The unusual events of this afternoon have made it possible for the House of Commons to have a debate which we certainly ought to have but which we might not have had except for these extraordinary circumstances and that is a debate on the subject of "Rolls-Royce Ltd. and the RB211 aero-engine", Cmnd. 4860. Last night, when I thought it possible that today's debate might collapse, I gave the Department notice that I wished to raise this subject, and I did so again today as soon as the unusual Adjournment took place.
I have to declare an interest. I do not have the same direct relationship with a Rolls-Royce factory as my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) or my hon. Friend the Member for Derby, North (Mr. Whitehead), who I hope will join the debate, but I have a specific interest in relation to sub-contractors. The health and future prosperity of Rolls-Royce are of considerable importance to the Cameron Iron Works, Livingston, and to many other suppliers and I therefore feel entitled to raise the subject in some depth.
We have to look at the White Paper through the eyes of the serious Press, and I shall borrow heavily from the Engineer of 21st January, 1972, which contains an important article on this subject. The Engineer states:
A year ago next week Rolls-Royce died in a shameful and stunning event of unparalleled proportions. But the events that surrounded that death and how the company came to be resuscitated are recounted in a most revealing document. 'Rolls-Royce Ltd. and the RB211 Aero-Engine'.
The Engineer refers to this as a naïve White Paper and says that it
shows clearly that monitoring by various parties gave no warning of the crisis which became apparent only from technical and financial assessments completed by the company a few days before 22nd January last year. Yet only two months earlier the Government had handed out £42 million and the banks another £18 million while the Minister of Aviation Supply expressed the hope that this important development programme can be successfully completed'.
We should like to know on what evidence the Department and the Minister at that time made the statement that
this important development programme can be successfully completed".
The Engineer goes on to say:
The chairman and the deputy chairman called on the Minister at their own request on 22nd January to report that Rolls-Royce was in a most serious situation, and made it plain that they favoured stopping the RB211. Prime Minister Edward Heath favoured continuing the project and in the event the engine will cost £100 million less than it would under the old Rolls-Royce contract".
Let us say, with the Engineer, "We should be thankful for that", but this is not by any means the complete story. I continue the quotation:
What the White Paper does not spell out is how or why Rolls-Royce crashed why its management failed so hopelessly to keep track of the millions ticking up on the cash register why development and production were pitifully out of step and far from the umbrella of cost control and why management was so blind it could not see what was happening months before the crash. Nor does it explain why management failed so miserably in its attempt to estimate launching costs and why one product was allowed to topple the company.
Those are clearly loaded questions. I am not sure that I would phrase them in that way because, like the Under-Secretary of State for Trade and Industry. I have a high regard for Sir Denning Pearson whom we saw as members of party committees and when he came before the Select Committee. The time has come for mature reflection on what can be said about these questions so that this kind of failure does not happen again. I therefore raise the questions constructively and not in a destructive spirit.
The Engineer also refers to another mystery:
…why management structure was allowed to evolve paying only lip service to tight financial control, when as far back as December, 1969 the Industrial Reorganisation Corporation provided a loan on condition that the company sorted out the basic management weakness of financial control and forward planning.
I am asking two questions here. What is now different about management control and, secondly, do the Government on reflection think that they have learned any lessons from what happened 13 months ago?
Finally, the Engineer says:
An even more important question is whether the Government and Rolls-Royce have learned their lessons. New blood is trying to liberate talent in the companies yet discipline the old guard, deeply entrenched in its aim of perfection at any price but proving it is uphill work. The great fear is that even Rolls-Royce's giant hiccup could mean no more than a had dream and the company could settle back into its old ways. If this happens all the effort will have been in vain.
Tonight the Government have the opportunity to assure us that the company has not settled back in its old ways, not that I would say, from what I saw, that all its old ways were necessarily bad. Now that my hon. Friend the Member for Derby, North is present, I say again that this is an attempt not to knock Rolls-Royce but to look in as mature a way as possible at the White Paper and ask the questions that people in the industry are asking.
Flight International of 27th January says:
When an industry is spending its own R and D money, as the aircraft industry largely did in its first 50 years, it is entitled to privacy. But when it is spending public money, as it has had to do increasingly in the last ten years, the obligations change. This means that traditional attitudes must change—in industry and in Government. Why, in the minds of Ministers, does aerospace so often 'get it wrong'? Why has the estimated cost of the RB211 increased in four years from £65 million to nearly £200 million? And is there any reason for Ministers to believe that any new project proposal will not escalate in the same way?
It is not just a question of looking into the past. Rightly or wrongly, we are confronted with a crucial decision whether or not to participate in the post-Apollo programme, a subject I raised during the defence debate. I understand that the Under-Secretary of State for Defence for the Royal Navy is going to Cape Kennedy to talk to the Americans about this in two or three days' time. It is estimated that, give or take 20 per cent., the cost of this project will now be about 5 billion dollars, and arguments could arise on what the Western European contribution should be. But Ralph Lapp estimated a cost of 25 billion dollars and, therefore, if those of us who want to participate in the post-Apollo programme are to make headway and retain any credibility, we want to know that the estimating procedure that is now being adopted is somewhat more realistic than the estimating procedure
for the RB211. I simply interject that. These, of course, are questions of the moment and not simply a matter of raking up the very difficult past.
I return now to Flight:
The first point to get straight is that aerospace is particularly difficult, if not the most difficult, industry. If a nation wants new aerospace projects exactly costed, it can give up aerospace.
I would accept that. We are not asking for exact costing. The issue here is a more realistic general costing.
The second point is that only industry is capable of estimating costs. Civil servants cannot do this; the research establishments can advise them, but costing is above all the responsibility of the men in the design office, on the drawing board, on the shop floor and in the boardroom. They have to be made aware that their industry's new obligation to account for the money which society is providing is their obligation. It is their future.
I should like to ask another question of the Department. I am willing to be told, and I would like to believe, that since the setting-up of the procurement agency and the Rayner Committee's Report things are perhaps a bit different. and perhaps tonight would be the occasion on which the Government could produce some evidence to show how Rayner is working in this field and, indeed, if it is true that the National Defence Industries Council, on which his Department is represented, is also working well, because it is impossible to disentagle these questions between the D.T.I. and the Ministry of Defence.
Going back again to Flight:
If the weight of specific fuel consumption or delivery date of the RB.211 were, like the cost, 300 per cent. out the engineers would, to put it mildly, have failed professionally. In fact the RB.211 promises technically to do what was expected of it—more in the case of quietness. Why then is not the same professional attitude towards costs apparent—not only in this but in other aerospace projects past and present? Money is a taboo subject—somebody else's problem. Parliament, which constitutionally provides the money, asks but the answer is always the same: civil or military, we don't talk about money.
If the Government think this is unfair, let them say so, for there is time in this Adjournment debate to go into the question of money in some detail without being unduly interrupted, I would imagine.
Flight goes on:
If the Minister and his civil servants are so unresponsive to the shareholders, how much should the contractors care? The only people
who can cost the job—the men who depend on aerospace and on whom aerospace depends —are not being forced to be professional in the area that matters most. Indeed, so unreal is the attitude that management itself, as the White Paper shows, does not know what is happening, and workers go on strike for more money even after bankruptcy.
Well, there are two sides to that story, as my hon. Friend the Member for Derby, North (Mr. Whitehead) well knows. But I think it is fair to raise the whole question of the way in which workers are taken into the confidence of management in a situation in which vast sums of public money are involved. My hon. Friend the Member for Derby, North knows more about this than I do, and I think he should raise this point.
How is the industrial attitude to be changed? Only by changing the attitude of the financiers and buyers—ministers and civil servants.
I ask the Government whether this is fair.
There is nothing in the White Paper that could not have been published when it was agreed; and the very act of publication would have helped to ensure that the agreements were made with care. To talk about money is not only a civic duty when the money is provided by the taxpayer; it also induces professionalism.
I think it really is true that more frankness and openness, while it would not have eliminated all the mistakes—because it would be silly to say that—would at least have gone some way towards eliminating some of them. So this is an opportunity for us to learn the Government's thinking on the whole question of accountability when vast Government sums are involved. I am sure my hon. Friend the Member for Derby, North and my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), who specialise on this subject, will want to pursue it further.
I am not going to quote at length, but there was an important article, again on 27th January, in the New Scientist, the technology review. It pointed out that:
When the government spent £20 million on purchasing all the Rolls-Royce Ltd. patent rights last year, it set itself on an expensive road.
That is a bit of an understatement. The article goes on to say that the Leader of the House, the Lord President:
…when he gave the news to the House of Commons last March, said that the government had done this to protect the Rolls-Royce monopolies and prevent the fruits of its research and development from falling into the hands of competitors.
This is what the Government undoubtedly said at the time, and I think that was the understanding of all of us
The article continues:
This could easily have happened because in most countries renewal fees must be paid annually on any patent that is to be kept in force. If renewal fees are not paid, the patent ceases and all the information contained in it enters the public domain. Anyone can then use that information, and no one can re-patent it. And the patent offices of the world are the last places to look for credit. There were rumours that Rolls-Royce owed the British Patent Office money, but it is hard to see how this can have been true. Cheques are the usual method of payment—any fee paid by a bouncing cheque is immediately regarded as unpaid.
I do not know whether this has been asked in the Press at all; but what have the Government learned about the whole application of patent law? In one of the debates 13 months ago—one of those rather hectic debates in which the Minister for Aerospace took part—there was a long discussion which ended up in sending for the Solicitor-General for the whole legal position. I would hope that such an event would never take place again in the House of Commons.
But, of course, the time to settle the legal issues is not during a crisis but when there is no crisis on and we can look at the matter in cold blood. I think we should be very foolish as a country not to mend our roof, as it were, while no rain is falling, because if we wait for the next storm we shall land in trouble. So I say to the Government that they would be wise, while there is no particular crisis, to look at the legal situation. Before there is further industrial trouble in Rolls-Royce or anywhere else, we really should clear up all those legal difficulties that caused such a headache 13 months ago.
I come back to the New Scientist:
But what did the government get for its money? The protection of all patents means all British and foreign rights. A check through the British patent office indexes shows that Rolls-Royce Ltd. was averaging over the past few years of its life about 200 British patent applications per year—in 1971 Rolls-Royce (1971) Ltd. filed only around 100. The original company's activities led to an average of well over 100 patent applications accepted and
published per year. This 50 per cent. or so relationship between applications made and applications accepted ties in comfortably with the expected averages. Bearing in mind the fact that an accepted British patent can last 16 years but requires annual renewal fees to keep it alive, some light begins to dawn on the kind of numbers of patents that the receiver was selling to the government and, more to the point, which might require renewing.
Of course, not all patents are kept in force for more than a few years. It is common practice to weed out the losers and renew only the winners. Likewise, not all accepted patents are 'sealed' and come into force at all. Failure to seal an accepted patent can be for various reasons. It may be opposed by some third party who considers the invention not to be as new as the patent office examiners were prepared to accept. On the other hand the company may have second thoughts on paying the £8 sealing fee and starting the snowball of renewal fees rolling.
In Britain those renewal matters can be very heavy. A sliding scale applies which rises from a fifth-year payment of £13 to a final payment of £40. And if the fees are paid up to six months late (as might well happen in time of turmoil as at Rolls-Royce last March) up to another £18 may be rung up.
I should like to ask what has been done about the patent law. The New Scientist says:
According to the Department of Trade and Industry, it is not the Government that is paying the renewal fees. So far the fees have been paid by the Receiver (out of that £20 million purchase price for the patents) and Rolls-Royce (1971) Limited. Which is all perfectly acceptable under patent law whereby any philanthropist can pay the renewal fee on anyone's patent. But it poses the question what will happen next year and the year after.
I make no excuse for going into this matter in some detail, because it is a matter of considerable importance. I hope the Government will be able to shed some light on what they have done in the last few months to improve the situation in case of an accident in the future.
I should like to draw the Department's attention to a very reflective article by Hugh Stephenson on 24th January, 1972. He raises the question of the accepting houses. The White Paper says:
The accepting houses were not informed by the Bank of England that the sum of £42 million to be provided by the Government would be subject to check by the independent accountants, because this check was essentially a matter of determining the exact sum to be paid by the Government to Rolls-Royce, and the Bank of England took the view that it was not a matter of such significance as to require them to draw it specifically to the attention of the accepting houses.
The question that arises is as to the whole rôle of the Bank of England in these difficult events.
I should like to ask how the Government saw the rôle of the Bank and how they see this rôle being any different for the Bank the next time. This might require some consultation with the Treasury, and perhaps inquiries can be made during this Adjournment debate. Hugh Stephenson went on to say:
That puts it in a nutshell. The outside accountants were to make comments on the work programme and management methods of the company. There was a theoretical possibility that Rolls-Royce might need less than £42 million extra from the Government. (Though, in view of known cost overruns even by that stage, such a possibility must have seemed remote.) As the passage quoted implies, no one was questioning that the Government were committed to put in up to a further £42 million, if required.
Stephenson then points out quite rightly:
The point is not merely semantic. Indeed. there is evidence that the Government have accepted it in practice, even if they are not prepared to say so publicly in a White Paper. For that November 9th agreement (or rather the publicity given to it on 11th November and subsequently) led not only the accepting houses but the whole range of Rolls-Royce's trade creditors into continuing to deal with the company on 'normal terms' This only occurred because the Government encouraged the idea that they had renewed their commitment to see RB211 contract through. This is a critical point. Without special Government hacking the RB211 contract has never been financially viable. Without the Government's extra £42 million in November, 1970"—
we have had no explanation of these events—
…the accepting houses might have announced their refusal to continue their £20 million acceptance facility when it came up for renewal in April. 1971, thus forcing the company and the Government to face the possible effects on the general confidence and the need to find a further £20 million of immediate finance. Rolls Royce's trade creditors would have started demanding cash payments, or at least have reduced their exposure, thus dealing the company's cash position a major blow. It was to meet those dangers that the Rolls Royce hoard put out a Press release and arranged for letters to go to their major suppliers on 11th November, 1970.
This was at the board meeting when Sir Denning Pearson resigned as chairman to he replaced by Lord Cole….
The White Paper makes no mention of this public statement in which as a result of the discussions the Government had undertaken to provide substantial additional launching aid in respect of the
RB211 engine and satisfactory arrangements had been made with the banks to meet the company's needs. He goes on:
Nor does the White Paper refer to letters which went out in November, signed by Rolls Royce directors, and saying that the company's financial problems were now behind it because of the Government's extra £42 million. Many companies, however, consider that they were, in consequence, seriously misled by these events to the detriment of their shareholders.
At this point I wish to speak on behalf of the subcontractors. I would make it clear that the Cameron Ironworks does not feel particularly aggrieved, but there are some others which do feel aggrieved. The key question that arises for British industry is that, unless there is a fairly full explanation at some time, then a Government which try to do this sort of thing again will never be fully believed. Some of us wonder whether a Rolls-Royce option could ever be handled again in that form and get away with it. [Interruption.] I see that the Minister does not agree.
The hon. Gentleman will realise that I had notification that he was to raise this matter only 10 minutes before he did so. If he is to make charges that we have said one thing and done another, I would ask him to be explicit and to say exactly what.
The Minister will agree that last night a warning was given to the Department that if business in the House collapsed this matter would be raised. I do not think the Minister for Aerospace can complain; if he wishes to make that kind of complaint he had better go to the Lord President of the Council and ask what happened to the Government business. Let us leave that out of account.
Order. I hope the hon.
Gentleman will not pursue that point, because the time is known to have been very short in the special circumstances of today. All would agree that "reasonable notice" is usually rather longer than was possible today.
I am not complaining about this. I am merely stating it as a fact. I was asking the hon. Gentleman to clarify his question. I do not think the other matter is relevant.
The other thing is extremely relevant for these reasons, because what the Minister has revealed is that the Government had no intention of letting the House of Commons try to probe by asking fairly reasonable questions, as I have done up to now, on the White Paper. Indeed, if it is absolute nonsense, why is not a departmental brief available?
On a point of order, Mr. Deputy Speaker. I have never known it to be a rule of the House that a Department should be ready at the drop of a hat to debate any issue raised at short notice by an hon. Member. That is a new concept in our procedure, especially on a highly complex matter when people's reputations are involved.
At the risk of being out of order, I would put it to you, Mr. Deputy-Speaker, that a new doctrine has been enunciated. It is a doctrine that a Government produce a White Paper and then plead, "We have not done anything about it, it is unfair to probe this in the House of Commons." This happened 15 months ago. It is a very important Whitehall point. What does Whitehall think it is up to?
The whole of the hon. Member's speech has consisted of reading from articles in the Press which have very little to do with the White Paper. I am trying to reply to articles in the Press, which, I take it, is what the hon. Member wants me to do. I will endeavour to do that. The suggestion that there is short notice because of an unusual situation with regard to the proceedings in the House is a perfectly valid one, and to draw the conclusion that the Government never intended the White Paper to be discussed is really stretching the imagination beyond even the hon. Gentleman's belief.
If I could have the Government Whip's attention, I would submit that a serious House of Commons point has arisen. I am glad to see that the Parliamentary Private Secretary to the Lord President is present. It is of some consequence to the House that the Lord President, as Leader of the House, who has a certain obligation to all its Members, on whichever side of the House they sit, and who has discharged that obligation admirably on many occasions, should come and let us know whether he intends to give that full degree of time which the White Paper warrants.
I have spoken at some length. This is an extremely important point. I end by saying that I hope the Lord President will come and reveal his intentions. I see that hon. Friends of mine have a great deal to contribute and so I will sit down.
I was enjoying that speech until the last few minutes of it, when I felt we were getting a diversion into an area which was not nearly of such great consequence as the opportunity for this debate provided by the hon. Member for West Lothian (Mr. Dalyell). As has already been remarked, he is certainly heavy on speech writers. I get a free copy of the Engineer. Unfortunately I do not get free copies of the New Scientist or Flight, but I hope that if I mention that fact in this Chamber something will be done about it in responsible quarters.
I welcome the opportunity to have a chance this evening to comment on the partnership which has developed between Her Majesty's Government and Rolls-Royce (1971) Ltd. It is a partnership which is working extremely well and one which has proved that Government and private or nationalised industry can work together, although it is a pity that in this case they were forced to work together.
As I see it, arising out of the White Paper there are two jobs facing that partnership. First, there is the reconstruction of the prestige of Rolls-Royce. From an engineering point of view this has never been in doubt. When the total edifice of Rolls-Royce collapsed, the whole company was suspect not only in the eyes of the shareholders, who suffered very badly, or the Government, who now find themselves in partnership with the new company, but more so by the customer. It takes many generations, not only of engines but also of people, to build up the credibility of a company in advanced technology. That is something which Rolls-Royce has successfully done, and it was right for the hon. Member for West Lothian to draw attention to exactly who was responsible for the collapse of the old Rolls-Royce Company. Much more interest should have been deployed by the old top management of that company, and if it had been deployed on a day-to-day basis the, collapse could have been avoided.
One of the problems facing the Government partnership with Rolls-Royce, therefore, is the reconstruction of the company. I hope the Government will not forget the sub-contractors who suffered so extensively in the collapse of the old company, because in that type of industry which has vertical integration, where one can get only certain specialised companies supplying upwards through the chain to the finished product, it is the old sub-contractors who are the new subcontractors. Those old sub-contractors suffered badly in terms of the liquidity they lost in an industry which is almost always permanently short of liquid capital.
Secondly, the task is one to which we should all try to devote ourselves: the completion of Rolls-Royce 211 engines to the satisfaction not only of the customer aeroplane manufacturer but especially of the airlines which want to use it. It is significant that at no time was there any real challenge to the engineering choice which Lockheed, T.W.A., Eastern and Delta had made. They all believed in the engine. It was that engineering capability which weathered the storm and enabled Rolls-Royce (1971) Ltd. actually to come into being and exist.
I would like to pay a tribute to the Lockheed Corporation and its Chairman, Dan Haughton. It has been my privilege to get to know him over the past few months and to find that we had such a sturdy ally who was quite determined in the renegotiation period to make a success of his aircraft in partnership with the Rolls-Royce engine and is still quite determined to see that success through to profitability.
In the completion of the RB211 there is also the need not to lose sight of the other engines which Rolls-Royce has continued to produce and of which mention should be made in considering the White Paper. The export potential of so many aeroplanes depends almost entirely on their engines. This is certainly true of the Lockheed aircraft and of the low noise levels that the RB211 produces. It is certainly true in the case of the Harrier aircraft produced by Hawker-Siddeley which has now been exported to the United States Marine Corps and which we hope will also be exported in due course to the United States Navy. There is no doubt that the Pegasus engine which had been developed makes the Harrier a unique vehicle by world standards. I hope that in the completion process which needs to go on right across the whole Rolls-Royce Company, sight is not lost of the need continuously to improve and develop these engines to make such that the culmination of the engine and the air- plane is considered together as a quantity which can sell.
I hope that my right hon. Friend the Minister might at some time—probably not tonight—in terms of his sponsorship rôle have good news for this House on the development of such engines as the Pegasus 15. An uprated engine would probably assure Hawker-Siddeley an extended sales of its Harrier in the United States.
There is no doubt that the tremendous work put in on the Olympus, especially on the problems of noise suppression and smoke elimination, makes the Concorde not only feasible but a worldwide sales getter. It is unrivalled in the world, and Rolls-Royce (1971) Limited should be encouraged to make sure that the Concorde is considered as part of its partnership with the Government.
The hon. Member for West Lothian, whom I regret to see suddenly leaving the Chamber as I am about to return to his speech, spoke of the need for mature reflection on what has happened. That is all very well, provided that it does not turn into a post mortem which seeks to dissect and leaves a corpse behind. I hope that the hon. Gentleman will see what the effect of a post mortem would be I cannot see its value. I believe that we need to observe, to learn and to prove that we have learned. There is no area where there is a need for greater learning than in the area of project management. This has consistently beset this House in aerospace contracts: how to manage the contract and keep it within the predicted cost limits.
Without doubt there is a need for those in the top management in any company involved in advanced technology, especially in aerospace manufacturing, themselves to be aware and to be involved continuously in the process of project management. They dare not delegate it to people further down the administrative chain. If they are known to be involved, the workers on the shop floor and the draughtsmen on the drawing boards will themselves feel involved, because they will become part of a team which is known and visible. There is need to get the senior management of companies to appreciate that it is only by their involvement and not by their delegation that project management in this type of industry can ever work properly.
Here, in terms of senior management, where one is looking at a partnership with the Government, I hope that Ministers themselves and not just their Departments will feel and exhibit this involvement. The Minister for Aerospace has shown this very much during the Rolls-Royce renegotiations. Certainly I do not question my right hon. Friend in this. I am merely stating the principle.
The interface with the Government is usually seen in terms of launching aid, which is referred to in Annex A of the White Paper. There is a comment in Annex A on the way in which the return is achieved on launching aid by sales. I believe that this return is usually limited to 7½ per cent. as a maximum of the revenue achieved on any sale. Obviously this is not enough in the aerospace industry ever to get back all the launching aid. Therefore it is all the more important to control the losses which generally appear to arise.
I want to discuss those losses. The industry itself has developed a feeling, from all that one reads and hears, that it does not have to show its accountability to the Government. There is also a feeling which has been expressed to Committees of this House recently that perhaps the Government themselves do not have to show accountability. That is bad. I believe that when public money is involved on such a large scale as comes up in any one of these projects, let alone just the RB211, there is a need for the public to know that it is money which is being successfully monitored and controlled.
We have discussed the escalation on the RB211 from £65 million to £200 million. Again, I regret the disappearance suddenly of the right hon. Member for Bristol, South-East (Mr. Benn) as I rose to speak. One might also quote the escalation which took place on the Concorde during the right hon. Gentleman's unhappy reign in that sector. I doubt whether it was an escalation other than in inflationary terms. I believe that the true cost is probably the cost that one has at the end and which was there all the time if only successful project management control had been set up at the very start of the programme.
The TSR2, which was cancelled when it reached a considerable expenditure, probably would have cost £700 million anyway. There is the eternal problem of budgeting that somehow, from a Government point of view, one does not like to show what is to happen too far ahead. That is a great pity because if we had entered into the Concorde project in the knowledge that it would probably cost £1,000 million, I do not think that the decision would have been any more difficult to take than if it had been only £250 million. It would have been better to have faced the total problem at the beginning, even if it was of the first order of accuracy, which most of these escalations do not produce nowadays.
I end with a plea that we should look to the Government, especially to the present Government, to give us more chance of seeing what is going on in the projects for which this House votes money and is responsible. I do not want this to be done in the way in which the hon. Member for West Lothian seemed to suggest, though I do not think he really intended to say what he did, in terms of trying to see what went wrong. I prefer it to he done as a method of trying to control what is happening in the future, which is always difficult to see.
The whole House owes a debt of gratitude to my hon. Friend the Member for West Lothian (Mr. Dalyell) for raising this important subject. Hon. Members on this side take with a pinch of salt the protestations of the Treasury Bench that they are unprepared to answer the debate. Had the Government felt any urgency in debating the lessons of the White Paper, Government time would have been found. The time has not been forthcoming, and my hon. Friend the Member for Derby, South (Mr. Walter Johnson) received no answer when he asked when that time was likely to be forthcoming. It is right, therefore, to spend a few minutes discussing some of the implications of the White Paper.
If the Minister says today that he still cannot answer the points raised in Mr. Hugh Stephenson's article, which was a reiteration of the points raised in his original article of 26th February last year—when, incidentally, I had a Private Member's Motion before the House on the subject, that is a poor outlook. As I say, that was 26th February, 1971. Unless the right hon. Gentleman is working to the Julian Calendar, I make that one year and three days ago. We should like to know a little today about the undertakings given to the subcontractors on 9th and 11th November, 1970.
The point which I wish to make, however, is a very much more localised one. This episode has been a sad time for Derby and the self-confidence of the Derby Engine Division. We have now had a year in which to digest it. If we look at the painful lessons learned, they have not been learned only by the engineers and the accountants. They have been learned by the subcontractors and by the work force—those many people who worked for Rolls-Royce, who in many cases had their life savings in the workers' share scheme and who have been told that the Government cannot help them, and who, in many cases, had to sacrifice their careers when the great shake-out began in March last year.
The Government have, as they state in the last few paragraphs of the White Paper, accepted their commitment to the RB211, and they have effected a successful renegotiation authorised across the Atlantic in somewhat bizarre circumstances by that odd vote in the United States Senate. We are concerned about what is to happen to the Derby Engine Division within the context of the British aeronautics industry and within the context of the obligations that the Government have accepted in consequence of the nationalisation of the Gas Turbine Division and all the subsequent responsibility for research and development in the aero-engine business.
The sums were wrong. We have to admit that. The accountants were wrong. The time scale was wrong by some six or nine months. These matters are gone into in detail in the White Paper, and they have been fairly faced, late in the day, by Sir Denning Pearson and Sir David Huddie, who gave evidence to the Expenditure Committee. But it was also right to make the original try and to go ahead with the engine. But Sir Denning Pearson told the Committee in the course of his evidence:
In my view Rolls-Royce would very rapidly have run down hill to the point where the Company would hardly have been viable"—
if the engine had not been proceeded with. Surely we should look at the consequence now of what proceeding with the engine entails. I submit that proceeding with the engine entails a full commitment from the Government to get the best out of it that they can.
Flight International has been quoted several times. I do not wish to add a lengthy quotation, but I should like to remind the House of the extensive flight test of the Lockheed TriStar with its RB211 engines which was carried out by Flight International on 13th January. It concluded with these words:
I have flown many aircraft during their pre-certication stages but I have never met one so polished and accurate at such an early stage in the development…and from what I have seen so far it is my opinion that this aircraft will be as painless to operate as it is to fly.
The widespread acclaim of the RB211 engine—it has got provisional certification now of two engines as of last week—has led many people to suppose that a decision cannot be far away on the next stage. The point is that the Lockheed TriStar now needs that additional range of options, that additional attraction. which will bring to it more buyers in quite different spheres than it has at the moment.
If the Government are talking about a return on their capital and on the considerable expenditure which has escalated throughout the period for which they have had responsibility, as the hon. Member for Hastings (Mr. Warren) said, they ought to be looking seriously—I am sure they are—at the sales figures. I put it to the right hon. Gentleman today, as I put it to his hon. Friend unavailingly yesterday: at what stage is the Government's evaluation of an up-rated engine for the RB211? We are told that a figure of about £20 million would be needed to get the engine up to 45,000 or 47,000 lb. of thrust. Those are considerable figures. Set against the £200 million, to which the Government are already committed and set against the overall expenditure on the engine, to stretch it to an additional capacity in this way would, in the judgment of the House, be a necessary expenditure if we could see that there was a considerable return to be gained.
Recently I met a distinguished executive of one of the major airlines—an airline very close to the hearts of right hon. and hon. Gentlemen opposite. I will not go further to identify it. He said that he was immensely attracted to the short-range TriStar and that he would very much like to buy it. The one thing that held him back was that his airline was thinking of increasing its operations on a scale which would demand a long-range as well as a medium-range airbus. Therefore, he had to look at the problem which would arise if, having bought the medium-range Lockheed TriStar, and then looking for a long-range version, he found no comparable aeroplane of the same make for which spares and so on could be interchanged. Therefore, he had to look, painful as it was, at the McDonnell-Douglas DC 10, where these options were already on offer.
The Derby engine division has admittedly been pulled back from the brink, but Rolls-Royce has the RB211 in manufacture. However, we are now at a stage which strikes a chill down the spine of any aeronautical engineer, because, although the major engine programme is in production, there is no other engine programme at the research and development stage. There is no engine on the test beds or on the drawing boards. The company is waiting. Mr. Morrow has come to the House and given evidence to the Select Committee about the 25,000 lb. engine which Rolls-Royce proposes to offer; but that is another generation of engine involving a considerable scale of research expenditure. The sales of the Lockheed TriStar will be significantly improved by the development of an un-rated RB211 engine which could be offered for an alternative version of the Lockheed aeroplane.
I do not believe that now, after all the pain and toil of the Rolls-Royce affair over the last year, we would wish to see the aero-engine business getting even further into the morass which seems to have engulfed our airframe industry generally, concerning the provision of aeroplanes solely designed in this country. I should not like to see Rolls-Royce facing quite so bleak a prospect as now faces some of the other large manufacturers in this sphere.
I suggest, to quote finally the notable report of the Society of British Aerospace
Companies, published on 7th January this year, that its estimate, although it is in a degree special pleading, ought to hold good for the aerospace industry. The society, in its report, said:
The rôle of advanced technology for the future of Britain should nowhere be in question. Country after country finds it ever more simple to compete in mass production industries, and Britain can only hope to maintain its present standards by creating and fostering competitive advantages in brain-intensive areas. Britain should press home what advantages she has and in aerospace she has a world position it would be improvident to let slide. But such technology must be maintained; once the industry falls behind, recovery can be achieved only at immense cost.
We are counting the cost. We want to know how great the Government's commitment is to pressing home the advantage which we have, which we in Derby believe we still have, in aerospace. It would be improvident and, in my view, more than foolish to let this technology slide. I hope that we shall receive some indication from the Government today, in the wake of the White Paper, of what their intentions are for an up-rated RB211 engine.
We are indeed grateful to my hon. Friend the Member for West Lothian (Mr. Dalyell) for initiating the debate, even at such short notice. The Minister has staled that he had only 10 minutes' notice. Of course, the same applies to those of us who have already contributed to the debate. I do not wish to follow the controversy which developed between the Minister and my hon. Friend.
I should like to emphasise the point made by my hon. Friend the Member for Derby, North (Mr. Whitehead) that, however useful the debate, it is no substitute for a full-scale debate on the White Paper with adequate notice. I hope that that can be arranged soon. Having got this opportunity, it is useful to put these points to the Government.
Despite the fact that the contract for the RB211 was eventually successfully renegotiated, it is useful not only to talk about the future but to go back, as the White Paper does, to some extent over the history of the Rolls-Royce RB211 affair. I think that what happened and the lessons to be drawn from what happened have important implications for the future.
When considering what went wrong at Rolls-Royce we are equally considering what went wrong at Government level, because, as the hon. Member for Hastings (Mr. Warren) has fairly pointed out, the history of the RB211, from its inception until the collapse of Rolls-Royce a year ago, has important implications concerning the relationship between the Government and private industry when large sums of public money are being made available. It raises the question of the quality and quantity, but particularly the quality, of financial and technical information about the project which was available to successive Governments.
I put down a Question for a week last Monday on this matter to the Minister asking what improvements he was making in the arrangements for having financial and technical information available to his Department. He gave me an answer which I think he would admit, if he were frank, was completely meaningless. He told me absolutely nothing. he obviously reckoned, quite accurately, that the Question would not be reached orally and, therefore, he gave me a completely meaningless answer.
It would be useful, particularly in view of what his hon. Friend the Member for Hastings has said, if the Minister would say something about developments in the Department over the last year for improving financial and technical information. If we have a full-scale debate on the White Paper, as I hope we shall, obviously we shall want to consider the role of the I.R.C., for example. But, whatever the ideas of the hon. Member for Hastings about the I.R.C. generally may be, the fact is that this was at least an outside agency available to the Labour Government which was able to go into Rolls-Royce and, as the annexe to the White Paper makes clear, say some very illuminating things on the subject of Rolls-Royce management, financial control and so on, at the time of the investigation. But that agency is no longer available. When the Government got very seriously worried about the Rolls-Royce RB211 situation towards the winter of 1970, they had to call in outside accountants, Cooper Brothers, to go in and make an accurate investigation of the company.
Is it not a fact that one of the problems faced by the I.R.C., not only with Rolls-Royce but on any other subject, was that it had no ability to tell the Government what were the problems it found when put into a particular company, and that it was its complete inability to communicate to the Government, to which it was supposed to be responsible, that helped to accelerate the Rolls-Royce crash?
I do not think that that is an accurate description of the situation, but I agree that the I.R.C. was not a wholly satisfactory way of looking at the Rolls-Royce situation. But that emphasises my point that there is a need for more strength at departmental level where we have, as in that case, an outside firm of accountants brought in to look at the situation. The House is entitled to some explanation of the Government's thoughts on this aspect of the matter and of what they intend to do to remedy what was obviously an unsatisfactory situation.
Concerning the White Paper generally, it is a very unsatisfactory document in a number of respects. It does not clear up satisfactorily the question of what the Sunday Express, I notice in a headline, called "The Rolls-Royce Disaster", whether the disaster was really necessary, or whether the whole situation could have been handled in a way which would have avoided the public bankruptcy of Rolls-Royce. The White Paper does not answer that question in anything like a satisfactory way.
The White Paper suffers from another major defect in that it does not give any inkling of what we know to be a fact, that at the time of the Rolls-Royce bankruptcy the original intention of the Government was to write off the RB211 engine completely. One would get the impression from the White Paper that all the way through the Government's only object was to do everything possible to save the RB211 engine. We who listened to and participated in debates at the time of the collapse know that that is simply not true. The Minister was very cross with my hon. Friend the Member for West Lothian because he made certain allegations, as he said, which he did not then go on to justify. To save being criticised similarly, I shall quote what the Minister said. No doubt it is very painful for him to be reminded of this. It is a rather long quotation, but in view of the Minister's sensitivity we may as well have it on the record.
In his speech in the House on 8th February, 1971, the Minister said:
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"—
that is, the RB211—
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.
A little later on, just to make the thing crystal clear to us, the Minister said:
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."—[OFFICIAL REPORT, 8th February, 1971; Vol. 811, c. 99–100.]
That was the view of the right hon. Gentleman on 8th February, 1971.
That, as well as guidance, no doubt, from Government spokesmen, caused the political editor of The Times, David Wood, to say in The Tunes of 9th February, 1971:
Mr. Heath is not interested in any purely British or joint Anglo-American attempt to salvage the RB211 project.…Mr. Heath and senior ministers do not believe that a satisfactory renegotiation of the contract is possible.….For the Government, RB211 has done enough damage to Britain and is to be regarded as a complete write-off.
That is the situation with which we were faced. The Minister knows that and the House knows it. But there is not the slightest indication of that in the White Paper.
The other thing about the White Paper which is unsatisfactory is that it does not answer the basic question whether the Government's handling of the situation has ultimately saved any public money. To put it no higher, there must be a very strong suspicion that, so far from saving public money, at the end of the day, as with yesterday's announcement on the U.C.S. affair, the Government's handling of this situation has cost the public purse additional sums of money. If the Minister says that that is not so. I hope that he will demonstrate why it is not so. I do not wish to go into financial figures in detail. They are extremely complicated. They are not always laid out in the White Paper in an absolutely clear way. If we have an adequate debate on the White Paper with adequate notice, I would hope that either myself or some of my hon. Friends would be able to put rather detailed points about the figures in a way in which it would be impossible for me to do clearly this evening. But we need a good deal of elucidation from the Government about various statements in the White Paper.
Coming to the present situation, there is still a tremendous number of uncertainties. There is the price to be paid for Rolls-Royce (1971), and we have had no satisfactory answers about that from Ministers recently. We understand that there are difficulties, but Ministers must also appreciate that this matter is very important from the sub-contractors' point of view, not to mention the shareholders' and the worker shareholders' point of view in particular, and it is important to get this matter cleared up because there have been wildly varying estimates as the year has gone on of what the likely result for creditors and shareholders will be. At one point there was absolutely no prospect for shareholders. But the situation has improved to some extent. Creditors are now apparently more optimistic about what they will receive. But it is highly unsatisfactory, and I nope that the Minister appreciates this. An indication of how the Government are attempting to speed up this matter would help us considerably.
There are still quite a number of points outstanding about the patent position. I have put down a number of Questions to the Minister within the last fortnight about that, and the last two answers I have had from the Government have made the position to me, at least, extremely unclear. There seems to be some intention to transfer patents to companies, apart from Rolls-Royce (1971) Limited, which will take over other parts of the old Rolls-Royce Limited, and to do that—if the answers mean what they say—at less than full economic price. I can hardly believe that that is what the Government mean, but if the Minister could elucidate a little on his answers of the other day it would very much help.
It would also help if we knew the Government's attitude to the question of the transfer of some of these patents, perhaps to overseas concerns which might be interested in buying them. In some cases, most hon. Members would consider that this would be highly undesirable. But, as my hon. Friend the Member for West Lothian said, a statement of Government policy in this direction is badly needed.
My final point looks to the future and is, at this moment, probably the most important of all. It concerns the orders that are likely to be placed by B.E.A. for an airbus and the consideration which is being given by B.E.A., which will subsequently have to come before the new British Airways Board and be considered in relation to B.O.A.C.'s considerations on airbus purchase, whether to buy the Lockheed Tri-Star or the A300B.
There were questions in the House yesterday about this when it was explained that the British content in the Lockheed 1011 is proportionately very much higher than in the A300B. This applies to maintenance, including spares during, the life of the aircraft, but it also applies to the capital cost. These figures are quite significant, and they have considerable implications for B.E.A. and the British Airways Board. I appreciate immediately that it would not be a very satisfactory way of proceeding for the Government to say to B.E.A.: "Regardless of what you consider to be your best interests and regardless of the economics of the matter, we are directing you to purchase the 1011". This would be unsatisfactory also from the point of view of the British Airways Board. In the long run it would be unsatisfactory to Lockheed and Rolls-Royce because it would give the impression that this was an unsatisfactory aircraft with an unsatisfactory engine being foisted on an unwilling nationalised industry.
However, we all feel that a very important national interest is involved in this decision, and the only satisfactory way of resolving it would be to urge upon B.E.A. and the B.A.B. to come to a decision about the purchase as soon as possible. Here I appreciate the airline's position that the longer that it can delay a final decision the better for it because it can consider new factors that come up in the intervening months and get more up-to-date figures. After all, the European airbus has not flown and there is still only limited experience of the 1011. But I want to press on Ministers, and hon. Members on the Government side probably feel the same, that it would be very desirable if the decision by the B.A.B. could be made as soon as possible, having regard to all the interests. I think if it were a decision for the 1011, as I think it may well be, this would give the additional fillip to the project which it requires, and I hope that the Minister might be able to say something about it this evening.
Will my hon. Friend take the opportunity now that the Leader of the House is with us to comment on the discussion we had earlier when the Government complained they had been given very short notice and had no departmental briefing in extenso on one of their own White Papers? This is a matter of some importance because when White Papers are presented to the House it is intolerable that departmental briefing should not be readily available to Ministers. For senior Ministers to complain that they had such ridiculously short notice that they could not answer one of their key White Papers on this subject seems to me absolutely grotesque.
I had, in fact, sat down but I think my hon. Friend has made his point now and I would not like to add to the troubles of the Leader of the House, who still looks rather punch drunk from what happened on the European Communities Bill earlier. No doubt, he will have heard what my hon. Friend has said, and all I can say is that I very much agree with him.
Perhaps I could reply to the hon. Member for Glasgow, Craigton (Mr. Millan) first, but I would like to refer to the question of short notice. The hon. Member for Derby, North (Mr. Whitehead) rather curiously thought it was an advantage that I should have had a year and a half to forget about this matter. I cannot. I have been briefed on this over and over again. But it is a moving saga, and certainly I do not claim, having been able to hold a discourse on the matter for a couple of hours three months ago, to be able to do so today with accuracy without refreshing my memory, particularly on figures, which can be very misleading if they are not accurate.
So I make no apologies for saying that I do not profess to be able fully to answer this debate at short notice. We first heard of it at 6.20 p.m. through the duty officer at my Department. I understand that the hon. Member for West Lothian (Mr. Dalyell) was invited to speak to my private office but did not do so. I received the message at 6.30 p.m., and we started the debate about 10 or 15 minutes later.
I was grateful to the hon. Member for Craigton for his comments on the position concerning B.E.A., the B.A.B. and the airbus order. This is the responsible way to look at it, and it is very important to keep in mind that an overtly enforced order does not do the project very much good. But I entirely accept that an early decision would be in everybody's interest, and I think the B.A.B. and B.E.A. realise this too.
I am sorry if my answer to the hon. Member for Craigton was meaningless but we are urged to keep our answers short and sometimes the questions put down are not designed for that sort of answer. But, broadly speaking, I will explain what we have been doing during the last year.
The procurement executive of the Ministry of Defence has been in very close touch on the technical side with the relevant executives in Rolls-Royce to try mutually to work out a much better system of technical reporting and technical cross-communication between the Government and the company. Equally, on the D.T.I. side, where we are more responsible for the management side, we have been doing the same exercise with regard to financial reporting. We have come a long way in agreeing with Rolls-Royce on the type of financial information we shall require, the frequency with which it is provided and, to a degree, the means by which it is compiled, because obviously accuracy and topicality are affected by that.
The hon. Member inquired about the Government's use of outside bodies to monitor or check the situation in private industries where the Government have money at stake. I think that purely from the financial side one would be hard-pressed to find a more suitable body than a reputable firm of accountants, and, whatever merits I.R.C. may have had, it was certainly never designed to monitor, and was never provided with the equipment to monitor, in the sense that the word is used in the aerospace industry. I think its investigation was handicapped because it had no real status in the company until the company accepted that it would put a nominee of the I.R.C. on its board. As the House knows, it originally accepted Mr. Morrow in July, 1970.
The I.R.C. was also handicapped, or perhaps the Government were handicapped, by the very confidential nature of the I.R.C.'s questioning of the company in relation to the Government. That was something that the right hon. Member for Bristol, South-East (Mr. Benn) agreed should be the basis of the I.R.C. reports when he introduced the relevant legislation. It is something he rightly adhered to, and it is something we are bound to adhere to as his successors. I do not wish to disparage the people in the I.R.C., but I do not think it was designed for this purpose and, therefore, it had certain weaknesses.
The hon. Gentleman also asked whether we have saved any money by the Rolls-Royce collapse and the purchase by the Government of the aero-engine divisions. The answer is emphatically "Yes", if only—I do not suggest that this is the only factor—because of the very great largely unquantifiable claims that Rolls-Royce Ltd. was liable to meet and which the renegotiation of the contract has removed entirely. There are other factors, but that establishes very firmly that the cost would have been great if the company had continued to carry on with the development of the engine, with the delay then building up. It is only in the past week or two that we have managed to get the provisional certification. I am very hopeful that the full A.R.B. certification will follow fairly soon. There have been hiccups, but I am confident about the situation.
The hon. Member for Derby, North was worried about the future of the Derby engine division. We could perhaps say that his concern is about the whole of Rolls-Royce, because this factor carries right across the board, except perhaps on the military side. I accept his arguments about a stretched RB211. The difficulty is that this is a classic example of the chicken and the egg.
I echo what my hon. Friend the Member for Hastings (Mr. Warren) said about Mr. Haughton, who has carried a remarkable burden with remarkable courage and pertinacity. Until Mr. Haughton can tell Rolls-Royce, "I am in a position to modify the airframe for this engine", it is very difficult for Rolls-Royce to commit itself to an extension of the engine. It cannot do so without the pretty clear knowledge that there will be an aero-plane for it to power. I have made it clear to Rolls-Royce that as soon as it is in a position to say that stretching the engine is commercially the right thing to do, supported by a financial and technical assessment, I shall certainly consider it. No indication has been given by me or anyone in my Department that that is not something that will be sympathetically considered, but we hesitate to build an engine without an aeroplane to put it in, particularly at the kind of cost involved.
I appreciate that, and I accept that this is a situation where everyone is watching everyone else. But the Government are a prime mover in a sense in that they would put up the money. What kind of time-scale does the right hon. Gentleman think will be involved before a decision is made?
I have kept the matter under fairly close review. I understand that Mr. Haughton hopes to be able to make his decision by mid-June or the end of June, and that no serious time would be lost if a Rolls-Royce decision on the engine were not made until about the same period, hearing in mind that all the time, as it develops the existing engine, Rolls-Royce is learning a great deal and going out of its way to learn such lessons as it can which are applicable to stretching the engine. I am assured that, even if it were given the go-ahead tomorrow, Rolls-Royce would not wish to do much more than it is now doing on the ordinary, basic engine. I am not unduly worried that the chicken will be too far ahead of the egg, or vice versa.
Yes, Sir. That answer is subject to advice, because I am not a technician, but I understand that, although we are very hopeful that we shall get the full A.R.B. certificate before very long, there will be a lot of further improving design work even on the basic engine as it goes into service, as on all engines. I have no doubt that Rolls-Royce has plenty of projects in mind to improve the existing engine that will involve the design team, so I do not think there is any fear of the team's not being kept together. If I find I am wrong on the technical side I shall write to the hon. Gentleman, but I do not think I am. It is jumping the gun a little to say that the whole design stage is over and that the engine is now in full production. There is a good deal of testing still to be done, and there are possibilities of improvements on the blades and so on. So there is design to go on, and I think there will be overlap for some little time.
My speech of 8th February last year was read out by the hon. Member for Craigton. I do not go back on it in any way. If the hon. Gentleman can assure me that I am wrong and that there is a colossal market opening up, I shall be pleased. A year has passed, and there have been three more orders, from Court Line. I do not believe that if we had not built the engine we should necessarily have said goodbye to keeping Rolls-Royce in the advanced league. There are other advanced projects available. Nobody could be more anxious than I am that the engine should have a very good market. Before hon. Members criticise that speech a year later, they should give me some evidence of a colossal market, which is the point I was replying to. I should be only too grateful to receive that evidence. No one is more willing to eat humble pie if it turns out to be a colossal market. At present I think my prophecies are rather better than the hon. Gentleman's. We are very hopeful, and I am sure that the engine will be good technically.
I endorse what my hon. Friend the Member for Hastings said about Mr. Haughton. As for the idea that we do not wish to discuss money, my only concern is not to fail to disclose to the House anything relevant at any given time, but not to be asked to negotiate in public. I am also very anxious that we should in no way injure our chances of making the best possible commercial deal, particularly with Concorde. The detailed figures that people often naturally ask for must be delayed rather than given while commercial negotiations are in progress. The same applied at the very difficult time a year ago. I pay tribute to the two hon. Members for Derby seats for having been reasonably forbearing in not pressing me to give away information in the middle of our Lockhead negotiations, which could have been very damaging.
I come now to the speech of the hon. Member for West Lothian. I was a little surprised that when he remarked that the Government had acted in one way and said other things he was not prepared to continue on that line but was only too willing to be side-tracked into a procedural argument which had little to do with the RB211. That is up to him, but I draw the rather natural conclusion that he was getting a bit short of ammunition.
I think that would be a wrong conclusion. I was side-tracked by the length of my speech, but my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) put one case for me which I would wish to have put. However, there is another. It is true that the unsecured creditors were at first told that they would be lucky if they got anything. Then, in March, 1971, they were told that they would get 12½p, when the £53 million to debenture holders had been paid in full. In June, 1971, the unsecured creditors were told that they would get 50p in the £. In October, 1971, there was full repayment. If there is another occasion such as this, after so many changes, the Department's word will not be taken.
All those statements were made by the receiver. In no sense were they made by the Government. I was careful on every occasion when I referred to estimates to indicate that these were made by the receiver. The fact that the Government may have money in an undertaking which goes bankrupt does not make the Government responsible to the receiver. Indeed, the receiver would be wholly outside his terms of reference under the Companies Act if in any way he took instructions from the Government or from anyone else. To be honest with the hon. Member, he is getting very confused about the legal and quasi-legal background to this matter.
For example, the hon. Member said that the Solicitor-General had been called to the House to explain the law because there was a crisis and no one had thought about it before. That is quite untrue What the Solicitor-General did was to explain the legal advice which Law Officers have given, not only to this Government but to previous Governments as a whole, in regard to the law under Section 332 of the Companies Act. The idea that the Law Officers only just thought about it then is absolute nonsense, and the hon. Member knows it is. We have had a great deal of correspondence on the subject, and I have endeavoured to show that any other explanation of Section 332 would encourage deceit and encourage defrauding of people. This is something which no Government could undertake to do. Even though under the Crown they are not bound by the law, successive Governments have always taken the view that they should behave as though they were so bound because otherwise they would be deceitful.
This is something which the hon. Member must face. If he thinks that he can produce better wording for Section 332 let him introduce a Private Member's Bill and see how it runs. As it stands at the moment I am convinced that it would be extremely difficult to improve on the general principle. I am equally satisfied that my right hon. and learned Friends advise the Government every bit as well as those who advised the last Government. Curiously enough, they came to the same conclusion.
The hon. Member referred to patents. Here again there is no confusion in the law. The situation in regard to patents arises because of some rather curious provisions in the patent law of overseas countries over which we have no control. For this reason the Government acquired the patents. At the time it was thought that Her Majesty's Government should acquire the patents, the arrangement with the receiver was that, although there was no attempt to put an individual valuation on this large number of patents, it was recognised that in toto they would not come to anything like the £20 million. That £20 million covered the patents and the remainder of the advance purchase. I think the hon. Member for West Lothian is trying to make a mountain out of a molehill.
In one breath I am rebuked for saying that the receiver is in any way connected with the Government and it is said that the receiver is quite separate from the Government's procedure. The Minister washes his hands. Five minutes later the Minister says, "by arrangements with the receiver". I am sure that the receiver and the Government were very closely linked. This may have been for the best, but the hon. Gentleman cannot put it both ways.
No, I am not. If the hon. Member would do me the courtesy of listening—and goodness knows, I was bored listening to him reading from his long pieces of paper—he would understand that it is one thing to say that the Government are not responsible to the receiver, but quite another thing to say that the Government negotiate with the receiver on a sale or purchase. Of course the whole operation which the Rolls-Royce purchase deal was about was a purchase by the Government of assets from the receiver. The receiver's responsibilities to creditors were his and his alone. He is the only person who is in a position to say, and has the physical facilities to make, any estimate of what will be available to shareholders and creditors.
There is a clear distinction between that and negotiating with the receiver, and it does not in any way make him the agent of the Government. We could not have a clear and fair negotiation on any other basis than that of treating him as independent, as indeed he is under the provisions of the Companies Act. This is a red herring that the hon. Member has been drawing across the path.
Will the hon. Gentleman clear up one point about the £20 million paid in respect of patents? Is the position that the whole of that £20 million expressed for the purchase of the patents originally will be treated as a payment to account for the assets of Rolls-Royce (1971) Ltd., or is it the case—as I believe the Minister said this evening, but perhaps I did not understand him—that part of the £20 million will be the allocation for the purchase of the patents and the rest will be towards the overall purchase price?
One values the so-called assets on the basis of Rolls-Royce as a going concern. Therefore, one starts by endeavouring to establish the profit level and then applying an appropriate multiplier. Obviously, the whole basis of the Rolls-Royce business is inextricably intertwined with the rest of its patents so that there will be an overall valuation which will include the patents. So the £20 million is on account of the whole bill. I do not think one would get very far—and it would be a long-drawn-out operation which I hope will not be necessary, because it would prolong the procedure—by going through the long list of patents and putting a value on each. Some have little value and others have a considerable amount. The value is in the business.