Short Brothers: Privatisation

HL Deb 01 November 1988 vol 501 cc148-80

7.9 p.m.

Baroness Turner of Camden rose to ask Her Majesty's Government whether consideration has been given to the effect on employment in Northern Ireland of the decision to privatise Short Brothers.

The noble Baroness said: My Lords, I welcome the opportunity to address the House on the matter of the proposed privatisation of Short Brothers plc in Northern Ireland. In case it may be wondered why I, a Peer living and based in London, should be concerned about the issue, I should perhaps explain my interest. As your Lordships will know, I was until recently assistant general secretary of ASTMS, now the Manufacturing, Science and Finance Union, MSF, following a merger with the technical union, TASS. My union has long had members in Ireland—in the Republic as well as in Northern Ireland.

It is perhaps not fully appreciated in this country that, despite all the very difficult sectarian problems in Northern Ireland, the trade union movement has maintained its unity. The Irish Congress of Trade Unions covers trade unions throughout the whole of Ireland, although there is a Northern Ireland committee. The Irish congress, through its policy of, "A Better Life for All", has been able to maintain that unity through concentrating on those issues such as employment in which all workers, no matter what their religious background or beliefs, have a common interest. The unions are a great force for sense and stability in the Province, which I believe is not always fully appreciated here.

During the Summer Recess I was in Ireland—in Dublin—for the opening of a new union office. I was asked to meet members from Belfast in order to discuss the problems which they saw arising both from the projected privatisation of Short Brothers plc and from the problems facing the Harland and Wolff shipyard. I framed my question around Short's since different issues are involved in the shipyard, to which I shall return at another time. It has relevance here because it raises the whole question of employment in the Province as does the privatisation of Short's.

Your Lordships will be aware of the horrendously high unemployment figures in the Province. They are far, far worse than in this country. Male unemployment stands, I believe, at around 26 per cent. As I understand it, that is due largely to the decline in manufacturing industry employment. The shipyard, for example, has drastically reduced its workforce over the years, as has Short's. It is generally agreed that the high rate of unemployment adds to the problems in Northern Ireland and may very well lie at the heart of the alienation which appears to exist in sections of the population. The hopelessness generated by long-term unemployment provides a fertile breeding ground for violence and inter-community strife. One or two of my noble friends who will speak later in the debate will no doubt deal with some of those matters.

The trade union fears in relation to Short's and the projected privatisation are not—I repeat, not—based on ideological dogma. There are of course many, including myself, who believe that a major enterprise such as Short's, with very considerable importance within the community both from an economic and a social standpoint, ought to be publicly rather than privately owned. However, I am not advancing that general argument tonight although I believe it to be a powerful one. The unions are concerned that Short's in private ownership would be extremely vulnerable to decisions by people outside Northern Ireland without any accountability to the Northern Ireland economy and that that would have disastrous effects on the already parlous employment situation. I believe that most privatisations have resulted in a reduction of the workforce concerned. That is not something we should want to see in this case.

It will be said, I am sure, that Short's is facing difficulties and that the way out of those difficulties is through privatisation. In the 1960s Short's invested considerably in research and development for the Belfast freighter. It was anticipated that the Government would place an order for 30 of those aircraft. In fact they cancelled the order after 10 were built. That did not allow Short's to recover its initial investment and that burden has been compounded annually. The current operating loss is in part due to underfunding and cut-backs in Ministry of Defence expenditure. Short's, backed by the unions, has consistently argued for the financial restructuring of the company and for a definite commitment from the Government.

I should say that in addition to seeing the unions I have also met representatives of management. They also are concerned about government intentions. They have argued strongly for recapitalisation. The company has been operating for many years on the basis of borrowings to fund new investments to cover the losses it has made in some years.

It would make good business as well as good political sense for the Government to give the support that both management and unions have been seeking. The company has played and continues to play a major role in the economy. It has an important research and development facility. The worry is that if this company is sold to a foreign predator the R&D facility will be transferred away from Northern Ireland with consequently disastrous effects upon future development there.

Short's is also well known for its training role. It trains the largest number of high skill apprentices in the Province. As we all know, aerospace is a high-tech industry and the importance of Short's to Northern Ireland for the future can therefore hardly be overestimated.

The management and unions are concerned that the Government have not given the firm assurances sought that, even if there is privatisation, the company would not be sold off in bits and pieces but would be maintained as an entity. It is absolutely vital that the entity of the company is maintained. I ask tonight for assurances from the Minister on that point. I gather that some private assurances have been given but I hope that this evening those can be put on record and I look to the noble Lord to do that.

Management and workforce are also concerned about the future of the projected commuter aircraft known as the FJX. I have here some material with which I am sure the Minister is familiar concerning this new and sophisticated aircraft which is designed, as Short's put it, to meet the demands of a new era in regional air travel. The company has undertaken extensive market research involving some 60 prospective airline customers and has found a projected market of around 1,000 aircraft. To quote from the company's publication: Market reaction to the new design has far exceeded expectations and as more and more airlines contribute to the programme, it has become clear that the concept of a completely new design, delivering the advantages of jet operation with turboprop economics, is one which offers tremendous potential through the 1990s and beyond". It is anticipated that 70 aircraft a year would be built at a unit cost of £10 million, giving a turnover of £700 million. Of course it requires government support, perhaps in partnership with other investors.

I believe that most aircraft manufacture throughout the world is in receipt of visible or invisible government support. That is certainly true of the US where huge government contracts won by Boeing have millions of dollars worth of research and development money built into them. Other governments, like the Dutch, give direct support.

Short's belongs to a very select club indeed. I am told that there are only 20 companies in the whole world—and Short's is one—which can design and build an aircraft themselves right through, as the company put it to me, from a drawing on the back of an envelope to certification. That is too valuable an asset to lose to a foreign multinational company with no commitment to the Province or to have sold off in bits and pieces and thus effectively destroyed.

There is a social as well as an economic aspect to all of this. 1 have referred several times to the sectarian problems in Northern Ireland and to the violence which we all deplore. For many years Short's was seen—as indeed was the Harland and Wolff shipyard—as providing employment for the members of one community only. Management and unions now however are committed to a programme of affirmative action and fair employment. The management tells me that it is proud of its affirmative action programme, although it agrees that it will take time for the full effects to work through.

However in 1979 only 5 per cent. of the workforce was Catholic. Today that proportion has risen to 11 per cent. More significant perhaps is the fact that in the last 10 years the intake of Catholic apprentices has trebled and it is hoped that the effect will be felt throughout the workforce. Out of a total workforce of 7,600, over 800 are Catholics. Although that may not seem a high enough percentage—and indeed management agrees that it is not—it makes Short's the employer of the largest group of Catholics in Northern Ireland. Again there is a fear that privatisation may affect those developments.

I hope therefore that the Minister will be able to respond positively to the points I have made. The management and the workforce need the assurances for which I am asking. The Government should not rush into privatisation on ideological grounds without realising what that would mean to the Province, not only in regard to employment here and now but for the future. I repeat that this is a high-tech operation with a substantial R&D facility, with an importance in the sphere of training that it is difficult to overestimate and with an economic spin-off into the rest of the economy which is very important for the economic health of the country. It has excellent industrial relations and projects for the future that deserve our support. I await with interest the Minister's response, as do management, unions and the community as a whole in Northern Ireland.

Finally, before I sit down, I should like to make a brief reference to the report in the newspapers this morning concerning the break-in which took place at Short's, I believe, the previous night. There has been a great deal in the tabloid press of what appear to be scare stories to the effect that a missile was stolen. I have been given to understand this morning from management that the object that was stolen was an entirely non-operational plastic model which is not a threat to anyone. I hope that this evening the Minister will be able to deal with that point when he replies because it is very unfortunate that some of these stories have appeared. I gather that there is no foundation for them.

7.20 p.m.

Lord Bonham-Carter

My Lords, we must all be grateful to the noble Baroness, Lady Turner, for putting this Question to the Minister about the proposed privatisation of Short Brothers. It provides the Government with an opportunity to clarify their intentions in connection with the privatisation of Short Brothers, which of course cannot be kept separate in the minds of any of us from the privatisation of Harland and Wolff and the privatisation of Northern Ireland Electricity.

The fact is that the situation of each of those firms is intrinsically and profoundly different. What is rather worrying is that the Government's policy toward each of them is identical. I start from the simple proposition that nothing happens in Northern Ireland without it having profound political consequences and implications. This evening I do not propose to argue against privatisation as such. In some cases it is very beneficial to the public; in other cases it is less beneficial. In fact I take a rather agnostic view about privatisation as a dogma, a doctrine or a policy.

However, one thing is true of privatisation: as a policy it must take account of the time, the place and the circumstances in which that policy is to be put into practice. It seems to me that to pursue a policy of privatisation, or indeed any other kind of policy, which neglects time, place and circumstance is to commit the ultimate dogmatic fallacy. I was interested to hear that in the previous debate the noble Lord, Lord Skelmersdale, said that it was a practice of the Conservative Party to learn by experience. It is a practice that we should like to see the Government pursue more regularly than they have done in recent years.

If one takes into account the circumstances in Northern Ireland, one must take account of the fact that it is a very special place which exists in very special circumstances and where, it seems to me, the political consequences of any policy and any action should be regarded as more important than the strictly economic consequences. It is a place where wisdom should take priority over dogma. In considering the proposed privatisation of Short Brothers those political implications must be looked at very carefully. Of course a great deal depends upon the way in which it is done. I shall return to that point later.

However, it must be borne in mind that the decision to privatise Short Brothers must be perceived by the population which it affects in combination with the privatisation of Harland and Wolff and Northern Ireland Electricity and in conjunction with the excessively and monstrously high unemployment figures to which the noble Baroness has referred. It seems to me—and others will correct me if I am wrong—that it has been perceived in Northern Ireland as likely to increase unemployment, likely to lead to the break-up of Short Brothers, as part of an economic withdrawal of support by Her Majesty's Government for Northern Ireland, as a triumph of ideology over common sense, and, as the noble Baroness said, as likely to increase rather than diminish communal tension. It may make some savings but it seems to me that any savings that it may make will be at large social and political cost. Those are some of the considerations that I think should be taken into account before this decision is implemented.

Therefore it seems to me that the political impact of this policy can only he negative. It can only erode the confidence of the population of Northern Ireland in the good intentions of Her Majesty's Government. The Government will have considerable difficulty in dispelling those perceptions and the conclusions which many people have already drawn.

In answering the Question put to him by the noble Baroness, the noble Lord has an opportunity to do some fence-mending by telling the House frankly, unequivocally and clearly what are the Government's intentions and how they propose to soften the blow which the announcement of this decision has already inflicted. As the noble Baroness said, we are talking potentially of some 7,500 jobs of people directly employed by Short Brothers and probably another 2,000 if indirect employees are taken into account. We are speaking of a company which has a high reputation but which, as the noble Baroness said, has been unduly funded by means of loans. I am told that up to March 1988 there were losses of, say, £45 million, more than 50 per cent. of which, I think I am right in saying, has gone in servicing loans. We are speaking of a company which some people believe can only survive if it is sold as a whole and if it is sold off in parts will not long survive.

In answering the Question which has been put to him the Minister should make clear whether or not it is the Government's intention to keep the company together. Their intentions are obscure and somewhat ambiguous. We have been told that it will be a private undertaking. We do not know what a private undertaking is until it is made public. We do not know what is meant by the words spoken in another place by the Parliamentary Under-Secretary of State on 21st July and recorded in Hansard at col. 1298. We do not know how strongly the Government will fight nor how firm is their intention: to transfer the company as a whole to the private sector". It is the words "as a whole" which I think most of us on this side of the House regard as important. I hope very much that the noble Lord will be able to give the House an assurance that the Government's intention is firm and that they will not be moved from it.

Nor do we know, as the Parliamentary Under-Secretary of State said in the same debate, what weight the Government will give to what he called: the contribution that a continuing viable business could make to the Northern Ireland economy". If he agrees that its contribution is substantial, if he agrees (and he can hardly deny it) that the Northern Ireland economy is in a very fragile state, and if he agrees that the fragility of the Northern Ireland economy is one of the elements which make it so difficult to achieve communal peace, I hope that he will follow his beliefs and give great weight to the factor which he has mentioned.

I hope that in his Answer to the Question which has been put to him the noble Lord will make it clear that Her Majesty's Government will only transfer Short Brothers to private ownership as a whole. Of course in saying that one raises another question; namely, how can they ensure that the purchaser of Short Brothers will not sell off those parts of it that seem uneconomic. I should be interested to know whether the Government would consider participating in the ownership of Short Brothers. Will they put the discovery of a purchaser who intends to develop the company above doctrinaire considerations? On the precedent of the Rover Group or British Airways, will they recapitalise the company and write off its debt? These are all questions relevant to the decision, none of which has been answered. The noble Lord has a marvellous opportunity tonight—which I am sure that he will take—to put our minds at rest and to reassure the people who have anxieties. I greatly look forward to his answer, which I am sure will be unequivocal and will dispel our doubts and those which other noble Lords no doubt will express to him in the course of this evening. The issue is a genuinely important one. I look forward with slightly dubious confidence to receiving the reassurance that I hope I shall receive.

7.31 p.m.

Lord Dormand of Easington

My Lords, I say at the outset that I am no expert on Northern Ireland or on Short Brothers. However, I feel compelled to make a brief contribution to this debate for a number of important reasons. I repeat what the noble Lord, Lord Bonham-Carter, has said. Any substantial move made in the Province must be looked at in a different context from anything that is undertaken in the rest of the United Kingdom.

I find that there are no fewer than 33 organisations which have been privatised since 1979 or, like the coal industry, are being talked about for privatisation. However, even if the most fervent supporter of privatisation were to say that as a principle it is successful, that would be a criminal misuse of the word. I say what I am sure a number of other noble Lords will say: in some circumstances it is correct and appropriate that it should be done and in others that is not the case. I am on my feet because I think that in this case it is higly inappropriate. It is pure ideology. It is doctrinaire in the extreme.

Another reason I have intervened is the comparison of Northern Ireland with my area—if I may so describe it—the northern region. When I was in another place I frequently spoke about the problems of the northern region. Let me remind noble Lords that this debate is about the effect of the privatisation on employment in Northern Ireland. That is what the Motion states. While I hope that I did what I could for the northern region, I always had to say that there was one other part of the United Kingdom which always had a high unemployment rate—Northern Ireland. There has been no sign of it being reduced. The northern region has had its closures of pits, steelworks and shipbuilders. Most noble Lords will know the great problem that exists in Sunderland at the moment, where the Government are proposing to privatise the shipyards. Those matters, and privatisation, have led to massive unemployment. The promises that we receive from the Government about providing alternative employment have proved completely empty. Figures have been proved beyond any doubt to be false.

Government statements on the reduction of unemployment are thoroughly misleading. We had reference to this in the House today at Question Time. I mention the subject in this context because I am very much afraid that the same position may apply when we consider the effect of the possible privatisation of Short Brothers. At Question Time today the Minister admitted that there had been seven changes in the way that unemployment figures are measured. On this side of the House we think that it is more like 19. In fact there was such a discrepancy that I looked at the research that the Library has done. It states: There have undoubtedly been a number of changes in the way in which the unemployment series is calculated over the past 9 years"— that is to say, since the present Government came into power— All bar one of these has reduced the numbers in the monthly count. The exact number of changes is a subject of political controversy. The DE state that six changes since 1979 have had a discernible effect on the . . . figures for adult unemloyment' ". I quote that because I have to say to our friends in Northern Ireland that they will probably have the same criterion applied to any unemployment relating to Short Brothers.

Whenever privatisation is mentioned I consider three aspects. The first is investment policy. With Short Brothers the difficulties are directly related to the historical investment policy of the Government. This has been spelt out in some detail by my noble friend on the Front Bench. I read recently, as did the noble Baroness, of the experience with the Belfast freighter. I believe that the facts are worth repeating. It was expected that the Government would place an order for 30 of these aircraft. I am assured that the figure is correct. However, the Government cancelled the order after only 10 were built. This did not permit Short Brothers to recoup its initial investment and this burden has been compounded annually.

My reading of the situation is that this is a continuing and heavy burden which the company has to bear. This is an example of the debts which Short Brothers have to service, and the interest charges are likely to increase every year. Last year Short Brothers made a loss of £46 million but £25 million was simply the repayment of loans. That confirms what the noble Lord, Lord Bonham-Carter, quoted.

There can be little doubt that the solution lies in the recapitalisation of the company. There must be a capital structure which fully recognises present day problems, which includes recognition of the fact that the livelihood of some 7,500 people is dependent on that structure.

Secondly, one must look at future prospects. We know that there are three divisions which make up an integrated production facility: missiles, aerostructures and aircraft manufacture. I confess that when I began to look at this aspect I did so with some trepidation. There has been little publicity—in my view, insufficient publicity—about developments of that kind by the Company. However, I then learnt about Starstreak, the possibility of subcontracts arising from the Boeing AWACS contract and the plans to build the turbo fan commuter aircraft known as the FJX.

I also came to realise the importance that Short Brothers places on research and development. Some noble Lords may be aware that I frequently raise the question of research and development in this House. I do so because in the modern world, and with an economy such as ours, high quality research and development is of supreme importance. I congratulate Short Brothers on what it has done in this field. My noble friend on the Front Bench said that such research and development might be exported if the firm were privatised. That is something that we must all fear. The Government would be foolish in the extreme to ignore the contribution which research and development will make to the future success of Short Brothers.

The third aspect that I examine when privatisation is mentioned is the quality of the workforce. When I was a Member of another place I represented one of the most depressed constituencies in the country. It was one of my continuing tasks to try to persuade companies to come to my area in the North-East of England. In talking to chairmen and executives I was always interested to learn—when I first became a Member of Parliament I found it surprising—that their main inquiry concerned the workforce. The availability of grants, suitable locations and similar matters were important but the most important matter was the quality of the people whom they would have to employ if they were coming to that part of the country.

Whatever else has been said about Short Brothers, there is no question but that the application, the assiduity and the responsible nature of the people employed in the company is one of its great assets. If the Government believe for one moment that privatisation will improve on those virtues, that is possibly the greatest demonstration of their doctrinaire approach to such matters.

It is perhaps not too much to say that the survival of Short's is essential in large part for the survival of the economy of Northern Ireland. All the ingredients of success are present. I have talked about investment, about future prospects and about the workforce. Had time permitted, much more could have been said to show conclusively that the move towards privatisation would delay, perhaps even destroy, the progress towards full employment in this part of the United Kingdom. I hope that the Government will have second thoughts about a move which is demonstrably unsuitable in this case.

7.40 p.m.

Lord Dean of Beswick

My Lords, I placed my name against this Unstarred Question in the hope of making a useful contribution. I wish to express my appreciation to my noble friend Lady Turner for giving us the opportunity to do so, but I wish to speak more globally than just on Northern Ireland, though I do not understand the emptiness of the Government Benches when I believe that political manoeuvres are taking place to try to form some kind of political association in Northern Ireland that will give the Government uncommitted force. The total absence of Members on the Government Back-Benches indicates that that is rather an empty prospect.

I believe that, if we take the words "Northern Ireland" out of it, we have heard all this before. Your Lordships' House on a number of occasions has debated the manufacturing industries of the United Kingdom. Northern Ireland is an integral part of that manufacturing base and also of the United Kingdom. Some of our finest engineering products historically—I do not mean going back too far—have been made in that Province, certainly at Harland and Wolff and Short Brothers. The work that Short's Sunderland flying boat did during the last war is legendary in subduing the U-Boat menace and that type of thing. Since then there has been the turbine generating division and manufacturing of turbines at Larne by what was originally the AEI and is now GEC. Northern Ireland has always been noted for making its contribution to our reputation in Great Britain as being able to produce goods in the engineering field with the highest skills and quality that historically could compete with the best.

When we were debating manufacturing industries I used the phrase in your Lordships' House—it was not a phrase that I coined but I found it fitted the argument adequately and other noble Lords have used it—what do we mean by "seed corn"? If the seed corn is not nurtured and raised properly in an industry, we shall be signing the death warrant of any such industry. I have just heard my colleague Lord Dormand speak of the devastation in the North East. I come from an area in Manchester from where I have taken my title, Beswick; that was originally the centre of the largest engineering group in Europe in the old days. It is now an industrial desert. No engineers are being trained there because the factories no longer exist. One could reel off the names one after another. They have gone completely out of existence, wiped off the face of the earth. The social consequences of that are still being felt in the area because nothing has come to take their place.

We spoke in the debate on manufacturing industry some time ago of the appalling damage that has been done. Over the short time since I came to your Lordships' House, some five years ago, I have heard a succession of noble Lords from various parts of the House, including Government supporters. Cross-Benchers and my old colleague on the Front Bench, the noble Lord, Lord McCarthy, drawing attention to the fact that lasting damage was being done to our capacity to perform against our competitiors. If one analyses any figures that may be produced, this country has lost a generation of young skilled engineers who should have been trained and been ready to meet the challenges that now arise for them to take on.

We now find in parts of the United Kingdom a dearth of skilled engineers to take up work. The Government were warned at the time that that would happen, but they took no notice. What has been the result of that policy? Anybody in this country who wants to buy modern machine tools has to buy them from our foreign competitiors, because the machine tool industry was completely massacred by what appears to be the Government's short-sighted policy regarding Short Brothers. Everybody knows that any company or factory involved in the aero industry always has to bear a rather unfair burden of the development costs to get a product onto the market. Once again, Short's, like many of our other industries on the mainland, is not involved in fair competition.

My noble friend Lady Turner made the point that the American air industry, which leads in the world, feeds its research department with huge contracts, that it knows it will receive from the American Government via their armed forces. There is a partnership there that gives them a start on everybody else. All that noble Lords on this side are asking is that the Government give some consideration now to allowing Short's to carry on, if it needs public money to support it. What is wrong with that? It is not only Short's that matters in Northern Ireland. I have been given some information which shows that as well as Short's, there is a list of other companies and sub-contractors involved who no doubt train apprentices in smaller numbers. A number of places in Northern Ireland will be badly hit, such as Kilkeel, Ballymena, Lisburn, Londonderry and Craigavon, so we are not talking only about Short's. We are talking about the tentacles going out from Short's to the downstream activities of the smaller companies. They probably involve some family companies which train a small number of boys.

I hope that the Minister will listen carefully to what has been said tonight. 1 know that many of these people are skilled engineers. Once the downward spiral starts as a result of government action it is almost impossible to stop it. We have seen this at work in this country with devastating effect.

For my part my union, the AEU, has played a large part in industry in Northern Ireland along with its colleagues in the Irish equivalent of the TUC. There is no inter-union rivalry on this issue. The opinion is unanimous among unions about what ought to be done: that this company ought to be allowed to continue and the Government should, where necessary, be called upon to give assistance. God forbid. Somebody earlier talked about what would happen if the place closed. My noble friend on the Front Bench said that the employment of Catholics had risen to 11 per cent. One can just imagine, in an area of the United Kingdom where the divide is bad, what would happen if somebody had to start producing redundancy figures at Short's with the argument about employment or the percentage or ratio of the sectarian divide. It would be an impossible task and in my opinion to produce that kind of situation would be almost like throwing petrol on a fire that we are already trying to put out.

In my view the Government should take a serious look at what is happening. They should say unequivocally that Short's must carry on. The company is part of our manufacturing base, which is supposed to be stirring and beginning to expand again. It is illogical that a company with a history such as Short's—where the base is expanding and skilled engineers are again in demand—is being taken through the exercise of having its lifeline butchered, as has been happening on the mainland over the last 10 years.

I hope that tonight the Minister will give the House some comfort and say that Short's will be allowed to carry on in the interests of the economy not only of Northern Ireland but of the United Kingdom in general.

7.50 p.m.

Lord Monkswell

My Lords, I thank my noble friend Lady Turner for introducing the subject and I do so for two reasons. I am a member of MSF, and therefore a colleague, and I work in British manufacturing industry. I see that what is projected to happen to Short's is bringing the company into risk. I hope that in speaking for Short's I can speak also for British manufacturing industry.

It is interesting to think that here am I in what some would describe as the prime of my life; yet I am virtually a grey-haired old man. That is what the last 10 years in the British manufacturing industry has done to me. A few years ago I was mistaken for Gerry Adams and I sometimes wonder whether being the leader of a political party may be better for one's hair colour—although at this stage I do not believe that I am a threat to Neil Kinnock.

I should like to speak about nationalisation, the British manufacturing industry and Short's. First we must ask why companies, industries and undertakings were nationalised in the first place. In almost every nationalisation, from the water industry in the last century to Rolls-Royce in the early 1970s, two common threads run through. The first is bad management; the second is under-capitalisation.

Nationalisation and privatisation are held up as ideological watchwords. However, in practice the main reason for nationalisation is to ensure that the undertaking can produce the goods. Two reasons for nationalisation are, first, that the employees see the business as a bad employer and, secondly, that the consumers see it as a bad producer. One can see parallels through the programme of nationalisation over the past 100-odd years.

It is interesting to look back and see how Short's was nationalised. I have looked at copies of the Commons Hansard published in 1943, when the event took place, and it makes interesting reading. At that time we were at war and it was not good for everything to be publicised, but reading between the lines one can see that two factors were in operation. First, there was a lack of confidence on the part of the Government in the directors of the undertaking. Secondly, the company owed to the bank enormous amounts of money, which, effectively, was an indicator of under-capitalisation. The matter was well aired in Parliament and questions were asked through March, April and June 1943. I shall not quote chapter and verse, but Sir Stafford Cripps gave clear and succinct answers where he could given the limitations of war time. He was sasked whether it was part of his socialist ideology and commitment. The answer was an unequivocal "no".

A month after the new management had been installed output had risen. A year after, production was 69 per cent. higher than in the previous 12 months. Obviously a significant change took place with the nationalisation of Short's and it enabled them to make a significant contribution to our war effort.

I note that in 1976 the Labour Government envisaged a future for Short's as a partner in the British aerospace industry but retaining strong local links in Northern Ireland. However, by 1980 there had been a change of government and they were concerned only with limiting the perceived drain on public funds. It is interesting that in 1980 the Government did not make the same mistake as they made in connection with Rolls-Royce in the early 1970s. They were careful to underline to the financial community the fact that, as a last resort, they would bail out Short's.

Since 1979 Short's has had to live in the climate in which all British manufacturing industry has suffered. It has led to what I would describe as the production of almost "concentration camp victims" rather than to companies becoming leaner and fitter. The devastation of British manufacturing industry is self evident. My company has lost two-thirds of its workforce and an enormous amount of productive capacity.

We are now beginning to pull ahead a little and it may be conceivable that Short's will survive for a short period in a privatised world. However, the company will not survive unless it receives capital restructuring. Even then it will not survive in the long term unless the whole climate of British manufacturing industry changes radically.

Short's is a designer, developer and manufacturer of advanced aerospace technology. It is a significant supplier to the Ministry of Defence and a significant employer in Northern Ireland. However, on one hand it is too large to depend on the leadership and financial supprt of one individual, while on the other hand it is too small to compete with the giants of the aerospace industry such as British Aerospace, Airbus, Boeing or McDonnell. However, it can design, develop and manufacture specialist aircraft for specialist needs. This evening we have heard mention of the new aircraft that it has conceived, and such a development is one of the terrific features of Short's. When one looks back through its history to 1901 one can see stage by stage the vaulting ambition of Short's engineers and designers to push back the frontiers of technology. You cannot do that with a piecemeal approach. You have to have a long-term view and a commitment to the future. You have to be able to take risks and you must have the support—dare I say it?—of your bankers. Too often Short's has suffered lack of support from its bankers and customers and—dare I say it?—now it looks like a lack of support from its owners. We are the owners. The British citizens are the owners of Short's. Should we really sell it short? That is a curious phrase.

Perhaps I may come to the last specific questions which I want to ask the Minister, having set the scene. What assurances will there be for suppliers to the Ministry of Defence following any changes which the Government may think about? What assurances for the stability of employment, earnings and high-tech. manufacturing industry can be guaranteed for the company? Has support from the Irish Government and the European Community been considered? The fundamental question is: will financial restructuring take place?

8 p.m.

Lord Blease

My Lords, I wish to join in expressing my warmest thanks to my noble friend Lady Turner for initiating this important debate, and also to say that I welcome the reasoned manner in which she presented the case for Short Brothers. At the same time, I hope that it will not be considered presumptuous of me from these Back-Benches also to thank noble Lords who have already taken part in this debate and those who are to take part. What I have heard have been very reasoned and constructive approaches to the problems of Short's and Harland and Wolff.

I know that this debate is being viewed with serious interest and concern by workers and management of Short Brothers and by others in the Province. Perhaps I may add with emphasis that particular attention will be focused on the tenor of the reply of the noble Lord, Lord Lyell, who is to respond to this debate. He already has a fair number of points to cover. I know that he has a big heart and that he will respond to what has been put before him.

Reference was made by my noble friend on the Front Bench to the role of the trade unions. I should like to add to that by saying that the record of the Northern Ireland Committee of the Irish Congress of Trade Unions is second to none in its genuine efforts to overcome the different problems at workshop level. Those are genuine efforts throughout to promote a situation where there are jobs for all in Northern Ireland, and where there is a better life for all. I am glad that I can underscore what my noble friend has said, having experienced some of that work.

The debate has been directed with forthrightness in expressing the deep apprehension of the Short's workers and management about the manner in which this serious and shattering policy decision has been so casually pursued by the Government—almost a cavalier approach in their announcement to turn Short Brothers into the private sector from public ownership. In the 85 years that Short's has been in the aerospace industry, some 40 of those years have been under public ownership. Short's record over those 40 years has been impressive, not only by its contribution to the national interest of the United Kingdom but also by Short's place in the forefront of international aerospace industry. Other noble Lords have referred to that and it is not for me to underline what has been so ably said.

I should like to underscore a point which has already been mentioned: Short's outstanding efforts to support the Royal Air Force in the 1939–45 war is a record in history. Reference could be made to the Short's Skyvan. The Belfast has already been mentioned as a freighter which has been 25 years in existence, and it is still flying throughout the world doing admirable service; and there is the Short 360. Those aeroplanes are being used by companies and national air forces throughout the world. Short's zis not a Province-based project. Their products have a worldwide reputation for achievement and performance.

The Short's market is not flagging. Demand for aeronautical aerospace engineering is an open market. It is a market of growth and potential for profitable production and employment. If Short's workers and management are to take any comfort from the new proposed position of the company, the company must be restructured financially and technologically to maximise its opportunities and needs for the competitive market. That has already been reinforced by other speakers in this debate.

However, in my view there has been no indication from the Government of how the sale of Short Brothers is to be conducted. Is it to be run down or is it to be restructured and capitalised to make it more attractive for an interest in development? Even a common car dealer has a presentation formula for sales, price and development. Surely Short's should be in the game of making a popular demand for their particular company, if that is necessary, if that decision is the one which the Government wish to follow. Surely the Government must deeply involve the chairman, the board and the management of Short's in any assessment of a new potential owner. It should not be left to some government-appointed nominee to decide the future of the company and its employees as well as the public assets.

In their Statement about the privatisation of Short Brothers in another place on 21st July the Government indicated their decision to sell the company. The Statement was based on what I consider to be three factors: concern about profitability; concern about the national interest; and concern about the long-term interests of the employees. That has been spoken about by Ministers. Is it not time that the Government demonstrated some active concern to allay the apprehension of Short employees and to help the morale of all concerned in Northern Ireland?

Is there not urgent need for the Government to clarify publicly the matters on profitability? What is the national interest and what do they mean by the long-term interests of the employees and particularly the future which the Government envisage for Short Brothers? What do the Government propose as a constructive method? They must have given some thought as to what the future of the company should be, and let us hear what they have in mind.

Short Brothers is a public company and the Government have much more than mere statutory obligation to the Short's board, the employees and the Northern Ireland community. The Minister has been asked to take on and respond to a number of factors, and I am going to add to that list. I am encouraged to do so by something said by the Northern Ireland Secretary of State on 9th September last year when he paid a day-long visit to the Short's factories. He flew in one of the aeroplanes and met senior management and personnel on the shop floor. After making some very praiseworthy mention of the qualities of production at Short Brothers, he ended by saying: I give all the support I can to Shorts in their efforts to secure orders. I have been very impressed by the quality of the work I have seen. I think the spirit here is very good, and that also is important. I believe Shorts is well equipped to meet the challenges of the future". I put forward a proposal and have been encouraged by what has been said by the Secretary of State, Mr. Tom King. I ask the Minister to use his influence and good offices to invite the Minister, Mr. Peter Viggers, and the Secretary of State, Mr. Tom King, to do what other private and public companies have undertaken in similar transfer of ownership circumstances. I suggest that the Government should urgently convene a conference of representatives of Short Brothers board, the management and representatives of the employees, at which the Minister will have the opportunity to clarify the relevant issues and give the necessary reassurances. I look forward to hearing his response.

8.10 p.m.

Lord Graham of Edmonton

My Lords, I am extremely grateful to my noble friend Lady Turner for giving us the opportunity to debate this situation. Although the peg upon which the debate hangs is the future of Short's, this debate is not about Short's but about Northern Ireland, because Short's figures largely in the economy of Northern Ireland.

The debate is not only about Northern Ireland but about the economy of the United Kingdom; it is not only about the economy of the United Kingdom but about the raison d'être for the Government's transfer from public into other ownership. We do not need to look into a crystal ball, and nor do the people of Northern Ireland, as to what happens when this Government take the step that they are now contemplating for Short's and Northern Ireland.

The Minister in his lonely position, who hitherto has had at least one comrade sitting next to him, has now been completely deserted. There is not one Member apart from the Minister on the Government Benches. That is a fair indication of the attitude that Government supporters—I do not say the Government—take on a debate which is crucial to the future health and welfare of Northern Ireland. I certainly hope that those who report these matters in Northern Ireland will take special note of what I consider to be the contempt shown by Government Back-Benchers on this matter. It is a disgrace.

I ask the Minister to take on board my concerns. His ministerial colleague, the noble Lord, Lord Skelmersdale, in an earlier debate said, "At least this Government learn from their experiences". What can the people of Northern Ireland, the workers and the management of Short's, learn from the experiences of other people? The workers and the management are concerned of course at what has happened to other means of employment in Northern Ireland. I refer to ICI, Courtaulds, Rolls-Royce, British Enkalon, Goodyear, Grundig, De Lorean, Learfan, Michelin and Carreras. Those companies are a catalogue of what has happened to industry in Northern Ireland, and it is not a happy one.

We should look, for example, at what has happened over the past few years with the Government's desire to get out of the management of business and leave the business of managing to others. That is an extremely unhappy example. Two points stand out. Those who manage the transfer—that is, the merchant banks and the solicitors—grow very fat from the proceeds and the workforce grows slim. I remind the Minister, if he needs reminding, of what happened when other privatisations have taken place in the past few years. When the British Airports Authority was privatised, more than £20 million was paid out in fees and commission. When British Airways was privatised, £15 million was paid out in commissions. When British Gas was privatised, £79 million was paid out in commissions. For British Petroleum the figure was £16 million; for British Telecom it was £97.5 million; for Cable and Wireless it was more than £20 million; for Enterprise Oil, £9 million, and for Rolls-Royce it was £19 million. Against that background the Minister has to persuade the people of Northern Ireland and the workers and management of Short's that it is good business for them and for Northern Ireland; and he must justify the money that will be paid out.

I ask the Minister further to take on board the recent events in the sphere of privatisation. I live in the district of Enfield and Edmonton and I was proud to represent Edmonton in another place. There is a great stench in that area arising from the Government's privatisation of the ordnance factories. I stood in this Chamber, hour after hour, seeking to get the noble Lord, Lord Trefgarne, to answer some of the points which worried me then; that is, whether the Government were getting the right price. I can tell the Minister that the valuation placed upon the Enfield factory by the Government was £1.5 million. That was for dozens and dozens of acres of land. The value of the two sites at Enfield and Waltham Cross is now estimated to be in excess of £400 million.

The size of the workforce at Enfield was 2,500. They have now gone and the factory has been closed down. When the purchasers and others of the Enfield factories were tackled by a Select Committee regarding their policies, they gave stout assurances on what would happen to the work and work prospects. Those assurances have all gone by the board. I repeat. there is a great stench about the care and concern which this Government show after they have got rid of their responsibilities.

The Minister must tell the House—and, more importantly, the people of Northern Ireland—that in changing the ownership of Short's how much care and concern the Government are showing to make sure that the economy of Northern Ireland does not suffer unduly and that the work is replaced by other work. The Minister must show that the Government are more concerned with people than they are with profit, that they are more concerned with the interests of the taxpayer than they are with the interests of the shareholders and that they are more concerned with the economy and welfare of communities in Northern Ireland than they are with getting out of the business of running companies like Short's.

8.18 p.m.

Viscount Chandos

My Lords, with the indulgence of the House and apologies for failing to put down my name in time for inclusion on the list, I should like to intervene briefly on this important Question tabled by the noble Baroness, Lady Turner of Camden.

The rightful concern shown by your Lordships' House this evening about the prospective privatisation of Short Brothers is based on the general and on the particular—the general policy of privatisation and the specific instance of the privatisation of a company in the troubled and economically depressed province of Northern Ireland. As for the general concern, my colleagues and I on the SDP Benches believe that the privatisation of non-monopolistic enterprises can generally be justified at the appropriate time and in a suitable form. The Government's record on choosing the appropriate time, the suitable form and, indeed, the correct objectives for privatisation has been distinctly mixed. In this case, even ignoring the geographical location of the company, the form of privatisation is of vital importance.

Every speaker this evening has stressed the vital necessity for maintaining the company in its present form with its three principal activities undivided. I have no doubt that the privatisation of British Aerospace in 1981, with the Government retaining a shareholding for a time, was the right decision at the right time in the right form; but it was the privatisation of the whole company of civil and military divisions together that took place and which has been subsequently supported by the Government, however grudgingly, through the provision of launch aid for the airbus programme.

British Aerospace would have been gravely damaged by being divided in 1981, particularly if the parts had been sold to companies without the necessary long-term commitment and perspective. In just the same way the ultimate return to profitability and viability of the business of Short Brothers would he threatened if it were sold in separate parts. The management of Short Brothers, recruited by the Government, believes that the company should be kept together not for political or doctrinaire reasons but for commercial and industrial ones. The Government may not choose to listen to the Opposition Benches; as the noble Lords, Lord Dean of Beswick and Lord Graham of Edmonton, have said, the Government Back-Benches are sadly silent. The Government should feel obliged to listen to Short's management, which they themselves appointed.

In addition to these industrial arguments there is the overwhelming reinforcement of the economic and social implications for Northern Ireland arising from any weakening of Short's as a stand-alone business. In terms of overall employment and of engineering and other skills, the special circumstances of Northern Ireland can justify a tempering of pure commercial considerations even if these were to point to a dismantling solution. As the commercial considerations in fact point in exactly the same direction as the broader economic and political factors, the noble Lord, Lord Lyell, can have no excuse for not giving your Lordships' House the commitment to maintain the company whole that has been unanimously requested this evening.

The president of Boeing, the most successful aircraft company in the world, described Short's last year as "this great and vigorous company". The Government cannot ignore expert evidence of this kind in determining the future of Short's and they should commit themselves today not to practise vivisection on a great and vigorous part of Northern Ireland life.

8.22 p.m.

Lord Fitt

My Lords, I am quite certain that if the people in Northern Ireland and throughout the Six Counties were to see the Government Benches in this House this evening they would very quickly begin to think of having a devolved government where the real needs of Northern Ireland could be discussed with open and sincere objectives. I sometimes become terribly depressed when we are debating Northern Ireland in this House. I look over at the Government Benches this evening and wonder how many noble Lords would be there if we were discussing rivers or Scottish salmon.

Northern Ireland is one of the most depressed parts of the United Kingdom. As I listen to this debate and take part in it for a few minutes, it takes me back to about 30 years ago, when I first entered political life in Northern Ireland as a Belfast City councillor in the late 1950s. One of the first political campaigns in which I became involved was to join a deputation from Short's to this House to seek financial assistance in order to ensure the continuation of the company. I believe that my noble friend Lord Blease and I travelled on the same plane that morning to attend at Westminster. I have no hesitation in saying that it was the first time I had been on a plane and I was rather apprehensive. Some of the Short's employees who were also on the plane were not averse to using four-letter words. To tell you the truth, the situation scared the life out of me as I was taking part in my first flight.

What has been said this evening by noble Lords on this side of the House I can reinforce, not being a member of any particular party, but as one who has a deep and abiding knowledge of what Short's means to the Province of Ulster and the six counties of Northern Ireland. Short's is not an East Belfast firm, though geographically it is situated there, as is Harland and Wolff. Short's draws its workforce from all over Northern Ireland and there are many other places where it has employees. There are employees of Short's in the Isle of Man, Holland, Newtownards, Washington, Sydney (Australia), Hong Kong and throughout the RAF establishments in this country. So it is not an East Belfast industry alone.

I rise this evening to explain another element which I regard as being of tremendous importance in relation to anything that happens at Short's. For many, many years the Catholic elected representatives and the Catholic minority viewed Short's with great hostility, on the ground that the major part of its workforce was drawn from the Unionist and Protestant community. I can recall when many Catholic elected representatives would not have given two damns if Short's had closed down on the ground that "none of our constituents are employed there, so why should we worry about it?" That atmosphere has now changed and I am absolutely delighted to see such a dramatic change take place.

Those who know what has been happening in recent years are aware of Irish-American organisations that have a deep and abiding hostility to Short's and its workforce. They have been doing their damnedest to try to persuade the American elements involved in Short's to withdraw orders, which would lead to the closure of the firm. This campaign has been waged for many years now by hostile Irish-American groups which want to see the end of Short's. How happy they would be if Short's were to be privatised.

I am very glad to say that, within recent years, elected representatives of the minority community and of the party to which I formerly belonged have gone out of their way to visit the United States to tell the American people and those investing money in Short's and creating employment there that they want to keep the company going as an industrial concern. This state of affairs does not arise very often in Northern Ireland. It is only a recent political development. I believe that it augurs well for any industry in Northern Ireland that can have the support of all the representatives of both communities in an attempt to keep an industry going.

My noble friend Lord Graham read out a list of the tragedies of unemployment representing companies that gave great hope when they were introduced into Northern Ireland. Some within a few months, others within a few years, packed their tents and went off into the night. One firm that my noble friend did not mention was Birmingham Sound, which was led by Dr. MacDonald. That firm came into the City of Derry with such great hopes and it created great optimism in the early 1960s. Within a week or a fortnight it was decided that the factory was to close down. It caused great and absolute despair in Derry at that time. I suggest that it played no little part in the further despair which was created in the intervening years and which eventually led to the civil rights demonstrations of the late 1960s.

The firms mentioned by my noble friend Lord Graham created an atmosphere. In every company both in this part of the United Kingdom and particularly in Northern Ireland privatisation leads immediately to a massive reduction in the workforce. Some people, particularly those of the Conservative and Tory philosophy, will say "That workforce was overmanned in the first place". They will say that these were people in jobs doing nothing and it was private enterprise that brought about the rationalisation of the manning so that the redundancies would have to take place. I do not subscribe to that at all. I believe that the industry, notwithstanding the financial implications and the social consequences, must play a great part in government thinking.

The noble Lord is one of the longest serving Ministers in the Northern Ireland Office. He will be all too aware of the vital importance of Short's and Harland's continuing to be employers in Northern Ireland. The two maintstays of work in Belfast—Short's and Harland's and the shipyard, Harland and Wolff—are now threatened with privatisation. If privatisation of this industry takes place, we all know that it will lead to massive redundancies. I remember making a speech in another place in 1979 before the advent of the Tory Government and complaining bitterly that the unemployment figures in Northern Ireland totalled 65,000. I thought that that was far too high a number of unemployed people. In the nine years that have elapsed since then the figure has reached 124,000—it has doubled since the advent of the Tory Government.

As to privatisation of the industry, there is no way in which one can hive off the missile section so that it would continue as a separate entity in Short's. It may be possible to do that for a few years, but Short's is an entity with three component parts that must be allowed to stay together, and it must be allowed to remain in public hands. Any attempt by someone to take it over would be a pure and simple attempt to operate from a profit motive. In the present situation in Northern Ireland there is much more than the profit motive to be taken into consideration. I ask the Government sincerely to think again before allowing this company to be taken over.

8.33 p.m.

Lord McCarthy

My Lords, I wish to begin by thanking the noble Baroness, Lady Turner of Camden, for initiating the debate. It has been very interesting, if rather unbalanced. As several noble Lords have said, all the contributions have come from this side of the House. We have sympathised with the loneliness of the Minister, not only in terms of speeches but in regard to the Benches behind him. On the other hand, we know that he is used to being the boy on the burning bridge. We know that he has a good heart. We hope that he has a good brief. If he has a good brief, perhaps I may observe that he has no need to be brief. He must feel free to say as much as he wishes and to talk as long as he desires to try to answer some of the very reasonable points made in the debate.

In a debate in which as far as I can see there have been only two honest to goodness Northern Ireland accents, as the noble Baroness declared her interest, I suppose that I should declare mine. My interest, involvement or concern in Northern Ireland arises directly from 10 years as a director of Harland and Wolff. In that period I grew to be very concerned and involved with the problems of Northern Ireland, particularly the social and economic problems deriving from the highest level of unemployment in the United Kingdom.

That is the central thrust of what the noble Baroness has asked: what are the implications of what the Government are threatening in terms of unemployment in Northern Ireland, and in Belfast in particular? She made three points that were taken up by speakers on this side of the House. In view of the need for the Government to answer those points, I think that I am entitled to reiterate them.

First, there is the need to ensure a future for the FJX and the question of how far this depends upon the kind of government investment and commitment that the aircraft industry is able to command in other countries. Secondly, if the Government go forward and privatise Short's, there is the need to ensure that the owners are British. This is not simply because of the defence involvement but also because of the symbolic nature of Short's, Harland and Wolff and companies of a similar size in Northern Ireland, and the way that it will be interpreted if the company is sold out to some foreign firm for profit to produce a further reduction in the size of the public sector borrowing requirement. Thirdly, there is the need—this was echoed by the noble Lord, Lord Fitt—to maintain the present excellent record of the company in the area of affirmative action. What can the Government do to reassure us on these three central points?

I wish to refer first to those who decided to concentrate on the particular circumstances of Harland and Wolff—I think that that is part of the argument tonight—as against those who have concentrated, as I wish to, on the link between what the Government threaten or propose to do in regard to Short's and the policy of privatisation in general. As several speakers have said, when we wonder what would happen to Short's under privatisation we are entitled to consider what has happened in regard to privatisation in other situations.

Most speakers have concentrated tonight on the special circumstances of Northern Ireland and of the company. The noble Lords, Lord Bonham-Carter and Lord Fitt, emphasised the political and social symbolism of these large companies, the way they will be seen to be linked together, the way it would be felt that, as Short's goes, so Harland and Wolff will go and, as Harland and Wolff goes, so Northern Ireland Electricity will go; and if they all go together and in the same direction, that the Government will be saying something much more profound to Northern Ireland than that they are privatising three relatively small concerns. The Government will be saying that they are withdrawing. That is what they claim to be saying, but it will be seen differently. This is one of the central points made in the debate.

The noble Lord, Lord Monkswell, stressed that we should look at the frontiers of public and private ownership in Northern Ireland in a non-ideological way and that we should not be committed to the extension of public ownership in Northern Ireland, just as we should not be committed to the reduction of public ownership in Northern Ireland for ideological or political reasons. We should look at the consequences and at what is likely to happen in a concrete situation at a particular point in time. If we do that, the general argument for privatisation or public ownership—we are not arguing that tonight—can be seen to come down strongly in favour of maintaining public ownership of the company.

The noble Lord, Lord Blease, emphasised the admirable production, production development and industrial relations records of the company and the fact that it is in an expanding market. He said that it is in a coming game, and that the gains in that game, which the company is in a good position to glean, should not be sold off cheap and then garnered by private speculators.

The noble Viscount, Lord Chandos, and other speakers made the case, and it is a special case, for Short's. He made the case against what he called vivisection and for the need to keep the three parts of the company together, which was the unanimous view of the company's management and workforce. We want to address those points to the Government and ask the Government and the Minister to think carefully about what they say.

I should like to move to the argument put forward by several other speakers, including the noble Lord, Lord Graham, and the noble Viscount, Lord Chandos, that there is a link between what may be happening in Northern Ireland and previous privatisations. As the noble Lord, Lord Graham, said, we have now had 30-plus privatisations. We are bound to ask the Government whether the worrying features of previous privatisations that we have observed are to be reflected if they persist and privatise Short's.

One of the most pervasive features is that the enterprises are sold for less than their true value. The Institute of Fiscal Studies estimates that so far they have been under-priced by some £3.5 billion; that is to say, the difference between the offer price and the price that the shares fetch on day one. That is roughly twice the normal rate of discount in the private sector. As the noble Lord, Lord Graham, rightly said, in addition to selling the assets at less than their true value there is the cost of the fees for doing that to all those who participate in the sales process, which is again estimated by the Institute of Fiscal Studies, at the present rate, to be something less than £1 billion. First, we ask whether the company is to be sold, if it is to be sold, at less than its true value so that profits can be made in the private sector rather than the public sector. What assurances can the Government give us about the cost of selling the company?

Secondly, as the noble Lord, Lord Dormand of Easington, said, what will be the effect on the labour force? Almost every Opposition speaker has made that point. It is not merely a theoretical point. Redundancies have followed every privatisation, from 60 per cent. in British Steel in two years to 30 per cent. in Rolls-Royce. It varies, but it is a constant factor. Substantial redundancy always follows privatisation. Thirdly, and this is a point which has not been addressed by previous speakers, there are always vast handouts to the new management. A tremendous change in differentials and rates of pay invariably follows privatisation. Again, the Income Data Services has calculated that in the first two years of privatisation so far, top managerial boardroom salaries rose by 85 per cent. while the workforce has been subject to mass redundancies and wage increases, if it is lucky, which roughly keep pace with the cost of living. As other speakers have suggested, that has consequences for industrial relations and trade unions. That brings me to the fourth general characteristic of privatisation so far.

As the noble Lord, Lord Blease, said, privatisation has a bad effect upon management/union relations. We have had many examples of companies which have bought previously publicly owned companies. There is the notorious example of Trafalgar House, which bought part of British Shipbuilders and then immediately de-recognised the unions and took the consequences. Hoverspeed has refused to recognise trade unions. British Rail Hotels was sold and de-recognised the Transport and Salaried Staff Association. Cable and Wireless abrogated a longstanding arbitration agreement. In British Telecom there has been hostility and animosity and the forced de-unionisation of top management. That is what has so far happened with privatisations. There have been a lack of consultation, de-unionisation, unilateral action, hostility and deteriorating industrial relations. We have to ask whether that is what the Government plan for Short Brothers if they denationalise the company, or is it to be different?

Is it that the special circumstances which have been stressed by so many speakers have been taken on board by the Government either to the point where they are not going to be dogmatic or ideological, as they have been in the past when every government department must trot along each year with its scalp load of denationalised sectors, and therefore not denationalise at all, or are they going to denationalise with understanding and conditions to prevent many of the features of privatisation? Those are the questions that we put to the Minister tonight.

Before I sit down, I shall mention several specific questions for the Minister to answer. He can take as long as he wishes. What about the future of the FJX? What about protection against being taken over by a foreign firm? Will the Government promise, if they sell the company, to sell it as a whole? Will they help if the company moves into the private sector by funding the debt and by announcing long-term contracts, as they have done in some cases with British Shipbuilders, and by providing the necessary public investment, or does privatisation mean that the company will be on the market for investment? Will the company, as several speakers have said, receive the necessary financial restructuring? Will there will be guarantees about employment? Will there be guarantees about consultations? Finally, will there be a conference with the workers, the ministry and the management, as the noble Lord, Lord Blease, suggested, before anything is done? Those are the questions. We await the replies.

8.45 p.m.

The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell)

My Lords, the noble Lord, Lord McCarthy, has wound up what has been a fascinating debate. I shall come to my erstwhile tutor's contribution. I shall not take him, or your Lordships, back 28 years, when the noble Lord instructed me and gave me an even better resumé than he has this evening of political institutions in your Lordships' House, in another place and all round the world.

If I can satisfy the noble Baroness who asked the question so eloquently and well, and her noble friend, as well as the noble Lord, Lord MacCarthy, satisfied me 28 years ago, I shall be happy, and the noble Lord may feel that he has contributed, directly or indirectly, something to the answer I shall give this evening.

The Question asked by the noble Baroness, Lady Turner of Camden, relates to Short's and Northern Ireland. The question revolves around the concept of privatisation and I shall try to answer all the points that have been raised. I can clearly not respond to the invitation of the noble Lord, Lord McCarthy, to take as long as I want tonight. Out of brevity and courtesy I may have to write to one or two of your Lordships about some of the queries.

All kinds of views have been expressed in Northern Ireland. It has been said that privatisation is of itself a recipe for dismantling the publicly owned companies which form an important and most influential part of Northern Ireland's industrial base. It has been suggested here and in Northern Ireland that that policy is being pursued solely for ideological reasons and is not concerned with the wellbeing of the company in question or the workforce, let alone the particular circumstances of the Northern Ireland economy. Perhaps I may rebut that straight away. I think the main thrust of what I have to say was raised by the noble Lord, Lord Dormand of Easington. I congratulate him on dipping his toe into Northern Ireland although, as he and other noble Lords will know, the Question asked tonight by the noble Baroness has wider connotations than Northern Ireland.

The investment policy and the main thrust of the Government's policy of privatisation in Northern Ireland are centred around several items. Privatisation is and will remain a major element in the Government's strategy, to promote efficiency, to increase incentives and above all to widen ownership of the company. Your Lordships have referred a great deal this evening to ownership of the company. There are two shareholders: 90.5 per cent. of the shareholding is owned by the Department of Economic Development in Northern Ireland: 9.5 per cent. is owned by the Department of Trade and Industry. That is technically the ownership of the company.

Noble Lords

Us.

Lord Lyell

My Lords, if the noble Lord will have patience, I shall come to him. He may ask a question at the end. However, that is the ownership of the company, using the word in the technical sense. The noble Lord may shake his head, we may be able to discuss legal points later or perhaps I may do it in writing.

Transferring state businesses into private ownership, not just in the cases that have been mentioned this evening by your Lordships, has increased business efficiency. It allows employees to take a direct stake in the companies in which they work. I have the employees of Short's especially in mind when we raise this point. Privatisation leads to very beneficial changes in attitude. Above all it gives everyone the opportunity to have a real stake in their business.

More than 17 major businesses have been privatised and there have been some very notable successes. We have heard this evening of four companies which were referred to by the noble Lord, Lord McCarthy. However, we did not hear about the National Freight Consortium. Over 80 per cent. of the share capital of that company is owned by the employees and the profits of the company have gone from £4.3 million for the financial year to 1981 to £370 million for the financial year to 1986. The pre-tax profits of Amersham have quadrupled in five years. British Aerospace, which was mentioned by your Lordships, was privatised six years ago. Its pre-tax profits have tripled. So I do not think that the Government need be in any way apologetic about the policy of privatisation.

The real problem in Short's or in any elements of British industry, let alone in Northern Ireland, is not the ownership of shares. This goes for the whole of British industry, including Short's and Harland and Wolff. I was most apprehensive that my former tutor, the noble Lord, Lord McCarthy, was making a slip of the tongue in referring to Harland and Wolff. However, he swiftly brought the relevance of his remarks on Harland and Wolff into line with the Question this evening. The problem with Harland and Wolff, and above all Short's, which is faced by the economy in Northern Ireland is the ability to win orders and succeed in the presence of highly competitive market forces. I think the three examples I have been able to give will go a long way to prove that it is in the private sector that we find the best chance to respond rapidly to market forces in the world as well as to win orders.

Public ownership simply cannot be conducive to the quick response to market forces which is necessary in industry throughout the world today. With public ownership, investment is perennially subject to public accountability and the need to minimise risk. That goes for every single industry, be it in Northern Ireland, Scotland, Wales, England or elsewhere in the world. In the long run the survival of an industry cannot be guaranteed by the state in any way. Survival is dependent upon the ability of the company, its management, workforce and product to respond to markets and the needs of the market.

The main element of the Question asked this evening by the noble Baroness, Lady Turner, has been Short's. I have found elements of a common thread in many of the arguments that have been put forward by Members of your Lordships' House. Those elements come from a fascinating document which contains the opinions of a group that calls itself KNIFE. I very much admire its logo but there are a number of inaccuracies in the communication that I have seen. However, I shall spare your Lordships my thoughts on that.

The recent financial progress of Short's has been worrying. It has given the owners and shareholders of the company—that is, the Government—cause for concern. However, I wish to stress that it is the Government's view that the company has a number of strengths. This was raised by everybody who has spoken this evening. First, Short's has a proven record of competing in international markets with a wide spectrum of products. Those noble Lords who fly to and from Northern Ireland, as I am afraid 1 do very frequently, cannot look out of their aeroplane without seeing the engine nacelles of the large aircraft which in most cases have been produced by the Boeing company in Seattle. One finds that they are made by Short's in Belfast. I understand that there are all kinds of elements in the Boeing 737, 747 and the 757 which originate at Short's. We look at other airports in the United Kingdom as well as around the world and find the proven record of Short's with the SD 330 and SD 360 aircraft. Once again I declare an interest since these excellent aircraft fly me on many of my journeys around the United Kingdom as part of my work.

Short's has very great strength in its contacts for what are technically known as—and I do not want to become involved in detail this evening—aero-structures. These contracts have been carried out for a number of the world's leading aircraft and aero-engine manufacturers, including Boeing, Rolls-Royce and the Netherlands company, Fokker. As everybody has stressed and I wish to stress as well, Short's has a skilled workforce with skills in design, development and production. Above all, Short's has a particularly good reputation with customers and competitors. Several noble Lords have mentioned this. My right honourable friend in another place mentioned the Pride in Excellence award. Once again this has been awarded by Boeing to its subcontractors and once again Short's has won it. The award does not go to every single subcontractor: it must be earned, and Short's have earned it more than once—I think three times at least in the last four years.

With all these advantages, the Government believe that the future for a strong, viable business at Short's is best served not by continued dependence on public ownership of the company, as it exists at the moment, but by grasping the opportunities of the private sector. The Government are supported in their views by the board. I shall not quote word for word, but the board put out a press release on the day after the speech of my honourable friend the Parliamentary Under-Secretary of State in another place. That speech has been referred to by your Lordships. The company concluded its comments by stating that it wished to emphasise its commitment and responsibility for the complete enterprise—the employees, the customers and the suppliers, and would be seeking to secure a future in the best interests of all. That includes everybody.

The Government are supported in the view that privatisation is the proper channel for the onward progress of the company by the board. The Government believe that the real means of retaining jobs in this sector, as well as in Short's and in Northern Ireland, is to maintain a high level of successful and, above all, profitable business activity. We believe that that is demonstrably more likely in the private sector.

However, I wish to stress that as we move towards privatisation, the Government will continue to provide support for Short's, and, in considering the sale of the company and the method of privatisation, we shall of course give full weight to the importance of the company to the Northern Ireland economy. I say, above all to the noble Viscount, Lord Chandos, and other noble Lords who are interested in the mechanics of the privatisation, that the Government have appointed a merchant bank and other advisers. All of us are currently assessing the position. No firm decisions have yet been taken.

I think that all of your Lordships who are aware, not just of the Northern Ireland economy, not just of Short's and not just of privatisation, would agree that professional and confidential negotiations are the best way forward in this particular process.

The noble Baroness produced a particularly interesting and professionally detailed lovely glossy brochure. Perhaps that is the wrong term to use in your Lordships' House. However, I am delighted that the noble Baroness is observing the excellent product that is detailed in the brochure. The brochure covers everything that could possibly be said about the FJX aircraft and the project.

The support for the FJX project, and indeed the future of that project, will depend entirely upon the attitude towards the project of the future owners of the company. The project, as it is at the moment, would in no way be detrimentally affected by the process of privatisation on which the Government are at present engaged.

The noble Lord, Lord Bonham-Carter, asked me about the privatisation of Short's. He and other noble Lords expressed a fear that the privatisation could lead to the breakup of the company. I stress what my honourable friend has already said, and I repeat once again that we believe that the best avenue for privatisation is to allow the company to be sold as a whole. But neither we nor our advisers nor anyone else can give a firm guarantee that that will be the case. However, we certainly take very seriously everything that has been said by your Lordships this evening. That will, of course, form part of continuing negotiations with our advisers.

I missed one particular point which was raised by the noble Baroness. That concerned the headline in the newspaper regarding the burglary that took place yesterday at Short's. I shall search for that piece of paper as I cannot find it at the moment. However, I cannot say a great deal about that matter because it contains quite a bit of confidential material, but I shall cover that point before I finish tonight. I shall certainly locate that information.

The noble Lord, Lord Boyd-Carpenter, is notable by his absence and I would not wish to bring him into the discussion. The noble Lord, Lord Bonham-Carter, and others were worried that the Government's process of privatisation would lead to economic withdrawal from Northern Ireland. I have stressed that privatisation is a national policy, and Northern Ireland is very much part of the United Kingdom. We believe that it is right that Northern Ireland should benefit from privatisation. I give your Lordships the commitment of the Government to Northern Ireland and to the economic welfare of the Province. That commitment remains undiminished.

A minor miracle appears to have occurred. I have found my thoughts on the theft of a training missile aiming unit. I must try and get the technical term correct. The unit stolen was an inert training unit—it was not an operational missile launcher, as I believe the noble Baroness mentioned. It was in fact a plastic model.

The armed robbery is being investigated by the Royal Ulster Constabulary, as well as by the company. The Royal Ulster Constabulary is keeping an open mind about who is involved in the theft. However I stress, particularly in view of everything that has been said tonight about defence products from Short's, that Short's has a very good security record. Nevertheless it is urgently reviewing its security. It will consult with the Ministry of Defence security advisers about any changes that may be necessary.

The noble Lord, Lord Dormand of Easington, and one or two other noble Lords raised the question of the latest figures for the financial results of the company. Your Lordships will be aware that the figure of £46 million has been mentioned in your Lordships' House. That is a speculative figure. It would be very unwise for us to mention or go any further in examining, or indeed thinking, that that will be the scale of the end of year results, as when the auditors have made all their adjustments the figures may vary in any particular way.

The noble Lord, Lord Dormand, mentioned AWACS. The AWACS is a variation of the VC137, which is a military version of a Boeing 707. So far as I am aware, Short's is making sundry items for the Boeing company. I cannot say whether Short's is still supplying elements or parts for the AWACS aircraft. As I have stressed to your Lordships, the products of Short's are visible any day and every day at airports throughout the United Kingdom.

The noble Lord, Lord Dean, referred to the seed corn of research and development in Northern Ireland. The Government are committed to the company as it stands but we shall have to see how the privatisation negotiations turn out. This will be an important factor in our discussions with the merchant bank and other advisers. I can give a complete guarantee to the noble Lord, Lord Monkswell, that he bears no resemblance to the gentleman whom he mentioned at the outset of his speech. Indeed, if his hair has gone grey in 10 years, mine has gone a little more grey in four and a half years in Northern Ireland; but not too grey.

The noble Lord, Lord Monkswell, referred to the undercapitalisation of Short's. The financial results for the financial year 1987 show that the sum of £22 million was added to the preference share capital of the company. That was provided from public funds by the Government. The noble Lord will see that the company has been supported and that capitalisation has been a prime element of the Government's support for Short's over the past five to 10 years.

The noble Lord, Lord Blease, referred to the tenor and tone of any comments that I might make. As always, I am flattered by his kindness and I hope that I shall be able to give him some help this evening. The sale and privatisation is naturally a matter for confidential and professional negotiations. That point will be familiar to many of your Lordships, not least to the noble Viscount who sits on the Social Democrat Benches. The noble Lord went on to refer to the ownership of the company. The company is owned 90 per cent. by the Department of Economic Development in Northern Ireland—in other words, by the Government—and 9.5 per cent. by the Department of Trade and Industry, indeed, by the Government. The company is totally publicly owned. The noble Lord referred to a conference. A meeting took place with my right honourable friend the Secretary of State yesterday but I do not want to add anything further to what was said.

The noble Lord, Lord Dean of Beswick, queried support for United States companies by way of defence contracts. Short's has benefited from Ministry of Defence work. One-third of Short's entire business and turnover comes from the Ministry of Defence. The Starstreak missile which is being developed by Short's has been funded by the Government. A privatised Short's would continue to be eligible to obtain defence orders. I hope that that also covers a point raised by the noble Lord, Lord Monkswell.

I should like to stress once again that my right honourable friend the Secretary of State and my honourable friend Mr. Viggers meet the chairman of Short's and its senior management on a regular basis. The noble Lord, Lord Monkswell, will be aware of the Government's continuing interest in Short's. The noble Lord, Lord Graham of Edmonton, was flattering about the number of supporters among my noble friends. I say to him that size is no necessary guarantee of strength and that I continue to speak for the Government on Northern Ireland, whatever may be the numbers and whatever may be the conditions in the House.

The noble Lord. Lord Graham, was concerned about government policy. Our policy in Northern Ireland concerning any industry or any privatisation is to allow managers to manage the company. The noble Lord made a most interesting reference to the Royal Ordnance Factories in his former constituency. I am afraid that there is no chance of my making any useful contribution on that issue this evening. I enjoyed his contribution to the atmosphere in your Lordships' House. I can assure him that there will be no such atmosphere when we come to the privatisation of Short's.

Noble Lords

So it has been decided.

Lord Lyell

My Lords, I can assure the noble Viscount, Lord Chandos, that we should prefer to sell the company as a whole.

The noble Lord, Lord Fitt, who has much experience of Northern Ireland, made some comments about the presence in your Lordships' House. The noble Lord has experience of all kinds of Northern Ireland assemblies, devolved and in another place. Possibly his remarks may be a trifle double-edged in view of some of the performances in relation to Northern Ireland politics in your Lordships' House. Perhaps I do a disservice to your Lordships' House. Some of the performances in another place as well as in Northern Ireland lead one to wish that more political action in Northern Ireland could be carried on in the atmosphere which we have here this evening.

The noble Lord took issue with my noble friends and the support from the Government Benches this evening. He referred to debates on salmon and other sporting issues in your Lordships' House. I referred to the Good Book and the Gospel of Saint John, Chapter 6, Verse 6. He may ignore the first part but I think that he will find a useful little maxim there which serves me well in Northern Ireland. However, I shall not discuss that in detail this evening.

The noble Lord quoted unemployment figures which are at variance with the figures which were published recently by the Government. The figure is 115,000, which is 19.9 per cent. of the male population and 11.7 per cent. of the female workforce. Those are the official figures which I should like to put on record.

Lord Graham of Edmonton

Disgraceful!

Lord Lyell

My Lords, the noble Lord, Lord McCarthy—I have already taxed your Lordships' time, and probably his, considerably this evening—referred to the FJX project. I hope that I have covered that issue. I am not able to say a great deal about it. The project is admirable. It requires a great deal of work and the timescale goes far beyond the question of privatisation which we are discussing this evening. So far as concerns privatisation of the concept, I would ask the noble Lord and all other noble Lords who are interested in this issue to wait and see. In our confidential and professional negotiations we shall certainly do the best for the company.

The noble Lord asked about affirmative action. I stress that the Catholic percentage of the workforce has doubled since 1979. The latest figure from Short's shows that 10.8 per cent. of the workforce is from the minority community and monitoring of the Catholic percentage of the workforce is continuing. I should like to congratulate the company on that achievement. It is the management of the company which has carried it out. I think that the praise due to the Government in this particular aspect must be limited. The level of appointments of Catholics to the company is regularly at or above 16 per cent.

The noble Lord asked also about the attitude by the workforce to any new management. I took his remarks down fairly carefully; if I have not taken them down with the accuracy which I would have done 28 years ago I shall write to him in the morning. Any new management of the company, we believe, will be committed to the company and its products and above all to its workforce. There can be no guarantee as to the industrial relations of a privatised company. Noble Lords have referred to the situation in four companies which have been privatised. I shall spare your Lordships any comments about the other 13 companies and how well they have or have not done. However, I do not believe that industrial relations have suffered in companies that have been privatised, and in the vast majority I believe that the industrial relations climate will have improved very considerably.

I should like to conclude by saying that the Government have made clear—and I reiterate it once again tonight—that they will continue to provide support for Short's while we move toward privatisation. In particular, I want to confirm earlier parliamentary statements that those who deal with the company can do so in the knowledge that in the last resort the Government will ensure that creditors have their claims fully met.

In conclusion, Short's has enormous strength. It has proven ability to compete around the world. It has already proved its ability to develop new projects. One looks at the SD 330 and 360, the Tucano, the Blowpipe, the Javelin and the Starstreak. Its aerostructures division contracts with leading aircraft and aeroengine manufacturers throughout the world. The workforce is highly skilled and the company has a sound technology base as well as a very good reputation with both customers and competitors. We believe that privatisation will aid all those objectives.

Baroness Turner of Camden

My Lords, before the Minister sits down, perhaps I may ask him to firm up some remarks that he made during the debate. For example, one of the issues that everyone has stressed during the debate is the necessity to maintain the company as an entity. Is it not possible in the course of the negotiations—which we understand are confidential—for stipulations to be made that the entity of the company should be maintained? Is it not also possible to ensure that the research and development facility which is so important for Northern Ireland stays in Northern Ireland no matter how privatisation proceeds? Is it not possible for that to be part of the negotiations and part of the stance that the Government take in those negotiations?

Lord Lyell

My Lords, certainly I could not give a guarantee, but I am sure that everyone who has the company's wellbeing at heart will note what the noble Baroness has said, and above all will note everything that I have said. However, the negotiations are confidential and I could not give a guarantee this evening as to exactly the final form of those negotiations.