§ 3.55 p.m.
§ THE LORD PRIVY SEAL (LORD SHACKLETON)My Lords, with permission, I should like to make a Statement on the computer industry which is being made in another place by my right honourable friend the Minister of Technology. The Statement is as follows:
"I am pleased to be able to inform the House that with the backing of the Government the commercial and scientific computer businesses of I.C.T. and English Electric Computers are to be brought together into one company to be called International Computers Limited—'I.C.L.'. I.C.L. will be by far the largest company outside the United States of America specialising in commercial and scientific computers. Plessey, a major manufacturer of telecommunications equipment, will participate in the new group and will also form a joint development company with I.C.L. to study and develop the convergence between computers and communications.
"In pursuing our objective of a strong, independent British computer industry, and recognising I.C.L.'s need for heavy expenditure on research and development and for securing a strong financial position, the Government propose, subject to the approval of Parliament, to participate in the financing of the new company's operations to the extent of £17 million over a period of five years. Of this total amount the Ministry of Technology have agreed to provide £13½ million over the next four years as a grant towards I.C.L.'s research and development expenditure. The remaining £3½million is to be subscribed for ordinary shares of £1 each which will be issued to the Government at par. Two shillings per share will be payable on issue and the balance in 1972.
"The current market value of these shares substantially exceeds the amount to be subscribed for them. These terms have been designed to make a high proportion of the Government's contribution available as support of the research and development programme chargeable against revenue, while giving the Government a substantial participation in the future pros— 694 perity of the company which this programme is designed to achieve.
"I have in mind making use of the powers for which the Industrial Expansion Bill makes provision subject to the enactment of the Bill and the necessary Affirmative Resolution. As the result of these arrangements the Government will hold initially 10.5 per cent. of the ordinary shares and the other shares will be held 53.5 per cent. by the former I.C.T. shareholders, 18 per cent. by English Electric, 18 per cent. by Plessey. It will be the policy of I.C.L. to continue to manufacture, market and service the present I.C.T. 1900 and the English Electric System 4 ranges of computers with enhancements. It will also sell and service the Elliott 4100 range.
"The know—how and experience of I.C.T. and English Electric computers will be pooled to develop for the 1970s a new range of computer systems as competitive as any available in the world markets at that time. The new range will be designed to enable both the 1900 series and System 4 users to transfer their work to it without difficulty. In the light of the Government's intention to place orders for large computer systems, I.C.L.s research and development programme will include the development of such a system to meet the expected demand at home and overseas.
"The Government will have a director on the board of the new company, but do not intend to intervene in the day-to-day management. To safeguard the public interest, the Government and the company will enter into an agreement, the text of which, when completed, I will make available to the House. There will be a revision of the existing arrangements between the National Research Development Corporation and I.C.T. which will bring forward the repayment of the money advanced by the National Research Development Corporation.
"My right honourable friend the President of the Board of Trade has indicated that he does not intend to refer the proposed arrangements to the Monopolies Commission. Neither English Electric nor Plessey will enjoy a preferential position in the supply 695 of components to International Computers Limited, which will seek its supplies from the most competitive sources."
§ THE EARL OF DUNDEEMy Lords, I am sure we shall all be delighted to hear that at long last the Government are stirring on this matter. This is one of the subjects on which we were told three and a half years ago that the Government were all poised for dynamic action, but the fuse has taken quite a long time to reach the dynamite. I think it was about two years ago when the noble Lord, Lord Byers, moved a Resolution on this subject and all noble Lords who took part in the debate pressed the Government for more speedy action.
As the Statement has been in my hands for only a short time, I do not think I ought to say anything about the arrangements which the noble Lord the Leader of the House has described for shareholding in the new computer company, International Computers Limited, part of which is to be held by the Government under the Industrial Expansion Act (and I merely put in the proviso) if and when the Act reaches the Statute Book. I am sure that if, having reflected on this subject and examined the Statement, any of your Lordships wants to discuss these matters, it would be easy to arrange a debate on an Unstarred Question or in some other way. Meanwhile, I hope that the noble Lord will assure the House, as I am sure he can, that no undue pressure was used in bringing about this merger of the companies concerned.
In the final part of his Statement, the noble Lord said:
The new company will seek its supplies from the most competitive sources.I am sure that none of us would take exception to that, but I seem to remember that in the debate which I have mentioned the Government indicated that some special action might be taken to encourage the production of computers in the development areas. I recognise, of course, that there must be limits to that, but I wonder whether the noble Lord could say if any Government decision has been taken about it.
§ LORD GLADWYNMy Lords, on behalf of my noble friends on these 696 Benches, and notably on behalf of my noble Leader Lord Byers, who unfortunately could not be present at the moment to hear the Statement, I would say that we greatly welcome this development, which will help this country to compete in the production of what has been called rightly "the goods of the future." I would ask, if I may, three questions. First, has the Industrial Reorganisation Corporation played any part in the merger? Secondly, will the resources now made available to the new corporation for research and development compare in any way with the resources which we know are available to such enormous bodies as the International Business Machines of America? Thirdly, will the shareholders be consulted?
§ LORD SHACKLETONMy Lords, I can only say that I do not know where the noble Earl, Lord Dundee, has been during the last 3½ years, because if there were only one thing that one could say of this Government, it would be that it has brought enormous pressure and support behind the computer industry. If the noble Earl wants to hear the various things that have been done, I may say they have all been announced in your Lordships' House. When the Government proceed by free negotiation to persuade a number of private enterprise firms to come together, I think it is a little unfair to suggest that the Government ought to have used more forceful methods. This is something which has been freely entered into by the firms concerned with the support of the Government. It is a new and exciting development, and I should have thought that the Government should be congratulated on the rapidity with which they have brought about this merger, which largely reverses the situation in regard to large computers. The noble Earl may remember that when we debated the Plowden Report the recommendation then was that large computers should be imported from America. The Government have taken hold of that and we are now going to make our own. This is a good example of joint association between private enterprise and Government.
I did not quite understand the reference to I.B.M. in this matter. I.B.M. are still the largest, and a remarkably efficient and highly competitive, computer firm, 697 which covers, I believe, something like three-quarters of world production. The American firms will continue to compute—I beg your Lordships' pardon to compete, and compute—in this country. I understand that the I.R.C. were interested in this matter, but I cannot say how far their good offices specifically contributed towards the result. Certainly they knew all about it and no doubt approved it. The shareholders have to be consulted. The normal letter will go out to shareholders to-day. The Boards are recommending to the shareholders participation in the merger.
§ LORD CONESFORDMy Lords, can the noble Lord help me in the matter of this new noun "know-how"? Is this baby language for "knowledge" or does it mean something different?
§ LORD SHACKLETONMy Lords, it does mean something different. Like all jargon which is used properly, it has a specific meaning, tailored (if the noble Lord will allow me to use that word) to a particular use. It contains a more specific meaning than knowledge alone. I am surprised at the noble Lord's question because, when I was going through the Statement, I picked out two other words of which I said I must have the exact meaning as the noble Lord, Lord Conesford, would be bound to refer to them.
I am sorry that I am unable to answer the noble Earl's question on development areas, but clearly what he suggests would be consistent with the Government's policy generally. I am afraid that I do not know where these factories will be, but I rather think that at least one of them is in a development area.
§ LORD IRONSIDEMy Lords, is the noble Lord able to say that the money the Government will put up for research and development will be distributed across the board, on software as well as on hardware? Will the noble Lord also give some indication of whether the obsolescence of certain computers in Government service which have already been supplied by the companies concerned will be hastened?
§ LORD SHACKLETONMy Lords, the first question is relevant to the Statement, but I am not sure about the second. They are both important points. As I 698 understand it, research and development will be across the board. There is a great deal of research going on at universities on particular aspects of computers. There is one, I believe, on peripherals generally. But money will be available to cover the whole field and there will be a properly worked out research programme. Software is an important aspect of it.
LORD REAMy Lords, I believe that this company is to be a British concern. If that is so, could the noble Lord explain why the title includes the word "International"?
§ LORD SHACKLETONMy Lords, there are quite a number of international companies which are British owned. It is a suitable title to indicate what I hope will be the world-wide ramifications of this new British industrial giant.