§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Cope.]10.13 pm
§ Mr. John Bruce-Gardyne (Knutsford)
I hope that I shall not be out of order if, through you, Mr. Deputy Speaker, I thank Mr. Speaker for having selected this subject for the Adjournment debate. It involves matters of some importance from the point of view of parliamentary accountability.
On 22 May my hon. Friend the Minister of State, Northern Ireland Office, announced that the Government had agreed to provide for the De Lorean Motor Co. atime-limited guarantee of £7 million.The justification for that decision was thatPart of the company's office accommodation was destroyed by … a petrol bomb attack on 5 May 1981. No damage was caused tothe production facilitiesbut for some while following the fire manning and productivity levels were severely reduced … The disruption of production … has adversely affected the company's cash flow."—[Official Report, 22 May 1980; Vol. 5, c. 185.]That, alas, is an experience that has been suffered by many companies in Northern Ireland over the past 10 years. Taxpayer funds are regularly available for compensation payments for such damage, but I shall be interested to learn from my hon. Friend whether any of them at any time was ever offered a £7 million loan guarantee, or anything like it.
In the case of this corporation, the taxpayer had already committed upwards of £70 million and the House of Commons had twice been assured that all claims on the public purse had been exhausted.
At the beginning of August 1980, my right hon. Friend the Secretary of State told us that the De Lorean corporation had agreed in writing that the provision of the £14 million loan that my right hon. Friend had announced the day beforeremoves the obligation, contained in the original agreement"—signed between Mr. De Lorean and the right hon. Member for Barnsley (Mr. Mason)—to consider further applications"—[Official Report, 7 August 1980; Vol. 990, c. 761.]—for taxpayers' subventions to this business.
However, six months later my hon. Friend the Minister of State announced that the Northern Ireland Office had had second thoughts. Early in February he told usI have now agreed in principle to the provision of a time-limited guarantee for commercial loans of up to £10 million, subject to certain acknowledgements which record the company's acceptance that neither the Northern Ireland Development Agency nor the Department of Commerce has any financial obligations towards the company".—[Official Report, 12 February 1981; Vol. 998, c. 973.]In the light of those double assurances given on the Floor of the House, I find it difficult to avoid the conclusion that the Northern Ireland Office has a somewhat frivolous attitude towards its accountability to the House for the sums it disburses in the name of the United Kingdom taxpayer.
But that is not all. In the case of this latest douceur, there seems to be some implication that if the De Lorean corporation were to abandon its operations in Belfast that would constitute a victory for the IRA. On that basis, the taxpayers' obligation is totally and utterly open-ended. 638 Mr. De Lorean apparently has only to cry "Your money or my factory" and the Northern Ireland Office will cough up once again. I hope that my hon. Friend will refute that, although in the light of experience one must agree that any such assurance given to the House would be conditional on subsequent events.
It is important to recognise that we are considering one of the wildest speculations ever presented for parliamentary endorsement since the days of the South Sea Bubble. Mr. De Lorean touted around the most plausible Governments of the world his scheme to build a gull-wing sports car to challenge, single-handed, the combined might of Ford, General Motors, American Motors and others in the United States market, and none of them would look at it.
Even the Southern Irish, who are not exactly slouches in spreading around their taxpayers' money, reckoned that the proposed balance of risks and rewards was too heavily tilted against the taxpayer for them to look at it.
That is hardly surprising in view of the fact that Mr. De Lorean was proposing to subscribe 4 per cent. of the capital and collect 70 per cent. of the equity. However, he then met the right hon. Member for Barnsley, who was then Secretary of State for Northern Ireland. He must have reckoned that there are no suckers on earth like suckers grown in Barnsley. Notwithstanding the fact that Mr. De Lorean had been obliged to warn potential American investors that none of them should invest unless they were prepared to lose the whole of their minimum $25,000 investment, the right hon. Gentleman threw us in for £52 million for starters. Needless to say, it was our money and not his.
That was the position when the present Government took office. I suggested to my right hon. Friend the Secretary of State for Northern Ireland that we should call it a day, pay whatever compensation was needed to buy out the commitments of the right hon. Member for Barnsley and write it off to experience. I was told that it would be far cheaper to go on. That is what we have been told continually and at repeated intervals over Concorde. We know what has happened in that respect.
We are told that the unemployment situation in Northern Ireland is bleak and would be rendered bleaker by the withdrawal of United Kingdom taxpayers's finance for this American concern. That is a serious proposition and a powerful argument. I would, however, ask my hon. Friend whether it can be seriously argued that long-term employment in another black spot, Clydeside, was advanced by the hundreds of millions of pounds that we poured into Linwood. I take leave to doubt it. We know what happened there.
Moreover, the £14 million presented to this American gentleman in August last year was specifically found by reallocation of expenditure within the Northern Ireland budget. Northern Ireland Members have argued that other parts of that budget from which funds were withdrawn to feed Mr. De Lorean would have provided sounder longterm employment in the Province. They are in a far better position than I to judge the position. I cannot help feeling that they could be right.
Two specific questions arise, in addition to those of parliamentary accountability, which concern me considerably. The £14 million handout of August 1980 was said to be designed to compensate Mr. De Lorean under the terms of his remarkable original agreement with the right hon. Member for Barnsley for, among other things, 639 adverse movements in the pound-dollar exchange rate. It may not have escaped your attention, Mr. Deputy Speaker, that since August last year the pound-dollar exchange rate has moved in the opposite direction. The movements of which Mr. De Lorean apparently complained have been reversed—in fact more than reversed. I should like to ask my hon. Friend whether we shall get some of the £14 million back.
Shortly before Easter, my hon. Friend the Minister of State told us that the taxpayer would start to see a return on his money very shortly after the first shipment of these remarkable cars left the Belfast docks. I understand that the first shipment left the Belfast docks around the middle of April. Have we had any money yet? Have any royalties been paid yet? If not, I begin to wonder what is meant by "very shortly". I presume, in any case, that the royalties would be paid out of the guaranteed loans that we have been presenting to this gentleman. That does not therefore advance us very much.
It is no part of my contention to argue that this adventure is bound to fail. I accept that there is a possibility of success. Succeed or fail, it is of an altogether too speculative nature to be appropriate for widows and orphans, or even for the taxpayers for whom the Minister of State, myself and 633 other Members are supposed to be the trustees.
I am increasingly driven to the conclusion that this is another classic example of the way in which civil servants, having made a dubious investment, try to cover their tracks by pouring more and more money down the same drain. The House is owed an explanation of how successive undertakings given by the Secretary of State and the Minister of State that Mr. De Lorean's begging bowl could not repeat its achievements have successively been vitiated by events. The Northern Ireland Office, like the raven, has cried "Never more" too often. It is about time that it meant it.
§ The Minister of State, Northern Ireland Office (Mr. Adam Butler)
It may surprise my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) to hear me say that it is right that we should have this debate, because it allows me to put the history clearly on the record and perhaps to dispose of some of the exaggerations which obtain inside and outside the House.
My hon. Friend raised two valid points which are more recent than the others that he has raised on previous occasions. He questioned whether this investment should have been undertaken, and whether it was appropriate for the pension funds and the taxpayers to put money into it. The two more recent points arise from the Government's latest decision to provide further guarantees and from the question whether the Government have been fully accountable and open to the House about those decisions. I shall tackle the last point first, because in Adjournment debates one tends to run out of time. When any hon. Member suggests that the House has been misled, it is proper that Ministers should give an explanation. There has, of course, been no intention to mislead the House.
A decision was taken, following the events that my hon. Friend briefly described—to which I shall refer when I outline the history—that the Government should guarantee further loans so that the cash requirements caused by those events were likely to overrun those already provided for. We took the decision on 1 May, after 640 thorough investigation of the issues, and informed the House at the earliest opportunity, on 22 May, in a written answer. Whether an oral statement should have been made is a matter of opinion.
I believe that the House accepts that in the special circumstances of Northern Ireland, not only was the right decision taken but it was judged that in the light of the circumstances the guarantee should be given that the statements about no further funding must be regarded as not referring to the eventuality.
§ Mr. Bruce-Gardyne
My hon. Friend has made a serious statement. He said in answer to a question on 22 May that the Department of Commerce had agreed to allowa further time-limited guarantee of £million."—[Official Report, 22 May 1981, Vol. 5, c. 185.]He related that to damage to the company's office on 5 May. He now tells us that the decision was taken on 1 May. How does he relate that? It seems that there was a further error in the answer which he gave on 22 May.
§ Mr. Butler
I do not think that my hon. Friend believes that I said 1 May and then that we took the earliest opportunity to inform the House. The date is 21 May. I am sorry if that was not clear.
I owe it to the House to go back over the history. Events might then become clearer. De Lorean Motor Cars Ltd. was established in July 1978 to manufacture in Belfast the De Lorean automobile, a new gull-wing luxury personal car. All of its ordinary share capital of about £546,000 was owned by the De Lorean Co. which is a Michigan registered corporation. The Northern Ireland Development Agency subscribed £17.8 million in the form of redeemable participating preference shares.
The Department has provided substantial assistance in various ways which have been spelt out in parliamentary answers, both written and oral. There is no reason to go into detail except to remind the House that there is a large element of loans in the total sum. At the time that the decision to invest was taken, it was expected that, out of that £53 million, £24½ million would be recovered.
It is suggested that the amount of private investment set alongside the public investment is minimal. To put the record straight, I should say that funds for the development of the project have been raised in various ways by private investors totalling about $33 million to $34 million which, depending on the conversion rate used, is between £16 million and £18 million.
§ Mr. Bob Cryer (Keighley)
How much of that expenditure was on research and development for the motor car? If it was a significant sum, why was such an enormous amount of taxpayers' money spent subsequent to the research and development to get the car into production?
§ Mr. Butler
A significant proportion of that sum went into research and development. One cannot produce a new car with such novel features without research and development. One cannot distinguish in development costs between research and development and the funding of the plant for production purposes.
My hon. Friend reminded the House about the further loan provision last summer and then of the guarantees provided against commercial bank loans in December. It was fully explained to the House that, although, as part of the August deal, the obligations of the Government to the 641 company had been removed by agreement, there was nothing to prevent the Government from producing further funds or, as happended, providing guarantees if the circumstances so justified. We argued, and I believe that it was accepted by most hon. Members, that because of the proximity of the launch, the past investment, and especially because of the employment consequences of not proceeding, it was right to provide those guarantees. In May 1981 the company suffered a serious disruption of production because of petrol bomb attacks on its premises and subsequent disruptions in production, and the Department agreed to guarantee further bank borrowings. Those are the basic facts of the Government's involvement.
The House is aware that the project was approved by the Labour Administration. Whatever the justifications were then, my hon. Friends and I had to be concerned with the position that we found.
What is the position today? I was delighted that my hon. Friend, at least tonight, did not suggest that the factory and car were the figment of somebody's imagination. He has questioned time and again whether there has been genuine production in the factory. Because I believe that certain information is available if properly researched—I am not abusing confidences—I want to state the present position so that we can see that we are dealing with real production.
The company has produced more than 1,000 cars to date, with an export value of about £10 million. In the whole of 1981 it expects to produce and sell about 8,000 cars, with an export value of about £80 million. Cars are being produced at the rate of 130 per week and the company plans to increase that number gradually until about 400 cars per week are available in the autumn. In 1982 it hopes to produce and sell 20,000 or more cars, with an export value of about £200 million.
On the question of sales, two shipments have left Belfast docks, the first of which is either in the hands of the dealers or on the way to them. After the normal pre-customer preparations, we can presume that sales to the retail customer will begin shortly. The next shipment is expected within the next week, which will bring the total shipped to more than 1,000. The royalty payments on the cars will be made, as agreed, at the end of the quarter—that is, at the end of June. That is the answer that I gave to my hon. Friend on the last occasion that we debated the matter.
The company has provided Northern Ireland with a highly visible international project, and a substantial 642 opportunity to broaden the Province's industrial base and to reduce its dependency on traditional and diminishing heavy engineering and textiles. It offers hope for the training and development of new skills for the Northern Ireland work force. It is an important outlet for management and commercial expertise. If it is successful, the project undoubtedly will give a boost to the attractions of Northern Ireland for additional foreign, mainly United States, industrial investment.
It has never been denied that the commercial risks associated with such an enterprise are high, although I refute my hon. Friend's suggestion that this is a speculation which compares with that of the South Sea Bubble. That is exaggerated talk which adds nothing to the argument and does not assist the company in its efforts. However, the risks are high, and recent events outside the company's control have increased the risks.
We believe that the potential value of the project to Northern Ireland, and West Belfast especially, is such that the Government should accept the risks that are being taken. I repeat deliberately that we are talking about a part of the United Kingdom where the average unemployment rate is over 17 per cent. In the area in close proximity to the factory unemployment is about 30 per cent. or more. In the circumstances, we believe that the Government's support for the company in the way that we have shown it is justified. Time will tell whether that support was worth while. We accept that time will tell whether the company's efforts succeed. I hope sincerely that they will.
I accept that my hon. Friend has a valid argument on behalf of the taxpayer. He is justified in asking the questions that he continues to throw at the Government about whether public money should continue to be made available. The answer that I gave in the House on a previous occasion about future expenditure still stands. That statement was made in good faith. The circumstances that have prevailed would surely fall outside a statement about no further money being made available. However, we must accept that other companies have to meet the consequences of actions that they may not have foreseen. I believe that the company and Mr. De Lorean are well aware of the reluctance with which the guarantee was forthcoming. Accepting that, and accepting the statements that have been made about normal commercial conditions, I believe that if further cash is required to ensure the launching of the car he will see that that money is made available from sources other than the public purse.
§ Question put and agreed to.
§ Adjourned accordingly at seventeen minutes to Eleven o' clock.