§ 2.57 p.m.
§ Lord Molloy asked Her Majesty's Government:
§ Whether they were aware of the proposed sale by Ferranti plc of their defence interests to GEC plc while they were negotiating with the West German Government over the award of the radar system contract for the European fighter aircraft.
§ The Parliamentary Under-Secretary of State, Ministry of Defence (The Earl of Arran)My Lords, the companies informed the Ministry of Defence that discussions were taking place in advance of the announcement of the proposed acquisition on 23rd January.
§ Lord MolloyMy Lords, I thank the noble Earl for that reply. However, is he aware that, despite that fact, there are still some unpleasant and disturbing aspects in the whole affair? Can he confirm absolutely that the Germans were aware of the negotiations well in time? Further, are Her Majesty's Government aware that the creation of such a massive monopoly would be quite contrary to their philosophy of competition?
§ The Earl of ArranMy Lords, I can tell the noble Lord, Lord Molloy, that my right honourable friend the Secretary of State did have useful and constructive discussions on many issues with his German counterpart, when he was here last week. These naturally included the European fighter aircraft. Both gentleman agreed that the EFA is the best solution to meet the requirements of their airforces in the second half of the 1990s and beyond. There was also a useful exchange of views on the EFA radar upon which, contrary to speculation, no decisions were made.
As regards the noble Lord's point about competition, I must tell the House that it is entirely the responsibility of the supply company to determine the appointment of its workforce; in other words, it is a commercial judgment at the end of the day. Obviously, it would be most satisfactory if the decision or the prize were given to this country rather than to Germany. However, the decision has yet to be made.
§ Lord Dean of BeswickMy Lords, can the Minister tell the House, now that this exercise has effectively created a monopoly, what proposals the Government have in mind to ensure and guarantee that the taxpayer will have the benefit of reasonable and realistic pricing?
§ The Earl of ArranMy Lords, I must correct the noble Lord, Lord Dean, on that point. It is not a monopoly situation; indeed, the decision has not yet been decided. The competition implications will be examined by the Director General of Fair Trading and considered by my right honourable friend the Secretary of State for Trade and Industry. The important point I wish to make is that no decision has as yet been made. Moreover, if the matter is referred to the Monopolies and Mergers Commission, the decision will be made at that time.
§ Lord Graham of EdmontonMy Lords, will the Minister deal with the main thrust of the Question? Were the Germans made aware of the possibility of the arrangements that became known later at the time the European fighter project was being considered? Will he also tell the House what steps the Government have taken to ensure the protection of the maximum number of jobs? Are the Government concerned that in any such arrangements whereby there are new alignments of management it is inevitable that some job fall-out will take place? What have they done to ensure that that is kept to the minimum?
§ The Earl of ArranMy Lords, I have just given an answer to the second part of the noble Lord's question. I repeat again, as regards the workforce, it is a commercial judgment as to where the supply contractor deploys his workforce in the event of the prize being given. That is all that I can say on that point.
§ Lord MarshMy Lords, does the Minister agree that far from the German authorities not being aware of the proposed bid, GEC is to be congratulated on making the bid, without which it is almost 10 inconceivable that the United Kingdom would have obtained the order?
§ The Earl of ArranMy Lords, in the cirumstances it seems a sensible decision.
§ Lord Williams of ElvelMy Lords, will the Minister tell the House which view the Ministry of Defence will express to the Director General of Fair Trading via the Merger Panel? As he is aware and has said, the Director General of Fair Trading has to make a recommendation to the Secretary of State for Trade and Industry. The Minister will be aware that the Secretary of State is advised by the Merger Panel upon which the Ministry of Defence is represented. What advice will the Ministry give? Will it give the advice that it gave in respect of the Plessey takeover in 1986 where it said that defence should not be a monopoly situation? Will it give the advice in respect of the GEC takeover of Plessey in 1988 where it advised that it did not matter whether it was a monopoly situation? Which of the two positions will the Minister take?
§ The Earl of ArranMy Lords, the noble Lord asked a long question which is based on speculation. I am not at the Dispatch Box to answer speculative questions on behalf of Her Majesty's Government.
§ Lord MolloyMy Lords, does the Minister agree that it is hoped that jobs will be created not just in Edinburgh but throughout the country? If the apprehensions felt by the management, professional bodies and trade unions materialise, will the Government then seek to discuss those matters with the bodies that I have mentioned?
§ The Earl of ArranMy Lords, again that question is based on speculation. If the outcome is successful, it will be for the commercial judgment of the supply contractor who wins the prize, as I have said, to decide, obviously in conjunction with its trade unions, where its workforce will go.
§ Lord AnnanMy Lords, are we not moving into another ball game in which we have to ask ourselves not merely whether there is a monopoly in this country but whether there is a monopoly in the European Community? Our firms must be able to compete satisfactorily with other firms in Europe even if they form a monopoly in this country.
§ The Earl of ArranMy Lords, the noble Lord makes a reasonable point. Of course at the end of the day it is for the commercial decision of the supply contractors, and indeed of the Government, as to where they obtain their procurement.