§ Motion made, and Question proposed, That this House do now adjourn—[Mr. Newton.]8.53 pm
§ Mr. George Foulkes (South Ayrshire)
I am glad that we are able to take the Adjournment debate at this early hour because the future of the Stonefield Vehicles factory at Cumnock has generated a great deal of national interest throughout the United Kingdom. As we have extra time I know that many hon. Members from both sides of the House will contribute valuable arguments.
When I was walking through the corridors someone said to me that in this place on this memorable date, because of my name, it was an appropriate time for fireworks. The issue should set the House alight. There is a record of Government disinterest and neglect. I say that to the Under-Secretary of State more in sorrow than in anger.
On a number of occasions it was suggested to the Secretary of State and the Under-Secretary that they should visit the factory, see the vehicle and acquire the enthusiasm that I and the workers at Stonefield have about its potential. The Secretary of State told Ayr trades council that he would certainly visit the factory. The Under-Secretary told me earlier that he certainly hoped to visit it. Even the South Ayrshire Conservative and Unionist Association wrote to the Under-Secretary of State urging him to go and see the potential of the Stonefield vehicle for himself. The hon. Gentleman did not take advantage of that offer.
Stonefield Vehicles was the most important element in the investment of the Scottish Development Agency, which in its turn is undoubtedly one of the most important aspects of industry for which the Under-Secretary is responsible. We therefore see a record of neglect and disinterest by the Under-Secretary.
The vehicle was designed and developed in Scotland. It is an example of positive Scottish initiative, an example of the new technology that the Government say they are trying to encourage and which Scot- 1404 land is now in danger of losing. I commend the enthusiasm of the Stonefield action group, the former workers of the factory who have formed themselves into a body to try to preserve Stonefield in Cumnock and find someone to take over the factory. They came to Westminster. I thank my colleagues on both sides of the House who came to see them today. The representatives of Cumnock and Doon Valley district council all travelled south because of their strong belief in the future of the vehicle. The former workers are desperately trying to find a buyer. Their visit here today was an attempt to make more widely known the advantages of the vehicle. We were privileged to have a visit by my right hon. Friends the Deputy Leader of the Opposition and the Shadow Chancellor—one cannot have one without the other. They saw the vehicle. Unfortunately, the Secretary of State, the Under-Secretary and the Prime Minister, who were all invited, felt unable to come along.
My hon. Friend the Member for Glasgow, Provan (Mr. Brown) asked me helpfully, during one of our earlier discussions today about Stonefield Vehicles, what the company needs. It principally needs a substantial further investment of funds.
Let us consider the story so far. Already £4¾ million of public money has been invested in Stonefield. The development stage was almost complete. After 18 months of rigorous trials the Ministry of Defence had given its approval. That approval was barely four months old, and the first substantial orders were beginning to come through, when the Government threw the company's future into jeopardy.
The previous Government—my right hon. Friend the Member for Glasgow, Craigton (Mr. Millan) and his right hon. and hon. Friends—had clearly indicated that in order for Stonefield Vehicles to progress logically it needed £6 million with continuing support through all its phases until it reached the stage of making a profit and was operating at full capacity. However, after the general election the Conservative Government decided to change the SDA's guidelines. I must make it clear that it was the Government's decision that put Stonefield Vehicles where it is today. The SDA's new guidelines removed the social responsibility that previously existed so that no 1405 longer must the SDA consider unemployment or social conditions in the area when making investment.
I do not often quote the Investors Chronicle, and even less frequently do I quote Edinburgh bankers. However, an Edinburgh banker in that journal said:The agency does have access to resources which would allow them to put far more money into their kind of investment than even we as a big merchant bank could. We deal with commercial lending. They have a much longer view and think more in terms of development finance, equity or debenture stock. It is not altogether an enviable role because they can end up with all sorts of cases which the normal market would not touch … But they have to take into account this wider social obligation.Money could come from other sources, but that was an important element in the SDA's finance. Otherwise, why have the SDA?
The other part of the new guidelines for the SDA was the necessity to find a private sector participant whenever possible. I draw the attention of the House to the passage that states:it should not invest in any enterprise for which sufficient and appropriate private sector money is ascertained by the Agency to be availableThe corollary of that is that if private finance is not available it is appropriate for the SDA to provide the money. I ask the Minister to consider whether we might not have reached the stage where he and the SDA should reconsider whether private finance is genuinely available. It may be some time before we reach that point.
The plug was pulled out by the Government at a crucial stage in the company's development—before it had reached the important stage of breaking even and eventually making a profit. The company had a great product. It has been acknowledged by everyone, including the Secretary of State—and perhaps even the Minister—to be the best in its class. Many people have said that, and I have read it in many professional and technical journals. It has potential markets. Without a guaranteed future the potential orders cannot be expected to solidify. That point was mentioned by some Conservative Members earlier today.
It is remarkable that up to the time when the Government created the prob- 1406 lems the company had come close to clinching a major £81 million order in Malaysia, was negotiating a major deal in Kenya, and had begun to develop contacts in the Middle East and elsewhere. Lest anyone doubt the truth of that—it is reputed that the Minister has indicated doubt—I confirm that I have spoken to two people who have shown interest in purchasing Stonefield. Inevitably, they checked on the market. They confirm that the contracts are at the stage claimed by the management of Stonefield. The Minister may shake his head, but they are independent people who have no reason to say otherwise. Indeed, they have every reason to be doubtful about any potential orders before embarking upon such an investment.
If we were in Japan, or some other country that takes seriously State assisance to such industries, the company would receive orders from the Ministry of Defence. That point has been raised by a number of Members during our discussions. I hope that in the light of this opportunity for debate the Minister will not stick to a prepared text. Will he seriously consider, especially as the moratorium on defence spending has ended, returning to the Ministry of Defence and asking whether there is not now some requirement for that excellent vehicle? If only the company had one or two relatively small orders from the Ministry of Defence, Stonfield—in whatever form it emerges—could go to Ministries in other countries and say not only that the vehicle had the approval of the Ministry of Defence but that the Ministry had shown its enthusiasm by purchasing. Regrettably, all that we have at present is the stamp of approval. We need positive orders. I hope that the Minister will indicate that the Government will take action on that point.
The Government's action in pulling out at this time was the main problem for Stonefield. The House need not take only my word for that. Some hon. Members in the Chamber are members of the Public Accounts Committee. The verdict of that Committee was very clear. It judged that the Government's action had a marked effect on the company's sales effort. It concluded:We can only regret that there was not sufficient flexibility in the provision of public finance to enable the successful development 1407 of this vehicle to proceed smoothly to the production phase in order to safeguard the substantial investment of public funds already made.As I said earlier, £4 million of public funds has been put into Stonefield. Is it not sensible to put in that additional amount of money which will get it to the productive phase and to the stage where it is likely to make a profit? Otherwise we are losing the £4¾ million that has already been put in.
Mr. Bob Cryer (Keighley.
My hon. Friend might care to bear in mind the different views of the Government towards financing motor vehicle projects. He has mentioned a relatively small amount of money of which this widely praised vehicle was deprived. At the same time, shortly before the Summer Recess the Government announced finance of £14 million for the De Lorean motor car venture in spite of the fact that no car has yet been made and that there are no vehicles in production. Production there has been delayed on three occasions, yet the taxpayers' total contribution is now approaching £60 million. In my view, there is a stark contrast there.
§ Mr. Foulkes
I am grateful to my hon. Friend for raising that point, because a number of people in Scotland have raised it. It is a question which the Under-Secretary might answer. Why is it that so much more money can go into De Lorean, which has no real prospects on the market, when we are asking for a much smaller amount of money to go into a Scottish development, for which the Minister has responsibility, in respect of which there is a clearly proven market? That is the comparison, and I am grateful to my hon. Friend for making it.
I should like to try to anticipate some of the criticisms about the Stonefield operation which might cone from the Minister, because they have certainly come from elsewhere. It has been said that the factory makes losses in the development stage, but what young company does not? Is not that part of setting out on a new enterprise? It has been said that the product range is wider than desired and that the prototypes have been custom-built to different specifications for each market. It has been said that the production costs are high. Of 1408 course they are high when volumes are low. However, when there are large orders and when break-even capacity has been reached, unit costs will fall. The product range will become much narrower when it is seen where the demand is and we do not have the wide range of products that are available at the development stage.
The Minister's implicit assumption is that a complicated entrepreneurial project, which this is, can cover its costs from the year zero. Clearly that is not the case. It is ludicrous to suggest that. It shatters the myth that Conservative Members have any conception about how business works. The Scottish Development Agency's view—and this is a key to the future success of whatever may come out of Stonefield—is that the marketing of the vehicle is key, and that it is no use merely producing good vehicles in Cumnock if the company cannot get access to the markets and sell the vehicles in them. All other things, such as finance to keep it going and Ministry approval, are important, but the company needs these markets.
However, the Government have recently urged the Scottish Development Agency to look for one possible buyer who has both the finance and that kind of marketing contact. That is not easy to find at the best of times, but with the current recession which Government policies have induced, and particularly when we are looking at vehicle manufacture, it becomes much more difficult. I suggest that there are somewhat more hopeful options. Perhaps the marketing skills could be bought in. Perhaps some agency which has particular skills in marketing could be used as an agent for Stonefield Vehicles in Cumnock, which would allow production to be carried out by the productive unit in Cumnock while an agency was brought in to carry out the marketing.
It is again evidence of the Government's lack of interest, lack of flexibility and indecent haste in this matter that when the Scottish Development Agency had to call in the receiver in August, they did not allow it to look at this other kind of option. They were looking for one buyer who could carry out all the functions that might make Stonefield successful.
1409 In another context the Minister has told us that he is willing—and this is genuinely helpful—to consider extending backing from public funds, but not if there is no prospect of orders in adequate qantities. How does he expect Stonefield, particularly in its present position, where the work force has been put on the dole and the sales force has been disbanded, ever to get orders?
If the Under-Secretary of State does not respond positively today, he will have to answer to the people of Scotland. It is amazing how this issue has excited the imagination of people in Scotland. The Under-Secretary has slightly misjudged the issue, which he probably thought would go away quietly. He has underestimated the potential of the vehicle. I hope that in the light of the evidence that he has heard in this debate, and in view of the pressure that has been put on hon. Members, he will recognise that he has made a mistake and change his mind and consider alternatives.
What are the alternatives? In the light of what I have said, I urge the Gevernment and the SDA to reconsider their financial commitment to this firm. I propose the formation of a consortium to raise the necessary finance. I ask the Government and the SDA to take the inititive and hold urgent consultations with banks, financial institutions and other interested people.
Earlier I spoke to my right hon. Friend the Member for Rutherglen (Mr. Mackenzie) who said that when he was Minister of State he did not wait for people to put in offers to take over companies which unfortunately went into liquidation. He, my right hon. Friend the Member for Glasgow, Craighton (Mr. Milian), the then Secretary of State for Scotland, and his predecessor, the former Member for Kilmarnock, now Lord Ross of Marnock, found the people to take over such companies. They took an active, positive, interventionist role. I submit that the role of the Under-Secretary of State, with his responsibility to industry, should be active, not passive. He should encourage—
§ Mr. Dennis Canavan (West Stirling-shire)
Successive Governments have realised the extreme difficulties to economic recessions and their effects on industry. My hon. Friend has hit on a 1410 valid point, namely, that the Labour Government went out of their way to get people, either from the public or private sector, to take an interest in companies going into receivership. For instance, a factory in my constituency would not have existed had it not been for the pressures from the Labour and trade union movement, and even Ministers at that time who tried to find interested people to help. That factory, the chipboard factory at Cowie, went into receivership a few years ago and is now a viable concern. The Under-Secretary of State is trying to take credit for that. It is no great credit to him. That factory is now a viable concern because of the initiatives of the Labour Government. I wish that the Under-Secretary would now show similar initiatives with regard to Stonefield.
§ Mr. Foulkes
My hon. Friend has highlighted the general point by giving a specific example—a good example. Perhaps the Under-Secretary is worried about the public spending implications. I know that he and his leader—his leaderene—are concerned about the public sector borrowing requirement and public investment. The right hon. and learned Member for Hexham (Mr. Rippon), who has recently been quoted often by Labour Members, said that the Government should invest in wealth-producing ventures, not in new job creation schemes where people are paid to break stones or to be under-productive. If necessary, we want the Government to borrow money to invest in wealth creation, and there is nothing more potentially wealth-creating than an enterprise such as Stonefield.
I know that there are other hon. Members who want to discuss different aspects of this matter before the Under-Secretary of State replies, but I seriously urge the Under-Secretary of State, in the light of all the representations that have been made to him, to give some hope to the people of Cumnock tonight. It is an area in which there is 15½ per cent. unemployment, rising rapidly, and in which there are unemployed miners who form a great and dedicated work force. What has the Under-Secretary of State to offer tonight to that dedicated work force?
I ask the Under-Secretary of State to throw out just a ray of hope and to say 1411 that the Government will re-examine the prospects for defence contracts for Stonefield Vehicles; that the Government will not sit back and wait for someone to come but will use their own powers and those of the Scottish Development Agency to find someone—if necessary a consortium—to take over the factory at Cumnock and to keep Stonefield Vehicles for Cumnock, Scotland and the United Kingdom.
§ The Under-Secretary of State for Scotland (Mr. Alexander Fletcher)
I am intervening at this stage, Mr. Deputy Speaker because it may be for the convenience of the House for me to reply now to the points raised by the hon. Member for South Ayrshire (Mr. Foulkes). I am sure that there will be time available for other hon. Members who wish to contribute to the debate. I have no desire to exclude them.
I should like at this point to reply to the main arguments put forward by the hon. Gentleman—
§ Mr. Bruce Millan (Glasgow, Craigton)
On a point of order, Mr. Deputy Speaker. I am not trying to prevent the Minister from saying something helpful, if that is what he intends to do, but will it be in order for him to reply later to other contributions? It will be highly unsatisfactory if other points are made and there is no reply to them.
Mr. Deputy Speaker (Mr. Richard Craws/law)
I am sure that, by leave of the House, the Minister will be able to reply later to other contributions.
§ Mr. Fletcher
I was about to come to the point that, with the permission of the House, I shall be happy to answer any further points that may come up later.
I want to reply to the main charges that have been made by the hon. Member for South Ayrshire. I am delighted that he has taken this opportunity to give the House a chance to discuss the question of Stonefield Vehicles. I accept the deep concern and the sincerity of the interest that he has shown in the company. I assure him that it is equalled only by that of my right hon. Friend and myself. The hon. Gentleman can shake his head. I do not doubt his sincerity but there is no evidence on which he 1412 can base any judgment of the work done by Ministers and officials in the Scottish Office—and by the Scottish Development Agency—to try to resolve this problem. To judge the enthusiasm or interest of Ministers by whether they drive around in vehicles or indulge in gimmicks of that kind may be typical of the superficiality of the hon. Gentleman's arguments, not just on this subject but on many other subjects in the House. I want to deal with the company in question and the desire of my right hon. Friend and myself to see it succeed.
If we had been indifferent to the company's fate it would not have lasted as long as it did. Considerable efforts were made by Scottish Office Ministers and officials to save the company, and significant sums of public money have been advanced to the company since this Government took office. My right hon. Friends and I have taken a very keen interest in the company's future and very much regret that the vehicle has failed to achieve the commercial success which was expected of it. Perhaps I may set out some of the background to the present position in order to put matters into a proper context.
I know that the argument is that there is a lot of interest in and enthusiasm for the vehicle. I have received letters and requests from a number of influential people as well as ordinary people, concerned about the matter and urging the Government to save the company. But none of these urgings has been accompanied by orders. Everyone says that it is a magnificent vehicle, including Labour Members and organisations in which they may be interested or involved, but no one comes along with an order for it. I ask the hon. Members to try to see the position in that context—at least for a moment.
The Scottish Development Agency first invested in the company in February 1977 and subsequently increased its stake, until the total funds provided to the company from the public purse now amount to about £5 million. It is now a wholly owned subsidiary of the SDA.
The technical merits of the vehicle have never been in doubt. It successfully completed very stringent testing by the Ministry of Defence, whose defence sales organisation has vigorously promoted the 1413 vehicle at its own exhibitions of equipment. In September 1979 the agency requested approval from the Secretary of State to make a further investment of £2 million in the company to expand the marketing arrangements for the vehicle. After careful consideration my right hon. Friend and I agreed that the likely volume of sales would not be adequate to support the large-scale expense involved in providing a self-supporting network of marketing and back-up facilities which would be required and that, in any case, the £2 million further investment proposed would not be sufficient to provide such a network.
§ Mr. Foulkesrose—
§ Mr. Fletcher
I must make this point. If we had accepted the proposition that £2 million was necessary to provide the network and the back-up organisation to market the vehicle—
§ Mr. Fletcher
Just a second. I ask the hon. Gentleman to curb his impatience. I must finish this point. If we had accepted the case we would indeed have been guilty of an error of judgment, because it was our opinion that if the company were to set up the back-up sales and marketing network required to sell the vehicle, considerably more than £2 million would have been required.
§ Mr. Foulkes
The Under-Secretary has touched on the crucial point that I was making. He talks about a self-supporting network and a whole range of outlets specifically for Stonefield. I was saying that, because he insisted on that, because that was the narrow blinker through which the Scottish Office was looking at it, the Scottish Office did not look at the possibility of another company with marketing contacts for its own vehicles taking the Stonefield on board on an agency basis.
§ Mr. Fletcher
I shall not give way to the hon. Gentleman if he is going to miss the point in that way. I listened to him very carefully. However, he is so busy trying to intervene that he is not listening to what I am saying.
The proposition was that with £2 million the company might set up its own 1414 extensive marketing back-up and service organisation. Our argument was that to do that independently would require more than £2 million and in our opinion that was not the right way to go about it. We believed that it needed to ally itself to a commercial organisation—preferably with an existing network of this kind—and to come in on the back of that company or some similar organisation providing the sales and marketing expertise which we felt—I am convinced rightly—was needed to make a success of the project. We were offering advice on how the project might succeed. The view that we took has since been substantiated by experts in the motor vehicle industry.
The Scottish Development Agency, which had already recognised the marketing weaknesses in the company and the attraction of linking Stonefield with an industrial partner, had conducted tentative discussions with potential interests as early as 1978. My right hon. Friend and I, in recognition of the soundness of this approach, offered the extension of further funding of £600,000 to enable the agency to continue its search for a private partner. I must emphasise in this context that, however great its technical merits, any specialised product of this kind requires substantial and expert promotional and marketing support to achieve the volume of sales necessary to justify full-scale production and to recover costs. That was the view that we held then and that is the view to which we have held since. Incidentally, it is wrong for hon. Members to think that we said to the SDA "Go off and do it." The Scottish economic planning department was fully involved in supporting and helping the agency and still is, so far as the receiver is concerned. It is seeking to ensure that any possible interest is quickly followed up and examined to see whether the project might still bear fruit.
We were convinced that support could be provided only by the private sector where a sales organisation and expertise was already available, and that backing from public funds could not be maintained indefinitely with no prospect of orders in adequate quantities. Although I accept that it takes time, as the hon. Gentleman suggested, to build up the volume of sales in a project of this sort, the fact is that fewer than 100 vehicles have actually been sold since full-scale 1415 production became possible in May 1978. It is incorrect to suggest that it is only within the last year that full-scale production became possible. The starting date for production was May 1978. During that time fewer than 100 vehicles have been sold, whereas the company and the SDA estimate that to break even between 700 and 900 vehicles per annum would have to be sold.
Much has been said of the deadline which the agency was set to find a private sector partner. As I said, there had been a number of expressions of interest from possible partners even before the present Government took office, and the agency was therefore not starting the exercise from scratch. In deciding how much further funding to extend our aim was to ensure that the field of every possible private sector partner was thoroughly tested. Indeed, public funds continued to be made available after the initial £600,000 had been exhausted and until the end of July of this year when the agency decided to call in the receiver.
In the event, as a result of the previous approaches that I have mentioned, potential partners were identified, and as long as there was any chance at all that they would maintain their interest we continued to authorise the agency to keep the company in funds, mainly by extending the bank overdraft guarantee. This approach appeared to have borne fruit when Tozer Kemsley and Millbourn—TKM—took out a purchase option for £120,000 on condition that the agency put up a matching amount. This we readily approved and these funds were used to enable the company to continue trading while TKM carried out an assessment of the market possibilities for the vehicle.
§ Mr. Tam Dalyell (West Lothian)
At the invitation of the Secretary of State for Defence I was one of the Members of Parliament who attended Exercise Crusader in the Rhine Army. At that time it was made very clear by the military that there were to be huge purchases of—I imagine—such vehicles. If Stonefield is not available, where will the military get the vehicles which it says are necessary and which are said—I cannot judge it—on military grounds to be absolutely 1416 essential for our NATO commitment? If they do not come from Stonefield, where will they come from?
§ Mr. Fletcher
If the hon. Gentleman will allow me a few moments, I shall come to the whole question of Ministry of Defence sales and the efforts that have been made in that respect. I was talking about the £120,000 option paid by TKM and the fact that this was matched by the agency with our ready approval.
We were all extremely disappointed, therefore, when TKM, with all its expertise in this field and in the knowledge that further public funds would be made available in the event of a TKM/Stonefield partnership, concluded that the sales prospects were not sufficiently promising to justify exercising its option to purchase. That decision itself confirms that there would be no point in the agency attempting to continue with the project alone and relying indefinitely on financial support from the taxpayer.
However, rather than put the company into liquidation the agency appointed a receiver, with the task of looking after the company's affairs and, in practice, to provide yet another breathing space in which to attract a suitable partner. The company's future is now in the hands of the receiver. If a private buyer comes forward with a viable proposition to continue production in Scotland which would qualify for Government financial support we would be delighted to consider it at that date.
The hon. Member for South Ayrshire suggested that we should take some further initiative, such as using a consortium of bankers. I can tell him that funding of the company is not the difficulty, as judged from the public sector or, indeed, as I understand it, from the private sector. The difficulty is finding a marketing partner for the company that can produce the orders without which the company cannot succeed no matter what funds are made available from the public sector or the private sector. It is incorrect to suggest that the company has been facing a financial problem. After two and a half years of trading it has been unable to get anything approaching the volume of orders that could justify the investment of further funds.
§ Mr. Foulkes
Does the hon. Gentleman agree that a consortium should consist not only of those putting in the funds but of those who have marketing contacts? If there were a positive initiative from the Scottish Office or the SDA to bring the two groups together, that would be more likely to succeed than if the two groups were left on their own.
§ Mr. Fletcher
Even though the company is in the hands of a receiver, there are still one or two parties who are interested in the company. We are happy to encourage that. The hon. Gentleman speaks of Ministers not taking the initiative. We are fully aware of the interests that exist, and arrangements of the sort that he has suggested are still being considered by those in the private sector. Such schemes are still being discussed with the receiver. We are fully aware of these schemes and propositions. I do not know at this stage whether they will bear fruit and lead to anything positive. We are happy to keep things going if there is any prospect of such a scheme coming forward.
A great deal has been said about the vehicle. It has attracted a great deal of admiration. Unhappily, admiration alone does not sell vehicles. Sales have been disappointing and well below expectations. There have been a number of expressions of interest in the vehicle from Kenya, Malaysia and Greece, but none of these expressions has developed beyond that stage, beyond an expression of interest.
Contrary to what has been reported by the media, there were no substantial orders on the point of being signed when the decision to appoint a receiver was taken. Had there been anyone talking seriously to the company and about to order some vehicles, that would have changed things completely. I know that the hon. Gentleman has read much in the press about these matters and I suppose that he has said a lot to the press. However, it has been dangerously misleading to those whose jobs depend on the company for those as ill-informed as the hon. Member for West Stirlingshire (Mr. Canavan) to suggest that orders are on the point of being taken when nothing could be further from the truth.
§ Mr. Foulkes
Will the Under-Secretary of State accept in good faith from me 1418 that I have spoken personally to two people who have been in touch with the agents in Malaysia who have been negotiating the purchase, that the order was on the point of being completed and that there is still the possibility of the order being completed? I have spoken to two people who have told me that in good faith. Will the hon. Gentleman accept that in good faith?
§ Mr. Fletcher
I do not doubt for a moment that the hon. Gentleman has spoken to two persons who have told him that they were on the point of doing something or other. I can tell him that the company, the agency and the Scottish economic planning department—indeed, all those involved with the facts of this case—are unable to support what the hon. Gentleman has suggested in respect of orders. No orders were on the point of being signed when the company was handed over to the receiver. If any substantial orders had been available, that would have altered the circumstances. There was no benefit for the Government in suggesting that a receiver might be appointed if there was any prospect whatsoever of the company remaining in business.
It is possible—this relates to the intervention of the hon. Member for West Lothian (Mr. Dalyell)—that some of the potential orders might have become firm had the Ministry of Defence been seen to have placed a substantial order with the company. My right hon. Friend pursued the possibility of an MOD order very strongly with my right hon. Friend the Secretary of State for Defence. The Ministry of Defence has purchased a small number of the vehicles for specific purposes, but has no immediate need for large numbers of such vehicles. Nor is it likely to have such a need for several years, since its existing stock of vehicles is sufficient for its purposes until the mid-1980s. The Ministry of Defence could not be reasonably expected to determine the exact specifications of any successor machine for its 1-ton Land-Rover so far in advance of its requirement. In addition, it must give proper consideration to the merits of any other British competitors in the field at that time.
During an intervention comparisons were drawn between the Government's attitude to the De Lorean project in Nor- 1419 thern Ireland and the view taken about Stonefield. Like many of the commentaries made in this affair, those comparisons have not been based on valid grounds. The additional funds recently provided for the De Lorean project represented the Government's honouring of a contractual agreement, entered into by the previous Labour Administration. The major differences are that De Lorean has firm orders on its books from car retailers in the United States of America for at least one full year's production, and has attracted private funding for research work on the vehicle's design. Therefore, the House will accept that there is a significant difference in comparison with the unfortunate situation at Stonefield.
§ Mr. Fletcher
The hon. Gentleman was inaccurate when he said that the stories of Stonefield and De Lorean were similar. De Lorean has firm orders for its first year of production and has attracted private funding for research on the vehicle's design. The two situations are clearly not comparable. If Stonefield had been in the same position as regards orders or private funding, its future would have been much brighter.
I should stress that my right hon. Friend and I are fully conscious of the importance to Scotland of advanced technology projects, such as the Stonefield vehicle. I very much regret that its obvious excellence has not been equalled by its commercial performance. We had to ask ourselves why that should be so. It was not because of any deficiencies in the machine. In the end, we had to accept—and the hon. Gentleman must accept—that the lack of firm orders, despite many expressions of interest, was attributable to only one thing, namely, a lack of proper marketing and support outlets, and the organisation required to provide them on a world-wide scale.
As a result, we had to decide whether such facilities could be provided by the agency alone. We concluded that to do 1420 so would be extremely impractical and would push the selling price of the vehicle to too high a price to be competitive. Therefore, the course that had been determined, to establish a link with an existing marketing concern, was the only course that was feasible and sensible if the project's future was to be ensured.
We did not reach that decision out of a desire to see an end to a publicly financed enterprise, but in recognition of commercial reality. Hon. Members on the Front and Back Benches would do well to address themselves to that reality. We still hope that a potential partner will emerge to save the project, and we shall help towards such a solution in any way open to us.
I was asked whether I could give any ray of hope. The company is now in the hands of the receiver, and is available at a knock-down price. If no one comes forward with a proposition that will make it viable, on one, either in the House or elsewhere, will be able to claim that the Government did not give the Stone-field company every possible opportunity to succeed.
§ Mr. David Lambie (Central Ayrshire)
I am glad to be able to participate in the Adjournment debate tonight along with my hon. Friend the Member for South Ayrshire (Mr. Foulkes). As an Ayrshire Member, I know the problems of Stone-field Vehicles because these are the problems that face most of the other industries in our area.
I am very disappointed at the Minister's statement tonight. He still has not answered the point that was made by my hon. Friend the Member for South Ayrshire. Why did the Government pull the plug out from the company four months after it had received Ministry of Defence approval for the vehicle? Why did the Government break an agreement that had already been made by the previous Labour Government and the Scottish Development Agency to fund more than £6 million for the complete development of this company? Why did the Tory Government, when things seemed to be going well and when orders were appearing on the horizon, cut off about £2 million that had been allocated by the SDA in association with Labour Government Mini- 1421 sters? The Minister has not answered that point.
It is right to say that there were no orders. There are many projects in their development stage for which there are no orders. It is wrong for the Minister to say that the company could not show a profit. No company shows a profit during the development period. When the end of the development is reached and the product is ready to be marketed, previous losses can be recouped. That is the usual commercial proposition carried out by any company.
I wish to make another appeal to the Minister tonight to stick to the orginal agreement made by the Labour Government and the SDA and give this company a chance. I have seen many receivers called in during my 10 years as a Member of Parliament and I know that the biggest fear now is that the vultures who usually appear in such circumstances will buy the plans and the blueprints of this vehicle and that they will take them away and develop the vehicle either in England or on the Continent. Once again, we will see a project being researched in Scotland and developed south of the border or even outside the United Kingdom. That is one of the greatest fears of the work force.
At the beginning of this month I visited Cumnock and met the work force of Stonefield Vehicles. When I was there I had vivid memories of the last time I was outside that factory, because that factory was once occupied by Scottish Aviation as an extension of its works at Prestwick. As a Member of Parliament interested in the future of Scottish Aviation at that time, I remember that we had to ask the work force in Cumnock to close that factory in order to concentrate the labour force and the company's activity at the main factory in Prestwick. We did that in order to try to keep Scottish Aviation going. At that time the work force agreed to take that action and we were fortunate at a later stage in getting the late Mr. McKelvie to come to that factory and build up the Stonefield Vehicles project.
Scottish Aviation was saved by a Labour Government intervening to include it in the nationalisation proposals for British Aerospace. There are, therefore, still 1,400 to 1,500 people working at Prestwick, all because of a political 1422 decision taken by a Labour Government. We ask the Minister to show the same initiative and speak on behalf of industry and development in Scotland. He can get the project going again if the Government will allocate the £2 million.
In Scotland at present ¼ million people are unemployed, which costs the Government £1.2 billion per annum. Instead of paying unemployment and losing income tax and national insurance contributions, the Government should pay Stonefield Vehicles the £2 million that they stole from it. In the long run that will save money.
Where will the 100 men go if they lose their jobs? In South Ayrshire the main industry of mining is in decline. Throughout Ayrshire over 22,000 people are unemployed which is one-tenth of the unemployment in Scotland. They will find it hard to find other jobs. At the labour exchange at Cumnock unemployment stands at 15.3 per cent. In the Secretary of State's constituency of Ayr, unemployment stands at 12.2 per cent. In my constituency, the unemployment rate in Irvine is 17.5 per cent. and in Kilbirnie, 26 per cent. In the constituency of my hon. Friend the Member for Kilmarnock (Mr. McKelvey) unemployment is running at 14.2 per cent.
The men from Stonefield will be thrown on the scrap-heap of unemployment, when there is a project that could be developed for the benefit of the area and of Scottish industry generally.
I hope that the Minister will listen to the pleas from all sides of the political spectrum in Scotland, change his mind and grant the £2 million.
I have been in contact with the work force and management of the Scottish division of British Aerospace and know how important it is to get a Ministry of Defence contract. I do not understand why the Government have withdrawn support from Stonefield immediately after the Secretary of State for Defence gave approval for this vehicle. British Aerospace at Prestwick is awaiting a Government order for a communication plane for which the ideal candidate is Jetstream. The moratorium on defence expenditure is to be lifted next week. With his responsibility for industry in Scotland. I hope that the Miniser will, with his right hon. Friend the Secretary of State for 1423 Scotland. make sure that that order is given to British Aerospace at Prestwick.
We know from leaks from the Scottish Office that the Secretary of State took the question of military orders for Jet-stream to the Cabinet. Those leaks were in order to build up the reputation of the Secretary of State. The Prime Minister stated that, if it was a choice between an American or a British aeroplane, she was on the side of the British aeroplane.
We were told that the Ministry of Defence was to order 14 Jetstreams, which would have given us a solid base for aircraft development. Unfortunately, the moratorium on defence expenditure was imposed immediately after that and we are still awaiting confirmation of the order.
The Secretary of State has a constituency interest in the future of British Aerospace at Prestwick. Will the Under-Secretary give us an assurance that we will get the Jetstream order? It will guarantee the jobs of the 1,400 employees and will increase the work force over the next four or five years to 2,000. That would give us something and it would salve the conscience of Ministers who are doing nothing in Scotland to help us.
All that Ministers are doing is going round factories where they think they will get good publicity. They keep away from places where they will get bad publicity and there are few factories in my area that Ministers could visit. I make my plea on behalf of the work force not only at Stonefield but at British Aerospace.
§ Mr. Dalyell
On a point of order, Mr. Deputy Speaker. It will be within your recollection that the Under-Secretary read out a prepared statement from the Secretary of State for Defence. Is it not at least a matter of parliamentary manners, even if it is not in "Erskine May", that when a Minister's statement is read out he should at least be represented in the Chamber, even if he cannot be present himself? Surely the debate has taken such a turn that if we are to have a Government reply it might well come from the Secretary of State for Defence or at least the Under-Secretary of State for Defence for the Army. Could the Government Whip possibly—
§ Mr. Deputy Speaker
Order I understand what the hon. Gentleman is saying. There are many things that the Chair does not think are good manners, but it is not for the Chair to rule on the matter that the hon. Gentleman has raised. It is not for the Chair to decide who answers debates.
§ Mr. Deputy Speaker
Order. I am not taking any more points of order on who is to reply to the debate. The hon. Gentleman does not need to answer the hon. Member for West Lothian (Mr. Dalyell).
§ Mr. John MacKay (Argyll)
During the summer we have all read in the press and watched on television the campaign waged on behalf of Stonefield. I was interested to attend a meeting in the House this morning, held under the aegis of the hon. Member for South Ayrshire (Mr. Foulkes), because I was genuinely concerned about what I had read in at least one newspaper.
I understand the concern felt by Ayrshire Members. The hon. Member for Central Ayrshire (Mr. Lambie) has listed the unemployment problems in his constituency. I understand that Ayrshire has serious problems. However, I also saw during the summer the hon. Member for South Ayrshire taking part in campaigns that would close the Hunterston plant and put 1,200 people out of work. That makes it seem a little odd that he should make such loud complaints about this problem.
§ Mr. Canavan
The hon. Member for Argyll (Mr. MacKay) made his own constituents unemployed at Corpach.
§ Mr. MacKay
The hon. Member for West Stirlingshire (Mr. Canavan) shows an amazing ignorance of Scottish geography if he thinks that Corpach is in my constituency. The hon. Gentleman was not a geography teacher. Like me, he was a mathematics teacher, and I only hope that his mathematics are better than his geography.
There are some serious problems about the Stonefield plant. My hon. Friend the Under-Secretary underlined them, but 1425 they are worth repeating. In November, there were no orders for this truck on the order books. There were many inquiries and potential orders, but that is not the same as real orders. Hon. Members have been to look at the Metro. It would be wrong for the dealer at whose premises we went to see the Metro to assume that we would place firm orders. Some of us may place orders; some will not. It is a real problem that in November there were no firm orders for the vehicle.
It is equally true that in the previous two and a half years, for a portion of which the Labour Party was in power, only 92 trucks were built, ordered and sold. No great number went to one particular buyer. My hon. Friend the Member for Banff (Mr. Myles), a hill farmer, who, unfortunately, cannot be present for this debate, has informed me that he tried out the truck but found it too expensive from a capital point of view and too expensive to run for hill farmers to consider as a possible vehicle in the hills.
That brings me to the military use. The hon. Member for South Ayrshire did not make much of a reply that appeared in Hansard for yesterday. I had read previously that the Ministry of Defence had given the vehicle a certificate of approval. That seemed a wide approval. In Hansard, however, in reply to the hon. Member for South Ayrshire, the Under-Secretary of State for Defence for the Royal Air Force gave details of the Ministry's approval to the Stonefield vehicle. The reply gave me a different slant from that which I had read in the newspapers over the last three months. The reply stated:The Stonefield vehicle was evaluated at the Military Vehicles and Engineering Establishment under the sponsorship of the Ministry of Defence's sales organisation to establish its suitability as a towing vehicle for the 105 mm light gun. The trials were carried out at the company's expense to obtain the endorsement of the defence sales organisation that the vehicle was suitable for this purpose with a view to overseas sales. The endorsement was given on 22 August 1979."—[Official Report, 3 November, 1980; Vol. 991, cc. 477–78.]I may be wrong but that seems a much more limited endorsement of the vehicle by the Ministry of Defence than that which I was led to believe had been given.
1426 I should still like my hon. Friend and my right hon. Friend the Secretary of State to urge the Ministry of Defence to consider buying the vehicle for that limited purpose and also to look at the vehicle for other purposes.
It is strange that some Opposition Members, who are most vociferous in their views against the Ministry of Defence, now want the Ministry to spend money. I accept, however, that they have a right to adopt two standpoints.
§ Mr. Norman Buchan (Renfrewshire, West)
On a question of accuracy, the hon. Gentleman purports to claim that the quotation that he has read out is a very limited and highly qualified endorsement of the vehicle by the Ministry of Defence. Is it not the case that this is what was sought and that this is what was given, and that it is a very high-grade endorsement. It does not mean what the hon. Gentleman suggests.
§ Mr. MacKay
I accept that the hon. Member for Renfrewshire, West (Mr. Buchan) has suddenly become a defence expert and is enthusiastic about defence. On the basis of the answer, it seems a high endorsement but still means that the vehicle has been endorsed for a limited function.
§ Mr. Bill Walker (Perth and East Perthshire)
Hon. Members agree that it is important that defence procurement orders should be placed with British companies wherever possible, and certainly with Scottish companies wherever possible. I believe that the House is united in that view. I draw my hon. Friend's attention to the fact that the Boulton and Paul Defiant was classified by the Air Ministry, as it then was, as a fighter and accepted. It was not very successful. The Albemarle was classified as a bomber transport and was not very successful.
If this vehicle is what it is claimed to be, it should live up to its role. We do not want the Ministry of Defence to buy items to be used by our troops if they are not good enough for the job. I hope that the vehicle is good enough. It is important not to order something because it happens to be made in Scotland if it is not up to the job.
§ Mr. MacKay
I thank my hon. Friend for explaining that a Ministry of Defence endorsement is not necessarily Holy Writ.
It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Newton.]
§ Mr. MacKay
I do not wish to go into the question of endorsement. We can agree across the Chamber that, for whatever role the Ministry of Defence endorses the vehicle, it is important that the Minister works on the Ministry of Defence to try to achieve orders for it in that role and to examine other possible roles. If I were convinced that £2 million extra was all that was required, I might be urging the Minister to go ahead with the £2 million and to get on with it, However, I fear that if I did that and my hon. Friend agreed with me, as he does most of the time, and listened to my advice, next year the hon. Member for South Ayrshire would host another meeting requesting another £2 million.
The Minister made clear tonight, in a way which has not been made clear before, that the £2 million is specifically for the marketing of the machine and not for its production. If the production level has to be between 700 and 900 vehicles a year to break even, the company will need a fair cushion of money in the next two to four years to cover the significant losses involved in building up from no orders last November to between 700 and 900 a year. In spite of the obvious appeal of a job creation project on such a scale, I should be reluctant for public money to be poured year after year into this project in the hope that next year the company might break even and not have to come back for more.
It is disturbing that the search for private partners is still on. Perhaps the private investors are not convinced about all the potential orders. The Minister's quotation from TKM was interesting. Perhaps the debate will help by giving the problem publicity. I wonder whether the banks and other financial institutions are examining Stonefield.
The problem is one of marketing. If the marketing does not work, a company can produce the best goods in the world 1428 but they will remain at the end of the factory. I wonder whether the future of the vehicle is so uncertain that only the poor British taxpayer can take the risk and pour in money year after year.
I hope that the Minister will reiterate the assurance that he and the SDA are taking an active part in seeking a private buyer. Opposition Members suggest that the Minister is being purely passive. I hope that he will underline what he has already said. I hope that he will also underline, for the sake of the publicity from the debate, that if a private buyer or consortium expresses interest the Government and the SDA will give it every possible assistance to get the project going.
I hope that when that private buyer or consortium comes along the Minister will do all in his power to persuade the Minister of Defence to order some of the vehicles so that other people in the world will take confidence from that order. If he does that he will have the support of hon. Members on both sides of the House.
§ 10.5 pm
§ Mr. William McKelvey (Kilmarnock)
If Stonefield Vehicles is allowed to fold, the people of Ayrshire, and certainly the people at Stonefield Vehicles, will see that as another nail deliberately hammered by the Under-Secretary into the coffin of industry in the area. That is how they see the position now, and if the Under-Secretary went up to meet them he would understand and appreciate their point of view. That was certainly the view that they expressed to me today when I met the deputation.
The people in Ayrshire feel that the Government have something against the people of Scotland. I do not necessarily agree with them, but their view is understandable, given the industrial statistics in Ayrshire. Unemployment there is catastrophic. It is 14 per cent. in my area, which is considered one of the best parts. It goes up to 18 per cent. and even to 26 per cent. in the worst parts of Ayrshire. No Government can be proud of that record, whether or not they are prepared to pursue some crackpot monetarist scheme that is ill thought out and untried.
There are certain similarities and parallels between the position at Stonefield 1429 Vehicles and an issue that we dealt with in the House not long ago—Massey Ferguson. The work force at Massey Ferguson was commended by the Under-Secretary and the Secretary of State for the dignity with which it accepted the sack. It was commended on having shown initiative and having travelled to London to state its case. It was given plenty of assurances of assistance, but ultimately no assistance came. The reason given was that it was impossible to provide aid for a multinational company. We were told that if that had not been so the finance might have been available. Stonefield Vehicles, however, is being deliberately starved by the Government of the finance that it needs to develop. The people of Ayrshire, and particularly those who work at Stonefield, will not forgive the Government for that.
It has been said that the Under-Secretary likes to be photographed in factories in order to gain publicity. There is nowhere for him to do that in Kilmarnock, Cumnock or Ayrshire generally. The Under-Secretary could be photographed at factories in Ayrshire, but the factories are only monuments that are gathering dust. Monsanto has disappeared. The factory still stands but is in mothballs. Skefco has disappeared. Again, the factory still stands, but it, too, is in mothballs. There is an endless catalogue of such factories, and I fear that we shall add Stonefield to it because the Under-Secretary has turned a deaf ear to our pleas.
If he had met the work force when it came to see us, he would have seen a film which demonstrated the versatility of the new truck. It has Ministry of Defence approval for towing guns. But with its versatility it can do much more. It can be used in agriculture, in forestry and in telecommunications. That is why it should be given the opportunity to live.
§ Mr. John Home Robertson
(Berwick and East Lothian): Does my hon. Friend agree that this vehicle can also be used in the fire service? I have been in touch with the firemaster of the Lothian and Borders fire brigade only today. It has one of these vehicles and it has made it abundantly clear that it would like to buy more, but it is constrained by Government spending cuts.
§ Mr. McKelvey
My hon. Friend raises a relevant point. District and regional councils throughout Scotland would dearly love to possess such vehicles, but they cannot afford them.
There were firm orders for the truck from Malaysia and Kenya, and they would have firmed up. The purchasers, however, would not buy the last Stonefield vehicles. They knew that the Government were about to withdraw finance from Stonefield and starve it of the funds that it needed. In those circumstances, it would be considered daft if they placed firm orders. We cannot blame them for that.
If the company had been given the £2 million originally promised, and if that promise had been honoured, the workers at Stonefield feel confident that they could have produced the goods and that the orders would have come in. That is the crux of the matter. They should be given that opportunity.
The people of Ayrshire and Scotland will watch the developments at Stone-field. Once more the Under-Secretary is seen as a purveyor of platitudes; his crocodile tears are noticed by them, as is his lack of action. They will remember that when the Government go to the country for votes. Labour has a two to one majority in the Scottish industrial areas and the Conservative Party will be completely and utterly annihilated in the same fashion as that in which it is trying to annihilate Stonefield.
§ Mr. Bill Walker (Perth and East Perthshire)
I welcome the opportunity to speak in the debate. There is much more at stake than simply the question of Stone-field, serious though that is. For a long time we in Scotland have not been active enough in supporting Scottish industry at all levels and in all parties. I believe that, mistakenly, past Governments have supported industries that have no future; they were not new or creative but old and dying. Consequently, a pattern has emerged whereby it is now expected that when Governments take an interest in something it is almost a kiss of death. That is regrettable.
The Stonefield project should be considered carefully. It may surprise Opposition Members to know that I believe 1431 that we would be letting down the Scottish people if we did not examine it in great depth, and was satisfied that we had taken action in a way that could be justified. I mentioned earlier that Ministry of Defence approval itself could be very narrow and, much worse, misleading and wrong. I cited the example of the Boulton and Paul Defiant, a fighter aircraft. It was not a success. It served on a few sorties successfully but then it became a kiss of death to fly in it. That machine was later used extensively by the Royal Air Force for tugging and towing. It was successful in that use. That is why I believe that we must look carefully at the Stonefield project.
If a vehicle is classified in a fairly narrow category, it may not be successful. There is a possibility that we could be drawing a definition so narrowly that the machine would never be given the opportunity to meet it. Defence procurement is important. It is an area that hon. Members have not considered carefully enough in the past. I say "carefully" because it is easy to write blank cheques. It is easy to say "Yes, it is a desirable project and because the defence people say that we want it at this time we should have it". I wonder sometimes whether the price of defence equipment and procurement should be considered more carefully.
I draw the attention of Opposition Members to the fact that many hon. Members in the House tonight are seriously concerned. We would not be here if we were not concerned. I hope that my hon. Friend the Under-Secretary is listening. If there is a future for the vehicle, we expect it to be kept in Scotland. We expect it to be kept in a way that will show the Scottish people that we have not let them down and that we have not allowed something with potential to go elsewhere. Equally, we must be able to say to our electorate that this is not another example of a Government pouring thousands of millions of pounds into a project that is not commercially viable. That is important. I believe in the sincerity of the hon. Member for South Ayrshire (Mr. Foulkes). He has a duty to inform the Minister who the people are who have told him that definate orders exist. I understand his reluctance to name them in the House, but he has a 1432 responsibility to give the information to my hon. Friend if only to ensure that the best interests of the people at Stonefield are looked after.
I believe that this debate will perform a useful function. If nothing else, I hope that it will come to the attention of prospective private purchasers who are interested in the knock-down price that we are told receivers always charge. That has not always been my experience of receivers, but it is a fact that receivers normally try to dispose of assets—in that I include the designs and the potential—at the best possible price in the interests of the creditors.
The appointing of a receiver is not normally the end of the road. It is an interim stage before the end of the road, and it frequently means that there is life thereafter. Often it is the only way out of a situation where management and the work force are unable to find viable commercial answers. The appointment of a receiver allows time for that to be changed. I hope that the situation at Stonefield will result in just that. All that is required to make the company viable is not an order from the Ministry of Defence, important as that is, but an act of faith by the private sector which says "There is a future here. We can see this. It means something."
I hope that a Scottish organisation will be able to do that. But it is perhaps more important to find the people to run the company.
Money is not the difficulty. The difficulty is finding the people with the commercial expertise, flair and ability to turn this potential opportunity into a real opportunity. I believe that Governments of all colours should not become involved in a situation such as this, which really calls for an entrepreneur if anything ever did. It calls for the chap who sees the potential. It is unfortunate that the individual who set up the project is no longer around, because, as we all know, the difference between success and failure is often the chap up the front—the individual responsible.
The debate has provided a welcome opportunity for hon. Members to discuss this matter, and I am delighted that the hon. Member for South Ayrshire initiated it. It has given many of us an opportunity to look at the problem and 1433 to see the wide ramifications which exist. There are lessons for all of us. In particular, there are lessons for industrial Scotland. That is really what we are concerned about. We are concerned about where the jobs will come from tomorrow, who will work in our factories and what they will manufacture.
It is easy to be critical and to say that someone has done nothing. However, we must remember that we have a responsibility because £4¾ million of taxpayers' money has already gone into this operation. Unless we can be satisfied that the company has a future and that it can be commercially viable it would be wrong to put more money into it. But that is not a reason for doing nothing. If anything, it is a reason for doing something. It is a reason for proving it conclusively, one way or the other.
The market can be tested with regard to the potential of those who want to put in money. It would not be expensive to send someone to Malaysia just to check on the orders that we understand are in the offing. We ought to consider that possibility, because it is not expensive in relation to the money which could be used.
I ask my hon. Friend to take note of the concern that is felt on both sides of the House. None of us wants to see this venture destroyed just for the sake of destruction. We would prefer it to be given life. However, I would not want it to be given life if it proved to a continuing and lasting drain on the taxpayer.
Mr. Bruce Milian (Glasgow, Craigton)
I support what has been said by my hon. Friend the Member for South Ayrshire (Mr. Foulkes) and by my other hon. Friends. I did not find the Minister's reply convincing, but he still has five minutes in which to try to produce better answers.
We are dealing here with a first-class vehicle. The Minister did not deny that, and that is the evidence from everyone who knows anything about it. The basic question is whether it has a real prospect of becoming a commercial success. The Government pulled the rug from beneath the company before giving it an opportunity to prove whether it could become a commercial success. The Minister gave 1434 an inaccurate description of the timetable involved.
The company was established in January 1977; it was producing a completely new vehicle in factories that it took over in 1977. It was inevitable, and it was recognised from the start by the SDA and the Labour Government at that time, that the company would require a good deal of finance before it could become viable. In practice, because of the Government's dogmatic insistence that the SDA should find a private partner, this company has been brought down. It was not a lack of Government intervention, but unhelpful Government intervention that created the crisis that the company is now facing.
I am not against the idea that if the circumstances were right and if it could be achieved, private capital should be involved in the venture, but it is a high-risk venture and at present we are not operating in a congenial industrial climate. Industry is going down the drain everywhere. In Scotland we have a catastrophic industrial situation, and with the present high interest rates it is a particularly unpropitious time to find a private investor who is willing to take the sort of high risk that is involved in this venture.
The Government told the SDA that their assistance could not continue unless the SDA found a private investor immediately to bear a certain amount of the risk. It was that decision by the Government that brought about the present crisis. From the information that is available—although it is true that there was not a whole range of orders already available to the company—there were good prospects, whether in Kenya, Malaysia or elsewhere, for a vehicle that met the needs of a part of the market that was not satisfactorily catered for by a British manufactured vehicle. That could have been proved only if the company had had sufficient time, and had not been faced with Government intervention, to show whether it could achieve the orders that were necessary to keep it going.
This is a prime example of the sort of company for which the SDA was designed—a high risk venture with a good deal of initial development money, and with a real prospect of commercial success in an area that is meeting a demand 1435 in the market and doing so with a product that is designed, developed and built in Scotland.
The Minister said that anyone who wishes to get in can do so at a knockdown price. That means that all the existing Government investment will be lost. He then said that anyone who goes in will receive Government assistance. Even if this route along which the Government are going is successful, it will cost them more than if they had maintained the company in its existing form and put in the necessary cash. What is far more likely to happen, at best, if someone comes in, is that it will be someone who is attracted by the knock-down price to take the patents and the skill and enterprise which have been put into the vehicle, and who will manufacture it somewhere other than in Scotland. If that is the result, it will be the direct responsibility of the Government.
It is not too late even now for the Government to intervene in a helpful way. I hope that the speeches made this evening will encourage the Government, even at this late stage, to do something actively to keep this very worthwhile and enterprising project in Scotland.
§ Mr. Alexander Fletcher
The hon. Member for South Ayrshire (Mr. Foulkes) referred to an agreement that there should be an investment of £6 million in the company. We have no knowledge of any such agreement. He must have made some mistake or error in suggesting that some prior commitment had been made or had been passed on to the Government. He made a point—as did his right hon. Friend the Member for Glasgow, Craigton (Mr. Millan)—about the receivership. The phrase used was that the vultures would buy the plans and remove them from Scotland.
The receiver must get the best price he can, but the receiver knows that the Government are most concerned to ensure that any purchaser of the company will continue the business in Scotland. We have made that perfectly clear to the receiver. The receiver, when he was appointed, was fully aware of the very strong views that the Government and the SDA hold. I am sure that the debate 1436 tonight will reaffirm the strong views held on each side of the House.
I agree entirely with my hon. Friend the Member for Perth and East Perthshire (Mr. Walker) that defence procurement is important. He said "Keep Stone-field in Scotland if there is a possible buyer, or if there is an opportunity to do so." I am happily repeating the assurance that I have given to the Opposition that we shall do that to the best of our ability.
My hon. Friend the Member for Argyll (Mr. MacKay) wants my right hon. Friend the Secretary of State and myself to urge the Ministry of Defence to buy. That is what we have been doing on the Stonefield project, but I have explained the difficulties of the Ministry of Defence. In this case it is not so much a matter of cash limits but that the requirements for vehicles of this kind will not come into being for some years
The hon. Member for Central Ayrshire (Mr. Lambie) knows my views on Jetstream, but it is not really a matter for this debate.
The right hon. Member for Craigton wants better answers. He said that this is a first-class vehicle. We have never disputed that. He talked about the SDA investment. I agree that it was a good investment for the SDA to go into a company such as this on start-up, but the company has been capable of production since May 1978, and there must be a point in time when one must look at the orders that the company has achieved during that period. The figure, as we know, is less than 100 in two and a half years. Had there been any prospects at all of new and substantial orders being available, there would have been no problem on the part of the agency or of the Government in keeping the company going.
Despite the passion and the emotion on occasions generated by Labour Members. the commercial reality is there today—that the company was ready to produce the vehicle and had been for two and a half years but the number of orders was pitifully low and there were no prospects of any substantial orders in the pipeline.
The right hon. Gentleman referred to the Government's insistence on a commercial partner. What we were looking for—I believe that this is absolutely 1437 right—was a commercial partner who could help to sell the vehicle and help to get orders for it. The SDA could not do that; the company could not do that. Although various efforts were made to hire people into the company to do it, these had not succeeded, and it seemed to us that we should try to get another partner to do so.
In July of this year the chief executive of the SDA said in his press statement:The agency has already made prolonged and vigorous efforts to find a buyer or partner for the Stonefield project, and Government has supported the company financially during this search. Now that TKM can no longer proceed, and in the absence of any other potential purchaser, there is no alternative for the agency but to appoint a receiver.1438 I say to my hon. Friends who ask about the future that we take the view very strongly and repeat that Government support for a viable project—even at this late stage—that may emerge from the efforts of the receiver will be given, inasmuch as anything possible that can be done, not just to prolong the life of the company but to keep the business—
§ The Question having been proposed at Ten o'clock and the debate having continued for half and hour, Mr. Deputy Speaker adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at half-past Ten o'clock.