Sir Charles Villiers, whose term of office ends in September, has tackled the difficult task of adapting the BSC to changing market conditions with energy and dedication. I am glad to pay tribute to his work and to express our appreciation of it. As his successor I have appointed Mr. Ian MacGregor. He will tomorrow join the BSC board as a part-time deputy chairman. Sir Charles Villiers and I are agreed that, now that a successor has been appointed, it would be best if he were to take on the job as chairman with the minimum of delay. Mr. MacGregor will therefore become chairman on a full-time basis on 1 July.
Mr. MacGregor was born in Scotland but has spent most of his working life in America, where he has had an outstandingly successful business career. He was chief executive of AMAX, the metals and natural resources company, from 1966 to 1977, and remains on that board. He has many other appointments, including deputy chairman of BL, director of the LTV Corporation, a large steel producer, and a partnership in Lazard Freres and Co., a New York-based investment bank. In Mr. MacGregor I believe that we have found a man with the qualities needed to lead the BSC out of its present difficulties. Mr. MacGregor's personal salary will be paid by the BSC at the appropriate rate, based on the recommendations of the Review Body on Top Salaries—currently £48,500 a year. Mr. MacGregor has commitments as a senior partner in Lazard Freres, but his partners have agreed to release him in return for certain financial conditions. These conditions comprise two elements: the first is a payment to Lazard Freres of £675,000—[Interruption.]—for the three years of the appointment, two-thirds of which will be returnable pro rata if he completes less than three years; the second involves payments, again to Lazard Freres in the range of nil to £1,150,000, linked to the performance of the BSC under Mr. MacGregor's chairmanship. [Interruption.]Order.
These performance payments would be made in 1984 and 1985.
Is the right hon. Gentleman well?
Order. I suggest that the House now listens to the statement from the Minister.
These performance payments would be made in 1984 and 1985 and would be related to certain performance criteria to be agreed between the Department of Industry and Lazards. The level of the performance payments will be assessed by a performance review committee, comprising two persons nominated by me—[Interruption.]
Order. Opportunities for questioning will follow. We must hear the statement.
The level of the performance payments will be assessed by a performance review committee, comprising two persons nominated by me and two persons by Lazards, with an independent chairman acceptable to both.
During the period of his appointment, Mr. MacGregor will cease to be an active partner in Lazard Freres—[Interruption.]Order. Hon. Members must be fair. I think that the Minister should be heard out, and then we can have some questions.
He will cease to be an active partner in Lazard Freres but will become a limited partner with a reduced interest in the firm. On taking the post of chairman of the BSC he will relinquish most of his current directorships, including that of BL, but I have agreed that he should continue his longstanding links with AMAX.
I should make it clear that the payments to Lazard Freres that I have described are not for payment in whole or in part to Mr. MacGregor, except in so far as they contribute to Lazard Freres' profits, in which he retains a small share. Their purpose is to compensate Lazard Freres for losing the business services of Mr. MacGregor. I should also emphasise that they are substantially conditional on his serving for the full three years and achieving results. We have been prepared to secure the release of Mr. MacGregor because the willingness of a man of his calibre to be chairman of the BSC reflects our belief that the current problems can be solved and that the corporation can be restored to profitability as an efficient producer of steel and become a secure employer. For the Government to set financial targets is not enough; we must also seek to appoint people capable of achieving those targets. In appointing Mr. MacGregor, that is what I believe that I have done, and I am sure that the whole House will wish him success in his difficult task at the BSC.Regardless of the suitability of Mr. Ian MacGregor for this post—on that, no doubt, we shall suspend judgment until the time comes—is this not the most staggering statement that this House has heard in a long time? What the Secretary of State is talking about is a transfer fee, which, when we work out the reward that goes to Mr. MacGregor himself, comes to very nearly £2 million. Does the Secretary of State envisage a signing ceremony? If so, on which pitch will it be—Shotton, Corby or half of Llanwern?
Is it not a fact that Mr. MacGregor will be serving—the Secretary of State hopes—until his seventieth birthday; which is five years after the age at which all steel workers finish their term of contract; and that he will be offered this sum of money, as will Lazard Freres, at a time when the steel workers still remember the offer of 2 per cent. because, according to the Secretary of State, the industry could not afford more? First, can the Secretary of State tell us on what authority this payment is to be made and on what Vote it is to come? Second, can he tell us in general terms—since I gather they have to be worked out—what are the performance criteria on which so large a sum is to be given to these American bankers at the Secretary of State's behest? Is the sum to be given, for example, for improving industrial relations? If so, the statement of Mr. MacGregor, reported in a newspaper this morning, that he reckons that he can take on Mr. Bill Sirs, is not the most promising way of establishing industrial relations. Is it for the improved production of steel? If so, when we are told that steel production is going down—perhaps to 12 million or 13 million tonnes—the loss of steel may be the criterion. Is it for our export markets in steel, at a time when imports are coming in at an alarming rate? Finally, does the Secretary of State understand that this is so important a matter, not only for the Opposition but for the whole House, that we shall expect an early debate on it, in which the Secretary of State will make the matter clear?I should have thought that it was common ground that the chairmanship of the BSC is an extremely important and responsible job. If the new chairman succeeds, with the help of all those concerned, in converting the present situation into a successful one, any payment that is made on his account—not necessarily to him—will be very good value for the country and for all those who work in the steel industry or use its products.
Mr. MacGregor is a man of proven performance. He is subject to a partnership agreement and it was up to his partners to decide whether they would release him. They have released him on the conditions that I have explained. It is, as the right hon. Gentleman said in the only valid comment that he made, a transfer fee, and perhaps the bigger the transfer fee the better the player. The bulk of the money to be paid will be paid depending upon performance. It will not, except for the salary that I have announced, go to Mr. MacGregor himself, except for his share as a limited partner in the profits of the partnership. The cost of the transfer payment will not fall on the BSC; it will fall on my Department, or on the Exchequer.It will fall on the British taxpayer. The Government do not have any money.
It will certainly fall on the taxpayer, but the transfer fee is paid only—[Interruption.]
I remind the House about interruptions from a sedentary position. It is a long time since I said it, but it remains valid. They are grossly unparliamentary when they are persisted in—[Interruption.] The hon. Member for Bolsover (Mr. Skinner) really must harken to what I say.
I am doing so.
I have no wish to quarrel with the hon. Gentleman, but he must behave himself.
I repeat to the House that the bulk of the transfer package—that is, all except the £225,000—will be paid by the taxpayer only according to performance.
I was asked finally what will be the ingredients of the performance criteria. [Interruption.] The workers in the industry stand to benefit enormously by having an effective and successful chairman. The performance criteria still have to be defined. They will include not only the financial performance but such other matters as the strength of management, the stability of industrial relations, success in the export market, and productivity.The Secretary of State did not answer a number of questions that I asked him. First, what is his authority for payment; secondly, are we to have a debate; and thirdly, does he really believe that industrial relations are going to be improved by a man whose first statement is that he is going to take on the trade union leader with whom he will have to work?
The authority is the agreement of my colleagues, within action that is within our power; a debate is up to the usual channels; the man about whom we are talking was appointed by the previous Government as deputy chairman of British Leyland, and I am sure that the remark that the right hon. Gentleman quoted is taken totally out of context of Mr. MacGregor's character or views.
Is it not a thousand pities that the appointment of a man of Mr. MacGregor's abilities should be clouded by the farcical nature of the arrangements surrounding it, including the setting up of a mini-committee to decide precisely what those arrangements are? Has the right hon. Gentleman stopped to think what will be the effect of arrangements of this kind on the climate of pay negotiations?
I should have thought that the House would appreciate the importance of getting the best man for this job. All that has not been agreed is the criteria by which any payment by the taxpayer for performance will be judged. The taxpayer's money is not to be used except to the limited extent that I have stated—as justified by performance.
Is my right hon. Friend aware that, however excellent may be the qualities of Mr. MacGregor, the Gilbert and Sullivan complexity of the deal with Lazard is so open to misunderstanding and ridicule that many of us on the Government Benches will have the greatest possible difficulty in supporting him?
I am disappointed that my hon. Friend should take that view. He cannot doubt that, where there is an obligation by the man concerned—as there is in this case because he is subject to a partnership agreement—if he wants to leave, his partners can impose conditions. I have judged that this is the best man available for a vital national task and the transfer fee seems to me to be totally justifiable.
Is there any precedent for this extraordinary arrangement, and was it approved by the Cabinet and the Prime Minister as well as by the right hon. Gentleman?
There is no precedent to my knowledge in this country, but it is normal in America for rewards according to performance to be paid to executives. In America they have option shares. There is no need for a committee to judge performance, because performance is judged by the level of the shares on the market, according to which the executive concerned will, if it seems justified, gain an advantage.
My right hon. Friend will know—and his right hon. Friend the Prime Minister will know still better—that I am no uncritical supporter of his. Does my right hon. Friend accept that if Mr. MacGregor can achieve the kind of results for British Steel that Mr. Edwardes has achieved for British Leyland he will be cheap at the price—indeed, cheaper at a much higher price, and that the price in any case by comparison with what is paid in football transfer fees is not excessive? Will my right hon. Friend also confirm that when Mr. MacGregor takes office he will be at liberty to put forward plans for a reduction in the rate of the phasing out of the capacity of British Steel, provided that those plans in the long term result in no greater cost to the taxpayer?
My hon. Friend has made extremely sensible and justifiable comments. As for his last question, it will be for Mr. MacGregor to form his own judgment and make proposals, and I shall hope to hear from him in due course.
The right hon. Gentleman did not answer the question put by my right hon. Friend the Member for Battersea, North (Mr. Jay). In view of the totally unprecedented nature of this transaction, did it have the knowledge and support of the Cabinet and the Prime Minister personally?
The right hon. Gentleman knows very well that details of such matters are not revealed in the House. This is the Government's policy, and I am announcing it.
Will my right hon. Friend assure the House that no British-oriented senior executive manager could be attracted to undertake this task who would be willing to do so as a service to the country? Is not the problem that so much abuse is poured on the chairmen of nationalised industries by the press and the public, and the chairmen of nationalised industries are so concerned about Government interference, that many senior executives feel that they cannot undertake this task? How can that underlying problem be corrected?
My hon. Friend has put his finger on a real problem. The salaries recommended by the Review Body on Top Salaries bear very little relation to some salaries in the world market. I repeat that Mr. MacGregor is taking on this job at the salary which his predecessor, the present chairman, gets. The only additional benefit is a share as a limited partner in the profit of the partnership, which is hypothetical and cannot be known by us or predicted. I have been involved in the search for a new chairman for the BSC when Sir Charles Villiers should come to the end of his tenure for nine or 10 months. A couple of score of names have been considered, several of them very seriously. One or two people active in British industry who would have been highly suitable in the event found it impossible or wrong in their judgment to extricate themselves from their present responsibilities. In the event, this is the best man available, and I judge it to be greatly in the interests of the BSC and all those concerned with it that he has accepted this responsible task.
Does the right hon. Gentleman realise that it appears to Members on the Labour Benches that the Prime Minister has heard this statement for the first time now?
I must leave such guesses made by hon. Members to themselves. It is not for me to discuss the processes by which a decision like this is reached.
Is my right hon. Friend aware that we are fortunate in getting the services of Mr. MacGregor, as under his chairmanship AMAX grew faster than any other American metals corporation? Will he comment on whether it was open to Mr. MacGregor to retire from his partnership with Lazard Freres and, if so, whether Mr. MacGregor was willing to retire?
I acknowledge the validity of my hon. Friend's first comment. The question about Mr. MacGregor's freedom, subject to the partnership agreement, is for him. All I know is that the decision by him involved the agreement of Lazard Freres.
Is the Minister aware that this extraordinary arrangement will have a devastating effect on what is supposed to be the Government's policy of restraining wage demands? It is one rule for the rich and one for the poor. Why should Lazard Freres be rewarded to the tune of £1,150,000 if Mr. MacGregor does well for the Steel Corporation? What object is there in that? If he does badly, will Lazard Freres pay up? Is a man who is almost as old as I am likely to make a success of the Steel Corporation, which is an unmanageable business? Will he remain a paid director of Lazard?
I forget the first point—I remember it now—a bad example for the pay of other people. Surely the right hon. Gentleman understands that unless the management is the best available, the interests of the workers are sacrificed. In allowing Mr. MacGregor to leave in breach of his partnership agreement, Lazard is sacrificing the earnings that this highly active man has been bringing to the company since he has been with it. He has been a prolific profit earner for the company. That is why the figures have been set as they have. However, the bulk is payable only according to performance. As to AMAX, yes. I have agreed that Mr. MacGregor may keep a fee from AMAX.
rose—
Order. I propose to call three hon. Members from each side.
As the British Steel Corporation has to operate in an international environment, will my right hon. Friend accept that many of us understand the need to offer internationally competitive remuneration to anyone who takes on a job of that size?
Lest I have misunderstood one point, I wonder whether my right hon. Friend could say whether Lazard Freres, in the course of the performance review, is to participate in profits made by the British Steel Corporation.No participation is envisaged for Lazard Freres in the profits that we hope will be made by the British Steel Corporation.
May I press the right hon. Gentleman on the point raised by the hon. Member for Flint, West (Sir A. Meyer)? Will the criteria of performance of this immensely expensive new chairman, appointed in this Gilbertian situation, include his willingness to reconsider the proposals to shut down one-third of the steel industry, including highly profitable and viable plants like that at Consett?
He will make his own assessment of the situation, but in the meanwhile the plans that have been proposed by the BSC, to the extent that they are ready for fulfilment, will go ahead.
I recognise the right of companies in the private sector to do what they feel is right, but does my right hon. Friend agree that in the public sector, and particularly in a company such as the British Steel Corporation, which has been subjected to almost intolerable strains, one of the criteria in appointing a new chairman should be that he is a man whose appointment, both in its circumstances and in his person, can heal the harm done to that corporation? Does my right hon. Friend feel that the arrangement with Lazards can possibly be beneficial in bringing about a harmonious relationship? Would it not, in fact, have been better if the NEB had bought Lazard Freres and Mr. MacGregor with it?
What matters is that British Steel should get the best chairman that we can find. I believe that that has been achieved.
Is the Minister aware that, following the 13-week strike and in view of the closures affected and projected, industrial relations in the steel industry are at an all-time low and that his monstrous announcement this afternoon will make matters much worse? If the Government intend to steamroller this appointment through the House, will he at least give us an undertaking—to give Mr. MacGregor a chance—that he will institute an inquiry into the BSC before this gentleman takes over?
I do not at all have the impression that moral in the BSC is at its lowest. I believe that many steel workers will welcome the importance that the Government attach to getting the best man available in the world to carry out the vital task of putting the industry back on its feet.
If my right hon. Friend believes, as I am sure he does, that Mr. MacGregor is twice as good as anyone else available and that therefore the British Steel Corporation needs him and the Government need him to run the corporation, would it really not have been better if he had taken on Mr. MacGregor on a half-time basis? In that way, he would still have got a good man and this would have allowed him to keep his other appointments. Are we not reaching a position in which we do not appoint people to run nationalised industries in conjunction with other appointments, simply because it is customary not to do so? Is it not time we looked at this? There are plenty of people in the free enterprise sector who have more than one half-time appointment.
I repeat that Mr. MacGregor is taking on this responsibility for the salary that the present chairman is getting. I do not think that it would have been better to try to get him on a half-time basis.
Does the Secretary of State recall that when a distinguished Conservative predecessor—Disraeli— sought to acquire an expensive foreign asset for this country—the Suez Canal—he went to the merchant bankers—the Rothschilds—to raise the money, and did not seek to pay them for this help? Does he recognise that despite the farcical nature of his announcement today, the judgment that will be made must depend on the track record of that distinguished international business man, who has proved so successful in all that he has turned his hand to and whose success was recognised by the previous Labour Government in appointing him to the post that he held at British Leyland? Does he recognise that by the manner of his announcement today he has made the task of the new chairman very much more difficult?
I welcome the tribute of the hon. Gentleman to the performance of this remarkably effective business man, Mr. MacGregor. I do not accept his appraisal of what I have done. I think the House would have been critical if I had gone to the private sector and, by some means of persuasion, obtained the money from it.
Turning to the question already put by my right hon. Friend about the possibility of a debate, will the right hon. Gentleman urge upon his right hon. Friend the Leader of the House that he should make a statement to the House tomorrow about the possibility of a rearrangement of business next week, so that the opinion that has been expressed by all sides of the House on this matter can be debated at a very early stage?
I think that my right hon. Friend the Leader of the House will have heard what the right hon. Gentleman said. The right hon. Gentleman, I believe, is not considering adequately the interests of the steel workers. It is not sensible to chew over this decision of the Government. Let Mr. MacGregor go into action and have his opportunity.
When the right hon. Gentleman says that he does not think that I am considering the interests of the steel workers, will he bear in mind that I am considering not only their interests but those of the management and people who work in that industry, and that I and many of my people who have been associated with the steel industry regard both the manner of his announcement and the way in which he has acted as an insult not only to the people who work in the industry but to all the management in the industry. There are plenty of people in the industry who could have done this job without all the farcical bribery that the right hon. Gentleman has introduced.
The efforts made by the previous Government to find chairmen of nationalised industries are not within my knowledge—
He would have got a Labour Member.
Yes, he might have got a Labour Member. We are seeking a chairman who will rescue this industry and those who depend on it, and I do not think it makes sense to forget the reality that the better the chairman, the better the management, the men and the users of the British steel industry will be served.