hash of their relations with the National Enterprise Board that the whole of that Board has resigned? The Government have shown that they are incompetent and the Secretary of State can give no guarantee that they are in control.

Mr. Marshall

I was being kind when I gave way to the hon. Gentleman. He came into the Chamber at 8.15 pm. He has not been following the debate, yet he immediately wants to go off at a tangent.

The remarks of the right hon. Member for Deptford do not stand up to examination. He cited four reasons for nationalisation.

Mr. John Silkin

The hon. Gentleman does not understand. I said that the Government could not afford to let such things happen. Therefore the Secretary of State's remark that the Government will not interfere in the management was absolute nonsense, and the hon. Gentleman has proved that.

Mr. Marshall

The right hon. Gentleman does not understand the difference between management and ownership. The owner, represented by the directors on the board, is within his right if he exerts his influence over the way in which the board maintains its stance. Clarification is available to the right hon. Gentleman, but perhaps he wishes merely to rehearse his prejudices.

The right hon. Gentleman said that nationalisation was needed as there had previously been a lack of success. However, that does not stand up to examination. Those companies that went into British Aerospace during 1975–76 made profits of £19 million and £29 million. The post-tax profits of British Aerospace were £29 million in 1977 and £28 million in 1978. Therefore, there is a continuing pattern.

The success of British Aerospace can be ascribed to the work of many of the private sector companies and their managers and work forces. The beauty of the measure before us is that it gives us a chance to revert to a healthier situation before it is too late.

The right hon. Gentleman also mentioned the ability to finance. Several hon. Members have mentioned that. Like any other private company that operates under the Companies Act 1948 the company would have an opportunity to seek aid under the Civil Aviation Act 1949, under the Industry Act 1972 and also under the Science and Technology Act 1965, so in that sense it would be on all fours with other companies.

I turn to one or two of the contributions that we have heard from other parts of the House. I think that the whole House will recognise that we have heard some remarkable speeches from the Conservative Benches. We have heard speeches from my hon. Friends the Members for Welwyn and Hatfield (Mr. Murphy), for Hertford and Stevenage (Mr. Wells), for Preston, North (Mr. Atkins), and for Bristol, North-West (Mr. Colvin). All of them were discussing the industry in speeches based on their constituency experience; all of them, as has been pointed out, representing seats previously held by Labour Members; and all of them reflecting the way in which the Government have a mandate for the measure that we bring before the House tonight.

I turn to the speech of the hon. Member for Rochdale (Mr. Smith). From time to time I have said to him, through you, Mr. Speaker, that I believe that he talks a good deal of common sense on industrial matters. I have said that even when he has proposed to vote against us. I welcome the fact that he and his colleagues will be supporting us tonight.

I take the point that the hon. Member fairly raised on the question of employee shareholding. This is a matter to which the Government have given great consideration. We shall need to consult British Aerospace on the precise way in which this scheme will operate. Inevitably, that will take some time, but we intend to make our views on what we propose known quite clearly. We recognise that there must be some reasonable incentive to make the scheme attractive to employees. Like the hon. Member, we think that it has great significance, far beyond the measure before us tonight. The degree to which that shareholding will exist will affect our final decision on the total shareholding which the Government will seek to take. That is why we cannot be precise when we speak about a half shareholding.

I come now to one or two of the other specific questions on the way in which the investment decisions might be made. Again, we believe that these will be matters for British Aerospace, as a company operating independently. We have made it plain that the Government directors will be there to safeguard the shareholders' interest but not to interfere with commercial decisions. We have also made it plain that we shall continue the process of consultation.

I turn to what the hon. Member for Nuneaton was saying a few moments ago about a matter to which my hon. Friend the Member for Hertford and Stevenage also referred. It is, of course, the usual attempt to mislead the House to suggest that we have not sought, and, indeed, that we do not intend to continue having, consultations on these matters. We had consultations with the Confederation of Shipbuilding and Engineering Unions and with the Aerospace Staffs Liaison Committee in the period before the Bill was introduced, and we have made it plain that we intend to continue those consultations after the Second Reading, if the House so wills. In addition, my right hon. Friend the Secretary of State, my hon. Friend the Minister of State and I have had many opportunities in recent months to visit many of the plants of British Aerospace to discuss these problems and to meet representatives of the workforce and management. Therefore it is wrong to imply that in some way we are seeking to go over the heads of all concerned.

I turn to one other issue which the right hon. Member for Deptford raised—the defence commitment. This is a key issue. We regard it as the reason for the form of shareholding that we seek and, indeed, the form of director representation that we require. It is undoubtedly one of the reasons why we have seen the greater interest and involvement of a number of Governments in the aerospace industry. To that extent I agree with the hon. Member for Nuneaton. However, I remind him that when he cites the United States, it is still the fact that Boeing, the doyen that he mentions, is a private company.

I had the opportunity to visit Boeing recently. Whatever one may say about the way in which we would naturally seek to see our competition thriving against Boeing, the fact is that it is a highly successful company even if one extrapolates that part of its business which gets benefit from research and development contracts through the National Aeronautics and Space Administration.

I would like to move on to one of the other aspects which is of particular importance in our thinking on this Bill. I refer to the whole question of stability. I am glad to find in various parts of the House, as I believe, recognition that we have reached a stage in the life of this Parliament, and in the life of our industry, when we must be willing to look at new forms and new ways of seeking a better relationship between Government, this House and industry. I believe that it was my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson)—who spoke with great experience having served in the industry—who made a telling point. Hon. Members must have been impressed by the way he told us very frankly of his experience of being in British Aerospace when it was nationalised. He spoke of the immediate problems and politicisation of that great industry. These were very telling comments.

I hope my hon. Friend will not find it embarrassing if I say that I found the speech of the hon. Member for Bristol, North-East who followed him, in equally constructive vein when he talked of the problems which come in changing organisation following nationalisation. He struck a chord in me because I was in the steel industry at the time of nationalisation and I have seen how ghastly an industry can be when it goes through a process of centralisation, decentralisation, and so on.

All hon. Members, when they speak of the way in which this Government should intervene, must recall that, day after day, and week after week, the Government are urged to intervene on many occasions for political reasons in. for example, the steel industry and the shipbuilding industry. Now, in the case of aerospace we see a profitable industry. If the industry should have a period in which life becomes more difficult, the whole business of State ownership presents an inevitable temptation for the Government of the day to intervene. I do not believe that that would be proper. The response has to be such as to allow commercial management to make the best decisions in favour of all its work force rather than being pushed by hon. Members into precipitate or wrong action.

Stability is what we seek and the right hon. Member for Deptford in opening from the Opposition Front Bench—I noted his words carefully—could not really bring himself to say anything too unkind about the Bill. He called it pragmatic and ingenious. He praised my right hon. Friend's integrity. There was little which we could find to argue with him on that. The only thing he went on to say was that he feared that the Bill before the House was perhaps one which might be too acceptable to my hon. Friends. This was a theme taken up by a number of hon. Members, who seemed to regard it as in some way shocking that we should not make their life easy by coming forward with proposals for outright denationalisation, recognising as we do the problems of stability.

It is no part of our job to make the life of the Opposition easier but what was said from the Opposition Front Bench in opening was in direct contradiction with what was said when the hon. Member for Nuneaton came to reply on behalf of the Opposition. That is a situation with which we have to learn to live. In this area of opportunity which now faces British Aerospace there are a number of ways in which the House can help. There were speeches today from all sides of the House which recognised the big difference which, I believe, sets the aerospace industry apart from many of the nationalised industries we have discussed on many other occasions. The difference is that this is, above all, an internationally competitive manufacturing industry. It is one which requires the utmost speed in decision-making. It requires freedom of action to move untramelled by the kind of interventionism which has created much of the fear and many of the problems which have affected a large area of nationalised manufacturing industry in recent years.

In the Bill we have deliberately tried to keep the options open to the extent that we are giving hon. Members an opportunity to participate. I am glad to see the hon. Member for Westhoughton (Mr. Stott) present. He was clearly announcing his enthusiasm to join us in Standing Committee and I am glad to feel that, with all his experience on the Aircraft and Shipbuilding Industries Bill, we shall have the benefit of his contributions. As my hon. Friend the Under-Secretary of State for Trade points out, the hon. Gentleman did not say very much on that occasion but we realise that there are certain reasons for that.

The Bill is to be related to the future memorandum and articles of association which will govern the activities of British Aerospace Limited. As the Committee proceedings develop, the Government will be interested to receive hon. Members' views. For that reason we have left areas of flexibility in relation to the total Government shareholding and the way that that shareholding will be used to block foreign ownership. We are seriously prepared to consider those matters. That is why I invited the right hon. Member for Deptford to consider the matter in that constructive way and not fall back on his natural prejudices.

I should like to return to a point made by my hon. Friend the Member for Ruislip-Northwood. In a powerful speech he gave the House the benefit of his experience of what it was like to be in British Aerospace at the time that it was nationalised. He went on to demolish the case of the right hon. Member for Deptford. With his interest in the record, I hope that the right hon. Gentleman will try to read what my hon. Friend had to say.

My hon. Friend the Member for Ruislip-Northwood was concerned about the degree to which the Government would seek to use the blocking mechanism in an attempt to prevent a foreign shareholder gaining effective control. He went on to raise the valid question whether that would present a restrictive attitude and one that might make it more difficult for us to take part in partnerships with other aircraft manufacturers.

The Government believe that the better way to proceed in that area is to look for opportunities to create new organisations, and do not, in a sense, see people buying their way into British Aerospace Limited. After all, that is the whole rationale for British Aerospace Limited, and it is in that sense that we see other opportunities.

The reason why I highlight the opportunities for that kind of partnership arrangement is that many hon. Members argued that in the past the British aerospace companies might have come together, but failed to recognise the way that the process has inevitably continued. It has become a natural feature. The question was asked whether the Government or British Aerospace could afford the cost of future developments, but it is precisely because of the high cost of the total civil aviation package that we now have more and more co-operative ventures.

Looking around the world, one finds that the major American aerospace companies are busy placing contracts in this country, which we are delighted to see. I believe that it can be said that there is now no one national capability to stand alone in the highly expensive field of aerospace manufacture. That is why the Government feel it right to seek opportunities to keep their options open.

The right hon. Member for Deptford referred to the question of the disposal of assets, as did the right hon. Member for

Battersea, North (Mr. Jay), and I accept that he makes a fair point. However, I remind him that under the Industry Act 1975 there are provisions—[Interruption.]—The hon. Member for Keighley (Mr. Cryer), who appears to be having a private conversation, joined us at 8.15. If he will be kind enought to allow me to reply to his right hon. Friend, I am sure that the whole House will appreciate it.

The disposal of assets is covered under part II of the Industry Act. However, we may well wish to consider the matter in Committee to see the precise way in which that kind of problem could be tackled. The Opposition have not, on any single occasion today, raised a point of real substance that could in any way undermine the validity of what we seek to do. The Bill is one which hon. Members in their hearts know to be a moderate, responsible and balanced way to achieve stability in the industry. I commend it to the House.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 311, Noes 247.

Division No. 108 AYES [10.00 pm
Adley, Robert Buck, Antony Fell, Anthony
Aitken, Jonathan Budgen, Nick Fenner, Mrs Peggy
Alexander, Richard Bulmer, Esmond Finsberg, Geoffrey
Alton, David Burden, F. A. Fisher, Sir Nigel
Amery, Rt Hon Julian Butcher, John Fletcher, Alexander (Edinburgh N)
Ancram, Michael Cadbury, Jocelyn Fletcher-Cooke, Charles
Aspinwall, Jack Carlisle, John (Luton West) Fookes, Miss Janet
Atkins, Robert (Preston North) Carlisle, Kenneth (Lincoln) Forman, Nigel
Atkinson, David (B'mouth, East) Carlisle, Rt Hon Mark (Runcorn) Fowler, Rt Hon Norman
Baker, Nicholas (North Dorset) Chalker, Mrs. Lynda Fox, Marcus
Banks, Robert Channon, Paul Fraser, Rt Hon H. (Stafford & St)
Beaumont-Dark, Anthony Chapman, Sydney Fraser, Peter (South Angus)
Beith, A. J. Churchill, W. S. Fry, Peter
Bell, Ronald Clark, Hon Alan (Plymouth, Sutton) Galbraith, Hon T. G. D.
Bendall, Vivian Clark, Dr William (Croydon South) Gardiner, George (Reigate)
Benyon, Thomas (Abingdon) Clarke, Kenneth (Rushcliffe) Gardner, Edward (South Fylde)
Benyon, W. (Buckingham) Cockeram, Eric Garel-Jones, Tristan
Best, Keith Colvin, Michael Glyn, Dr Alan
Bevan, David Gilroy Cope, John Goodhart, Philip
Biffen, Rt Hon John Corrie, John Goodhew, Victor
Biggs-Davison, John Costain, A. P. Goodlad, Alastair
Blackburn, John Cranborne, Viscount Gorst, John
Body, Richard Crouch, David Gow, Ian
Bonsor, Sir Nicholas Dickens, Geoffrey Gower, Sir Raymond
Boscawen, Hon Robert Dorrell, Stephen Grant, Anthony (Harrow C)
Bottomley, Peter (Woolwich West) Douglas-Hamilton, Lord James Gray, Hamish
Bowden, Andrew Dover, Denshore Greenway, Harry
Boyson, Dr Rhodes du Cann, Rt Hon Edward Grieve, Percy
Bradford, Rev, R. Dunn, Robert (Dartford) Griffiths, Peter (Portsmouth N)
Braine, Sir Bernard Durant, Tony Grist, Ian
Bright, Graham Dykes, Hugh Grylls, Michael
Brinton, Tim Eden, Rt Hon Sir John Gummer, John Selwyn
Brittan, Leon Edwards, Rt Hon N. (Pembroke) Hamilton, Hon Archie (Eps'm&Ew'll)
Brocklebank-Fowler, Christopher Eggar, Timothy Hamilton, Michael (Salisbury)
Brooke, Hon Peter Elliott, Sir William Hampson, Dr Keith
Brotherton, Michael Emery, Peter Hannam, John
Brown, Michael (Brigg & Sc'thorpe) Eyre, Reginald Haselhurst, Alan
Browne, John (Winchester) Fairbairn, Nicholas Hastings, Stephen
Bruce-Gardyne, John Fairgrieve, Russell Havers, Rt Hon Sir Michael
Bryan, Sir Paul Faith, Mrs Sheila Hawkins, Paul
Buchanan-Smith, Hon Alick Farr, John Hawksley, Warren
Hayhoe, Barney Mellor, David Shepherd, Richard (Aldridge-Br'hills)
Heath, Rt Han Edward Meyer, Sir Anthony Shersby, Michael
Heddle, John Miller, Hal (Bromsgrove & Redditch) Silvester, Fred
Henderson, Barry Mills, Iain (Meriden) Sims, Roger
Heseltine, Rt Hon Michael Mills, Peter (West Cevon) Skeet, T. H. H.
Hicks, Robert Miscampbell, Norman Smith, Cyril (Rochdale)
Higgins, Rt Hon Terence L. Mitchell, David (Basingstoke) Smith, Dudley (War. and Leam'ton)
Hill, James Moate, Roger Speller, Tony
Hogg, Hon Douglas (Grantham) Molyneaux, James Spence, John
Holland, Philip (Carlton) Monro, Hector Spicer, Jim (West Dorset)
Hooson, Tom Montgomery, Fergus Sproat, Iain
Hordern, Peter Moore, John Squire, Robin
Howe, Rt Hon Sir Geoffrey Morgan, Geraint Stanbrook, Ivor
Howell, Rt Hon David (Guildford) Morris, Michael (Northampton, Sth) Stanley, John
Howell, Ralph (North Norfolk) Morrison, Hon Charles (Devizes) Steel, Rt Hon David
Howells, Geraint Morrison, Hon Peter (City of Chester) Steen, Anthony
Hunt, David (Wirral) Mudd, David Stevens, Martin
Hunt, John (Ravensbourne) Murphy, Christopher Stewart, Ian (Hitchin)
Hurd, Hon Douglas Myles, David Stewart, John (East Renfrewshire)
Irving, Charies (Cheltenham) Neale, Gerrard Stokes, John
Jenkin, Rt Hon Patrick Needham, Richard Stradling Thomas, J.
Johnson Smith, Geoffrey Nelson, Anthony Tapsell, Peter
Johnston, Russell (Inverness) Neubert, Michael Taylor, Robert (Croydon NW)
Jopling, Rt Hon Michael Newton, Tony Tebbit, Norman
Joseph, Rt Hon Sir Keith Nott, Rt Hon John Temple-Morris, Peter
Kaberry, Sir Donald Onslow, Cranley Thomas, Rt Hon Peter (Hendon S)
Kellett-Bowman, Mrs Elaine Oppenheim, Rt Hon Mrs Sally Thompson, Donald
Kilfedder, James A. Osborn, John Thorne, Neil (Ilford South)
Kimball, Marcus Page, Rt Hon R. Graham (Crosby) Thornton, Malcolm
King, Rt Hon Tom Parris, Matthew Townend, John (Bridlington)
Knox, David Patten, Christopher (Bath) Townsend, Cyril D. (Bexleyheath)
Lamont, Norman Patten, John (Oxford) Trippier, David
Lang, Ian Pattie, Geoffrey Trotter, Neville
Langford-Holt, Sir John Pawsey, James van Straubenzee, W. R.
Latham, Michael Percival, Sir Ian Vaughan, Dr Gerard
Lawrence, Ivan Peyton, Rt Hon John Viggers, Peter
Lawson, Nigel Pink, R. Bonner Waddington, David
Lee, John Pollock, Alexander Wakeham, John
Lennox-Boyd, Hon Mark Porter, George Waldegrave, Hon William
Lester, Jim (Beeston) Powell, Rt Hon J. Enoch (S Down) Walker, Rt Hon Peter (Worcester)
Lewis, Kenneth (Rutland) Prentice, Rt Hon Reg Walker, Bill (Perth & E Perthshire)
Lloyd, Peter (Fareham) Price, David (Eastleigh) Walker-Smith, Rt Hon Sir Derek
Loveridge, John Prior, Rt Hon James Wall, Patrick
Luce, Richard Proctor, K. Harvey Waller, Gary
Lyell, Nicholas Pym, Rt Hon Francis Walters, Dennis
McAdden, Sir Stephen Rathbone, Tim Ward, John
McCrindle, Robert Rees, Peter (Dover and Deal) Watson, John
Macfarlane, Neil Rees-Davies, W. R. Wells, John (Maidstone)
MacGregor, John Renton, Tim Wells, Bowen (Hert'rd & Stev'nage)
MacKay, John (Argyll) Rhodes James, Robert Wheeler, John
Macmillan, Rt Hon M. (Farnham) Ridsdale, Julian Whitney, Raymond
McNair-Wilson, Michael (Newbury) Rifkind, Malcolm Wickenden, Keith
McNair-Wilson, Patrick (New Forest) Rippon, Rt Hon Geoffrey Wiggin, Jerry
McQuarrie, Albert Roberts, Michael (Cardiff NW) Wilkinson, John
Madel, David Roberts, Wyn (Conway) Williams, Delwyn (Montgomery)
Major, John Ross, Stephen (Isle of Wight) Winterton, Nicholas
Marland, Paul Ross, Wm. (Londonderry) Wolfson, Mark
Marlow, Tony Rossi, Hugh Young, Sir George (Acton)
Marshall, Michael (Arundel) Rost, Peter Younger, Rt Hon George
Mates, Michael Royle, Sir Anthony
Maude, Rt Hon Angus Sainsbury, Hon Timothy
Mawby, Ray Scott, Nicholas TELLERS FOR THE AYES:
Mawhinney, Dr Brian Shelton, William (Streatham) Mr. Spencer Le Marchant and
Maxwell-Hyslop, Robin Shepherd, Colin (Hereford) Mr. Anthony Berry.
Mayhew, Patrick
Adams, Allen Bradley, Tom Coleman, Donald
Allaun, Frank Bray, Dr Jeremy Concannon, Rt Hon J. D.
Anderson, Donald Brown, Hugh D. (Provan) Conlan, Bernard
Archer, Rt Hon Peter Brown, Robert C. (Newcastle W) Cook, Robin F.
Armstrong, Rt Hon Ernest Buchan, Norman Cowans, Harry
Ashley, Rt Hon Jack Callaghan, Rt Hon. J. (Cardiff SE) Cox, Tom (Wandsworth, Tooting)
Ashton, Joe Callaghan, Jim (Middleton & P) Craigen, J. M. (Glasgow, Maryhill)
Atkinson, Norman (H'gey, Tott'ham) Campbell, Ian Crowther, J. S.
Bagler, Gordon A. T. Campbell-Savours, Dale Cryer, Bob
Barnett, Guy (Greenwich) Canavan, Dennis Cunliffe, Lawrence
Barnett, Rt Hon Joel (Heywood) Cant, R. B. Cunningham, George (Islington S)
Benn, Rt Hon Anthony Wedgwood Carmichael, Neil Cunningham, Dr John (Whitehaven)
Bennett, Andrew (Stockport N) Carter-Jones, Lewis Dalyell, Tam
Bidwell, Sydney Cartwright, John Davidson, Arthur
Booth, Rt Hon Albert Clark, Dr David (South Shields) Davies, Rt Hon Denzil (Lianelli)
Boothroyd, Miss Betty Cocks, Rt Hon Michael (Bristol S) Davies, E. Hudson (Caerphilly)
Bottomley, Rt Hon Arthur (M'brough) Cohen, Stanley Davies, Ifor (Gower)
Davis, Clinton (Hackney Central) Jones, Rt Hon Alec (Rhondda) Roberts, Gwilym (Cannock)
Davis, Terry (B'rm'ham, Stechford) Jones, Barry (East Flint) Robertson, George
Deakins, Eric Jones, Dan (Burnley) Robinson, Geoffrey (Coventry NW)
Dean, Joseph (Leeds West) Kaufman, Rt Hon Gerald Rodgers, Rt Hon William
Dempsey, James Kerr, Russell Rooker, J. W.
Dewar, Donald Kilroy-Silk, Robert Ross, Ernest (Dundee West)
Dixon, Donald Kinnock, Neil Rowlands, Ted
Dobson, Frank Lambie, David Ryman, John
Dormand, Jack Lamborn, Harry Sandelson, Neville
Douglas, Dick Lamond, James Sever, John
Douglas-Mann, Bruce Leadbitter, Ted Sheerman, Barry
Dubs, Alfred Leighton, Ronald Sheldon, Rt Hon Robert (A'ton-u-L)
Duffy, A. E. P. Lestor, Miss Joan (Eton & Slough) Shore, Rt Hon Peter (Step and Pop)
Dunn, James A. (Liverpool, Kirkdale) Lewis, Ron (Carlisle) Short, Mrs Renée
Dunnett, Jack Litherland, Robert Silkin, Rt Hon John (Deptford)
Dunwoody, Mrs. Gwyneth Lofthouse, Geoffrey Silkin, Rt Hon S. C. (Dulwich)
Eadle, Alex Lyon, Alexander (York) Silverman, Julius
Eastham, Ken McCartney, Hugh Skinner, Dennis
Edwards, Robert (Wolv SE) McDonald, Dr Oonagh Smith, Rt Hon J. (North Lanarkshire)
Ellis, Raymond (NE Derbyshire) McElhone, Frank Snape, Peter
Ellis, Tom (Wrexham) McGuire, Michael (Ince) Soley, Clive
English, Michael McKay, Allen (Penistone) Spearing, Nigel
Ennals, Rt Hon David McKelvey, William Spriggs, Leslie
Evans, Ioan (Aberdare) MacKenzie, Rt Hon Gregor Stallard, A. W.
Evans, John (Newton) Maclennan, Robert Stewart, Rt Hon Donald (W Isles)
Ewing, Harry McMillan, Tom (Glasgow, Central) Stott, Roger
Field, Frank McNally, Thomas Strang, Gavin
Fitch, Alan McWilliam, John Straw, Jack
Flannery, Martin Magee, Bryan Summerskill, Hon Dr Shirley
Fletcher, L. R. (Ilkeston) Marks, Kenneth Taylor, Mrs Ann (Bolton West)
Fletcher, Ted (Darlington) Marshall, David (Gl'sgow, Shettlet'n) Thomas, Dafydd (Merioneth)
Foot, Rt Hon Michael Marshall, Dr Edmund (Goole) Thomas, Jeffrey (Abertillery)
Ford, Ben Marshall, Jim (Leicester South) Thomas, Mike (Newcastle East)
Forrester, John Martin, Michael (Gl'gow, Springb'rn) Thomas, Dr Roger (Carmarthen)
Foster, Derek Mason, Rt Hon Roy Thorne, Stan (Preston South)
Foulkes, George Maxton, John Tilley, John
Fraser, John (Lambeth, Norwood) Meacher, Michael Torney, Tom
Freeson, Rt Hon Reginald Mellish, Rt Hon Robert Urwin, Rt Hon Tom
Garrett, John (Norwich S) Mikardo, Ian Varley, Rt Hon Eric G.
Garrett, W. E. (Wallsend) Millan, Rt Hon Bruce Wainwright, Edwin (Dearne Valley)
George, Bruce Mitchell, Austin (Grimsby) Walker, Rt Hon Harold (Doncaster)
Gilbert, Rt Hon Dr John Mitchell, R. C. (Soton, Itchen) Watkins, David
Ginsburg, David Morris, Rt Hon Charles (Openshaw) Weetch, Ken
Golding, John Morris, Rt Hon John (Aberavon) Wellbeloved, James
Gourlay, Harry Morton, George Welsh, Michael
Graham, Ted Moyle, Rt Hon Roland White, Frank R. (Bury & Radcliffe)
Grant, George (Morpeth) Newens, Stanley White, James (Glasgow, Pollok)
Hamilton, W. W. (Central Fife) Oakes, Rt Hon Gordon Whitehead, Phillip
Harrison, Rt Hon Waller Ogden, Eric Whitlock, William
Hattersley, Rt Hon Roy O'Halloran, Michael Wigley, Dafydd
Haynes, Frank O'Neill, Martin Willey, Rt Hon Frederick
Heffer, Eric S. Owen, Rt Hon Dr David Williams, Rt Hon Alan (Swansea W)
Hogg, Norman (E Dunbartonshire) Palmer, Arthur Williams, Sir Thomas (Warrington)
Holland, Stuart (L'beth, Vauxhall) Park, George Wilson, Gordon (Dundee East)
Home Robertson, John Parker, John Wilson, Rt Hon Sir Harold (Huyton)
Homewood, William Parry, Robert Wilson, William (Coventry SE)
Hooley, Frank Pendry, Tom Winnick, David
Horam, John Powell, Raymond (Ogmore) Woodall, Alec
Howell, Rt Hon Denis (B'ham, Sm H) Prescott, John Woolmer, Kenneth
Huckfield, Les Price, Christopher (Lewisham West) Wrigglesworth, Ian
Hughes, Mark (Durham) Race, Reg Wright, Sheila
Hughes, Robert (Aberdeen North) Radice, Giles Young, David (Bolton East)
Hughes, Roy (Newport) Rees, Rt Hon Merlyn (Leeds South)
Janner, Hon Greville Richardson, Miss Jo TELLERS FOR THE NOES:
Jay, Rt Hon Douglas Roberts, Albert (Normanton) Mr. James Tinn and
John, Brynmor Roberts, Allan (Bootle) Mr. James Hamilton.
Johnson, James (Hull West) Roberts, Ernest (Hackney North)

Question accordingly agreed to.

Bill read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).