§ 5.7 p.m.
§ Lord Trefgarne
My Lords, with your Lordships' permission, I wish to repeat a Statement being made in another place by my right honourable friend the Secretary of State for Trade and Industry on the decision reached yesterday by the European Commission following its review of the arrangements reached with British Aerospace regarding the sale of the government shareholding in Rover Group. The Statement is as follows:
"The Government believe, in the circumstances at the time, the additional concessions granted to British Aerospace were a necessary part of our agreement so that the privatisation of Rover Group could proceed. That deal brought considerable benefits. It freed the taxpayer from the contingent liability of the Varley Marshall Joseph assurances. That liability then amounted to £1.6 billion and was set to rise substantially over the corporate plan period. It ensured that Rover Group's needs would not in future require special government aid, which had amounted to £3.5 billion while under public ownership. It safeguarded over 190,000 jobs, mostly in the West Midlands. It made a desirable contribution towards restructuring within the European motor industry. Under BAe's ownership the corporate plan is being fully implemented. Rover has already committed more than £500 million of new capital investment. The new model range is highly successful and the company has returned to profitability.
"The Commission's principal decisions are as follows: that (I quote) '£150 million represented a reasonable purchase price for the company';
that the Government should provide an undertaking that any arrangement between BAe and the Inland Revenue will not allow Rover Group to use more than the £500 million of trading tax losses specified in the sale agreement with BAe, and that these losses will remain within Rover Group. I am of course very happy to give an undertaking that the terms of the sale contract will be adhered to;
that BAe should automatically be required to pay financial penalties if there is any change in control of Rover Group or its principal subsidiaries before July 1993. We shall be exploring precisely what this means with the Commission;
that the grant of £1.5 million towards Rover Group's costs incurred in the acquisition, and the £9.5 million contribution towards BAe's costs in buying out the minority shareholders, should be repaid;
that the benefit to British Aerospace of deferring payment of the £150 million consideration for Rover Group should similarly be repaid.
"In relation to this deferment, the Commission has concluded that BAe should be required to pay an amount of £33.4 million calculated as the estimated gross interest saving to the company. Fairness suggests that any such benefit, and 1758 therefore any repayment, should be assessed net of tax, thus reflecting the true value of the deferment to the company. We estimate that the equivalent post-tax benefit would be some £22 million, a difference of £11.4 million.
"If the Commission's decision is on the basis of the gross interest saving, then the net cost to BAe will depend on whether tax relief is available in respect of the repayment under normal UK tax law. The availability of tax relief on the £33.4 million will need to be settled in due course between British Aerospace and the appropriate tax authorities and perhaps ultimately in the courts.
"The Commission also notes that expenditure of aid agreed in 1987 for the restructuring of the Leyland-Daf commercial vehicle operation has been slower than anticipated. It suggests the possibility that up to £40 million of this may eventually need to be repaid. The Commission acknowledges however that this figure is speculative and that the final out-turn of expenditure will not be known until next year.
"As the Commission's efforts to bring all state aids within the Community under control are beneficial for the development of the single market, the Government believe it is important to support them. We have thus always acknowledged its ultimate right to reach its own judgment on the status of these additional arrangements in the context of the 1988 decision. We also accept that any benefit received by a company which the Commission properly decides is a state aid incompatible with the treaty should be repaid.
"Equity suggests that the repayment should represent the net value of the benefit received by the company and not contain any unintended element of penalty. We are therefore concerned that the Commission has decided on £33.4 million in respect of the interest when the estimated benefit to British Aerospace is some £22 million, handing down a decision in gross terms without regard to whether or not the repayment will be allowable against tax under normal UK law.
"We shall accordingly wish to give careful consideration to this aspect of the decision and to any representations by BAe. Subject however to that, the Government, having carefully studied the arguments and in order to demonstrate our support for Community policy on state aids, have decided to accept the Commission's decision on repayment. We shall be discussing with the Commission and British Aerospace other detailed matters raised on the Commission decision. I am advised that British Aerospace will consider its position in the light of this Statement and after studying the Commission's decision in detail".
My Lords, that concludes the Statement.
§ 5.13 p.m.
§ Lord Williams of Elvel
My Lords, the House will be grateful to the Minister for repeating the Statement made by the Secretary of State in another place. We can begin to say that the truth is coming out as the truth will always do in these matters.
1759 I wish to be clear about the Government's view. From the Statement it is not entirely clear to me exactly how the Government regard the legal position. Now that they have said that they will not challenge the European Commission's verdict, will the noble Lord confirm that his Government, according to the noble Lord's own estimate, wrongly gave away more than £22 million of taxpayers' money by postponing the payment of the purchase price and that Parliament was not properly told?
Will the Minister further confirm that in addition £9.;5 million of British Aerospace costs in buying out Rover minority shareholders were wrongly paid by the Government and that Parliament was equally kept in the dark? Will he further confirm that a grant of £1.5 million towards the cost of the Rover acquisition was wrongly paid by the Government to British Aerospace? Does he agree that for reasons of their own the Government decided not to report that agreement either to the Commission or to Parliament?
Will the Minister also confirm that at the last minute certain tax concessions were offered, perhaps the result of a number of meetings which are now on the record between the Inland Revenue, the DTI and British Aerospace? Will he confirm that these concessions were never reported to the Commission and that, as I understand it, a full report has now been demanded by the Commission? Will he now tell us the full extent of these special tax concessions that were given?
I ask the Minister to confirm also that while British Aerospace has a perfect right to go to the European Court, the Government, with their responsibility for the management of public funds, now accept without equivocation that the money was wrongly paid and should be repaid?
I hope that the noble Lord will confirm all those matters because they are a logical consequence of the Statement that he has repeated. Will the Minister tell us why there has been no apology, no admission of responsibility and no statement about who is to accept the blame? The noble Lord, Lord Young of Graffham, made a Statement in this House on 14th July 1988 which said:the Commission has approved the final terms of the acquisition". [Official Report, 14/7/88; col. 981.]Can the Minister say how that statement can be reconciled with the events that are now revealed? How can it be reconciled with the Commission's decision of 13th July that the purchase price would be paid immediately? In addition, how can that state of affairs be reconciled with the letter written by the noble Lord, Lord Young of Graffham, to the chairman of British Aerospace, dated 12th July, stating:On deferment of the £150 million consideration, I can offer three possibilities in ascending order of risk that the deferment will be picked up by the European Commission in which case they might require repayment of the notional interest saved"?We now know that the deferment was picked up by the Commission which has demanded repayment. Can the Minister say how it is possible to justify the statement that the Commission had approved the 1760 final terms? It could not have done because it had never been told them.
The truth of the matter is that from the start this deal has been as crooked as a corkscrew. Ministers have twisted and turned and engaged in deceit. It is now there for everybody to see. It is a sad and shabby story. In the end the party opposite will pay the ultimate penalty.
§ Lord Ezra
My Lords, I too wish to thank the Minister for repeating the Statement on an issue which raises major problems of industrial policy and ethics. However desirable the objective may have been to transfer the Rover Group into a wider industrial group and give it greater opportunities for growth, nonetheless it is very clear that the methods adopted for that purpose were, to say the least, questionable.
A matter of concern to the House right from the start was the closed nature of the transaction. It was a closed bid even though it was known that there were other bidders. What appears to have made the matter worse was that in addition to it being a closed bid there were, as has now become apparent, secret protocols of a financial nature which were only revealed at a later stage.
Therefore, my first question to the Government is very much in line with what the noble Lord, Lord Williams, asked. Are these methods regarded by the Government as a proper way of proceeding in such cases? Can we assume that these events will not be regarded as a precedent if there should be any similar situation? There is the specific issue of the tax relating to the saving on the deferment of the payment of the purchase price. As I understand it, the Commission has specifically insisted that the sum of £33.4 million, which is the gross value, should be repaid in that form. The Government have stated that they wish to take up the issue. However, can we assume that that will not be a sticking point and that if the Commission insists on full repayment it will be met?
Finally, there is the question of the Government stating that they fully support the Commission's policy on state aids. This particular transaction makes that statement of adherence to that policy somewhat questionable. Are we to assume that for the future the Government will be extremely careful in this area and avoid falling into such traps? If we continue to claim, as they do, that we have a good record of compliance with Community legislation—indeed it has often been said that it is better than that of any other member state—surely that assertion has been somewhat dented and weakened by recent events.
§ Lord Trefgarne
My Lords, I wonder whether your Lordships—and I refer to both noble Lords—fully recall the circumstances which surrounded this transaction. To put it bluntly, the Rover Group was on its uppers. It had spent thousands of millions of pounds of taxpayers' money and was set to spend thousands more. I believe that the Government were right, and that my noble friend Lord Young was right, to seek to return the Rover Group to the private sector and hence to put the financial responsibility where it rightfully belonged.
1761 The fact is that large industrial enterprises of that nature hardly ever prosper under public ownership. Here was a classic example of the shackles of nationalisation ruining the commercial prospects of an otherwise viable venture.
§ Lord Trefgarne
My Lords, the noble Lord has had his chance to speak. He may speak further later on. I am attempting to explain the background to this matter. It appears to me that that had not occurred to the noble Lord when he made his intervention.
As I said, the Rover Group was in a very serious situation. The results of that situation and the enormous financial burdens which would have followed would have fallen on the taxpayer. The sum of £1.6 billion was already on the slate so far as concerned the Varley Marshall assurances and thousands more millions of pounds were already in prospect. When the noble Lord talks about the stewardship of public money, let him please ponder on the figures to which I referred.
In regard to the issue of concealing matters from Parliament, this matter and everything concerned with it was properly reported to Parliament at the appropriate time. I can draw the noble Lord's attention to the relevant Estimates which were laid recording this expenditure, if he would like me to do so. Contrary to the allegations which have been made from time to time by noble Lords opposite and others, there were no special tax concessions made to British Aerospace or to the Rover Group in this matter.
I turn now to deal with the relationship with the Commission. We have always acknowledged the Commission's right to reach its own judgment on the matter. It has now reached its conclusions and, as I said, we shall abide by them, although the position of British Aerospace is a matter for that company to decide.
Perhaps I may add at this point that these figures, representing £33 million or £34 million—depending on one's point of view—pale into insignificance beside the figures in some other recent cases of which the noble Lord may be aware. I refer, for example, to that Of the Renault company, where I believe that the Commission called for £900 million of public money to be returned to the unfortunate French taxpayers.
§ 5.24 p.m.
§ Lord Hatch of Lusby
My Lords, I too should like to thank the Minister for repeating this Statement, if only because it is in such direct contrast to the statements he has made to me and to the House in Answers to recent Questions on the subject. The last time I asked him a Question on the matter, he said that the allegations of bribery and deceit were only to be found in my mind. In that case, my mind must have spread very widely through the newspapers of this country and those of the world today.
1762 Will the Minister now accept, first, that the report made by his colleague, who is a Privy Counsellor and a member of the Government of which he is a member, exposes the fact that the British Government used taxpayers' money to bribe a commercial enterprise in order to maximise its profits—which the company has done since the deal was made; and secondly, that in so doing Parliament and the Commission were deceived by the Secretary of State, as was outlined but not yet answered, by my noble friend Lord Williams of Elvel?
§ Lord Trefgarne
My Lords, the noble Lord has made that allegation on more than one occasion. I have rejected before, and I do so again today, the allegation that Parliament was in some way deceived. As I have already said—and I do not mind repeating it—the Rover Group was on its uppers. Only one firm was seriously interested in taking it over. The Commission has confirmed that fact, and that answers the issue raised by the noble Lord, Lord Ezra. There was only one credible bidder. I think that British Aerospace did the British taxpayer a great favour by taking over the company. I am greatly obliged to BAe for so doing.
§ Lord Jenkins of Hillhead
My Lords, is the Minister aware that I have rarely heard a more irrelevent bombardment than that with which he sought to divert attention from the detailed questions put to him by the noble Lord, Lord Williams of Elvel? Is he further aware that across that broad segment most concerned with business and industry, the transactions of the Government are assuming an increasing habit of sleaziness? Will he also reflect upon the likelihood that this may be an inevitable consequence of the elevation of the pursuit of mammon into a supreme god and its achievement as a state of grace?
§ Lord Trefgarne
My Lords, I am afraid that that is the sort of high philosophy which generally excapes me on these occasions. However, I respect the noble Lord's point of view. He was, of course, a distinguished president of the Commission not so very long ago. Therefore, he will understand that the Commission and the governments of member states often form different views on the same subject. This was one such occasion.
§ Lord Nugent of Guildford
My Lords, is my noble friend aware that most people who have not been entirely bewildered by the adverse press presentation of this affair in respect to the enormous liability of the Rover Group—which my noble friend rightly told us had already cost the taxpayer thousands of millions of pounds and was likely to cost even more because there was no possibility of it becoming sound—will feel a sense of immense relief that further money will not be lost to the taxpayer? Is he also aware, in regard to the other major point he made about the jobs of 190,000 men and women being at stake, that it will be seen that by getting the Rover Group transferred to a strong and viable company such as British Aerospace the prospect of the continuing employment of such people is now secure? At the same time, it will also be seen that 1763 the taxpayer has been relieved of further enormous liabilities.
As regards the technicalities of this deal made with British Aerospace, there were certainly other points to be considered. Indeed, my noble friend was very nearly beaten up by noble Lords opposite when he stated how various further concessions had to be made so as to get British Aerospace finally to accept this hot potato. Of course, the company finally accepted the deal, doubting the possibility that it would lose hefty sums of money in the process. However, BAe accepted the deal, took over the company and, thank goodness, is now making a success of the venture. Regarding the broad interests, the repayment of £44 million in order to conform with the Commission's principle of maintenance of competition—which is perfectly reasonable—does not seem to be serious and it is an enormous relief to the taxpayer.
§ Lord Trefgarne
My Lords, I am greatly obliged to my noble friend; I entirely agree. What would noble Lords opposite have had us do? Would they have had us allow the company to go bankrupt?
§ Lord Trefgarne
My Lords, I should be obliged if the noble Lord would keep quiet when in a sedentary position. If he wishes to intervene, I will give way. Would they have had us allow the company to go bankrupt with the cost to the taxpayer of perhaps £2,000 or £3,000 million? About 200,000 people would have been put out of work in the West Midlands. If that is what noble Lords opposite seek, then let them say so loud and clear.
§ Lord Stoddart of Swindon
My Lords, is the noble Lord aware that his attack on the Rover Group, before it was handed over to British Aerospace, is quite unjustified? Had the Rover Group not been taken into public ownership in 1976, the British car industry would not have existed. The noble Lord's party voted against taking British Leyland into public ownership at that time.
The fact that the industry was under public control over a long period meant the continuation of the British car industry. That it needed thousands of millions of pounds for its restructuring and for capital investment was due to the failure of its previous owners to provide that capital when it should have been provided over the years. The noble Lord's attack is therefore completely unjustified.
Nevertheless, the Government made a decision that they would sell the industry or virtually give it away without any competitive venture, without any tendering or similar activity. The problem that the Government have with the British people is that the people believe that the Government, on a doctrinal basis, were ready to get rid of the Rover Group at virtually any price because they did not want it under public control.
The lack of transparency in the dealings in this matter—and there has been a lack of 1764 transparency—has made the public suspicious of the Government's whole approach to the privatisation programme, not only in respect of Rover but of other industries as well. The noble Lord must bear in mind that the British people believe that the whole truth has not yet been told in this instance.
Finally, if the noble Lord believes that the Government were correct in all their dealings, why do they accept the Commission's ruling on the matter? If they really believed in what they had done, they would not accept the ruling. They would reject it out of hand and advise the Rover Group to repay nothing at all because everything that has been done has been completely above board and legitimate.
§ Lord Trefgarne
My Lords, if the noble Lord will forgive me for saying so, I believe that he lives in a world of his own. Companies in the public sector have almost without exception failed to prosper. The Rover Group was no exception. The fact truthfully is that Ministers and officials are very bad at running industrial enterprises. That applies just as much to Conservatives as to noble Lords and others opposite. The best people to run commercial and industrial enterprises are commercial and industrial experts, not Ministers and officials. That is, I fear, the basic reason why all these nationalised enterprises have done so badly over the years. British Leyland, or the Rover Group as it became, were no exception to that rule. We were right to return the business to the private sector. There was only one conceivable purchaser and that was British Aerospace. There were no other serious bidders. The Commission has accepted that point. British Aerospace was prepared to pay £150 million for the business and that was a good deal for the British taxpayer.
§ Lord Mayhew
My Lords, are we to understand from the noble Lord's replies that in his view the Secretary of State kept Parliament properly and fully informed about this transaction?
§ Lord Trefgarne
My Lords, I have said on more than one occasion today that the appropriate procedures for reporting these matters to Parliament were complied with.
§ Lord Molloy
My Lords, is the noble Lord aware that this matter is only just beginning? It is not an issue about privatisation or nationalisation, or the squandering of funds by the publicly owned Rover Company. If the noble Lord were to read every newspaper in the country, including today's edition of the great London newspaper, the Evening Standard, he would discover the issues. He does not seem to be aware of it. It is the grave suspicion of appalling corruption and the interpretation of the word "sweeteners". Everybody knows what "sweeteners" means. The issue is not what he referred to—the failure of Rover. It is the manner in which the negotiation was conducted in the name of Parliament. If the noble Lord reads any newspaper he will discover that all are ashamed of what has happened. We, on these Benches, are too. The greatest shame of all is that the noble Lord opposite does not seem to have the slightest concern about the manner in which the whole transaction was conducted.
§ Lord Trefgarne
My Lords, the noble Lord opposite and his noble, right honourable and honourable colleagues are keen to draw our attention to circumstances where they think more money could be paid or money should not be saved. This transaction saved the British taxpayer thousands of millions of pounds and I am proud that it did so.
§ Lord Boyd-Carpenter
My Lords, is my noble friend aware that those listening to these questions are shacked and horrified at the attempt by certain noble Lords opposite who happen to disagree with the transaction to make wild charges of corruption for which they have not a scintilla of evidence? It is utterly contrary to the principles and practice of this House to make them.
Is my noble friend further aware that those of us who have followed this matter know well that the Ministers concerned did what they believed to be right and in the interests of the British taxpayer with the highest motives and intentions? It is surely right that we should discuss the matter—if we do—on that basis and not try to confuse it with wild charges of corruption for which there is not the slightest basis in evidence and for which no evidence has been offered today.
Perhaps I may add, as the noble Lord, Lord Jenkins of Hillhead, is about to rise a second time, that I was a little amused at his reference to the pursuit of mammon. If, as Chancellor of the Exchequer, he had pursued mammon more effectively, the finances of this country would have benefited a great deal.
§ Lord Jenkins of Hillhead
My Lords, I cannot resist saying that as I was the only Chancellor of the Exchequer to achieve a surplus in 40 years, that remark is a little ill-directed.
However, leaving aside any wild charges—if they be that—of corruption, I should like the noble Lord to tell us, independent of the merits of the deal (which may or may not exist) why the Government and government spokesmen could not tell the truth before it was forced out of them?
§ Lord Trefgarne
My Lords, I believe that the discussions that we had with the Commission on this matter—about which I dare say the noble Lord will have heard, although he had left the Commission by that time—were entirely right and proper. Of course we have had a disagreement with the Commission on the matter. I do not for a moment deny that. However, there is nothing disreputable about having a disagreement.