HL Deb 04 February 1971 vol 314 cc1375-89

3.58 p.m.

LORD CARRINGTON

My Lords, I should like to repeat a Statement that has been made in another place by my right honourable friend the Minister of Aviation Supply. The Statement reads as follows:

"The Board of Rolls Royce have to-day issued a statement, copies of which I have had placed in the Vote Office."—

in our case, my Lords, in the Printed Paper Office—

"They have unanimously decided, for the reasons given in the statement, that it is not possible for them to proceed with the RB.211 engine under the present contract with the Lockheed Corporation.

"As the Board of Rolls Royce have stated, the loss of resources already committed to the project combined with the losses which will arise on termination are on such a scale that they are likely to exceed the net tangible assets of the company. In the light of this situation the Board have decided that they have no alternative but to ask the trustees of the debenture holders to appoint a Receiver and Manager.

"To ensure continuity of those activities of Rolls Royce which are important to our national defence, to our collaborative programmes with other countries and to many air forces and civil airlines all over the world, the Government has decided to acquire such assets of the aero-engine and marine and industrial gas turbine engine divisions of the company as may be essential for these purposes. The necessary legislation will be introduced early next week.

"The Government has no liability in respect of the contract between Rolls Royce and Lockheed. The Government will explore, with the Receiver, the future of the RB.211. Because of the very grave consequences which must follow from the decision of the Rolls Royce Board, the Government is also undertaking urgent discussions with the Lockheed Corporation and with the United States Government.

"The Board have stated that there will inevitably be substantial redundancies within the company. I have been informed by the Receiver that he will be discussing this urgently with the staff and the unions concerned. The Department of Employment will, of course, provide the maximum help in finding alternative employment in all the areas affected. Interviewing teams will be sent into the factories as necessary. Redundancy payments to employees are guaranteed under the Redundancy Fund arrangements.

"It will be for the Receiver to assume responsibility for the protection of the debenture holders. Thereafter any remaining assets will be available to meet the claims of other creditors.

The Board of Rolls Royce intend to call an Extraordinary General Meeting of the company in order to pass a special resolution requesting the Secretary of State for Trade and Industry to appoint an Inspector to conduct an inquiry under Section 165 of the Companies Act 1948."

4.0 p.m.

LORD SHACKLETON

My Lords, this is a Statement of such an appalling nature that it is almost impossible to find appropriate words with which to discuss it. The implications must be apparent to every Member of your Lordships' House. It does not require me to indicate the great blow, the great national blow, this represents. The repercussions, which are intensely serious so far as Rolls Royce are concerned, go much wider, to the large number of contractors and, indeed, to the confidence of investors in British industry generally. I think the Government have taken the only step—though I shall want to ask a few questions—in proceeding (and we may as well call it this) to nationalise certain sections of Rolls Royce.

There are a few questions I should like to ask the noble Lord. As I understand it, it has been decided, to acquire such assets of the aero-engine and marine and industrial gas turbine engine divisions of the company as may be essential… Are the Government in a position to give information about some of the other divisions—for instance, the motor car division, in which a great deal of British prestige is also involved? I would also ask the noble Lord whether he can throw more light on any discussions which took place between the Government and Rolls Royce on any request for further financial help? I take it that the degree of financial vulnerability ran into vast sums, and it would be useful for us to know about this.

One is very tempted at a moment of this kind to refer to the Government's philosophy in regard to industry, but I think it is apparent to everybody, on both sides, how, when confronted with the realities of a hard situation, the Government have to intervene. It is appalling that it should be in a matter of such desperate seriousness. I understand from the noble Lord that we shall be having legislation very shortly. We have been considering, and the whole House no doubt is considering, how soon we can debate this matter, and a point for consideration is whether, before the legislation arrives here, we should have a full discussion. On the other hard, if legislation is arriving very soon—and I imagine the Government are hoping to pass it under co-operative emergency arrangements—I must make clear to the noble Lord that at the very least we shall want a full discussion on Second Reading, however far we facilitate the other stages. My noble friend Lord Beswick may also have some questions on this Statement, but I think one can only repeat again—and I know the noble Lord must feel it himself—the sense of intense shock that this brings to all of us, and indeed to Britain.

LORD CARRINGTON

My Lords, I am obliged to the noble Lord for what he says. I do not think that anybody in the House could dissent from him when he says that it is indeed a grave situation and one which has come as a great shock to all of us. He asked me a number of questions. With regard to the divisions of Rolls Royce which it is not Her Majesty's Government's intention to acquire, it will be for the Receiver to decide what to do with them. The noble Lord also asked me whether there would have been a vast sum of money involved in the Government's stepping in. As soon as the Government stepped in with any more money for Rolls Royce they would themselves have been liable for all the contractual obligations and debts of Rolls Royce. As he himself has said, this would have run into a vast sum of money. He is perfectly right when he says that whatever our own particular political philosophy may be, when it is in the interests of the country and in the interests of our defence—which it most definitely is in this case—it is essential for the Government to intervene and to ensure the continuity of our defence programme.

As regards a debate, or a debate on the Bill which I hope will be coming to your Lordships very shortly, I shall be very happy to meet whichever is convenient to noble Lords opposite. Perhaps we might discuss that matter when we know when the Bill is coming up, and what the timetable will be.

LORD BYERS

My Lords, I should like to associate myself with what was said by the noble Lord, Lord Shackleton. This is indeed a very had blow to British prestige at home and abroad, quite part front the human considerations which will affect so many people. I merely want to put two points to the noble Lord. Will an effort be made now to renegotiate the contract with Lockheed, and possibly with some, or all, of the customers? And in the meantime will efforts be made to preserve intact, so far as possible, the technical and research teams of Rolls Royce, so that they will not be dissipated, in case there is an opportunity of refinancing the company?

LORD CARRINGTON

My Lords, if the noble Lord will look at the Statement I made, I think he will find that, though not explicitly, both those points are covered. It certainly will be the intention of the Government to discuss with the Receiver the future of the RB.211, and we shall be having discussions with the Lockheed Aircraft Corporation and with the United States Government. It would be right to say to your Lordships that I think there are formidable difficulties in the way of the continuation of this project, and I do not think too much hope should be based upon it.

LORD BESWICK

My Lords, may I ask one or two more specific questions? First, may I ask the noble Lord what steps he is taking to assure, or reassure, our German and Italian partners in the enormously important M.R.C.A. project, about the viability of the RB.199 engine? Secondly, when he talks in the Statement about the continuity of activities, can he say that this does not mean just maintaining a repair and servicing organisation, but that it means continuing research and development in such important projects as, for example, the RB.410?

LORD CARRINGTON

My Lords, it does, of course, mean much more than just continuing the repair facilities of Rolls Royce, and it is the Government's intention to continue with the engines for the aircraft that the noble Lord opposite knows about, such as the M.R.C.A. and the Jaguar. With regard to his first question, I would make it abundantly clear that we do intend to continue with the M.R.C.A. and the RB.199 engine. I have personally written to the German Minister of Defence and I have asked the Vice-Chief of the Air Staff to go over and talk to the Germans and assure them of this.

LORD GEORGE-BROWN

My Lords, as one who, for 25 years, was the elected representative of a vast number of the people who work on this project, and as one who, as a Minister, committed this country to a course of action which enabled us to have the contract for the RB.211, may I say to the Minister of Defence, with your Lordships' permission, how shocked I am. It is not just the misery for 27,000 families; it is the dreadful acknowledgement that an Englishman's word—and the intertwining of the two "Rs" was in fact the visible sign of that—is perhaps no longer his bond. Is the Minister aware that to let the board of Rolls Royce—ex-margarine manufacturers, failed chemists—announce in our name that we can no longer honour our contract is the blackness of the announcement this day? Will the Minister please tell your Lordships why no part of the £60 million-odd has been made available, so that a discussion can take place about the consequences of telling Europe, Asia and America that we can no longer honour our contract?

Why was no move made before this very short-lived Board made the announcement? Who will believe us in regard to the engines, about which my noble friend Lord Beswick asked? Who will believe us about the Concorde? I ask the Minister of Defence to tell us. I remember, and the noble Lord, Lord Carrington, may remember, the great and the late Sir Winston Churchill once saying—and I did not agree with him—that he was not elected First Lord of the Treasury to preside over the liquidation of the British Empire. Is the noble Lord, Lord Carrington, not coming to the conclusion that Mr. Heath and Mr. Davies seem to think that they were elected to preside over the dissolution of Britain's most famous and most basic industries?

LORD CARRINGTON

My Lords, the noble Lord asked me one question, and otherwise made a series of comments. I think we all share the shock that he has expressed about what has happened to Rolls Royce. He asked me why the Government had not given any of the £60 million which they had promised to Rolls Royce for the further development of the engine. The reason is—if the noble Lord will recollect the events of, I think, last November—that the £60 million was contingent upon the report of Cooper Brothers & Company as to the finances of Rolls Royce, and that report has not been received. If money had been paid when we knew the situation of Rolls Royce, as we did last week, the Government would have been responsible—it is no good the noble Lord shaking his head it is true—for all Rolls Royce's debts. The Government came to the conclusion that the amount of money which it would be necessary to inject into Rolls Royce in order to save the company and the RB.211 contract was such that the taxpayer should not be asked for it, and that the right course was the course that I have announced to your Lordships.

LORD GEORGE-BROWN

My Lords, may I follow that up for one second, with apologies to my colleagues? I shall not thereafter pre-empt others of your Lordships. With respect to the noble Lord, Lord Carrington, is that true? Surely, part of that money could have been advanced on the clear understanding, clearly written, that it did not commit the Government to taking over Rolls Royce's debts, involvements and commitments. I ask the noble Lord—he must have been advised about this; at least, I should like to think he had been advised about it—why was that interim course not taken, so that we should not find ourselves as a nation faced with a decision made by a handful of men who have no responsibilities whatever to the people of this country?

LORD CARRINGTON

My Lords, if the Government had advanced any more money to Rolls Royce, knowing that Rolls Royce was insolvent, they would, I am advised, have become liable. In any event, I wonder whether it would have been very honest of the Government to do that, knowing that by so doing Rolls Royce would continue trading when they were insolvent.

LORD ALPORT

My Lords, it was said that the Government intend to take over certain assets of Rolls Royce. What criteria have been used in the selection of the assets concerned? Are they assets particularly connected with the defence interests of this country, or with the international obligations of Rolls Royce, or with the technical complexity of the company. What are the criteria which the Government are using in relation to this decision?

LORD CARRINGTON

My Lords, as I made clear in the Statement, the assets will be those which are important to our national defence, to the collaborative programmes with other countries, and to the many air forces and civil airlines all over the world who use Rolls Royce engines.

LORD BURNTWOOD

My Lords, when the noble Lord talks about the acquisition of certain shares in connection with the engine division, has he in mind legislation to provide for the nationalisation of that section; or has he in mind—which I think many of my noble friends would not find satisfactory—some sort of shareholding comparable to the British Government's shareholding in the petrol companies? Furthermore, is the noble Lord aware that when I was chairman of the Commonwealth Airline Operators' Conference in 1968, the announcement by Sir David Hubbie of the development of the RB.211 was acclaimed on the grounds that at least it would give some assurance and insurance that we could retain a share of the Commonwealth market for aircraft? This goes far beyond the immediate economic problems of to-day. The whole of our technological reputation in the world is at stake here.

LORD CARRINGTON

Yes, indeed, my Lords. That is perfectly true. But there is no suggestion that the technicians at Rolls Royce could not have made the engine—I do not think there is any doubt whatever that they could. There are the financial difficulties and the question of the delay, which would have enabled Lockheed and the airlines who were proposing to buy the aircraft to sue Rolls Royce for late delivery of the engine. With regard to the noble Lord's first question, it is the intention of the Government to acquire the assets.

LORD DIAMOND

My Lords, is the noble Lord not placing too much stress on the one point which he has made about the unlimited liability of the Government if they had assisted with part of the finance which was conditionally promised? Is he aware that this is admittedly a difficult field for the lawyers to advise us about? But is it not absolutely clear that if the Government had allowed themselves an instrument by which, at arms length, money could have been advanced, the position would then have been very similar indeed to money being advanced by a bank? In those circumstances, a bank advancing money does not get itself involved, albeit that the directors of the board have their responsibilities under the Companies Act.

LORD CARRINGTON

My Lords, I am advised that that is not so, but I should not like to quarrel with the noble Lord. I do not know whether my noble and learned friend on the Woolsack would like to intervene; I am not a lawyer. But of course this is not the only issue. I do not want to play up this one, but I think your Lordships should be aware of what sort of money was involved. The £60 million was promised by the Government and the banks four or five months ago. The Rolls Royce board now say that it will cost, in addition to that, anything between £60 million, £70 million or £80 million more to go on with the engine. In addition to that, the 550 engines were going to be sold under the contract which Rolls Royce had entered into, at a loss of £110,000 for each engine. There were also the claims against Rolls Royce from the airlines and from Lockheed, which might well have amounted to another £40 million or £50 million. In the context of what we had to decide, these were very large figures indeed and the Government had to make up their mind what was the right thing to do in the national interest.

THE EARL OF KINNOULL

My Lords, while expressing my sympathy with my noble friend and the Government at having to face this traumatic decision, may I ask whether the Lockheed Company was consulted before this decision was taken; and, indeed, whether it refused to renegotiate the contract before the decision was taken?

LORD CARRINGTON

My Lords, whether or not Lockheed were consulted was, of course, a matter for Rolls Royce, and I think the noble Earl must ask Rolls Royce.

4.20 p.m.

LORD GEORGE-BROWN

My Lords, is this not getting absurd? The Government appear to acquiesce in a decision which must be absolutely epoch-making and catastrophic. Did they not ask whether this new board of Rolls Royce had approached Lockheed? Have they not asked themselves whether, as my noble friend put it, the I.R.C., which the Government so hurriedly got rid of as an agency that was not part of Government, might not have been a useful instrument?

My Lords, I have been looking at the Standing Orders of your Lordships' House, which I think is probably right for a fledgling Member of the House. In the place I know rather better there is something called Standing Order 9, which we should no doubt have tried to use today, and which I suspect one of my former colleagues has tried to use. But under your Lordships' Standing Order 32 (I am quoting from page 15 of the Standing Orders of the House of Lords) I find that no statement or question of which notice has not been given shall be made the occasion for an immediate debate "unless the House so order". In view of what I regard as the totally unsatisfactory nature of the Statement made and the answers given to questions, may I test the feeling of the House as to whether your Lordships might be willing to order that an immediate debate should now take place?

LORD CARRINGTON

My Lords, I was once upon a time Leader of this House, and I was also for a number of years Leader of the Opposition. If I may very respectfully say so to the noble Lord, Lord George-Brown, I think he ought to come here a little more often, and listen a little more often to what goes on in your Lordships' House, before he makes the sort of suggestion that he has made this afternoon. Of course any of your Lordships can get up and pray in aid any Standing Order. Indeed, if any of your Lordships care to look at the Standing Order Book and to follow the rules, they can make your Lordships' House totally and absolutely impossible, because your Lordships' House operates only by custom and restraint. I very much hope that the noble Lord, Lord George-Brown, will follow the conventions which we have followed in this House for very many years—ever since I have sat in it—and not try to do something which may have been done in another place but which I think would probably not go down very well here.

LORD SHACKLETON

My Lords, I wonder whether I might intervene at this point. I think it is perhaps a little unfortunate that the noble Lord, Lord Carrington, used the expression he did about my noble friend. I myself had in mind the possibility of Standing Order 32, but the Government have already agreed that if we wish for an early debate they will facilitate this. I think the purpose (and I do not doubt the noble Earl the Leader of the House is bearing this in mind) in allowing this discussion to go as widely as it is now going is to enable us to establish certain facts. Though I cannot recollect an occasion on which it has been done, if the Government were refusing facilities for a debate then I think that it might be right to test the opinion of the House. But I am not sure that it would lead to a particularly useful or orderly discussion at this moment. Therefore my own view is that we ought not this afternoon to take advantage of Standing Order 32, although I must admit the thought had occurred to me.

LORD CARRINGTON

My Lords, I am much obliged to the noble Lord. I wonder whether I might apologise for anything I said about the noble Lord, Lord George-Brown, which was in any sense offensive. I had not realised I had said anything at all.

LORD BESWICK

My Lords, I wonder whether we could try to get this matter into a rather different perspective. Whilst deploring the debacle of the RB.211 engine—this ill-fated engine which has brought nothing but trouble since the contract to which my noble friend Lord George-Brown referred was entered into—can the noble Lord give an assurance that it is the intention of the Government that this company, with a fresh start, under public ownership, shall be a dynamic and expanding enterprise?

LORD CARRINGTON

My Lords, I have already given the noble Lord that assurance.

LORD SHINWELL

My Lords, in view of what the noble Lord has said about the Government's intention to acquire some of the assets particularly because of their relation to defence requirements, would the Government consider, after an examination of the Rolls Royce accounts, of all their financial transactions in recent years and of the contracts entered into, quite legitimately, by the company, acquiring all the assets because of the importance of the company to the national interest in relation to technology and the future of the aero industry?

LORD CARRINGTON

My Lords, I do not think I could give that undertaking. The Government have examined the situation very carefully and believe that they should acquire the assets which are necessary to them for the continuing use of those assets in the interests of defence and of civil airlines and the air forces of the world. It will be for the Receiver to dispose of the other assets and I have no doubt that he will be able to do so.

LORD GEORGE-BROWN

My Lords, I am willing to be rebuked all the time and at any time, and I accept it very happily, but if I am not to pursue the temptation (as my noble friend the Leader of the Opposition says I should not) of Standing Order 32, may I ask how soon the usual channels can arrange to let us know how early the debate will be? Because I honestly regard this matter, as I am sure all your Lordships do, of such critical importance to the nation that I do not think it can hang around for weeks. How soon can we know?

LORD CARRINGTON

My Lords, I will, of course, pay great attention to what the noble Lord says, but it does depend a little on how long, for example, the Bill would take to get through another place. If it took a long time, then obviously it would be necessary to have a debate here first. If it were going to be a very short time, noble Lords opposite might feel that it would be sufficient to have a debate on the Bill here. But I am entirely in the hands of noble Lords opposite, and with the agreement of both sides of the House we shall do what is necessary.

LORD SHACKLETON

My Lords, since the noble Lord put this question to me, may I say that I think it is quite clear that on this side of the House (and I suspect tacitly, if over-discreetly, on that side of the House) there is a strong desire to debate this subject at the earliest opportunity. Unless, therefore, there is a prospect that the Bill will come to us within, say, a week, then I think we must have a debate. This is a matter of much too great seriousness. It was against this background that I was also considering Standing Order 32, but I am sure we should do better to deal with this matter in a regular way and perhaps have a debate early next week.

LORD CARRINGTON

My Lords, what the noble Lord the Leader of the Opposition has just said is perfectly agreeable to us.

LORD PARGITER

My Lords, there are many other aspects of Rolls Royce which are reciprocal to the aero-industry part of Rolls Royce, and which are profitable. I gather from the Statement that these are to be hived off. Would it not be desirable that we should have a debate before the Bill, in order that some decisions may be taken in the light of the discussions?

LORD CARRINGTON

I think, my Lords, generally speaking, the divisions of Rolls Royce which the Government would not acquire would be the motor car division and the oil engine division.

VISCOUNT ST. DAVIDS

My Lords, may I ask the noble Lord one short and simple question? The noble Lord says that he and his colleagues are not willing to acquire the other assets of Rolls Royce and are willing to let them go into the hands of the Receiver, to be disposed of. Would he be happy if the Receiver disposed of them to foreigners?

LORD CARRINGTON

My Lords, the parts of the Rolls Royce company which are essential to the national interest are going to be acquired by the nation.

LORD CONESFORD

My Lords, may I ask my noble friend whether he could enlighten us on one point? He referred in his first Statement to the acquisition by Her Majesty's Government of certain assets. I do not think that anything in the Statement indicates how the valuation is to be made. Am I right in assuming that that will be dealt with in the legislation?

LORD CARRINGTON

I am not quite sure about that, my Lords, but certainly I think there would have to be negotiations with the Receiver, as I understand it. Whether these will include the valuation, I am not quite sure.

BARONESS WOOTTON OF ABINGER

My Lords, it may or may not be proper or desirable for my noble friend Lord George-Brown to invoke Standing Order 32, but I should have thought it was definitely improper that, in the absence of testing the opinion of the House on Standing Order 32, we should have an immediate debate, which seems to be what is happening.

LORD HANKEY

My Lords, may I ask the Government one further question? Will they, in considering what to do about the Rolls Royce situation, take account of the position of the aircraft industry as a whole and the place it holds in regard to our balance of payments? This is a very important question, my Lords, it is not just a defence question. We have gravely disappointed the airframe industry on the grounds that we were to reap various advantages by selling Rolls Royce engines abroad. Will that still be the position? Ought we, perhaps, to consider revising some of the previous decisions? Will the Government consider this matter on the broadest scale; not just on financial grounds but on the broadest engineering, balance-of-payments and industrial grounds?

LORD CARRINGTON

Of course, my Lords, the Government have already considered it on the widest possible grounds. I think it would be a very good thing if we debated this point when we have the debate next week, or whenever it is.

EARL ST. ALDWYN

My Lords, earlier on, the question was raised whether we could curtail the business for to-day and take some of it next week. It has now been agreed through the usual channels that we will continue with the Committee stage of the Misuse of Drugs Bill until 6 o'clock and then proceed with the rest of the business on the Order Paper for to-day; and continue on Tuesday next with the rest of the Committee stage of the Drugs Bill.

LORD BYERS

My Lords, in the light of the debate we have just concluded on the Statement about Rolls Royce, may I ask the noble Earl whether that is not going to affect the business for next week? Does what he has announced still stand in the light of it?

EARL ST. ALDWYN

My Lords, obviously there may have to be adjustments, but I should think that the possibilities are that we shall not have the debate before Tuesday. We may need to have it later in the week, if we are not going to get the Bill as early as my noble friend thought that we might.

LORD BYERS

My Lords, that is my point. Does the noble Earl say that the House will not sit on Monday?

EARL ST. ALDWYN

My Lords, the House will not sit on Monday.

LORD WINDLESHAM

My Lords, I beg to move that the House do again resolve itself into Committee on the Misuse of Drugs Bill.

LORD SHACKLETON

My Lords, before this Question is put, may I ask if we are not to have the second Statement?

THE LORD CHANCELLOR (LORD HAILSHAM OF ST. MARYLEBONE)

My Lords, I will put the Question, and then the noble Lord can ask his question. The Question is that the House do again resolve itself into Committee on this Bill.

Moved, That the House do again resolve itself into Committee.—(Lord Windlesham.)

LORD SHACKLETON

My Lords, I should like to speak on this Question because there has been no consultation about the second Statement.

LORD WINDLESHAM

My Lords, perhaps I also may be permitted to speak on my own Motion and to apologise to the noble Lord. The second Statement was not ready; it had not been completed in the House of Commons at the time when I moved my Motion. Since I rose to move it, however my noble friend Lord Lothian has received word that he is free to repeat it, and he will now make the second Statement. I therefore beg to ask leave to withdraw my Motion.

Motion, by leave, withdrawn.