Rolls-Royce Limited

Bill Presented – in the House of Commons at 12:00 am on 8th February 1971.

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3.51 p.m.

Photo of Mr Jeremy Thorpe Mr Jeremy Thorpe , North Devon

I beg to move, That this House do now adjourn.

Mr. Speaker, on Thursday last you ruled that events connected with Rolls-Royce were a proper matter for debate under Standing Order No. 9 as a matter of urgent importance to this House, and it is in that spirit that I rise this afternoon to initiate this short debate.

The disaster which has overtaken Rolls-Royce is not limited in its effect to one firm. Its impact on many other firms dependent on Rolls-Royce could well set off a chain reaction graver than any of us in this House realise and certainly can foresee. But, just as signficant, I suggest that bound up in these events is the good faith and the commercial credibility of this country. For 50 years Rolls-Royce has been synonymous with excellence in the engineering sphere all over the world. Indeed, any advertiser who wished to sell his product would be tempted to refer to it as "the Rolls-Royce of its kind". The fact remains that at this moment there are only three really important aero-engine firms in the world—Pratt and Whitney, General Electric and Rolls-Royce. It is the third which has now been compelled to appoint a Receiver.

Bankruptcy is the only form of suicide permitted by the law to put a firm out of its agony; but also it is the only way in which a firm, and sometimes indirectly a country, may renege on its responsibilities and its liabilities. Perhaps the supreme irony of the situation is that Rolls-Royce at this moment, if one considers the Olympus 593 turbo-jet engine for the Concorde and the RB162 lift jet for the V.T.O., is technologically ahead of both the United States and of Europe.

Of course, grave mistakes have been made. We would not be debating the issue today were it otherwise. It is quite clear that the firm underestimated the technical problems. Its research costings were millions of pounds too low. and we have seen the cost of the launching rise from £65 million to £75 million to £135 million and now to £170 million. It is also clear that the financial control was totally inadequate.

It has also been suggested that the previous Government, although applying stringent conditions for the granting of launching aid, carried out insufficient research into the viability of the original contract and thereafter failed to make financial checks on the progress of the company.

However, it is not my purpose this afternoon to hold an inquest. It is my purpose to try to cure the patient. If there is to be an inquest, I suggest that the Chamber of the House of Commons is perhaps not the best forum for a discussion of complicated financial and technical problems. It may well be that the Select Committee on Science and Technology or some other body will wish to go into those matters.

Indeed, within a wider context it is, I suggest, vital that we discuss the whole question of the relationship between the State and private industry, which raises problems substantially the same, whether we live in a Marxist or capitalist society. They are certainly not resolved by falling back on the doctrinal formulae of the past in regard to the relationship between the two. I believe, however, that it is right that we should hold this debate because it is clear that we can raise the questions which are worrying many thousands of people in this country, and it is clear also that the Government can give some indication of their intentions.

In view of the shortness of the debate and the many right hon. and hon. Members who are closely interested and, indeed, who represent many thousands of constituents whose employment is at stake, I shall be as brief as possible in order that many other Members may intervene.

I want first to examine the impact which this disaster has had at home and abroad, and then to comment on Her Majesty's Government's present proposals. The mere fact that the Bill is not yet at a stage in which we can consider it—at any rate, it may be available to other hon. Members, but I should find myself slightly inhibited in examining it whilst I am on my feet—does not preclude us from examining some of the basic principles involved. First of all, there is the domestic economy. The grave issue here is whether or not the RB211 contract can or will be renegotiated. If it is not, there will be many very grave problems. The Financial Times suggested on Friday that there could be as many as 40,000 redundancies, half amongst Rolls-Royce employees and half amongst the 112 subcontracting companies which are dependent on the RB211. I believe that is an underestimate, because there are many firms which are already restricted by the Government's tight money policy and could be pitched into bankruptcy.

Of course, there is the added importance that unemployment would occur in many areas which are development areas where there is little alternative employment and where already much taxpayers' money has been invested in trying to improve the infrastructure of the economy in those areas. We need only consider that the engine pods are supplied by Short Bros. and Harland of Northern Ireland to realise what would be the effect on the economy if there were increased unemployment in Northern Ireland, quite apart from the political implications there. Therefore, there are very great social costs involved. There is the cost of redundancy, unemployment benefit, loss of profit and loss of taxation. Therefore, I say straightaway that if the decision be that the RB211 contract is not to be renegotiated, the social costs which this country will have to pay, quite apart from the economic ones, are very high indeed.

I believe that the situation is no less serious internationally, because if we are compelled through default to cancel a major aeronautical contract it will throw into doubt our credibility, our commercial competence and our good faith in all spheres of advanced science. Lockheed was perhaps entitled to wring its hands and say that it had at the moment been left holding the largest glider in the world.

If this contract goes, there is no doubt that this country—and let us made no mistake about it—will be out of the large aero-engine business forever. The danger is this incident will throw doubt upon our credibility in other related spheres of defence technology.

At this moment, in the computer industry we are seeking closer co-operation with the French and the Americans. In the nuclear power field we are about to bring off a major deal with the Germans and the Dutch. At the end of March we hope that the test flight programme for Concorde will have been completed. The indications are that the tests will be successful, and our salesmen will then have to set off to sell an aeroplane powered by Rolls-Royce engines. The customer will ask: "Can you deliver? Is your estimate of the cost correct? What about your delivery dates?"

It is perhaps ironic that the Concorde project, on which we have spent £1,000 million jointly with the French, is the aircraft for which we at the moment have no orders. Its development costs were initially put at £150 million. The immediate reaction to that estimate by my colleague Eric Lubbock—who, I hope, will within the foreseeable future be able to bring to the House once again his knowledge of the scientific and technical subjects on which we knew him to be so expert—was to bet, and this was in December, 1962, a monkey to a mousetrap that the production cost of Concorde would be multiplied by five. He was wrong: it was an underestimate.

Therefore, we have Concorde on the one hand and, on the other, the possible cancellation of this engine when perhaps £150 million or £200 million more could enable us to continue with a project for which there are already firm orders for 178 aircraft and possibly 600 engines.

Therefore, the first question that I want to ask the Government is: what assurances did the Government, or have the Government, given to the United States Government about their willingness to bail out the Lockheed contract? The circumstantial evidence is that between 27th and 29th January the American Government received information—

Photo of Mr Jeremy Thorpe Mr Jeremy Thorpe , North Devon

And what is not typically Liberal is the inability to hear an argument from another quarter.

The first indication is that Mr. David Packard, the Deputy Secretary of Defence, was certainly under the impression—I put it no higher—that the British Government intended to bail out the Lockheed contract, as a result of which Lockheed, on 1st February, agreed to absorb a 200 million dollar loss on the C5A—on the basis of its belief that there would be guaranteed delivery by Britain.

If, and the Prime Minister shakes his head, that is absolutely untrue, I feel bound to say to him that this at least was the impression which the American Defence Department had, and which it therefore transmitted to Lockheed, as a result of which many decisions were taken. If there is a misunderstanding on the issue, it is all the more important that the Government should take care in future that no further misunderstandings of this sort should arise, because a little later I shall suggest that very close governmental co-operation may be necessary.

There is no question that if this contract is to be renegotiated it will have to be on the basis of Government-to-Government. After all, the banks have had their fingers severely burned. It was the banks which, on commercial grounds, sparked off the bankruptcy of Rolls-Royce, and if a negotiation is possible which will be underwritten by the American banks there is no question but that this will have to be underwritten by the British and American Governments.

We all know that, in effect, what has happened has been a race against time whether Lockheeds or Rolls-Royce went bankrupt first, but there is a tremendous similarity between the position of the British Government and of the American Government in regard to this contract. Lockheed is the largest United States defence contractors and its continuation in business is vital to the Americans for the Polaris and Poseidon programmes. But we must also realise that the Nixon Administration, following well-established Conservative precedents, might be disposed to follow precisely the same course; namely, to nationalise those sections which they need for their defence interests, to sell off those sections which are profitable, and to leave a shell to carry the liabilities and obligations of the bankruptcy.

I therefore move to the first question that I want to put to the Government, which is whether or not we as a House believe that the proposals for nationalisation, such as we have seen them so far—we do not have the advantage of the Bill—are adequate to face this situation. I believe that the Government are entirely right to bring forward the proposal to nationalise the aero, marine and industrial gas turbine divisions. The Government, after all, are the only body which could act decisively to keep intact this sector of Rolls-Royce.

The Prime Minister rightly pointed out on Saturday that Rolls-Royce are suppliers of aero-engines to 81 air forces and 200 civil airlines, and I believe that the protection and maintenance of those sectors of Rolls-Royce is not only essential to our own defence but is essential to the defence of the Western world. Indeed, the multi-rôle combat aircraft is the most important military collaborative effort that we are at present carrying out with the Six.

But I wonder whether the proposals of which we have read go wide enough? Personally, I believe that only those rare creatures in the political spectrum who have the most purblind faith in the free market would be happy to see the car division of Rolls-Royce bought up by a foreign consortium. Whilst I see that David Brown, who, I think, on the basis of his expertise, may well have some claim, is in the running, I very much doubt whether there is any British consortium which could find the necessary capital to take over the car division of Rolls-Royce.

But on the basis of the Government's criterion of preserving those parts of Rolls-Royce which are essential to our defence effort, I suggest that they must look again at the question of taking over the car division as well. The car division, too, is involved on vital defence work. It produces many of the diesel engines that are needed for tanks. It has a licence to produce the Wankel rotary engine, which is being introduced into many of our fighting vehicles.

So I believe that the Government, and I accept the prospect of nationalisation, at which the party opposite has only recently arrived, in their present approach are being far too restrictive. I suggest to the Government that if they are right to nationalise these sectors of Rolls-Royce, and I believe, frankly, that they had no alternative, they would be wrong if they were to do a three-pronged operation which is what I understand they have in mind—first, to strip the company of its profitable sectors and sell them off; then, to retain what they need in the interests of national defence; and, finally, to leave a shell to carry with it to the grave of bankruptcy the Lockheed contract and any other liabilities and obligations. I suggest that this would come perilously close to using a legal device to avoid paying one's debts.

This is a new situation. It is the first time, I believe—I am subject to correction—in which an act of nationalisation has been carried out with a contingent liability to a foreign company. What has happened is that, a receiver having been appointed, the Government have moved in to make a compulsory purchase order in advance. If the Government are merely doing this as a holding operation, subject to the qualifications which I have made about the extent of their acquisitions, I believe that what they are doing is absolutely right. However, I greatly hope that they will go further and indicate to the American Government that they are prepared to renegotiate if possible the RB211 contract. This will mean that the four airlines will have to be prepared still to buy, that Lockheed's are prepared to waive their penalty clause, and that we can get a realistic escalation clause based upon a realistic initial costing.

Then I hope that, subject to that, the Government will indicate that they are prepared to adopt the BP solution of taking a 51 per cent. share in the whole of Rolls-Royce. This would mean either that they would create a new company and give a one for one share to the existing shareholders or that they would revive the existing shell. If this could be done, I believe that we have a prospect of providing the necessary finance and of paying the debentures and secured creditors and indeed the shareholders.

Let us remember when talking about shareholders that we are talking about £2 million-worth of shares which are held by the workers of Rolls-Royce. We are talking about countless pension funds which had invested in Rolls-Royce. It was a blue chip security up to about a week ago.

I therefore hope that the Government will go much further and will not think that their job is merely to bring about a moratorium but will try to refloat the ship as a whole. We shall also look carefully to see what is to be the measure of compensation in which the Government will be the only buyers. It would be an irony of politics if it could be said that a Conservative Government had nationalised with inadequate compensation. This would be Socialist robbery indeed.

There is then a wider question. I think that Britain has rightly decided that we will not compete for the exploration of space with America and Russia. We have already opted out of the market for large airliners, as the Boeing 747 and the Douglas DC10 testify. Where do we draw the line? Which will be the next technology where we say that we as a nation are incapable of competing in the world markets? This is a very important question.

I genuinely believe that the attitude of the Government and of the country and the decision which the Government ultimately take on the RB211 will draw the sharp line between the areas where we compete and those beyond which we will not go. We are in effect to seek out the areas where we are still in business and those from which we retreat.

There is no doubt that the lesson of Rolls-Royce is that the company overreached itself. It tried to develop on its own. Indeed, the case for a European-based aircraft industry seems to me now to be obvious. Only a European- or an American-based aircraft industry will be sufficient to compete in the world. There is also the question of whether we are now going to run the risk that Britain will become the industrial sub-contractors—the sweated labour—for other technologies. That is a situation which I do not want to see Britain adopt.

So far I think that the Government have been right in ensuring that there is a moratorium and in preserving our vital defence interests, but I greatly hope that they will now go further and arrive at an arrangement which will preserve Britain's good name and our commercial competence. There is a limit to what the taxpayer is expected to pay to bail out companies which have made commercial mistakes.

There is also the very difficult sphere of determining where the commercial considerations of a company end and the political persuasions of a Government begin and where commercial judgment has been affected by political persuasion, sometimes in the very best interests of the country but leading to a commercial decision which a company might not otherwise have taken. It is a very difficult dividing line.

In the whole of the Rolls-Royce fiasco there are wider considerations. If the RB 211 contract is not renegotiated, Britain will not only create very wide-scale unemployment; not only shall we drive many associated companies into bankruptcy; not only will we start a chain reaction, but I believe that we will do very great damage to our commercial credibility in the world at large.

Difficult though this may be, I think that it is essential that once the Government have taken over Rolls-Royce they use their very best endeavours with the American Government to see if the whole of this contract cannot be renegotiated, because I also believe that this country and the House have more than a moral obligation inherited from the previous Government. It is very easy for politicians to say, "We are not bound by anything which our predecessors did. We do not like their politics. We do not like their policies. We have overthrown them. All is changed".

Modern technology and modern business are not quite as simple as that. This was a contract aided and abetted by the previous Government, welcomed by the Opposition, welcomed by the Liberal Party, and welcomed by the whole country, as a great coup for Britain. It is that contract which has fallen foul.

The firm involved is a firm to which I believe quite apart from financial considerations we also owe a very great moral debt. It is dangerous—at no time is this more true than when one is addressing a Tory Government—to try to bring into the realms of commerce any suggestion of sentiment or any sense of history. However, if the House will allow me to take that supreme risk, and even if the hon. Member for Chigwell (Mr. Biggs-Davison) cannot remain awake until the end of the quotation, I want to remind the House—

Photo of Mr Jeremy Thorpe Mr Jeremy Thorpe , North Devon

Since this is a short debate—

Hon. Members:

Hear, hear.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Order. The right hon. Gentleman has already been speaking for half an hour.

Photo of Mr Jeremy Thorpe Mr Jeremy Thorpe , North Devon

Since this is a short debate, and you have already rightly implied, Mr. Speaker, that I have taken rather longer than I should—[HON. MEMBERS: "Hear, hear."]—I shall at least comfort myself with having so revived the hon. Member for Chigwell that he has been able to rise to his feet.

Photo of Mr John Biggs-Davison Mr John Biggs-Davison , Chigwell

I wanted to ask the right hon. Gentleman whether he realises that he has shortened the time available for the debate by the inordinate length of the brief which he is reading out, written, no doubt, by Mr. Eric Lubbock, who was well repaid by the glowing tribute paid him in the right hon. Gentleman's speech.

Photo of Mr Jeremy Thorpe Mr Jeremy Thorpe , North Devon

That remark may have been worthy of the hon. Gentleman, but I very much doubt that it is worthy of the seriousness with which the entire House wishes to debate the position of Rolls-Royce.

Shortly after the war, Lord Tedder—[Interruption.]—I did not come to the House, after pitching out a Tory, to be shouted down. Shortly after the war, Lord Tedder unveiled at Rolls-Royce at Derby a window to the memory of the R.A.F. and the Battle of Britain. Many hon. Members who are connected with Rolls-Royce will know it well. He said: For many months before the actual Battle of Britain, and during 1940, I saw at first hand many of the problems, and many of the crises, which, had they not been solved and overcome—on the drawing board, in the laboratory, in the foundry, on the test rigs, in the machine shoos and on the production line—would have lost the Battle of Britain before it began to be fought in the air. The reputation, the skill, and the integrity of Rolls-Royce have for many years been bound up with and been synonymous with the commercial expertise of this country. It is the Government's job not merely to skim off and sell the profitable sectors, not merely to take what they regard as being in Britain's defence interests, but to try to retain in being—I believe that this is the argument which the right hon. Gentleman the Secretary of State for Trade and Industry successfully tried to impress upon his colleagues in the Cabinet—to try to retain and maintain the unity of this tremendously great international organisation.

It will take a lot of hard bargaining with the American Government, and I do not suggest that we should meet the full cost of refloating the RB211. I am suggesting that it is the Government's job not only to have a moratorium but to take over and keep in being Rolls-Royce as an entity in itself, bringing to bear the best management, technical, commercial and financial expertise. They should try to renegotiate the RB211 contract, the symbol of whether or not we keep in the aerospace race, which, in my opinion, this country is well capable of doing.

Let it not be said merely that this is a hard commercial decision, bankrupting one section and allowing it to take all the liabilities away, while the Government skim off what is profitable, selling that and keeping only what we need for our defence interests.

If the Government do that, they will not have risen to the occasion. If, on the other hand, they say that they will try to renegotiate this contract and will try to retain the unity of Rolls-Royce, they will give hope to many thousands of men and women who are employed in Rolls-Royce, and they will give the firm a chance to rise again. If that can be done, the British nation will feel that there is here symbolised a determination to fight back and see that ultimately the commercial and technical genius of the British people can win through.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I have the names of well over 30 right hon. and hon. Members who wish to speak in the debate. There are two hours and 25 minutes left. I ask hon. Members to be as brief as they can.

4.25 p.m.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

Last Thursday afternoon my right hon. Friend the Minister of Aviation Supply made a statement about the position which had developed with regard to Rolls-Royce. A Bill to give effect to the Government's intentions has already been introduced; it is available in the Vote Office, and the Second Reading debate has been arranged for next Thursday. Obviously, I cannot anticipate discussion on the Bill itself, but I welcome this opportunity to give the House some further explanation of what has happened.

The House will recall something of the history of the RB211 project, but it may be helpful if I briefly recapitulate some of it.

On 1st April, 1968, the right hon. Gentleman the Member for Bristol, South-East (Mr. Benn), then the Minister of Technology, made a statement to the House about the Rolls-Royce order to supply the RB211 engine to Lockheed. I need not go over that statement, in which the right hon. Gentleman explained the then Government's part in the venture. Suffice it to say that in due course the previous Administration made arrangements to provide launching aid of up to £47 million. That was intended to cover 70 per cent. of the estimated cost of launching the engine, which was then put at £65 million. Later, the estimated cost was increased to £75 million.

The next development of significance in the present context came in 1969 when the Industrial Reorganisation Corporation undertook an examination of Rolls-Royce affairs in order to see whether additional funds should be provided. As a result of that examination, and following negotiations with the company, the I.R.C. agreed to make a loan of £10 million. This was to be followed by a further loan of £10 million, which, for reasons I shall explain, was never made. There were to be changes in the company's management. As the House will be aware, the Board was strengthened by the appointment of Mr. Morrow and Lord Beeching, and a new post of financial controller was created. Also, there was to be a structural reorganisation within the company, which was to lead to economies of about £10 million a year, although, in fact, insufficient time had elapsed for much to be achieved in that direction.

There was much more to the history of this affair but, in view of the limited time available for the debate, I shall confine myself to that account of the past history. I come now to the immediate past.

In the autumn of last year the new Government were informed by Rolls-Royce that the cost of launching the RB211 had risen to £135 million, compared with the original figure of £65 million, which, as I said, had been later increased to £75 million.

The House will realise that my right hon. Friends and I were both surprised and shocked, to put it mildly, at the revised estimate which was put before us. The decision which we reached last autumn was taken only after the most careful consideration of all the facts as they were then made available to us.

We were told that the technical opinion at that time was that the development of this engine within the revised cost estimates was practicable, although tight, and this, of course, was a crucial factor. Therefore, bearing in mind the magnitude of the programme and its obvious importance, the Government decided that they would take part in a combined operation with the company and with its bankers to meet the increased cost, the Government for their part making a further contribution of launching aid up to a maximum of 70 per cent. of the increased cost over £75 million; that is, 70 per cent. of the £60 million, or £42 million of additional launching aid. This made at that stage a total Government contribution of up to £89 million towards the launching cost of the RB211, that £89 million included the £42 million which the Government had, on certain conditions, agreed last autumn to make available. The banks were at the same time to make available a further £18 million. All this was subject to certain conditions, and to one condition in particular which was an entirely new one and one which the whole House will, I am sure, agree was a most prudent one in the circumstances.

Because of the size and complexity of the operation, because there had already been such a large cost escalation and because the position had deteriorated so markedly my right hon. Friends and I took the wholly unusual step of making it a condition of the provision of new launching aid that there should be an independent outside check of the company's position and prospects. I think the House will agree that it was just as well we did. Consequently, a firm of acountants, Messrs. Cooper Bros., was asked to undertake the investigation.

Meanwhile the Government decided not to make any further assistance available through the Industrial Reorganisation Corporation beyond the £10 million which had been committed under the previous Administration. Further changes in the management of Rolls-Royce were made and Lord Cole was invited to serve as Chairman. Lord Cole took over early in November in very difficult circumstances, and he deserves the gratitude of the House and of the taxpayer. The provision to further launching aid was made conditional on a satisfactory report to the Government from the independent accountants, and one of the consequences of this condition has been that no part of the £42 million was advanced to the company.

The independent accountants did not complete their investigations before the events of last week. Their preliminary inquiries enabled them to provide considerable assistance to the Government in considering the further and very difficult situation which developed after 22nd January. It was on that day that Lord Cole told the Ministry of Aviation Supply that in the opinion of the executive committee of the Rolls-Royce Board the RB211 development and production programme could not be met. Rolls-Royce, so we were informed, considered that it had either to stop the RB211 forthwith or to postpone delivery in the hope that the extra six to twelve months gained would enable the engineering problems to be overcome.

The company kept the situation under day-to-day review, and on 26th January the board decided in principle that, subject to discussions with Lockheed and the Government, the company should not continue with the RB211 project.

What was it that led to this sad and momentous conclusion? What had gone wrong? What had gone wrong was that the launching of the RB211, which represented a major advance in engine technology, had been undertaken by the company in the face of intense competition, and in these circumstances it was led into major errors of commercial judgment. There have been, as we now know, gross underestimations of the development time and hence of the overlap between development and production programmes. This in its turn led to major increases in the cost of production. But—and this was the hard commercial fact—Rolls-Royce was nevertheless bound by those terms of the contract which provided for a fixed price and which it had originally signed in the spring of 1968.

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

And which was virtually forced upon it.

Hon. Members:

By the Minister.

Mr. Jones:

By the American lobby.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

No doubt the right hon. Gentleman who was the Minister of Technology at the time will have something to say about the situation then.

Photo of Mr Ivor Richard Mr Ivor Richard , Barons Court

Will the right hon. Gentleman give way?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

No. I must emphasise here that the situation disclosed to the Government by the Rolls-Royce Board was the result of a totally new appraisal by the new management of Rolls-Royce of the consequences of continuing with the project. The conclusion of the Rolls-Royce board was that: … it was not feasible for them to proceed with the RB 211 under the present contract.

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

Will the right hon. Gentleman give way on this particular point? It is an important matter.

Photo of Miss Betty Harvie Anderson Miss Betty Harvie Anderson , Renfrewshire East

Order. It cannot help either side of the House or any opinion when discussing a grievous national calamity of this nature to have the House unwilling to hear the Chancellor.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

The hon. Gentleman knows perfectly well that I normally give way frequently. There are many hon. Members who wish to speak in the debate.

Let me give the figures to show what has happened. The Rolls-Royce commitment to Lockheed was to deliver 540 engines at a price of £350,000 each, at a specified time and with a specified performance. Last November when we decided to provide additional launching aid subject to the investigations by the in- dependent accountants, the estimated production costs had already risen to £410,000 per engine. Hon. and right hon. Gentlemen may well ask why last November, when it was then known that every single engine delivered would be sold at a loss, the Rolls-Royce board nevertheless decided to continue with the project.

The answer was that it had committed itself to a contract with penalty provisions which would become operative in the event of the non-fulfilment of the contract. The consequence was this: contract price per engine £350,000, estimated cost of production last November £410,000 per engine, estimated cost of production now about £460,000 per engine. That is to say, on the information now available, on every engine delivered to Lockheed there would have been a loss of not less than £110,000 and the commitment was to deliver 540 of the engines. The House will see that on present estimates of production costs, the actual losses on production alone would have been at least £60 million. If the production costs had gone up further the loss would have been greater.

That is not all. The launching costs are now estimated to be much higher than was estimated only last November. A provisional estimate now puts them at £170 million at least, or at least £35 million more than the estimates of last November. Of course, cost escalations of this kind—and we could not be sure that we had seen the end of them—are, frankly, insupportable in a project governed by a fixed price contract.

On Thursday last the right hon. Member for Bristol, South-East (Mr. Benn) put this question: … can the right hon. Gentleman"— that is, my right hon. Friend the Minister of Aviation Supply— 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?"—[OFFICIAL REPORT, 4th Feb., 1971; Vol. 810, c. 1924.] I must say to the right hon. Gentleman that, quite frankly, I was surprised, in the light of all that had happened, that there should be any suggestion that the Government under the existing contract should have poured yet more of the taxpayers' money into the RB211 to cover the cost of escalation.

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

No questions? Is the case so weak?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

As far as this one engine is concerned, the position last week, as we knew it, was that the estimated launching costs had risen to at least £170 million and that the estimated production losses had risen to at least £60 million. Furthermore, and, of course, of great importance, in addition to these costs there were open-ended commitments in respect of potential claims for delay in delivery of the engine.

So far as the Government were concerned, the position last week was this. To have bailed out the company by keeping it as such in business would have involved the Government in either of two alternative commitments. The first would have been a commitment to provide Rolls-Royce with the full assistance required for it to complete the RB211 contract and to meet all the costs of the open-ended claims. The second alternative would have been the assumption, in the event of withdrawing completely from the contract, of meeting all the running-down cost and the open-ended claims. To have entered into any such commitment as either of these would have involved the Government in assisting the company to carry on the business when the directors themselves knew that it was insolvent and there was no reasonable prospect of meeting the liabilities as they fell due, and this the Government, obviously, could not do.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

May I ask the right hon. Gentleman one factual question? He has given the revised launching figure of £170 million and the production loss of £60 million. Could he give the House an estimate of the penalty payments on the assumption that £170 million produced the engines, though late?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

No. I cannot give that, and all I would say is that I think the House will appreciate, in view of what has happened, and of what may or no be the future of the RB211, that it would be very unwise to go beyond what I have said. [HON. MEMBERS: "No."} As far as these particular liabilities are concerned, what I can say is that it would be £50 million provided that they were only six months late, but I think that to go beyond that would not be right in the circumstances.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

If I may continue, I want to say this to the right hon. Gentleman the Member for Devon, North (Mr. Thorpe), who, I thought, at one point was urging us to go wider. The Government's conclusion was clear. He mentioned on one occasion, and one occasion only, the word "taxpayer". This Government are responsible to the taxpayer and we are not prepared to provide the massive sums required to keep the company as such in business, with or without the RB211; nor were we prepared to do what some hon. Members opposite have proposed; namely, to acquire the shares of the company, because this would have involved assuming in full the company's huge liabilities—again, at the expense of the taxpayer. Equally, however, we were not prepared to accept any risk that the activities of Rolls-Royce which are vital to our national defence should stop; and, to put it bluntly, without Rolls-Royce engines many of the aircraft of the Royal Air Force would be grounded.

With regard to the divisions of the company where we are acquiring assets, I should like to say this. It would not have been possible to separate the civil and the military sides of the business, even if we had wished to do so, because their organisation and their activities and facilities on which they depend are closely integrated. We had also to bear in mind the international collaborative programmes and the fact, as the right hon. Gentleman said, that many foreign air forces and some 200 of the worlds' airlines are dependent upon Rolls-Royce engines. Consequently, the Government decided to acquire the assets referred to by my right hon. Friend on his statement on Thursday.

The extent of the acquisition will depend largely upon the future of the RB211, which the Government, as the House knows, are exploring with the Receiver. The assets to be acquired by the Government will be vested in a company with limited liability, the shares of which will be held by the Government. This will make it easier for private capital to participate in due course. The overriding consideration, as, I think, was recognised by the right hon. Gentleman, has been to act quickly and decisively in the national interest to ensure the continuity of the operations of the aeroengine, marine and industrial gas turbine engine divisions of Rolls-Royce.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

No. As far as the future is concerned, the legal position is, of course—and this is very important—that the Crown has inherent power to dispose of the assets which we shall be acquiring following the passage of legislation now before the House. There is, therefore, no question of further legislation being required in the event of the disposal of those assets, or, in whole or in part, of the Government's shareholding in the new company.

Several Hon. Members:

Several Hon. Members rose

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

On a point of order. This is, as you know, Mr. Deputy Speaker, a most serious point. Is it in order for the right hon. Gentleman to come to this House and to make a statement about one of the greatest companies of this country and not say what the Government themselves did to attempt to renegotiate the contract with Lockheed?

Photo of Miss Betty Harvie Anderson Miss Betty Harvie Anderson , Renfrewshire East

The hon. Member knows that that is not a point of order.

Photo of Sir Charles Taylor Sir Charles Taylor , Eastbourne

On a point of order. Mr. Deputy Speaker. As my right hon. Friend has shown quite categorically that he is not prepared to give way during his speech, is it right that hon. Members opposite should keep interrupting him—when he has said he will not give way?

Photo of Miss Betty Harvie Anderson Miss Betty Harvie Anderson , Renfrewshire East

A point of order shortens debate.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

The future of Rolls-Royce is of course, as the right hon. Gentleman said, a matter of concern to a number of other Governments because of the international collaborative programmes to which I have referred. As regards the United States, when my right hon. Friend the Prime Minister spoke to President Nixon, the President said that the American Government would be prepared to co-operate with the British Government and Lockheeds in exploring the future of the RB211. Urgent discussions with the Lockheed Corporation and with the United States Government are, therefore, taking place. Obviously, I cannot anticipate the outcome of these discussions but I must emphasise that the Government have no liability in respect of the contract between Lockheeds and Rolls-Royce, and, if the project is to continue, there must be a completely new arrangement.

I am conscious that these developments will, as the board of Rolls-Royce has already explained, make substantial redundancies inevitable. I am afraid that, as far as this is concerned, there is nothing that I can now add to what my right hon. Friend said on Thursday. Just before I came over to the House this afternoon, I spoke to the Receiver about the question of redundancies because I felt that, as I was reporting to the House, I should speak to him myself. He told me that he has been in touch with the unions and that he has assured them that before any action is taken which affects redundancies the unions will be consulted. I only wish there were more information which I could give. I have done my best, but I am afraid that, at this stage, it is not possible.

The right hon. Gentleman the Member for Devon, North referred to the future of Rolls-Royce trade creditors and subcontractors, and this is a very important point. As has already been announced, steps will be taken to ensure that banks will not be prevented by current credit restrictions from accommodating, subject to normal banking criteria, those companies, trade creditors, suppliers or subcontractors of Rolls-Royce, who may need additional temporary finance as the result of these developments.

The House should also know that, subject to the passage of legislation, it is the Government's intention to appoint Lord Cole and Mr. Morrow, in whom they have full confidence, to the board of the new company. There is much more, if I had had the time, that I should have liked to say. I have stated the hard facts so that the House may judge the Government's decision, but behind and beyond these compelling facts no one who has lived with this problem can be wholly devoid of emotion. As the right hon. Gentleman said, this is a great and symbolic industry. There are also the personal tragedies of those families who reap the consequences. True, it was open to us, backed by the resources of the State, to take action the consequence of which would have been to avoid the appointment of a Receiver, with all that that signifies, but, as I said before, we have a responsibility to the taxpayer, and I have no doubt——

Photo of Miss Betty Harvie Anderson Miss Betty Harvie Anderson , Renfrewshire East

The right hon. Member for Stepney (Mr. Shore) knows that the Chancellor of the Exchequer has said he will not give way.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

I have no doubt whatever that the decision which we took was the right one.

4.50 p.m.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

There is nobody in the House today who would have wished this situation upon us. At least we are united in this. I had imagined when the Chancellor came to the House and decided to open the debate that he would have been more forthcoming than he has been. I say this not in a malicious way but because the decision announced by his right hon. Friend last Thursday was probably the most important industrial decision announced in the House since the war, and we have nothing from him but two figures, and one that I had to draw out of him, by which to judge it. The House is entitled to the fullest information about this matter as to the past, the present and the future. I would welcome an inquiry into it from my point of view, making available all the information that was open to me, and I accept the full responsibility for the part that I played in it.

The debate must cover ground a little wider than the right hon. Gentleman the Leader of the Liberal Party or the Chancellor of the Exchequer covered. First, there must be reference to the back- ground of the order, not so much for historical reasons but because it bears greatly on the central question now, which is whether or not the RB211 should be kept going. Secondly, we are bound to consider the Government's handling. Thirdly, we are bound to consider the future of the company in the new position. I reiterate—particularly after having heard the Chancellor of the Exchequer's speech—the necessity for a White Paper to be made available to the House before Thursday to allow us to consider the facts. The Cabinet must have had tons of paper before it during its critical meetings last week, and some of that paper could be and should be made available to the House.

There is no dispute in the House about Government support for civil aircraft. It has gone back many years. Launching aid was designed and introduced, in 1960, I think, to allow British aerospace firms to launch successful projects. In many cases the return on investment does not come directly from the aircraft or the engine actually launched but either from the spares which come later or from the fact that launching aid may fund a basic development out of which a whole new family of engines or aircraft may come. That is why the Government are bound to take a longer term view of the decisions required of them in this area.

In the early 1950s it was thought by everyone that speed would be the future of air travel. It was only in the later 1950s, when Rolls-Royce and other engine manufacturers began to study the further development of air travel, that they recognised that four consideration would be dominant. First, there would be an enormous increase in the volume of air travel; secondly, the public would want, and would be able, to move into the so-called air buses; thirdly, this would require more powerful and quieter engines; fourthly, the major growth would occur in the United States.

I want to say in passing something which is very relevant to the debate. The House and the country as a whole are greatly concerned with the environment, particularly with aircraft noise and the siting of major airports. The case for this generation of aero-engines is that it is the answer to the problem of aircraft noise. In coming forward with its proposals for a high technology engine Rolls-Royce argued, and argues even more strongly now, that the whole future of the British aero-engine industry depends upon being able to produce an engine of the kind known as the RB211, or the RB207, which was produced at the same time. I urge the House to recognise that this is not a prestige project in the sense in which that phrase is often used.

We are talking about the work-horse engines of the 1970s and the 1980. Rolls-Royce argued—and this view was accepted by both sides of the House and certainly by my old Department—that what we were discussing was the survival of Rolls-Royce, because if Rolls-Royce could not get an order for this engine the whole of its business would gradually fade away. The problem that confronted Rolls-Royce was that of finding orders and a market for its high technology engines.

If anyone has any doubt about it, I can assure him that, since the survival of Rolls-Royce was at stake, all the drive to launch the RB211 came from the company from the very outset. My colleagues and I accepted—and I still accept—the basic argument that without the RB211 engine there is no future for the British aero-engine industry whether or not in public ownership.

When we approached the question of funding this engine we had some experience behind us. The right hon. Gentleman the Chancellor mentioned my supplementary question about the Olympus 593 for the Concorde. I am glad he did. I say this not in a carping spirit, but let us compare the two contracts, one for Concorde with its Olympus engine and one for the RB211. When the Concorde was launched in 1962—and the right hon. Gentleman remembers it because he was a Treasury Minister throughout that period—there were no orders for Concorde. There are still no orders nine years later. There was an unlimited financial commitment by the Government. They agreed to pay all the escalation, which has been from £150 million to £825 million, of which I might add only £240 million has actually been spent by the British Government. The contract was embodied in an Anglo-French treaty with no break clause, and not a penny of the money of Rolls-Royce or of B.A.C. was put at risk by the Concorde or the Olympus 593. If the Olympus engine had been funded on the basis of the RB211 Rolls-Royce would have been bankrupt in May, 1964, because the cost had doubled between 1962 and 1964 and—this is the point I was hinting at and which must be considered carefully—if the RB211 had been funded on the basis of Oylmpus 593 Rolls-Royce would have still been in business today.

We are talking about two ways of fund-an advanced engine. We said to Rolls-Royce, that it must find an international partner, not go it alone. It must find a partner, as Plowden said, either a European partner—as in the A300B—or an American partner, Douglas or Lockheed. Secondly, we said that there must be launching orders before we would consider supporting the contract. Thirdly, we said that the Government commitment would be strictly limited. It was not a percentage of whatever the cost was; it was 70 per cent. of the initial cost which was a fixed investment of £47 million, and we said that Rolls-Royce and Lockheed must be prepared to put the full resources of their two companies behind the project.

The question I ask myself now inevitably is "were those terms too harsh?" Certainly Rolls-Royce and Lockheed knew what the terms were. They were in no doubt whatsoever. They clearly understood what was at stake in launching the aircraft under those conditions, because we had discussed that with them beforehand. Rolls-Royce was continually searching for a market for these engines.

In case anybody thinks that the Labour Government were encouraging Rolls-Royce foolishly, let me list the projects it put forward and what we did with, them. First, it wanted the RB207 for the European airbus, A300, and was supported by Hawker-Siddeley, by France and by Germany. This was rejected by the Government, because there were no orders. Secondly, it wanted the BAC211, urged from the Conservative side of the House, supported by B.A.C. and B.E.A.: rejected by the Government, again because there were no orders. Thirdly, it bid for the Douglas DC10, with the RB211 engine. Rolls lost the contract. Fourthly, it wanted the 10–11 contract which it won and which we are discussing. After that contract no fewer than three other projects were brought forward by Rolls, one for the European airbus A300B, with an RB211, but again there were no orders.

It should not be assumed that if one seeks European partners the problem of the aircraft industry is solved. Let me give this example. When we were considering the A300B, which was urged upon us by Hawker-Siddeley and by the French and Germans, the position revealed by our calculations was as follows. If 250 of them were sold, 90 per cent. of our money would have been lost. If 350 of them had been sold we would have lost 50 per cent. of our money. And at that time no orders had been placed whatever and we decided not to go ahead. Similarly, when the right hon. Gentleman considered the BAC311 he came to a similar conclusion.

Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield

In cataloguing the various projects which have been turned down, would the right hon. Gentleman go back a little further, to the TSR2? Will he accept that had the TSR2 proved itself, Rolls-Royce would have had a run of orders?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

We are now discussing the RB211 and the civil business on the question of launching aid. In the case of TSR2, it was the Government who were the customers. Even after TSR2 went the exports of the industry doubled during the period we were in power. This was in part because of the focusing of effort on those projects that we thought likely to be successful.

Photo of Mr John Wilkinson Mr John Wilkinson , Bradford West

Would not the right hon. Gentleman also agree that imports went up very substantially and that the net gain to our balance of payments was no higher during that period?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I will come to that matter. This is one of the most powerful arguments for continuing the RB211 today.

I have no doubt that the decision taken in March, 1968, which provided for recovery of investment by the Government by levy and with the family of engines that were to be launched, and the implied preference indicated in our own calculations, that it was right to go ahead at that time. I would ask the hon. Member for Woking (Mr. Onslow), who said on television that we had forced Rolls into this, to consider carefully whether he is not being too flattering in thinking that a Minister could persuade two of the biggest companies in the world to produce an aircraft against their better judgment, and stake their money on it.

Photo of Mr Cranley Onslow Mr Cranley Onslow , Woking

After the events of the last week, it would be a brave man who refused to disbelieve anything. Could the right hon. Gentleman say why he thought it right to manufacture the Lockheed order by making it possible for 50 of the aircraft to be underwritten by the Government? Why did he think right in the competition which went on between the A300B and the Lockheed 10–11 to use figures in the case of the A300B which meant that the consortium was buying two engines for the same amount of money Lockheed was paying for three?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The hon. Gentleman's points are significant. The comparison we made in the case of A 300 B as compared to the Lockheed was a comparison based on orders. I beg the House to remember that, regardless of the figures given by the Chancellor of the Exchequer, we are talking here of engines for which there are already nearly 600 orders. By contrast, the Concorde, on which we in Britain have spent £250 million, has still not had a single order—[Interruption.] It has options, but no orders. The problem is this-and I am sure the House will not dissent. The difficulty today is in selling, and also in selling at a profit. It is not just a matter of manufacturing hardware.

On the question of checking the contract, it was not the contract that was wrong. What was wrong was the estimate made by the company of the cost of developing the engine. This was a commercial deal. The price was fixed by competition. It was not Lockheed squeezing Rolls. It was General Electric and Pratt & Whitney, fat on their defence contracts, which squeezed Rolls. The Government did not have the expertise to check the figures of the most experienced air engine company in Britain. Any delay would have killed the contract. The Rolls board had accepted it. The Government by having a fixed price investment were similarly deliberately putting a squeeze to see that the company assumed its responsibility for its own decision.

Photo of Sir Robert Cary Sir Robert Cary , Manchester, Withington

Was it not absolutely fatal for the whole of the contract that Rolls-Royce accepted it on a fixed contract basis?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

As I have said, it was not the contract that was wrong; it was the estimating that was defective. In 1968 one could understand Rolls-Royce being in difficulties in getting its figures right, but if The Times is to be believed on 21st July last year, two and a half years later, after the election, Sir Denning Pearson was assuring his shareholders that he had the resources to carry this through. Therefore, there is no question of his having come to me for further launching aid for this engine during the two and a half years following the contract when he might, it is argued, have had second thoughts.

The truth is that I did have anxieties about Rolls-Royce subsequently—not on the RB211, but on difficulties with the Spey, problems with the Olympus, the RB199 and the fear of general overloading. I asked the I.R.C. to look into the matter. The I.R.C. came back with a report that indicated manifest financial accountancy weakness. I discussed the matter with I.R.C. and they put Lord Beeching and Mr. Morrow on the board. This report was available to the incoming Government in June.

This matter bears very much on credit. Twelve months ago Lockheed nearly went bankrupt. Everybody knows it. The Galaxy, or C5A, had escalated; there were reports in February that Lockheed was on the point of bankruptcy, themselves victims of fixed price contracts. Everyone squeezes everyone else in this business. What happened then? I had an immediate message from Dan Haughton saying that if I wanted any further information about the position he would immediately make it available to me. I was told everything with total frankness by the Americans when they were in trouble. Mr. Haughton knew that if the Lockheed 10–11 collapsed Rolls-Royce would go with it. When I was in Washington in April I visited Mr. Packard in the Pentagon and discussed the problem of Lockheed with him then. He, too, was totally frank. I went to Burbank and discussed the matter with Mr. Haughton and he was totally frank. I come back to the different treatment meted out to Lockheed by this Government when they were faced with a similar situation.

Photo of Mr Jock Bruce-Gardyne Mr Jock Bruce-Gardyne , South Angus

The right hon. Gentleman referred to the I.R.C. and, because of his anxieties, the appointment of Lord Beeching to the board. No doubt the right hon. Gentleman noticed a statement in yesterday's Sunday Times that his own Department was seriously concerned about the state of Rolls at the beginning of 1969, to such an extent that it wished to engineer what it described as "a palace revolution". That failed and they then referred the problem to the right hon. Gentleman, after which, according to the civil servant quoted in the Sunday Times, there was a deathly hush. Will the right hon. Gentleman comment on that report?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I made the great mistake of not seeing the Sunday Times over the weekend. The story is totally untrue. I wish to put on record that I have every confidence in all the officials who advised me throughout this period, though I accept full responsibility. I will go further and say that I had confidence in Sir Denning Pearson and Sir David Huddie who carried the most appalling burden of responsibility in landing this huge export order. Neither the newspapers nor the hon. Gentleman, who is a very fair man, should seek now to try to drive a dividing line between me and those who advised me at that time. That story is totally without foundation. I put I.R.C. in and discussed the I.R.C.'s report with Sir Denning Pearson as soon as it was available.

We come to the handling of this issue by the present Government. They too read the quotation from Sir Denning Pearson in July, after the election, which was reassuring. It was not until August that the figures came to the Department, and no doubt they caused alarm. Unfortunately, there have been three Ministers in charge of the aircraft industry since the election. There was the Minister who is now leading the Common Market negotiations, then the present Secretary of State for Trade and Industry, and now the right hon. Member for Gloucestershire, South (Mr. Corfield). heading a new Department. The I.R.C. has been abolished. There have been a number of changes which may or may not have diverted Government attention from this problem. In November the right hon. Gentleman gave the figures and said that his Department was satisfied that the amount would be sufficient but that the accountants would have to look at it separately. We were invited to congratulate the Government on their handling of the matter, which we did dutifully with the help of the Whips in the Division Lobby.

We come now to the present crisis and we have a little more information from the Chancellor today. First, he confirmed what Rolls-Royce said, that no money has been paid to Rolls-Royce since the debate in November. Then we had the report to the Government of the impending trouble. There were four alternative courses open to the Government. One was the course advocated by the right hon. Member for Wolverhampton, South-West (Mr. Powell): to let Rolls-Royce go bankrupt and leave it at that. That was rejected. The second course was to put enough money in to get Rolls-Royce going to complete the RB211 contract. The third course was to tell Lockheed the position and provide some funds to ease the negotiation, still under Rolls-Royce as a private company. The fourth course was to let it go bankrupt, but to take it all over and keep the RB211.

The Government chose none of these courses. They chose to let it go bankrupt, to sell off profitable parts, and to let it go bankrupt in such a way as to escape the responsibility owing to Lockheed. One of the most serious aspects of this whole affair is the defaulting on Lockheed.

The right hon. Gentleman gave figures: £170 million for launching, £60 million for production losses, £50 million for possible penalty payments. That has to be measured against a loss of credit and a loss of orders so colossal that it may well be the case that this was not justified. But the right hon. Gentleman did not mention two other factors which I am sure were in his mind. One was the Government's desire for an exemplary bankruptcy, and the other was to save the 6d. tax cut in the Budget. When he talks about the taxpayers, I wish that he would talk about the nation, because he might be surprised to find that the nation, in their capacity as taxpayers, would not want to default upon their partners across the Atlantic.

Photo of Mr Thomas Boardman Mr Thomas Boardman , Leicester South West

Will the right hon. Gentleman recall how he was responsible for Beagle going into liquidation and leaving its creditors high and dry, creditors incurred at a time when the Labour Government were in charge?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The hon. Gentleman is totally wrong. I made it my business to see that every creditor in Beagle was paid. If the hon. Gentleman has to intervene, he ought to get his facts right.

We are now counting the consequences of the Government's action. Twenty-thousand jobs are likely to be lost in Rolls-Royce and another 20,000 outside. Does the Chancellor know how many working days will be lost by those people? As a result of the bankruptcy, 10 million working days will be lost in a year; exactly the same amount lost in industrial disputes last year.

Second, the workers lost £2,500,000 in shares. The balance of payments will be affected because B.E.A. and B.O.A.C. have still to buy aircraft with RB211 equivalents, but they will have to buy General Electric or Pratt and Whitney, and that will have to be borne on the balance of payments of this country which is not so altogether safe that we can afford to disregard it.

Photo of Mr Michael McNair-Wilson Mr Michael McNair-Wilson , Walthamstow East

If the right hon. Gentleman believes in the RB211 as much as he says, why did he not give Rolls-Royce an open-ended commitment to carry on with the engine?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I gave the reasons: because I did not believe that the Concorde type of contract was right. But somewhere between the two, the unlimited escalation and the defaulting, lies the right answer to the problem.

Photo of Mr Norman Tebbit Mr Norman Tebbit , Epping

Will the right hon. Gentleman give way?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

It is not unreadiness to give way that makes me refuse, but every time I give way I keep out a back-bench Member who wants to speak.

It is possible that Lockheed will be forced into bankruptcy. It is most unlikely that the Pentagon will go to Congress to raise money to bail out a British aero-engine manufacturer to preserve its engine in an American aircraft when there is major unemployment in the American aerospace industry; and when the British Government have allowed this default to occur. There are airlines such as Eastern Airlines, Air Canada, T.W.A. and Delta whose whole planning depends upon the 1011 with the RB211 engine. I do not know whether they are likely to go bankrupt, but I know, as does the hon. Member for Bristol, North-West (Mr. McLaren), that within 12 weeks the marketing teams from B.A.C. have to sell Concorde if it is to go ahead. We have been told by the Minister that the spring of 1971 is the key date. To the very airlines that were relying on the British Government's word on the Lockheed aicraft, the marketing men will say, "We have a marvellous supersonic British aircraft with a Rolls-Royce engine". They will get the answer, "When shall we get our 1011 with the Rolls-Royce engine, which was the contract signed in 1968".

Will the Americans now buy the Harrier with a Rolls-Royce engine for their Marine Corps against a great deal of criticism from the American aircraft industry? What about the M.R.C.A.?

The cost of this decision could be so enormous that the Chancellor, far from saving his Budget and the taxpayer, could be costing the country far more. No wonder Mr. Haughton, when he came to London, was shocked and appalled at what he heard.

Hon. Members:

So are we.

Photo of Mr Martin McLaren Mr Martin McLaren , Bristol North West

Surely the right hon. Gentleman would not wish to say anything which would make the sale of Concorde more difficult?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

But how could I want to? I want to save the RB211 in part, to save the Concorde. But if the RB211 is allowed to go down the drain, then the hon. Gentleman and I will face the consequences in the City of Bristol which might follow from the failure to sell Concorde. I am afraid that when the Prime Minister spoke to the Young Conservatives yesterday about the need to rid ourselves of our illusions, he did not quite realise whose illusions were being got rid of and by whom on this occasion. Our partners in America, and the French and the Germans, our potential partners in Europe, will all have their confidence in this country destroyed by the decision announced by the Chancellor to save his budget when he comes to it at the end of next month.

The House must have the facts. When the Bill is introduced on Thursday, Rolls-Royce must be kept together. I cite the speech of the hon. Member for the Cities of London and Westminster (Mr. Tugendhat) about non-recurring management decisions in respect of mergers. We cannot have Rolls-Royce now trying to unscramble its component parts in order to sell them off, when the company must be kept together to save the RB211. There must be a quick and honourable settlement with Lockheed. It must be an honourable settlement. That is what the House wants.

The RB211 is still the future of Rolls-Royce, whether publicly or privately owned, or owned in part by the Government and in part privately. There must be a future for this company in these advanced engines.

There must be an inquiry. We must have the facts, Rolls-Royce must be kept together. We must honour Lockheed, and the full resources of the Government must be behind the new company.

It is not without significance that the greatest industrial crisis in a single industry faced in the last 10 years has not been brought about by industrial disputes, but by management failure, commercial failure, and financial and technical failure. That should perhaps be set in the balance when we turn to other business later in the week.

I believe that the lessons of this will take a long time to learn. Neither the Concorde nor this contract was perfect. However, if we as a nation wish to be in this business and to get the high living standards coming from taking risk, we shall have to put our hands in our pockets and pay for it ourselves. It is not only Rolls-Royce which went bankrupt, but the Government's whole industrial policy, at the time that they made their announcement.

5.21 p.m.

Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield

In the latter part of his speech, the right hon. Gentleman did a great disservice to the British aerospace industry. When he talks about the possibilities of the Harrier being cancelled and so on, he will not help the situation.

I will explore the point about Lock-heeds later in my speech, but Britain as a whole owes the Rolls-Royce concern a great deal. The Merlin engine in the Hurricanes and Spitfires of 1940 saved the country in its hour of peril. However, one point must be made clear. I disagree with the right hon. Gentleman, the Leader of the Liberal Party. It is impossible to divorce historical features from the present situation. The jet engine came into being at the tail end of the war. It was invented by a Britisher, Sir Frank Whittle, and was developed by Rolls-Royce and Bristols. I wonder how many Americans today know that the jet engine was developed by Britain. The jet engine was given to the United States on a plate almost for nothing. It was a display of great generosity on the part of Britain.

Since then, technology has advanced at a tremendous pace. Projects became more involved. At one stage, it was thought right to merge Bristols and Rolls. I was always doubtful whether it was wise, for geographical and other reasons. Without such a merger, at least we would have had some form of competition and substance, assuming that one company went wrong.

The Rolls-Royce Company has always been technically biased. Going back to the days of the great Lord Hives and others, rather than being commercially biased, they were technically biased and perfectionists. A job was never finished with, and that costs a great deal of money. But that was not to the technical detriment of Rolls-Royce. In that way, it was able to build up its great symbol in the world. It brought about a high level of engineering, but at a price.

The contract with Lockheeds for the RB211 was hailed by the Labour Government, including the right hon. Gentleman and his Prime Minister, as a great victory. One would have thought that they had played a leading role in the episode. That was the impression that they gave in this House and on television. The then Prime Minister, as usual, took credit for an achievement which had not concerned him a great deal. However, following the country's experience with the escalation of costs in the TSR2 and Concorde projects, it was not very sensible, to put it mildly, to allow a company to accept a fixed-price contract where there was a Government involvement of 70 per cent.

In drawing up a budget, it is practically impossible to have a fixed price on any contract of this kind. That is where the right hon. Gentleman was wrong in comparing the Olympus engine with the RB211. Had the Olympus venture dealing with the supersonic Concorde been placed on the shoulders of a free enterprise company, the resources would not have been sufficient to get it going.

In the latter part of his speech, I thought that the right hon. Gentleman was defending his own skin more than the aerospace industry. We were told about the escalation of costs on the Concorde. The right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) did his best. He went to Paris and tried to cancel it. He was unable to do so. It was only six months ago that the right hon. Member for Bristol, South-East (Mr. Benn) was speaking with confidence about the Concorde. He did not today, though I should like to think that he still has confidence in its viability. It is a great venture which can still pay off, but there may be problems when it comes to getting it into Kennedy Airfield.

The rot in the aerospace industry started with the Labour Government's cancellation of the TSR2. Here was an aeroplane which Wing Commander Beaumont, the test pilot, flew supersonic for eight hours and reported that it had given him less trouble than the Canberra. In the February before the 1964 General Election, the Labour Party almost scared the Australians out of buying the TSR2. Instead of buying Phantoms, had we gone ahead, the Americans might have been buying the TSR2, and Rolls-Royce would have had a steady flow of production on which to base future business.

When he was Minister of Aviation, the right hon. Member for Stetchford even had the jigs and tools destroyed at a time when his Government had a majority of four, in case the Tories came back and wanted to revive the project. He said that there was insufficient space in the country to store the jigs and tools. That was at a time when there were empty hangars all over Britain. I want now to discuss the future, because we must concern ourselves with what is to happen now. My right hon. and hon. Friends dealt with this matter immediately. There was no lag. I do not see what else they could have done. Listening today to my right hon. Friend the Chancellor of the Exchequer, I do not think that I read too much into his words: he said that talks were going on with the United States. In view of that, I ask right hon. and hon. Gentlemen opposite not to "flame up" the situation. Any news on the matter coming out of this House will be relayed back to the United States. I ask the Opposition to be patient and wait and see whether anything comes of the talks now being held.

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

The House knows that the hon. Gentleman carries a great deal of weight in the Conservative Party. Would his recommendation to his leaders be that we should seek to renegotiate the RB211 contract?

Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield

If the hon. Gentleman can contain himself, I shall come to that. Government financial interest in aerospace industries over a number of years has not been very satisfying. I have in mind Short Bros. and Harland. With great respect to those who are trying to build up a viable business, they have not got very far. Though I am not a believer in nationalisation, it is the only way of dealing with the Rolls-Royce situation.

The right hon. Member for Devon, North (Mr. Thorpe) said that he did not think that there was a motor car concern in Britain who could handle Rolls-Royce and Bentley cars. I disagree with him violently.

Photo of Mr Stan Orme Mr Stan Orme , Salford West

What about Handley Page?

Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield

The hon. Gentleman should not make that sort of personal reference. I left Handley Page 14 years ago because I disagreed with Sir Frederick Handley Page.

Photo of Mr Stan Orme Mr Stan Orme , Salford West

I assure the hon. Gentleman that I was not making a personal reference. I had in mind the recent failure of Handley Page as a private concern.

Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield

Had Handley Page been taken over by the Hawker-Siddeley Group, as was suggested at one time, I believe that all would have been well.

Photo of Mr Jeremy Thorpe Mr Jeremy Thorpe , North Devon

The hon. and gallant Gentleman has just referred to me, and perhaps I might point out that I did not say that there was no British car firm capable of taking over Rolls-Royce. I said that there was unlikely to be one with sufficient capital to do so, and that the chances were that it would be bought by a foreign consortium.

Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield

I should like to go with the hon. Gentleman, but on no account must the motor car division of Rolls-Royce fall into foreign hands.

The David Brown Corporation and Rolls-Royce have had intimate discussions recently on the basis of forming a joint sales and spares organisation throughout the world. That collaboration could be advanced as they both make hand-made motor cars.

As has been said, the aero engine and heavy marine projects must be kept going. The David Brown Corporation, through Vosper's and Thorneycroft's, has orders with the Brazilian Government worth about £100 million. Foreign Powers are depending on this company delivering its products in future.

The right hon. Member for Bristol, South-East referred to the RB211. It is a remarkable engine, particularly in relation to noise. It is about half as noisy as existing jet engines, and the fuel consumption is extremely favourable. It has many features which put it far ahead of its competitors.

The Lockheed TriStar is tailored for the RB211. We must consider whether Lockheed could wait, accepting the delay which we know to be inevitable with the RB211, or could wait perhaps even longer to redesign the wings and the aeroplane to take the American engine. These matters must be weighed in the cost, but time is more important.

I was in the United States just before Christmas. Whilst talking to a director of one of the major air lines of America, he said," I am sorry that Rolls-Royce is going ahead with the RB211." I asked, "Why?" He said, "We want to get off the hook with the TriStar. We have a number on order, but we have over-capacity in seats with the jumbo jets, so we want to get out." So there are problems in America in dealing with the national air lines. It may not be helpful to the situation to think that they do not want the aeroplane as badly as they did a year or two years ago.

I hope that something will come of the talks which are going on. British industrial honour is at stake. Our exports to America are enormous and the future holds even greater prospects. I prefer to leave my right hon. Friends to do what they can on a mutual basis, Government to Government, to try to get something moving, if it fits into the Lockheed programme in time.

Photo of Mr Phillip Whitehead Mr Phillip Whitehead , Derby North

Does the hon. Gentleman agree that it would have been better for Her Majesty's Government to have gone directly to the other parties in the deal, the American Government and Lockheed, as soon as they knew the situation at Rolls-Royce on 26th January before the bankruptcy?

Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield

None of us know what discussions took place between Downing Street and Washington on the hot line. We know that the Prime Minister has had discussions with Mr. Nixon. We must leave it there. We would be well advised to leave the matters in the hands of the Government, and we may know something in a few days.

I turn now to the bonus shares held by the staff and workers. We are told that the figure may be £2 million. I should like confirmation of that figure. Something should be done for these people in any new structure by giving them long dated or reasonably dated bonds to enable them to participate in the new company, whether wholly or partly retained by the Government or sold off. I believe that workers' shares should get some priority in any new company.

Many people living on small fixed incomes in this country put their money into Rolls-Royce years ago when it was a real blue chip share in the stock market as a means of livelihood for their retirement. I hope that full consideration will be given, first, to workers and staff and then to other shareholders.

We have been told that the banks will be tolerant to the small sub-contractors I know several cases where companies are in grave difficulties. This is spread across the breadth of the country. We have not seen the end of it.

I think that my right hon. Friends have dealt with a most difficult situation in the best possible way.

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

On a point of order. I have no doubt that the hon. Gentleman has forgotten the undertaking which he gave to me. The hon. Gentleman has already said that he will leave the matter to his right hon. Friends. I wonder whether he would be kind enough to commit himself one way or the other?

Photo of Miss Betty Harvie Anderson Miss Betty Harvie Anderson , Renfrewshire East

Order. That is not a point of order for the Chair.

5.34 p.m.

Photo of Mr Walter Johnson Mr Walter Johnson , Derby South

Although a full-scale inquiry is obviously necessary into what can only be described as a national disaster, I consider that there is nothing to be gained by recrimination, blaming each other, or trying to score party points.

What we are talking about in this debate is the livelihood of thousands of highly-skilled workers who, through no fault of their own, suddenly find themselves facing unemployment. In my constituency, some 30,000 people work for Rolls-Royce. I am advised that over 50 per cent. of the staff could be affected, because they are directly involved in the research, development and production of the RB211 engine. These very highly-skilled workers, who have devoted most of their working lives to the company, ask nothing more than the right to work.

I ask the House to consider what this will mean to Derby. There will be 15,000 people without work—and this in a town where the level of unemployment is the highest for many years. The whole town is stunned and shocked by the grave news. The prospects of reemployment in other industries in Derby are very remote. Large numbers of these workers are buying their own homes on mortgage and, therefore, it will be very difficult for them to move to another part of the country because they will not be able to sell their houses. There will be no work in the town so people will not he able to buy. With my hon. Friend the Member for Derby, North (Mr. Whitehead) I have had discussions with the works committee and certain senior technical engineers. I am convinced that a further wholesale investigation should take place before Rolls-Royce and the Government completely abandon the RB211. This engine is acknowledged as the most advanced aero engine in the world. The vast and costly research and development which has gone into this engine—the rebuilding and retooling of the factory, special computers installed, and the most advanced automatic casting equipment in the world-will be wasted unless we continue with the RB211. All this must not be wasted. Nor should we allow these men with special skills to fall on the scrap heap.

I am aware that the Minister has stated that the company stands to lose £110,000 per engine, but the engineers on the ground say that this figure is exaggerated, that they are now ironing out most of the technical difficulties and that production costs will fall. As an indication of the loyalty, faith, and belief of the workers in this great project, design teams have been working in their own time to eradicate these difficulties. These men ask for no more than the opportunity to work—to use their skill to build the world's most advanced engines.

Surely it is in the interests of the nation that a full investigation should take place not just by accountants, but by specialist engineers. They should take evidence not only from top management, but from the engineers dealing with the research and production of the engine. I suggest that the works committee should be brought into the discussions. It has a big stake in this project, too.

I should now like to say a word about the Government's part in the events leading up to the disastrous news which we heard last Thursday. According to normally reliable Press reports, the Government, through the Minister, gave an undertaking to his opposite number in America that they would back the RB211. I know that this has been denied, but the fact that the Americans are adamant that the British Government would guarantee the engine surely calls for a reply from the Government on this most important point. I hope that the Minister will answer this point when he replies. Otherwise, the suspicion will remain that Rolls-Royce has been allowed to go broke so that it could opt out of the contract with Lockheeds. This would be a disgraceful state of affairs and make life very difficult indeed for British engineering exporters throughout the world. Would our word be trusted again? We should honour our obligations.

Having said that, surely the American Government and Lockheeds could be more helpful? I am advised that some of the research costs have been due to modifications by Lockheeds on the airframe. This put up the cost. With regard to the delay in delivery, with the good will and enthusiasm of the staff, which are certainly there, the period of the delay could be shortened. It would not embarrass Lockheeds, because most of the airlines which have ordered the TriStar are facing huge losses and would welcome the delay in having to pay for TriStars. Surely Lockheeds could waive the penalty clause in these circumstances.

I know that many hon. Members wish to take part in the debate, and so I will conclude by asking the Government to agree to this further investigation, to continue discussions with Lockheed, but above all to look at this grave situation not only in the light of economics and financial considerations, but please to take account of the human suffering that will arise if many thousands of workers are thrown out of work. These are men who have given a lifetime of loyal, devoted service to this company. I beg the Government not to abandon them.

5.41 p.m.

Photo of Mr Enoch Powell Mr Enoch Powell , Wolverhampton South West

There are many hon. Members whose constituencies are affected, as, indeed, is mine, directly and indirectly by the consequences of these events, who want to take part in this debate, and I have promised to be extremely brief.

The word "disaster" has been thrown about in comment in the last few days in connection with what has happened. It was used in this debate by the right hon. Member for Devon, North (Mr. Thorpe). I believe that the use of that term, and that whole approach to what has happened, does a great disservice. The relevant resources exist today exactly as they existed a week ago, or, for that matter, months ago. The physical productive assets are there; and, of course, what is much more important, in fact what is decisively important, the men, with their experience, their skill, and their design ability, are there today as they were before. I associate myself with the hon. Member for Derby, South (Mr. Walter Johnson) in saying that what we ought to be debating this afternoon is not the past but the future.

The practical question is: by what method we are to seek best to utilise those resources? What method are we to use? We know what method is to be applied in the case of all those assets which are not within the ambit of the Government's proposed legislation. Those assets will be bid for by those who believe that they have the enterprise, the managerial ability and the backing to make them profitable, and this will happen relieved from the incubus of that one disastrous train of events which led to the Receiver being appointed last week.

For that side of this great undertaking there is a fresh start; but a different method is proposed in regard to the assets within the scope of the Government's legislation. There it is not to be private enterprise but the State itself which will bid to become the owner of the assets. Indeed, the State proposes to see to it that no one else is allowed to have a chance: no one else is to bid.

It appears to me that all the reasons which have been urged for the application of a different method in the case of the aero and other engine assets from what is going to be applied to the rest of the assets do not bear examination.

It is said that there are air forces and air lines throughout the world that are looking to the products of Rolls-Royce, and which are dependent on them, as to some extent, we in this country are. In that case, if there is such a demand for the future products of this side of the Rolls-Royce undertaking, then, indeed, they ought to be profitable. There ought to be, there no doubt is, good ground for private enterprise to bid for them, to manage them and to utilise them, like the rest of the Rolls-Royce undertaking.

It might be a different question if the Government's case was that there was no demand for the potential output of the firm. The greater the demand, the more compelling the demand, the more sure it is that private enterprise could make the best use of these assets.

Photo of Mr Enoch Powell Mr Enoch Powell , Wolverhampton South West

I shall give way once. I must honour my undertaking.

Photo of Mr John Stonehouse Mr John Stonehouse , Wednesbury

Would the right hon. Gentleman welcome a successful bid for the aero-engine division of Rolls-Royce from the United States or Japan?

Photo of Mr Enoch Powell Mr Enoch Powell , Wolverhampton South West

Yes. I am not afraid to answer that question. I am not afraid to see any good money put into British industry, wherever it comes from. I have answered the right hon. Gentleman's question straight.

The second argument which is used by the Government is that there is a defence interest here, an interest bound up with the defence of this country. But is it to be the Government's case that whichever firms we depend on for products to be used in our national defence must be taken into nationalised ownership? If that is so, this argument will carry us very far indeed.

Finally, we are told by my right hon. Friends that these assets are going to be taken into national ownership and managed for the State by those who will have no personal responsibility whether they succeed or fail, until they can be restored to a profitable condition, when they may once again invite the participation of private enterprise. That is an extraordinary proposition to come from a Conservative Government—that State ownership is the natural instrument, the chosen method, for restoring unprofitable assets to profitability.

I fear that by this decision the Government have done a grave wrong. They have done a grave wrong in the first place to those who are depending upon the assets, above all the human assets, being restored as soon as possible to their most profitable application—in the interests of the nation and in the interests of the workers themselves; for I do not believe, and the evidence does not support the proposition, that national ownership and State management are the best method to do that.

I believe, however, that the Government have done even wider damage if possible than that, because, by their decision in this case, they have cast doubt and discredit generally upon that belief in the principles of capitalism and private enterprise for which the Conservative Party stands.

5.48 p.m.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

The right hon. Member for Wolverhampton, South-West (Mr. Powell) is a classicist, but I fear he would find that the scientists and technologists of ancient Rome and Greece had far less in common with him, and he far less in common with them, than he has with the mercantile capitalists in this country in the middle ages. What the right hon. Gentleman does not seem to understand is the role of private and public capital respectively in the kind of technological age in which we are living.

I speak as someone who represents a Scottish constituency in which 4,000 workers would be affected were there to be wide-scale redundancies as a result of this crisis, and in the context of having 62,000 unemployed men and women in the west of Scotland already, a 9 per cent. rate of employment, and the fact that redundancies on any considerable scale—indeed, on any scale—are extremely serious. It is against that human background that I want to set my speech.

There are occasions in this House when we are conscious of a national feeling about an issue as well as party considerations and party differences. This is one issue on which there are certain national feelings, certainly in so far as they are expressed by the trade unionists whom some of us have met over the last two or three days, about what should be done in this situation.

I am talking now about the present and the future and not about the past. If we talk about the present and future and what people want to see done and what the workers in Rolls-Royce want to see the Government do, not only for them but for the country, there is a real identity of interest between both sides of the House and people outside. It is on that that we should concentrate our attention.

What is clear first of all is that they are all concerned, and we are all con- cerned, about the human effects of this in terms of unemployment and the immediate consequences of these terrible events. Second, we are concerned, I believe, about the longer-term economic effects, because what seems very clear is that, when not only a major British industry but one which occupies such a position of symbolic importance in the British nation as Rolls-Royce collapses, the consequences as they spread through the rest of the economy cannot be underestimated.

I do not know—and neither can the Chancellor know—how many firms in Britain today are postponing their investment decisions for another three or six months. I do not know—neither can he know—just how much we are likely to see further decline in employment, investment and economic activity spinning off from the events of last week. What I am certain of is that whatever the Chancellor was planning as his Budget judgment and strategy will now have to be rethought as a direct consequence of last week's events and the events which we are living through today. So this, of course, is of tremendous national concern.

Surely also of national and not of party concern—this is what the right hon. Member for Wolverhampton, South-West seemed not to understand in talking about the way in which private capital could keep in being the employment and skills of the workers affected by RollsRoyce—is that Rolls-Royce and the British aero-engine industry is infinitely more than the simple sum of its parts. It is not just the workers in the industry or the assets employed in the industry which are important: it is the concentration of skills, technologies, scientists and craftsmen in an industry which has led the world and has been a leading exponent of modern technology not only in Britain but in the world. That is of national concern.

It is of national concern not merely that we keep certain parts of the industry going. It is of national concern, and of concern to the Chancellor, who is most concerned, rightly, with the taxpayer, that we look to the future of the British taxpayer. We must think not only of the Chancellor and his Budget and how much he will be able to give away in March: we must think of the long-term future of the British economy. In terms of the long-term future of the British taxpayer, what matters is that this centre of technology, of advance, of all that we can hope for as we move forward into this scientific future, is kept as an integral unit in which it can operate to maximum efficiency and advantage to the country.

These, therefore, are the three national interests with which we are concerned. We should now consider what the Government, in our view and that of the shop stewards of the industry, should do in this situation. First, it is clear, and emerges as a very strong view from the shop stewards of Rolls-Royce, that the first priority is that the Government must leave absolutely no effort unspared to secure a successful renegotiation of the RB211 contract.

We know that the Government are in negotiation, and I know that the hon. Member for Macclesfield (Sir A. V. Harvey) said, "Let us leave it to the Government for a few days: let us not talk too much about this." But we must talk a little about it, so as to make it clear to the Government that the feeling of the House and the nation and the workers in the industry is that the Government's efforts must lead to a successful renegotiation of the contract. Unless the RB211 can be preserved, it will be inevitable—technologically inevitable, not just economically inevitable—that many of the skills and expertise and the concentration of excellence which is Rolls-Royce will have to be dispersed.

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

In fairness to the hon. Member for Macclesfield (Sir A. V. Harvey), he said that he would recommend to his Government the continuation of the RB211. My right hon. Friend should know that.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

Yes, I heard the hon. Gentleman say that, but I also heard him say, "Let us not press this too hard; let us trust the Government to negotiate." I am prepared to accept that we should allow a little time for this, because, obviously, these negotiations must be extremely delicate, and we cannot question in advance. But we should go a little further than the hon. Gentleman was ready to go, and ask the Government to put every ounce of effort and skill in negotiation into ensuring that they are successful. They should be aware that this is the feeling of the House.

But, of course, if the RB211 is secured, we are then talking in a very different context, because the unemployment effects would be marginal. They would not be the kind of effects which the Press and many people have been taking for granted in the last two or three days. I would say to the Minister and the Chancellor that, in so far as some of us have been able to discuss this with the workers in the industry, we have found that not one worker in Rolls-Royce at this moment is prepared to accept that any redundancy is necessary. If the RB211 is secured and if, on the basis of that, Rolls-Royce can look forward to a successful future, we need not talk in terms of the tragic consequences of redundancy. It is that situation which we must seek to avoid.

I am not prepared to accept that redundancy is inevitable, because I believe that it is possible for the Government, given the background of the present situation, and the factors affecting the American Government and Lockheeds which we have heard about today, to renegotiate successfully the RB211 contract. That must be the priority.

Photo of Mr John Nott Mr John Nott , St Ives

Does the right hon. Lady think that her very understandable desires in this respect would be helpful in the renegotiation of the contract on a successful basis by the Government? The Government must not go into the renegotiation, surely, with the House telling the other party to the negotiation that, at all costs, the Government must succeed. That is not the way to conduct negotiations.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

Of course this kind of situation is always very difficult, and I recognise the difficulties from the Government's point of view. If, of course, they had a House of Commons which said, "We do not care whether you successfully renegotiate the RB211 or not," they could then hold a hand of strength and say that, since no one cared, they could negotiate successfully. But in justice to the workers of Rolls-Royce and the company's interests and the country as a whole, we cannot fairly take that attitude. We must say to them, "Of course you must do the negotiations, but please know that the country is hoping for and willing you to be successful in those negotiations."

I do not think that makes it very difficult for the Government. Indeed, I should have thought it strengthened their hand. But, having said that there is this tremendous united national concern, we then come to a point at which party considerations affect the issue. In my view, it is not so much that our party considerations affect it but that the Government's party dogmas affect the situation. If we are considering the real technological need to keep the skills of this industry together, let us get the matter into perspective. This is an industry in which on average the ratio of staff—that is, scientists, technicians, draughtsmen and supervisors—to productive workers is of the order of three to one, and I doubt whether there is any other industry in the country in which the ratio is anything like as high. We are, therefore, considering this high degree of concentration of skill.

If the Government say, "We do not want to keep this concentration of skills together; we are only concerned with those parts which we regard as essential to our defence interests and our obligations to people abroad", we are bound to end up with a decision being reached, which is expressed in this very open-ended Bill which we have seen for the first time this afternoon, to nationalise those parts which the Government see as essential to be nationalised and to leave to private enterprise some of the identifiable and most profitable sectors of the industry.

I say to right hon. Gentlemen opposite that they are bound to reach that conclusion because they take the wrong starting point. The starting point, while it should include British defence interests and obligations abroad, should essentially be that of how we can best keep for the future of Britain this spearhead of technological advance which is represented by Rolls-Royce. If they take that starting-point, there is no question that they should take into public ownership all the assets of Rolls-Royce. Nor should they consider the earliest possible moment at which they can hive off the profitable bits. The trouble about right hon. Gentlemen opposite is that in their anxiety to determine what are British interests they always make their determination in the interests of tomorrow and not of the day after tomorrow. They always determine this question in the short term and not in the long term.

While the Government are coming to the view that public ownership is necessary and in the public interest, we are bound to quarrel with them on their definition of how far public interest takes us. We are bound to say that in the public interest, in the cause of ensuring the best possible future in the aeroengine industry and the aero space industry, we believe that they are wrong in their limitation of the areas of Rolls-Royce which they want to transfer to public ownership. I doubt very much whether, as they proceed with the process of public ownership, they will find that it is as easy as they think to separate the little bits off to be sold back to private enterprise.

The logic of the situation is surely this. If we are dealing with a highly competitive international industry, if we are dealing with a situation in which we have to develop in order to stay in business, we have to take into account all our national resources. Where do we find them? Many of them are found in the universities. Others are in technological institutions and in Government establishments concerned with R and D. The logic of nationalisation will drive the Government into such a degree of integration that we might as well not discuss the possibility of future hiving off because it will not be a practicable possibility, nor will it be desirable in the national interest.

I say to the Government: Accept that in the efforts to renegotiate the RB211 engine you have behind you all the good will of all the industry of Rolls-Royce. You have the good will of the trade unions and those of us on this side of the House. But, equally, you should accept that on the politics of the public ownership proposals we shall be bound to quarrel with you.

6.5 p.m.

Photo of Major Sir Henry D'Avigdor-Goldsmid Major Sir Henry D'Avigdor-Goldsmid , Walsall South

I hope the right hon. Lady the Member for Lanark (Mrs. Hart) will take it as no discourtesy if in the interests of other hon. Members who wish to speak in this debate I do not follow her in her remarks. Not that I was not as intensely interested in them as any hon. Member with a direct constituency interest. I think I can say, like my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), that I certainly have an indirect constituency interest, although I appreciate that the problem is centred in other constituencies.

We are discussing a tragedy. A curious assumption that I have noted throughout the debate is that the Rolls-Royce company was apparently surprised when it made this shocking discovery about the costs of the RB211 agreement into which it entered. In fact, the Rolls-Royce company has not been in profitability since 1961. My reading of the Rolls-Royce accounts is that 1961 was the year in which it started capitalising its R and D expenditure.

May I draw an analogy? If one sets up a barrow and sells £ notes at 19s. 6d., the chances are that one does a very good business so long as one's capital lasts. If, at the same time, one puts a special credit to research and development amounting to 2s. for every £ note sold, one seems to be making a huge profit, but the problem arises when one reaches the end of one's capital. This is the end of the road which Rolls-Royce has now reached. It started on that road in 1961.

It was a little like the story of the emperor's new clothes. Hon. Members will remember that the emperor's favourite tailor said to him, "I have here a material of such splendid gossamer quality that it is only perceptible to people with the finest sentiments. Only people with these special attributes can seen the beauty of this marvellous material with which I shall make you a suit" The emperor, of course, could not see the material but he was pleased. All his courtiers, naturally, were also very pleased. They all said what a wonderful suit it was. They did not like to admit to the tailor that they did not have the special qualities which enabled them to see the material. Then a little boy said, "The emperor has no clothes on."

This is the position of that great company; the emperor has no clothes on. The trouble with this company is that it has been carried entirely by Government orders. I doubt whether it has been commercially profitable since 1961. Government orders have paid its overheads to a great extent. When that famous deal in 1968 with Lockheed was negotiated, no one really knew whether Rolls-Royce was really on its own or whether the Government were behind it. There was, so to speak, what we call a grey area. I do not think that this contract that Lockheed insisted upon could really have been entered into by Lockheed on entirely commercial considerations. I believe the company insisted on it because it felt that at the last moment the Government would come to the rescue. I am sure, too, that Rolls-Royce would not have accepted this extremely arduous contract if it had not also had the feeling that at the end of the road the Government would bail it out. It is because there was this element of doubt between the company and its clients that we have reached this impasse.

I thought that the right hon. Lady the Member for Lanark did herself less than justice in suggesting that a renegotiation would have been easy. From what we have heard I should have thought that over the last six months desperate attempts had been made by Rolls-Royce without any success whatsoever because the Lockheed company thought that it was on to a good thing. It thought that as a last resort Her Majesty's Government would bail Rolls-Royce out, and we see perhaps the change of emphasis that we have had with a change of Government.

The interesting thing to me is that just at the moment when with the nationalised industries we are insisting on a tremendously commercial point of view being taken by them and their chairmen we are insisting that in the private sector the same principles are not being applied. I say that despite the frowns of my right hon. Friend the Member for Wolverhampton, South-West. I cannot help asking myself what, in fact, the directors of Rolls-Royce were doing.

The right hon. Gentleman the Leader of the Liberal Party read a paper from his friend Eric Lubbock——

Sir H. d'Avigdor Goldsmid:

There is no discredit——

Photo of Mr Jeremy Thorpe Mr Jeremy Thorpe , North Devon

This is an unjustified assertion, and I do not think that the hon. Gentleman should press it.

Sir H. d'Avigdor Goldsmid:

I do not wish to say anything discreditable about Eric Lubbock or about his father. His father was deputy chairman, and knew his business: when he was deputy chairman, Rolls-Royce was earning profits. As time has gone on I do not think that the independent directors of Rolls-Royce have served the company or the country very well. They should have been in the position of the small boy who pointed out that the emperor had no clothes on. That was what they were appointed to the board for. We had to wait until November, when Lord Coles assumed the role of the small boy and asked where the emperor's clothes were.

Marx said that history repeats itself, the first time as a tragedy and the second time as a farce. In this case we have gone the opposite way round. We had the farce seven years ago, when Rolls Razor collapsed, and the reason which led to the Rolls Razor collapse was smaller but very similar to that which led to the Rolls-Royce collapse—an inability to find out the facts. I quite agree that in the Rolls Razor case a number of gentlemen enriched themselves very heavily and none has enriched himself over the fall of Rolls-Royce.

So we have this tragedy, which has certainly hit almost everyone in the country. It was a company of national prestige, perhaps the single most important company by name in the country—and it has gone. I do not think that there is any question of an easy renegotiation. The attempt has been made, and has failed. So we have a tragedy which hits those directly employed in the business, those indirectly getting their living from the supplying businesses, and investors all over the country—and among investors I include all the pensions funds, which are very much hit, and those who ben-fit from pensions funds are hit as well.

This is the tragedy we contemplate, and it is important that we should try to draw the lesson from it. That is why I have intervened, and not just in order to take up time that would otherwise be available to hon. Members who wish to talk of their constituents.

6.15 p.m.

Photo of Mr Stan Orme Mr Stan Orme , Salford West

I speak not because I have a direct constituency interest but because this is a matter which affects the whole House. It also affects many skilled members of my trade union; draughtsmen and engineers who face redundancy. It is only right that their views should be put to the House.

The right hon. Gentleman the Member for Wolverhampton, South-West (Mr. Powell) demolished the Conservative argument that one should take an industry into public control, get it back on its feet again and then sell it back to the private sector. He advocated, in effect, that this concern should continue to remain in the private sector and be resold, as it were, to interested parties, whether foreign or British. It is rather strange that he should make this suggestion when private enterprise has failed as dismally as has Rolls-Royce. What confidence can we have that private enterprise would be better under a different management?

Photo of Mr Enoch Powell Mr Enoch Powell , Wolverhampton South West

The disciplines of private enterprise have ultimately been applied even to this firm in a way that they cannot be to anything which the State owns.

Photo of Mr Stan Orme Mr Stan Orme , Salford West

The right hon. Gentleman probably knows more about the disciplines of private enterprise and the private sector than I do. All I can say is that the disciplines he talks of do not seem to have served Rolls-Royce particularly well.

The Chancellor of the Exchequer said that a major error of commercial judgment had been made by Rolls-Royce and that because of it the Government were now forced to take the aerospace section of Rolls-Royce into public ownership. I want to say, in answer to what the Prime Minister said over the weekend, that if it is in the national interest that sections of Rolls-Royce having to do with defence, and the like, should be taken into public control, it is also in the public interest that the profitable side, from which the nation as a whole would benefit, should also be taken into public control.

The Rolls-Royce workers want to see this undertaking kept as a whole. We on this side cannot see the logic of taking over only the aerospace side, which is, at the moment, sustained in the main by public money. We want to know why the whole concern cannot come under public control.

The problems facing skilled workers thrown out of work have been eloquently described. We all know what the problems of industrial redundancy are. We have faced them, as have other hon. Members in the past. But here we have not just a question of redundancy but a question of the loss of skills to the nation if these units are broken up. These men are skilled engineers, technicians, draughtsmen, and people on the shop floor who have served apprenticeships. Hon. Members must know that if they are driven out of this work their skills may be lost to the nation for all time—and they are skills that we as a nation can ill afford to lose.

It is on skills like theirs that our wealth is now founded. Our wealth is founded on our exports and on our ability to manufacture, and for that reason we must maintain this labour force. That is why it is so essential that the RB211 project should continue. We must have in mind not only its possibilities and prospects but the exchange values it will bring to us, and the fact that it will underwrite the maintenance of an aerospace industry which will disappear if the RB211 is dissipated in its entirety.

The Chancellor of the Exchequer gave no details of the form which public control will take. No doubt we shall hear more about this on Thursday. As to the limited company, there will be no parliamentary accountability. The taxpayer, who will be directly involved, will not be able to ascertain what is happening or to question the control and conduct of the industry.

We are introducing a form of public ownership in a sector where it has not previously existed. It would appear that there is now only a small section of the Labour Party which is not convinced that public ownership of this vital industry is essential.

There should be accountability. The House will want to discuss the questions of management, the control of the industry in the future and the type of enterprise which is to be created by Rolls-Royce. We are entitled to express a point of view. The workers in the industry are very concerned about these matters.

The workers do not want to contemplate redundancies, and we should not contemplate them if at all possible. However, if there is redundancy, will the arrangements for redundancy stand as they would with any ordinary firm, or will the workers here suffer as the Handley Page workers did when that firm went bankrupt? I had dealings with the Handley Page workers over a number of months arising out of redundancies there and I know that the matter was never satisfactorily resolved.

What has happened to Rolls-Royce and the problems it will face in future questions, as the right hon. Member for Wolverhampton, South-West so honestly said, the viability of private enterprise to resolve our problems in key industries such as this one in our present-day economy. Some of us think that private enterprise does not have such an ability, and what has happened to Rolls-Royce proves that we are right.

6.23 p.m.

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

In view of the shortage of time I am sure that the hon. Member for Salford, West (Mr. Orme) will forgive me if I do not follow him in detail. I am largely in agreement—I never thought I would be—with much of what he said when dealing with the difficulties of those employed by Rolls-Royce directly or indirectly if the firm must substantially contract its labour force.

I realise what a difficult period my right hon. Friend the Minister for Aviation Supply must have come through in the past few months leading up to this decision. Unlike in the case put by the right hon. Lady the Member for Lanark (Mrs. Hart), it is obvious that the contract for the RB211 would have bankrupted Rolls-Royce if Rolls-Royce had been left to continue it. It is also obvious that the private interests could not find the money required to keep the company in business.

If the Government had not stepped in and decided to nationalise, the resulting unemployment would have been much severer than even that which has been contemplated by the House today. This event has been called a national disaster. In spite of what my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) said, I do not believe that the description "national disaster" overstates the matter.

I urge my right hon. Friend the Minister to use his best endeavours to renegotiate the contract with Lockheed, for the following reasons. I believe that this engine is one of the most advanced engines available anywhere in the world. If Britain is to remain in the aerospace industry, she must be able to design and produce advanced technology jet engines. These are engines with a high ratio bypass which are quiet—they are much quieter than the existing series of engines—and produce the tremendous power required in the airbuses of the future, the planes which will carry the passengers of the later 1970s, 1980s and 1990s.

Much has been said about those directly affected in Derby and elsewhere. I want to deal with the position of those employed by sub-contractors such as Joseph Lucas and by Short Brothers and Harland in my constituency. At Short Brothers about 1,500 men are working on the pods for the RB211 engines. The House can imagine the dismay with which these men heard this news. This is the bread and butter of Short Brothers. The firm has other work on Skyvans and missiles which is successful, but if this contract goes it is not only a question of the jobs of these 1,500 men rising to an estimated 2,000; it may involve the whole company with a force of 6,000 or 7,000 men, plus 800 men employed directly in a small Rolls-Royce subsidiary factory in Dundonald in the constituency of my hon. Friend the Member for Down, North (Mr. Kilfedder).

In view of the news which has reached us from Northern Ireland over the past weekend, it is unnecessary for me to stress the seriousness of the unsettled conditions and the civil disorder in the streets there. One shudders to think what would happen if a further 6,000 or 7,000 men were released to such conditions. Idle hands would soon turn to dangerous and perhaps evil ways in today's conditions in Northern Ireland; because there is no hope that these men could be otherwise employed in the Province.

The Minister said that the Government would make every effort to redeploy the men involved in other industries; but there is no similar industry in Northern Ireland. These men would have to leave the Province—as many of them are family men, they would not find this easy—or would have to remain unemployed in Northern Ireland for a considerable time, if not for the rest of their working lives.

Therefore, in the interests of Rolls-Royce itself, of the subsidiary factories, and of the political state of the United Kingdom as a whole, this contract must be kept in being.

It is also in the best interests of Lockheed to keep this contract going, because Lockheed cannot get another engine from Pratt and Whitney without incurring considerable extra expense. Not only would the firm have to pay much more for the engine; it would also have to redesign the plane. Those who know anything about the industry know what is involved in redesigning a plane. Why should Lockheed take such action for the sake of £120,000 an engine, which for 540 engines comes to a total of between £100 million and £150 million? Why should not Lockheed add a small percentage to the total price of the plane and keep the contract in being?

Why should not the British Government get together with the American Government, because we know of Lockheed's financial difficulty, and renegotiate the contract so that Britain can remain in the aerospace industry, so that this engine can be preserved, and so that skills to which tribute has been paid by hon. Members on both sides can be retained in Britain?

Much of the argument advanced by my right hon. Friend the Member for Wolverhampton, South-West missed the point. The sums and the risk involved in the aerospace industry are of such an order that it is impossible to expect the private sector to bear them. There are both technological and defence reasons for keeping Britain in this industry. The spin-off alone is worth a great deal to this country.

The House was surprised at the research which has been done on carbon fibres, to mention just one aspect of research. Who, buying anything from a transistor radio to a car body, is not concerned with strong, light indestructible materials, much of the primary research on which is done in the aircraft industry in its work on the advanced materials of the future?

For that additional reason, I ask my right hon. Friend to use his very best efforts with Lockheed and with the United States Government so that the contract may be preserved.

6.30 p.m.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

This is a short debate. I have in the circumstances tried to cut my own time to the minimum, and I shall do my best to deal with as many of the points raised as is possible in the time.

First, I take up the speech of my hon. Friend the Member for Belfast, East (Mr. McMaster). I wish to make clear, because some doubt was cast upon it by the hon. Member for Derby, South (Mr. Walter Johnson), the Government's position in regard to the RB211. We have said that we shall explore its future with the Receiver with a view to making it possible to continue if an acceptable contract can be negotiated, if an acceptable offer to negotiate such a contract is forthcoming. There can be no guarantee such as the hon. Member for Derby, South mentioned.

It is on that question and on the future of the RB211 that the question of redundancies and the size of the redundancy problem rests. For that reason, I cannot give the House a clear idea of the magnitude of the problem. I can only say at the moment that the redundancy payments under the national redundancy payments fund are safeguarded, but it must be a day or two at any rate before this aspect becomes clearer.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

May I put to the right hon. Gentleman one question about redundancy payments which has been raised with me by the shop stewards at Bristol? They said that the Receiver had moved them from their full working rate down to a basic rate, and, if they work at that rate for six weeks and are then made redundant, some of them, they say, will lose £300 because their redundancy payment would be related to their last six weeks at work.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

I must have notice of that. I have seen the Receiver for only about five minutes. I shall be seeing him again tomorrow, and I shall try to clarify that point.

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

It is more important to keep the RB211.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

I come now to some of the more general points, and I shall try to put some of them into rather more accurate perspective. Understandably, much has been said about the prestige of Rolls-Royce. The right hon. Gentleman the Leader of the Liberal Party equated the name with engineering excellence, and both he and the right hon. Gentleman the Member for Bristol, South-East (Mr. Benn) held the preservation of the RB211 to be essential to our engineering and commercial credibility. The point was made, too, that this project was thought to be a last chance for Britain to remain in the aero-engine league.

I believe both those propositions to be questionable. In the first place, I suggest that the House should address itself to the alternative spectacle of a company constantly coming back to Parliament for more money, money measured in many tens of millions of £s, whether to meet faulty estimates of technical problems and the time and cost to be taken to overcome them, or whether to meet merely faulty financial estimates of a more general nature. Would that create confidence in the company abroad, or even at home?

Again understandably, the right hon. Gentleman the Member for Bristol, South-East draws upon his experience as the Minister in charge of my Department, and I refer in particular to his views upon the reactions of our European partners. Well before the General Election, and with a fraction of the facilities which were available to him then and are available to me now, I was aware that, far from our French partners with the Olympus and our German partners with the M.R.C.A. and our other projects regarding the RB211 as in any way essential to the credibility of Rolls-Royce, they took a contrary view. In fact, their reaction was very different.

Constantly, I have been told of their fear that Rolls-Royce's preoccupation with this engine was diverting resources which they felt were badly needed on the projects in which they are more closely interested, such as the Olympus, the Adour, the BS360, the RB199 and the M45.

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

Is that not a natural conclusion for people who have a vested interest in a particular project or engine?

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

Yes, that is so, but it is a reflection of their view that there were defects in those engines which were delaying their delivery but which could have been solved more quickly had it not been for the diversion of the energies of Rolls-Royce to which I have referred. From what I have gleaned from the preliminary reports which are now beginning to come back from Germany and France, I believe that that view remains the same today. Certainly, in Europe the RB211 was coming to be regarded not as a great advantage to Rolls-Royce but as a project which was gradually sapping both its resources and its energies.

Let us put into perspective also the claim that there was an enormous potential for this engine and that the loss of exports, as one hon. Gentleman put it, would far outweigh the cost of the massive rescue operation which would now be required to continue with that engine on the present contract. What are those prospects?

At the outset, let us have right on the record the actual number of orders for the aircraft. At the latest count, there are 110 firm orders, with a further 68 which are not firm, including the whole of the 50 Air Holdings order, which is little more than a bookkeeping transaction, and a somewhat bogus one at that.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

It is certainly not an airline order. What is the lesson of the DC10, the Lockheed 1011's nearest rival, which is doing so much better and selling to airlines so much better than is the 1011 itself? Clearly, what is attracting airlines to the DC10 as opposed to the 1011 is, in the first place, the availability now of a stretched version dependent on more powerful engines which are in production. Even if one were rash enough to discount the financial cost of going on with this engine and developing a more advanced version, whether it be the —61 or the —50, we must ask ourselves what can now be the prospect of such an engine being available in time to compete with versions of the CF6 and JT9 which are already in production and which to all intents and purposes equal, if they do not exceed, the estimated performance of the RB211? [Interruption.] I am replying to the idea that there is an enormous potential market for this engine. I do not believe that there is now.

Nevertheless, I believe, as my hon. Friend the Member for Belfast, East pointed out, that it may still be very much in Lockheed's interest to continue with it, for the very good reason that these engines are not readily interchangeable and, as my hon. Friend said, they require a quite major redesign of the aircraft in order to change from an RB211 to a JT9 or CF6, as the case may be. But it is not my idea, even if it be anyone else's, of retaining our position in the big engine league to develop at this enormous cost an engine which is to a large extent behind engines of equivalent power and performance.

We have had the suggestion that in some way the British Government are reneging on their obligations. The right hon Gentleman the Leader of the Liberal Party said that Mr. Packard has been under the impression that the British Government would bail out the Lockheed contract and that was why Mr. Haughton had accepted the $200 million loss on the C5A.

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

Would the right hon. Gentleman say whether an attempt was made by the Government to renegotiate the contract before his having to call in the Receiver, and, if so, was this unsuccessful, and why is he hoping for success afterwards when the Government position is so much weaker?

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

The Government were never, as the right hon. Gentleman has made plain, a party to the contract. It was for Rolls-Royce to negotiate. All I can say to the hon. Gentleman is that I put to Mr. Haughton a proposal as to what he might be able to offer and he said that he was not in a position to make any offer at all because of his own finances.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

Three days ago, or the day before the Receiver was put in.

Hon. Members:

Sit down.

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

Was the threat of a receivership made?

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

There was no threat of a receivership. The hon. Gentleman knows, or ought to know, as well as I do that the company was in the position, had it gone on trading that it would be incurring grave penalties under Section 332 of the Companies Act.

The view of the Leader of the Liberal Party is a complete distortion. No one who has followed fairly roughly, as I have done over the last year or more, the proceedings in the United States Congress on this contract can have any doubt at all that the question of whether Mr. Haughton was in a position to refuse this settlement of $200 million had anything whatever to do with his ability to complete the Lockheed-Rolls-Royce contract.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

Mrs. Hartrose——

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

Mrs. Hartrose——

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Order. If the right hon. Gentleman does not give way the right hon. Lady must not persist.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

I have only 10 minutes; I thought it was a courtesy to the House to take only 20 minutes.

The right hon. Member for Bristol, South-East mentioned that Lockheed was nearly bankrupt 12 months ago, or whatever it was. Does he or the House really think that in those circumstances the United States Government, against the background of all that was going on in Congress at the time, would have bought Lockheed out to save Rolls-Royce? He said that Lockheed was relying on the British Government's word. Whose word? His word? If he gave that word, why did he never tell the House? It the Government in effect, or in his opinion, adopted the position of a guarantor, why was that not made plain and clear in public and to the House?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

This is an important point. I said that when Lockheed was faced with possible bankruptcy there was total frankness on its part in dealing with me, and I contrasted it with what I thought to be the failure of frankness on the part of the Government in relation to Lockheed and the Americans. I never said that we were more than an investor to the extent of the £47 million, but that Lockheed relied on the word of Rolls-Royce.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

I took it down, and we shall see it in HARSARD, the right hon. Gentleman's words were, "the British Government's word". It could only have been his own. In other parts of his speech he was at pains to emphasise, as he has just done, that all the drive and initiative came from the company. Yet he goes on to talk of the possibility of more launching aid. The very basis of launching aid is that a large part, before this particular contract never less than 50 per cent., of the risk falls upon the company, and this is the basis of its incentive. In this contract in the early stages it was only 30 per cent. If we go on with this enormous escalation it becomes 100 per cent. underwriting by the Government, which is a complete negation of the whole principle of launching aid.

The right hon. Gentleman went on to draw a comparison, I do not think a very close one, with Concorde. Surely the distinction here for the purposes of his argument is quite clearly that with Concorde and its engine there really is a true partnership with the French Government, a partnership in which the costs are equally shared. There was no such agreement here; the agreement with Lockheed was of a totally different nature.

Then the right hon. Gentleman went on to say that he did not believe that the Concorde type of contract was the right one to apply here, presumably for the reason that it tied the Government too tightly. He proceeded, I think probably rightly, to approach this RB211 contract from a totally different angle. He did so with what object? Surely only with the object of ensuring that the Government were not bound to a wholly indefinite and open-ended commitment and were left an opportunity, should the necessity arise, of calling a halt.

My right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) criticised us for the nationalisation element. I would only ask him, as a former Opposition spokesman on defence: can he really in his heart of hearts believe that the uncertainties that would arise by having, so to speak, a Dutch auction for the parts of this great enterprise is underwriting our defence with the surety that we on this side of the House regard as essential?

Photo of Mr Enoch Powell Mr Enoch Powell , Wolverhampton South West

Yes, without hesitation; and I regard the proposition which my right hon. Friend has just put to the House as humbug.

Hon. Members:

Oh.

Photo of Mr Frederick Corfield Mr Frederick Corfield , Gloucestershire South

If I were back in the barrack-room I would tell my right hon. Friend what I regard his views as.

I conclude by referring to the comments of the right hon. Member for Bristol, South-East on openness. I can assure him that the openness with which relations were conducted under his auspices has continued in exactly the same way. I am bound to say that I have the greatest admiration for the way in which Mr. Haughton conducted his discussions with me, being completely frank about the Lockheed situation. I was very distressed that Lockheed was not given more notice of this calamity. This was a matter, as I tried to explain to the House the other day, which arose very suddenly. Efforts were made to get

hold of Mr. Haughton by Rolls-Royce personnel but it was impossible to make an appointment with him before the appointment that had already been arranged for Tuesday of last week.

If we are to talk about openness, I would ask the right hon. Gentleman to reflect on his own conduct. We were, after all, told on 1st April, 1968, of the winning of this contract. It was 19 months later before we were told of the negotiations for launching aid to which the contract was said to be subject when he made his announcement. On making inquiries in the Department I was surprised to discover that despite the fact that the announcement was made on 1st April it was not until August that Rolls-Royce submitted the contract——

Photo of Mr Ernest Perry Mr Ernest Perry , Battersea South

Mr. Ernest G. Perryrose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That this House do now adjourn.

The House divided: Ayes 210, Noes 282.

Division No. 125.AYES[6.50 p.m.
Abse, LeoDavidson, ArthurHannan, William (G'gow, Maryhill)
Allaun, Frank (Salford, E.)Davies, Denzil (Llanelly)Hardy, Peter
Allen, ScholefieldDavies, G. Elfed (Rhondda, E.)Harper, Joseph
Archer, Peter (Rowley Regis)Davies, Ifor (Gower)Harrison, Walter (Wakefield)
Armstrong, ErnestDavis, Clinton (Hackney, C.)Hart, Rt. Hn. Judith
Ashton, JoeDeakins, EricHattersley, Roy
Atkinson, Normande Freitas, Rt Hn. Sir GeoffreyHeffer, Eric S.
Bagier, Gordon A. T.Doig, PeterHoughton, Rt. Hn. Douglas
Barnes, MichaelDormand, J. D.Huckfield, Leslie
Barnett, JoelDouglas, Dick (Stirlingshire, E,.)Hughes, Rt. Hn. Cledwyn (Anglesey)
Beaney, AlanDouglass-Mann, BruceHughes, Mark (Durham)
Benn, Rt. Hn. Anthony WedgwoodDriberg, TomHughes, Robert (Aberdeen, N.)
Bennett, James (Glasgow, Bridgeton)Duffy, A. E. P.Hughes, Roy (Newport)
Bishop, E. S.Eadie, AlexHunter, Adam
Blenkinsop, ArthurEdelman, Maurice
Booth, AlbertEdwards, Robert (Bilston)Jay, Rt. Hn. Douglas
Boyden, James (Bishop Auckland)Edwards, William (Merioneth)Jeger,Mrs.Lena(H'b'n&St.P'cras,S.)
Bradley, TomEllis, TomJenkins, Hugh (Putney)
Brown, Bob (N'c'tle-upon-Tyne,W.)English, MichaelJenkins, Rt. Hn. Roy (Stechford)
Brown, Hugh D. (G'gow, Provan)Evans, FredJohn, Brynmor
Brown, Ronald (Shoreditch & F'bury)Fernyhough, E.Johnson, James (K'ston-on-Hull, W.)
Buchan, NormanFisher,Mrs.Doris(B'ham,Ladywood)Johnson, Walter (Derby, S.)
Callaghan, Rt. Hn. JamesFitch, Alan (Wigan)Jones, Barry (Flint, E.)
Campbell, I. (Dumbartonshire, W.)Fletcher, Raymond (Ilkeston)Jones,Dan (Burnley)
Carmichael, NeilFletcher, Ted (Darlington)Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Carter, Ray (Birmingh'm, Northfield)Foot, MichaelJones, T. Alec (Rhondda, W.)
Carter-Jones, Lewis (Eccles)Ford, BenJudd, Frank
Castle, Rt. Hn. BarbaraFraser, John (Norwood)Kelly, Richard
Clark, David (Colne Valley)Freeson, ReginaldKinnock, Neil
Cocks, Michael (Bristol, S.)Gilbert, Dr. JohnLatham, Arthur
Coleman, DonaldGinsburg, DavidLawson, George
Concannon, J. D.Golding, JohnLeadbitter, Ted
Corbet, Mrs. FredaGourlay, HarryLee, Rt. Hn. Frederick
Cox, Thomas (Wandsworth, C.)Grant, George (Morpeth)Leonard, Dick
Crawshaw, RichardGrant, John D. (Islington, E.)Lestor, Miss Joan
Crosland, Rt. Hn. AnthonyGriffiths, Eddie (Brightside)Lever, Rt. Hn. Harold
Cunningham, G. (Islington, S.W.)Griffiths, Will (Exchange)Lewis, Arthur (W. Ham N.)
Dalyell, TamHamilton, James (Bothwell)Lomas, Kenneth
Darling, Rt. Hn. GeorgeHamilton, William (Fife, W.)Loughlin, Charles
Lyon, Alexander W. (York)Orbach, MauriceStallard, A. W.
Mabon, Dr. J. DicksonOrme, StanleyStewart, Rt. Hn. Michael (Fulham)
McBride, NeilOswald, ThomasStoddart, David (Swindon)
McCartney, HughOwen, Dr. David (Plymouth, Sutton)Stonehouse, Rt. Hn. John
McElhone, FrankPalmer, ArthurStrang, Gavin
Mackenzie, Gregor Pannell, Rt. Hn. CharlesSummerskill, Hn. Dr. Shirley
Mackie, JohnPavitt, LaurieSwain, Thomas
Maclennan, RobertPeart, Rt. Hn. FredTaverne, Dick
McNamara, J. KevinPendry, TomThomas,Rt.Hn.George (Cardiff,W.)
MacPherson, MalcolmPerry, Ernest G.Thomas, Jeffrey (Abertillery)
Marks, KennethPrescott, JohnThomson, Rt. Hn. G. (Dundee, E.)
Marquand, DavidPrice, J. T. (Westhoughton)Thorpe, Rt. Hn. Jeremy
Marsh, Rt. Hn.Richard Probert, ArthurTomney, Frank
Mason, Rt. Hn. RoyRankin, JohnTorney, Tom
Mayhew, ChristopherReed, D. (Sedgefieid)Tuck, Raphael
Mellish, Rt. Hn. RobertRees, Merlyn (Leeds, S.)Varley, Eric C.
Mendelson, JohnRichard, IvorWainwright, Edwin
Mikardo, IanRoberts, Rt.Hn.Goronwy(Caernarvon)Walker, Harold (Doncaster)
Millan, BruceRobertson, John (Paisley)Wallace, George
Miller, Dr. M. S.Rodgers, William (Stockton-on-Tees)Watkins, David
Milne, Edward (Blyth)Rose, Paul B.Wellbeloved, James
Molloy, WilliamRoss, Rt. Hn. William (Kilmarnock)White, James (Glasgow, Pollok)
Morgan, Elystan (Cardiganshire)Sheldon, Robert (Ashton-under-Lyne)Whitehead, Phillip
Morris, Alfred (Wythenshawe)Shore, Rt. Hn. Peter (Stepney)Whitlock, William
Morris, Charles R. (Openshaw)Short,Rt.Hn.Edward(N'c'tle-u-Tyne)Williams, Mrs. Shirley (Hitchin)
Morris, Rt. Hn. John (Aberavon)Short, Mrs. Renée (W'hampton,N.E.)Williams, W. T. (Warrington)
Moyle, RolandSilkin, Rt. Hn. John (Deptford)Wilson, Alexander (Hamilton)
Mulley, Rt. Hn. FrederickSillars, JamesWilson, Rt. Hn. Harold (Huyton)
Murray, Ronald KingSilverman, Julius
Ogden, EricSkinner, DennisTELLERS FOR THE AYES:
O'Halloran, MichaelSmall, WilliamMr. William Hamling and
O'Malley, BrianSmith, John (Lanarkshire, N.)Mr. John Pardoe.
Cram, BertSpearing, Nigel
NOES
Adley, RobertCockeram, EricGriffiths, Eldon (Bury St. Edmunds)
Alison, Michael (Barkston Ash)Cooke, RobertGrylis, Michael
Allason, James (Hemel Hempstead)Coombs, DerekGummer, Selwyn
Amery, Rt. Hn. JulianCooper, A. E.Gurden, Harold
Archer, Jeffrey (Louth)Corfield, Rt. Hn. FrederickHall, Miss Joan (Keighley)
Astor, JohnCormack, PatrickHall, John (Wycombe)
Atkins, HumphreyContain, A. P.Hall-Davis, A. C. F.
Baker, Kenneth (St. Marylebone)Crouch, DavidHamilton, Michael (Salisbury)
Baker, W. H. K. (Banff)Crowder, F. P.Hannam, John (Exeter)
Balniel, LordCurran, CharlesHarrison, Brian (Maldon)
Barber, Rt. Hn. AnthonyDalkeith, Earl ofHarrison, Col, Sir Harwood (Eye)
Batsford, BrianDavis, Rt. Hn. John (Knutsford)Harvey, Sir Arthur Vere
Bell, Ronaldd'Avigdor-Goldsmid, Sir HenryHaselhurst, Alan
Bennett, Sir Frederic (Torquay)d'Avigdor-Goldsmid, Maj.-Gen. JackHastings, Stephen
Bennett, Dr. Reginald (Gosport)Digby, Simon WingfieldHavers, Michael
Benyon, W.Dixon, PiersHawkins, Paul
Berry, Hn. AnthonyDodds-Parker, DouglasHayhoe, Barney
Bitten, JohnDouglas-Home, Rt. Hn. Sir AlecHeath, Rt. Hn. Edward
Biggs-Davison, JohnDrayson, G. B.Heseltine, Michael
Blaker, PeterDykes, HughHicks, Robert
Boardman, Tom (Leicester, S.W.)Eden, Sir JohnHiggins, Terence L.
Body, RichardElliot, Capt. Walter (Carshalton)Hiley, Joseph
Boscawen, RobertElliott, R. W. (N'c'tle-upon-Tyne,N.)Hill, James (Southampton, Test)
Bossom, Sir CliveEmery, PeterHolland, Philip
Bowden, AndrewEyre, ReginaldHolt, Miss Mary
Boyd-Carpenter, Rt. Hn. JohnFarr, JohnHordern, Peter
Braine, BernardFenner, Mrs. PeggyHornby, Richard
Bray, RonaldFidler, Michael
Brewis, JohnFinsberg, Geoffrey (Hampstead)Hornsby-smith,Rt.Hn.Dame Patricia
Brinton, Sir TaltonFisher, Nigel (Surbiton)Howe, Hn. Sir Geoffrey (Reigate)
Brocklebank-Fowler, ChristopherFletcher-Cooke, CharlesHowell, David (Guildford)
Brown, Sir Edward (Bath)Fookes, Miss JanetHowell, Ralph (Norfolk, N.)
Bruce-Gardyne, J.Foster, Sir JohnHunt, John
Bryan, PaulFowler, NormanHutchinson, Michael Clark
Buchanan-Smith, Atick(Angus,N&M)Fox, MarcusIrvine, Bryant Godman (Rye)
Buck, AntonyFry, PeterJames, David
Burden, F. A.Galbraith, Hn. T. G.Jenkin, Patrick (Woodford)
Butler, Adam (Bosworth)Gardner, EdwardJennings, J. C. (Burton)
Campbell, Rt.Hn.G.(Moray&Nairn)Gibson-Watt, DavidJessel, Toby
Carlisle, MarkGilmour, Sir John (Fife, E.)Johnson Smith, G. (E. Grinstead)
Carr, Rt. Hn. RobertGlyn, Dr. AlanJopling, Michael
Channon, PaulGoodhart, PhilipJoseph, Rt. Hn. Sir keith
Chapman, SydneyGoodhew, VictorKaberry, Sir Donald
Chataway, Rt. Hn. ChristopherGorst, JohnKellett, Mrs. Elaine
Chichester-Clark, R.Gower, RaymondKershaw, Anthony
Churchill, W. S.Grant, Anthony (Harrow, C.)Kilfedder, James
Clark, William (Surrey, E.)Gray, HamishKing, Evelyn (Dorset, S.)
Clarke, Kenneth (Rushcliffe)Green, AlanKing, Tom (Bridgwater)
Clegg, WalterGrieve, PercyKinsey, J. R.
Kirk, PeterNormanton, TomStanbrook, Ivor
Knox, DavidNott, JohnStewart-Smith, D. G. (Belper)
Lambie, DavidOnslow, CranleyStodart, Anthony (Edinburgh, W.)
Lane, DavidOppenheim, Mrs. SallyStokes, John
Legge-Bourke, Sir HarryOrr, Capt. L. P. S.Stuttaford, Dr. Tom
Le Marchant, SpencerOwen, Idris (Stockport, N.)Tapsell, Peter
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)Page, Graham (Crosby)Taylor, Sir Charles (Eastbourne)
Lloyd, Ian (P'tsm'th, Langstone)Page, John (Harrow, W.)Taylor,Edward M.(G'gow,Cathcart)
Longden, GilbertParkinson, Cecil (Enfield, W.)Taylor, Frank (Moss Side)
Loveridge, JohnPeel, JohnTaylor, Robert (Croydon, N.W.)
McAdden, Sir StephenPercival, Ian Tebbit, Norman
MacArthur, IanPeyton, Rt. Hn. JohnTemple, John M.
McCrindle, F. A.Pike, Miss MervynThatcher, Rt. Hn. Mrs. Margaret
McLaren, MartinPink, R. BonnerThomas, John Stradling (Monmouth)
Maclean, Sir FitzroyPounder, RaftonThomas, Rt. Hn. Peter (Hendon, S.)
McMaster, StanleyPrice, David (Eastleigh)Thompson, Sir Richard (Croydon, S.)
Macmillan, Maurice (Farnham)Prior, Rt. Hn. J. M. L.Tilney, John
McNair-Wilson, MichaelPym, Rt. Hn. FrancisTrafford, Dr. Anthony
Madden, MartinQuennell, Miss J. M.Trew, Peter
Madel, DavidRaison, TimothyTugendhat, Christopher
Maginnis, John E.Rawlinson, Rt. Hn. Sir Petervan Straubenzee, W. R.
Marples, Rt. Hn. ErnestRedmond, RobertVaughan, Dr. Gerard
Marten, NeilRees, Peter (Dover)Vickers, Dame Joan
Mather, CarolRees-Davies, W. R.Waddington, David
Maude, AngusRenton, Rt. Hn. Sir DavidWalder, David (Clitheroe)
Maudling, Rt. Hn. ReginaldRhys Williams, Sir BrandonWalker, Rt. Hn. Peter (Worcester)
Mawby, RayRidley, Hn. NicholasWalker-Smith, Rt. Hn. Sir Derek
Maxwell-Hyslop, R. J.Ridsdale, JulianWall, Patrick
Meyer, Sir AnthonyRoberts, Michael (Cardiff, N.)Walters, Dennis
Mills, Peter (Torrington)Roberts, Wyn (Conway)Ward, Dame Irene
Mitchell,Lt.-Col.C.(Aberdeenshire,W)Rodgers, Sir John (Sevenoaks)Warren, Kenneth
Mitchell, David (Basingstoke)Rost, PeterWeatherill, Bernard
Moats, RogerRussell, Sir RonaldWells, John (Maidstone)
Molyneaux, JamesSt. John-Stevas, NormanWhite, Roger (Gravesend)
Monks, Mrs. ConnieSandys, Rt. Hn. D.Whitelaw, Rt. Hn. William
Monro, HectorScott, NicholasWiggin, Jerry
Montgomery, FergusScott-Hopkins, JamesWilkinson, John
More, JasperSharples, RichardWoodhouse, Hn. Christopher
Morgan, Geraint (Denbigh)Shaw, Michael (Sc'b'gh & Whitby)Woodnutt, Mark
Morgan-Giles, Rear-Adm.Shelton, William (Clapham)Worsley, Marcus
Morrison, Charles (Devizes)Simeons, CharlesWylie, Rt. Hn. N. R.
Mudd, DavidSkeet, T. H. H.Younger, Hn. George
Murton, OscarSmith, Dudley (W'wick & L'mington)
Nabarro, Sir GeraldSorel, HaroldTELLERS FOR THE NOES:
Neave, AireySpence, JohnMr. Tim Fortescue and
Nicholls, Sir HarmerSproat, IainMr. Keith Speed.
Noble, Rt. Hn. MichaelStainton, Keith

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

The Clerk will now proceed to read the Orders of the Day.

Photo of Mr Gregor Mackenzie Mr Gregor Mackenzie , Rutherglen

On a point of order. While I and my hon. Friends appreciate, and were concerned about, the importance of the matter we have just discussed, and the effect which it will have on many of our constituencies, not least my own, you will understand, Mr. Speaker, that I am a little disappointed that the subject which I wished to raise, the present unemployment of 115,000 people in Scotland, was not able to be raised because of that Standing Order No. 9 debate which we have had.

The subject which I wished to raise is of concern to many of my hon. Friends in the House. I would ask you to think about this problem, how it comes about that Private Members' time can be passed over to another day. As I understand the situation, and from advice which I have had from hon. Friends of mine who have been Members of the House much longer than I, this is a novel situation in which a debate under Standing Order No. 9 has precluded a Private Member from raising a matter of considerable importance. I would ask you to consider and rule upon this point.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I have some sympathy with the hon. Member, but I am governed by the Standing Orders. I have acted in accordance with them. No doubt, note will be taken of what the hon. Member has said.