British Aerospace and British Shipbuilders

– in the House of Commons at 12:00 am on 23 July 1979.

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Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East 12:00, 23 July 1979

With permission, Mr. Speaker, I shall make a statement on the future financial structure of British Aerospace and British Shipbuilders.

Since taking office we have carefully considered the circumstances of these industries, in the light of the undertaking, set out in our manifesto, to introduce private ownership.

I turn first to aerospace. British Aerospace, with its spread of interests embracing civil and military aircraft as well as guided weapons and space systems, makes a substantial contribution to both our national economy and our national defence. Despite the fierce competition in this international industry, I am confident that our industry has the talents and skills to flourish. In the years ahead it will generate large internal funds, but substantial external funds will also be required. I have therefore considered how these demands may best be financed. As part of these considerations, my colleagues and I have consulted, among others, the board of British Aerospace and the trade unions representing those employed in the industry.

The Government propose that British Aerospace should in future operate within the framework of the Companies Acts. The ownership of the industry will therefore be transferred from the present statutory corporation to a company incorporated under the Companies Acts. Initially, the shares in that company will be held by the Government, which will then make shares available to private ownership. Employees will be given a special opportunity to buy shares. The Government intend to retain a shareholding of about half.

The change to company status will not result in any alteration to the present business; its assets, liabilities and contracts will all be transferred to the new company. I would also hope to secure continuity in management at board level.

The Government look to the company to obtain the external funds it needs from commercial sources, although it will retain the power to provide funds on commercial terms, if this proves neces- sary. On that basis, we shall not expect to intervene in the administration of the company as a commercial concern.

Legislation will be introduced before Christmas to permit these policies to be carried out. We have considered a number of alternative courses, including the introduction of private capital into the dynamics business. The legislation that the Government will be bringing before the House would not exclude this, but the Government's strong preference is to maintain the present structure of the industry.

I have also considered whether a comparable financial reconstruction might be made for British Shipbuilders. In principle, I should have liked to introduce private sector finance to this industry at the same time. I have concluded, however, that in the light of the particular problems of the industry and the consequent difficulty of predicting its future size—about which my hon. Friend the Minister of State is to make a statement later today—this is not the right time. The Government have therefore decided not to bring forward measures at the moment to introduce private sector finance to the shipbuilding industry.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

Before I question the Secretary of State, may I suggest, Mr. Speaker, that the House has a right to hear from him—not from his hon. Friend the Minister of State—what he intends to do about shipbuilding? Is the Secretary of State too sensitive to contemplate the impact of his political philosophy on the livelihood of other people? Does he not realise that the House wants to hear the butcher, not the butcher's boy?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

I think that the House will respect my hon. Friend the Minister of State, who has spent a great deal of time—we cannot all devote the same amount of time, in a team, to each set of problems—to visiting and meeting the people concerned in the shipbuilding industry. The House will see from his statement and his replies that he is putting forward the policy of the Government, with which, of course, I totally identify myself.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

In spite of that, in my view the Secretary of State should have made the statement himself. He has attempted to give the House the impression that the trade unions have agreed almost enthusiastically with his proposals with regard to British Aerospace. Is not that untrue?

Secondly, is it not true that without Government funds there would be no British Aerospace industry at this moment?

Thirdly, in this new structure is not the Secretary of State already moving to the day when we have lost our manufacturing capacity and have become merely subcontractors to the Americans?

Finally, will the Secretary of State note that we on the Labour Benches believe that the strengthening, not the weakening, of the publicly owned industries is vital to the health of the economy and that the question of restoring these assets to public ownership, and on what basis, will be the subject of urgent consideration by the Labour Party in the coming months?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

I did not try to give a false impression about the trade unions' position. I said that my hon. Friend had consulted them. One of the unions is opposed, on political grounds, to denationalisation, and particularly hopes that the dynamics option, to which I referred, will not be followed. [HON. MEMBERS: "Which one?"] The Confederation of Shipbuilding and Engineering Unions. The other union—the staff association—would prefer to maintain the present structure, but my hon. Friends and I hope to persuade the membership of the unions—and, I hope, the unions as well—that it is in the interests of those who work in the industry, as well as in the interests of those who own the industry, namely, the taxpayers, that independence from Government decision-making should be introduced. It is a highly competitive, fiercely competitive, world. We believe that the commercial management of such an industry will produce more jobs, more secure jobs and better paid jobs, and a better service to the taxpayer.

Photo of Mr Cranley Onslow Mr Cranley Onslow , Woking

Disregarding the temper and tantrums form the Opposition and reverting to Britsh Aerospace, is my right hon. Friend aware that the Government's strong preference against any hiving off of dynamics will be welcome not only in the industry but in the House? The House will also welcome the Government's declared intention that projects such as the HS146 shall depend for their future success on their market prospects and not on any subsidies from the taxpayers' purse. Will my right hon. Friend tell us a little more about what is meant by continuity of management? Does that include the early appointment of a chairman with some real business experience?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

I would not want to make comments on individuals of the board, but I hope that we shall be able to retain a number of members of the board when the change occurs. The answer to the first two parts of my hon. Friend's question is "Yes, Sir".

Photo of Mr Clinton Davis Mr Clinton Davis , Hackney Central

Will the Minister indicate what proportion of shares he has in mind to allocate to employees or to enable employees to purchase? He completely omitted that in his statement. Is not this just another fig leaf—similar to the case of British Airways the other day—designed to hide another purely doctrinal spasm on behalf of the Conservative Government? Will he also indicate what sort of rewards will be available to the City slickers who will be employed in promoting the sale of these shares?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

The proportion of shares to be allotted to employees has not yet been decided. The doctrinal spasm came from the Labour Benches.

Mr. J. Enoch Powell:

What progress have the Government made towards solving the conundrum of inducing private persons and corporations to invest in an undertaking which is in the control of directors not responsible to shareholders other than the State?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

It is precisely that situation which we propose to alter by transfering the assets, contracts and liabilities to a Companies Act company.

Photo of Mr Robert Adley Mr Robert Adley , Christchurch and Lymington

Is my right hon. Friend aware that I have a regular meeting with the shop stewards of British Aerospace at Hurn? May I tell my right hon. Friend that one of the shop stewards told me a few weeks ago that what had happened since nationalisation—[Interruption.] The shop stewards at Hurn tend to speak one at a time, unlike Labour Members. One of them told me that all that had happened since nationalisation was that at Hurn they had replaced what he called the discipline of the boardroom with a vacuum. With the exception of a few politically motivated trade unionists and the inevitable noises from the Opposition, is my right hon. Friend aware that there will be widespread welcome for a move which will be seen as adding strength to British Aerospace and its ability to compete in world markets? Will my right hon. Friend ascertain from the Leader of the Opposition whether it is likely to be the policy of the Labour Party to seek to confiscate without compensation in future?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

Many who work in the industry will share the opinion that my hon. Friend has put forward.

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

Is the right hon. Gentleman aware that since the war under private ownership thousands of millions of pounds of public money have gone into the industry and that no civil or military aircraft in the world—for example, in France, Germany and America—would have been built without enormous sums of taxpayers' money? If he intends to continue that funding under the new system of ownership, to what extent can he call it a return to private enterprise?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

I did not call it a return to private enterprise. If I had to describe it, I should call it a participation between public and private enterprise. I repeat that it is greatly to the advantage of the public as taxpayers and to those who work in the industry that investment and production decisions are made without the intervention of politicians, provided that the national interest is protected. It is true that defence contracts will be a large part of the business of British Aerospace when it is converted to a company. That will remain for the Government of the day to decide.

Photo of Mr Stephen Ross Mr Stephen Ross , Isle of Wight

Is the right hon. Gentleman aware that my party welcomes in principle his decision, especially in respect of British Aerospace? However, we think that the Government should retain 51 per cent. of the holding and not around 50 per cent., to which he referred. I congratulate the right hon. Gentleman on his attitude towards British Shipbuilders, which I believe to be correct, much as I regret the inclusion of some efficient companies in British Shipbuilders that should never have been nationalised in the first instance.

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

I shall bear in mind the hon. Gentleman's comments.

Photo of Mr Robert Atkins Mr Robert Atkins , Preston North

Does my right hon. Friend recognise that many of my constituents who work for the military aircraft division of British Aerospace will welcome his decision? Despite what Opposition Members say, will he remember that over 2,000 of the shop floor workers at the Preston factory signed a petition opposed to nationalisation when the nationalisation measure was being pushed through the House by the right hon. Member for Chesterfield (Mr. Varley) and the Government of whom he was a part? How will the Government proceed in future with military aircraft projects and the selling of those aircraft to countries abroad where necessary and when required?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

I do not think that any change in decision-making about defence contracts or sales is implied in the statement.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East

Is the right hon. Gentleman aware that his statement has already been specially made for the benefit of the citizens of Bristol by his hon. Friend the Member for Bristol, North-West (Mr. Colvin) over the weekend? Will he explain why it is necessary to throw British Aerospace, which is now so successful, into a state of turmoil in pursuit of an abstract political doctrine which will not have the support of the unions in the industry?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

I shall not ask why it was necessary to nationalise in the first place, because the object of this exercise is to ask me questions. I do not accept that turmoil is involved. I believe that the pattern proposed by the Government will be to the benefit of all concerned.

Photo of Mr Christopher Murphy Mr Christopher Murphy , Welwyn and Hatfield

Does my right hon. Friend agree that his statement will create greater stability in the industry and will get rid of the uncertainty that has been the cause of much discontent in recent years among those on the shop floor? Will he confirm that the HS146 project, which is of especial importance in my constituency, will be the subject of commercial decisions made by the new company?

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

Is the right hon. Gentleman aware that, as his ideological claptrap increases and as the interests of the nation are put second, there is a growing opinion, especially in the ranks of the Labour movement, that when the next Labour Government take office we shall take back these national assets, in the interests of the British people, without paying enormous sums of compensation?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

The hon. Gentleman does not yet speak for his party.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

You wait and see, mate.

Photo of Mr Michael Grylls Mr Michael Grylls , Surrey North West

Does my right hon. Friend accept that in reality British Shipbuilders is not one company but a conglomeration of independent yards, or what were independent yards? Once compensation has been paid, which has taken far too long, will my right hon. Friend be prepared to negotiate in due course with anyone interested in buying the warship building yards, which would leave British Shipbuilders free to concentrate on merchant shipbuilding?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

We shall review the position from time to time. We have not discarded the idea of participation by the private sector in shipbuilding.

Photo of Mr James Johnson Mr James Johnson , Kingston upon Hull West

Is the right hon. Gentleman aware that 5,000 constituents represented by hon. Members in this House in Hull and on the north bank of the Humber who work at what was formerly the Hawker Siddeley set-up at Brough, both management and those on the shop floor, are completely satisfied with the existing state of affairs? The right hon. Gentleman says that he has consulted the unions, but has he consulted each of the two main unions at Brough, the AUEW and the General and Municipal Workers Union? If so, what did they tell him?

Photo of Mr Michael English Mr Michael English , Nottingham West

The right hon. Gentleman did not even know that they were there.

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

My hon. Friend the Minister of State consulted the CSEU, whose components include those who work in the industry.

Photo of Mr Ivan Lawrence Mr Ivan Lawrence , Burton

What effect is this welcome step for British Aerospace likely to have on the public sector borrowing requirement?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

It should have a beneficial effect.

Photo of Mr Roger Stott Mr Roger Stott , Westhoughton

If the right hon. Gentleman does not accept that his statement will cause turmoil within the industry, will he accept that it will cause unnecessary uncertainty within the industry? Is he aware that my constituents who work for British Aerospace at the Lostok factory in my constituency were in full support of the Labour Government's attempt to take the industry into public ownership? Will he guarantee them and the House that none of the shares that he is proposing to sell will go to foreign competitors?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

No placing of shares in the industry will be permitted to foreign competitors, but individual foreigners will be free to buy individual—[Interruption.] I repeat, there will be a complete safeguard against the ownership of a significant tranche of the industry by a foreign competitor.

Photo of Mr James Hill Mr James Hill , Southampton, Test

I congratulate my right hon. Friend on his statement on British Aerospace. In the circumstances, will firms in the shipbuilding warship section, such as Vosper Thornycroft at Southampton, be given the opportunity to participate in some such scheme in the not-too-distant future?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

We shall reconsider that option from time to time.

Photo of Dennis Skinner Dennis Skinner Member, Labour Party National Executive Committee

Does the right hon. Gentleman accept that his statement is a direct consequence of the tax cuts that we heard about a few weeks ago for the wealthy in our society, and a part of that same pay-off? Does he accept that a future Labour Government would be acting properly in taking back without compensation as about £5,000 million has now been invested by the taxpayer? Will he bear in mind that there will be those of us at Labour Party conferences and outside who will be arguing that case and urging trade union nominees on pension board committees not to invest any money in the shares that he is currently offering?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

Comments such as those of the hon. Gentleman and his hon. Friend the Member for Liverpool, Walton (Mr. Heffer) will be responsible for any uncertainty that there is in the industry. But I suspect that the public will realise that such monstrous behaviour as they both suggest to people who will have bought shares individually will not be contemplated by the Labour Party.

Photo of Mr John Wilkinson Mr John Wilkinson , Hillingdon Ruislip Northwood

Will my right hon. Friend accept from someone who has worked fairly recently both in the private enterprise aircraft manufacturing industry and briefly in British Aerospace itself that the work force of British Aerospace will be reassured that it is to remain an entity under its present management system and that it is to be a broadly diversified corporation of the kind directly comparable with successful companies in the United States?

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

Will the Secretary of State explain his answer to the question by my hon. Friend the Member for Westhoughton (Mr. Stott)? By what mechanism will it be impossible for foreign competitors to acquire shares?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

The key factor is the control of the resulting Companies Act company which, under the legislation that we propose, will be, for that purpose, firmly in the hands of the Government.

Photo of Mr Gordon Bagier Mr Gordon Bagier , Sunderland South

Does the right hon. Gentleman agree that there is a big difference in his approach towards the aerospace industry and shipbulding industry in his statement today? Will he say what is his criterion in deciding the different approaches? Is the reason that there is profitability in the aerospace industry, from which his friends will get money, but not in the shipbuilding industry? Is he laying down that criterion?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

Part of the shipbuilding industry is profitable. It is the sheer amount of uncertainty in the shipbuilding industry—which will be explained by my hon. Friend later this afternoon to those who do not already realise it—that is the difference between the two.

Photo of Mr Michael McNair-Wilson Mr Michael McNair-Wilson , Newbury

Will my right hon. Friend say whether his action over British Aerospace is an earnest of his intention towards Rolls-Royce (1971) Ltd.?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

Rolls-Royce is not, alas, making a profit at the moment. I am not sure that I am correct on the technical aspect. At the moment Rolls-Royce is not in an equivalent position to that of British Aerospace, although I hope that it will become so.

Photo of Mr Frank Hooley Mr Frank Hooley , Sheffield, Heeley

Will the Secretary of State clarify his earlier replies about foreign interests acquiring shares in British Aerospace? Will the proposed legislation preclude foreign financial and commercial interests from obtaining a substantial stake in the new set-up in British Aerospace?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

As investors, individual foreign shareholders will certainly be able to buy shares—but not as controllers and decision-makers.

Photo of Mr Michael Colvin Mr Michael Colvin , Bristol North West

Would my right hon. Friend please send to the hon. Member for Bristol, North-East (Mr. Palmer) a copy of the Conservative Party election manifesto, which quite clearly he has not read and which stated that the Conservative Government would return British Aerospace to private ownership at the earliest opportunity? Would he confirm that the statement I made at the weekend—to which the hon. Gentleman referred and in which I expressed a hope that the so-called BP solution for returning British Aerospace to private ownership would be used, as with British Airways—was made not because I was privy to any special information but merely because I expected the fulfilment of yet another general election pledge, for which the Government had an overwhelming mandate from the British people?

Photo of Mr Alex Lyon Mr Alex Lyon , City of York

If the public interest in British Aerospace is to be protected, does not that mean that the private shareholding will also be protected? Does not that in turn mean that we shall create a new kind of shareholding in which the shareholder takes the profit but the taxpayer bears the loss, if there is one?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

No. The prospect of profit and the risk of loss will affect all those who hold shares in the proposed company.

Photo of Mr Bob Cryer Mr Bob Cryer , Keighley

Will the Secretary of State explain how our position as a member of the EEC affects the shareholding offer? Is it true that under the Treaty of Rome there can be no limits placed on people who buy shares—so that there is a possibility that British Aerospace may be sold off to rival concerns?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

No one contemplates a limit on the private ownership of shares. What must be guarded is the decision-making. The proposed legislation will ensure that no foreign decision-makers affect the control of the company.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

Is not it obvious that the hon. Member for Bolsover (Mr. Skinner) and his cohorts on the Left are terrified of British workers buying shares in British industry?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

Their attitude is a little obsolete.

Photo of Mr Ioan Evans Mr Ioan Evans , Aberdare

Does the right hon. Gentleman agree that British workers share completely in the ownership of British Aerospace and the shipbuilding industry at present? Will he clarify his position on foreign investment? Has he thought through the implications for defence? As £5,000 million of public expenditure has been poured into these industries, does he say now that the profits will go to our foreign competitors?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

Public ownership, in the sense of nationalisation, is not at all the same as public ownership in the sense of widespread share ownership.

Photo of Mr Peter Hordern Mr Peter Hordern , Horsham and Crawley

Does my right hon. Friend agree that, in offering shares in British Aerospace to investors abroad, the Government will be following the interesting and excellent example set by the previous Government in offering a specific number of shares in British Petroleum to American investors?

Photo of Mr Michael English Mr Michael English , Nottingham West

We have heard several of these statements about various industries. [HON. MEMBERS: "Only two."] Hon. Gentlemen forget the Budget. They obviously were not there.

The right hon. Gentleman will surely agree that all the statements omitted one factor. For what purpose will the capital receipts be used? The right hon. Gentleman is far too moral to wish to say to company directors that it is a criminal offence to apply capital receipts to current expenditure and wish to belong to a Government who might conceivably be doing it.

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

My right hon. and learned Friend the Chancellor explained that as a once-only contribution to reducing the public sector borrowing requirement some disposals would be part of our strategy.

Photo of Mr Andrew Bennett Mr Andrew Bennett , Stockport North

Will the Minister visit Woodford and Chadderton, in Greater Manchester, and hear the opposition of the work force there to his proposals? Does he agree that it is risky to encourage someone to invest both their livelihood and their savings in the same enterprise?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

I agree with the hon. Gentleman's second proposition. Nobody will force workers to invest their money in the shares.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

Further to the question about the transfer of shares to foreign investors, perhaps the right hon. Gentleman will be able to put in a stipulation that prevents control going away. That may be possible. What is there to stop directors being appointed—as happens by large and powerful groups of shareholders—and therefore decision-making in the new British Aerospace being powerfully influenced by foreign companies?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

Control can be prevented by use of Part II of the Industry Act 1975, by special provision in the company's articles of association and by the use of individual residual Government shareholdings.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

The right hon. Gentleman was not listening. He answered a splendid question—but it was not my question. My question is this: what is to stop a director being appointed by a group of foreign shareholders? Leave aside the question of control. Will that affect the way in which the company is being conducted in future?

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East

The Government intend to retain a large shareholding. By both that and by the legislation—and by some of the legislation left to us by the last Government—there is no danger of foreign control.