§ The Secretary of State for Trade and Industry (Mr. Norman Tebbit)
With permission, I should like to make a statement about INMOS.
When the House debated INMOS last month, I explained that the Government had two objectives: to ensure the company's early transfer to the private sector; and to find a private sector source for the additional capital and support the company needs if it is to realise its full potential.
This morning Thorn EMI and the British Technology Group announced that they had reached agreement in principle for the purchase by Thorn EMI of the National Enterprise Board's shareholding in INMOS at a price of £95 million.
A sale of the NEB shareholding to Thorn EMI would meet the objectives I set out. Thorn EMI has assured me of its determination to develop INMOS and of the importance it attaches to fulfilling the aims of the company's management. It has the financial, technical and managerial resources to do so. This proposal will assure the continued transfer of technology to Britain and British industry's access to this technology.
The House also expressed concern that the Government should receive a fair price for INMOS. The Government's total investment in INMOS is £65 million, in addition to which certain guarantees have been provided. The Thorn EMI offer of £95 million for the NEB's share of the equity implies a value of about £125 million for INMOS. It offers a fair return on the Government's investment, and Thorn EMI will assume responsibility for the guarantees. The offer will fall to be considered by the Director General of Fair Trading, who will advise me in due course.
Tribute is due to the founders of INMOS and to the work force in Britain and America, who have created a company with a most promising future in this advanced and fast growing industry. It is their skill and dedication that have enabled the Government's investment to bear fruit.
I am glad to tell the House that the transaction has the support of both the British Technology Group and the board of INMOS, which consider that the participation of Thorn EMI will strengthen their company and help it to achieve its objectives. The INMOS board has said it regards Thorn EMI as an ideal partner.
I hope that the House will agree that this represents a satisfactory outcome. INMOS has found a strong and committed parent company. Thorn EMI has gained an attractive investment in a key industry of the future. The Government have secured a fair return on the taxpayers' investment, which vindicates support for the company and the continued development of INMOS' technology within the United Kingdom. I therefore commend to the House this welcome conclusion to a matter in which I know many hon. Members have taken a keen interest.
§ Mr. Peter Shore (Bethnal Green and Stepney)
I readily join with the Secretary of State in acknowledging that tribute is due to the founders of INMOS, including the Labour Government, and to the work force in Britain and America who have created a company with such a promising future. I join with him in what amounts to a public celebration of the achievements of this most successful public enterprise.
1375 After our debate on INMOS on 21 June, the Secretary of State will not be surprised to learn that the Opposition, and indeed many Conservative Members, will welcome particularly that part of the statement that promises continued United Kingdom ownership and control of INMOS. Will he not have the honesty and grace to acknowlege that the House helped at least to steer him away from the crass folly—and worse—of accepting last month's offer by the American AT and T company to buy up and to break up INMOS and then to hive off separately the R and D establishment at Bristol?
Is the Minister aware that the sale of INMOS, just when it is moving into strong and growing profitability, is patently ideological in its motivation and financially far less rewarding than it would have been if he had had the guts to stand up to the Treasury and tell it to wait? Is he satisfied that, in the light of its poor record, in such high technology areas as nucleonics and body scanners, Thorn EMI has the right people at the top level to make the correct strategic decisions for the development of INMOS?
What guarantees have been given—I found none in the statement—for the continuing autonomy of INMOS within the vast and sprawling Thorn EMI group? Does the right hon. Gentleman think, therefore, that it would have been prudent to have retained a golden share or its equivalent to ensure that the new owners do not subsequently sell-off INMOS to an overseas company and to maintain its continued independent management within the Thorn EMI group?
§ Mr. Tebbit
It is regrettable that the right hon. Gentleman should add sheer impudence to the reckless stupidity that he exhibited in the debate on INMOS a few weeks ago. He knows perfectly well that his reckless remarks then came close to prejudicing the deal and thereby damaging the British interest. I told him so at the time and he pretended not to understand. I repeat today that the right hon. Gentleman's conduct came close to prejudicing the deal.
The right hon. Gentleman's carping, ill-informed and ill-natured remarks about Thorn EMI contrast with reality. Thorn EMI has made far more good commercial decisions that the NEB or the right hon. Gentleman and his hon. Friends, who landed us in adventures such as De Lorean, of which he is no doubt still very proud. If he throws enough money at problems, some of it is bound to bounce back, but very little has done so. If INMOS is as good an investment as I believe it to be, and he believes it to be, it is absurd to suggest that Thorn EMI would want to get rid of it.
§ Mr. Mark Robinson (Newport, West)
I congratulate my right hon. Friend on his statement. INMOS is in my constituency in Newport and it has been known since 1980 that if it reached profitability it would be placed in the private sector. I welcome the fact that the uncertainty has now ended, and I compliment my right hon. Friend on finding a British solution, for which some of us have argued for a long time. Does he agree that INMOS's contribution in terms of jobs—the number has doubled since I entered the House—is continuing to increase and offers future prosperity?
§ Mr. Tebbit
I thank my hon. Friend for his remarks. It was paramount in our consideration to find the right 1376 industrial solution for the company. I believe that that has been found and that Thorn EMI has all the qualities required to make a success of it. I am very glad to have been able to collect £95 million for the taxpayers to help make up the NEB losses of £31 million on NEXOS, £4½ million to date on Aragon, £7.2 million on INSAC and £75 million on Alfred Herbert. That was the result of the sheer brillance of NEB decisions.
§ Mr. Paddy Ashdown (Yeovil)
Has not the British taxpayer had to provide about £150 million to launch and sustain INMOS? Has not a United States independent valuer this year assessed the value of INMOS at £200 million? Is not this year's turnover predicted at £100 million? Is not this year's profit, based on first quarter returns, predicted at £30 millon? In the light of those facts, how does the Secretary of State justify, except in terms of his own narrow dogma, the sale of this profitable company with a high potential for only £95 million to one of the Government's friends?
§ Mr. Tebbit
Broadly, the answer to most of the hon. Gentleman's questions is no. But let me specify more clearly some of the matters on which he is wrong. First, he compares speculative valuations of the company at some considerable time in the future with the price achieved for 76 per cent. of the company's equity. So he is in a fairly muddled condition. [Interruption.] The hon. Gentleman asked a series of muddled questions. He must be quiet and listen to the clear answers that he is getting.
The hon. Gentleman got himself thoroughly muddled about the extent of the taxpayers' investment. The taxpayers' investment has been £65 million, and, in addition, certain guarantees have been given. As I made clear in my statement, the Thorn EMI company has taken responsibility for the guarantees.
§ Mr. Michael Grylls (Surrey, North-West)
Will my right hon. Friend accept that most sensible people recognise that this high technology company will be much better off in the private sector, and that most Members wish it well in the private sector, under successful managers, in Thorn EMI?
§ Mr. Tebbit
I am sure that my hon. Friend is right. There is no good reason why the taxpayer should be called upon to provide the investment for companies of this kind. The launch of the company has been successful; it will now go successfully into the private sector. That is what should be done. If there are people in the Labour party or in the trade union movement for example, who think that this is an undervaluation, I am amazed that they did not come forward and make an offer for it themselves.
§ Dr. Jeremy Bray (Motherwell, South)
Can the Secretary of State say what undertaking Thorn EMI has given to INMOS of its total independence of management? Can he confirm that under the take-over rules Thorn EMI is bound to offer the founder and other employee shareholders the same price that it has paid to BTG? Does he think it any wiser to ease the incentive on management by taking out its equity interest than it is in the interests of the British taxpayer to sell out prematurely?
§ Mr. Tebbit
The best answer that I can give to the hon. Gentleman's question is that the INMOS board on which Mr. Barron sits has recommended the offer to BTG. Thorn EMI has expressed the wish to retain the company's existing skills, and I hope that, having firmly established 1377 the company's future, there will be every opportunity of securing those. Of the three founder members, only Mr. Barron and Dr. Petritz remain with the company, and their precise position will be decided in discussion with Thorn EMI. Both, of course, are members of the INMOS board which supports the present deal. I think therefore it would be reasonable for the hon. Gentleman to assume that the founder members support the deal and are happy with the arrangements.
§ Sir John Farr (Harborough)
I congratulate my hon. Friend on concluding this deal with the British company. To some Conservative Members, however, what is more important than the cash gained is the fact that the company will remain under British control.
In view of the fact that in this country we are so low in the world production league of chips as to be almost invisible, to see INMOS go overseas at a later date would be fatal. Can my right hon. Friend tell the House—he has already been asked this by the right hon. Member for Bethnal Green and Stepney (Mr. Shore)—what further control there is on the company? Have we erected any barricade or barrier to prevent total or part disposition of this very important state shareholding to an overseas buyer at a future date?
§ Mr. Tebbit
I am grateful for my hon. Friend's remarks. I do not think that he should underestimate the extent of the abilities of this country in the semi-conductor field. There are 10 factories already producing semi-conductors in the United Kingdom. [Interruption.] My right hon. Friend the Minister for Information Technology has just reminded me. If the hon. Member for Bolsover (Mr. Skinner) would listen to my right hon. Friend, he would learn a great deal more than he does by constantly yacking with his ears shut and his mouth open.
The prime logic of the deal has been the industrial logic, and making sure that there is a good future for INMOS. The best security against any future disposals of INMOS is the success of the company. If the company is successful, Thorn EMI will not wish to dispose of it.
§ Mr. Tam Dalyell (Linlithgow)
Does the Secretary of State recollect that when I participated in the INMOS debate I said that I had spent several hours at INMOS in Newport as its guest in December? Therefore, may I ask him specifically two questions? When he talks about developing INMOS, what does that mean in terms of research and development? Does it mean expansion at Bristol, expansion elsewhere or expansion at a Welsh university? What precisely does it mean?
Secondly, may I ask the Secretary of State this as gently as possible? He told my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) that his speech in the INMOS debate had prejudiced the deal. I listened carefully to my right hon. Friend, with whom I have not always agreed, and he made a most powerful, serious speech. What hard evidence is there that my right hon. Friend prejudiced this deal?
§ Mr. Tebbit
First, the company will be developed in a manner which is satisfactory to the board of the company. [AN HON. MEMBER: "That means nothing."] The hon. Gentleman says it means nothing. I am telling him that the present board of INMOS is satisfied that the arrangement provides adequately for the future development of the company, and I agree with the board of the company.
1378 Secondly, with regard to the speech of the right hon. Member for Bethnal Green and Stepney (Mr. Shore), I am surprised that the hon. Member for Linlithgow (Mr. Dalyell) does not understand that, when difficult commercial negotiations are going on that type of speech is the least helpful thing that can happen, when I was being asked by the right hon. Gentleman for pledges to exclude many of the potential would-be purchasers. It was hardly the way to secure the best deal for the British Government.
§ Mr. Richard Page (Hertfordshire, South-West)
Will my right hon. Friend accept that Conservative Members greet the sale with relief as well as congratulations, as it is one of the few NEB companies which has given a modest return on the money invested and compares favourably with the very long list of liquidations and bankruptcies which litter the way among NEB companies which have been promoted by the Labour party? Will my right hon. Friend assure the House that, if an opportunity arises to sell any of the other companies in the British Technology Group, where suitable, he will immediately do so?
§ Mr. Tebbit
I thank my hon. Friend and I give him the assurance that we shall continue to look for good homes for other companies in the NEB-BTG portfolio.
§ Mr. Ian Wrigglesworth (Stockton, South)
Is the Secretary of State aware that the success of INMOS is very welcome news and the retention of its ownership in this country is a great relief to all those who feared that it might go abroad?
Can the Secretary of State clarify two points? First, how does he justify the claim that this offer is a fair return on the Government's investment? Did the Government consider other methods of selling the shares, such as a tender offer or a public flotation of the shares, in order to allow the market to judge the value of the company? Secondly, can he say a little more about the position of the founder members, who are are so crucial to INMOS? Am I right in thinking that the shares will now be valued at some £5 million per founder member? If that is the case, might there not be a temptation for them to leave the company, thereby doing it considerable damage?
§ Mr. Tebbit
First, of course we considered many other possible routes for the disposal of this company. The flotation possibilities were not particularly attractive. They were a little way down the road and somewhat speculative. To have got the best price, the majority of the shares would probably have been sold in the United States. Even so, we did not see the opportunity to sell a controlling interest in the company—certainly not in the immediate future—and, if that route had been taken, the Government might well have lost control of it at some time or another, while still being responsible for a good deal of its debt. It was therefore not an attractive route.
I think that I had better leave the founder members to speak for themselves. I understand that Mr. Barron, in particular, has been making statements to the press today through the board of INMOS, and has indicated his satisfaction with the deal. I am sure that he will stay with the company.
§ Mr. Jonathan Sayeed (Bristol, East)
During the debate on INMOS, I asked for assurances from my right hon. Friend that the company would not be sold at a bucket-shop price, and that its technology and expertise 1379 would not be dispensable. I am very grateful for his statement. The company was sold at a sensible price to a British firm, and the statement will be most welcome in Bristol, where part of INMOS is based.
§ Mr. Tebbit
I thank my hon. Friend for what he has said, and emphasise again that I consider the deal to be a good one, particularly on industrial grounds. It was those grounds which had priority, and not the question of exactly how much we could squeeze out at the end of the day. [Interruption.] Yes, indeed. We have made it plain many times in the House that our priorities in the privatisation programme relate to the long-term economic effects, as opposed to the immediate cash effects.
§ Mr. Roy Hughes (Newport, East)
Does the Secretary of State appreciate that there is bound to be concern about the rather cynical approach that he has adopted, both in the debate a week or so ago and in his statement this afternoon? Does he further appreciate, bearing in mind the huge public investment in the firm, that there is also bound to be concern about its future development—plans are already under way—and about employment prospects in Newport? Can the right hon. Gentleman say anything concrete which may at least alleviate the present concern of employees in Newport?
§ Mr. Tebbit
Let me tell the hon. Gentleman—in case he missed it on the first, second and third occasions —that the deal has the support of the board of INMOS, whose members regard Thorn EMI as an ideal partner. I suspect that the hon. Gentleman's anxiety arises from his frustration at seeing a successful deal.
§ Mr. Hugh Dykes (Harrow, East)
Does not my right hon. Friend agree that the Government should be congratulated on this excellent deal? Does he not think that, after the damage done by the Opposition in the original discussions, it is appalling for the right hon. Member for Bethnal Green and Stepney (Mr. Shore) to cast aspersions on the high-technology abilities of Thorn EMI, one of the most successful groups in the country?
§ Mr. Tebbit
I agree with my hon. Friend. Not content with having prejudiced the deal before, perhaps in ignorance, the right hon. Gentleman has tried today to prejudice it in full knowledge by attacking the competence of Thorn EMI. I only wish that his Government had shown half its competence.
§ Mr. Tim Wood (Stevenage)
Despite the ill-judged and carping criticisms of Opposition Members, I assure you, Mr. Speaker, that Conservative Members warmly welcome the statement, and are delighted that Thorn EMI is making this investment. I am sure that the development of INMOS will be much more successful as a result. I wonder whether anything can yet be said about the future of the various INMOS development and manufacturing centres.
§ Mr. Tebbit
I do not think that it would be right for me to add anything to what was said by the board. The company's future will depend on its success in developing its products, and I believe that the chances of such success have been increased by the deal announced today.
§ Mr. Brynmor John (Pontypridd)
The right hon. Gentleman praises the workers, but does he accept that they are justifiably concerned about the level of employment in, for example, south Wales? Does he expect employment to remain static or to increase, or will it be a matter of the board of INMOS judging that employment can go hang so far as profits are concerned?
§ Mr. Tebbit
Unless there are profits, there will not be employment. The future and the expansion or otherwise of the work force depend upon the success of the company, and not upon windy rhetoric in the House. I believe very strongly, as does the board of the company, that the prospects of success have been enhanced.
§ Mr. Ian Lloyd (Havant)
We all wish the new arrangements every success, but the Secretary of State will be as aware as I am— if not more so—of the quite exceptional conditions that obtain in the semi-conductor industry. He will know that our largest company is 30th in the world league, and that in Japan and the United States exceptional sums of Government money have been spent,—and are continuing to be spent—in support of the private sector. What is the basis of his confidence that Thorn EMI INMOS will be able to climb up the league from 30th position without further public support?
§ Mr. Shore
The Secretary of State prefers to accuse and abuse rather than answering questions; we are all familiar with his technique by now. The more uneasy he is about answering the fundamental question, the more abusive he is. We have heard the way in which he has replied to his hon. Friend the Member for Havant (Mr. Lloyd), for example. He knows perfectly well that he came perilously near to betraying the national interest by agreeing to sell the firm to an American company. He considered the proposition before him very seriously; I know it, he knows it, and that is why he is reacting so strongly.
Let me repeat the question that the right hon. Gentleman did not answer. In virtually all their privatisation deals the Government have insisted on retaining a golden share—or at least some control mechanism—because the national interest has been involved. Enterprise Oil is the most recent example, but it is by no means the only one. Why are they now denying themselves the possibility of a say in the future of this semi-conductor firm and in the same semi-conductor industry? That industry will be crucial, involving as it does the transputer development which—as the right hon. Gentleman ought to know—is probably of world-shaking importance.
§ Mr. Tebbit
I must congratulate the right hon. Gentleman on his sheer courage in putting his head above the parapet to get it thumped once again. [Interruption.] Perhaps the hon. Member for Wigan (Mr. Stott) would cease interrupting from a sedentary position for once. I did not seek to take a golden share because the British Government have no wish to have such a share in Thorn EMI Ltd., and, quite clearly, we could not have continued to seek to control a company which we had sold to another company.