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Ferranti Limited

Volume 885: debated on Monday 3 February 1975

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5.

asked the Secretary of State for Industry if he will make a statement about his discussions with Ferranti.

35.

asked the Secretary of State for Industry when he now expects to complete his discussions on the future of Ferranti Ltd.; and if he will make a statement.

A statement will be made when we have completed our studies of the financial prospects of Ferranti Limited and have discussed arrangements for the future of the company with the employees and the management.

Has any money been made available to the company since the Department was first told that the company was in difficulty? Why has there been this apparent delay in getting an outline agreement?

In reply to the first part of the supplementary question, the Government have given the company's principal banker a guarantee under Section 7 of the Industry Act to ensure that adequate finance is made available for the day-to-day running of the company. On the question of the delay, I regret the time that this has taken, but a series of very complicated issues has to be resolved. There is the question not only of the capital structure which is most suitable for this company but of the percentage of the equity which the Government should take, the relationship between the Government and the company in terms of control, the form in which other capital requirements of the company can best be met, the sources and terms of the non-Government capital, and the price at which the Government will subscribe to the equity. Those are a series of unrelated complicated issues which take a long time to resolve, but I am hopeful that we shall resolve them very shortly.

Does my hon. Friend recollect that on 9th December he confirmed that he had received the accountants' report on the financial affairs of Ferranti and assured me that a statement would be made shortly? Does he appreciate that the longer this matter drags on the more the confidence of both management and employees of Ferranti will be undermined? Will he help me to clarify the matter to my constituents by giving me his understanding of the terms shortly?

When I made that statement I was hopeful that we should be able to make a statement before now, but for reasons which are outside our control there have been changes in the precise financial position of the company—changes which have become apparent only since we received the accountants' original report. It is because we have had to take account of those changes that we have not so far been able to make a statement. I reiterate that, bearing in mind the consequences to which my hon. Friend has rightly drawn attention, we are determined to ensure that the tripartite talks take place as early as possible.

9.

asked the Secretary of State for Industry whether the Government intends to increase its holding in the Ferranti Company; and, if so, what percentage share it intends to hold.

In consideration for any financial support the Government may give to Ferranti Limited we shall require a substantial part of the shares of the company. The size of that shareholding will depend upon the extent of the support to be given and the most suitable capital structure for the company.

Is the hon. Gentleman aware that probably the main reason for Ferranti's financial difficulties was that it kept open the Oldham transformer works for social reasons because it provided a good deal of employment, and that this brought it into serious financial difficulties? Does he think that Ferranti should not have done that and therefore remained solvent? If he thinks that Ferranti should have done it, why is it that those industries which pursue social objectives are the ones in which a public stake has to be taken?

The decision to maintain employment and production at the Oldham transformer works was taken on commercial grounds, without any pressure from the Government. By that decision the company must stand. I am glad that it took that decision, which I believe was a proper one. On the second question, it is our view that if a Government put substantial funds into a private company, they should take a commensurate stake. We take a different view from that of the last Conservative Government, who, for example, put £40 million of aid into ICL at a time when the total nominal share equity was valued at less than that, and took no share equity at all. We think that that is quite wrong.

If the Minister feels so strongly on this point, will he explain why the Government are at this very minute doing the opposite of what he said and putting money into the Kirkby co-operative without any share in the equity?

The purpose of having a share stake is to ensure that the actions of the company are duly accountable in accordance with the money stake which has been given. In the case of Kirkby Manufacturing and Engineering Company Ltd., rigorous arrangements and procedures are laid down to ensure full monitoring. One of the conditions for the continued payment of tranches in proof of need is to ensure that the co-operative is acting in accordance with the purposes for which it was set up and that there is no danger of its going into liquidation.

Why should private individuals in a co-operative be subjected only to monitoring, when the rest of the Minister's suggestion is that the private sector should be accountable in some way?

The workers who work in the Kirkby co-operative are fully satisfied with the conditions of accountability. As for the Ferranti workers, it is entirely in accordance with their wish that public money put in will be accountable, and they are satisfied with the methods which we suggest.

On a point of order. In view of the very serious double standards revealed in the answers to those questions, I beg to give notice that I shall seek to raise the matter on the Adjournment as early as possible.