I beg to move,
That this House authorises the Secretary of State to pay or undertake to pay by way of financial assistance under section 8 of the Industry Act 1972, as amended by the Industry Act 1975 and the Industry (Amendment) Act 1976, sums to Meriden Motor Cycles Ltd. in connection with its business, being sums which, when aggregated with the £4·95 million previously paid by the Secretary of State under that section in respect of that business, exceed £5 million but do not exceed £5·45 million.
I should like to think that the sudden discovery of interest in other parts of the House implies that perhaps we shall not have too lengthy a proceeding on the motion.
The House is already familiar, as a result of the statement that my right hon. Friend made to the House, with the general outlines of what I have to say this evening. It is just over two years since the Meriden Motor Cycle Co-operative was established, with a grant of £750,000 and a loan of £4·05 million, and then, in October 1975, a further loan of £150,000—bringing the total Government provision to £4·95 million. That is where it has stood until this motion.
In this time the Co-operative has produced over 19,000 motor cycles, most of which have been exported. In addition to the production of its own Bonneville motor cycle, it is also assembling machines that have been imported in knock-down form from Italy and Austria, and it is also now making—I am sure that this will be a matter of great interest to hon. Members who are possibly considering ordering such an appliance—an exercise machine for an Austrian manufacturer.
During this period the company has shown itself capable of running a complex manufacturing plant and a medium-sized manufacturing plant with great flexibility in the use of labour and without industrial disputes. The very encouraging aspect of its work has been that productivity has shown a marked improvement since the Co-operative took over. Under the previous owners—and recognise that the manufacturing pattern was somewhat different—productivity was running at the rate of 14 machines per man-year, whereas now the Co-operative has attained a rate of 22 machines per man-year. This represents an increase in productivity of over 50 per cent. during the time in which the Co-operative has been operating.
This has been achieved in the face of considerable difficulties. I think that hon. Members who have followed the work of the Co-operative will recognise that the management has operated with considerable skill, expertise and efficiency.
Nevertheless, what has emerged from various discussions with the Co-operative and from assessments that have been made on behalf of the Department is that there is still a need to evolve a more satisfactory management structure. That is a point that the Co-operative itself recognises. My hon. Friend the Member for Coventry, North-West (Mr. Robinson) will no doubt be contributing to the debate later if he should catch your eye, Mr. Speaker, and he will be able to give the House considerable personal information on the way in which the attitudes of the Co-operative have developed towards the need for managerial expertise.
These difficulties are hardly surprising when one thinks of the very radical change in the management form between the original private ownership and the current co-operative ownership. Therefore, one should not see this limited management shortcoming as in any way an indictment of the experiment as such but rather as one of the spin-offs of the experiment in that it has identified an area in which further attention will be needed.
When the Co-operative was set up, it was considered that it would be unnecessary for it to set up its own world marketing organisation because it was thought that the marketing could be achieved quite efficiently by using the world network of the Norton Villiers Triumph organisation. NVT itself was at that time a substantial producer of motor cycles, but, of course, in 1975 there was a considerable levelling off of demand in the United States and there was considerable over-stocking by the Japanese, which led to an intense period of price cutting. This price cutting was so severe that NVT was unable to meet the competition. Therefore it had to cut back on its production and was forced to revise the scale of its marketing operation.
Since then, it is reasonable to say—without attributing any fault to either side—that because of the nature of the changes that have taken place in the world market and the nature of the changes in the marketing machinery, the relationship between producer and marketer has not been ideal.
Again, in fairness to both parties, I must say that in discussions that they had with the Chancellor of the Duchy of Lancaster and myself, both parties recognised that it would be preferable if the Co-operative were to have its own marketing operation. There is deep-seated conviction among members of the Co-operative that they would do far better if they were marketing their own product and therefore deriving more of the profits margin for the Co-operative.
Since NVT was willing to co-operate in this objective, we felt that it was a further experiment worth supporting. Therefore, the Co-operative will be buying from NVT certain marketing assets and rights such as the right to use NVT's markets, the designs and special tools for the models that they produce, spare parts, dealer franchises, and so on. My hon. Friend is in a position to explain, if he thinks it necessary, the internal strategy of the Co-operative, in view of the effective role that he has played as the Co-operative's adviser over a considerable period.
My right hon. Friend the Secretary of State indicated to the House on 7th January that in view of the representations made by NVT and the Co-operative, we had accepted their proposition to establish a marketing facility and agreed that this would be a valuable further experiment, and that we would provide £500,000 for this purpose. That is the purpose of the motion before the House this evening.
The £500,000 is part of a package which was negotiated by NVT and the Co-operative, and which also involves GEC, a completely new element in the fortunes of the Co-operative. The Industrial Development Advisory Board has been consulted about these proposals and has supported them, given that the Government's further commitment is strictly limited.
Under the new arrangements, GEC will provide £1 million worth of working capital for the Co-operative in the form of revolving credit. It will buy machines from the Co-operative and will hold them until United Kingdom dealers take them and sell them. It will have paid the Co-operative the base price on purchasing, the price agreed between the Co-operative and GEC. The difference between the base price and the actual marketing price will be returned to the Co-operative minus a nominal handling charge for GEC, plus a deduction to be decided as appropriate between the Co-operative and its dealers as the dealers' margin.
In case GEC should interpret too literally what my right hon. Friend has said, I should make it clear that GEC will pay us immediately on sale to the dealer and not wait for the dealer to sell to the trader. If GEC waited till then, it would make a difference to our cash flow.
I am sure that GEC will operate strictly to the terms we have agreed. My hon. Friend the Member for Coventry, North-West was correct in remedying the slightly inaccurate version that I put forward. This means that the Co-operative feels that a larger proportion of the eventual marketing price will return to it than at present.
In addition to this revolving credit, which is an extremely important factor, as my hon. Friend has said, in the firm's liquidity, GEC will also provide certain managerial, marketing and technical advice in the further development of the existing machine, where there are one or two areas of difficulty which the Co-operative and some of its customers would like to see eliminated. Also, to help with the marketing side, Lord Stokes has now agreed to help the Co-operative in setting up its marketing organisation.
The Government will relinquish their present security over the whole assets of the Co-operative and subordinate their loan to all other creditors. The payment of interest between now and the end of 1978 will be deferred. This will mean a total deferment of £1·05m. The purpose of this relinquishing of security is to enable the Co-operative to obtain a facility which is normal to virtually all other enterprises—namely, access to bank overdraft facilities.
Because of the high credit gearing in the original structure of the company when it was set up just over two years ago, and with the Government having this prior claim, it has been extremely difficult for the Co-operative to obtain normal commercial credit. It is hoped that by altering the status of the Government loan, while in no way writing it off or even writing it down, we shall give the Co-operative access to bank facilities.
In the same way that we are not writing down or writing off the loan, it should be stressed that the interest has not been waived. It has been deferred. Therefore, the interest will still be payable and there will be negotiations between the Co-operative and the Government to establish a programme of repayment of loan and interest. This, however, will be at a later stage, as we see the financial development of the Co-operative. I shall keep the House informed of developments in this sector.
Because of the burden which I have described of a high gearing of loan finance, the Government propose that the new £500,000 should take the form of a straight grant rather than add further to the loan capital of the Co-operative. Hon. Members will notice that the motion makes no reference to either the subordination or the deferment of interest, because under the Act we are required to get permission for further finances. The objective here is not further finances but the altering of the handling of existing finances. Therefore, under the Act, it is not necessary for us to seek a resolution for the subordination or the deferring of interest, but clearly the House should be told fully what the package consists of. That is why I have expanded on the arrangement.
Finally, at the suggestion of NVT, as a separate transaction, when NVT receives the assistance which is being paid to the Co-operatives to buy NVT's marketing assets, the Government have agreed to allow NVT to use that money to redeem part of the Government's preference shareholding in NVT. That of course will be done on the basis of expert advice. We shall be employing valuers to establish precisely what would be the appropriate redemption for the sum involved.
The effect will be that there will be little or no net outward flow of capital so far as the Government are concerned, but that is largely an irrelevancy. One must recognise that there will be a loss of a real asset in the loss of part of the shareholding in NVT, but in terms of cash flow it means that the Government will pay out virtually nothing.
It is reasonable to say that in these two years the Co-operative has made considerable achievements. It is equally true to say that there are many problems still confronting it. The managerial problem still has to be met, and the assistance from the GEC will be invaluable in this respect. From the discussions I have had with the Co-operative—I have been in the Department only a relatively short time, I know that its members are determined to stand on their own feet. While they welcome the advice from the GEC, they want to develop their own full managerial capacity. In addition, they will need to develop new products or to improve existing ones. These are challenges to the Co-operative.
The present proposals are intended to correct certain of the deficiences which the first two years of operation have highlighted. We believe that the link established with the GEC is a helpful support to the Co-operative in the next phase of its existence. We believe that the Co-operative experiment should continue. I hope that the House will share this view and support the motion.
This motion is part of an interesting package deal whereby it seems that one of the country's leading capitalists, Sir Arnold Weinstock of GEC, is coming to the rescue of what was originally a Socialist-inspired workers' co-operative. The Government are asking for approval of further advances of £500,000, and NVT, which will receive that money, will use it to redeem preference shares held by the Government. But the important part of the package is that Sir Arnold Weinstock and GEC are injecting £1 million, plus other assistance, into the future running of the Co-operative. We hope that this intervention by GEC will begin to introduce some new realism into the Meriden Co-operative.
I am sure that everyone who has looked aver the first two years of what the Minister described as an experiment will realise that there is room for more realism in the running of the Co-operative. In order to guarantee its survival, it needs to produce a product with real market prospects at home and overseas. It needs so to conduct itself that it can produce a sensible return on capital.
We have only an hour and a half for debate. The Co-operative also needs good standards of management and some design and marketing skills before it can make real progress. I hope that proper remuneration will be available for that management, as opposed to the present arrangement. We accept that there is a need for common sense in the running of the Co-operative and we hope that the new package will produce that.
In case the hon. Gentleman is under any illusion that there is a lack of realism for management in those areas to which he referred, they were precisely excluded from the Co-operative because it did not have the right to do those things. There was no idea on the part of the Co-operative that management was not needed. Now we have the selling and design rights, we shall fill those management slots too.
I shall be coming to the way in which it was set up with deficiencies in management. Perhaps when the hon. Gentleman catches your eye, Mr. Speaker, he will be able to satisfy the House on those points. What is needed for the future
I cannot give way again, or we shall get nowhere in the debate and the hon. Lady will run the risk of not being called to speak. Let me go into the details of the matter before provoking the hon. Lady to intervene.
No one on this side of the House has anything at all in principle against the idea of worker co-operatives. Properly managed, they seem to me and to many of my right hon. Friends to be an attractive idea. We are principally in favour of them so long as the workers who own the industry raise capital on the market and aim to produce a proper return on the capital, so long as they can survive in a competitive market, and so long as they are subject to the same disciplines as anyone else running an industry. Most important of all, we are certainly in favour of worker co-operatives so long as they can be viable without continued support from public funds.
But we sometimes have some hostility towards what seems to be the instinctive approach of some of those within the Labour Party in favour of worker co-operatives in all circumstances. We hope that what is now being done to Meriden will bring an end to there being those in the Labour Party who seem prepared to demand the support of taxpayers' money for any organisation run on worker co-operative lines, even if it is uncompetitive and unsuccessful, so long as it is worker-owned. We must not drift into a situation in which every factory faced with closure for some unfortunate reason immediately resorts to appealing to the Government for public assistance for a worker co-operative way out of its difficulties.
However, we are basically in favour of worker co-operatives run on sound commercial lines. We also wish to make clear that we do not rejoice in the difficulties that the Meriden Co-operatives has undoubtedly got into. We realise what really lay behind the Co-operative. It was conceived by those who run it principally because of the great pride which those who were employed in the factory took in their craftsmanship and in the motor cycle that they produced, a fine piece of engineering in its time. Since they began the Co-operative enterprise they have achieved great increases in productivity. We realise that a great deal of blood, sweat, tears and sheer honest effort have gone into it.
Having spoken of the effort that has gone into the enterprise, I must add that no one can be made very happy by the fact that it has once more returned to the House for the approval of further public assistance in order to carry on. Given this further resort to the House, we can now see that there were certain important ways in which the whole idea of the Meriden Co-operative was misconceived as it was originally set up in the rescue deal by the Minister who is now Secretary of State for Energy.
The Co-operative was launched with public assistance on what was declared at the time to be a once-for-all basis—words uttered several times by Ministers then and to be found in, for instance, the annual report on the operation of the Industry Act for 1974–75, at page 13. Having been launched with substantial public assistance on that once-for-all basis, the Co-operative found itself in February of this year unable to pay its bills and trading debts, with 600 out of 700 of its employees laid off, and with a large quantity of unsold motor cycles stored by its salesmen or in the factory.
What we now need to do, given that the first rescue operation has not succeeded, is to take as constructive a view as we can, to ask what has gone wrong with the Socialist dream that first conceived the Co-operative, and to decide how some common sense can now rescue it, if it proves possible to find a serious market for its main product.
This is an appropriate time to look back over the Meriden operation. Looking back, we can see what was needed in the original deal that has proved to be wanting. First, it has become obvious that more management skills were needed. I am sure that the majority of hon. Members will agree that management in industry is a profession in itself, a craft, a skill. It has its own arts, and it is a serious lifetime career for the best. Meriden has proved that the enthusiasm of workers from other backgrounds in managing an organisation is no substitute for basic management skills.
GEC is about to provide those management skills. It is worth bearing in mind that that is not the first help from the private sector that the Co-operative has required for its management problems. It has already had help from a three-man senior management team from GKN, who were seconded to the Co-operative in 1976. The Co-operative began by losing £1 million in its first year of operation. It is now breaking even, largely because of the assistance of the team from GKN, who helped to turn a monthly loss of about £80,000 into a profit of about £3,000 a month by the end of the year.
Those management advisers had some wise words on their experience of trying to intervene in the Government's favourite child, the Meriden Co-operative, and what they found they had to deal with. I wish to quote from The Times of 25th January this year and to ask hon. Members to reflect on what was then said by a member of the GKN team who had worked inside the Co-operative.
It is a great pity that the Government did not insist on proper management controls when it set up the co-operative. If this had been done at the start Meriden would have been in a competitive position today.
It is still not too late to save Meriden but it is essential that professional management and experienced engineers should be introduced.
He went on to point out a particularly silly aspect of the original Meridan conception. He said:
the big stumbling block remained the flat rate payment of £56 a week for all 700 employees. This would have to be changed to attract the right sort of recruits.
I think that members of the management coming in from GEC are unlikely to be employed on the flat-rate basis which was originally one of the great principles of the Meriden Co-operative. If we derive anything from this lesson we should remind ourselves that management is a much undervalued profession in British industry at the moment. Let us hope that from now the value of real management skills will be appreciated and will be paid for properly within the Meriden Co-operative.
What the original deal needed was a proper marketing operation. It had the arrangement with NVT to market the Triumph motor bicycle, which expires early this year, and which NVT is only too anxious to be relieved of. This arrangement was set up at a time when NVT had a large stage in the motor bicycle industry. The Minister referred to the great upsurge in Japanese competition, but we cannot help thinking that it was partly as a result of the Meriden deal itself that NVT has been driven out of motor bike production.
The factories at Wolverhampton and Smallheath, both producing a perfectly reasonable bicycle, have been closed partly because of the subsidised competition from Meriden. NVT was anxious to get out and now the Government are to pay £500,000 to NVT to buy out the marketing rights for Triumph motor bicycles. NVT has agreed to use that to redeem some of the Government's preference shares, and in that way it is only a book keeping operation. I think NVT is only too glad to get out by redeeming those preference shares and its former workers have a great deal to regret in the history of the whole Meriden operation.
But the main thing that Meriden needed, and still needs, is a product which has an assured place in the market place both in this country and overseas. Its principal product is the Triumph Bonneville motor bike. Although other products are being assembled they are very fringe activities and the future of Meriden depends on the Triumph Bonneville.
Anyone who knows something about motor bicycles will agree that this was a very good bike when conceived and was a considerable triumph in engineering, but it is of very out of date design. It now has a very small and declining specialist market. The BMW machine is preferred by the British police force and it is increasingly preferred by the market. I hope that no pressure will be put on any part of our domestic market to take that old fashioned bicycle in preference to overseas competition.
But the Meriden Co-operative has continued to turn out the Triumph Bonneville motor cycle and has failed to sell them in adequate quantities. There is no future for a worker co-operative, or any other industry, which makes a product in excess of the capacity which the market can absorb. I should like to ask the Minister how many of these bicycles are at the moment still unsold either in the hands of NVT or at the factory.
The hon. Gentleman wants to intervene in everyone's speech. He clearly takes a great pride in his part in the position of the Meriden Co-operative, but I would ask the hon. Gentleman to contain his information until he is lucky enough to catch the eye of the Chair.
The Triumph Bonneville remains unsold in large quantities, and it remained unsold at the time the Government stepped in in February. Can the Minister confirm that the present deal involves no new product development at all? To update the Bonneville significantly or to introduce a new product would cost millions of pounds of further investment. GEC's £1 million will only pay the bills of the Co-operative, even though it is euphemistically described as "working capital", and enable it to continue. Given that the present product has proved difficult to sell and has an uncertain and specialist market, is it the case that GEC will provide what at one time was thought to be part of the deal—some sub-contract engineering work and some other product which can usefully employ the skills of the Meriden Co-operative in some worthwhile and sure market?
If it is not, returning to these bicycles—the purchase and marketing of which I gather the GEC money will largely finance—will that marketing be assisted materially by the ECGD facility which is being handed on to the Meriden Co-operative? This seems to some of us to be a more significant part of the Government's part in this rescue than the £500,000 which we are asked to approve tonight.
A £6 million facility was given to NVT originally to finance export sales. My understanding is that about £2·5 million or £3 million of that remains unused. We should like to know how far that facility is approved of by the ECGD itself, and how far it will supervise the terms on which use is made of the facility. My understanding is that, when the ECGD was ordered to provide this facility to NVT, it was on the basis of the public interest and not on the advice of its own advisory board or its own commercial judgments.
On what basis will the future of what is left of this ECGD facility be used by the Meriden Co-operative? Will it continue to be provided, at the Government's insistence, in the public interest, not on the advice of the ECGD and not in any way whereby the Government are answerable to Parliament for that important facility being made available for the sale of motor cycles?
Having got on to the ECGD credit, I conclude by commenting on the stranger parts of the Government's part in financing this operation over and above this £500,000, which everyone realises is part of a package.
The Government were inclined to refuse Meriden's request for assistance when they were first approached early this year, and they must have had some basis for reaching a judgment that it was right to refuse the Co-operative's application. Certainly they waited for the crisis at Meriden to build up. It is true that no formal application for assistance was made until December, but everyone knew that the Co-operative was heading for deep financial crisis. That information was available to the Government last summer, but they took no steps.
The Government turned down flat the first application made for Industry Act assistance. In his statement on 10th January of this year, the Secretary of State made it clear that he had turned down the original application because he was concerned about the stocks of motor cycles with which the factory was filling up and which his hon. Friend the Member for Coventry, North-West (Mr. Robinson) is anxious to explain away. The right hon. Gentleman was also saying that the future of the company depended on its market position and long-term viability. After that, the Government waited until 600 of the 700 employees were laid off and the Co-operative was in serious difficulties in continuing to trade at all, and then we had the rescue, which was conceived by the Chancellor of the Duchy of Lancaster.
Why did the Government turn down the original application and then apparently change their minds? The deal was announced on 7th February of this year. Describing the position of the Co-operative, the Secretary of State said:
On the production side the co-operative has made a promising start, but it has not yet been able to demonstrate its ability to create the necessary conditions for long-term viability without further support from public funds."—[Official Report, 7th February 1977; Vol. 925, c. 1057.]
How does that description square with the Government's own criteria for assistance to companies under the Industry Act, which were announced a few months ago? Will more assistance now be given to companies other than Meriden, which have not so far been able to demonstrate their ability to create the necessary long-term viability without help from
public funds? If this is the Government's new recipe, it is a recipe for creating permanent pensioners of the State from companies that are not able to demonstrate financial viability and soundness.
Why have the Government changed their minds on this occasion? It is difficult for us to challenge the motion because there is limited State involvement—£500,000 will go to NVT, which will pay it back to the Government. The Government also are deferring payments of interest until 1978. This company has already had one year interest-free on its loan and these further five instalments are worth £1·05 million. The Minister says that he will keep the House informed about the scheme to repay more than £1 million of deferred interest. But no matter how that will be repaid, the fact is that it has been deferred until 1978. The Minister has at least assured us that the payments will be deferred, and not waived.
The Industrial Development Advisory Board has, on balance, come out in favour of the proposition, as long as the Government commitment is strictly limited. Perhaps some Member of the Government could underline the fact that the commitment is strictly limited. I have already recalled that the last time that Meriden got Government assistance it was on a once-for-all basis." Now this is a "strictly limited commitment". Perhaps someone could tell us whether we have at last reached the end of the road, and that in two years time we shall not have another "limited" application before the House for approval for public funds that are required essentially to enable the Co-operative to pay its bills.
We shall give the Co-operative one more chance because of the advice of the Industrial Development Advisory Board, and because GEC has put its money up. I would not advise my hon. Friends to be more capitalist than Sir Arnold Weinstock and GEC. However, we are deeply suspicious of deals that are conceived between Sir Arnold Weinstock and the Chancellor of the Duchy of Lancaster in the Chancellor's flat. That is how this whole rescue deal was conceived.
One may well ask what is in it for Sir Arnold and GEC. Why is he rushing in to rescue a Socialist co-operative that is so dear to the hearts of hon. Members below the Gangway? Maybe he sees a great future for the motor cycle industry, and a return on his capital from sales of the Triumph Bonneville motor cycle. If so, then good luck to Sir Arnold, this company and all who sail in it.
But maybe Sir Arnold has bigger irons in the fire with the Government. If ever a capitalist was in the know about trends in Whitehall, and had Ministers to breakfast, it is Sir Arnold Weinstock. He has interests in power plant manufacturing, and ordering, and in the future development of nuclear policy in this country. He has been criticised heavily by the Left Wing of the Labour Party for his company's distribution of capital to shareholders. It is unworthy to think that the El million is a down payment for other things in prospect, but it was very good public relations to go in when the Government were about to abandon the Meriden Co-operative, but Jack Jones said they could not do so. That was the stage when Sir Arnold Weinstock stepped in.
Given what has happened, we hope that the Co-operative will achieve commercial viability and make motor cycles that will sell in a market that is prepared to buy them at a proper price. We hope that the concern will make good without further recourse to public funds.
We do not underestimate the fact that 700 jobs are at stake at the Meriden Co-operative, and we appreciate the Government's concern. But we must remember that those jobs have not been saved by Socialism or by a Bennite rescue operation. We hope that the Co-operative, with good management and sound commercial advice, will prove that it can give better job security to its members from now on.
Since the Opposition do not intend to press this matter to a vote, I shall be brief.
I was slightly disappointed at the sour tone of the early remarks of the hon. Member for Rushcliffe (Mr. Clarke). However, he improved somewhat towards the end of his comments. I do not begrudge him his party political points, but he asked some nit-picking questions and offered some totally irrelevant criticisms, which no doubt arose more from the hon. Gentleman's inexperience that from any wish to hurt the venture.
The fact is that the motor cycles are selling well in North America, stock levels are well below what we anticipated, and the machines are selling at a profit. But that is not to say that our problems are solved. We still have many problems. But the tone of argument brought to this matter by the hon. Member for Rushcliffe in his opening remarks will do nothing but damage to the situation. It is precisely that divisive attitude, which goes so deep in many of our companies, that prevents them from realising their full potential. I shall deal no more with the hon. Gentleman's remarks, but I only hope that he does better next time.
I should have thought that the financial ingenuity of my right hon. Friend the Secretary of State for Industry and the involvement of the Chancellor of the Duchy of Lancaster was a matter for admiration by Conservative Members, particularly among those who have the interests of the financial community so much at heart and know so much about these matters. This transaction has been achieved at virtually no cost to the Government since it involves an alleged asset which some Opposition Members might seek to value.
I wish to pay tribute to the constructive work carried out by my hon. Friend the Minister of State, Department of Industry. This has been one of the most complicated negotiations I have ever seen. I shall not weary the House with the details, but I believe that it has involved Dennis Poore in negotiations involving eight companies in three different continents. The House will realise what a bonanza it has been for the legal profession. We are nearly at the end of the tunnel, and it has taken quite a while to get there.
I do not want to appear churlish about the Government, but I wish to voice one criticism. It relates to the appalling length of time taken by the Government to put through a fairly simple governmental operation. It is not a House of Commons problem, but a management and organisation problem within the Department. The fact that the matter took so long to agree is inexplicable and unjustified.
The Co-operative and Mr. Dennis Poore, with whom I had protracted and complicated negotiations over a period of two and a half years, and who has shown complete integrity throughout, decided that it was not possible to continue with an artificial relationship that bore no resemblance to the original relationship that was envisaged when the Co-operative was set up.
I do not want to go over the past. That is water under the bridge. It is time to make a new start. It was because he and the Co-operative recognised and agreed that it was not possible going on with that relationship, that brinkmanship with the Government became inevitable and a crunch could not be avoided if we were to get the terms that would offer the basis of an ongoing operation. That is why he stopped taking bikes and why he stopped selling them. That is why the stocks built up at Meriden. That is why people have had to be laid off and why it has taken so long to do so over the past five weeks excruciating negotiations. They have stuck it with the same pride as they stuck the difficult periods that they have had to overcome in these most difficult negotiations.
If the Government's involvement was so trivial, if there was no commitment to public funds, and if the hon. Gentleman cannot understand why the Government delayed, why is it necessary for the Co-operative to have this motion and the extra half a million pounds of public funds? Why is it necessary to defer over £1 million pounds of interest to the end of next year? Why does the Co-operative need almost £3 million worth of export credit? I cannot understand that.
All exporting companies need export credit and Meriden exports 90 per cent. Most exporting companies, or all of them, use ECGD. It is to be used on the same terms as the previous company used it. If only the hon. Gentleman would take the trouble to inform himself before he gets on his feet to ask questions to which he should know the answers, it would be so much better for the House. The hon. Gentleman does not like it when he gets the answers.
When the Co-operative was set up, the operation was mounted on the basis that we would have an ongoing viable motor cycle industry, including the factories of NVT. The reasons that that was not the case had nothing to do with me or my right hon. Friend the Minister of State, but they were fundamental to why we did what we did. That may have been wrong, but two wrongs do not make a right. Let us try to be constructive. That is by far the better approach. It is an approach that would become the hon. Member for Rushcliffe.
That was one reason, and there were many others, most of which were outside the control of the Co-operative. However, we put together a deal that gave us a sporting chance of making it through. We have the selling rights that we need above all. We have the waver on interest and the subordination of security, which in its turn gives us the overdraft facility which was negotiated and agreed with the Nat-West. We have also agreed with the Nat-West to take over on the same terms the ECGD as with previously applied. There is therefore the ECGD financing and we have the £1 million from the GEC.
The problem of Meriden was not a management problem. The problem was that we did not have what is known as the industrial property rights, which meant the trade marks. The franchises, the selling rights, even the special tooling rights were not ours. Such matters are at the heart of any business. If we do not have these things, we are not viable. That is where the crunch comes. That is when we decided to do a deal, which is a very good deal.
The GEC comes in on the management, which will be helpful, because we are now taking on two new, entirely separate and indispensable managerial aspects. One is the selling and the other is the engineering. Of course, GEC can help in both, but let us remember that there are a great many people who would still be interested in coming back into the motor cycle industry who have a great deal to contribute.
Long term it is clearly understood between the Co-operative and GEC and the people who are being spoken to now with a view to their coming in that the Co-operative must have its own management if it is to succeed. We cannot have advice without responsibility from outside. Advisers cannot say that they are not responsible because they are only advisers. No business can be run like that. It bears reflecting why the industry under its marvellous management talent—I am not referring to Mr. Dennis Poore, but long before his time—got itself into the mess that it did.
I believe that we have put together a good deal from the Co-operative's point of view. Does it deserve it? I think that the case is clear: a 50 per cent. increase in productivity; no strikes; full flexibility of labour; a growing maturity; a growing sense of responsibility; sensible and practical industrial democracy; and a recognition that it would always need the management skills that it would not get until it had the two vital areas denied to it so long as they were with NVT. I believe that the Co-operative more than deserves this deal.
I suggest that this deal will make many people very happy. It will certainly make very happy two old-age pensioners who sent Meriden their life savings of £364. That is the kind of feeling of loyalty that can be built into industrial relations in this country and from which we can gain and on which we can capitalise.
This is a constructive night, because the Government have shown that they are prepared to change course. They are prepared to change their mind. What is wrong with that? Every sensible businessman changes his mind at times. Why cannot the Government change their mind? They changed their mind over Chrysler and over Meriden. No doubt there will be other cases which deserve such treatment. I hope that my right hon. Friend will not flinch if he has to change his mind. There is nothing wrong with that. That is a situation that any sensible Government must face.
Overlooking the arrogance, exuberance and inaccurcy which no doubt took the hon. Member for Coventry, North-West (Mr. Robinson) out of Jaguar—some may say unfortunately— into this House, I should like to echo his plea that a constructive approach be adopted to the problems of the Meriden Co-operative. I pay tribute to the work done by the hon. Gentleman behind the scenes on behalf of the Co-operative. However, I cannot share his enthusiasm for this excessively cosy deal between Mr. Dennis Poore, GEC and the Co-operative, with the taxpayer apparently having no right of representation whatsoever.
I cannot agree with the hon. Gentleman that it is not a matter for the House of Commons how another £500,000 of the taxpayers' money is spent immediately and another £1 million of interest is deferred. Indeed, the hon. Gentleman is asking for the right for the Co-operative to change its mind, so there is no guarantee that this is the end of the matter.
The hon. Gentleman will realise, from my record, that I am deeply committed to trying to save not only the motor cycle industry, but the motor car industry of this country. Indeed, it was a Conservative Minister who first made the scheme of arrangement to try to do just that. Because Meriden would not go along with that scheme, the Government were driven to the three-factory solution and further injections of public money—not Government money—with the result forecast by myself and others that it would inevitably lead to the closure of one or more of the other factories still remaining in private hands. Unfortunately, that is what transpired.
To get back to a constructive approach, is the Minister telling the House that a grant of £5 million, plus some deferment of interest, plus some working capital from GEC, will be enough to produce a new engine?
I do not want to detain the House with many technicalities. However, it is common ground that the present machine is not adequate for development. We need not go into whether the engine should be vertical or flat. Again, I ask: is it enough money to assemble a design team? I have spoken with the former chief designer of motor bikes—who, so far, has not been tempted back into the service of the Co-operative. Is this enough for the design and production of a new model, let alone the problems of the sales facilities that are so absolutely necessary? Here I am at one with the hon. Member for Coventry, North-West.
The original deal was set up on a false basis, with NVT retaining the marketing rights and the rights to the name. The House should not have agreed to that. It reflects no credit on either the Government or the House that they fell for a deal that was solely in the interests of Mr. Poore and that he has now managed to come out of quite well—thanks to the recycling of this £500,000 grant. Is not the House entitled to a bit more information about how Mr. Poore exercised his stewardship in the selling of Meriden bikes and in purchasing and selling goods from the receiver of the Norton factory in Wolverhampton? The House would like more information about that before he is allowed to repay this Government asset.
We have not been given much information upon which to form a judgment. The Minister has made no attempt to make available—and I have checked the sources that are available outside the House and in the Vote Office and Library—the GKN Report on which the GEC interest was apparently aroused. Nor have we had anyinformation about the GEC involvement other than the sparce allusions that the Minister made tonight. It is not good enough. We are entitled to more information before being asked to underwrite this instalment on what remains a blank cheque.
We have had no indication that this will understand that this puts those of in the matter. I hope that the Minister will understand that this puts those of us who are trying to take a constructive attitude in a difficult position. We have to justify this not only to taxpayers but—in my case—to constituents who have been done out of their jobs in Small Heath and Wolverhampton by the rescue. What they want to know—and here I am trying to reach the root of Government policy—is where the drift of Government policy is in this matter. Is it just drift or is there indeed some plotted course that is being adhered to?
Without wishing to denigrate at all the virtues of the experiment of a workers' co-operative, do not let us pretend to ourselves that the people at Meriden are some sort of Latter-Day Saints. They are the people who deliberately sabotaged the first rescue scheme and who undermined the livelihoods of their fellow workers at Small Heath and Wolverhampton. The mere fact that there have been no industrial disputes since then reflects little credit on what went on before—when they made no attempt whatsoever to co-operate.
More recently there has been a change in the atmosphere and I pay tribute to that fact. On that I agree with the hon. Member for Coventry, North-West. But we have not been given enough information on which to base an assessment about how the experiment should proceed in the future. It is not enough just to give assurances that the mere addition of Lord Stokes to the team or the passing interest, by means of working capital, of Sir Arnold Weinstock will be a guarantee of success. These flutterings of well-known names is no substitute for hard information about the Government's policy and what is proposed.
Here I come to something that is at the root of present industrial problems. There is no confidence on the shop floor or among management in the Government's policy for industry. This is particularly true in the motor industry, but is it shared by the motor cycle industry. The Government have no clear policy for these great industries on the basis of taxation, road building, fuel policy, marketing policy or import strategy. No clear path is shown by the Government to those who work in these industries that will give them any confidence for the future.
I do not see how those involved with this enterprise can feel secure on the basis of a £500,000 grant, some extra working capital and assistance with managerial and other skills from Sir Arnold Weinstock. That is no basis on which to build and develop confidence, industrial skills and the capability that we need so badly. The Government should give us more assurances about where the future of the industry lies and what is Government policy.
Order. The scope of the debate is fairly narrow. It affects all aspects of the affairs of the Co-operative, but it would not be in order to debate the motor cycle industry in general. I appreciate the hon. Gentleman's difficulties, but we must not go too wide.
I shall follow your guidance, Mr. Deputy Speaker. I was saying that I found it difficult to see how those in the Co-operative could have confidence in the future on the basis of the financial assistance so far made available and without any assurances for the future. The sums mentioned tonight cannot take the industry very far along the road that it would like to travel.
I should like to draw attention to some of the lessons that can be learned from the Co-operative and the conclusions that my constituents who have been working in the other factories should draw from the Co-operative and the finances made available to it. Is this putting a premium on the occupation of factories and the scuppering of Government plans that are funded by taxpayers' money? My constituents are confused. They ask why similar facilities were not made available to them. What have they done wrong that prevents similar assistance being given to enable them to retain their jobs and to build up their industry?
These people are proud of motor cycles and the Norton that they built was better than the Bonneville. The police would have ordered the Norton machine if it had not been sabotaged by the continuance of the Co-operative and the collapse of Norton. That was why they had to buy BMW machines.
Serious questions have been left unanswered about the future of this enterprise and this industry. The Government owes the House more information and the industry a better basis for confidence in the future.
In view of the churlish and sneering speeches by hon. Members opposite, it is astonishing to learn that they do not intend to vote against the motion. It is clear that at least those who are in the Chamber would dearly love to do so if they dared.
They are fond of telling us about the sins of workers, but this is an enterprise in which the workers have shown great devotion to their factory and a determination to keep it open and in which there has been industrial peace.
There has been this unprecedented enthusiasm, but all we get from hon. Members opposite are baseless and disgusting accusations of sabotage directed against these workers. The hon. Members for Rushcliffe (Mr. Clarke) and Bromsgrove and Redditch (Mr. Miller) should be ashamed of themselves.
My hon. Friend is right. That is just what it is. Hon. Members opposite have accused us of having "an instinctive prejudice in favour of worker co-operatives." Yes, I think that many of us have an instinctive prejudice in favour of workers' co-operatives, and I for one am proud of it. What we are expressing is a determination that the workers should have as much control as possible over their own working lives. That is what workers' co-operatives are about.
Let there be no misunderstanding that the failure of the motor cycle industry was a failure of private enterprise, no more and no less. It was not the failure of the workers in the industry. They were not responsible for the management, nor the design nor for the marketing. It was a private enterprise, and it went bust, and many of our constituents were expected to go bust with it. But they refused. So I am pleased that, despite the length of the negotiations in this case—which I regret—in the end correct decisions have been taken and this Co-operative will stay in being.
It is necessary that the Labour Government should make this gesture. I call it a gesture advisedly because the amount of money involved in the whole of this enterprise is chicken feed compared with the amounts of money being daily disbursed to private industry, without the say-so of this House and with far less justification than is the case with Meriden.
Hon. Members opposite have talked of bad management. Yet here we have a factory which was being closed but which is now producing motor cycles successfully. We are told about bad management. We are told that GEC's intervention will mean production of a product that will sell. I wish that GEC was doing that very thing with its own enterprise in my city of Coventry, because there are many workers at GEC in Coventry who would be pleased if GEC was doing something to produce there a product with an assured place in the market. I suggest that GEC should use some of its management skills to protect the jobs of GEC workers in Coventry and elsewhere.
Yes, Mr. Deputy Speaker. Before you were in the Chair, the hon. Member for Rushcliffe dwelt at length on the benefits that would accrue to the Co-operative, which, he said, is being kept alive by means of the injection or what he called "GEC realism". I am following in that exposition.
Despite the sneers of the Opposition, the Government are doing the minimum which it would be proper for a Labour Government to do in their reaction to the worker Co-operative. I believe that working people throughout the country would have been horrified had there been anything less, and that, conversely, they will be pleased by the motion tonight.
We heard from the hon. Member for Rushcliffe an interesting exposition of capitalist ethics. He said specifically, without being called to order, that he wondered "what was in it for GEC". In his exposition of capitalist ethics, he said that it was unworthy to think that this contribution by GEC was merely a down payment but that it was "very good public relations." I hope that my constituents will be watching his opinion of what makes capitalists operate in this kind of economy. He is saying that GEC is not interested in maintaining work but is trying to smooth its own path in its other relationships with the Government. I have not said that—the hon. Gentleman has.
I hope that the hon. Member is wrong. I hope that the facility that GEC is to give to Meriden comes from respect for the achievements of the Meriden Co-operative. Whether it does or not, I have no doubt that the Labour movement and the working people in general would have been disheartened in the extreme had Meriden been allowed to collapse, because it does not deserve to collapse. It has succeeded, and it needs relatively little assistance. I am pleased that the Government have decided to be forthcoming with that assistance.
Those hon. Members, such as my hon. Friend the Member for Rushcliffe (Mr. Clarke), who would like to support workers co-operatives particularly when they show that they are able to go out to the capital market—as we hope Meriden will do—are faced with the problem of reconciling our good wishes with immodest speeches such as that made by the hon. Member for Coventry, South-West (Mrs. Wise). Such speeches make it difficult for those hon. Members who wish to give the Government some support.
Other hon. Members wish to take part in the debate so I shall be brief. I regret that the principle at stake is caught up with the emotionalism about co-operatives. Once more, late at night, the Government are trying to get through public expenditure on the nod in a disgraceful manner.
The Minister of State is the most mellifluous person who could have been chosen to open the debate. When he was doing his "foot in the door" bit today he was taking part in a confused piece of salesmanship. He brought forward a shoddy prospectus for what my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) described as a blank cheque. We have no repayment schedule and we know nothing about how interest payments are to be found. We have another grant making the total grant £1 ¼ million.
At least two questions must be answered before the end of the debate. What does managerial help mean? Does it mean that managers are to be seconded from GEC or are a specific number of people to be trained by GEC? The Minister also talked about GEC's contribution to new and improved products. Launching new products is an expensive operation and, in contrast with the engine problems, this could be an expensive business. Is GEC to share the research and development costs? Exactly what is the commitment of GEC?
Those of us who wish to see this opportunity taken up are persuaded that because GEC is willing to back it there is more hope than we originally believed. But the attack on GEC by the hon. Member for Coventry, South-West will not help the enterprise to go forward to success.
Because of the GEC commitment and the reconfirmation by management, some of us may be persuaded to support the Government, despite the hon. Member and her hon. Friends below the Gangway.
I shall intervene briefly and I shall not follow in the technological discussions. I should welcome the Minister's comments on a particular matter about which I am concerned. Some hon. Members who are members of the Select Committee on Science and Technology recently had the pleasure of visiting the Honda works in Japan. We were immensely impressed by two matters—first, the degree of production automation and second, the degree of quality control instituted in the factories.
I recognise that the Meriden Co-operative will not necessarily be producing a mass-production motor cycle that will be competing in the same markets and that it has tried to get into a more specialised sphere. Nevertheless, even with the higher quality vehicle or bike, a high degree of automation, as many might suggest, will be increasingly vital in the future if the industry is to hold its own and compete against resurgent competitive industries in countries such as Japan.
This is a matter on which we can reasonably seek, in a debate such as this, some comments and reassurances, as we would like to feel that both the question of automated production lines and the question of quality control will be looked at very carefully, and that the proper means of instituting both will be followed up by the provision of this further money.
In view of the time, I shall be very brief. I should like to make one point and to put one question. Before doing so I should declare a degree of personal interest.
Apart from my training as an apprentice on the shop floor of a vehicle manufacturer, I was, before my recent incarnation as Member of Parliament for Workington last year, slightly involved through my company in the retail aspect of motor cycles. To my horror, when I went into that side—discussing the point that has just been made—I found that it was completely dominated by Japanese machines. I endeavoured to introduce British machines—to be told by distributors that, first, they were like hens' teeth, and second, that they did not sell when one got them. Despite that, and despite not selling on the home market, I welcome the increased production figures that were mentioned earlier.
In his statement on 7th February, the Secretary of State mentioned the three points of success, which were marketing, design and product. In common with everyone present, I hope that we welcome the package that has been put together on marketing.
However, my point—it has also been made by my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller)—is that unless we have a correct design programme, that is particularly in respect to the smaller machine, this brave experiment will ultimately fail. It is no good talking, as we are at present, about cobbling together a very small machine from foreign products, or enthusing over selling rowing machines or health machines or whatever. We are wasting our time on that, and it will ultimately fail if we continue on this line, no matter how much money is put in. I hope that when the Minister winds up the debate something will come out about this.
Is any money being spent on new designs? Is there any launching date for new machines? I want to see British machines conquering this country. I do not want to see us swamped by Japanese machines—motor cycles, cameras, cars or anything else.
My other question follows up the remarks of my hon. Friend the Member for Rushcliffe (Mr. Clarke) on the ECGD loan of £6 million. I should like to know whether it was based on a commercial decision on the books or whether it was a political decision. I believe that this is a disproportionately huge sum. Those who made the decision do not appear to be accountable to Parliament, and at present it appears to be an indirect unaccountable method of pump-priming the hoped for increase in motor cycle sales in North America, which, if that is so, will make a nonsense of any Government statements about limits of financial support.
My hon. Friend makes the point very well. I hope that we shall be having some explanation. That has been asked for in the past.
I come to the point about future design and model production, apart from the ECGD question. I hope that the results will be encouraging. I do not want to see this brave experiment fail, particularly after the tremendous individual efforts and sacrifices of the members of the Co-operative. They deserve to succeed. I shall support the measure tonight, despite the activities in my hon. Friend's constituency. But unless there is an ongoing Government product policy, new design and increased production, particularly in the 100 cc to 250 cc range, this Co-operative will ultimately fail, and its death throes will be drawn out by taxpayers' money. If there are no new products this measure will be a waste of money and those involved, apart from those working in the Co-operative, will have to bear the responsibility of raising and prolonging false hopes for the workers and squandering taxpayers' money.
Mr. Alan Williams:
I am sorry that the support of Conservative Members tonight has been given so reluctantly. I am sure that the truculance of some of their speeches will be noted by the workers in the Meriden Co-operative and those in the area. The Opposition could have been more generous in their welcome. However, that is for them.
The hon. Member for Rushcliffe (Mr. Clarke) said that this situation represented the involvement of one of our leading capitalists--GEC—with a Socialist co-operative. So what? This is an industrial experiment. If the co-operative feels that a relationship with a private firm can be of benefit, all strength to it. I am in favour of the Co-operative trying such a venture. I should have thought that the House could welcome that, without looking for any sinister motive.
The hon. Member was skirting around a veiled innuendo, and did not do himself much credit. Having heard him speak before, I found his speech tonight below his usual standard. Because of his implication, let me make it absolutely clear—there is no quid pro quo, there has never been any question of a quid pro quo and I would never agree to a quid pro quo to GEC for this operation.
All I said was that it was interesting that Sir Arnold Weinstock was prepared to put up £1 million after the Labour Government had decided to turn down a similar application because they were not satisfied about the viability and future marketing prospects of the company. That aroused the interest of those who observed the negotiations.
I am surprised that the hon. Gentleman finds this a matter for satirical comment. It was reasonable to establish, as we did, that, in the arrangements implicit in the original proposal, we were not convinced that the Co-operative would be able to carry out its own marketing effectively. The relationship with GEC has made a major difference to our assessment and, I suggest, probably to the IDAB's assessment of the possibility of the Co-operative now being able to carry out a world-wide marketing operation. Conservative Members pride themselves on their knowledge of business. They must know that it is not simple to go for the first time into world-wide marketing, with stocks and on-going production, and be able to sell.
I see some of them nodding agreement. For us, therefore, the involvement of GEC and Lord Stokes tilted the balance—I am sure that the same applies to IDAB—in making us feel that this marketing proposition has a reasonable chance of success and that the Co-operative should be given this opportunity.
The hon. Member for Rushcliffe also asked how many bicycles were unsold. Offhand, I would not regard that as appropriate information to give, as it is internal information of the Co-operative. The motor cycle market is a seasonal one, particularly in the United States. This is only the first selling month of the year there. It would therefore be normal practice to build up stocks during the winter period.
The hon. Gentleman draws in his breath in a quizzical way. If one does not carry on with a steady production level, it means hiring and firing. In this sort of industry, therefore, stocks build up over the non-selling period and are then disposed of over the selling period. The Co-operative could further legitimately defend itself by saying that when the stocks were being built up, it was not doing its own marketing—NVT was—and the purpose of this operation is to enable it to do its own marketing.
The hon. Gentleman also asked about the ECGD facility. All we have done is to transfer the facility. It is implicit in the fact that it is a seasonal industry and therefore will build up stocks that it will need an ECGD facility to hold stocks in the overseas markets. That is perfectly normal. My hon. Friend the Member for Coventry, North-West (Mr. Robinson) assures me that the stocks are now running down. I must take his advice on this. Certainly, the ECGD facility is subject to the same rules as it was previously, the normal rules of its operation. There is nothing different in that.
The hon. Members for Rushcliffe and Bromsgrove and Redditch (Mr. Miller) asked about the development of a new engine and a new product. There is no finance in this proposal for new product development. That was not part of the proposition, because the Co-operative is still considering a range of possibilities, and producing a new product is one possibility. It may decide to establish a relationship with another firm in another country. That is entirely for it to decide. It was not part of the existing proposal.
The hon. Member for Arundel (Mr. Marshall) may have misunderstood what I said about the GEC technical involvement. That is to help deal with certain design factors in the current model. It is not that GEC will take on responsibility for designing a completely new model. That has never been part of the deal, and I would not want the House to feel that I had left that as a suggestion.
The hon. Member for Bromsgrove and Redditch asked about the GKN report. Hon. Members are fully conscious of the need to avoid publishing documents which contain confidential information. There is always a difficult balance of decision as to where it is worth publishing documents and where it is not. We are considering whether to publish the latest of the Boston Group investigations, because certain hon. Members have asked for publication. The consultants' investigations would involve so much detailed internal information that it would have been inappropriate for us to publish that document, but where we can be helpful we hope to be so.
My hon. Friend the Member for Coventry, South-West (Mrs. Wise) made the point that the industry's failure was a failure of private enterprise. It is worth repeating that we are in this predicament because there were years and years of inadequate investment and inadequate product development when the industry was in private hands. Whatever the hon. Member for Bromsgrove and Redditch says—and I fully appreciate the vigour with which he defends his constituents—if he wants to lay blame at anybody's door for the collapse of the operations in his constituency he should look at those who owned the business and let it run into the sands.
I would be the first to admit it, Mr. Deputy Speaker, but I am very glad that I said it.
We have seen this evening a fraudulent attempt at support from Conservative Members. Many of them are afraid to be seen in the Midlands expressing the views they really—
That this House authorises the Secretary of State to pay or undertake to pay by way of financial assistance under section 8 of the Industry Act 1972, as amended by the Industry Act 1975 and the Industry (Amendment) Act 1976, sums to Meriden Motor Cycles Ltd, in connection with its business, being sums which, when aggregated with the f4-95 million previously paid by the Secretary of State under that section in respect of that business, exceed £5 million but do not exceed £5·45 million.