Short Brothers (Hansard, 27 February 1989)

§ Mr. Kevin McNamara (Kingston upon Hull, North) [by private notice]
To ask the Secretary of State for Northern Ireland whether he will make a statement on the future financial reconstruction of Short Brothers plc Belfast.

§ The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Peter Viggers)
The Government recognise the need to restructure the balance sheet of Short Brothers plc in advance of sale to provide a framework for the successful transition of the company into the private sector. In preparation for this, and in order to effect a reduction in the Government's liabilities, we propose to replace the company's indebtedness to commercial banks by convertible loans from the Government at national loans fund rates, with the intention of conversion into equity for disposal on sale of the company. An additional provision of £390 million has therefore been included in the 1988–89 Northern Ireland spring supplementary estimates; these are covered by the Draft Appropriation (Northern Ireland) Order 1989, which will be laid shortly. To facilitate this, an increase will be necessary in the Northern Ireland Office grant-in-aid to the Northern Ireland Consolidated Fund, which will be provided for by a Northern Ireland Office late spring supplementary estimate. The issue of the loan to the company will be subject to the approval of the European Commission.

§ Mr. McNamara
I am obliged to the Minister for his statement. I only regret that it arose by way of a private notice question and was not volunteered by him as a statement to the House, as the issue had been trailed extensively in the press over the weekend. Indeed, it was the subject of a hostile leader in The Daily Telegraph this morning.
It is a matter that affects not only Shorts in Northern Ireland but a great number of subcontractors in this country. The future of Shorts has a sad history, which caused the Trade and Industry Select Committee to say that it has not developed as part of a carefully planned strategy but in too precipitate a manner. Whilst we welcome the support that has been given to Shorts on this occasion, we regret very much that the Government were able to find adequate sums only when they intended to privatise the company, and not over the years when adequate capital could have prevented many of the problems with which Shorts has been confronted. The company now finds itself in exactly the same position as Rover was in when it was being sold off to British Aerospace.
There are a number of key questions that still have to be answered. The Minister has announced his arrangement. Presumably—will he confirm this—this money will come from the contingency fund. Secondly, can he state that the original tranche of £390 million as a supplementary estimate is only part of what is to be an overall package, and that further moneys will be available for whatever company decides, or is chosen, to purchase Shorts? The Select Committee estimated that between £700 million and £850 million would be needed to meet the accumulated deficit, future liabilities, working capital and launching aid for the FJX. The Minister has said nothing 22 whatsoever about that launching aid, nor, indeed, has he announced who is to be on the shortlist of prospective purchasers of the company. Is he in a position to make that announcement now, as he has gone some way towards reconstructing the financial position of the company?
Yesterday, it was reported that GEC and Fokker would make a joint bid—GEC for the missiles division and Fokker for the aircraft and airframes division—but that if they were succesful, they would not be keen to pursue the FJX jet because of Fokker's interest in the Fokker F50. Will the Minister confirm that any joint venture bid will be committed to continuing the FJX and that launching capital for the project will be available from the Government? That is fundamental and of the utmost importance to the future of aircraft building in Northern Ireland.
Finally, will the Minister confirm that whoever purchases Short Bros, its headquarters and research and development will be kept in Northern Ireland, and that the proud name of Short will be retained? Instead of being dragged here to make statements on these important matters, will he give an undertaking that he will carefully inform Members from Northern Ireland who are interested in these matters and ensure that statements are made in the House, without his having to be pursued by means of a private notice question? Great sums of public money are at stake and all taxpayers have an interest. In particular, will the Minister give an undertaking that, when the time comes to make his decision on Harland, it will not be announced surreptitiously by a planted question, but in the open on the Floor of the House?

§ Mr. Viggers
The hon. Gentleman approached this question in his usual manner. We had intended to make the announcement this afternoon by a written question and answer and that would have been entirely appropriate because this is an interim measure as part of the privatisation process. The final amount of any reconstruction will depend on the outcome of negotiations with the prospective purchasers.
The hon. Gentleman said that the measure was precipitate. He must have forgotten that it was on 6 December 1984 when the Government expressed their intention to privatise Shorts. I announced in the House on 21 July 1988 that it was our intention to proceed on the current basis, and our policy has been consistent since then. The hon. Gentleman referred to the company's capital shortfall. That is the result of losses on the profit and loss account. He asked for details of the £390 million. These will be in the spring supplementary estimates. He then asked about lauch aid and prospective purchasers. It would not be helpful to Shorts, Northern Ireland or the United Kingdom as a whole for me to go into detail on our discussions with prospective purchasers. The negotiations are commercially confidential and that must be respected. The preferred option is to sell the company as a single entity. On that basis, proposals have been invited from private sector interests.

§ Mr. Robin Maxwell-Hyslop (Tiverton)
Will my hon Friend tell me whether statements about launch aid for the FJX will be made by Ministers from the Northern Ireland Office or from the Department of Trade and Industry? Clearly, if it were a United Kingdom firm, statements would come from the Department of Trade and Industry. It is important to know that, not least in relation to who 23 will respond to questions when the time is ripe on that matter, bearing in mind the recommendations of the Select Committee, of which I am a member. Which Minister will respond to those recommendations of the Select Committee on Trade and Industry—Ministers from the Northern Ireland Office or the Department of Trade and Industry?

§ Mr. Viggers
The handling of Shorts is generally a matter for the Northern Ireland Office, but the Department of Trade and Industry has 9.5 per cent. of the shares of Shorts and we consult with it closely. Launch aid for the FJX is tied up completely with our negotiations with prospective purchasers. It would be unthinkable for the Government to proceed with the FJX without knowing the clear intentions of the prospective acquirer.

§ Mr. Malcolm Bruce (Gordon)
Does the Minister accept that the privatisation of Shorts is regarded as a delicate matter in this House and the Province, and that there is great anxiety that the Government are not giving a forthright, clear exposition of the privatisation? Will he give a clear and absolute assurance that the Government are determined to sell the company as a single entity? Will he make it clear that in those circumstances the Government recognise their obligation to provide the kind of launch aid that the FJX requires to ensure that the company can continue as a single entity? Will he undertake to give the House the assurance that any privatisation will prevent the possibility of subsequent asset-stripping, which is feared in Northern Ireland?

§ Mr. Viggers
I have said many times that our preferred option is to sell the company as a single entity. I have made it clear that the information memorandum was issued on that specific basis. Launch aid would be something for which the prospective acquirer would be eligible to apply to the Government. Of course, it would be the purpose of Government in Northern Ireland to ensure that the jobs and the skills are kept in Northern Ireland. It is for that reason that we are negotiating with full recognition of the sensitivity of the situation.

§ Mr. Cranley Onslow (Woking)
How long does my hon. Friend expect that he will need to bring his negotiations to a conclusion?

§ Mr. Viggers
The privatisation of Shorts is causing concern to those who work for the company. While its board welcomes privatisation—as I believe do many of its workers—nevertheless uncertainty is always bad for any company. We recognise the need for urgency and we shall bring the discussions to a conclusion as quickly as we can.

§ Mr. Doug Hoyle (Warrington, North)
While I appreciate what the Minister is saying about selling Shorts as an entity, does he agree that the press speculation about GEC and Fokker—that GEC is interested just in missiles and Fokker would not be interested in the FJX—leads to a lot of anxiety and anguish among people in Northern Ireland, especially those who are employed by Shorts?
Will the Minister say categorically that any decision to sell Shorts will involve it being sold to a company that is determined to take up the FJX project, which is essential to the success of Shorts?

§ Mr. Viggers
I am not responsible for press speculation, much of which is wide of the mark. It is the Government's clear and express intention that Shorts should be moved to the private sector. It has many high-quality skills and excellent products. We believe that the right place for Shorts is within the commercial disciplines of the private sector and we are confident that it will have a good future.

§ Mr. Gerald Howarth (Cannock and Burntwood)
I warmly welcome this long overdue reconstruction of the company's accounts, and my hon. Friend's undertaking to expedite as quickly as possible the sale of the company and to relieve the uncertainty. Will my hon. Friend tell the House that the company has a healthy order book and that it is not a company devoid of good products to sell in the market place?

§ Mr. Viggers
I know that my hon. Friend follows this matter closely. He will be aware that the company has an order book approaching £1,000 million for a number of outstanding projects, including the Tucano, the SD360, the Starstreak missile and, of course, the important aerostructures business for Boeing and Fokker.

§ Mr. D. N. Campbell-Savours (Workington)
Will the Minister be careful about handing over a company such as Shorts to Lord Weinstock and his colleagues at GEC, who frighten those of us who are interested in protecting the taxpayer and in procurement on defence contracts? Is he aware that when we were examining in the Public Accounts Committee the question of irregularities in procurement and all sorts of overcharging by defence contractors it seemed that invariably GEC was there in the front line? Is it right that Lord Weinstock should be allowed to increase his monopoly when that is clearly against the national interest?

§ Mr. Viggers
I simply say that I believe that the hon. Gentleman's remarks are a slur on a fine British company.

§ Mr. Barry Field (Isle of Wight)
My hon. Friend has kindly told us the coupon of the commercial loan stock, but I do not believe that he has told us the terms. Can my hon. Friend inform the House of those terms? My hon. Friend may be aware that Westland Aerospace in east Cowes has been one of the main competitors of Short Brothers in obtaining Boeing composite wing contracts? Can he assure the House, and especially myself, that British taxpayers' money will not be used to subsidise future contracts and to take them—perhaps, to West Germany—in unfair competition with a company that has obtained those contracts through sheer guts and determination, excellent teamwork between management and the work force and without taxpayers' subsidy, despite the fact that unemployment in my constituency is above the national average, rather like Northern Ireland?

§ Mr. Viggers
As I mentioned in my original response to the private notice question, the loans will be from the Government at national loans fund rates and they will be convertible into the shares of the company at the time of the sale. My hon. Friend makes a fair point on behalf of his constituency company. I shall simply say that the objective is that Shorts should operate in a completely commercial environment.

§ Mr. Harry Barnes (Derbyshire, North-East)
Are not private enterprise solutions for Northern Ireland, of all places, terribly inappropriate? A. J. P. Taylor, the 25 historian, talked about war Socialism as something that operated during the two world wars. There is great conflict in Northern Ireland and surely something that represented the collectivist solution would be the appropriate means of trying to handle the problems of the Province.

§ Mr. Viggers
Absolutely not. I am delighted that, in the past two years, unemployment has gone down from a headline total of 131,000 to a headline total of 111,000. That drop is not due to the public sector, but principally to the private sector, which has been investing in industry in Northern Ireland. I reject the hon. Gentleman's idea that a collectivist answer would be the right one for Northern Ireland. Although Shorts, which we are currently discussing, has maintained a roughly stable work force, the work force of Harland and Wolff has declined from more than 9,000 to about 3,000 during the time that it has been in public ownership. Such ownership is, therefore, absolutely no guarantee of employment.

§ Mr. Nicholas Baker (Dorset, North)
Will my hon. Friend confirm once again that the people of Northern Ireland who work at Shorts stand to benefit from, and respond to, a measure of privatisation of the kind proposed just as much as any other people in the rest of the United Kingdom?

§ Mr. Viggers
My hon. Friend is absolutely right. I believe that 655,000 people work in about 17 enterprises that have been moved from the public sector to the private sector. If one were to ask most of those people now whether they wished to move back into the public sector, with all the problems involved, they would reject that suggestion out of hand.

§ Mr. Julian Brazier (Canterbury)
In welcoming this commitment to the future of Short Brothers, evidenced by the money made available to it, and to be carried out by the excellent principle of trying to get it into the private sector, may I ask my hon. Friend whether he has taken full account of the position of GEC as one of the potential bidders? That company is already a supplier of electronic components to Shorts and to its competitor, British Aerospace. Has my hon. Friend taken account of the fact that GEC is not only a prime contractor to the naval sector through its ownership of Yarrow Shipbuilders, but is the largest supplier of electronic equipment and is trying to buy the second largest supplier of electronic equipment? Since GEC can be regarded in this context as the referee and one of the players it is rather difficult to see how we can avoid allowing GEC to do rather well out of a monopoly position.

§ Mr. Viggers
Although individual companies may be prepared to identify themselves as interested in Shorts, it would be wrong for me to be tempted by my hon. Friend to comment upon any individual company. I do not propose to do so.

§ Mr. Ian Gow (Eastbourne)
Is my hon. Friend aware that the rebuke from the Opposition Front Bench 26 spokesman about his answer this afternoon is wholly unmerited? Is not the story of Short Brothers as a company in the public sector a deeply unhappy one? Since more than four years have elapsed since the Government announced their intention to privatise the company, will my hon. Friend understand that on the Conservative Benches, and apparently even in some quarters of the Opposition Benches, the view is that the sooner the company is privatised the better?

§ Mr. Viggers
I am grateful to my hon. Friend and I am absolutely certain that Shorts has an outstanding future in the private sector.