TRANSFER SCHEMES

HC Deb 24 October 1984 vol 65 cc711-52

Lords amendment: No. 1, in page 1, line 6, at beginning insert— Subject to an affirmative resolution of each House of Parliament".

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The Minister of State for Defence Procurement (Mr. Adam Butler)

I beg to move, That this House doth disagree with the Lords in the said amendment.

I make an important point at the start. The amendment deals with a very narrow point. Its essence was the subject of discussion in Committee, when a similar amendment was proposed by Labour Members. It was opposed by the Government and defeated in Committee. The Government remain opposed to the amendment, and I shall be urging the House to reject it.

During the passage of the Bill through the House and the other place the Government have done their best to keep Parliament informed of their intentions. I shall repeat the main points. We have made it clear that we shall transfer to the new company all the assets that are currently attributed to the royal ordnance factories' training fund, together with other specific assets, and that all this property will be vested in one company. We have announced that there are to be four subsidiary companies, each of which will correspond to a division of the business and will act as an agent subsidiary of the holding company. We have explained how we intend to treat the transfer of intellectual property rights. We undertook to provide, and have provided, copies of the relevant articles which in due course it is intended to incorporate into the articles of association of the company, designed to prevent foreign control. We have discussed at length the principles of valuation that will be applied to the assets transferred.

We have explained the position of employees transferred from the Civil Service to the employment of the new company and their terms and conditions of employment following the transfer, including the new company pension scheme. We have emphasised that we intend—I am happy to repeat this once again—that they will suffer no detriment as a result of the transfer. Most of these matters go far beyond what will be dealt with by a scheme made under the Bill. It has been the Government's concern that the House should understand not simply the mechanics of the transfer of assets but the entire range of Government thinking with regard to the new company's future.

What is proposed by the amendment is that the scheme could not be made, and not one part of what the Government plan to do, and have said publicly that they plan to do, could come into effect until that scheme had been considered and approved by both Houses of Parliament. The scheme is nothing more than conveyancing machinery for transferring property from the Secretary of State to the company. That is what the scheme is about, and that is what we are discussing. The Bill covers a great deal more.

The scheme will say nothing about the structure of the new company organisation, the value of the company, the articles of association, employees and their future terms and conditions of service, privatisation, future Government policy towards the new company or any of the matters affecting the future of the company about which the House is quite rightly concerned, and which the Government have been at pains to disclose. The amendment, if accepted, would mean in effect hat although the length and breadth of the matter can be, and has been, debated in the House and in the other place, and every detail of it considered and voted upon, nothing could get under way until Parliament had been able to examine, in the minutest detail, the scheme, about which everything essential is already known.

I consider this concern with the detailed words of the scheme to be quite disproportionate to the importance of the general issue. It is not an attempt to learn more of the Government's intentions, but solely an attempt to delay matters. It is not as though Parliament will not see the scheme. I remind the House that the scheme is required to be laid before Parliament within one month of its coming into force. My predecessor, my hon. Friend the Member for Chertsey and Walton (Mr. Pattie) undertook, in a written answer to a parliamentary question on 18 July that the scheme … will be placed in the Library as soon as work upon it has been satisfactorily completed and certainly not later than … vesting day".—[Official Report. 18 July 1984; Vol. 64, c. 249.] That is the day on which it actually takes place. The scheme and the accounts that follow may be the object of scrutiny by the Public Accounts Committee, which will no doubt publish a report in due course. All this shows that the Government have no wish to hide any of these matters from the scrutiny of hon. Members. We would hardly be able to do so even if we so wished.

The truth of the matter is that the amendment would not achieve the kind of parliamentary control that it envisages. Most of the important aspects of the matter fall outside the provisions of the scheme. A. debate on the scheme itself would not advance Parliament's knowledge of the provisions by any appreciable degree. Hon. Gentlemen know that a debate on the scheme would be used merely as an opportunity once more to go over the general principles of privatising the ROFs. Points that have been raised many times in the House and the other place will once again be taken out and paraded.

Mr. Lewis Carter-Jones (Eccles)

Is the right hon. Gentleman not attacking the Chair by what he is saying? If the matter has been discussed over and over again, whether we discuss it again is a matter for the Chair, not for the right hon. Gentleman.

Mr. Butler

With respect, and subject to correction, Mr. Deputy Speaker, if the amendment were to be passed, it would require the scheme to be debated under the affirmative procedure. I do not believe that in that case Mr. Speaker or Mr. Deputy Speaker would have a say in the matter. We are not seeking to deny the House or the other place the opportunity for debates on the Bill. However, there have been the usual thorough debates on the Floor of the House and in Committee, and in the other place. We are having a further limited debate through this amendment. However, the Government cannot be accused of denying the House opportunities for debate.

I said that I thought the amendment was a delaying tactic and that there was no reason why there should be an opportunity for all these matters, which had been discussed in full, to be paraded again. I remind the House that both Houses have approved the main and crucial provisions of the Bill.

We cannot afford to risk any further delay. The Government and the management of the ROFs are anxious that vesting day should take place at the earliest possible opportunity. It is true that there are still some details to be resolved before this can happen, including those connected with the precise financial structure of the company and with the final terms and conditions of employment. No real progress can be made in getting the company under way and getting it started in business and beginning to build for a profitable and successful future in a purely commercial environment until vesting day.

The House will recall that originally the Government hoped that vesting day would be 1 October. Many expectations in the ROFs were geared to that date. There was considerable disappointment when it proved impossible to meet that date. The amendment would require that, even when all outstanding problems had been resolved and the scheme was ready to be made and take effect, vesting day could not take place until the scheme had been placed before Parliament and debated here and in the other place. If there were some real advantage to be obtained from this, the Government would accept the delay in vesting day that such a necessity might occasion. However, for the reasons that I have mentioned, there is no advantage and no necessity for that.

To delay vesting day while the House again went over ground that had been well trodden would do nothing but damage to the new company. Such delay would merely perpetuate and add to existing uncertainties. It would lower morale and dilute enthusiasm.

The Government's intentions are clear. The Opposition may not approve of them, but they understand them. We must get on and proceed towards vesting day. Let us remove uncertainty, let the new company get down to business and show what it can do.

Mr. Jack Straw (Blackburn)

While the right hon. Gentleman is talking about the removal of uncertainty, will he comment on rumours that 1,800 job losses are likely in the ordnance factories, including 200 at the Blackburn factory and up to 500 at the Chorley factory?

Mr. Butler

I shall willingly say something about that. I thought that the amendment was too narrow to allow me to comment on that subject, but, with your discretion, Mr. Deputy Speaker, I am happy to respond to the hon. Gentleman's question.

I am not sure that I can add anything to what has already been said publicly, but in some ammunition and explosives factories the order book is weak. Unless it recovers, it is difficult to foresee anything except the need for redundancies. The management, with whom I am in close contact, is doing what it can to find new orders and is considering whether it is possible to adjust production programmes. No final decisions have been taken.

Some try to insinuate that if redundancies take place they will be connected with the Bill, vesting day or privatisation. I deny that suggestion. We are talking about a commercial situation and it is important for me to explain that situation to the House.

There are two principal factors. First, over the two or three years since the Falklands conflict, and generally to improve war maintenance reserve, stocks of ammunition and explosives have been built up and the factories have been operating at a high level. The additional work load associated with those enhancements is coming to an end and the Ministry of Defence requirements will return to normal levels.

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Secondly, it is suggested that there has been a deliberate switch of an order to Germany. I deny that it is a switch by the Government. Those who take a close interest in the matter know that there is a collaborative arrangement in the production of the towed howitzer, the F870, and that the ammunition for it is made in different parts of the European Community.

The ROFs have gained more than their share of the orders to which, strictly speaking, they were entitled under the collaborative arrangement. When a further tranche of ammunition was required, Germany was given the order as a move towards redressing the imbalance that had developed.

In summary, there has been a reduction in the Ministry's requirements and an order that might have been expected by the ROFs has gone, by right, to Germany.

Any notice of redundancies will be announced in the normal and proper way and would be a precautionary notice. I shall continue to support the ROF management in trying to improve the order book, but at the moment the position is not helpful.

Mr. Mark Fisher (Stoke-on-Trent, Central)

Will the Minister give us a categorical assurance that if redundancies have to take place they will do so before vesting day, so that the terms and compensation will be those offered by the Ministry of Defence? If he cannot give that assurance, will he at least assure us that the terms of redundancies that occur after vesting day will be no worse than those offered by the Ministry?

Mr. Deputy Speaker (Mr. Harold Walker)

Order. I do not wish to deflect the Minister from responding to that intervention, but I remind the House that we are straining the terms of the amendment before us.

Mr. Butler

You have been tolerant, Mr. Deputy Speaker, but this is a matter of great anxiety to hon. Members on both sides of the House and to some of those listening to our debate. It was helpful for me to be able to say what I did. I assure the hon. Member for Stoke-on-Trent, Central (Mr. Fisher) that redundancy terms will be identical for those made redundant before or after vesting day. I imagine that if redundancies are declared the management will wish to make an announcement as soon as it reasonably can and it will have to judge the situation from that moment. I can give the hon. Gentleman the assurance for which he asked.

I return to the peroration of my speech on the amendment. Let us not delay matters further. We should disagree with the Lords amendment so that there is no risk of delay. There is no need for more explanation of the scheme.

Mr. Kevin McNamara (Kingston upon Hull, North)

My first pleasant duty is to welcome the Minister on his first appearance at the Dispatch Box in his new job. I hope that when he has finished with the ROFs he does not leave the welter of disarray that he has left in Northern Ireland industry, with the closure of so many factories and the loss of so many jobs.

I am sure that the right hon. Gentleman and I will have many enjoyable debates in the years ahead, but I am amazed at the attitude that he has adopted to the Lords amendment. He suggested that it was only a narrow point, but, in fact, it seeks to return to Parliament some control over the Minister's actions.

The Bill is a major enabling measure. If a Labour Government came to the House, said that they wanted to take an industry into public ownership and asked for the principle of that decision to be agreed by the House—without giving details of compensation, organisation, the transfer of liabilities—there would be an outcry from Conservative Benches. The Labour Government would be accused of riding roughshod over Parliament and of taking dictatorial action. We would be told that we had, in the words of the present Lord Chancellor, an elective dictatorship—though it seems that the present one does not come in for the same criticism from the Lord Chancellor.

Yet that is precisely what the Bill is doing. The clause gives the Secretary of State for Defence a blank cheque to do what he wishes. The Secretary of State should be obliged to come back to the House and to the other place and say, "This is the scheme. This is what I want to do."

It is nonsense to suggest that there will be proper parliamentary scrutiny after the decision has been taken. There is no proper method of parliamentary scrutiny. The Minister referred to the provision in clause 3. Subsection (9) states: Within the period of one month beginning with the day on which a scheme comes into force, the Secretary of State shall lay before Parliament a copy of the scheme, but omitting any material the disclosure of which he considers would be contrary to national security or to the commercial interests of any person. The information to be given to the House and the public about an industry of vital importance to the nation's defence will depend purely and simply upon the whim and the decision of the Secretary of State. We will be given no real substantive information. The House cannot accept such a provision. After the Bill has been passed, we should have the right to consider what has been said.

It will be only an affirmative order. We will not be able to amend it. However, we will be able to examine what is happening, and, before the scheme goes into operation, the Government will have to justify it to the House. It is important that we should have that power.

It is no ordinary industry which is being privatised. The industry has never been in private hands before. It has been a state industry since the reign of Henry VIII. The industry is vital to the defence needs of this country. What is involved is the supply and quality of ammunition for our troops, of vehicles, propellant and explosive—the life blood of the Army. If we are not to be allowed to discuss the proposals, and the principles on which the industry is to be passed to private ownership, an industry which is vital to the security of our country will not receive proper attention from this House and we shall not know in what manner it is to be given to the City friends of the Government.

The Minister of State has stated that much information was given in Committee and in the other place. However, that information had to be wrested from the Government. The undertakings which they gave were forced on them by the rightful suspicions of, among others, Conservative Members, who insisted that the information should' be forthcoming. I pay tribute to those hon. Members.

We were promised two documents. We should have received them by now. Vesting day was to have been 1 October—two months after the Bill had passed through both Houses—and any delay is not the responsibility of the Opposition or of the other place but of the Government. The Government have pressed too much into their parliamentary programme, and the Department has been unable to deal with most other problems associated with the denationalising of the royal ordnance factories.

By now we should have seen MOU, the memorandum of understanding—the dear friend of the hon. Member for Chertsey and Walton (Mr. Pattie). Where is it? What will it contain? Perhaps we shall deal with that point on a later amendment.

More particularly, we have not been given the scheme. We could reasonably have expected to have received it by now. We were told that everything would be ready for 1 October. We were told that all the best brains in the Department were working.

Mr. Denzil Davies (Llanelli)

That is a relative term.

Mr. McNamara

I do not share my right hon. Friend's view. I would like to think that morale in the Ministry of Defence, and indeed in the rest of the Civil Service, was high and that, because of the way in which the Secretary of State treats his civil servants, they rushed to work extra overtime all the time in order to get the work done. However, the work has not been done and we know that morale there is very low indeed.

The country needs to know what is being sold off, but I understand that even the Department still does not know what is to be sold and what is to be kept. If the Department does not know, neither does the Minister.

As information was elicited in Committee and in the other place, we know what we might have expected to appear in the scheme. We might expect this mere conveyancing document to contain a description of the property and rights appropriated to the trading fund of the royal ordnance factories, and conversely a description of what was not to be included. Presumably, such information would be given in the scheme.

The Minister has told us today that the whole question of intellectual property rights was satisfactorily dealt with in Committee. He may have explained the principles, but he did not tell us what was to be transferred, who was keeping what, and what was to happen to the patent rights.

We still do not know—presumably, this too would be made plain in the scheme — what will be the relationship of the agency factories with the new Royal Ordnance plc. What will be the position of Featherstone, with its hard alloy components, of Powfoot with the propellants and of Summerfield with the explosives? How will they compete with the factories in the new divisions? How will they compete with private industry? Are they to compete one against another? We do not know what the rules of competition will be, but presumably the scheme would tell us.

We do not know what the liabilities are. We have had no description of them. However, the Minister of State told us in a marvellous statement that he knew what the valuation principles would be.

In Committee, it emerged that no one knew what the valuation principles were to be. Since the Bill completed its Committee stage and, I believe, since it passed through the other place, we have heard that Coopers and Lybrand, the firm responsible, has not yet itself finally decided what the valuation principles will be. That being so, how could we be expected to know what they were to be and to accept them?

The Under-Secretary gave us some tremendous help on this matter. He expounded a new economic doctrine "Lee's theory of usefulness" which will appear with Gresham's law and Marx's theory of the surplus value of labour in all the textbooks. On what principle was the valuation of assets to be based? The Under-Secretary said: The question arises … on what principles is the valuation of assets transferred under the Bill to be made? The answer is that the valuation will be made on the basis of its usefulness to the new company."—[Official Report, Standing Committee D; 28 February 1984, c. 323.] That is a dangerous valuation and an extraordinary definition — and the man is supposed to be an accountant. Perhaps that is why he came to Parliament. If he deals with all our national assets on that basis, the country will be bankrupt.

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That is a strange theory of usefulness, but if Coopers and Lybrand has not finalised the principles, the Department and the Treasury cannot have reached agreement with the accountants. Yet we are expected to disagree with an amendment that would give us precisely the information that the Government have denied us and which is of paramount importance to the nation. Obviously, when an industry has not previously had to bother too much about these matters, arriving at valuation principles is bound to be complex. The Government are rushing to privatise an industry which, by their own definition, involves complex and difficult issues. They do not know what the industry is doing, where it is going or what its value is.

Many matters have emerged in trying to arrive at valuation principles. For example, the ROFs have a suite of offices in Egypt under an informal arrangement with the Egyptian Government. When the Secretary of State visits Egypt he may wish to inspect them and assess their value. There are 600 railway wagons, but no one knows whether they belong to British Rail or to the ROFs. It is difficult to ascertain who owns what and why. We are expected to pass legislation when the Government do not know what they are buying or selling. We cannot agree to that—

Mr. J. D. Concannon (Mansfield)

It has all been leaked anyway.

Mr. McNamara

I hope that has been noted.

There has been a change in organisation within the Ministry of Defence and the ROFs. I understand that the Master General of Ordnance has created a new contract department, which means more civil servants. I understand that there will also be new contract departments within the four new divisions.

Other matters must be considered. What will be the rights of Royal Ordnance plc in regard to the Ministry of Defence facilities that it will use—until such time as they are privatised, which I understand to be the Government's intention? What about weapon and vehicle proving sites and weapon ranges — who will pay for what and how much? Will all additional costs be published in the balance sheet when we eventually see it, if we ever see it?

This is a different position from that painted by the Minister. He said that it was a small, narrow point and could not understand what was bothering the House. He said the amendment would create further delays and that we should get on with the job. We do not even know what the job is because we have not been given that information—and the Minister does not know it either. However, we do know that there is a real chance that people will lose their jobs. The Minister was cagey when he replied to my hon. Friends' questions. We need to know whether the figures are accurate. Are 600 jobs at stake at Birtley, 450 at Chorley, 150 at Blackburn and 460 at Bishopton? We listened carefully to the Minister. All this ties up with the scheme. If the Government can flush out 1,600 jobs from the factories, that makes them easier to privatise and more attractive to buyers. The order given to Enfield, which the Under-Secretary almost, but not quite, put on the record on Monday evening, makes it more attractive. Yet there is a public need, creating public demand, being met by a public factory—but that will be given away for private profit. There is far more at stake than the Minister has suggested.

Mr. Straw

Does my hon. Friend agree that the Minister's answers, which were imprecise, are quite unacceptable, and that that is no way to treat the ROFs' employees—1,800 of whom now face a real threat to their jobs and do not know on what terms any job losses will take place?

Mr. McNamara

rose—

Mr. Deputy Speaker

Order. I hate to interrupt the hon. Gentleman, but, as I said during the Minister's remarks, it is difficult to reconcile a discussion about redundancies with the amendment before us. Would it not be wiser to raise constituency interests and redundancies under a later amendment dealing with commencement?

Mr. McNamara

I bow to what you say, Mr. Deputy Speaker. However, the amendment states that the Secretary of State may make a scheme subject to an affirmative resolution of each House". The scheme includes labour, valuation and assets. However, I accept what you say, other than to say—I am not challenging you, and would not do so—that when the Minister said that it was a commercial matter and that commercial factors affected the decision, that is relevant to section 1 of the scheme.

The Minister spoke about replacement to normal level of munitions stock. The majority of the 1,600 people who may be affected were working in the factories long before the Falklands dispute, and I hope that they will work there for a long time to come. The Minister cannot use the replenishment of stock after the Falklands dispute as an excuse to get rid of jobs.

The Minister gave a final, feeble excuse of not wanting to waste any more time. It is the Government who are wasting time. We have had no sign of when vesting day will be. We cannot vest if we do not have a scheme. I have tried to list seven or eight matters that may be contained in any scheme. The Government have not yet reached agreement on many matters, and on the primary matter of valuation neither the Department nor the Treasury has accepted any proposal from Coopers and Lybrand. There must be time for both Houses to examine the scheme and the principles laid down.

The Government could do much better than that. Instead, they continue to steamroller through Parliament a Bill which is obnoxious to those who work in the factories, to many Conservative supporters and to many others. Members from all parties in the other place objected to the principle of getting rid of this important national asset—of flogging it off to the Government's friends in the City — without any need to do so and without any feeling for those employed in the industry or for the national interest. But then, that is all we have come to expect from Conservative Governments.

Mr. Robert Atkins (South Ribble)

I commiserate with my right hon. Friend the Minister for coming at a late stage to debate an interesting and complex Bill which has taken up much time in Committee and on the Floor of the House. I congratulate him on his appointment, and commiserate with him for having to carry the burden at this late stage.

However, I must take issue with him on some matters which are causing anxiety to my constituents who work either at ROF Chorley, ROF Blackburn or ROF Patricroft. For that reason I am greatly interested in the legislation. From the beginning I have said that I support the Government. I am confident that the Government's view will prevail, and rightly so, for some of the reasons that my right hon. Friend gave. Nevertheless, this is an opportunity to raise the anxieties of the work force both at management level and on the shop floor about certain aspects of the Bill.

I gave my support earlier to the Government's view that a skeletal framework was the best way to flesh out the Bill through discussions with the work force and trade union and management representatives. It would ensure that we achieved what was best for all involved. Only last week on a visit to ROF Chorley the work force told me that the official side, which I understand to mean all those involved in disucssions with representtives of the ordnance factories, is happy to wait until vesting day, to tread water and to allow the company which will come into existence to sort out the unresolved difficulties and problems. That may not be an accurate view, but it is a perceived view, Therefore, it must be recognised.

Many issues regarding the no-detriment guarantee, which was given in previous debates in the Chamber and in Committee, are causing anxiety. I am therefore grateful to the Opposition for having tabled an amendment which allows us to discuss, under the terms of the scheme, some anxieties which do not appear to have been recognised.

The work force does not wish to have to make sudden and urgent decisions on problems relating to pensions and available options by being confronted with a short time scale in which to make decisions. The work force fears that in months or years to come it may find that those decisions were not in its best interests. Further discussions are therefore required, especially regarding pensions.

There has been considerable pressure for full index-linked pensions. Last week a constituent told me that without that guarantee the no-detriment offer counted for little. It was suggested that there should be a deferred option scheme on pensions to allow people to decide, not immediately but over a period of time—perhaps six months or a year—which option would be best for them.

The work force is also worried about the rules of the new pension scheme, under which the trustees of the scheme have the right to discontinue it. I sought to explain to the work force that that was unlikely. Nevertheless, that matter must be cleared up. If it is the case — I understand that the trustees are insisting that it should be the case—I should like my right hon. Friend to justify it.

Other worries include matters relating to what is called technical redundancy. The union side is still discussing with the official side the redundancy which it believes should be merited as a result of the change from being a civil servant to not being a civil servant. I should be grateful if my right hon. Friend would deal with that matter.

The work force believes that the terms of the pension scheme, under what is known as the Ministry of Defence Manual, sections 9 and 11, should obtain. It is not yet satisfied that those discussions have been fruitful. I hope that my right hon. Friend will consider that matter.

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I wish to raise other matters which do not fall specifically within the terms of the amendment. I am confident that the amendment will not be carried, but I cannot miss the opportunity to mention the odd matter and hope that the Chair is not listening. One matter, relating to the problems of some of the work force, was mentioned by the hon. Member for Blackburn (Mr. Straw) and others. I shall not go into detail because it is difficult to do so when talking about a rumour.

It must be made clear, again and again, that the problems depend entirely on the reduction of the MOD order book and the requirement necessary under the terms of the memorandum of understanding that the FH70 work must go to Germany, where it is needed. We are entitled to about 23 per cent. and have already done 36 per cent. of it. Under the terms of the agreement, the Germans are entitled to that and we cannot refuse them. However, it may entail some redundancies. The views of those working in the ordnance factories about redundancies and pensions would be bound to be affected if those who remain decide to take a certain course of action.

Matters relating to the Government's or the ordnance factories' view about an offer of voluntary premature retirement to those likely to lose their jobs—the number is normally extremely limited—should be considered by the ordnance factory organisation, new and existing management and the Minister. They should also consider whether the long-term principle of last in, first out, is right in circumstances where special skills are important for the future.

There is undoubtedly uncertainty about those matters and about the loss of the preferred source arrangement which has obtained for so long. Where a company is likely to be privatised, and therefore to become a competitor alongside other competitors for MOD business, the preferred source arrangement cannot continue. It is believed, with some justification, that while the factories remain a state operation, the preferred source arrangement, or something similar, should apply until vesting day. As the hon. Member for Kingston upon Hull, North (Mr. McNamara) said in relation to the use of MOD facilities and ranges, it is important that the advantages of the preferred source arrangement, not necessarily under the existing terms, are retained until vesting day.

I have been told that the managements of the Royal ordnance factories are losing credibility because they cannot explain, in terms which the work force both locally and nationally wishes to hear, exactly what is going on. I accept my right hon. Friend's stricture that, in some respects, delay will compound those problems or worries. I am not entirely sure that I agree with him that morale will become low. With the threat of redundancies, morale is already low. In terms of the future of the ordnance factories, the quality of workmanship, professionalism and all the matters to which we have referred here and in Committee, I do not believe that the workers have a longterm fear about their product line, but they are clearly worried about the order books, about the position of the Ministry of Defence, and about their future in relation to pensions and redundancies. Whether or not my right hon. Friend believes that it is unfair for me and some Opposition Members to refer to those matters, none the less the perceived view in the work force and in management is that those matters are still unresolved.

I shall support the Government on this amendment, for reasons that I have already given, but I still believe that there are questions to be answered and problems to be resolved. Those problems are not insuperable, but my right hon. and hon. Friends and the official side of the Ministry of Defence must understand that the work force is extremely worried. Although I emphasise that the imminent redundancies have nothing to do with privatisation, the perceived view is that there is a relationship and that has caused confusion and anxiety. Ministers have a duty to make matters as clear as possible as soon as possible with sympathy and understanding.

Mr. Fisher

I add my congratulations to the Minister on his appointment, but hon. Members who served on the Standing Committee that considered the Bill must have been deeply disappointed at the way in which he approached the subject. He appeared to say that parliamentary scrutiny was a narrow point and that because we had discussed the Bill in Committee it was not worth discussing it again. That cannot be so, and all hon. Members should deplore such a view from a Minister.

The Minister also said that because we had discussed the Bill fully in Committee there was no need to discuss it further now and that the Government should proceed with their plans, failing to make the simple distinction between the principles in the Bill and the way in which they are implemented. That is what worries the House tonight. The House and those who work in the ordnance factories have a right to know how the Government intend to proceed.

The Minister appeared to say that we know it all and that, therefore, there is nothing more to say. He glossed over the problems of the scheme, and anyone coming to the debate for the first time and listening to him would gain the impression that the scheme had been laid out in the Bill and that there was nothing to add. Nothing could be further from the truth. We know little about the scheme. We know that Coopers and Lybrand was commissioned by the Government to produce valuation principles. When the Under-Secretary of State replies, will he say whether the report has been completed and whether Coopers and Lybrand has advised on the principles of valuation? Presumably those principles will be included in the scheme, but the House and the country have a right to know how those public assets will be disposed of. The fact that the House must scrutinise matters relating to taxpayers' money means that it has an absolute right to be informed about the scheme.

The Minister seemed to give the impression that hon. Members knew exactly what would be valued — the rights and properties already appropriated to the trading company and those that had yet to be transferred. Some Ministry of Defence rights and properties that are not presently with the ROFs will be transferred to the company. They should be itemised clearly so that hon. Members may scrutinise them. The same applies to liabilities, agreements, licences and contracts, and I hope that the scheme will have much to say about the tendering arrangements for the subsidiary companies or their divisions in the ROFs. There are rumours that the tendering arrangements are far from satisfactory and that companies inside the ROFs and factories that have been working on some contracts for years will have to re-tender competitively, not only against other companies inside the ROFs, but against private companies. If that is so, will the Minister explain how those arrangements will work and how the pricing arrangement will reflect the research and development costs that have already been incurred in the ROFs?

The Minister should not have glossed over those important points. Anyone listening to him would have gained the impression that we knew which patents, rights and intellectual property would be transferred, but we have been waiting patiently for the list of between 200 and 300 patents for eight months. In Committee the Under-Secretary of State said that we would get a full and frank list of the intellectual property within two or three months, but we are still waiting for it. I am sure that the list will be published in the scheme, but it must be put before the House before vesting day so that we know what is happening.

We are also concerned about Ministry of Defence facilities, such as test ranges and proving facilities, which must be of great interest to the ROFs, as they determine their ability to test and prove their work. Presumably they will also be covered by the scheme, but it is not before the House, which has the right to know.

I am also worried about the memorandum of understanding that will explain the relationship between the Secretary of State, as the chief shareholder, and the new company. We should have a clear understanding of that relationship, but the Minister did not refer to it. He said that most of the articles of association were known to the House, but that is not the case. The articles of association have not been put before the House in a clear and frank way. They are different from the memorandum of understanding, and the Minister of State, even allowing for the fact that he is new to this brief, should get the distinction correct and should be clear that the House has a right to know.

I understand that the capital structure of the company, pensions for transferred staff, contracts and conditions of employment are being negotiated at present by the proposed management of the new company, the Treasury and the Ministry of Defence. The House must know about the state of the negotiations as regards pensions, terms and conditions and especially the capital formation of the company before vesting day. The House has the right to scrutinise such matters and to recommend changes. If the Government are reluctant to provide that information, Conservative Members who take an interest in this matter should ensure that the Bill is not passed today, and should demand that those basic facts are made known to the House before it is too late.

The Minister must know that what he said about delay is nonsense. An affirmative resolution could be passed by the House in a matter of hours. It is a matter not only of courtesy but of parliamentary democracy that that procedure should be followed and that the Government, even with their steamroller majority, should go through the form of putting their detailed plans before the House.

The valuation of the new company is of deep concern to taxpayers, since much public money is at issue. The book value of the ROFs is £450 million, plus the goodwill. The value of the patents is yet to decided, as is the value of any other assets that are to be transferred. We have had nothing on valuation. We do not know what the capital structure of the company will be. We do not know what the valuation of the assets will be and how they will be transferred. It is vital that the Government make those matters clear. The House should have the right to consider the plans for capital formation and valuation by affirmative resolution. The Board of Inland Revenue should, and I hope will, be extremely interested in the valuation of the assets, because until they have been valued and agreed with the board it will be difficult for it to allow future tax allowance claims.

5.30 pm

The Government have a duty to the Treasury and to the Inland Revenue to make clear and put before the House the valuation of the assets and the capital structure of the company so that there will be no doubt about how public money is being used. With the precedent of previous privatisation deals, Opposition Members are sceptical about depreciation policy and the valuation of assets. There is also the fact that when privatisation takes place there is a tendency for the Government to undervalue the shares and, effectively, to give huge discounts to whoever is buying them in order to make the privatisation a success. That must not happen in this case. The only way in which we can ensure that and reassure ourselves that it will not happen is for the Minister to lay the scheme, the valuation, the memorandum of understanding and the capital formation of the new company before the House and let us and not the Government, be the judge of them.

The Minister completely failed today to answer crucial questions. We do not know whether the scheme and the memorandum of understanding are ready. I hope that the Minister will bring us up to date on that when he replies. If they are ready, why have they not been published and brought before the House? If they are not ready, why are they not ready? What has the Ministry of Defence been doing? Presumably there are difficulties in producing the scheme and the memorandum of understanding. The House has a right to know what those difficulties are. The Opposition require a clear statement from the Minister on the state of the scheme and the memorandum of understanding and an explanation why he is not bringing them before the House.

The scheme, the memorandum of understanding, the capital structure, the valuation, contracts, pensions agreements, and tendering arrangements are all important aspects of the implementation of the Bill. Parliament is wholly in the dark about them. The Government will not tell the House about them, and therefore presumably they do not know the state of all those factors. It is unacceptable in a parliamentary democracy that the Government should completely scorn parliamentary scrutiny of their actions and the disposal of taxpayers' money. I trust that the House will carry the amendment.

Mr. Paddy Ashdown (Yeovil)

On behalf of my colleagues, I also welcome the Minister to his new position. I congratulate him, or perhaps, as the hon. Member for South Ribble (Mr. Atkins) said, commiserate with him. It is a pleasure to follow the hon. Member for Stoke-on-Trent, Central (Mr. Fisher). The hon. Gentleman may like to know that the hon. Member for South Ribble nodded agreement with almost every point that he made, and I agreed with almost every point that the hon. Member for South Ribble made. How sad it 'was, therefore, to hear him make a speech in favour of voting for this motion and to hear him finish, presumably on the admonition of his Whip, by saying that he would vote with the Government on the amendment. Why can he not live up to the rhetoric and logic of his speech and the power of his constituents' views and go through the Lobby against the Government and in favour of the amendment?

Mr. Robert Atkins

The reason that I gave for supporting the Government was that in the final analysis I believed, and still believe, that my right hon. Friend's argument against delay has merit. In the circumstances, I prefer to vote for the motion in the interests of my constituents. None the less, I can still speak, as I did, of their worries.

Mr. Ashdown

I shall deal with the subject of delay, but the hon. Gentleman with his "on the one hand" and "on the other" made a speech that would have graced the Opposition Benches. Perhaps he would like to come across and join us.

I join the hon. Member for South Ribble in commiserating with the Minister on having arrived rather late in this complicated debate. Being charitable, that is no doubt why he believes that the subject is unimportant. I took care to note his words. We shall see in the Official Report whether I have them right. He said that the debate was somehow "disproportionate to the importance of the issue".

There may be those outside the Chamber who also believe that this is an esoteric matter, just another in the long list of the Government's privatisation schemes and not a matter of great importance, but it touches on the central issue, which is the coherence and effectiveness of our defence forces. It is something that touches every citizen. For reasons of pure dogma the Government are privatising an organisation which has been successful—the Minister said that — and was efficient during the Falklands campaign, which is not a drain on the public purse, and which contributed US$62 million last year to the public sector borrowing requirement. It is not an organisation which was nationalised by a former extreme Left-wing Labour Government; far from it. It is an organisation which has been in the ownership of the Crown for the benefit of the nation for 400 years. It was nationalised by Henry VIII, as the hon. Member for Kingston upon Hull, North (Mr. McNamara) said.

Henry VIII was no Left-winger. His credentials could have put him on the Conservative Benches. Like Conservative Members, he was keen to abolish tiers of Government; in his case, mostly his Queens. Far from being a nationaliser, he was a privatiser, as the churches and monasteries found to their cost. He decided that the ordnance factories should be in the ownership of the Crown. That is what the Government are overturning in pursuit of their dogma.

The scale of the operation is large, and it has been conducted against the advice of Conservative Back Benchers. Former Conservative Ministers, including a former Secretary of State for Defence, have spoken against it. Under such circumstances, and given the size of the task, one might imagine that a Government with any circumspection might operate a little cautiously, but not so. We have before us a Bill of enablement which was referred to by my noble Friend Lord Diamond in another place as having a capital "E". It gives the Minister, as the hon. Member for Stoke-on-Trent, Central said, almost a blank cheque. The Minister can write any scheme that he likes.

My noble Friend Lord Diamond said: In all my experience of legislation … I have never seen a Bill which consults Parliament so little, and indeed which scorns Parliament in the way it gives all powers to the Government and to the Minister and none to anybody else."—[Official Report, House of Lords, 19 July 1984; Vol. 454, c. 1635.] Those were his words, and they are powerful enough.

The vital interest of large sections of our community and of our defence interests will depend upon the drawing up of the scheme which gives flesh and substance to the enabling Bill. In another place Lord Carver, a former chief of the general staff, said that he believed it would damage our defence capabilities. The vital interests of our services may be—I do not say that they will be—seriously affected by the nature of the scheme which the Minister has given himself full powers and a blank cheque to devise under this Bill of enablement. The hon. Member for South Ribble pointed out eloquently that the future of ROF employees could be affected deeply by the nature of the scheme which the Minister has given himself a blank cheque to write in any way that he desires. The services themselves, the defence organisation and our defence integrity could be affected by it. Suppliers and customers, both here and overseas, will also be affected, yet the Minister has free rein under this Bill of enablement to do precisely what he wants in drawing up a scheme.

When this matter was discussed in another place, the argument advanced by the Government spokesman was exactly the same as the one put forward in this House by the Minister. He said that the details were there for all to see and were well known, but that is far from the case. The problem is that none of the details of the scheme are known, and the Government have given us very little information on which to proceed.

No information has been released about the detail of the scheme. It has been promised, but it has never been delivered. It was promised by the hon. Member for Pendle (Mr. Lee) on 23 February. During the Committee stage, information was promised about patents and intellectual property. The hon. Gentleman said that the list of between 200 and 300 patents and items which were patentable would be produced within two to three months. Having been made that promise on 23 February, we might have expected that information by the end of April, or at the latest by the end of May, but eight months later we have still not seen it.

The Minister says that he has nothing to hide. That may be so, but why has that information not been produced? If the Minister has nothing to hide, there can be only two possible answers: either the Secretary of State, who made the promise in the first place, was wrong, or his Department is so inefficient that it cannot honour his promise.

That was not the only occasion. We were also promised that a memorandum of understanding would be released, but it has not been. Again the Minister says that he has nothing to hide. Why, then, has that memorandum of understanding, which is so essential to our knowing the nature of the scheme, not been produced? If the Minister has nothing to hide, it can only be either that the Minister who made the promise was wrong or that his Department is so inefficient that it has been unable to produce it in line with his undertaking.

That is not the end of the story. Three months ago we heard from the Minister of State's predecessor that articles of association were "in final draft." We have not yet seen them. The Minister says that he has nothing to hide. If that is true, the only reason why we have not seen those articles which were in final draft three months ago is either that he was wrong in making that statement or that his Department was so inefficient that it could not honour it.

In those three key areas the Government have failed to live up to their undertakings. In those three key areas, if the Minister has nothing to hide, we have worse to fear, because either he was wrong in making those statements, or his Department was too inefficient to be able to honour them. In either case it seems to me that we have nothing to lose by inserting an extra safeguard by insisting on seeing some of the details which the Minister and his spokesmen have told us they would give us but about which we have heard no more. The House wishes to hear some of the details of the scheme which can have such a profound effect on the nature of our defence, on ROF employees and on all the other people involved.

I ask the Minister to explain the matter touched on by the hon. Member for South Ribble, who said that acceding to our request would result in delay. What have the Government to fear in allowing Parliament to scrutinise the details of this vital scheme? No one doubts that they will carry it when they produce it in the House, because they have a majority of 140. What will it cost them to allow the matter to be debated so that some flesh can be put on the scheme, and so that the House can see it and do its job properly? The delay involved will be one of two or three hours. I do not believe that the hon. Member for South Ribble, whose respect for the importance of the House is not questioned, can seriously suggest that the House should take so lightly its proper duties by attempting to scrutinise Government legislation in the absence of any of the safeguards given by the Government being honoured and in the absence of any details of the scheme.

5.45 pm

It is not exaggerating to say that the Bill is crucial not only to an established institution but to the nation's defence. What other job can the House have but to scrutinise such an important piece of legislation which can have such long-term ramifications? This is not a minor item. It is not, to use the Minister's words, an item which is disproportionate to the importance of this issue. With this legislation the Minister and the Government are attempting to abuse ministerial power. They are demonstrating their disregard, even scorn, of the functions of the House. That is why I and my right hon. and hon. Friends will vote in favour of the amendment. I call on Government supporters who served on the Standing Committee and who value the functions of the House to have the courage to do the same.

Mr. John Golding (Newcastle-under-Lyme)

It was an inspired act of mine to suggest to my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher) that he should serve on the Standing Committee which considered this Bill. We listened to a devastating attack by him against the Government's handling of this matter. However, I am not as charitable as my hon. Friend. Often during our consideration in Committee of the British Telecommunications Bill I had to chide him for being too soft on the Government. Tonight, despite a brilliant presentation of the argument against the Government, again he has not been as hard as he might have been.

The House would not pass the British TelecommunicationsBill without examining the licence. The Government were forced to bring the BT licence before the House and to have the detail of it debated before they could proceed with privatisation. What is more, the Government were shamed into producing the articles of association in a way that they ought to be shamed tonight into withdrawing their proposed motion.

We are talking about money. In this privatisation Bill the Government are attempting to steal money from the public purse. We are debating whether the Government are to be allowed to steal it in private behind locked doors and without being observed or whether they will have to put their hand in the public purse and steal in the full light of day. That is what the valuation and the rules of tendering are about. They are about Ministers being prepared to hand taxpayers' money over to private interests. That is what privatisation is about and that is what we are discussing.

It is essential that we see the scheme and the memorandum of understanding before privatisation is allowed to proceed.

I disagree with the hon. Member for Yeovil (Mr. Ashdown) in one respect. It is possible that the Government would have accepted the Lords amendment if it had said subject to an affirmative resolution of the House of Commons. They have a majority of 140 in the House of Commons. Even the hon. Member for South Ribble (Mr. Atkins), who totally disagrees with the Government—

Mr. Robert Atkins

No, I do not.

Mr. Golding

When speaking to his constituents, the hon. Gentleman totally disagrees with the Government.

Mr. Robert Atkins

The hon. Gentleman is being carried away by the exuberance of his own verbosity, but he must not misrepresent the truth. I was a supporter of the principle of the Bill from the outset and one of the instigators of the privatisation of the Royal Ordnance Factories as long ago as two to three years before the Bill was introduced. There has never been any question about my commitment to the principle of privatisation. However, I remain concerned about aspects of the privatisation that fall upon my constituents and members of the work force. That is not to gainsay my support for the principle of privatising the ROFs.

Mr. Golding

We are not discussing the principle, because that was decided on Second Reading. If we were to be debating the principle now—

Mr. Robert Atkins

The hon. Gentleman is engaging in semantics.

Mr. Golding

—you, Mr. Deputy Speaker, would say: "The hon. Member for Newcastle under Lyme is out of order in talking about the principle. We are discussing whether the House will be"—

Mr. Deputy Speaker

Order. I suggest that the hon. Gentleman should bring himself within order.

Mr. Golding

We know each other, Mr. Deputy Speaker, and we respect each other. Having decided a principle—in my view, the House came to the wrong decision—we are now discussing whether we shall ever be allowed to debate the detail. The hon. Member for South Ribble did not direct himself to the principle. It was my impression that he did not agree with the Government on any one point of detail. He was speaking for his local newspaper and his constituency.

Despite what the hon. Member for South Ribble has said, the Government can depend on his vote. The Government are not worried about what will happen to the scheme or the memorandum of understanding in this House. Conservative Members such as the hon. Member for South Ribble who take an interest in these matters but disagree with the Government on detail will still vote with the Whip. I understand that. I have always voted with the Whip and I do not treat that as a practice to be scorned. I have never voted against the Whip and I understand why the hon. Gentleman and others will act likewise. I merely say that I understand that he will do so, and that I understand that the Whips will be pleased that he will. I understand also that the Whips will take the tally and will say, "Whatever the memorandum of understanding, and whatever the scheme contains, we can push them through the House." They know that they can separately push the scheme through the House in an hour and a half. The issue will be brought before the House on a Thursday night at half-past 11 and the payroll vote will get it through.

The Whips and the Government generally are not bothered about the House. However, they are bothered about the other place. They cannot whip the other place in the same way as they can whip this one. The hon. Member for Yeovil mentioned Lord Carver, of whom the Government are frightened stiff. Ministers do not know what they are talking about in terms of defence, but that cannot be said of Lord Carver.

Mr. Robert Atkins

Oh yes, it can.

Mr. Golding

There are some strange interjections from Conservative Members. Lord Carver said in another place that British tanks were Inadequate at the beginning of the second world war because they had been produced by private companies in a private enterprise system. He explained that he has had more confidence lately because tanks have been produced by royal ordnance factories. If he were to repeat such arguments, he might well persuade their Lordships to throw out the scheme.

Mr. Deputy Speaker

Order. It is a long-held convention in this place that we do not comment on the proceedings in another place. It is in order for the hon. Gentleman to refer to the views of a Member in another place, but we do not comment on the proceedings of that place.

Mr. Golding

I did not want for one moment to refer to the proceedings in another place, Mr. Deputy Speaker. I think that it is a legitimate argument against the Government to say that they are frightened of a defeat in another place. There is no doubt in my mind about that. The Government have chosen to disagree with the other place because it was probably said, "We shall give you the Bill. We shall give you the principle, on the understanding that you come back to us with the detail." That was a rational attitude, but what would have happened if Ministers had said, "We shall not let you consider the detail."? Would the Government have secured the Bill if that had happened? That answer is no, for the reasons that my hon. Friend the Member for Stoke-on-Trent, Central and the hon. Member for Yeovil have given.

The Bill is about the security of the nation; if the Government get the scheme wrong and the understanding wrong, they will put the nation's security at risk, which of course we do not want. That is a matter of sufficient importance to demand that the detail be debated in the House and in another place before the Government proceed to privatisation.

There are other arguments; my hon. Friend the Member for Stoke-on-Trent, Central has advanced some of them. It is exceedingly important to the staff that the details of the pension arrangements be settled. It is exceedingly important that redundancy arrangements be settled. It is not sufficient for Conservative Members to say, "I accept the principle." It is important that they should say, "Even though we accept the principle, it is important that we consider the detail." It is important that my right hon. and hon. Friends accept the decision of the House, but that does not mean that we should refrain from discussing the detail.

We are dealing with the lives of working people and they cannot be brushed on one side as the Minister would wish. That cannot be treated as of no consequence. He must not say that the debate is unimportant. To many, the debate about detail is more important than the debate about principle. That is true of many of my constituents and many of those in the constituency of my hon. Friend the Member for Stoke-on-Trent, Central.

The index-linking of pensions is extremely important. I find it difficult to explain to my constituents who work at ROF Radway Green that there will be no index-linking under the privatisation of the ROFs while index-linking remains intact under the British Telecom legislation. That is the sort of detail that we should debate when we know finally what it is that the Government propose.

The Minister of State's contribution to the debate was unsatisfactory. I wish that the Under-Secretary of State had addressed the House immediately after his right hon. Friend resumed his place. If that had happened, we might have had something to debate. It would have been better to have the answers to the questions. We could have debated those rather than wait until almost the end of the debate for the Under-Secretary to give his non-reply before the division. That would have been better than merely witnessing the use of the steamroller before leaving the House.

These arguments will not go away. The Government are acting in the most disreputable manner and they must not be allowed to do their shoddy work and shoddy deals in private without our having our say in the House of Commons.

6 pm

Mr. Bruce George (Walsall, South)

I share the sentiments of many previous speakers in this debate who have welcomed the Minister of State to the hot seat. I am rather less optimistic than my hon. Friend the Member for Kingston upon Hull North (Mr. McNamara), who believes that the adversarial relationship will run for years. I must tell my hon. Friend that the survival rate of Ministers in the Ministry of Defence is on a par with that of machine gunners during the first world war. The Ministry of Defence, which I have called the Bermuda triangle of Conservative politics, is one step removed from the House of Lords, oblivion in some other form, business and the door marked "exit". I am not entirely convinced that the Minister of State has security of tenure. Already, by his short speech he has placed himself in column inches well in front of most of his colleagues who were on the Standing Committee for 24 sittings. In comparison, his contribution so far has been monumental and majestic.

I could not understand the remarks of my hon. Friend the Member for Kingston upon Hull, North about the royal ordnance factories offices in Egypt. I have no objection to selling arms to our allies — they are all reasonable countries. Had the Egyptians been sensible enough to purchase some time ago fast fighting vehicles from the royal ordnance factories, the issues of their country, the middle east and Christendom would have been different. My hon. Friend is, however, more of a biblical scholar than I am.

Mr. McNamara

The issue was not that they had offices there but that they discovered that they had offices there.

Mr. George

I believe that the Minister of State makes a great mistake if he thinks that this amendment is a party issue. It is not. All hon. Members who have spoken so far have accepted that the issue of principle has been settled. The Minister must not assume that any request to delay is motivated even partly by party considerations. A House of Commons rather than a party issue is at stake. For a few seconds while the Minister was speaking, I felt rather guilty that apparently I had been involved in a process of delay and had been motivated by purely party political considerations. I felt that, in wanting to debate and scrutinise, we were somehow slowing the machinery of Government to an unacceptable level.

We must not assume that, just because we were engaged for 24 sittings in Standing Committee, there was adequate scrutiny. To debate is not necessarily to scrutinise adequately. If that were the case, in many ways we would be the most powerful legislature in the world. Those hon. Members who were on the Standing Committee will confirm that much of the information given to them was bestowed late in the day. In some cases, as the sitting discussing a particular section of the Bill was unfolding, we were given the information, which meant that we had not time to scrutinise. In many ways, the Standing Committee was legislating in a vacuum. The Government were making things up as they were going along.

We complained repeatedly throughout the 24 sittings that we who were legislating and supposedly doing an important job were given grossly inadequate information. The Government said to us, "We cannot give you the information now because we have not made a decision." We were at least given the hope that at some stage in the not too distant future we as legislators would be given the necessary information upon which we could make rational decisions and with which we could adequately perform the task of scrutiny. That information has, however, not been given. To be told that to want the information before we make a final irrevocable decision is somehow to act unfairly and that we have had adequate time for consideration is to make a nonsense of the task of the House. Some Conservative Members must recognise that our point is a parliamentary point. I hope that at some time the roles will be reversed and that those who are prepared to shut their eyes to what is happening will suddenly become the defenders of parliamentary principle. The regrettable corollary of that point is that some people who defend Parliament might slip into the role of supporting realpolitik when finally making a decision.

The regrettable fact is that this afternoon we have been told that everything essential is already known. We are ignorant of so many matters involved in the privatisation of the royal ordnance factories, yet, at the end of eight or nine months, we are making a decision based on imperfect information. We have been told that the amendment is a delaying exercise. This afternoon, we have been told, "We have had enough talk." That statement comes ill from someone who has managed, because of other appointments, to miss out on most of this talk. The Minister is not in a good position to say that enough is enough and that we have had sufficient talk. We are doing the job that we are paid to do—scrutinising legislation. As has been said many times, this legislation will reverse 400 years of history. Asking for a delay of a couple of months, or even weeks, after such a lengthy period of royal and state control over the manufacture of armaments is not asking too much.

The Minister of State told the House that we cannot afford to risk further delay. What is the risk in further delay? There is no real risk, because the affirmative resolution procedure does not establish overnight that there will be real parliamentary scrutiny. We are asking the Government, after a reasonable interval when all the information is available to us, merely to present the information for debate. I should prefer the House to perform the real task of legislation and scrutiny and not to act simply as a rubber stamp or reactive legislature.

The Minister of State has coined a phrase that may enter some book of quotations or records. He said: there are still some details to be resolved". That must be the understatement of the year. An enormous amount of detail must still be resolved, but hon. Members will not be privy to that information. We shall consign this piece of legislation to the statute book, although many gaps will emerge. When the process is over and we ask ourselves whether we performed the proper task of scrutiny, I believe, without any shadow of doubt, that we shall answer that we did not.

The fault lies not just on our shoulders. Hon. Members who have taken the trouble to be in the House have gone through the motions and have participated in the legislation that has been passed to the House for scrutiny, but those outside who have not been members of the Committee or have not participated in previous debates are, willingly or unwillingly, unfortunately colluding in a process of legislating by inertia. Parliament has slipped into its position of relative unimportance by incremental means—little Acts of Parliament passed with minimal scrutiny. Over centuries, that process amounts to an abdication of parliamentary control.

What are some of the gaps that must still be filled in by the Government? According to the Government, we know it all. The resilience of the parliamentary system — this shows not the resilience of the Standing Committee system but the potentiality of the Select Committee system—was shown by the fact that the Select Committee on Defence stopped some of the greatest inanities of the Government in dealing with privatisation. Other people were involved as well, but we must take an important share of the credit for considering the privatisation of security. We know, to our cost, the importance of security.

The Government planned to hand over the guarding of ordnance factories, including the factory at Enfield with its vast collection of small arms of enormous attraction to terrorists, to a private security firm. That was stopped. The Ministry of Defence police will remain within the ordnance factories, but for how long? What discussions have taken place with the MOD police? Is their presence at the ordnance factories merely a sop to parliamentary opinion which has objected to the privatisation of security? If the Bill goes through without an affirmative resolution procedure, will the Government then be able to pass the proposals which they have been unable to get approved during the last 12 months?

This is why the real details should be given to us before we finally pass this legislation. What will be the arrangements for the guarding of the ordnance factories after vesting day? That could be a short period. As we all know, the. Government would be elated if the opportunity were presented to them to flog off the ordnance factories in total or in part—or even to flog off the profitable parts and to let the weaker parts simply wither away despite their long record of service to the state.

What will happen to security after vesting day? What will happen to it when these factories are finally privatised? Will the MOD police remain, and for how long? If there is to be an ordnance factory security force, how will that differ from the existing arrangements'? Will it be at least as good as what now exists, even though in my opinion the current arrangements are inadequate`? Indeed, the Select Committee's report on Enfield clearly highlighted the inadequacy of the security arrangements when it visited that establishment a few months ago.

I am pleased to say that some of the more glaring deficiencies have since been remedied. But once the ordnance factories are privatised and the MOD police go, as I presume they will, what will be the training arrangements for the new ROF police force? For how long will those men be trained? Will they have access to arms? What will be the command and control arrangements? Will they be trained alongside MOD police? Many questions have been asked which so far have remained unanswered.

The amendment will at least allow the House to be privy to Government thinking on security. I do not want to be held responsible for legislating away the ROFs and, as a result of Government action, for creating inadequate security arrangements. This House deserves proper assurances about security arrangements after vesting day.

There are still gaps in our information about the role and status of the agency factories. There are still gaps in our knowledge about the rights of the redundant. We heard a great deal in Committee about TUPE'81 — the Transfer of Undertakings (Protection of Employment) Regulations. We thought we were given assurances, but in recent weeks they appear to have been dissolving before our very eyes. We are entitled to know about redundancy and pensions.

We are told that the scheme is for conveyancing purposes only, but the Minister cannot have been around long enough or have read the Committee debates closely enough to appreciate the importance of the scheme. That scheme is not available to us. We are told that perhaps it will be available before vesting day. That is great news!

It seems that the Government will probably publish the details of the scheme just before the whole operation goes private. It is disgraceful that the scheme will not be made available to us before this passes out of the control of the House of Commons. It is disgraceful that the memorandum of understanding is not available. The Minister told us that some details still have to resolved but added, "But—tough luck—you will not have a chance to resolve them before the whole thing goes private".

6.15 pm

Why cannot we have access to the Coopers and Lybrand report which has apparently been commissioned to look at the valuation of assets? The Government have searched but apparently cannot find the information to present to us. It is therefore unsatisfactory for the Minister to say that everything essential is already known. The scheme must be laid before us. Even if the amendment is accepted, the amount of parliamentary scrutiny in which we will participate will be inadequate, but if it is carried there is at least the promise that this detail will be presented to us, albeit in a perfunctory debate lasting only one and a half hours.

The amendment, which I wholeheartedly endorse, strikes at the very heart of the legislative impotence of this House of Commons. We accepted the principle on Second Reading and have gone through Committee, and any further delay is to be regretted. We are becoming a reactive and rubber-stamp legislature. It is by no means only a party view that the Ordnance Factories and Military Services Bill should be subject to proper parliamentary scrutiny.

I am told that the Grant to Redundant Churches Fund Order 1984 is subject to the affirmative resolution. If the Government are prepared to apply the affirmative procedure to that, I am certain that a Bill such as this ought to be subject to the same kind of parliamentary scrutiny. By agreeing to the amendment, we shall be striking a blow for the legislature. The affirmative procedure means that the order must be approved by both the House of Commons and the House of Lords before it can take effect. Should such an order be opposed, because of the Government's intransigence we shall regrettably have no further opportunity to debate the subject.

The general rule must surely be that, if an enabling Bill seeks the maximum parliamentary supervision, it should be laid in draft and not become active until approved by the House. If the Government desire to treat Parliament seriously, they will agree to the amendment.

We have been engaged in alleged scrutiny since the turn of the year. At a superficial glance that might appear to have provided the House with enough time to scrutinise this complicated legislation, but we must not be beguiled into thinking that time spent on legislation equals adequate scrutiny. If time was equated with scrutiny, we would have done our job, but having been involved in 24 sittings of the Standing Committee, I can testify to the fact that we were unable to do our job. By opposing the other place, which did an adequate job of scrutiny, and by opposing the amendment, the Government are showing their contempt for the House. I therefore hope—with little expectation of satisfaction—that enough Conservative Members will share our interest and concern, and will not see this as a narrow, partisan issue. I defy any Conservative Member to say that the speeches of Opposition Members have dwelt in any way on the principle of privatisation.

We must concede that this legislation will come into effect. We hope at some stage to be in a position to rectify it, but today we have been debating the scrutiny that has not been achieved. In those circumstances, I hope that hon. Members will agree to the amendment, as this legislation, which reverses many centuries of history, deserves proper scrutiny, and that has not yet been achieved by the House.

Mr. Peter Pike (Burnley)

I also send my good wishes to the Minister in his new post, although he has assumed it rather late in the Bill's passage. I, too, wish to speak in support of the amendment, which is both simple and important. I agree with my hon. Friend the Member for Walsall, South (Mr. George) that we are debating not a party political issue but one that should be supported by all hon. Members. It concerns the right of this House to know exactly what the legislation that we are being asked to approve means and our ability to scrutinise it. Therefore, I believe that hon. Members on both sides of the House should support the amendment.

The Bill's progress has demonstrated that the right stand was made when we originally debated the amendment in Committee on 31 January. It is now about 10 months since the Bill had its Second Reading shortly after the Christmas recess. Then, many hon. Members said that we did not have sufficient information and that we were debating a blank cheque. Even at this late stage we regrettably still find that several items have not been finalised, such as the memorandum of understanding, the question of valuation principles, and the report from Coopers and Lybrand. Perhaps the report has been finalised recently, but the decisions are not known to hon. Members. That is an important issue and we are entitled to know about it. Indeed, we are entitled to know on what basis the valuation has been made and what the Government will realise when privatisation takes place.

There are also items concerning the unions that have not yet been finalised, even at this late stage. I refer to redundancy and, more importantly, to pensions. The Minister's undertakings in Committee still seem to be open to different interpretations. I understand the concern of workers that those items still have not been resolved. Indeed, there is still considerable concern among the work force at the Blackburn factory as a result.

In Committee, we were given an undertaking that the scheme would be available within four weeks at the latest after vesting day. But in Committee the Under-Secretary of State and the Minister several times assured us that the vesting day of 1 October was reasonable and would be achieved. We said that we did not believe that 1 October was feasible and that it would not be attained. We have, of course, been proved correct and we are now talking about 16 November. Even that date is hypothetical, and vesting day may well not be until next year. However, if the original vesting date had been attained — the Minister said that an answer in July stated that the scheme would be published within four weeks of the vesting day —the scheme would have been out by now, as it is virtually four weeks since that vesting date. The scheme should certainly be available next week. Indeed, we hope to see it as soon as possible.

Nevertheless, the important factor is the right of the House to know exactly what it is being asked to approve. I accept that we cannot debate privatisation tonight. That principle was established on Second Reading, albeit that we were, and are, opposed to it. Nevertheless, we must accept that privatisation will take place. However, we have the right to know about the scheme, and the method of valuation and to know that the right agreements have been reached with the trade unions. We have the right to know that the work force is happy with the situation that will face it after vesting day. That is why hon. Members on both sides of the House should support the amendment.

Even at this late stage I hope that the Minister will have second thoughts, and accept that our case is reasonable and fair. It was a matter of some concern to me that earlier tonight he seemed to believe that the time factor was more important than the democratic rights of hon. Members to know exactly what they are being asked to approve of. Surely it is only right and proper that we should have the right to consider the scheme, debate it and to use the affirmative resolution procedure. The delay in parliamentary time needed would be minimal. Members of both Houses should have the opportunity to know exactly what they are agreeing to. The delay is not important, but the principle is. We should have that opportunity and we should protect the interests and rights of hon. Members on both sides of the House and from both Chambers.

Mr. Denzil Davies

We welcome the Minister to the debate and to his new responsibilities. However, he made rather heavy weather of his opening remarks. It is not a delaying amendment. By "delay", what is meant is, at most, one day's debate in this House—or even half a day. Indeed, we are quite prepared to debate the matter from 4 pm to 7 pm. There could be half a day's debate in this House and half a day's debate in the other place. That is one day's debate on a very complicated scheme. Therefore, when the right hon. Gentleman talks about delay, he is on very weak ground.

We must again ask why the Government are so worried about having a three-hour debate on a scheme which is complicated, and which involves the transfer of public assets at certain values — valuation is extremely important — into a company which, although initially owned and controlled by the Ministry of Defence and the Government, will later be sold to private interests with all the problems and public interest involved. Why can we not have three hours' debate in this House on that important scheme?

The scheme is described as a conveyancing arrangement. I do not know who decided on that phrase. If that is all that the scheme involves, why has nothing been done before? I understand that there are great difficulties in deciding what should be included in the document. There are many difficulties in deciding on valuation and many other aspects. We are discussing not a conveyancing device, but the heart of the Bill. The Bill has no other heart.

6.30 pm

My hon. Friend the Member for Walsall, South (Mr. George) and others mentioned Henry VIII. This is a Henry VIII Bill. Basically it is a one-clause, skeleton Bill. There is nothing else in the Bill. The Minister may think that later clauses are important, but they are mere padding. 'The Bill is about clause 1(1) which begins: The Secretary of State may make a scheme". That is the end of it. The rest of the Bill is draftsmen's padding. The Government apparently do not want to appear to be introducing a one-clause Bill.

The scheme is at the heart of the Bill and determines everything. That is why we want a proper debate. The Government could have avoided the argument over the amendment by telling the House what the scheme involves. They could have circularised hon. Members with the details and we could have debated the scheme this afternoon, or even earlier in Committee. All that we are asking is to see the scheme. That is not too unreasonable. We may agree or disagree with parts of it. Certainly we do not accept the principle of the Bill, but we accept that the Government will carry the day on that. We are now talking about the detail, which is extremely important not only for ordnance factory workers but for hon. Members and the public.

One does not have to be a clairvoyant or a brilliant lawyer to work out what will be in the scheme. It will have to set out the property and rights of the trading fund and the property and rights that will be transferred from the trading fund to the company. It will also have to set out the property and rights that are not appropriated to the trading fund. We have heard about railway wagons and all sorts of bits and pieces all over the place that are used by ordnance factories but which are not appropriated in an accounting sense to the trading fund. There must be a long list? Why can we not be told what is on that list. Why can we not be told which properties are being transferred? That is all that we want to know.

Another problem is that of intellectual property rights. It is no argument to say that the problem is easy. It is not. The question of patents and whether the Ministry of Defence retains rights in patents, designs, know-how and licences is complicated. Hon. Members are adult and knowledgeable enough to debate such matters and decide whether they like the scheme.

We did not debate the agency factories in detail in Committee. Perhaps that was our fault, but three factories are privately owned and will be supplying, as they have in the past, products such as hard alloys to the ordnance factories. What will be the future relationship between the new limited company and those factories? Why can we not be told so that we can make up our minds?

Test ranges and proof facilities also create difficulties. Royal ordnance factories have been allowed to use test facilities owned by the Ministry of Defence, presumably free of charge. What will happen in future? Will a private company listed on the stock exchange and sold to private owners have the same relationship with the Ministry of Defence? I assume that the new company will still have to use the same facilities. How will that be worked out and what will the charge be? How will the Ministry determine the cost of allowing a private company to test shells on a Ministry range? The House should be allowed to debate such matters. If we do not debate them, no one will. That is the tragedy in the Government's attitude. I hope that they will change their mind. The Government are not prepared even to allow us to debate such matters in the House although the House is responsible for deciding whether to transfer the assets to private persons.

We debated valuation many times in Committee, but we did not achieve satisfaction. Valuation is not as easy as Ministers try to pretend that it is. The scheme will have to include principles of valuation as well as value itself. Will the assets be transferred without a value attached to them? Will land, patents and liabilities be transferred without value, or will each asset be valued? Will the scheme include principles of valuation? Will it contain that extraordinary concept of "usefulness" to the company? Is that Coopers and Lybrand's valuation principle? Does it base value on the usefulness of a company? I have never heard of that before.

I thought that valuation was assessed according to market value—the Government should appreciate that—and on what an asset may fetch in the market place? I see that the Under-Secretary is nodding. I am glad that he agrees. Usefulness is a vague concept. I prefer market value, which is a tested form of valuation. The term "usefulness" seems to be a cloak for an arbitrary value. It will be difficult and take a long time to value all the assets because no one has valued them before. They have been put into the trading fund at any old value.

Valuing the assets properly is important. Once a valuation is made it will stick. When the publicly owned company is sold on the stock exchange, the valuation will still stick. It must be right. If it is much below market value, the public will be robbed. If the company is sold at too low a valuation, the public will lose money and private interests will gain.

Will all the assets be valued in money terms? Will the pounds and pence be set out in the scheme? Will we then be able to tot up the valuations to see whether the public interest has been protected?

The Government could have avoided these problems if they had accepted the amendment and said, "Here is the scheme. We have done our best. We understand the problem, but we are honest, clear and clean with the House of Commons." That is all that we ask. The amendment is not partisan; it is not meant to delay. We shall not stop the Bill because of an argument about a three-hour debate on an affirmative resolution. The Government know that very well.

The Under-Secretary is a reasonable man. He tried to meet our points in Committee as much as he was allowed. Why does he not agree that this is a perfectly reasonable demand, and say that as the other place has seen its reasonableness, the Government will allow the House of Commons three hours to debate the scheme that the Government are drawing up? He may say that he cannot do that, so I shall ask him to do something else. Will he give us an assurance that there will be a debate in the House before any private capital is injected into the ROFs or any shares sold off? The House is entitled to look at the matter again in the light of what the scheme contains. The House should be able to see what is being sold and what price the Government are getting for public assets, and we should be able to understand what is happening to the ROFs.

We are concerned about the people who work in the factories, but I shall not go into that now, because we shall debate it on another amendment. There is a great deal of concern, which is partly caused by privatisation. People are worried. The morale that has been so high in the ordnance factories for so long is now low. The ROFs have one of the best work forces of any establishment. However, the workers see their jobs going, and they fear that the 1,700 redundancies in the pipeline are merely the start. Those redundancies may not be caused by privatisation, but many future redundancies will be caused by privatisation.

The privatisation of these factories will lead to a massive job loss, and a loss of the skills of the people who work in the factories. Those skills will be lost to our economy for ever, because there is nowhere in civilian manufacturing industry, as a result of lack of growth in the economy, where such skills can be utilised. We shall lose the skills of a generation of people who have worked for their industry and the defence of their country. The Government owe them a little more than telling us that the amendment is a delaying amendment. We are merely asking for a proper debate on a scheme that transfers people from one place to another.

It is no good the Minister looking surprised. This scheme transfers people from the Civil Service to a company. It may be done under TUPE '81, but such people will be transferred from Government service. Why can we not debate that?

Mr. Butler

The right hon. Gentleman may be setting scares running through the work force. He said that it was being moved from one place to another, and that is not intended. However, he is right to say that the status of such people will change.

Mr. Davies

That is what I said. If that was loose language, I shall be more precise. The place from which these people are being transferred is the Civil Service and the place to which they are being transferred is the company. The scheme shifts 18,000 people. Why can we not debate it?

Mr. Golding

If redundancies follow, as the hon. Member for South Ribble (Mr. Atkins) fears, will there not be a transfer from one factory to another?

Mr. Robert Atkins

I did not say anything like that.

Mr. Golding

The hon. Gentleman did.

Mr. Davies

I shall not follow that, although my hon. Friend has made a good point. We can discuss this on a later amendment. There is a special problem of redundancies within the new organisation.

My point is that we are transferring not only land and intellectual property, but people, although that may not be set out in the scheme. We should be able to debate the conveyancing mechanism that shifts these 18,000 people. I hope that the Under-Secretary will reconsider the "Resist" that he has on his brief. This is the last day on which he can have a fling. Why does he not worry about civil servants for a change? Most of his Ministers are abroad selling arms anyway, so he can have a fling and accept that the House of Commons should have three hours to debate the scheme.

6.45 pm

The Under-Secretary of State for Defence Procurement (Mr. John Lee)

We have had a long debate, in the course of which a very large number of different issues have been raised by hon. Members of all parties. Although we are discussing an amendment to the Bill, the debate has seemed at times more like a Second Reading debate. Of course, it was inevitable that this would happen, given the terms of the amendment that we have been discussing.

A debate on the scheme to be made under the Bill would be nothing but a repeat of what has been heard in the House this evening. The debate would not be confined to the scheme. Indeed, when the scheme is published hon. Members will find that it is a limited document, because it does not deal with more than a small fraction of the issues with which we have been concerned during the past two hours or so. Any debate held on the scheme would inevitably spill over into other matters of greater interest, and, indeed, consequence. What will not be contained in the scheme is, in general, of greater interest to the House than what will be in it, and it is inevitable that any further discussion on the scheme will turn out to be a repeat of today's performance.

My right hon. Friend the Minister of State for Defence Procurement said in his opening speech that we had had all the discussion that we need.

The hon. Member for Walsall, South (Mr. George) drew the attention of the House to the fact that we had had 24 sittings of the Committee. I shall attempt to answer the various points made in course of our debate, but very little that I shall say will be new. Nearly all of it has been said before, on Second Reading, in Committee, and on Report. The reason why it will not be new is that the Government have already made to the House a very full disclosure of their intentions. The scheme, when published, will not add to what is already well known about what the Government plan to do, but so that we may have the opportunity, in effect, to hold this same debate once more, we are to risk further delays to vesting day and postpone the time at which the new company can get down to doing what it is intended to do. That is why we disagree with the amendment.

I shall now deal with the details of the debate. The hon. Members for Stoke-on-Trent, Central (Mr. Fisher) and for Kingston upon Hull, North (Mr. McNamara) and others have talked about "the scheme" and "schemes". The scheme is the means by which property rights and liabilities are transferred from the ownership of the Secretary of State to the new company. The scheme avoids the need for any further conveyancing documents and can thus greatly simplify the transfer of property. It also binds both parties in the way in which an ordinary conveyancing transaction could not do. The corollary is that any person adversely affected by the transfer may claim compensation from the Secretary of State.

The scheme consists largely of a short operative part and a number of schedules. All the property rights and liabilities to be transferred will be listed in the schedules. The operative part of the scheme will provide for the transfer of the property, rights and liabilities so listed, and will stipulate the number of nominal value shares to be issued by the company in consideration of the transfer.

The scheme will also set out the relationship between the distributable and non-distributable reserves of the company. It will not include details of pension schemes. The scheme will also not set out the actual value of the new company. This will be done in the opening balance sheet, to be published as soon as possible after vesting date. However, the scheme will contain among its schedules a statement of the principles of valuation that apply, and the actual valuation, which will be carried out by accountants and others expert in this subject.

Further schedules will contain the terms and conditions on which intellectual rights will be transferred to the new company, details of certain contracts that are to be executed after vesting day by the Ministry of Defence and the new company, and the way in which certain books and records of interest both to the company and the Department, will be dealt with. The first scheme will be laid before Parliament in accordance with clause 3(9) well before vesting day itself. It may be necessary to exclude some matters on grounds of national or commercial security, but the exclusions will be kept to a minimum. The scheme will, of course, be scrutinised by the Public Accounts Committee.

Mr. Denzil Davies

Will the monetary value of the property, rights and assets to be transferred be listed alongside them in the document?

Mr. Lee

I am just about to deal with valuation. All the assets that are to be transferred to the company will be valued and we shall have the benefit of professional advice in the valuation exercise. The schemes transferring the assets will contain an explanation of the basis of valuation. Fixed assets will primarily be transferred on a depreciated cost basis.

Assets such as work in progress cannot be valued in advance and the valuation exercise will, therefore, not be completed until after vesting day. The precise valuation of those assets will probably not be known for two to three months after that date. Where book values are nil or only a nominal value applies, an economic value may have to be determined. That is what we have termed "usefulness".

A closing balance sheet of the ROF trading fund will be prepared and audited by the National Audit Office and published. An opening balance sheet of the new company will be published as soon as possible after vesting day. Publication of the opening and closing balance sheets is important, so that Parliament will be able to look at both of them and have any discrepancies between the two explained. It will be for the Secretary of State to satisfy himself, so that he can satisfy Parliament, that full value in terms of the issue of securities in return for assets transferred has been secured for the taxpayer.

A number of hon. Members have mentioned the Coopers and Lybrand report. Coopers and Lybrand has been producing long form reports on all divisions of the group and on the group as a whole. They are being used in the production of a company business plan. None of the information in those documents will be in the scheme or be made public—they are commercially confidential—but the information, updated, will be used for prospectus purposes when we move to flotation. The yellow book rules of the stock exchange will then apply.

Valuation principles are not the subject of the Coopers and Lybrand report. They are for discussion between the Ministry, the Treasury and the ROFs, in which Coopers and Lybrand is retained as adviser.

Mr. Denzil Davies

Will the hon. Gentleman answer my question? Will the schedule include the money values of the assets being transferred? Will the value of plant and machinery, Land or intellectual property be set out? The answer must be yes or no.

Mr. Lee

The answer is no. I shall come to the specific point about intellectual property.

The new company will obtain services and facilities from the Ministry. They will be provided on an arm's length basis, in the same way as they would be provided to any other company seeking to use Ministry facilities, such as the proving ranges. They will be governed by contracts and the full cost of the services will be recovered. If the ROF company prefers, it will be free to provide its own facilities or to obtain them elsewhere. That will be a decision for the company.

Mr. Robert Atkins

Will my hon. Friend mention the preferred source arrangement, which is part and parcel of the problem to which the right hon. Member for Llanelli (Mr. Davies) referred?

Mr. Lee

The preferred sources arrangement is gradually being phased out and will certainly have ended before vesting day when we move to a policy of competition.

Most people assume that preferred sourcing will always work to the disadvantage of the ROFs, but it will work to their advantage in some cases because they will be able to participate in the tendering for certain contracts from which they were originally excluded.

The right hon. Member for Llanelli (Mr. Davies) mentioned the property in Egypt. The offices are loaned by the Egyptian Government and the only trading fund assets are are some filing cabinets, a typewriter, an air conditioning unit and a car. It is expected that those assets should not prove too difficult to value.

The right hon. Gentleman also mentioned the 600 railway wagons. They are jointly owned by the ROF trading fund and the Ministry. Their future management and deployment—not their ownership—is being studied.

I was asked about the agency factories. The three agency factories at Powfoot, Featherstone and Summerfield are managed in accordance with agreements that define the terms of the agency. Those agreements will be transferred to the ownership of the new company by the scheme. Therefore, the management of those factories will not change, and nor will the basis on which they operate.

The articles of association are available. They are filed at the companies registry in Cardiff, but contain only basic detail. I shall ensure that a copy is made available in the Library.

Intellectual property rights include patents, registered designs, trade marks, copyrights, other property rights in inventions, designs, drawings and technical information. It is essential that the new company secures access to the IPRs that it will need to carry on its work. It has been decided that outright ownership of the IPRs, rather than a mere licence to use them, would benefit the company, by making it self-sufficient and securely established in its field.

The IPRs will be transferred to the holding company by the initial scheme, which will come into effect on vesting day. The group structure of the new ROF organisation will mean that the subsidiary companies of Royal Ordnance plc will be able to use the relevant IPRs freely. The Ministry will retain free rights in the IPRs transferred. In addition to specific reservations in favour of the Ministry, the Crown possesses a statutory right to use any patent for Government purposes. Finally, the rights of employees in respect of intellectual property will not be affected by the transfer.

I was asked about the list of the IPRs. That is being prepared and, subject to the caveat of security, will be published in the spring.

Mr. Ashdown

In February the Minister promised us that list within two or three months. Now he says that he will publish it in the scheme, which will not come out until vesting day. How does he square those two statements?

Mr. Lee

We hope that vesting day will be fairly soon anyway, but the ROFs have a long and distinguished history and there are several hundred IPRs to be dealt with. The work is well under way.

Mr. Fisher

Will the Government be giving a cash value to the intellectual property rights, and will they be specified on publication of the scheme? The Minister made an extraordinary admission when he said that all these public assets were being transferred without a single cash value being attached to them. Have even the principles of valuation been established? The hon. Gentleman referred to them, but it does not appear from what he said that the Ministry yet knows what those principles will be.

Mr. Lee

I understand that no specific valuation will be placed on the IPRs, because they will be transferred to the new holding company, which needs them to generate future trade, turnover and profits.

When we move towards privatisation, which we have always said is most likely to be carried out through a flotation — probably in 18 months to two years — the business will be valued on some form of earnings basis.

Mr. Denzil Davies

On an asset basis.

Mr. Lee

No, not on an asset basis. The assets will obviously be taken into account, as will the IPRs. Essentially, those rights are needed to generate turnover, revenue and profits.

I do not want to deal with pensions on this amendment, but I shall try to answer the question put to me by my hon. Friend the Member for South Ribble (Mr. Atkins). I know about his interest in the matter, because I visited his local factory at Chorley at the end of last week. A period of grace will be allowed in which employees can make up their minds whether to transfer accrued benefits. It may not be as much as six months, but it will be a reasonable period.

7 pm

Mr. Straw

I have been trying to digest the Minister's words about intellectual property rights. Is it not the case that intellectual property rights will be among the principle assets of the new, privatised, hived-off ROFs? I am thinking of what the factories design and make on the basis of what people have thought out. Is it not scandalous that a low cash value should be put on the fundamental asset of the organisation?

Mr. Lee

No, it is not. The vast majority of companies do not carry such assets—the IPRs and patents—in their own balance sheets with a high value on them. Most companies write such things down to a very small figure. It is essential that the companies should retain them, because it is from the IPRs, the expertise and skills, the personnel, and patent rights that turnover, revenue and profits are generated. Ultimately, the valuation of the individual ROF subsidiaries and the whole flotation will depend on the earnings generated from the IPRs. Valuation will come through in overall terms and will flow back to the taxpayer.

Finally, I move to the question of ROF security, which has engendered considerable interest. The hon. Member for Walsall South, specialises, in the nicest way, in this subject. We have taken powers in the Bill to enable the MOD police to remain at ROF sites for as long as we consider necessary, but in the longer term we intend that the ROF's will set up their own company guard force to take up the responsibility of guarding ROF premises where this is considered appropriate.

A number of detailed questions have been asked about the organisation and training of the new company guard force. I am afraid that it is still too early to give full answers to these questions. The Ministry of Defence will be liaising very closely with the ROFs on the question of recruiting and training such a guard force, with the aim of creating a reliable and efficient system.

The new company guard force will not be armed, but I believe that the different value of the access of MOD police to firearms should not be over-rated. Security arrangements will have to be cleared with local police authorities, and contingency plans will be made for civil police support where necessary at each of the sites. There are arrangements for the civil police to draw arms should the situation so warrant, and contingency plans will include the possible need to call upon armed police.

As the new company guard force is built up, liaison arrangements with the existing MOD police guarding each site will be worked out. I should emphasise that MOD policemen will remain subject to the ultimate control of the Secretary of State for Defence and that command and control arrangements will reflect this chain of command.

The report of the Defence Committee recognised that decisions about the withdrawal of MOD police from the less sensitive sites would need to be taken on a case-by-case basis, and that at some ROF sites the police could sensibly be withdrawn. Schedule 3 to the Bill gives us the flexibility to take these decisions as circumstances —including threat assessments—warrant.

The Government will be submitting their observations on the Defence Committee report shortly, but no final decisions have yet been taken, and we will be examining the security questions most carefully over the next year or so.

Mr. George

I may have misheard the Minister. Is he saying that the new guard forces will not have access to arms? Even if they were swiftly called to the scene of a major robbery, the police could be five, 10 or even 15 minutes away. Surely there should be a proper deterrent force, and access to arms to deter potential terrorists should be a prerequisite for guarding arrangements.

Mr. Lee

On particularly vulnerable sites it is likely that our own MOD police will stay for a very long time and existing arrangements will continue to apply.

We have spent many hours in discussion—a couple of hours today, in Committee and on Second Reading. There has been consideration by both Houses. We have covered many aspects of privatisation. I now ask the House to disagree with the amendment.

Question put,

That this House doth disagree with the Lords in the said amendment:—

The House divided: Ayes 258, Noes 189.

Division No. 470]	[7.04 pm
AYES
Adley, Robert	Coombs, Simon
Aitken, Jonathan	Cope, John
Alison, Rt Hon Michael	Cormack, Patrick
Amess, David	Corrie, John
Ancram, Michael	Couchman, James
Arnold, Tom	Critchley, Julian
Ashby, David	Crouch, David
Aspinwall, Jack	Currie, Mrs Edwina
Atkins, Robert (South Ribble)	Dickens, Geoffrey
Baker, Rt Hon K. (Mole Vall'y)	Dorrell, Stephen
Baker, Nicholas (N Dorset)	Douglas-Hamilton, Lord J.
Banks, Robert (Harrogate)	du Cann, Rt Hon Edward
Batiste, Spencer	Dunn, Robert
Beaumont-Dark, Anthony	Durant, Tony
Bellingham, Henry	Dykes, Hugh
Bendall, Vivian	Eggar, Tim
Benyon, William	Emery, Sir Peter
Bevan, David Gilroy	Evennett, David
Biffen, Rt Hon John	Eyre, Sir Reginald
Biggs-Davison, Sir John	Fallon, Michael
Blaker, Rt Hon Sir Peter	Farr, Sir John
Body, Richard	Favell, Anthony
Bonsor, Sir Nicholas	Finsberg, Sir Geoffrey
Boscawen, Hon Robert	Forman, Nigel
Bottomley, Mrs Virginia	Forsyth, Michael (Stirling)
Bowden, Gerald (Dulwich)	Fox, Marcus
Boyson, Dr Rhodes	Franks, Cecil
Braine, Sir Bernard	Fraser, Peter (Angus East)
Brandon-Bravo, Martin	Galley, Roy
Bright, Graham	Garel-Jones, Tristan
Brinton, Tim	Glyn, Dr Alan
Brittan, Rt Hon Leon	Gow, Ian
Brown, M. (Brigg & Cl'thpes)	Gower, Sir Raymond
Browne, John	Grant, Sir Anthony
Bruinvels, Peter	Greenway, Harry
Bryan, Sir Paul	Gregory, Conal
Buck, Sir Antony	Griffiths, E. (B'y St Edm'ds)
Burt, Alistair	Grist, Ian
Butler, Hon Adam	Grylls, Michael
Butterfill, John	Gummer, John Selwyn
Carlisle, John (N Luton)	Hamilton, Hon A. (Epsom)
Carlisle, Kenneth (Lincoln)	Hamilton, Neil (Tatton)
Carlisle, Rt Hon M. (W'ton S)	Hampson, Dr Keith
Carttiss, Michael	Hannam, John
Cash, William	Hargreaves, Kenneth
Chalker, Mrs Lynda	Harris, David
Channon, Rt Hon Paul	Haselhurst, Alan
Chapman, Sydney	Hayward, Robert
Chope, Christopher	Heathcoat-Amory, David
Clark, Sir W. (Croydon S)	Heddle, John
Clarke, Rt Hon K. (Rushcliffe)	Henderson, Barry
Colvin, Michael	Hicks, Robert
Conway, Derek	Higgins, Rt Hon Terence L.

Hill, James	Price, Sir David
Hind, Kenneth	Proctor, K. Harvey
Hirst, Michael	Raffan, Keith
Holland, Sir Philip (Gedling)	Renton, Tim
Hordern, Peter	Rhodes James, Robert
Howell, Ralph (N Norfolk)	Rhys Williams, Sir Brandon
Hubbard-Miles, Peter	Ridsdale, Sir Julian
Hunt, David (Wirral)	Rippon, Rt Hon Geoffrey
Hunter, Andrew	Roberts, Wyn (Conwy)
Jessel, Toby	Robinson, Mark (N'port W)
Johnson Smith, Sir Geoffrey	Rossi, Sir Hugh
Jones, Gwilym (Cardiff N)	Rost, Peter
Jones, Robert (W Herts)	Rumbold, Mrs Angela
Kershaw, Sir Anthony	Ryder, Richard
King, Roger (B'ham N'field)	Sackville, Hon Thomas
Knight, Mrs Jill (Edgbaston)	Shaw, Giles (Pudsey)
Knowles, Michael	Shaw, Sir Michael (Scarb')
Knox, David	Shelton, William (Streatham)
Lawrence, Ivan	Shepherd, Colin (Hereford)
Lawson, Rt Hon Nigel	Shepherd, Richard (Aldridge)
Lee, John (Pendle)	Silvester, Fred
Leigh, Edward (Gainsbor'gh)	Sims, Roger
Lennox-Boyd, Hon Mark	Smith, Sir Dudley (Warwick)
Lewis, Sir Kenneth (Stamf'd)	Smith, Tim (Beaconsfield)
Lightbown, David	Soames, Hon Nicholas
Lilley, Peter	Speller, Tony
Lloyd, Ian (Havant)	Spence, John
Lloyd, Peter, (Fareham)	Spencer, Derek
Lord, Michael	Spicer, Jim (W Dorset)
Luce, Richard	Spicer, Michael (S Worcs)
Lyell, Nicholas	Squire, Robin
McCrindle, Robert	Stanbrook, Ivor
McCurley, Mrs Anna	Stern, Michael
MacGregor, John	Stevens, Lewis (Nuneaton)
MacKay, John (Argyll & Bute)	Stevens, Martin (Fulham)
Maclean, David John	Stewart, Andrew (Sherwood)
McQuarrie, Albert	Stokes, John
Madel, David	Stradling Thomas, J.
Major, John	Sumberg, David
Malins, Humfrey	Tapsell, Peter
Malone, Gerald	Taylor, John (Solihull)
Maples, John	Taylor, Teddy (S'end E)
Marland, Paul	Temple-Morris, Peter
Marlow, Antony	Thomas, Rt Hon Peter
Mates, Michael	Thompson, Donald (Calder V)
Mather, Carol	Thompson, Patrick (N'ich N)
Mawhinney, Dr Brian	Thorne, Neil (Ilford S)
Mayhew, Sir Patrick	Thurnham, Peter
Merchant, Piers	Townsend, Cyril D. (B'heath)
Meyer, Sir Anthony	Twinn, Dr Ian
Miller, Hal (B'grove)	van Straubenzee, Sir W.
Mills, Iain (Meriden)	Vaughan, Sir Gerard
Mills, Sir Peter (West Devon)	Waddington, David
Miscampbell, Norman	Waldegrave, Hon William
Mitchell, David (NW Hants)	Walker, Bill (T'side N)
Moate, Roger	Wall, Sir Patrick
Monro, Sir Hector	Waller, Gary
Montgomery, Fergus	Walters, Dennis
Morris, M. (N'hampton, S)	Ward, John
Morrison, Hon C. (Devizes)	Wardle, C. (Bexhill)
Moynihan, Hon C.	Warren, Kenneth
Needham, Richard	Watson, John
Nelson, Anthony	Watts, John
Neubert, Michael	Wells, Bowen (Hertford)
Newton, Tony	Wells, Sir John (Maidstone)
Norris, Steven	Wheeler, John
Onslow, Cranley	Whitfield, John
Ottaway, Richard	Wiggin, Jerry
Page, Richard (Herts SW)	Winterton, Nicholas
Parkinson, Rt Hon Cecil	Wolfson, Mark
Patten, Christopher (Bath)	Wood, Timothy
Patten, John (Oxford)	Yeo, Tim
Pawsey, James	Young, Sir George (Acton)
Pollock, Alexander	Younger, Rt Hon George
Porter, Barry
Powell, William (Corby)	Tellers for the Ayes:
Powley, John	Mr. Ian Long and
Prentice, Rt Hon Reg	Mr. Tim Sainsbury.

NOES
Adams, Allen (Paisley N)	Hamilton, W. W. (Central Fife)
Alton, David	Hardy, Peter
Anderson, Donald	Harman, Ms Harriet
Archer, Rt Hon Peter	Harrison, Rt Hon Walter
Ashdown, Paddy	Hattersley, Rt Hon Roy
Ashton, Joe	Healey, Rt Hon Denis
Atkinson, N. (Tottenham)	Heffer, Eric S.
Banks, Tony (Newham NW)	Hogg, N. (C'nauld & Kilsyth)
Barnett, Guy	Holland, Stuart (Vauxhall)
Barron, Kevin	Home Robertson, John
Beith, A. J.	Howells, Geraint
Bell, Stuart	Hoyle, Douglas
Benn, Tony	Hughes, Robert (Aberdeen N)
Bennett, A. (Dent'n & Red'sh)	Hughes, Roy (Newport East)
Bermingham, Gerald	Hughes, Sean (Knowsley S)
Bidwell, Sydney	Hughes, Simon (Southwark)
Blair, Anthony	Janner, Hon Greville
Boothroyd, Miss Betty	John, Brynmor
Boyes, Roland	Johnston, Russell
Bray, Dr Jeremy	Jones, Barry (Alyn & Deeside)
Brown, Gordon (D'f'mline E)	Kaufman, Rt Hon Gerald
Brown, Hugh D. (Provan)	Kennedy, Charles
Brown, N. (N'c'tle-u-Tyne E)	Kilroy-Silk, Robert
Brown, Ron (E'burgh, Leith)	Kinnock, Rt Hon Neil
Bruce, Malcolm	Kirkwood, Archy
Buchan, Norman	Lambie, David
Caborn, Richard	Leadbitter, Ted
Callaghan, Jim (Heyw'd & M)	Lewis, Ron (Carlisle)
Campbell, Ian	Lewis, Terence (Worsley)
Campbell-Savours, Dale	Litherland, Robert
Canavan, Dennis	Lofthouse, Geoffrey
Carlile, Alexander (Montg'y)	Loyden, Edward
Carter-Jones, Lewis	McCartney, Hugh
Cartwright, John	McDonald, Dr Oonagh
Clark, Dr David (S Shields)	McKay, Allen (Penistone)
Clarke, Thomas	McKelvey, William
Clay, Robert	Mackenzie, Rt Hon Gregor
Clwyd, Mrs Ann	McNamara, Kevin
Cocks, Rt Hon M. (Bristol S.)	McTaggart, Robert
Cohen, Harry	Madden, Max
Conlan, Bernard	Marek, Dr John
Cook, Frank (Stockton North)	Martin, Michael
Cook, Robin F. (Livingston)	Mason, Rt Hon Roy
Corbett, Robin	Maxton, John
Cowans, Harry	Maynard, Miss Joan
Cox, Thomas (Tooting)	Meacher, Michael
Craigen, J. M.	Meadowcroft, Michael
Crowther, Stan	Michie, William
Cunliffe, Lawrence	Mikardo, Ian
Dalyell, Tam	Millan, Rt Hon Bruce
Davies, Rt Hon Denzil (L'lli)	Miller, Dr M. S. (E Kilbride)
Davies, Ronald (Caerphilly)	Mitchell, Austin (G't Grimsby)
Davis, Terry (B'ham, H'ge H'l)	Molyneaux, Rt Hon James
Deakins, Eric	Morris, Rt Hon J. (Aberavon)
Dewar, Donald	Oakes, Rt Hon Gordon
Dormand, Jack	O'Brien, William
Douglas, Dick	O'Neill, Martin
Dover, Den	Orme, Rt Hon Stanley
Duffy, A. E. P.	Park, George
Dunwoody, Hon Mrs G.	Parry, Robert
Eadie, Alex	Patchett, Terry
Edwards, Bob (W'h'mpt'n SE)	Pavitt, Laurie
Ellis, Raymond	Pendry, Tom
Evans, John (St. Helens N)	Penhaligon, David
Ewing, Harry	Pike, Peter
Fatchett, Derek	Powell, Rt Hon J. E. (S Down)
Faulds, Andrew	Powell, Raymond (Ogmore)
Field, Frank (Birkenhead)	Prescott, John
Fields, T. (L'pool Broad Gn)	Radice, Giles
Fisher, Mark	Randall, Stuart
Foot, Rt Hon Michael	Redmond, M.
Foster, Derek	Richardson, Ms Jo
Foulkes, George	Roberts, Allan (Bootle)
Fraser, J. (Norwood)	Roberts, Ernest (Hackney N)
Garrett, W. E.	Robertson, George
George, Bruce	Rogers, Allan
Godman, Dr Norman	Rooker, J. W.
Golding, John	Rowlands, Ted
Hamilton, James (M'well N)	Sedgemore, Brian

Sheerman, Barry	Tinn, James
Sheldon, Rt Hon R.	Torney, Tom
Shore, Rt Hon Peter	Wallace, James
Short, Mrs R. (W'hampt'n NE)	Wareing, Robert
Silkin, Rt Hon J.	Weetch, Ken
Skinner, Dennis	Welsh, Michael
Smith, C.(Isl'ton S & F'bury)	White, James
Smith, Rt Hon J. (M'kl'ds E)	Williams, Rt Hon A.
Snape, Peter	Wilson, Gordon
Soley, Clive	Winnick, David
Spearing, Nigel	Winterton, Mrs Ann
Steel, Rt Hon David	Woodall, Alec
Stewart, Rt Hon D. (W Isles)	Young, David (Bolton SE)
Stott, Roger
Straw, Jack	Tellers for the Noes:
Thomas, Dr R. (Carmarthen)	Mr. John McWilliam and Mr. Frank Haynes.
Thompson, J. (Wansbeck)
Thorne, Stan (Preston)

Question accordingly agreed to.

Lords amendment: No. 2, in page 1, line 9, leave out "or to different companies"

Mr. Butler

I beg to move, That this House doth agree with the Lords in the said amendment.

Before I explain why the Government have had what might appear to be a change of heart, I wish to thank the right hon. Member for Llanelli (Mr. Davies) and other hon. Members for their kind remarks about me. The arrows were somewhat barbed by the time they reached me, but I appreciated the sentiments.

The House may wonder why we are asking it to agree to this amendment when we asked it to disagree with the previous amendment. The effect of the amendment would be to restrict the power of my right hon. Friend to transfer property rights and liabilities by an initial scheme to more than one company. The Government have been concerned to ensure maximum flexibility in the operation of the powers conferred by the Bill. The establishment of the ROFs as an independent commercial company necessitated the making of many decisions on the form and structure of the new organisation.

When the Bill was introduced, no decisions had been taken whether the most favourable structure would be a single company organised in divisions, a holding company with subsidiaries or a number of separate, autonomous companies. The Bill was drafted with commendable prudence to enable any of those possible courses to be taken in the light of further consideration.

I know that the employees of the ROFs have always been concerned that the organisation should continue to operate as a whole after it is established as a public limited company. We have attached particular importance to that concern as it came from those most directly affected. Nevertheless, it was also the case that commercial considerations could suggest an organisational structure which conflicted with the one company approach. In Committee we resisted an amendment on similar lines, and, indeed, we resisted this amendment in the other place.

On 24 July my hon. Friend the Member for Chertsey and Walton (Mr. Pattie) announced that the Government would ask the House to disagree with the amendment when the Bill returned to this House. However, we have reconsidered the matter. The company structure which we have decided on as the best one to meet all relevant considerations is that of a holding company and subsidiary companies. The subsidiary companies will, however, act only as divisions of the holding company. They will be agent subsidiaries, and no property will be vested in them. They will trade not on their own account, but on behalf of the holding company. Strictly speaking, the profits they make will be not their own profits, but those of the holding company. This structure will enable the group to be managed as a whole. Decisions affecting the whole will be taken centrally, but decisions affecting only one or other of the divisions can be taken and implemented locally. We believe that this structure provides the best combination of central and devolved management.

Consequently, all ROF trading fund property will be vested in the holding company. The Government are therefore now willing to accept the amendment. We recognise that in making the initial scheme, my right hon. Friend the Secretary of State will be constrained to transfer property from the trading fund to one company only. That is what he intends to do, and the Government are willing that that intention should be given legislative form. The employees of the royal ordnance factories, and others, can now be assured that the transfer of assets from the trading fund will not result in a break up of the existing organisation. We hope that the Government's acceptance of the amendment will be welcomed by those who have doubted our intentions in the matter.

I must, however, make it clear to the House that acceptance of the amendment does not necessarily mean that my right hon. Friend will not at some time in the future be able to transfer property from the holding company to another, whether that other is one of the existing subsidiaries, or a different, quite separate, company. There is nothing in the amendment to prevent that from being done. The power to transfer property by a subsequent scheme from a company which received it under an earlier scheme to another company is contained in clause 1(1)(b). The amendment to subsection (1)(a) does not affect that power.

It is important to mention this to avoid any future misunderstandings. The Government are willing to accept, the amendment and to submit to a formal constraint on the ambit of the initial transfer. Once the royal ordnance factories are established as a single commercial entity, however, there must be freedom to take account of commercial considerations.

As for the eventual means of privatisation, it is only prudent to retain flexibility. However, there is no present intention, nor present expectation, that any part of the existing organisation will be sold off separately. We have said, and I repeat, that the most likely method of introducing private capital into this venture is by way of a flotation of shares in the whole. The timing will depend on many factors, and it is impossible at this stage to be precise about it. Above all, the company — its management and work force — will have to come to terms with the challenges and opportunities of a truly commercial environment.

With that brief explanation, I commend the amendment to the House. I hope that my hon. Friends and Opposition Members will support it.

Mr. Denzil Davies

I do not intend to be churlish, because the right hon. Gentleman made clear the limitations of the amendment. We welcome the Government's acceptance of the amendment, as far as it goes. As the Minister said, the amendment means that the words "different companies" in the original Bill are unnecessary because the Government will transfer all the assets to one company.

With all the problems facing the Secretary of State of transferring all the assets to one company, I can see why the Government do not wish to transfer some assets to one company and some to another. The problems of evaluation would be even greater than they are now. Expediency triumphed in this case. I accept that everyone will be pleased about that, but we all know that the day after vesting day the Secretary of State can do what he likes. He owns all of the shares and the Bill deals only with what happens up to vesting day. After that he has complete discretion.

When we debated the amendment in Committee, we did not press it to a Division. It was debated again in the other place and eventually accepted. The spirit, if that is the right word, behind the amendment was that the ordnance factories should not be broken up through privatisation by vesting day. The amendment cannot apply beyond vesting day, because that is as far as the Bill goes. We cannot provide for that in the Bill, and the amendment does not provide for it either.

Behind the amendment is the belief and conviction that, if the Government privatise the industry—we disagree with that—they must not sell off the ordnance factories piecemeal; for example, they must not sell off the ammunitions subsidiary separately. I can see the temptation to do that. We have heard that the work level may not be as high over the next few years as it has been, that there may be redundancies and that profits may not be good. One subsidiary — ammunitions will be the largest division in terms of numbers, though perhaps not in terms of profits—may be more acceptable to buyers than another; for example, vehicles.

If the Government feel that they cannot sell all the divisions or float a large percentage of shares in the holding company, I can see the temptation to sell, for example, the ammunitions subsidiary separately to someone who wishes to acquire it. We would oppose that. Before the flotation takes place—I expect that there will be at least a statement—we shall use every available procedure to stress that point.

We do not want the ordnance factories sold as separate subsidiary companies or separate divisions. If a percentage of shares is to be sold, we would prefer it to be done as an entity. The Government may prefer that, but with such events as the fall in stock market prices, higher interest rates, the pound going through the floor, and other things that might occur during the coming months, the Government may be tempted to sell the profitable parts and retain or close down the loss-making parts.

We are glad that the Government have at least accepted the amendment. It does not go far, but it is better than nothing.

Mr. George

When I listened to the beginning of the Minister's speech, I thought that after a great deal of debate and pressure we were going to achieve something, but as the speech unfolded I could not understand the Government's motive in making the concession. I was sceptical.

I remember talking to a friend who works in the security business and is involved in debugging. I asked him how many bugs he had found and he said "Four and a half." I asked him what the half was, and he said that he searched and searched because he knew that there was a bug but he could not find it.

During the Minister's speech I wondered what the Government's motives were in making the concession. As the Minister's speech evolved it was obvious that the reason why they made the concession was that they were giving nothing away. The Minister was like a magician pulling something out of a hat, giving the illusion of concession, but in fact giving no concession at all. The Minister clearly wished the message to go out that anyone wishing to participate in the sale of the century of this major Government enterprise would still be able to do so.

7.30 pm

I have several motives for hoping that the Government will consider selling the ROFs as a whole. First, I want the companies to be maintained as a separate entity because the ordnance factories are interdependent. They are part of a system, and many ordnance factories produce the overwhelming majority of their output for other ordnance factories. I understand that 95 per cent. of the output of the Featherstone agency factory and 72 per cent. of the output of Bridgwater factory goes to other ROFs. The companies are linked. One company may appear to be unprofitable, but its profitability must be considered in relation to other factories in the system.

The Minister is saying, "We accept the amendment, but it will make no difference, because when the time comes we can transfer from the holding company to the divisions." The Government are looking forward to the day when they can offer to a major investor the opportunity of buying a fine job lot. However, I wonder whether, commercial practice being what it is, any prospective purchaser will wish to buy the lot. Prospective purchasers will consider the assets, see where the bargains are, see where the valuations are low, see where the Government have granted major contracts, see where the winners are, and go for those. But the companies which may be vital to our national security may not be profitable, and buyers will avoid them like the plague. The bigger and more profitable companies will be like ripe plums on a tree, while the remainder will collapse, with the loss of many jobs.

The companies should be kept together because they are interdependent, but I fear that that will not happen. We are already hearing of prospective buyers eyeing the more profitable parts of the ROF system.

Another, purely political, reason why I wish the companies to be kept together is that it would be far simpler for a future Labour Government to reintegrate them into the public sector than it would be if the companies were sold in droplets. I cannot commit the Labour party to anything, but I hope that a future Labour Government will have a high commitment to reintegrating the companies into the public sector, where they belong.

Mr. Lee

Will the hon. Gentleman concede, in fairness, that in all the debates we have had on this issue the Government have repeatedly emphasised their intention to move towards privatisation in the form of a flotation of the whole? We have accepted that there is a thin possibility of sales of the individual divisions, but we have continually emphasised that the most likely form of privatisation is a flotation of the whole in due course, for the obvious reasons which the hon. Gentleman outlined.

Mr. George

If the Minister is correct, in two or three years' time I shall humbly apologise for misjudging him and his colleagues.

Mr. Golding

I hope that my hon. Friend will not apologise. Words such as "most likely" and "thin possibility" are not words of the sort that can be used when talking to people whose jobs and livelihoods are at risk.

Mr. George

I am not grateful for my hon. Friend's intervention because I was halfway through the point that I was trying to make to the Minister, which is that if he is proved to be right in two or three years from now, I will apologise. However—I assure my hon. Friend that I am not as gullible as he might believe — I believe that, despite the assurances, the companies will be sold off in parts because I cannot envisage a prospective purchaser buying the lot. That is a simple fact of life, and I suspect that if the Minister remains in his present position for a few years I shall not have to eat humble pie. I am pretty certain that my analysis is correct.

I am sorry to bore the House with a few more sentences on security, but it is logical from a security point of view that the companies should remain united. At present, Ministry of Defence police can be transferred easily among the companies in the ROF system because they are part of the same employing category. They are part of the ordnance factories and can be transferred in the event of manpower shortages or crises. It is an illusion to claim that the police will bail out the new security force. I have visited an ordnance factory and several private defence establishments. It would be more than possible for a clever burglar or a dedicated terrorist to get into a badly guarded factory, remove sensitive and dangerous armaments and to get away before the police panda car or the policeman with his truncheon arrives on the scene. That would be a wholly inadequate response.

The present arrangement—that Ministry of Defence police have access to armaments—is a deterrent, but from what the Minister said it would appear that they will not have access to arms under the new arrangements, except in some factories. I am delighted that Ministry of Defence police will remain in some factories — I presume that the factory at Enfield will be one—but I must repeat to the Minister that all ordnance factories manufacture equipment which could be of great advantage to a prospective terrorist. A robbery at one factory might be inadequate, but simultaneous robberies at several factories would enable terrorists to match sets of equipment and to produce instruments of destruction. With the present unity of ordnance factories there is likely to be security reinforcement among them all.

I fear that the companies will be sold and that the Ministry of Defence will have no power over them. A private company that buys an ordnance factory will say, "We shall operate the security arrangements which we believe to be appropriate." If the Minister believes that may private defence factories have adequate security arrangements, I shall tell him privately that, based on my experience that analysis is exceedingly naive.

I have used security as one reason why the ordnance factories must be kept together. I suppose that historians or political scientists studying our proceedings over the last 10 months may say that the Government having made a concession shows the power of the Back Bencher. If political scientists read the Minister's speech with double care, they will find that the concession is marginal. It may be a credit to the Opposition, but it is clear from what the Minister said that he is reassuring people outside the House that if they wish to buy the lot, the acceptance of the amendment will not alter one jot, the Government's intention to sell the lot. The amendment is hardly a victory, but we are grateful for the Minister's honesty when he said that the concession was of minimal importance.

Question put and agreed to.

Lords amendments Nos. 3 and 4 agreed to.