HL Deb 25 March 1986 vol 472 cc1295-303

3.40 p.m.

Lord Lucas of Chilworth

My Lords, with the leave of the House, I will now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Trade and Industry on the subject of British Leyland. The Statement is as follows:

"As the House is aware, British Leyland and the Government have been in discussion with several companies about the privatisation of the main Land Rover-Leyland businesses. Of these, General Motors has made proposals concerning Leyland Trucks, Freight Rover and Land Rover.

"In relation to the truck and van sectors, the talks with General Motors concentrated on the possibilities for combining the respective Leyland and Bedford businesses to the mutual benefit of General Motors and British Leyland. In respect of Land Rover, where there are opportunities for Land Rover in expanding European and world markets, the Government were determined that, as a condition of privatisation, special arrangements should be concluded to safeguard United Kingdom interests, including a measure of real United Kingdom control over the future of the business. For its part, however, General Motors wished to have effective control of the company from the outset and an assurance of full ownership and control within a relatively short period; and it became clear that it was not able to compromise on these points. Despite the view taken of the General Motors proposal by the British Leyland board from its commercial standpoint, this was not a basis for an agreement acceptable to the Government in the national interest.

"General Motors has stated that it is not willing to proceed with an arrangement for Leyland Trucks and Freight Rover which excludes the Land Rover company and the talks have therefore been ended.

"The British Leyland board will give further study to the alternative ways forward for all the businesses concerned. For Leyland Trucks, which operates in a depressed and fiercely competitive market, the board will continue to examine the possibilities of collaboration with other manufacturers and other ways to sustain its improving trend in performance. The Government continue to support the commercial development of this business in accordance with established plans. For Land Rover and Freight Rover, the board will include in its examination the various expressions of interest which have already been announced, with a view to recommending the course most likely to achieve the privatisation of the businesses in a way which best secures their future".

My Lords, that concludes the Statement.

Lord Bruce of Donington

My Lords, we are indebted to the noble Lord for having repeated the Statement made in another place. May I take the somewhat unusual course of congratulating the Government on achieving such a remarkable U-turn? It reflects very great credit upon them. I do not feel that the House would wish to withhold its approval from these mature considerations, following some vacillation that has done enormous harm to the British motor industry, that have now acknowledged the existence of a national interest. This is revolutionary. Hitherto, in the statements that have been made, we have been up against the harsh dictates of market forces and the harsh dictates of competition. Here, we have a Statement that the Government, presumably from the outset, were determined—the term is "were determined"—that there should be a measure of real United Kingdom control over the future of the business. This is somewhat astonishing in view of the vacillation and the conflicting statements that have been made both here and in another place concerning these various competitive offers.

Moreover, in the more recent discussions with General Motors, or, rather, following them, the Government decided that the proposals were not the basis of an agreement acceptable to the Government in the national interest. It would be outside the mood of the House if I was to be unduly cynical about this and say that we could possibly substitute electoral interest, particularly in the West Midlands. I do not wish to be uncharitable. I accept the fact that the Government now regard the national interest as being of some importance. This will be reassuring to the entire population of the United Kingdom. In continuation of that, and in view of the fact that the Government announce their intention to continue to support the commercial development of the business in accordance with established plans, may we now ask the Government to be really sensible and carry this to its logical conclusion?

In view of the hassles that have taken place over the past weeks, would it not be in the national interest to abandon this privatisation charade altogether? Would it not be best, in the interests of the British taxpayer, to continue to support British Leyland at a considerable saving to public funds of some billions above the expenditure it has made? Would it not be better, in any event, and fairer to the British taxpayer, even on the assumption that there is lurking in the Government's mind the continued desire to privatise, to continue to support Leyland until such time as there arrives the long-promised industrial recovery, concerning which the Government appear to be most confident and which, if it occurred, would necessitate or generate demand for British transport, trucks, Range Rovers and the lot, far in excess of existing demand?

Is it not the case that the Government, while exuding public optimism as to Britain's recovery, which itself would assist all these industries, are in fact suffering from private pessimism? In these circumstances would it not be better if the Government as a matter of honour (and in view of the fact, to use the words of the noble and learned Lord the Lord Chancellor, that they are a minority elective dictatorship who, I am afraid, are largely discredited now in the public mind) abandoned these proposals altogether until the British people have had an opportunity to pass a further verdict upon the Government?

Lord Ezra

My Lords, I should like to join the noble Lord, Lord Bruce of Donington, in thanking the noble Lord, Lord Lucas, for telling us about the Statement in another place. The Government have reached a decision in the current negotiations with General Motors. That is clear. What is not clear is what the alternative is. Here is a major sector of British industry that is in difficulty, not through any fault of its own but because it is in a general market problem, as the Statement indicated. Yet we are not clear what the alternative is. Is this not a demonstration of the lack of an industrial strategy for this country?

Should we not have, as an integral part of this Statement, an indication of what is now proposed? In the Statement which the noble Lord read out to us it is indicated that the Government continue to support the commercial development of this business"— that is the Truck business— in accordance with established plans". What exactly does that mean? Does it mean that the Government will be prepared to put the necessary investment into this business; that they will be prepared to provide the necessary marketing organisation for this business; that they are prepared to do what our Japanese competitors do: to have a real national effort to build up this sector of their industry; or does it mean that they will remain totally "laid back" and wait until some other bidder comes forward who happens, coincidentally, to meet the criteria—including the national criteria—which the Government have mentioned?

I think that we are entitled to know what the alternative policies are. The Government have been very clear in the reasons why they have not accepted the GM proposals. That is fine. But we now need to know the next step. Where shall we go in supporting and rebuilding this vital sector of British industry? Are we just going to let it continue through an uncertain, indeterminate period while we wait for alternative bidders; or will the Government say, "Let us get together with the enterprise and build it up so that it becomes a really powerful operation within Europe and in the rest of the world".

I think that we have reached a moment of great decision in respect of our motor industry. We have to decide one way or the other. At the moment I think that we have left this situation in limbo. I very much hope that in his reply the noble Lord will be able to indicate to us precisely what positive policy the Government have in mind.

Lord Lucas of Chilworth

My Lords, I am obliged to both noble Lords opposite for their reception of the repetition of this Statement. I shall do my best to answer the comments which they have made.

Let me first start with the noble Lord, Lord Bruce of Donington, in saying there has been no U-turn whatsoever by the Government. Your Lordships will recall that I gave certain assurances to the House over a number of weeks. At the outset, we sought certain assurances from General Motors. Among those assurances was the national interest element. Regrettably General Motors and the Government could not find sufficient common ground which is why General Motors wish to end the discussions.

I should remind the noble Lord, Lord Bruce of Donington, that the British taxpayer has put £2.2 billion into British Leyland in the past few years and has already underwritten a further £1.5 billion. Certainly very much more money would be needed and it has been the Government's policy, as declared at the last election, that British Leyland would be returned to the private sector as soon as was practicable. If I may say to the noble Lord, Lord Ezra, that is exactly what is now proposed. That is the policy. It remains for British Leyland's board to examine carefully how best this may be achieved.

Discussions are still continuing with a number of companies interested in Leyland Bus, Land Rover and Freight Rover, Land and Range Rover, in Land Rover only, and in Leyland Truck only. These discussions will be continuing.

The industrial recovery is not something at which one arrives. The recovery has been growing apace over the past six years, notably as a result of this Government's general policies. We enter the sixth successive year of advancement. I think that it would be wearisome to your Lordships if I repeated the figures that I have so often repeated in the past few weeks.

To answer the noble Lord, Lord Ezra, I think that our intentions are abundantly clear: to secure for British Leyland as a whole—particularly Leyland Bus, Land Rover and Freight Rover and Leyland Trucks—a secure future in a highly competitive international business to the betterment of both the taxpayer, the management, and those who work in that industry. In this we shall use our best endeavours over the next few weeks.

Lord Boyd-Carpenter

My Lords, while sympathising with my noble friend in having to repeat this Statement, may I ask him whether it means that it is the intention of Her Majesty's Government to go on pouring large quantities of the taxpayers' money into what The Times this morning so rightly describes as the unprofitable production of unwanted vehicles? Is my noble friend aware that any doubts that any of us may have had as to the wrongness of this decision have been entirely dissipated by the approval given to it by the noble Lord, Lord Bruce of Donington?

Lord Lucas of Chilworth

My Lords, my noble friend Lord Boyd-Carpenter asks a specific question: are the Government going to pour more taxpayers' money into the company? Since the British Leyland hoard have not asked the Government for any more money, I think that the question—and I say this with great respect to my noble friend—is a little hypothetical. We seek with the British Leyland board to find an alternative solution: that of returning the various businesses to the private sector where one would anticipate the buyers, and particularly the companies who are already discussing the various businesses, would provide the requisite capital to further the interest which I have just described.

Lord Mackie of Benshie

My Lords, would the Minister tell us which description he accepts: that of his noble friend of pouring money into an unsuccessful business: or his description of the sixth successive year of advance?

Lord Lucas of Chilworth

My Lords. I prefer my description. Certainly I think that my noble friend was referring to pouring money into a business which has not been able to fulfil—at this time anyway—its best ambitions: that of a larger car share. Although the truck business has a 16 per cent. share of the United Kingdom market, it has a very small share of the European market. It is a share of a market which has been fast declining.

With regard to Land Rover that company is the only one—between the bus company, the truck company and itself—that has turned any of its turnover into profit, and that only in the past two years.

Lord Shepherd

My Lords, in the process of privatisation—which I presume the noble Lord supports—would he not accept that in order to get a fair price for the shareholders (that is the state) and a continuity of employment for those who work within the industry, one should not decry what have been major achievements within British Leyland since the very dark days in the 1960s.

Is it not a fact that General Motors have expressed very keen interest, in terms of Leyland Trucks, as a consequence of the undoubted investment, design and imagination of those responsible for that segment of the business? However, will not the noble Lord agree that in a period of 18 months, which I think is the time that the Government have been in intense negotiations with General Motors, they had a clear view as to what was the national interest—that is, the retention of shares or some form of control over the national interest as far as this group is concerned—and that that impression must have been given to General Motors some months ago? However, it looks as though it has come just at the very last moment and that General Motors has decided to pull out.

Does not that remove any degree of confidence that any other negotiators might have in the process of the Government's intention as regards privatisation? Will not the noble Lord accept what the noble Lord, Lord Ezra, put most fairly and forcibly: namely, that there needs to be a clear statement of strategy and intention on behalf of the Government towards a very significant part of industry? We are not just considering British Leyland: we are considering all the other companies and organisations whose entire business is dependent upon the success not only of British Leyland but of all motor manufacturing and vehicle production in this country.

4 p.m.

Lord Lucas of Chilworth

My Lords, I endorse what the noble Lord, Lord Shepherd, said about the huge advance that both the management and workforce of British Leyand have made in recent years. Nevertheless, the fact remains that both the bus and truck businesses have not made any profit whatever for the past 10 or 12 years, and, as I suggested, in this intensely fierce international market they are unlikely so to do despite the fact that the product is better—particularly the trucks—and despite the fact that they now command 16 per cent. of the United Kingdom market.

There needs to be a further investment of both technology and money, and we believe that that would best be advanced through the private sector rather than continuing to put forward public money. General Motors' interest was known for some little while. In fact it was widely reported in the press as long ago as last autumn. While the negotiations were obviously of a commercially confidential nature it was undesirable to discuss them too broadly, and while General Motors knew that we sought certain assurances, negotiations were kept alive in the belief that our interests and its interests could be met. In the event, that was not to be. I should be happy to consider the wider aspects of industrial policy, but I fear that the House would not thank me were I so to do this afternoon.

Lord Soames

My Lords, as a member of a small European advisory council to General Motors, I did not intend to intervene had it not been that the Minister talked about General Motors withdrawing from the negotiations. May I ask him to tell the House when it was that Her Majesty's Government informed General Motors of what they perceived to be the British national interest? Was it at the beginning of the negotiations or was it in comparatively recent days?

Lord Lucas of Chilworth

My Lords, as I understand it, it was during the course of negotiations that the assurances which we sought were made very clear. Various options were looked at, a number of which have been reported in the press. However, finally I think it was 21st March when we found that the gap was too wide.

Lord Shepherd

My Lords, will the noble Lord reply to the question, because it is very important? When was the breaking issue on the part of the Government laid before the negotiators of General Motors? It is no good saying that it was part of the negotiations. We wish to know when the breaking point arose.

Lord Lucas of Chilworth

My Lords, I do not believe that there was a particular breaking point. The matters were discussed and pieces were left over. I do not believe that one can say that at any one time there was a conversation which could be constructed to mean a breaking point. On 21st March General Motors felt that there was no further room for negotiation.

Baroness Seear

My Lords, there must have been a moment and a reason why the Government suddenly decided to make the decision that they made. When was it? What caused it? That is what your Lordships' House is asking.

Lord Lucas of Chilworth

My Lords, I have told the House the reasons for General Motors and the Government breaking off discussions. The reasons, which I shall repeat, were that the assurances which we sought regarding ownership and an element of United Kingdom control and United Kingdom management were matters with which General Motors was unable to agree, and we decided mutually that there was no point in continuing. Exactly on which date or day that happened I am afraid I do not know. Your Lordships will appreciate that I was not party to the discussions myself. However, as I have already said, on 21st March the Government decided that none of the points which were put to us would work and it was then felt by both the Government and General Motors that there was no point in continuing with the negotiations.

Lord Brougham and Vaux

My Lords, does my noble friend agree that the national interest is to have a bus and truck division manufacturing in this country? With a huge overcapacity as regards the bus and truck industry not only in England and Europe, but also world-wide, unless BL get into bed with someone in the way that Ford or Fiat have, in five to eight years' time there will not be a BL vehicle or a Bedford made in this country.

Lord Lucas of Chilworth

My Lords, I understand what my noble friend says. I would not like to hypothecate quite as much as he has. It has always been our intention from the outset that a negotiation, a collaboration or a merger would be desirable in the long-term interests of a British-based truck and bus manufacturing industry and of all those who worked in it. The British Leyland board and ourselves will continue to work to that end.

Lord Bruce of Donington

My Lords, is the noble Lord aware that the truthful way in which to answer the question put to him by his noble friend Lord Soames is to say, quite frankly, that the Government's final decision and their U-turn took place immediately following representations by Conservative Members of Parliament in the West Midlands to the Chairman of the Conservative Party—the Chancellor of the Duchy of Lancaster—Mr. Tebbit, who then decided that the political interest lay in the direction of the decision which the Government then reached?

Lord Lucas of Chilworth

My Lords, if my noble friend Lord Soames was dissatisfied with my answer to his question he no doubt would have made that abundantly clear to me. On the other hand, I have explained to the House quite clearly and honestly the circumstances which arose concerning the ending of discussions between the Government and General Motors.

Lord Gisborough

My Lords, is it not important that the company should be part of a large group with large capital available and with a large sales organisation? Is not the question of who owns the shares a red herring, because what does it matter? What is important is that the capital and so on should exist and that the jobs should be maintained. It really does not make a ha'p'orth of difference whether the shares are owned in Britain or anywhere else.

Lord Lucas of Chilworth

My Lords, that is a view shared by a number of people. What we remain concerned about is that there should be a strong manufacturing presence in the United Kingdom employing, I think it is, 29,000 people directly and several thousand others in the supply industries; and that is what both the British Leyland board and ourselves seek to achieve.

Lord Harris of Greenwich

My Lords, is the noble Lord aware that the question put earlier by the noble Lord, Lord Soames, has not been answered by him? It has been answered by the noble Lord, Lord Bruce of Donington, but not by him. Perhaps I may put it to the noble Lord again. He says that this decision, to which he was not a party—which we all recognise, but of course he has advice available to him—was taken on national interest grounds. The question is a simple one. These negotiations went on for a substantial period of time, as the noble Lord is well aware. When was that definition of the national interest made by Ministers?

Lord Lucas of Chilworth

My Lords, I cannot answer that question, and I do not believe that anybody else can, because various options on the various assurances which we sought were discussed over a period of many months. As I have said three times already, it was decided on 21st March that none of the options on all the various assurances which we were seeking in the national interest, in the interests of the industry, in the interests of the workforce, and so on, would work, and the talks ended on 21st March.

Lord Cledwyn of Penrhos

My Lords, with respect to the noble Lord, part of the answer is given in the Statement he has just read. It says: For its part, however, General Motors wished to have effective control of the company from the outset". The Statement also says: the Government were determined that … special arrangements should be concluded to safeguard United Kingdom interests, including a measure of real United Kingdom control". When was that made plain? If that had been made plain from the start, the negotiations would have broken down at the start.

Lord Lucas of Chilworth

My Lords, I do not believe that the negotiations would have broken down at the start. In any kind of negotiation—and the noble Lord the Leader of the Opposition knows this very well—one puts on the table the optimum, and one moves around making adjustments to what one ideally would like and what is pragmatic. In the end, as I have said, none of the options available to us or to General Motors was considered suitable, and this was decided on 21st March.

Lord Mackie of Benshie

My Lords, perhaps the noble Lord, Lord Soames, could tell the House when General Motors was made aware of these objections.