I beg to move,
That this House authorises the Secretary of State to pay or undertake to pay sums by way of financial assistance under section 8 of the Industry Act 1972 in respect of a guarantee or guarantees to be given to the bankers of Alfred Herbert Limited covering borrowing facilities made available by the bankers to that company, insofar as the amount paid or undertaken to be paid under the guarantee or guarantees is in excess of £5 million but does not exceed £15 million
The House will recall that on 29th October 1974 my predecessor announced the Government's intention to give guarantees for an increase in the company's overdraft to enable it to carry on business while proposals for its long-term future were worked out. These guarantees have been give under Section 8 of the Industry Act 1972 and amount at present to £5 million.
I was able earlier today to outline the broad shape of the long-term arrangements envisaged by the Government to secure the company's future in my reply to the Question by my hon. Friend the Member for Coventry, North-East (Mr. Park). It will, however, take some months to negotiate the details and put the arrangements into effect, and meanwhile the company needs further working capital to enable it to continue business.
I am therefore inviting the House, in accordance with Section 8(8) of the Industry Act 1972, to authorise me to increasing the guarantees of borrowing by the company as necessary beyond £5 million up to a total figure of £15 million.
The House will not need reminding that Alfred Herbert is one of the largest United Kingdom machine tool manufacturers and one of the largest in Europe. It is one of the industry's biggest exporters, and employs about 6,000 people. It is not confined to the machine tool industry. It is a substantial manufacturer of small tools and instruments. Indeed, its business is wide-ranging in another sense. While Alfred Herbert is inevitably associated with Coventry and the West Midlands, its nine manufacturing plants range from Rotherham in the North to Falmouth in the South-West.
These considerations were very much in our minds when we intervened to keep the company in business last October. They are no less relevant today.
The health and strength of our engineering industry, which is so important to our export performance, is vitally dependent on an efficient home machine tool industry. In helping to put Alfred Herbert on the way to a profitable future we shall be demonstrating the importance we attach to machine tool manufacture as a fundamental part of our engineering industry. We shall also be expressing confidence in the company's potential for the future.
Since the House was informed of the Government's decision that this company should be kept going, a thorough examination has been undertaken of its problems and prospects, with the help of consultants appointed for the purpose and through a tripartite consultative committee. The executive directors of the company, representatives of the employees from each of the nine sites and officials of my Department served on this.
I have now considered the consultants' recommendations and the proposals of the consultative committee. These have been taken very fully into account by the Government in reaching their decision. It has become clear that the company has suffered from a long period of financial stringency which has seriously inhibited its ability to maintain and modernise its own equipment and to develop new designs and products. Its difficulties have been compounded by its high overheads, its heavy burden of short-term debt and its inability to generate an adequate cash flow.
The Government have, therefore, concluded that Alfred Herbert's continuance will require a radical reconstruction of its capital and the injection of up to £25 million of public money under the Industry Act, primarily in the form of equity under the provisions of the Industry Bill which has recently had its Third Reading in the House. The Government's equity will in due course be vested in the National Enterprise Board when it is set up under the prospective new legislation.
In the meantime, it is of the utmost importance that the company, under its recently appointed acting Chairman, Mr. John Buckley, should apply itself, as I am sure it will, to the urgent task of strengthening its management organisation. It also needs to work out a long-term strategy for the future, with the help that it will be able to derive from the reports and recommendations received from the consultants and from the management and employees themselves.
I am sure that Mr. Buckley and his colleagues will share my determination that this company, which has a potentiality for success in the future, should set as its goal the restoration of its profitability as quickly as possible, so that it can once again prosper and find a place among the successes of this essential industry which supplies so much of the basic tools of production of British and world industry.
It would be wrong for me to lay down the particular policies that the company should pursue. There will be difficult decisions for the company to take. I am confident that it will apply itself to its many problems with the determination to set the company on the road to a prosperous future.
This will call for a very high degree of dedication from all who work in the company and for the utmost co-operation at all levels. I am greatly encouraged by the processes of discussion, of exchanges of information and consultation, which have been developed so far in the past months. These are testimony to the great good will which already exists in the company. I hope that they will be built on in the even more difficult times ahead.
It is, I am sure, essential that the decisions that have to be taken will have the ready and willing assistance of all concerned and that everyone in the company will accept the responsibility of working for the company's future. In the present situation the Industrial Development Advisory Board attached particular importance to the need for the ablest management which at the same time will be free to respond to market and commercial demands. The board considered that the consultations and the understanding reached with the work force had established a welcome recogni- tion of the major steps that would have to be taken.
I have accordingly informed Mr. Buckley that, while the Government may provide the financial resources that they think are needed for the company to revive, it is for the company itself—and that means everyone from management to shop floor—to ensure that these resources are put to effective use.
Yes, I can confirm that. The hon. Gentleman will know that he put a Question to my right hon. Friend the Secretary of State for Energy on 30th January, when my right hon. Friend confirmed that. But the Government did not take that view. That was made plain at the time.
Alfred Herbert has much ground to make up. It will have difficult decisions to take and changes to make if it is to prosper in the tough world of international competition. Only good management and a committed work force can do this.
My Department and, when it is established, the National Enterprise Board will be concerned to see that resources put into the company are efficiently employed. The additional interim assistance which I am proposing tonight will enable Alfred Herbert to continue while the financial reconstruction is being negotiated and implemented. I invite the House to approve the motion.
It would be difficult to say to the right hon. Member anything other than that in his speech he has made about as inadequate a case for the expenditure of the sums of money that we are asked to approve tonight as I have ever heard. It would not be difficult to make that speech about virtually any company, no matter how inadequate its management, no matter how bad its industrial relations, no matter how totally unsaleable its products. It could have been made in defence of any expenditure in almost any conceivable circumstances.
After hearing what the Secretary of State has said about spending £25 million, I must say that there is a growing anxiety in this country about the total inability of the Government to understand that every time they seek to expend sums of this sort, for the kind of reason the Minister has given us tonight, in a totally inadequate way, the credibility of the Government is a little further damaged.
It can be no coincidence that on this particular evening we should just have heard that the Post Office has lost £300 million, which the Department sponsoring it did not know about until a matter of weeks ago. The one question about which we can generalise is that the ability of Governments to monitor and oversee industry in this country is totally inadequate.
The lack of any factual backing for the assertions of the Secretary of State for Industry in what he has said will have provoked the greatest doubts and anxieties on the part of almost all those who have listened to him.
Perhaps I can indicate to the House why I believe that the right hon. Gentleman's speech is inadequate, not just for what he said but for the things he did not say. First, I want to make it quite clear that this is a company that in the most material ways has failed, and the responsibility for that must lie very substantially upon the management. A very substantial responsibilty for allowing the position to deteriorate must lie upon the owners and the shareholders of that company, who did so little over so long a period of time to intervene and to act as shareholders should have done in their best interests.
Let us be quite clear that there is no joy for anyone in the failure of Albert Herbert. It was a great British company, and it has gone into a sad decline. The question the House is asked to consider tonight is whether, on that track record in the markets in which it operates, and with the management and the work force it has, it is likely to have within itself the basis upon which to become the profitable company about which the Minister has spoken.
I believe that we are entitled to ask two questions about the case the right hon. Gentleman has put forward. First, what is the underlying nature of the investment opportunity that he is putting to this House? Is there any real reason to suppose that this company, in its own pattern of trading, has within itself the ability to turn from the losses which are its recent record to the profitability which he envisages at some unspecified period in the future?
The second question is whether, assuming that the Minister is to spend £25 million in support of industry, he is right to spend it on this company, as opposed to supporting other more successful companies which may not even be in the machine tool industry. He made no attempt to indicate whether the Government have made a careful decision about the best way to invest £25 million. Is it best to invest it in Alfred Herbert, or elsewhere in the machine tool industry, or in some other direction? Those are the two fundamental questions which the Minister should answer.
Is there, then, any justification in investing this money specifically in Alfred Herbert?
There are four areas in which the Minister has access to information which would enable him to make a judgment and to put before the House the basis upon which that judgment was made. First, he has the accountants' report. Secondly, he has the recommendations of the tripartite discussions. Thirdly, he has the views of the Industrial Development Advisory Board. Fourthly, he has the views of the management of the company itself.
The reality is that the right hon. Gentleman did not seek in anything that he said to give any indication of what any of those four methods of trying to reach a judgment was. There was no indication in his speech of how profitability was to be achieved, whether there would be any return on the investment committed to the company, or whether the company's products were likely to be more successful in the future than they had been in the past. He gave no indication whether any of these matters had been decided upon for any reason, one way or the other.
I should find it interesting to know how it is that I can read in a national newspaper detailed quotations from the accountants' report. I cite as an example Victor Keegan's article in The Guardian giving chapter and verse of the report's contents. This House, which has to give the money, is given no insight into the contents of the report and the basis on which the Minister has made his judgment.
I have no idea what the tripartite recommendations of the trade unions, the management and the civil servants were. No indication has been given to this House. However, because one of my hon. Friends happened to ask the right question earlier today, we know that the IDAB recommended against the proposals but that the Secretary of State apparently was more concerned to choose the one favourable quotation from the IDAB report than with informing the House that the conclusion of the report was that the money should not be forthcoming in the way that the Government proposed.
The fourth area which intrigues me most is the Minister's own judgment, because he said that the company would determine the strategy whereby it earned profits. I welcome that. It is in conflict with what the Government did in the case of British Leyland, where the Ryder team determined the strategy and laid it down for the management to follow, which was a crazy way to go about anything of this kind. It is far better to say to a management "You will have to carry out the strategy, so you had better devise it and put your conviction behind it."
However, if I were investing my own money, I should prefer to see the strategy before committing the money. It is clear from the question answered earlier today that the company has not yet produced the strategy and, therefore, that the management could not yet know, and has not been able to satisfy the Minister, how profits are to be forthcoming. I say that not one penny of my money would go to backing a management which had not worked out its strategy to bring the company to profitability. However, the Minister has said clearly that for the future the company will be expected to work out such a strategy.
If I praise the rectitude of the Minister's judgment in recognising that it is the management which has to make this judgment and that it is its responsibility, the one question which follows from that concerns the amount of equity that the Government intend to take. The Secretary of State did not explain this to us. We have heard figures of the order of £25 million. I have no idea whether the right hon. Gentleman intends to take 5 per cent. or 95 per cent. of the equity. But, if there is to be a substantial element of equity in the Government's hands, the concept which the right hon. Gentleman advanced at Question Time suggesting that it would be for the company determine and carry out the strategy at least asks us to accept that there is to be a break with tradition of a kind that I find totally unbelievable. It is that a largely nationalised company will be given the freedom to determine its own strategy.
There has never been such a position in a case where the Government owned a significant shareholding. There is no precedent for civil servants not being in such close proximity to the workings of the company that every significant decision taken has to be cleared with Ministers before it is taken.
I do not believe that the management of the company will be given the freedom which the Secretary of State says that he intends that it should have. I believe we shall find that £25 million will have been poured into this company but without the dramatic steps necessary to move towards a more viable basis having been taken. The company will be perpetuated in a framework that is more comfortable for it to operate in at the moment. Pressure for change will be diminished by the Government's action today, particularly because there is no clear agreement on what the nature of the change should be.
The House should consider where this £25 million might have been better used. Could it have been better used in machine tool companies that are profitable and viable or sections of Alfred Herbert that could have been profitable and viable if they had not been held back within an unprofitable company?
We must look at what has happened to resources deployed out of Alfred Herbert in the past four years. Between 3,000 and 4,000 people who worked for the firm in 1971 no longer work for it. Eight factories that were in the group in 1971 have been sold. It is not possible to make a meaningful judgment of whether the company's existing operations ought to be perpetuated unless one considers what has happened to those people and factories since 1971. If, far from being subsidised by the taxpayer, the people are in profitable and viable jobs in the West Midlands and the rest of the country where the company formerly traded, the Secretary of State has misled the people who are to continue working for the company. It would have been better for him to tell them to look at their colleagues who had left and sought profitable, well-paid and more secure jobs elsewhere. It might have been better to concentrate this £25 million on helping profitable companies to take over some of Alfred Herbert's present factories where the company is not capable of making a success.
These questions have not been answered because, politically, they are unanswerable. They are based on the assumption that the status quo will not be perpetuated and that people will be asked to make decisions based on what the real world is all about—that, unless we can sell our products, we shall have to continue the degree of subsidy inherent in present industry at considerable cost to people whose taxes have to finance it.
If the hon. Gentleman thinks I said that, then, to make it quite clear, I will tell him that I did not say that. I did not mean that, and I do not think that would be a good idea. This debate is much more significant than trying to see whether a particular sentence or phrase can be interpreted in a way I would never have dreamt of meaning it. It is a waste of time to get involved in a semantic discussion of this sort.
The real question we should face is whether this money could give a greater sense of security and return to the country if we redeployed the assets and work force of Alfred Herbert rather than perpetuated them in the existing framework which is economically unjustifiable.
So we end up, as is increasingly the case with decisions by the Government on industrial policy, with the worst of all possible worlds. No plans have been put before the House for bringing the company into profitability. That is not to say that plans do not exist, but the House has no knowledge of any such plans and is, therefore, entitled to assume that there is none.
We do not know whether the Government intend to monitor the flow of funds to the company. Whereas in the Ryder report on British Leyland there were very clear guidelines for an insistence on modernisation and redeployment before funds would be allowed to continue to flow, there are no such safeguards in the proposals now before us. Although the £25 million is going to this company, there is no attempt at determining whether the money would be better going to other companies inside or outside the machine tool industry.
Once again the Government have failed to read the message which has faced the company since the IRC intervened in 1968. There are no grounds for assuming that profits will flow from what the Government are seeking to do. The one certainty is that a very large sum of scarce resources has been committed to what will be seen as a political solution, not an industrial solution, of Alfred Herbert's problems.
Unlike the speech by the hon. Member for Henley (Mr. Heseltine), my right hon. Friend's statement will be widely welcomed not only in my constituency but throughout Coventry. The hon. Member for Henley posed plenty of questions but provided no answers, except to advise the people employed in this company to get out of it as fast as possible. No doubt they will take note of what he said. It is worth bearing in mind that unemployment in the city is now close to the national average and is a matter of very great concern.
In proposing these guarantees, can the Minister say to what extent they take account of past debts incurred by the company and its future restructuring. Which of the options set out in the report submitted by the consultants, management and the trade unions are to he taken up. I have in mind particularly the proposal to close the Red Lane works in Coventry. This is the only works where roll grinders are manufactured in this country for the British Steel Corporation, and if the works were to close the BSC would presumably have to import this equipment.
Do the Government intend to take a majority share in the company in order to ensure accountability for the guarantee money and, possibly, future longer-term finance? What provisions are to he made for the work force, through its elected representatives, to take part in the company's future decision making?
The difficulties at the company are a reflection of the difficulties of the whole machine tool trade. In Coventry companies like A. C. Wickman are considering a three-day working week and others are building for stock. This arises from the fact that in the last five-year cycle in this trade there were two and a half years down and only 18 months up on the sales curve. In this situation it is vital that as much as possible of the retooling order for British Leyland is placed with the British machine tool trade. Ensuring that this happens might be a suitable exercise for the little "Neddy" on machine tools, or, if that were not considered suitable, perhaps a Standing Committee could be set up for this purpose, to monitor and give advance notice of machine tools required.
The company having been assisted by guarantees or by the influencing of orders, there still remains the problem, even at a time of rising unemployment, of a shortage of skilled labour. The Chancellor of the Exchequer recognised that in his Budget by allocating more money for training, but that is an area which would repay further examination.
I realise that some of these matters do not come within the responsibility of my right hon. Friend, but they are all part of the effort needed to secure a resurgence in British industry, which must start in the machine tool trade.
I welcome the opportunity to make a brief contribution to the debate because a company called Herbert Controls and Instruments operates from Letchworth in my constituency. It has a work force of about 300 and manufactures ancillary gauging equipment for the machine tool and related industries. The company's imme- diate future depends largely on the orders which will come in within the next six months or year. To some extent it is well placed because more than 60 per cent. of its output is sold abroad.
The company, which is admittedly only one part of the Herbert Group, has the will, the capacity and the potential to survive. It has excellent industrial relations, which have been, perhaps, paradoxically, improved by the difficulties of the last nine months. Everyone who works there, whether in management or in the work force, is fully aware that there can be no viability over any acceptable time scale for a company such as this without profits. Therefore, I very much welcome the statement made by the Secretary of State that the aim will be to ensure a profitable future.
The difficulty which I, the hon. Member for Coventry, North (Mr. Park) and others have is that on the basis of what we have been told this evening there is inadequate information for us to make a judgment on the provision of funds of this magnitude to a specific company. The problems of Alfred Herbert over the last 10 years are typical of the problems of the machine tool industry, and in a wider sense they are typical of the problems of British industry as a whole.
The country has suffered from an excessive preoccupation with the preservation of jobs in the near term, and with that goes the support of declining industries beyond their natural life. That has meant expansion without adequate profitability, which has led to chronic under-investment in the activities of this company, in which there are greater opportunities for a profitable future.
If, as the Secretary of State says, the company is to concentrate in future on profitable activities, there remains the question of the structure, and after 45 minutes' discussion we are little wiser how that will be achieved. As my hon. Friend the Member for Henley (Mr. Heseltine) so forcefully said, there is no adequate basis on which we can make decisions on investment or on other forms of assistance on this scale. If there is to be, as promised, a radical reconstruction of the company's capital, we should also be told about the radical reconstruction of the company's activities which must accompany it. The House is put in an impossible position to take far-reaching decisions if it does not have adequate information on which to base them. In the long-run there can be no benefit to the work force, no incentives to management, no returns for shareholders, who are now to include the taxpayers through the National Enterprise Board, no returns in the longer and wider sense to the community as a whole, and no solution to the problems of employment and the on-going future of British industry unless these matters are properly settled.
I believe that it is a wholly inadequate procedure for us to debate orders of this kind with so little notice of what the Government's intentions are. Very little information is given to us on the Order Paper, although it has been supplemented by a Written Answer which appeared only this afternoon. Is this an adequate basis for proper parliamentary discussion of matters of such far-reaching importance and concern?
First, I should like to congratulate the Minister on his opening remarks in which he emphasised the importance of the machine tool industry to this nation. Secondly, I should declare an interest, and when the register of Members' interests is published within the near future, hon. Members will see what it is.
I am troubled by the abysmal ignorance of the hon. Member for Henley (Mr. Heseltine) on the machine tool industry. I know that he is concerned with many problems and that he cannot be an expert on everything. Has he ever visited the major works of Alfred Herbet, and has he ever discussed with the senior members of the present Alfred Herbert management the nature of the problem facing that company? Had he done so, on balance he and the hon. Member for Hitchin (Mr. Stewart) would not be so obsessed with immediate profitability. There are other problems that the associated with this company apart from mere profitability at this stage.
Therefore, on reflection it is important to look at the strategic importance of this industry. This has been considerably overlooked by successive Governments. I am not being critical of this Government or of previous Governments of any colour. However, had it not been for the determined efforts by those in the machine tool industry, we should not have been as prepared as we were towards the latter stages of the 1914–18 war and we should certainly never have made up the leeway in the 1939–45 war.
The curse of Alfred Herbert was the fact that the man who virtually owned the company held office for a long time—for far too long. As a result, some of the more enterprising members of that vast organisation moved—very success fully—into other machine tool companies within the United Kingdom. This was not only in their interests but in the interests of the machine tool industry and the nation. They have helped those companies and have done very well themselves.
We should also recognise the importance of giving some hope and recognition—and, certainly, there should be some direct vocal acknowledgment by Conservative Members—to the efforts that these men will make to rescue this company from a bad management policy that has lasted for many years. Those hon. Members who know anything about the management of the industry should learn some lessons from the troubles that started at Alfred Herbert.
A great deal has been said about the British Leyland project. My hon. Friend the Member for Coventry, North-East (Mr. Park) will recognise that we cannot re-equip British Leyland unless, first, we give the incentive to re-equip British machine tool industry. Therefore, we must adopt an expansionist mood, not merely towards Alfred Herbert. We should financially expand other companies which are not only profitable but could be infinitely more profitable. This would help not only our home market but help us to fight against intense competition from West Germany, which is a highly industrialised nation, and certainly America, which is another highly industrialised nation.
Many lessons can be learned from this short debate. The first is how we can encourage this industry, help the skilled craftsmen who are working in it, and encourage the junior echelons of management to recognise their work and the chief executives to increase the exports of this vital industry. When the economy starts to improve, the first sign will be orders for machine tools. When orders for machine tools increase, everyone can feel happier about the future of this nation.
I must add to what was said about the wholly unsatisfactory way in which hon. Members on both sides of the House were able to prepare for this debate. It must have been evident that if there was to be a reasoned and informed debate on this important matter involving considerable public expenditure, hon. Members should have had at least summaries of the Peat Marwick report, which went to the Government, and the joint recommendations of the management and employees in Alfred Herbert.
I regret that the Secretary of State neither before this debate nor when introducing it gave us any indication of the recommendations in those two important documents. In addition, back-bench Members' only means of knowing that an extremely important Written Answer was given this afternoon was by means of what appeared on the tape at about 4.30 p.m. If we had not seen the tape we would not have known of the important statement made by the Financial Secretary about this company, which related to this order.
This is an important point. I must make it clear that Front Bench Members were in no more privileged position than back-bench Members.
I do not believe that the Secretary of State, in opening, drew out the real implications of the Government's proposals regarding Alfred Herbert. I shall make two points arising from the financial position of the company and from what the Secretary of State said.
First, hon. Members on both sides of the House with constituency interests—I do not include myself in that category—will wish to be aware of the financial position. The overwhelming proportion of the £25 million envisaged for this company will not contribute to providing greater job security for those working at Alfred Herbert. The overwhelming proportion will go towards reducing the bank overdrafts and indebtedness of the company. Second, there seems to be no prospect in the foreseeable future of providing any return on the £25 million of taxpayers' funds which will be used.
Alfred Herbert has substantial indebtedness. We can see that from the last published annual accounts of the company and what has occurred since. There is a company debenture of £2·4 million. There is an FCI loan of £6 million, all of which has to be repaid over the next two to five years in four annual tranches. There was a bank overdraft on 31st October 1974 of £7·9 million. Since October of last year a further £5 million of public guarantees of overdraft finance have been offered in addition. Tonight we are being asked to approve an order which provides a further public guarantee to another £10 million of bank overdraft finance.
When the full expenditure as envisaged by the motion has been incurred, Alfred Herbert will have total debts of £31·3 million. How much debt can Alfred Herbert carry? We know that a company can normally expect to carry a ratio of debt to equity of about 1:1·50. Alfred Herbert has very little in the way of equity funds. Its equity funds in October last year were £17·5 million. We were told this afternoon in the Secretary of State's Written Answer that the amount of equity in the company's balance sheet will be written down. The normal practice would be to write this down by the amount of loss which, as the directors of the company have already made public, in the current financial year will be a further £4 million. So there will be a write-down of shareholders' funds which must bring shareholders' funds down to about £11 million or £12 million.
That being the case, it must be evident that £20 million-plus of the £25 million will actually be used to repay the indebtedness which has been assumed by the company.
The Secretary of State said today that of the balance of funds that will remain after the indebtedness had been paid off, some had to be provided for working capital. I am sure that that is correct. That being so, it is self-evident, it would appear, that there can be very little left over for genuine capital investment in Alfred Herbert, which is the only thing that will secure the long-term employment and security of those employed there.
I do not believe that it is those who have a constituency interest who should be particularly happy about this solution. The people who should be happy tonight are the creditors of Alfred Herbert, who are the bankers. They are the people who will really benefit from the announcement made today.
I turn to my second point. I do not believe that there will be any significant return on this £25 million of taxpayers' money that is to be put in. To get a return by way of dividend on these funds would require a dividend payment of about £1½, million a year. The House should consider whether that is at all probable from a company which has made a loss in each and every one of the last five years and whose total losses over the last five years will now, in aggregate, by October of this year, have amounted to £18 million. Indeed, as we believe from the Peat Marwick report, none of the options which Peat Marwick could foresee for the company envisages any profit until 1977 at the very earliest.
Therefore, I believe that to all intents and purposes, from what the Secretary of State has said tonight, the £25 million of taxpayers' money that is to be made available will be made available effectively on a grant basis, because there is no possibility of any return on it.
We have to return to the question which my hon. Friend the Member for Henley (Mr. Heseltine) rightly posed—whether this is the best way of using £25 million, even if it is thought right to use it in this particular industry. I return to the Answer which the Secretary of State's predecessor, now the Secretary of State for Energy, gave me on 30th January, when I asked him what was the difference of view between the IDAB and the Government as to how Alfred Herbert should be handled. The then Secretary of State said,
The board and I recognised that the business should be placed on a sound and continuing basis.
Therefore, there was no difference of objective between the Government and
the IDAB. The right hon. Gentleman went on to say,
The board recommended that this was best achieved through allowing the company to go into receivership. I took the view that this was not the best course."—[Official Report, 30th January 1975; Vol. 885, c. 319.]
It was the IDAB's view that receivership was the best way of putting the business on "a sound and continuing basis"—to use the phraseology of the Answer.
I have been following the hon. Gentleman's argument. He has been very critical, but he does not pose any solutions. Does he feel that Alfred Herbert should go into liquidation or receivership with the loss of the 7,000 jobs, or does he feel that more money should be made available for complete State ownership?
If the hon. Gentleman's right hon. Friend would publish the Peat Marwick report and the proposals put to him by the management and employees, there would be an opportunity for all hon. Members to form a view on that matter. All that I and my colleagues can rest on is the IDAB report. Of course, the board is composed of a number of people who have enormous experience between them. I would have thought that a recommendation from the IDAB would carry considerable weight.
If it is right to use public funds in this industry surely we should consider how best they can be used. In Germany, for example, in the early part of this year, Government funds were provided for soft loan finance for counter-cyclical purchases by German industry of German manufactured machine tools. That is a far more rational use of public funds. If public funds are to be used, they should be used in a way that will allow the profitable parts of industry to grow and expand.
The way in which the Government are proceeding is to use taxpayers' money in the most wasteful way, and basically to pay off creditors. I do not believe that there is any possibility of the £25 million representing the ceiling of the commitment. The way in which funds are being used will not ensure the longterm security and prosperity of the employees of the company.
I say one thing for the hon. Member for Tonbridge and Mailing (Mr. Stanley): he does his homework unlike some of his hon. Friends. However, he does his homework only on the economic and financial sectors. He never does his homework on some of the human and social problems that are involved. Ever since I heard the hon. Gentleman first making speeches on issues of this sort I do not think I have heard him mention jobs or employees once.
I thought that was the purpose of the motion before the House.
I welcome the motion that my right hon. Friend has introduced because I represent many constituents in Nuneaton and Bedworth who work at Alfred Herbert's various plants in Coventry. I am grateful for what my right hon. Friend has said, because in representing Bedworth I represent an area which is fast approaching the highest unemployment percentage in the whole of the West Midlands. I recognise the contribution which my right hon. Friend's guarantee will make towards the furtherance of Alfred Herbert's future efforts.
I am glad that we have an opportunity of discussing this matter. With reference to the hon. Member for Henley (Mr. Heseltine), and given the kind of pronouncements that he has been making. Since the Government have been in power, it is clear that by now there would be no car industry, no motor cycle industry and, by the sound of things, no machine tool industry either. Every application for industrial support that we have adopted since we have been in office the hon. Gentleman has opposed. Let the hon. Gentleman remember that these grants for financial assistance have all been given under the legislation that was enacted by his Government—namely, the Industry Act, 1972. He should remember that we are using that Act tonight. That is the Act that his own Government introduced. When the hon. Gentleman and some of his hon. Friends are critical of what my right hon. Friend proposes, I wish to goodness they had voiced their criticisms before passing that legislation.
I am not in any way criticising the Act. It was essentially an Act which gave great power to the Minister to use as he saw fit. It so happens that in a growing number of cases it has been used wrongly. That does not make it a bad Act, but it makes Ministers' judgments bad judgments.
Some of the hon. Gentleman's hon. Friends criticised the Act on its introduction, but the hon. Gentleman was all in favour of it at that time. I recognise the logical consistency of the arguments advanced by the right hon. Member for Down, South (Mr. Powell) and others who are not here tonight, such as the hon. Members for Oswestry (Mr. Biffen) and Cirencester and Tewkesbury (Mr. Ridley). They recognised the possibilities and they have been true to their principles. But we have seen how the hon. Member for Henley has changed when it suits his book.
I support the financial assistance that is to be given because of the contribution made by Alfred Herbert—a contribution which I hope it will continue to make in the future—in respect of not only its companies based in this country but the subsidiary companies which it has overseas and which so help our export performance.
My hon. Friend the Member for Coventry, North-East (Mr. Park) was right to say that if we are to re-equip British Leyland, we stand committed to inject £3,000 million fixed and working capital into that corporation by 1982. Is he suggesting that the bulk of that capital should be spent on imported machine tools? That is the corollary of some of the Opposition arguments which we have heard tonight.
We recognise that there must be a fundamental re-equipment of British Leyland if we are to match some of the opposition we get from Datsun, Fiat, Volkswagen and other continental producers. I believe that the motion will go a long way to make re-equipment possible for Alfred Herbert and, indeed, for the whole machine tool industry.
I understand that a fairly prominent person in the Machine Tool Trade Association suggested that we could not supply British Leyland and attend to exports at the same time because there was not the capacity in the machine tool industry. I understand that that gentleman was rebuked for his remarks.
My researches indicate that with the right amount of support, both strategic and tactical, at the right time the industry—and, of course, Alfred Herbert—can supply British Leyland and make a significant contribution to exports and our balance of payments.
I hope that the Secretary of State for Industry will be able to give a little more information about the consultative and participatory processes by which workers in future will be able to share decision-making. We are undergoing yet another experiment in industrial democracy which the Secretary of State for Energy has initiated. It is an important experiment. We do not have many occasions where workers are enabled to share in future strategy decision making in companies.
I hope my right hon. Friend will say more about machine tool imports. I have tabled a number of Questions asking the Government to give grants to that industry to enable them to meet the competition of foreign-produced machine tools. I hope that my right hon. Friend will be able to say something about the prospects of Government grants for British firms and perhaps suggest how they should be spent. It is no good putting large sums of money into a company like Alfred Herbert and giving it guarantees if the grants which the Government give out are to be spent on imported machine tools. I hope that the Minister will say something about that and about the policy options he intends recommending following the Peat Marwick study and the joint union-management proposals.
I hope, too, that we shall hear something about Red Lane. It is difficult to ask about Alfred Herbert in Coventry without constituents asking, "What is going to happen to Red Lane?" It is an important factory, as my hon. Friend the Member for Coventry, North-East has said. That, too, has important balance of payments and import repercussions. I endorse everything my hon. Friend has said. We both have constituents working at Alfred Herbert.
If the figures produced by the hon. Member for Tonbridge and Mailing are accurate, they seem to make not just a good case for an injection of public money but a cast-iron case for a complete takeover. If we are really having to pay these sums of money into a company like this, I would like to see not just partial public accountability but complete public accountability—nationalisation. I hope that the House will support this motion and give all possible encouragement to my right hon. Friend to keep alive the British machine tool industry.
Constituency interests or the lack of them have been fairly freely revealed tonight. While I have no constituency interest in any of the Alfred Herbert factories or former factories, I have a constituency interest in well-staffed, well-managed and highly efficient and profitable engineering works of various kinds that rely on a regular supply of up-to-date machine tools. Part of their efficiency is due to the fact that the policy of almost all of them is to equip themselves with the best bargains they can find from any part of the world—a policy which, for what it is worth, I try to encourage.
When my colleagues asked me earlier this evening at our party meeting whether I had any advice to offer as to how they should vote later tonight—[Interruption.] They are votes on which right hon. and hon. Members of the Labour Party have occasionally relied. [Interruption.] The idea of a democratically run party must come as a surprise to some groups of Labour Members. I told my colleagues that I preferred to wait for the opening speech of the Minister before offering any advice.
I now realise what a sucker I was to suppose that I could get a grain of information from a threadbare utterance which would have disgraced the president of the smallest banana republic in the world. I profoundly hope that no one from the International Monetary Fund or the other bodies to which the begging bowl will soon pass was in the Gallery to see to what depths our affairs have fallen. Every elementary question which an A-level student in these matters would have jotted down for an essay on these affairs was neglected or deliberately passed over.
We have referred to the fact that the right hon. Gentleman has suddenly taken on a heavy new burden, but we are entitled to some continuity in the conduct of our affairs. I would have hoped that this massive organisation down Victoria Street, which you, Mr. Deputy Speaker, and I pass several times a day, would have been able to furnish something a little more credible than we have had tonight. There is no excuse on this occasion. It cannot be said that suddenly a tidal wave of economic disaster has overcome a great British firm and the House of Commons must act quickly without too much investigation. For four years there has been a loss on the audited accounts of the company. Ever since 1967 the return on capital from Alfred Herbert has been derisory. Governments of both complexions, if they cared about this company—and I am not particularly suggesting that they should—ought to have looked at it long ago. There again, I wonder what this great apparatus of Government has been doing during these wasted years.
My own view is that the Government were confidently relying on the fact that the major Opposition party in size has a guilt complex about the Act which it so unwisely passed, and which my hon. Friends resolutely opposed, and that the usual half-hearted official Opposition vote would be all the Government had to meet tonight. But I believe that public opinion is now thoroughly roused about the way in which the weak, the inefficient and the feather-bedded succeed in getting money out of the Government, while the smaller, well-managed firms—there are dozens of machine tool makers in places like Halifax who know how to run their businesses—have to go crawling to their bank managers when some temporary trouble affects them.
Unless in the closing minutes of this debate the Minister or his colleague can seriously address themselves to questions like whether this is fair to the efficient competitors in this country of Alfred Herbert, whether the money will be used to promote a counter-cyclical policy in the machine tool industry, which has been badly needed for years, whether this will assist British Leyland or whether it will simply be a cover for British Leyland to indulge in an expensive and unjustified "Buy British" policy at all costs—unless, indeed, we have further and better particulars—I am bound to advise my colleagues that this proposal should be opposed.
I shall certainly do that. Mr. Deputy Speaker.
One point that I should like to follow up concerns the opinion of IDAB, an experienced bunch of people. I should like to see the same question as was asked in January or February asked again today, because in the meantime we have done something about changing the position of IDAB to give it some more experience. It is unlikely that it would take the same view today as in the past.
The hon. Member for Henley (Mr. Heseltine) put the blame foursquare on the management of Alfred Herbert, and in many ways he may be right, but really the blame lies on British industry. Way back in 1969 the CBI was doling out prizes to companies for their foresight in investing in new equipment and plant. They selected their top 10 pacemakers of the year, and in 1969 Alfred Herbert received a plaque from the CBI. This award was made, it was said, to Alfred Herbert for the most impressive plant built in this country since the war.
No one can argue that the management at Alfred Herbert was not then trying to do something about investing. But after 1969 we had four years of the Tory Government, with a complete and catastrophic fall-off in investment in industry right across the board, decreasing the need for machine tools. That is why we are here tonight, not because of the failure of one particular company.
I should like to think that we are here to help just one lame duck. I assume that we have a strategy, under the Industry Bill 1975, truly to regenerate British industry. It is no good going on about regenerating British industry if we are then told that we have not the capacity to produce the machine tools. Factories in Birmingham are full of equipment from East Germany, West Germany and Russia, all brought in under very shady deals in terms of the financial arrangements. It is extremely difficult to prove these matters or to get even our own Government—which we hope would want to do so—to take action.
We are told that the NEB will be involved in the shareholding. It is already going to have shares in one other machine tool company, Kearney and Trecker Marwin Ltd. Why cannot it co-ordinate the effort being put into British Leyland?
We are talking of investing over £2,000 million, and Opposition Members criticise an investment of £25 million. The new machine tool orders required by British Leyland can only be glimpsed from the Ryder Report. What we are told is that, unlike most of the rest of the world's industry, British Leyland's equipment is clapped out and twice as old as the average for the rest of the world, and that there is a vast new market there.
It is no good if the NEB does not do its job. Rather than sitting issuing directives, pleading and cajoling, it must get in and do something, even sending people into companies to ensure that the money is spent properly, so that we do not find British Leyland going abroad for new machine tools when we have been asked to keep going a large sector of the productive capacity of the British machine tool industry.
I hope that my right hon. Friend will enlarge on that, because it is of crucial importance bearing in mind the problems of our motor industry.
I hope that the hon. Member for Birmingham, Perry Barr (Mr. Rooker) will forgive me if I do not comment on his remarks. In the brief time available to me, I want to take up some of the remarks of the hon. Member for Nuneaton (Mr. Huckfield), which in their own way represented a classic exposition of their kind.
The hon. Gentleman's arguments were drearily familiar: "We shall take a major share in British Leyland. Therefore, we must have another company making machine tools, which this company will need. The Opposition have never had any sympathy for people who will be out of work. In opposing this measure, they are opposing employment. They are damaging people's employment prospects. They do not care about them, and we do."
It is precisely because the Opposition are interested in people having employment in viable industries with long-term prospects that we oppose measures like this which pump money into companies simply because they exist and are in trouble.
All that has been said about Alfred Herbert is that it employs a lot of people, it is in trouble, and, therefore, we must give it money. No one has said that we have reason to believe that Alfred Herbert can pull itself round if we make the money available. The Secretary of State spoke vaguely of a united effort by management and labour and said that, with additional money, the whole thing would come right. He almost added "God willing", but not quite.
Again and again we hear arguments of this kind. We hear that, because a company is in difficulties, that is the principal reason why we must preserve it. The House never asks why the company is in difficulties and whether the money being made available will help it get out of its difficulties.
We heard earlier in the debate that most of the money would go to pay off existing debts. It will not be available to create new machines. It will be used simply to keep the company alive. I have no doubt that three months from now the Secretary of State will say "Three months ago we voted £25 million to keep the company alive. It is alive, but barely, and it needs another £25 million to keep it going. Having put in £25 million, we dare not do other than put in the rest, otherwise we shall lose the money that we have already put into it."
However, it is even worse, because in effect the Secretary of State will use the money to undermine the commercial chances of the company. The word will get about that Alfred Herbert is owned by the Government and that it can be given extended credit and treated on a non-commercial basis because the Government are involved.
We are taking part tonight in a further chapter in probably the most dreary story ever written about this country. The Government overspend. Because of that, they over-tax. The result of its over-spending is inflation, and, therefore, we must have price controls. Because we have price controls, companies get in difficulty. Because companies get in difficulty, we must have Industry Acts. So we end up putting money into companies which are in difficulty mainly because of the Government's own activities.
We seem to spend half our time making difficulties for companies and taking money from companies. We spend the other half of it handing it back to them in order to bail them out of the difficulties into which the Government's policies have put them.
Tonight is just a further chapter in a very boring Alfred Herbert history. The Secretary of State will be back again to explain that he listened, as very few people do, but those who have listened have always found themselves in difficulties. The hon. Member for Nuneaton, with his seductive stories about protecting families and jobs, has sought to prop up another company which is a drain on the nation. He has done nothing to preserve employment in the Midlands or to help the future of British industry. I shall vote enthusiastically against this proposal.
We now come to the end of the debate. I should like to say that we now understand what it is all about, but we do not. Some hon. Gentlemen opposite had the gall to ridicule the hon. Member for Colne Valley (Mr. Wainwright) who said that he came into the Chamber to make up his mind and then to advise his colleagues in the Liberal Party on how they should vote, hoping that he would have some information from the Secretary of State.
I do not think that I have ever heard a more inadequate argument put forward by the Secretary of State. My hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) was a little unfair, because the Secretary of State gave three reasons for this investment and my hon. Friend cited only two. One reason was that a lot of people and jobs were involved. My hon. Friend begged the question whether jobs could be more effectively preserved in other ways than giving £25 million. However, I leave that point aside. The second reason was that the company was in trouble. The third reason, which my hon. Friend left out, was that the company was a major manufacturer of machine tools. That was about the sum total of what the Secretary of State put before us.
The Secretary of State—I say this in no personal sense, because the right hon. Gentleman is normally a very effective performer at the Dispatch Box—did not seem to understand what he was talking about. It was certainly his least effective performance. I do not know whether he had a chance to read his brief before coming into the Chamber. He certainly did not seem to feel at home. The House did not find his performance convincing.
In the absence of any speech, we must turn to the Secretary of State's Press release, which nobody in the House received until quite late today. No attempt was made by the Library to make it available to hon. Members, although it was produced this afternoon.
Obviously this is a minor matter. We are giving only £25 million. The House is deciding, in an hour and a half, whether £25 million should be made available to Alfred Herbert Ltd.
So we look to the Press release, in which we get words of great wisdom which give us the whole justification for this investment. We are deciding to spend £25 million. My hon. Friend the Member for Henley (Mr. Heseltine) also made this point. If anybody was making any investment for any purpose at all, whether in industry, in business or in private life, would he not first decide what he wanted to do? Would he not first consider whether the expenditure was justified, and then decide whether he could get the money for it? Yet in this incredible situation, which is making an absolute farce of Parliament, we are asked to approve the expenditure of £25
million without any information or justification. We merely have a Press release from the Secretary of State:
It will be for the company to determine the strategy and the consequent pattern of production to give effect to this purpose.
The safeguard, in the final sentence of that paragraph, is:
The aim will be to ensure that Alfred Herbert Ltd. will achieve a profitable future in the coming years.
Is there any company in this country which, whatever its situation, does not have as its aim a profitable future?
The sum of the wisdom that we get from the Secretary of State in his Press release is that, because the company wants to be profitable, we should give it £25 million.
The hon. Member for Perry Barr, somewhat plaintively, said that he hoped there was a strategy. Surely this must be part—
No. I must sit down shortly.
Surely this must be part of the great strategy for the regeneration of industry. I suspect that the hon. Gentleman knows that there is no such strategy. A problem has arisen, and the Government have met it in the only way that they understand.
There is not a limitless supply of funds that we can give to anybody who asks. Money is being denied to, for example, the textile industry. Labour Members who complain about the state of that industry should realise that this £25 million is going to a company which has no official strategy or published plan of what it is going to do with it. Other industries will suffer.
The hon. Member for Nuneaton (Mr. Huckfield) has the nerve to say that his constituency has above average unemployment in the West Midlands. How am I supposed to feel with the male employment rate in my constituency of 6·9 per cent. when I see how glibly money will be given to Alfred Herbert without proper examination by the Department of Industry or Ministers?
Ministers seem to have no understanding of the subject with which they are dealing. They offer grossly insulting ex- planations to the House. Until we have a proper justification and an examination of whether there are better ways of spending this money, the House has no right to approve the Motion.
The Opposition are in a schizophrenic mood about this matter. They have not yet made up their minds about whether they wish to see a strong and viable machine tool industry. They are reacting to the new mood within the Conservative Party. They feel they must go back to Selsdon as quickly as possible and forget the past.
I asked the hon. Member for Henley (Mr. Heseltine) during the Third Reading of the Industry Bill last week whether the Opposition, if they had been in Government, would have supported the cases we have supported. I failed to get a straight answer from him. I suspect they do not know. The argument is still going on within the party, and they are fudging this issue as they are fudging most others at the moment.
I have been criticised for not providing the House with enough information. No one would think I was bringing forward this motion under the Conservatives' Industry Act 1972. One would assume it was some other measure put on the statute book by a Labour administration. The Opposition have a guilt complex here.
I know the hon. Gentleman was Mr. Chataway's PPS and has to show loyalty to him. The assistance given to NVT was done in exactly the same way as I am doing it tonight, though with a little more explanation, and I hope to have the opportunity of giving more information. Does the hon. Gentleman think it was right or wrong to give that assistance?
We did not debate NVT in the way we are debating Alfred Herbert, but it is not profitable to pursue this course. The hon. Gentleman is on the defensive, and I will not embarrass him further by putting more questions to him.
The hon. Member for Henley asked a great many questions, and he criticised Alfred Herbert's management. That criticism was also shared by my hon. Friend the Member for Wallsend (Mr. Garrett). Clearly, the management in Alfred Herbert will have to be strengthened—
I agree. Mr. Buckley has done a fine job, and he will assemble around him men who can help the company a great deal.
The criticism was made that IDAB did not take the same view as the Government in December and January. I can assure hon. Members that IDAB feels that the Government are adopting the right strategy and course with Alfred Herbert. The hon. Member asked whether we were proposing to take a majority stake in the company. One of the defects of the 1972 Industry Act is revealed in this respect. I wish to take the opportunity here of correcting what was said by the hon. Member for Colne Valley (Mr. Wainwright) about his party vigorously opposing the Act when it was before the House at that time. I wound up the debate for the Opposition on that occasion, and I can tell hon. Members that the Liberals abstained.
Again the hon. Member is hedging. I can assure him that on the Second Reading of that Bill his then hon. Friends—just about as many were then present as are now in the Chamber—did not oppose the Act.
One of the defects of that Act is that we cannot move to a majority stake in Alfred Herbert, and that is one reason why the holding will be vested in the National Enterprise Board. We intend to take that majority stake.
I was also asked what strategy would be adopted by Alfred Herbert. I want the management and work force to decide what strategy they want to adopt. I do not want to get involved in that strategy, because the management and work force can come up with the right solutions. My hon. Friend the Member for Coventry, North-East (Mr. Park) asked about provisions for the work force taking part in decision taking. One of the functions of the NEB will be to develop industrial democracy, and that is one of the provisions of the Industry Bill which is now before Parliament. I hope that it will be developed successfully.
The hon. Member for Tonbridge and Malling (Mr. Stanley) suggested that we should publish the Peat Marwick report and the other report. We are following precisely the same procedure as was followed by his Government when they gave assistance under the terms of the 1972 Act. Consultants' reports were never presented to the House in such circumstances by the Conservatives.
It is absolutely crucial that Alfred Herbert should be supported. I could give export figures for the company to show that there is no doubt that the company has a crucial rôle to play in the machine tool industry. If there was a loss of capacity, as some hon. Members are prepared to contemplate, if the company went into receivership, it would be disastrous for the British machine tool industry. The Government are supported by IDAB on that score. The company had a production level in 1974 of under £20 million with a work force of only 6,000—