HL Deb 21 November 1979 vol 403 cc144-56

3.58 p.m.


My Lords, with the further leave of the House, and with my apology also to my noble friend Lord Ailesbury, may I repeat a Statement which has been made in the other place by my right honourable friend the Secretary of State for Industry. The Statement reads:

" With permission, Mr. Speaker, I should like to make a Statement on the relationship between the National Enterprise Board and Rolls-Royce.

" I have had in recent months to consider the relationship between the NEB and Rolls-Royce in the light of evidence of some friction over a considerable period. I have concluded that the friction is not a passing problem of personalities or a difference of opinion on the management of the company but is inherent in the relationship and would almost certainly survive a change of management.

" Rolls-Royce is a company of a scale and importance such that the supervision of its board by another board, however eminent and accomplished, is bound to give rise to strain.

" Moreover, it is a company with which inescapably Government has exceptionally close connections and where important decisions lie directly with Government.

" I therefore decided that in view of these two considerations, from which there is no escape, it would not be right to paper over the cracks but rather to plan to remove the source of the difficulty. Clause 2 of the Industry Bill now before the House will give me power to direct the NEB to transfer its shareholdings in Rolls-Royce to the Secretary of State, and I told the NEB of my intention to make such an order as soon as the Bill becomes law. This decision was in no sense whatsoever a reflection on the members of the NEB or their staff. Rather, it is a judgment that the role they had been given in relation to this major company was, in the last analysis, not an appropriate one. When I expressed to the NEB my intention I was told categorically that were I to adhere to my proposal all the members of the board would resign. I was asked to re-consider. This I did.

" Yesterday I told the board that I did adhere to my proposal. The House knows that the chairman, Sir Leslie Murphy, and all the members of the NEB have resigned from their posts. I have accepted their resigations with regret. The board was composed of distinguished people from business and trade unions who co-operated together to serve the country with dedication. I hope this form of co-operation will become possible in the new board.

" The NEB has, as the House knows, important disposals to arrange and other continuing tasks to perform. It will have a catalytic investment role, especially in connection with advanced technology and increasingly in partnership with the private sector; as well as its regional and small firms roles.

" I am glad to tell the House that Sir Arthur Knight, chairman of Courtaulds Ltd., has accepted my invitation to take over the chairmanship of the NEB with immediate effect. Sir John King, chairman of Babcock International Ltd., has accepted my invitation to become deputy chairman, and five other persons have similarly indicated their willingness to serve: Mr. Robert Clayton, technical director of GEC; Mr. Alec Dibbs, deputy chairman of National Westminster Bank; Mr. George Jefferson, chairman and chief executive of British Aerospace, Dynamics Division; Mr. Dennis Stevenson, chairman of Peterlee and Newton Aycliffe New Towns; and Mr. John Caines, secretary to the NEB. I am deliberately leaving some places vacant and I have today written to the TUC about this.

" The House will wish to know that following the recent announcement that Sir Kenneth Keith wishes to retire from the chairmanship of Rolls-Royce after seven years' service, Sir Frank McFadzean has indicated his willingness to accept appointment as chairman."

That is the end of the Statement.

4.3 p.m.

Baroness BIRK

My Lords, I would say that that was a very surprising Statement, except that we probably knew what was coming and, I would say with respect, I do not think anything that comes from the Department of Industry now and from the Secretary of State is surprising at all. The Secretary of State has said many times that he does not want to interfere with management—in fact he said last week, "I am no manager "—yet he has taken away a subsidiary from a holding company, which goes right against the grain of any proper corporate industrial organisation; and I would say that the new board, however distinguished, know very well that they will have no real independence. That is quite implicit in their appointment; they know very well how the cookie is going to crumble. It is also highly doubtful whether they will attract staff of the high quality which has been working with the NEB up to now, and which is one of the most important reasons for keeping the NEB in its present form.

The Secretary of State, as the Minister said, has written to the TUC. How can the Minister expect trade unionists to allow their names to be put forward for this weak substitute? The general secretary of the TUC and Mr. David Basnett, who has recently retired at the end of his term of office, have both said strongly that in these circumstances they cannot see trade unionists co-operating. I should have thought that the Government, in a situation where there is not very much co-operation between themselves and trade unionists, would have wanted to keep clear this area, where trade unionists, the Government and industry have been working harmoniously; but no, they have stopped that.

I would ask the Minister whether it is true that, when presenting the half-year's accounts, the chairman of the NEB, Sir Leslie Murphy, made critical comments about Rolls-Royce; and is it not a fact that the Secretary of State endorsed that statement before it was made public? Now the Government are adopting a stance as a result of being leaned on heavily by Sir Kenneth Keith, and I would say that what is good for Sir Kenneth Keith is not necessarily good for Rolls-Royce and the country.

Since there is a written agreement between the NEB and Rolls-Royce which gives a right to the NEB chairman to be present at all discussions with the Secretary of State, may we be told at how many discussions he has been present, minuted or unminuted, and what view will be taken about BL's bid for severance from the NEB in order that it can bed down in the Industry Department's protection?

Is the Minister also aware that Mr. Bruce-Gardyne, a very active spokesman on financial affairs on the Government Back-Benches in another place, expressed great concern that Rolls-Royce should be separated from the NEB, since Rolls-Royce had accumulated a whole bookful of orders without any clear prospect of fulfilment? I should like to know how this change will improve the efficiency of Rolls-Royce, which is really a major consideration. Sir Kenneth Keith referred to the NEB as a "bureacratic contraceptive". Using the same vernacular, I would say that in the Statement today we have now heard of the castration of the NEB, even though it has been packaged with new faces.

4.7 p.m.


My Lords, we on these Benches wish to thank the noble Viscount for repeating the Statement which, like the noble Baroness, Lady Birk, we very much regret. We are not without sympathy for the Government in the predicament in which they must have found themselves in seeking presumably to reconcile the views of the NEB with those of Rolls-Royce, but our view consistently in this matter has been that there should be as much stability and continuity as possible in the operations of the National Enterprise Board, irrespective of the political complexion of the Government of the day.

That was why, in response to the Government Statement on this matter last July, we welcomed the undertaking that until such time as the vitality of the private sector was restored—that was the phrase used—the board would have a continuing role for those companies which had been in difficulties and for which it had a responsibility so long as the business concern had a prospect of viability and no solution based on the private sector was available. We could understand, even applaud maybe, a policy which returned Rolls-Royce to the private sector in a commercially viable way by merging it, as indeed it has been rumoured might be the case, with a company run as efficiently as GEC under Sir Arnold Weinstock, but that is not what we have been told is to happen.

With those points in mind I would ask the Minister a number of questions. First, given that for some time to come Rolls-Royce will need to be subsidised by the taxpayer, what makes the Government think that civil servants in the Department of Industry can monitor its performance better than people having as much commercial expertise as the members of the National Enterprise Board who have just resigned or, for that matter, those who are now, we are told, to replace them? Secondly—and here in a sense I echo what the noble Baroness, Lady Birk, has just said—is it the intention that British Leyland should now be treated in the same way? If that is not the intention, on the basis of what principle is it to be treated differently? Finally, I put a general question. Do the Government really believe that, in the light of this Statement, there is for much longer a worthwhile future for the NEB?

4.10 p.m.


My Lords, a very large number of points have been raised by the noble Baroness and the noble Lord, Lord Rochester, and so I hope that the House will bear with me if I try to go through them. First, my right honourable friend has no intention of interfering in management. The noble Baroness rightly described the NEB as a holding company, but we have here a situation involving an enormous organisation with 60,000 employees, a turnover of £700 million, and a board of its own of highly qualified people, and that board is asked to report through an intermediary to the Government, who, as my right honourable friend's Statement made entirely clear, cannot escape from certain essential decisions, particularly those regarding finance in the longer term. May I say to the noble Baroness that I have some experience of corporate organisation, and I have to say to her that it is not an example of normal corporate organisation to submit a board of the size, and with an operation of the size, we are talking about to an intermediary board before one gets to those who control the money for its operation in the last resort.

I should like to make one other point at this stage, and that is that the whole board of Rolls-Royce made it very clear to my right honourable friend that they were unanimous that the friction which had been going on for some time had reached the point where it was in fact endangering the current operation of Rolls-Royce. So we were dealing with a situation which had become serious and immediate.

So far as the staff of the NEB is concerned, Sir Arthur Knight is today having a meeting with the staff, and I should like to make clear that my right honourable friend has the highest respect for the staff of the NEB, as has Sir Arthur Knight. I believe, and hope, that the staff will continue to do the dedicated and loyal job that they have always done.

The noble Baroness said, if I have her words correctly, that she did not feel that any self-respecting trade unionist would join such a weak substitute. The NEB, as reconstituted—and all appointments are not yet made—cannot by any stretch of the imagination, against the list of names that I have read, be regarded as a weak substitute. We very much regret—

Baroness BIRK

My Lords, I should like to take up that point with the noble Viscount. What I said was that their independence would not be the same as that of the present NEB, because they knew perfectly well what the situation was. That is the point.


My Lords, I shall deal in a moment, if I may, with the continuing role of the NEB. We very much hope that the trade unions—and we are aware of the statements made, to which the noble Baroness refers—will, when the dust is settled (if I may use a colloquial phrase) see that the Government have taken a perfectly proper decision on a difficult and immediate large-scale organisational problem. I hope—and my right honourable friend hopes—that when they do appreciate that that is the situation, some of them will in the future play their part on the basis of their particular contribution.

The noble Baroness mentioned the question of criticism of the Rolls-Royce organisation. The Rolls-Royce board themselves, with Sir Kenneth Keith, would be the first to agree that they have not been perfect, that much remains to be done, that the full order book is only one part of the problem. In his letter of resignation, which he had long planned after his seven-year stint, Sir Kenneth Keith said to my right honourable friend that the main task for his successor would be in the organisational area, in the reduction of costs, and in the improvement of productivity; and I am quite sure that Sir Frank McFadzean will perform those duties and put this problem right from within a very large organisation.

I should like to turn for a moment to the question of consultation, which has had a long history. The consultations on the tricky questions of Rolls-Royce have been going on for a very long while, in the days of the previous Administration as well as of ourselves. These consultations continued, and, to cut the matter short, on 7th November my right honourable friend had an important meeting with the NEB on the problems before him, and he outlined the problems at that time. It was to his great regret that following that meeting the board made clear that it could not co-operate with the continued tasks of the NEB, which involved some 70 other companies.

So far as BL is concerned, this is a separate company. I would say to the noble Lord, Lord Rochester, that we have not changed our policy since our July Statement. This situation has come about from friction building up and a decision having to be made. Thus, the BL situation does not at this stage arise.

My last point is that there is no question of there being an alternative between the civil servants and the NEB. Our belief is that on this size of operation the board of Rolls-Royce must deal with its own management affairs, and the Government—who have much less a role than the NEB was equipped to do because, as noble Lords have pointed out, the NEB had much management experience also—become the direct holder of the cash and the direct reporting point, and not a monitor in the sense that the NEB attempted to be.


My Lords, may I ask the noble Viscount a small question about co-operation with the TUC? What hope is there of Sir Keith Joseph, or the management, having real co-operation with the TUC? Is the Minister aware that a month or so ago Sir Keith Joseph spoke on radio about the three poisons which he applied to our national economy? The first poison, he said, was the TUC—the trade unionists. The second poison was egalitariarism—and he spat the word out. The third poison I cannot for the life of me remember—


The Tory Party.


But I think that those two poisons together really show that there is not any hope of co-operation with trade unionists. Bearing in mind what has happened, is this not a fatal flaw in the whole of this argument for change?


My Lords, I, too, cannot remember what the third point was, but the first point was not about the trade unions themselves. He criticised certain trade union attitudes, but without reference to his speech I could not recall them. So far as this subject is concerned, if I may say so to the noble Baroness, we are talking about an impasse situation which arose between two great State bodies; and, as my right honourable friend's Statement made clear, we are talking about a question of judgment as to what to do about that. I believe my right honourable friend's Statement follows basic industrial logic, and I believe that in time the TUC—or, at least, members of the TUC—will come to see that. We very much hope that that will be so.


My Lords, may I, from this side of the House, ask my noble friend to say what is going to happen when Rolls-Royce comes directly under the Minister? Will we be able to ask Questions in this House? I realise that my noble friend will need some reflection on this, but perhaps we could have a ruling after due consideration has been given to it. Because it would seem, now that there is no longer to be "a buffer State", that we may have the right, in both Houses of Parliament, to put Questions, not on the day-to-day management but on the broad strategy of Rolls-Royce. I should like my noble friend to reflect on that. May I also say that many of us have felt that British Leyland, and particularly Rolls-Royce, were out of place in the NEB context. It is not easy for any organisation to look after the well-being of 70 different companies which are so disparate—employing, at one end, 165,000 people and, at the opposite end, 10 or 20 people—and to give fair consideration all round. Therefore, one would support my right honourable friend's judgment, made on industrial and corporate policy lines, in allowing and backing the judgment of the board of Rolls-Royce. He had to back either Rolls-Royce or the board of the NEB, and he decided to back the Rolls-Royce board in their request that they should go direct to the Ministry. I am sure this is the right decision.

Several noble Lords: Question!


I am going on to put a question, my Lords. This is a Statement, by the way, and not a Question. We can put a viewpoint following a Statement.

Several noble Lords: No!


Then what was the point in the remarks about the TUC? Was that not a viewpoint, that you would not get co-operation? Was it a question? My Lords, in putting this point I would say that many of us support the need for an NEB. We are glad that my right honourable friend has been able to attract such a distinguished board, which will have an ongoing role in looking after industrial companies which fall on hard times and which need care and attention and financial assistance.


My Lords, perhaps I may deal briefly with those three points. I personally believe that, for those who like to ask Questions in Parliament, the removal of an intermediary is in fact an advantage. But I must make clear that, just as in the case of the nationalised industries at the moment, a very great number of questions usually refer to the management of the operation, and the Answer that may well be given is that that is a matter for Rolls-Royce, just as the Answer very often is, for example, "That is a matter for the British Steel Corporation" So I do not think the Question and Answer position will change; we can answer Questions only on those matters for which we are responsible.

I agree with the second part of my noble friend's question-cum-remarks. So far as the third part is concerned, the continuing role of the NEB is very important. We have made no secret of the fact that its role is gradually to increase the private sector involvement in many of its holdings, but at this stage in time it has 70 companies and a large number of holdings, and it has a very important disposal job to carry through, for which we need high calibre people—and I am glad I have been able to tell the House that we have been able to engage them.


My Lords, can the noble Viscount tell me whether or not this change that is to take place—a very important one—can be made without Parliamentary action? Am I not right in thinking that this change is being made under a power in an Industry Bill which has not yet even come before this House and which certainly is not yet law? In other words, it was said that this was going to be done if the Bill was passed.

Secondly, can the noble Viscount tell me what has been our experience in the past in respect of matters of inportance for the country where responsibility has been retained by a Minister and his civil servants? I can remember the case of London Airport, where, after a Select Committee was appointed, it was decreed that civil servants could not do the job. Would it not have been far better to have given more time to this matter, and to have allowed us to discuss it before coming down on the side of Rolls-Royce rather than supporting the NEB?


My Lords, the legal position at the moment, as I understand it, is that there has to be an NEB. That is why, when my right honourable friend was given no option by a declared intention on 7th November of the entire board to resign, he was obliged in law to take steps to make sure that the NEB, which has certain legal functions, continued with its work, some of which is extremely urgent. That he has done. What he mentioned in his Statement was that, once the Industry Bill has gone through this House and becomes law—at that point in time—he will in fact require the NEB to transfer the shares in Rolls-Royce to him as Secretary of State. This is something which he will, by then, on the assumption that the Bill is passed, have the power to do. That will be done in the future. So far as the civil servants and their abilities are concerned, I am quite satisfied as to their ability, with the full qualifications and credentials that they have, to carry out the role that the Government retain. The management of Rolls-Royce, I have to say once again, will be controlled by the highly efficient board which Sir Frank McFadzean takes over.


My Lords, does not what my noble friend so well said earlier about the organisational difficulties involved in interposing the board of the NEB between the board of a large company and a department apply equally and perhaps, indeed, a fortiori, to the position of British Leyland? Secondly, will my noble friend join with me in expressing admiration for and paying tribute to the work, which I saw at one time, done by Sir Kenneth Keith in obtaining the orders for Rolls-Royce without which that company would not be in existence today?


My Lords, I am very grateful to my noble friend for raising both those points. The whole concept of the NEB and its position as we inherited it was not one that we would have wished for. However, the last thing we wanted to do was to cause abrupt changes or a major disturbance, and we accepted things as they were. We worked out a policy for moving forward which we believe will strengthen the industry of this country and the NEB and its holdings. The only reason why we have deviated from that is that the crisis situation between Rolls-Royce and the NEB has forced us to do so. It follows that, while my noble friend is right in saying that there are many similarities, although not exact parallels, between the British Leyland situation and the Rolls-Royce situation, at the present time we do not contemplate any such following through, because we have not got an immediate thrust of crisis in that respect. I hope that that answers my noble friend's question.

May I add that I entirely echo my noble friend's sentiments on Sir Kenneth Keith, who has done valiant work in leading Rolls-Royce with an inspiration which has built up the order book. It is my industrial experience that it is easy enough to rationalise back and to rationalise down, but that if one wants an industry one has to have volume. Sir Kenneth Keith, backed by world-excellent products, has built up that volume. Much, as he acknowledges, remains to be done to turn that volume into profit. But I agree with my noble friend.


The noble Viscount is candid in stating that so far as the Government are concerned they want to see an end to the NEB. Obviously, decency prevented them from burying it until it was dead. So the process here is to kill it off. And they have been forced to face the issue a little prematurely because there is still life in the old dog. So, having got rid of the NEB board, they have fetched in a crowd of stooges to act as undertakers when the body is dead.

The Government's policy at home and abroad is, I am sure he will agree, aptly summed up by the two Statements today: sanctify rebellion abroad and applaud the rebels; and, at home, go hell bent on a policy of confrontation. That has to be faced up to by the Labour Movement and by all who work under its banner: if the Government want to confront, then give them a bit of their own confrontation.


My Lords, I feel that the question-and-answer period and the period of Statements having taken over 30 minutes, it is perhaps time that we moved on.