HC Deb 11 July 1980 vol 988 cc1013-26

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Cope.]

2.30 pm
Mr. Gerald Kaufman (Manchester, Ardwick)

This debate takes place against the background of the most frightening unemployment that Manchester has suffered since the war. In the 14 months since this Conservative Government came to power. 60,237 redundancies in Greater Manchester have been reported to the Department of Employment. In the city of Manchester the number of redun dancies reported to the Department is 10,288. Those are devastating figures. In Greater Manchester we have 89,597 in the dole queues, including 11,641 school leavers. In the city of Manchester the jobless total is 49,294, including 5,445 school leavers. That is the blackest unemployment situation in Manchester for very many years. Manchester is now above the national average for unemployment.

That tragedy has been brought about by the deliberate policies of this Government, yet this is the moment when they have decided to meddle with the security of three of the most important employers in Manchester. Between them, Ferranti, ICL and Fairey Engineering employ 14,000 workers in Greater Manchester. Ferranti has increased its overall work force by 350 in the past five years. The two ICL factories in my constituency of Ardwick have increased their work force over the same period by 300. Very few companies have been able to increase their work force in recent years, but Ferranti and ICL have been doing so.

All three companies were rescued by Labour Governments from the mistakes and disasters of private ownership. Thanks to the efforts of the workers, and with the help of the National Enterprise Board, they became successful and prosperous. They were making profits and providing secure employment. Their shares were held on behalf of the taxpayer by the National Enterprise Board—100 per cent. at Fairey, 50 per cent. at Ferranti and 25 per cent. at ICL. Dividends were being paid to the taxpayers as a return on their investment. Then, for wanton political reasons, this Government ordered the National Enterprise Board to sell off the shares. The result at a time of economic crisis is that security has been replaced by uncertainty and confusion. What is more, the taxpayer has not only lost the prospect of further dividends but has made a capital loss on the sales. Taking into account the impact of inflation, the money received or expected on these shares sales is less than the money that the taxpayer put into those three companies. In the case of ICL, it is less than half.

Other problems have also been created by those forced sales. When the National Enterprise Board owned 25 per cent. of ICL, the Minister at the Department of Industry with responsibility for the National Enterprise Board had the special duty of protecting the interests of ICL. I held that job, and I discharged that duty. There is now no such ministerial responsibility. As a result, there is no one with the special duty to speak up for ICL in the Cabinet. Yet, within the next few days, ICL needs a spokesman in the Cabinet more than ever before because the Government are about to take a decision of immense importance affecting ICL. It was referred to in the previous debate, but I make no apology for returning to it, especially in the light of the inadequacy of the reply to that debate by the Under-Secretary of State.

The Government are about to decide on an order worth £150 million for a new computer system for the Inland Revenue. Of that, £60 million worth would go to ICL. A large part of the equipment was designed in my constituency in West Gorton. It would mean work at the factory at Ardwick in my constituency and at Ashton-under-Lyne, and 500 jobs are at stake.

There is no doubt that ICL can do the job. It can supply the computers competitively, and back their installation with a nationwide support service. This will be the largest computer system in the United Kingdom. It is a huge project involving 20,000 visual display terminals in 60 district offices. Many British companies in addition to ICL would gain from it.

The Government have a clear policy, inherited from the Labour Government, of special preference for ICL, the only British-owned computer company facing cut-throat competition from powerful foreign interests. That policy involves placing Government computer orders with ICL on a single tender basis rather than going to open tender.

The Labour Government would certainly have placed the order on that basis. If this Government fail to do so they will inflict a massive blow deeply damaging to the prospects of ICL in world markets where ICL earns £300 million a year for Britain. At a time of high unemployment, it would be folly if this order were taken away from ICL.

On behalf of my constituents and on behalf of British technology, I ask the Minister for an explicit assurance that this order will go to ICL. I ask for a vote of confidence in ICL.

Secondly, I ask the Minister for assurances about the future of Fairey Engineering. The morale of the company has been damaged by the months of degrading haggling over the sale of Fairey. Now S. Pearson has become the owner, but constituents of mine who work there complain that during this critical period there has been no adequate consultation with the work force. I have heard today from trade union reresentatives that the unions have not been consulted to date on the takeover by Pearson. They learnt of the sale from the company notice boards.

The workers are deeply concerned about redundancies which recently have been declared and have not been justified to their satisfaction. They believe that the company faces grave problems without new capital investment. The workers did not want Fairey to be sold, but under its new ownership they ask for assurances. First, they want an assurance that the group will be kept together. I understand that my hon. Friend the Member for Stockport, South (Mr. McNally) who, together with my hon. Friend the Member for Stockport, North (Mr. Bennett), will seek to intervene in this debate, has something to say about that. Secondly, the workers ask for consultation with the unions about plans for the future. Thirdly, they ask for a guarantee that Fairey Engineering, Stockport, will be kept as a viable site. Fourthly, they ask for fresh investment to give the company confident prospects for the future.

I ask the Minister for these assurances on behalf of my constituents and those of my hon. Friends.

Thirdly, I ask for assurances about the future of Ferranti. Last week the Government bowed to pressure in this House and acted to prevent Ferranti from being auctioned off like a white elephant to the highest bidder. Although the immediate threat has been lifted, the peril remains because in two years the shares will be free to be put on the market and the City vultures who did nothing to save Ferranti at its time of trouble will be able to swoop once again. Ferranti is living under a two-year suspended sentence.

I ask the Minister for two assurances about Ferranti. First, I ask for a promise that the Government will make a reference to the Monopolies and Mergers Commission if there is any likelihood of a major company moving to prepare a takeover of Ferranti. Secondly, I ask for Government action to prevent foreign shareholders from buying into Ferranti, which is so dependent on defence orders. Preventing a foreign takeover under the Labour Government's 1975 Industry Act is not enough. A substantial foreign minority shareholding would provoke serious problems and must be prevented.

None of these worries would be aroused, and none of these assurances would be necessary if the Government had not wantonly decided to meddle with the security and stability of these companies by ordering their forced sale, but these deplorable developments have taken place. Therefore, on behalf of my constituents and of the people of Manchester, I ask for these assurances, as the minimum that we have the right to expect.

2.40 pm
Mr. Tom McNally (Stockport, South)

I reinforce what my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) has said—not least about the way in which trade union workers in NEB companies have been treated over the last few weeks and months. The Minister knows that hon. Members have frequently asked Ministers to consult unionists. These workers in companies that have got into trouble have given the maximum co-operation to help in their rescue.

My constituents and many others in South Manchester have come face to face with reality, not with theory. We heard the theory last night—how market forces and the guiding hand of the market will rescue our high technology industries. My constituents know that when their companies came under pressure and they needed help the market was absent. It was the NEB that kept three major high technology companies in being and kept together workers of high skill to carry on good work. The reward, as my right hon. Friend said, is that they are to be degraded, to be hawked around the market with scant care for the companies that they helped to save. Even at this stage the Minister should give us some assurances about consulting the unions.

Whether or not the present incumbents of the Department of Industry accept it, or some later incumbent does so or not, once the U-turns come the emasculation of the NEB will be shown to have been a major error by this Government. The NEB was building up a track record of co-operation and shrewd judgment that would have benefited this country.

As my right hon. Friend said, the Secretary of State has meddled where there was no need for him to be involved, yet in other parts of the North-West, such as the textile industry, where he could be usefully employed, he says "That is for the market; I will not be involved". There have been many attempts to describe the Secretary of State. I thought of describing him as Sweeney Todd, but when I read the reviews of the new musical show of that name I discovered that Sweeney Todd at least had a constructive purpose in cutting throats. The Secretary of State is cutting throats and leaving viable industries to bleed to death. He should be ashamed of himself

2.43 pm
Mr. Andrew F. Bennett (Stockport, North)

I congratulate my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) on initiating the debate and on his speech, with every word of which I concur. Once again, I record the debt of gratitude that the people of South Manchester owe my right hon. Friend for his period as a Minister, when he worked so hard to get the NEB involved in saving these companies from the market forces which so nearly destroyed them.

I agree that the most important thing, certainly for the workers of Fairey, is to remove the uncertainty created by the Government, to give them guarantees about job security and guarantees that they will be consulted and that the investment promised by the NEB will be made.

I have written to the NEB on behalf of Labour Members concerned about this problem. I have received a reply which gives some assurances which I should like the Minister to underwrite. It states: Thank you for your letter of 1st July, 1980, about the sale of the NEB's shares in Fairey Holdings Limited to Doulton and Company Limited, which was completed on 27th June, 1980. In offering to purchase these shares Doulton gave assurances to the NEB that the present Fairey Group would be kept intact with a separate identity within the Doulton Group and that the Fairey name would be maintained In addition, Doulton has given undertakings that the terms of employment of the employees of Fairey and its subsidiaries would be no less favourable than those applying at the date of completion, and that it has no present intention of effecting any redundancies in relation to Fairey or its subsidiaries. These undertakings have been reflected in public announcements which have been made by the NEB and by Doulton and Co. Ltd. I hope that the Minister will underwrite those undertakings. I hope also that if there is no intention of bringing about redundancies—that seems to be firmly said in the letter—he will say what is the position of those who are employed by Fairey but who have received notices that there will be redundancies. They feel that they were being made redundant as part of the manoeuvring to try to get a better price for the company. They have a right to know as soon as possible whether Doulton is prepared to take back their redundancy notices or whether it is going to press them.

Many of us were concerned that Fairey was committed to two products only—on the nuclear side and on the military side. We wished to see the development of a third product, and Fairey was making good progress, with NEB assistance, in developing a programme for robotics. I hope that we can have assurances that the new financial arrangement will ensure that that new investment goes ahead and that the company has the opportunity to grow in those three areas, and not merely rest on its existing technology.

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

This has been an interesting day. In opening I should like to say that it is good to see the right hon. Member for Manchester, Ardwick (Mr. Kaufman) talking on industrial matters again. We missed him on the wilder shores of Environment, but, as usual, he brought his sense of excitement and emotive language to the occasion. I welcome him back into the fold, as it were, and I appreciate that he has a most serious constituency interest here, as do the hon. Members for Stockport, North (Mr. Bennett) and Stockport South (Mr. McNally).

Judging by the figures in front of me, I think that I am right in saying that the right hon. Gentleman is representing his interest in ICL, whereas his hon. Friends are representing their interests in Fairey and Ferranti. It is in that broad context that the right hon. Gentleman brought all these points together.

The right hon. Gentleman and his hon. Friends made a number of specific points about the implications of the disposals of the NEB shareholding for the companies concerned. Before I respond to those points it is essential that I remind the House of the policy of the Government on the disposal of the NEB, as it is relevant to many of the points that the right hon. Gentleman and his hon. Friends made in relation to individual cases.

In some cases they knew that the assurances that they sought could not be given here. They are in many cases assurances which, if they pursue them, they will wish to pursue with the commercial interests concerned directly in their constituencies. I have no doubt they have the ability to do that.

It is a fundamental theme of Government policy that we should transfer resources from the public sector to the private sector wherever possible. We believe that market forces provide the best response to the needs of the economy and that without the discipline imposed by the free market it is all too easy for the country's limited resources to be misallocated.

In the case of the National Enterprise Board the natural progression—if that is what is argued by the Opposition—by which assistance was offered should, in my view, lead to the termination of that assistance at the earliest and most convenient time. By definition, that releases resources that could be used by a whole range of other desirable activities.

Over the past five years, under successive Governments, the NEB has acquired interests in a miscellany of unrelated companies. Some the right hon. Gentleman will remember well from his time at the Department. They were imposed by the previous Administration without rhyme or reason in some cases. In the case of Rolls-Royce, after a period it became increasingly clear that that was not the best mechanism by which to relate the taxpayers' interests, the Government's role and the interests of that company. One must look at each individual case on its merits, even in terms of the existing portfolio.

We do not believe that any useful or indispensable purpose would be served by the NEB retaining many of the companies that I have just mentioned. The Industry Act 1980 has given the NEB the function of disposing of its shareholdings to the private sector.

In the new guidelines that will be published shortly we are giving the board certain criteria to guide it in exercising that function. In particular, in preparing for any disposal the board shall seek to secure the highest available consideration, subject to the interests of the taxpayer and the company, taking into account such other factors as the Secretary of State may draw to the board's attention—for example, the United Kingdom's defence interests.

When I speak of taking the company's interests into account I mean the interests of the work force and the widest possible consultation that can be arranged in each circumstance. The guidelines also specify that NEB shareholdings should be sold off as soon as is commercially practicable.

Within the overall requirement, however, normally the board will have to use its judgment about the timing and nature of its disposals. I am pleased to say that the board has made a good start with the disposal of its holdings in ICL, Fairey, and Ferranti, with a healthy return, despite what the right hon. Member for Ardwick said, on the taxpayer's investment.

In the debate following my right hon. Friend's statement on the NEB, almost exactly a year ago, the right hon. Member for Ardwick expressed fears on behalf of the work forces at ICL, Fairey and Ferranti. I revert to the right hon. Gentleman's mastery of emotive language. He said that the companies were being sold off in order to be "looted" by the private speculators who let them down in the first place. The right hon. Gentleman and his friends who appear to support that line are still trying to argue that case, in spite of the fact that none of the three disposals provides any evidence of that view.

I turn to the specific points made in the debate. We were told that there is considerable anxiety in the Fairey work force about the future of the company. I hope that Opposition Members will not attempt to increase that anxiety in in order to score political points. After all, Fairey, in common with other companies in the engineering sector, has recently experienced a down-turn in orders. That has forced the company to announce redundancies at Stockport. They are not a consequence of the disposal of NEB shares. The redundancies were announced before that was completed. It is wrong to assume that they would have been averted had the company remained with the NEB.

It must be clear to hon. Members that for a number of other companies in which the NEB is involved—Alfred Herbert comes to mind—the market situation cannot be denied.

I turn to the terms of the disposals. I assure the House that the interests of the company and the work force have been fully taken into account.

Mr. Andrew F. Bennett

The Minister says that the interests of the work force were taken into account. Why were the employees not consulted, so that they could decide whether their interests were being taken into account?

Mr. Marshall

The hon. Gentleman and I will never agree about what makes fair consultation at this remove. I am not privy to the detail. Prior to the debate I sought assurances from the NEB about what has taken place. I have no reason to believe that its account is unfair.

In offering to purchase the shares the Doulton group assured the NEB that the present Fairey group would be kept intact, with a separate identity within the group. Undertakings have also been given that the terms of employment for the work force at Fairey and its subsidiaries will be no less favourable than those applying at the time of acquisition and that there is no present intention of effecting redundancies at Fairey or its subsidiaries.

The Doulton group has made it clear that the purpose of acquiring Fairey is to diversify its interests into the engineering sector and that it is looking for the Fairey board to continue to develop a coherent strategy for the profitable development of the group.

It is wrong to suggest that Fairey's prospects have been damaged in any way by the disposal. I can understand that the right hon. Member for Ardwick is anxious to ensure that the company's interests, as well as the taxpayer's interests, are considered when the NEB sells its shares. In that case there is nothing between us. The guidelines make it clear that the NEB must have regard to both. That is what it has done in the Fairey case.

However, if the right hon. Gentleman wants the NEB to be a sort of sanctuary to insulate companies from economic realities, I have to take issue with him. In the long term that course would be inimical to the interests of the company and its work force. The only way that the long-term interests of companies and their employees can be secured is through maintaining competitiveness, and the challenge of a free market is the best spur to competitiveness.

Despite what the right hon. Member for Ardwick said, ICL is keen to distance itself from the image, which the right hon. Gentleman has fostered from time to time, that the company is either Government-owned or was Government-rescued. It has gone so far as to make the point in a recent advertisement in The Times. The company is clearly proud of the fact that it is privately owned, independent and dynamic, and I know that the right hon. Gentleman will wish, as I do, that its continuing success will provide continuing employment for his constituents.

The PAYE computer project has nothing to do with the disposal of the NEB shareholding in ICL, but since the matter has been raised in the debate I should reiterate that the Government recognise the importance of that project to the United Kingdom computer industry. The industry is aware that the Government's policy of acquiring large computers by a single tender from ICL must be subject to satisfactory price, performance and delivery.

I confess that I was a little concerned that the right hon. Member for Ardwick was seeking an unqualified assurance that orders would go to ICL, without reference to what was put on offer. I am sure that the right hon. Gentleman, reflecting on his former role, will appreciate that any purchaser must look at price, performance and delivery. However, the interest of the right hon. Gentleman is clear and the Government will take it fully into account. Of course, we are up against the deadline of changing EEC and GATT regulations, but any contract placed before the end of the year must take into account satisfactory price, performance and delivery. If we did not ensure that, we should be failing in our duty.

The right hon. Member for Ardwick asked what safeguards there were that Ferranti would remain independent at the end of the two-year period during which institutions have undertaken not to sell their shares. As my right hon. Friend made clear to the House on 1 July, it is impossible to provide that sort of safeguard. It is not in the interests of the company—or its work force—for it to be permanently safeguarded from bids on the market. In certain circumstances, such a bid might present major opportunities for growth and further employment.

Ferranti management and representatives of the work force who came to see my right hon. Friend—many hon. Members haxe expressed an interest in this matter—asked for a two-year breathing space. We have provided that by placing the NEB's shares with institutions on the conditions that have been announced. Indeed, it was clear from the general tenor of our debate on the matter that that view was widely-shared throughout the House. Lest it be argued that the Government are not responsive to the views of the House, I cite that case as an example of where what was carried out took full account of the general sentiments of the House.

As to the possibility of a foreign takeover, when I give the right hon. Gentleman the reply that he has so often given me, namely, that it is a hypothetical question, he will know from his many years' experience on Standing Committees that I give that reply because it is a fact. The question cannot be determined in advance. The right hon. Gentleman mentioned the existing powers to prevent a foreign takeover of an important manufacturing undertaking that is of special interest to the United Kingdom. Those powers would be considered if a foreign bid materialised.

I appreciate the way in which the right hon. Gentleman the Member for Ardwick and his hon. Friends put their questions to me. I wish to cover two or three more points before I finish. I have no quarrel with the way in which the NEB has exercised its shareholding in the companies. The top managements have been left to get on with their jobs. That emphasises the point that I made earlier about the need for direct contact if hon. Members wish to look at the present state of the companies now that the NEB is no longer directly involved.

Against that background, we see no public benefit in the NEB's retaining its holdings. There is every reason to suppose that the managements of the companies can do their job just as well under private ownership. I believe, therefore, that the disposal of the NEB's shareholding will have done harm neither to the companies and their employees nor to Greater Manchester. The public resources that have been released by the sale of the holdings can be applied where they are most neeeded, to the benefit of the country as a whole.

Question put and agreed to.

Adjourned accordingly at Three o'clock.