§ 4.0 p.m.
§ LORD SHACKLETONMy Lords, if I may, with your Lordships' permission, I should like to repeat a Statement which is being made by my right honourable friend the Minister of Technology in another place. It is as follows:
"To-day the Report of the Committee of Inquiry under the chairmanship of Sir Roy Wilson into the pricing of certain contracts made with Bristol Siddeley Engines, Ltd., is being published. The House will want to study the Report very carefully and, no doubt, to debate it. The Government accept the general conclusions reached. I will quote those which deal with the more important issues.
"First: on the excessive prices for engine overhauls for the years 1959–63 the Report of the Inquiry states, and I quote:
'During the period under review Bristol Siddeley Engines budgeted for, and achieved, exorbitant profits on their overhaul contracts with the Department. The appproximate extent of the profitability of these contracts was, at the time, known to the company at all levels of management. We do not accept that the overcharging has been justified by any of the arguments put forward by the company'."The conclusions of the Report go on to state, and again I quote:'In relation to the overhaul contracts the conduct of the company's estimating and price-negotiating representatives amounted to intentional misrepresentation, by which the Department's representatives were deceived'."Second: a factor which contributed to the excessive profits was double charging by the company for certain work, and the Inquiry investigated this aspect in great detail. On this the Report has said—I quote:'It was not just a simple matter of B.S.E. sending in duplicate bills for the same items: what happened was that they sent in individual bills for the repair of spare parts and that some of the amounts charged in those bills were for work which had already been taken into account in fixing the composite price which had been agreed for the overhaul of an engine as a whole.'807 "They concluded—again I quote:'The fact that in relation to a number of sub-assemblies there was double charging at Coventry as between the overhaul contracts and the repair of spares contracts was known to B.S.E.'s estimating staff from about the dates when in each case it first occurred, and to certain of their superiors at later dates.'"Third: the Report examines in detail the part played by Ministry staff who were deceived by the company and considers whether the staff concerned could have prevented this deception. They have concluded, and I quote:'The main reason why the Department failed to prevent excessive profits from being made on the overhaul contracts was that the estimates of man hours made and accepted by the Directorate of Technical Costs were too high; and in this respect the Directorate of Technical Costs fell seriously below a reasonable standard of competence.'I should inform the House that this lapse was the subject of a full Departmental inquiry in 1966, carried out in accordance with standard Civil Service procedures, and appropriate action was taken at that time with the officers concerned."Fourth: on organisational matters the Inquiry recognised that these events took place several years ago at about the same time as those of the Ferranti case and that, in the intervening years, improvements have been made in the organisation and staffing of those areas of the Department which were involved. The conclusion of the Report on this aspect states, and I quote:
'There was in general a lack of adequate system and co-ordination as between the various Directorates of the Department which were concerned in one way or another with the overhaul contracts. We note that the Department have already introduced some measures to deal with this problem, and that they are keeping it under constant review.'"Fifth: the Inquiry also dealt with repair of spares contracts for 1959 to 1964. It is fair to say that in the body of their Report the Inquiry state that the knowledge of these profits within the company was not so precise as in the case of the overhaul contracts nor was the company's conduct in securing these profits so deliberate. Their main conclusion was, and I quote:'The profits on the repair of spares contracts were in all the circumstances excessive. They should be reviewed jointly by the Department and the Company.'808 "Sixth: the House will recall that in February, 1967, after long negotiations, B.S.E.L. agreed to refund a sum of £3.96 million in respect of excessive profits made on the engine overhaul contracts. The Report says, and I quote:'In considering whether this settlement was a good one or a bad one it is essential to bear in mind that negotiations would in all probability have taken a very different shape if the Department had been aware of all the facts which we have discovered in the course of our inquiry.'It further says, I quote:'In all the circumstances we do not think that the amount for which the Department agreed to settle can reasonably be criticised.'"Seventh: in addition the Report deals with a number of other subjects. The question of Press statements over the Easter weekend of 1967 was examined and has been reported in sufficient detail to enable the Inquiry to be satisfied that no impropriety was involved."Eighth: an important conclusion of the Inquiry reads as follows:—
'Greater emphasis should in future be placed on the duty of contractors to quote fair and reasonable prices.'I have already taken action to draw this to their attention."Ninth: the Inquiry also came to the conclusion that—and I quote:
'The Department will be at a serious disadvantage in negotiating fixed prices so long as "equality of information" is withheld.'"On this point I would refer to the Statement made on Monday by my right honourable friend the Chief Secretary to the Treasury—not repeated in this House because your Lordships were not sitting—on the arrangements to secure equality of information and post costing."The House will be aware that in October, 1966 (long after the occurrence of the events with which we are concerned), the business of B.S.E.L. was acquired by Rolls Royce Limited who have always enjoyed an excellent world-wide reputation. The Report indicates in clear terms that Rolls Royce were in no way implicated in these events, but it is clear that further consideration must be given to the situation; involving as it does Rolls Royce, as the new owners of 809 B.S.E.L., and the Government; and to all the financial issues raised by the Report, including the engine overhaul contracts and the repair of spares contracts, in relation to the general high level of profit achieved by B.S.E.L. on Government contracts as a whole for 1959–63.
"The Government not only accept the conclusions of the Wilson Inquiry, they also accept the seven recommendations of the Second Special Report (1966–67) of the Public Accounts Committee, with only one reservation. This relates to the basis for settling the appropriate size of the refund if any similar cases should arise. Since the P.A.C. report was made, as my right honourable friend the Chief Secretary to the Treasury announced on Monday, it has been agreed with industry that a Review Board should be set up to deal with this question.
"The House will wish to consider carefully the grave implications of the conclusions reached by the Wilson Committee. We for our part shall look sympathetically at any request for an early debate"— —and perhaps I may interpolate that your Lordships may or may not wish to debate this—
"At this stage therefore I do not want to comment beyond saying this: the Government must be able to rely upon the word of contractors with which they deal. However conscientious civil servants or Ministers may be, and however vigilant is the Public Accounts Committee, there can be no guarantee that the taxpayers' money will be safeguarded unless contractors themselves accept this as part of their duty to the community. We are all dealing with public money. The thousands of contracts, large and small, signed by the Government each year must be negotiated on the basis of confidence on both sides.
"Finally, I should like to express my appreciation of the great care and expert attention which Sir Roy Wilson and his colleagues, Sir Leslie Robinson and Mr. C. J. M. Bennett, have devoted to this task."
My Lords, that concludes the Statement.
§ 4.10 p.m.
EARL JELLICOEMy Lords, I am grateful to the noble Lord for repeating the Statement which his right honourable friend the Minister of Technology has made in another place. We have just listened to a very grave Statement indeed. In view of that, and in view of the complexity of this question, I would wish at this stage, pending a careful perusal of the Report of the Committee of Inquiry, to make only one comment. As I think is made quite clear in the Statement, Bristol Siddeley Engines Ltd. were acquired some eighteen months ago by Rolls Royce. Rolls Royce is one of our greatest companies: it rightly enjoys a world reputation. It now has a chance of a further and major breakthrough into the United States market. I should therefore like to express the hope that, whatever else the Government may decide to do as a result of the very serious findings of this Committee of Inquiry, they will be very careful—and the terms of the Statement itself give me confidence in saying this—to do nothing which will in any way injure the reputation of Rolls Royce or its prospect in world markets.
§ LORD BYERSMy Lords, following on what the noble Earl has said, we on these Benches would also wish to study the Report in detail before commenting. At first sight it does appear to be a very sorry story indeed. The noble Lord referred to setting up a Review Board. Is this specifically to deal with this problem, or is it the Government's intention that there should be a general Review Board to deal with major Government contracts in the future?
§ LORD SHACKLETONMy Lords, I certainly agree with the noble Earl, Lord Jellicoe, and, as he said, I was at great pains, as was my right honourable friend, to make clear the position of Rolls Royce, which is a very great company of which we have good reason to be proud nationally. I appreciate that it is necessary for noble Lords to read this really rather remarkable document. On the particular point about the Review Board, this is the Review Board set up under the new procedure agreed with industry which will work in certain circumstances where there may be an 811 excessive rate of profit, or, I believe (though here I would like to check my source, because it is another issue), where a loss is made. There is, in fact, machinery which will help to oil the wheels a bit under the new system in which full equality of information is made available.
§ LORD GRANVILLE OF EYEMy Lords, may I ask my noble friend the Leader of the House whether, when we have had an opportunity of studying this very serious and grave Report, particularly with regard to the statement which he made concerning the setting up of a national Review Board, there will be an opportunity in your Lordships' House to debate this question?
§ LORD SHACKLETONMy Lords, it is unfortunate that we were not able to have the Statement on Monday; I even contemplated whether we ought to repeat it on Tuesday. I will certainly consult with my noble friends, and with noble Lords opposite, about the possibility of a debate. It is, of course, open to the noble Lord himself to put down a Motion for Papers, or an Unstarred Question, and it may be that the new machinery on post-costing is one which, in due course, we might discuss when we have our fairly frequent discussions, usually on an Unstarred Question from the noble Earl, Lord Kinnoull. Perhaps the noble Lord would like to break his monopoly on this.