HC Deb 13 April 1988 vol 131 cc154-7
7. Mr. Strang

To ask the Chancellor of the Duchy of Lancaster when he last met the chairman of Rover plc; what subjects were discussed; and if he will make a statement.

Mr. Kenneth Clarke

I made a statement on 29 March on the subject of Rover Group privatisation, and I have nothing further to add.

Mr. Strang

Does the Minister accept that most people will judge the Government's sale of Rover by the extent to which British Aerospace increases volume car production and maintains—if not accelerates—the pace of design and engineering projects, including the crucial new Metro? In view of the reports in yesterday's and today's Financial Times, will the Minister make it clear that there is no question of the Government's allowing the EEC to reduce the amount of public money going into the new combined company, as that would be bound to have an adverse affect on investment and jobs?

Mr. Clarke

There are European Community rules on such matters, and sensible discussions are now taking place between us and the Commission, which will reach their outcome in due course. The agreement that we have reached is subject to the Commission's approval, and to that of British Aerospace shareholders. We shall have to await the outcome of the discussions taking place now in Brussels on the first point.

Mr. Budgen

Since, no doubt, the chairman of Rover demanded stable exchange rates, and since the Chancellor of the Exchequer has promised stable exchange rates to manufacturing industry, will my right hon. and learned Friend be good enough to guarantee to the rest of the community eternal youth?

Mr. Clarke

I have no recollection of having promised stable exchange rates to anybody. I rather regret that it is impossible for any Chancellor of the Exchequer to achieve complete stability in exchange rates in present circumstances. We would be more interested in discussing with the Rover Group the terms upon which we negotiated the proposed sale to British Aerospace. I think that they are reasonable, that £800 million is a fair reflection of the debts that would be accumulated by Rover Group at the time of completion of the sale, and that the £150 million that BAe proposes to pay is a fair price for the Government's share.

Mr. Hoyle

When the Minister next meets the chairman of Rover plc, will he ask him when he intends to meet the trade unions? Does he agree that there was no consultation with the trade unions prior to the announcement of the bid by BAe—[Interruption.] Never mind the yahoos behind the Minister. The trade unions do matter to the people who work at Rover. We occasionally hear from the Tories that they matter. One of the Minister's colleagues behind him is nodding assent. Does the Minister agree that they matter just as much as shareholders? Will he ask the chairman to meet the trade unions to explain about the bid from BAe and where Rover fits into the picture?

Mr. Clarke

As my hon. Friend the Member for Solihull (Mr. Taylor) was provoked into remarking a moment ago, not surprisingly consultation with the trade unions was no doubt complicated by the rather foolish strike that was taking place at Solihull at the time that the negotiations were under way. However, I am sure that if the hon. Gentleman puts his point to the chairman of the Rover Group he will be reassured about reasonable relationships with the trade unions. I suspect that large numbers of trade unionists inside the Rover Group rather welcome the proposed deal with BAe and think that it offers them a good stable future in the private sector.

Mr. Oppenheim

When will my right hon. and learned Friend scrap the so-called gentleman's agreement by which we put up non-tariff barriers against Japanese cars? Is it not true that those non-tariff barriers benefit Japanese manufacturers by giving them a cosy high-price market in which to sell, compound the inefficiency of the British industry and cost consumers dear?

Mr. Clarke

We keep such agreements under review inside the Government. I have considerable sympathy with my hon. Friend's point of view that, on closer analysis, such deals often turn out to be of considerable advantage to Japanese importers by guaranteeing higher prices for a lower volume of sales than they would otherwise be able to have.

Mr. Andrew Smith

Will the Chancellor clarify the precise allocation of the £800 million cash injection? Can he confirm reports that, depending on the definition of debts in the Rover Group's balance sheet, a surplus of between £43 million and £240 million will accrue to BAe? What guarantees can he give that that money will be invested in jobs and new vehicles, and not used to inflate BAe's share price?

Mr. Clarke

The figure of £800 million was a reasonable estimate of the level of debt likely to be faced by the company at the time of completion of sale. I think that the hon. Gentleman has, understandably, been disturbed by some of the interpretations that have been put upon the Rover Group's annual accounts which were published recently. The figure of debt shown there was the figure at 31 December 1987, not at the expected date of completion of sale. The figure in the published accounts leaves out the provision that has already had to be made for restructuring costs that will be incurred following the changes made in Leyland Trucks. When one takes into account further additional losses likely to be made this year, one comes to the £800 million, which was the Government's best judgment.

Mr. Wells

Will my right hon. and learned Friend quickly resume the proper position of a Minister in the Department of Trade and Industry in relation to the Rover Group and advocate to the chairman of the Rover Group that he takes quick action to invest in Land Rover so that new models can be produced, so that spare parts can be provided to those who have bought from Rover in the past and so that service and marketing arrangements, which have been woefully inadequate, can be improved dramatically within the next nine months in order to make the industry one of the great growth industries in Britain?

Mr. Clarke

I am sure that the proper role of a Minister of Trade and Industry is to leave such matters to the commercial judgment of the owners of the company, but I am sure that the chairman of the company would acknowledge the force of some of my hon. Friend's criticisms. Land Rover is obviously a very attractive part of the business. It should have a very strong future and I am sure that the present management, under new or present ownership, will take steps to ensure that its performance is everything that we would desire.

Mr. Blair

Returning to what the right hon. and learned Gentleman was saying a moment ago, is it not the case that, on any basis, the £800 million cash injection is a generous estimate of indebtedness and that it is certain to leave some surplus over and above the indebtedness of the Rover Group? In those circumstances, is not the failure to achieve any guarantees on investment, model development or jobs all the more extraordinary and lamentable? What was the right hon. and learned Gentleman's Department doing over the past few weeks? Was it conducting a genuine commercial negotiation on behalf of the taxpayer, or was it getting rid of Rover at any price?

Mr. Clarke

I do not agree with the hon. Gentleman's assertion. In more detailed discussions with the European Commission, I trust that we shall be able to satisfy it that we are making reasonable provision.

I am not sure what the point of the hon. Gentleman's attacks is. His comments slightly contradict those made a moment ago by his hon. Friend the Member for Oxford, East (Mr. Smith), who feared that there might be some reduction in the amount of public money going into the company. We are interested, not just in injecting public money into the company, but in making a reasonable and proper deal. The deal is based on what we think is a good estimate of the level of bank indebtedness of this company at the time of the likely completion of the sale.