§ Mr. William Wilsonasked the Secretary of State for Industry if he will be making a further statement on the National Enterprise Board's report on British Leyland's corporate plan.
§ Mr. VarleyFurther to the answer I gave to my hon. Friend on 22nd March, I am today placing in the Library of the House a copy of a report from the National Enterprise Board on British Leyland's corporate plan. Copies are also available in the Vote Office.
The report outlines the strategy contained in BL's 1978 corporate plan and recommends the Government to give the plan full support and provide the funding necessary to enable the new BL board to carry through its proposed strategy.
Overall, the public finance envisaged in the plan and the NEB's recommendations will remain within the £1,000 million total originally indicated by the Ryder Report and accepted in principle in April 1975 by the Government. £150 million of this had been advanced by the end of 1977. BL will need more funds from private sources, and its ability to raise these will depend on the strength of its balance sheet and its commercial performance.
The Government have concluded that it is right to give BL the backing recommended by the NEB. The Government accept in principle that £850 million of public funds will be needed over the period 1978–81 and envisage that, if BL progresses on the lines set out in the plan, the necessary funds will be provided. In future the financial provision will be looked at annually, starting next November, in the light of progress made and of future prospects. If events show a serious risk that the plan's objectives cannot be achieved, the Government with the company and the NEB will have to consider the options; and the Government would have to accept the financial consequences of any change of plan that they might then agree with the NEB.
To assist the monitoring of BL's performance, the Government have also accepted the NEB's recommendation that a financial duty should be imposed on the NEB under section 6 of the Industry Act 1975 in respect of its responsibility for 4W BL, of a 10 per cent. return on capital to be earned by 1981. The duty for later years will be considered further when BL's 1979 corporate plan is put forward towards the end of this year.
British Leyland has urged strongly that it should be provided with £450 million of new equity in 1978 in order to provide for its cash needs and to strengthen its balance sheet, and this request is fully supported by the NEB. The Government accept the case for equity put forward by the NEB and agree that £450 million should be provided in 1978 in this form. The Government agree with the NEB that the form of future funding should be left open until BL's next corporate plan is considered in November.
I stated on 22nd March that I had authorised the NEB to advance a short-term loan of £275 million to BL to enable the company to repay some temporary borrowings and to continue its capital expenditure programme until Parliament is able to consider the situation. As already foreshadowed by British Leyland in a document issued to its shareholders, the intention is that BL should make a rights issue as soon as possible. This will amount to £450 million, paid up initially as to £270 million, which will largely replace this short-term loan, and the remaining £180 million will be provided later in the year.
The Government accept the NEB's proposal that the NEB should provide £300 million of the £450 million. This will take the NEB close to its present financial limit of £700 million, and I am today laying a draft order to raise the limit to £1,000 million. I am also today laying an order for affirmative resolution under section 8 of the Industry Act 1972 to provide the balance of £150 million. The House will have an opportunity to debate these two orders shortly.
I shall also be placing in the Library of the House on Wednesday 5th April the NEB's preliminary statement of results for 1977.
§ Mr. Woodallasked the Secretary of State for Industry if he will give details of all the payments made by the Government and the National Enterprise Board to British Leyland Ltd. since publication of the Ryder Report.
§ Mr. Les HuckfieldThe main payments made by the Government and the 5W National Enterprise Board to British Leyland Ltd. since publication of the Ryder Report are as follows:
Two hundred million pound equity capital subscribed by the Secretary of State pursuant to a rights issue by the company—October 1975; £70 million long-term capital provided by the National Enterprise Board under the Industry Act 1975—February-March 1977; £30 million long-term loan capital provided by the National Enterprise Board under Section 8 of the Industry Act 1972 on direction by the Secretary of State under Section 3 of the Industry Act 1975—March 1977; £50 million long-term loan capital provided by the National Enterprise Board under the Industry Act 1975—September 1977; £275 million short-term loan provided by the National Enterprise Board under the Industry Act 1975—March 1978. In addition, the company has received small amounts of assistance from the Government under a variety of schemes which are available to industry generally.