HC Deb 13 July 1988 vol 137 cc361-9 3.31 pm
The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke)

With permission, Mr. Speaker, I should like to make a statement about the Rover Group.

I told the House when I announced the agreement we had reached with British Aerospace for the sale of the Government's shareholding in Rover Group that I would try to return to the House before the summer recess to report further developments.

This morning the European Commission decided the outline terms upon which it would be willing to close its state aid procedure. These terms effectively reduce the amount of the cash injection from the Government into Rover Group to £547 million with the consideration remaining at £150 million, but there would have been important relaxations in the tax conditions. Until lunchtime today, it appeared that British Aerospace was prepared to accept these terms. However, at the last minute it has asked for more time to consider the implications of other conditions attached to the Commission decision. Discussions between British Aerospace and the Government are continuing, and I will report to the House further as soon as I am able.

Mr. Bryan Gould (Dagenham)

Is not this brief and astonishing statement an embarrassing confession that the Government have got themselves into an unholy mess—a mess that remains unresolved even at the cost of a humiliating rebuff to the Prime Minister and the Secretary of State and of conceding to the EEC control over everything, including the Government's pet privatisation projects, that might still be called British industrial policy?

Does not this mess leave the Government having to answer one or two difficult questions? If British Aerospace were to decide, as now seems in doubt, to go ahead with the reconstructed deal, how is it that the Secretary of State offered it £250 million more than it was prepared to accept? Why was the EEC so much more effective as a negotiator on behalf of the British taxpayer than the Secretary of State? Why was he so profligate with taxpayers' money? Is not this further evidence of how careless the Government are when they dispose of public assets without thought for the taxpayers' interest?

If, on the other hand, British Aerospace shareholders refuse to back the deal, what do the Government have to put in its place? After the Government have put all their eggs in this one basket, where is the fallback position for which we have pressed the Chancellor repeatedly in recent months? Where is the guarantee of the future of the last British volume car manufacturer? Do not Rover's excellent results today show what has been and can be achieved under public ownership, and do they not demonstrate that this ill-starred foray into privatisation is an expensive and shortsighted folly?

If the key to the deal is the tax arrangement whereby British Aerospace hopes to use Rover's tax losses to offset its own tax liability, will this not fall foul of the Income and Corporation Taxes Act 1988? Is it perhaps this potential illegality that is now worrying British Aerospace?

Above all, where is the sense of commitment to the British volume car manufacturing industry that this sorry episode shows is so signally lacking both from the Government and now, sadly, from British Aerospace? Where is the recognition of the importance of this industry and the guarantee of its future? What reliance can be placed on an arrangement born only of the Government's obsession with privatisation and which even then the Government have bungled'?

Mr. Clarke

My statement may have been surprisingly short, but it is not in the least embarrassing for me, my right hon. and noble Friend the Secretary of State or the Government.

When I last appeared before the House, it was clear that the agreement that we had reached was conditional upon the discussions with the European Commission. My right hon. and noble Friend conducted with considerable skill the negotiations with the European Commission and with British Aerospace. He produced an agreement satisfactory to the Government, to the Commission and, as far as I was aware until an hour or two ago, to British Aerospace. At the last moment, British Aerospace has decided that it wishes to reconsider part of the deal. It is my opinion that the point troubling it is not especially important or material, but that is for British Aerospace, not me, to determine. When we have the result of its deliberations, I shall straight away make a further statement to the House.

The hon. Gentleman's other questions are based, not surprisingly—inevitably in the circumstances—on his ignorance of the precise deal arrived at, but that does not stop him, as usual, speculating or trying to make points out of it. The scale and structure of the original agreement has been changed to reflect the negotiations with the Commission, the compliance with the state aid procedures that the Government support actively inside the EEC, and the considerable improvement in the trading position of the Rover Group since we first entered into our agreement. In my opinion, an agreement can now be reached that is satisfactory to the Government, and I can speak on behalf of the Government.

The hon. Gentleman guessed that the key to the deal might be the illegality of the tax arrangements, but he is wrong. He has made a false guess. The proposals for the tax arrangement are entirely consistent with the law of the land and are not being queried by anybody who understands what he is talking about—which is not the case with Opposition Members, who are speculating. The time to give the details to the House is when we are satisfied that the negotiations are concluded. That is now in the hands of British Aerospace, which I trust will soon come to a decision. I undertake to inform the House fully as soon as I can.

Mr. Norman Tebbitt (Chingford)

Is it not entirely consistent with the Opposition's usual attitude that the hon. Member for Dagenham (Mr. Gould) should damn the deal whether or not it goes ahead? He approves neither of successfully floating it into privatisation nor of keeping it nationalised. Does my right hon. and learned Friend agree that, although great progress has been made by the Rover Group, and despite what the hon. Gentleman called splendid results, it is taking £400 million or £500 million in cash to persuade anyone to take the business away?

In his further talks with Commissioner Sutherland, will my right hon. and learned Friend express the hope that if this is the sauce which is applied to the British goose there had better be the same sauce for the German gander when the proposed merger between MBB and Daimler Benz comes forward, with a proposed subsidy of about £1 billion?

Mr. Clarke

I agree with the first part of my right hon. Friend's question. The hon. Member for Dagenham (Mr. Gould) condemned the conditional agreement we reached; although he could not make up his mind whether we were making too big or too small a cash injection into the company, he was against it. He has condemned today's agreement without knowing what it is. He will continue to condemn whatever emerges. To be fair, I think he prefers a nationalised Rover Group. That is the regime under which the company cost the British taxpayer £2.9 billion since British Leyland was nationalised in 1976.

We must sort out the matter. I have to make it clear that our problem is not with Commissioner Sutherland. We have entered into a satisfactory agreement with the commissioner, consistent with the state aid proposals which this country supports. We do not think there should be competition in subsidies throughout western Europe. The British Labour party thinks that, but we and the Commission do not. I agree with my right hon. Friend that we will expect the Commission to take seriously talk in the press of massive German injections of state aid into companies like MBB.

Mr. Robert Sheldon (Ashton-under-Lyne)

Is the Chancellor of the Duchy aware that not only are all the changes confusing but they put in doubt the nature of the deal which might be expected? Is he aware that the Public Accounts Committee will certainly want to scrutinise carefully the various changes to make sure that he is getting the best possible deal on behalf of the taxpayer and is ensuring that we get value for money at the end of the day?

Mr. Clarke

The right hon. Gentleman is a careful man, so he rightly expresses doubt at a time when, for obvious reasons, he cannot know the full details of the agreement. I hear what he says about the Public Accounts Committee rightly wishing to take an interest once the matter has been concluded. I assure the right hon. Gentleman that the Government have been careful to make sure that the interests of taxpayers, the company and the economy are taken care of in the discussions.

Mr. Tim Smith (Beaconsfield)

Regardless of what the shareholders of British Aerospace may think about this —surely they are entitled to reconsider the matter when there has been such a significant change in the terms—is it not the case that the deal offers much the best future for the Rover Group? When the company was to be offered for sale to foreign owners, the Opposition did not like it, and when it was to be British ownership they did not like that either because they have not go a constructive thought in their heads about it.

Mr. Clarke

Of course, the shareholders in British Aerospace have not yet entered directly into the matter. Anything that emerges from the discussions now taking place will have to go to an extraordinary general meeting of the shareholders if the British Aerospace board continues to be in agreement with the deal. Certainly I have made it clear throughout, as has my right hon. and noble Friend, that we see considerable attractions in a satisfactory agreement of this kind. We think that the uniting of British Aerospace with the Rover Group would be welcomed by those who work in the company and by all who supply and deal with the product as well.

Mr. Terry Davis (Birmingham, Hodge Hill)

Is not the Minister aware that we have now got the worst of all worlds? Unless the uncertainty created by the Government's policy is resolved quickly, it will be unnecessarily difficult for the Rover Group to sell cars during August, one of the most important selling months in the year.

Mr. Clarke

I agree that it would be worrying if uncertainty surrounded the Rover Group for any longer than was necessary. I share the hon. Gentleman's concern that that should not be so. I trust that any difficulties are resolved rapidly and that I can report to the House in the very near future. I expected to be able to make a statement to the House this afternoon expressing in full the terms of the agreement. I thought that British Aerospace was in agreement with that, but as it has asked for more time neither I nor my right hon. and noble Friend had any alternative but to agree.

Mr. Teddy Taylor (Southend, East)

Can the Minister say something about the great distress and uncertainty caused to the splendid Rover Group whose cars I have always bought and found satisfactory? Is he really saying that the Government are reducing the aid to be given to Rover because Commissioner Sutherland has asked it but that they will make it up by what he calls tax concessions?

Is that a sensible state of mind?

Does my right hon. and learned Friend appreciate the views of British Aerospace, which, like many British companies, feels rather aggrieved that we always reveal full details of financial transactions, yet, in the case of Airbus, where British Aerospace is carrying a horrendous loss, the other three participants never reveal any details about the money given by their Governments? Is it not time to ask the Commission to ask other countries to act as cleanly in financial terms as Britain does?

Mr. Clarke

I agree with most of what my hon. Friend has said, except that, in the case of the Airbus project, not one of the four partners reveals full information to any of the other three, nor does the Commission take any part in the matter.

In principle, I agree with my hon. Friend that we should establish in Europe a regime whereby state aids are fully exposed to the Commission and other members, needless competition between countries is avoided and the matter is policed by the Commission in accordance with the Community's agreed policy. Last year the Commission changed our deal on Leyland-DAF. It changed the French Government's recent Renault proposals and we shall expect it to take a close interest in the Italian Government's proposals for the restructuring of its steel industry in southern Italy and in the German proposals for the aircraft industry and the Daimler Benz-MBB deal.

There is, therefore, no disagreement between my hon. Friend and me. We discussed the deal, which was satisfactory, with the Commission and we shall wait to see whether British Aerospace confirms the impression with which it left us this morning, that it found the deal satisfactory.

Mr. Matthew Taylor (Truro)

Is not the Minister looking as red today as would do credit to the Labour Front Bench, not only as a result of the fiasco in which he has involved the House this afternoon, but also because the golden give-away terms of the deal have been exposed by the Commission and it has been shown that British Aerospace is not interested without a golden give-away? Will the Minister at least be honest enough to tell the House what the sticking point is with British Aerospace and what he will do about it if the deal falls through?

Mr. Clarke

My florid complexion is a natural result of my healthy lifestyle. I agree that it contrasts somewhat with the pallor of the hon. Gentleman, who does not appear to get into the open air very much in the south-west of England.

The agreement reached is based on changes to the structure and scale of the original agreement, which was always conditional upon Commission consent. However, I hope that the House will agree that it is obviously not sensible for me to relate the exact nature of the agreement until the final snag with British Aerospace—if it proves to be a snag—has been resolved. It would be wrong for me to start trailing in discussion the points at issue, particularly as I am still somewhat puzzled to discover that British Aerospace believes the matter to be so significant.

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

Does my right hon. and learned Friend accept that, basically, the most important thing is that Austin Rover should remain a British national based on another excellent British company, British Aerospace? Does he further agree that, although British Aerospace may be a little coy at this time, it may work out that, with the tax concessions and the excellent future of Austin Rover, which has turned a £39 million loss into a £7 million profit, this is a great venture for it?

Does my right hon. and learned Friend further agree that, although the Opposition are suggesting that the deal should be allowed to fall through, British Aerospace is willing to commit £1,000 million to the future of the great technological advance of this country, which is what we need, should have and, I believe, can have?

Mr. Clarke

My hon. Friend is a significant voice in such matters in the west midlands and in the House and I hope that those people concerned with the last-minute consideration of the agreement will bear in mind his opinions.

British Aerospace is one of the key manufacturing companies in this country. It produces extremely advanced, high-technology aircraft. The Rover Group has announced extremely encouraging results today and is doing very well, thanks to Graham Day and the management and work force of the company. I note my hon. Friend's opinion that a purchase by British Aerospace would be to the advantage of all concerned.

Mr. Andrew Smith (Oxford, East)

Are we not having today a demonstration of breathtaking incompetence on the Government's part in this matter? Will the Minister tell us what the snag, as he described it, is—or does he not know? He confessed to being puzzled. Does that not show the irresponsibility with which the Government are handling the matter? Will not the uncertainty generated by the statement damage the interests of car workers in this country and all those who depend on their work? Have not the Government made a mess of this? What will the Minister do if the deal falls through and British Aerospace will not go along with Rover?

Mr. Clarke

The hon. Gentleman cannot reasonably cast doubts on the Government's position. I know exactly what the agreement is. My right hon. and noble Friend negotiated a satisfactory conditional agreement a few months ago, on which I reported to the House, and he has negotiated a satisfactory agreement with the Commission and BAe. It is BAe's management which decided at the last moment that it wanted a little more time to think about one detail. I know what that detail is. It is not for me but for BAe to reach a decision on that. I am merely saying that I am surprised that the management attaches so much weight to it. However, I trust that that problem will soon be resolved.

I have already explained that it plainly is not sensible for me to start conducting the next stage in the negotiations in this forum; it would not help the Rover Group or anybody else. I hope that I shall soon be able to bring fuller and more satisfactory news to the hon. Gentleman who has a perfectly valid and legitimate constituency interest.

Mr. Michael Stern (Bristol, North-West)

Will my right hon. Friend confirm that in view of today's events he is now open to receive alternative bids for the Rover Group, whether from Britain or abroad; and if not now, when'?

Mr. Clarke

I have been avoiding hypothetical questions. My hon. Friend is jumping the gun more than somewhat. As I received the news that BAe wanted more time in a message from its chairman only two and a half hours ago, it may be that in two and a half hours' time all will be resolved. It remains the Government's clear commitment to return the Rover Group to the private sector, and the continuing good performance of that company under the leadership of Graham Day with the support of the work force is taking us encouragingly in that direction by whatever route.

Mr. Dave Nellist (Coventry, South-East)

As a determined opponent of Rover privatisation and the Common Market, may I at least welcome the Minister's statement on the delay on the basis of any port in a storm? If he wants to stop speculation in the disagreements—not the agreement—that have emerged in the past two and a half hours, after Sir Raymond Lygo said that the basis of BAe's wanting Rover was on the basis of no cost to the company, apart from the risk, will he confirm what happened this morning at the commissioner's meeting in terms of amendments and conditions that has caused BAe to back off? If Commissioner Sutherland can negotiate a £253 million reduction in BAe's bribe, why could not the Minister?

Mr. Clarke

There was a full meeting of the Commission this morning, at which it approved the terms negotiated by Commissioner Sutherland, just as the Government have supported and approved the terms negotiated by my right hon. and noble Friend. I shall let BAe know that the hon. Gentleman approves of its last-minute request for more time; it might encourage it to make up its mind and to look at the deal with more interest again. As is invariably the case as a result of discussions with the Commission because of its duty under the state aids regime, there have been changes in the scale and nature of the deal, as there were last year in the case of Leyland-DAF and recently in the case of Renault. What has emerged is, I believe, satisfactory to all the parties, but it is not for me but for the BAe board to decide whether it is prepared to go ahead and recommend it to its shareholders.

Sir Giles Shaw (Pudsey)

My right hon. and learned Friend is still to be congratulated on the zeal with which he is pursuing the deal, and I am glad to hear him say that he is satisfied with what Commissioner Sutherland has to say on this issue, but, in view of the problem that has occurred, what time limit has he placed on BAe to make its decision clear, since it is surely BAe which has failed to respond to what was a good offer originally?

Mr. Clarke

We are not in a position to impose a time scale. BAe is entitled to ask for more time to consider the matter and it will appreciate the need to come to a final decision as rapidly as possible. I cannot give my hon. Friend any more information than I have, since I discovered only at half-past one that BAe wished to delay a final decision and at half-past two I was on my feet here answering questions. Perhaps by the time I return to the office all will be resolved so that I can come back to the House as soon as possible to give the final details.

Several Hon. Members


Mr. Speaker

Order. We have a very long day ahead of us. I will allow questions to continue for a further five minutes. As the Chancellor of the Duchy has just said, this is an interim statement.

Mr. Tam Dalyell (Linlithgow)

Is the Chancellor of the Duchy aware that any questions from me will be extremely gentle and cautious as I spent 25 years involved in the motor industry and I am aware how the industry may change its mind at the last moment? He has my personal sympathy for these difficulties. Having said that, will he say something in the new statement about Bathgate, where the Rover Group still owns what was the biggest concentration of machine tools under a single roof in Europe? That may not be a central problem, but it is very important for my constituents.

Mr. Clarke

The hon. Gentleman has reminded me yet again of his concern about the Bathgate site. I believe that that is a planning matter to be resolved by the local authority and by my right hon. and learned Friend the Secretary of State for Scotland. However, I will bring myself up to date with events. I share the hon. Gentleman's desire to see the site brought back into productive use and providing employment for his constituents once again. I am sure that my right hon. and learned Friend the Secretary of State for Scotland shares that desire.

Sir Peter Hordern (Horsham)

Is it not clear that those who work for the Rover Group will be much better off under British Aerospace than they would be if the Rover Group continued to go cap in hand to the Government for more funds? After the expenditure of £2.9 billion, is it not a matter for congratulation and in the public interest that the House has the prospect of staunching this endless flow of money?

Mr. Clarke

I agree that, apart from this unexpected last-minute hitch, our present position is so much more satisfactory than anyone could have thought possible had the Rover Group continued to be in public hands. The Rover Group's performance is steadily improving and plainly we have reached the stage where it should be returned to the private sector where I am sure that it would be much better off than it used to be as a pensioner client of the Government.

Mr. Bob Cryer (Bradford, South)

Is the Department of Trade and Industry so inefficient that it takes an EEC commissioner to point out the bare-faced robbery of the British taxpayer through this proposed deal by British Aerospace? Does not the Chancellor of the Duchy realise that in his zealotry and bigotry to sell off a publicly owned company he is causing uncertainty in the private sector? Major component suppliers such as Hepworth and Grandage in Bradford which supply the majority of the pistons to the Rover Group inevitably must face a degree of uncertainty, like the rest of the industry, including the Rover Group, as a result of this shilly-shallying. Why cannot the Chancellor make a commitment to retain public ownership so that every company in the components supply industry knows precisely where it is?

Mr. Clarke

I will not explain again the basis on which everyone who has any experience of the state aids case knows that the deal was bound to emerge in the course of discussions with the European Commission. The hon. Member for Bradford, South (Mr. Cryer) sounded as if he was endorsing the final decision that we reached with Commissioner Sutherland. That is very welcome, and I look forward to the hon. Gentleman's support when he finds out what he is talking about and when he sees the scale and structure of what we have negotiated.

We are satisfied, the Commission is satisfied, and I believe that the taxpayer should also be satisfied. The component suppliers to whom the hon. Gentleman has referred have always been strongly in favour of the sale of British Aerospace. As I explained in an earlier statement, I think that it is in their interest that an agreement of this kind should be entered into.

Mr. Roger King (Birmingham, Northfield)

Will my right hon. and learned Friend accept that in my constituency the Rover Group plant at Longbridge, the Lode lane Land Rover plant, the Cowley plant and others have worked outstandingly well to produce the good results for the Rover Group, as we have seen? Is he aware how much each and every one of the employees looks forward to working for an excellent company like British Aerospace? On behalf of all the employees, will he convey to the British Aerospace board the message that faint heart never won fair lady?

Mr. Clarke

I join my hon. Friend in congratulating the work force on the welcome improvement and results. The half-yearly results show a profit before interest of £28.8 million, compared with a loss of £10 million for the same period last year. That improvement in the group's performance had its bearing on the negotiations about the agreement as it ceased to be conditional and we talked about a final agreement which we believed should be accepted to achieve the result that my hon. Friend desires.

Mr. Dennis Turner (Wolverhampton, South-East)

Would it not be a good idea if the Chancellor of the Duchy of Lancaster were to nip off to his office to find out the up-to-date situation? He might then put us all out of our misery. We shall keep the debate going while he is away.

Mr. Clarke

I agree entirely with that suggestion. I am dying to get back to my office to find out what is happening.

Mr. Iain Mills (Meriden)

Does my right hon. and learned Friend agree that this is a bad day for the Opposition? Does he agree also that, on a day when the Rover Group announced good results and when the partnership between two great British companies is still continuing, it is quite devastating to find Opposition Members laughing and negative and that they do not regard the matter as important? My final question is on behalf of the components industry and dealers. Will my right hon. and learned Friend ask Opposition Members whether they would prefer a deal with a foreign cartel?

Mr. Clarke

I agree with my hon. Friend. Opposition Members came to the House prepared to denounce the agreement, whatever it was, and they are still trying to denounce it, but they cannot find out what it was or what it might be. They do not know what they want, so I shall not put the final propositions to them. I do not believe that there is any undue cause for concern among dealers and others in the industry. I hope to be able to report back to the House as soon as I can.