HL Deb 03 November 1988 vol 501 cc389-91

3.5 p.m.

Lord Bruce-Gardyne asked Her Majesty's Government:

What requests have been received from the Ford Motor Company for selective financial assistance from public funds towards the cost of its projected new engine plant in South Wales; and what consultations have taken place with the EC Commission.

The Minister of State for Defence Procurement (Lord Trefgarne)

My Lords, the company has been offered regional selective assistance of £26 million towards the costs of its new engine plant developments in South Wales. Consultation with the European Commission was not required.

Lord Bruce-Gardyne

My Lords, I am most grateful to my noble friend for that helpful and informative reply. I am sure your Lordships hope that this compulsory punt on behalf of taxpayers will prove cost-effective. Will my noble friend tell us how this piece of selective assistance compares, both absolutely and also as a proportion of the total investment by Ford, with the selective assistance given to the same company for its original engine plant investment in South Wales 10 years ago?

Lord Trefgarne

My Lords, the assistance to which I have referred today amounts to about 5 per cent. of a project costing something like £550 million altogether. The earlier project to which my noble friend referred cost £270 million altogether, of which the then government provided £73 million, representing about 27 per cent. of the cost of the whole project.

Lord Callaghan of Cardiff

My Lords, is the Minister aware that those figures are totally irrelevant? It is a fact that the guarantees that were then given on behalf of the workforce of South Wales have been more than justified, and it is because Ford's expectations have been exceeded that it has now brought this tremendous new venture, which is of the greatest significance and will provide for the production of 850,000 engines every year, to South Wales. If we can spend money at that rate as a sprat to catch a mackerel, let us have many more sprats.

Lord Trefgarne

My Lords, it is certainly the case that the earlier investment to which I referred, and which the noble Lord will no doubt also recall, presumably tempted Ford to proceed with this further investment. This latter investment has been, I believe, the result of a team effort, both by the official organisations involved, the Welsh Office and the local authority, and the trade unions which have persuaded Ford that their industrial relations record is such as to justify this further investment.

Lord Morris

My Lords, I wish to ask my noble friend about something that has always puzzled me and, I suspect, a lot of people. Why is it that the Ford Motor Company, with its massive resources and its massive leverage, needs recourse to taxpayers' funds in order to take investment decisions of this kind? How is it that such huge organisations can lean on government to use public funds in order to assist their development in any part of the country?

Lord Trefgarne

My Lords, the fact is that the Ford Motor Company, like the rest of us, operates in the real world. In the real world, grants or this kind are available not only from places within the United Kingdom but also from other places in Europe and elsewhere. The Ford Motor Company is therefore able to shop around.

Lord Cledwyn of Penrhos

My Lords, is the noble Lord aware that, against a worrying industrial and employment background in Wales, we welcome very warmly indeed this development which will bring 700 jobs to the Bridgend area and I understand 2,300 jobs in factories producing component parts throughout the whole of the United Kingdom? Is he further aware that the subsidy to which he has referred is modest compared with the benefits which will be derived from it? Is the Minister also aware that we are grateful to my noble friend Lord Callaghan for the intervention which he made in 1977 when he was Prime Minister which first brought Ford to the Bridgend area? Therefore as Shadow Welsh Spokesman in this House it gives me great pleasure to thank everyone concerned.

Lord Trefgarne

My Lords, it is certainly the case that this new investment will lead to a number of important employment opportunities in the area concerned. That is very much to be welcomed.

Lord Diamond

My Lords, has the Minister by any chance worked out a cost-benefit analysis of the amount and, if so, can he give the House a rough indication of what it is?

Lord Trefgarne

Yes, my Lords, we have calculated that from the Government point of view the investment represents a cost of just over £10,000 per job created.

Lord Bruce-Gardyne

My Lords, notwithstanding the supplementary questions which my noble friend has answered so effectively, is it not apparent that the sprat in this case was very much smaller to catch a very much larger mackerel? Does that not reflect the lesser gullibility of Her Majesty's present advisers compared with those of 10 years ago, or the better investment climate for inward investment which prevails today, or, as I suspect, a combination of the two?

Lord Trefgarne

My Lords, I think that it is important to point out that the decison that Ford has taken in respect of this latest investment very much reflects its confidence in the likely success of the venture in South Wales. That relates not only to the money which the company will receive from the Government in support of the venture but also, as I said just now, the greatly improved industrial relations atmosphere in that part of the country, which has made an important contribution to the decision-making process.

Lord Callaghan of Cardiff

My Lords, if I may mix the cooking metaphor, does it not also show that in addition to the fact that sprats can catch mackerel, the proof of this pudding has been in the eating and that it is the success of the first venture which has brought the second?

Lord Trefgarne

My Lords, I believe that the noble Lord is right in saying that the success of the earlier venture has contributed to the Ford decision on this occasion. Having said that, there was fierce competition for the Ford plant and I am very pleased that the decision has gone the way of South Wales.

Noble Lords

Hear, hear!

Lord Rugby

My Lords can the Minister tell me whether or not the engines will run efficiently on unleaded fuel?

Lord Trefgarne

My Lords, I think that production of the engines will begin some time in 1994. I am certain that by that time they will be able to run on the unleaded fuel to which the noble Lord refers.