HC Deb 04 February 1971 vol 810 cc1922-35

3.53 p.m.

The Minister of Aviation Supply (Mr. Frederick Corfield)

I have to make a grave statement in regard to Rolls-Royce Ltd.

The Board of Rolls-Royce have today issued a statement, copies of which I have had placed in the Vote Office. They have unanimously decided, for the reasons given in that statement, that it is not possible for them to proceed with the RB211 engine under the present contract with the Lockheed Corporation.

As the Board of Rolls-Royce have stated, the loss of resources already committed to the project combined with the losses which will arise on termination are on such a scale that they are likely to exceed the net tangible assets of the company. In the light of this situation the board have decided that they have no alternative but to ask the trustees of the debenture holders to appoint a Receiver and Manager.

To ensure continuity of those activities of Rolls-Royce which are important to our national defence, to our collaborative programmes with other countries and to many air forces and civil airlines all over the world, the Government have decided to acquire such assets of the aero-engine and marine—[Interruption.]—and industrial gas turbine engine divisions of the company as may be essential for these purposes. The necessary legislation will be introduced early next week.

The Government have no liability in respect of the contract between Rolls-Royce and Lockheed. The Government will explore, with the Receiver, the future of the RB211. Because of the very grave consequences which must follow from the decision of the Rolls-Royce Board, the Government are also undertaking urgent discussions with the Lockheed Corporation and with the United States Government. The board have stated that there will inevitably be substantial redundancies within the company. I have been informed by the Receiver that he will be discussing this urgently with the staff and the unions concerned. The Department of Employment will, of course, provide the maximum help in finding alternative employment in all the areas affected. Interviewing teams will be sent into the factories as necessary. Redundancy payments to employees are guaranteed under the Redundancy Fund arrangements.

It will be for the Receiver to assume responsibility for the protection of the debenture holders. Thereafter any remaining assets will be available to meet the claims of other creditors.

The board of Rolls-Royce intend to call an extraordinary general meeting of the company in order to pass a special resolution requesting the Secretary of State for Trade and Industry to appoint an inspector to conduct an inquiry under Section 165 of the Companies Act.

Mr. Benn

Is the right hon. Gentleman aware that the collapse of Rolls-Royce and the statement that he has made constitute a major national tragedy for this country——

Mr. Kenneth Lewis

It is your fault.

Mr. Benn

—which will have serious consequences.

Mr. Lewis

It is your fault.

Mr. Speaker

Order. The hon. Member must not interrupt from a sedentary position.

Mr. Benn

Without disrespect to the right hon. Gentleman, I think that the House ought to have heard the statement from the Prime Minister personally, or from a Cabinet Minister.

The collapse of Rolls-Royce will be a grave blow to British exports, to the engineering industry and to confidence in this country, and will affect thousands of workers and their families in different parts of the country. May I ask these questions. First, will the nationalised Rolls-Royce Company which the right hon. Gentleman announced today be there simply to wind up the existing business, or is it the intention of the Government that it should continue with the Concorde, the M.R.C.A., the Jaguar, and other programmes, and actively seek business abroad?

Second, can the right hon. Gentleman tell us, with regard to the RB211, why there should not be a provision governing this great engine not dissimilar from that governing the Olympus 593 engine, where there has been even greater escalation but where, under the contract authorised in 1962, the Government have covered the escalation?

May I also ask what the extent of the deficit was, and why no money has been paid since the debate in November? May we have a White Paper giving the facts to the House so that we can understand how two and a half months after a Resolution was promoted why the right hon. Gentleman and his hon. Friend welcoming the Government's handling of the problem, without any Government money or any Government intervention, this transformation of the situation could have occurred?

Mr. Corfield

Of course the Government are aware of the gravity of the situation, and I should like to make it abundantly clear that I am responsible for this Department and that I intend to fulfil those responsibilities.

The nationalised company of Rolls-Royce is not intending to wind up its activities. It will be my intention to ensure that the existing business is carried on and that the collaborative undertakings are fulfilled, and in every possible way to expand the activities and restore the tarnished reputation of the company.

With regard to the RB211, it seems to have escaped the notice of the right hon. Gentleman that this contract was a commercial contract between two companies. He will recall that, in the debate of 22nd November, he spent six columns of HANSARD explaining to us how he had encouraged them to undertake that contract. The reasons why the Government considered that it was not right to pour out more money at this stage were that the figures required reached approximately £150 million, that they took into account that the engine would in any case be between six and twelve months late and that we could have no assurance that this would not give rise to very large but unquantifiable claims on the part of Lockheed.

Mr. Whitehead

Would the hon. Gentleman not agree that the fact that the engine was to be 12 months late—and the company now accept that—should have been a fact which the Government could have been aware of at the time that the announcement was made in November about further financial aid?

Mr. Corfield

No, Sir.

Mr. Ramsden

While one can accept that Government acquisition may be necessary to buy time, and in view of the defence interests concerned, can my hon. Friend tell us a little more about the form of that acquisition and, in particular, about the price contemplated and give us an assurance which will be in such a form as not to exclude the possibility of early disposal to industry?

Mr. Loughlin

Hive it off.

Mr. Corfield

The intention is that this company shall be set up as a limited liability company under the Companies Act, with the whole shareholding owned by Her Majesty's Government. That will, of course, enable what my right hon. Friend has in mind to take place, should this be appropriate in future. As regards the price, I am sure the House will appreciate——

Mr. Heffer

You are not credible any more: pack it in.

Mr. Cortield

I am sure the House will appreciate that the only figures available at the moment are book value figures, which I am advised have very little relationship to what would be a fair price between the Government and the Receiver.

Mr. Benn

While welcoming the statement which the right hon. Gentleman made, that the Government intend to run Rolls-Royce, when nationalised, as a going concern, may I ask him whether he can assure us that it will not be sold to foreign interests or, indeed, any others, after Government money and Government management have gone in? Will he answer the question which I put to him, as to why, in respect of the RB211, where the escalation has been substantially less than in the case of the Olympus 593, the Government are not prepared to look at that as a possibility in view of the very substantial export earnings involved in it?

Mr. Corfield

The right hon. Gentleman may or may not realise that, at the present latest estimates, the cost of these engines per copy is running at £110.000 more than the price in the contract. Therefore, no amount of launching aid will cover production losses of that level. With regard to the question of sale to foreign interests, I thought that it was agreed, among the right hon. Gentleman, myself and others, that it would be sensible to look towards a European aeroengine industry. If that is the case, it may be desirable for Snecma and Rolls-Royce to get together in such a way that it could be argued that there were foreign interests, so I will not give an assurance of that nature. I can assure the House that we have no intention whatever of handing over this vital defence industry to overseas interests entirely.

Sir A. V. Harvey

How many staff and workers are involved in the assets which the Government propose to acquire? Why have we had to wait until this Government came in to make the investigations of the company's affairs towards the end of last year? What steps did the right hon. Member for Bristol, South-East (Mr. Benn) or the I.R.C. take to investigate the financial standing of the company and of the RB211 project?

Mr. Corfield

In regard to the numbers to be employed or to be made redundant, I am sure the House will appreciate that it has not been possible, in the short time available, to obtain any accurate assessment from the company. I should be very loth to state a figure which might raise false hopes by being too low or create unnecessary despondency by being too high. But these investigations are of course going on most urgently.

In regard to the second part of the question, it is clear, I think, with the advantage of hindsight, that the financial control exercised by this company has been of a very mediocre order for a very long time. It is equally clear that this was apparent to the right hon. Gentleman when he asked the I.R.C. to investigate it. Unfortunately, the situation is such, and the time available to them and the time available since is such, that I am afraid that new discrepancies and problems are revealing themselves almost daily.

Mr. Millan

Will the hon. Gentleman now answer my right hon. Friend's request for a White Paper, and, in particular, in the White Paper, will he try to give us some more information about the question of possible redundancies, since there are more than 80,000 men involved, and many of them, particularly in Scotland, are in development areas? We must have very quickly something which will restore a certain amount of confidence to these men, who are shattered by today's events.

Mr. Corfield

I assure the hon. Member and the House that I will be anxious to give the House further information about redundancies as soon as I can with any degree of accuracy. I do not think that we need a White Paper for that. On the overall problem, I have told the House that there will be a Department of Trade and Industry inquiry, which I think is probably the forum in which to discuss the other matters.

Mr. Mather

Is my hon. Friend aware that the original agreement with Lockheed was given the blessing of the right hon. Member for Bristol, South-East (Mr. Benn) on 1st April, 1968—a date not without significance? Is he also aware that the British Aircraft Corporation at Weybridge in my constituency is dependent for all current production aircraft on Rolls-Royce engines? Can he give an assurance that this production will continue, so that the necessary reassurance may be given to B.A.C. customers?

Mr. Corfield

One of the principal reasons why the Government have determined to acquire the necessary assets is to ensure continuance of the provision of these engines and the support of them in service.

Mr. Barnett

Is the right hon. Gentleman aware that he told me in the House not long ago that, whatever the accountants reported, the Government would provide £42 million, but that he then reversed that in a private letter, though refused to rectify his incorrect statement to the House? [Interruption.] Will he now make it clear whether or not that money was provided and whether any other money was provided by the Bank of England? Will the Bank of England now rank as an unsecured creditor? Would he say whether, as a matter of principle, the Government have not ruled out the possibility of bringing other interests into public ownership, provided that is in the national interest?

Mr. Corfield

I admit, in answer to the first part of the hon. Gentleman's supplementary question, that my scepticism in regard to the figures that I had been given did not lead me to believe that the figures would be any less when the accountants reported, but I never in my wildest dreams or nightmares imagined that they would be as bad as this, and I do not think that the hon. Gentleman did either.

The answer to the second part is that the £42 million was, of course, dependent on the accountants' report. It has not been paid. Nor, indeed, has the £18 million promised by the banks for the same purpose. It was attached to the engine and the decision not to continue with the engine automatically cancels that. As far as I am aware, there is absolutely no liability in respect of that £42 million towards the company.

Sir J. Langford-Holt

As 50 per cent. of the total productive population of the town of Shrewsbury is employed by Rolls-Royce, may I ask my right hon. Friend whether the diesel engine division, which is the direct employer there, will form part of the legislation which is to be introduced next week?

Mr. Corfield

I do not think that that would fall in the national interest on which I am judging this matter, but I have no doubt that this is a profitable division on its own and that there will be bidders for it when the Receiver comes to deal with it.

Mr. Walter Johnson

Does not the right hon. Gentleman realise that this disgraceful and alarming state of affairs is causing grave anxiety in the country, especially for those who work in this industry, many of whom have given a lifetime of service to it? Does he appreciate that 80,000 jobs are at stake, 30,000 of them in my constituency? Does he realise the massive redundancies that will occur in a constituency such as mine and the fact that great hardship will be caused in the town of Derby? What steps is he taking to acquaint the workpeople with the facts so that they know precisely where they stand in the matter? Why have the Government decided to abandon this world-famous company—[Interruption.]—which has brought great credit to Britain in both peace and war?

Mr. Corfield

It really is a gross exaggeration to say that 80,000 jobs are at stake. I have made it abundantly clear that the successor company will succeed to the greater part of what are the present Rolls-Royce activities.

As for abandoning Rolls- Royce, here we have a commercial situation in which one disastrous contract has put the company into a position in which the total amount of money needed to put it on its feet as it is now would run not into many millions of £s but several hundred million £s of more money. This is the basic reason why we have decided not to abandon it but to reconstruct it in the way I have indicated.

Mr. Rost

Is my right hon. Friend aware that his grave statement, which has been received with such disgraceful hilarity by hon. Gentlemen opposite will cause very serious unemployment in my constituency of South-East Derbyshire? Is he further aware that those who lose their jobs will not hesitate in putting the blame fairly and squarely where it belongs, which is on the previous Administration — [Interruption.] — who underwrote this contract without vetting it and then caused the most serious inflation this country has ever had and thereby caused the company to default?

Mr. Corfield

My hon. Friend is, of course, quite right—[Interruption.]

Mr. Heffer

Grow up.

Mr. Corfield

I suggest that the hon. Gentleman re-reads the speech which the right hon. Member for Bristol, South-East made on 22nd November.

Mr. Palmer

Does the right hon. Gentleman recall that when I suggested before Christmas that this concern should be nationalised he poured scorn on the suggestion but that now he has had to do it under the worst possible circumstances? Does not the House deserve an explanation? How much unemployment will be caused in the Bristol area, in which the right hon. Gentleman has a very real personal interest?

Mr. Corfield

The hon. Gentleman really must refresh his memory. The context in which he put that question was of nationalisation in conditions in which those who took it over would have been open to all the unquantifiable penalties under the contract. I was, therefore, right in saying that that was about the most expensive thing one could do.

Mr. Onslow

Is my right hon. Friend aware that the sympathy which hon. Members on this side of the House have with him in having to make this grave statement today is made all the greater by the knowledge that this disaster is the direct consequence of the suicidal terms of the original RB211 contract, which was so recklessly encouraged by the right hon. Member for Bristol, South-East, whose hon. Friends should not be so hypocritical about this today?

Does my right hon. Friend agree that what the House and the country want now is for us to be able to get on with debating the matter in detail, to hear how the jobs of the people in aviation and the contracts which Rolls-Royce had with its sub-contractors and customers all over the world can be honoured, how the company can be put back on to a viable basis as soon as possible and how it can then be returned to private enterprise? [Interruption.]

Mr. Corfield

I am grateful for my hon. Friend's earlier remarks and, as I said, it will be my intention to ensure that the new company does exactly what he had in mind in the latter part of his supplementary question.

Hon. Members


Mr. Sheldon

Will the right hon. Gentleman inform the House whether the intention to nationalise this company was taken simply in order to abandon the RB211, and thus avoid the liability for the contract, or whether there were any other purposes involved? What other parts of the company will be dropped in this way, or is it just the RB211 part that will be so affected?

Mr. Corfield

The situation that faced the Government was that the company had itself decided that it could not go on with the RB211 in the present contract. The Government had to address themselves to the problem of keeping going the essential defence and other interests to which I have referred.

Mr. Sheldon

What else will be dropped?

Mr. Corfield

The question of what assets the Government take over must be matters for some further consideration, though I have a reasonably broad idea of what they will be. [HON. MEMBERS: "Tell us."] The question of what other assets are available and what will happen to them must depend on the demand which the Receiver receives, and I am not pessimistic about the sale of most of the other assets.

Mr. John Hall

Is it not a fact that the I.R.C. agreed to advance some £20 million to Rolls-Royce, of which I think about £10 million has already been advanced? How is it that the I.R.C., which was supposed to carry out close and detailed investigations of companies asking for loans, did not discover the true situation of the company? Would it be true to say that Rolls-Royce was trading for a time while insolvent?

Mr. Corfield

It is only fair to say that the I.R.C. was not basically designed for this sort of operation. It did not really have time to go into the matter in that sort of detail necessary. One of the matters which has, of course, caused grave concern to the Government and the company is the fact that it should in no way breach its obligations under Section 332 of the Companies Act. It was that fact—that it would have been doing so had it gone on trading—which made the time factor so very small.

Mr. C. Pannell

Is the Minister aware that we are in the presence not of frivolity or hilarity on either side of the House but of stark tragedy, and that to anyone who has spent a lifetime in the engineering industry this is an extraordinarily painful moment? When we are in the presence of something as large as this, with great respect to the right hon. Gentleman and the work he has put into this, it is hardly a job for a Minister who is outside the Cabinet. With great respect to the right hon. Gentleman, responsibility at the end of the day rests squarely with the Prime Minister, a responsibility which he should accept in the House if he is competent to do so.

Mr. Corfield

That question lies with my right hon. Friend, I hope I am right in saying that if he had not confidence in me he would remove me.

Mr. Harold Wilson

Following what my right hon. Friend has just said, will the right hon. Gentleman take it that, in the words with which he began his statement, the whole country will regard this an as extremely grave tragedy and it is the duty of the House as a whole, never mind charges from one side or the other, so to regard it? Any debating points of the kind which have been thrown across the Floor of the House can be dealt with in a future debate, but today we are concerned with a company which is one of the leaders in world technology with a name famous for its prestige and excellence. The company has now fallen, let us hope only temporarily, into the dust and, in that situation, everything should be done not only to save that part of a company which has certain continuing obligations but to maintain everything we have understood by the name "Rolls Royce". There should be no question of splitting up or hiving bits off to other companies? In particular, will the right hon. Gentleman be a little more forthcoming and make quite clear—he was rather dubious about this—that despite sales in Wall Street last night, which have been interpreted by our City editors in a certain connection, there will be no question of selling off the know-how, technology and everything which has been built up to any American company or other foreign interest?

Mr. Corfield

Of course, I accept what the right hon. Gentleman has said about the prestige of the company, but there are activities which the company has set up which really have no bearing on its present activities and these must be matters for further consideration. But the basic aero-engine capabilities, marine engineering capabilities, and the share in Rolls-Royce associates are matters which we regard as the core of this company and those which we regard as essential for us to acquire. Others must be for further consideration.

Several Hon. Members


Mr. Speaker

Order. I fully realise the importance of this statement, but we have already had something like half an hour on it. I believe other arrangements can be made for future discussion on it. Mr. Rippon.

Mr. Kilfedder

On a point of order. Mr. Speaker. Could I ask for your assistance? I have a Rolls-Royce factory in my constituency of North Down. Is it possible for extra time to be granted so that I can express my concern and ask my right hon. Friend, who I appreciate is concerned for the future of this company, for an assurance that the jobs of the employees in this factory will not be in jeopardy?

Mr. Speaker

No. I am afraid many other hon. Members in the House are in just the same position. Other ways must be found of carrying the matter further.

Mr. Thorpe

Further to that point of order. Mr. Speaker. In a situation which is generally accepted to be a national disaster, is it not possible to suggest that all parties in this House, albeit if they represent only two million people, might have an opportunity of expressing a view?

Mr. Speaker

I had not seen the right hon. Gentleman rise. I am afraid the moment has gone. I called Mr. Rippon.

Mr. Atkinson

Mr. Speaker, you did refer to a coming debate. Have you any certainty about this and any knowledge of the day on which it will fall? Could you give some indication to the House as to when we shall have this debate and under what circumstances in order that we may press further questions on members of the Government?

Mr. Speaker

That is not a point of order.

Mr. Whitelaw

In this important matter of the question of the time, I might be able to help the House. As my right hon. Friend has said, we intend to introduce legislation and to bring it before the House as soon as possible. I am hoping that that will be done next week. I do not wish to commit myself finally to that, but certainly the Bill will be introduced next week and, if the arrangements can be made properly, a debate on the Second Reading of that Bill will be held next week. I hope that that will be agreeable, but I cannot commit myself for the simple reason that if I am to do so I would have to ask the House to take the Second Reading of the Bill at a much shorter interval than would normally be the case when a Bill is introduced. Before doing so it is only courteous to consult the House and everyone concerned to make sure that that is all right; but if that can be Thursday it will be.

Sir C. Taylor

Further to that point of order. There are many hundreds of sub-contractors to Rolls-Royce throughout the whole country who have had no word of encouragement or comfort about their future. These firms are almost entirely reliant upon their service to Rolls-Royce and I think some answer should be given about these firms that supply Rolls-Royce as sub-contractors.

Mr. Rankin

In view of the statement just made by the Leader of the House, could we have a further statement tomorrow?

Mr. Whitelaw

Of course, if that is possible. I am only anxious to proceed and to help the House as much as I can. I do not wish to make statements unless I am absolutely certain they can be carried out. That is why I want further time to consider this, but if possible tomorrow.

Mr. Benn

I am grateful to the right hon. Gentleman for being helpful on the question of a debate, but if there is difficulty in producing legislation early could he consider the proposal I made that there should be a White Paper covering some of the facts to enable us to debate the matter on principle—because the Bill will be a matter of detail—early so that hon. Members having interests involving Rolls-Royce contractors will have a chance of expressing their views?

Mr. Whitelaw

Perhaps I should make it perfectly clear that it is my clear belief that it will be possible to introduce the Bill by the beginning of next week.

Mr. Thorpe

Further to that point of order. In accepting that the Leader of the House will do everything he can to expedite matters in the House, we are in the difficulty that the House wishes to express a view but there are certain procedures under the Companies Act, not least the appointment of a Receiver, and it will be very important that there should not be conflict between the rôle of the law on the one hand and the wishes and views of this House on what is essentially a national matter, on the other hand. Could I therefore suggest that for the good order of this House and for the protection of the rights of hon. Gentlemen it is all the more important that there should be a debate, even if there is no legislation available, before the Receiver is seized of this matter and before the matter becomes in any shape or form sub judice?

Mr. Burden

There is one point that is really relevant to the whole situation. It is the question of the position of subcontractors. Might I, through you, Mr. Speaker, ask my right hon. Friend if, without awaiting the decision and deliberations of the Receiver, some statement can be made as soon as possible; otherwise there could be very widespread economic repercussions in this matter.

Mr. Speaker

All these questions are quite irregular.

Mr. Ogden

On a point of order. The Leader of the House seemed to indicate that he would be more than willing to try to get the Bill on this serious matter before the House as soon as possible. The right hon. Gentleman and the House must be aware that the grave statement made this afternoon destroys the credibility of a great deal of the Government's industrial policy as regards nationalisation and hiving-off——

Mr. Speaker

Order. That is not a point of order.

Mr. Ogden

—and that the need is for a debate——

Hon. Member

Sit down!

Mr. Speaker

Order. I want to hear what the hon. Gentleman has to say.

Mr. Ogden

At least some of us in the House think that there should be a debate on industrial policy in general before the Bill is introduced.

Mr. Milan

On a point of order. A moment ago the Leader of the House said that he did not think that a White Paper was necessary because he hoped that the Bill would be available some time next week. Can I put it to him through you, Mr. Speaker, that some of us think that, even if we have the Bill next week, it would be very helpful for the debate if we had a White Paper from the Government setting out as much of the background and the present situation as it is possible for the Government to set out?

Mr. Speaker

That is a point, but I do not think that it is a point of order.