International Computers Ltd.

HC Deb 06 April 1981 vol 2 cc746-58 7.56 pm

The Minister for Industry and Information Technology (Mr. Kenneth Baker)

I beg to move,

That this House authorises the Secretary of State to undertake to pay, in respect of guarantees by way of financial assistance to International Computers Limited under section 8 of the Industry Act 1972 (as amended by the Industry Act 1975, the Industry (Amendment) Act 1976 and the Industry Act 1980), sums exceeding £5 million but not exceeding £200 million.

The motion is being made under section 8 of the Industry Act 1972. It provides, as my right hon. Friend the Secretary of State for Industry announced to the House on 19 March, for a Government guarantee of loan facilities advanced by banks to International Computers Ltd. The proposed loan guarantee is limited to an amount of up to £200 million for a period of up to two years. ICL's principal banks are themselves continuing their support for the company in an amount of £70 million as part of this arrangement.

As my right hon. Friend also said on 19 March, the Government have a special interest in ICL as a major customer of its products. The company's equipment, to a value of over £300 million, supports vital operations in some 20 departments, including defence, revenue assessment and collection, agriculture, health and social security. ICL also has a significant place in this country's information technology industry, employing some 23,000 people in the United Kingdom, many of them highly skilled, and contributing substantially to the balance of payments.

In recognition of the company's importance to the functioning of Government, we have thought it right to respond positively to the proposal that we should join with the banks to provide a limited, temporary measure of support for ICL.

ICL can point to significant achievements since its formation in 1968. The company's productivity, turnover and profitability have risen impressively over the years. In 1980 its overseas turnover exceeded £300 million for the first time—a sixfold rise since 1973. Through sustained development work and acquisitions the company is now able to claim that it is offering its most comprehensive and competitive range of products ever. The value of ICL's world-wide customer base is well over £2,000 million in 80 countries. Apart from IBM, this is the biggest customer base, outside America and Japan, of any computer manufacturer.

Despite this record of success, the company reported a sharp drop in profit in the second half of the year ending 30 September 1980. It has since announced that current trading is running at a loss and that the adverse conditions could continue well into the current year. This downturn has been caused primarily by the impact of the world-wide recession—which, notwithstanding their long-term prospects, has hit high technology industries like the computer industry particularly hard. For a company like ICL, which is geared to growth and a high level of expenditure on research and development, a severe and prolonged flattening out of sales and hence of profitability gives rise quickly to financial problems. I have been interested to note recent press reports which suggest that other multinational computer manufacturers have experienced similiar difficulties, extending to operations in this country.

ICL is taking vigorous action to contain costs, including 10 per cent. redundancies already announced across the work force in the United Kingdom and a proposal to the unions for a zero pay increase in 1981. Redundancies are unfortunate but, I fear, necessary. The company is therefore responding to its difficulties positively and with determination.

Despite the adverse trading conditions, it is continuing to secure success in the market place, including significant new orders in the past few weeks. I have been delighted to note also the recent statement of confidence in the company by the ICL computer users' association.

The assistance envisaged by the motion is of limited amount for a limited time. No public expenditure will be incurred unless the guarantee is called, and there is therefore no effect on the public sector borrowing requirement. The sum of £200 million that we propose as the maximum of the guarantee—which covers only borrowing beyond the point at which ICL has drawn on existing facilities from its principal banks of £70 million—is judged by the banks and the company as sufficient to enable the company to review its longer-term business opportunities in the light of its current trading position.

Mr. Nick Budgen (Wolverhampton, South-West)

Has any inquiry been made in the City as to what it would cost to buy such a guarantee from a private source?

Mr. Baker

Not as far as I know.

Given a revival of markets, the company expects to return to profitable operations. At the end of the two years our guarantee lapses. The measure is therefore temporary and the circumstances exceptional.

I am in no sense apologetic in approaching the House for approval of this support. I believe that it is a constructive but limited measure of Government involvement in an important component of a key industry which has excellent long-term prospects. As a Government we have never set our face against sensible ways of encouraging success. To have refused the approaches made to us would certainly have risked a destructive and very expensive outcome, which would have benefited no one and would have damaged our own computing operations in particular, together with those of many other major users. As the 1979 Conservative manifesto made clear, the national interest sometimes suggests that the Government should help a firm in difficulties, provided that help is of a temporary nature.

If the House approves the motion, the Government will of course enter into a formal agreement on the loan guarantee with ICL and its principal banks. I do not believe that it would be right for me to make public the details of that agreement, as I have already been asked to do in questions tabled by two hon. Members. By its very nature, such an agreement will contain information of a commercial nature, which should properly remain confidential. Successive Governments have followed the policy of not publishing the detailed conditions and terms of loan guarantee assistance given to private industry under section 8 of the Industry Act 1972.

I should like to give the House an indication of the broad principles that we have established for our relationship with the company during the period of the guarantee. First, we shall of course wish to monitor the business activities and performance of the company very closely while the guarantee is in operation, and the company have agreed to this. Secondly, we shall expect to keep in close touch with the progress of the review of longer-term business opportunities that ICL is conducting. As Minister for Industry and Information Technology, I meet frequently all major companies in this industry, to discuss plans and prospects, and it is essential for companies in such a fast-moving sector to review their strategic position in the market from time to time in the light of their expectations and trends in the industry.

The Department's discussions with ICL will be on a more formal basis, in recognition of our financial support for the company, but the background will be the same as for our wider interest in information technology developments in the United Kingdom. It is in this context also that we shall be continuing our support for the company's R and D activities under selective schemes available to industry in general. Thirdly, we expect the company to consult us on any major organisational and management changes during the period of the guarantee.

Of course, I cannot predict at this stage what the outcome of ICL' s review of its business opportunities will be. There has been press comment on the possibility of association with another company. ICL, like most companies in the industry, regularly examines ways of cooperating with other companies. Indeed, it has several cooperative arrangements already with both United Kingdom and overseas concerns. The information technology industry is one which thrives on change, not least because of converging technologies and changes in market behaviour. In these circumstances, it would be both proper and prudent for ICL to examine the scope for new arrangements, which might strengthen its commercial position, provide a better means of spreading the heavy R and D load inseparable from computing, and secure the interests of the all-important customer base.

But this is speculation about the future. The immediate need, for which I seek the approval of the House, is to provide ICL with the guarantee of additional banking facilities of up to £200 million for up to two years, as the prerequisite of this strategic review of this company's business opportunities.

8.5 pm

Mr. John Garrett (Norwich, South)

The Opposition agree with the proposed Government assistance to ICL. We believe it to be a welcome recognition of the need to support and develop a vital national industry. However, we have some questions to ask.

The motion is a lesson for our times. A company prospers under the surveillance of the National Enterprise Board and so, according to the prevailing doctrine that only under private ownership can it be free and dynamic, the State holding is sold off. Within 18 months the company has to be bailed out by the Government, and up to £200 million in public money is put into it so that it can be made profitable again for the benefit of private shareholders. It sounds to me a poor deal for the taxpayer.

The decision to sell the public stake in ICL now looks to have been thoroughly unwise, even to the City. As the Financial Times said on 20 March, the Secretary of State's critics will now argue that the sale was made too soon; certainly it will be argued that the current rescue attempt might well have been easier to mount from the NEB's headquarters than from Sir Keith's own offices. It might have added that the necessary future close supervision of the company would have been carried out more competently by the NEB than by the Department of Industry. Indeed, ICL now meets the criteria that the Government have invented for assistance from the NEB. It is in a high-technology sector, it is in a market with potential for exceptional growth, and it is a business of crucial national importance.

As The Times commented: Had the NEB not been instructed to dispose of its holding in ICL, the present crisis would probably not have arisen. Not only would access to the required facilities have been facilitated, but the monitoring of the company's operations, which forms a routine part of the Board's activities with any company in which it has a holding, could well have given an early warning of the deteriorating position and could have led to some corrective action. The pursuit of one element of the Government's ideology—the sale to private interests of State holdings—has led to an embarrassing defeat on another element of Government ideology, non-intervention in industry. The Department of Industry is gripped by policy schizophrenia—whether or not to intervene. Luckily, it is seeking a cure in intervention. As the Financial Times commented, there is now virtually nothing credible left in Sir Keith's avowed policy of non-intervention in industry. The Act under which these funds are to be made available is a relic of a similar U-turn by a former Tory Government. In 1971 they repealed Labour's Industrial Expansion Act in a fit of non-intervention, and in 1972 they replaced it with an even more interventionist Industry Act, for which we have had reason to be grateful ever since. Conservative Governments are always in the process of eating their words on this issue after 18 months in office, at a terrible cost to British industry.

We know that when the problems of ICL became apparent the company was hawked from one potential purchaser to another—Shell, BP, GEC. There was no luck there. Then it was suggested that Control Data, Sperry Univac, Philips, Nixdorf, Siemens, Hitachi and Fujitsu might be interested in getting the Government off the hook. There was no luck there, either.

Are the Government still trying to find a partner or an owner for ICL? The Minister referred simply to cooperation. A number of us believe that something deeper is needed. The American Sperry Univac or NCR could be interested. What they want, of course, is ICL's expertise and its customer base on the cheap. They could now acquire them for about £60 million. They particularly want its customer base in 20 Government Departments and its 35 per cent. market share in Britain. I very much doubt whether they would want to retain all its 24,000 employees in Britain in the long run.

If such a takeover went ahead, we should be back in the familiar position of having a few worthless guarantees from a foreign multinational to maintain the work force. After a few years there would be the virtual closure of the one European computer company that is a force in the world computer industry. Skills essential to technological advance in this country would be dispersed for ever, and in this field we should slip behind and finally out of the race to develop computers. Any Government who countenanced such a solution would be regarded as doing irreparable damage to our standing and competence as an industrial nation. Perhaps the Minister will be more forthcoming about his intentions when he winds up. Does he regard it as unacceptable that ICL should ever be taken over by a foreign company?

On the other hand, I cannot see that Government assistance is likely to be "limited or temporary"—the Secretary of State's words. A little while ago, the phrase was "temporary and tapering". The Secretary of State is more likely to be temporary and tapering than the assistance to ICL. The use of ICL equipment in the key Inland Revenue application will lock the Government and ICL even closer together.

In fact, ICL has been a succesful company in a murderously tough business, dominated by one company, IBM, which has 15 times its turnover. Half of ICL's sales are overseas. Its new range of middle-sized computers, advanced processors and file stores are as technically advanced as any of the products of its competitors. Over the years, it has spent about £500 million on developing its 2900 series, and that investment is beginning to pay off. Its turnover rose from £150 million in 1972 to £624 million in 1979, and its profit from £3 million to £45 million. The sale of the Government holding produced a profit of £24 million. That, of course, was before the Government's economic policies began to bite.

The company's present problems arise primarily from the Government's economic policies, which, as all the world knows, are based on reducing inflation somewhat by destroying British industry totally. The chairman of ICL said that the company had been hit by a combination of inflation, high interest rates and uncompetitive sterling. He said: I lay most weight on the speed of change of the real effective exchange rate". In addition, ICL has had to compete with companies which have been able to raise money at half the interest rates that ICL has had to pay.

On top of that, from January 1979 IBM started price cutting on a scale which led the EEC to charge IBM with offences against its competition rules, after complaints by four European computer makers. Have the Government joined in those complaints against IBM? What is their attitude to the pricing policy of IBM, and what do they intend to do about it?

Now that the Government have come to the rescue of ICL they have to participate in its future. So the Government must answer a number of important questions. There has been severe criticism of ICL's management and its product strategy. It is accused of trying to do too much, and carrying too large a range. The company's leasing arrangements, too, have been criticised. Difficulties seem to have developed so suddenly that everyone has been caught off guard. The board was far too optimistic about the growth in demand for its products. Clearly, the board needs more outside directors of a high calibre. How do the Government view these criticisms? Do they propose to see that something is done about them—at least by appointing new outside directors?

The company has to spend about £60 million a year on research and development. That obligation makes it exceptionally vulnerable to a downturn in activities. The Government provide only about 10 per cent. of that research and development funding—far less than is given by other Governments to the company's competitors. Do the Government recognise any further obligation to support the company's research and development costs? The Minister mentioned this matter, and I do not understand why there should be any secret. What do the Government feel about putting money into research and development at ICL?

Do the Government accept that the company is vital to a strategy for the development of the data processing and transmission industries in Britain—industries which France, Japan and the United States accept as essential to industrial growth? Government support for the computer industry in France is double our level, in Japan it is seven times our level, and in the United States it is greater still.

We now have a Minister for Industry and Information Technology. He is responsible for a number of schemes, for example, for the development of microprocessors. After months of dithering, the Government have supported Inmos. The NEB has subsidiaries in information technology equipment and software. Now the Government have taken ICL again under their wing. So we have an array of ad hoc developments in an area where we need a comprehensive strategy if we are to take advantage of the potential for rapid growth. As was said in Computer Weekly on 12 February, the United Kingdom computer industry has been hampered by the lack of an appropriate Government policy.

Will the Government develop a strategy for this and related industries, as the National Economic Development Office has urged them to do? Foreign import penetration is increasing inexorably. In computer and allied fields, import penetration from foreign manufacturers has risen from 20 per cent. to 60 per cent. over the past 10 years. Should there be an EEC strategy using public procurement and support, before world markets are carved up by the United States and Japan, both of whom are protectionist at home and aggressive abroad?

While I am on the subject of the EEC, I should like to know whether it is true that the French and Irish have complained in Brussels about this Government's guarantee to ICL. It is rich that the French should do that, after having poured money for 20 years into trying to build an ICL of their own.

The managing director of ICL said that if Europe's computer requirements were met by the United States and Japan, those two countries would have their hands on the means to control Europe's social and economic development.

The rescue of ICL, which we welcome, makes it imperative that the Government should swallow their ideology again—by now, they should be accustomed to doing that—and produce a policy and a plan for the future of this country in a crucial sphere of industrial development. How long shall we have to wait for such a strategy and plan for such a crucial industry?

8.16 pm

Mr. Tom Arnold (Hazel Grove)

I apologise to the Minister for not being here when he started his speech, and I congratulate him and the Government on having taken such a wise step—as I said when my right hon. Friend the Secretary of State for Industry made the initial statement to the House.

This is not a matter on which the House should take an ideological view, because it is a practical matter. As a Member who represents part of Greater Manchester I am greatly concerned about the future of ICL—as are all hon. Members who represent the area. My constituency, which used to be part of Cheshire, has always taken a practical view, so I am glad that the Government have taken a similar view on an issue which poses a number of complicated questions.

There is one issue that the House should consider this evening. I hope that my hon. Friend will be able to assure me about the policy that the company proposes to fellow. The Government have given the company a breathing space, but no more. The problems of ICL are not new. The company has faced difficulties for a number of years, as the House has been told on previous occasions.

There appears to have been some confusion among the management—the hon. Member for Norwich, South (Mr. Garrett) mentioned the company's management—about whether ICL is competing with what I shall call the big boys or whether it intended to concentrate on specialist areas in technology where it could make a contribution. There is a choice here, and it is not one that can be ducked. I hope that the company will make good use of the time that it is being given by the Government to resolve the issue.

If the company continues to try to get the best of both worlds it will remain a headache for its employees, shareholders and the Government. I am convinced that Greater Manchester—perhaps the whole county, because many of its employees and directors live in all parts of the county—can and will benefit from this wise Government policy, provided that everyone recognises that difficult decisions need to be taken and to be taken soon.

I hope that my hon. Friend the Minister will answer one or two of the questions that I have raised. I repeat that I welcome this step, and I am sure that the Government have taken the right decision.

8.20 pm

Mrs. Gwyneth Dunwoody (Crewe)

I intervene in this debate because, frankly, the story of ICL greatly concerns my constituents. Until recently, many of them worked at the ICL factory at Winsford, which, although in the constituency adjoining mine, has provided a great deal of employment.

When I came into the Chamber this evening I wondered how the Minister would manage to explain this extraordinary volte face. Of' course, I can see why he was put up to do this job. He sounds very reasonable. To put forward such an extraordinary case, a Government need someone who at least sounds faintly coherent.

This company was created with taxpayers' money. It was developed with taxpayers' money. In the Winsford area it received enormous support from the local authorities. As soon as the Government came to power, however, even though this was an industry which manifestly was of tremendous importance and manifestly one of the new technology industries which were likely to develop greatly in the future, they could not wait to sell off the shares to anyone who was prepared to take them, irrespective of the national interest.

In the comparatively short time that this Government have been in office a situation has arisen resulting in their having to come back here and say that the people who took over total control and benefited from the taxpayers' past efforts to create a new industry are unable to cope unless they have their present operation underwritten once again by the taxpayers' money.

What are we being offered? The hon. Member for Hazel Grove (Mr. Arnold) says that the Government's proposal is very sensible because it will guarantee employment and produce a great involvement in the area of Greater Manchester. But let me tell the hon. Gentleman a cautionary tale about what happened to ICL in the Cheshire area. Unfortunately, this present measure comes too late for my constituents because they have already lost their jobs. But the reality is that here is a company which, competing as it does in a growth industry, and which is capable of developing an enormous number of new jobs, has failed dismally to protect the interests of those who supported it in the past.

When Winsford was a new town it welcomed the advent of this new industry and made a great many efforts to accommodate the firm. It offered large industrial sites and considerable assistance in terms of rate holidays. It sterilised suitable parts of its industrial estate so that the firm would be able to develop. Indeed, that was one of the conditions on which the firm originally set up in the Winsford area.

Despite the money spent in providing housing and the encouragement given the firm by the local authority, when it came to the point, the firm suddenly announced, almost without consultation, that it intended to close the entire factory and move elsewhere.

Thinking about it, this is an extraordinary history. Only last August ICL came to the North-West group of Labour Members of Parliament in great travail. It said that it was very concerned that the Government were not interested in awarding a major contract for the Inland Revenue computer to a British firm and it wanted hon. Members to do all that was possible to ensure that that contract went to the firm, because it would provide employment and because it represented the future of the British computer industry.

Labour Members from the North-West undoubtedly had a specific interest in trying to save jobs, and they did their best to make sure that Parliament discussed the implications of the Inland Revenue computer contract and that everyone involved knew what the price would be if the contract went to another firm. Yet, even while those talks were going on, there was a dramatic change in ICL's order book and the company seemed unable to cope with the changing processes of open competition.

I am prepared to accept that most of the difficulties which ICL faced were the result of direct Government policies. There is no doubt that many actions of the Conservative Government as soon as they came to office made it virtually impossible for ICL to compete in overseas markets. But it is also true that the management of ICL seemed to be astonishingly little concerned about the future of its employees in the Winsford area.

To those who think that their future has been safeguarded by the Government's guarantee, I say "Beware. You may find that ICL has not sufficient flexibility to retrain or to recreate new lines. You may find, as I think very soon other constituences in the North-West will find, that even those people in the Winsford area who have been retrained will not retain their jobs."

There is a strong suspicion amongst those who work in the computer industry that ICL would still be prepared to do a deal that meant that it imported a great many parts and simply made up goods here with a large American partner. That will not safeguard employment, and it will not safeguard the interests of the British taxpayer. Certainly it will not help create the British computer industry.

When my hon. Friend the Member for Norwich, South (Mr. Garrett) said that the difficulties that had arisen were likely to prove dangerous to the British as a whole he was not exaggerating. Modern government works in such a way that the computer is becoming the one tool by which not only the unions but anyone who controls the machinery of computers will control the future of day-to-day administration. If we in this country ever reach the stage that ICL was created specifically to avoid, where all that computer control is in the hands of a foreign company, we shall have to consider seriously where our best interests lie.

If I speak bitterly it is because, in an area in the North-West, where we know what unemployment is like, where we are losing jobs in traditional engineering faster than we can recreate them, where there are far too many young people out of work and where there is difficulty even in getting proper apprentice training for many of the people who were halfway through that sort of education, we thought that at least we had one new and burgeoning industry which provided some hope. What has happened in Winsford can happen elsewhere.

If we do not retain a manufacturing interest in the computer industry there is no indication that there is any future for those who want to work with computers. The implications are great, both politically and industrially. I do not believe that the people of Winsford and its surroundings and my constituents who worked for ICL have been well served. I record my extreme dissatisfaction with the manner in which the Minister has skated over all the implications of his announcement. I hope that those who work for ICL in the future will be treated better than those who worked for the company in the past.

8.28 pm

Mr. Hugh Dykes (Harrow, East)

It behoves me to be brief. I apologise to the Minister and to the House for missing the start of the debate. This was due to a perhaps over-optimistic estimate of the time when the debate would begin. The business of the House is proceeding extremely rapidly. That is perhaps an additional reason for keeping my speech short.

The hon. Member for Crewe (Mrs. Dunwoody) concentrated mainly on a grievous local issue. All hon. Members have sympathy for constituents confronted with local closures. I wish, however, to refer to ICL as a national company and an international company. I shall carefully read in Hansard tomorrow what my hon. Friend the Minister said. I assume that he expanded on the comments of my right hon. Friend the Secretary of State recently about the need to give this emergency assistance to the company. There is a big difference between what may be short- and medium-term emergency support given until the financial situation becomes clearer and the longer-term, fundamental support that the State, in a mixed economy in the advanced world, has to give this sort of industry.

I welcome the assistance, although it has arisen in rather sad circumstances. I am glad that the Government saw the need to give the support. ICL is our leading computer manufacturer. The assistance enables the company to continue within the ambit of a private sector company with private shareholders while the particular difficulties in current circumstances last. I thank the Government for taking this essential step and providing a vital breathing space.

There will need to be careful thought about the longer-term future of the computer industry, particularly in individual countries of Europe and, indeed, in the whole of Europe. I become increasingly fearful—it is no exaggeration to use the word—of the horrendous danger of Western Europe falling badly behind—principally behind Japan but also behind the United States—in the highest advanced developments of telematics and information technology and in the intrinsic nature of the machinery and equipment now being developed. We in Europe are getting very primitive. That worries me a lot.

While ICL has developed a pristine range of machines from the small and medium to the large, that company, no less than others in Britain in this industry, needs to do some heart-searching and re-thinking in coming months and years about the products on which they will concentrate. I believe that they should get together with their European counterparts. My reasons go wider, but I believe that co-operation over size will be essential.

I am also glad to support the assistance that has been provided when I reflect upon the modest Government support that will have been given over the period 1966 to 1984 in comparison with other countries. The whole industry will have received aout £260 million over that lengthy period. ICL itself will have received only about £70 million. Incidentally, ICL has only one quarter of the United Kingdom market. It is not the giant in British terms that some people imagine. It is simply the largest single company.

In France, even though there is a substantial private interface, the State invested about £600 million over that same long period, while in Germany the figure was over £1,000 million. In Japan the figure was nearly double the size of the German figure, although constructed in a different manner, which we, in the West, should examine closely to see whether there are lessons to be learnt. The total United States figure, federal and local, is enormous in an economy and an economic system regarded as par excellence the premier private enterprise economy. This shows the return to the good old common-sense, old-fashioned but equally valid and modern conclusion that one cannot say, in a complicated mixed economy system, that private is heroic and public is wicked, or the other way round. That applies above all to the computer industry.

Some people—they would not include my hon. Friend the Minister—may have hesitated about that concept at an earlier stage in the life of this Government. I welcome the fact that it is not so now. An extremely welcome form of assistance and support has been provided for ICL just at the time it is needed.

The company was clearly taken by surprise. It cannot be criticised for that. Hon. Members do not know enough about the internal details of what happened. Over the critical summer months from July and August onwards, for a short period, the company and its management were taken by surprise by a sudden collapse in new ordering and the return of some of the leasing contracts. It would have been catastrophic if an old-fashioned conclusion had been drawn from what was a short-term though admittedly grotesque and sizeable accident. The Government have taken the right course of action.

Mrs. Dunwoody

I do not want to interrupt the hon. Gentleman's apologia. He is speaking warmly of the company, and I am sure that he has a deep feeling for it. Does he really believe that it is a good deal for the taxpayer, who has created and supported the company, still to underwrite the guarantee now that it has been sold to private enterprise and he no longer has an interest?

Mr. Dykes

The hon. Lady will always provide a shrill and tendentious description of history. I am dealing briefly with the motion on the present plan. I welcome public sector support up to the maximum of £200 million, which I should have thought was right up the hon. Lady's street, so I am surprised by her attitude.

I thank my right hon. Friend for supporting and promoting this action. I hope that we shall soon have an authoritative statement from ICL on its plans for 1981 and beyond.

8.36 pm

Mr. Kenneth Baker

The hon. Member for Crewe (Mrs. Dunwoody) was kind enough to say that I sounded reasonable.

Mrs. Dunwoody

I did not say that the Minister was reasonable.

Mr. Baker

I was about to assert that obvious verity—not only do I sound reasonable; I am reasonable. We have had a sensible and reasonable debate.

My hon. Friend the Member for Harrow, East (Mr. Dykes) raised the much wider question of the strategy for the industry. The computer industry is only part of a much larger range of industrial and commercial activity known as information technology, which ranges from satellites to television games. It is one of the great growth areas. 'We have a world lead in parts of it but we cannot expect to have a lead throughout. The main part of my responsibilities is to ensure that we do not miss the boat. ICL is not the entire British computer industry, which covers a range of small, medium and even some reasonably large companies.

The Prime Minister today launched the micro computers-in-schools scheme, which is an important step forward. It aims to bring microcomputers to every school, and is an important element in microtechnology strategy. The two companies supplying the machines are British. Neither existed in 1977. One started in that year and the other in the following year. They make exceptionally good small microcomputers. It is a vast and immensely complicated industry. Big and small and hardware and software work side by side.

The hon. Member for Norwich, South (Mr. Garrett) asked about the sale of the NEB's shareholding in [CL. When that took place there was no reason to question the company's future performance. It had just turned in a healthy annual profit of £46 million, an increase of 22 per cent. The decision to sell the shares was part of the Government's wider plans to dispose of the NEB's assets. The NEB never took an active role in ICL. We see no advantage in taking out a new shareholding or involving the NEB again. ICL should primarily determine its own future.

The hon. Gentleman also asked about the Government's attitude to an overseas buyer. Such questions are speculative. It is primarily for the company to decide how it can most satisfactorily secure its position, having regard to its large and remarkably loyal body of customers.

Mr. John Garrett

Can the Minister confirm that discussions are not going on between the ICL board and any other company with a view to the other company taking a shareholding in ICL?

Mr. Baker

As I have said, this is a speculative matter. It is really a matter for the board and for the management of ICL.

I was about to say that the Government, as an important customer accounting for between 6 per cent. and 8 per cent. of ICL's total turnover, wish to see, in any association which ICL might wish to effect, relevant assurances on the continuity of facilities, including research and development, production, support and marketing operations.

The hon. Gentleman asked about ICL's leasing arrangements and whether its leasing business was a matter for concern. I confirm that it is not. Leasing is a useful alternative means of making a sale where the user does not wish to purchase outright. The disadvantages are that ICL must find backers to finance the leasing companies and make provision in its accounts for the repurchase of equipment from them and for the depreciation of equipment, but ICL considers that there is no serious risk in its leasing activities.

The hon. Gentleman and others asked about the level of research and development. It is not our normal practice to reveal the details of applications made to us for research and development assistance. I am sure that the hon. Gentleman understands why that is so. We are currently considering a range of proposals from ICL which could lead to our doubling the current level of support for the company's product development activities in the coming year.

Mrs. Dunwoody

Will the hon. Gentleman forgive me—

Mr. Baker

I could forgive the hon. Lady almost anything.

Mrs. Dunwoody

I am deeply moved by the Minister's kindness. He has announced that the Government may well wish to undertake an even greater involvement in research and development. On that basis, how can the Government justify the fact that they will have no control, beyond the most general monitoring, over the way in which the money is used?

Mr. Baker

The hon. Lady seems unaware of the way in which we handle approaches in relation to research and development. We receive such approaches from a wide range of companies in the technology industries across the whole spectrum of British industry. It is a fairly regular occurrence for the Department to examine R and D programmes and projects. I assure the hon. Lady that when we approve such projects in other industries we do not think of taking a shareholding in the company. It would be quite inappropriate to do so.

Mr. Barry Henderson (Fife, East)

Is it not true that out of about £230 million provided to the industry for research and development work only about £70 million has actually gone to ICL, which is perhaps the only one in which the Government had, in effect, taken shares?

Mr. Baker

Over the years the Government have provided research and development funds for ICL. I undertake to confirm the exact amount to my hon. Friend. Under the science and technology measures, in arrangements for research and development schemes the money must be matched, or more than matched, by the company involved. ICL has maintained a high level of research and development over the years over the whole range of its products. I think that that is recognised. In certain areas, such as the content addressable file store and the distributed array processor, it has undoubtedly done very well indeed in research and development.

As I explained, we believe that the difficulties faced by ICL are temporary. The company was hit by the decline in orders for large computers in the autumn of last year. That decline is now beginning to hit other large computer companies throughout the world. A company such as ICL, which was geared for high growth, is hit very hard by a downturn in the inflow of orders.

The hon. Gentleman and others, including my hon. Friend the Member for Hazel Grove (Mr. Arnold), referred to the strategic reviw of ICL. The strategic review is the most important way of examining where ICL should go in the future.

Hon. Members asked whether ICL should try to develop and market a range right across the board, from the large to the small computer. Back in 1968 ICL made only large computers. Since then it has developed an extensive range down to the small mini-computers.

The proportions in ICL's order book in the year ending last September were, for the large machines, 11 per cent. by value, for the medium machines, 26 per cent. by value, for the small and communications machines, 34 per cent., for software, 13 per cent. and for other orders, 16 per cent. That illustrates the way in which ICL has moved into the medium and smaller range. If it had not done that in the middle of the last decade it would not have survived at all.

I hope that with support the company will be given a breathing space in which to examine its strategic objectives and to overcome its temporary problems.

Mr. John Garrett

I fear that the Minister may finish his speech before dealing with my question about the Government's attitude to IBM's pricing policies in Europe, which have led several European computer makers to complain to the EEC about unfair competition.

Mr. Baker

I have noted what the hon. Gentleman said and I shall examine it. The complaint was made about 12 months ago, when IBM brought out its range.

Question put and agreed to.

Resolved, That this House authorises the Secretary of State to undertake to pay, in respect of guarantees by way of financial assistance to International Computers Limited under section 8 of the Industry Act 1972 (as amended by the Industry Act 1975, the Industry (Amendment) Act 1976 and the Industry Act 1980), sums exceeding £5 million but not exceeding £200 million.