National Enterprise Board

Orders of the Day — Supply – in the House of Commons at 7:15 pm on 26th November 1979.

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Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford 7:15 pm, 26th November 1979

I beg to move, That this House condemns the action of Her Majesty's Government on Rolls-Royce which forced the unanimous resignation of the National Enterprise Board; and deplores the damage done to Britain's industrial reconstruction by the Government's policy.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

I have selected the amendment in the name of the Prime Minister.

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

The motion has two aspects to it. The first is the unique occasion of the entire board of a nationalised corporation resigning, perhaps not at the instance of the Secretary of State but in direct opposition to his views. The second is not only the damage that this does but the damage to industrial reconstruction and to the prospects that flow from it.

I deal first with the resignation itself. As I say, it is unique. One has heard of the case where a chairman and a Secretary of State have had a difference of opinion. This can happen very often, and no blame need be attached to either if the chairman resigns. No blame need be attached to either if out of loyalty, friendship or conviction one or two of the chairman's colleagues decide to resign with him. But when a whole board resigns, it is at least open to question whether the handling by the Secretary of State is all that one would wish. If there is one thing that a Minister should be capable of dealing with, it is the management of men. Why else is he a Minister?

On this occasion the entire board found itself in total disagreement with the Secretary of State. What is interesting about it is that the Secretary of State cannot quote it as a very good illustration of the Government's philosophy. We have had many lectures from the right hon. Gentleman on the Government's philosophy towards industry and towards the nationalised industries in particular.

Only recently, on 20 November, the right hon. Gentleman gave us another little lecture. It was on the occasion of the Second Reading of the British Aerospace Bill. What he said then was in amplification of what he had said on many pre- vious occasions. He said that the Conservative Government would not interfere at all in management and that their duty was merely to create an economic climate in which industry could flourish.

The first half of this Supply day shed some light on the economic climate that this Government have been creating, but to that I intend to return a little later. However, on 20 November the right hon. Gentleman was discussing the Government's relationship with British Aerospace, having been questioned about defence and other contracts between the Government and the proposed new company. He said: We intend to maintain these quite separate from the Government's relation with the company as shareholders."—[Official Report, 20 November 1979; Vol. 974, c. 228]. Here we have a new creation by the Government—about fifty-fifty Government and private. That was the basis of the British Aerospace Bill. But the argument was that the Government should maintain a totally separate basis and should not interfere in any way. We were dealing with a very large industry. British Aerospace is an enormous industry. There are enormous defence contracts upon which the whole aerospace industry depends, as well as other Government contracts. It was proposed that we should take this step because it was the Government's philosophy to let the industry get on with the job.

On 21 November, the following day, in a statement on Rolls-Royce, the Secretary of State informed the House: Rolls-Royce is a company … with which, inescapably, the Government have exceptionally close connections and where important decisions lie directly with the Government."—[Official Report, 21 November 1979; Vol. 974, c. 388.] Was that not true of British Aerospace the day before? What happened in those 24 hours? We are told that the shareholdings leave the National Enterprise Board and go direct to the Secretary of State.

I said that on 20 November the Secretary of State had given us one example of his philosophy. We had another example on the following day, but a conflicting one. On 20 November he said something that I found extremely interesting in the light of events only 24 hours later. He said that a business—the right hon. Gentleman always talks about business when he means industry, but I shall let that pass—would not function best when depending on Ministers and civil servants however well intentioned they may be."—[Official Report, 20 November 1979; Vol. 974, c. 216.] I understand that. That is another example of the right hon. Gentleman's philosophy. The right hon. Gentleman says "Do not, whatever you do, let an important enterprise get into the hands of Ministers and civil servants, 'however well intentioned they may be'." It seems that on 21 November he goes back on the philosophy of 20 November. Perhaps the right hon. Gentleman will be in a position to give us some further information when he catches your eye, Mr. Deputy Speaker, in a short while.

On two occasions during the proceedings in Committee on the Industry Bill my hon. Friend the Member for Thurrock (Dr. McDonald) has asked whether it is true that the Midland Bank has been approached to act as a consultant for Rolls-Royce. To that question we have had no answer. If that is true, it indicates that there is a third basis rather than the two apparent conflicting philosophies. If it is not true, the policy of 20 November has been taken over by that of 21 November.

That is the right hon. Gentleman as a philosopher, but let us take him in another role that every Minister must have from time to time, namely, a peacemaker. As he said, it took him no more than a short while to realise that there was conflict between Rolls-Royce and the NEB. He said in his July statement that the National Enterprise Board would have responsibility for looking after the interests of national companies. He said that clearly. He added that the NEB would have his full support.

That was the right hon. Gentleman being clear and decisive. He was telling us exactly where we stood. However, in his statement on 21 November he told us that there was friction between Rolls-Royce and the NEB. He said that the friction is inherent in the relationship"—[Official Report, 21 November 1979; Vol. 974, c. 388.] —that is, between the NEB and Rolls-Royce. It may be that he thinks that that friction is inherent in the relationship between all holding companies and subsidiary companies. Is that true? In most instances holding companies and subsidiary companies work together.

It is true that there was a written memorandum of agreement between Rolls-Royce and the NEB. I grant that that is unusual. It does not often happen between a holding company and a subsidiary company. However, we are dealing with two important companies, each of which has a point of view. The written agreement, the peace treaty, that the right hon. Gentleman had backed—he had given his full support to the holding company in July—was well known to him. He was well aware of its contents. Therefore, he was well aware that the friction was exacerbated by certain criticisms that the chairman and board of the NEB had of the management of Rolls-Royce.

The criticisms—I shall not go into them beyond saying that they were important in the running of Rolls-Royce and in the company's direction—had the full endorsement of the right hon. Gentleman. Indeed, he agreed with me only the other day that that was so. He had seen them before the half-yearly financial statement of the NEB appeared, on which occasion the criticisms were made public. He had seen them before the meeting took place.

Is it not true that the National Enterprise Board had brought to light criticisms with which the right hon. Gentleman agreed? We do not know about that as our questions have not been answered. They may or may not be criticisms which the Midland Bank will be called upon to consider and act upon as a consultant. As I have said, we do not know because our questions have not been answered. However, the criticisms were endorsed by the right hon. Gentleman, so the NEB was proved right.

If that is so, what made the right hon. Gentleman move from giving the National Enterprise Board his full support? He moved from that position to one so antagonistic towards the board that the whole board, even the non-executive directors, said "Thank you very much, we have had enough and we are resigning." Were the right hon. Gentleman's statements about non-interference not to be taken literally? Of course, he has on so many occasions expressed his philosophies in the House. He did so as recently as the day before the statement in which he announced the resignation of the entire board. Were his statements about non-interference uttered in what might be described as Pickwickian language? I suggest that that must be so.

The old board resigned in toto and a partial board was appointed. The right hon. Gentleman says that he left vacancies. The vacancies were not being filled but the new half-board was appointed before he had accepted the full resignations that he knew would take place. He knew when he accepted the names of the new board that the entire old board would resign.

The right hon. Gentleman must answer our questions. Did he inform the new board members before he approached them to become members that the whole of the old board would resign, every one of them, including the non-executive directors? If he did so inform them, and I believe that he must have done, they knew for certain the penalty for disagreeing with the right hon. Gentleman, even if the whole board was unanimous. They knew that they must never question his view. They knew that they had to accept from the start their subordinate position to the right hon. Gentleman, which in many instances would mean a position subordinate to officials, however "well intentioned they may be". That is why the board will have no power and no independence.

When I deal further with the issue of independence, I come again to the agreement that was made between Rolls-Royce and the NEB. I refer especially to the part of it which confirms that, whenever the chairman of Rolls-Royce seeks a meeting with the Secretary of State, the chairman of the National Enterprise Board has a right to be present. That is obvious if they are discussing Rolls-Royce matters. That is why I dismiss from my mind the answer given me by the right hon. Gentleman. I probed him twice, but he never properly replied. He merely told me that he had had a private meeting with the chairman of Rolls-Royce. He said that that was to discuss chairmanship. I believe that the chairman of Rolls-Royce had intimated to the permanent secretary —I am not certain whether he should have told the permanent secretary without telling the chairman of the NEB—that that was what the private meeting was about.

What the Secretary of State did not tell me was how many meetings he had alone without the chairman of the National Enterprise Board having been invited but with civil servants present on a minuted basis. It is important that we should know that information. His words were: I said that I had had only one meeting privately with the chairman of Rolls-Royce. Of course, one meets both the chairman of the Board and the chairman of Rolls-Royce on occasions other than private meetings."—[Official Report, 21 November 1979; Vol. 974, c. 392.] That is not the answer to the question I put. Perhaps the right hon. Gentleman will now give me the answer.

If the National Enterprise Board is to have independence, it must have not only a board that is independent but also a staff that is conscious that it is independent. Its morale depends entirely on that. If the staff know that any views expressed, though approved by the board, can simply be vetoed by the Secretary of State and, if necessary, the whole board asked to resign, there will not be very good morale in the NEB.

It is also the essence of independence, which protects the staff and the public, to have a strong board. A number of names, some of them distinguished, have been given as members of the new board. How can such a board ever develop the strength of the old board without trade union members? It has not got trade union members. One reason is that trade unionists regard with distaste the fact that Rolls-Royce has been taken away from the National Enterprise Board. I do not know whether that alone would have made them refuse membership. The basic reason was that the board was never consulted. There were no meetings with the Secretary of State. The board was never allowed to develop its views. The right hon. Gentleman merely said "I know you have offered your resignation if I decide to take Rolls-Royce away. Very well, I accept your resignation."

The tragedy is that management and trade union members of the National Enterprise Board during its two years of existence have worked closely together. They have worked together well as a team in working sector groups and in NEDO. What will be the effect on that? I must confess to feeling disturbed about the possibility of considerable damage being done to that partnership. The damage goes much wider. It will affect the whole of our industrial reconstruction. How is the new board, whether a half board or, at some later stage, a whole board and staff, to do its job, even one as emasculated as that given to it? Perhaps this is where the Midland Bank comes in—

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

As the right hon. Gentleman is talking about the NEB in general terms, will he comment on the action of his hon. Friend the Member for Nuneaton (Mr. Huckfield)—I was not able to warn him that I would be raising this point—who marched in Birmingham with the Communist shop steward, Mr. Robinson, in direct encouragement of a strike that could be crucial to British Leyland? Does the right hon. Gentleman approve that sort of action by one of his Front Bench spokesmen?

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

My hon. Friend will have to answer for himself. No doubt he will. I was dealing with the National Enterprise Board. My marching days—

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

The right hon. Gentleman must be careful at this moment. I have to say that. His own record during the past day or two has not been totally lily-white. I am thinking of Port Talbot.

The serious aspect of this matter is the damage to industrial reconstruction. I asked how the board and staff were to do the job in the circumstances. It will be interesting if the Secretary of State can tell the House whether the board and staff knew that any independent decision to which they may come is subject either to the Secretary of State's ultimatum and diktat or perhaps to the diktat of the Midland Bank, which would be even worse.

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

Will my right hon. Friend ask the Secretary of State whether he has con- sidered whether he is entitled to take these actions in regard to the NEB in advance of the passing of the Industry Bill?

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

I dare say that the Secretary of State can answer for himself. I shall try to help him out. I imagine that he is entitled to take this action, strictly in law, because he can do what he likes with the National Enterprise Board at any time. That is exactly the trouble in which we find ourselves. I am sorry to be brief in reply to my hon. Friend. I am conscious that this is a short debate. Many of my hon. Friends and no doubt hon. Members on the Government Benches are anxious to speak.

Another matter to which I wish to refer is the uncertainty. We have several times asked the Secretary of State what is to happen at British Leyland. It is not only that hon. Members in this House have a right to know. It is also a fact that the whole motor car industry and the country have a right to know.

Photo of Mr Nicholas Budgen Mr Nicholas Budgen , Wolverhampton South West

Will the right hon. Gentleman comment on the proposals by Mr. Robinson that any restructuring in British Leyland should be stopped by sit-ins?

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

I have not seen such a proposal. This is not the place to comment on that. This is the place to comment on the National Enterprise Board, as I am trying to do.

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

I will not give way. There is no time and I cannot answer frivolities. What the country needs is a rescue operation—

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

That is right. It could get a rescue operation through a new Government. It is possible, however, that, for a month or two, we are landed with the old one. It would be pleasant if we had the same powers over this Government as the Secretary of State took over the National Enterprise Board.

We need industrial reconstruction. We need it badly. Time is going fast. We have seen the regional functions cut away. We have seen £250 million, £50 million in Scotland, cut off regional aid. The functions in the North and the North-West are the only ones left regionally to the National Enterprise Board and a staff that are likely to be demoralised by what has happened.

The general role of encouraging public enterprise has been taken away from the National Enterprise Board. Much of its role in acting as a catalyst in private enterprise has also gone. As a result of action in the last few days, the adult education role which the right hon. Gentleman thought that the Board might continue to operate with new companies, because the private sector was unable or unwilling to help, is under pressure from the right hon. Gentleman. This has happened despite the limitation for which the hon. Member for Lincoln (Mr. Carlisle) requested when he called on the Secretary of State to return companies other than Rolls-Royce to the private sector as soon as they can face it."—[Official Report, 21 November 1979; Vol. 974, c. 398.] This has taken place on top of an economic climate that the right hon. Gentleman was going to substitute for good industrial reorganisation. It is an economic climate that has brought a minimum lending rate of 17 per cent. and a cut in public spending on roads of £200 million. How does one get industry moving without roads? The steel industry, shipbuilding and the textile industry have been decimated. Only one additional brick is being added to the wall of intransigence and dogma that we see tonight. I appeal to my right hon. and hon. Friends to support the motion in the Lobby.

Photo of Sir Keith Joseph Sir Keith Joseph , Leeds North East 7:40 pm, 26th November 1979

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: 'welcomes the Government's decision on Rolls-Royce, expresses its appreciation of the services of the members of the National Enterprise Board who have recently resigned, welcomes the appointment of a strong new board to carry forward the work of the National Enterprise Board and the intention to make further appointments, and endorses the Government's determination to strengthen the role of private capital in industrial reconstruction.'. The right hon. Member for Deptford (Mr. Silkin) devoted most of his speech to the resignation of the entire board of the NEB. He warned us that he would spend an equal amount of time on the damage done by the resignation of the board to the reconstruction of British industry. In the event, he did not spend that time on the second subject. I do not think that he was able to pursue it because the House would have laughed at the claim that the regeneration of British industry depended on a single board, no matter how distinguished.

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

The Secretary of State must read Hansard tomorrow. He will find that he is quite incorrect. At no time did I say that I would give equal time to the two matters. I said that this was to be a very short debate. I was interrupted by Conservative Members on two occasions.

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

The right hon. Gentleman said that there were two headings to his speech. He developed one and neglected the other, presumably because it was too weak to develop.

My right hon. and hon. Friends and I have no criticism of the National Enterprise Board, which has, much to our regret, resigned. We have respect for the members of the board as individuals, and the disagreement was no reflection upon them either as individuals or as a board. They were given a very difficult role to fulfil when, in addition to all their other tasks, the last Government required them to conduct monitoring of Rolls-Royce.

I and my right hon. and hon. Friends on coming into office inherited what can only be described as a state of friction between two distinguished boards. I made inquiries of the NEB within a month of coming into office about the prospects for Rolls-Royce.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Industry)

Does the Secretary of State really dismiss what is in effect the constructive dismissal of the chairman of the TUC economic committee so lightly?

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

I do not accept that there was any constructive dismissal. I shall reply to the speech of the right hon. Member for Deptford in sequence, and I shall come to that point.

I began on the assumption that there was a simple friction of personalities causing a difference of view between the boards of Rolls-Royce and the NEB. As the months passed I came more and more to the conclusion that this issue was not one of a simple conflict of personalities but an incompatibility of the roles of the two boards, given the unique relationship between Rolls-Royce and the Government. I explained that to the House in my statement and in answer to questions on it last week.

When I told the NEB board of the Government's decision, I was faced with the categoric reply that if the decision were adhered to the board as a whole would resign. I make no criticism of the board for taking that decision. The members of the board took it honourably and, as they saw it, in the interests of the country. But it was they who faced the Government with the categoric decision after the Government, in seeking to resolve the friction which had existed since long before we came to office, decided to carry out one of the options open to them.

I realised that the result of adhering to that decision might be to lose all the members of the National Enterprise Board. Let us consider, however, the choice with which the Government were faced. On the one hand was the decision of the Rolls-Royce board to resign if it were left under the supervision of the NEB. On the other hand was the categoric assurance by the NEB that if a decision to separate the two boards were made its members would all resign. I should have been criticised whichever choice I had made.

If I, by my decision, had lost the entire board of Rolls-Royce, that would have been one lot of criticism. We came to the other decision, and the right hon. Member for Deptford has criticised me. He has done so because I did not manage to succeed in the almost impossible task, which had baffled my Labour predecessor, of acting as peacemaker between these two boards.

Photo of Mr Phillip Whitehead Mr Phillip Whitehead , Derby North

Does the Secretary of State not accept that the antipathy to the NEB within Rolls-Royce came largely from Sir Kenneth Keith? Does he not agree that since Sir Kenneth had intimated that he was about to retire, all the Secretary of State had to do was to wait for the retirement and, indeed, to expedite it?

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

Sir Kenneth Keith had presided over a remarkable success story. He had presided over a team that had achieved a remarkable success in putting Rolls-Royce back in joint lead in the markets of the world for aero engines. It is true that I knew of his intention to resign. However, I also knew that among that small group of people capable of taking on the chairmanship of Rolls-Royce and qualified to succeed Sir Kenneth there was widespread—I do not say total and universal—reluctance to take the chairmanship if Rolls-Royce were left under the supervision of the NEB.

Several Hon. Members:

rose

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

I will not give way. I an anxious to make a brief speech.

The right hon. Member for Deptford went on to tease me with a couple of inconsistencies. He said that because I believed and had said that businesses would flourish best if they were answerable not to Ministers and civil servants but to consumers and investors, therefore I was being inconsistent in saying that when I had the power—which will be when the Industry Bill becomes law—I would transfer the shares to the holder of my office. However, there is no inconsistency because it is my earnest hope that sooner rather than later Rolls-Royce will also go into the private sector. This is merely a transitional stage.

The right hon. Gentleman then went on to tease me about moving Rolls-Royce from the hands of the NEB into the hands of Ministers and civil servants. However, the point of the move is that Rolls-Royce at the moment is in the hands not of one of those layers but of both. It makes sense that Rolls-Royce, in its unique position, should be relieved of the double supervision.

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

In examining the choice before him, did the Secretary of State consider examining the causes of the friction between the chairman of Rolls-Royce and the chairman of the NEB?

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

In so far as it was proper for a Minister to know what had happened before he took office, I knew that the friction existed before the change of Government. It was not proper for me to inquire what had happened before. I had concluded from my analysis of what I knew from my time in office that the problem would not be resolved simply by a change of personalities.

The right hon. Member for Deptford asked me two or three specific questions. The Department has not had any contact with the Midland Bank about possible employment of consultants in relation to Rolls-Royce. The Department is continually in discussion with banks, businesses and professional houses about the part-time or full-time secondment of individuals from those establishments. For all I know—I do not keep in touch with it—there may be a discussion with the Midland Bank about the secondment of an individual. If so, it has nothing to do with the monitoring on anything else of Rolls-Royce.

I was asked whether I had given the House full information about any private meetings that I might have had with Sir Kenneth Keith in breach of—

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

—about any meetings that I might have had with Sir Kenneth Keith in breach of the memorandum of understanding. I have here to correct an error. I told the House under questioning last week that I had had one such meeting with Sir Kenneth Keith. I was wrong. I had two such meetings with Sir Kenneth Keith. I had a private lunch with Sir Kenneth Keith in addition to that. However, that had no relationship whatever to the NEB. I had a private lunch at which I was told something about the business. It was not relevant in any way to the subject that we are discussing, whereas one of the two meetings that I had, which was attended for part of the time by one civil servant, did have as its theme the position of Sir Kenneth Keith as chairman of Rolls-Royce and his determination, as he previously warned my permanent secretary, to leave that office at about the end of this year.

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

The real point of the question is the memorandum of agreement. Was the chairman of the NEB invited?

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

No, he was not. These were two specific meetings about the proposed resignation of Sir Kenneth Keith. He was not invited. I was, perhaps—I am not sure—in breach of the memorandum of understanding. I may have been. But it had nothing to do with the relationship between Rolls-Royce and the NEB; it was about the personal decision of Sir Kenneth Keith.

I was asked whether the members of the new NEB board were informed that they were being asked to fill vacancies that would be left if the then existing NEB board members all resigned. The answer is "Yes". They were informed. The approach to them was made on the assumption that the outcome of the present discussions would be followed by the realisation of the threatened resignation of the entire board.

I must assert that the distinction of the names of the new members of the NEB is sufficient assurance of their integrity and independence. However, it must also be recognised by the House that these individuals who were invited to become directors of the NEB were all well aware of the philosophy of the Government towards the board. They had made themselves aware of the general theme that was expressed by my right hon. and hon. Friends and myself in the House.

My right hon. Friends and I very much regret that, for reasons which we understand, the trade union members have not been replaced. I have not even approached individual representatives of the trade unions to ask them to accept membership at the moment, as I am advised that that would not be productive. However, I hope that the time will come when the trade unions will recognise that the NEB still has a role to play which it regards as important and which is in the national interest as well as the interests of the trade unions and their members, so that individuals from the trade unions will take the vacant seats left for them.

I was asked by the right hon. Member for Deptford about the implications of the Government's decision for British Leyland. I can only repeat that the British Leyland board has made a case to me to be treated in the same way as Rolls-Royce. I acknowledge that there are some factors that are similar to those in the Rolls-Royce situation, but I do not regard British Leyland as on all fours with Rolls-Royce. I shall therefore listen carefully to any case that the British Leyland board makes to me. It is a very distinguished board. However, I do not in any way commit myself to giving it the same answer as was given to Rolls-Royce. I shall listen to its case.

I want to emphasise that there is no difference—nor has there been any difference—between the NEB, Rolls-Royce, the Department of Industry and myself on the imperatives facing Rolls-Royce, which has had a triumphant success in getting a huge order book. That huge order book in itself involves extra cost in carrying the necessary stocks and investment for carrying out the order book. While the orders have been secured, the exchange rate has gone against Rolls-Royce. The differential inflation rates have also gone against Rolls-Royce. There is a clear need—Rolls-Royce, the NEB and the Government recognise it, and have recognised it for some time—for Rolls-Royce to improve its financial and productivity performance. Sir Kenneth Keith has acknowledged that in his speeches for some time.

The Government very much regret that the unavoidable choice which had to be made by the Government in the situation—and which was inherited by the Government but not created by them in any way—led to the disappearance of a distinguished board of people. We regret that it has not been practicable at this stage to fill all the seats of the NEB, as we would wish. The vacant seats for trade union representatives remain. At the appropriate stage I shall seek to secure that they are filled.

I must refer to the point from which the right hon. Gentleman flinched. We must neither exaggerate nor underestimate the role of the NEB. In its early years the board was dogged by the excessive pretensions imposed upon it at the time of its birth. The House will remember that it was born as the central plank in the great programme envisaged or dreamt up by the previous Government under the pretentious title "The Regeneration of British Industry".

A single board, however distinguished, cannot bring about the regeneration of British industry, especially when the Labour Government, which set up the NEB, proceeded to imprison British industry in the most hostile climate that had been known for decades. Therefore, I emphasise that the NEB had a useful and important role to play, but we do the country, the board and its valuable staff no service at all by exaggerating that role. It will be played by the new board, although I very much regret the absence of trade union members, as well as it was by the last board. As the amendment shows, the Government wish to pay tribute to the service of the former board. We believe that the board will be strengthened. We hope that it will be strengthened in due course as a result of the return of trade union members. We believe that the more that private enterprise plays its full part in investment and expansion of industry, the better. We welcome the new board because it shares that philosophy with the Government. I hope that my right hon. and hon. Friends will reject the motion and vote for the amendment.

Photo of Mr Thomas Urwin Mr Thomas Urwin , Houghton-le-Spring 7:58 pm, 26th November 1979

First, I join my right hon. Friend the Member for Deptford (Mr. Silkin) in condemning the situation that led to the mass resignation of the whole of the NEB board, including the chairman, Sir Leslie Murphy. At the same time I point out to the Government that the board was composed of men of the highest integrity, drawn from industry—industrialists themselves—and prominent leading trade unionists. They achieved for themselves the unique distinction of having worked tremendously hard to make a success of what was in every respect a difficult role to fulfil. I only hope that the new board, when it is completed, will achieve, in turn, at least an equal reputation.

I remind the Secretary of State for Industry of his statement last week that certain places on the board had been left vacant and that he was writing that day to the TUC. What kind of response did he get from the TUC? Presumably the letter was based on an invitation to the TUC to provide names of people who might become members of the board.

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

The letter did not contain an invitation. It contained a lengthy explanation of what had happened.

Photo of Mr Thomas Urwin Mr Thomas Urwin , Houghton-le-Spring

I am grateful to the Minister for that correction. I should have thought that if it was not done on that date it should have been suggested to the TUC by now that it should consider making nominations to fill those vacancies.

I wish to draw a veil over recent events and to some extent to attempt to broaden the debate. The actions of the Government in the last few weeks over the National Enterprise Board, Rolls-Royce and the denationalisation of certain public enterprises have created a good deal of anxiety in the minds of many people in the industrial world—not least among those experiencing difficulty in finding employment. There are youngsters looking for their first jobs as well as many steel men who have been regularly displaced from industry. Some of the questions that will be posed on that subject in the debate need answers.

I recall that one of the important roles of the National Enterprise Board was to supplement investment in industry where the private sector was failing, in many cases where risk capital was not being invested and was not likely to be invested. The Government amendment to the Opposition motion states, among other things, that the House endorses the Government's determination to strengthen the role of private capital in industrial reconstruction". Those words might sound optimistic, but, when we have just learnt that industrial capital investment declined by 2·5 per cent. in the last six months in comparison with the previous six months, we are entitled to be pessimistic about the comments in that amendment and about reliance on private investment. The present position may be due to a downturn or a cyclical trend, but it carries with it the inevitability of increasing unemployment. It creates an opportunity for us to fill the gap in industrial development by the simple expedient of allocating more capital resources, rather than less, to the NEB.

The National Enterprise Board is one of the sacrificial lambs to the Government's policy of massive cuts in public expenditure, many of which are wholly unsocial and a further manifestation of a high degree of political dogma. One hopes that the NEB will not be left simply to deal with emergency cases—the hospitalisation of lame ducks, and so on—that sufficient growth capital will be made available to small firms, which are the seed corn of industry in many areas, and that there will be increasing investment in new technology, especially in the exciting and new development of microelectronics.

Japan and the United States are rapidly developing a monopoly in these matters. The United Kingdom will suffer an escalation in job losses as a result of the use of these new technologies, while not having the opportunity to participate fully in the industrial revolution which will improve the living standards of millions of people not only in this country but in other parts of the world. That is the logical outcome of greater investment in the microchip industry.

This is not the time to extend the debate to cover the social consequences of this industrial revolution in microelectronics, but today I received two letters from highly responsible groups of people in different parts of the country, pointing out the importance of planning ahead against the development of this industry, the threat to jobs, the use of leisure, and ensuring in general terms that no one is worse off as a result.

I feel that we are entitled to speculate about the future role of the National Enterprise Board in the light of Government policy. I am prompted to ask the Minister, when he winds up the debate, to say whether the Government are as fully committed as their immediate predecessors were to the regional policy aspects of the work of the NEB. Those Labour Members who were then in the Government, especially those hon. Members representing the development areas, will recall how we greeted enthusiastically the proposal to set up the National Enterprise Board and how we cried out for badly needed investment in industry. We welcomed the innovatory role of the NEB and looked forward with considerable anticipation to the spin-off result that we expected from the work of the NEB.

We had then, and still have, the Northern regional board and the North-Western regional board. I should like to know whether the Secretary of State and his colleagues are genuinely committed to a regional policy. Will the regional boards continue to operate in the future as they have done over the past few years?

I listened to the dispassionate approach of the Secretary of State last week when he answered questions on the Rolls-Royce issue. I could not gather any degree of enthusiasm about the Government's policy towards the regions. If the Secretary of State is only mildly enthusiastic about regional policy, surely he will consider—it is not too late—implementing the commitment by the outgoing Labour Government to set up a Northern Development Agency, which could work as a complement to the National Enterprise Board and make its own significant contribution.

It is not too late for the Secretary of State and his colleagues to undergo a transformation or conversion, as did St. Paul on the road to Damascus. When the Minister winds up the debate, I hope that he will give us some hope about the future role of the National Enterprise Board in relation to the northern regions.

Photo of Sir Peter Emery Sir Peter Emery , Honiton 8:08 pm, 26th November 1979

I found the opening speech from the Opposition unusually ineffective. The right hon. Member for Deptford (Mr. Silkin) added nothing new to what he said during Question Time last week when my right hon. Friend the Secretary of State made a statement. He put the matter much more concisely during Question Time than in his speech today.

I am sorry that it has been proved necessary for the members of the National Enterprise Board to resign. I believe that it was right and proper that my right hon. Friend should state clearly and simply what caused the resignation, as he saw it, but, even more important, that he should pay particular tribute to the members of that board for their considerable service to the country in the past.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

Will the hon. Member bear in mind that this House has not yet had an explanation of what was wrong? All we have had is a fictitious description. When we are making comments about the commendable work of the NEB, this House had better be sincere about it and insist that we should have more information.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

I respect the hon. Gentleman, as I know he respects me, across the Floor of the House, but I think that it would be better if he were not to make his speech by way of an intervention in mine.

I wish to turn now to one, and only one, aspect that arises because of the resignation, and that is obviously tied up in the industrial reconstruction mentioned in my right hon. Friend's amendment. The political control of industries, either nationalised or with large public sector shareholdings, has been for many years and still is today one of the more complex problems still requiring a solution from politicians. Indeed, the very nature of the motion and the amendment on the Order Paper this evening, and now under discussion, is active proof of the truth of my hypothesis.

What is strange is that hon. Members on both sides of the House, while differing so much in philosophy and entirely unable to agree on the extension or otherwise of nationalisation, are likely to be in complete agreement about the ends desired of nationalised industries. By this I mean that when institutions or industries are in the ownership of the public, the management of those industries and Ministers—whether Tory or Socialist—responsible for those industries wish to see them functioning as efficiently as possible and with the greatest benefit possible for the British people—who, after all, are the taxpayers, and in this instance the shareholders.

What is quite evident is that neither side of the House has evolved or developed a method of management or of managerial control that is satisfactory either to the industries themselves or to our supporters on either side of the House. After all, it was the Socialists who appointed Sir Michael Edwardes, yet many Opposition Members are today baying at his heels over the strong action for which I wish the House would give him support in the reorganisation of British Leyland.

Although they were appointed by the Socialists, it must be admitted that there are several highly successful entrepreneurial capitalists among those who have just resigned from the NEB. If any of my colleagues doubt me, they have only to look at the record of Sir Jack Wellings, who has brought a marvellous breath of fresh air to those nationalised bodies to which he has generously given much time since he joined the Coal Board in 1973. If we could get away from political claptrap, the debate could be of real interest and real use in finding a solution to the problem of the management of public enterprises and nationalised industries.

Before I set out to give the House one thought that I have on this matter, Mr. Deputy Speaker, I wish to ask the Minister who is to reply to the debate several questions that I hope will establish the background to the thinking that I am trying to put to the House.

As Rolls-Royce has been taken away from the NEB, how is the supervision of that company to be carried on by Ministers? It is all very well to suggest that certain guidelines will be set by the Secretary of State and that the fulfilment of these will be the basis of the judgment of the success or failure of the company. But life is not as simple as that, and the civil servants within the Ministers' departmental control cannot and will not leave the matter in such an amorphous position. These civil servants have to protect their Minister. They will protect him, just as they protected Ministers in the past, and just as they protected me when I was lucky enough to serve in that Department.

The guidelines that are being carried forward will need to be looked at, and the advice of these civil servants will be sought by the management of Rolls-Royce on investment decisions, on closure decisions, and even—although it may be denied—on decisions concerning levels of remuneration. The Department of Industry will have to react to these inquiries. If anyone is in doubt about this, let me refer to a note circulated by the director of public affairs of Rolls-Royce Ltd, only today, in which he says, in paragraph 1, that All major policy decisions have always been taken by the Government, which has never ceased to monitor the company's performance closely through both the Department of Industry and the Ministry of Defence. If anyone doubts what I am saying, let him consider that statement by Rolls-Royce.

How many civil servants does the Minister envisage will now be employed in working and monitoring and consulting on the Rolls-Royce account? By way of contrast, I should like to know how many people were employed by the NEB to do the same task.

Why does the Minister believe that the excellent civil servants in his Department—and I mean that only as a matter of praise—will be any better at the somewhat unusual task, for civil servants, of monitoring Rolls-Royce than the industrial specialists recruited by the NEB to do the same task?

Lastly, I come to what is perhaps the most difficult question. In considering industrial reconstruction, are the Government wishing entirely and completely to repudiate sections 7 and 8 of the Industry Act 1972? If that is not their wish—as I believe to be the case—is it not fair to say that the Government accept that at times there is aid and investment which should be made available to industry and to commerce of a sort that the market, the joint stock banks or the merchant banks consider to be, in banking terms, unbankable—aid that they would be unwilling to advance because of the extreme risk and the lack of security?

I accept that these may be and should be exceptional cases. Obviously, we do not wish to use this investment as a means of increasing the public sector. The Opposition would disagree on that, but that is one of our areas of disagreement. It may be that only an initial injection of aid or loans should be allowed in order to make certain that we do not get into an open-ended commitment of a Leyland proportion. But, even with these limitations, do the Government believe that all supervision of public sector or nationalised industry is best carried out by and only by the Civil Service, or by the Civil Service advising the Minister?

I am not usually associated with the views of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), but the House may recall that in the very detailed considerations of the Select Committee on nationalised industries several years ago he was to be found advocating a separate Minister for nationalised industries, with a specialist Department, recruited mainly from industry, which should have the task of the supervision of these industries.

I do not go as far as that, but from my experience I should like to make two specific declarations. The first is that supervision, when it means management control of nationalised industries by civil servants, and then ministerial responsibility, should be discouraged and stamped on whenever possible. Where there is a statutory authority through the Minister to this House, it is nearly always impossible—this is so whether with Conservative Governments or Socialist Governments—for the sticky fingers of Ministers and civil servants not to interfere in the managerial construction and decision-making of those industries reporting to that Minister.

I therefore wish to advocate that whenever supervision is necessary this should, if possible, be done by an independent industrially experienced and industrially oriented committee authorised to report direct to Ministers. I believe that such a solution could well obtain the backing of both sides of the House, and in so doing it might well find the management of nationalised industries having a sympathetic and understanding industrial ear for their own problems and equally experienced advice which could, when discipline was necessary—there is no doubt that it is necessary at times—apply guidance and advice coming from the voices of men who had themselves been in similar positions to the managers of the nationalised industries.

When the Minister reflects on this one proposition, will he see whether it could be developed? If it could be developed, it might well maximise the working and the benefits of public enterprises and nationalised industries, and, again, it might even mean that debates such as this debate tonight would be superfluous.

Photo of Mr Phillip Whitehead Mr Phillip Whitehead , Derby North 8:21 pm, 26th November 1979

That was quite an outstanding speech in its thought and its clarity of expression. I say only one thing to the hon. Member for Honiton (Mr. Emery): why sketch in the blueprint when one can fly in the production model? What the hon. Member was describing was the National Enterprise Board. What he was describing was the NEB performing the functions which we set out for it during the previous Administration.

I want to take only a few minutes' time and to confine my remarks to Rolls-Royce and its position under the new dispensation, as the hon. Member has just described it. But I would say at the outset that I have the gravest regret about the resignation of the NEB and the way in which it has come about. I think it has weakened the NEB, and it has not strengthened Rolls-Royce. I think that I should say exactly why.

I think that it has weakened the NEB because the board, which has had its problems, and inevitably so—both with some of the companies that it has administered and with Governments of both major parties and civil servants working for those Governments—nevertheless had built up a body of expertise and a degree of trust which will now be severely threatened, both by the haemorrhage of talent consequent upon the resignations and by the attitude of hostility that there will now be on the part of the trade union movement.

However I look at the new membership of the NEB, I do not see it as being the equal of the old. An unnamed Minister was quoted in the press last week as saying that it was not exactly a galaxy of talent. There are talented people on the new board, but it clearly has major omissions. Perhaps it has some commissions which may raise the odd eyebrow. I raise an eyebrow at the presence on it of a representative of GEC. I shall say why. A number of the companies which the NEB is administering are directly competitive with GEC and some of GEC's enterprises. When the Minister of State replies to the debate, I should like him to see whether he can reassure me, and other hon. Members who feel this, that there is not a serious problem of a conflict of interests on this point.

I turn now to the question of Rolls-Royce. The Secretary of State has praised the revival of Rolls-Royce under Sir Kenneth Keith. Of course, we have to say in reply to that that a good part of that revival has taken place under the auspices of the NEB. Sir Kenneth has never made any secret, in private conversation with me as a constituency Member of Parliament in Derby, or with any other hon. Member on either side of the House, of his deep dislike for the NEB. We take that as read. He has described it as a bureaucratic contraceptive—a contraceptive which stops him having as many babies as he wants to have. He has a great many babies on the go at present.

The slight problem here is that any body which is regulatory, which is attempting to hold to account in an informed way bodies spending the sums of public money involved in an enterprise such as Rolls-Royce, is bound to have a contraceptive effect in that sense. The Public Accounts Committee is a contraceptive. The Comptroller and Auditor General is a contraceptive—and quite rightly so. The problem for the House tonight is to consider the style and leadership of Rolls-Royce as it has been set out under Sir Kenneth Keith and as it no doubt is now intended to continue under his hand-picked successor—because he has again made no secret of the fact that he wanted Sir Frank McFadzean to succeed him. I question how widely the Secretary of State trawled elsewhere in his attempts to find a new chairman for Rolls-Royce. How far can Rolls-Royce under this management be allowed to go its own way, and how far, indeed, will it be effectively audited by the civil servants of the Department of Industry? Those are the two questions.

I would be the first, living in and conscious of the heart-beat of Rolls-Royce all the time, to acknowledge the great successes that there have been. But the strategy involved is in many ways a dangerous one. I do not say that to discount it or to disparage it. I simply say that the American strategy, which is effective in what Sir Kenneth Keith has embarked upon with Rolls-Royce, is extremely risky. In that high-risk game, we are reminded, wherever Rolls-Royce employees live, of the last episode of very high-risk strategy in the American market and the bankruptcy of 1971 and the agonies to which that led.

The high-risk strategy—the Boeing deal, the decision now to go ahead with the construction of plant in Miami and Atlanta, Georgia, the decision to announce a quite unprecedented guarantee for the construction of the Boeing 757 aircraft—necessarily raises questions of audit of a very serious nature, particularly when there are those within Rolls-Royce, as well as outside, who would ask some questions about the company's decisions over the last three or four years. Did Rolls-Royce really gets its calculations vis-a-vis the exchange rate right? Was it wise to make so many deals in dollar terms with an exchange rate of $1·85? Looking ahead, when Rolls-Royce makes its assessments and says that it wants £200 million from the taxpayer and an equivalent amount from the market, has it taken suf- ficiently into account both the exchange rates that will prevail over the next two or three years and the level of market demand?

One of the areas in which Rolls-Royce was caught very badly short two years ago was in underestimating the speed of the upturn in the aviation market. The aviation market is a funny thing. It tends to be going up precisely when other things are going down because of the very great lags involved. So there is no particular paradox now in seeing the order books for civil aviation in a more healthy state than they have been for many years just as Western Europe and the United States are on the brink of a major recession.

When I look at the clash between the NEB, the apparent arguments over the NEB's calculation that Rolls-Royce was in the market for funding to the degree of £700 million over the next two or three years and the Rolls-Royce counter-argument that it only wanted a couple of hundred million from the taxpayer in that same period, I think that we might well end up splitting the difference. We might well find that both arguments are wrong and that the watchdog body was right to challenge the slightly bland estimates that are emerging from the company.

I say that as someone who wishes the company well, and the House will realise why with my constituency interest. We are now in a position where for a variety of reasons, some of which were touched on by the Secretary of State, Rolls-Royce suffers from both low productivity and difficulty in getting its production right, as well as anything like a proper return on its equity. The figures will not look too good for this year. There are a variety of reasons for that.

What we in Derby fear, and what those who follow the affairs of Rolls-Royce fear, is that we may now be in a position where the company is involved in very great risks indeed over the next two or three years—because of necessity, it is a high-risk strategy—when the audit may be weaker than we would desire.

The hon. Member for Honiton put his finger on it, and so, in briefer and more brutal words, did Sir Leslie Murphy in his statement of resignation or dismissal, however one describes it, when he said: I have no confidence that Ministers advised by civil servants who have no business experience are competent to discharge the task previously carried out by the NEB. That is the crucial issue. We must remember what caused the bankruptcy of Rolls-Royce in 1971. On the one hand, it was engineering and managerial hubris of a very high degree and, on the other, a bad audit by civil servants under Governments of both parties—of our party as well as under the Government of the right hon. Member for Sidcup (Mr. Heath). When I think of the high-risk strategy then, the brilliant and dynamic people who pursued it, and the relevant failure of the Department of Trade and Industry adequately to monitor the last 18 months of the progress of Rolls-Royce before the crash, I now go cold at the thought that we may be moving into that position again.

It may be said by hon. Members that there is now one big difference—that Rolls-Royce is now a publicly owned company, which was not the case in 1971. It may be argued that there is this direct input, to which the hon. Member for Honiton referred. As he said, quoting the Rolls-Royce press statement today, Rolls-Royce appears to regard it as true for the foreseeable future that there will always be a very tight relationship between the Government of the day and the company when all major policy decisions have always been taken by the Government which have never ceased to monitor the company's performance closely through both the Department of Industry and the Ministry of Defence. The monitoring will go on. The question mark that we have raised concerns the capacity of those who will be carrying out the monitoring and the audit, unless a skilled team is recruited to do it.

I come to my final worry, which is that even this condition, in the insouciant words of the Secretary of State, appears to be blown away, because in reply to me the other day the Secretary of State said—I think he said it in the debate today—that he expects the company to be returned to private ownership. In other words, he expects it to be flogged off.

There was a report in the Financial Times the other day about the interests of GEC. Referring to Sir Arnold Weinstock, it said: Sir Arnold confirmed yesterday that GEC had been involved in talks about Rolls-Royce for some years but no conclusion has been reached. The talks have covered ideas such as a full merger, GEC taking over Rolls-Royce's industrial gas turbine work … and GEC helping to strengthen the aero-engine manufacturers' management. GEC is a successful company. But one can load too much on even a very successful company, particularly in view of the investment risks involved here. Looking back at the sad history of British Leyland, I believe that we loaded too much on the successful parts of that, as merger followed merger, in the hope that good would drive out the bad. Of course, the reverse was the case.

Is it seriously the intention that Rolls-Royce should be sold off back to the private sector? Is that is the intention, it makes nonsense even of the assurance that we had about the auditing of Rolls-Royce that is promised. Indeed, it makes nonsense of the suggestions for tightening control through the Department of Industry. Of course, I hold a different view from Conservative Members about the advisability of a massive increase in the private sector as against an increase in the public sector. I am a mixed economy man, and my criterion for public ownership is not doctrinaire at all. It is whether or not the degree of input of public investment requires direct public accountability. We shall lose that if we take Rolls-Royce out of the public sector and flog it off to Arnold Weinstock or anyone else.

Those are the questions I have to ask today. In the absence of the Secretary of State, I would say that there is one remarkable thing about him which I greatly admire. He has the courage to admit his mistakes afterwards and is not one to create a desert and call it peace. The time comes when the right hon. Gentleman calls it a desert, as witness the National Health Service. However, I hope the Secretary of State will have the courage to come back—if not today, at some future time—and say that it was a fundamentally mistaken decision that so hamstrung the NEB. I believe that that decision will, in the long term, weaken Rolls-Royce.

Photo of Mr Michael Grylls Mr Michael Grylls , Surrey North West 8:30 pm, 26th November 1979

The House will no doubt pay great attention to what the hon. Member for Derby, North (Mr. Whitehead) has said. Derby is the home town of Rolls-Royce, and any drama over a large company dominating a town must be immensely worrying for those who work in it and for the hon. Gentleman's constituents generally.

I begin by referring to the terms of the motion where it says that the resignation of the entire NEB board has done damage to Britain's reconstruction. The House will accept, as my right hon. Friend the Secretary of State said, that the two are totally unconnected. Whatever view one might or might not have about the NEB, to pretend that it had any connection whatever with the reconstruction of the British industrial scene is absolute nonsense. As my right hon. Friend said, if there are difficulties in British industry today it is because of the anti-enterprise climate that has been with us for too long.

The resignation of the NEB board was a rather curiously petulant act of little significance in the long term. If we look briefly at the financial achievements of the NEB since it came into office in 1975, we see that it has been very poor indeed. If, for example, we consider that of the taxpayers' money put into the NEB, £1·4 billion, a profit of £30·7 million was made last year, and that after extraordinary items there was a loss of £40·3 million, we realise that that is not a good return on capital. It is not a handsome return on £1·4 billion of taxpayers' money.

If we take out Rolls-Royce and British Leyland, which is something that the NEB liked to do when considering its figures, and consider only the investments that the NEB has made on what it likes to call its "entrepreneurial judgment", we see that on a capital of £300 million the board last year made a loss of £5·27 million, so the record of the NEB has not been good. For that reason I do not shed any crocodile tears for the members of the board tonight. I fully accept, of course, that, as honourable men, they did the job to the best of their ability. The strange thing is that the NEB clearly thinks—presumably, that is why the board has resigned —that the removal of Rolls-Royce from under its wing has done damage to it.

Since they were transferred to the NEB in February 1976, the Board has complained about Rolls-Royce and British Leyland and said that these two large lame ducks were landed on its plate and it therefore was not fair to judge the return on those companies in relation to the general return on capital within the NEB. The Board has complained that it has been landed with these two companies and never wanted them. Therefore, I should have thought that if Rolls-Royce were taken out the NEB could say "That is better. We can now be judged on our own entrepreneurial skills "—so-called—"and the companies in which we have invested."

The nub of this debate is about how good the NEB was at monitoring Rolls-Royce. The NEB and, as the hon. Member for Derby, North said, Rolls-Royce have failed to get to grips with the financial problems of exchange control and currency fluctuations. The NEB seems to have slipped up on all of these matters, and that illustrated a lack of financial discipline within the Rolls-Royce company that the NEB did nothing about.

There are arguments that have been well rehearsed here and in other places about the duplication and confusion of having two boards of directors—which is really what it came to—to run one company. My hon. Friend the Member for Honiton (Mr. Emery) has great experience of industry, but I disagree with him about the duplication of these boards. Having an NEB board as well as a Rolls-Royce board has made it difficult to run those companies efficiently.

My hon. Friend quoted from the Rolls-Royce circular, but he did not quote the last sentence, which says: This effort has always far exceeded that of the NEB in both time and technical competence. In effect, Rolls-Royce is saying that the Department's monitoring, which was going on in parallel with that of the NEB, was superior in technical competence. We should pay great attention to that, because that was the view of Rolls-Royce over the four-year period that it was under the wing of the NEB.

Hon. Members will remember the report that the NEB made to the House in January about Rolls-Royce. The report claimed, quite rightly, great successes for Rolls-Royce in the £2,000 million worth of sales achieved for the RB211 engine. I read that report very carefully, and there appeared to be no reference whatever to whether the company would make a profit out of the order. It is a wonderful thing to have an order, but it is rather more sensible to make a profit out of it. Therefore, I deduced from that that the controls by the NEB were not particularly effective. That being so, why not remove them? Why have this extra layer of control?

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

I have not understood the hon. Member's argument. I thought that the argument was about friction. The hon. Member should bear in mind that we wanted a serious debate on this matter, without impugning the character, integrity, financial expertise and accountability of the NEB, which has been excellent ever since it was formed. Perhaps the hon. Member will desist, because we are not here to discuss the matters that he is discussing.

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

The hon. Member must allow me to make my speech as I wish, within the rules of order. This debate is about technical competence in monitoring. Personalities come and go. We all pass from the scene in due course, therefore personalities are least important. The important thing is how these bodies do their monitoring. The fact is that Rolls-Royce, which has had the experience, came to the conclusion that the monitoring from the Department of Industry was actually better than that of the NEB. I should prefer the better monitoring system to the second-class one, and, in any event, I do not like the idea of haying two layers of monitoring and two boards of directors. That only leads to confusion. Therefore, I believe that my right hon. Friend has done the right thing and taken a bold and courageous decision which will be in the long-term interests of Rolls-Royce. Time alone will tell.

I warn the House that logic dictates that my right hon. Friend should now do the same thing over British Leyland. At this moment that company trembles on the precipice with its latest strike. This most expensive lame duck with £1,000 million of taxpayers' money committed to it should have the same logic applied to it as was applied to Rolls-Royce. The unnecessary bureaucratic layer of the NEB should be removed. The position of British Leyland is so important that decisions are bound to be taken by my right hon. Friend, so why have another layer in between?

Having sat through the last Parliament, when most of this money was spent on British Leyland, I must point out that Parliament was never told the truth about the company. The British Leyland saga, and its monitoring by this Parliament, has been a disgraceful farce, because we have not been told the truth. There has been no projection of profits in six months. United States companies have quarterly forecasts and quarterly balance sheets of what they have achieved and what will happen in future. Why not British Leyland? There has never been one such report.

In 1978 the pre-tax profits of British Leyland were £15·3 million—a derisory figure when the investment put into that company is taken into account. Yet, after that result was announced, the NEB approved a further several hundred millions of pounds of taxpayers' money to go into British Leyland. Why was that done when the result was so bad? We do not know what contribution has been made to the investment programme of British Leyland from internally generated profit. In a debate last April my right hon. Friend the Secretary of State talked about the expected contribution of £200 million from BL between 1978 and 1981 from its own internally generated profits which would match the investment of taxpayers' money. We can only assume that none of that has arisen and that BL has not made sufficient—or any—profit to contribute towards its investment programme. I admit that I am talking in the dark. Should we not be told? Would it not be better to take BL out of the NEB? My right hon. Friend will always be responsible, whether the NEB exists or not. Why do not we face the realities?

In its last report on BL the NEB talked about an 18·5 per cent, increase in productivity. That was the basis upon which the House of Commons was asked for more money. In the event BL achieved a decrease in productivity of minus 3 per cent., yet the company was still given the money. That is the sort of monitoring carried out by the NEB. It is totally ineffective and it duplicates the monitoring that is carried out by my right hon. Friend and the civil servants in the Department of Industry, which is always carried out with a company with that size of investment.

Those of us who have read the NEB reports on BL over the last three or four years know that in every report there have been false dawns, none of which has occurred but all of which have been supported by the NEB. Perhaps that was inevitable—the Edwardes plan was its creation. Michael Edwardes was the board's nominee. Mr. Edwardes' director of strategy was the recent head of the NEB BL evaluation unit. Connections were too close to ensure detached assessment. I believe that that is as true today of BL's connections with the NEB and the House as it has been from the beginning.

I hope that my right hon. Friend will listen carefully to the evidence about removing BL from the extra layer of control. It would help BL at this time to remove further conflict and confusion. In the past the NEB has acted as an advocate rather than an assessor, and an advocate rather than a monitor. That is not what is required. As my right hon. Friend knows, in the case of Rolls-Royce he is the shareholder. He carries out monitoring because he is a large shareholder. However, he will not run the company and he will not run BL, nor will he want to. The House of Commons in its traditional role of controlling public expenditure will appreciate that the control should be direct.

I do not believe that the old NEB will be greatly lamented or missed. I hope that the new board under Sir Arthur Knight will take a more detached and critical view of the company and its portfolio. That is the board's duty, and I believe that my right hon. Friend has instructed it to do just that. I hope that the NEB will take a critical view of its activities and, as soon as possible, bring the companies in its portfolio to a state where they can be returned to the market. They will be totally removed from the public sector and from meddling by the House of Commons or the NEB. I believe that to be my right hon. Friend's aim, and I support him totally in that aim.

Several Hon. Members:

rose

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. Before calling the next speaker, I should tell the House that I understand that it will be convenient for the winding-up speeches to begin at 9.20 pm. Short speeches will enable me to call more of the hon. Members who wish to speak in this important debate.

Photo of Mr Kenneth Eastham Mr Kenneth Eastham , Manchester, Blackley 8:49 pm, 26th November 1979

I support the motion condemning the Government. The recent resignations are obviously signs that all is not well and that relationships are not good. It is doubtful whether we shall ever know the full facts of the meetings and negotiations that resulted in not just one or two board members but the whole board deciding to resign.

Recent events have caused great unease and a loss of confidence. I doubt whether things will be any better now that the Secretary of State has set up the new board. There is no trade union representative on the new board to support the venture or even to identify with the rather doubtful structure of a board that will apparently meekly accept all the diktats of the Secretary of State and the Government.

I found great support for the NEB during the general election campaign and I do not recall any criticisms or suggestions for major changes. Those in the North-West recognise that 30,000 jobs in the North and North-West are being assisted by the NEB. That means that not only 30,000 workers but 30,000 families are being assisted. That is of great importance.

Companies have tottered in the past not because of a lack of skill among the workers of the industries but aften because of incompetent managements. Rolls-Royce is a classic example. What happened to that company was not a reflection on the skills of the workers, but they were, nevertheless, nut at great risk because of the lack of judgment in that company.

Conservative Members want to reverse the trend and to go back to the sort of managements that ran these companies when they failed. The Labour Government had to step in to help and to make those companies successful. I do not know how Conservative Members can justify returning those companies to the private sector when one takes into account the amount of taxpayers' money that has been used to bring about revivals and to restore confidence in a number of industries.

The Secretary of State says that the like to know what sort of role the right hon. Gentleman envisages for the board. I am suspicious about his attitude to the future role of the NEB. The confidence of workers in the various firms being assisted by the board will not be improved if they believe that their futures could be at risk and that their firms may collapse, with all the job losses that could result.

The debate so far has concentrated on British Leyland and Rolls-Royce. What about the other companies, such as Ferranti in my constituency, that have been assisted? The National Enterprise Board loaned Ferranti £6·3 million. Once again, with much trade union co-operation, that company became successful. Conservative Members refer to the lack of profits made, but in 1978 that company made a profit of £9·12 million. By 1978 sales had doubled in a new and exciting technology. However, these same workers are once again afraid that they will see the new technology that they have encouraged and promoted taken away and stolen by other private companies. That would be a travesty of justice.

In Manchester, Fairey Engineering, which went into liquidation in 1977, was aided by the NEB and consequently 1,700 jobs were saved. The NEB was born from the failures of private companies.

If I were a Conservative Member, I should be embarrassed to stand here this evening and defend the about-face of the NEB. I should be particularly embarrassed in view of the extent to which the Conservatives have failed in the past. They created this disaster quite unnecessarily. British engineers do not deserve such treatment. Sometimes it is understandable that workers rebel. It is understandable that they should express their anger because they find that they are paying the price, although they have done nothing wrong.

What is so magical about private companies that have so often failed and collapsed with the complete loss of an industry to the cities, the towns and even the nation? Those firms were not backed by banks and had to go to the NEB for finance. What has the Minister done for those industries? From the day that the Government came to power it has been clear that if we are not careful the innocents in industry will pay the price, with their jobs, because of the political dogma and spite exercised by the Government.

Photo of Mr Kenneth Eastham Mr Kenneth Eastham , Manchester, Blackley

The hon. Gentleman says "No", but I have no confidence in the Government. If one goes into the North-West of England and speaks to industrial personnel there, one finds that they agree with me rather than with the hon. Gentleman.

The greatest damage that has been done has been the loss of good industrial relations. If confidence is to be engendered it is essential to have good industrial relations. However, we do not see any confidence. We have already received representations from men in the factories who are giving not just their time but their lifeblood and skills. Other people are giving only money, but these people are giving their all. One might think that those who work in an industry have more at risk than those who give only their money and are playing—tinkering about. The Opposition are correct to condemn the Government. I believe that industry will endorse the Labour Party's attitude.

9 pm.

Photo of Mr John Lee Mr John Lee , Nelson and Colne

I welcome the opportunity of speaking in the debate because I believe in the role of the National Enterprise Board. I regret that some of my hon. Friends signed an early-day motion at the tail end of last week, in effect, welcoming the resignation of the board.

I am pleased that the Government intend to retain the NEB. It would have been a near-disaster to have abolished it, just as when we abolished the IRC in the early 1970s. I support the limited role that we now have for the NEB.

I am sorry that the debate and the whole approach to the NEB have been clouded by the affairs of Rolls-Royce and the resignation of the board. I believe that the NEB is, or should be, larger than both of those matters. However, I share the sentiments expressed about Rolls-Royce by the hon. Member for Derby, North (Mr. Whitehead). As he knows, many of my constituents are in the Rolls-Royce work force at Barnoldswick, and they are concerned about the future of the company.

Unfortunately, too many Labour Members take an ideological stand on the NEB and see it as a further thrust of Socialism. I am sorry that the right hon. Member for Deptford (Mr. Silkin) is not in the Chamber, because I am about to quote what he said on a recent visit to Scotland. The right hon. Gentleman said that had Labour been in office it would have been pouring money into the depressed areas through the NEB and the Scottish and Welsh Development Agencies. Apart from the fact that we do not have the money to pour in, those sentiments are incompatible with what Sir Leslie Murphy, the former chairman, said in the NEB's 1978 report: The NEB is not a source of subsidised finance. Its involvement is limited to those cases which show a real prospect of commercial returns and it is right that that should be so. I believe that the NEB has a practical role to play. The experience of the business men and trade unionists who were on the board, and of those who are now on the newly constituted board, enables them to take better decisions, on balance, than many of the civil servants.

I must declare an indirect interest in the workings of the NEB. I was instrumental in introducing a mining machinery manufacturing company—Pitchcraft in Barnsley—to the NEB. I am happy to say that the NEB invested money in that company and made a profit out of a subsequent sale to Booker Brothers McConnel. That introduction was made on an entirely altruistic basis. There was no personal involvement.

Some of my hon. Friends have rightly drawn attention to some of the investment mistakes made by the NEB. Of course it has made mistakes. So have many companies, investors and merchant banks in the private sector. Venture capital is not easy to decide. It is wrong to denigrate the NEB because of certain mistakes that it has made.

The NEB has now gained the confidence of a substantial proportion of in- dustry. It has been working closely with some of the joint stock banks and with particular elements of the financial institutions. Some of the pension funds were jointly involved in NEB investments. On balance, the majority of the business community and of informed journalistic opinion supported the continuation of the NEB.

The Government, in their first Budget in June, marked out what I term the tennis court. Unfortunately, a combination of the world recession and rising interest rates has effectively nullified much of the Budget. I do not believe that many hon. Members on either side of the House or many people in the country realise the seriousness of the economic situation that will face us in the early 1980s or the number of casualties that will arise from the heavy blizzard that is to come. As the hon. Member for Manchester, Blackley (Mr. Eastham) said, it is certain that in the early 1980s we shall have the new Ferrantis and the new ICLs which will need the intensive care of the NEB or a similar body before they are returned to the private sector. This is probably where the two of us disagree in ideological terms.

I believe that the NEB has done a lot, especially in the regions. However, earlier this morning I was speaking to the North-West director of the NEB. He is extremely concerned about the events of the last few days which have caused the flow of new propositions to dry up. It is vital, therefore, that the first task of the newly constituted NEB is to restore morale. As I said in my opening remarks, the NEB is larger than Rolls-Royce or any other existing board.

I believe passionately in private enterprise. But I also believe that there is a time when the State has a role to play. Our economic problems are far too serious for party political point scoring.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline 9:05 pm, 26th November 1979

I shall try to make my remarks fairly brief, because many of the very intelligent arguments of the hon. Member for Nelson and Colne (Mr. Lee) are among the matters to which I intended to refer.

I want, first, to comment on the position in my own constituency and to ask the Minister to say how a company such as Monotype Holdings, which has a substantial interest in the Dunfermline constituency, is likely to fare in terms of continued support through the National Enterprise Board.

As the hon. Member for Nelson and Come pointed out, in this debate we are talking about more than Rolls-Royce and British Leyland, and I want to ask the Minister where he disagrees with the statement made by one of the NEB's principals which appeared in the 1978 report. It reads: The NEB cannot and does not seek to involve itself in the day-to-day management of companies. It would be to duplicate the management skills which are to be found in the companies. In effect the NEB delegates to the boards and managements of subsidiaries the responsibility for running the companies efficiently within a broad strategy approved by the NEB to achieve agreed objectives. Where is the difference, if any, between the strategy which will be imposed on a company such as Rolls-Royce in its direct relationships with the Minister's Department and that type of statement made by the NEB itself?

We are discussing a philosophy in relation to a mixed economy, not a mixed-up economy. We are trying to analyse the boundaries of public intervention and public accountability, at the same time allowing the flexibility of day-to-day management decisions to take its course. This is a very difficult area. It is one on which we have tried throughout the last 17 years and more to get some guidelines, and it is only now with organisations such as the NEB that we have a remote chance of achieving some success.

If we bring these accountability decisions into the orbit of a Department of State, we shall be bringing these decisions into areas of activity and concern which lack flexibility and decentralisation. I am not maligning civil servants; they are very good at defending their Ministers. But, by their very nature and the fact that they have to defend Ministers and often aid the defence of Ministers here in drafting answers to parliamentary questions and hon. Members' letters, they have a centralising element. That is disadvantageous to the operations of industrial concerns.

It is difficult for an organisation such as the House—I am a member of the Public Accounts Committee and so I am especi- ally aware of the difficulties—to achieve a balance between public accountability and allowing an organisation to take risks. It is a good industrialist who takes risks and is right about 80 per cent, of the time. That industrialist is magnificent it he is right about 90 per cent, of the time He is marginally good if 50 per cent, of his decisions are correct. What guarantee is there to the House and to the country that the interrelationship between the Department of Industry and organisations such as Rolls-Royce will get even 50 per cent, of the decisions correct?

I know Sir Frank McFadzean well and I admire him. However, I think that the wrong decision has been made. With great respect to the previous chairman of the NEB, Sir Frank should have been made chairman of that organisation. It would have been much more sensible to put him in charge of the NEB instead of placing him in charge of Rolls-Royce.

Sir Frank was formerly chairman of Shell Transport and Trading. He was in charge of the operations of a loosely organised concern. The peripheral concerns, the independent national companies of Shell, are allowed to take intricate investment decisions in an almost arm's length relationship. That is the type of philosophy that should be applied to the operations of the NEB. I press the Government to take cognisance of the organisational and personnel problems in bringing such organisations in direct contact with the Civil Service.

Photo of Mr Robert Taylor Mr Robert Taylor , Croydon North West 9:12 pm, 26th November 1979

In common with the hon. Member for Dunfermline (Mr. Douglas), I am a member of the Public Accounts Committee. I remind the House of an answer that was given to a question on 8 May 1978. The question was put to Sir Leslie Murphy by my right hon Friend the Member for Taunton (Mr. du Cann). Sir Leslie said: I have never knowingly gambled on anything. I have never placed a bet in my life, so perhaps I can go on the record for that. However, there is a first time for everything. There is no doubt that earlier this month Sir Leslie gambled. He gambled that my right hon. Friend the Secretary of State would not wish to face the political consequences of the mass resignation of the board of the NEB. As my right hon. Friend has already said, he was faced with the alternative of the resignation of the board of Rolls-Royce or the resignation of the board of the NEB. In my view, my right hon. Friend made the right choice.

If Sir Leslie lost his first bet, it is apparent that he does not appear to realise it. In the Financial Times on Saturday, Sir Leslie was quoted as saying: I believe the Board will have a future and if I have to be sacrificed in order to achieve that, I am willing to be sacrificed. Those are splendid words, patriotic words that are worthy of the highest praise from Parliament. The only snag is that the talk of sacrifice is misguided and totally out of place. No one has been sacrificed. Sir Leslie held a pistol to his own head and to his surprise it was loaded.

Concern has already been expressed that other members of the board have suffered a similar fate. Tribute has been rightly paid to them. They are important, successful and interesting people. However, as a Member of this place I do not know exactly what they have contributed to the success or failure of the board. I do not know how frequently the board meets. I do not know whether any of the non-executive directors have visited the board's investments before decisions are taken. Which of the members of the old board are prepared to take responsibility for only one year ago investing £4½ million of British taxpayers' money in British Tanners? That was a bad mistake. The decision was taken against all the advice of industry as a whole.

The resignation of the old board is to be welcomed because I believe that the new board will have a fresh approach. It will not be prepared to invest taxpayers' money in enterprises that have no chance of success to allow them to compete on an unfair basis with companies in the private sector that themselves are successful.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool 9:15 pm, 26th November 1979

The amendment to the Leader of the Opposition's motion contains words of which the House and those outside might take some positive notice. Those words state that the Government expresses its appreciation of the services of the members of the National Enterprise Board who have recently resigned and welcomes the appointment of a strong new board to carry forward the work of the National Enterprise Board … I do not know whether it is a very strong board. It seems to me to be only half a board at the moment. There is nothing strong about it. By the use of the word "strong" in relation to the new board, the amendment suggests that the previous board was not strong.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

The Secretary of State nods his head. He is always in a permanent state of nodding. I do not know whether it is a nervous reflex. We on this side of the House know that he has been against the board ever since it was established. The only person oscillating in the House is the Secretary of State.

I can recall a debate in the House last year on the NEB when its record was questioned only by the right hon. Gentleman. Then came May. The right hon. Gentleman was faced with the realities of life. He is not seeking to take up a posture of opposing the board and wanting to banish it. He now seeks to modify the board. No one knows what he means. He does not even know himself. I understand that he told the House tonight that the board has a useful role to play. That is belated thinking by the great philosopher. It is a great admission.

The hon. Member for Surrey, North-West (Mr. Grylls) made an unthinking speech, lacking in courtesy and attention to the integrity and efficiency of the members of the National Enterprise Board who have now resigned. The hon. Gentleman described the board members as acting petulantly. I have had recent experience of the National Enterprise Board. I was surprised at the care, attention, consideration and thoughtfulness of the board and particularly Sir Leslie Murphy and his deputy. According to the Secretary of State, the sheet has been cleaned. His friends have been put on the board. We know that—never mind that little luncheon the right hon. Gentleman had with the chairman of Rolls-Royce about which nothing was said. I could not have had a luncheon in such circumstances without mentioning the matter.

The regions have benefited from the co-operation that hon. Members have enjoyed with members of the board. My right hon. Friend the Member for Houghton-le-Spring (Mr. Urwin) has already mentioned this matter. Now that the principle of "I'm in charge" has been invoked by the Secretary of State and his friends placed on the board, answerable to the right hon. Gentleman and his civil servants, does he believe that hon. Members will receive the same accommodation from the new board as we received from the old board? I suspect that if I asked pertinent questions of the new chairman he would find it necessary to avoid answering me until he had spoken to the Secretary of State seeking advice on the answer he should give.

A lot of nonsense has been talked in the House tonight. Conservative Members have sought to commend the members of the old board but without really meaning what they have said. I refer in particular to the hon. Member for Surrey, North-West, who spent his time dealing with technical monitoring. But the NEB function was not one of technical monitoring. Its function was to monitor financially, and no one in this House can criticise the efficacy of the NEB on that score.

Many of the contributions from the Conservative Benches have been disappointing because of the dogmatic and prejudiced nature of their approach. From the Opposition side of the House have come serious and sincere expressions to the members of the board who were forced on grounds of principle and integrity, and in defence of their efficiency, to resign. That is what the Secretary of State must bear in mind.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Industry) 9:21 pm, 26th November 1979

The motion moved by my right hon. Friend the Member for Deptford (Mr. Silkin) condemns the action of the Government with respect to the NEB and Rolls-Royce and, by implication, the stewardship of the Secretary of State for Industry.

It is interesting to reflect that throughout what has admittedly been a very short debate only one Conservative Member welcomed the events of last week, and only one other speaker in the whole debate has supported the Secretary of State The right hon. Gentleman cannot feel very sanguine about that. In the short debate there has been a marked lack of enthusiasm on the Conservative Benches for the actions that the right hon. Gentleman has been pursuing in respect of the NEB.

The right hon. Gentleman's role in this matter has been one of confusion and of changes of mind—the latter on his own admission. He did not come to office with the intention of taking Rolls-Royce away from the NEB. He changed his mind on that. He has changed his mind on the manifesto commitment of the Conservative Party, which was to abolish the NEB. He tended to vacillate in the Second Reading debate on the Industry Bill as to what his real intentions were for the NEB. His actions with respect to the Board and Rolls-Royce seem, to say the least, to lack definition.

The right hon. Gentleman is not carrying too much conviction, particularly as one who says that he does not believe in ministerial and governmental interference in the first place, when he says that he believes that the Department of Industry is best placed to deal with Rolls-Royce, particularly in its present circumstances. He appears, then, to have had several changes of mind in a few short months in office.

The result of his uncertainty is an air of total uncertainty in his party. The Right wing of his party is not particularly happy about the circumstances which prevail. The right hon. Gentleman's uncertainty has certainly created an air of uncertainty within the TUC. I thought that the Secretary of State—strangely, for him—was a little less than candid with my right hon. Friend the Member for Houghton-le-Spring (Mr. Urwin) in that regard. He referred to his letter to the TUC about the matter. I have a copy of it here. The right hon. Gentleman said that it did not contain any invitation to the TUC. However, it says in the penultimate paragraph: I have left vacancies on the board which I hope can be filled by trade unionists at a later date. If that is not an invitation, I should like to know what is. It is very strange that the Secretary of State should not have been properly and fully forthcoming on that point.

The right hon. Gentleman must greatly regret the circumstances that he has created In regard to the TUC. He must also regret the uncertainty that he caused to British Leyland, Fairey, Ferranti, Inmos and the titanium project. All those are affected by the air of uncertainty that now surrounds him and his attitude to the NEB. Indeed, more than 60 companies in all are affected and a great many people's jobs are at stake.

The Secretary of State introduced a Bill to restrict the purposes and functions of the NEB. There was no real argument in favour of the Bill on Second Reading. There was an assertion of the right hon. Gentleman's doctrinaire attitudes, certainly, but there was no real argument based on economic or industrial grounds to support what he was doing. There was no mention of the fact that at the same time he was taking powers away from the NEB in respect of other countries, among our partners and competitors in France, Germany, Italy, Australia, and Canada. Those are hardly Left-wing Administrations.

The Bill also reduces the proposed finances of the NEB and limits its action on investment. Indeed, it gives more power to the Secretary of State himself. That aspect of the Bill is also very strange, seen against the long-standing background of the right hon. Gentleman saying that he does not believe in a role for the Government in the direct management of industry. We all acknowledge that there was a long-standing difference of opinion between the National Enterprise Board and Rolls-Royce. Against that background the arch-priest of nonintervention became directly involved himself. Why did he do that? In his statement on 21 November he said that Rolls-Royce is a company of a scale and importance such that the supervision of its board by another board, however eminent and accomplished, is bound to give rise to strain.Moreover it is a company with which, inescapably, Government have exceptionally close connections and where important decisions lie directly with Government. Later on, in reply to my hon. Friend the Member for Derby, North (Mr. Whitehead)—who made a most incisive and perceptive speech about this issue this evening—the right hon. Gentleman said: I am sure that the House would be surprised if I did not hope that Rolls-Royce would finish up firmly and profitably in the private sector."—[Official Report, 21 November 1979; Vol. 974, cc. 388–94.] If that is so, what of this special close involvement with the Government? What will become of it then? If it is so much in the national interest for this involvement to be maintained, established, or to be made more effective, what will happen if he sells off Rolls-Royce either in whole or part? He must know that his attitude in this matter affects the management not only of Rolls-Royce but of the other companies that I have already mentioned.

There is a special relationship between the Government and Rolls-Royce. It is very simple. It is public money—public expenditure. I have a question for the Minister of State about that. I hope that he will tell us where the Secretary of State has failed. Is it the Government's intention to bring about a financial restructuring of Rolls-Royce in this new relationship? Will they ensure that Rolls-Royce stays within its budget forecasts? This, after all, goes to the heart of the difference between the NEB and Rolls-Royce.

Contrary to the assertion of the hon. Member for Surrey, North-West (Mr. Grylls), the NEB was trying to be an effective steward of public expenditure. That is where the real difference of opinion lay. The NEB sought answers, as was its duty. Sir Kenneth Keith refused to reply. The question has got to be "Why?" The treatment of the board by him and the Secretary of State borders on double dealing—less than candid, to say the least.

I understand that when he met the board on 7 November the Secretary of State asked for 24 hours in which to consider its position. In the event he took two weeks. He did not return to the board. He did not give it an answer. He did not debate or discuss the issue with it. At the end of that two weeks he effectively dismissed the members of the board. Those are the facts. The Secretary of State, who prides himself on his intellectual honesty, will have great difficulty in the weeks and months ahead in getting away from the fact that his actions in this matter have been of a very dubious nature. He had considerable difficulty even in remembering how many meetings he had had with Sir Kenneth Keith. I think that that is deplorable. How are we to view what has happened against that kind of background? One ex-board member—not a trade unionist—said to me "If this is an example of the Government's attitude to public administration, it stinks." I agree with his comments.

The Secretary of State has destroyed the independence and credibility of the NEB. It is no wonder that the board resigned, and it is no wonder that there has been a complete revulsion on the part of the trade union movement. I can tell the Secretary of State what is the response to his letter. The finance and general purposes committee of the TUC met today and decided that because of his actions there was no basis on which its members could serve the new board. [HON. MEMBERS: "Shame."] I agree that this is a matter of considerable regret, particularly as I belong to the school of argument that wants a consensus approach in these matters.

Hon. Gentlemen who said "Shame" should direct their remarks at the Treasury Bench and not at the TUC. The Secretary of State has brought about those circumstances, not anyone in the trade union movement.

What are to be the terms of reference of the new board? The Secretary of State has created a new board of people who appear to be placemen. Certainly, at best they cannot claim independence or credibility, and at worst—as my hon. Friend the Member for Derby, North said—there are some serious questions to be asked about them. The new chairman replaces a former colleague who was dismissed in the most disgraceful circumstances. The vice-chairman, Sir John King, is emotionally and ideologically opposed to the whole idea of the National Enterprise Board, as he said in a letter to The Daily Telegraph on 3 May. It is pathetic that a man could then accept the vice-chairmanship of the very organisation that he sought to denigrate so effectively.

It is also a matter of perhaps even greater concern that Mr. Robert Clayton of GEC should be appointed to the new board. He is known to work for a company that has designs not only on Rolls-Royce but on several other companies in the control of the National Enterprise Board. He is known to be chairman of GEC-Fairchild Limited, one of the prin- cipal competitors of Inmos. May we have an assurance that a man in this position will not be shown confidential documents? If we cannot have that basic assurance about this man's role, we must say categorically that his appointment is against the public interest.

It is also woefully inept and extremely regrettable that appointments of this kind are made at the same time as the Secretary of State asserts that there will be an independent role for the new board. It is not tenable to argue that way, and I do not believe that he expects us to believe that it is so.

There must also be questions about the ever-smooth transition of Sir Frank McFadzean to yet another chairmanship of a public company, and his relationship with Sir Kenneth Keith in this respect is again a matter for serious public concern.

These are issues that go to the root of the differences between the Secretary of State and the ex-members of the NEB. The Secretary of State has created anger, confusion and mistrust. He has destroyed the credibility of the NEB and his own credibility—if he ever had any—in relation to the trade union movement. He appeared not to notice his impact on David Basnett, the chairman of the TUC economic committee. How the Secretary of State can believe that any constructive proposals can be forthcoming from the TUC after his treatment of David Basnett, I fail to understand.

The NEB remains. We are not quite sure why. We are not quite sure on what basis. But it has major responsibilities to the public and responsibilities for a great many jobs. I cannot bring myself to believe that the Secretary of State sought to put himself in this position. Did he really not care about trade union involvement and the contribution of the trade unions? Did he not value it at all? Was he in any doubt about their intentions? I do not believe that for a moment. He knew quite clearly what their intentions were.

What has the Secretary of State achieved by all this? He has got himself into considerable difficulty. He has damaged—perhaps fatally—the credibility of the NEB, as his hon. Friend the Member for Nelson and Colne (Mr. Lee) pointed out, particularly with small companies and with entrepreneurs. The right hon. Gentleman has certainly not helped his own position in terms of the developing recession and the economic and industrial difficulties that we are likely to face. He has reduced his room for manoeuvre. He has reduced the flexibility of the Government to deal with the mounting problems.

I believe that the right hon. Gentleman, in his dealings with Rolls-Royce, will also regret the absence of an independent and detached point of view in overseeing the very large amounts of public money which are likely to be needed to go on funding that company.

As bankruptcies and unemployment mount, he has the colossal nerve to say that the Government, unlike the previous Labour Government, had come to office to create the right conditions and climate for industrial expansion. He says that when we have MLR at 17 per cent. and overdrafts at 20 per cent.—

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Industry)

If the hon. Lady believes that, she lives in cloud-cuckoo-land. Far from improving the climate, the right hon. Gentleman and his colleagues in the Government have made it seriously worse. That is the reality of the situation. If the hon. Lady does not believe that, she ought to go back to her abacus.

The former board was protecting the national interest in these matters. It was protecting public expenditure. It was protecting jobs. It was carrying out its difficult duties. I agreed with the hon. Member for Nelson and Colne when he said that the NEB cannot possibly have 100 per cent. success in these matters. There have been some failures. That is absolutely right. No one on the Labour Benches would pretend that the NEB would not have failures from time to time, or that on its own it could bring about a complete restructuring of British industry—a view that the Secretary of State wrongly attributed to my right hon. Friend. We do not believe that for one moment. But the NEB was doing an effective job and now it is no longer in a position to do so.

The Secretary of State has reduced his control over these events by the action he has taken. As a result, he may find himself involved in more public expenditure, not less, because of that lack of control. As unemployment rises, and as people pay for the policies of the Secretary of State and the Government with their jobs, the Secretary of State will regret his actions. He will regret his abject misjudgment and mismanagement of a board which has been playing a constructive, effective and even unique role in our industrial policy. We believe that it was a crucial role, too. His hon. Friends and he may smile, but we believe that in the end their jobs will also be forfeit as a result.

Photo of Hon. Adam Butler Hon. Adam Butler , Bosworth 9:39 pm, 26th November 1979

This was supposed to be an all-out attack on the Government. It has gone off with all the enthusiasm of a firework left out in the rain since 5 November. We started off with what was, for a three-hour debate, far too long a speech from the right hon. Member for Deptford (Mr. Silkin), a speech that was excessively boring. We ended up with a contribution from the hon. Member for Whitehaven (Dr. Cunningham) which sank to the depths of personal criticism of my right hon. Friend the Secretary of State, which is totally unworthy of the hon. Gentleman. Also, the hon. Gentleman could not resist a slur on the integrity of Mr. Clayton, who has just been appointed to the NEB.

Photo of Hon. Adam Butler Hon. Adam Butler , Bosworth

Let me finish. It was very much a slur on the integrity of Mr. Clayton, saying that he was incapable of distinguishing between responsibilities in his position on the NEB. Mr. Clayton is a research engineer of international reputation, and I have no doubt that he will observe the accepted standards in regard to propriety in this matter.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Industry)

The Minister of State is wrong. I made no comment on Mr. Clayton's personal qualities. I commented on the unfortunate fact that he was the chairman of one of the main competitors of Inmos, and in those circumstances I asked how there could exist a situation in which Inmos trusted him.

Photo of Hon. Adam Butler Hon. Adam Butler , Bosworth

On another occasion the hon. Gentleman might explain to the House why Sir Jack Wellings, who was on the board, was not in the same position of conflict as chairman of the 600 Group, a well-known machine tool group. Why was he not put in the same position vis-a-vis Alfred Herbert? While on the NEB, Sir Jack Wellings was responsible for decisions in regard to Alfred Herbert. The same integrity applied to Sir Jack Wellings as does to Mr. Clayton. It was an unworthy slur by the hon. Member for Whitehaven.

I start, as many other speakers have started, with my own tribute to the late board members. They are men of great competence. I have no doubt that they will continue to serve British industry, in either the public or the private sector, as they have done in the past. Their resignations are to be deeply regretted. I think that it was for them a matter of principle and that they believed that in some way my right hon. Friend's actions reflected on their competence. However mistaken that reaction, one has to respect their views. But I think that some small encouragement is to be gained out of a mass resignation on grounds of honour or principle, because there is no reflection on the individuals concerned; nor, in the circumstances—and bearing in mind how the board was composed—should the unanimous decision have been taken for political reasons. Therefore, we very much hope that the trade unions will think very seriously about filling the seats on the board deliberately left empty by my right hon. Friend.

The right hon. Member for Deptford told us that the board members had resigned because they did not like the decision to take Rolls-Royce away from the NEB and because they had not been consulted. Those are two reasons why, for their own good, they might have decided to resign. We get a slightly different story from the hon. Member for Whitehaven, who seemed to be acting tonight as a sort of messenger boy for the TUC. I sincerely hope that he is wrong.

Under the previous Administration, the TUC asked for the privilege to be put on the board of the NEB. Tribute has been paid today, and previously, to the role that the TUC members played. Trade union leaders are, I think, aware of the fall from grace that some of them have suffered in the public mind in recent years. I believe that in wisdom they will wish to discourage any impression that their motivations in this matter have been political—as opposed to sharing a common view and act of resignation with the whole board—and that they will prefer to demonstrate that their original seeking after board representation flowed from a wish to look after their members' interests and to serve British industry.

As for the new board, I wish Sir Arthur and his colleagues well. They have an important and continuing job to do, and from what I know of Sir Arthur I am sure that he will fight his corner as hard as anybody.

Some of my hon. Friends and Labour Members asked a number of questions and I shall try to answer them if I can.

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

Will the hon. Gentleman explain precisely what Sir Arthur's corner is, because it seems to me that his corner has gone out of the window? On the basis of the appointment, he has obviously decided to wind down the NEB, which is precisely the opposite of what the Labour Party put into operation.

Photo of Hon. Adam Butler Hon. Adam Butler , Bosworth

The hon. Gentleman listened to my right hon. Friend describing the future role of the NEB. I shall return to that. That is the corner that Sir Arthur will fight—for the future of the NEB and for the role that it now has. I hope that the hon. Gentleman will allow me to answer some of the rather more important questions that his hon. Friends asked.

The hon. Member for Dunfermline (Mr. Douglas) asked about the future of Monotype Holdings. That is a matter for the NEB, but in no way is it affected by the decision of my right hon. Friend in regard to the future of Rolls-Royce.

My hon. Friend the Member for Surrey, North-West (Mr. Grylls), as usual, made a useful contribution, and referred particularly to the lack of profitability of many of the companies within the NEB's holding. He rightly drew our attention to the fact that that state of affairs cannot continue without an injection of public funds, which has its consequences elsewhere.

I shall return to the invaluable contribution of my hon. Friend the Member for Honiton (Mr. Emery). I shall also deal with several other points.

The crux of the debate has been the question of duplication between the role of the NEB and that of the Department of Industry. My right hon. Friend put considerable emphasis on this. I do not know whether the House is aware of the extent to which that duplication existed. It is true that the NEB said that it would stand back from management decisions, but it required to see plans and budgets, to have full-scale quarterly and periodic reporting and to approve expenditure down to £5 million. That would seem to be sufficient.

When one looks at the role of the Department during this time, one finds that under NEB guidelines the same sort of monitoring—following almost exactly the same subjects, such as forward plans and budgets and major investment decisions, but this time only if above £10 million—had to go before the Department and, in many cases, to Ministers. That has presented difficulties, and no one can say that the monitoring has been entirely successful. One wonders how it is that the budgets for Rolls-Royce for 1978 and 1979 were not available to the Department until April in each respective year. Nobody can say that the system has worked really efficiently.

As has been said in the debate, there have been factors arising out of the position of Rolls-Royce as a supplier to the Ministry of Defence. In that case there is almost continuous monitoring by the Ministry of Defence in respect of orders, overseas supplies and licences of all kinds. I say to my hon. Friend the Member for Surrey, North-West that that is where the distinction between Rolls-Royce and British Leyland lies. Of course there are similarities, and one can argue that the extra layer of supervision exists for British Leyland as for Rolls-Royce, but that is only one consideration that we had in mind when we took the decision about the future of Rolls-Royce. As I have said, the close relationship between Rolls-Royce and the Government on defence matters does not apply to British Leyland.

Photo of Mr Phillip Whitehead Mr Phillip Whitehead , Derby North

The Minister said he would answer the debate, but he has not, as yet, answered one question. Will he now answer one of my questions? At what point is it envisaged that Rolls-Royce should be sold back to the private sector, and what is the timetable? As and when that happens, what kind of accountability will there be?

Photo of Hon. Adam Butler Hon. Adam Butler , Bosworth

The hon. Member for Derby, North (Mr. Whitehead) caught me just as I was trying to find my note about the points that he had made. The point he made in his speech was not the same as the question he has just put to me. He was asking how this close relationship between the Ministry of Defence and Rolls-Royce was compatible with the return of Rolls-Royce to the private sector. The answer is that that is exactly what we shall do with British Aerospace, and if we can do it with British Aerospace—which we shall do successfully—it can be done perfectly well with Rolls-Royce.

My hon. Friend the Member for Honiton, in probably the best contribution to the debate, introduced the important question of the role of public money and the control of it, whether through agencies or directly through the Department. I would commend to my hon. Friend the work done by the Expenditure Committee in 1971–72, when this matter was looked at in considerable detail.

It is possible for supervision to be carried out through the Department. It is done effectively in relation to certain other nationalised industries and it was also done effectively during the five years between the nationalising of Rolls-Royce and that company being handed over to the NEB. If anyone doubts how it worked or whether it worked well, I commend him to look at the minutes of a meeting between Mr. Ian Morrow and the Select Committee to which I have just referred, in February 1972. There, Mr. Morrow described how good his relationship was with the Department and how satisfactory that relationship was in terms of the passing of information and the control, as far as it was necessary, by officials.

Mr. Morrow went so far as to say that the officials with whom he dealt knew more than the board of the company because of the attention they had paid to detail. He was asked specifically: Can you really say that the contacts you have in the Government Departments are sufficiently expert to be able to read your balance sheets and all the other information and be fully informed of what is going on? Mr. Morrow answered: Yes, I think so. Since that time, the Department has considerably strengthened itself with the establishment of the industrial development unit, which is staffed by those expert in business and finance seconded from outside the Civil Service. They have given excellent service and they will continue to do so.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

Will the Minister inform the House whether the Government have yet decided on the financial duty of the new board? If so, what is it? Will he now answer, because lie has not given any indication in his summing up? This is one chance for him to make his name.

Photo of Hon. Adam Butler Hon. Adam Butler , Bosworth

Presuming that the hon. Member was referring to the new NEB, I must point out that there is no need for a change in financial duty until disposals of assets or the transfer of Rolls-Royce take place. Therefore, there is no change at this moment in the financial duty imposed on the NEB.

A number of hon. Members have sought to show that there is no future for the NEB. My hon. Friend the Member for Nelson and Colne (Mr. Lee) was very strong in his support of a future for it. He should not need reassurance from me. We have spelt out clearly that the board will continue with its casualty clearing role. The right hon. Member for Houghton-le-Spring (Mr. Urwin) asked about the regional role. That, too, continues and we have specified that the board will be active in areas of high unemployment. The special role in new technology will also continue but with the added incentive that the board is required to introduce the private sector at the first appropriate moment.

The Secretary of State has explained very carefully why we believe it necessary that Rolls-Royce should be withdrawn from the responsibility of the NEB, and should report instead direct to him through the Department of Industry. There are particular special circumstances in the Rolls-Royce case. The relationship between the Government and Rolls-Royce is inevitably close, and once the Industry Bill becomes law the Secretary of State, with the benefit of the Department's industrial development unit with its direct business experience, will once again take up the reins from his predecessor.

To suggest that Rolls-Royce will be in any way damaged by the change of responsibility can only be harmful to that company's prospects. Fortunately, Rolls-Royce's customers and suppliers can judge the emptiness of such suggestions by the nature of their source. Those customers and suppliers will look forward, as we shall, to the day when the financial quality of the company is reflected in the private sector participation in ownership and in the strength of its shares on the Stock Exchange.

It is through the private sector route that the future of so many of our nationalised industries must lie. The potential of new industry should be subject to the test of private risk taking. It is so easy for the Government or their agencies to spend other people's money. The future of all industries depends ultimately on their fitness to compete. That fitness can be achieved only through the disciplines of the market place and can be proved only by those disciplines. That is why the Industry Bill requires the NEB to dispose of its shareholdings as soon as appropriate. That policy would have been pursued in response to Parliament's wishes by the previous board. The new board will pursue that policy with vigour in the knowledge that it will be for the benefit of its subsidiaries, their managements and work forces and Britain's industrial economy.

I ask the House to show its support for this policy and for the Government's recent decision on Rolls-Royce, which were taken in the best interests of the company. I hope that the House will also show support for my right hon. Friend the Secretary of State, who is laying the foundations for industrial recovery in this country.

Question put, That the original words stand part of the Question:—

Division No. 111AYES10.0 pm
Adams, AllenFoot, Rt Hon MichaelMeacher, Michael
Allaun, FrankFord, BenMellish, Rt Hon Robert
Anderson, DonaldForrester, JohnMikardo, Ian
Archer, Rt Hon PeterFostar, DerekMillan, Rt Hon Bruce
Armstrong, Rt Hon ErnestFoulkes, GeorgeMiller, Dr M. S. (East Kilbride)
Ashley, Rt Hon JackFraser, John (Lambeth, Norwood)Mitchell, Austin (Grimsby)
Ashton, JoeFreeson, Rt Hon ReginaldMitchell, R. C. (Soton, lichen)
Atkinson, Norman (H'gey, Tott'ham)Garrett, John (Norwich S)Morris, Rt Hon John (Aberavon)
Barnett, Guy (Greenwich)Gilbert, Rt Hon Dr JohnMorton, George
Barnett, Rt Hon Joel (Heywood)Ginsburg, DavidMoyle, Rt Hon Roland
Beith, A. J.Golding, JohnMulley, Rt Hon Frederick
Benn, Rt Hon Anthony WedgwoodGourlay, HarryNewens, Stanley
Bennett, Andrew (Stockport N)Graham, TedOakes, Rt Hon Gordon
Bidwell, SydneyGrant, George (Morpeth)Ogden, Eric
Booth, Rt Hon AlbertGrant, John (Islington C)O'Halloran, Michael
Boothroyd, Miss BettyHamilton, James (Bothwell)O'Neill, Martin
Bottomley, Rt Hon Arthur (M'brough)Hamilton, W. W. (Central Fife)Owen, Rt Hon Dr David
Bradley, TomHardy, PeterPalmer, Arthur
Bray, Dr JeremyHarrison, Rt Hon WalterPark, George
Brown, Hugh D. (Provan)Hart, Rt Hon Dame JudithParker, John
Brown, Robert C. (Newcastle W)Hattersley, Rt Hon RoyParry, Robert
Brown, Ron (Edinburgh, Leith)Haynes, FrankPendry, Tom
Buchan, NormanHealey, Rt Hon DenisPenhaligon, David
Callaghan, Rt Hon. J. (Cardiff SE)Heffer, Eric S.Powell, Raymond (Ogmore)
Callaghan, Jim (Middleton & P)Hogg, Norman (E Dunbartonshire)Prescott, John
Campbell, IanHolland, Stuart (L'beth, Vauxhall)Price, Christopher (Lewisham West)
Campbell-Savours, DaleHome Robertson, JohnRace, Reg
Canavan, DennisHomewood, WilliamRadice, Giles
Cant, R. B.Hooley, FrankRees, Rt Hon Merlyn (Leeds South)
Carmichael, NeilHoram, JohnRichardson, Miss Jo
Carter-Jones, LewisHowells, GeraintRoberts, Albert (Normanton)
Clark, Dr David (South Shields)Huckfield, LesRoberts, Allan (Bootle)
Cocks, Rt Hon Michael (Bristol S)Hudson Davies, Gwilym EdnyfedRoberts, Ernest (Hackney North)
Cohen, StanleyHughes, Mark (Durham)Roberts, Gwilym (Cannock)
Coleman, DonaldHughes, Robert (Aberdeen North)Robertson, George
Concannon, Rt Hon J. D.Hughes, Roy (Newport)Robinson, Geoffrey (Coventry NW)
Conlan, BernardJanner, Hon GrevilleRodgers, Rt Hon William
Cook, Robin F.Jay, Rt Hon DouglasRooker, J. W.
Cowans, HarryJohn, BrynmorRoper, John
Cox, Tom (Wandsworth, Tooting)Johnson, James (Hull West)Ross, Ernest (Dundee West)
Craigen, J. M. (Glasgow, Maryhill)Johnson, Walter (Derby South)Ross, Stephen (Isle of Wight)
Crowther, J. S.Jones, Rt Hon Alec (Rhondda)Rowlands, Ted
Cryer, BobJones, Barry (East Flint)Ryman, John
Cunliffe, LawrenceJones, Dan (Burnley)Sandelson, Neville
Cunningham, Dr John (Whitehaven)Kaufman, Rt Hon GeraldSever, John
Dalyell, TamKilroy-Silk, RobertSheerman, Barry
Davidson, ArthurKinnock, NeilSheldon, Rt Hon Robert (A'ton-u-L)
Davies, Rt Hon Denzil (Llanelli)Lambie, DavidShore, Rt Hon Peter (Step and Pop)
Davies, Ifor (Gower)Lamborn, HarryShort, Mrs Renée
Davis, Clinton, (Hackney Central)Lamond, JamesSilkin, Rt Hon John (Deptford)
Davis, Terry (B'rm'ham, Stechford)Leadbitter, TedSilkin, Rt Hon S. C. (Dulwich)
Deakins, EricLeighton, RonaldSilverman, Julius
Dempsey, JamesLestor, Miss Joan (Eton & Slough)Skinner, Dennis
Dewar, DonaldLewis, Ron (Carlisle)Smith, Rt Hon J. (North Lanarkshire)
Dixon, DonaldLitherland, RobertSnape, Peter
Dobson, FrankLofthouse, GeoffreySoley, Clive
Dormand, JackLyon, Alexander (York)Spearing, Nigel
Douglas, DickLyons, Edward (Bradford West)Spriggs, Leslie
Douglas-Mann, BruceMcCartney, HughStallard, A. W.
Dubs, AlfredMcDonald, Dr OonaghSteel, Rt Hon David
Duffy, A. E. P.McElhone, FrankStoddart, David
Dunn, James A. (Liverpool, Kirkdale)McGuire, Michael (Ince)Stott, Roger
Dunnett, JackMcKay, Allen (Penistone)Strang, Gavin
Dunwoody, Mrs. GwynethMcKelvey, WilliamStraw, Jack
Eadie, AlexMacKenzie, Rt Hon GregorSummerskill, Hon Dr Shirley
Eastham, KenMaclennan, RobertTaylor, Mrs Ann (Bolton West)
Edwards, Robert (Wolv SE)McMahon, AndrewThomas, Dafydd (Merioneth)
Ellis, Raymond (NE Derbyshire)McMillan, Tom (Glasgow, Central)Thomas, Jeffrey (Abertillery)
Ellis, Tom (Wrexham)McNally, ThomasThomas, Mike (Newcastle East)
English, MichaelMcWilliam, JohnThomas, Dr Roger (Carmarthen)
Ennals, Rt Hon DavidMagee, BryanThorne, Stan (Preston South)
Evans, Ioan (Aberdare)Marks, KennethTilley, John
Ewing, HarryMarshall, David (Gl'sgow, Shettles'n)Torney, Tom
Faulds, AndrewMarshall, Dr Edmund (Goole)Urwin, Rt Hon Tom
Field, FrankMarshall, Jim (Leicester South)Varley, Rt Hon Eric G.
Fitch, AlanMartin, Michael (Gl'gow, Springb'rn)Wainwright, Edwin (Dearne Valley)
Flannery, MartinMason, Rt Hon RoyWalker, Rt Hon Harold (Doncaster)
Fletcher, L. R. (Ilkeston)Maxton, JohnWatkins, David
Fletcher, Ted (Darlington)Maynard, Miss JoanWeetch, Ken

The House divided: Ayes 256, Noes 312.

Wellbeloved, JamesWilliams, Rt Hon Alan (Swansea W)Wrigglesworth, Ian
Welsh, MichaelWilliams, Sir Thomas (Warrington)Wright, Sheila
White, Frank R. (Bury & Radcliffe)Wilson, Gordon (Dundee East)Young, David (Bolton East)
White, James (Glasgow, Pollok)Wilson, Rt Hon Sir Harold (Huyton)
Whitehead, PhillipWilson, William (Coventry SE)TELLERS FOR THE AYES:
Whitlock, WilliamWinnick, DavidMr. James Tinn and
Wigley, DafyddWoodall, AlecMr. John Evans.
Willey, Rt Hon FrederickWoolmer, Kenneth
NOES
Adley, RobertEggar, TimothyKing, Rt Hon Tom
Alexander, RichardElliott, Sir WilliamKitson, Sir Timothy
Alison, MichaelEmery, PeterKnox, David
Amery, Rt Hon JulianEyre, ReginaldLamont, Norman
Ancram, MichaelFairgrieve, RussellLang, Ian
Aspinwall, JackFaith, Mrs SheilaLangford-Holt, Sir John
Atkins, Robert (Preston North)Farr, JohnLatham, Michael
Atkinson, David (B'mouth, East)Fell, AnthonyLawrence, Ivan
Baker, Nicholas (North Dorset)Fenner, Mrs PeggyLawson, Nigel
Banks, RobertFinsberg, GeoffreyLee, John
Beaumont-Dark, AnthonyFisher, Sir NigelLennox-Boyd, Hon Mark
Bell, RonaldFletcher, Alexander (Edinburgh N)Lester, Jim (Beeston)
Bendall, VivianFletcher-Cooke, CharlesLewis, Kenneth (Rutland)
Bennett, Sir Frederic (Torbay)Fookes, Miss JanetLloyd, Ian (Havant & Waterloo)
Benyon, Thomas (Abingdon)Forman, NigelLloyd, Peter (Fareham)
Benyon, W. (Buckingham)Fowler, Rt Hon NormanLoveridge, John
Best, KeithFox, MarcusLuce, Richard
Bevan, David GilroyFraser, Peter (South Angus)Lyell, Nicholas
Biffen, Rt Hon JohnFry, PeterMcAdden, Sir Stephen
Biggs-Davison, JohnGalbraith, Hon T. G. D.McCrindle, Robert
Blackburn, JohnGardiner, George (Reigate)Macfarlane, Neil
Body, RichardGardner, Edward (South Fylde)MacGregor, John
Bonsor, Sir NicholasGarel-Jones, TristanMacKay, John (Argyll)
Boscawen, Hon RobertGilmour, Rt Hon Sir IanMcNair-Wilson, Michael (Newbury)
Bottomley, Peter (Woolwich West)Glyn, Dr AlanMcNair-Wilson, Patrick (New Forest)
Bowden, AndrewGoodhew, VictorMcQuarrie, Albert
Boyson, Dr RhodesGoodlad, AlastairMadel, David
Braine, Sir BernardGorst, JohnMajor, John
Bright, GrahamGow, IanMarland, Paul
Brinton, TimGower, Sir RaymondMarlow, Tony
Brittan, LeonGrant, Anthony (Harrow C)Marshall, Michael (Arundel)
Brocklebank-Fowler, ChristopherGray, HamishMates, Michael
Brooke, Hon PeterGreenway, HarryMather, Carol
Brotherton, MichaelGrieve, PercyMaude, Rt Hon Angus
Brown, Michael (Brigg & Sc'thorpe)
Browne, John (Winchester)Griffiths, Peter (Portsmouth N)Mawby, Ray
Bruce-Gardyne, JohnGrylls, MichaelMawhinney, Dr Brian
Bryan, Sir PaulGlimmer, John SelwynMaxwell-Hyslop, Robin
Buck, AntonyHamilton, Hon Archle (Eps'm&Ew'll)Mayhew, Patrick
Budgen, NickHamilton, Michael (Salisbury)Mellor, David
Bulmer, EsmondHampson, Dr KeithMeyer, Sir Anthony
Burden, F. A.Hannam, JohnMiller, Hal (Bromsgrove & Redditch)
Butcher, JohnHaselhurst, AlanMills, Iain (Meriden)
Butler, Hon AdamHastings, StephenMills, Peter (West Devon)
Cadbury, JocelynHavers, Rt Hon Sir MichaelMiscampbell, Norman
Carlisle, John (Luton West)Hawkins, PaulMitchell, David (Basingstoke)
Carlisle, Kenneth (Lincoln)Hawksley, WarrenMoate, Roger
Carlisle, Rt Hon Mark (Runcorn)Hayhoe, BarneyMolyneaux, James
Chalker, Mrs. LyndaHeath, Rt Hon EdwardMonro, Hector
Channon, PaulHeddle, JohnMontgomery, Fergus
Chapman, SydneyHenderson, BarryMoore, John
Churchill, W. S.Heseltine, Rt Hon MichaelMorgan, Geraint
Clark, Hon Alan (Plymouth, Sutton)Hicks, RobertMorris, Michael (Northampton, Sth)
Clark, Dr William (Croydon South)Higgins, Rt Hon Terence L.Morrison, Hon Charles (Devizes)
Clarke, Kenneth (Rushcliffe)Hill, JamesMorrison, Hon Peter (City of Chester)
Cockeram, EricHogg, Hon Douglas (Grantham)Mudd, David
Colvin, MichaelHolland, Philip (Carlton)Murphy, Christopher
Cope, JohnHooson, TomMyles, David
Cormack, PatrickHordern, PeterNeale, Gerrard
Corrie, JohnHowe, Rt Hon Sir GeoffreyNeedham, Richard
Costain, A. P.Howell, Rt Hon David (Guildford)Nelson, Anthony
Cranborne, ViscountHowell, Ralph (North Norfolk)Neubert, Michael
Critchley, JulianHunt, David (Wirral)Newton, Tony
Crouch, DavidHunt, John (Ravensbourne)Normanton, Tom
Dickens, GeoffreyKurd, Hon DouglasOnslow, Cranley
Dorrell, StephenIrving, Charles (Cheltenham)Oppenheim, Rt Hon Mrs Sally
Douglas-Hamilton, Lord JamesJenkin, Rt Hon PatrickOsborn, John
Dover, DenshoreJessel, TobyPage, John (Harrow, West)
du Cann, Rt Hon EdwardJohnson Smith, GeoffreyPage, Rt Hon R. Graham (Crosby)
Dunlop, JohnJopling, Rt Hon MichaelParkinson, Cecil
Dunn, Robert (Dartford)Joseph, Rt Hon Sir KeithParris, Matthew
Durant, TonyKaberry, Sir DonaldPatten, Christopher (Bath)
Eden, Rt Hon Sir JohnKellett-Bowman, Mrs ElainePatten, John (Oxford)
Edwards, Rt Hon N. (Pembroke)Kilfedder, James A.Pattie, Geoffrey
Pawsey, JamesShepherd, Richard(Aldridge-Br'hills)Trotter, Neville
Percival, Sir IanShersby, Michaelvan Straubenzee, W. R.
Peyton, Rt Hon JohnSilvester, FredVaughan, Dr Gerard
Pink, R. BonnerSims, RogerViggers, Peter
Pollock, AlexanderSkeet, T. H. H.Waddington, David
Porter, GeorgeSmith, Dudley (War. and Leam ton)Wakeham, John
Powell, Rt Hon J. Enoch (S Down)Speed, KeithWaldegrave, Hon William
Prentice, Rt Hon RegSpeller, TonyWalker, Bill (Perth & E Perthshire)
Price, David (Eastleigh)Spence, JohnWalker-Smith, Rt Hon Sir Derek
Prior, Rt Hon JamesSpicer, Jim (West Dorset)Wall, Patrick
Proctor, K. HarveySproat, IainWaller, Gary
Pym, Rt Hon FrancisSquire, RobinWalters, Dennis
Raison, TimothyStainton, KeithWard, John
Rathbone, TimStanbrook, IvorWarren, Kenneth
Rees, Peter (Dover and Deal)Stanley, JohnWatson, John
Rees-Davies, W. R.Steen, AnthonyWells, John (Maidstone)
Renton, TimStevens, MartinWells, Bowen (Hert'rd & Stev'nage)
Rhodes James, RobertStewart, Ian (Hitchin)Wheeler, John
Rhys Williams, Sir BrandonStewart, John (East Renfrewshire)Whitelaw, Rt Hon William
Ridley, Hon NicholasStokes, JohnWhitney, Raymond
Ridsdale, JulianStradling Thomas, J.Wickenden, Keith
Rifkind, MalcolmTaylor, Robert (Croydon NW)Wiggin, Jerry
Rippon, Rt Hon GeoffreyTebbit, NormanWilkinson, John
Roberts, Michael (Cardiff NW)Temple-Morris, PeterWilliams, Delwyn (Montgomery)
Roberts, Wyn (Conway)Thatcher, Rt Hon Mrs MargaretWinterton, Nicholas
Rost, PeterThomas, Rt Hon Peter (Hendon S)Wolfson, Mark
Royle, Sir AnthonyThompson, DonaldYoung, Sir George (Acton)
Sainsbury, Hon TimothyThorne, Neil (Ilford South)Younger, Rt Hon George
St. John-Stevas, Rt Hon NormanThornton, Malcolm
Scott, NicholasTownend, John (Bridlington)TELLERS FOR THE NOES:
Shelton, William (Streatham)Townsend, Cyril D. (Bexleyheath)Mr. Spencer Le Marchant and
Shepherd, Colin (Hereford)Trippier, DavidMr. Anthony Berry.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 32 (Questions on amendments), and agreed to.

MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to, pursuant to Standing Order No. 18 (Business of Supply).

Resolved,That this House welcomes the Government's decision on Rolls-Royce, expresses its appreciation of the services of the members of the National Enterprise Board who have recently resigned, welcomes the appointment of a strong new board to carry forward the work of the National Enterprise Board and the intention to make further appointments, and endorses the Government's determination to strengthen the role of private capital in industrial reconstruction.