§ 1. Mr. Diamond
asked the Minister of Aviation whether he will now state the total profit made by Ferranti Ltd. on the Bloodhound contract up to 31st March, 1961; and what profit would have been needed to secure a return of 10 per cent. per annum on the capital employed.
§ The Minister of Aviation (Mr. Julian Amery)
My Department has no right of access to the books of Ferranti Ltd. for the purpose of ascertaining the actual profit made by the firm. I do not, therefore, know what this was.
According to the best estimate I can make, it seems possible that the profit made on Bloodhound production for the Ministry of Aviation up to 31st March, 1961, was approximately £4.5 million. On the same basis of calculation, the profit to secure a return of 10 per cent. on capital employed would have been about £400,000.
§ Mr. Diamond
Do I gather that the Minister is saying that, according to the best of his information, a reasonable return of profit—the figure of 10 per cent. on capital employed is reasonable—would have been £400,000 and the actual profit made was more than 10 times that amount?
§ 2. Mr. Diamond
asked the Minister of Aviation whether, in computing the figure for overhead expenses incurred by Ferranti Ltd. on the Bloodhound contract, his Department disallowed trade subscriptions to the Aims of Industry organisation and similar bodies.
§ Mr. Amery
No, Sir. For the purpose of payment for supplies on contracts such as these, the contractor's overheads are expressed in the form of a percentage addition to the direct labour costs. This is based on the proportion which the contractor's general expenses bear to direct labour employed. In assessing this figure, we do not normally take account of individual items which, as in this case, would be too small to affect the final percentage.
§ Mr. Diamond
How do we know that they are too small to affect the final percentage unless we are given an idea of what the final figure is? Is it not a fact that every accountant acting in this way examines items of this kind, and is it not right that the country should know whether or not subscriptions to organisations of this kind are paid for by the taxpayer so that the Conservative Party can benefit out of the taxpayer's payments?
Will not the Minister agree that there is now so much public money, very rightly, being put into the aircraft industry that it would be a very good thing if he, when looking into the question of contracting, insisted upon a return being given to him of any public moneys to be used in this way?
§ Mr. Amery
The important thing is to make quite sure that we get a proper percentage. The object of the negotiations with the contractor is to agree an overhead rate, and this, naturally, involves some give and take. We do not want to waste time, have excessive effort or employ more people than necessary in looking into individual items; and not every small item can be identified as 435 having in the outcome been specifically allowed or disallowed.
§ Sir C. Osborne
We recognise that Ferranti is probably the most efficient company in the world in this class of business, and, as a result of these contracts, I believe, it secured great export orders, but could my right hon. Friend assure the House that these extraordinary profits are not being repeated elsewhere in other contracts, and could he assure us that the other tiny items such as those raised in this Question do not affect the major one brought out in answer to Question No. 1?
§ Mr. Speaker
We cannot go back to Question No. 1 now. I do not understand this process. A supplementary question can arise only out of the last answer.
§ Mr. Wigg
Can the right hon. Gentleman say when the report will be published? Secondly, as this firm has had a touch "touch" the tune of several million pounds, have negotiations been opened with a view to the return to the public of money improperly obtained? Will he assure us that no more contracts will be awarded to Ferranti's until the money has been refunded?