With permission, Mr. Speaker, I should like to make a statement.I informed the House on 1 March that British Aerospace had declared a serious interest in acquiring the Government shareholding in Rover Group and that negotiations were being put in hand. British Aerospace asked that the negotiations should be on an exclusive basis. We agreed to this, provided that the further studies that it wished to carry out on Rover Group, and the negotiations between British Aerospace and the Government, were concluded by the end of April. I promised to return and report the outcome of these discussions to the House at the earliest opportunity. I can do this today because British Aerospace has completed its investigations satisfactorily and earlier than anticipated. The negotiations have therefore been concluded and agreement reached. The rules of the stock exchange require in these circumstances that an announcement is made without delay. Today we have entered into a conditional contract with British Aerospace for the sale of the Government's shareholding in Rover Group. Before entering into the contract with British Aerospace, we considered a number of confidential expressions of interest, but none amounted to a specific offer. The board of Rover Group believes that this is the best possible outcome for the group. British Aerospace is strongly committed to the further development and growth of Rover Group, working with the existing Rover Group management who have made so much progress in improving the performance of the businesses. Honda told us that it welcomed the continuity of Rover Group's management team which would be assured by British Aerospace's ownership of the company. I therefore hope that the important operational partnership between Rover Group and Honda can continue to develop satisfactorily. Without constraining British Aerospace's day-to-day management of the business, we have agreed important conditions on the agreement. British Aerospace has undertaken not to relinquish control of Austin Rover and Land Rover within five years. This undertaking is supported by legal arrangements designed to ensure that it is not to its financial advantage to do so. I shall now turn to the main financial terms of the agreement. During negotiations it has been impressed on us by the board of British Aerospace that Rover Group operates in a highly competitive industry and that, notwithstanding the recovery in 1987, its current and prospective levels of profitability are insufficient to meet the interest burden on debt built up through many years of accumulated losses. The Government have been equally concerned that the merger of these two major British manufacturing groups should move forward only on a firm financial footing. Since 1975, when the Government became the majority owner of British Leyland, the banks have been content to advance large sums on the strength of the Government's involvement. In order that the company is in a fit state to return to the private sector it is appropriate that we should deal with this accumulated indebtedness, which no company without similar backing could be expected to maintain. Of course, we would have had to undertake this exercise whatever route had been adopted for Rover Group's privatisation. The Government have therefore agreed that the Government will make a cash injection of £800 million into Rover Group for this purpose. Following agreement on these steps to strengthen the Rover Group balance sheet, we have been able to conclude an agreement to sell the Government shareholding in Rover Group for £150 million. We have also agreed with British Aerospace and Rover Group arrangements whereby £1·1 billion of Rover Group's trading tax losses will effectively be eliminated, leaving only £500 — [interruption.] — £500 million of these losses will remain to be claimed against Rover Group profits in the future. British Aerospace has also agreed that other currently available tax reliefs within Rover Group will be applicable only within that group. I turn now to the elimination of the Varley-Marshall-Joseph parliamentary assurances relating to Rover Group's bank debts, trade creditors and other obligations. These currently total approximately £1·6 billion. While Rover Group has been in public ownership, the Government have given assurances that the obligations of the group will be met. No new obligations incurred by the Rover Group after the date of completion will benefit from the assurances. Obligations incurred between now and the completion date will cease to benefit from the assurances on completion. The negotiations with British Aerospace have concerned only the Government's shareholding in Rover Group. British Aerospace has said that, following completion of its acquisition of the Government's shares, it will make separate proposals to Rover Group's minority shareholders in due course to acquire their shares. British Aerospace has made it clear that these proposals will be fair and reasonable and will be made after consultation with the Rover Group board and its advisers. The agreement is, of course, subject to the approval of the British Aerospace shareholders and the completion of the normal European Community procedures. We also expect to receive the advice of the Director General of Fair Trading. I should like to explain what progress there has been on the European Community implications of these plans. On 14 March we notified the European Commission that we proposed to deal with the necessary restructuring of Rover Group's finances. My right hon. and noble Friend the Secretary of State met Commissioner Sutherland on 23 March to explain the Government's objectives and proposals. He had a further meeting with Commissioner Sutherland yesterday. The Commission met this morning and decided to open the formal state aid procedure. I am confident that the Commission will expedite its investigation. The agreement brings to a successful conclusion the privatisation initiative that began in earnest with the flotation of Jaguar in 1984. Since he took office in May 1986, Mr. Graham Day has presided over a remarkable period of change. The House should pay tribute to his achievements. He returned the group to an operating profit last year. He has already returned 18 Rover Group businesses to private ownership. These include the trucks and bus activities, Unipart, Istel, and Jaguar Rover Australia, which are all trading profitably under their new owners. The final step that I have announced today will fulfil our commitment to privatise Rover Group within the life of this Parliament. In the hands of British Aerospace, Rover Group would have the best available chance of developing its independent role in the vehicle industry. We cannot afford to underestimate the contribution to the economy of the largest United Kingdom passenger vehicle producer with a turnover of £3 billion, exports of £1 billion, direct employment of 43,000, and indirect employment of two or three times that number in the component supply sector, as well as over 50,000 jobs in Rover Group's distribution networks. This will strengthen Rover Group's ability to compete at home and abroad and thus benefit all those who work with and for it, as well as the economy as a whole. I commend the agreement to the House.
Has not the Chancellor of the Duchy of Lancaster got his seasons confused? Is not Christmas, rather than Easter, normally the season for giving? Is not this astonishing statement another sad instalment in the sorry saga of the Government's long attempts to write off Britain's largest indigenous car manufacturer at any price? Is it not an act of political irresponsibility and industrial sabotage, totally lacking in industrial logic or commercial sense?Will the right hon. and learned Gentleman confirm that he is paying British Aerospace £650 million—enough to raise child benefit by £1 per week—to persuade it to walk away with net assets worth £770 million? How can that crazy logic be justified, even in terms of this Government's ridiculous economic calculations? Will the right hon. and learned Gentleman also confirm that, with his characteristic lack of regard for the taxpayer's interests, he is writing off £1·1 billion of debt that is owed to the taxpayer, allowing Rover and its future owners to retain enough tax losses to ensure that they pay no tax whatsoever on any profits that they may make in the next few years? Will the right hon. and learned Gentleman comment on reports that tomorrow British Aerospace will reveal that it is short of cash itself? Is it not clear that BAe views Rover as a sort of cash cow to help it over a liquidity problem, and that instead of putting money into volume car manufacture it intends to take it out—hardly the right basis for an industry that desperately needs a long-term commitment to investment if it is to survive? What assurances can he offer the House that the investment that is desperately needed will be made by a cash-starved BAe? Does the right hon. and learned Gentleman recognise that Rover's collaboration with Honda is crucial to its future? Does not the cancellation of the Legend project make it clear that Honda is already disenchanted, and will it not become even more disenchanted as the greedy logic and confetti money basis of the deal becomes increasingly clear? What assurances does the right hon. and learned Gentleman have that the EEC will complete its investigations in time or in favour of this ridiculous deal? Finally, what assurances can the right hon. and learned Gentleman give the House about the future of this vital British industry? Is not his statement a further sign that all that the Government wish to do is to wash their hands of this important industry as quickly as possible, with no regard whatsoever for the future of the work force or for Britain's industrial future in this vital area?
I did not follow all the hon. Gentleman's financial logic—if that is a fair description of the way in which he put his questions. If he is acquiring a somewhat belated concern for the interests of the taxpayer, he might reflect on the experience of the taxpayer since 1976, when the company was taken into public ownership, because during that time the taxpayer has had to pay £2·9 billion to cover the losses that have been made by the company. If the hon. Gentleman tries to convert that into other things that might have been bought by the taxpayer with that money, he will find that he reaches some spectacular conclusions.When the hon. Gentleman comes to analyse the bargain that the Government have struck with British Aerospace, he should reflect, first, on the full terms, which I gave the House in some detail. At the moment the taxpayer is facing an obligation under the Varley-Marshall-Joseph assurances that amounts in total to £1·6 billion. On the basis that I have given, that prospective liability will be extinguished in the next few months and no now liabilities will accrue under that head. When it comes to extinguishing the tax losses that have been accrued by Rover in the past, like several of his hon. Friends when I read it out, the hon. Gentleman totally misunderstood the implication of that. Extinguishing those tax losses means that they cannot be offset against future profits. It is to the benefit of the Exchequer to extinguish over £1 billion of accumulated tax losses, and it is worth about £400 million prospectively to the British economy. The remaining £500 million of tax losses available to British Aerospace is of use to it only against future Rover Group profits, and Rover Group has been earning those on its trading profit and loss account during the past 12 months. The hon. Gentleman says that British Aerospace regards Rover as a "cash cow". I assume that that is his description of British Aerospace's commercial judgment that the company is a good long-term investment from which it expects to earn profits in the future. I trust that it will do so if its management is successful in developing the business. The hon. Gentleman has no reason whatsoever for casting doubt on Honda's reaction to the deal. We have sounded out Honda, which is content that its important commitment to and involvement with the Rover Group should continue. The hon. Gentleman is irresponsible in casting doubt on that. I advise the hon. Gentleman to go away and study the deal. It is an extremely good day for the taxpayer that we can see the end of the Varley-Marshall-Joseph assurances and extinguish all those tax losses. It is a very good day for the Rover Group and all who work in it that a company such as British Aerospace has judged that it wishes to bid for that company and that it sees a long-term future for the business. When the hon. Gentleman talks about sabotage, he has a brass neck. During the past fortnight the activities of the trade union and labour movement have sabotaged 1,000 new vehicle jobs in Dundee. When he is faced with a deal such as this, a little modesty on his part would be rather suitable.
I congratulate my right hon. and learned Friend on the deal. Is he not doing what BAe and Rover should do? Should they not get together in the same way as General Motors, Ford and Boeing in the United States, to strengthen the production and manufacturing technology available to a combined group to compete in the world today?I am delighted that BAe is acquiring the management talents of Graham Day, but may I have an assurance that no pay-off is involved relating to BAe's problems in financing the Airbus?
The judgment made by the management of BAe is in line with that made by other successful companies in other parts of the world. There is nothing unique about an arrangement between an aerospace company and a vehicle manufacturer.I can assure my hon. Friend that there is no hidden deal behind the full details that I have given the House today. In particular, our arrangements with BAe on its aerospace business remain as they have been: a close pattern of partnership.
Is it not unfortunate that the Secretary of State for Trade and Industry is not a Member of the House of Commons, which has pre-eminently the right to discuss economic and financial matters, and to which the Secretary of State might then be personally accountable?Is the right hon. and learned Gentleman aware that the Public Accounts Committee may well wish to examine the justification for the sale, and will certainly want to distinguish between the Government's right to produce policy objectives and the right of the taxpayer to be sure that his money is protected?
This is a collective decision by the Cabinet and the Government. The Government are, of course, answerable to the House for their decisions, and are certainly accountable to the House for the way in which they look after public money and the taxpayer's interests. They have absolutely nothing to fear from an examination of the arrangements by the Public Accounts Committee. If the Committee wishes to take evidence, we shall welcome the opportunity to explain further.
May I turn from the politics of the Opposition to the jobs of my constituents, and the constituents of many other west midlands Members?I welcome the early timing of the announcement to relieve uncertainty. May I ask, however, whether out of the "dowry", if I may describe it thus—in view of the expression
any commitment was sought for the replacement of the Metro car, which accounts for two fifths of the Rover Group's sales and is the only Rover car in the country that is in the top-selling bracket?"committed to the further development of Rover Group"—
I can assure my hon. Friend that BAe has told us that it looks on its acquisition of the Rover Group as a long-term investment and is committed to the maintenance and development in the longer term of the group's present business. It would clearly be wrong for the Government to impose constraints and commitments on the management of the group when it must make its own decisions on capital investment and on its future.I am in no doubt that BAe has acquired the business to develop and maintain it. Obviously, it will address itself —together with the Rover Group management which is joining it—to the future well-being of the business and the shape of the product range.
Does the Minister agree with his noble Friend Lord Bruce-Gardyne, who has described these as "golden giveaway terms"? Does he agree that the Government are paying BAe to take the Rover Group off their hands just as it is becoming profitable, and will he at least guarantee that the Government's golden share of 15 per cent. in BAe will be maintained?It is now clear to the electorate that, whatever else may be the case, investments in the economy are not safe in the Government's hands.
If those comments by Lord Bruce-Gardyne are accurately quoted, I flatly disagree with them. I advise the hon. Member for Truro (Mr. Taylor) and my noble Friend to study the terms more closely and to consider the full extent of the contingency liabilities and obligations that the taxpayer now faces in owning the Rover Group. As a consequence of the deal, we will extinguish all those assurances and all the excessive tax losses, and will return the company—on a sound basis—to the private sector, where it has a better prospect of thriving in the future. The arrangements for the golden share in British Aerospace remain unaffected and stay as they have always been announced.
I thank Leslie Crowther for that statement, which is the industrial equivalent of the 5p cemetery. What will the Minister say to give any confidence to the workers of Rover, given that BAe has just announced its intention to reduce its costs by one fifth in the next two years and by a further one third in the following two years? Since Rover and BAe are both heavily dependent on export markets, and are therefore vulnerable to the falling dollar, what guarantees is the Minister giving today for the jobs of Rover workers against the background of that economic cutback? With an increased tendency towards sweating in Ford, Jaguar and Land Rover, is it not a fact that car workers' trade unions will have to strenghthen their organisations to fight the battles ahead?
British Aerospace is in a highly competitive market in both its civil aviation and military business. Therefore, I have no doubt that all those with the interests of BAe at heart will welcome the commitment of the management to bring down, and keep down, its costs and remain competitive, which I am sure it will endeavour to do. The guarantee of jobs that the hon. Gentleman seeks cannot be given, except in the context of looking for jobs to be assured by continued success in the market place. It does not matter who owns the company, whether it is a public sector or private sector owner, of whatever sort. The well-being of the company and those who work for it depends on its continued success in the market place and the continued improvement in performance that we have seen under Graham Day's leadership in the past 12 months.The idea that the organisations representing car workers need to be strengthened does not instantly come to my mind. What is needed is for the organisations representing those workers to come up to date with the 1980s and realise that the attitudes that they have displayed recently in the face of an attractive Ford investment proposal in Scotland will set the car industry in this country moving backwards, rather than forwards.
Will my right hon. and learned Friend accept that this is a welcome end to a disastrous story that was started by the right hon. Member for Chesterfield (Mr. Benn) when he put together two companies that should never have been together? Is it not a vindication of the Government's policy of a step-by-step privatisation of the original British Leyland group, culminating in this arrangement with BAe? In fact, the paying of £800 million is a good deal when it gets the taxpayer off the hook for a £1·6 billion guarantee. The taxpayer should be rejoicing, and we should be wishing the firm every success in the future.
I am grateful to my hon. Friend for his comments. It is a remarkably successful outcome to the Government's attempts to prepare the Rover Group as a whole for a return to the private sector. I agree that we should look back with relief to the ending of a period during which almost £3 billion has been expended by the taxpayer on covering losses in that group, when we all know how £3 billion of taxpayers' money could have been put to other purposes had the group not been performing as it was.On the matter of the £800 million, the fact is that the bank indebtedness of the company was allowed to accrue only because the Government were standing behind it. No other company trading in the same way as the Rover Group could have built up that bank indebtedness. It is simply not reasonable to expect it to be taken on by any new purchaser. That would have applied however we had eventually moved to privatisation of the group. Therefore, we have extinguished that bank indebtedness but, at the same time, as my hon. Friend the Member for Surrey, North-West (Mr. Grylls) points out, we are getting rid of all sorts of other liabilities for the taxpayer which cannot be brought to an end except by successful privatisation of the sort that I have announced.
Will my right hon. and learned Friend recognise that BAe buying Rover is a remarkable achievement for a privatised company —British Aerospace—encouraging first Royal Ordnance plc and now Rover into the private sector? Will he recognise that in writing out a contingent liability we are saving potential damage to the taxpayer? In recognising that the fortunes of the company are bound to be significantly improved in the private sector, we are now certain that the company can continue to expand as it has done so dramatically since it was first privatised.
I agree with my right hon. Friend. As a result of the changed industrial climate and the Government's economic policies, we have seen a powerful manufacturing group emerge composed of what were fairly unsuccessful nationalised industries only a few years ago. Every responsible hon. Member must wish that this great group will go on to be a very powerful manufacturing force in the British economy.
As BAe needed Government help to fund its contribution to Airbus development a year ago, how will BAe find the money to finance new model development at Rover Group in future? What assurances, estimates or forecasts has BAe given the Government about jobs at Rover Group in view of the tremendous job losses that have taken place at BAe since it was privatised?
I do not know whether the hon. Gentleman is, by implication, criticising the provision of launch aid for the Airbus project. Launch aid is in no way a subsidy. It is aid to develop a product which has a particularly long lead time before it can produce any returns. It also enables BAe to engage in the Airbus project, which is still at a fairly early stage of development in the civil aviation market. However, launch aid is not a subsidy, because there are agreements attached to launch aid whereby it will be repaid on terms that will show a return agreed in advance with the Government. There is no way in which a comparison can be drawn between that aspect of financing civil aviation and the capital needs of a vehicle business. Of course, the company will have to look to its resources and ability to raise money on the assets to finance its future model development. That is inevitable in that business as in any other.The loss of jobs in BAe is the inevitable result of the competitive pressures on the company. However, the security of jobs in any business depends in the end on the ability of the business to remain competitive and its ability to produce products that it can sell successfully in the market place. No nationalisation process can get round that.
Within the agreement between BAe and the Rover Group, has there been an agreement on management contracts for the most able members of the Rover board? Was any other organisation prepared to put up more money than BAe for the Rover Group?
I cannot, of course, give details of the contracts of individual managers with the new company, any more than I could give details off the cuff of existing management contracts. I know that BAe regarded the existing management of Rover Group as one of its assets, and it intends to continue to work with the existing management. This will cause the minimum of disruption to those engaged in the company. We did not receive any offers from anyone else. We received some expressions of interest, but they have proceeded no further. We have reached a satisfactory conclusion to our negotiations with BAe.
This appears to be a very generous settlement for BAe. It is getting Rover Group on the cheap. In return for this generosity, what specific assurances has the right hon. and learned Gentleman secured for the future investment in model development and the continuity of Rover's presence in the volume market? What form will the legal agreement over relinquishment take? What has happened to the £80 million from the pension fund which the workers contributed to the Rover Group balance sheet? In view of the importance of this matter for jobs and industrial success in my constituency and elsewhere, should we not have a full debate on this issue as soon as possible?
I have not the first idea what price the Opposition think they would have negotiated in such a deal had they embarked upon one. I suspect from some questions from other Opposition Members that they have not yet fully absorbed the details of the very successful bargain that has been struck between BAe and the Government in reaching this arrangement.We have not imposed requirements on the purchasers of the company about model development or the volume that it should seek in the market, because we believe that it is contrary to the interests of the company and everyone working in it to attempt to put those political constraints on the management's ability to manage the business in the best interests of the company and those who depend on it. The pension fund in the Rover Group accumulated a surplus. Together with a large number of other companies, the group is taking a tax holiday on contributions with regard to the company and increasing the benefits to the members. The employers and the employees have both contributed to the pension fund. I understand that both are now benefiting from the fund's good performance and there have been improvements to the benefits, for which credit should be given. As I told the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) a moment ago, the Government would welcome the opportunity to explain the position to the Public Accounts Committee, if the Committee regarded the matter as important enough to look at, and we would certainly welcome a debate on the Floor of the House. I am sure that my right hon. Friend the Leader of the House is ready to arrange a day for such a debate, through the usual channels.
I welcome the conclusion of the negotiations. My right hon. and learned Friend will be aware that Austin Rover is the tip of a manufacturing iceberg, because thousands of component suppliers throughout the midlands, and indeed the country, feed into the two main assembly plants. They have geared production for an output of 500,000 cars per year. Is my right hon. and learned Friend satisfied that the new management of BAe has the financial backing and commitment to ensure that such volume manufacturing will continue and, with it, the prosperity of large chunks of our manufacturing businesses?
Throughout the negotiations, we have been conscious of the interests, to which my hon. Friend rightly draws attention, of the component suppliers and the distributors, and the tens of thousands of jobs that are indirectly dependent upon the Rover Group's business. I think that they will welcome the outcome of these negotiations because we have achieved the conclusion of the privatisation process without disrupting business or creating any excessive uncertainties. My hon. Friend will remember that when various other bidders were rumoured to be in the field two years ago and there was uncertainty, the company lost £250 million-worth of sales, 2 per cent. of its market share, which it has never recovered, and there was considerable alarm among dealers and component manufacturers. This has been a smooth process which has had their interests very much in mind.The continued volume of production and success of the business depends entirely on the success of the management and work force in maintaining and improving their position in the market place. We believe that the privatised company will be much better placed to compete in that market place than it would be if it continued in public sector ownership.
Will the right hon. and learned Gentleman kindly answer the question asked by my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) about whether he or the Government have received any estimates or forecasts of the effect of this deal on the employees of the Rover Group, and perhaps its suppliers? Does he agree that, just as BAe must put the matter to ballot of its shareholders, it is only fair that the Government should put it to a ballot of their shareholders—the electorate?
I made it clear a moment ago that we have not entered into detailed commitments about the future shape of the business, except that BAe has made it clear that it has bought the company as a long-term investment and is committed to its continued development. The total number of employees engaged in any particular occupation will depend, as I keep saying, upon its success in the market place. I am in no position to make forecasts about that for anything more than the immediate future. The acquisition in itself has no effect upon employment prospects in the group, except to give a little added security to those who work there because of the potential benefit of the company being free to trade as a private sector company.I have no intention of embarking on a referendum on this subject. The judgment of the people might be a little more reliable than that of the Labour party, but I fear that the period of uncertainty during the referendum would do a huge amount of damage to the business and all those dependent on it.
Will my right hon. and learned Friend accept my congratulations on the speed as well as the success of the negotiations that he has led? Perhaps those congratulations should also go to that hard-working team of officials who serve him so well. Will he lift his uncharacteristic shyness on two aspects? Will he comment further on, first, the Honda association and the joint projects undergone by Honda — not just the management commitment, but the project list — and, secondly, on the competitive business within the European Community? My right hon. and learned Friend referred to the opening of the European processes. Does he have some confidence that they will be closed favourably at the appropriate time?
I am grateful to my hon. Friend, who had responsibility for this business at more difficult times. As he was so successful in assisting the company through those difficult times, I am sure that he is as delighted as I am to see the project come to such a successful conclusion with this privatisationWe have ascertained that Honda is perfectly content for the acquisition to go ahead. Indeed, it appears to welcome it. It would have been somewhat worried if a car manufacturer had shown an interest in the group, but we have had no offer from any car manufacturer. Honda has shown its willingness to continue to collaborate model by model with the Rover Group, which has been important to the group in the past. Processes within the EC will inevitably take a little time. All the other member states have to be given the opportunity to comment on the state aid element of what we propose. We have the Commission's agreement to expedite that process as quickly as possible, and I hope that it will be concluded within the next few months.
Is it not true that, while BAe is paying £150 million, the tax loss concession is worth £175 million to it, so it ends up with £25 million in hand? Has not the right hon. and learned Gentleman handed an inquiry to the Public Accounts Committee on a plate? Is it not true that the only people who who have benefited from this matter in the past few days, and indeed, today, are those who are speculating in BAe's shares who have pre-empted this decision and who will inevitably make a substantial gain?
The hon. Gentleman is a member of the Public Accounts Committee and no doubt he will have an opportunity to put forward those arguments again. I remind him that the taxpayer is guaranteeing £1·6 billion-worth of bank and trade creditors who have been dealing with the company on that basis until now. Those liabilities will be extinguished over the next few months. For the moment, because of its losses, the group has accumulated £1·6 billion-worth of tax losses, which could be offset against any future profitability of the group, at great expense to the Exchequer. We have extinguished over £1 billion-worth of those tax losses, and that in itself saves the Exchequer a contingent liability of about £400 million. When the hon. Gentleman looks at the deal more closely he will see that it is a bargain for the taxpayer, that proper accountability can be mantained for the public interest and that it is good news for BAe and those involved in the Rover Group.
Will my right hon. and learned Friend give a clear assurance to the House that any future application for launch aid by BAe will in no way be affected by its link with the Rover Group, whether or not the Rover Group is running at a profit at the time and whatever means of financing the Rover Group is being conducted by BAe?
I am not anticipating any early application for more launch aid from BAe, because we have only recently concluded the launch aid arrangement for the A330 and A340. If any future launch aid applications are made, we shall look at them on exactly the same basis as we have looked upon past applications in the light of our statutory obligations and our judgment whether they are justified in order to get a project under way in the interests of the national economy. I can assure my hon. Friend that the agreement that I have announced today in no way affects our dealings with BAe on the other parts of its business.
Will the Minister explain the logic of the sequence that when private companies go bust they are taken into public ownership to protect jobs, with taxpayers' money they are turned into profit, and then, when they are in profit, they are handed back to private enterprise? All the industries that have been nationalised in the past 20 years have been badly run in the private sector. What guarantees has the Minister that this enterprise will be better run in the private sector than it presently is in the public sector?
I do not want to give too long an answer to explain the sequence of events. I am sure that hon. Members will recall the background. The economic and industrial climate in the country was quite disastrous to the success of any major manufacturing industry. There was raging inflation, large public sector deficits and a steady loss of competition in international markets. Car companies were overmanned and inefficient, with over-powerful and out-of-control local trade union leadership encouraged by the Government of the day to continue to obstruct any moves towards real competitiveness and higher efficiency. The Government then nationalised the company to protect it against reality and to subsidise continued over-manning and inefficiency. Nearly £3 billion-worth of taxpayers' money was lost in covet-mg the losses.Then a Government came in who were determined to improve the climate of British industry, to back up the management that wished to turn the company around, and to support Graham Day and his team in their efforts to produce the first trading profits. We are now putting the company back where it belongs, in the private sector, in an economic environment that is very attractive to the whole of British manufacturing industry.
Does my right hon. and learned Friend agree that two fundamental points are being missed? First, the Rover Group has been purchased by a British company, which is important. Secondly, looking at the balance sheet of the Rover Group, and bearing in mind that my right hon. and learned Friend certainly is not in a seller's market, he and his Department have achieved a very good deal indeed for the taxpayer. Will he confirm that when he approaches the Commission, he will argue that Renault recently had 1·2 billion-worth of debt written off by the French Government, with the approval of the Commission? When he argues under articles 92 and 93 of the treaty of Rome, will he use the same arguments to gain approval for the deal as the French Government used?
I share my hon. Friend's pleasure at the fact that the company that made an offer to the Government for the Rover Group is a British company and one of our major manufacturing companies. That is welcome indeed. I agree that the deal that we have struck in selling the Government's shareholding is reasonable and fair and perfectly advantageous to the taxpayer and to the companies involved.When we go to the European Commission we shall point out that the state aid that we shall be providing will be part of the process to return the company to the private sector, where we expect it to thrive in a competitive environment. Therefore, I trust that the Commission will look favourably upon the suggestion as a logical step in getting rid of a history of subsidy and loss and enabling the company to enter a privatised setting, which ought to be consistent with the whole policy of the Community towards the European market.
What is so special about British Aerospace, which is declaring redundancies in my constituency, that it has managed to get the Government to suspend their normal policy of allowing free play of the market in competition and getting a splendid bargain because it happens to be the first in the queue to ask for it? Bearing in mind that it took a long time for the Government to decide to give launch aid, even as a loan, it is surprising that the decision was reached so quickly. May we look forward to the day, as the owners of Rover, that the company will ask for launch aid for new models? Will the taxpayers have such a bargain when that is taken into consideration?
British Aerospace has reached this successful conclusion because it was the first company since the election to put the proposition to us that it wished to acquire a company which everyone knew we proposed to privatise. We gave it exclusive negotiating rights for a period because we feared the disruptive effects on the business if everyone began making bids for it and created a great air of uncertainty for the company, its component suppliers and distributors. I am sorry if the hon. Gentleman finds the speed of the negotiations disconcerting. It is true that for a change this piece of business has been conducted with reasonable secrecy, expedition and good sense on all sides. That is the way in which good government should be conducted.
I thank my right hon. and learned Friend for the excellence of the arrangements, and particularly for the fact that a formula has been found to keep the company British. I would have thought that that would find complete accord with my colleagues across the Floor. Will the understanding and the obligation given that the company will remain in the present hands for the next five years also apply to all subsidiary parts of the company, including Land Rover? This would allow for the further protection of the employment of my constituents.
My hon. Friend represents Yardley in Birmingham and I am sure that his opinion coincides with that of the vast majority of the people who live in Birmingham whose well-being depends to a large extent upon the industry. We will have to wait to see, but my expectation is that this arrangement will be welcomed by the work force and by all those who work in the area and are dependent on the Rover Group for business. Most will share my hon. Friend's view of the purchaser and welcome the fact that British Aerospace has been the successful purchaser. We have entered into an agreement whereby British Aerospace will not be able to sell the whole business or any substantial part of it during the five-year term. I am certain that it will not be able to sell off Land Rover separately during the five-year agreement.
Will the Minister help us by clarifying paragraph 3 of his statement:
How could there be a specific offer from anyone if no one had the information on which to base the offer, which was exclusive to British Aerospace? Was there any interest from Ford, and did Ford express any annoyance at the way in which it was treated over Austin Rover?"Before entering into a contract with British Aerospace we considered a number of confidential expressions of interest, but none amounted to a specific offer"?
I cannot disclose commercially confidential approaches to us. I certainly cannot start disclosing the nature of the representations made to us by different companies or identify the companies involved. As I have said, we had various expressions of interest, but none of those amounted to an offer. —[Interruption.] The hon. Gentleman has given an explanation of why, perhaps, there was no offer. I have explained to the House why we felt that it was right to agree to the request of British Aerospace and Rover Group that there should be a period of exclusive negotiation with British Aerospace. The alternative would have caused considerable uncertainty to all in, and possibly disruption to, the business. Therefore, we pursued exclusive negotiations, which have come to a successful conclusion. No one could complain about that.
What about Ford?
I am not prepared to disclose the nature of our exchanges with individual companies or to identify those companies. Such approaches are commercially confidential.
Does my right hon. and learned Friend find as surprising as I do the degree of hypocrisy and synthetic attitude of many Opposition Members, including the hon. Member for Dagenham (Mr. Gould), in particular about foreign ownership? Will he confirm that this must be the best offer for the 45,000 people working at Austin Rover? Does he agree that the need for a secure future for the 51,000 people working in the distribution network, and the hundreds of thousands who work in the components industry, is often forgotten? Finally, does he remember the great opposition from Opposition Members to Land Rover going to General Motors and Austin Rover going to Ford, and does he agree that the solution for a good British company bringing in technical skills must be the best possible solution?
I agree with my hon. Friend. I am sure that had there been privatisation with another company there would have been wild indignation from the Opposition if another car manufacturer had expressed an interest, or an overseas company had expressed an interest. They are pressed to find objections to British Aerospace, which is a rather popular and successful company. As far as I can see, their main criticism has been about the terms that we struck. They are trying to convince the House and the public that the Labour party would have struck a more successful privatisation deal with some unknown purchaser—an unlikely concept.With regard to my hon. Friend's last serious point, it is particularly good news for all those who work in the components industry. There will be more jobs in the industries that provide the components for the Rover Group, such as Unipart, than there are in the Rover Group itself. The smooth transition from one ownership to another, with no threat of disruption to the business, will be welcomed by all those interested in the components industry.
Order. I must have regard to the fact that there is to be another statement after this one and that there is a very heavy day in front of us. I shall allow questions to continue for another five minutes and then we must move on. I say now, rather than at the end of this statement, that I shall consider calling those hon. Members who are not called now when this matter is debated on another occasion. I ask for brief questions, please.
The Minister has told us that Rover's debts are £1·6 billion. What are the company's assets, and how do they compare?
In December, the net asset value was £334 million, but I must ask the hon. Gentleman to await the report and accounts of the company and the balance sheet that will eventually be put to British Aerospace shareholders for a further and an up-to-date figure.
When my right hon. and learned Friend considers the remarks of the Opposition, will he remember that they reached the zenith of their financial control with the operation of the National Enterprise Board? Is my right hon. and learned Friend aware that other large motor manufacturing companies have billions of pounds worth of invesment lined up to produce new models and new developments? Does he therefore accept that the terms that he has announced today are barely enough, if enough, to ensure that Rover escapes permanently from the public sector?
I entirely agree with my hon. Friend's comments about the Opposition's record when they were in government. It bears no comparison with our own. I agree also with his final judgment that their attacks upon us show complete schizophrenia. One moment they object to the fact that we are injecting cash to eliminate £800 million of bank debts that would never have been accumulated if the company had not been in the public sector, and the next moment they suggest that the new group will not be strong enough to raise the capital to invest in new models. Had we handed this company to anybody without doing something about the scandalous level of debt that it has been allowed to accumulate when it was under public sector control, it would have been in considerable difficulties. That is why it is a perfectly sensible bargain to get those debts out of the way before the company is returned to the private sector.
Will the Minister not be so dismissive about the interests of the workers in the company, particularly in relation to the pension fund? Is he aware that today car industry workers are far more alert and aware of the consequences of the pension fund? Recent industrial action in the car industry was not about wages and conditions; it was about pensions. The Minister has been far too dismissive this afternoon of the fact that it is his responsibility to ensure that the interests of the workers in the pension fund are fairly dealt with. There is evidence that the "increases" in no way reflect the amount of the increase in the pension funds.
I am extremely concerned —as concerned as the hon. Gentleman—about jobs in the car industry and about the well-being of the work force. My opinion is that the position of the work force in this company will be made better, not worse, by transferring the company to the private sector, where it will have a better chance of thriving in the market place. One reason why we are acting as we are is that we believe that privatisation is in the interests of commercial organisations and of all those whose livelihood depends upon them.The last time that we had an exchange on the pension fund I made inquiries to find out what the dispute was about over the Rover Group's pension fund. It seems to arise from a misunderstanding of a perfectly ordinary process, whereby a pension fund has accumulated a surplus that has been earned on the investment of both employer and employees. The employer and the employees are benefiting from that surplus by way of a holiday on contributions for the employer and improved pension benefits for the members of the fund. That does not justify a strike in the car industry or in any other industry, and I trust that the hon. Gentleman will not lend his support to groundless strikes in this or in any other industry.
Is my right hon. and learned Friend aware that he has secured a very good deal for the British taxpayer, in the sense that he has found a willing buyer for the Rover Group? Does he recall the uncertainty that prevailed just two years ago and the damage that was done to the business of the company at that time? Will he contrast that with the excellent way in which he has concluded this deal, which guarantees British ownership?
I am grateful for my hon. Friend's judgment of the bargain that we have struck, and I have every regard for his opinion in these matters, which is more accurate than that of our critics on the Opposition Benches. I also agree with my hon. Friend that most people outside the House will welcome the fact that the successful purchaser is a great British company and that it is a major exporter of manufactured goods from this country. I am quite sure that the opposition from the other side of the House would have been very strong if anything else had occurred.On the last occasion, when we did not proceed in a different way but when rumours emerged about the interest of other companies, the effect was devastating, and in a period of about two months the company lost 2 per cent. of its market share, which it has never recovered. This time, the comparable confidentiality, the expedition of the negotiations and the fact that we never declared open house to all the other bidders has been to the great advantage of the company and of all those who work for it.
What are the legal arrangements that are allegedly designed to make it not in the interests of British Aerospace to sell within rive years, and how enforceable are those arrangements? How can the Minister possibly say to the House and to the nation that he has obtained the best possible offer when he did not provide to any company other than British Aerospace the information that would have been needed in order to obtain appropriate offers from anyone else, including Ford?
We have attached terms to the injection of cash into the Rover Group so that, even if there were to be a sale within five years, the first £650 million of any profit would go the Government? It would not therefore be in the financial interests of British Aerospace to avoid that term. If it attempted to use the tax losses over and above the £500 million that remain, then, pound for pound, that benefit would be taken back by the Treasury, so again it would not benefit the company if it sought to do that.The hon. Gentleman also asked why we gave no other company the opportunity to make an offer. If we had provided everybody else with such an opportunity, we should have run the risk of causing great uncertainty and disruption to the business.
Is my right hon. and learned Friend aware that in 1960 we produced 14 times the number of cars that were produced by the Japanese, but that by 1979 they were out-producing us by eight to one? Have not the British car industry, the British car worker and the British taxpayer paid a heavy enough price already for the years of union plutocracy and the emasculated management of the car industry? Is not this, under very difficult circumstances, an extremely good deal?
I agree with my hon. Friend. In 1988 the vehicle industry in this country is being completely transformed. That has to be compared with the position in the late 1970s, when the Government of the day intervened and poured taxpayers' money into the industry to enable it to remain uncompetitive, overmanned and inefficient, in the belief that somehow that would safeguard jobs in the industry. One sees that there are plenty of Opposition Members who fondly imagine that that is the right way for a Government to behave towards an important commercial undertaking.
Can the right hon. and learned Gentleman assure the House, preferably with the authority of his right hon. Friend the Leader of the House, who is sitting beside him, that there will be a full opportunity to debate this extraordinary statement during the week that we return from the Easter recess, particularly so that we can press him for the answers that he has notably failed to give us this afternoon on such issues as the prospective job losses, which the Rover Group must surely have discussed with him? Is he aware that, in the absence of any such assurance I shall ask you, Mr. Speaker, to consider an application this afternoon under Standing Order No. 20 for a debate forthwith?
The Lord President of the Council and Leader of the House is sitting beside me, and he has intimated that he will welcome an opportunity to discuss, through the usual channels, the possibility of a debate on this matter. I do not think that he would want me to bind him to exactly when that debate is to take place, but I am sure that he has taken on board the request for an early debate. I personally would welcome such a debate.I realise that the details of this deal are complex but I attempted to be as explicit as possible in my statement. It is remotely possible that when people have studied the details they will not wish to press for such a debate, but if they do so we shall be happy to debate the matter once more. I look forward to taking the matter further. I hope that by the time we hold our debate I shall have more encouraging news about our progress towards making this conditional agreement a final agreement—as we make progress with the European Commission and as we move towards the general meeting of British Aerospace shareholders.