B.Ae and Rover Group: Tax Benefits (Hansard, 30 January 1990)

§ The Minister of State, Department of Trade and Industry (Lord Trefgarne)
My Lords, the Government are not in a position to estimate the value to British Aerospace of the tax benefits arising from their acquisition of the Rover Group and available to them under normal UK tax law; such valuations are highly subjective and dependent on assumptions about the future taxable capacity of the enlarged British Aerospace group.

§ Lord Hatch of Lusby
My Lords, does the Minister agree that these tax benefits which have been given to British Aerospace are a use of the taxpayers' money in order to bribe a company that is acceptable to the Conservative Party to take over the Rover Group? Despite what has been said before the Select Committee by the former Secretary of State for Trade and Industry, this represents a state subsidy to British Aerospace in order to persuade them to take over Rover.

§ Lord Trefgarne
My Lords, as my right honourable friend the Secretary of State said in published correspondence to Mr. Gordon Brown, a member of the noble Lord's party, no particular tax benefits were conferred. Therefore the noble Lord's question does not arise.

§ Lord Williams of Elvel
My Lords, in his Answer the noble Lord mentioned normal tax law. Is he aware that Sir Peter Gregson gave evidence to the Public Accounts Committee in another place that the arrangement was that the company should have the opportunity to submit to the Inland Revenue its proposals for reorganising its affairs? The arrangement was that before implementing them, the company should obtain clearance from the Inland Revenue under Section 768 of the Income and Corporation Taxes Act 1988. Under what law or what provision of that Act or what body of any law is such clearance available?

§ Lord Trefgarne
My Lords, every commercial enterprise is entitled to make application to the Inland Revenue for whatever provision it thinks it is entitled to. Nothing special applies to British Aerospace in that connection.

§ Lord Williams of Elvel
My Lords, will the noble Lord draw my attention to any company in the past 10 years that has received clearance from the Revenue under that section?

§ Lord Trefgarne
My Lords, the noble Lord points to the fact that the Inland Revenue is jolly hard to please!

§ Lord Williams of Elvel
My Lords, is it not therefore the case that the DTI was, first, advising the company badly; and secondly, prepared to go in for almost any tax fiddle that would get rid of Rover?

§ Lord Trefgarne
My Lords, the Government did not employ any fiddle to get rid of Rover, as the noble Lord suggests. The Rover Group had contingent liabilities upon the Government of something like £1.9 billion. In addition, there was the prospect of the Government having to provide something like another £1 billion. In round figures that made a liability on the public purse of something like £3 billion. I am very happy that that liability has been transferred to the private sector.

Lord Bruce of Donington
My Lords, is the noble Lord aware that it is quite clear from the correspondence between his noble friend and British Aerospace that the whole transaction was politically corrupt from the beginning and that there was a deliberate effort to mislead the other place?

§ Lord Trefgarne
My Lords, I completely reject those quite unfounded allegations.

§ Lord Brougham and Vaux
My Lords, does my noble friend not agree that had the merger not taken effect, hundreds of thousands of people would have been out of a job? It sounds as though the Opposition could not care less about jobs.

§ Lord Trefgarne
My Lords, as I said just now in answer to an earlier question, it is certainly the case that there were substantial financial problems facing the Rover Group. British Aerospace will clearly be in a position to overcome those problems, and I hope that noble Lords on both sides of the House will welcome that.

§ Lord Barnett
My Lords, may I return the Minister to the Question on the Order Paper, in particular his First Answer? Was he strictly accurate in that reply? He said that he could not give us a figure because it was not known how much British Aerospace would have available under their tax liabilities. Surely he will know how much relief was available under the deal, regardless of how it was to be used?

§ Lord Trefgarne
My Lords, the position is nothing like as simple as the noble Lord suggests. Furthermore, matters have to be discussed and agreed with the Inland Revenue, as I said earlier. Therefore my original Answer was correct.

§ Lord Hatch of Lusby
My Lords, if the noble Lord does not accept that this was a bribe, can he explain to the House what the former Secretary of State for Trade and Industry wrote to the commissioner in Brussels about and also the chairman of British Aerospace, giving him three options? They were to help British Aerospace to avoid the attentions either of the commissioner in Brussels or of Parliament here. Can the noble Lord also tell the House whether the deal was put to the whole Cabinet, including the Prime Minister? Can he say whether the Cabinet and the Prime Minister knew of the details before the deal was struck?

§ Lord Trefgarne
My Lords, the disposal of the Rover Group was an extremely difficult matter. There was not a queue of companies forming up to buy this enterprise. British Aerospace was the only enterprise willing to make an offer for it. British Aerospace fiercely fought the negotiations; indeed, on the day before agreement was reached it nearly walked away. The fact is that the taxpayer has achieved an extraordinarily good deal and I am very pleased about that.

§ Lord Williams of Elvel
Will the noble Lord think carefully about what he has just said, that British Aerospace was the only company interested in buying Rover? Is it not the case that there were other candidates and that the Government gave exclusivity to British Aerospace? Therefore by definition it was the only company available to bid.

§ Lord Trefgarne
My Lords, no bid other than the one from British Aerospace was received for the Rover Group. Some firms have alleged that they were making a bid or were going to make a bid, but none did. I think that the Lonrho Group or some persons purporting to speak for that group have suggested that they made a bid in association with a Japanese company. Apparently the Japanese knew nothing of it.

§ Lord Williams of Elvel
My Lords, how on earth can somebody make a bid when exclusivity has been given to somebody else?

§ Lord Trefgarne
My Lords, there was nothing to prevent anybody else making a bid if they had wished to do so. The Government would have been bound to consider such a bid, had it been received.

§ Lord Stoddart of Swindon
My Lords, is the noble Lord suggesting that Lonrho is lying?

§ Lord Trefgarne
My Lords, I have made no such suggestion. There may have been a failure of communications within the group.

Lord Bruce of Donington
My Lords, on whose side was the failure of communications?

§ Lord Trefgarne
My Lords, I am not in a position to answer for the affairs of that or any other company.