Orders of the Day — Motor Vehicle Industry

– in the House of Commons at 12:00 am on 16th December 1975.

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4.36 p.m.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

This must be the first debate on the motor industry in this House for 30 years in which there will be no speech by my former hon. Friend the Member for Coventry, North-West (Mr. Edelman). Throughout his parliamentary life Maurice Edelman fought for the interests of his many constituents who work in the Coventry car factories, and his voice in this Chamber will be sorely missed today. But it is typical of the man as we knew him that he has still found a way, through his posthumous letter in The Times today, of making known his characteristically trenchant views.

Like my other hon. Friends who sit for constituencies in Coventry and the surrounding area, and like my hon. Friends who sit for other areas of England and Scotland where there are large concentrations of car workers, Maurice Edelman would rightly have drawn attention to the employment aspects of any decision about this industry. It is certainly true that, while we have very sadly almost come to take as read the employment difficulties of Scotland, serious unemployment in the West Midlands has only recently come to be a factor that looms large.

It would be idle to pretend that jobs were not the key issue in the prolonged and, indeed, agonised considerations that we gave to the Chrysler problem over the period of seven weeks since Mr. Riccardo gave his Press conference in Detroit at the end of October. What kind of a Labour Government would we be if 60,000 jobs did not matter? But jobs were not the only issue. On the one hand, it could have been argued that it made sense to let this company go under. since its long-term future was in serious doubt, since it had failed for more than five years to produce any new models in this country, and since, despite assurances given eight years ago, its parent company seemed to have no strong commitment to it.

Furthermore, it is posible to point to the Report on the Future of the British Car Industry by the Central Policy Review Staff, which has been published today and which indicates over-capacity in British motor vehicle production, and to say that to let Chrysler go was a golden opportunity of ridding ourselves of that over-capacity. The arguments to the contrary contended that the best way to deal with this over-capacity was through general slimming down, rather than through amputation of one limb.

There were further arguments for retaining a substantial Chrysler presence in this country. There were the particular arguments about the Iranian contract being a benefit to our balance of payments and an important symbol to overseas customers of our determination to fulfil large-scale orders. There was the general argument about the danger to this country's industrial future if our manufacturing capability were steadily eroded. It was these which prevailed.

There were other arguments which led to the decision that this company should continue to be a Chrysler company locked into the Chrysler world-wide distribution network, producing new Chrysler-designed models and benefiting from that company's experience and know-how. I assure my hon. Friends, who I know are concerned about this, that a complete or partial merger with British Leyland was considered by us carefully and in detail, and was found to be impracticable. The alternative, a wholly or partly State-owned Chrysler competing with the State-owned British Leyland, was clearly out of the question.

So we now move forward on this new basis, having taken serious into account the formidable body of evidence and information assembled in three key documents. The first of these is the Ryder Report on British Leyland. The second is the Report of the Trade and Industry Sub-Committee.

I apologise to the House and to my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) who is Chairman of that Committee, for the fact that it has not been possible to publish the Government's reply to the Report in time for this debate. [HON. MEMBERS: "Why not?"] I shall tell the House why not if it will be patient for a moment or two. The House will appreciate the preoccupation, within the Government and my Department, with the Chrysler situation. Until we had reached decisions about Chrysler we were prevented from giving final consideration to the Select Committee's Report and to giving a response to that Report—

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

I assure the House that the White Paper will be published, and in due course we shall be more than ready to debate it.

The third document is, of course, the Report of the Central Policy Review Staff, which we have published in fulfilment of our undertaking. Earlier this year, when the Government were presented with the difficulties of British Leyland they asked the Central Policy Review Staff to undertake a study of the long-term prospects for the British car industry. That Report has been published today by Her Majesty's Stationery Office and copies have been placed in the Library and in the Vote Office. As is made clear in the Report, the Government are not committed to the acceptance of all the detailed facts and arguments there set out.

Photo of John Stanley John Stanley , Tonbridge and Malling

Will the Secretary of State tell the House quite candidly why this Report, which has been in existence for many months, saw the light of day only at 11 a.m. today?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

The hon. Gentleman is not being fair to the Government. This is only the second Report that has been published since the Central Policy Review Staff was set up. The last Report was published when I was Secretary of State for Energy, and concerned energy conservation. We have now published this Report. I would take this criticism seriously if the previous Conservative Government had been more forthcoming with CPRS Reports. However, the Report has been made available. I am sure that the hon. Gentleman will have time to study its conclusions, and he may well be able to catch your eye, Mr. Deputy Speaker, in the debate that we shall have tomorrow on the motion to implement the arrangements that we have made concerning Chrysler. I do not believe that the House has missed out all that much.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

What sort of confidence can the right hon. Gentleman expect this House to have in him and his judgment when he totally ignores a Report produced by a Select Committee of this House? That Report should have been considered first and the Chrysler one second.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

I do not agree. The Government could not respond to the Report of the Select Committee until they had made up their mind exactly what to do about the Chrysler situation. In view of what we have announced today it will be possible to give a considered response to the Report of the Select Committee, taking into account the decision that we have made.

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

It is quite clear that in November the final printed version of the CPRS Report was available to the Government. Why did it take until 11 o'clock on the day of this major debate before the House was given a chance to see it?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

It was always the intention that the Report should be available. It is arguable and debatable whether it should have been made available earlier than today. However, my right hon. Friend the Prime Minister made it plain, and gave an undertaking to the House some weeks ago, that it would be made available for this debate. It is disingenuous of the hon. Member for Henley (Mr. Heseltine) to suggest that he will not have sufficient time to consider the CPRS Report for the further debate that we shall have on the Chrysler situation in this House tomorrow.

I repeat that the CPRS Report does not commit the Government. That is made clear in the fly-cover to the Report as presented today. However, I want to make it absolutely plain that we accept some of the arguments contained in it. The House will want to know the relationship between those arguments and the future position of Chrysler UK.

The CPRS Report describes the likelihood that the European car assembly industry, which faces considerable overcapacity at the present time, will remain in a fiercely competitive situation for the coming decade.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

The Government should assess the total capacity of car firms already in this country and the likely requirement for sales in this country, Europe and elsewhere in 1978–79. Will the right hon. Gentleman give an undertaking that consideration has been given to this and that the slimming that has taken place in Chrysler as a result of this action will result in a situation in which we can look forward to selling the production of our car factories?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

I disagree very much. The hon. Gentleman has said that it depends on the success of the slimming operation and on the company's achieving longterm viability. The arrangement that we have made, as I made plain in the statement that I made earlier and in answer to questions earlier today, is the Government's objective.

It is essential that we improve labour productivity within the motor car industry. There must be better relationships on the shop floor, less constant interruptions, and smoother production. That is our aim and that is what we shall repeat again and again when we talk to the work force of Chrysler UK.

The arguments deployed in the CPRS Report will be influential in shaping policy towards the motor vehicle industry, but the way to do this is not to allow a complete sector of the industry to collapse without due regard to economic, balance of payments and employment implications. The Government's plan involves substantial improvements in productivity, so it is absolutely necessary that there will be some redundancies. All this will be in harmony with the changes called for in the CPRS Report.

Photo of Mr Jeremy Thorpe Mr Jeremy Thorpe , North Devon

The right hon. Gentleman is right to call attention to the need for better industrial relations and increased productivity. In so far as Lord Ryder has made this a condition for further money for Leyland, do the Government intend to make it equally a condition for further money for Chrysler?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

Certainly we shall monitor the stages of financial assistance that we are making available to the Chrysler Corporation. We could do this through the Government directors, whom we shall appoint to the Chrysler UK Board. It is conditional in the same way on improvements and the acceptance by the work force of that company.

The CPRS Report emphasises the importance of economies of scale, the need for capital investment in new models and for some modernisation of plant. Chrysler UK is obviously very much too small to operate viably on its own. It could exist efficiently only as part of a much larger company. The accord reached with the Chrysler Corporation not only recognises this but lays down in great detail the extent to which Chrysler UK will form part of Chrysler worldwide. It specifies the models that will be produced in Britain—models whose designs and toolings costs will have to be spread over production in a number of countries.

Finally, and most importantly, the CPRS Report emphasises the need to improve labour productivity in British car plants—all British car plants, and not only Chrysler UK. The agreement with Chrysler recognises that this is essential to the viability of Chrysler UK.

A great deal of effort will be put into improving industrial relations, productivity, quality and reliability of delivery. This effort will be at shop floor and plant level, with improved worker participation, and at national level between national unions, management and Government by means of planning agreements. Planning agreements will cover targets to increase productivity. Basic to the achievement of these targets will be, as the CPRS Report emphasises, a change in outlook between management and labour on the shop floor. This battle for a change in outlook is the battle for the future of the British volume car industry.

Photo of Mr Tom Litterick Mr Tom Litterick , Birmingham, Selly Oak

Is the House to understand—this is very much related to the remarks that my right hon. Friend has just made about the co-operation of the work force, and so on—that no consideration has so far been given to the comprehensive, incisive and sophisticated report which was written and delivered by the workers of Chrysler?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

As my hon. Friend will recall. I received a copy of that report from representatives of the workers direct in a Committee Room of this House. The report has been considered, and we have taken into account the views expressed to us. Within the next 24 hours steps will be taken to meet some of the representatives of the work force from the Chrysler plants so that we can go over the situation with them and explain precisely our plans and our hopes for the company.

However, the battle has to be won, and if it is a battle for Chrysler it is also a battle for British Leyland. Money cannot be invested year after year in new models and new plant if productivity fails to improve.

The three Reports have a good deal in common and cover a great deal of ground. Their diagnosis of the industry's problems are strikingly similar. Although there is divergence—sometimes a sharp divergence—on some of the remedies to be applied, all three Reports are agreed that there is a future for the British industry if decisive steps are taken now. There are striking and even alarming comparisons of productivity between the British car worker and his continental counterpart.

Photo of Mr William Molloy Mr William Molloy , Ealing North

One that point, will my right hon. Friend tell the House whether he is contemplating having discussions with representatives of the trade unions involved to see whether they would agree to supplying a nominee to be one of the new Government directors?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

My hon. Friend will recall that in the statement and the questions that I answered earlier I pointed out that there may well be a possibility that Chrysler United Kingdom will resuscitate the worker participation plans that it put before the work force earlier in the year. Certainly we would want to enter into discussions with them, and it may well be possible to have direct worker representation on the board. I do not want to go firm on this at this stage. I have to have discussions with the workers and we need to discuss the matter further with Chrysler UK.

There is no single reason for the malaise of the British car industry. Some blame can be attached to all the parties concerned. Some blame can certainly be attached to Governments, to management, to work forces and to the unions.

Photo of Mr John Biffen Mr John Biffen , Oswestry

Will the right hon. Gentleman give way?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

This is the last time I shall give way.

Photo of Mr John Biffen Mr John Biffen , Oswestry

I am very grateful. Before the right hon. Gentleman leaves the subject of the relationship between Chrysler and British Leyland, will he indicate to the House whether, during the last few days, whilst the whole rescue operation for Chrysler was being discussed, he sought and secured the views of Lord Ryder? If so, what were they?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

Lord Ryder was consulted about the general situation in relation to the National Enterprise Board and the question whether the NEB could be involved. We were told by Lord Ryder—on behalf, I think, of the NEB—that the NEB was committed wholly and completely to the success of British Leyland. I think that he was right and that that decision was right. But he was consulted. I think that is the answer to the hon. Gentleman's question.

Photo of Mr John Biffen Mr John Biffen , Oswestry

The right hon. Gentleman has not quite understood my question. It was not about Lord Ryder's views on Chrysler UK being incorporated into British Leyland under the auspices of the NEB. My question was about Lord Ryder's views on the decision that the Government have taken themselves in respect of Chrysler UK.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

The consultation with Lord Ryder took place many weeks ago—I think it was as many as four weeks ago—when we were wrestling with this problem and varying schemes. But the decision that we have taken is a Government decision. When we reached the conclusion that we could have an agreement with the Chrysler Corporation, we did not go to Lord Ryder and say "Do you approve?" That would not have been proper, and I do not think that the House would expect that situation to exist.

Photo of Mr James Wellbeloved Mr James Wellbeloved , Bexley Erith and Crayford

Will my right hon. Friend indicate whether the motion that is to be tabled will contain positive proposals to secure this massive injection of public funds as a charge against the assets of Chrysler UK? Is he aware that that sort of move would greatly encourage hon. Members on the Government side of the House to support him? Is he aware that it would also have two other benefits? First, it would minimise the opportunities for the Chrysler parent company to hold a pistol to the head of the Government in one or two years' time; secondly, it would have the great merit of conforming to the Labour Party manifesto.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

As far as I can recall, the motion that will be tabled later today will set out the contingent liability. It will be the agreement that we have reached with the Chrysler Corporation about the way in which the project is funded. The loan that is received from the Government for the capital and model development programme will be secured against the assets of the Chrysler Corporation and not the assets of Chrysler UK. I think that the main question that my hon. Friend wanted to ask—which I have answered—was: will the Chrysler Corporation guarantee any of the loans that it will be receiving? The answer is a definite "Yes, it will". But it will not be spelled out precisely in that way in the motion that will, I think, come before the House tomorrow night.

I was discussing the question of the problems of the British motor car industry. From time to time, perhaps, all parties are blamed. Successive Governments are blamed, as are managements, work forces and the unions. Whatever the reasons, I think that this debate ought to be regarded as a new starting point.

I have already—both in my statement and at the beginning of this speech—referred to our proposals for Chrysler, and my right hon. Friend the Secretary of State for Scotland, who will be winding up the debate, will be adding more information on Chrysler. But this debate provides a useful opportunity for the House to review development in British Leyland since my right hon. Friend the Prime Minister made his statement of Government policy on 24th April and to survey the size of the task ahead.

Without doubt, we are all better equipped to understand the nature of the task ahead for British Leyland—as for the motor car industry as a whole—with the help of the study conducted by the CPRS. In approaching the subject of the performance of and the outlook for British Leyland, the House will, I am sure, recognise that it is not just in the Government's interest—or the interests of the National Enterprise Board or those who work there—that the company should succeed. It is a matter of vital interest to everybody who represents car workers and to every hon. Member of this House.

A common thread to the Reports I have referred to earlier that have been published this year is the central significance of the health of our motor vehicle industry to our economy. First, I should like to remind the House of some of the progress that has been achieved this year in British Leyland since the Ryder Report was published. To begin with, the necessary mechanics of financial reconstruction have gone ahead smoothly. The Scheme of Arrangement was approved by an overwhelming majority of shareholders voting.

Following this, in early October the Government subscribed £200 million of new equity through a rights issue, under the British Leyland Act. At the same time, the interim arrangements approved by the House for guaranteeing the company's larger than normal overdrafts to a limit of £100 million were extinguished as it had always intended that they would be. This meant, of course, that a large part of the new equity was immediately required for the repayment of some of British Leyland's borrowings over previous months.

Early in October, a new Chairman—Professor Sir Ronald Edwards—and four non-executive directors were appointed to the board of the company, including a member of the Ryder team. British Leyland is now two and a half months into a new financial year, under the direction of its new board. The internal reorganisation of the company along the lines recommended in the Ryder Report was begun within a matter of days after the Report's publication.

The complexities and the full significance of these changes are inevitably not immediately apparent to those who are not closely concerned with the affairs of the company, but I can assure the House that this has been a very considerable task and, I believe, its swift accomplishment has provided a sound organisational foundation on which to build the company's future strategy.

The House will not need reminding that 1975 has presented the industry with some of the most difficult trading conditions experienced for many years. During this period it has been necessary to adjust volumes of production as closely as possible to the very different demand conditions from those of a few years ago. During this period British Leyland has continued the necessary process of bringing about a planned and orderly reduction in manpower levels.

Since January 1974 manpower has had to be reduced by 28,500. A large proportion of that reduction has taken place in the period since the Ryder Report was published. Although a reduction of this kind in the number of jobs provided by the company can never rightly be regarded as an achievement in itself, we must recognise that it has been made necessary by the trading conditions and that it has been a precondition to maintaining employment for the remaining 154,000 employees.

In the market place British Leyland has achieved an average share of 31·1 per cent. of the domestic car market during the first 11 months of this year. That includes several months of unusually high achievement as well as the relatively disappointing figures of the past two months, when low levels of stock have severely affected the company's position.

The company has introduced two successful new models and has made improvements to most of the other models in its range. At a time of increasing competition it has been an innovator in new forms of guarantee for the consumer which have been publicly welcomed by the Director General of the Office for Fair Trading.

On industrial relations there have been serious problems and these will take time to resolve. As the CPRS Report has so clearly stated, what is needed in the United Kingdom motor vehicle industry is a fundamental change of attitude amongst all those employed at all levels. The Ryder Report also saw the need for such a change, and this recognition was at the root of the team's recommendations for joint councils and joint committees.

Photo of Hon. Douglas Hurd Hon. Douglas Hurd , Oxon Mid

Is the right hon. Gentleman aware that the account which he has just given of progress in British Leyland is in sharp contrast to the much more incisive and depressing account given last week by Mr. Whittaker to the workforce?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

I do not want to give the impression that we are satisfied with the progress that has been made in British Leyland. The point I am making is that progress has been made. It would be as well for the House to recognise that there has been progress. That does not mean that much more does not have to be done. Indeed, much more has to be accomplished. The loss of 28,000 jobs for the year is an indication that the problems of British Leyland are being faced and that the organisation is getting down to a more productive basis. It is clear that we need changes, including a change of attitude in British Leyland. There will be friction and problems in bringing them about.

The management and unions at British Leyland have been involved in lengthy and complex negotiations in the application of industrial democracy. The first of the meetings of the new joint management committees at plant level have already taken place, and I understand that it is hoped that an election to the top tier of the new system will take place in the next few months.

Although negotiations have at times been difficult, the new machinery has a great potential for a better future. I am sure that this is the way ahead. I am hopeful that amid all the obvious difficulties experienced it may be proved that valuable pioneering work has been done at British Leyland, providing experience which can be built upon.

During this year British Leyland has continued to account for over half of the United Kingdom's export of complete cars. In particular, exports to the United States of America have flourished. In the financial year up to October, they were running at a level of 36 per cent. above the previous year. There have been real achievements in the first few months.

But I repeat that it is no good being complacent. It would be foolish to pretend that there is not still a long way to go. [HON. MEMBERS: "Hear, hear."] Those who cheer will agree that we have had the courage to publish the CPRS Report today. The Report has made it doubly clear that we are prepared to ensure that we make a success of the British motor car industry. There are difficult times ahead for British Leyland and the first few months must in many respects be regarded as merely a preliminary stage.

The Ryder Report stressed that there are certain minimum time scales involved in bringing about new capital investment, and that it must be a matter of years before the fruits of this investment can be seen in terms of performance and profit. Against this perspective there is no doubt that there is much scope for better performance. The Government have made it clear that future tranches of money from public funds will be conditional upon improvements in performance, starting with the current year.

Of course, the NEB and my Department will be maintaining a close watch on these developments throughout the course of the year. I repeat that there needs to be a great improvement. The principle of making future injections of finance conditional upon progress in performance and in the equally important area of productivity remains an essential feature of our policy towards British Leyland.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

No, I shall not give way again. I have given way on a great many occasions. I feel that the House wants to get on with the debate.

These are all matters which we can pursue when the House considers the Report of the Trade and Industry Sub-Committee and the Government's response to it.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

Bearing in mind the statement I made earlier today and the speech that I am now making, hon. Members will not wish me to delay matters any further by giving way to the hon. Gentleman or to any other hon. Member.

I must make it clear that we consider the problems of Chrysler and British Leyland, and the valuable contribution to employment, production and exports by Ford and Vauxhall, not merely against the background of what some may believe to be factors and difficulties special to this country. The fact is that the motor vehicle industry world-wide is having a bad time. The British industry is particularly hard hit.

For the past 20 years or so the demand for vehicles generally, and passenger cars in particular, has shown an increase fluctuating from year to year but with a steadily rising trend. There have been, however, certain weaknesses in the industry and events over the past few years have brought them into sharp focus. The demand for cars turned down sharply. Some household names in the vehicle industry found themselves in difficulty. Over the next few years only the lean, tough and competitive in the motor industry can hope to survive.

There will be difficult adjustments to be made. Excess capacity can no longer be carried. I hope that amid all the traumatic events of the past few months and weeks, right from the start of the deep troubles into which British Leyland fell, we shall not decry the positive contribution to our economy made by our motor industry.

In this country we take too much pleasure in picking out all the worst features in our industrial scene. As Secretary of State for Industry, in the past six months I have come against my share of them. We should draw attention to our massive capabilities and skills and the magnificent success of some sectors of our industry. They come up against the best in the world and they compete with them. Our motor industry is an exporter of immense importance and vitality. The component sector emerges from the CPRS Report with flying colours.

The industry as a whole is well on the way to a positive balance of payments this year—taking fully into account our imports of foreign cars and trucks—of about £1,500 million. That is an immense contribution to our living standards and fully justifies the detailed scrutiny and concern of which the industry is a focus. In never relaxing that scrutiny and concern, let us pay tribute to the achievements as well.

The last seven weeks have been in some respects the most difficult of my life. The thought of 25,000 workers, and probably as many indirectly employed in the motor vehicle industry, becoming unemployed was daunting and haunted me day and night. I hope that hon. Members on all sides of the House will look at these problems seriously and will examine the statement and the Order that we intend to lay, and will support us in the Lobby tonight.

5.11 p.m.

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

I wish to associate myself and my right hon. Friends with the opening remarks of the Secretary of State for Industry about Maurice Edelman. I campaigned against Mr. Edelman in 1964, and it was then perhaps for the first time that I came to understand the comradeship that underlies many of the associations across the Floor of the House. Maurice Edelman will be sadly missed, and it is particularly tragic that this debate should take place so soon after his untimely death.

This is the third debate in the past month in which the House has debated some aspects of the Government's industrial policy. This afternoon it is the motor industry. But the underlying themes are inseparable and run through all three debates. Year by year, industry by industry, we have failed to achieve the performance that has characterised most of our more successful competitors. In Britain there has been a unique failure to face the consequences of changed economic circumstances that have diminished our presence in overseas markets and made us less able to resist the penetration of imports into our market. The remedies that need to be applied are unpalatable. They will be the cause of social and economic disruption, and whichever Government are responsible for introducing them will require great courage.

The question is no longer one of choice but of timing. We shall either of our own will begin the battle to encourage change and adjustment or it will be forced upon us. In the short term we have shown our preference to put off that day. Out-dated industries are subsidised, out-dated jargon is resurrected, and outmoded concepts are extended.

While other countries told their people the truth and gave leadership to cope with the major changes in the distribution of world economic power in 1973, the reality is that Labour, first in Opposition and now in Government, have plunged us into a self-deluding electoral device of the social contract to buy power for themselves in the short term, at the expense of the whole nation in the long term. When other nations have set their faces to the wind, we have lived on borrowed money and pushed our inflation up to 27 per cent.

Photo of Mr Tom Litterick Mr Tom Litterick , Birmingham, Selly Oak

If what the right hon. Gentleman says is true, will he explain why the principal industrial nations in the northern hemisphere have higher unemployment rates than ours and have seen a greater increase in unemployment in comparison with the United Kingdom?

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

I shall deal with that point in detail later in my remarks.

Other nations underwent change, but we in Britain defied it on an escalating scale. First there were little examples—significant not in major terms but only in terms of the examples and headlines that they created. I refer to Meriden, Kirkby, and the Scottish Daily News. Then the more spectacular cases—such as Alfred Herbert, British Leyland, the conflict with Sir Monty Finniston of British Steel—dominated the headlines. The clamour behind them was always the same—namely the cry "We are protecting jobs."

How different it all looks now. In the United States of America unemployment is being reduced; in Germany the trends are levelling out; in France the figures are no higher they were six months ago. But in Britain the worst is yet to come and nobody would like to forecast whether 1½ million or 1¾ million jobs will finally prove to be the peak. What everybody agrees is that the peak will not come until another year has passed. The responsibility for that lies wholly with the leaders of the present Government.

Those who keep records of these events will know that the Labour Government, after a much publicised period of introspection, realised what they had done and announced a change of strategy. The new industrial policy at Chequers and the attitudes adopted at that meeting are there for those who want to read them. The Secretary of State spoke about the situation a few days before the Chequers meeting. He said: To improve our industrial performance, available resources should go to those industries and companies which have the soundest performance or the best prospects. This must be the first principle of Government aid to the private sector. Now, a month later, comes Chrysler.

The Secretary of State's case is indefensible, and if I needed conviction of that his speech this afternoon proved it beyond my worst fears. He claims that the Government are saving jobs, creating a long-term viable company, helping our balance of payments and saving public expenditure. If those assertions were true we would support the Government. But we oppose the Government's plans because we refute the claims made for them by the right hon. Gentleman—[Interruption.] The Secretary of State for Scotland ought to talk about motives. He is the last one to come to this House to justify the expenditure of £162 million to defend his political base in Scotland. Today's announcement will prejudice job prospects in this country. It will not ensure a viable future for Chrysler United Kingdom. Indeed it will weaken our balance of payments and increase public expenditure.

It is right that we should debate these proposals put forward by the Government in the context of the motor industry as a whole. But what is totally indefensible is that in a major debate of which much advance notice has been given, the Government for many weeks and days have deliberately sought to withhold from the House the basic information that would have made this debate more meaningful and better informed. It is intolerable to have treated the Select Committee in that way. But what is beyond comprehension is that the CPRS Report, which was in the hands of Ministers weeks ago, should have been deliberately withheld until 11 o'clock on the morning of the debate that is to take place.

For the Secretary of State to say that he had the courage to publish the Report is to re-write history. A few weeks ago they believed that they were to allow Chrysler to go to the wall, and now the CPRS Report sustains their case for doing so. Therefore, they promised to publish the Report—but then, for reasons known to the world but apparently unknown to Labour Ministers, they lost their nerve. They were lumbered with the then commitment—a commitment apparently incapable of being withdrawn—to publish the CPRS Report since it would scuttle the case which they have put forward this afternoon. That is why they held back the Report till the last conceivable moment, first, so that the national Press would not be given access to it yesterday and, secondly, so that Members of this House would in practice not have an opportunity to read the Report before the debate. To call that courage is the most extraordinary travesty of language.

Anyone who has studied the Report, even in the four and a half hours allowed to us, will have learned why the Government were so anxious to hold it back. No doubt we shall come increasingly to rely on The Sunday Times in future. It published on Sunday, with total accuracy, details which the Secretary of State was unable to produce for the House until today.

The Report, together with the Select Committee's Report, are important. They are models of the sort of thing this House should be discussing. They talk about British industry as it is. No one escapes their analysis, least of all those of us in this House who must, in the last resort, bear the responsibility for a decade or more in which by our speeches, actions and omissions we have fostered a climate in which the problems set out in the Reports have grown steadily more acute. Whether on politicians, management or workers, the blame is spread thickly. In the name of sanity, our task should be to learn from what has happened and begin the process of correction.

But what do we see? The Secretary of State says that the CPRS Report concludes that the motor industry is having a bad year. I think we all knew that. That is not the point. The Report says the industry will go on having bad years for the next decade and that this is not the industry in which to back winners, as is suggested in the Chequers strategy. We see international competition in motor manufacturing getting tougher every year, and there is massive spare world capacity. To make matters worse, Japan, Spain, Brazil, Korea and Iran are adding to that capacity. In Europe, manufacturers are operating at two-thirds of existing capacity, and even if they do not increase at all over the next decade it is unlikely that a level of demand will be reached that will be profitable at any time in that decade.

By any tests, all our manufacturers are the weakest examined in the Report. All British producers are among the weakest internationally by any standard, whether on the number of models produced in economic numbers, the number of models produced in the most important market segments, quality and after-sales reputation, price and delivery record, number and organisation of plans, return on capital and balance sheet strength, level and rate of improvement of output and productivity, which is probably actually negative over recent years, or in over-manning and output per man. This is the improbable background that led the Government to take the decision announced by the Secretary of State today. He did not try seriously to undermine the arguments in the Report, yet anyone who even skims through its pages will be led to the irrefutable conclusion that Chrysler does not have a long-term viable future because it cannot reach the scale of operation by which it can generate sufficient funds for investment—

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

We shall consider Chrysler's position in a moment, but I would advise the right hon. Gentleman to take a detached view about the advice he is given from that quarter.

Let us look at the case on which the Secretary of State rests. It cannot be substantiated by the Report. He says that this measure will protect jobs. In reality it will destroy jobs because it merely delays the unemployment which must come at Chrysler. It ensures a consequential widespread loss of jobs elsewhere. One of the causes of our present economic difficulties is the inability of hon. Members opposite to understand the relationship between these two factors, but the Secretary of State knows that what he is doing is preserving one set of unviable jobs at the expense of another set of productive jobs and that he is doing it for entirely political reasons.

Let us look at the implications of these proposals on the hitherto secure jobs at Ford. If Chrysler and British Leyland are to fight for their market share by using taxpayers' money to support the "Superdeal" concept, which leads to retaliation from Chrysler, who reduce prices by between £160 and £200 per car, what does that do to the prospects of Ford and Vauxhall who are still controlled by the disciplines of the market? It is not only at Ford that productive employment will be reduced. The repercussions will ripple throughout the economy.

Unless the Government are prepared to increase their massive borrowing requirement still further—and they have already said that their social programme will have to be cut rather than allow this to happen—the rescue operation for Chrysler will have to be financed by additional taxation or by further cuts in expenditure. Other producers must lose their markets and other workers must lose their jobs because Chrysler workers are believed to be crucial to the Government's electoral prospects in Scotland.

The Secretary of State claimed that paying the social security benefits involved in redundancy would be more expensive than the scheme to which the Government are committed, but that argument cannot be taken seriously because, in the last resort, it is an argument for everyone staying in his job for all time regardless of the economic case for his moving. It is nearly always cheaper in the very short term to subsidise unproductive jobs rather than to pay benefits to help the workers move. If the Government consistently fail to allow the redeployment of labour and assets when they are no longer being profitably employed, then what on earth was the revision of policies at Chequers all about?

Secure jobs can be provided only by an efficient allocation of resources. The great merit of the Chequers strategy was that it appeared to recognise this. Just before the Chequers statement, the Chancellor of the Exchequer explained on television that a high degree of unemployment in the immediate future was inevitable, but he added that it would be very different in 1977 because then we would be seeing a real boom—it is always next year—and we would be reaping the first great harvest of the new industrial strategy. But the Government have now abandoned the new industrial strategy and have destroyed the employment prospects which were its major justification.

Let us place this redundancy issue in perspective. Under this Government, 37,000 men and women are joining the dole queues every month. A total of 28,000 workers have lost their jobs in British Leyland, and the Secretary of State for Industry must take the credit for that. In the steel industry, 40,000 workers have been told that they will have to go and the Secretary of State has told us that he is going to run down the aerospace industry. There are likely to be massive redundancies on the railways, and all over the private sector painful adjustments are having to be made.

In this situation the Government have selected probably 12,000 Chrysler workers, who are producing goods that people do not want to buy, for special treatment. They have been selected not because they have any economic significance which distinguishes them from the 1¼ million who, in terms of unemployment, are in just as despairing a situation as would be the 12,000, but because the Government, as in every previous crisis, have lost their nerve.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Central

The right hon. Gentleman is dealing with different people.

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

We are dealing with 1¼ million people who are out of work and must have a reason to understand the hard re-alignment which they must make and cannot understand why 12,000 people who are no more economically significant than they are will be receiving £162 million of taxpayers' money while, for them, there is the dogma of nationalisation of the aerospace and shipbuilding industries, the restrictionism of the port schemeintroduced by the Government—

Photo of Mr Tom Litterick Mr Tom Litterick , Birmingham, Selly Oak

What about the effects on unemployment?

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

It is a dangerous task for hon. Members opposite to lecture us about unemployment—[Interruption.]

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. We have been very orderly so far today.

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

I accept that the hon. Gentleman should lecture me on unemployment because he supports the Labour Party, which has more experience of creating it. When I came to the House I watched the level of unemployment rise year after year under the Labour Government in the 1960s. I was a member of a Government which—because it was appalled at the consequences of 1 million people being unemployed, largely as a result of the policies on which the previous Labour Government were defeated—regarded as the first priority the elimination of unemployment in the early 1970s. With all the consequences of trying to maintain the highest possible level of employment, I watched the Labour Front Bench encourage every dissident militant group in the country which sought to grab a prior position for itself and so produce higher levels of unemployment. I watched the social contract send United Kingdom unemployment to a level which is no longer equalled in Western Europe man for man. We have a year to go before we hit the 1¼ million, 1½ million or 1¾ million which will be the factual record of a Labour Government. In spite of all the cant and humbug we get from the Labour Benches, that is the reality.

Whenever it comes to a crisis, the Government lose their nerve. The Prime Minister might talk of a Dunkirk spirit, the Chancellor of the Exchequer might offer to trade in his medals. Even the Secretary of State for Industry has his wounded heroes. If only the Government would use less of the language of the trenches and more of the courage, we should at least start finding our way out of our deep-seated troubles.

Let us take the second argument that is produced by the Secretary of State for Industry. He argues that the balance of payments implications justify his actions. I totally refute that argument. Chrysler today holds 5 per cent. of the home market. Even that figure will decline when the fleet buyers return to the market. Assuming that that market share came on offer tomorrow, it could be argued that foreign cars would capture the same proportion of it—34 per cent.—as they hold of the overall domestic market. So to the foreigners might go about one-third of the 5 per cent. of the domestic market that Chrysler holds. To deny the foreigners that prize of an extra per cent. of the domestic market, the Secretary of State for Industry justifies his proposals.

What the Secretary of State has forgotten is the impact of his proposals on the other United Kingdom manufacturers—on Ford, British Leyland and Vauxhall. Management and workers, when they read of our deliberations here, will find no conceivable incentive for them to act as they know, and as the CPRS Report confirms, they have no choice but to act.

They must act in two ways. First, they must eliminate the consequences in terms of imports that arise from the fact that one cannot buy Ford or British Leyland cars under a three-months' wait, because productivity is too low and industrial relations are too bad. Secondly, they have to achieve the higher export market which we desperately need. In saving that notional 1⅔ per cent. of the national home market, I cannot overstress to the Secretary of State for Industry that other motor manufacturers need only increase their exports by 3 per cent. to save what he fears to lose on the balance of payments. As the CPRS Report so devastatingly reveals, the ability to do that lies totally within the determination of the management and the work force here in Britain. There are no excuses save our own inadequate performance. By propping up Chrysler, the Secretary of State is providing one more reason to destroy the sense of urgency needed to achieve even that modest target. He is sapping the morale of the strongest in pursuit of temporary respite for the weakest. We can never survive as a nation in that way.

The Government's case rests neither on jobs nor on imports. It rests simply on political fear. That is what the Conservative Opposition believe, it is what the Secretary of State for Industry believes and it is what all Labour Members know to be true. The Chrysler deal was negotiated by one Minister behind the responsible Minister's back. It is a deal that was negotiated in a panic, in response to a political, not an economic, judgment, a deal that in its simplest form is a personal triumph for Mr. Riccardo and a national humiliation for this country.

If one accepts, as I do, the broad conclusions of the CPRS Report, one is faced with an unpallatable but inevitable question. I would ask not how I prop up the company, when all the evidence is that to do so is at best an expensive short-term delusion. I have to ask how I use the resources of Government to assist the harsh human consequences of change in a way that minimises the immediate anguish and offers the most secure long-term future both for the people involved and the nation. That is the question which the Government should have asked and on which they should have acted. That is the question that 1¼ million people have to face, and the whole ingenuity and energy of the Government should be mobilised to help them to do so. There is no reason why the Iran order should not have been completed within a phased rundown of the Chrysler Company. The Secretary of State for Industry could have explained why that option, which he favoured, could not have been pursued.

The questions that need to be answered, if money of the extent involved in today's Order is available, are how the Government can use their armoury of weapons to help those who have to move from job to job and, perhaps, from home to home—

Photo of Mr Harold Lever Mr Harold Lever , Manchester Central

Will the hon. Gentleman at some point keep his twice repeated promise and tell the House why he thinks Chrysler believes that there is long-term viability for this company and why it backs that belief with large sums of money?

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

I have only to make a promise once to keep it. As the right hon. Gentleman knows, no matter how often the Labour Party makes promises it never keeps them. The right hon. Gentleman need have no anxiety. I am coming to the motives of the Chrysler Corporation.

The second question I ask is how the Government can encourage genuine long-term investment, offering security and profit. They have failed to show that they have even begun to understand the ways in which this will inevitably have to be done if we are to produce a firm, prosperous manufacturing base in this country.

I want to say something about the one man to emerge triumphantly from this sorry affair. Mr. Riccardo's position is acute and simple. His United Kingdom company will lose £40 million next year. In addition, it needs the injection of a vast capital sum. He cannot countenance either proposition. What options did he face instead of soldiering on at untold cost with a certain loss of £40 million next year?

First, he could have allowed the United Kingdom subsidiary to go bust. That is the "pistol at the head" argument, about which we hear so many hints and get such little substantiation. That solution in theory would be cheap, but it is unthinkable that a major company in that position would ever do it. That was not a realistic option, whatever may have been said, and if the Government believed it they have no one but themselves to blame for their naivety.

Alternatively, Mr. Riccardo could have put the United Kingdom subsidiary into liquidation, paid off the creditors and withdrawn, just as British Leyland is doing in Italy with the Government's approval. But that alternative would leave him with little change out of £100 million next year. The cheap options were narrowing. He could see only one option as he looked anxiously around the world for money to deal with the problems in the United States.

What did he see? He saw the endless, gaping purse of the British taxpayer. In the deal announced today the only cash that Mr. Riccardo has to find next year is £10 million to improve Ryton. The Government will pay for one-third of his work force and lend him enough money to hold out until the United States market gives him a chance to sort out the situation at his leisure.

The Prime Minister said recently that we need a vigorous, alert, responsible and profitable private sector. He has demonstrated his usual consistency by backing a private company whose vigour has seen its home market share decline from 12 per cent. to 5 per cent. in a decade, the responsibility of some of whose work force prompted the Prime Minister to accuse them of wanting to gratify politico-industrial ambitions and of holding views that were fundamentally amoral, and whose profit record over 10 years turns out to be a loss of £438 million.

I have left out one of those adjectives—alert. Mr. Riccardo is certainly that. The Prime Minister's admiration for that alertness will be paid for by our taxpayers' money and by our workers' jobs.

For a fraction of what Mr. Riccardo was bound to spend next year in any circumstances, he has massive investment, he has pushed his losses on to the United Kingdom Government, he has got a third of his work force out of his company at the taxpayers' expense, and he has kept 100 per cent. of the equity in the company. Mr. Riccardo is known as the flame-thrower. He has certainly burnt up the British Government and the British taxpayer today.

It was something of a relief for the Secretary of State to pass into the quieter waters of British Leyland. It was not long ago that we observed the British Leyland rescue. That belonged, or so we thought, to the earlier industrial strategy, although we may be forgiven for failing to distinguish between the two. My hon. Friend the Member for Mid-Oxon (Mr. Hurd) summarised the situation. The euphoric way in which the Secretary of State for Industry described what is happening in British Leyland is credible only to a Government totally divorced from the newspapers, informed comment, the CPRS Report, and anyone who has the first idea of what is happening in the factories of British Leyland.

We were told when the British Leyland rescue took place that there would be a new spirit of worker participation. There have been more strikes since the rescue than in the equivalent preceding period. I understand that Lord Ryder went up to tell the workers how to behave, and there were two more strikes the next day. Yesterday workers walked out because cats had turned the paint shop into a public lavatory.

There was to be new investment in much-needed machinery. In practice—has not the Secretary of State for Industry been told, has he not been briefed?—the management has now stopped all capital expenditure in the car division in order to pay the wages, because there is a higher loss than was budgeted.

A new commercial spirit—that was the promise. It led to "Superdeal", which provided a demand for cars that the company could not produce, to sell at a price that was loss-making, and so the taxpayer will pay. "Superdeal" led to Chrysler's offering reductions of £160 to £200 a car, which was also loss-making, and the taxpayer will pay for that as well, while Ford and Vauxhall watch and wait, certain only that if it goes on, they will be wiser to get in on the act now, before their companies are also run into the ground.

So it is that the few, halting steps that led from Chequers have rapidly retraced themselves away from the icy winds. Far from having a new purpose based on explaining to our people the world as it will continue to be, we must limp a little longer until others take decisions out of our hands. The party that came to power as the champion of national sovereignty, to protect us from its imaginary threat from European nations, has shown itself unable to withstand even the blusterings of a single American multinational company.

The Secretary of State for Industry might expect me to admire his courage in putting from the Front Bench the Government's case for the deal, in which he so patently does not believe. I would have admired his courage more if he had put his own case against the deal from the Back Benches. He may well believe that he owes a loyalty to the Prime Minister who put him where he is. He will come to realise that £160 million is too high a price to pay for so illusory a debt.

We at least shall vote against this misconceived and politically-inspired deception of the British people.

5.46 p.m.

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

I echo what my right hon. Friend the Secretary of State for Industry said in referring to the absence of Mr. Maurice Edelman, who was one of the many people who instructed me in some of the intricacies of the motor car industry when I first came to the House. He remained a friend ever after. Maurice Edelman will be a loss to Coventry and the House.

I now move to someone rather more frivolous. Nothing exceeds the gusto with which Tory Members, especially those representing such industrial areas as Henley, advocate unemployment as the solution to the problems of profit. The crisis we face is one of the philosophy of the hon. Member for Henley (Mr. Heseltine), of his system, and his class. I heard in his speech very little compassion, very little about jobs, very little about the workers involved.

The hon. Gentleman used the occasion to pour fun on the various leaks from the Cabinet that we have all heard, and to advocate profitability as the only criterion when we face the problem of more than a million unemployed. Thank Heaven, Maurice Edelman, among others, held humanity at rather a higher level than did the hon. Gentleman, who speaks for the Conservative Party. There is the soul of the Conservative Party. We noted the cheering. When we are dealing with a situation in which 60,000 or 70,000 men face unemployment, the Tories say "Do nothing. Let the criterion of competitiveness have its way." What kind of people are they? What kind of people do they think I represent in Linwood? If the Government had not acted to save the jobs, the men in Chrysler would have done so, and I would have backed them.

The hon. Gentleman used the phrase "multinational companies". We held our breath and waited for a word of criticism. None came.

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

I believe that it would be more appropriate to give way to the hon. Member for Henley, if he wished me to do so. I should like to deploy my argument, and then I shall be willing to take interventions from the two hon. Members singly or together.

This is indeed the crisis of capitalism, exemplified by the workings of a multinational company. There are now multinational companies with more power, through their wealth, than individual nations and States. The 200 largest companies in America—that is not very many for one finds 200 firms in a small town—control a larger budget than every nation in the world with the exception of the United States and the Soviet Union.

This is the problem with which we have to deal, and it was the problem which we faced when, in the years between 1970 and 1974 which the hon. Member for Henley dismissed so lightly, we were working out industrial policies to deal with it. It is against this background that we have to look at the Chrysler situation.

Churchill once said that the purpose of recriminations is in order not to commit the same mistakes in the future. Therefore, it is worth looking at one or two of the Reports and to measure what they say against the background of the Chrysler company.

We have had a lot of fuss and fun about the CPRS Report coming out only today. Its main conclusion was that we had an over-capacity of 25 per cent. On both sides of the House, this is the figure picked on and, although I shall deal with the criticism of over-capacity more fully later, I put out the caveat now that the reason why there is over-capacity in any industry is that capitalism creates it so that it can make profits when the market rises, with the result that when the market is not in a boom condition, industry is in a position of over-capacity.

The Report goes through a number of points at which it is worth looking. It refers to the competitive weakness of the British car industry. It refers to poor distributive networks abroad. In the case of Chrysler it had very good outlets. The trouble was that, following our entry into the EEC, it moved its outlets in Europe towards Simca production.

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

The reason is that Chrysler had a foothold in the Common Market. Because it is a multinational company it has capacity in Japan, in America and in Europe and, therefore, Chrysler UK Limited becomes expendable unless we are prepared to finance it. Chrysler has said to its dealers in Belgium that they must sell seven Simca cars for each Chrysler UK car.

Incidentally, I hope that the Government notice that within this multinational company there is a policy, apparently, to exercise export controls. I assume that one of the British Government's reactions to protect us is to exercise import controls.

Then the Report talks about the products on offer and points out that there are 15 mini-models on sale in this country of which only two are British—the Imp and the Leyland Mini. They are 12 and 17 years old respectively. Some of their rivals are only two to three years old. The failure of Chrysler is that, having established a foothold here, it has not invested sufficiently to develop new models.

Photo of Mr Bob Cryer Mr Bob Cryer , Keighley

On this point about design, my hon. Friend will recall of course that the design team in the United Kingdom section of Chrysler developed a number of new models which were promptly taken abroad. Is it not a characteristic of multinational companies to use British ingenuity and talent and to spread it elsewhere?

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

My hon. Friend has taken one of my bull points.

On capital investment the Report says that Chrysler can be faulted. A lot of it was through choice, because there was an alternative. Let us look, for example, at the competition that we faced. Let us consider the Japanese share of the market. Of all European countries importing Japanese cars, the United Kingdom comes highest in the list of those countries producing cars. The Japanese share of the British market is 9·3 per cent. The Japanese shares of the markets of Germany. France and Italy are 1·4, 1·3 and 0·1 per cent. respectively. On top of all this, Chrysler has introduced special incentives for the introduction of the Simca into Europe instead of dealing with it in direct competition from Britain.

Those are the problems that we face. The Report says that, if Chrysler were to go, only about 60 per cent. of Chrysler sales in the United Kingdom would be picked up by British Leyland, Ford and Vauxhall, which means that 40 per cent. of Chrysler UK sales would go to a foreign producer.

I do not accept the Report, but it makes a number of pregnant comments, all of which have implications for the reason for the failure of Chrysler UK.

But I come now to what I regard as the most intelligent and comprehensive Report of all on Chrysler, and it was made by the workers themselves. This Report has not been paid sufficient tribute, and I regret that from the beginning of this crisis it took Ministers five weeks to listen to the workers in the industry. The inner knowledge, understanding and engineering and marketing awareness brought to bear in this Report is outstanding.

The Report analyses the company factory by factory and suggests alternative methods of use. It deals in this way with the main criticism of the Think Tank document, which is the problem of overcapacity, and says: We do not accept the argument that there is over-capacity' in the British motor industry … We believe that there is a need for positive utilisation of the industry's capacity (rather than its elimination or run-down) in order to meet the need for better and more varied forms of transport. The House of Commons Select Committee concluded that UK manufacturers could take more advantage of their expertise in the design and manufacture of commercial and specialist vehicles of all kinds. Long waiting-lists for British buses and coaches, Land-Rovers, diesel engines, agricultural tractors and heavy trucks show the need that exists for this kind of vehicle. How can we glibly accept the Think Tank report which says that there is 25 per cent. over-capacity when there is an 18-month to two-year delay on deliveries of such working vehicles as Land-Rovers? They add: This contrasts with the saturation in the popular car sectors of the market, and demonstrates the ineffective and irresponsible utilisation of the above capacity. However, the widespread ecological and environmental criticism of the private petrol-driven car as a socially irresponsible form of transport suggests to us that we must explore the feasibility of new kinds of product of a socially useful kind to harness the skills of the existing work force and the existing plant and machinery. That is what is missing in the Think Tank Report. It produces the statistics, but it brings no imagination to bear on them.

I think that the answer of the workers is the better one. There are alternative methods. We should seek to keep the labour force as high as possible so that they can explore the methods for new kinds of production and new vehicles and so that we can call upon their expertise and knowledge to deal with the situation.

The workers also analyse investment. The Think Tank Report says: It is not an immediate corollary that more investment leads to better and more productivity. But the opposite is not true. We certainly shall not get considerably more productivity without more investment. The workers' report shows what is being achieved by listing the fixed assets per man in major companies. In Ford US, they are over £5,000, in Volkswagen £3,600, in Renault £2,400, in Ford United Kingdom £2,600—and in Chrysler United Kingdom £1,400. If we compare the annual capital expenditure per employee, we see a deplorable picture. In 1974, the exenditure on plant, machinery and equipment per employee by British Leyland was £258, by Ford £430 and by Chrysler £15.

Photo of Mr David Madel Mr David Madel , Bedfordshire South

Would the hon. Gentleman accept that it is not just investment on its own which is the problem, but the use made of that investment—the working methods in the factories—that we must deal with if we are to be more competitive?

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

This is one reason for using the skills and knowledge of the work force. I was saying that the opposite is not true. Agreed, without investment we shall not get productivity, but if investment is not intelligently used we shall not get productivity, either. That is an additional argument for listening to the workers, but there are other factors.

There are possibilities that, through the operations of multinationals, particularly in respect of the system of price transfer, some of the losses that we have been discussing by Chrysler are less than they are said to be, for the very simple reason that they use the Chrysler Switzerland organisation to handle their overseas sales. As a result, the price per car exported to Europe is about half the price per car of the other major British companies. The profit is made through Geneva, where there is a more favourable tax system for them.

So, for all those reasons—export controls, which lead to dealers pushing Simca, transfer pricing and the fact that they are offering special inducements for the sale of Simca in Britain in competition with Chrysler UK—we should take some of Chrysler's difficulties with a pinch of salt.

Having said that, however, I do not accept the suggestion of the hon. Member for Henley that we are not confronting a major crisis in the car industry and in Chrysler. Chrysler said that if it did not get assistance, it would go. I have tried to argue why this was. This is the problem that faced the Government. I cannot pretend that I am happy at the size of the figures referred to for the immediate run-down in my area. I know that the Secretary of State for Scotland would not suggest that I should feel any other way. I hate paying tribute on the basis of leaks, but it is clear that a considerable part of the Cabinet fought hard on this and that the Secretary of State for Scotland was one of those who fought.

We understand what employment is about in some of these areas. Despite the cheap remarks of the hon. Member for Henley, who has already left, I believe that the main forces which secured a change of policy in the Cabinet were, first, the labour force itself—the magnificent unity between works in the Midlands and in Scotland. Second, the wider Labour movement was not prepared to accept such a fall-out of jobs. Third, that section of the Labour movement which is properly represented in the Cabinet also fought to secure these changes.

If we had any difficulty, it was due to the deplorable fact that the hon. Member for Banff (Mr. Watt) and even my hon. Friend the Member for South Ayrshire (Mr. Sillars) raised the bogy of the SNP and the possibility of Scottish Chrysler going it alone. That was malicious, stupid and ignorant. If the company had gone it alone, Linwood would close tomorrow. As it happens, no engines are made at Linwood, so the end-product, presumably, would have been a kind of "Flintstone" car, running along the roads without an engine.

Photo of Mr Hamish Watt Mr Hamish Watt , Banffshire

Does the hon. Gentleman agree that there are sound economic and engineering arguments for retaining Linwood while allowing other parts of Chrysler to go to the wall?

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

There is the voice of the Scottish National Party. I hope that every Scotsman who works in Coventry will read that, and that every mother and father in Scotland who have a son working in Coventry will read it, too. The workers in Linwood have a higher morality than the leadership of the SNP, as represented by that remark. They have not looked for a solution that would allow their fellow workers to go to the wall. Nor should they, and nor would I. But the SNP has already said this, and the hon. Gentleman has just said it again. I shall make sure that that is branded on them from Land's End to John o' Groats.

I was shocked by that remark, and have lost the thread a little. I expect that sort of thing from the Tory Party. I had forgotten that the hon. Member was a Tory only two or three years ago. He was one of their converts. St. Paul did better than that.

I deal with Linwood alone not because I neglect the Midlands—my hon. Friends from the Midlands know that we have fought this fight together—but because we have particular problems in Linwood. It is a small town, and if this work had gone it would have been a dead town—a mini-Jarrow. I thank the Cabinet for not letting that happen. Of course, I applaud them for having a rescue operation.

But it is not enough. We must try to find some means of alleviating the immediate problems. I understand the problems of bringing in the Avenger. We shall need a lot of solidarity on questions like that, too. But this kind of weight cannot be put on our town immediately. We should diversify the use of the pressing factory and the aluminium die-casting factory there. Diversification must also be looked for in the Stoke factory, which can do contractual work for other Coventry firms. Such solutions must be found to hold the best of our skilled workers, not only because they require it for the sake of their families and their own wellbeing but in order to keep the core of skilled work that we shall build up from August.

I welcome a rescue operation, but I deplore the fact that it will mean such an immediate drop in employment in my area. I find totally unacceptable the initial figures suggested. I welcome the fact that it seems that Linwood will be put on a more secure basis after that. It will require understanding—understanding way beyond the comprehension of the hon. Member for Henley—between the workers at Linwood and those at Coventry to secure that objective.

I have argued from the beginning that the right solution is public ownership. When we are dealing, as the hon. Member for Henley said, with a multinational company, one thing that we can call in aid is the power of the State. That should have been used. We should have taken over Chrysler on Mr. Riccardo's own valuation, which, apparently, was nil. We should have held the employment situation until the company picked up. We should have given some of the boys in the research and design centre their heads, to see what they could come up with in terms of the new concepts that they are bursting to get through to the Cabinet. We should have seen in what way we could assist speeding up contractual arrangements on behalf of British Leyland, in the earlier delivery of working vehicles. Only at that point should we have considered slimming down the labour force and moving towards an amalgamation, in two or three years, of Chrysler and Leyland, to make a giant, publicly-owned British motor vehicle industry, rather than just a car industry, which would compete with the rest of the world. I regret that despite the policy that we worked on between 1970 and 1974 we have not found it possible to achieve this solution. I shall continue to press for this solution.

We are in a very deep crisis—deeper than some hon. Members believe—and it does not concern only Chrysler. I do not believe that there is any means of solving it until we take real power from the small groups—who, in a small, tight circle, control the fate of men—and bring it down to our level and into our own hands.

6.11 p.m.

Photo of Mr John Eden Mr John Eden , Bournemouth West

I have two interests to declare. First of all, I have a personal financial interest in this industry. Second, I had the privilege to serve on the Trade and Industry Sub-Committee of the Expenditure Committee which conducted a survey into the motor vehicle industry. As a member of that Committee, I should like to pay a warm tribute to its Chairman, the hon. Member for Sheffield, Attercliffe (Mr. Duffy). Throughout our investigations he displayed a single-mindedness and an impartial determination to seek out the truth in the discharge of his responsibility to the House. I am sure that all hon. Members recognise that and wish to applaud him. Nothing that he did was motivated by anything other than a desire to serve the House. In doing so, he has undoubtedly helped to produce a Report that I think in all humility one must recognise has made a mark in the history of Select Committee Reports. It is certainly a milestone in the challenging nature of its conclusions, and now it has been shown to be fully vindicated and supported in the findings of the CPRS.

I am sure that the hon. Member for Attercliffe will endorse my remarks when I say that on that Committee we were extremely well served by a clerk of quite exceptional merit and also by a professional adviser whose widespread knowledge of the motor vehicle industry has been recognised throughout the country.

Understandably, in defence of the policy that he enunciated, the Secretary of State for Industry rested his case on jobs saved. I fully understand the view expressed by the hon. Member for Renfrewshire, West (Mr. Buchan) representing, as he does, a constituency that would have been affected by the closure of a major source of employment. However, all hon. Members sooner or later must face up to the price that we are being called upon to pay for jobs saved. There has been an attempt to recognise this, to endorse the desire to move away from past practices and to change the emphasis of policy, thus giving a firmer foundation to our industrial base. There was an attempt to emphasise the fact that jobs saved in the short term could prove extremely costly by weaknening our industrial base in the long term. Those whose employment was rescued for a short period might find that it was at the expense of the jobs of others, and even of their own, later. This would be the consequence of the failure to grapple with the harsh industrial realities that have overtaken us.

I understood that that was the message of the Chequers strategy. That certainly seemed to be the view of Ministers at that time. The Chief Secretary to the Treasury, speaking in September this year to the London School of Economics, spelled it out very simply. He said: There are still some who believe that when redundancies are created by a company no longer being able to sell its goods, the Government can, and should, bail it out. Even if the money was available—and when we are already borrowing £9,000 million, it isn't—bailing out unviable companies cannot, in the long run, save jobs. It is in that context that we should be considering the decisions that the Secretary of State has announced on behalf of Chrysler.

My hon. Friend the Member for Henley (Mr. Heseltine) spelled out in a brilliant speech the full implications of the Government's decision for this country. I need add no emphasis to what he said. There are harsh lessons to be learned. They are difficult enough to learn as it is, but the Government, by decisions of this kind, are making it almost impossible for British people to realise the truth and accept reality.

The Chrysler decision raises a number of harsh questions, some of which were put to the Secretary of State during the course of his statement and many of which he failed to answer. Clearly, further careful probing of the implications of this policy is needed. In the first instance one must know the implications of the Chrysler decision for British Leyland. It is clear that belated attempts are now being made to try to bring about a better and more disciplined attitude to work throughout British Leyland's operations. That is the reason that underlies the decision of Mr. Derek Whittaker to withhold further capital investment.

With British Leyland's record of strikes and losses being worse in the past few months than in the previous corresponding period, clearly something drastic needs to be done. One of the great doubts that we had in the Select Committee was whether the intention, enshrined in the Ryder Report, of withholding tranches of capital investment in the event of the failure of attitudes to change, could be made to stick. Certainly the test is on right now.

If these disciplines are being applied in British Leyland, what are the comparable disciplines to be applied in respect of Chrysler? Before contemplating a commitment of this magnitude in Chrysler one must ask what discussions took place between the Government and those employed in Chrysler? What undertakings were exacted on behalf of the British taxpayer to ensure that money—his money —would not be invested in a totally wasteful exercise? One is led to ask what is the effect of the Chrysler decision on Vauxhall? What representations have the Government had from Vauxhall about their decision to invest in Chrysler? What will be their attitude if Vauxhall is next in line, queueing up for assistance from the British taxpayers?

Photo of Mr John Eden Mr John Eden , Bournemouth West

Not a bit like hotel keepers. This is a basic industry of this country. It is most important to ensure that the money invested in it, whether by the taxpayer or by any other means, earns a proper rate of return.

As the CPRS Report shows clearly, in all respects, no matter what may be the yardstick by which the performance is judged, Chrysler comes out worst. That is no recipe for an investment decision of this or any other magnitude. Clearly the Government had in their grasp the opportunity to bring home the truths and realities of our industrial situation. As my hon. Friend the Member for Henley said, they failed to take that opportunity; they ran from it at the last moment.

Lessons have to be learned. I am sure that the majority of Labour Members understand this as well as do Conservative Members. It is no pleasure to have to spell out these things. It is no pleasure for any Member of Parliament to turn to a report, made available this morning, and to read the catalogue of disadvantages afflicting our industry in this key sector. They are set out simply, and they certainly repay close attention and study. At the outset, in paragraphs 12 and 13 of the CPRS Report, some of the disadvantages are listed as follows:

  1. "(a) Too many plants and too much capacity so that economies of scale are not obtained.
  2. (b) Too many models, engines and body types. British productivity per man is far below the levels in the EEC…We are particularly bad in assembly, where the labour requirements for assembling the same car, even with identical capital equipment, are nearly double. In engines it is 50 per cent. to 60 per cent. more.
13. The main causes of this low labour productivity are:
  1. (a) Over-manning—in some operations 50 per cent. to 80 per cent. more than on the continent, even when both job and equipment are identical.
  2. (b)Slower work pace—slower line speeds, late starts, frequent stoppages, bad work practices.
  3. (c)Poor maintenance—British plants need 50 per cent. to 70 per cent. more maintenance men, yet lose twice as many production hours due to breakdowns, even when capital equipment is identical in age with that on the continent."

Photo of Mr John Eden Mr John Eden , Bournemouth West

These are the lessons that have to be learned, and Labour Members do those whom they represent no service by trying to pretend that they are not the stark realities against which we have to judge our own industrial conduct and performance. Until we can get to grips with this we shall never be able to mend the weaknesses in certain sectors of British industry.

One of the ways in which we could get to grips with this—I hope that some Labour Members who have a direct influence in these matters will turn their attention a little more closely to this than they have done in the past—is to seek by some means or another to reduce the number of different unions represented in a single car assembly plant. Hon. Members should realise that it is important to rationalise labour, productivity and work force. That is desperately needed.

Chrysler has a longer history than that of the past few months. Its history goes back to the days of the old Rootes Group, before Chrysler came on the scene. Since Chrysler took an increased stake in, and ultimately total control of, the United Kingdom operation it has undoubtedly come to the conclusion that this is a place in which it would not willingly continue to invest. There are many reasons for that view, and this is probably not the place to go into them. Undoubtedly some of those reasons are the result of a false impression on the part of Chrysler's American management about what it can achieve in its United Kingdom operations. Perhaps there was a misunderstanding over the approach at the start of the company's full-scale ownership. These are matters which require further study.

One point that the Secretary of State emphasised was the need to retain capacity to meet the important Iranian order for completely knocked-down vehicles. We should bear in mind that the future of this contract is not so secure as some would have us believe and that there is the possibility of this order being scaled down in the fairly near future as Iran's capacity to make these vehicles increases. This warning is set out clearly on pages 48 and 49 of the CPRS Report. This was something to which we drew attention in our Report from the Select Committee.

There are many points that arise during this debate that could and should be made. It is unfortunate that we have only a short time in which to speak. Perhaps the lesson that most bears underlining is that the motor vehicle industry should be seeking to get better consistency in the quality of its product, to ensure continuity of supplies, to bring about much-needed improvements in productivity and, above all, to achieve the changes in attitude without which no further investment can be justified. It is a matter of regret that the Government have missed the opportunity to drive home these lessons.

6.27 p.m.

Photo of Mr Eric Moonman Mr Eric Moonman , Basildon

May I add my voice to those who have already spoken of the great loss we feel following the death of Maurice Edelman. There is no question but that this was the sort of subject in which he was greatly interested and to which he was deeply committed. The letter in The Times today shows that he had his own ideas about how the problem should be resolved. We shall miss him. He was a great civilising influence on the House.

I want to deal with one part of this wide debate. I believe that the Government, in their negotiations with Mr. Riccardo, had a good and substantial case to argue on legal, moral and practical grounds. My contention is that we have lost the opportunity to argue that case. This is a matter of great regret because, despite some of the speeches we have heard—and this will become more evident as the debate progresses—this is not a matter which separates the House on party lines. I have the same misgivings as have been expressed by some Conservative Members when analysing this problem. Some of us have grave reservations about what we heard this afternoon from the Secretary of State.

The question of rescuing Chrysler in Britain cannot be looked at in isolation. It has to be looked at in the context of Government industrial relations and how we can get that relationship right. One of the great dilemmas over the past 15 years has arisen from the fact that successive Governments have failed to provide the ground rules to industry. It is a serious matter at a time of expansion. It becomes critical when, as now, we have to take decisions in dealing not only with inflation but with poor industrial performance on the part of organisations within key exporting industries.

If the Government are to command respect and co-operation from industrial management they must show that they understand and are prepared to apply the principles of good management. In the past few months they have obviously begun to show that this could happen. The Government's basic industrial relations policy is sound. The National Enterprise Board, planning agreements, the nationalisation of industries for which the Government are the principal customer, reflect sound common sense. The fundamental aim of increasing investment in profitable industry is also worthy of support. It is all the more distressing, therefore, that a strategy which, incredibly enough, appears with the date stamp of November 1975 should already have been divested so soon. I do not believe that economic or industrial planning has to be inflexible "throughout the whole of the period". Anyone who has had any industrial experience must be alarmed—and industry will feel the same reaction—when that plan, with all the merits I have mentioned, is immediately altered as it is in this case.

None of us should be under any illusion that the Government's statement on Chrysler is a major shift not only in terms of the sum of money involved and in failing to follow-through its stated policy of backing winners, but also because its creates a psychological mood, not only in the motor industry but elsewhere, that competence, skilled performance and intelligent marketing are now the qualities that we want to reward.

The most regrettable feature of the whole incident is that somehow a group of people within a company, both management and men, have said, "We are going to the front of the queue". I resent this, not only from a constituency point of view but from the point of view of the country, because it is an enormous sum of money. If we want to get people to believe that a fair decision has been made, they must also have the belief that no group of work-people and no organisations can use their muscle to move to the front of the queue. Yet I do not believe that, as politicians, we can lecture to any group of people and say "You must consider the national good and need" as Governments have done in recent years, if we are prepared to tolerate a situation of this kind. It is quite nonsensical and unfair.

The important document called "Industrial Strategy" caused a great deal of debate, but those guidelines must now have been affected by this decision—make no mistake about that. We have to ask ourselves where the Government's industrial strategy is now. It is extremely worrying that the Government seem to be prepared to depart from their policy in order to prop up an ailing motor manufacturing company which is not even owned by British shareholders. There is a widespread feeling among many people outside this House that any money put into Chrysler will go into the pockets of the American shareholders.

The Government should explain why they are prepared to put so much money into an American company without taking any British equity shareholding. Do the Government intend to look, likewise, at Ford or General Motors? I put it quite bluntly that the Secretary is putting the credibility of Government industrial relations at risk. This is a major decision, and I am not convinced that even today my right hon. Friend quite appreciates how serious the drift is from the industrial strategy.

My next point relates to the scale of the industry. This concerns many people outside Chrysler, and in view, of the importance of the CPRS Report, there has rightly been some anxiety about its late delivery, which is to be regretted. If we save Chrysler, it may be at the expense of British Leyland and other companies in the industry. If contraction has to come eventually—and the day may not be so far away, whatever the Government do—one has to ask, why not at this stage?—and prepare for it by using some of these reasons to aid the potential unemployed.

I understand the sentiments of my hon. Friend the Member for Renfrewshire West (Mr. Buchan), who spoke movingly from a constituency point of view. But he must ask himself whether it is inevitable that if this policy is approved we shall have to go through the same exercise again in two years' time. We are talking not only about the credibility of Chrysler, but also about saving jobs in the medium-long term. Today's decision will undermine our economy and our long-term chances of survival.

It is clear that the Cabinet have been faced with a harsh decision, even if we are inclined to ignore what we read in the Sunday Times. I say with sadness that I believe that this Cabinet has been intimidated and overwhelmed by events. It has certainly been impressed by the overstated political implications of the closure of the Linwood plant. But if we are taking decisions with half an eye on the Scottish political scene, the Scottish National Party has made greater inroads than any of us imagined, and certainly more than it deserves. Above all, the Cabinet have been intimidated by Mr. Riccardo.

I do not know how many hon. Members have got a copy of the report and the declaration of intent from Chrysler, but this must be the most scandalous piece of paper which any company in this country has negotiated with the Government. There are hon. Members on the Government side of the House—some more interventionist than others—who will nevertheless agree that this is scandalous sell-out. It is no commitment by Chrysler at all.

My hon. Friend the Member for Renfrewshire, West, I am sure, genuinely wants to preserve jobs in his constituency, but he will find little to be confident about.

No conditions are asked for by the Government in the document. It is a series of general statements of good intentions, and even the desire for new models. I would have thought that the last thing that one would expect in a truly hard-hitting report by a company whose record has still to be determined, is that it would talk about new models. It is an extraordinary reflection of pious hope. Nothing in the document commits Chrysler in any way whatever, and therefore by bailing it out we are placing the greatest stress on other motor companies.

The House will forgive me if I, too, make a constituency point but some of us have very large numbers of people in our constituencies who work for some other motor companies. I have been approached by Ford management and workers and they have explained that they have got through very difficult periods with a more successful approach than Chrysler.

In my constituency, between 7,000 and 8,000 people work at Fords, which means that probably 20,000 families are involved. They are asking what is the evidence on which the Government decision was made. Let us look at the track record.

The aim of the Government strategy was to back winners, and I am not prepared to have a lapse in my rational thought processes to accept any Government saying, one month, that they are going to back winners on the basis of competence and skill, and then saying, the next month, that they will now use different criteria.

In a comparison of added value in the motor industry, we find that last year Ford added £4,100 per man, with an index figure of 69; British Leyland was down, at £2,600, with an index figure of 44; Vauxhall did better, with £3,500, with an index figure of 59; Chrysler was £2,400, with an index figure of 41. I do not have sophisticated constituents, but they have a right to know why the Government ignored this sort of performance in making up their mind. I am not too sophisticated, either, so I must be excused if I say that I, too, would like to know as well. I have not heard an adequate explanation up to now.

The question still remains whether there are not better uses for this money. We all have a responsibility, if we are to criticise the Government, to say how we would like to see this money spent in a different way. Over the last 12 months, I have received requests from small companies in my constituency, and I would not be surprised if other hon. Members had received similar requests. These companies said they would like to invest in a piece of equipment or plant, and I have put their case to the Department of Industry, sometimes successfully. The sums involved in such requests amount to between £10,000 to £20,000. The numbers of employees involved are not very many and they have not got the muscle to get to the front of the queue. We are talking about companies which, with assistance, would be able to stay in business with perhaps 100 or 200 employees, for five to ten years. Over the country as a whole, that is a lot of people.

The Government should not think in such global terms. They forget that an essential feature of industry is that we still have large numbers of small companies which could benefit from this enormous sum of money if it were spent in a better way. It does not need an economist to recognise how many small companies could be helped with just a portion of the money which is being put into Chrysler, with better response than we are likely to get from Chrysler. The Government's industrial policy makes sound management sense, but it is not good management to prop up Chrysler now. There are sounder ways of dealing with unemployment and better ways of helping people to get other jobs.

Photo of Mr Eric Moonman Mr Eric Moonman , Basildon

My hon. Friend is entitled to argue his constituency case but he has no right to prevent others from doing so. I say this however: if we are to relate this debate only to matters affecting constituencies, the nation as a whole does not even have a chance.

It is not for me to defend the Government. Someone from the Front Bench has to say whether there is still a credible way of securing a partnership between Government and industry.

6.40 p.m.

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

Liberal Members share the general sense of great loss at the death of Maurice Edelman, who, among many other achievements, contributed unfailingly in this House to debates on the motor industry, in an original, engaging and elegant way. He will be deeply missed here as well as elsewhere.

The central point of this debate on the motor industry is strategy, and I shall deal with that. However, I first wish warmly to endorse literally everything said by the hon. Member for Basildon (Mr. Moonman), particularly on two points. The first is the monstrous unfairness of this Chrysler proposition to all those worthy industries in the country that are being left out. Secondly, I agree with the hon. Member that on the point about saving jobs, with Chrysler we are probably talking about saving them for only two years, or even less. When, as was said earlier today, the cost works out at about £10,000 per job, we must remember that we are paying all that money to save these jobs for only a short time.

On the more central point of the debate, I must repeat what has been said from the Liberal Bench on every occasion within the last 12 months that this industry has been debated. It is intolerable, from the point of view of the effectiveness not only of Parliament but of the Cabinet, that in the last year these matters have always been looked at from a narrow view induced by panic, and never in the context of the motor industry as a whole, including its vitally important components sector. They have never been looked at in the context of British manufacturing industry, either.

This also reflects on the Conservatives, because if they had looked with care at the appalling financial record of British Leyland during 1970–74, when they were in office, they would have set the alarm bells ringing in the national interest. Still more, if they had looked at the pathetic annual sums masquerading as depreciation in the accounts of Chrysler United Kingdom they would have realised that it could not be long before disaster overtook that company. It was in the classically mismanaged position of having put aside paltry sums that did not even approach the amounts required to renew its equipment and to re-tool for new models.

After all this depressing history, my heart rose on 14th November when I received from the Department of Industry a hand-out about the new Secretary of State. It quoted him, on the need for a realistic strategy, as saying 'By realism I mean, above all, based on the hard facts of world markets and what we can do as a medium sized economy to compete in them a lot more strongly that we have in the past.' It went on It was essential to develop a way of determining priorities, continued Mr. Varley, since the amount of money the Government had available for industry was limited. The new approach would be a starting point for developing the Government's own industrial planning". The new approach has not lasted even a month. Here we are again, being asked at pistol point to take a decision that was vouchsafed to us only at 3.35 this afternoon and that will have immense consequences. It is an insult not only to Parliament but to all those industries which are well managed and whose workers give of their best. We have at the last moment received copies, neatly bound and obviously prepared for many weeks, of the Central Policy Review Staff study. In particular, there is the magnificent chart 36, which should be hung in every sixth-form room in the country. It shows in the most splendid form, which I thoroughly applaud, a chronicle of inevitable disaster starting with Failure to rationalise product range and plant structure. It goes through all the stages of catastrophe, until one arrives at the state in which Chrysler United Kingdom and the greater part of the British motor industry are today.

However, even the CPRS study fails to put the matter in anything like the full context provided by the report of the Select Committee under the chairmanship of the hon. Member for Sheffield, Attercliffe (Mr. Duffy). It does, however, rub in many of the facts that should be taken into account before this matter is decided tonight or tomorrow. One of those facts is that in the EEC there are 14 motor car manufacturing and assembly firms with a capacity to produce 15 million vehicles annually for a market that is estimated, in normal times, at 10 million. In the United States, however, where the market is estimated to be of the same size, there are only four firms, and they provide a similar number of vehicles.

The CPRS study also issues the warning, which the Cabinet should have taken firmly into account before giving way to Mr. Riccardo, of the threat to our exports of the rapid development of the motor car industry in continents such as South America and the Middle East and, as we shall know to our cost, in Eastern Europe. The study is also most eloquent on the dangers of fragmentation in the British industry.

I come now to the crucial point of the CPRS recommendations, where the Report says quite explicitly that there are at least three too many motor car assembly plants in Britain. Yet, faced with that clear recommendation, which was well supported by a wealth of evidence, we are proposing to try to save for a couple of years, or, at least, until the next General Election, all the assembly plants of Chrysler UK. It must be brought home to the country that this strategy, as it was put before us by the Secretary of State, simply will not work.

I asked the right hon. Gentleman immediately after his statement whether he would reconcile Chrysler's grandiloquent statement of intent—the second that we have had to endure from Chrysler—with the amount of finance mentioned in the statement. He was unable to do that there and then, but he promised to deal with the matter during his speech. However, he did not even approach the problem when he opened the debate.

In this difficult situation we have to rely on whatever advice is at hand. I have been assisted by the Bristol University motor industry research group. Hon. Members will have seen its work in the Economist, The Guardian and the Observer. After an infinite number of calculations, taking the Sunday Times leaks as the best indication it has—and a very good indication they were of the Government's intentions—taking what might be called a central assumption about sales over the next five or six years—neither the best nor the worst that could be estimated for Chrysler—and taking full credit for all that is known of the Iran contract, it arrives at the following figures: for 1975, as is well known, there will be a loss of over £50 million. In 1976—Chrysler agrees with this figure—there will be a loss of about £39 million. In 1977, assuming that the Iran contract goes ahead, the loss will be reduced temporarily to £2 million. In 1978, there may even be a small profit of £4 million. All these figures are in terms of 1975 values.

In 1979 the losses will start again, with a loss of under £10 million, and after that the losses will begin to escalate again. On this basis, by 1979 Chrysler UK will have to appeal to the British Government and taxpayers for yet more vast grants in aid. The General Election, of course, will be over and the cosmetics will have been applied for a modest amount of time.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

As the hon. Gentleman descends into the sort of persiflage and electoral propaganda which he used in his last sentence, and as he is a constituency neighbour of mine whose constituency is not far from the steel industry, what advice would he give the Government who are faced over the next nine months with a possible direct additional unemployment figure of about 55,000 in the motor car industry and perhaps another 70,000 in industry, including the steel industry, and those industries which produce components for the motor car industry?

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

As the Government have refused to tackle this matter in a proper context I am not prepared to devote the time of the House to a full answer.

Photo of Mr Nigel Lawson Mr Nigel Lawson , Blaby

The hon. Member for Penistone (Mr. Mendelson) has just come into the Chamber.

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

If the hon. Member for Penistone (Mr. Mendelson) would stay in the Chamber, if he can bear to do that for a moment—

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Order. Please can we get on as quickly as possible. A great many hon. Members wish to speak.

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

I do not intend to follow the hon. Member for Penistone except on one point, namely, that I entirely dispute his figures, which are based on the premise that if one component firm of the British motor industry goes out of business the whole of this production will be lost to the United Kingdom motor industry as a whole. I pay British Leyland at least the compliment of believing that it will be able to fill a substantial part of any gap left by the slimming down or the disappearance of Chrysler UK.

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

It is essential that we should take seriously the strong recommendation of the CPRS study that at least three assembly plants must be phased out as soon as possible. One of the keynotes of the CPRS study is the speed with which rescue decisions must be made if the industry is to survive in a major sense at all. Therefore, we on this Bench make no bones about the fact that one of the major assembly plants which must go must be one of British Leyland's and only those who are deeply involved in the management can say which. Certainly either the Longbridge works or the Cowley works will have to be phased out and there must be an emphasis on volume cars with a certain premium quality which will make up for the fact that if we produce simply the cheapest model of the most rudimentary kind we cannot hope to compete with the vast and highly integrated plants in Germany, Italy and elsewhere.

It is also necessary to admit that there will have to be even more redundancies. The important point is that if tough action of this kind is taken, in relation to Chrysler UK and British Leyland—the British motor industry as a whole—the jobs of those who are left will be much more secure. The very worst human factor which haunts this industry and which will continue to haunt it after today is the insecurity and the feeling that no one in the industry knows what next week may bring. That is at the base of many of the problems of labour relations.

If the aid to British Leyland had been limited to about £650 million, the same Bristol University team reckons that a cash flow could be generated which would make British Leyland self-sufficient after the expenditure of £650 million of Government money and that on a sensible assumption about sales it would, after four years, be able to produce an annual profit approaching £150 million before tax. It would be a slimmer industry but much more efficient and would offer more secure employment to those remaining in it, who would number, in the case of British Leyland, about 90,000, excluding those employed by component suppliers.

Unless these matters are faced, as the hon. Member for Bournemouth, West (Sir J. Eden) so cogently told us, there will be continued insecurity, recourse to public funds, and resentment by most of the rest of British workers at the favoured treatment being meted out to this particular industry.

In conclusion, it cannot be emphasised too strongly how important it is that for the expected upturn in world trade in perhaps 18 months' time British industry should be poised to take advantage of the new markets there will then be for the science-based industries and the quality-based industries, at which the British work force is so very good. It is no service to buy off for a mere two or three years jobs which do not provide real work satisfaction for our people, which are conducted in an atmosphere of boredom and insecurity and which cannot possibly be an abiding contribution to the British way of life.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

The House knows that I have no power to impose a time limit on individual speeches. However, I hope that hon. Members will aim at about 10 minutes each from now on.

6.56 p.m.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

As we are all aware, the debate has raised a number of extremely grave issues, and most of them have already been touched on in the speeches from the Front Benches and in other contributions. There is the question of jobs at stake, not just directly but indirectly. There is the question of the need for Britain to aim at achieving industrial and export success. There is the question of public money, public accountability and public equity. There is also the question, which my hon. Friend the Member for Renfrewshire, West (Mr. Buchan) raised, of the lack of consultation between the Government and the workers in the industry. Then there is the question of our economic relationships with the transnationals.

First, I want to refer to the jobs aspect. I am utterly convinced that it would never have been right to abandon directly at least 40,000 to 50,000 jobs, with all the spin-off that would be involved in the steel industry, on the basis of a one-month's emergency situation presented to us by Chrysler UK and Chrysler America. Therefore, it is bound to be right to preserve jobs. I take that as the starting point for my remarks. I have many serious criticisms, but I am with the Government on saving jobs at this point, the more so because I believe that the House would make a great mistake if it overlooked the fact that fundamental decisions about the future viability of industries which are basic to Britain, including the steel industry—to which my hon. Friend the Member for Penistone (Mr. Mendelson) referred—are being made at a time of economic depression that is crippling the whole of the world.

The decision that we have now made, in December 1975, could have been very different if we had had to make it in December 1973 or December 1977. We must bear in mind the fragility of any ruthless decisions that might be made to abandon jobs at this moment—decisions that might be bitterly regretted one or two years from now. Therefore, I agree with the Government about saving jobs.

I turn to the question: how? As an additional justification for the Government's decision we must consider the social support costs that have been touched on, but only partly. It is not a matter of merely comparing the cost of the operation which the Government have undertaken with the direct cost in terms of unemployment benefit and supplementary benefit. It also concerns the indirect cost of losing the advantages and the tremendous public expenditure on housing, schools and public facilities that has taken place in the areas where jobs have come into being in the car industry.

In my constituency, when the pits were closing down we watched village after village where millions of pounds were in effect being wasted. That money had been spent on the infrastructure necessary for those working in the pits. One wastes the infrastructure cost if one throws away the jobs and says "We hope that at some time in the future there will be jobs for you." We must balance in the account the cost of creating new jobs in the future.

Taking all these things into account, one finds that the balance sheet works out fairly evenly. But it should not be "jobs at any price" without the prospect of viability and success, which is absolutely necessary.

Lest anyone should suppose that there is some innate contrast between at least this aspect of the Chequers strategy and the strategy of the Labour Party's manifesto, let it be perfectly clear that we are all concerned with achieving industrial success. It is not our aim to invest in industrial failures. However, that means that we must gear production to the market. We must make what we can sell and see how we can improve our prospects of making what we can sell.

I hope that hon. Members will not take this CPRS Report as something that has descended from the gods in their heavens. It contains quite a lot of very useful material, although if it had been presented to me by my officials I would not have regarded it as suitable for publication until it had been added to and thought out properly.

How is it possible to have a Report about the car industry—which is what it calls itself, although half of it is talking about the motor vehicle industry, about which the Select Committee was talking; the other half seems to be restricting itself to cars—which points out the tremendous involvement of the transnational companies without, as far as I can see—my hon. Friends will forgive me if I have omitted a sentence in my rush to read it, since it was published only this morning—one mention of the element of transfer pricing? How can we look at our car industry without referring to the considerable element of transfer pricing that has been involved in the Chrysler case?

I should like to quote from this "excellent Report"—las my hon. Friend the Member for Renfrewshire, West described it—that has been prepared by the shop stewards in the Chrysler plant, in which they mention the allegations that artificially low export prices were charged to other Chrysler subsidiaries, particularly in Switzerland where taxes and profits are lower than in the United Kingdom. They say that there is a calculation available showing that in the last three years alone Chrysler United Kingdom may, through this kind of transfer pricing, have in effect given away £93 million to the Swiss subsidiary.

Where is that in the CPRS Report? May we have a comment on that from the CPRS? If we get one I shall take the rest of what the Report says a little more seriously.

In looking at what is to be done, we must ask ourselves whether we are talking about the motor vehicle industry or the car industry. If we are talking about the motor vehicle industry, again one must raise an eyebrow at Table 26 on page 108 of the CPRS Report, in which there are assumptions—and assumptions built into "demand scenarios". I thought that the word "scenario" had left Whitehall a year or two ago, but apparently it has not. It is headed Assumptions built into demand scenarios. It gives a worst case and best case for 1980 and 1985. I look at the line that says Export to Rest of World"— that is to say, not to North America; not to EEC countries or EFTA countries; not to Europe or Northern America, but to the rest of the world. In other words, very broadly, it means the Third World. Here we have a figure for 1974 of 0–27 million vehicles for the exports to the rest of the world. The worst case prediction for 1980 is that they will have dropped by almost half to 0–14 million. The best case prediction for 1980 is that they will have dropped to 0–19 million. These are also the worst case and best case estimates for 1985.

All right. There are some of the more developed developing countries which are themselves beginning to undertake car assembly. We know all about that. Every hon. Member who has travelled anywhere knows also that if he could take 10 or 20 Land Rovers in his pocket, they could be disposed of immediately. So why are we not making the things which we can sell? Why cannot we use the labour, equipment and investment in order to go into Chrysler and British Leyland and gear ourselves, not with pessimism but with real hope, to doing the job properly, making things efficiently and getting the better relationship between workers and management that will be necessary for that, and having a success with the motor vehicle industry?

It seems to me that the attitude of the CPRS Report is to say, "There will be only a limited demand for motor vehicles. We have not been very good at it, so let us withdraw and let everyone else make their sales and do well." What sort of attitude is that for the British Civil Service? I sincerely hope that the Government do not accept the advice of the CPRS.

Photo of Mr Alan Clark Mr Alan Clark , Plymouth, Sutton

On the point about transfer pricing, I accept entirely the figures in the Report relating to this matter. Would not the right hon. Lady agree that the disguised transfer of £93 million by the parent company through trading operations in Switzerland is an evasion of the British exchange controls and a fair indicator of the level of reliability which we can expect from this company in dealing with it in the future?

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

I do not draw precisely that conclusion. The conclusion that I draw is that in assessing the viability of the operation of Chrysler United Kingdom, if the Government take into account the losses created by transfer pricing they can have a better perspective of future viability if they approach the company and their dealings with it in that way.

Photo of Mr Tom King Mr Tom King , Bridgwater

This matter is important. Presumably one person who would know whether transfer pricing was going on is Mr. Riccardo. If what the right hon. Lady has suggested were true, it seems surprising that he was willing to give the whole operation to the British company plus £35 million as a sweetener.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

Let me not try to understand Mr. Riccardo's motives. I have some difficulty in understanding my own Government's attitude in this matter, so I do not want to try to get into Mr. Riccardo's mind.

My final point is one of grave criticism of the Government. It relates to the question of public money, public accountability and public control. We have heard this afternoon that there are to be two Government-appointed directors on the Board. We have heard that there will be a planning agreement. Perhaps my right hon. Friend the Secretary of State for Scotland would be good enough to tell the House when it is expected that the planning agreement will be devised, agreed to and concluded. Will it include an audit agreement? Will it include provisions about a guaranteed return?

In terms of the Government's money, which is now to go into Chrysler without any public equity, without any public shareholding, without any firm degree of public control except through the planning agreement mechanism, will my right hon. Friend tell us whether, by the nature of the agreement which has been concluded with Chrysler, all doors must inevitably be regarded as closed to a future option to transfer the loan or part of the loan into equity, or could there still be, not necessarily in the next year, an option to do that in later days under the terms of the agreement? I would have thought that the agreement cannot be so unconditional that that would necessarily be ruled out for the indefinite future.

Many anxieties are felt by hon. Members on both sides of the Chamber. My own anxiety is very deep. I think it will be an anxiety that will be expressed over and over again by many of my hon. Friends when money is put into a company in this way without taking public equity and public control. I should have thought that the logical answer would be public ownership, relating this issue to British Leyland. We could then have seen what we could make of the whole enterprise. As I have said, there will be grave anxiety.

It is against that background that I shall vote with the Government tonight and tomorrow night—[HON. MEMBERS: "Oh."] No one should be surprised by my last statement. I said at the beginning of my remarks that I support the Government in that they are saving jobs. I think it is right that they should do so at this time.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

Conservative Members want more unemployment. That is what they are here for.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

I hope that as the weeks go by we shall see some satisfaction being given to the Labour Party's intense feeling that public money should be accompanied by a public equity shareholding.

7.12 p.m.

Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove and Redditch

I have been in the House for only a relatively short time but, like many others, I pay tribute to the late Member for Coventry, North-West, Maurice Edelman. In a debate of this nature I still find myself involuntarily looking towards his seat in anticipation of his contribution.

The Government Front Bench must take on board that considerable dissatisfaction has been expressed from both sides of the House about the Government's failure to relate the Chrysler operation to any coherent strategy for the motor industry as a whole. That is the main criticism that I wish to make, but there are two other matters to be considered in debating the Chrysler operation. The first matter is that a tactical or holding operation is needed. The hon. Member for Renfrewshire, West (Mr. Buchan) was eloquent on behalf of his constituents, but a longer-term strategy must be established before the short-term measure can be satisfactorily judged.

The Secretary of State's predecessor, the Secretary of State for Energy, when discussing British Leyland in the House made a salient remark when he said that the British Leyland decision would come to be regarded as a turning point not only in the history of the motor industry but in the whole of our post-war industrial history. Indeed, it has proved a turning point, and we have taken the wrong turning. As far as I can see, we are going ineluctably down that turning.

I pay tribute to the work of the Select Committee that was chaired by the hon. Member for Sheffield, Attercliffe (Mr. Duffy). It was well aware of the dangers of the wrong turning. In paragraphs 153 and 154 we find the Committee making that very point—namely, how to avoid a company becoming a permanent pensioner if it is not viable and is unable to make profits. The only answer the Committee could obtain from the senior civil servant in charge of that side of the Department of Industry was that he found it difficult to envisage any Government finding it easy to turn down one Company when it has approved another.

Is that not the situation in which we now find ourselves? Will it not be repeated before another 12 months are out, unless there is a coherent strategy, which is acted upon? On this point I endorse the remarks of the hon. Member for Basildon (Mr. Moonman), who, I think, had the attention and sympathy of the whole House.

As regards tactical strategy, I must take up some of the remarks of the hon. Member for Renfrewshire, West. I am sorry that the hon. Gentleman has left the Chamber again. Of course, he was very properly defending his constituents, but I also represent a constituency with many motor industry employees and some of his remarks cannot be allowed to go unchallenged, especially his assertion that the workers of Chrysler, if the Government had not intervened, would have saved their jobs for themselves. If the management and the employees had wished to save their jobs for themselves they could have done so. The CPRS Report, at which the right hon. Member for Lanark (Mrs. Hart) was trying to throw mud—I note that the right hon. Lady has not had the courtesy to wait for the following speech—clearly sets out just how far the management and other employees in our motor industry have to go if the industry is to remain viable. The overmanning in trim departments, maintenance departments and frame-building departments, for example, ranges between 70 per cent. and 100 per cent.

Photo of Mr Tom Litterick Mr Tom Litterick , Birmingham, Selly Oak

I think it is important that the hon. Gentleman should make his meaning absolutely clear. The sort of statement that he has made is always ambiguous when it comes from the Opposition Benches. Will he tell the House and the people outside whether he means that the Chrysler collapse has taken place because of the deficiences of the workers? Is that what he is saying? If he is not saying that, let him make his statement clear.

Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove and Redditch

I referred to the management and other employees in the company. I shall not be pinned down by an intervention of that nature.

Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove and Redditch

I shall develop my argument, if Labour Members will listen. Productivity in the motor industry has not been adequate. I am not seeking to lay the blame on one side or the other as the hon. Gentleman tries to suggest. The fact is that it takes twice as long to assemble in this country as it takes in exactly similarly equipped factories producing the same models on the Continent. That raises a strategy decision to which the Government should be addressing their attention.

The hon. Member for Renfrewshire, West said that capitalism inevitably led to over-capacity In anticipation of an expected upturn of trade. My God, have we not heard from the Secretary of State for Industry and Labour Members from below the Gangway that we should maintain industrial capacity in anticipation of the great upturn in trade which we keep on being told will be next year or 1977? I think that that is very much a case of the pot calling the kettle black. How could Chrysler have possibly invested more money if it was making no profits? The Select Committee made it clear that the company was in a long-term loss-making situation. How could it be expected to invest? The hon. Gentleman's complaint shows no understanding of the situation within the industry.

We wish to hear the Government's views on the future of the motor industry and how their declaration of intent relates to their strategy. The figures that we have been given this afternoon, leaving aside the provision for certain losses and possible losses, amount to loans of £55 million and £35 million. Those loans are supposed to transfer the Avenger production line from Ryton up to Linwood and to make it possible for a new model to come out of Ryton. They are also supposed to take account of the other possibilities stemming from the declaration of intent. If that is so, the sums are ludicrously inadequate, as anyone with any experience of the industry would know.

Significant figures are quoted in the CPRS Report. A new pressing shop would cost £100 million, a new power train assembly £150 million, the gear box would involve a figure of £75 million, and a paint shop would cost £20 million. Therefore, what will we get out of the expenditure of £55 million and £35 million? It will certainly not ensure the long-term viability of that company.

My hon. Friend the Member for Henley (Mr. Heseltine) was right to say that the Government gave a promise only to deceive. That is why the jobs allegedly being protected are being endangered—not only those jobs but also the jobs of others in the motor industry. There is no long-term future on the basis of the figures advanced this afternoon. The Government must come clean on the long term future of Chrysler and how it relates to the rest of the motor car industry.

The right hon. Gentleman the Secretary of State for Industry gave no clear answer to me a little earlier in the afternoon when I asked whether the reduction in capacity at Chrysler will have to be matched by a corresponding reduction in capacity at British Leyland if the whole motor industry is to remain viable. However, he later gave a highly optimistic, and indeed euphoric, account of what is happening at British Leyland at present. What is happening at British Leyland at the moment, contrary to the right hon. Gentleman's account, is that capital investment has stopped. I voted on the Government side to give capital to British Leyland for investment as a holding operation until the necessary bench marks were established on which the progress of the company could be monitored as a pre-condition to further investment.

What has happened is that Leyland has frittered away a vast sum and there has been no investment. Therefore, how can the Secretary of State be so complacent about the progress made in that company? When will we have a chance to review the progress made in meeting those bench marks before we have to consider the £600 million that is supposed to be advanced next spring?

The Prime Minister said of earlier events at Chrysler this year that the Government were not prepared to contemplate the use of taxpayers' money or money borrowed from the Government to gratify politico-industrial ambitions. The Prime Minister was referring at that time to the strike by Chrysler workers at Stoke. His remarks might well have applied to recent manoeuvres by Mr. Riccardo.

7.25 p.m.

Photo of Mr Patrick Duffy Mr Patrick Duffy , Sheffield, Attercliffe

As the House knows, I am the Chairman of the Trade and Industry Sub-Committee of the Expenditure Committee. For six months this year my colleagues and I conducted an investigation into the British motor vehicle industry. I warmly endorse the words of the right hon. Member for Bournemouth, West (Sir J. Eden) about the purpose of its work, the rigorous analysis that sustained its findings and the impartiality that at all times characterised our conclusions and, I believe, our recommendations. I also wish to pay tribute to the service we receive from a most able Clerk and specialist adviser.

I pay a further tribute to my colleagues on the Committee for the quality of their contributions and the enormous amount of work they undertook. They assimilated a huge amount of written evidence and attended 60 meetings and made numerous visits. I believe that we were punctilious in the fairness of our approach. We heard evidence from shop stewards at Cowley, Longbridge, Ryton, Linwood, Dagenham, Luton and Dunstable. We also visited Cowley, Dagenham, Linwood, Ellesmere Port and Dunstable, and made a point of holding discussions jointly with management and unions. In regard to formal evidence, the record will bear out that one-third more unions than management witnesses appeared before us either at Westminster or during our visits to plants.

I have looked briefly at the CPRS Report and I am delighted to see that its main conclusions closely parallel our own. It is important to remember that our Report was about the motor industry as a whole, including commercial vehicles, whereas the CPRS Report dealt only with the manufacture of cars. However, one of our main conclusions—namely, that 12 cars would be chasing 10 buyers in the next 10 years—is confirmed by the CPRS. Therefore, the implications of excess capacity are very serious.

I wish to make a brief analysis of some of the reasons for the British motor industry's present plight. In 1964 that industry was about the same size as the main European motor industries. Its new capital investment produced a new range of vehicles efficiently. Now, however, the United Kingdom industry is small scale in world and even European, terms. The stagnation, relative decline and the financial difficulties facing all but one of the major car assemblers represents an economic catastrophe which, in scale and impact, is almost without precedent in British industry.

The saving grace of the British industry has been the manufacture of commercial vehicles and components. Without those resilient and efficient sectors, our motor industry's balance of payments would barely have been in the black. I find the present situation in the industry astounding in view of the fact that, despite all our difficulties, this country is still a nation of relatively high prosperity. With its high per capita incomes and highly developed and complex industrial base, the United Kingdom is a favourable environment for a motor industry, and a car industry in particular. Although the motor car has its detractors, the fact remains that it has brought freedom of travel and greater enjoyment to many millions of people.

When the purchase of a car is such a high priority with so many people, why has the car side of our industry failed so badly? From my Sub-Committee's study of the industry, I am convinced that Government, management and labour must all share the blame. Governments have been unable to resist the use of the industry as an economic regulator. Various studies suggest that the British motor industry accounts for a key 11 to 12 per cent. of GNP, directly or indirectly. Its significance in terms of employment and our balance of payments is very great.

All this has proved too much of a temptation to Governments of both parties. The artificial booms and slumps in the market for vehicles have been engendered by changes in sales taxes and hire-purchase terms. This has made it impossible to plan investment production and capacity utilisation over even the medium term. By contrast, the West German Government have avoided a short-term policy weapon for their car industry on the ground that the longer-term possibilities of the industry are the crucial factor in the steady growth of the German economy.

Although in the last few years it seems that Government economic management has taken a more responsible view of the industry, erratic usage of capacity led to reduced investment in plant and equipment, and eventually to reduced investment in new models. To a large extent the damage had been done.

The second tranche of the blame must fall on management. Because of the rate of growth of our economy, which has been lower than that of our rivals, our exports have been essential for the survival of our motor industry. It seems that some managements have failed to grasp this nettle. I do not believe a large home market is needed when we require large exports. If the product, marketing and efficiency are right, cars can be exported at prices that cover full accounting costs of production.

British managements bemoan official interference to the point of the detriment of getting on with the job of designing, producing and selling cars. British management's preoccupation with "production" as such led to insufficient attention being paid to marketing and industrial relations.

Management failure is perhaps best exemplified by a recent incident at Cowley when the management threatened to send home the work force if a production rate of 28 cars an hour was not achieved. When the men worked at that rate they ran out of parts and components because the logistics of production—the responsibility of management—were not good enough. Poor direction from the top has contributed significantly to the industry's difficulties.

The work force cannot be free from blame. The multiplicity of unions has led to inter-union rivalry and helped to make a poor situation worse. Far too frequently the strike has been part of the negotiating procedure, sometimes even as an opening bid. The strike record of the British motor industry is a sign of the weakness of union organisation and not its strength.

Photo of Mr Ivor Clemitson Mr Ivor Clemitson , Luton East

Would my hon. Friend agree that his criticisms of the multiplicity of unions and the prevalence of strikes do not apply to Vauxhall Motors?

Photo of Mr Patrick Duffy Mr Patrick Duffy , Sheffield, Attercliffe

The record of the motor industry is patchy, but there is much merit in my hon. Friend's reminder.

The union leadership must be able to make agreements stick and grievances must be taken through agreed procedures. This will be a fundamental element in the success of the industry, particularly at British Leyland.

Economies of scale are vital to the industry. The larger the operation, the lower the unit costs. Car making involves foundry work, machining, metal pressing and assembly. The lesson of the last five years has been that a fully integrated and efficient operation requires an output of about 1¼ million units a year. A reorganised and rationalised BLMC with good production, management and labour relations would be large enough to survive. Firms with an output significantly smaller will inevitably encounter difficulties.

Last Thursday, the Expenditure Committee authorised my Sub-Committee to carry out an inquiry into Chrysler UK, provided that the Government's decision involved public expenditure, whether in the form of grant, loan or guarantee. The Secretary of State's speech today made it clear that this condition has been fulfilled, and it may be for the convenience of the House if I state clearly now that my Sub-Committee intends to conduct a thorough investigation of the Government's plan for Chrysler UK, looking particularly to see to what extent it represents value for money.

We shall be examining the purposes for which the money will be used, its accountability and monitoring, the long-term future of the company's British operations and the impact of the of the British industry, particularly, of course, British Leyland. We plan to hear oral evidence from all the principal actors in this particular drama and will be happy to receive written evidence from any organisation or individual which wishes to submit it.

May I begin our inquiry by inviting my right hon. Friend to come and give evidence to my Sub-Committee at 10 a.m. on Wednesday 14th January. I hope he will accept my sympathies in view of the difficult and trying period of negotiations to which he has been subjected and forgive us for placing one extra burden on his shoulders.

I do not wish to comment on the Government's specific proposals for Chrysler because my Committee will he forming its own opinion, but there are some areas of concern which I would like to bring to the Secretary of State's attention.

What will be the impact of his proposals on the publicly-funded British Leyland? How soon will the Iranian motor industry be self-sufficient and what effect will this have on the Iranian contract which is mentioned on Page 49 of the CPRS Report? Optimism aside, what impact will the new Chrysler models have? Why has no equity been taken? Surely when public money is spent there should be commensurate public control? Will there be an increase in the scale of the operation and will this have any effect on production costs? What will be the Government's attitude to other firms in similar trouble? Can we assume that this is a one-off rescue? Did the Secretary of State consider the possibility that the interests of British industry as a whole might be better served by giving assistance on this scale to an industry such as machine tools where we have a proven leadership rather than propping up an ailing sector of an ailing industry?

My Committee was told by the Department of Industry that viability was no longer regarded as an essential requirement for firms that were to be assisted with public funds. We concluded that we were unable to see how a firm could avoid becoming a permanent pensioner if it were not viable and therefore unable to make profits. This apparent conflict has still not been resolved. In our Report we said that rigid economy and high cost effectiveness, not to mention commercial survival, should be among the criteria for the expenditure of public money. In a case like this, Parliament, as well as the Government, has a duty. This duty does not intrude on the prerogative of Government or the merit of individual decisions, but when public money is spent the objectives of its expenditure must be made quite clear. Contrary to the impression given in the House yesterday, it is not any Government Department or a Secretary of State who should exercise final control. It is Parliament.

7.37 p.m.

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

I shall try to speak as briefly as I can because I know there are still a large number of hon. Members wishing to take part in the debate. I pay tribute to the hon. Member for Sheffield, Attercliffe (Mr. Duffy) for the part he has played, not only in today's debate but over the many months in which he has worked extremely hard.

However, I find it impossible to condemn the rescue operation which has taken place. In his brilliant speech, my hon. Friend the Member for Henley (Mr. Heseltine) made clear the case many of us would like to support. But those of us who come from a very different part of the country and have lived our whole lives against a background that is totally unrelated to what he was saying cannot go along with his point of view. Though I disagree with the conclusions reached by the right hon. Lady the Member for Lanark (Mrs. Hart) and the hon. Member for Renfrewshire, West (Mr. Buchan), because there is no final and attractive answer in nationalisation, I have to recognise that maintenance of employment on a scale that is at least acceptable at a time when there is no alternative employment and when we have an ever-rising unemployment rate is something we have to consider very carefully.

One hon. Member said earlier that "we should now make a start"—that is, to be tough. This is always a facet of the argument when considerations such as those involved in the Chrysler situation are before us. I should remind my hon. Friends that this was a consideration when the problem of UCS cropped up early in the life of our own Government. For the same reasons, we were obliged to take a similar course to the exercise before us today.

That is why I support the rescue operation, although I am highly critical of the amount of money involved. I am also doubtful whether the operation will bring the required result in the long term and whether suitable arrangements have beep made to monitor or control this vast amount of public money, although I do not accept what some Labour Members regard as the answer.

We must think also of the effect of this on other industries. Various industries have been mentioned—the steel industry, textiles, paper making—but no one has mentioned the small businesses, of which there are a large number, and which for a fraction of this vast sum could create the expansion and the export markets which are so badly needed. It is only natural that small businesses should bitterly resent a sum of this magnitude being allocated in this way. It is a rescue operation, yes, but we doubt the longterm results of it.

It is surprising that it is not more often mentioned that the car industry, above all others, has been used as a regulator for the economy. That has been happening for a decade, and as long as it is used in that way it is impossible to plan ahead. If one cannot assess demand accurately because of another factor which enters and varies that demand, it is not surprising that over-capacity has reached the point referred to in the CPRS Report before us. Planning ahead is essential in any industry of this size, and some idea of public demand is a basic feature.

We are faced with the extra capacity referred to in the Report, the criticism of investment levels and no long-term proposal for correcting the weaknesses set out in the CPRS Report and the Expenditure Committee's Report. Unless we set about correcting those weaknesses, as my right hon. Friend the Member for Bournemouth (Sir J. Eden) said earlier, we shall not be able to put the industry in a competitive position within the time scale involved with the money which we are considering today.

The Central Policy Review Staff Report says that employment in the motor industry could fall by 275,000 in 1985. Let us recognise that what we are trying to salvage today is within managable proportions compared with the possibility of having to deal with 275,000 unemployed. Therefore, we have a duty in looking ahead to try to make this immediate operation work, and work effectively.

We cannot have expected—and I do not think my hon. Friend the Member for Henley can have expected—the total shutdown of the Chrysler company overnight. But here the Government are open to great criticism. The primary reason for nobody expecting that to happen is that there is no suggestion of restriction in any other sector. It would have been illogical to expect one industry to bear curtailment of this magnitude when there is no evidence of the curtailment of expenditure in other spheres which many of us believe to be essential.

Coming to the immediate prospect, we have to consider how to contain and control the situation, which means seriously examining a whole range of aspects that have gone wrong. We have to look at the quality of the product, delivery dates, productivity rates, overmanning, and last, but by no means least, industrial relations within the industry. None of us can deny that the number of disputes in the industry has far exceeded the normal level. The faults lie throughout the whole work force at every level. Some of us have been in fairly close contact with one motor plant ever since its inception. We have a duty to make possible a viable future for the industry after more substantial redundancies than many of us like to contemplate, some in my area. We have a duty to put to the work force that this is the last chance, and that in this huge operation the immediate rescue will have to be proved to be worth while in a matter not of weeks but of months and no longer.

Several hon. Members:

rose

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

Order. There are 12 hon. Members who are anxious to take part in the debate. In the 75 minutes remaining for Back-Bench speeches, it will help if hon. Members are reasonably brief in their contributions.

7.46 p.m.

Photo of Mr George Park Mr George Park , Coventry North East

When my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) told the House that his Committee intended to investigate the Chrysler deal and issued invitations to the Front Bench to attend, the thought passed through my mind that unless my hon. Friend supported the Government tonight in the Lobby there would be nothing for him to investigate, because Chrysler would have gone.

Every hon. Member has been a prospective parliamentary candidate, but how many hon. Members have been prospective members of the dole queue? That is what we are discussing. I fear that too many hon. Members have no experience in that direction, and that is why they have dealt with this serious issue in the way they have.

I shall greatly miss the wise counsel and courteous approach of the late Mr. Maurice Edelman, who was the Member for Coventry, North-West. I was glad to hear the tributes paid to him today. He was as anxious as I am that we should not, in his words, be "taken for a second ride" by Chrysler. He was referring in part to a delegation that he led in 1964, of which I was a member, as the convener at Chrysler, Ryton. We went to see the Minister of Technology to discuss the difficulties of Rootes at that time, which were similar to those of Chrysler today.

In the negotiations, which preceded the acquisition by Chrysler of 30 per cent. of the equity, undertakings were given that nothing would be done to disadvantage the United Kingdom operation. A Government director was appointed, but he never once made a report. When Chrysler acquired the whole of the company, he said that he felt no further obligation because he was then a Chrysler director. Therefore, my late hon. Friend the Member for Coventry, North-West was wondering, just as I am wondering, what are the terms of reference of the two directors to be appointed. At the very least they must report regularly on the company's performance.

I should much have preferred the Government to take a share of the equity in putting in this money, but I ask those who advocate giving no help to consider the cost of putting all the Chrysler employees and the workers in their suppliers on the dole. The average redundancy payment would be about £760. For the Chrysler workers alone that would amount to £35 million. A married worker with two children would be entitled to draw £33 a week in the first six months. He would also have a rates rebate, his children would have free school meals, and he might be entitled to supplementary benefit. The workers would cease to pay income tax, at an average of £10 a week. That item alone makes a total of £500,000 a week. There are earnings-related benefits for the first six months the total cost of which would be about £70 million. If hon. Members do some simple arithmetic they will find that the amount of money the Government propose to put in the company is close to that. They must ask whether it is a more constructive way of using the money than to throw men on the dole, with all the frustrations that that brings, particularly in the areas mainly affected—the West Midlands and Linwood—where there are no alternative jobs at present.

I am not pleading a constituency interest. Some of my hon. Friends who have felt that that has been done have missed the point. We are talking about Chrysler UK, a company that has ramifications throughout the United Kingdom and that keeps many hundreds of small businesses going. Choking off the orders from Chrysler would mean choking those companies as well.

The CPRS Report and experts from Bristol have been quoted, as well as the Select Committee's Report. I have only one thing to say to people who place so much faith in the experts. The experts were wrong about the RB211, and they can be wrong again.

I believe that Chrysler can be rebuilt into a viable company, if certain prerequisites are met. There will have to be a rebuilding of the Linwood toolroom, for a start. It is nonsense to talk about new models unless there is a toolroom to produce the tools. It is stupid to imagine that the company can reach good production levels in the Stoke machine shop, when 3 per cent. of the machines there are more than 33 years old and another 30 per cent. are more that 14 years old. If hon. Members had a chance to see the sophisticated equipment at Simca they would have the complete answer to the difference between the productivity levels of Simca and Chrysler UK. In 1974, capital expenditure had reached the ludicrous level of £15 per worker in Chrysler, compared with £430 for Ford and £258 for BLMC. The sum of £15 per man is not enough to maintain the machines. That is another reason for the rundown in Chrysler.

The Iranian contract, and all that it would mean to this country if we did not carry out contracts, is another reason for helping Chrysler.

I accept that the input of Government money demands a complete change of attitude by the work people in Chrysler UK and by management. The attitudes which prevailed at times were certainly more like trench warfare, as one hon. Member has said. But those attitudes may have been telescoped into the very recent past, and may have been brought on by the uncertainty caused by the rundown that I have mentioned. In 15 years as a convener I had three major strikes. I do not think that that is a bad record, by any yardstick.

The current Reports seem to take no account of the fact that it is not so long since the car trade was a seasonal occupation. One was six months at work and six months out of work. Yet even in that climate companies prospered, made profits and paid good wages. Reading the tale of gloom in the red-backed Report, one would think that everything must go our way before companies can be successful. We managed to survive in Coventry and the West Midlands on six months in, six months out.

The industry is not one that responds well to examination on a statistical basis. Cars are bought when the economic sun shines. It is accepted in the trade that people do not buy cars when the snow is on the ground. The choice of a car is highly individual. It is not always related to reason or facts. Otherwise, some hon. Members would not be driving the cars that they are.

The CPRS Report refers to overcapacity, but I believe that that is due to the concentration of vehicles in the same range. It leaves out of account the long waiting lists for British buses, coaches, Land Rovers, diesel engines, tractors and heavy trucks. That was mentioned only once today, by my right hon. Friend the Member for Lanark (Mrs. Hart).

I ask those who think that aid to Chrysler would impair the recovery of British Leyland "What guarantee have you that if Chrysler were out of the way British Leyland would fill the vacuum?" There is no such guarantee. The vacuum could easily be filled by further imports, which would have an effect on the balance of payments.

Unlike many hon. Members, I believe that the aid offer is a declaration of faith in the workers and management of Chrysler. It is a courageous decision in the light of many conflicting circumstances.

In conclusion, I should like to ask three or four questions specifically related to Ryton. What is the time gap between the transfer of the Avenger to Linwood and the arrival of the Alpine from Simca? What happens in the interim? What build-up is expected at Ryton? Is Ryton to be regarded as a second preference for production of Alpines? I also want to put the question that will definitely be put to my right hon. Friend when he sees the trade union representatives—can there be work sharing, because in Coventry we believe in sharing bad times?

8.0 p.m.

Photo of Mr John Wells Mr John Wells , Maidstone

I am extremely perturbed by paragraph 3 of the declaration of intent. In my constituency, we have one of the smaller but one of the few seemingly totally profitable Chrysler plants. I should declare an interest straight away, in that I am a director of a company that is a considerable purchaser of Chrysler products.

The Chrysler plant in my constituency is the very cradle of the Rootes company, and the people who work in Chrysler Maidstone—the old Tilling Stevens works—are people who have been loyal to that company for many years. If it gave gold watches, there would be more gold watches given by Chrysler in Maidstone than anywhere else, because there are fewer strikes and there are better relationships. I am delighted to be called immediately after the hon. Member for Coventry, North-East (Mr. Park), because he knows the position of the works in my constituency.

I am very perturbed to read, in the declaration of interest, the words which will necessarily involve redundancy … specifically to provide continued employment at Chrysler UK's principal plants located at Ryton, Stoke, Luton, Dunstable and Linwood. That means to me that the people who work hard and show a profit in Maidstone will be made redundant to satisfy the Government's attempts to stave off my temporary colleagues in the Scottish National Party. It seems that the Government are likely to kick my constituents in the teeth to keep in employment people in Linwood who have given very little loyalty to this company in the past.

I hope that my surmise is wrong. I believe that the hon. Member for Sheffield, Attercliffe (Mr. Duffy) and his Committee should seek to take evidence from Chrysler Maidstone at the earliest opportunity, to discover the excellence of what is being done there. It is a small plant, but it is diversified. Many facets of the Chrysler products are being worked on there. There is engine rebuilding, there are axles, there are parts, and there is air conditioning—all of them necessary, useful and profitable.

We have seen an even smaller Chrysler Works at Canterbury, called Canterbury Trim, where 30 loyal, long-serving and excellent employees of the company have been made redundant in order to hand over their work to Ryton. If the company can treat 30 people in Canterbury like that, it can treat 370 people in Maidstone in the same way. If that is the company's intention, it is disgraceful.

I wrote to the Secretary of State some days ago seeking a specific assurance on this point. I know that the right hon. Gentleman has been busy. I realise that he has been worried. I have seldom seen a more pathetic and worried figure at the Government Dispatch Box than the Secretary of State today. But he might have had the courtesy to tell one of his under-strappers to send me a post-card saying that he had received my letter. The grave discourtesy of the man, and of the Government, to me and to my constituents makes me nearly as indignant as the hon. Member for Attercliffe seemed to be about the attitude of the Government towards his Committee.

While there is still time, I hope that the Government directors to be appointed to Chrysler UK will draw the attention of the Chrysler company to the need to support those of its employees who have, in their turn, in the past given loyal service to the company. A little loyalty would be extremely welcome.

8.05 p.m.

Photo of Mr Hamish Watt Mr Hamish Watt , Banffshire

No one in this House will have taken any pleasure from today's statement by the Secretary of State for Industry. No one can ever take pleasure when faced with Hobson's choice. Which political figure in Scotland today would wish to see Linwood close? What should we do with the steel industry in the West of Scotland if Linwood were allowed to close? Much of the output of the steel industry in the West of Scotland is dependent on Linwood as an outlet.

I am especially proud to be a member of a political party which has succeeded in concentrating the mind of the Secretary of State for Scotland on saving Linwood. But how do we see Linwood being saved? It is to be saved by the Government—

Photo of Mr Hamish Watt Mr Hamish Watt , Banffshire

I shall not give way to the hon. Gentleman. I have promised to be brief, and I am not prepared to give way—

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

I hope that the hon. Member for Renfrewshire, West (Mr. Buchan) will not persist, because the hon. Member for Banff (Mr. Watt) has indicated that he intends to make a brief contribution, such as will be extremely valuable to the House.

Photo of Mr Hamish Watt Mr Hamish Watt , Banffshire

Linwood will be saved by saving Chrysler UK. But what chance has Linwood of being viable in the future? The plant at Linwood was brought to Scotland by the Rootes Group under pressure from successive Governments who did nothing to build up the infrastructure of component parts and so on required to get a factory of that kind off the ground.

I should have liked to see Linwood taken in as part of a rationalised British corporation. Then we could have gone on to hive off a viable and well-structured Scottish motor vehicle corporation with cars being manufactured at Linwood, heavy trucks at Albion and tractors and vans at Bathgate. However, apparently we are stuck with trying to save the whole of Chrysler UK.

It has been my honour and privilege in the past few months to serve on the Trade and Industry Sub-Committee of the Expenditure Committee under the illustrious chairmanship of the hon. Member for Sheffield, Attercliffe (Mr. Duffy). One factor to have come out clearly in the course of the Committee's work is the imbalance in the British motor vehicle industry. We have seen company after company going after the prestigious car market instead of going after the markets which really exist for buses, tractors, trucks, Land Rovers and many other specialist vehicles. We still find too many companies going after the prestige side of the industry which to them, apparently, is the motor vehicle side, and the mass produced side at that. They do not even concentrate on the specialist side, which has paid very well.

It bothers me that we have the Government proposing to prop up still further the over-capacity of the car manufacturing industry. We are told that there is fully 25 per cent. too much capacity for motor vehicle production, yet here we are with the Government proposing to use this money to prop up this section of the industry which has shown itself to be totally unviable.

Another criticism which I make of the Government is that in this declaration of intent they have put virtually no conditions on Chrysler UK. During the investigations of the Committee chaired by the hon. Member for Attercliffe, we saw just how poor was the management of Chrysler UK. If we prop up the company, have we any guarantee that the management will improve? Have we any guarantee that it will attempt to better the relationship between workers and management? In factory after factory we found virtually no communication between management and worker. I am extremely disturbed to think that we are likely to continue the situation where we have workers against managements.

I have no doctrine one way or another. I have no love for Socialism or for capitalism. Every time that I have had to take a decision, I have applied one criterion—will it work? I suggest that this package deal will not work. If worker continues to be against management, all this money will go down the drain. Workers and management should be represented equally on the boards or else the cash that we are committing today will be totally wasted.

8.11 p.m.

Photo of Mr Ivor Clemitson Mr Ivor Clemitson , Luton East

We have heard a lot about over-capacity in the car industry. Whether or not there is over-capacity, one thing is certain—that we as a nation are far too dependent upon the car industry. Once we have said that, we have said a great deal about British industry in general.

We often talk as though our industrial problems were of recent origin. The hon. Member for Henley (Mr. Heseltine) was on this tack today. That is absolute nonsense. We have been declining comparatively as an industrial nation for the best part of a century. We were slow to take advantage of the second wave of the Industrial Revolution in the early years of this century. The car was one of the main components of that wave. We did not pioneer the car. We certainly did not pioneer its mass production. That was done by other nations. There has been a number of waves of the Industrial Revolution since that one and we have successively missed out, not in terms of inventions but in terms of their development.

Now we are once more trying to maintain a position basically rooted in the past, instead of accepting the challenges and possibilities of the present and the future. That is the position we are in with Chrysler UK. We are putting money into a company essentially to maintain it as it is, albeit in a slimmed-down form—not to convert it into what it might or, in my view, should be. This is essentially a short-term operation.

Of course, I welcome the saving of jobs. I am as concerned about the jobs of Chrysler workers as is anyone else. There is a number of such workers in my constituency. But if we are really concerned about a viable, long-term future for this enterprise and therefore for the jobs of those workers, we should first of all examine the areas of under-capacity in the vehicle industry and consider converting the existing assets of plant, machinery and manpower, much of it skilled, to those other uses.

There is no over-capacity in the production of commercial vehicles. I recall no mention in the Secretary of State's speech today of the commercial side of the Chrysler Corporation. Yet 3,000 people work on the commercial side in the South of Bedfordshire. We should consider the under-capacity in the production of diesel engines. We import about £40 million-worth of diesel engines a year. The production of Chrysler commercial vehicles has been held up for some years because they have not been able to get diesels from Perkins—yet Perkins has received a Queen's Award to Industry for exporting 85 per cent. of its products. What sense does that make? It is an Alice in Wonderland situation.

We should consider the under-capacity in the production of buses. Any bus company will testify that it has been waiting for years for new buses. What about under-capacity in component manufacture? So one could go on.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

Do my hon. Friend and the House know that there is no capacity for the custom-building of ambulance chassis? While this may have been brought about historically before the war, the fact that we have no such capacity surely illustrates a back-to-front approach to vehicle building as a whole.

Photo of Mr Ivor Clemitson Mr Ivor Clemitson , Luton East

I am grateful for that intervention, which further illustrates my point. We should consider these areas of under-capacity or, as my hon. Friend says, non-capacity. We should also consider new technological developments and, even outside the context of the motor vehicle industry, other industries as well. Of course it takes time to change, but change we must.

Of course the package that the Secretary of State has presented to us can be criticised for lack of any ownership stake in the company, but my main point is the way in which we constantly seem to pursue short-term expedients, defending the ultimately indefensible, trying to maintain a pattern of industry which is dying instead of converting to one with a future. The way to bring about change is not to let the old die and leave it to the miraculous forces of the market to bring in the new, as the hon. Member for Henley advocated. That system has signally failed for the best part of a century—not just the last few years.

We need to plan for the new, but some of the major planning mechanisms in the modern world are, as Professor Galbraith has reminded us a number of times, the supra-national companies. Three out of four major vehicle producers in this country are supra-nationals. The problem is how we plan with these planning mechanisms, the supra-nationals. What we have seen in the case of Chrysler is not a planning operation but the spectacle of a company coming cap in hand to the Government for money. We have missed a considerable opportunity. I hope that there will be time to take this opportunity with this company.

We must plan with the planners, but that is not easy when they are not based in this country. The context is not British but European and, increasingly, worldwide. There was a time when the supra-nationals in the car industry were composed of virtually autonomous units which planned, tooled and made cars. Now there is, and will increasingly be, an international division of labour. As the CPRS Report says on page 56 in reference to General Motors and Ford, They will move towards a total European approach in product development and allocation of production between countries in order to achieve maximum economies of scale. The fear of workers, certainly in Vauxhall, is that in the process of Europeanisation—General Motors has its own word for the process, "commonisation", a bastardised expression—we shall be the losers. One thinks of the Cavalier car recently imported into this country and sold, with just a Vauxhall badge stuck on it, as a Vauxhall car. The new Vauxhall models have an increasing European or even world content and a decreasing British content.

Shall we end up with Vauxhall or other companies as merely CKD operations—and knock-down, not knock-up, operations? Are the skills of thousands of people in design and tooling processes to be discarded? How can we build in a quid pro quo each time with these supra-nationals? How can we say, "We lose on some but we gain on others"? How can we plan for that?

These are big questions and big challenges not only to the Government but to the trade union movement. We are only just beginning to look at those questions and trying to find some preliminary answers to them.

This debate easily merges into the debate that we shall be having tomorrow about employment and unemployment. If we accept that there must be some reduction in employment in the motor industry, we must plan for other job opportunities, whether they are to be found in manufacturing or in other spheres. If we do not, the motor towns of this country, the Coventrys, the Lutons and the Oxfords, could become areas far more blighted than even the present development areas.

8.21 p.m.

Photo of Mr David Madel Mr David Madel , Bedfordshire South

It is a pleasure to follow the hon. Member for Luton, East (Mr. Clemitson) who is, as it were, my next-door neighbour. Everyone realises what a difficult decision the Government have had to make about what to do with Chrysler. This was highlighted by the letter from the late Maurice Edelman in today's edition of The Times when he pointed to the fact that in the past Chrysler had given certain assurances to British Governments which had not always been kept.

However, first I should like to endorse what the hon. Member for Luton, East said about the lack of information concerning the commercial vehicle section of the Chrysler operation. As he pointed out, to date we have had no information at all about this. When the Minister winds up the debate, will he say how the investment money is to be spread between Linwood, the Midlands, Dunstable and Luton? The declaration of intent by Chrysler says in paragraph 4(4) that A new van/truck is to be introduced in 1978. I assume that it is to be produced in Dunstable. Can we be certain that that date will be kept? How much money will be required? How many extra employees will be taken off? Will there or will there not be redundancies in the Dunstable and Luton areas? I am sure that the Government have been through the problem with a fine tooth comb with Mr. Riccardo and I hope that the Minister will be able to say quite a bit about the commercial vehicle section.

As has already been mentioned, the debate also takes in the whole problems of the motor industry at large. I should like to congratulate the hon. Member for Sheffield, Attercliffe (Mr. Duffy) and his Committee on the excellent work which they did in their Report to the House on the problems of the motor industry. Their Report underlines dramatically the two central problems which have dominated this industry since the war. In paragraph 26 on page 9 it says: The post-war boom with its problems of production rather than demand put the greatest emphasis on engineering. This meant that the three vital areas of industrial relations, marketing and after-sale service were virtually ignored—to the long-term disadvantage of the industry. That point is endorsed on page 27 where in paragraph 68 it says: The British motor industry is strong in research, design and development skills and experience. The second central problem which the Report dramatically underlines is the constant changes in economic policy which both Governments have inflicted upon the motor industry. This point is brought out on page 32 which deals with the NEDO Report. Paragraph 82 says: The Government should endeavour to avoid the imposition of special measures applying to the motor industry which accentuate the fluctuations in demand". On page 34 we find that even the Permanent Secretary at the Treasury, Sir Douglas Wass, admits that: fluctuations in demand during the 1960s had had a de-stabilising effect on investment". Therefore, the Treasury admits in this Report, from the evidence which it gave, that the motor industry has been used as a yo-yo, and that this has been bad for industrial relations and has not been helpful to the general prosperity of this country.

Another point which must be added is that there was a careless assumption that one could boom ahead with housing, roads and schools in car-producing areas and all would be well. In fact, all that growth in social expenditure, welcome as it was, was based on the premise that the motor industry would provide virtually an everlasting increase in employment opportunities. Unhappily, this is not now the case and it is one of the many dfficulties that the Government have had to face when deciding what to do about the Chrysler Corporation.

There is an interesting section of the Sub-Committee's Report dealing with investment problems. On page 39, paragraph 96, there is reference to the fact that inadequate investment and the lower productivity of old plant have been the greatest contributors to the poor profitability of the mass-production car side of the industry. On page 38 there is evidence from ASTMS. There is reference to the lack of preventive maintenance carried out in car assembly plants That organisation feels that this reinforces the conclusion which is drawn in paragraph 75 about the whole question of the amount of time we have to spend on maintenance and repairs to our plant in this country compared with our overseas competitors, especially those in Europe.

Much has been said about industrial relations in the car industry. In the few minutes remaining I shall say a few words about that subject. There is no doubt that the insecurity and the uncertainty of employment in the motor industry has gravely added to the difficulties of people being employed in that industry. I am glad that the Select Committee tried to grasp on page 86 the whole problem and the whole possibility of industrial democracy and worker participation. In paragraph 213 the Committee wisely says that it will not lay down a particular blueprint for this particular matter. But it does point to the fact that many improvements will have to come about in participation and involvement in the car industry if we are to move out of the difficulties.

In fact, the Committee is absolutely in line on that aspect with the recommendations of the CPRS review because in the fifth conclusion of that review it says that there has to be a complete change in attitudes and methods of communication and consultation within the car industry if progress is to be made. Completely at the heart of this matter is the need to have acceptable grievance procedures in the car industry, which every employee understands and which he will operate so that the grievance procedures are used before we get into the difficulties of having a stoppage in plants.

I welcome the fact that the Trade and Industry Sub-Committee is to reconvene. I think it should ask for witnesses from Chrysler to attend. I realise that it cannot compel American witnesses to come here, but in view of what the Government are doing for Mr. Riccardo, the least we can expect is that he will agree to attend to be cross-examined by the Sub-Committee. That will be most useful. We want the Committee to go into the Government's problems. I hope that it will bear in mind the third main conclusion of the CPRS review which says: It is not too late to correct these weaknesses in the British motor industry. Those weaknesses are poor quality, bad labour relations, unsatisfactory delivery records and so on.

Much has been expected of this industry since the war and much has been done by it. It has provided a great deal of employment and a great deal of satisfaction. However, training for assembly line workers, different lay-off procedures, a changed system of redundancy payments and new processes of employee involvement are matters which must be grasped by the Government. I hope that they will continue to be grasped by the Expenditure Committee and that it will call for witnesses from Chrysler to see whether we are to get a viable Chrysler operation now that the Government have decided to go hand in hand with the company to see whether improvements can be made.

8.30 p.m.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

I shall be supporting the Government in the Lobby tonight and tomorrow evening, although I shall do so with certain reservations. I recognise that the Government have had to take a difficult policy decision. Nevertheless, I welcome their concern to prevent unemployment, although I must say that the 5,000 redundancies that look like being occasioned in Coventry as a result of this agreement will represent a bitter and savage blow to the city. It will mean that the city of Coventry will have more than 21,000 people unemployed and an unemployment percentage above 10 per cent.

I have some reservations, because I cannot help feeling that this is a rather a botched-up and patched-up agreement. Even using the strongest wallpaper and cement, I do not think that the Government can paper over all of the cracks. What occurs to me—and it has occurred to me and other of my hon. Friends in the context of British Leyland—is that merely putting in money, underwriting losses and guaranteeing loans, does not ensure the future or the viability of Chrysler in this country. Many of us said when it was proposed to inject £3,000 million of fixed and working capital in British Leyland over the next six years that what we had to do—and the remarks made then are just as relevant now—was to move towards the definition of a strategy for the British car industry.

The simple fact which no one can deny after looking at the Reports from the Think Tank and the Sub-Committee, is that there is over-capacity at the smaller end of the model range. When we analyse the investment plans that the Ford Motor Company has had to make for "Bobcat" at Dagenham, when we see the Europeanisation and integration that Ford and Volkswagen now practise we are bound to come to the conclusion that there must be a doubt whether Chrysler UK is big enough to undertake projects on this scale.

Some of us who have examined the Chrysler situation believe that had Chrysler stuck to the original Rootes model strategy when it took over the company and concentrated on being slightly up-market instead of going for volume production—attempting to get 15 per cent. of the market—it might have been in a much more viable position now. Against the doubts I have that Chrysler may be too small to compete in this sort of market, bearing in mind its marginal domestic position in the States, I have to accept, as I hope every other Labour Member accepts, that we could, if this company had pulled out, have faced a job loss of about 70,000. The Think Tank Report says that if the company had completely pulled out of Coventry there would have been an increase of about 82 per cent. in unemployment. If it had pulled out of Linwood completely there would have been an increase of 15 per cent. in unemployment.

That is why I recognise the initiative the Government have taken to preserve jobs. It is not only the jobs that have been preserved that I have to set against my doubts concerning the future viability of Chrysler. I have also to bear in mind the position of British Leyland and that of the importers. Yesterday my right hon. Friend the Secretary of State for Trade, in an answer to a Question, told me that in the first 11 months of this year the import penetration of the United Kingdom car market by the Japanese. Eastern Europeans and Europeans was 33·4 per cent. compared with 27·1 per cent. in the corresponding period last year.

It is well known that at the moment British Leyland has outstanding orders from about 90,000 people. These people are waiting for cars that British Leyland cannot provide. This is not because of the effects of "Superdeal"—because the effects and results of that have been overestimated. What has happened is that British Leyland has seriously underestimated its sales potential. We have, therefore, a position in which the only other British domestic car producer cannot match demand. At the same time, most of the importers, particularly Fiat and the Japanese, have high stocks of most models in this country.

Although the Think Tank Report reckons that if Chrysler pulled out of this country about 60 per cent. of its market could be picked up by other British producers, we have to bear in mind that British Leyland has an acute model shortage while importers have high stocks in this country. I am bound to say that I do not believe that other British manufacturers would pick up the 60 per cent. What frightens me is that if Chrysler were allowed to pull out and if this vote tonight and the Order tomorrow do not go through, import penetration by the Japanese, Fiat and other European companies could increase by more than 40 per cent. One has only to go to Teesside to see the Japanese imports, or Warrington to see Fiat's plant, to appreciate the stocks that importers are now holding in Britain. This proves the level of success that importers already have in this country. I say to some of my hon. Friends that the only alternative, if they want to maintain the British stake for domestic producers, is a policy of import controls. Without this, I fear that if Chrysler were allowed to pull out the Japanese and other importers would move up to a 40 per cent. or greater penetration of our domestic market. I recognise this particularly in a situation in which about 15 per cent. of the British passenger car market could be at stake.

Although the Opposition have given us some pretty foreboding figures, we must remember that in the last four years Chrysler UK has more or less continually taken 12 per cent. of domestic production. That is a big chunk of the domestic market which could be laid open and laid waste to the importers, particularly if, as we are led to expect, the Chancellor of the Exchequer reveals in tomorrow's debate some relaxation of hire-purchase controls to stiumlate the domestic market. The alternative must be a policy of selective import controls to protect the British market.

I have never advocated the nationalisation of Chrysler or the integration of this company with British Leyland. I believe that British Leyland will have enough difficulties of its own to sort out. The nationalisation of Chrysler UK could lead only to further rationalisation and plant closures. I do not want either the nationalisation of Chrysler or its absorption into British Leyland, but I want far better public accountability than we have in the agreement so far.

I tried to remind my right hon. Friend of the rather weak and certainly unlegislative form of the undertakings that Chrysler gave in 1967. I do not see anything more forceful in the undertakings that Chrysler has given in its latest declaration of intent. Although the Chancellor of the Duchy of Lancaster, for whose financial acumen I have great respect, said that the good feature of this agreement is that he has managed to get Chrysler to put money in, I still have not been told what there is to stop the Chrysler Corporation from pulling out.

I am worried about the situation that we may have to face in one or two years' time when the Chrysler Corporation comes to the Government with exactly the same story and says "We thought we could make it". The Corporation could say that it was making losses in the United Kingdom, that it was under pressure from its banks in the United States, that its United Kingdom operations had the greatest loss-making potential throughout the world, and that it would have to consider once more pulling out. That is very much the kind of situation that I am afraid we could now be embarking upon.

I do not think this is a five-year or a 10-year strategy. All we have is the importation, in CKD form, of the Alpine into Ryton—that is not going to keep many of my constituents busy—and the transfer of the Avenger from Ryton to Linwood. Presumably it will be the Series 7 Avenger, because I cannot see how any model made at Linwood will sell more successfuly than the Series 6. Apart from those two factors, I see nothing much in the declaration of intent by the Chrysler Corporation about model strategy. Those two factors do not constitute a long-term strategy for the survival of Chrysler in this country. That is why I view the plan as a very short-term strategy. If we were to have a 10-year strategy for the Corporation there would have to be new foundry capacity and the re-establishment of the Linwood tool room. There would have to be a massive promotional campaign to reestablish customer confidence.

I am glad that there will be Government directors on the board, and I welcome my right hon. Friend's initiative on that score. I hope that they will be more answerable to his Department than were some erstwhile Government directors who were put on the Chrysler board. I should like to think that the Government will move towards participation in taking an equity stake in the company.

I hope that it will be remembered that at Ryton, particularly, the company has a very modern plant, and pioneered the introduction of measured day work, so it certainly is not a pig in a poke. Chrysler UK has modern capacity. Though I have some reservations, I shall support the agreement tonight. I recognise the value of the £80 million or £100 million benefit to the balance of payments from the Iranian contract. I would far rather the Government supported a policy of selling British cars to Iran than selling Anglo-French Jaguar fighters to Egypt. That is the kind of test of British honesty and sincerity that I should like the Government to embark upon.

I hope that when my right hon. Friend the Secretary of State winds up he will say a lot more about how we shall ensure that this same situation does not arise again in two years' time. I welcome the initiative, but I have reservations about it, particularly as some of my constituents will be hardest hit. However, we must move towards getting back the confidence of the workers and the customers to ensure that the Chrysler Corporation stays in this country for as long as possible.

8.43 p.m.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

We have to examine the Danegeld, of which the £162 million announced today is a starter, under three headings. What have the Government done? What have they not done? What should they have done? The CPRS Report, which cost the taxpayer one-third of a million pounds and which we extracted from the Government at 11 o'clock on the morning of a debate on a subject involving the expenditure of £162 million, begins: The Future of the British Car Industry

  1. 1. The prospect is one of very tough competition in the Western European car industry for at least the next decade.
  2. 2. The British car industry has serious competitive weaknesses. There are too many manufacturers".
The first thing that has not been done with the Danegeld is to eliminate one of the manufacturers. The second thing that has not been done is to save Chrysler. Let there be no doubt about that whatever. It is proposed to take the Avenger from a factory that was not constructed for it but that was quite close to the source of engines at Stoke to a Scottish factory that is not designed for it, 200 miles from its source of engines. It will then have to be moved all the way back, with a cost penalty that will make it totally uncompetitive in the English market, let alone any export market.

Let no one imagine that the Avenger has been saved, that Linwood has been saved, that Ryton has been saved, or that Stoke has been saved. They have not. Let no one imagine that the taxpayers' money has been saved.

What has been done? The market basis of the huge sums of capital investment in British Leyland is wrecked today. The Government are trying to pay Peter to rob Paul, who is also being paid to rob Peter—and all this payment is by the taxpayer. The Ryder market forecast, on which the capital investment in British Leyland is based, is grossly optimistic, but the £162 million attempts to buy for Chrysler part of the market that exists for British Leyland cars when it is already bespoken for by the public money, prudently or imprudently, invested in British Leyland. It cannot be double-counted, or accrue to both.

The Government are also transferring unemployment, not saving it. They are double-counting their alleged saving, in that the component suppliers who would have supplied Chrysler will instead supply sales by British Leyland. They may not be the same component suppliers, but roughly speaking there will be the same volume of employment. There will be the same number of tyres, whether they go to British Leyland or to Chrysler, the same number of speedometers, petrol tanks, generators and batteries, and the same area of glass. By robbing Peter to pay Paul we do not save unemployment in the component industries. This double-counting has crept in or deliberately been put in by the Government.

What else have the Government done? They have abandoned the attempt to control inflation. When the Permanent Secretary to the Treasury lost his nerve under examination before the Select Committee and allowed himself to say that no expenditure of less than £1,000 million in one year had any influence on the rate of inflation, the cat was out of the bag. When he said that he could not even imagine circumstances in which £550 million in a year could be committed under the Industry Act, his imagination showed its limitations.

What else has been done? A message has been sent loud and clear to Ford and Vauxhall—why should they retain their operations in Britain? For one reason only—the Government cannot now refuse them money. Ford has been viable to date. If the Government buy part of its market with public money for Chrysler there is an unanswerable case for Ford to ask for public money also. What about Vauxhall? Vauxhall is also not viable on throughput, like Chrysler, in that it can never generate enough money out of its volume of sales to capitalise the next model, without which it will go out of business. Therefore, we must support two more American firms with the taxpayers' money, and thereby undercut an enormous investment that has already been made in British Leyland.

Those are the bald facts. What should we do instead? In the rescue operation of British Leyland an expenditure of over £1,000 million is involved on machine tool plant and equipment. As things stand at present the bulk of this will be imported across the exchanges at a huge cost in foreign currency, and will provide little employment for people in Britain.

The resources should be directed so that a much, much higher proportion of the plant and equipment that British Leyland will need and for which the British taxpayer will be paying is made in Britain, instead of being imported. That is the positive step that the Government should have taken, which would be a genuine impetus to useful employment in this country.

Moreover, it would then enable the British machine tool industry to generate a volume of turnover in which its production runs would be great enough to get its overhead costs down so that it was competitive again in the export markets. That is the positive opportunity that the Government have missed by the Danegeld paid today.

When the House votes on this matter tomorrow night, it will know what it is doing. It will live with the consequences. As the Danes came back for more, remorselessly, so will the overseas companies come back remorselessly for more and more of the taxpayers' money in order to wreck the basis upon which a huge sum of it has already been committed to the one remaining truly British manufacturer. There never was a more complete circle of folly. The job of the House of Commons is to break that circle.

8.52 p.m.

Photo of Ms Audrey Wise Ms Audrey Wise , Coventry South West

This evening we have heard quite a lot of what we are accustomed to hearing from the Opposition Benches. We heard a quite callous disregard for the unemployment of real people. From hon. Members of the Scottish National Party we have heard an open statement that, apart from Linwood, the Chrysler workers in the rest of the country could have been dispensed with. The hon. Member for Banff (Mr. Watt) has forgotten that in my constituency in Coventry, for instance, there are many Scottish people, and many Scottish workers working at the Chrysler plant. They have relations in Scotland. Perhaps they would not be so keen to hear the hon. Gentleman's remarks.

What I have been waiting for are some positive words. It is easy to be critical. I, myself, have points of criticism of the Government's proposals, which I intend to make, but they are different in kind and quality from the criticisms that come from the Opposition Benches.

We have also heard from a number of quarters the usual remarks about labour relations being at the root of all evil. I have some scepticism about this, because I remember that when we discuss troubles in other trades and other companies, where labour relations are characterised by complete docility and yet the companies go bust or sectors are in trouble, there is no comment whatsoever from the Opposition about the place and importance of labour relations.

In relation to Chrysler, we are talking about a company that is now declaring to the Government that it will work with its employees on the basis of extending employee participation. I am very interested in that. I notice that this same company, Chrysler, produced its plan for employee participation when, and only when, it was seeking help from the Government. There was no word about employee participation at earlier dates; in fact, this company even went so far as to close down its suggestion box system. It said to the workers "We are employing people to think about the way in which this place should be managed", and even rejected suggestions from its workers. I hope that when the Government look at this declaration of intent by the Chrysler Corporation, they will look at it very closely, with a very sceptical eye. But I am afraid that it is being accepted at face value.

Among other things, it is said that Chrysler International will support the effort of Chrysler UK to the full extent of its managerial, product planning and design capacities. I suggest that the prime motivation in Chrysler's attitude to its subsidiaries is to promote not the interests of those subsidiaries or their respective national economies but the interests of Chrysler International. Chrysler's managerial strength has not yet been displayed to any great extent in Britain. Its product planning has mostly been seen in its skill at transferring products from Britain abroad, along with design.

We have some employee participation if the Government care to use it. We have some suggestions, for instance, about the kind of economies that could be made. I listened with interest, followed by disappointment, to the speech of my right hon. Friend the Secretary of State. I heard him say that he had taken into account the document delivered to him by the workers, but I did not hear him make any comment on any fact or suggestion contained in it. For instance, if economies are being looked for, what about the suggestion made by the shop stewards that internal reorganisation is required to eliminate the restrictive and top-heavy managerial structure that has been imposed during past rationalisations? What about the suggested disposal of the expensive prestige London offices? Have those matters been taken into account? I wonder whether the Government have noted fully the condemnation contained in the workers' report regarding the systematic transfer of machine tools from British plants to Simca and South America? Can we guarantee that that kind of thing will not continue?

I should like to see some evidence of real guarantees. The late Member for Coventry, North-West, Maurice Edelman, has appeared many times in this debate, although, sadly, by proxy. He figured many times in Hansard on this very question of Chrysler, guarantees and declarations. The work which has been done by such hon. Members on this point should not be wasted. We should take notice of it.

We are told that we need the tight integration of Chrysler UK into Chrysler's world-wide activities. That was the phrase used by my right hon. Friend to justify this form of rescue. I am in favour of rescuing the jobs involved and I reject the torrent of hypocrisy that we hear from the Opposition. But when I hear that this method has been chosen because it allows for the tight integration of Chrysler UK into Chrysler International's world-wide operation, my blood runs cold. That sort of integration is a large part of the trouble and a large part of the problem.

One reason why the Government face such difficulty in deciding what to do about the situation is that Chrysler can hold a pistol to the Government's head because we are now too dependent on Chrysler's international operations. I am afraid that the process now begun will continue, so that in the end Chrysler will be holding a machine gun instead of a pistol to the Government's head. I am extremely worried about this situation.

We should be looking to a more tightly integrated and rational British motor industry, but we have heard nothing about this concept. Indeed, there were some interesting unanswered questions in the Secretary of State's speech. Dealing with public ownership, he said that the idea of two State companies competing with each other was clearly out of the question, but he did not say why. Perhaps he was correct to say what he did, but the House and the workers who are involved would like to know why it is apparently not out of the question to have competition between a publicly propped-up private company and a State-owned company. There could be a rational argument for two State-owned companies. Therefore, I wish that there had been much more than a mere out-of-hand rejection of that concept.

My right hon. Friend said that consideration had been given to linking British Leyland and Chrysler. I am very interested in that suggestion, but I do not pretend to know the answer. I am interested because I happen to have a large British Leyland factory in my constituency, as well as many workers employed by Chrysler. It is not sufficient for the Secretary of State to say that such a suggestion is not practicable. He should say why. I genuinely would like to know the answer to such questions—questions that so far remain unanswered.

The Labour Party manifesto reserved the right to take a public stake or an equity equivalent to the amount of public investment. Again we have received no coherent answer to the question why the Government are not taking such a stake. If we had an ownership stake, accountability and monitoring of the situation would be far easier.

Therefore, although I appreciate the Government's motives, and at the same time entirely reject unworthy political slurs from the Opposition, I believe that we are entitled to ask, even at this late stage, for a more rational and Socialist approach to our motor vehicle industry.

9.3 p.m.

Photo of Peter Viggers Peter Viggers , Gosport

I join the hon. Member for Coventry, South-West (Mrs. Wise) in her incredulity at the Government's present situation. I must at the outset of my remarks declare an interest because between 1968 and 1970 I worked for Chrysler and when I left the firm in 1970 I was company solicitor.

At the heart of the Government's proposals is the intention to shuffle production lines. I find this a remarkable suggestion because it is no simple matter. There is now a successful production line at Ryton producing a range of cars and it would be difficult to move this line to Linwood. It is not on all fours with moving a caravan but is more equivalent to moving a house. It means taking the plant to pieces brick by brick and reassembling it elsewhere. It is a peculiar suggestion that the Government should wish to demolish the production line and to build it elsewhere.

In 1969 Chrysler decided not to produce a new model in this country. The proposal at that time was that Chrysler would build the 1800 model in this country. That model was designed and the production tools were made in the United Kingdom. It was decided at a late stage to switch production from the United Kingdom to France, and an important factor in the consideration was the labour difficulties being experienced in the United Kingdom Chrysler factories.

The Government are now proposing to use taxpayers' money to invest where Chrysler has not chosen to invest since 1969. Apparently Chrysler is to give undertakings on output and exports, but what happens when Chrysler falls down on these undertakings, as I believe it will? Chrysler gave under-takings to continue the British enterprise when it took over from Rootes and we have seen the value of those undertakings.

The Government are effectively going into the car sales business because they will need to ensure that the production of Chrysler is sold. But the Government will be competing with themselves because they are already in this business through British Leyland.

I believe that Chrysler should be allowed to do its worst and that the Government should then deal with the resulting problem on a piecemeal basis. I do not believe that this will result in 25,000, 50,000 or 70,000 people being made unemployed. It will simply mean that Chrysler has decided not to continue with its factories. But the factories and the work force will remain and it will be for the Government to decide how to apply the money to minimise the damage. I believe that £162 million could be better spent on minimising damage on a piecemeal basis rather than propping up this American multinational company.

The Luton-Dunstable plant producing Commer and Dodge trucks and vans has had a reasonably successful and profitable history and will remain viable. The Ryton assembly plant is currently producing Avenger cars and there is no reason why it should not continue to do so, perhaps as part of a different organisation. The Stoke engine plant is substantially responsible for the CKD—completely knocked down—parts which are the subject of the Iranian Peykan project. I see no reason why this contract should not continue whether or not it is ultimately controlled by Chrysler Corporation.

There remains of the major plants only Linwood, producing Hunters and Imps. The Hunter is a reasonably successful car which is not capable of further development. It is unexciting and unlikely to have a substantial future. The Imp range has never achieved great success. The limitations of the chassis and design have marked it for some years as a model range that needs replacement.

When the move to Linwood was first contemplated there might have seemed some arguments of industrial synergy because of the location of the Pressed Steel Fisher factory on the same industrial estate. As motor vehicle assembly plants have become larger and the production methods more sophisticated, it has become increasingly advantageous for production to be concentrated in one area where components can be conveniently assembled without transport difficulties. Linwood has been bedevilled by the inconvenience of moving chasis and components from the main components manufacturing area in the Midlands to Scotland.

With the benefit of hindsight, it is easy to see that the decision to open a motor assembly plant at Linwood was a mistake. There is a further reason for this. To a legendary extent the work force at Linwood are regarded as bloody-minded and belligerent and the Chrysler management responded by putting in its most aggressive management with its obvious result: bad labour relations. It is not for me to say whether the reputation of the plant is or is not fair, but anyone proposing to invest money in car production in that area should take the background into account. There can be no sufficient justification for demolishing the car production line in the Midlands for the purpose of propping up a plant that is not being successful.

The Chancellor of the Duchy of Lancaster is sometimes referred to as a financial wizard who descends deus ex machina to produce rabbits from hats. I am afraid that on this occasion he has not only produced a lame duck but has gilded it with taxpayers' money. Tied round its neck is a brick because it is certain to sink rapidly to the bottom of the pond.

9.10 p.m.

Photo of Mr Tom King Mr Tom King , Bridgwater

The speech made by my hon. Friend the Member for Gosport (Mr. Viggers), who has an intimate personal knowledge of Chrysler and a keen interest in the motor industry, reflects the high standard of the speeches from this side of the House. Several of my hon. Friends have close constituency interests, including my hon. Friends the Members for Bromsgrove and Redditch (Mr. Miller) and Bedfordshire, South (Mr. Madel). Some of my hon. Friends were members of the Select Committee which studied the industry, and to their contributions hon. Members must attach particular importance. I am sorry that the hon. Member for Sheffield, Attercliffe (Mr. Duffy) is not back in his place, but many hon. Members paid tribute to him for his chairmanship of the Select Committee. In that he was nobly supported by my right hon. Friend the Member for Bournemouth, West (Sir J. Eden), my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) and others. The knowledge which they brought from their study has gone some way towards minimising the culpable sabotage attempted by the Government.

I cannot be within recollection that any other report crucial to a debate should have been produced grudgingly and with great difficulty at 11 o'clock on the morning of the debate. Many hon. Members are in Standing Committee until one o'clock and they had from then until 3.30 p.m. to study the extremely important CPRS Report. We have not been told why the Report was not made available more promptly. The Report is dated November and bulk copies were available in November. Yet not until 11 o'clock this morning was it made available to us.

We received pledges from the Lord President and the Minister of State, Department of Industry, who recognised that it was essential that the Report should be available for any debate on the motor industry. Not only was that Report grudgingly produced only two hours before the debate, but no reply was given by the Government to the Select Committee Report, despite Ministers having said that a reply would be needed for any debate on the motor industry.

The only compensation the Opposition have is that they can at least turn to The Sunday Times for the complete details of the Chrysler deal. The extracts given in The Sunday Times are correct in each specific detail. It is ironic that after this debate we shall move on to censure and exclude from the House two journalists who produced an advance copy of a Select Committee document. It could be argued that dissident Cabinet Ministers who leaked the contents of the Chrysler Report might be similarly excluded from the House for six months.

The Government are guilty of gross contempt of the House when it is considering the most important industry in the country, an industry employing 1½ million people and representing 10 per cent. of the total industrial production of the country. There have been criticisms of the faults and failings of the motor industry, but it would be wrong to let the debate go by without recognising the considerable ability, ingenuity and achievement of the car industry. To quote from the Select Committee's Report: United Kingdom manufacturers are adept at making specialist vehicles of all sorts and selling them both at home and abroad. Their products include armoured cars and light tanks, fire engines, agricultural tractors, heavy trucks, bus and coach chassis and medium weight trucks made by mass production at some of the lowest unit costs in the world. British expertise in the manufacture of trucks and diesel engines has made this country the United States multi-nationals' major overseas design centre for such vehicles and equipment. There are many aspects of the motor industry that we respect, particularly the strength and skill of the component industry. Some hon. Members may have managed to read as far as the pages about the export achievement of the component companies and their profit records. For example, Lucas, GKN and others have managed in extremely difficult conditions to trade very effectively and to do great work for this country with their export earnings.

But it is inevitable that the debate will dwell on the difficulties. We have been privileged to have, even if with little notice, the Select Committee and CPRS Reports. All sorts of pet answers have been given to the problems of the motor car industry. Any fair observer will recognise that the whole industry is in a vicious circle, and it would be wrong to allocate total blame in any one direction. Low output and low profits have led to low investment, leading to further low output and further low profits. The industry has become stuck in that situation.

The industry has also been hit hard by Government policy. Both sides of the House must face the criticism made by the Select Committee and the CPRS. The Select Committee went so far as to say that it believed that Government interference had destroyed the will to invest in the industry. That might seem a little extreme, but within the past 14 years—and therefore both parties must share responsibility there have been 24 changes of Government policy directly affecting the industry. When one appreciates that, one can understand the grounds on which the Select Committee made that allegation.

What is clear from a study of the Reports is that no bogy can easily be found. Hon. Members have tried to pretend that multi nationals were the cause of the problems. The right hon. Member for Lanark (Mrs. Hart) had a swipe at transfer pricing. She found that the nub of the matter was transfer pricing from Chrysler to its Swiss subsidiary by which Mr. Riccardo has been siphoning out millions of pounds that no one else knows anything about. That might be true. I am not in a position to tell, though it would be in breach of the Exchange Control Act. It could be happening, but one thing makes me wonder whether it is. If the sums were as large as has been suggested, if it were such a successful way of siphoning out profits, I wonder why Mr. Riccardo was willing to give the whole Chrysler operation in the United Kingdom, lock, stock and barrel, to the Government—and with a sweetener of £35 million.

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

The hon. Gentleman has posed one question and answered another. It is one think to ask "Why is Mr. Riccardo willing to give this us?" It is another thing to say that transfer pricing was or was not applied. All the evidence is that Chrysler was selling its cars to the Switzerland subsidiary at a very low mark-up, and that the price from Switzerland was high so that Chrysler could take advantage of the special tax concessions for foreign firms there. We believe that the sums run into several millions. If the hon. Gentleman cannot deny it, he should not raise it.

Photo of Mr Tom King Mr Tom King , Bridgwater

I am not sure whether the hon. Gentleman was here when his right hon. Friend the Member for Lanark made this point, when she was questioning whether Chrysler was as unviable as had been said. She suggested that transfer pricing was the great secret that the Government had not stumbled on and that the whole viability of Chrysler would be transformed if only this magic chest could be unlocked. As I suggested just now, if that were the case, I do not think that Mr. Riccardo would have offered the business to the Government plus a gift of £35 million.

The Select Committee and the CPRS have made their comments. What will worry everyone who is concerned about employment is that one of the findings of the Select Committee is that there are too many car companies, and it goes on to say that there is 25 per cent. excess capacity in Europe and that by the very best and most optimistic case which can be made, by 1981 only 80 per cent. of Europe's existing capacity will be utilised.

There is the threat of a reduction of employment in the medium term of 55,000 if we are to secure long-term employment. If that is not done, there is a real threat of a loss of jobs on a scale approaching 275,000 by 1985. Those are the figures given in the CPRS Report, and they make extremely sombre reading.

The Report goes on to say that the industry in this country cannot break even below 1·8 million units, let alone make any allowance for further investment. At the moment, we are producing 1·3 million. On the very best case that can be made, only by 1980 are we likely to be producing the 1·8 million units needed merely to break even.

There are other aspects to which the CPRS draws attention. One is the growth of Japan and the very measured approach of Japan to the British market which is now in a position to expand considerably both here and in Europe. If Japan expands into Europe, we have the threat of increased European pressure on this country. Added to it we have the threat of the Spanish industry. There is also the threat of the Eastern European industry where there are now Fiat factories in Poland and Russia. It will not have escaped the notice of hon. Members that there is on sale in this country a 1500 cc Polish-made Fiat at exactly the same price as an 825 cc British Mini. What is more, Russian rates of inflation, whatever they may be, are more under control than the Secretary of State can lay credit to for his Government. That is not likely to improve the situation.

When we look ahead to the Iranian contract and discuss it in the Chrysler situation, how much confidence can we have in the continuity of that contract? In any event, even if it continues, the plans of the Iranians are to ensure 100 per cent. local content by 1981. This is a very poor basis on which to plan ahead.

Against this background, we have the Government's first bite at their strategy with Leyland, and it is a worrying situation. That has been savaged by the unanimous Report of the Select Committee. When we consider the conclusions reached by the Ryder Committee and adopted by the Government, on mature reflection and in the light of the points made by the Select Committee, some of them look terrifying.

The implication of the investment programme in Leyland is that out of its earnings Leyland will generate half the money needed for the investment. How can anyone believe that it will produce El.4 billion of the £2–8 billion required for the investment scheme? Is it realised that the other aspect required under the Ryder strategy is that for Leyland to achieve the objectives laid down in the Ryder Report it will have to become, by 1985, the most profitable car company in Europe? Obviously we look for a recovery in Leyland, and we hope that it will succeed. But can we plan prudently and intelligently on the basis that it will become the most profitable car company in Europe, given the difficulties that it faces at the moment?

Having seen the Leyland approach of the Government and the Ryder strategy, we were told that the Government had a new strategy, outlined in the document called "An Approach to Industrial Strategy". It was launched at Chequers with all the fanfare and a Press conference. It seems to have died a remarkably quick death. I had an embarrassing experience when I was virtually assured in the Vote Office, where I went for a further copy, that it had never actually been issued. It is not recorded in the Vote Office. I was not aware that the Vote Office exercised any critical judgment of the quality of documents that it receives, but obviously it has decided that this one is of such transient interest that it should no longer be filed. It was with great difficulty that I finally succeeded in obtaining a copy.

Of course, there might be another Cabinet Minister who made it his business to see that all known copies were withdrawn—

Photo of Mr Tom King Mr Tom King , Bridgwater

We are pleased to welcome the Chancellor of the Duchy of Lancaster, who no doubt has the copies carefully stashed away for recycling.

One can understand why this document might have been buried, because it set out the criteria by which to judge the main faults of British investment in the past. If one were about to announce a Chrysler decision of the kind that we have had, would one like to be told that among the faults and problems was an inefficient use of capital which has resulted in a relatively poor return, or that one of the faults was a poor choice of investment and that one of the more difficult factors was a limited supply of labour on which manufacturing industry could draw? That was a conclusion of the Government only a month ago. The Secretary of State for Employment looks surprised to hear it, but I know that it was an initiative of other Departments.

It was a strategy based on the principle of no lame ducks, I remember. We had a new phrase—"wounded heroes". It may have surprised some of my hon. Friends to know who would be cate-gorised as a wounded hero. It must have surprised Mr. Riccardo even more to be greeted by the Chancellor of the Duchy with the words. "Whatever the Secretary of State for Industry may say, to me you are a hero." God knows, they were wounded. With a loss of £430 million in the previous 10 years, there was no doubt about that. But the heroism might be more difficult to observe.

Of course, the whole Government strategy was to look at the problems and say, "In future, we must encourage investment based on accurate sectoral analysis to show where investment should go." And the first sectoral analysis that we had from the Government was presumably the CPRS Report. If ever there was a sectoral analysis which clearly said, "Do not put a penny there," it must be this CPRS Report.

Then we advance to the actual decisions on Chrysler. We move on to the implications of those decisions. I am pleased to see present the hon. Member for Sheffield. Attercliffe because he and his Select Committee drew attention to the point which must be made, that this is not just a decision for Chrysler or the British motor industry. It is a decision for the whole of British industry, about where the funds will go and where effort will be made and encouragement given.

I do not know whether the Secretary of State heard the attack on the declaration of intent by his hon. Friend the Member for Basildon (Mr. Moonman), who was backed by a number of other Labour Members. The declaration is amazingly vague. There appears to be no real commitment and nothing to stop Chrysler upping sticks in a year or two depending on how the market goes. The figures quoted by the hon. Member for Colne Valley (Mr. Wainwright) suggested that Chrysler might pick up for a year or two and that then its profit performance was likely to fall again. If that is right, it is likely that we shall see the third declaration of intent from Chrysler by about 1980.

But the seriousness of this declaration is that it spells out clearly how the damage will be done. I have said that the danger of the payment to Chrysler is its impact on other companies in the motor industry, particularly Vauxhall and Ford. I wonder how Vauxhall and Ford will react to the first paragraph of the declaration of intent, which says: Her Majesty's Government and Chrysler Corporation have reached agreement on the broad terms on which Chrysler and Her Majesty's Government will co-operate to strengthen Chrysler United Kingdom Limited, so as to maximise the opportunities for growth of Chrysler United Kingdom in their mutual interest and for the benefit of Chrysler United Kingdom's employees, dealers and customers". How can they do that except at the expense of the Vauxhall dealers and at the expense of the Vauxhall and Ford employees? The British Government are now committed. Therefore, when Vauxhall sees what has happened and asks why it should be left out of the club—and in its present difficult financial situation in which it faces losses it will be impossible for the Government to resist—what will the Government do? What will the Government say to Ford when it asks why it should be the only unsubsidised car company in the country?

The tragedy of unemployment is an option which cannot be bought out in any way. The Chief Secretary to the Treasury has given the answer better than anybody. He said: Even if money was available—it is not—when we are already borrowing £9,000 million, bailing out unviable companies cannot in the long run save jobs. That is the point. The Government are attempting to bail out and are spending money wastefully. The cost is £10,000. per job.

Why not tackle the problem in the way in which the last Conservative Government tackled it with the wool textile scheme which symbolically ended yesterday? In that case £15 million worth of investment in the form of grants encouraged £60 million of investment from companies and helped to secure 60,000 jobs. There was £15 million of Government money. It worked out at £250 a job. If there are viable areas where companies will put up their own money with encouragement from Government, that is surely a much more satisfactory way to go about the problem.

Our criticism of the Government is the overriding fault found by the Select Committee in its study of the industry, which said that the problem was one of attitude. It is not a question of just unions, just management or just lack of investment. Above all it is a question of total commitment in people's attitudes throughout the industry. That is what must change. The tragedy of the Government's approach is that it is positively hindering and handicapping the efforts which are made in these companies where the attitude might change.

The Government still have to get union acceptance of 8,000 redundancies. There must be new manning levels and agreement on a level of productivity similar to that of French Chrysler. We have no information from the Government whether they have any undertaking about this. We should like to hear whether there is an undertaking.

The Labour Government have changed course completely over this issue. The Secretary of State for Industry has been absent for the whole of the debate apart from his opening speech and that of my hon. Friend the Member for Henley (Mr. Heseltine). We understand why he was absent and we sympathise with him. It was significant that when my hon. Friend said that the Chancellor of the Duchy of Lancaster had negotiated behind the back of the Secretary of State for Industry there was a cry of "Rubbish".

Photo of Mr Tom King Mr Tom King , Bridgwater

The interesting point is—we have heard it again—that that cry came from the Chancellor of the Duchy of Lancaster and not from the Secretary of State for Industry.

Hon. Members:

Let him say it.

Photo of Mr Tom King Mr Tom King , Bridgwater

I am sorry, I have to complete my speech soon.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

The hon. Gentleman has made a totally unwarranted attack on my right hon. Friend. I hope that he will withdraw it. The negotiating team consisted of my right hon. Friends the Secretary of State for Scotland, the Chancellor of the Duchy of Lancaster and the Paymaster-General. I led the negotiations. I hope that the hon. Gentleman will not perpetuate this myth and total distortion.

Photo of Mr Tom King Mr Tom King , Bridgwater

I meant no attack on the Chancellor of the Duchy. I appreciate the intervention of the Secretary of State and am glad that he has made this point clear. The facts are as I stated. He did not contradict me. [HON. MEMBERS: "Withdraw."] The Secretary of State for Industry ended his speech with the cry, "What sort of Labour Government would we be if 60,000 jobs did not matter?" I will tell the Secretary of State. It is the sort of Labour Government who fought the election on the slogan "Back to work with Labour" the sort of Labour Government who have now added 750,000 to the unemployment queue and are adding to it at the rate of 35,000 a month. With the industrial strategy put forward by the right hon. Gentleman today the Government will add to those figures at an ever-increasing rate.

9.36 p.m.

Photo of Mr William Ross Mr William Ross , Kilmarnock

The hon. Member for Bridgwater (Mr. King) began his speech on a much higher tone than some speeches we have heard today. He highlighted the importance to this country of the motor car industry. The fact that 300,000 people are directly employed in that industry with another 1 million people working for it indirectly through supply industries, components and services and the rest, must show the importance that it holds for us.

There was an element of frivolity about some of the speeches and the attitudes of Conservative Members who failed to appreciate what we were talking about—the livelihood of men and women who will be directly affected by our decision tonight. I wonder what would have been the reaction from the Conservatives if we had come forward today and said, "Chrysler is being liquidated and the Government are doing nothing about it." What would have been the attitude of the Scottish Tory Members of Parliament

Photo of Mr Nigel Lawson Mr Nigel Lawson , Blaby

You nearly said it—Scottish nationalists.

Photo of Mr William Ross Mr William Ross , Kilmarnock

Every single one of them would have been on his feet protesting. The hon. Member for Henley (Mr. Heseltine) started to tell us that the great aim of the Tory Party in 1970 when it came into office was to cut down unemployment.

Photo of Mr William Ross Mr William Ross , Kilmarnock

Let us see what happened. Have we forgotten UCS? Have we forgotten that the Tory Government decided that they would give no more help to UCS—that it was to be butchered? That was the phrase used. We had months of agony and changes of policy that eventually led the Government to change their mind. What happened? By January 1972 unemployment in Scotland was 150,000—

Photo of Mr William Ross Mr William Ross , Kilmarnock

Less than 127,000. For 17 months, in the early 1970s, it was never lower than 127,000. That is why the Tory Party has no political base in Scotland.

The hon. Member for Gosport (Mr. Viggers) came to the conclusion that there should never have been a motor car industry at Linwood. There were not many hon. Members in the Chamber at the time that he said that. The Conservative Government took Rootes to Linwood. Phase 1 was in 1962 and Phase 2 was not completed until 1965. One hon. Member asked earlier about the cost of the Chrysler agreement per job, but did hon. Members opposite work out the cost per job in respect of that exercise? It must have been much higher. The Opposition thought it was important then to save jobs, but today they think it is important to kill those jobs. That is the alternative and they must face up to it. We either accept the plan now before us, or we accept that nearly 60,000 jobs, direct and indirect, will be lost, including 12,000 at Linwood.

Photo of Mr William Ross Mr William Ross , Kilmarnock

The hon. Gentleman is simply showing his lack of faith in the motor car industry in this country.

Photo of Sir Patrick Mayhew Sir Patrick Mayhew , Royal Tunbridge Wells

Will the right hon. Gentleman explain to the House why the CPRS Report begins with a Government note that the Report was being published as a contribution to public discussion on these difficult issues?

Why was its publication held up so long, which means that it can no longer make a proper contribution to this debate?

Photo of Mr William Ross Mr William Ross , Kilmarnock

The Report has been published for public discussion. The discussion has hardly begun, and it will not end with tonight's debates. I have known many reports that have been accepted by Governments at the time, and I can assure hon. Members that they proved in the event to be quite wrong in some of their projections. We have produced this Report and we have published it, and that is more than the Conservative Government did with any of their Reports from the CPRS. Some hon. Members have said that we should have produced the Report earlier, but if we had produced it six days later they would have said we published it too late. The Government just cannot win. We have shown much more courage than the Conservative Government did, and we welcome the discussion that has taken place.

The Opposition today were writing off Chrysler. The hon. Member for Colne Valley (Mr. Wainwright) was for closing down Longbridge, Cowley and Linwood, and others were writing off British Leyland altogether. Where does all this defeatism end?

There are problems in the industry, not only in this country but in the whole of the Western world. One of the points dealt with by the CPRS Report is that action ought to be taken at a Community level. The CPRS suggested that we should turn our attention to the level of imports coming from Japan and develop a Community effort. If we start trying to solve our problems in the way that the Opposition did when in government, we shall not solve them: we shall fill this country with foreign cars.

Photo of Mr Nigel Lawson Mr Nigel Lawson , Blaby

I realise that Ministers have difficulties in reconciling their differences in Cabinet, but will the right hon. Gentleman at least reconcile his difference with the Secretary of State for Industry who, in contradistinction, said that unemployment would have to come in the motor industry. He said that there should not be an amputation of Chrysler, but that the unemployment should be spread throughout the whole industry. Now the Secretary of State for Scotland says that there will be no reduction in manning.

Photo of Mr William Ross Mr William Ross , Kilmarnock

My right hon. Friend said that the restructuring of British Leyland had already cost 28,000 jobs. He pointed out that what has been proposed in this scheme is a contraction or slimming down, by restructuring, of about 25 per cent. That is precisely what should be done, not simply a reaction to the situation by saying that 25,000 Chrysler jobs should go, even though that might mean that the viable commercial vehicle sector at Dunstable would be closed down as well.

Photo of Mr Nigel Lawson Mr Nigel Lawson , Blaby

Nobody is saying that.

Photo of Mr William Ross Mr William Ross , Kilmarnock

Hon. Members were today advocating the complete liquidation of Chrysler, and they cannot avoid the inevitable implications of that. I shall certainly not let them off the hook on that one.

The speech by the hon. Member for Henley completely lacked humanity.

Photo of Mr William Ross Mr William Ross , Kilmarnock

The hon. Member for Henley should be condemned for the kind of speech he made. He said that the money would be better used looking after employment. I hope that he will listen to the right hon. Member for Renfrewshire. East (Miss Harvie Anderson). The hon. Gentleman should consider what is happening in Scotland in the endeavour to get new industry in. We are in the middle of a recession, whether he realises it or not. At this time it is difficult to get mobile industry, and to suggest that it can be got at a stroke, even a stroke that lasts over a year, is rubbish. The CPRS Report talked about it taking five years to redeploy those laid off. The right hon. Lady will tell the hon. Member for Henley how difficult these things are in the West of Scotland. No wonder her speech contrasted so markedly with his. She has to live with the problems, as does my hon. Friend the Member for Renfrew-shire West (Mr. Buchan).

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

And the hon. Member for Basildon (Mr. Moonman).

Photo of Mr William Ross Mr William Ross , Kilmarnock

I shall come to my hon. Friend the Member for Basildon (Mr. Moonman). I have dealt with the hon. Member for Colne Valley. Defeat is written all over his face.

I regret the sloganising attitude of the Opposition, who seem to think there is an easy way out of all of this. They seem to believe that we should let Chrysler go, but if they believe that they must face up to what the cost would be. One of my hon. Friends was describing exactly what it would mean if, instead of spending the money on Chrysler, we spent it on roads and on other services.

If we let Chrysler go, the immediate cost will be that of unemployment benefit and earnings related benefit. It will also be the cost to the country of the loss of taxable revenue. My right hon. Friend the Secretary of State gave the total cost as being between £100 million and £150 million. It is the consequences of this to the nation that the hon. Member for Bridgwater slid over easily. There is no doubt that the cost of this operation is as nothing compared to what we should have to pay in the first year if we followed the policies that are advocated by Conservative Members.

Photo of Mr William Ross Mr William Ross , Kilmarnock

All the points that have been made by Opposition Members, including their sneering at the possible future for Chrysler, are in contrast to what was said when Chrysler went to Linwood.

Photo of Mr William Ross Mr William Ross , Kilmarnock

Only two years after Chrysler moved to Linwood, Rootes was in trouble.

Photo of Mr William Ross Mr William Ross , Kilmarnock

Hon. Gentlemen should appreciate that we are dealing with a serious situation. It is a situation that costs jobs and affects the balance of payment.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Order. It is quite clear that the right hon. Gentleman will not give way. The hon. Member for Louth (Mr. Brotherton) must not rise again.

Photo of Mr William Ross Mr William Ross , Kilmarnock

I am surprised at Opposition Members ignoring the importance of the balance of payments. The hon. Member for Bridgwater paid tribute to what the motor car industry had done. The people employed by Chrysler have done their share too. The Iranian contract is a valuable asset to this country. Some hon. Gentleman said that it could have been dealt with in another way. It could not. If Chrysler goes, that goes. We shall lose not only £165 million which would assist our balance of payments, but we shall have to deal with the aftermath, the gap into which foreign cars will race. The hon. Gentleman said that the motor car industry in Britain could not fill the gap. It will be filled, but at the expense of our balance of payments. The cost to the balance of payments in terms of jobs and the cost of the Iranian contract is something which hon. Gentlemen have not reckoned with.

Some of my hon. Friends questioned whether this was the best way of dealing with the matter. My right hon. Friend the Member for Lanark (Mrs. Hart) referred to this, as did other of my hon. Friends. We examined several ways of dealing with the matter, but I can assure my hon. Friends who were worried about the cost that it would have been much greater if we had chosen a different solution and would have left the Government with open ended commitments which they were not prepared to share.

I shared, as I am sure many hon. Members who are concerned with the motor car industry and in particular with Chrysler shared, the horror at the way this was sprung upon us. That was implicit in some of the remarks that were made in the debate. However, we have to face the facts and find a solution. We believe that this solution is the best one. What does it achieve? [HON. MEMBERS: "We cannot hear."] I suggest that if hon. Gentlemen cannot hear they start listening. What does it achieve? Production will continue at Dunstable.

I was asked about the likely number of redundancies that there would be at Dunstable. The ultimate number of redundancies at Dunstable and Luton will be 400. Production will continue at Ryton with the Simca car. It will continue at Stoke with the Iranian contract. Production of spare parts at Birmingham continues. Production continues at Linwood.

Comparing what we have achieved out of this with the reality of what faced us at the start, I think that the Government ought to be commended for the kind of deal that we got.

The speech of my hon. Friend the Member for Nuneaton (Mr. Huckfield) was a balanced one. He weighed all the dilemmas and came down on the Government's side. My hon. Friend the Member for Basildon was not quite so balanced—I am sorry to say. He said that we had put Chrysler at the top of the queue. I assure him that we did not put Chrysler at the top of the queue. The events were forced upon us. We have dealt with them with humanity and with efficiency. We have dealt with them. We are satisfied that unless we are given the good will and the kind of industrial relations that we must get over the whole motor car industry—not just Chrysler, because this applies to British Leyland, Fords and Vauxhall; if hon. Members are so beloved of the CPRS Report, it is there—unless we get that new attitude, there is no hope at all for the motor car industry. I am satisfied that we can get it.

Photo of Mr John Stonehouse Mr John Stonehouse , Walsall North

I respect the sincerity of my right hon. Friend the Secretary of State in wishing to protect jobs in Scotland, but may I ask what his position will be when Ford

and Vauxhall come forward, perhaps next year, for a subsidy to maintain jobs in England?

Photo of Mr William Ross Mr William Ross , Kilmarnock

It may well be that we shall take half of their profits, as, indeed, we are prepared to take half the profits of Chrysler.

My hon. Friend the Member for Basildon said that the declaration of intent was a "scandalous sell-out". I do not know how he can look at this matter in a balanced way and look at the question of employment and describe it as a sell-out. The declaration of intent is far more specific than that of 1967, and some of the questions about which my hon. Friend was concerned I, too, was concerned about. There is to be a planning agreement. That, I think, should give us a certain measure of control and information that we never had previously. There will also be Government-appointed directors on the board, and hon. Members should remember that our loans are backed either by the Chrysler Corporation in America or against the assets of that company in the United Kingdom.

Taking into consideration all these advantages and the whole question in respect of employment, the point that I must make to all Scottish hon. Members is that if they vote against us tonight they are voting for unemployment in Scotland such as they have never had previously.

Question put, That this House do now adjourn:—

The House divided: Ayes 260 Noes 285.

Division No. 17.]AYES[10.0 p.m.
Aitken, JonathanBraine, Sir BernardCordle, John H.
Alison, MichaelBrittan, LeonCormack, Patrick
Amery, Rt Hon JulianBrocklebank-Fowler, C.Costain, A. P.
Arnold, TomBrotherton, MichaelCritchley, Julian
Atkins, Rt Hon H. (Spelthorne)Brown, Sir Edward (Bath)Crouch, David
Awdry, DanielBryan, Sir PaulCrowder, F. P.
Baker, KennethBuchanan-Smith, AlickDavies, Rt Hon J. (Knutsford)
Banks, RobertBuck, AntonyDean, Paul (N Somerset)
Beith, A. J.Bulmer, EsmondDodsworth, Geoffrey
Bell, RonaldBurden, F. A.Douglas-Hamilton, Lord James
Bennett, Dr Reginald (Fareham)Butler, Adam (Bosworth)Drayton, Burnaby
Benyon, W.Carlisle, Markdu Cann, Rt Hon Edward
Berry, Hon AnthonyCarr, Rt Hon RobertDurant, Tony
Biffen, JohnChalker, Mrs LyndaEden, Rt Hon Sir John
Biggs-Davison, JohnChurchill, W. S.Edwards, Nicholas (Pembroke)
Blaker, PeterClark, Alan (Plymouth, Sutton)Elliott, Sir William
Body, RichardClark, William (Croydon S)Emery, Peter
Boscawen, Hon RobertClarke, Kenneth (Rushcliffe)Eyre, Reginald
Bottomley, PeterCockcroft, JohnFairbairn, Nicholas
Bowden, A. (Brighton, Kemptown)Cooke, Robert (Bristol W)Fairgrieve, Russell
Boyson, Dr Rhodes (Brent)Cope, JohnFarr, John
Fell, AnthonyKnox, DavidRenton, Tim (Mid-Sussex)
Fisher, Sir NigelLamont, NormanRidley, Hon Nicholas
Fletcher, Alex (Edinburgh N)Lane, DavidRidsdale, Julian
Fletcher-Cooke, ChariesLangford-Holt, Sir JohnRifkind, Malcolm
Fookes, Miss JanetLatham, Michael (Melton)Rippon, Rt Hon Geoffrey
Fowler, Norman (Sutton C'f'd)Lawrence, IvanRoberts, Michael (Cardiff NW)
Fox, MarcusLawson, NigelRoberts, Wyn (Conway)
Fraser, Rt Hon H. (Stafford & St)Lestor, Jim (Beeston)Rodgers, Sir John (Sevenoaks)
Freud, ClementLewis, Kenneth (Rutland)Ross, Stephen (Isle of Wight)
Fry, PeterLloyd, IanRossi, Hugh (Hornsey)
Galbraith, Hon. T. G. D.Loveridge, JohnRost, Peter (SE Derbyshire)
Gardiner, George (Reigate)Luce, RichardRoyle, Sir Anthony
Gardner, Edward (S Fylde)McAdden, Sir StephenSainsbury, Tim
Gilmour, Rt Hon Ian (Chesham)McCrindle, RobertSt. John-Stevas, Norman
Gilmour, Sir John (East Fife)Macfarlane, NeilScott, Nicholas
Glyn, Dr AlanMacGregor, JohnShaw, Giles (Pudsey)
Godber, Rt Hon JosephMacmillan, Rt Hon M. (Farnham)Shelton, William (Streatham)
Goodhew, VictorMcNair-Wilson, M. (Newbury)Shepherd, Colin
Goodlad, AlastairMcNair-Wilson, P. (New Forest)Shersby, Michael
Gorst, JohnMarshall, Michael (Arundel)Silvester, Fred
Gow, Ian (Eastbourne)Marten, NeilSims, Roger
Gower, Sir Raymond (Barry)Mates, MichaelSinclair, Sir George
Grant, Anthony (Harrow, C)Mather, CarolSkeet, T. H. H.
Gray, HamishMaude, AngusSmith, Cyril (Rochdale)
Grieve, PercyMaudling, Rt Hon ReginaldSmith, Dudley (Warwick)
Griffiths, EldonMawby, RaySpeed, Keith
Grimond, Rt Hon J.Maxwell-Hyslop, RobinSpence, John
Grist, IanMayhew, PatrickSpicer, Michael (S Worcester)
Grylls, MichaelMeyer, Sir AnthonySproat, Iain
Hall, Sir JohnMiller, Hal (Bromsgrove)Stainton, Keith
Hall-Davis, A. G. F.Mills, PeterStanbrook, Ivor
Hamilton, Michael (Salisbury)Stanley John
Hampson, Dr KeithMiscampbell, NormanSteel, David (Roxburgh)
Hannam, JohnMitchell, David (Basingstoke)Steen, Anthony (Wavertree)
Hastings, StephenMoate, RogerStewart, Ian (Hitchin)
Havers, Sir MichaelMonro, HectorStokes, John
Hawkins, PaulMontgomery, FergusStradling Thomas J.
Hayhoe, BarneyMoore, John (Croydon C)
Heath, Rt Hon EdwardMore, Jasper (Ludlow)Tapsell, Peter
Heseltine, MichaelMorgan, GeraintTaylor, R. (Croydon NW)
Hicks, RobertMorris, Michael (Northampton S)Taylor, Teddy (Cathcart)
Higgins, Terence L.Morrison, Charles (Devizes)Tebbit, Norman
Holland, PhilipMorrison, Hon Peter (Chester)Temple-Morris, Peter
Hooson, EmlynMudd, DavidThatcher, Rt Hon Margaret
Hordern, PeterNeave, AireyThorpe, Rt Hon Jeremy (N Devon)
Howe, Rt Hon Sir GeoffreyNelson, AnthonyTownsend, Cyril D.
Howell, David (Guildford)Neubert, MichaelTrotter, Neville
Howells, Geraint (Cardigan)Newton, TonyTugendhat, Christopher
Hunt, JohnNott, Johnvan Straubenzee, W. R.
Hurd, DouglasOnslow, CranleyVaughan, Dr Gerard
Hutchison, Michael ClarkOppenheim, Mrs SallyViggers, Peter
Irvine, Bryant Godman (Rye)Page, John (Harrow West)Wainwright, Richard (Colne V)
Irving, Charles (Cheltenham)Page, Rt Hon R. Graham (Crosby)Wakeham, John
James, DavidPardoe, JohnWalder, David (Clitheroe)
Jenkin, Rt Hon P. (Wanst'd & W'df'd)Pattie, GeoffreyWalker, Rt Hon P. (Worcester)
Jessel, TobyPenhaligon, DavidWalters, Dennis
Johnson Smith, G. (E Grinstead)Percival, IanWeatherill, Bernard
Johnston, Russell (Inverness)Peyton, Rt Hon JohnWells, John
Jones, Arthur (Daventry)Pink, R. BonnerWiggin, Jerry
Jopling, MichaelPrice, David (Eastleigh)Winterton, Nicholas
Joseph, Rt Hon Sir KeithPrior, Rt Hon JamesWood, Rt Hon Richard
Kershaw, AnthonyPym, Rt Hon FrancisYoung, Sir G. (Ealing, Acten)
Kilfedder, JamesRaison, TimothyYounger, Hon George
Kimball, MarcusRathbone, Tim
King, Evelyn (South Dorset)Rawlinson, Rt Hon Sir PeterTELLERS FOR THE AYES:
King Tom (Bridgwater)Rees, Peter (Dover & Deal)Mr. Spencer Le Marchant and
Kitson, Sir TimothyRees-Davies, W. R.Mr. Cecil Parkinson.
Knight, Mrs JillRenton, Rt Hon Sir D. (Hunts)
NOES
Abse, LeoBennett, Andrew (Stockport N)Callaghan, Jim (Middleton & P)
Allaun, FrankBidwell, SydneyCampbell, Ian
Anderson, DonaldBishop, E. S.Canavan, Dennis
Archer, PeterBlenkinsop, ArthurCant, R. B.
Armstrong, ErnestBoardman, H.Carmichael, Neil
Ashley, JackBooth, AlbertCarter, Ray
Ashton, JoeBottomley, Rt Hon ArthurCarter-Jones, Lewis
Atkins, Ronald (Preston N)Boyden, James (Bish Auck)Cartwright, John
Atkinson, NormanBradley, TomCastle, Rt Hon Barbara
Bagier, Gordon A. T.Bray, Dr JeremyClemitson, Ivor
Bain, Mrs MargaretBrown, Hugh D. (Provan)Cocks, Michael (Bristol S)
Barnett, Rt Hon Joel (Heywood)Brown, Robert C. (Newcastle W)Cohen, Stanley
Bates, AlfBuchan, NormanColeman, Donald
Bean, R. E.Buchanan, RichardColquhoun, Mrs Maureen
Benn, Rt Hon Anthony WedgwoodButler, Mrs Joyce (Wood Green)Conlan, Bernard
Cook, Robin F. (Edin C)Jenkins, Rt Hon Roy (Stechford)Roberts, Gwilym (Cannock)
Corbett, RobinJohn, BrynmorRobertson, John (Paisley)
Cox, Thomas (Tooting)Johnson, James (Hull West)Roderick, Caerwyn
Craigen, J. M. (Maryhill)Johnson, Walter (Derby S)Rodgers, George (Chorley)
Crawford, DouglasJones, Alec (Rhondda)Rodgers, William (Stockton)
Cronin, JohnJones, Barry (East Flint)Rooker, J. W.
Crosland, Rt Hon AnthonyJones, Dan (Burnley)Rose, Paul B.
Cryer, BobJudd, FrankRoss, Rt Hon W. (Kilmarnock)
Cunningham, G. (Islington S)Kaufman, GeraldRowlands, Ted
Cunningham, Dr J. (Whiteh)Kelley, RichardSandelson, Neville
Davidson, ArthurKerr, RussellSedgemore, Brian
Davies, Bryan (Enfield N)Kilroy-Silk, RobertSelby, Harry
Davies, Denzil (Llanelli)Kinnock, NeilShaw, Arnold (Ilford South)
Davies, Ifor (Gower)Lambie, DavidSheldon, Robert (Ashton-u-Lyne)
Davis, Clinton (Hackney C)Lamborn, HarryShore, Rt Hon Peter
Deakins, EricLamond, JamesShort, Rt Hon E. (Newcastle C)
Dean, Joseph (Leeds West)Latham, Arthur (Paddington)Short, Mrs Renée (Wolv NE)
Delargy, HughLeadbitter, TedSilkin, Rt Hon John (Deptford)
Dell, Rt Hon EdmundLee, JohnSilkin, Rt Hon S. C. (Dulwich)
Dempsey, JamesLestor, Miss Joan (Eton & Slough)Sillars, James
Doig, PeterLever, Rt Hon HaroldSilverman, Julius
Duffy, A. E. P.Lewis, Arthur (Newham N)Skinner, Dennis
Dunn, James A.Lewis, Ron (Carlisle)Small, William
Dunnett, JackLipton, MarcusSmith, John (N Lanarkshire)
Eadie, AlexLitterick, TomSnape, Peter
Edge, GeoffLoyden, EddieSpearing, Nigel
Edwards, Robert (Wolv SE)Luard, EvanSpriggs, Leslie
English, MichaelLyon, Alexander (York)Stallard, A. W.
Ennals, DavidLyons, Edward (Bradford W)Stewart, Donald (Western Isles)
Evans, Fred (Caerphilly)McCartney, HughStoddart, David
Evans, Gwynfor (Carmarthen)McElhone, FrankStott, Roger
Evans, Ioan (Aberdare)McGuire, Michael (Ince)Strang, Gavin
Ewing, Harry (Stirling)Mackenzie, GregorSummerskill, Hon Dr Shirley
Faulds, AndrewMaclennan, RobertSwain, Thomas
Fernyhough, Rt Hon E.McMillan, Tom (Glasgow C)Taylor, Mrs Ann (Bolton W)
Fitch, Alan (Wigan)McNamara, KevinThomas, Dafydd (Merioneth)
Flannery, MartinMadden, MaxThomas, Jeffrey (Abertillery)
Fletcher, Ted (Darlington)Mahon, SimonThomas, Mike (Newcastle E)
Foot, Rt Hon MichaelMallalieu, J. P. W.Thomas, Ron (Bristol NW)
Ford, BenMarks, KennethThompson, George
Forrester, JohnMarshall, Dr Edmund (Goole)Thorne, Stan (Preston South)
Fowler, Gerald (The Wrekin)Marshall, Jim (Leicester S)Tierney, Sydney
Fraser, John (Lambeth, N'w'd)Mason, Rt Hon RoyTinn, James
Freeson, ReginaldMaynard, Miss JoanTomlinson, John
Garrett, John (Norwich S)Meacher, MichaelTomney, Frank
Garrett, W. E. (Wallsend)Mellish, Rt Hon RobertTorney, Tom
George, BruceMendelson, JohnTuck, Raphael
Gilbert, Dr JohnMillan, BruceUrwin, T. W.
Ginsburg, DavidMiller, Mrs Millie (Ilford N)Varley, Rt Hon Eric G.
Golding, JohnMolloy, WilliamWainwright, Edwin (Dearne V)
Gould, BryanMoonman, EricWalden, Brian (B'ham, L'dyw'd)
Gourlay, HarryMorris, Alfred (Wythenshawe)Walker, Harold (Doncaster)
Graham, TedMorris, Charles R. (Openshaw)Walker, Terry (Kingswood)
Grant, George (Morpeth)Morris, Rt Hon J. (Aberavon)Ward, Michael
Grant, John (Islington C)Moyle, RolandWatkins, David
Grocott, BruceMulley, Rt Hon FrederickWatkinson, John
Hamilton, James (Bothwell)Murray, Rt Hon Ronald KingWatt, Hamish
Hardy, PeterNewens, StanleyWeetch, Ken
Harrison, Walter (Wakefield)Noble, MikeWelsh, Andrew
Hart, Rt Hon JudithOakes, GordonWhite, Frank R. (Bury)
Hattersley, Rt Hon RoyO'Halloran, MichaelWhite, James (Pollok)
Hatton, FrankO'Malley, Rt Hon BrianWhitehead, Phillip
Hayman, Mrs HeleneOrbach, MauriceWhitlock, William
Healey, Rt Hon DenisOrme, Rt Hon StanleyWigley, Dafydd
Heffer, Eric S.Ovenden, JohnWilley, Rt Hon Frederick
Henderson, DouglasOwen, Dr DavidWilliams, Alan (Swansea W)
Hooley, FrankPadley, WalterWilliams, Rt Hon Shirley (Hertford)
Howell, Denis (B'ham, Sm H)Palmer, ArthurWilliams, W. T. (Warrington)
Hoyle, Doug (Nelson)Park, GeorgeWilson, Alexander (Hamilton)
Huckfield, LesParker, JohnWilson, Gordon (Dundee E)
Hughes, Rt Hon C. (Anglesey)Parry, RobertWilson, Rt Hon H. (Huyton)
Hughes, Robert (Aberdeen N)Pavitt, LaurieWilson, William (Coventry SE)
Hughes, Roy (Newport)Pendry, TomWise, Mrs Audrey
Hunter, AdamPerry, ErnestWoodall, Alec
Irvine, Rt Hon Sir A. (Edge Hill)Phipps, Dr ColinWoof, Robert
Irving, Rt Hon S. (Dartford)Prentice, Rt Hon RegWrigglesworth, Ian
Jackson, Colin (Brighousa)Price, William (Rugby)Young, David (Bolton E)
Jackson, Miss Margaret (Lincoln)Rees, Rt Hon Merlyn (Leeds S)
Janner, GrevilleRaid, GeorgeTELLERS FOR THE NOES:
Jay, Rt Hon DouglasRichardson, Miss JoMr. John Ellis and
Jeger, Mrs LenaRoberts, Albert (Normanton)Mr. Joseph Harper.
Jenkins, Hugh (Putney)
Question accordingly negatived.