HC Deb 26 January 1981 vol 997 cc639-46
The Secretary of State for Industry (Sir Keith Joseph)

With permission Mr. Speaker, I will make a statement on the BL 1981 corporate plan.

I am making available in the Library of the House and in the Vote Office a report by BL on its recent performance and details of the corporate plan.

The plan contains BL's strategy for returning the company's businesses to viability in the medium term. It foresees a need for some £620 million of additional Government equity in 1981–82, £370 million in 1982–3 and £150 million over the two following years in order to assist the continuing programme of restructuring and investment in new projects, including the LC10 medium car family.

The plan was submitted in four business sections. The policy of the BL board has been—and will continue to be—to decentralise decision-making to the operating units. The intention of the board, as stated in the plan, is to draw these operating units into four distinct businesses to enable management to concentrate on well-defined product groupings. These businesses are BL Cars, Land-Rover, Unipart and the Leyland Group. As the structure evolves, so the progress of each business will be separately monitored.

The board is meanwhile exploring a variety of possible forms of collaboration, and has written to the Government in the following terms: The board sees collaboration with other manufacturers as an important part of its strategy for recovery and reducing and eventually removing dependence on Government support. This might take the form of collaborations on components or on particular parts of the business; but the board would also welcome, and actively seeks, a relationship of a more comprehensive kind which might grow out of such collaboration. The Government support BL's intention of creating viable businesses and of attracting private capital into them. It has approved the plan and has agreed to fund the first two years of the plan, including the first phase of the LC10 programme—that is, £620 million in 1981–82 and £370 million in 1982–83—subject to regular monitoring by the BL board of progress in achieving the plan. The Government, as shareholder, will also be watching closely the financial performance of the company.

The chairman's letter to me of today's date, which I am publishing in full today in the Official Report and placing in the Vote Office, also makes it clear how the board will respond if the chances of achieving the plan's major objectives are appreciably reduced. It says: Circumstances may arise in which, through a substantial deviation in performance or an appreciable departure from the assumptions underlying it, the Corporate Plan is clearly not being achieved and it appears impossible to bring about recovery within the timescale envisaged. This could arise for external or internal reasons; an example would be a major strike which damaged or appeared certain to damage any substantial sector of the business. In such circumstances the Board would, in accordance with section 1 of the Plan, very quickly initiate a review (in consultation with the Government) of the Plan of the relevant business group, with consequent implications for continued Government funding. The board and management have assured me that they will not hesitate to take whatever difficult and fundamental decisions about the future of the company are necessary if circumstances, inside or outside BL, require it.

As I have already told the House, there will be an opportunity for full debate in the context of the amendment to the NEB's financial limit in respect of BL in the Industry Bill, which I shall table for consideration on Report. Clearance from the European Commission will be needed for the Government's funding.

Finally, it is the Government's intention that the shareholding in BL should be transferred from the National Enterprise Board to the Secretary of State. This transfer will not, however, take place until the Industry Bill now before Parliament receives Royal Assent. Meanwhile, the Government will discuss with BL matters arising from the change of ownership in order to ensure continuity of BL's financial arrangements.

The Government wish the BL board and the company's employees well in their task.

Mr. Stanley Orme (Salford, West)

The Opposition welcome the fact that the Government are to support the corporate plant to the tune of £1,000 million, because we believe, as obviously the Government believe, that this company is vital to the economy of this nation and to the 1 million jobs which are attached to BL in one form or another. Therefore, despite the opposition from the Government Benches, we think that the Government have taken the correct decision.

Secondly, will the Secretary of State assure the House that this money will not lead to cuts in other parts of the public sector?

Thirdly, we shall obviously want more details about the four sections which the corporate plan recommends, the powers under the Industry Bill which will enable the right hon. Gentleman to take control of the shares from the National Enterprise Board and the reference in his statement to private investment. I do not expect the right hon. Gentleman to answer these points today, but he has referred to the Industry Bill. Therefore, we should like an assurance, in the presence of the Leader of the House, that the House will be given a full day to deal with the British Leyland aspect when the Industry Bill comes before the House on Report.

As regards the key factor of labour relations in BL, I think that the right hon. Gentleman agrees that productivity on the new Metro has increased and that we want that to continue. Therefore, we need co-operation between the management and the trade unions. In a sense, it is regrettable that the corporate plan has not been brought forward on a joint basis. We would have liked to see that. We would also like the Secretary of State to use his good offices to ensure the improvement of industrial relations in BL.

Finally, as I stated at the beginning, we welcome the plan because, with the narrowing base of industry in this country, it is important that a major car-based publicly owned British company be maintained. We want to see it maintained as a publicly owned company. We do not want to see it broken up, divided or sold off. On that basis, we believe, and the workers and the management believe, that there is a great future for BL.

Sir Keith Joseph

I must correct one figure that the right hon. Gentleman gave in his over-enthusiasm. Nothing like 1 million jobs depend on BL, however important it may be for jobs.

The right hon. Gentleman asked for an assurance that the money would not come out of the public sector. But where does he think it will come from? Of course money of this order constrains the public sector. It is true that some parts of the private sector will benefit from the spending of this money, and that is welcome, but the rest of the money will come from the taxpayer, who will thus have less money to spend in other parts of the private sector.

Mr. Hal Miller (Bromsgrove and Redditch)

With many hundreds of thousands in the West Midlands, I welcome the Government's decision and statement, and the lie that has been given to Labour Party claims that the Government would not support British Leyland. Will my right hon. Friend confirm that the monitoring of BL will, in the main, be undertaken by the BL board rather than by the Government and that the Government also welcome and accept the need for collaboration with another major manufacturer?

Sir Keith Joseph

Yes, although, as I have said, the Government, as shareholder, will also watch closely the financial performance of the company. I have quoted a letter from the company chairman about collaboration.

Dr. David Owen (Plymouth, Devonport)

I welcome the decision to aid this key strategic industry, but will the Secretary of State say that in supporting competitive public enterprise he will also give it the same managerial freedom as the French Government have given to Renault and will allow what has happened with Renault, which has turned that company round—higher-than-average wages for car workers in that industry?

Sir Keith Joseph

I cannot believe that the right hon. Gentleman is giving us good advice. The decision about pay is for the board of BL and for the work force of BL

Mr. John Bruce-Gardyne (Knutsford)

Will my right hon. Friend elaborate slightly on his reply to the right hon. Member for Salford, West (Mr. Orme) about where the funds are to come from? Are they to come from increased taxation on private enterprise businesses and those employed in them, from a higher level of borrowing, hence a higher rate of interest and a higher exchange rate, or from inflation?

Sir Keith Joseph

The Government have to obtain the money that they spend, as my hon. Friend well knows, from taxing, borrowing or printing. There is no other source. The allocation of this cannot be traced and identified, but certainly public spending of this order has an implication for the disposable income of the private sector—through which wages and taxable spending flow—and for the private citizen.

Mr. Geoffrey Robinson (Coventry, North West)

Is the right hon. Gentleman aware that there is a great welcome from the Opposition for this decision, and also great sympathy for the agony that these decisions evidently cause him? What puzzles us is whether the right hon. Gentleman's continuance in office shows that he is a masochist or that the Prime Minister is a sadist. Can he specifically elaborate on the provision of funds? Is all of the £990 million to go to the LC10 programme in the first two years, or can he confirm—I have a direct constituency interest here—that the major new Jaguar model programme is also agreed and will be funded by the Government?

Sir Keith Joseph

I refer the hon. Gentleman to the BL report, which he will find in the Vote Office.

Mr. Robert Adley (Christchurch and Lymington)

Is my right hon. Friend aware that, although I have no objection to the principle of investing public funds in industries of this kind, I feel that there is a horrible sense of deja vu about this, in that the statement by the right hon. Member for Bristol, South-East (Mr. Benn) at the time of the Rolls-Royce carbon fibre affair and the euphoria which that engaged bore some similarity perhaps not to the euphoria but to the expressions of good will at least of my right hon. Friend today in relation to the future of BL? Will he, however, make one thing clear, namely, that the only reason why the Government have not agreed to break up BL into its constituent parts is that Sir Michael Edwardes threatened to resign if they did?

Sir Keith Joseph

I do not follow my hon. Friend's question.

The decision about the securing of private capital in different parts of BL is for the board, as is the timing and the extent.

Several Hon. Members

rose—

Mr. Speaker

Order. I hope that hon. Members will make their questions as brief as possible, which will enable me to call far more hon. Members than otherwise would be possible.

Mr. David Penhaligon (Truro)

In what way will the Government use their influence in this matter to try to consolidate recent improvements in labour relations? Or will they just continue to reply upon a policy of execution if it goes wrong?

Sir Keith Joseph

I do not think that Governments have a particular skill in affecting labour relations inside individual firms. It is for that that we have a board.

Mr. Michael Grylls (Surrey, North-West)

Does my right hon. Friend accept that everybody in the House wants and indeed prays that BL in the end will succeed, but does he agree that it is important to remember that the cost has been very high? It has been £10 for every second that Sir Michael Edwardes has been chairman of BL, or, to put it another way, £1,000 for every small business in Britain. Does he accept that money is not the cure-all for BL? What it needs is increased productivity and much more demanning, and then it can succeed only through its own exertions.

Sir Keith Joseph

I agree with that. It also needs good models and a healthy car market. We are witnessing the introduction of new models.

Mr. Greville Janner (Leicester, West)

When considering the number of people whose jobs depend on BL, has the right hon. Gentleman taken into account the hundreds of thousands of people who are not employed by BL but who manufacture parts and accessories and provide services in the East Midlands and elsewhere and who will welcome this decision quite as much as those directly employed by BL itself?

Sir Keith Joseph

Yes, but I think that the hon. and learned Gentleman would be misleading himself in referring to hundreds of thousands of people whose actual jobs depend on BL.

Mr. Alan Clark (Plymouth, Sutton)

Does my right hon. Friend accept that, while many Conservative Members recognise the need for an industrial strategy and for the diversion of some public funding in that direction, they are a little surprised to see him of all people talk of such enormous sums with such insouciance? We feel that BL can satisfy no criterion, save that of exerting social and political blackmail, to justify such an enormous diversion of funds from the private sector.

Sir Keith Joseph

My hon. Friend has some justification for his expression of surprise, but let him contemplate that there has been enough evidence over the past year to encourage a degree of hope that the progress already made, with a new model now introduced and with the acceptance of new working practices, together with a rundown of manpower in the key plants, will lead, as we hope, the market improves, to better results this year, provided that we do not witness a rise in the value of sterling as sharp as there was last year.

Mr. Robert Hughes (Aberdeen, North)

Can the Secretary of State tell us whether this is a planning agreement?

Sir Keith Joseph

No.

Mr. Robin Maxwell-Hyslop (Tiverton)

Will my right hon. Friend avoid robbing Peter when he pays Paul this time round by not undercutting the BL recovery by pouring more public money into Chrysler?

Sir Keith Joseph

I am sure that the point made by my hon. Friend will be very much borne in mind.

Mr. Arthur Lewis (Newham, North-West)

A little while back, it was officially reported, and has never since been denied, that BL, as an advertisement, gave a car to a very wealthy man, namely, the leader of the Liberal Party. If the company wants a good advertisement, why not give a car to every Member of Parliament at the taxpayers' expense? Why should BL give taxpayers' money to one selected Member of Parliament, as it has done? Should it not be told that taxpayers' money should not be given away in that manner?

Sir Keith Joseph

I do not know of the allegation to which the hon. Gentleman refers, but decisions about advertising are for the BL board.

Mr. Charles Morrison (Devizes)

Although not long ago the argument in favour of further funding of BL may have been growing a little thin, has not the success of the Metro put a totally different complexion on the situation? Does not that hold out high hopes for the prospects of the middle-range car in the future? Secondly, can my right hon. Friend say what benefit particularly will accrue from the transfer of BL from the NEB to his Department?

Sir Keith Joseph

There are certainly some signs for hope. The transfer of BL from the NEB to the Secretary of State reflects the wish of the NEB and BL, and the recognition that the sums involved are such that the Government cannot stand aside from decisions on them.

Mr. Ernie Ross (Dundee, West)

Does the right hon. Gentleman accept that if in his statement today he had accepted the need to support the total package sought in the corporate plan he would have given the company at least a minor breathing space for long-term planning and would have enabled it to expand, which is necessary if this country is to retain an indigenous car company?

Sir Keith Joseph

The company has been allotted the funds for which it asked for the period for which it asked for them.

Mr. John Stokes (Halesowen and Stourbridge)

Will my right hon. Friend confirm that these vast payments will be the last to be made to British Leyland? Are we, year by year, to fill the bath with the plug out?

Sir Keith Joseph

I can give no guarantees, but I very much hope that if sterling does not rise as it did last year, and the new models maintain the standard of the Metro, the company will, during the plan, be on its way to viability.

Mr. Ioan Evans (Aberdare)

Will the right hon. Gentleman now concede that he is moving a little away from his monetarist policies, and that, although this package will cost the nation £1 billion, it would cost it far more if BL were allowed to collapse? How many jobs would be lost? If, as the right hon. Gentleman says, it is not 1 million, how many jobs are involved?

Sir Keith Joseph

There is no escape for the taxpayer from the costs flowing from the decision of the then Labour Government virtually to nationalise British Leyland all those years ago. One way or another, supported or not, the taxpayer would have a big bill to meet. The number of jobs directly dependent on British Leyland is about one in the supplying industries for every one job in British Leyland associated with output. I am trying to ignore the jobs which arise as a result of overmanning.

Mr. Archie Hamilton (Epsom and Ewell)

Is my right hon. Friend aware that I welcome his commitment to introducing private capital into BL and into the new subsidiaries? Does he envisage that these will be controlling stakes before long, and does he agree that the sooner that happens the better?

Sir Keith Joseph

It is certainly the hope of the BL board to introduce private capital, but the degree and timing must be a matter for that board.

Mr. Tom McNally (Stockport, South)

Is it not time that the Secretary of State broke the news to his Back Benchers that he has made the right decision, and that it will be a plus for engineering, machine tools and volume car production? Instead of adopting his totally miserable approach, why does the right hon. Gentleman not bang the Dispatch Box and say that this is good news for British industry?

Sir Keith Joseph

The hon. Gentleman is ignoring the fact that the money has to come out of other aspects of industry. While this will be welcome news to those supplying BL, purchases which would have been made in other parts of British industry will, alas, not be made because all public spending is an act of choice.

Several Hon. Members

rose—

Mr. Speaker

Order. I propose to call four of the hon. Members who are standing before we move on to the application under Standing Order No. 9.

Mr. Geoffrey Johnson Smith (East Grinstead)

Is my right hon. Friend aware that there is scepticism about the long-term viability of BL in spite of today's announcement? When my right hon. Friend talks about collaboration with another car manufacturer, may we be reassured that when that collaboration comes—and some of us believe that it will have to come—a foreign manufacturer not at present producing motor cars in this country will be considered?

Sir Keith Joseph

The scope for possible collaboration is for the BL board to pursue, and I must leave the initiative with it.

Mr. Nicholas Winterton (Macclesfield)

I have a vested interest in seeing a successful British Leyland, not least because I have just purchased a new Rover car. However, upon what criteria has my right hon. Friend decided to give this huge sum of public money to British Leyland when there are other industries that employ, directly and indirectly, far more people than British Leyland but whose pleas for assistance have fallen on stony ground and continue to do so.

Sir Keith Joseph

The answer is that British Leyland was taken virtually into public ownership by a previous Labour Government, and, as I have explained, there is no escape for the taxpayer from costs whether this plan is supported or rejected.

Mr. Ian Lloyd (Havant and Waterloo)

Does my right hon. Friend consider that the directors, management and employees of British Leyland realise that they are rapidly acquiring the reputation of being the Corrievrekin, financially, of British industry? Are they aware that they will not cease to enjoy this reputation until their productivity per man hour matches that of their principal competitors? As that ratio is generally believed to be of the order of four to one, has my right hon. Friend been given any indication how soon that productivity will be matched? Until it is matched he will be asking the House again and again for millions.

Sir Keith Joseph

There is no difference between the British Leyland board, the rest of the people working in British Leyland and my hon. Friend about productivity. The new model, the new investment—that is, the Metro—is, I am told, at international, or, at any rate, European, productivity standards.

Mr. George Gardiner (Reigate)

Is my right hon. Friend aware that there will be disappointment in many quarters that substantial public investment is being made without any firm undertakings from the trade unions involved that it will not be jeopardised by the strike action that we have seen only in the recent past?

Sir Keith Joseph

I am not sure that my hon. Friend the Member for Reigate (Mr. Gardiner) would have been full of praise if I had arrived here, spending the same sum of money, with an assurance. The BL board has shown its willingness to insist upon good industrial performance, and the Government are leaving it to that board.

Mr. Orme

It is interesting to hear the Secretary of State defending BL and the production of new models with the arguments that have been used on the Labour side of the House. The success of the company lies in the new models and the development of the company. Will the Secretary of State explain his reaction to my statement that 1 million jobs would be at risk? I was talking about direct and indirect employment. I received the figures from the board of BL.

Sir Keith Joseph

I shall be grateful if the right hon. Gentleman will pass me the figures that he alleges support the figure of 1 million. I am sure that he is multiplying the correct figure by many times.

Following is the letter:

"Dear Secretary of State,

The Board believes that BL's 1981 Corporate Plan offers—subject to the risks and qualifications which are made clear in the Plan—the best feasible prospect of bringing about the recovery of the business. As you know, recovery will take time, and during this period the risks to the survival of whole sections of the business will remain considerable. While it should be possible for the business to accommodate the normal trading fluctuations within the framework of the Plan, the achievement of competitive cost levels is essential to ensure our survival. As we have made clear in recent weeks, even the success of a particular new model such as Metro cannot allow us to relax the strict discipline which has to be exercised on all aspects of our cost structure. Government approval of our Plan and funding request would not change this situation, because it is our own performance in the external competitive environment which fundamentally determines whether or not the business can survive. Dealers and customers would simply walk away from the company if there were a major strike. Moreover, they would desert us more gradually, but no less surely, if we allowed our costs to rise to uncompetitive levels—or indeed if it seemed to them that the necessary funds would not be sought from Government. Circumstances may arise in which, through a substantial deviation in performance or an appreciable departure from the assumptions underlying it, the Corporate Plan is clearly not being achieved and it appears impossible to bring about recovery within the timescale envisaged. This could arise for external or internal reasons; an example would be a major strike which damaged or appeared certain to damage any substantial sector of the business. In such circumstances the Board would, in accordance with section 1 of the Plan, very quickly initiate a review (in consultation with the Government) of the Plan of the relevant business group, with consequent implications for continued Government funding. The Board will, of course, be monitoring progress under the Plan regularly in the normal course of its business and in the context of the annual updating of the Plan towards the end of 1981. In our recent discussions on the Corporate Plan, you also asked me to confirm to you the views of the BL Board on the importance of collaboration in our recent recovery strategy for each of our main business groups. The Board sees collaboration with other manufacturers as an important part of its strategy for recovery and for reducing and eventually removing dependence on Government support. This might take the form of collaborations on major components or on particular parts of the business; but the Board would also welcome, and actively seeks, a relationship of a more comprehensive kind which might well grow out of such collaboration.

Yours sincerely,

Michael Edwardes"