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Commons Chamber

Volume 78: debated on Wednesday 1 May 1985

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House Of Commons

Wednesday 1 May 1985

The House met at half-past Two o'clock

Prayers

[MR. SPEAKER in the Chair]

Private Business

Glensanda Harbour Order Confirmation

Mr. Secretary Younger presented a Bill to confirm a Provisional Order under section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to Glensanda Harbour: And the same was read the First time; and ordered to be considered upon Tuesday 7 May and to be printed. [Bill 134.]

Oral Answers To Questions

Trade And Industry

Government Regulations

1.

asked the Secretary of State for Trade and Industry how many representations have been received by the Scrutiny Committee on the burden of Government regulations; and if he will make a statement.

The Parliamentary Under-Secretary of State for Trade and Industry
(Mr. David Trippier)

Field work for the "Burdens on Business" report involved more than 280 small firms and 14 business organisations. It has been published to stimulate further comment from all concerned.

Does my hon. Friend agree that European Community requirements are playing a significant role in increasing the burdens on business? What does he intend to do about that?

My hon. Friend is absolutely right. European Community requirements are a substantial and growing element in the regulatory burden. That is why my right hon. Friend the Prime Minister raised the matter at the last meeting of the Council of Ministers in late March. The Heads of State of all other member countries agreed with her, and I understand that the Commission has been asked to report back on necessary action.

What representations has the hon. Gentleman received about the burden of local government regulations on industry? Does he agree that over-zealous planning officers often place considerable burdens on businesses, especially small start-ups?

That certainly features in the report. Planning was a major concern in relation to small firms. That matter has been brought to the attention of my right hon. Friend the Secretary of State for the Environment, and we hope that action will ensue.

I congratulate my right hon. and hon. Friends on identifying these burdens and on the publication of the report. Does my hon. Friend agree that the quicker these obstacles to expansion are removed, the better? Will the Government consider whether the best way to achieve that is through the introduction of a deregulation Bill to scoop up and remove all those obstacles in one parliamentary measure?

As my hon. Friend will recall, in the debate on small firms on 18 January I said that some form of co-ordinated mechanism might be introduced to carry these initiatives forward. I chose my words carefully, because the decision as to the form of any such coordinating mechanism will have to be taken by people very much senior to me.

Does the hon. Gentleman agree that many local authorities have been extremely co-operative in relation to small businesses and that ratepayers have made considerable contributions, often carrying out duties which should be the responsibility of central Government?

I do not necessarily agree with that, although I agree that in many cases local authorities have tried very hard to assist small firms. We are concerned about the response of councils to the exhortations of the Department of the Environment—for example, in circular 22/80, which was supposed to give the benefit of the doubt to businesses seeking planning permission. A further circular 16/84 was issued by the Department of the Environment more recently and was widely welcomed at the Department of Trade and Industry. We await with great interest the response of the local authorities.

Passenger Cars

2.

asked the Secretary of State for Trade and Industry what proportion of the United Kingdom market for passenger cars is now taken by imports; and how this figure compares with that for 1978.

The Parliamentary Under-Secretary of State for Trade and industry
(Mr. John Butcher)

In the first quarter of 1985, 57·9 per cent. of the United Kingdom passenger car market was taken by imports. In 1978 the figure was 49·3 per cent.

Does the Minister agree that those figures prove that the Government are not defending the interests of the British motor components industry, given that in the 1970s it employed 1 million people but that figure has now dropped to 400,000? Will the Secretary of State now get on his cycle and defend the interests of people working in the motor industry by ensuring that multinational companies manufacturing in this country do not import complete vehicles from abroad? Will he also inform the Japanese that local content means United Kingdom, not European, content? Is he aware that the British motor industry will otherwise be decimated? What do the Government intend to do about that?

The hon. Gentleman has chosen the dates of his survey with conspicuous cunning. He is aware that between 1974 and 1979 imports of motor vehicles doubled from 28 per cent. to 56 per cent. It is this Government's duty to ensure that the more malignant trends of that period are put into reverse and that our motor industry becomes more competitive.

Of course we are anxious to see the maximum British content in British-built cars. That is why we stipulated certain measures in the Nissan deal and why we are anxious to support the flagship British motor industry builder, British Leyland, to the tune of £1·43 billion during the lifetime of this Administration.

To what factors does my hon. Friend ascribe the reluctance of the British public to buy British cars? Will those factors be taken into account when Austin Rover next wishes the taxpayer to subsidise it?

My hon. Friend should note that very good strides have been made by British vehicle builders. It is unfortunate that a large number of people in the United Kingdom have acquired the habit of buying foreign cars. They are not looking, as they should, at the better model range and increased quality now coming forward from British vehicle builders. I hope that they will reacquire the habit of at least looking again at British products.

In view of that answer, will the Minister take this opportunity to confirm that the Government, by refusing to allow British Leyland to put a new engine into production, are forcing it to buy Japanese engines, with a consequent loss of 5,000 jobs, mainly at the Longbridge factory in Birmingham?

As a Member for a distinguished constituency employing many car workers, the hon. Gentleman has a responsibility not to spread alarm and despondency by such questions. The matter that he has raised will be considered, among other matters, in the time-honoured tradition as part of the corporate plan. At the moment, I can say that the hon. Gentleman's question is pure conjecture.

I thank my hon. Friend for confirming that the Government are not yet prejudiced against the future of Austin Rover. Will he confirm that it would be in the best interests of the British motor industry if we had a British engine? Will he further confirm that if it was good enough for the mines to lose money, the modest extra sum of a comfort letter would help the British motor industry and save more than 5,000 jobs?

The whole question of future product development must be considered in the context of our discussions on the corporate plan. Of course, we appreciate BL's wish to see a design capability retained in the United Kingdom. Part of its submission is to be able to exercise that choice.

Will the Minister confirm what is known throughout the country—that the corporate plan includes a proposal to build a replacement for the A-series engine, costed at £250 million? Have not the Government refused to endorse BL's request? Is not the Department of Trade and Industry at war with Austin Rover over that project? Will the Minister end the uncertainty caused by the Government's reluctance to support the only remaining independent British vehicle manufacturer and stand by British industry, rather than force it into the hands of the Japanese?

Relations between BL and the Department of Trade and Industry are in their usual excellent shape. There is no confrontation or warfare. There is no formal bid for additional funding in the corporate plan. The question of BL's future product development strategy is one of the major matters to be considered as part of the discussions on the corporate plan. As previous Administrations have done, we shall place our conclusions before the House at the appropriate time.

Does my hon. Friend agree that one of the ways to improve British car market penetration, and so reduce import penetration, would be for hon. Members—when both inside and outside the House—to condemn practices such as industrial disputes, go-slows, demarcation disputes and excessive wage demands? Would not that improve the quality, productivity and delivery of British cars on to the British market?

My hon. Friend is right in identifying some of the past causes—[Interruption.]—of the British motor industry's difficulties. I am bound to say to him, if Labour Members will allow me to finish my sentence, that many of the malignant trends are being put into reverse and that British consumers should look yet again at the British product. In concentrating on BL, hon. Members may have missed an important target. There has been a significant increase in productivity and improvement in working practices within Vauxhall Motors and Ford. Vauxhall Motors is selling only 50 per cent. of its total production in the United Kingdom from the British-built source. It has only a 50 per cent., or less, British content in the cars which it manufactures. We are concerned that Vauxhall Motors and Ford should start cranking up their British content. British sales and British build.

General Agreement On Tariffs And Trade

4.

asked the Secretary of State for Trade and Industry what progress is being made towards a new general agreement on tariffs and trade round of international talks on trade.

11.

asked the Secretary of State for Trade and Industry what progress is being made in preparing for talks aimed at a new round of tariff reductions.

We are making good progress towards a new round of multilateral trade negotiations, although we do not yet have the agreement of all the GATT members. I hope that the Bonn economic summit will provide further impetus towards the launch of a new GATT round in 1986.

Does my right hon. Friend agree that freer trade will mean more trade and that more trade will mean more jobs in Britain? Will he give the House an assurance that the Government are doing what they can to ensure that all the GATT members enter into a new round of talks so that freer trade can be established as quickly as possible?

Yes, I can give my hon. Friend that assurance. I agree with what he has said. Since the second world war, world trade has increased eightfold, while world production has increased only fourfold. My hon. Friend has made an important point.

Does the Minister agree that free trade means free trade in both directions, and that that is an essential part of any agreement?

Yes, Sir. In any round of negotiations our aim will be to try to persuade other countries to remove any barriers that may exist against our exports.

Does my right hon. Friend accept that free trade will lead to more jobs only if the advice of the hon. Member for Oldham, Central and Royton (Mr. Lamond) is carried through? Britain has been a freewheeling area for most manufacturing countries, especially within the developing world, and even within the EC.

We have suffered because jobs have gone. Free trade in Britain has led to fewer rather than more jobs.

I cannot agree with my hon. Friend about that. We probably export more of our GDP than any other developed country—[Interruption.] It is interesting that such comments should be made today of all days when we know how confident British industry is about its export effort. My hon. Friend the Member for Macclesfield (Mr. Winterton) will know that we probably export more of our GDP than any other developed country. It is essential that we have overseas markets for our goods. That means that we must in general be in favour of free trade; that is, free but fair trade.

First, I appreciate the letter that I have received from my right hon. Friend. When he engages in international talks, will he be absolutely certain that they lead to a new multi-fibre arrangement that is acceptable to the British textile industry, whose future will depend on it entirely?

My hon. Friend will know that the Government have not yet come to a conclusion on the multi-fibre arrangement. I hope that we shall be able to discuss the matter in the near future.

Is the Minister aware that the answer that he gave to his hon. Friend the Member for Dumfries (Sir H. Monro) will create despondency in the textile industry? Whenever we hear his responses to questions on the textile industry, it seems that he is planning to open up totally free trade for the British textile industry. If he does that, he will have a war on his hands in the House.

I do not think that my answers need cause any dismay to the textile industry. It has heard and read reports of our exchanges on many occasions. It has made many representations to me, and I have engaged in many consultations. I am aware of the industry's view. I hope that the Government will soon have an opportunity to make their views clear to the House, and I am sure that we shall be able to convince it that they are right.

Does my right hon. Friend accept that moves towards a new round of GATT talks are extremely welcome? Does he also accept that a most important restriction on the growth of international trade is exaggerated and speculative movements in foreign exchange rates? Therefore, does he accept that he has a major departmental interest in the Government in following any avenues that may lead to a reduction in such movements?

My hon. Friend raises an extremely important point, but he will appreciate that it is primarily the responsibility of my right hon. Friend the Chancellor of the Exchequer, who has held talks about this and related matters in the OECD and in Washington.

Is it not true that the MFA was set up as a temporary measure behind which we could restructure our industry? Does not the Silberston report show that the damage caused to the British textile industry by at least liberalising the MFA would not be as great as is often claimed? Therefore, is there not a case, in terms of moral obligation and practical wisdom, to consider some liberalisation of the MFA?

I note what the hon. Gentleman says, and all those points will be borne in mind before decisions are taken. That is the view of the Liberal party on this issue.

When my right hon. Friend begins the new round of GATT, will he bear in mind the problems of Third world countries, which need to export to the European Community, and will he consider cautiously further attempts by the Community to erect trade barriers against products on which Third world countries depend for their existence?

I agree with my hon. Friend. In the European Community, Britain is trying desperately to retain a free trading element to give access to developing countries. Since we export to them, they must be given an opportunity to export to other countries. Otherwise, they will not be able to pay for the goods that they buy from us. It will be in our interests to do so.

Since our deficit in manufactured goods this year is already breaking all records, is it as self-evident as the Minister seems to believe that his free trade theology is best suited to our trading needs? Before he rushes headlong into a further round of tariff cutting, which can only increase our vulnerability to imports, will he ensure that we at least have a proper debate in the House and the country as to where the balance of advantage lies?

There is no question of headlong rushing, because trade talks are bound to take years. Nor are tariffs the major point. It is extraordinary that the hon. Gentleman should persist with such allegations on a day when we see that business confidence has increased, exports are increasing, the figures for manufactured exports are better than ever, there is more optimism. and export orders are at record levels.

Japan

5.

asked the Secretary of State for Trade and Industry if he will make a statement on his recent visit to Japan.

During my recent visit to Japan I had useful exchanges with senior Japanese Ministers, including the Prime Minister, about a range of multilateral and bilateral trade issues. I also met several leading industrialists with whom I discussed the prospects for further industrial co-operation and two-way investment.

I thank my right hon. Friend for that reply. Penetrating the Japanese markets requires not only commercial competitiveness but cultural understanding. To which bodies can smaller businesses especially look for guidance and advice as to how they can best penetrate Japanese markets?

The first point of contact for a company considering exporting to Japan and which needs advice is the Export to Japan unit of the British Overseas Trade Board, which can itself help and can direct companies to other places where help can be obtained.

When will the Secretary of State do something about the huge deficit between our imports of Japanese goods and our exports to Japan? He claims to be tough—the hammer of the unions. Will he show his toughness by standing up for British interests, especially with the Japanese?

That is a nice piece of gunboat diplomacy from the hon. Gentleman, but he should understand that things are not quite the way they were in the middle of the 19th century. There is little doubt in my mind that some members of the Japanese Government, including the Prime Minister, are as aware as the hon. Gentleman of the threat that will arise to the world free trading system unless Japan's trading surplus is abated. There will be many problems in organising a sensible abatement of that surplus. I do not entirely share the hon. Gentleman's gunboat diplomacy view, especially as gunboats are in short supply.

Well known as my right hon. Friend is as one of our principal gunboats in our trade disputes and relations with Japan, could he tell me what representations he has made to the Japanese Government on their predatory and disgraceful dumping prices in relation to the building of the Bosporus bridge? What did his counterpart in Japan say that they would do about this focused assault on our legitimate trading interests?

When I was in Japan, I was not aware of the scale of the subsidy that was being offered by the Japanese contractors and their partners in seeking to gain that contract. With regard to the bridge contract, the British company's bid and the scale of aid that was offered by the British Government were highly competitive with the Japanese company's bid and aid in that sector. However, the same was not true of either the pricing or the scale of aid offered on the associated roadworks; in particular, our partners in foreign companies were not able to come forward with an aid package the size of that of the Japanese. Having said all that, it seems to me that the Japanese tactics of subsidy in this case were scarcely compatible with their avowed aim of reducing their trade surplus. No doubt that will be brought to their attention.

Accepting that capitalism is a system of international competition and that the Government are dedicated to the capitalist concept, is it not true that for the British people the interests of British capitalism also have some interest? When will this capitalist Government, dedicated to the continuation of the capitalist system, do something about defending British capitalism against Japanese capitalism?

I think that the hon. Gentleman, uncharacteristically, may be in a state of some political confusion. I think that he is mixing up 20th century capitalism with 17th century mercantilism. I do not think that subsidies should form a large part of capitalism either in the United Kingdom or elsewhere.

Reverting to predatory pricing by the Japanese, may I ask whether my right hon. Friend is aware that there are 900 bridge builders in my constituency who would very much welcome some firmer international rules on the extent to which Governments can subsidise companies in important overseas contracts of this sort?

I would welcome not only firmer rules, but perhaps a greater willingness to abide by the rules; although again I have to say that in this case it does not appear that the Japanese Government broke such rules as there are.

If the Japanese people take no notice of the urgings of their Prime Minister to buy more goods from outside Japan, what steps will the Secretary of State contemplate?

Several steps could be taken, some of which I urged upon the Japanese Government. The Japanese Government could give a good example to the Japanese people by making major capital purchases from overseas. That is one thing that could be done. They could also help by introducing measures to internationalise the yen so that it more accurately reflected the strength of the Japanese manufacturing economy. Taking steps along those lines could ease that problem.

Does my right hon. Friend accept that the predatory pricing policies of Japan and the dumping of credit are an absolute disgrace, and that the consequence is that the Japanese are simply hijacking our industry? The bridge builders in the constituency of my hon. Friend the Member for Darlington (Mr. Fallon) will be eliminated as a result. Furthermore, many other British industries have had their bases destroyed by such policies. What is my right hon. Friend going to do about it?

I can well understand the anger felt by my hon. Friends, because clearly the British company's bid was competitive and better than that made by the Japanese company. British Government aid to that company was on the same level as Japanese aid, but unfortunately the countries associated with us were not as smart as the Japanese company's associates.

I agree that the Japanese Government, in offering cheap credit and subsidy to that extent, were foolish. It was probably unnecessary under the circumstances for the Japanese Government to go that far to get the order. The Japanese Government's action was incompatible with the programme they have announced to reduce their trade surplus. That will be brought clearly to their attention again. As I said in Japan, unless that surplus is abated, unless their markets are opened and unless the Japanese desist from some of their trading practices, protectionist forces will be impossible to resist.

Is the Secretary of State aware that, although I have no doubt that he raised these issues with the Japanese in Tokyo, there is a great difference between Japanese professions and Japanese actions? Precisely what undertakings, if any, did the right hon. Gentleman receive from the Japanese about a change in their policies? If no undertaking was given, what action will the right hon. Gentleman take to ensure that such undertakings are given?

When my hon. Friend the Member for Macclesfield (Mr. Winterton) is invited to speak from this Box I hope that he will put his case, but perhaps he will allow me to answer the question.

The undertaking that I received was that the Japanese Government would pursue with vigour the policies which Mr. Nakasone announced on 9 April—that is, opening and liberalising the Japanese market. An undertaking was given to seek further to reduce the non-tariff barriers where we could show that effective non-tariff barriers were being imposed by the Japanese Government.

Although no guarantees were given, a great deal of discussion took place about the liberalisation of the Japanese financial markets. I believe that that liberalisation will occur, although much too slowly for my liking. I have no doubt that the Japanese are keeping some of their powder dry, like most other countries, for future rounds of trade negotiations.

Manufacturing Industry

6.

asked the Secretary of State for Trade and Industry what is the most recent figure for output in manufacturing industry; and how this compares with the figure for the same month five years ago.

For February 1985 the index of production for manufacturing is 102, based on 1980 being the equivalent of 100. This is 4 per cent. lower than its value in February 1980, though 10 per cent. higher than its value during the trough in the first quarter of 1981.

Does my hon. Friend not find it alarming that output has fallen by that amount in the past five years? To what extent does he think that Government economic policies have been responsible for the fall?

My hon. Friend will know that manufacturing in the previous peak in 1979 was below that of the earlier peak in 1973. The trend is long term. I should have thought that my hon. Friend might have felt it worth while to refer to the significant CBI industrial trends survey published today. It is one of the most optimistic ever published. Manufacturing export orders are shown to be the best since 1977. The outlook for employment in manufacturing is also the best since 1977 and every sector is displaying much greater confidence. That shows that Government policies are benefiting manufacturing.

Is the Minister aware that a particular example of the decline can be seen in south Leeds, which was the manufacturing core of that great city? The industry has been in decline there in recent years. Is it now the perceived wisdom that manufacturing industry will never come back again and that it is all over and done with?

Of course that is not the perception. It is very much the Government's intention that the country should have a strong manufacturing base. That is borne out by the results shown in the CBI survey, which shows that manufacturing is participating fully in the recovery and that in 1984 manufacturing grew more quickly than the economy as a whole.

Exports are encouraging, but if we are to build on that tentative improvement we shall have to remain competitive. Is my hon. Friend not worried about the growing signs of protectionism around the world? Does that trend not reinforce the need for a round of GATT talks very soon in order to stop the growth of protectionism, which will damage our jobs and exports?

I am sure that my right hon. Friend the Minister for Trade will note what my hon. Friend says.

Does any member of the Government know anything about major manufacturing industry? If not, will the Government listen to those who do, such as Mr. Harvey-Jones of ICI and Lord Weinstock?

I will certainly listen to what the chairman of ICI says, especially about pay restraint. I noted what Mr. Harvey-Jones said the other day, and I agreed with some of his comments. I agree that one of the concerns of the manufacturing sector is the level of electricity prices. That is why we need a competitive coal industry—one one of the aims for which the Government have worked very hard.

Is it not true that there are bags of opportunities in our home market as well as opportunities for exporters? If only our motor manufacturers, for instance, took the same proportion of our home market as the French, the Germans and the Italians take of theirs, we would have the answer to the question, "Where are the jobs to come from?"

My hon. Friend is absolutely right. I am sure that he is well aware that every 1 per cent. of penetration of the domestic market is equivalent to a quarter of a million jobs. If only we could hold back the tide of imports, employment would rise.

The Minister's complacency will be taken very badly by British manufacturing industry. Is he not aware that manufacturing output is still 10 per cent. below what it was when the Government came to power in June 1979? That is a bigger drop than has been suffered in any other industrial country, and the biggest drop since the war. Is he not thoroughly ashamed of that disgraceful record?

I would take the hon. Gentleman's comments more seriously if he acknowledged that manufacturing output fell sharply between 1974 and 1979. I was referring not to what the Government thought about the future of business but to what business men themselves see as the future for employment, investment, output and exports.

Small Firms Counselling Service

7.

asked the Secretary of State for Trade and Industry if he will make a statement on the continuing role of his Department's small firms counselling service in the light of the growth of the local enterprise agency movement.

The work of the small firms counselling service is being reorganised to operate increasingly through and in partnership with local enterprise agencies.

Is it my hon. Friend's intention therefore to change the objectives set for the counselling service?

I see a continuing role for the small firms service in giving its excellent advice to existing small businesses and start-ups. I hope that, over time, the local enterprise agencies will concentrate more on startups, leaving the resources of the small firms service to be concentrated in the area of special skills and also on the up-market counselling that it does so well.

Will the Minister give further consideration to the work in this field of the Co-operative Development Agency, which the Government supported last year? The small workers' and service co-operatives are now growing rapidly, and they need counselling in both marketing and accounting if they are to survive.

I know of the hon. Gentleman's interest in co-operatives. As I have said before, we are very anxious to support them. We have put the taxpayer's money where our mouth is by supporting the Co-operative Development Agency. We are funding it for the next six years to the tune of £200,000. More than 1,000 co-operatives have now been established in the country, but that figure must be compared with a total of 1·4 million small firms and 2·5 million self-employed. The £200,000 that we give the Co-operative Development Agency every year should also be contrasted with the £75,000 that we give to Business in the Community, which relates to the local enterprise agency movement. Business in the Community helps the local enterprise agency movement in many ways. We are incredibly generous to the Co-operative Development Agency.

Is my hon. Friend aware of the excellent work of the small firms service in west Norfolk. and in particular the work of Dr. John Knights? If my hon. Friend is to integrate the work of the small firms service into the local enterprise agencies, is there a continuing role for it as a separate entity?

My hon. Friend used the word integrate, but I prefer to use the word complementary in describing the way that the two services will operate. I envisage a continuing role for the small firms service and I do not envisage a time when we can do without it. It has doubled over the past two years. The expertise in the counselling teams, which are composed, as my hon. Friend knows, of industrialists and not civil servants, would be difficult to find in local enterprise agencies. Therefore, the roles are complementary.

Some of these agencies are undoubtedly doing an excellent job, but does the Minister recognise that many of them are virtually talking shops? Is the Department carrying out a cost-benefit analysis of their work, and is any consideration being given to the establishment of some objective standard of performance?

I am surprised that the right hon. Gentleman should frame his question in that way. I am sure he will realise on reflection that the local enterprise agencies would be offended at being called talking shops. The only shops that one could connect with the local enterprise agencies movement stems from the fact that we are anxious that, within the communities, they should be one-stop shops. A survey has been conducted by Business in the Community, which shows that the movement is extremely successful. Another recent survey conducted in Scotland shows that where there are local enterprise agencies there can be a reduction in the level of unemployment by about 2 per cent.

Steel Scrap

8.

asked the Secretary of State for Trade and Industry how many representations he has received about the export of steel scrap.

Since 1 January Department of Trade and Industry Ministers have received 54 letters and telexes about the export of steel scrap. I have also met delegations that have referred to this subject.

Is the Minister aware that in the first two months of this year scrap prices rose by over 40 per cent., largely because subsidised industrialists in other countries such as Spain are buying imported scrap at inflated prices and thereby pushing up the international market price? In view of the resulting threat to the British foundry industry, will the Government intervene now to deal with this, instead of tolerating a threat to foundry workers' jobs brought about by the Government's doctrinaire worship of free market forces?

I agree with the hon. Member that the Spanish subsidy is an important aspect of the problem. This is being raised through the EEC and is being studied, and we are seeing what can be done about it. However, I do not agree with the hon. Gentleman that the answer to the problem is to impose controls on the export of scrap. That would not be effective if it were carried out in one country alone. Other countries in the EEC are strongly opposed to scrap control. Secondly, we have to take account of the needs and interests of the steel scrap industry as well. It is an important industry here, employing 100,000 people and making exports of £300 million a year. We cannot just shift the burden of the problem from one sector to another.

Does my hon. Friend accept that part of the problem for the steel scrap industry is continuity, that many of the contracts entered into are long-term contracts, and that any suggestion of controls and turning the tap on and off would destroy confidence in the industry, the importance of which to the economy my hon. Friend has just outlined?

I agree with my hon. Friend. A point that I should perhaps have added to what the hon. Member for Falkirk, West (Mr. Canavan) said when he quoted the figures on prices, comparing the latest month's with January, is that the recent trend has been for quite a reduction in prices. In April, prices of the main grades were £65 a tonne compared with £85 a tonne in the previous month. We have to see what happens in the market, but those price increases are from a very low level and in real terms are not all that different from those obtaining in 1979.

As I am one of the 54 who have made representations to the Minister on behalf of a private enterprise firm in my constituency, will he appreciate that it is not sufficient to turn a blind eye to this situation, otherwise more firms will go the the wall, with consequent redundancies?

Of course we must not turn a blind eye to the situation, and the 54 representations ensure that we cannot do that. The hon. Gentleman must also look at the interests of the scrap industry. Just because one industry is facing a problem, we cannot shift the burden of that on to another industry. There may be a problem of price. There is not a problem of an overall shortage of scrap, and it is to a shortage that the provisions for controls within the ECSC treaty relate. There is not a shortage of scrap at present.

Does the Minister accept that as far as the special steels industry is concerned nationally, and certainly the special steels industry in my constituency, the problem continues to be grave? Would it not be wise for the British Government to recognise that the Spanish Government are serving the interests of Spain, and that it is about time that this Government began to serve the interests of Britain?

I have acknowledged that the Spanish problem is serious. That has to be examined in the context of Spain's accession to the EEC, and it is being examined. This matter was raised at the last Council of Steel Industry Ministers. We cannot impose controls unilaterally. The hon. Gentleman must recognise that there are other countries in Europe which are firmly opposed to the imposition of scrap controls. What would be the point of scrap controls imposed on one country if it exports to another country, which then exports out of the EEC? Such a gesture would make the hon. Gentleman feel better, but it would achieve nothing.

"Support For Business"

9.

asked the Secretary of State for Trade and Industry what responses he has received following the publication of his advisory booklet, "Support for Business".

Over 200 telephone calls a week about DTI assistance are being received at the new London central inquiry point. Regional inquiry points are also receiving many calls.

In congratulating my hon. Friend on his initiative, may I ask whether he expects the supplementary leaflets to be available when he makes his welcome visit to Bolton during Local Enterprise Week?

We have already produced the leaflet on support for innovation. We hope that shortly we will produce the leaflet on support for investment. I shall certainly try to get it out in time for my visit to Bolton during Local Enterprise Week.

When will the Minister get the Prime Minister to understand that no amount of small, detailed schemes for the alleged support of industry can possibly compensate for the appalling burden of interest rates that are persistently higher than those of all our competitors, except Italy, the overbearing domination in the market of cash-rich, huge companies, which support the Government financially or otherwise, and, above all, the lack of purchasing power among the unemployed and the other millions of poor families in the country?

I think that the hon. Gentleman may have framed his question yesterday before having read this morning's newspapers. The Financial Times of today states:

"Small companies' confidence about general trading prospects improved markedly in the first quarter of this year, says a survey due out today. There is a strong upturn in the number of groups expecting to employ more staff, and a revival in investment plans, the study says."

Would my hon. Friend care to comment on whether there is another thing that businesses need, not least small businesses, which is to be left alone, especially by local government?

Wherever I go on my regional visits, I seem to be given conflicting advice from any audience that I address. On the one hand, there are people who say to me, "Let's have some more money"—or that is what they really mean when one takes off the fancy wrapping. That is the bottom line. That is, of course, taxpayers' money. In seemingly direct contrast to that, I get messages saying, "For goodness' sake, get out of our way, get off our backs and allow us to run our businesses in the way that only we can do." That is why we conducted the burden scrutiny exercise and that is why we published "Burdens on Business", and we hope to carry forward those initiatives to cut out the red tape and to free small business men from being prisoners of their in-trays.

Departmental Employee (Background)

10.

asked the Secretary of State for Trade and Industry if he will make a statement on the latest position regarding the civil servant in his Department whose Nazi background has been looked into.

The inquiries undertaken by the Department have revealed no grounds for disciplinary action against this officer.

Is it not strange that someone with such a known notorious background should have been taken on by the Department in the first place? Is the right hon. Gentleman aware that while someone who, for example, is a supporter of CND might be described by those who do the vetting or interviewing as a subversive, the person who is the subject of my question is a civil servant and, as the right hon. Gentleman has just said, will continue in that job?

The hon. Gentleman is making a serious mistake in the line of his questioning. He should understand that two problems may arise in relation to the political views and activities of a civil servant or a potential civil servant. One is whether he or she may or may not be a subversive—that is, a potential traitor to this country.

Exactly, that is one consideration that may apply. A second and broader consideration is that, whatever political views an official may hold, he is, within the limits of certain ranks of the Civil Service, debarred from active participation in national politics or from intervening publicly in matters of national, partisan controversy. This gentleman fell into neither of those categories.

Is the Secretary of State aware that the Minister for Trade told me in a letter that the Government confirmed

"that the Civil Servant in question attended meetings at a London hotel earlier this year regarding the formation of a new Right-wing organisation."
However, the view is taken by the Government that since the meetings to form this new Right-wing organisation were held in private, no rules were broken. Is it seriously the Government's position that, provided political activity does not take place in public, it is permitted under the rules?

There is nothing to prevent an official holding views or going to a meeting to listen to those who hold similar views or discussing his views in private. If we went to the extent of saying that the mere expression of an unpopular political view in private should be cause for dismissal from the Civil Service, we should be going a long way down a road which I think the right hon. and learned Gentleman and most of us would regret. I find the views of extremist Socialists, whether they are National Socialists or any other kind, extremely displeasing——

—but that should not give one the right to dismiss a person for holding such views.

Japan

12.

asked the Secretary of State for Trade and Industry what are the prospects for trade with Japan.

United Kingdom exports to Japan in 1984 rose by 16 per cent. on the previous year, to almost £1 billion. I hope to see this favourable trend continue, but much will depend on the effectiveness of the Japanese Government's 9 April import promotion package and on the continued efforts of exporters.

I thank my right hon. Friend for that reply. Despite the restrictive practices of the Japanese, how do we compare with other would-be exporters, such as Germany, to Japan? Are all countries being treated equally unfairly?

All countries are finding it equally difficult to export to Japan. We do not have figures on a strictly comparable basis from our own sources, but according to Japanese figures, which differ slightly from ours in some respects, we have been doing rather better than the Germans in increasing our exports—our exports and imports are of the same order as those of the Germans—and we have been doing better than the French, whose exports to Japan fell last year.

Does my right hon. Friend agree that one can lead a horse to water, but one cannot make it drink? In other words, unless our goods are what the Japanese people, as opposed to the Japanese Government, want, they are not likely to buy them. Does he further agree that we should equally ensure that our goods are better than Japanese goods?

Yes, indeed. The essence of a successful economic system must be competitiveness. In some areas our goods are selling extremely well in Japan. For example, Wedgwood china is selling so well there that Japanese manufacturers come as near as they dare to counterfeiting it in their imitations of the styling and the manner of marketing. So that is a clear case where competitiveness can pay.

Is the Secretary of State aware that these talks with the Japanese have been going on for many years, when a previous Tory Government were in office and when a Labour Government were in office and that the Japanese managed to string those Governments along by saying that they were going to change things a little bit later, but not just now, in favour of Britain? Will the right hon. Gentleman also bear in mind that one of the factors that enables British people to buy Japanese goods is that we are surrounded by hypocrisy? Is he aware, for instance, that at the time when the leader of the Liberal party was saying "Buy British" he was driving a Japanese car and that he stopped driving it only when he found that the British School of Motoring was to give £188,000 to the Liberal party, when he started driving a British car?

The hon. Gentleman is, as ever, amusing and, as ever, of course, he is deeply conscious of being surrounded by hypocrisy.

Small Firms (Marketing Advice)

13.

asked the Secretary of State for Trade and Industry whether he is satisfied with the level of advice on marketing available from his Department to small firms.

I thank my hon. Friend for his reply. Will he say what he intends to do to assist more firms with their marketing problems?

I am very conscious of the importance of marketing as one of the key elements in running a successful business of any kind. We have a golden opportunity to run a pilot marketing scheme in certain areas as a result of the non-quota ERDF money that is being made available in the steel, shipbuilding and textile areas. We are obviously very anxious to monitor how that marketing scheme is working within the business improvement service package to establish what degree of success has been achieved.

Is the Minister aware that many voluntary bodies have established small businesses, which are helping to create employment, and that they could do a lot more if they were assisted with marketing within the voluntary sector? Is he aware that one of the biggest frustrations is the lack of liaison between the MSC, which often provides initial funding, and his Department, which seems not to be aware of the developments within the voluntary sector and the general problem that responsibility for assistance to the voluntary sector is split among so many Departments? Will he take responsibility for co-ordinating the activities of voluntary bodies to create employment and marketing?

I should certainly like to look in greater depth at the problem which the hon. Gentleman has outlined. An initial suggestion, which might prove helpful, is that those voluntary organisations should get in touch with the small firms service, because what I omitted to say earlier is that there is a degree of marketing skills within these small firms counselling teams.

Is my hon. Friend aware that many small firms within my constituency and elsewhere would be much more successful in their marketing if they could get better help and support from the banks? Will he look at that question?

There is no doubt in my mind that over recent years the main clearing banks have proved to be more helpful and flexible than they had been in the past. Certainly my mail bag is full of complaints about the banking system and, perhaps, a degree of inflexibility on the part of the banks. Although I am not standing at this Dispatch Box to defend the clearing bank system in any way, I must point out that it would have been impossible, for example, for us to get the loan guarantee scheme off the ground without the support of the banks, and I very much welcome that support.

Overseas Projects Board

14.

asked the Secretary of State for Trade and Industry what response he is making to the representations made by Mr. Roy Withers, chairman of the Overseas Projects Board, about the nature of Government support for the board; and if he will make a statement on the level of Government support for the board.

What consistent support is this country going to give, in terms, for the capital goods industries to make sure that they are no worse than terms offered by our industrial competitors?

As the hon. Member will know, we give a great deal of help. There is the projects and export policy division of this Department, which is engaged in trying to help project business; we have the fixed rate export finance scheme by ECGD and we also have the aid and trade provision, which has gone up from £36 million to £66 million a year. So quite a lot of support is given and, in fact, we have won a great many projects.

Steel Industry

15.

asked the Secretary of State for Trade and Industry when he will be meeting the chairman of the British Steel Corporation to discuss the corporate plan for the steel industry.

BSC has only recently been in a position to resume its normal corporate planning process, and at present my right hon. Friend has no specific plans for an early meeting with the chairman to discuss the corporate plan.

Does the Minister appreciate that there is concern at the Llanwern steelworks about the failure to give the go-ahead for the concast project? Therefore, will he press the chairman over this issue, bearing in mind that the works has beaten all efficiency and production records in recent years—a trend, presumably, which the Government are trying to encourage?

The hon. Gentleman has raised this matter several times at Question Time and at Welsh Questions. As he knows, it is a matter for the corporation to put to the Government, and the corporation has not done that as yet.

Will my hon. Friend confirm that the Government's policies in relation to the BSC have been highly successful and have led to increased profitability, increased productivity, and a position in Europe which enables it to compete effectively with almost every other European steel producer?

I hope that the Government's policies have contributed to the success of the BSC. The progress on productivity has been dramatic. We have equalled and surpassed the levels in France and Germany and done our restructuring. The BSC project is now poised to reach viability. It is a tribute not only to the Government but to the management and all those who work in the corporation.

Order. I said that I would take the hon. Gentleman's point of order after Question Time.

The hon. Gentleman is entitled to raise it, but I am entitled to say when I will take it, which is after Question Time.

Order. I ask the hon. Gentleman to bear with me. I have said that I will take his point of order after Question Time, and I certainly will. We have one more question in Question Time to the Secretary of State for Trade and Industry, and that is No. 46.

British Aerospace

The following question stood upon the Order Paper:

3.31 pm

To ask the Secretary of State for Trade and Industry if he will make a statement on his Department's proposal to sell its residual shareholding in British Aerospace.

3.31 pm

The Government's residual shareholding of 96,852,746 ordinary shares, together with 50,000,000 new ordinary shares issued by the company, are being offered for sale at a price of 375p per share, of which 200p will be payable on application and 175p by 10 September 1985. All the offered shares have been underwritten. The offer will close on 10 May 1985.

Applications for all the offered shares have been received from priority applicants, who have been guaranteed allocation of 55 per cent. of the shares they have applied for. The remaining 45 per cent. are available for applications by the public subject to the preferential entitlements of existing shareholders and eligible employees of the company.

Copies of the prospectus for the offer have been placed in the Library.

I am delighted that the sale of the British Aerospace shares is going so satisfactorily. I hope that many workers within the industry will take up shares. Will my hon. Friend say whether he thinks, as I do, that this sale of shares is widely welcomed within the aerospace industry as a whole?

I am grateful to my hon. Friend for his comments. I am sure that the sale of the Government shareholding has been welcomed by the company, because British Aerospace has demonstrated its ability to operate profitably in the private sector. I am sure that the aerospace industry as a whole—and, indeed, the whole country—will benefit from the return of the company to full private ownership.

Is the Minister aware that today's statement is a further breach of the undertaking that the Government gave at the time of the sale that they would retain at least 25 per cent. of the shareholding? Virtually the whole of the profits of the company come from military orders, which are largely dependent upon public funding. There is a very considerable national interest involved and it is being abandoned by the sale. Far from that being welcomed, there will be widespread anxiety in the country about this further handing over of a national asset to private interests.

I refute totally what the right hon. Gentleman has said. It is not a question of abandoning a national interest. He will be aware of what was said in 1981 before the first stage of privatisation took place—that no further move would be made for the foreseeable future. It was indicated then that it would be in a year or two, and that the special share—details of which are set out in the prospectus, which I invite the right hon. Gentleman to read—would totally safeguard the national position, the special share being vested, as the right hon. Gentleman well knows, in my right hon. Friend the Secretary of State for Trade and Industry.

Will the Minister say why he believes that the sale of the shares will make British Aerospace more efficient? Is it not the case that British Aerospace has difficulty over dealing with its European partners, both in collaboration and in competition, because they have more Government support than is provided to our industries? Does not the sale of these shares have more to do with raising Government money than with making one of our primary defence industries more efficient?

No, it certainly does not have anything to do with that issue. If the hon. Gentleman cares to consult the company, which I am sure he will, he will discover quite quickly that it is extremely pleased not only that there should be a rights issue but that the shares should be made freely available on the market, thus indicating to the world at large that it is not dependent for its success upon a major Government shareholding.

Is my hon. Friend aware that many small shareholders who before the British Telecom sale had probably never heard of shares will welcome today's announcement? Can he say what special measures he will take to ensure that the small shareholder is favoured in the allocation?

Our attitude is favourable towards the interests of the small shareholder. However, my hon. Friend will appreciate that until the offer has been subscribed we cannot make any statement about the basis of allocation.

Will the Minister confirm that this company cannot be profitable without Government support? It is entirely dependent upon Government money. Is it not nonsense to sell off in this manner a high technology company whose future will be at risk if it has to depend upon the private market? Should it not therefore be retained in the public sector?

No, it should not. The hon. Gentleman is doing a great disservice to British Aerospace by describing it as being dependent upon Government support. It is not dependent upon Government support. There is a world of difference between the Government contracts and the export business of British Aerospace, which amounts to 63 per cent. The hon. Gentleman conveniently ignores that non-governmental business.

To follow up the question of my right hon. Friend the Member for Glasgow, Govan (Mr. Millan), does the special share provide any kind of permanent guarantee? Are the promises to be honoured?

I refer the hon. Gentleman to the prospectus, where the details are set out exactly. I shall not detain the House by reading out the summary of rights and restrictions attaching to the special share. They are to be found in paragraph 7 of the statutory interests section. I can assure the hon. Gentleman and the House that it safeguards the national interest.

What proportion of the remaining tranche to be sold has been reserved for employees?

Is the Minister aware that the main reason why the Government are proceeding with the sale is the need by the Treasury to raise more money and that this has been placed far ahead of the efficiency or profitability of the industry?

Secondly, is it not clear that the Government are breaking a pledge which they gave to the House? When the legislation was being discussed the Government told the House of Commons that they would retain 25 per cent. of the shareholding. There was no mention at that time of a golden share. It was only after the Government decided to renege on their commitment to the 25 per cent. that they pushed the golden share into place.

Thirdly, will the Minister tell us whether Kleinwort, Benson, the bankers handling the sale, will on this occasion allow its employees to buy shares, as the Government have confirmed happened in the case of British Telecom, which, surprisingly, appears to have been approved of by the Government?

The purpose of the undertaking that was originally given—that 25 per cent. of the shares would be retained—was to block any change in the articles of association dealing with foreign ownership. As the special share will be equally effective in achieving that purpose, there is no reason to retain the 25 per cent. shareholding.

As for the merchant bank advisers, may I remind the hon. Gentleman that Kleinwort, Benson is advising British Aerospace; it is not advising Her Majesty's Government. The Government are being advised by Lazard Brothers which has intimated to us that the staff who are directly involved in this exercise will not be allowed to participate in the offer.

Questions To Ministers

3.40 pm

On a point of order, Mr. Speaker. I raise this point, on reflection, more in sorrow than in anger. My first reaction was one of anger, but I think that the Secretary of State for Trade and Industry, who equated all Socialists with National Socialists, must have been ignorant and did not understand the nature of the struggle against Nazism.

Will the Secretary of State apologise to hon. Members and to the country for equating National Socialists with democratic Socialists, who fought, arms in hand, against the Nazis and laid down their lives? During the second world war, the deputy Prime Minister of this country was a member of the Labour party and a democratic Socialist. Thousands of my colleagues, who, like me, joined the forces at the age of 19, laid down their lives. They were democratic Socialists, and we find it offensive for any individual—especially the Secretary of State, who has suffered at the hands of certain people—to make that sort of allegation against democratic Socialists who died in the fight against Fascism.

I ask for an apology from the Secretary of State. I hope that he will retract his statement. I am sure that he will recognise, on reflection, that he made a grave error.

Further to that point of order, Mr. Speaker. I am happy to help the hon. Member for Liverpool, Walton (Mr. Heffer). He would have a good point of order if I had said what he, in his excitement, believed that I had said.

I referred to the views of the gentleman—one of my officials—who was described by the hon. Member for Walsall, North (Mr. Winnick) as having a Nazi background. As the House will know, "Nazi" is a shorthand term for the National Socialist German Workers party and I expressed my distaste for extremist Socialist views—I should be happy to make that "anti-democratic extremist Socialist views"—of any kind, whether they are National Socialist or other versions of Socialism.

Further to that point of order, Mr. Speaker. Perhaps you can help me. On question No. 10, which you may recall was about a particularly loathsome individual, Mr. Denis Pirie, it was said that his views were silly. They were not silly——

Order. I hope that the hon. Gentleman is not trying to perpetrate something of which we are not in favour, which is to put a supplementary question that he was not called to ask during Question Time.

With your indulgence, Mr. Speaker, may I finish my question, which I believe is important? You must have read Mr. Pirie's views. They were not silly; they were evil. Do you think it right that on the great point of principle about whether the views of a man working for a Government Department are silly or evil only one supplementary question should be allowed? How do you judge what is an important question?

As the House well knows, I make a judgment in these matters and I have to take into account other questions on the Order Paper and the broad, important issues that they involve. I made that judgment today.

Order. The hon. Gentleman asked his question earlier, and I hope that we are not about to pursue the matter.

Yesterday, Mr. Speaker, you made a plea for moderation of language. In the light of that, would it not be helpful if the Secretary of State for Trade and Industry did not come here with his poisonous tongue?

I think that that is an unworthy accusation, as the Secretary of State has made an apology.

On an entirely different point of order, Mr. Speaker. You gave my hon. Friend the Member for Stevenage (Mr. Wood) the privilege of asking question No. 46 after the official end of Question Time. I am deeply envious of that privilege and I wonder whether you can advise me as to how I may promote my questions in that way.

I did not grant it. It is up to Ministers to say whether they wish to answer a question at the end, but it is a well-established practice.

I am anxious not to prolong the proceedings, but I believe that in the response of the Secretary of State for Trade and Industry to the point of order raised by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) no apology was actually made. Moreover, the right hon. Gentleman continued to relate National Socialism to democratic Socialism when National Socialists have nothing to do with Socialism.

I heard clearly what the Secretary of State said, and at this particular time, 40 years on from a war in which the hon. Member for Liverpool, Walton (Mr. Heffer) and many other Members, including myself, were involved, I think that we should leave the matter there.

Commercial Rate Limitation (Scotland)

3.45 pm

I beg to move,

That leave be given to bring in a Bill to empower the Secretary of State for Scotland to set a ceiling on increases in rateable value imposed by assessors on commercial premises in the course of revaluations in Scotland; to make emergency powers available in the short term to provide assistance to those commercial ratepayers whose commercial viability is threatened by rate cost increases of more than 25 per cent. as a direct result of revaluation: and for connected purposes.
The Bill is necessary for a number of good and cogent reasons. Equally important, however, is the need for the Government to act or at least to make their position clear immediately. In this context, that means that decisions must be taken and announced within the next two weeks. In my view, if an announcement is not made before the Conservative party conference in Perth. it will be too late. A financial formula must be found to give some hope to the thousands of commercial ratepayers, both large and small, who face rate increases for 1985 of the same magnitude as their net profits for 1984.

This month, businesses will face the first instalment of the 1985–86 rates. Although some increase in the commercial rate burden has been anticipated in their budgets, it is unreasonable to expect businesses to have anticipated the extent of the increases. Many are now unable to draw up realistic budgets which will balance for 1985–86 and are being told by their financial advisers that they are no longer viable as a direct result of the rate increases. If nothing is done between now and mid-May, business men will have to choose between substantial staff lay-offs, at best, or total closure, at worst. The Bill is thus no academic contribution to the current debate about the need for rate reform. It seeks to throw an emergency lifeline to business men on the brink of going under for good.

It is now widely agreed that the combination of the reductions in rate support grant suffered by local authorities in recent years and the recent revaluation have produced an unexpectedly heavy burden on ratepayers in general. The Government recognised that in relation to the domestic sector by bringing forward a welcome increase in domestic rate relief to the extent of £38·5 million. When that relief was given, Ministers were still making soothing, platitudinous noises about the increased burden on commercial ratepayers, basing their argument on the average figures available at that time. We were told that on average commercial ratepayers in Scotland would suffer increases of 1 per cent., 2 per cent. or perhaps 3 per cent. We were also told that there would be winners as well as losers—that applies to Russian roulette, too. The Government also said that individuals who believed that they had been assessed unfairly could resort to the appeals procedure, but I submit that Ministers can no longer hide behind average increases which disguise wildly fluctuating individual increases.

The detailed information in the draft valuation rolls is not yet generally available because they will not all be published until the end of May or early June. However, there are specific examples of individual increases, sometimes concentrated in discreet localities. They have exploded the myth that there is no problem: there is a very real and urgent problem, as can be shown by referring to only a few examples.

I begin in the northernmost part of the United Kingdom, and quote, courtesy of the Shetland chamber of commerce, a camera shop which in 1984 paid rates of £500; in 1985 it is expected to pay £2,712. The only way to meet that increase is by selling extra cameras and film, but there is no way in which that can be done. It is quite unrealistic for such increases to be borne by shops.

I have two specific problem areas in my constituency. One is the market square in Kelso and the other in patches of the new developments in Hawick, where rate bills have increased by 100 to 150 per cent. Those are cost increases, not changes in rateable value.

I am told that the position is even worse in Perth, and worse still in Edinburgh with sevenfold increases in rateable value producing increases of 10 or 12 times in the amount of cash having to be paid.

This morning I was interested to receive some information from the director of finance, Mr. Kenneth Patterson, who said in a letter to his regional councillors that the average increase in rates payable had been split according to the following categories and in the following ways: the domestic increase across the Strathclyde region is, on average. 21·6 per cent.; industrial subjects have been decreased by 3·8 per cent.; shops have increased by 38·7 per cent., offices by 25·6 per cent., hotels by 22·7 per cent., and other commercial subjects, which include wholesale warehouses, bonded stores and retail warehouses, have been decreased by 16·9 per cent. The Strathclyde finance department reckons that the rates to be collected due to the expenditure increase in its budget and other matters are 11·4 per cent., so anything over that figure in the categories mentioned will be a direct result of revaluation. That explodes the myth that the commercial sector is suffering an average increase in the low, single-digit range.

This does not affect only small business. Information has been given to me by a major shoe retailer which has 138 outlets throughout Scotland, shops with household names. In its 1985–86 budget it assumed a 10 per cent. increase in rates, which made a figure of £728,000 for rates payable. The rate demand that it has received indicates an average 54 per cent. increase in rates, giving a figure of £1,028,000 in rates payable. Increases of that order will mean either closing 30 of the smaller branches, making about 120 employees redundant, or raising the prices in Scotland, which would mean a differential price structure. The same shoes would cost 3 per cent. more in Scotland than in England.

I pay tribute to the work being done by the Scottish branch of the National Federation of Self-Employed, which is doing its best to assist individual businesses that have been affected by the increases. I turned to that organisation in desperation when trying to seek redress for some of my constituents in Kelso and Hawick, and it was through its instigation that I conceived the scheme for selective rate relief which is enshrined in the Bill.

The Government claim that they have no legal machinery available to provide selective relief in the commercial sector. I acknowledge that, and this Bill seeks to provide the bones for that machinery. I do not make any extravagant claims about it—adjustment may be necessary in the suggested relief threshold of 25 per cent. There may be difficulty in defining commercial subjects. There may be problems also in designing a detailed test for need.

I am prepared to listen to the Government's arguments when we come to consider the Bill's detailed provisions. However, I am convinced that there is a need for urgent legislation. Given the political will, I am sure that a measure of selective rate relief in the commercial sector could be made available forthwith.

There is no prospect of salvation by means of the appeals procedure and it is not good enough for Ministers to use that as an excuse for legislative inactivity. The appeals procedure, like the original assessments, pays no regard to enterprises' ability to pay. It will be cruelly to raise false hopes to recommend appeals as a remedy for the ills that some businesses are suffering. The appeals procedure is hopelessly overburdened and it will take years to sort it out. Moreover, commercial subjects will have to wait until all the domestic appeals have been dealt with.

The Government have no alternative but to produce the necessary primary legislation to find the £4 million or £5 million needed to mount the rescue package. My right hon. and hon. Friends and I would give any such scheme our enthusiastic support. If the Government bring forward the necessary legislation, they will still be able to rescue hundreds of small businesses from extinction. If they do not, the Secretary of State might just as well take a bulldozer to many of the high streets of small and large towns in Scotland, and he will deserve richly the political retribution that will be visited upon him. If he does nothing, he will deserve everything coming to him.

Question put and agreed to.

Bill ordered to be brought in by Mr. Archy Kirkwood, Mr. Malcolm Bruce, Mr. Roy Jenkins, Mr. Russell Johnston, Mr. Charles Kennedy, Mr. Robert Maclennan, Mr. David Steel and Mr. James Wallace.

COMMERCIAL RATE LIMITATION (SCOTLAND)

Mr. Archy Kirkwood accordingly presented a Bill to empower the Secretary of State for Scotland to set a ceiling on increases in rateable value imposed by assessors on commercial premises in the course of revaluations in Scotland; to make emergency powers available in the short term to provide assistance to those commercial ratepayers whose commercial viability is threatened by rate cost increases of more than 25 per cent. as a direct result of revaluation; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 10 May and to be printed. [Bill 138.]

Public Accounts

Motion made, and Question proposed,

That this House takes note of the Twenty-Fifth Report from the Committee of Public Accounts in the last Session of Parliament on Financial Assistance to De Lorean Motor Cars Limited (House of Commons Paper No. 127 of Session 1983–84) and of the Northern Ireland Department of Finance and Personnel Memoranda on that Report (Cmnd. 9374 and House of Commons Paper No. 199 of Session 1984–85).— [Mr. Major.]

3.57 pm

First, I thank the Government for finding time for a debate on the affair that led to the De Lorean expansion in Northern Ireland and its subsequent demise. I am grateful to the Financial Secretary to the Treasury for being in his place. A number of the arguments which I and others will advance will be directed to the Treasury and the lessons that it can learn from the experience of the De Lorean enterprise.

This is an especially important debate, but we shall have our normal annual debate on the PAC reports in due course. That debate will embrace all the matters with which the PAC has dealt over the year, but I hope that it will encompass fewer reports than have been before the House in the past. In the meantime, the report before us is an exceptionally important one.

I must thank my colleagues for their efforts over a long and difficult inquiry. They pursued the issue with astonishing assiduity over a long period. Every weekend seemed to be occupied in reading voluminous sheafs of paper. The questioning of my colleagues added enormously to the understanding that we were able to attain. I thank also the Comptroller and Auditor-General of Northern Ireland and his Department. It is not normal to have major issues that involve the CAG of Northern Ireland and his Department, but in this instance we were extraordinarily well served. My colleagues and I are grateful for the way in which the CAG of Northern Ireland and his Department conducted their affairs and produced the resumés, briefs and information to us.

Finally, I thank the Clerk of the Committee and the witnesses who gave evidence. Also, rather exceptionally, I wish to thank Messrs Fallon and Srodes for their book. It is rare for the Public Accounts Committee to consider a matter that has already been dealt with in a book published for general sale, especially in a paperback edition. We believed it to be so valuable that we produced a copy for each member of the Committee so that we could compare the historical narrative with the detailed points that we were able to adduce.

The report is not the final assessment of the De Lorean affair, and we knew from the beginning that it could not be. We knew that we could not uncover several matters. We could have come to the view that we should wait until further information came to light, but we did not. We decided that as there were so many important lessons to be learnt, and as we might have to wait several years before some matters came to light, the report could not wait that long. Much more important than attributing blame is the fact that there are lessons to be learnt, not only in the Northern Ireland Department, but in the entire Government machinery. That must always be our first priority.

The importance of that is shown by our use of language in demonstrating the seriousness of the matter. The PAC is extremely careful about its use of language—it does not go for hyperbole. but for understatement—and we compared the language that we used on this occasion with that which we have used previously. We called the affair
"one of the gravest cases of the misuse of public resources to come before us for many years."
We called it
"a shocking misappropriation of public and private money."
We said:
"Mr. De Lorean's automobile companies received about £77 million of United Kingdom taxpayers' money and lost most of it within four years.
The Committee concluded:
"There was misplaced optimism by Government and its advisers when the original investment decision was taken and when additional investments were made. and there was ineffective supervision of the project as it proceeded."
Our final comment in this part of the report was that hardly any of those who dealt with Mr. De Lorean
"on behalf of the British taxpayer at a high level can escape substantial blame or criticism for their failure to prevent a major waste of public money."
We started by considering the details provided by the Comptroller and Auditor-General for Northern Ireland, and we identified the following issues for examination and exploration: first, the adequacy of the Department of Commerce's assessment of the potential viability of the project; secondly, the rather complicated structure of the De Lorean Motor Company, which was the American offshoot, and De Lorean Motor Cars Ltd., which was the Northern Ireland company, and the large contribution of public funds; and, thirdly, the provision of the master agreement—a legal document relating to the safeguarding of public funds.

We then considered the actions of the Department of Commerce and the Northern Ireland Development Agency during the project. The main issues which arose were the agreement with GPD Services Inc—the Swiss company—for the technical development of the car; the monitoring of the project by the Northern Ireland Development Agency, including the role of the nominee directors, about which I shall have more to say; De Lorean Motor Car Ltd's interest-free loans to the American De Lorean Motor Company; the lack of security for those loans and the method by which they were repaid; the justification for the sharp increase in employment during 1981 at a late stage in the life of the project; and, finally, the lessons that must be learnt from the failure of the project.

We had to ask: how practicable was the scheme from the beginning? Should it have been assisted? We know of the enormous problems in Northern Ireland, and we know of the special difficulties that existed with jobs available in east Belfast but none in west Belfast. The scheme would have produced 2,000 jobs in west Belfast, which would have been of enormous benefit to the country and to the people of Northern Ireland.

Then we had to consider the assessment by the Department of Commerce and how adequate and effective its negotiations were. We had to consider whether there was a sufficiently experienced team to deal with such a complex proposal. The Committee considered the importance of monitoring, because, in all its activities, it places great emphasis on the way in which monitoring is carried out. That is the only control we have. We consider several matters when we investigate a project, and the advice which we give from the start is that the Government Department concerned should be clear about what it wants to do. Also from the start—not at a later stage—we want the Department to set in train a scheme for monitoring the developing project. Finally, we want the Department to be in a position unequivocally to compare outturn with expectation.

The importance of monitoring is obvious: it gives us an understanding not only of what has happened, but of what is happening at the time. Therefore, if matters are not going according to plan, modifications can be introduced. That might strike hon. Members as being obvious and reasonable, but, unfortunately, we investigate many companies where that was not done. Usually, the monitoring is carried out after the programme has been fulfilled. We must always repeat the necessity for monitoring at the beginning of an operation.

Then the Committee considered the extremely tight timetable. Was it accepted unwisely? Should the business have been conducted differently? In this respect, we must consider the circumstances in which the decision was made. The first meeting between the Department of Commerce and De Lorean was on 12 June in New York. At that meeting he put forward a scheme for engaging 2,000 people to work in west Belfast. Between 19 and 21 June, John De Lorean visited Belfast. The heads of agreement were signed on 21 June. On 29 June a joint team from the Department of Commerce and the Northern Ireland Development Agency visited the United States.

Our criticism is that the joint team consulted no American banks, financial institutions or automobile companies. Indeed, at no time did the joint team approach any American bank or financial analyst for a report. Of course, it was said that De Lorean had received offers from Detroit, Puerto Rico and the Republic of Ireland. De Lorean required the Department of Commerce to reach a decision within the short period of 16 days. No one else was subject to such pressure; indeed, Puerto Rico had been considering the matter for a year.

On 7 July a report was commissioned from McKinsey. It is a pity that that was not done earlier. Its points are set out in paragraph 18 of our report. The four main business risks that McKinsey identified were: first, that the ambitious sales and marketing share projections might prove unattainable; secondly, that the technical difficulties of developing a new plastic body might not be resolved in time, resulting in a sharp increase in capital expenditure requirements; thirdly, that the timetable for moving from development to production had no margin for slippage, because the financial and operating projections assumed that the operation would be outstandingly efficient from its inception; and, fourthly, that the project depended largely on one man—John De Lorean—and that its viability would be in doubt should anything happen to him.

McKinsey concluded that the Department of Commerce was being asked to fund
"an extraordinarily risky venture"
and that
"the chances of the project succeeding as planned are remote".
It concluded that "common prudence" suggested that decisions should be based on a number of less optimistic assumptions than those put forward by the company. The Department of Commerce subsequently invited De Lorean Motor Company to comment on the risks and judged that DMC answered very effectively the McKinsey reservations as to the viability of the project.

That was not the view of the Public Accounts Committee. In paragraph 48, we state:
"DOC considered that 7 July 1978 was the earliest practicable date to commission McKinsey."
As negotiations had started nearly a month earlier, as early as 8 June, we were not convinced by that argument and would have expected that crucial assessment to be called for before the heads of agreement were signed. We were very impressed with the assessment that McKinsey made in so short a time. Moreover, we considered that the Department of Commerce and the Northern Ireland Development Agency team gave insufficient weight to McKinsey's conclusions. We were extremely concerned that the Department of Commerce so readily accepted De Lorean's predictably optimistic response to McKinsey's strongly stated reservations which, in the event, unfortunately turned out to be so accurate.

Besides the late commissioning of McKinsey, there was an inadequate check of what was happening in Puerto Rico and in the Republic of Ireland. The team was told that it was the company that had broken off the negotiations, but, in fact, as we know, it was the Republic of Ireland that pulled out. There was a feeling that many others were being attracted to the project and that there was a race as to who would get in first, when no such race existed. Perhaps the most astonishing reply that we received on this aspect of the inquiry, mentioned in paragraph 45, was when we asked what further checks, if any, were made on Mr. De Lorean's creditworthiness or business standing prior to the completion of the master agreement. The reply received was to the effect that the agreement was between the De Lorean companies and the Department of Commerce and the Northern Ireland Development Agency, not Mr. De Lorean personally. It said:
"There was no need to investigate his creditworthiness since no reliance was placed on him to input capital from his own resources".
There was no independent engineering assessment of the state of development of the car. In practice, the Government thought that they were buying the car, when they were purchasing the concept. Much of the design had to be undertaken subsequently, in ways that I shall describe. Finally, I repeat that the risks outlined by McKinsey were given insufficient weight, when they should have served as a warning.

I refer now to the structure of the De Lorean companies and the very high level of contribution from public funds. The point that we make strongly in our report is that the Department did not seek an adequate contribution of real risk capital from Mr. De Lorean, but left the control of the companies in his hands. As a result, De Lorean had control with little risk, and that was not a foundation on which the project was likely to prosper. That was the conclusion that we reached.

I should like to refer next to the provisions of the master agreement in relation to the safeguarding of public funds. I am concerned with the ambiguity in the master agreement, which was signed in July 1978. It was a legal document, but not as tightly drawn as it should have been. It enabled Mr. De Lorean to behave as if there were only one company, of which he was the sole proprietor. When one bears in mind the investment that he put in and the enormous investment that the British taxpayer put in, one realises that that was wrong. Several opportunities subsequently presented themselves to the Government to alter the master agreement to establish more effective safeguards, but unfortunately those opportunities were not taken.

One important aspect is the agreement with GPD Services for the technical development of the car. GPD was a Swiss-based company registered in Panama. I suppose that if that had been more widely known there would have been a greater alert as to what was going on. Because of the whole way in which the agreement was operating, tight monitoring and control was crucial. We say in paragraph 89:
"NIDA and its nominee directors gave Mr. De Lorean too much freedom to manipulate the companies to his own ends."
As an example, on 28 July 1980 there was an entire reconstitution of the board of De Lorean Motor Company, with new directors, including his wife, on the board. The nominee directors were not consulted about what was changing in an important part of De Lorean. The presence of nominee directors, inexperienced in the automobile industry, was not sufficient to ensure that the public funds committed were adequately protected and prudently applied.

The agreement with GPD came about because for some 20 years Colin Chapman had had an arrangement with Mr. and Mrs. Juhan, who were importers and distributors for Lotus in Switzerland. Mr. Chapman was a former chairman of Lotus. A contract was made between De Lorean and GPD Services for $17·3 million to carry out the engineering work. In fact, the contract stipulated that $17·3 million was to be paid in advance as a lump sum. Why was it to be paid in advance? We deal with the matter in paragraph 60 of our report. We say:
"The intention to contract with a Swiss company, about which nothing was known, and to pay what was envisaged to be the total cost of the work in advance ought to have been regarded by NIDA as being so unusual as to require close scrutiny."
Unfortunately, that scrutiny was not given. The agreement of the nominee directors should have been withheld.

I now come to the slightly complicated matter of the financing arrangements. I shall not spend too long on it. Those who wish to go into it further will find it all in the report. However, it would be wrong if I did not deal with it at least in moderate depth. A particularly unusual transaction occurred in May 1979 when, after the agreement, Lotus repaid GPD the $4 million that had been paid to it in November 1978 as a good faith deposit. That $4 million formed part of the funds that were misappropriated from GPD.

We were told that when De Lorean Motor Cars Ltd. commenced making payments to GPD in 1979 there was no reason why the nominee directors or NIDA should have been concerned at that development as it was embodied in the GPD contract, which provided for the payment to GPD of certain costs in addition to the advance payment. However, I must quote Sir Kenneth Cork, who was the liquidator. He took the view:
"if you paid someone US $17·65 million to procure the development of a car, you would not expect to pay any more until approximately US $17·5 million had run out; that is why I was astonished."
We echo that astonishment and regard it as an extremely serious lapse by the nominee directors and the Northern Ireland Development Agency that they did not challenge the payments.

Between April 1979 and December 1981, almost £11·5 million was paid by De Lorean Motor Cars Ltd. to GPD Motors in respect of the technical development of the car, over and above the advance payments totalling $17·65 million. We thought the level of control to be utterly inadequate. Over $17 million was misappropriated without detection by those with responsibility for monitoring the scheme.

In view of his serious allegations about the abuse of public funds, can the right hon. Gentleman tell the House how many of those involved have been removed from their positions as a result of grotesque incompetence?

The Public Accounts Committee is not responsible for going into such matters. That is one of the reasons why the Committee wanted a debate on the Floor of the House. Problems are involved which are not for the Committee to resolve. Our task was to ensure, to the best of our ability, that the House was informed about taxpayers' money which had not been properly applied, and that any lessons to be learnt were given to the House. Other matters are for those with other responsibilities.

I have had to go into the finances of the case in detail because it is necessary to explain how the money went adrift, or, as Sir Kenneth Cork said, "went walkabout". Contrary to the original intention, both the American parent company and the development of the car were largely financed by the taxpayer, and over $17 million was misappropriated without detection by those engaged in monitoring the project. Not one penny of that S 17 million paid to GPD was used for the development of the car.

I shall now deal with the interest-free loans by the Northern Ireland subsidiary company, De Lorean Motor Cars Ltd., to the American parent, the De Lorean Motor Company. We thought it wrong for the Northern Ireland Development Agency to permit De Lorean Motor Cars Ltd. to make any loans to the American company. There was no need for that. In the event, the United States company received £6·5 million in loans from the Northern Ireland company. The use of taxpayers' money to fund the activities of an American company over which the Northern Ireland Development Agency had no control was unacceptable. The agency was clearly wrong. The loans were made without any form of agreement. There was no security, no terms for repayment and the loans were interest-free. That was a wrong decision, and we draw attention to it in the report.

When Mr. De Lorean went to Northern Ireland in early August 1980, he insisted upon a top-level meeting with the Government about the company's request for more funds, totalling £14·9 million. That arose mainly from cost overruns, which had been with the Government since January 1980. The application had received the support of the Northern Ireland Development Agency at a board meeting on 28 May. The agency thought that £14·9 million would not be enough and suggested that a larger sum should be considered. McKinsey had predicted a need for between £14 million and £21 million.

Paragraph 28 of our report states:
"At a meeting on 5 August between Mr. Humphrey Atkins (by then the Secretary of State) and Mr. De Lorean, the latter indicated that the company required £20 million of extra funds, of which he expected to raise £6 million himself. The Government agreed to a loan of £14 million."
That was followed during 1981 by a large increase in the number of employees at the Northern Ireland factory. The target had been a maximum of 2,000 employees. In April 1981 a further 1,000 employees were recruited, and by January 1982 2,600 workers were employed in the factory. That large increase in employment caused a number of problems in connection with running the factory.

A second shift was introduced, but the company's training centre was unable to handle the high intake. Untrained labour had to be put straight on to the production line, and the quality and productivity deteriorated. The cash flow was put under additional strain. The extra production was not matched by sales, and by the end of January, of the 8,000 cars produced, only just over 3,000 had been sold. That left high stock levels for dealers and the company. A wrong decision was taken which owed much more to Mr. De Lorean's desire to attract new funds from investors in the United States than to any realistic assumption about sales projections for the car.

What lessons can we learn from all this? The most important lesson is about how the Government operate in high-risk enterprises. As in this case, the situation is sometimes so bad that the problems are not regarded in quite the same way as they might be in relation to other forms of investment. How should the Government operate in high-risk areas, given the need to consider them and not to turn them aside?

First, the Government must match the experience and the negotiating skills of the people with whom they deal. Resulting agreements must be unambiguous to prevent the problems which inevitably arise when one is dealing with circumstances which are not normal for such investments. Secondly, the Government must insist on adequate time in which to carry out a full and detailed assessment of a potential project's viability.

In the private sector an individual might come to conclusions based upon a hunch, a guess or an informed understanding and he is, therefore, able to act more quickly than as a Government Department. Unfortunately, the Government cannot do that. The Government must account for their actions to the taxpayer. The Government must be given adequate time. If that is not open to them, reluctant though they might be, they must waive a decision. The quality of management must be thoroughly assessed by the Government.

My right hon. Friend must understand what was happening in Northern Ireland in 1975–76. Today we are talking about one of the failures, but Northern Ireland has had many successes which would not have been successful under the conditions that he describes, because they would not have got past first base.

I shall be dealing with the specific problems in Northern Ireland. It is clear that the Government must take certain risks. I am explaining how such risks should be taken without putting too much of a brake on the work which is so necessary in Northern Ireland and elsewhere.

The quality of management must be thoroughly assessed by the Government, particularly when one man appears to be essential to the success of a project. Much greater investigation and control are needed. Where a new company is involved, the personal qualities and reputation of the person concerned need to be investigated most thoroughly. With a new industrial project, there must also always be a significant contribution of risk capital from the industrial side. The company must have a considerable stake in the project. It is no use relying on the expertise and understanding of the person concerned if he does not have a substantial element at risk himself. When contemplating any high-risk investment, the Government must consider the worst case. They must consider what will happen if things go wrong, how far things could go wrong, and the limits of the Government's risk. It is also important that the detailed monitoring arrangements should be agreed in advance. They must be set up when the decision is made, so that there is no uncertainty about how the monitoring is to be carried out.

It is also essential that the role of nominee directors should be clarified throughout the whole Government machine. A number of nominee directors are uncertain of their role. The Public Accounts Committee has examined the problem. The Committee may take further evidence, and it will certainly submit a report on the role of nominee directors. It is assumed that they constitute a proper method of control, but both on the Government side and in the business world there are wide variations in the operation of nominee directors and in the interpretation of their role. Assumptions made about the effectiveness of control by nominee directors may not be valid, or may have only partial validity.

Finally, phased investment, wherever possible, is the best practice. Again, there must be tight monitoring so that, when so much money has been spent, the exact position is known. The passage of money and the progress of the scheme must be seen to go hand in hand and to be related one to the other.

The Committee had a memorandum from the Department of Finance and Personnel. The memorandum and the subsequent correspondence show that the Northern Ireland Departments have accepted the Committee's criticisms of the handling of the project and have agreed with the Committee on the lessons to be learnt. The Committee has also been assured that the lessons will be properly applied. The Committee needs an assurance from the Government that the lessons will also be applied throughout the United Kingdom by all other Government-funded bodies with responsibility for industrial development investment.

What progress is being made by the investigation into the affairs of the De Lorean companies by the receivers and the Royal Ulster Constabulary? Is every effort being made to recover the maximum amount of the public funds invested in the project? I hope that the Minister can tell us how much of the money invested has been recovered by the Government to date.

My right hon. Friend the Member for Mansfield (Mr. Concannon) spoke about operations in Northern Ireland and the general aspects of industrial development there. I acknowledge the difficulties faced, at present and in the past, by those who have the great responsibility of attracting mobile investment into Northern Ireland. They operate in a highly competitive market. They have to cope with the pressure of the highest level of unemployment in the United Kingdom. They have to overcome the often distorted image of Northern Ireland shown to the world by the media before showing the many positive attractions that it has to offer. One of the most important of those attractions is the plentiful supply of skilled, flexible and dedicated labour. The Committee stated in the report:
"We would wish in this context to emphasise that in our view no blame for the failure of the De Lorean project rests with the workforce—on the contrary they emerge with great credit."
The Committee was very impressed by the work force.

When assessing the viability of a proposed enterprise in which public funds are to be invested, a delicate balance has to be struck between risk and reward. Both at the initial decision-making stage and later in the monitoring of the project one has to follow a difficult path between an over-careful concern with detailed control and over-reliance on the management's capabilities. The Committee concluded:
"it is our view that, in the De Lorean case, they were struck at the wrong place at each stage."
The evidence of Sir Kenneth Cork carried great weight with the Committee. He said that a smaller scheme might have been viable. One might ask whether De Lorean would have accepted a smaller scheme. That is another matter. The lessons here for every Government Department to learn are apposite and should be well heeded.

4.36 pm

I agree entirely with the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) that the report is most important. I am sure that the whole House will wish to join me in thanking the Public Accounts Committee for its painstaking examination of the very difficult and complex issues involved.

I think it would be useful if I made the Government's position perfectly clear right at the outset. This position has, of course, been affected and guided by a careful study of the Public Accounts Committee report itself. I shall be as brief as possible as I know that many right hon. and hon. Members on both sides of the House wish to take part in the debate.

I have no doubt that the only basis for successful industrial development in Northern Ireland or anywhere else is through soundly based enterprises, with the private sector playing its proper role in taking risks and generating profits, and with every project that comes forward for Government assistance being scrupulously researched and assessed and meticulously monitored.

Let me recall that at the time when this project was conceived the Government of the day, like the present Administration, were concerned about the very high level of unemployment in the Province. This was—and still is—particularly severe in west Belfast, where unemployment was then running at five times the average in greater Belfast which itself was well ahead of the Great Britain average. As we all know, these are the conditions in which terrorism can easily recruit on every street. Given the complex mixture of security, economic and social problems in Northern Ireland, there has been a natural desire for all Governments to explore every possible means of employment. All the conventional approaches to industrial development had been tried and failed in west Belfast. The normal industrial development project is spawned by an established company resting securely on a number of proven products, with substantial assets and financial backing. Such projects had shied away from Northern Ireland at that time.

By 1977 the flow of inward investment to Northern Ireland had virtually dried up. Between 1970 and 1977 only one American company decided to invest in the Province. A state enterprise—Strathearn Audio—had been attempted and had foundered. It was against that background that the Government negotiated with De Lorean, hoping to bring together an experienced and successful engineer and business man, with a good team and a seemingly viable idea, and with Government providing most of the capital.

The De Lorean project, with the prospect of more than 2,000 jobs, was very attractive. As the right hon. Gentleman has said, Northern Ireland was only one of several areas competing for the investment. As a deal with Puerto Rico had virtually been completed—indeed, compensation had to be paid afterwards because the deal was not carried through—the negotiating pressure was intense, especially as regards the time scale. About £40 million of American federal money was on offer if the project went to Puerto Rico, while Detroit itself was putting up money for the De Lorean project, believing that if the car went elsewhere the long-term viability of the Detroit industry could be affected.

The right hon. Gentleman has drawn attention to the speed with which the deal was arranged. He has referred to the lack of contact with American banks. However, the McKinsey report was available, and Mr. De Lorean's reputation at that time, both in America and around the world, had to be borne in mind. In his recent autobiography, the head of Chrysler said that De Lorean was a first-rate auto man and a super engineer for Pontiac. Such was the reputation of the person involved.

There was also the report written for Puerto Rico by the reputable auditors Kearney, which says:
"Kearney feels that DMC's marketing, production and organisation plans are sound. Assuming that significant delays or reversals are not encountered, Kearney feel that DMC should achieve its initial sales and production objectives."
Similarly, a report done for De Lorean by Booz, Allen and Hamilton stated:
"Entry into this market with its high capital investment and entrenched competition obviously involves considerable risk. Nonetheless, we believe that your product, your people and your business concept in combination should prove the necessary elements for success."
Those reports were available to the Department at that time.

It is strange that my hon. Friend should be seeking to make excuses for the lack of adequate inquiries about the pedigree and career of Mr. De Lorean, because anybody in the motor industry, not least General Motors, could have told the Department that De Lorean had been dismissed from General Motors. If the Department had asked the editor of the Detroit News, which has much to do with the motor industry, it would have found out that he had an extremely seamy past. Can my hon. Friend assure me that the Government will in no way grant money to any business man in this country on the basis that they granted it to De Lorean?

My hon. Friend's latter point is the easiest one to answer. One thing that has changed, and one of the lessons that have been learnt, is that money will not be put by the Government into projects in Northern Ireland unless private money is also put up. It is no longer a question of somebody coming along with an idea and the Government providing the money. In all the schemes going through now, there must be at least £1 of private money to any £1 of help from the Government.

I realise that my hon. Friend the Member for Macclesfield (Mr. Winterton) has had a deep and intense interest in this matter for a long time. I quoted the head of Chrysler, which, with all due respect to my hon. Friend, is a well-known company. Only three months ago, when he left that company, I read a great deal about the reputation of Mr. De Lorean. If my hon. Friend knew that at the time, he should have drawn it to the attention of the Northern Ireland Office. Similarly, if he knows of anyone who the Government are funding at present in Northern Ireland who is likely to come to a sticky end, we should be grateful for that information.

I cannot understand how the myth has arisen that no one went into Mr. De Lorean's background with General Motors. I spent some considerable time examining his background, certainly with General Motors. The hon. Member for Macclesfield (Mr. Winterton) says that Mr. De Lorean was sacked from that company, but I can only quote what a representative of General Motors told me when I asked him whether De Lorean could do the job. He said, "Yes. If that is the product you want, he is the only person in the world who can do it. He has a proven background, and if he came back to General Motors tomorrow we would put him on such a project." That is the sort of reaction I got from General Motors, from Chrysler in Pittsburgh, and from almost everyone I asked at the time.

I welcome the intervention of the right hon. Member for Mansfield (Mr. Concannon), who occupied the office that I now hold during what was obviously a difficult time. They are always difficult times in Northern Ireland. In fairness, I should say that the pressure was not all one way. It was made clear to Mr. De Lorean that assistance would be available only if the project was located in west Belfast. He did not have carte blanche to set up anywhere in Northern Ireland.

Having made the decision to compete for the project, efforts were then made to get the best assessment available in the time available, bearing in mind the fact that several places—Detroit, Puerto Rico and the Republic of Ireland—had shown their confidence in the project by making firm offers for it. When it came to the decision to assist De Lorean, a balance sheet of positive and negative factors was drawn up by Ministers in Northern Ireland. In the light of that assessment, the Government concluded that the balance of risk lay in favour of the project. I know from first-hand experience how heavily the responsibility for conditions in Northern Ireland weighs with Ministers, and I can understand the good intentions behind this experiment in policy.

When the Government took office in 1979, loans and share capital amounting to £52·8 million had already been offered and accepted. Of this, about £13·48 million had been paid to the company. The Government believed that unilateral termination of the agreement at that stage would have resulted in a cost to public funds in excess of the amount estimated to carry the project to completion. In 1980, the Government, after taking legal advice on the terms of the 1978 agreement, concluded that further assistance of £14 million should be made available to the company in addition to the £52·8 million already offered.

It is worth remembering that in 1981 the Government considered that there was a prospect that the project might be successfully established, albeit at a greater cost to public funds than was provided for in the original agreement. As late as November 1981, McKinsey—during the two years that company presented about 10 reports to the Government—which had been closely involved in the monitoring of the company, forwarded a report to the Northern Ireland Development Agency under cover of a letter which contained the following passage:
"You may detect in the report a rather more optimistic tone than has been characteristic of our previous reports. I think this is justified. The feed-back that we received from our dealer survey, my impressions gained from discussions with two area managers at the New Jersey Quality Assurance Centre all suggest that there is at least a good possibility that by the end of the year DMC will be reporting consolidated profits perhaps of the order of 30 million on 350–400 million dollars of sales. In other words the very considerable risk taken by HMG in agreeing to back the project in the first place might be seen to be paying off."
The road to hell is paved with good intentions, and the fact is that the project failed. When that happens, it is essential to extract every lesson that we can from the experience, and the House will be grateful for the lessons which the PAC listed in its report. This is not an academic exercise. Its object is to incorporate the lessons into current operating procedures and practice. In this respect, we owe a great debt to the PAC for the detailed work that it carried out.

I should record that the Public Accounts Committee's report presents a comprehensive analysis of the potential pitfalls in attracting and developing new industrial projects. It will help to shape the thinking of everyone who is involved in this area. For my part, I can assure the House that all of the major recommendations in the report have been accepted and incorporated into the procedures for handling industrial development in Northern Ireland.

As the Department of Finance and Personnel's memorandum of response of 24 October 1984 and the supplementary memorandum of 8 January 1985 make clear, Government policy has been changed. A project such as De Lorean would not now be supported. Industrial support is made available only for projects in which a substantial part of the financial resources is provided by the private sector. [Interruption.] The Industrial Development Board's operating arrangements and investment criteria are now devised in the light of the experience gained in the De Lorean case and are fully compatible with the recommendations in paragraphs 91 to 97 of the Committee's report.

I should say in response to a comment that I heard from the Opposition Benches about unemployment in Northern Ireland—no doubt made with the best of intentions—that we have not stopped investing money in what we believe are viable projects. If we consider what we are spending now to help industry in Northern Ireland—I trust that we are spending it sensibly, as did most previous Governments—I do not believe that the Government have anything to be ashamed of.

I simply wished to draw attention to unemployment in Northern Ireland. Some of my colleagues have high unemployment in their constituencies, but it is as nothing compared with Northern Ireland. If the Government want to do something about it, they must take risks commensurate with the problem. With the addition of the security problems in Northern Ireland, that is the context in which we should place this debate.

I appreciate the points made by the right hon. Member for Mansfield. I have a weakness in the House sometimes in that, as an ex-teacher, I always hear what is being said at the back of the class. Therefore, I issue an apology not only to the right hon. Member for Mansfield but to my hon. Friends and to other Opposition Members. I shall, after 11 years, try to disabuse myself of that habit.

The IDB's operating arrangements and investment criteria are now devised in the light of experience in the De Lorean case, and are fully compatible with those recommended in paragraphs 91 to 97 which, with regard to future policy, are the kernel of the report. In particular, they ensure, first, that the IDB has access to a range of skills appropriate to each project and to technical advice, and takes whatever time is required fully to assess project viability, including consideration of the worst case scenario. This week I have been looking into the sort of technical advice that we have been using on projects and the Mason that projects have been accepted or rejected on that technical advice.

Secondly, management quality is examined as part of the assessment process and, where a new company is involved, the personal qualities and reputation of the entrepreneur are exhaustively investigated. Thirdly, the parties' responsibilities are clearly defined in financial assistance agreements. Objectives and standards of performance and, where appropriate, detailed monitoring arrangements are agreed in advance.

Fourthly, where possible, agreements are based upon the principle of phased investment with a maximum upfront commitment from the private investors, and care is taken to ensure that there is an adequate reserve of private funds available should the project run into difficulties. Lastly, careful consideration is given to the company structure. The aim is to secure a legal commitment from the company which has overall or ultimate responsibility in the performance of obligation.

Moreover, in line with the Committee's recommendations in its report, the position of nominee directors has been reassessed and detailed formal advice on their role and responsibilities has been given. A document on the role and responsibilities of nominee directors was prepared by the Industrial Development Board, in April last year, I believe, and a copy has been made available to the Committee. The role of nominee directors is a difficult one, and we believe that in preparing this document we shall assist in future policy.

When a person becomes a nominee director, does the Minister's communication deal with the aspect that that person then owes his first loyalty to the company, not reporting to Government?

I know that the hon. Gentleman is an expert on the automobile industry. He has put his finger on the central question whether, when a person is put on a board, his first responsibility is to the company which has appointed him. Who pays for that? About £5,000 was paid in this case to the nominee directors or to those who put them on the board.

I have been considering this week what can be done. From discussions, it would seem that if a nominee director who is put on a company board to watch the interests—and that is what is done by the IDB in Northern Ireland—finds that there is some information which he cannot bring back which in his view will prevent him from doing his job properly and may put at risk the future of IDB investment in the company, he has to resign. This question will have to be discussed more widely. It is a difficult matter, and the hon. Gentleman was right to put his finger upon what could be a major weakness. If such a nominee director cannot bring back information and do the job for which the IDB appointed him, he should resign because he cannot do the job that he was appointed to do.

The Supplementary Memorandum of Response of the Northern Ireland Department to the Public Accounts Committee lists the 13 principles which the Northern Ireland Department will now follow in assessing and supporting new industrial projects. Lord Bruce-Gardyne, a Member of the other place and a former Member of this House, who has always surveyed the De Lorean project with at least a highly sceptical eye, stated:
"I was highly impressed, in particular, by the 13 specific steps to which the Northern Ireland Department is committing itself and its officials in the light of another plausible adventurer happening to appear before them."—[Official Report, House of Lords, 27 February 1985; Vol. 460, c. 993.]
As for the De Lorean case itself, the Government share the Committee's serious concern about the loss of public funds and are determined to take all available steps to recover as much of the loss as possible. I am sure that the House will be aware that there are certain aspects of the case which I should not discuss because of factors affecting legal actions relating to the De Lorean case. The Government and the receivers, however, have initiated legal action in the United States and in Switzerland. The United States Trustee in Bankruptcy has legal actions in hand on behalf of creditors, of whom Her Majesty's Government are the largest, against a number of parties, including De Lorean.

It has been asked how much money we have reclaimed. A total of £6 million has already come back and, with regard to the site at Dunmurry, the sum of £1·8 million. The Government will leave no stone unturned to get back in every way possible the money that went adrift or that went "walkabout," as was mentioned earlier by the Chairman of the PAC.

My hon. Friend has talked about the various sources from which the Government hope to recoup some of the taxpayers' dramatic losses. He has not mentioned the action that the Government were taking against Arthur Andersen. Can he update the House on what the Government are doing in respect of the accountants Arthur Andersen in New York?

I am grateful to my hon. Friend for asking that question. I have a side-note prepared because I thought that some hon. Gentleman might ask the question. It was not a plant. I assure the House, given the strong feelings of my hon. Friend the Member for Macclesfield on the De Lorean case, that he and I are not hand in glove. I assure my hon. Friend that Government action in the case to which he has referred will be vigorously pursued.

Out of fairness to Northern Ireland—and this was said by the Chairman of the PAC—I must put on record the fact that the tragedy of the failure of the De Lorean project was not the fault of the workers of the company or of the people of Northern Ireland. The factory was built, the work force trained and the product brought to market within two and a half years. The Public Accounts Committee acknowledged this at the beginning of its report.

The Public Accounts Committee also commented that it would not want
"the De Lorean experience to lead to the Industrial Development Board becoming an over-cautious bureaucratic organisation in danger of rejecting opportunities for fear of criticism".
There has to be a balance between careful assessment of a project and joint risk-taking on one side and careful control of public money on the other. That is a difficult decision for Ministers, and even more difficult in Northern Ireland.

I regard it as vital that, if we are to assess properly the lessons of this case and the Public Accounts Committee report, we must not confine ourselves to the easy line of criticism simply by being wise after the event, but we should try to understand the circumstances of the time and put ourselves in the position of those who made the decision and monitored the project. I am pleased to say that the Committee's report has emphasised this point.

It is said that those who ignore the lessons of history have to live them again. I trust that, with the help of the PAC report, that does not happen in this case. I shall be interested to hear the views of right hon. and hon. Members on this case and on the Public Accounts Committee report.

5 pm

I, too, wish at the outset to welcome the PAC report. It is well known in the House that I am not a lover of Select Committees or of the Select Committee system. However, the PAC is a time-honoured and respected body of the House, and over the years Governments have usually appreciated its work, responded as helpfully as Government policy would allow, and invariably taken on board many of the Committee's recommedations.

That was not wholly true on this occasion. Only after the PAC had objected to a poor and inadequate response from the Government did it get a few more positive acceptances of its recommendations. There was a poor response because the Government were embarrassed. The cash had been lost or had gone walkabout. That had happened in their time, not in Labour's time. As a result of the PAC report, new operational guidelines have been issued to those Departments and senior civil servants working within the Government's policy.

The Government's policies have changed. They now have a less interventionist policy. Their overall policy is less caring about the social distress and severe enconomic problems of areas and regions of the nation. Unemployment has risen dramatically. Ministers and senior civil servants have been frightened off taking initiatives and using Government intervention techniques to encourage industry, especially in those parts of the country to which, for a variety of reasons, private enterprise will not go.

Stilted, frustrated, shackled expertise has been the order of the day in Departments concerned with industry, commerce and in the development boards. Their enterprise and spirit has been dulled. They are no longer interested in searching for jobs, and their political masters have adopted the same attitude. There is no political will in the Government to fight the disease of unemployment.

That is the Achilles' heel of the Government, and it will be their downfall. Hence the fifth columnists in their ranks who are determined to undermine and ruin their noninterventionist strategy. All those forces, together with those of her Majesty's Opposition, will in due course succeed in their endeavours because there will be Merseysides, Bogsides and west Belfasts—no-go areas by private enterprise—and if dereliction, misery, mass unhappiness and civil strife are to be avoided, Government intervention will be absolutely essential.
"The decision to support the De Lorean project was taken not only in the knowledge of the risk of possible failure, also having regard to the great benefits which success could bring to an area beset by acute political, social, economic and security difficulties."
That statement appeared in Cmnd. 9374, the Government's response to the Committee. They added:
"The policy has, however, changed, and investment of this nature would not now be supported under present Government policy."
The Government will eat those words before this Parliament is at an end. Indeed, they have already' had a few gobstoppers—decisions which must have stuck in their throat.

When the PAC used the words
"the gravest misuse of public resources,"
everybody appreciated that it was an exaggeration. Over the years Governments have done much worse than that. One need go back only to 1962, when it was estimated that the production cost of Concorde would be £75·85 million. By 1979 the cost had reached £795 million—for a project which has never been a commercial proposition.

What of Ravenscraig and the fight by the Secretary of State for Scotland to keep it alive? It is not profitable. It is kept going on social and employment grounds. On 26 January 1983 the Select Committee on Trade and Industry questioned the then BSC chairman, Mr. MacGregor:
"Do you believe that likely present and future demand for steel from BSC could be met more efficiently by three or four integrated sites?"
He answered:
"Yes. Keeping five sites open, the cost is £100 million per year."
That was for social and employment reasons. De Lorean was £77 million over four years. Thus, it is not necessary for anybody to explain to right hon. and hon. Members who have lived through such decisions that De Lorean was one of the gravest misuses of public resources. Governments are periodically forced into situations in which social needs and job considerations outweigh strict economic calculations, and the emphasis in the PAC report should have been much more balanced in that respect.

In relation to the expression

"the gravest misuse of public resources,"
does the right hon. Gentleman not realise that a considerable amount of money was swindled?

Of course I do, but I am talking about the time when the agreement was being established. At that time we had to take into account the social considerations as well as the economic argument about whether we could manage to get as tight a master agreement as that to which the Chairman of the PAC referred.

In that sense, let us consider the PAC report and its examination of the De Lorean motor car project. The numerical strength of the PAC was 15 Members of Parliament. The Committee had nine sittings, and the average attendance at the Committee was six. Apart from one sitting, the highest attendances were for the two mainly drafting sittings, and then there were only 11, some of whom had not been present to question most witnesses. So much for the seriousness that they—the majority—attached to the subject.

As for their experience, especially of ministerial office, there were two former Under-Secretaries and the Chairman who had served as a junior Minister at the Treasury. The Chairman was Financial Secretary to the Treasury from 1975 to 1979. That was a most crucial time, because, before the De Lorean deal could be finalised and agreed by Government, the Treasury had to be won over or, by decree of ministerial majority, accept the final decision of the Economic and Industry Committee.

The Treasury had some reservations—expressed by the then Chief Secretary, now Lord Barnett—not in direct opposition but expressing doubts as to whether the economics of the project were open to serious question. However, the clear view of the Committee was that the De Lorean deal should go ahead, and on 26 July 1978, after a meeting at which 19 Ministers were present, I was given my instructions on how to proceed. Not one Minister and not one Department, including the Treasury, objected to my proceeding.

In the light of the PAC report—which was printed on 16 July 1984, six years after the deal was agreed by the Government in 1978—we must consider the background in terms of the situation in Northern Ireland and west Belfast at that time. Unemployment in the United Kingdom averaged 5·7 per cent. In Northern Ireland it was 11 per cent. In west Belfast, male unemployment was between 35 and 40 per cent. Youth unemployment stood at 50 per cent. It is a shocking and disgraceful indictment of the present Government to note that, while unemployment in the United Kingdom now averages 13·5 per cent., in Northern Ireland it averages 21 per cent.

Early in 1978 the Labour Government decided on a special policy for Northern Ireland. While there were always problems with security and continuing talks on constitutional change, something more positive had to be done at that time to alleviate the social distress caused by such high rates of unemployment. It was not just the awful social and economic scene—the ever-growing dole queues and soul-destroying despair as the Department of Commerce and the Northern Ireland Development Agency searched for jobs—but the frightening terrorist picture. That picture was one of terrorists in their ghettos of relative safety, of no-go areas for inward investment and of recruitment centres for the Provisional IRA and the Irish National Liberation Army, with thousands of young people constantly drawn into the clutches of those terrorist groups.

If the Government showed that they cared, that they recognised the awful severity of the problem, and produced a policy which would tackle the social evils of mass unemployment, they might also win those young people away from terrorism. In other words, if they cut off the terrorists' raw material, their supply of recruits, hopefully, by our deeds, we would be known and recognised.

The Cabinet agreed to my scheme to tackle this enormous problem by furnishing a new set of financial aids designed to attract investment in the Province. Whereas, in the assisted areas of Great Britain, 23 per cent. of cash grants was given to new developments for the purchase of land, the building of new factories and so on, in Northern Ireland I was allowed 40 per ent. for the whole of the Province and 50 per cent. cash grants in the areas of highest unemployment, such as west Belfast. That is why De Lorean went there.

I have had an opportunity to check the Members' attendance at four of the five sittings of the Committee. It was nine, 10, 10 and 12, and, as my right hon. Friend rightly says, attendance at deliberations was greater than that. He will be aware that the Financial Secretary to the Treasury is a member of the Committee who does not attend. There was one member who was ill almost throughout the proceedings and there was another who was waiting to transfer out of the Committee.

I am sorry that my right hon. Friend has started nit-picking on the numbers. I would not want to bore the House by reading out all the attendances, although I have a list here. Apart from one decimal point, there is no difference between what I have said and what my right hon. Friend has said.

Armed with these new financial aids granted by the Government, my right hon. Friend the Member for Mansfield (Mr. Concannon) and I bent all our efforts to sell Northern Ireland as a location for investment and industrial expansion. My right hon. Friend the Member for Mansfield did a sterling job; everyone in the Province will vouch for that.

In 1978 and 1979, we attracted seven American companies to Northern Ireland with job prospects for 4,100 people. De Lorean was one of them.
"The team of officials which negotiated the De Lorean project was responsible for the negotiation in 1978 and 1979 of 6 other new American Investments which are currently providing some 2,300 jobs (20% of all the existing jobs in US companies in Northern Ireland). Some of these companies have subsequently entered into expansion agreements."
That, too, is a quotation from the Government's reply to the PAC, in Cmnd. 9374. If, therefore, the PAC intended any reflection on them, that reply partly answers the criticism.

The negotiations on the De Lorean project were hectic but detailed. Contact had been made long before 20 June 1978 when the Northern Ireland Development Agency and the Departments of Commerce, Finance and Manpower Services examined the Booz, Allen and Hamilton consultancy report on the De Lorean project. That had been prepared months before for Puerto Rico and the Irish Republic. The collective view of those Departments on 20 June 1978 was that it was a high-risk project but that we should make a pitch for it.

On 22 June, therefore, we made contact with De Lorean. Departments were now stating their positions. The Industrial Development Advisory Committee said that it was a high risk but a potentially rewarding project. The Northern Ireland Development Agency found in favour of the project. The Northern Ireland Department of Finance was prepared to agree in principle.

Meanwhile, a lurid set of articles on Northern Ireland and the troubles there was appearing in the New York Times, upsetting our potential investors and potential American employers on our other American projects. Therefore, we decided to convince them face to face. My right hon. Friend the Member for Mansfield and officials made the trip. On 23 June, the Cabinet Office was informed of the De Lorean prospect. We asked it to inform our ambassador in Washington and to tip off Senator Kennedy and Tip O'Neill on the possibility and also asked that our ambassador be briefed to discuss it with the Prime Minister on his planned visit to Washington.

On 27 June, I was again in touch with the Chief Secretary. I promised him that I would try for more private investment before the Northern Ireland Development Agency's financial safety net was used. NIDA had devised a package to cover the possible gap in private investment just in case Oppenheimer, on behalf of the United States investors, failed to come up with sufficient private cash.

On 3 July, the Department of Commerce and the NIDA team went to Detroit to discuss the details of the corporate plan, and there were three days of talks. Then De Lorean came to Northern Ireland with the Booz, Allen consultants, and we had more discussions.

On 4 July. the Treasury informed me that approval would be considered only after discussion of the whole package. Therefore, on 6 July full details were sent to the Chief Secretary, the Cabinet Office and all the members of the NI Committee—the Special Cabinet Sub-Committee on Northern Ireland Affairs.

At this stage it is important to note that in this timetable the De Lorean company had already done all the work for Puerto Rico and the Republic of Ireland. It was a matter of reviewing the variables peculiar to the Province of Northern Ireland. We called in McKinsey, the independent consultants, to design the project. Then, on 11 July, a further letter was sent to the Chief Secretary bringing him up to date on all the details of the project.

On 17 July, in Northern Ireland, all the Departments concerned gathered together and the pros and cons were weighed again. The Department still approved, but concluded that at the end of the day this was primarily a political decision. NIDA, now realising that other Ministers were involved, urged me to use my best endeavours to secure a quick and favourable decision from the Cabinet Committee.

Evaluation and decision-making had thus been hectic since examining the Booz, Allen consultants' report on the project on 20 June 1978. There had been weeks of decision-making. NIDA had been fully engaged. A team of NIDA and Department of Commerce officials discussed the project in depth in the United States. There was in-depth discussion with De Lorean and his team in Northern Ireland. Top consultancy advice had been obtained and did not warn us off. We were told that it was risky, but we were not stopped. We had expert legal advice from the United States on countervailing duties. The Washington embassy was involved. All the necessary Whitehall Departments were kept in the picture. There was not one ministerial objection.

Furthermore, from not a single source had there been the slightest suggestion that the De Lorean team was suspect either as it stood or on the track record of its members. Indeed, General Motors encouraged De Lorean to come to Northern Ireland and advised the Americans to assist the project.

Then, later, Oppenheimer reported——

It is right to point out that one of the reasons for De Lorean was this spin-off. It is also true that General Motors became interested in Northern Ireland through this and, of course successfully followed De Lorean to Northern Ireland.

Would my right hon. Friend accept from me that General Motors did not want De Lorean anywhere near its plant ever again?

That may be so in retrospect, but I am talking about that time. That is the point. At that time none was suspect—neither him nor any of his team—and that has not been proved either.

Oppenheimer reported that 19 documents and cheques had come in from 133 investors whom he had lined up. I was thus able to impart a bit of pleasing news to the Chief Secretary.

On 24 July a message came from the Prime Minister that the De Lorean project should now go to the Economic and Industry Committee before any further action was taken. Consequently, on 26 July the EIC met, with the then Secretary of State for Trade and Industry, Mr. Eric Varley, in the chair. There were 19 Ministers present—19 Departments had examined my paper and briefed their Ministers—and on that day, without one voice raised to stop my proceeding, I was given my instructions. I concluded the deal on 28 July and made the announcement on 3 August 1978.

The press reported one trade union official in Northern Ireland as saying that
"the factory would do more to destroy the IRA than deploying the entire British Army."
Such was the feeling in the Province at that time.

That day the New York Times and Wall Street Journal carried definitive pronouncements that the De Lorean project was going to Puerto Rico—backing up De Lorean's view that he also had Puerto Rico in mind. Puerto Rico's business community was stunned at the news and threatened legal action against all of us, as my right hon. Friend the Member for Mansfield indicated earlier in an intervention. Thereafter, allaying the fears of the Chief Secretary, Oppenheimer's money started to come in: 120 investors each subscribed a minimum of $150,000 and later 206 dealers entered a sales agreement with De Lorean to purchase 26,350 cars over two years. Therefore. once the Puerto Rican proposition had gone, the Oppenheimer cash came into line.

I left office long before the factory was built. De Lorean received money from the then Government to which he was legally entitled. When I left the Province at the end of April 1979, only £17·7 million had been passed over to him. The vast bulk of the cash—apart from that which was promised and theoretically accepted—plus another two tranches of £14 million and £10 million in loans, were given to De Lorean by this Government. If the master agreement was weak, as suggested by the PAC, and the monitoring of the cash flow was not satisfactory, well, as the PAC said in paragraph 52:
"It is a matter of great concern to us that, on each occasion when Mr. De Lorean was seeking additional funds, no attempt was made to amend the master agreement to establish effective safeguards."
Why then did not those Conservative Ministers get a grip on the situation? They had the opportunity to tighten financial control of the De Lorean enterprise, and also to slow down production in keeping with the market. I believe that De Lorean Motor Cars Ltd. could have been saved. The Conservative Administration were lax in their handling of the affair, and I am sorry for all those who lost their jobs and hope for a decent future as a result of that lackadaisical approach.

May I say to all the officials who were involved at that exacting and exciting time that it was worth doing; it was worth fighting for. They need have no sense of shame. They did a remarkably fine job and it cannot be taken away from them—or John De Lorean. I echo very firmly the PAC's view:
"We wish to record that those involved have a number of positive achievements to their credit, many of which reflect well on Northern Ireland as a location for new industry. They built a modern automobile plant on a green field site, developed and produced a new car of acceptable quality with labour new to the industry and using new methods for mass producing fibre glass body shells. They employed 2,600 people at peak production, and established a distribution network throughout the United States, all in 2½ years."
By any standards, that was a major achievement.

Therefore, my right hon. Friend the Member for Mansfield and I regret that we had to leave before the factory was built and the product launched—and even before hardly any money was spent. But we are both of the opinion that, had we stayed on, with our keen interest in the project, allied with the political will to succeed, De Lorean motor cars would still be coming off that production line in west Belfast.

5.23 pm

The Northern Ireland contribution to the debate ought properly to have been made by my right hon. Friend the Member for Lagan Valley (Mr. Molyneaux), since the De Lorean factory was at all material times situated in his constituency, first as the Member for Antrim, South and now as the Member for Lagan Valley. The fact that it is invariably referred to as being in west Belfast is not without its significance in a context to which I will come in a moment. However, there is no need for me to convey the apologies of my right hon. Friend, especially—as I said yesterday—during an election campaign, since the Government have generously expressed their regret that no Northern Ireland Member was consulted before this matter was put down for debate today.

In one sense the debate is a churning up of the past, and the Minister is entitled to quote from the memorandum the specific statements of the Government that such a project and such a policy as this would not at present be entertained and lie outside the principles and guidelines which are now followed in the Northern Ireland Administration. In that sense it could be argued that the lesson has been learnt, but I am sure that the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), the Chairman of the Public Accounts Committee, would have been doing less than his duty if he had not obliged the House, upon this opportunity, to confront the misjudgment which occurred in 1978.

I apologise to the right hon. Member for Barnsley, Central (Mr. Mason), who has just made a remarkable political speech which revealed the sense of the speaker that he was on a defensive brief. It was well done, but those who read between the lines would come to the conclusion that there had in fact been a major error of judgment committed at the inception of the project.

What we have to account for is that Ministers, civil servants and Cabinets entertained a proposition which, upon the face of it, was positively hair-raising. They entered into an agreement which gave the authority and all the money into the hands of someone who was committing nothing. They were confronted with a personality who, to the most ordinary psychologist, would have been recognisable as a manifest shark—something which has been amply borne out in the succeeding years.

Those of us who watched the events at the time could scarcely believe our ears when we heard the terms of the agreement and contemplated the individual and the boasts of the individual with whom the agreement had been made. So we still have something to learn from considering how it was that a misjudgment of that scale, with such disastrous consequences, was made.

The Public Accounts Committee is, in a sense, debarred by its terms of reference and procedure from placing its finger upon the essential cause of the disaster, for, in its own words,
"the Committee do not seek to question the merits of Government policy objectives".
Unless Government policy objectives are questioned, and unless the analysis and the motives of the Government are questioned, we shall not be able to understand what happened. Certainly the memorandum was right in saying that it was essentially a political decision. Paragraph 3 of the memorandum says:
"The Government decided as a matter of policy that the potential economic and social benefits justified taking the risks".
Or, perhaps more significantly, as the Public Accounts Committee quotes from McKinsey in paragraph 18:
"the political and image benefits to be derived from the DMC project would have to be very substantial".
It was in the light of political and presentational or image considerations that Ministers and their advisers were prevailed upon to enter into an almost unimaginable contract which had foreseeable results.

I want to point to what, in my opinion, is the essential error in that political and presentational analysis. The word "image" in the sentence which I have just quoted is important, because what was done was done not only for results but for public consumption. It was done in the hope, no doubt, of its outcome. However, it was also done for show and to be shown off in certain directions.

The fundamental error is a wrong attribution of the relationship of cause and effect between violence and unemployment. This was highlighted by the right hon. Member for Barnsley, Central, who quoted a trade unionist who had said that an operation of this sort would help to "destroy the IRA." It is a total misunderstanding—a misunderstanding which is degrading in its character—to confuse terrorism with economic conditions, to suppose that nationalism and unemployment can be traded off one against the other, and from that to conclude that, somehow, one can buy out nationalism by offering economic advantages, or draw the teeth of the terrorists' pursuit of a political objective by investing in the areas from which they draw their strength.

It was that mistaken notion, that hysterical approach to Northern Ireland and its predicament, that created the frame of mind in which Ministers as sage and balanced as the right hon. Member for Barnsley, Central and the right hon. Member for Mansfield (Mr. Concannon) could, in good faith, make so grave a miscalculation as this. They have stressed the level of unemployment in Northern Ireland, but a high level of unemployment calls not for high risk but for more jobs. To state that unemployment is high in an area is not to justify the investment of money at greater risk than would have been judged wise in other circumstances. Indeed, those are the very circumstances in which one ought to be especially sure that the investment will be realised in terms of jobs.

The level of unemployment is no justification for risk taking; but always it comes out in the phraseology that there was that other factor, the factor referred to by the usual periphrasis as "security"—the notion that if additional employment could be brought into west Belfast, that in itself would be a pacifying factor in the circumstances of Northern Ireland. In the end, we had neither. We had the consequences of a miscalculation in the temporary creation of about 2,000 jobs, the loss of those jobs and great dismay and discredit over a wide area; and we gained nothing in the direction in which it was hoped gains would be made.

I have stated what I believe to have been the root cause of this astonishing misjudgment. In order to complete that argument I would, strictly, need to replace the false picture with what I regard as the true analysis of the causes and nature of the situation in Northern Ireland. However, we are discussing in much more narrow terms the report of the Public Accounts Committee and the De Lorean fiasco. Therefore, I shall limit myself to saying that a political misjudgment was motivated less by consideration of the high level of unemployment than by consideration of the security situation, founded upon a profound and dangerous misconception of cause and effect in Northen Ireland.

5.34 pm

I am very pleased to participate in this short debate. As has already been said, I have had a personal interest in the matter for some time.

May I congratulate, as other hon. Members have done, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) on the very competent way in which he presented his Committee's report and its conclusions. May I also congratulate his Committee upon its conclusions, many of which now appear to have been accepted by the Government, albeit at a late stage. I regret that the terms of reference of his Committee did not allow it to go further than it was able to go.

I endorse the sentiments and views expressed by the right hon. Member for South Down (Mr. Powell) about this affair, but I was somewhat surprised by the speech of the right hon. Member for Barnsley, Central (Mr. Mason). He seemed to be trying entirely to jutify the actions for which he and his Government were responsible. In doing so, he endeavoured to unload the entire blame upon the incoming Conservative Government of June 1979. If the right hon. Gentleman had investigated the career of Mr. De Lorean from his youth to his General Motors days, he would have discovered that he was responsible for so many crooked deals that it would not have taken him long to come to the conclusion that he should not be backed, had there not been, as was pointed out by the right hon. Member for South Down, very important political implications in the decision which his Government were taking, since it was envisaged at that time that there might be a general election in the autumn of 1978 and that the provision of jobs in west Belfast might be of political advantage to the right hon. Gentleman and his Government.

It is absolute nonsense to think that in the autumn of 1978 or in the spring of 1979 we were thinking in terms of a general election. We had been working on the plan to attract investment to Northern Ireland for the previous 12 months. Furthermore, the hon. Member for Macclesfield (Mr. Winterton) was involved in the character assassination of John De Lorean well after the deal was made. Prior to the deal being made with John De Lorean there was no evidence whatsoever of any bad dealing by that man. He had been the vice-president of General Motors for 17 years.

I can only say to the right hon. Gentleman that he should consult some of the motor manufacturers and others who are involved in the motor industry, not least the editor of the Detroit News. I am sure that that gentleman, and others, would give him the kind of evidence that I have briefly outlined. As many hon. Members will be aware, I cannot be totally objective about this matter.

As a Member of Parliament, I was responsible for producing and bringing before the Government real evidence of abuse of public funds. I brought it to the attention of the present Prime Minister. Unfortunately, that information was ignored by the Government and their agencies for what I can only describe as political expediency. I make that indictment of the present Government, just as I indict the right hon. Member for Barnsley, Central for his lack of knowledge in doing a deal and jumping rather hastily into bed, metaphorically speaking, with John Zachary De Lorean.

I pay tribute to a colleague in the right hon. Gentleman's party, Mr. Bob Cryer, the then hon. Member for Keighley. Mention has already been made of my hon. Friend the then Member for Knutsford, now Lord BruceGardyne. Also, I pay tribute to my hon. Friend the Member for Wolverhampton, South-West (Mr. Buclgen), who in this House sought time and again to bring the Government to their senses in their dealings with John Zachary De Lorean but, sadly, all to no avail.

It is significant that when I gave my Government ample evidence of the abuse and misuse of public funds they refused to act. Initially, they set up a police inquiry and police officers came to see me in my home in Cheshire. I released to them documents that had been presented to me by John Zachary De Lorean's personal assistant, who is a British citizen. I did not consider myself an expert in these matters and, therefore, I handed the documents to the highest office in the land, through representatives of the fraud squad of the Metropolitan police.

The matter was taken even further because police officers were sent to the United States. They were about to meet one of the most vital witnesses, Mr. William Haddad, a senior executive of the De Lorean Corporation, when, for some extraordinary reason that has never been explained, they were summoned back to London to report. Mr. Haddad could have confirmed in considerable detail the outline of abuse contained in information that I had given and in the many papers revealing the lifestyle of John Zachary De Lorean.

I should say to the right hon. Member for Barnsley, Central (Mr. Mason) that the one person who took advantage of the Concorde programme, which the right hon. Gentleman ran down, was John Zachary De Lorean. He did not travel cheaply at the United Kingdom taxpayers' expense. He travelled by Concorde, and perhaps the right hon. Member for Barnsley, Central should have directed his attention to that fact in his lengthy speech. Mr. De Lorean was supposed to be in charge of the company, yet he never spent a night in Belfast. He went into Belfast and flew out again as fast as he could. He spent British taxpayers' money as if it were confetti.

The right hon. Member should consider the evidence that has subsequently emerged about Mr. De Lorean's lifestyle—the pictures and works of art that he bought and the fact that cleaners in his Manhattan office complained that they could not do their work because of the clutter of expensive works of art and paintings that he had purchased in this country with British taxpayers' money.

If we want to get jobs into Northern Ireland, we must do business with people who are honourable. This man was certainly not honourable, as would have been revealed if his career and pedigree had been looked at in depth before the agreement was signed.

It is sad that I have to indict Governments with dishonesty and duplicity and that I have to indict individual Ministers with incompetence and, at best, apathy in dealing with this affair. Evidence was presented to the Prime Minister, and the Attorney-General was involved. I had a personal interview with my right hon. Friend the Prime Minister in her drawing room in Downing street. I wanted to take my solicitor with me—as a friend and not in an official capacity—but I was not permitted to do so. When I arrived at Downing street, I was faced not only by the Prime Minister, who clearly knew little about the matter, but by the Attorney-General and the Prime Minister's private secretary and her parliamentary private secretary. It was a lovely four to one situation.

When I put questions to the Attorney-General or to the Prime Minister, she referred them all to the Attorney-General and he replied as if he were some sort of dalek. He said that there was no evidence of criminal abuse. I had never said that there was. I had alleged that there was a massive abuse of public funds. That was my allegation.

I believe that my actions were justified and honourable when I brought matters to the attention of the holder of the most powerful office in this country. Parliament was not sitting and I was unable to use parliamentary privilege to raise matters, and subsequently I faced a suit for defamation from Mr. De Lorean and his company for $250 million, which at that time was the equivalent of £133 million. I was being sued for doing no more than my duty.

The right hon. Member for Barnsley, Central has tried to establish that what he did in respect of the agreement with Mr. De Lorean was his duty as a Minister trying to reduce unemployment. I accept that it is a Minister's duty to reduce unemployment, though I believe that what the right hon. Gentleman did with Mr. De Lorean was wrong, and I hope that the right hon. Gentleman will agree that I acted correctly when I was given evidence which I believed merited further investigation by those who had the expertise to deal with it.

I acted confidentially. I was subsequently identified by Miss Marion Gibson, who was a member of Mr. De Lorean's personal staff, to a journalist in America. Therefore, I was obviously pressed to make some comment to the media in this country. The right hon. Member for Barnsley, Central sought to justify his actions, and I hope that he will agree that my actions were both correct and honourable.

Where were the Government in supporting an hon. Member who had revealed what the PAC calls a "massive" abuse of public funds? Did they want to know me? Were they prepared to assist me? The answer is no. Governments in this country are on trial for the way in which they are prepared to deal with people who seek to help them.

I have nothing to lose in this matter. As many hon. Members know, the action by Mr. De Lorean and his company against me was struck out. In front of a master in the High Court, I was awarded £15,000 for defamation against Mr. De Lorean who had made some unjustified remarks about me. I am glad that the right hon. Member for Barnsley, Central is nodding in agreement. I will not see a penny of that £15,000 because of Mr. De Lorean's superficial insolvency, though it is interesting to see that he was released—on a technicality, in my view, because of the blunderbuss tactics of the FBI—during his drug trafficking court case. In every way, in my view, he was absolutely guilty and was trying to get money to buy himself out of trouble, which was typical of what he had done all his life.

I was faced with massive legal fees and the Government did not want to know. I am convinced that if I had lost there would have been a number of smiling faces in the Cabinet. They would have said, "One inconvenient nuisance out of the way." That is not the way for a Government to act. They were dishonourable in disowning a colleague who had done a service to this country. I am not being immodest about what I did, because I did what I believed to be right.

The Attorney-General did not want to know. He kept replying to my questions by saying that there was no evidence of any criminal misuse of public funds. I had never made that allegation. The PAC said:
"While we consider that the De Lorean plans were impracticable from the start, it has been argued by both Sir Kenneth Cork and McKinsey that a less ambitious operation aimed at producing under 10,000 cars a year, mounted with an eye for strict economy"—
clearly the right hon. Member for Barnsley, Central would not agree with that—
"and without the massive misappropriation of funds which took place, might have succeeded".
That is what I said six months before the receiver was called in, but the Government took no action and did not want to know. Indeed, I believe that more funds were advanced to the company before it went bust.

The report continues with the passage quoted by the right hon. Member for Ashton-under-Lyne:
"The blame for this lies principally with Mr. De Lorean personally, but hardly any of those who dealt with him on behalf of the British taxpayer at a high level can escape substantial blame or criticism for their failure to prevent a major waste of public money."
How did Mr. De Lorean spend all that money and why was no action taken? I hope that my hon. Friend the Minister will tell us how many people, if any—and who they were—lost their jobs as a result of the incompetence and the squandering of taxpayers' money involved in the De Lorean affair.

I could tell the House many things about this case, but unfortunately it would do nothing for the image of Parliament. Mr. De Lorean was clearly concerned only with his own image in reaching a deal with the British Government. I am sad that certain of my right hon. and hon. Friends who served as Ministers in Northern Ireland—for instance, my hon. Friend the then Minister of State, now Minister of State for Defence Procurement, did not come clean about this. Mr. De Lorean browbeat the then Minister of State with telephone calls urging him to "stop that man in London saying those things." Ministers must have known what was going on. It is a pity that they were not prepared to act or to take a parliamentary colleague into their confidence and say, "We cannot say this publicly, but we assure you that we are taking action and that these matters are being investigated." The Government stand rightly indicted for apathy, incompetence and wasting public money, although I am a little reassured by the fact that certain new criteria have been laid down by the Government to try to prevent a recurrence of this kind of abuse.

I have one further question for my hon. Friend the Minister to answer when he replies to the debate, as this information was not given by the right hon. Member for Barnsley, Central. I should like to know just how much finance Mr. De Lorean put up front. He was supposed to put up a substantial amount. The right hon. Member for Barnsley, Central referred to some 120 investors from America, mainly from New York, but how much of that money was ever actually put up? I do not believe that Mr. De Lorean put up more than about $750,000 himself, although he should have put up 10 times that amount to match the money provided by the British Government.

The House should be ashamed of Government for what Government have done with taxpayers' money. I pay tribute to the right hon. Member for Ashton-under-Lyne and to members of the Committee for the extremely hard and detailed work that they put into producing the report. I only wish that the baseline for what they were able to do had allowed them to make deeper, more relevant inquiries as to why this occurred and who was to blame so that action could be taken against those responsible for one of the most flagrant and massive abuses of public funds. The right hon. Member for Barnsley, Central talked about bringing jobs to Northern Ireland, but I bet that the basis of any agreement with any of the other companies was not that agreed with John Zachary De Lorean, who is about to make about $1,500,000 from sales of his memoirs.

I tell Mr. De Lorean from this Chamber that if he ever sets foot on the shores of the United Kingdom a writ will be slapped on him for the money that he owes me.

I am grateful for the support of my hon. Friend, who served on the Committee and played a major part in its inquiries.

I hope that the Government will give an assurance that if Mr. De Lorean ever sets foot in this country he will be arrested and that any assets that can be taken by the Government will be taken. It is possible that his book will be brought out in this country. That may help to repay some of the debts that this man owes not only here but in America and in many other parts of the world. Am I to have the assurance that the Government will have him arrested and take any resources that they can take from him? I believe that assurances to that effect will allay some of the fears of the people of this country who feel desperately let down because money has been poured down the drain.

The right hon. Member for Barnsley, Central should be aware that I am extremely sorry for the people who expected long-term employment rather than employment merely while it suited Mr. De Lorean, who always intended to walk away from the project. I am sorry for the work force of 2,600 in west Belfast and elsewhere. Those people were let down, and the taxpayers of this country were also let down, but those responsible have remained completely unpunished and it is time that they received their just desserts.

5.55 pm

Mr. William O'Brien
(Normanton)