The Rover Group (Hansard, 13 July 1988)

§ The Secretary of State for Trade and Industry (Lord Young of Graffham)
My Lords, I told the House when I announced the agreement I had reached with British Aerospace for the sale of the Government's shareholding in Rover Group that I would try to return to the House before the Summer Recess to report further developments. This morning the European Commission decided the outline terms upon which it would be willing to close its state aid 828 procedure. Those terms effectively reduce the amount of the cash injection from the Government into Rover Group to £547 million with the consideration remaining at £150 million with important relaxations in the tax conditions. Until lunchtime today, it appeared that British Aerospace were prepared to accept those terms. However, at the last minute they have asked for more time to consider the implications of other conditions attached to the Commission decision. Discussions between British Aerospace and the Government are continuing and I shall report to your Lordships' House further as soon as I am able.

§ Lord Williams of Elvel
My Lords, the House will be grateful to the noble Lord for making that Statement, although I am bound to say that it does not take us a great deal further. We are now in a state of almost total confusion. We have read articles in the press, undoubtedly inspired by official sources, saying that the Commission had decided what to do and that British Aerospace had decided on its reaction. The noble Lord the Secretary of State comes before us now to say that the deal is still in the balance and nothing is decided.
We are all grateful to Commissioner Sutherland for his efforts in protecting the interests of the British taxpayer rather better than do the British Government. On behalf of the British taxpayer I should like to thank him. He has achieved what I think the Government could have achieved in the original negotiations. As I pointed out when the Minister made his first Statement, this seemed to me to be an extremely generous transaction and other noble Lords agreed with me. From all accounts it is somewhat less generous now but we must see the final terms and conditions before we can pass judgment.
I should like to ask the Secretary of State to elucidate some of the expressions in his Statement. What is the meaning of the term "effectively reduce"? We have noted the figure of £547 million, which is somewhat less than the figure that he gave us not so very long ago. What is the effective reduction? Is it net reduction or gross reduction? What exactly does that term mean?
What are the important relaxations in the tax conditions that the Commission or the Government are now suggesting? The relevant sections in the taxes Act 1988 are Sections 393 and 768 and we all know that both those sections require the continuation of a trade. Are the relaxations and the tax conditions such as to move away from the fundamental principle that there should be a continuation of the same trade if tax losses are to be set against future profits, and has the revenue, in a wholly uncharacteristic manner, given its clearance to such arrangements?
Thirdly, what is the timetable? We understand from the Minister that at lunchtime British Aerospace was prepared to accept the terms but that it has now asked for more time to consider the other conditions. What is the timetable? Has the noble Lord set any deadline?
Fourthly, what are those "other conditions" upon which British Aerospace is said to be reflecting?
Those are the questions which the Statement, short as it is, raises in my mind. However, the confusion to 829 which I referred earlier remains and I have to say that it is of the Government's own making. It was they who proposed this deal, they who took it to the Commission and they who argued with the Commission; yet here we are still in a state of uncertainty. I can only offer to the Minister the old words: if you are in a hole, stop digging.

§ Lord Ezra
My Lords, I should like to thank the Minister for discharging his commitment to this House of keeping us informed before the Summer Recess of the progress of the negotiations in this deal. Having said that, like the noble Lord, Lord Williams, we are in a state of confusion.
I should like to come straight away to the point about a timetable. Naturally we should like to know about the terms on which this matter is to be settled before the final settlement is reached. If British Aerospace prolongs its consideration until after the recess and this matter is settled while we are away, we shall not have the opportunity of validly commenting on the proposals. I support the noble Lord, Lord Williams, who asked what is now to be the timetable. Has British Aerospace been given a limited amount of time in which to make its decision?
I believe that this House will be totally at one in wanting to see the Rover Group as successful as it possibly can become. The question is whether it could become successful under the arrangements now proposed. The terms have been substantially modified. The other items mentioned in the proposal from the Commission have not been revealed, as the noble Lord, Lord Williams, said. Are we in a situation in which we can say that if this deal were to go ahead and British Aerospace were to agree, it would be in the best interests of Britain's motor industry? It is on that point that we want to be reassured.

§ Lord Young of Graffham
My Lords, I am grateful to the noble Lord, Lord Williams, but let me at least clear one element of that confusion from which he suffers this afternoon. Let me deny categorically that there has been any briefing of any sort from any official source. I undertook that I would come before your Lordships' House as soon as we were in a position to do so. It is our practice to announce such matters first to your Lordships' House and not in any other way. Any other matters about which the noble Lord may have read certainly did not emanate from the Government or government sources.
The other element of confusion on which I shall happily satisfy the noble Lord and clear up with him is that there is no question of any change in the tax law. Any tax allowances or losses of any sort that would be available to British Aerospace or the Rover Group would be in accordance with the law of the land. It would be total impropriety to endeavour to change that in any shape or form. I am happy to give the noble Lord—and indeed all noble Lords in this Hous—an assurance on that point.
I duly note the gratitude which the noble Lord, Lord Williams, expressed to Commissioner Sutherland. For my part I have had no fewer than six meetings with the commissioner, and apart from anything that may have been said in the press they 830 have been conducted in a very temperate manner. I have nothing but admiration for Commissioner Sutherland. I fully understand his job just as he understands mine.
The Commission met this morning. It decided on the terms on which the procedure would go through and then issued that procedure. As I said in my Statement, the position is that British Aerospace, having just seen it—and it is a matter of considerable importance because I am sure that all noble Lords realise that, although governments are used to dealing with governments and indeed with the Commission, private sector companies want to ensure that they fully understand the conditions attached to any procedure—has asked me for further time to consider the other conditions that were attached. I do not think that I can do less than give more time.
I hope very much that I shall be in a position to come back to your Lordships' House before the recess. Indeed, I suggest that the timing is more a matter for British Aerospace than for me. There is no question of having a debate before the final terms are reached. It is the Government's job to govern. Afterwards it may well be that noble Lords will want to question those decisions of government, but surely it is for government to take them in the first place.

§ Lord Taylor of Gryfe
My Lords, from these Benches we should like to welcome the Minister's Statement and thank him for it. Despite the generosity of the original arrangement, the proposed deal should be supported. I realise that it is a very important commercial decision for British Aerospace and I believe that it would be unwise for us to press for a decision to be made before the recess and before the House of Lords has offered comment on it. I hope that we have supported the proposition in principle and that the terms of the Commission will be acceptable to British Aerospace. We hope that the uncertainty over a large sector of British industry will be relieved and that it will be in British hands.

§ Lord Young of Graffham
My Lords, I am grateful to the noble Lord, Lord Taylor. All noble Lords would like to see any element of uncertainty eliminated as quickly as possible and we shall do that. I hope your Lordships' House will accept that when the final terms are known the deal will be seen to be a fair one and indeed that there are good reasons for any apparent changes from the earlier arrangement. That is for another day.

§ Lord Bruce-Gardyne
My Lords, will my noble friend clear up one small point? Is it or would it be in conformity with the taxes Act for past losses on a motor business to be accountable against future profits on an aircraft business?

§ Lord Young of Graffham
My Lords, I am happy to assure my noble friend that until cars fly that would not pertain.

§ Lord Stoddart of Swindon
My Lords, is the Minister aware that some of us at least believe that it is an outrage that a British Government should have to go cap in hand to a polyglot junta sitting in 831 Brussels to make decisions affecting British jobs and British people? Can he assure the House that the actions which have been taken and the restrictions which have been put on the disposal of British Rover by the Commission, will not in the end result in a foreign takeover of the firm? He will have read—and it may well be untrue—of the idea that the restrictions by the Commission are a conspiracy to ensure that British Rover should be taken over by Volkswagen or some other Continental firm.

§ Lord Young of Graffham
My Lords, we are part of the European Community. We have the single market in 1992. An integral part of that market is to ensure that we have level playing fields throughout Europe. Part of that aim is to ensure that the member governments of the Commission do not subsidise their capital industries, their manufacturing industries, to such an extent that it destroys jobs in other European countries. Therefore what Commissioner Sutherland is undertaking is in the interests of all who live within the Community, including the United Kingdom. There are therefore rules that we should all follow. It is of interest to note that we are one of the best behaved of all the major countries within the Community in terms of state aid. Indeed our state aids are falling whereas those of others, notably France and Germany, are rising. I therefore support all the work that Commissioner Sutherland is doing. I hope that we see a satisfactory resolution of this matter.

§ Lord Harmar-Nicholls
My Lords, is my noble friend aware that in that last answer he does not carry everybody in this country with him? Large numbers of people resent being in the position where we are not able to spend our own money in our own way and to help our own industries as we think best. It may well be that this rigid adherence to the strict interpretation arising from the Treaty of Rome is something we should consider if we wish to preserve our future freedom.

§ Lord Young of Graffham
My Lords, 1 have long been aware that not everyone in the country is of the same mind. Indeed, I have heard a rather worrying rumour that not every citizen is totally behind this Government. These things happen. However, there are rules which have to be followed and these rules should be seen to apply to every single player in the game.

§ Baroness Seear
My Lords, will the noble Lord accept that we on these Benches are very glad to hear him confirm his acceptance of our membership of the Common Market and of the obligations that go with it? Will he also answer—1 think he did not— the question that came from my noble friend, or it may have been the noble Lord, Lord Williams, on these other conditions that British Aerospace is considering to which he referred in his Statement?
In commenting on his reply to my noble friend Lord Ezra, while of course it is the job of government to govern, does he agree that Parliament is nonetheless sovereign?

§ Lord Young of Graffham
My Lords, of course Parliament is sovereign, subject I suppose to the Treaty of Rome. I shall not debate in this Chamber exactly where those boundaries lie. In some areas unquestionably where Parliament is sovereign we have agreed to allow some matters to be determined in other ways within Europe. That is quite clear.
I heard the question that the noble Lord, Lord Ezra, put to me. I thought that discretion was the better part of valour in the interest of seeing this go through. It is better to leave these matters, which are commercial, to be settled between the parties. I hope to come back to your Lordships' House and explain all.

§ Lord Peston
My Lords, does not the Secretary of State see a contradiction between his statements that government must govern and that government must refer to the wishes of the Commission? As someone who strongly supports our membership of the Community, I still prefer government to govern. Is it too late for the Government to draw back from this foolhardy and over-anxious sale of a public sector asset at a price that is not helpful to the taxpayer and in the longer run is not helpful to industry?

§ Lord Young of Graffham
My Lords, the noble Lord shows great foresight in knowing exactly what the terms are before I give them to the House. I should like to put another point on which he may ponder at leisure. If he can tell me of one company that has done better in public ownership than in private ownership, perhaps he would write to me.

§ Lord Peston
My Lords, if the noble Lord is interested, I mention British Rover.