Land Rover-Leyland

HC Deb 24 April 1986 vol 96 cc443-52

Mr. Speaker

I call the Secretary of State for Trade and Industry.

Mr. Dave Nellist (Coventry, South East)

On a point of order, Mr. Speaker.

Mr. Speaker

I shall take the point of order later.

Mr. Nellist

It is on this matter.

Mr. Speaker

The hon. Gentleman has not been rising to ask a question, but I shall take his point of order.

Mr. Nellist

On a point of order, Mr. Speaker. Is it in order for the Secretary of State for Trade and Industry to seek this afternoon to make a statement on British Leyland which, I understand, is to make no mention of the fact that on Monday this week part of the British Leyland truck and bus operations, Self-Changing Gears in Coventry, was sold to Cummins Engine in America, and four days after that sale there is still no report to the House of Commons on that part of a British nationalised industry that has been privatised.

Mr. Speaker

Order. I am not certain that we can know what the Secretary of State will say.

4.27 pm

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Paul Channon)

With your permission, Mr. Speaker, I should like to make a statement.

When I made my statement to the House on 25 March following the ending of the talks between BL and GM on the privatisation of the main Land Rover-Leyland businesses, I made it clear that BL would continue to study alterntive ways forward for all the businesses concerned. In the particular case of Land Rover and Freight Rover, BL asked for proposals to be made by 15 April. As the House is aware, four proposals were received. These were from Aveling Barford in respect of Land Rover and Range Rover; J. C. Bamford in respect of Land Rover, Range Rover and possibly Freight Rover; Lonrho in respect of Land Rover and Range Rover; Schroders, acting for a management and institutional consortium, for Land Rover, Range Rover and Freight Rover.

The BL board has carefully considered these proposals and has weighed them against the option of retaining Land Rover and Freight Rover within BL for a possible flotation or trade sale at a later date. The board has concluded, on both commercial and industrial grounds, that retention of the businesses within BL pending a later sale presents a more attractive option for BL than any of the bids which have been received. The board has therefore recommended to the Government that none of the bids be pursued and that the companies be retained within BL while preparations for future privatisation are made. The Government have accepted the board's recommendation.

Mr. John Smith (Monklands, East)

Does the Secretary of State realise that this latest Government climbdown represents a humiliating and total reversal of their misguided policy to sell off the Austin Rover Group, Leyland Truck and Land Rover? Does he appreciate that, were it not for the exposure of the Government's furtive negotiations with General Motors and Ford and the forceful expressions of parliamentary—[Interruption.]

Mr. Speaker

Order.

Mr. Smith

Conservative Members may not like this, but they have to listen to it.

Does the right hon. Gentleman appreciate that, were it not for the forceful expressions of parliamentary and public opinion which forced the Government, especially the Chancellor of the Duchy of Lancaster, who is the leader of the Conservative party organisation, to get cold feet, the crucial remaining parts of the British motor vehicle industry would this day be under foreign ownership and control?

Should not the Secretary of State now apologise to the British Leyland Group for the damaging uncertainty, calculated in thousands of orders and tens of millions of pounds, which the Government have caused by their foolish actions? Is it not clear that the question of other bidders being considered for various parts of British Leyland was a blind in that, when General Motors and Ford ceased to be involved, the whole project collapsed?

Should not the Government end the remaining uncertainty which will be caused by references to a trade sale and a possible flotation, which puts the matter not so much on ice as on melting ice, and announce that between now and the next general election there will be no question of disposing of these British Leyland businesses? I ask the Secretary of State specifically whether the Government have any intention of resuming negotiations with General Motors and Ford before the next election. Will the right hon. Gentleman give a specific answer?

Does not this whole sorry episode, which goes back as far as August 1984 and which has today come to a partial—I hope a final—conclusion, demonstrate the total unfitness and incompetence of a series of Secretaries of State and of the Government as a whole to take on the serious responsibilities for British industry which were put upon them and which they have pitifully failed to discharge?

Mr. Channon

As usual, the right hon. and learned Gentleman grossly exaggerates the case he puts to the House. I strongly refute his allegations. I explained to the House on 25 March the exact procedures that the Government would follow after my statement and what would happen. We received four bids which British Leyland carefully considered. They were serious bids and were seriously considered. The Government seriously considered the recommendations by the BL board. I and the BL board believe that, commercially and industrially, the best future for this company will result from a flotation or trade sale in a year or two years' time when the company's financial situation is better than it is. That must be commercially, industrially and financially right, and I hope that the whole House welcomes it. I made GM's position clear in my statement of 25 March. Nothing has changed.

Mr. Kenneth Warren (Hastings and Rye)

I am sure that my right hon. Friend is very much aware of the substantial investment requirements of the BL group. Will he therefore give an assurance that those investment plans will be supported by the Government without reservation until we can step forward with privatisation?

Mr. Channon

The investment plans of the BL board will be considered in the context of the corporate plan in the normal way. I take note of my hon. Friend's views.

Mr. Terry Davis (Birmingham, Hodge Hill)

Surely the right hon. Gentleman is aware of the damage caused to BL, especially Freight Rover and Land Rover, by the uncertainty in the past three months—uncertainty which will continue indefinitely because of the right hon. Gentleman's statement that these parts of BL will be sold at some time in the future? What will the right hon. Gentleman do to compensate BL for that damage? Why will not the Government simply drop their pig-headed insistence on selling off the most profitable parts of BL and let the people who work at Freight Rover and Land Rover get on with the job of making and selling vehicles at a profit without constantly looking over their shoulders at what the Government are doing behind their backs?

Mr. Channon

The hon. Gentleman is trying to say that uncertainty remains. The proposal to privatise these parts of British Leyland has been known for years. That is not new. There is no new uncertainty. There will now be a period of stability. I am certain that I am acting in the interests of the companies as a whole.

Mr. John Mark Taylor (Solihull)

Is my right hon. Friend aware of the hopes and fears aroused in my constituency since the end of January? Whereas the prospect of Land Rover's privatisation will be welcome, the failure to take up the management buy-out will be seen as a missed opportunity, uniquely consistent as it was with the Conservative party's manifesto and backed up by trade union investment.

Mr. Channon

Of course I understand my hon. Friend's views. Naturally, the management proposals were considered extremely carefully, but the BL board concluded that the management proposals, and the other bids, did not represent the best course in the company's commercial, industrial or financial interests. In view of that recommendation, which was strongly supported by the board, the Government felt it right to pursue this course.

Mr. Paddy Ashdown (Yeovil)

Is not the scandal of this sorry affair the fact that foreign companies were able to see the advantage of investing in Britain which our Government were not able to see because of their short-term perspective? Will the right hon. Gentleman undertake to look at the possibility of European collaboration in this matter, as recommended by his colleague, the right hon. Member for Old Bexley and Sidcup (Mr. Heath) on 6 April in his article in The Observer?

Mr. Channon

I am not sure whether the hon. Gentleman is complaining about foreign investment or welcoming it—I expect that it depends on the company about which we are talking. I am trying—I hope that the Opposition will not try to change the position—to remove the uncertainty. Therefore, I have nothing to add to my original statement—[Interruption.]

Mr. Speaker

Order. This is a serious matter. It is not a laughing matter.

Mr. Steve Norris (Oxford, East)

Will my right hon. Friend comment on the assertion by the right hon. and learned Member for Monklands, East (Mr. Smith) that the GM-BL talks were somehow furtive? Does my right hon. Friend agree that that demonstrates to those of us whose industry interest is long-standing rather than just developed and manufactured from nothing, that people knew perfectly well that these talks were taking place, including all the GM employees, because the company circulated information to them telling them exactly what was going on?

Mr. Channon

My hon. Friend is entirely right. The hypocrisy, double-dealing and hopelessness of the general Opposition stance have been evident. Their behaviour throughout the talks has been absolutely disgraceful.

Mr. George Park (Coventry, North-East)

Is it not clear from the previous Government statement that a nationalised company could be more efficient than a privatised one? Why cannot the same logic be applied to British Leyland? The logic of the right hon. Gentleman's statement is that the faster efficiency increases, the faster the companies will be privatised—thus continuing the damaging uncertainty.

Mr. Channon

The hon. Member talks as if privatisation in the motor industry was a bad thing. When he looks at the example of Jaguar, I should have thought that would have given him cause for reflection, in view of the excellent results of Jaguar and the beneficial results of privatisation.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

Does my right hon. Friend accept that many of us feel quite bewildered today, although obviously we should not, because on this issue more than once victory has been lost that could have been won? Is it not a farce and charade in that, if the House had let General Motors buy, the Government would have been willing to sell? The management and workers put forward a perfectly viable and sensible proposition which in my view would have achieved what we keep advocating—a wider share-owning democracy. Why is it that the workers and management are not fit to buy it? Are not the Government hoist upon their own petard in that, if they are not willing to sell BL, they must back it and they must back it to the full? Are the Government willing to put money into the new design and a new future, because if they do not put in a new design and a new future we shall be stuck with failure? Do we want success and are we going to back it?

Mr. Channon

I have no doubt that the future of Land Rover in the way that I have outlined will be a successful one. The forecasts for it, I think, are good. I think that the prospects for it in the next couple of years will be very good. I have already explained why I think that privatisation is a good thing in the long term. The Government had to decide what was the best commercial, industrial and financial prospects for the company. If I had thought that the management buy-out was, I would certainly have accepted it.

Mr. D. N. Campbell-Savours (Workington)

Is the Secretary of State aware that the only part of British Leyland group that now has an immediate threat over its head is Leyland Bus? What is he going to do about it? Is he aware that morale throughout all the Leyland Bus plants has been totally undermined in the last months? Will he reverse his proposals to privatise?

Mr. Channon

No, but I share the hon. Member's concern about the future of Leyland Bus. I shall have to consider this matter with the board in the fairly near future because it is a serious situation and there are difficult choices to be made in the bus industry. I know very well the hon. Member's concern about this, and I shall certainly bear it in mind.

Mr. Roger King (Birmingham, Northfield)

Will my right hon. Friend accept that some of us do not necessarily have a great deal of confidence in the present BL board? We feel that, had it looked closely at the management buyout, it would have been abundantly obvious that it has the resources and the backing of the trade unions and the merchant banks that would ensure that Land Rover and Freight Rover could continue successfully. Can I have an assurance from him that, in the event of a future sale of Land Rover and Freight Rover, it will be privatised and not sold to another company or organisation?

Mr. Channon

I understand my hon. Friend's view about the management buy-out. Of course, if that had proved to be the one that was the most likely to lead to the industrial and commercial success of the company, that would have been a respectable solution, and one that the Government would have been very happy to take. It would have been a very good solution for the company if it had been the best commercial one, but it was the view of the BL board that this was not the best solution. I think that it was quite right for the Government to take the course that they have. I have said that we hope to prepare the company for privatisation in future. I think that it would be wrong for me at this stage to close any of the options, but I note my hon. Friend's strong views that the better way would be to have a flotation.

Mr. Gregor MacKenzie (Glasgow, Rutherglen)

Are we to understand from the Secretary of State's answer to his hon. Friend the Member for Hastings and Rye (Mr. Warren), that what he now proposes to do is to invest further sums of the taxpayers' money in the organisation and that, once improvements have been effected by this investment, he proposes to sell it off to the private sector at a very considerable cost to the ratepayer? That is what it sounded like to us.

Mr. Channon

No, I am glad to tell the right hon. Gentleman that that is not the case. There are no proposals from the BL board for further injection of equity into the Land Rover business.

Mr. Michael Grylls (Surrey, North-West)

Is my right hon. Friend aware that many people who very enthusiastically support the return of as much as possible of British Leyland to the private sector as quickly as possible will be disappointed by his decision today? In many ways it is an incomprehensible decision when there were a number of good offers on the table. Is it because it has come from a lame duck board anyway? Will not this proposal leave uncertainty over the head of British Leyland, with nobody knowing who is going to own it for two or three years, however long it takes? That will be very bad for its commercial future.

Mr. Channon

With respect, I cannot agree with my hon. Friend about that. What I am sure he agrees with me about is the need to provide the best future for the company. The BL board has made a very firm recommendation that retention of the businesses for the time being within BL represents the better commercial solution for that company in the long run and for the employment prospects for those in it. In those circumstances, I think that it was right for me to recommend to the House that that should be accepted.

Mr. Doug Hoyle (Warrington, North)

Having created the instability the Minister now talks of stability for the company, yet he is still leaving the company in limbo. Given that the management has hanging over it the real threat that in two years' time the company could be privatised, does he not agree that what is needed is the withdrawal of that threat, to allow the company to get on with it and to make the investment available to it so that it can begin a strong marketing policy and sales can begin to boom again?

Mr. Channon

I cannot agree with the hon. Gentleman. It has been known for a long time that these companies were to be privatised. There is nothing new in that. There is no new uncertainty about that. I believe that my decision today will remove the uncertainty. I think that it will lead to a period of stability.

Mr. Robert Atkins (South Ribble)

Is my right hon. Friend aware that my overriding interest and that of my constituents who work at Leyland Truck and Leyland Bus is that Leyland Truck is now first in the league of heavy truck manufacturers in the country and doing well, and Leyland Bus is considering offers for the purchase of that company? Will he confirm that the offers for Leyland Bus will still be considered on their merits, and take advice from those who understand the industry within and without as to at least one of those contenders? Will he also confirm that in the long term priority will be given to what I understand is a Conservative commitment to share ownership, directed particularly at the small shareholder and those working in the company?

Mr. Channon

I agree with a great deal of what my hon. Friend says. I confirm to him the position as he outlines it, of Leyland Bus. I am also glad to say, despite the great difficulties in the truck market, that Leyland Truck sales in the first quarter of this year are up by some 18 per cent. I think that is encouraging.

Mr. Andrew Faulds (Warley, East)

Have the Prime Minister and her Cabinet learnt any lesson from their somewhat unfortunate handling of these matters?

Mr. Channon

I think that what we have done is to arrive at a right conclusion, which I hope the House will support.

Mr. Richard Page (Hertfordshire, South-West)

While I welcome my right hon. Friend's statement, in view of the huge overcapacity in trucks, vehicles and cars throughout the world, will he now produce an overall plan for the future of British Leyland, as piecemeal disposal will lead to more problems than it would solve?

Mr. Channon

As my hon. Friend knows, the new chairman of British Leyland will take over next week and, of course, he will want to consider all the options now available for the future of the company.

Mr. David Winnick (Walsall, North)

Is the Secretary of State aware that people, certainly in the west midlands, will not forget the undercover and deceitful way in which negotiations went on without any public knowledge and, certainly, without any statement having been made to the House? Does not the Secretary of State recognise that what he has announced today is particularly a defeat for the Prime Minister—perhaps that is why she is not present—and those members of the Cabinet who took the decision purely because of party dogma and prejudice?

Mr. Channon

The hon. Gentleman is talking absolute nonsense. My hon. Friend the Member for Oxford, East (Mr. Norris) pointed out a little while ago that the idea that this was some undercover or deceitful negotiation is absolute nonsense. It has been known in all the newspapers for months. The idea that some secret things were going on has, I think, been fully exploded. If anything has been deceitful, it is the conduct of some Opposition Members.

Mr. David Madel (Bedfordshire, South-West)

Does my right hon. Friend agree that arguing endlessly about ownership of the commercial vehicle industry does not alter the fact that people who work in the industry are concerned about investment and job security? Therefore, will the Government do all they can to make sure that General Motors stays here with a strong, viable presence? Will my right hon. Friend join me in refuting the argument of the right hon. and learned Member for Monklands, East (Mr. Smith) that somehow the negotiations were furtive? Trade unionists in Bedfordshire told the right hon. and learned Gentleman about the negotiations months ago but he does not appear to have listened to what they said.

Mr. Channon

When it suits the Labour party to pretend that things are deceitful, it will do so. The House knows what value to put upon those words. As to the question of the commercial vehicle industry itself, my hon. Friend is right to draw attention to the very serious problems that exist in the industry. I certainly share his views about the importance of GM continuing in Bedfordshire. It is well recognised in Bedfordshire and throughout the country that that has been an extremely valuable investment both in jobs and in opportunities for the country.

Mr. Jack Straw (Blackburn)

Is the Secretary of State aware that Ministers' wilful misconduct of the affairs of British Leyland has cost that company and the taxpayer millions of pounds for which, if those Ministers were local councillors, they would be surcharged? Is the Secretary of State not aware also that any suggestion that there can be a period of certainty is wholly undermined as long as he continues with the idea of a possible sale to General Motors? If he is concerned about the future of British Leyland, why does he not rule out completely a sale to General Motors?

Mr. Channon

I have already said to the House that nothing has changed with the position as regards General Motors since my statement of 25 March. Perhaps the hon. Gentleman would be so good as to read what I said on 25 March, which was crystal clear and which the House accepted at the time. As to the question of uncertainty, I have a feeling that it suits some Opposition Members to try to create the uncertainty that they complain about.

Mr. Nicholas Budgen (Wolverhampton, South-West)

Does my right hon. Friend agree that it is difficult for the House to evaluate properly what he has said because he has not told us what price the bidders have offered or what funds the bidders have to support the company in future? The interest of the taxpayer and of the employees of BL is that the business should be sold for a good price to purchasers who are able to fund investment in it in future.

Mr. Channon

I agree with the latter half of my hon. Friend's question. As to the first part, I am not in a position to reveal all the commercial details that were given in confidence to the BL board. It would be wrong for me to do so. I assure my hon. Friend that the decision of the Government, based on the recommendation of the BL board, was taken only after exhaustive examination of the commercial, financial and industrial implications.

Mr. Robin Corbett (Birmingham, Erdington)

Cannot the Secretary of State understand that this afternoon he has added to the uncertainty? Earlier he spoke of privatisation within a year or two. A little later he talked about privatisation in the near future. Will he not give a guarantee from the Dispatch Box now that there will be no attempt at privatisation until after the next election?

Mr. Channon

I am not prepared to give such a guarantee. I shall ask the new chairman of British Leyland to consider all the options available. [Interruption.] No. Hon. Gentlemen are deliberately trying to create the uncertainty of which they are accusing me. The new chairman of British Leyland will consider the future privatisation of Land Rover by flotation or by trade sale at an appropriate date, but that will be after a period of stability.

Mr. Tim Yeo (Suffolk, South)

Does my right hon. Friend agree that, because of all the millions that the taxpayers have put into British Leyland, it is wholly right that individual taxpayers should in due course have an opportunity to invest directly in a successful part of it? Does he agree further that the precedent of Jaguar demonstrates, contrary to what Opposition Members say, that far from creating uncertainty, the prospect of flotation may act as an additional incentive to both management and workers?

Mr. Channon

I agree entirely with my hon. Friend. It is extraordinary that Opposition Members, faced with the Jaguar precedent, repeat the old-fashioned, out-of-date arguments against privatisation when it is clear that the privatised Jaguar company has been an outstanding success. What I think irks the Opposition is that it has been a success.

Mr. Norman Atkinson (Tottenham)

Does the Secretary of State realise that he has added considerably to the uncertainty by refusing to answer the questions put to him by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith)? He asked about the future of the Austin Rover division and about future discussions with American companies about the manufacture of motor cars in this country. Is the Secretary of State aware that in the period to which he has just referred, there have been continuing collaborative agreements with Honda of Japan which is now manufacturing to its specification? Does that not mean that creeping privatisation is taking place? Honda is making a creeping takeover. Unless the Secretary of State intervenes, before very long the Austin Rover division will be privatised by the Japanese and will not remain in British hands.

Mr. Channon

The statement was not about Austin Rover. The position of Austin Rover has not changed over the past few months; therefore, there was no need for me to make a statement to the House. The hon. Gentleman is inaccurate in what he has been saying. It had nothing to do with my statement this afternoon.

Mr. Geoffrey Dickens (Littleborough and Saddleworth)

Is not my right hon. Friend astonished at the attitude of the Opposition who for years have been trying to create the myth that our Prime Minister was bossy and would not listen? Today we have proof that the Prime Minister has listened to what Back Benchers have said. BL stays British, and we take things more slowly, which is sensible. Range Rover and Land Rover remain British. That is what the nation and most hon. Members want.

Mr. Channon

I am extremely grateful to my hon. Friend for his robust support.

Mr. Stuart Randall (Kingston upon Hull, West)

Will the Secretary of State confirm that the Government are totally committed to supporting the company's short and medium-term investment programme, which is so crucial to its future?

Mr. Channon

I have already answered that point. The Land Rover section of British Leyland does not need further equity. No application has been made to me by British Leyland and I see no reason why there should be one.

Mr. Tony Marlow (Northampton, North)

Will my right hon. Friend reassure the hon. Member for Warrington, North (Mr. Hoyle) that privatisation is not a threat but an opportunity? If my right hon. Friend were a betting man, would he expect that opportunity to be put into effect before the next election or after it?

Mr. Channon

I have not been told the date of the next general election, so I think it would be unwise to take up my hon. Friend's offer of a bet. I agree entirely with him on the first part of his question. Privatisation, when it takes place, will be good for the companies, for the employees and for all the people concerned, and should be done at the moment when it makes best industrial and commercial sense. That is what we intend.

Mr. Ian Wrigglesworth (Stockton, South)

Does the Secretary of State accept that he has a responsibility to the House and to the company to come forward to the House at an early stage to explain what preparation for privatisation means? Will he consult the new chairman of the board of British Leyland as speedily as possible and come forward with clear proposals and clear strategy for the company so that we may avoid a confusion such as has arisen in recent times? As we all know, BL cannot survive in the volume car business without a partnership with another major company from another part of the world or from somewhere else in this country. Will he make clear what will happen and also why he has turned down the application for the purchase of the company by the staff and the work force of Land Rover?

Mr. Channon

On the last part of the question, I have tried to explain why the BL board does not think that the proposal put forward by Schroder on behalf of the management represented the best commercial opportunity for the company. That is why the proposal was not accepted. As to the first part of his question, I do not think that there is any need for me to make an immediate statement. There will be a period of stability, and the matters need careful study.

Mr. Nicholas Soames (Crawley)

In view of the unfortunate behaviour of Her Majesty's Government towards General Motors, and in view of the enormous investments which that company has made for many years in this country, will my right hon. Friend assure the House that no lasting damage has been done to relationships between the Government and General Motors?

Mr. Channon

I am sure that no lasting damage has been done. I entirely agree with my hon. Friend about the welcome that the overwhelming majority of hon. Members give to American investment in Britain and to investment by General Motors. If any hon. Member disagrees with that, perhaps he will say so.

Mr. John Smith

In the course of his answers the Secretary of State said that privatisation might be in a year or two, in the near future or after a period of stability. Can he tell the House how long the period of stability will last before the new instability commences? Can he not state clearly and confidently to the House that there will be a period of stability until the next general election, and that that stability will be achieved by the Government saying that there will be no change in the ownership of British Leyland? That will remove all speculation and uncertainty and allow the businesses to run.

Mr. Channon

As the House knows perfectly well, this statement deals only with Land Rover and not with the whole of British Leyland. The right hon. and learned Gentleman is trying to widen the discussion to take in matters that we are not discussing. I am not prepared to give the undertaking that the right hon. and learned Gentleman seeks. I said in my statement: retention of the businesses within BL pending a later sale presents a more attractive option". That is the option we will pursue and we will pursue it after we have carefully considered the situation with a new chairman. There is no hurry on this because we want to do it at the appropirate time. It is clear from the proposals of the BL board that it believes that in a period of time such a course of action will be more advantageous for the company than it is at present.