HL Deb 24 February 1986 vol 471 cc848-55

4.51 p.m.

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

My Lords, it may be for the convenience of the House if I repeat in the form of a Statement an Answer being given in another place in relation to Vickers Shipbuilding and Engineering Limited. The Statement is as follows:

"Last Thursday the Government proposed a short postponement in the date for the receipt of bids for the sale of Vickers Shipbuilding and Engineering Limited to allow prospective bidders for the company to tender simultaneously for the first Trident submarine contract. The prospective bidders, however, saw practical difficulties in such a delay and I therefore decided to proceed according to the original timetable."

My Lords, that concludes the Statement.

Lord Bruce of Donington

My Lords, we are grateful to the noble Lord for having made the Statement. It would seem that this has been an on-off-on situation. First of all, the Government decide that the sale of the yard is to take place on 31st March. Then they decide to delay. Now they decide to fix the date again. I do not know what it is like in Government, but at any rate I know that in the Army we were always taught: order, counter order—disorder. Is it not the case that the DTI has always taken the view that a date should be fixed? The noble Lord today has indicated the victory of the DTI view over that of the Ministry of Defence. Once again, this Statement is a reflection of the evident disharmony that exists between the DTI and the Ministry of Defence.

We have exactly the same situation in relation to Westland. The music of Westland may temporarily have stopped but the melody lingers on. Just what is the Government's policy ultimately to be in this case? Here we have Vickers, which is the only British submarine yard in the United Kingdom. Last year it made a profit of £17 million and the year before £25 million, largely of course due to there being these cost-plus contracts. The company could not lose on them, anyway. Now the Government decide to privatise on a given date.

On what value is this privatisation to take place? On what value? The House is entitled to know. What valuation of any finite kind can be obtained until the contract for the Trident submarine has been finalised? I believe this was the argument of the Ministry of Defence: that it was quite pointless transferring until one knew what the earnings value, which is about 10 times the net asset value, of this contract was to be.

This shows a complete disregard for the interests of the British taxpayer. In the first place, at one fell swoop the British taxpayer is denied the benefit of the profits emerging from the Vickers yard on the basis of its cost-plus contracts which, if the Government's intentions are followed through, will amount to over a billion pounds, in fact many billions.

Thus the taxpayer is denied the income. He will also be denied the capital. He faces a loss because the Government are determined to flog off the company at virtually any price. Prudence would have suggested that if the ridiculous charade of privatisation was to be carried out, at any rate it should be carried out as much as possible for the benefit of the taxpayer by obtaining a proper price.

There is a case, before this matter is concluded, for compensation in the event of the cancellation of Trident being finalised within the contract. On present form, and indeed on past form, it is highly unlikely that the present Government will be returned after the next general election and any investor is entitled to know what is likely to be the compensation for cancellation.

In short, the whole matter is a complete shambles. The Government are divided among themselves on it. We now have the apparent picture of the DTI, and not the Ministry of Defence, in future being ultimately responsible for defence procurement. This is an intolerable situation. It only shows the confusion and disharmony that still prevail within the Government.

Lord Kennet

My Lords, it is difficult not to share some of the suspicions of the noble Lord, Lord Bruce, about what is going on, in view of the fact that Vickers, before obtaining the contract for the first boat, have spent a great deal of money, their money and the taxpayers' money. Now the thought that at this stage somebody in the real world may come in and bid for that contract, and take it away from Vickers, leaves one gasping at the unlikelihood of it. What more can the Government tell us about who it was who might have bid for the contract, to get it away from Vickers, which caused them to consider the delaying, then not to delay? Can the Government tell us what are the bids which are now before them? Is there still time for the appearance of anonymous nominee bids, as in the case of Westland?

If there is, and such a thing appears, what will they do this time? Will they be prepared to let it go through and rely on the cumbersome machinery of appointing inspectors and all the rest of it to find out who it was after it has gone through, which as I think it is now well understood at large, would leave time for an anonymous purchaser to move in and dispose of the future of that firm in a way that the Government could not prevent, because they simply would not have power at that time?

Thus, who are the bidders? Is it simply the employee bid, (which means the banks, and presumably the Government knows which banks—if they are respectable ones) and Trafalgar House? Are those the only two bids, or are there more? Secondly, on the matter of the cancellation payments raised by the noble Lord, Lord Bruce, will the Government admit that there is a temptation, because if they admit that there is a temptation the public and Parliament would be more inclined to believe that they are resisting it, to fix those payments high in order to make Vickers nice and saleable and to dissuade the next government, which may very likely not be them, from following their best judgment, which would be that the Trident system should be cancelled and possibly succeeded by another one?

Lastly, have the Government noticed the public opinion poll published yesterday in the Sunday Times which showed the extraordinarily strong objection of the British people to our national industrial assets being sold to overseas owners?

5 p.m.

Lord Lucas of Chilworth

My Lords, I have to thank the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Kennet, for their receipt of the Statement that I have just made.

A noble Lord

Why?

Lord Lucas of Chilworth

Because, my Lords, they received it with, in part, some grace; although I think that any confusion that might arise is in the mind of the noble Lord, Lord Bruce of Donington, and certainly not in the Government's mind. The Government's policy was set out on 25th July 1984 when there was an announcement to Parliament that British Shipbuilders were to sell the warship yards by 31st March 1986. That remains government policy and the Government have not changed their policy since that announcement was made.

On 10th October 1985 British Shipbuilders issued the sale documents for Vickers together with Cammell Laird; and that was the last of the yards to be put on the market. The sale documents included a deadline for bids for Vickers with Cammell Laird for Tuesday 25th February, and it was thought that it would be in the best interests of prospective bidders to have an extension of time. However, the prospective bidders themselves decided that it would not be in their interests and asked us to revert to the original time; so that in effect there has been no change at all.

The noble Lord, Lord Bruce of Donington, asked: what are the bidders bidding for? Perhaps I may say that the bidders are bidding for the company as the company stands together with the benefit of a draft contract. The noble Lord, Lord Kennet, asked me a number of questions. May I dispense with the last of his questions: whether the Government had noticed the public opinion polls? I think that my right honourable friend the Leader of the House in another place answered those publicly yesterday. I can add nothing to what he said.

I am not prepared this afternoon to disclose who are the bidders for this company in that they have not given their permission for their interest to be disclosed. It is in commercial confidence and I think that your Lordships would expect me to respect that. So far as I am aware, there is no mystery or nominee bidder on the scene to take Trident away. I think that that was the noble Lord's question.

Lord Kennet

Or to take Vickers/Cammell Laird away, my Lords?

Lord Lucas of Chilworth

My Lords, there is no mystery bidder to VSEL and to British Shipbuilders, who have the matter to consider. I am not quite sure what the noble Lord, Lord Kennet, was trying to get me to answer when he asked whether the Government would admit to a temptation to fix payments high—presumably in relation to the cancellation of any contact. There is a draft contract with VSEL. It is for the bidders, who have full knowledge of the content of that draft contract, to evaluate it in making their bid by tomorrow.

Lord Bruce of Donington

My Lords, the noble Lord has referred to a draft contract. Does the noble Lord know the contents of that draft contract? Does he know what price has been fixed in the draft contract? If he knows, it should be given. If he does not know, on what is any prospective purchaser going to rely; and how can this House or another place form any judgment on it at all? Would it not have been best in any event to await the finalisation of the contract? Then everybody would know exactly where they were, including the noble Lord himself and possibly the Government.

Lord Lucas of Chilworth

My Lords, if I took seriously the comments of the noble noble Lord, Lord Bruce of Donington, I suggest that he waits until the contract is completed; and then he will know.

Lord Taylor of Blackburn

My Lords, is the Minister aware of the great interest in this matter, especially in the Barrow area where, if my memory serves me aright, a quarter of the population are employed there? If there is any chance of their participating in the buying of this firm, they are very much interested.

Lord Lucas of Chilworth

My Lords, of course I understand the interest of the noble Lord, Lord Taylor, in this matter. There is a consortium bidding. I think it is that consortium which would reflect the interests that the noble Lord, Lord Taylor, asked about.

Lord Mayhew

My Lords, does the noble Lord not agree that the consortium may also answer the interests of the country and not only those of the people of Barrow? Can he explain a little more? As I understand it from his answers, the Government decided quite recently that it would be in the interests of those who are applying for this contract—and I gather that there are only two concerned—to postpone the day. And so the Government postponed the day and then they found that, on the contrary, they did not want to postpone. This is very strange: not to consult, to be taken by surprise in this manner and then to have to make a Statement to the House about it. Is this really the reason for the muddle?

Lord Lucas of Chilworth

My Lords, there was no muddle at all. We were not caught unawares. There was nothing at all strange about it. It was thought at one time that it might be in the best interests of prospective bidders to delay the date for bids to be in: that is, 25th February. This was discussed with the prospective bidders and was found not to be satisfactory to them, and we reverted to the original date.

Lord Kaldor

My Lords, if I understood the noble Lord aright, originally the Government wanted to give some more time for other people, other bidders, to come forward so as to find out whether there may be other bidders prepared to buy the company on more favourable terms. Now the Government announce that they are going back on this, that the time which they originally themselves proposed to allow other bidders to come forward is no longer there and that the matter is now to be closed. Can he explain to us why they changed their mind? If they considered it right and proper to allow time for other bidders to come forward, what is it that has made them now say, "No, we will not give any more time for the bidders to come forward"? What happened?

Lord Lucas of Chilworth

My Lords, I am not prepared this afternoon to speculate on the noble Lord, Lord Kaldor's understanding of rumour. What I can say is that in October of last year British Shipbuilders issued sale documents which intimated that the deadline for bids for the company was to be 25th February of this year. That is tomorrow. We have stayed with that arrangement although, in between, we had invited potential bidders to express an opinion as to whether they wanted more time and we were prepared to extend the 25th February deadline. In the event, those interested said they did not want an extension. So we returned to—we stayed with, in fact—the deadline of 25th February, which was announced in October of last year as part of the July Statement for the sale of the company.

Lord Mackie of Benshie

My Lords, as I understood the Minister, he said that because of commercial secrecy he could not disclose who the bidders were for this important public asset. Is it not in the public interest that this information should be disclosed? Is he at least prepared to say that any consortium bidding is a wholly British consortium and that there is no foreign interest involved?

Lord Lucas of Chilworth

My Lords, I did not say there was any secrecy at all. What I said was that I stayed with the commercial confidentiality in that those people bidding had in fact declined to make their interests public at this time. Noble Lords, I think, must recall that their bid is to the company, which is a subsidiary of British Shipbuilders, who have to act in the commercial interests of the company. They will then come to the Government, who have to take account of the wider aspect: that is, the national interest. That will be done during the course of events.

Lord Harmar-Nicholls

My Lords, I cannot understand why noble Lords are making such a meal out of this. Nobody knows better than the noble Lord, Lord Bruce of Donington, that this sort of thing happens every day. There is nothing unreal about it. An auction sale can be postponed because it might suit certain people who would be bona fide bidders. It happens every day. We have been told that initially it was said in October that 25th February was deemed to be the sort of date which would allow for the market to be tested in the proper way; and then nearer the 25th February it looked as though it might be to the advantage of potential buyers for the date to be extended, for all sorts of reasons such as arranging their finance and satisfying themselves that the terms of the draft contract which have been referred to are the ones they want.

It is common sense for the vendor in such circumstances to undertake to give a little extra time for such things to be sorted out. But the bidder might say: "I don't want it and indeed it may be embarrassing, having made my financial arrangements and everything else not to go forward on the day we contemplated". This happens every day; and the sort of interchange we have been listening to for the last 20 minutes puts any government wishing to sell into a position where people will not deal with them. We will prevent the Government getting their proper price by the intervention or the suggestion that somebody is cheating, and all sorts of ideas like that. This is why governments often do not get their price. I believe that—

Several noble Lords

Order!

Lord Harmar-Nicholls

My Lords, I am not easily shouted down. The noble Lords are being nonsensical, and in particular the noble Lord, Lord Bruce—an accountant of some repute—knows that it is nonsensical. In the normal running of a business it is right to ask questions, but to make a meal out of it like this is absolutely against the best interests of the shipbuilding and engineering company which wants to get the best price it can.

Lord Molloy

My Lords, I think the House will agree that we have just had a classic example of making a meal of a great big load of rubbish such as I have rarely heard. Could the Minister not answer this: Is it right for us to understand that the Government advanced the view that the date should be extended in the peradventure that someone else might put in a bid? Then they went to those who had already put in the bid, and who said, "No, we do not want any more delay", and so the Government caved in? Is that the situation?

Lord Lucas of Chilworth

My Lords, the answer to the noble Lord, Lord Molloy, is No.

Lord Molloy

My Lords, that is not an answer.

Lord Lucas of Chilworth

My Lords, the noble Lord asked me specifically: is this or is this not the position? I have just answered him by saying, No, it is not the position.

Lord Taylor of Gryfe

My Lords, may I ask the Minister whether the new date that is fixed—I am going back to the original date—will in any way inhibit the prospects of a management/employee buy-out consortium, keeping in mind that arranging these kind of bids, where you are covering a very wide range of interests and have to secure bank support for such a bid, takes a little time? Could I have the assurance of the Minister that the new date will enable the management/employee buy-out consortium to participate?

Lord Lucas of Chilworth

My Lords, since the two dates are but five days apart, the suggestion having been made on the 20th February that there should be an extension and the return to the original date of 25th February—I repeat, my Lords, the original date: there is no new date—I do not think that would have inhibited any serious bidder. I think I can give the noble Lord the assurance he is seeking, that the return to the original date will not inhibit any serious bidder.

Lord Hatch of Lusby

My Lords, the noble Lord appears to be stonewalling. He told us that the Statement was made last Thursday, 20th February. Why does he not tell us what caused that Statement to be made? What had happened between last October and the 20th February to cause the Government to decide that they were going to extend the date to just five days later? Then, only three days later, they changed their minds again. Surely this is a matter where the Minister can see that the House has a right to have a thorough explanation, and not for it just to be said that the Government changed their minds between last Thursday and today. What happened before last Thursday to cause them to make that Statement then, and what has happened since last Thursday and today in the context of a period that goes back to last October?

Lord Lucas of Chilworth

My Lords, it only recently became clear that negotiations between the Ministry of Defence and Vickers Shipbuilding and Engineering would not be complete before the date set by British Shipbuilders for the sale of the company: that is, that the 25th February should be the deadline for bids. It might have been of mutal advantage to run the two competitions simultaneously, but that did not prove to be possible. The original timetable, therefore, is acceptable to all those concerned in these matters.