HL Deb 23 July 1979 vol 401 cc1646-58

3.55 p.m.

The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trenchard)

My Lords, with the leave of the House, and in order to give my noble friend Lord Belstead time to consider the many points raised by the noble Lord, Lord Shinwell, may I at this point repeat a Statement made in the other place by my right honourable friend the Secretary of State for Industry. The Statement reads as follows:

" With permission, Mr. Speaker, I shall make a Statement on the future financial structure of British Aerospace and British Shipbuilders.

" Since taking office, we have carefully considered the circumstances of these industries, in the light of the undertaking, set out in our Manifesto, to introduce private ownership.

" I turn first to aerospace. British Aerospace, with its spread of interests embracing civil and military aircraft as well as guided weapons and space systems, makes a substantial contribution to both our national economy and our national defence. Despite the fierce competition in this international industry, I am confident that our industry has the talents and skills to flourish. In the years ahead it will generate large internal funds, but substantial external funds will also be required. I have therefore considered how these demands may best be financed. As part of these considerations my colleagues and I have consulted, among others, the board of British Aerospace and the trade unions representing those employed in the industry.

"The Government propose that British Aerospace should in future operate within the framework of the Companies Acts. The ownership of the industry will therefore be transferred from the present statutory corporation to a company incorporated under the Companies Acts. Initially the shares in that company will be held by the Government, which will then make shares available to private ownership. Employees will be given a special opportunity to buy shares. The Government intend to retain a shareholding of about half.

"The change to company status will not result in any alteration to the present business; its assets, liabilities and contracts will all be transferred to the new company. I would also hope to secure continuity in management at board level.

"The Government look to the company to obtain the external funds it needs from commercial sources, although they w ill retain the power to provide funds on commercial terms, if this proves necessary. On that basis, we will not expect to intervene in the administration of the company as a commercial concern.

"Legislation will be introduced before Christmas to permit these policies to be carried out. We have considered a number of alternative courses, including the introduction of private capital into the Dynamics business. While the legislation the Government will be bringing before the House would not exclude this, the Government's strong preference is to maintain the present structure of the industry.

"I have also considered whether a comparable financial reconstruction might be made for British Shipbuilders. In principle, I should have liked to introduce private sector finance to this industry at the same time. I have concluded however that, in light of the particular problems of the industry and the consequent difficulty of predicting its future size, about which my honourable friend is to make a Statement later today, this is not the right time. The Government have therefore decided not to bring forward measures at the moment to introduce private sector finance to the shipbuilding industry."

My Lords, that concludes the Statement. May I say that when it has been made in the other place, I shall be repeating the Statement to which I have referred about the shipbuilding industry. But at this stage it seems to me appropriate that we should take any views of noble Lords on aerospace.

3.59 p.m.

Lord MELCHETT

My Lords, once again, I regret to have to say to the noble Viscount that he has been able only to come to your Lordships' House and make a Statement of extreme vagueness. The only likely effect will be to create further grave uncertainty, this time in two major and extremely important sectors of the British economy. If I give just one example, the Statement says, incredibly, that the Government will retain about half of the shareholdings in British Aerospace. The noble Viscount knows very well that the crucial question is whether the Government will retain over half or under half. To say "about half" seems to me to be an extraordinary statement. Perhaps the noble Viscount will tell us what effect he expects that that vagueness will have on the ability of British Aerospace to sell these shares and, hopefully, raise money for the desperately needed future investment in this industry, which it is clear that the Government do not intend to provide. As I think the noble Viscount will acknowledge, massive investment is needed by British Aerospace and, indeed, by the aerospace industry throughout the world, particularly in the next generation of civil aircraft.

I wonder whether the noble Viscount could tell us what is the view of the board of British Aerospace regarding the effect of this Statement. Will it mean that Britain will be unable to play its part as a full partner in producing and manufacturing the next round of civil aircraft? That seems to me to be the inevitable consequence of the cutbacks and the uncertainties which the Government are forcing on the British aerospace industry.

To return to the question of the sale of shares, I wonder whether the noble Viscount, with his extensive experience in industry and commerce, could tell us whether he thinks that selling shares under these circumstances—in effect, a forced sale, regardless of whether the moment is right, and based solely on ideological reasons—is the way to raise the maximum amount of money for this vitally important public industry.

One thing above all which I regret about this Statement, in particular when one compares it with the Statement about the National Enterprise Board, is the conspicuous absence of any words of praise or, indeed, criticism of those responsible for managing both British Aerospace and British Shipbuilders and of the people working in those two industries. I hope that he will find himself able—even if his right honourable friend who made the Statement in another place did not feel able—to say that my noble friend Lord Beswick and the rest of those involved in the management of these two enterprises have done a magnificent job in extremely difficult circumstances. It might have been wise for the Government to recognise that fact, and the contribution of the employees, when making a major general Statement about the future of the two industries.

It is clearer in this Statement than in any that the noble Viscount has had to make to your Lordships' House in the last couple of weeks that the Government's policy is based simply and exclusively on their desire to create the greatest public loss with the greatest private profit. I can tell the noble Viscount that the buestion of restoring these assets to public ownership, and on what basis, is something which the Labour Party will be considering urgently in the coming months.

4.3 p.m.

Baroness SEEAR

My Lords, may I thank the noble Minister for repeating the Statement. I should like to echo the noble Lord, Lord Melchett, on one point; namely, the tremendous importance of maintaining the aerospace industry as one of great significance to this country, with its very real need for further investment. We should also very much like to know whether the Government intend to retain a 51 per cent. ownership of the industry. In our view, this industry has suffered a great deal of disruption; and it will be extremely unsatisfactory if it is felt that its future is once again in the melting pot. It is very difficult for an industry of this kind to settle down to long term development if it does not know where it stands.

One would have hoped that there could be agreement between the Government and the Opposition that the aerospace industry needs a clear prospect in which to plan ahead on the very long term basis that an industry of this kind needs if it is to make the plans that are required. However, we welcome the suggestion that the Government are to offer shares to the employees of British Aerospace. We very much hope that this offer will be taken up and that it will be the fore-runner of greater encouragement by the Government, not only in the nationalised sector but elsewhere, of employees to share in the ownership of the undertakings in which they are employed.

I welcome also the suggestion contained in the Statement that the industry, with its proposed new future structure, will give greater freedom of action to the highly skilled, responsible and expert management which has to run an industry of this kind and that in future it will be free from intervention by people who are often very much less expert than that management in the running of the industry.

So far as shipbuilding is concerned, we can, sadly, only agree that the whole state of this industry is such that the Government will have to preside with the greatest care over its contraction. Any attempt to turn it into a profit-making enterprise is, to say the least, unlikely to succeed.

4.5 p.m.

Viscount TRENCHARD

My Lords, the noble Lord, Lord Melchett, has criticised us before for making vague statements. However, I believe noble Lords opposite know well that the development of plans in these important matters is a progressive affair, that there is a time for a statement regarding the Government's intentions, that there is a time for detailed consideration with the board of British Aerospace and that there is then a time for the production of a Bill in which a great deal of detail is answered. I do not believe this to be a new precedent. Indeed, I believe it to be an efficient system.

Both the noble Lord, Lord Melchett, and the noble Baroness, Lady Seear, asked me whether I could elaborate further on the phrase " about half ". The answer is that I cannot do so this afternoon. I do not think that this point will create the great uncertainty that has been suggested. I believe that the great uncertainty was originally created by the plans to nationalise and then by the nationalisation of this industry.

To take the last but one point which was made by the noble Baroness, Lady Seear, I believe that freedom of action for a company is far more important when it comes to a feeling of certainty about the long term and the ability of the very excellent management to work out their future with a high degree of freedom.

When I repeated the Statement regarding the National Enterprise Board, the noble Lord, Lord Melchett, suggested that we were following a policy of making sure that an industry became profitable and that, just when it had become profitable, we " flogged " it off—that was the noble Lord's word, about which temporarily I got the wrong end of the stick—to private enterprise. Today he comes to us and almost says the reverse: " Wait until you can make a bigger profit for the taxpayer ". I do not know whether noble Lords saw the leading article in this morning's edition of the Financial Times in which, in relation to the statement by my right honourable friend the Secretary of State for Trade, British Airways made the same point: that perhaps one would get more money for the taxpayer if one did not move so soon. We believe that the market adjusts these factors to a very high degree, but noble Lords opposite really cannot have it both ways.

Lord WYNNE-JONES

My Lords, we want it for the country.

A noble Lord: My Lords, so do we.

Viscount TRENCHARD

My Lords, both the noble Baroness, Lady Seear, and the noble Lord, Lord Melchett, are concerned about the maintenance of the efficiency of the industry and its morale. I should like to draw the attention of the noble Lord, Lord Melchett, to what was said by my right honourable friend in his Statement. He said: I am confident that our industry has the talents and the skills to flourish ". There is no question in the Government's mind but that we have a very highly talented management and a very skilled workforce here, and it is simply the following of the best route to efficiency to maintain that and the necessary in-dependence—which the noble Baroness stressed so rightly—that leads us to follow this particular route.

Lord BALOGH

My Lords, is it not clear that what the Government are about to do is to infuse uncertainty into the situation, despite the denials of the Minister? Is it not true that all this dogmatic exercise is because they themselves say that the management was eminently very successful? Therefore, why the sale? The sale is because they have a dogma that whatever happens one ought to divest oneself of the control of these vital industries. It seems to me that for the Tory Party, which used to be the party of empirical experimentation, to pursue a policy purely on dogmatic faith is really scandalous.

Viscount TRENCHARD

My Lords, let me just comment on the question put by the noble Lord, Lord Balogh. We do not see it that way. We believe that we are not in any way being dogmatic. We know that this industry was being successful, has high skills, has had changes imposed upon it because of the dogma of noble Lords opposite. We believe that our plans will maximise the industry because for many years an effective majority of shareholding and a very powerful block of shareholding—with my experience in industry I know perfectly well that there are many times when even 30 per cent. of shareholding can be absolutely dominant—will maintain the needs of the country and combine it with the greatest degree of efficiency.

4.13 p.m.

Lord MISHCON

My Lords, will the Minister reflect for one moment with a due sense of responsibility upon his answers to the speech made by my noble friend Lord Melchett ? The Minister said that statements were made and policy was then adumbrated by a series of graduated steps. Is the Minister saying that it is the policy of Her Majesty's Government, on a vital national matter of this kind, to make a statement of policy before Her Majesty's Government have even decided whether that policy is to take a majority or an equal or a minority stake in this vital national industry? My noble friend asked the question and spoke of vagueness; and the Minister replied, presumably, that this is a matter which has not yet been decided by Her Majesty's Government. If that he the position, woe unto the country that has a Government of such indecision and muddleheadedness.

I will now move to the next point which my noble friend made and to which this time there was no answer at all, or certainly no answer that I heard. It was this: With the Minister's own personal great experience of commerce and industry, does he regard it as usual that, irrespective of the suitable market time and irrespective of all other considerations, an announcement should be made in the course of this Statement that a part of this great industry will be available for private investment? Does he not feel it incumbent upon him again, as this is a vital issue and ought to have been considered even before a preliminary Statement, to give my noble friend the courtesy of an answer?

Viscount TRENCHARD

My Lords, the policy of the Government is as stated in the Manifesto, to maximise the private sector investments in these industries. My right honourable friend's Statement takes note of the responsibilities of Government in relation to aircraft. My right honourable friend's Statement also speaks in not exactly precise terms because in relation to the question of the timing of the correct moment to offer shares to the public, the interests of the shareholder, of the taxpayer and of the country, have to be considered against the actual time when this plan is put into operation. We said in our Manifesto that we would avoid abrupt changes, and so we shall. The policy is now declared in relation to this industry. The carrying out of the policy and the timing of it will be very carefully considered with the board of British Aerospace and will be operated at the best time in relation to the interests of all concerned.

Lord WIGG

My Lords, will the Minister be good enough to come away from an exercise in semantics and get down to brass tacks? Who is going to provide the risk capital? Before he answers that question, will he bear in mind that two of the projects which cost this country hundreds of millions of pounds had their origin in Tory thinking, namely, the TSR 2 and Concorde? Who is going to provide the capital, or do we take it that they will not be started unless somebody in the City can see that he can make a profit?

Viscount TRENCHARD

My Lords, I would refer the noble Lord, Lord Wigg, to my right honourable friend's Statement, in which he said that in the years ahead the industry will generate large internal funds but that substantial external funds will also be required. I do not think I can sensibly add to that.

Lord BERNSTEIN

My Lords, the question I should like to ask the noble Viscount is this: is there anything more valuable than an efficient organisation, which the noble Viscount says this is, and of which the Government are going to sell half?—because I do not know that any organisation can be better than the people who work in it. I am sure the noble Viscount will agree with that. I should also like to ask: have any figures been made available to the Minister, or to anyone else, showing how much the profit or loss would be on the sale; how much it will cost to obtain the money, and what proposals have already been put to the City of London about getting the money?

Viscount TRENCHARD

My Lords, we believe that at the present time there is too big an ambit of government in industry.

A Noble Lord: Poppycock!

Viscount TRENCHARD

And we believe that government, in so far as it can be efficient in industry, will be more efficient if that direct role is reduced and greater independence is created. I do not think that I can add further to the statement that I have already made.

Lord MISHCON

My Lords, I apologise to your Lordships for being so persistent, but may I again ask the noble Viscount whether it is not laughable that a Statement should be repeated in this House, and that he should be responsible for the comment upon it, when he has not yet answered the question as to whether the Government have made up their minds about the policy of whether they wish to retain a controlling interest, an equal interest or a minority interest in this vital concern?

Viscount TRENCHARD

My Lords, I say again that the Government will retain such an interest as is necessary to ensure that the vital results for the country as a whole, and in particular for defence, are properly looked after. They will not retain more than that.

Lord WYNNE-JONES

Is that 51 per cent., my Lords?

4.20 p.m.

Lord PLANT

My Lords, I want to intervene as an ex-president of the TUC. After the workers in this industry, who were in favour of nationalisation, have read this phoney prospectus, I do not believe that they will be queuing up to purchase the shares. I think that the Government have to reconsider their position, because I believe they have now introduced an uncertainty into a great industry which will do nothing but harm the country. That is the view that I believe the workers will express when the prospectus sees the light of day. I think the Government are diminishing our capacity to advance when the economic recovery comes.

Several Noble Lords: Order, order!

Lord DENHAM

My Lords, I hope the noble Lord will forgive me for half a minute. I appreciate that noble Lords in all parts of the House feel very strongly on this issue. But there is a note in the Companion to the Standing Orders which says that Ministerial Statements are made for the information of the House, and although brief comments and questions for clarification are allowed, such Statements should not be made the occasion for immediate debate unless the House so order

Lord PLANT

My Lords, when I sat on the opposite Benches and when noble Lords opposite were sitting on these Benches I learned a great deal. I felt that they were not asking many questions; they were making pertinent statements to the Government of the day. Would the Minister agree that the Government are now destroying, or attempting to destroy, a nationalised industry and it will not be compensated for by more dynamic private industry? Would the Minister not agree, too, that the Government are now asking workers and others to purchase shares in this organisation so that they can finance the income tax reductions at the top rate from 75 and 80 per cent. to 60 per cent? Would the Minister also inform us what the trade union movement responsible for these workers has said? All the noble Viscount has said is that the trade union movement has been consulted; he has not told us what they have said. Will there be worker directors? I think we ought to be informed of the view of the workers as expressed by the trade union representatives who apparently have been consulted. I also wish to know what would be the Government's view if the workers in the industry do not purchase all the equity which is made available to them. Presumably it will go to the finance houses in the city. Will the noble Viscount please comment on some of the points I have raised?

Viscount TRENCHARD

My Lords, I have another long Statement to interrupt your Lordships' business later, and so I do not really feel that I can reply to that long statement. With regard to the ability of the Corporation on becoming a company, to place its shares, both in the market and with workers, time will show. We have a lot of faith in this industry and we believe that the market will bear a very considerable share of the future financing. We hope very much that the workers who are involved in the industry will consider purchasing shares in their own business; we believe that this is indeed a form of industrial democracy which should be encouraged. I have to leave the other points for another occasion.

4.24 p.m.

Lord MELCHETT

My Lords, if the noble Viscount is not able to answer all the questions my noble friend put to him, in particular about the views of those working in the industry—the noble Viscount may be finding it a little embarrassing to continually get up and not answer a series of questions asked by my noble friends—may I take him back to one question which I asked him which he did not answer: that is, whether British Aerospace's management have expressed any views on the effect that this Statement will have on the capacity of the British aerospace industry to take part in the manufacture of future generations of civil aircraft? May I put just one other point to the noble Viscount? He suggested that it was nationalisation which had caused the uncertainty in the aerospace industry. The noble Viscount may not remember, but in the arguments we had in your Lordships' House on the nationalisation of British aerospace the Government of the day, and I on behalf of the Government, constantly put forward the view that there was a good industrial argument for rationalising the industry, which is what we did in that Bill. Would the noble Viscount not agree that the Government have fully accepted that, and that no uncertainty was caused by it, because they are leaving British Aerospace intact while " flogging off " the profitable parts of it in conditions which will lead to the greatest public loss?

Viscount TRENCHARD

My Lords, I apologise to the noble Lord for not commenting on his point on civil aircraft projects. It is our view that an independent company operating at arm's length, and British Aerospace even before that, must decide within the general overall policy which civil aircraft projects are of the greatest value and which, commercially, within the financial possibilities of this country and British Aerospace, can be followed. I cannot comment on individual projects—not that the noble Lord has asked me to—but it is very much our philosophy that this is a matter for the management of British Aerospace.

So far as rationalisation is concerned, the question of whether rationalisation, which in many big industries is a need at points of time, is best performed by creating conditions in which it is likely to happen in any event, or whether it is best performed by nationalization, is where noble Lords opposite and we fall out.