§ Dr. M. S. Millerasked the Secretary of State for Industry what are the arrangements under which he deals with Rolls-Royce 1971; whether they are contained in any written understanding; and if he will publish details of any understanding that exists.
§ Mr. BennI am appending the hitherto unpublished text of the memorandum between the then Government and Rolls-Royce (1971) Ltd. which established their relationship. As the House knows, we are pledged in the manifesto to socialise nationalised industries. In consultation with the unions we shall take steps to make the management of these industries more responsible to the workers in the industry and more responsive to their consumers' needs.
Rolls-Royce (1971) Ltd.
The purpose of this note is to place on record for the benefit of both parties the principles governing certain aspects of the relationship between the company and the Government.
390W2. The Government's objective in establishing Rolls-Royce (1971) Ltd. was to secure the continuance of those activities of the aero engine marine and industrial gas turbine divisions of Rolls-Royce Ltd. that are important to national defence, to collaborative programmes with other countries, and to many air forces, civil airlines and private aircraft operators all over the world.
3. It is the wish of both parties that the board of the company should as far as possible operate as though it were the board of a privately-owned company established under the Companies Acts; and it is not the Government's intention, as sole shareholder, to concern themselves with the day-to-day running of the company or to diminish in any way the responsibility of the board for the conduct of the company's affairs. The Government will expect the company to act commercially and to earn a commercial return on its capital employed.
4. As is customary, the company's Memorandum and Articles of Association are widely drawn. The agreement of the Government, as sole shareholder, should be sought before any decision is taken to extend the company's activities into areas different from those in which it is currently engaged or to dispose of any significant part of the company's undertaking. The Secretary of State should also be consulted before the board appoints a chairman, and before it appoints a managing director or other executive directors and before it fixes their remuneration. Similar consultation should take place before additional directors are appointed or a casual vacancy is filled.
5. In its operations the company will be expected to pay regard in the normal course to declared Government policy. Against this background, it will be for the board to decide its policy on the size and deployment of its labour force, informing the appropriate Government Department in advance if it is considering making any substantial changes Similarly, responsibility for negotiating pay settlements taking account of the national interest will rest with the board, the Government being informed at an early stage of the board's intentions in any significant pay settlements.
6. In its dealing with the company the Government will have three quite distinct roles—sole shareholder, banker, and principal customer; the last of these will include the provision of funds for the development and production of military engines as well as launching aid in some form or other for certain major civil projects. In order that the company may frame its forward programme on a stable basis it will be in the interests of the company and of the Government that there should be consultation about what the programme should be and how it should be financed. A concomitant of this consultation will be the provision of such financial and other information as may be necessary to enable the Government to discharge their responsibilities in the three roles described above. The details of this arrangement will be settled in discussion between the company and the Government.
391W7. The arrangements described in the preceding paragraphs will continue to govern the relationships between the company and the Government as long as the Government are the sole shareholder. They would be subject to review in the event of a significant element of private equity being introduced into the company; and the Government will be prepared to consider earlier modification in the light of experience. The chairman will at all times have access to the responsible Minister to discuss any matters he or the board wishes to raise with the Government.
§ Mr. Trotterasked the Secretary of State for Industry if he will pay compensation to Rolls-Royce in respect of the Government's requirement that the company cancels its contracts with Chile for the maintenance of aircraft engines and the supply of parts.