HL Deb 16 December 1985 vol 469 cc565-73

5.8 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)

My Lords, with the leave of the House, I shall repeat a Statement regarding Westland plc being given in another place by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:

"For some months now Westland plc has been in serious financial difficulties and has been seeking an association with an external partner or partners. Negotiations with United Technologies commenced in September 1985 and led to a proposal from Fiat and United Technologies.

"At the suggestion of my right honourable friend the Secretary of State for Defence, the Government agreed that my right honourable friend should explore the possibility of an alternative association with Aerospatiale, MBB and Agusta becoming available to Westland. An initial proposal emerged and while it was being produced, the national armaments directors of the United Kingdom, France, Germany and Italy made a recommendation that certain helicopter requirements should in future be met solely from aircraft designed and built in Europe. For the United Kingdom this recommendation represented a substantial extension to the Government's policy agreed with our European allies in 1978 and of our general approach to defence procurement as set out in the 1985 Statement on the Defence Estimates The existence of the national armaments director's recommendation was regarded by Westland as a major obstacle to the United Technologies-Fiat option which they at all times preferred. In view of the urgent necessity for a deal to be concluded quickly the Government decided that from 13th December they would not be bound by the national armaments directors' recommendation unless Westland had by then received a firm offer from the three European companies which the board would recommend to it shareholders. The Government's intention was to give time for the completion of a firm offer by the European companies to Westland, but to remove any politically imposed obstacle facing Westland if such an offer were not made in time or was unacceptable to Westland.

"At the end of last week British Aerospace announced that they were prepared to provide a quarter of the funds offered by the European consortium. Also the Governments of the United Kingdom, France, Germany and Italy agreed, but on an entirely provisional basis, that if the European offer was accepted, they would meet their requirements in each of the three main helicopter classes by a single collaborative solution.

"Westland plc announced on Friday evening that agreement had been reached in principle whereby United Technologies and Fiat will between them take a minority shareholding in Westland. The view of the board of Westland was that the European offer which was finally received was neither firm enough nor attractive enough for them to be able to recommend it to their shareholders. Accordingly, Her Majesty's Government are not bound by the national armaments directors' recommendation. Full details of the United Technologies-Fiat agreement and of a capital reorganisation of Westland will be announced by the company shortly. As part of the proposed arrangements, Westland will take a licence from the Sikorsky division of United Technologies to manufacture develop and sell the Backhawk helicopter.

"United Technologies were at all times fully aware that there was currently no Ministry of Defence requirement and no provision in the defence budget to buy the Blackhawk helicopter or any other comparable helicopter.

"Westland have welcomed the agreement as a private sector solution to their present financial difficulties that offers firm prospects of long-term viability and continues the close co-operation between Westland and Sikorsky that has existed for several decades and led to the production under licence of the successful Wessex, Whirlwind and Sea King helicopters.

"Westland intend to continue with the Anglo-Italian EH.101 programme and to continue to take part in feasibility studies on a developed version of the A.129 and on the NH.90. United Technologies have assured Westland that they will continue to maintain a helicopter design and development capability in the United Kingdom.

"The Government have ensured that Westland had an alternative European-based offer to consider. But as a private sector company it is for Westland to decide the best route to follow in order to secure its future and that of its employees."

My Lords, that concludes the Statement.

Lord Bruce of Donington

My Lords, we on these Benches thank the noble Lord the Minister for repeating the Statement that has been made in another place. This has been a rather unsatisfactory weekend, or four or five days, for the Government. On the one hand, we have one Cabinet Minister busily briefing the press in one direction. On the other hand, we have another Cabinet Minister making private phone calls to journalists, giving another picture. That seems to be an extraordinary situation to occur.

Indeed, my Lords, it culminated in a statement made today in the Financial Times by the managing director of Westland, in the following terms. Sir John, the chairman of the Westland company, condemned the interventionist attitude of Mr. Heseltine, which was "worse than any Labour Minister" and "astonishing and distasteful". That is an almost unprecedented situation with which to be confronted.

It is well known that the Westland company has been in difficulties for some time. It is not a nationalised corporation but is a private, limited liability company operating with all the enthusiasm, energy and drive that is characteristic of private enterprise. Nevertheless, it has got into difficulties. The first question I have to ask the noble Lord the Minister is this: at any time over the past three months have any approaches been made to the Government by Westland for financial assistance? It is not entirely unknown for private concerns to make applications to governments for assistance. For example, in the case of Johnson Matthey Bankers they did not even need to make an application because a loan was granted by the Bank of England, which then told the Chancellor of the Exchequer about it afterwards.

We are entitled to know whether any approaches were made to the Government through one of their ministries. I do not mind which ministry; it could be the Department of Trade and Industry, or the Ministry of Defence. If such an approach was made, what was the response?

What is the urgency about this whole business? Why are we suddenly presented with a situation in which time becomes of such enormous significance? We learn from the Government's Statement that: The existence of the national armaments directors' recommendation was regarded by Westland as a major obstacle to the United Technologies-Fiat option, which they at all times preferred". Then the Government say in their Statement: In view of the urgent necessity for a deal to be concluded quickly the Government decided that from 13th December they would not be bound by the national armaments directors' recommendation unless Westland had by then received a firm offer". We are dealing here with a company employing some 11,000 or so people who have played some part—and who by all accounts have a large potential role to play—in connection with national defence. Why the hurry?

I am given to understand that unless something is done by 18th December—and it is very peculiar how these dates always coincide with a recess—a receiver will be put into the company; hence the sense of urgency. As a commercial professional practitioner myself, I know perfectly well, as will those of your Lordships who have any experience of this subject, that bridging loans can always be made if there is a reasonable prospect of any kind of reasonable financial deal being concluded.

Not only have I had the privilege of listening to the noble Lord repeating the Statement, but I have also received today a background briefing that was very courteously forwarded to me by Westland. It states: There are no financial advantages in the Aerospatiale, MBB and Agusta proposal compared with that of United Technologies and Fiat". That would imply that in financial terms the offer made to Westland by the European consortium is just as favourable as the other proposal. Why should the Government decide to disinterest themselves in this matter? We know perfectly well of course that the right honourable lady the Prime Minister is well addicted—always leaving Johnson Matthey Bankers in brackets—to leaving private enterprise to solve its own problems, because there is to be no assistance for lame ducks. On the other hand, we have the Minister of Defence—and this matter has defence implications—deciding to take the opposite view.

The shareholders, being the owners of the company, surely have some interests in the matter, and indeed the Westland directors advance their views and priority to those of anybody else. If the Westland directors are to be able to decide, surely they should be presented not merely with the UT and Sikorsky proposals but also in detail with the proposals that have been put forward by the European consortium. Then they can judge and the public can judge. That is surely the fairest way to go about it.

We believe not only that there is the shareholders' interest involved but also that there are questions of national security to be considered. Then there is the national interest and the interest of the employees. All those matters should be taken into account. In those circumstances I sincerely hope that the Government will see fit to take steps to ensure that both cases are fully deployed so that shareholders, Parliament and the public can make a decision on the matter.

As we have the noble Viscount the Leader of the House here with us now he may care to take a look at Section 2 of the Official Secrets Act, in the light of the most alarming disclosures of possibly official information concerning national security which have been made over the weekend in the discussion of these problems—quite openly, rather than in the privacy of the Cabinet.

Lord Kennet

My Lords, I echo the thanks of the noble Lord, Lord Bruce of Donington, to the noble Lord the Minister for repeating the Statement. I am not going to attack the decision which has been made by the Government on this matter. Clearly, whatever had to be done to save this firm had to be done. I submit that nobody outside the firm or the Government is in a position to know enough to be sure whether or not the right decision was made.

Having said that, I share much of the concern of the noble Lord, Lord Bruce of Donington, about the way things happened and the timing in which they happened. The Statement says that the negotiations with United Technologies—that is, on the American bid—began only in September 1985. That is only three months ago. The Statement also says that the Secretary of State for Trade and Industry, at the suggestion of the Secretary of State for Defence, opened discussions with the European-only consortium. My first question is this: when did that happen? Were these discussions going on before discussions were opened with the UT-Fiat bid, or did they begin afterwards?

A more important question is this: why was it all left so late? It is about a year since I began to understand that Westland was said to be heading for the rocks, and I am not especially well-informed on these matters. What has been happening during all that time? Did the Government really leave everything to the last minute? I think one may regret that what I regard as a brave attempt by the Secretary of State for Defence did not come off. It was a brave attempt to produce a European solution.

We on these Benches, as the whole House and the country know, attach the greatest importance to the foundation and the growing up of a unified European defence industry and, indeed, a unified European high-tech industry altogether. Every time an opportunity of fostering that build-up is missed, like this one, it is a matter to be regretted. I submit that it is also a matter to be investigated very fully, not in the spirit of placing any blame for what happened, but in order to avoid it happening in the future. Can the Government assure the House that they will examine the history of this affair in order to make sure that they are well-prepared to reach a European solution if it ever happens in the future to another company?

Lord Lucas of Chilworth

My Lords, I am grateful to the noble Lord, Lord Bruce of Donington, and to the noble Lord, Lord Kennet, for their reception of the Statement which I have just repeated. I do not want to enter into debate with the noble Lord opposite on the points he made in his statement, but he asked a number of specific questions. He asked, first, whether the company had discussed this matter with the Government. I can tell the noble Lord that discussions between Westland plc and the Government are on a continuing basis. We were aware, and have been aware for some time, of the difficulties facing the company. That the company has decided the matter is of some urgency—this relates to the noble Lord's second question—is entirely something for the commercial judgment of the company.

In regard to the European question put by the noble Lord and, indeed, by the noble Lord, Lord Kennet, the Europeans first came to Westland on 2nd December with a suggested solution to the problems which Westland had made abundantly clear were facing them. However, it is for a private sector company to seek solutions to its problems in the best way that its board, the company and, indeed, ultimately the shareholders, seek. It is not, of course, for the Government to interfere in that.

The noble Lord's fourth question concerned the date of 18th December and parliamentary timetables. All that I can assure the noble Lord about is that private sector companies do not regulate their commercial affairs in accordance with the parliamentary timetable. It is not for me to say what should be produced before the shareholders of that company, whether it be by United Technologies-Fiat or by a European consortium. It is entirely for those companies to present before the shareholders of Westland plc what information they so wish.

The noble Lord, Lord Kennet, asked three questions. I think I have dealt with the first in saying that United Technologies, through its subsidiary company, Sikorsky, has been discussing with Westland plc the solution which we have now heard. Discussions started in September 1985. Your Lordships will recall that Sikorsky and Westland plc have had business and commercial relationships for approaching 40 years. I have dealt with the European discussions in answering the noble Lord opposite.

As regards timing, again I can only say that it is a commercial decision by the boards of private sector companies on entering discussions or negotiations with other companies, as to when they make announcements. Certainly it would not be for the Government to dictate that in any shape or form.

Lord Molloy

My Lords, notwithstanding the fact that there has been some association between Westland and Sikorsky previously, is it not a fact beyond all dispute that Westland's best customer is the Ministry of Defence and that therefore the general public as well as parliamentarians in both Houses have a right to know precisely what is going on?

I emphasise the point made by my noble friend Lord Bruce of Donington, that there are two proposals. As the Minister has already said, it is up to the shareholders whether they wish for any further information and that it should come from Westland, or whoever it is. But that is not the point. If the Government are fully informed on the European proposition and on the American proposition, surely the general public, and indeed the shareholders of Westland, are entitled to know what are those propositions.

Finally, we have always understood, I think, on both sides of the House, that it is the present Government's policy to strengthen, wherever possible, the European defence industry. Is that still the policy, or is this the first shred of possible abandonment of that policy?

Lord Lucas of Chilworth

My Lords, I am grateful to the noble Lord, Lord Molloy, for his three questions. In answer to the first question, both Westland and Sikorsky believe that there is a substantial market for the Blackhawk helicopter, both in Europe and in many other parts of the world. As regards procurement by the Ministry of Defence, the noble Lord will appreciate that I cannot answer for that Ministry's future procurement programmes. I should think it would obviously be in the best interests of the Ministry of Defence to procure where the product is the most efficient and the most economic in all the circumstances.

As regards the two propositions, I do not believe that it is necessarily the duty of the company to make the general public aware of the commercial offers that are made to it. It is for the board of directors of a company to acquaint its shareholders of all matters pertaining to the running of the company, and I would expect it so to do. As regards our relationships with Europe, there is no change in the Government's stance from the Statement of Understanding that was made in 1978.

5.30 p.m.

Lord Cledwyn of Penrhos

My Lords, the noble Lord appears to say that this is a private matter. Would be confirm, however, that the Government have in fact been heavily involved in proceedings throughout and that it is a matter of public importance and of considerable interest? While it is a private sector matter, will he say to the House that the Government and the Cabinet have in fact argued the merits of both these proposals? That is the first point.

There is a second brief question that I want to put to the Minister. The Statement refers to the agreement offering firm prospects of long-term viability. The financial difficulties which have been referred to by him and which are referred to in the Statement have employment implications. We have been informed that as a result of the economics of the financial crisis in which the company has been involved several thousand men will lose their work. Can he say what are the implications for employment of the new agreement? Does it in fact mean that these jobs are now saved?

Lord Lucas of Chilworth

My Lords, I am grateful to the noble Lord, the Leader of the Opposition. Of course, the Government are involved in so far as our leading industrial companies do have discussions with Government departments from time to time; so the Government were aware of the difficulties of Westland plc. However, it is not for the Government either to advise or to support one proposition against another. Indeed, both my right honourable friend the Secretary of State for Defence and my right honourable friend the Secretary of State for Trade and Industry have never disagreed that in the last resort the decision is one for the company.

In response to the next question that the noble Lord asked me, may I say that I understand that the company is quite shortly to make known details of the agreement that they have accepted in principle with United Technologies Fiat. It will then of course be put before the shareholders, and I understand that a meeting of the shareholders has been called. The noble Lord will know that the shareholders will have three weeks from that date in which to make their views known to the board of the company. As regards the noble Lord's last question, which concerned redundancies, as the Statement said, the board of the company has made it quite clear that in accepting the United Technologies Fiat proposition in principle, it was—and they have said this—to ensure the future of the company and that of its employees. I suggest that any question of redundancy at this time is quite hypothetical.

Lord Harmar-Nicholls

My Lords, my noble friend is not a lone voice on this side of the House. I imagine that most people who have any understanding of business at this level would agree with the Minister absolutely in his Statement. This seems to be a case where any final decisions ought to be made by the people who are running the company. It is right that they should seek all the information that they can obtain. It is right that the Government, if they have any interest at all, should let that interest be known to the company. But the final decision ought to be made by the company, which is in full possession of all the details regarding employment and the general techniques it adopts. I suggest it would be deplorable if we started allowing politics to enter into this question. It is a matter which is full of technicalities. Any future partners ought to know better than any Government do with whom they are likely to work and are more likely to make the decision which is the right one regarding any sources from which they obtain their finance. Though we have been silent on these Benches until now, I should like the Minister to feel that his Statement has the support of all reasonable people who understand the working of business and who do not want to bring in any political advantage, because there seems to have been a bit of personal trouble on the fringes of certain discussions.

Lord Lucas of Chilworth

My Lords, I am most interested in what my noble friend Lord Harmar-Nicolls has to say about this matter. Of course, he is quite right to underline the fact that at the end of the day it is a matter for the commercial judgment of the company.

Lord Molloy

My Lords, if that is so, and if at the end of the day the decision has been made by some private organisation, what was the Cabinet meeting about? Why do we have a Cabinet? Or is it a complete waste of time? This is a pretty poverty stricken Cabinet, I admit; nevertheless, they have a right to say on behalf of the British people what is to happen to a firm of which the British people are its best customers and to say whether we are to support Europe or the Americanisation of this firm. Therefore this must be a Cabinet decision on behalf of the people. We may not agree with it but the Cabinet has a right to make it. If we are to say, "Oh, no, it is a matter for the private entrepreneurs", then why bother with this procedure at all? Why should it have gone to the Cabinet?

Lord Lucas of Chilworth

My Lords, I thought I had made it quite clear in answer to an earlier supplementary question that the interests of Ministers of the Government were the same as those of the two departments concerned, notably the Ministry of Defence and the Department of Trade and Industry, in that Ministers have never disagreed that in the last resort the decision is one for the company concerned.

Lord Mackie of Benshie

My Lords, would the Minister tell us whether the cash offer or the prospects from the American side was the deciding factor?

Lord Lucas of Chilworth

My Lords, I really do not know what the deciding factor or factors were. The company has not made that information public. It has said that in due course it will release details of the proposition which it is apparently thinking of accepting. I shall await that information with the same interest as the noble Lord.