Loans to Successor Company to Rank as Priority Creditor

– in the House of Commons at 12:00 am on 11th February 1980.

Alert me about debates like this

The Secretary of State shall stipulate as a condition prior to its nomination under this Act that the successor company shall have included in its initial articles and memorandum the necessary provisions to ensure that where the Secretary of State or any other Secretary shall advance moneys by way of loan to the successor company the loan shall rank as a priority creditor in any winding-up, after the claims for salaries and wages.'—[Mr. Les Huckfield.]

Brought up, and read the First time.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton 4:17 pm, 11th February 1980

I beg to move, That the clause be read a Second time.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

With this we may discuss the following:

New clause 15—Government funding.

Government amendment No. 22.

Amendment No. 23, in clause 5, page 5, line 8, after 'company', insert

'except that he shall not subscribe for or acquire such shares while the company is making losses, unless so authorised pursuant to affirmative resolutions of each House of Parliament'.

Amendment No. 24, in clause 5, page line 11, at end insert'; or (c) make loans to the successor company for capital investment, for the development of a particular project, or for long term research on such terms as may be agreed between the Secretary of State and that company when the prevailing rate of interest on the open market would prevent or inhibit such investment project or research.'.

Government amendment No. 28.

Amendment No. 36, in clause 7, page 6, line 35, leave out 'as a member' and insert 'as an existing holder of shares or other securities of the successor company or of any subsidiary'.

Government amendment No. 51.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

We wish to stick strictly to the wishes of the House, but there is a difficulty because we have not yet been presented with the memorandum and articles of association for the publicly quoted company, British Aerospace Limited. We have pressed the Minister and the Under-Secretary of State in Standing Committee since 27 November but all that the Government have done is to present us with the memorandum and articles of association for the private company.

We have been assured that the memorandum and articles of association of the public company are not dissimilar to those of the private company. However, the purpose of the Bill is to pave the way for the setting up of a publicly quoted company.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

If my hon. Friend intends to be helpful, I shall give way.

Photo of Mr Arthur Lewis Mr Arthur Lewis , Newham North West

There is no need for sarcasm. I was going to be helpful.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

I am sorry if my hon. Friend thought that I was being sarcastic. I was trying to be faintly humorous.

Photo of Mr Arthur Lewis Mr Arthur Lewis , Newham North West

Why make the remark? Why not wait and see? I was about to suggest that perhaps this is a matter for Mr. Speaker because his duty is to help hon. Members obtain relevant papers. I intend to suggest that Mr. Speaker can decide whether the House is entitled to those papers.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

I am deeply grateful to the hon. Member for the point that he has raised, because it gives me an opportunity to tell the House that I looked at this matter before we turned to our present stage in considering the Bill. I am satisfied that I can rule only on the content of the Bill. That is the reason for my selection of amendments. I understand that the hon. Member for Nuneaton (Mr. Huckfield) has his difficulties, but it is no good his looking to me to help him over that hurdle. Perhaps he will be kind enough to turn to the long group of new clauses and amendments being considered together.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

I do not of course wish in any way to question your selection of amendments, Mr. Speaker, and I thank my hon. Friend the Member for Newham, North-West for his helpful intervention. He realises the problems we face.

If my hon. Friends and I apppear to be groping for information occasionally, it is because we are still dealing with a nebulous concept—a publicly quoted company that we cannot understand because we cannot examine its memorandum and articles of association.

Photo of Dr Maurice Miller Dr Maurice Miller , East Kilbride

Does my hon. Friend accept that, although no one is trying to cast doubt on the fact that Mr. Speaker has made a right and fair selection of amendments, if the memorandum and articles of association had been available, it might have influenced Mr. Speaker in the kind of amendments that he selected?

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. If this is not a private quarrel, perhaps I may join in. In selecting amendments I am influenced solely by the Bill that is before us. On that basis, if the hon. Member for Nuneaton is groping in the course of the day, all will be well so long as he gropes in order.

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

I am not sure whether the hon. Member for Nuneaton (Mr. Huckfield) was raising a point of order, but I think that it might be helpful to explain what the hon. Gentleman knows well—that the draft memorandum in the Library, which was put there deliberately to assist our proceedings, is the draft memorandum of the successor company, as it is called in the Bill. That draft has been there since the Christmas Recess and has been available for reference.

Secondly, it might be helpful—

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order, I did not call the hon. Gentleman to address the House. Is he raising a point of order?

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

I said, Mr. Speaker, that I was not sure whether the hon. Member for Nuneaton was raising a point of order. However, he gave way to me.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. It is clear that I do not have the control I thought I had. I thought that the hon. Member for Nuneaton had submitted a point of order to me before beginning his speech. However, if he has now given way to the Minister we can continue.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

I think that we are reaching the point at which I should intervene in my own speech, Mr. Speaker. I am not blaming you for intervening.

The explanation given by the Minister of State is indicative of the general range of replies that he has given throughout the Committee stage since 27 November. It is monstrous for him still not to have provided the memorandum and articles of association for the publicly quoted company, British Aerospace Ltd. It is an insult for him to ask the House to proceed with the remaining stages of the Bill when we do not know what kind of company it will be, the activities in which it will engage or the shape, structure, form and aspirations that it will have. The Minister's action is an insult to the House and to workers in the industry and taxpayers who may well have to suffer the consequences of the Government's folly.

The crushing insult occurred when the most crucial part of the draft articles of association—the part that was supposed to prevent the company being taken over by foreigners, which many of us consider to be the most vital part of the Bill—was made available in the Library only last Friday. For the Government not to have put that in its final revised form into the Library before last Friday indicates a callous disrespect for the House and a monumental disregard for those who work in British Aerospace. The Minister of State is concealing information from us—information that we and our constituents need in order to make a judgment on the Government's proposals.

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

I am sorry that the hon. Member for Nuneaton should make these charges so early in the Report stage. However, he must not misrepresent the situation. He knows as well as I do that the draft article on foreign ownership and control was lodged in the Library during the Christmas Recess. The hon. Gentleman was sent a copy. A further draft was lodged in the Library at the end of last week—the hon. Gentleman was sent a copy of that, too—and that took into account certain points that the Opposition made in Committee. I hope that the hon.

Gentleman will not continue to mislead the House in this way.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

The Minister of State is misleading the House outrageously. In the intervening stages the company that he calls the shell company will have the Secretary of State as sole shareholder. As such the right hon. Gentleman can totally change the memorandum and articles of association while the company remains in that form. The only way in which these articles and the memorandum have yet appeared is in relation to the private company.

Before we can debate the serious issues that are raised by the Bill we have to see the memorandum and articles of association of the publicly quoted, fully fledged successor company. The Minister of State has not seen fit to provide them and that is an insult to the House. To ask the House to give the Billa Third Reading when we cannot understand it because we do not know what is intended is completely wrong. We have been placed in that position by the Minister's concealment and inactivity. We shall not let him get off this hook because we are sick and tired of his concealing information and we shall take serious note of this further inactivity on his part.

Photo of Lieut-Colonel Dick Crawshaw Lieut-Colonel Dick Crawshaw , Liverpool Toxteth

Order. The hon. Member has made the point that the documents are not available to the House. He has said that he will be returning to this matter time and again. If the documents are not available, the Chair cannot help him. He has made the point forcibly but the House will have to manage with what is before it. We have already been 15 minutes on this and we havenot even started on the new clause. I hope that the hon. Gentleman will now get on with it.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton 4:30 pm, 11th February 1980

Obviously, Mr. Deputy Speaker, I am anxious to make progress, but I thought it only right to describe our difficulties, because my hon. Friends will be groping for information when dealing with the new company because they do not have the articles. That is the mood in which we are forced to approach this debate.

We are concerned in these debates with the developing financial relationship between the Department of Industry and the new company. The amendments and new clauses have been adequately grouped to enable us to deal with more wide-ranging aspects.

In new clause 6, for example, we have tried to provide a formula to ensure that the Government get their money back. This company will be privileged—it will be tantamount to a private monopoly over large areas of industry, with completely inadequate accountability. We do not want to give it any more privileges. The company would not exist at all but for the large amounts of money put into the industry by the last Labour Government. We hope that it will be successful; if it is, it will be because of that money. New clause 6 would give the taxpayers'interests the necessary priority.

Newclause 15 deals with one of the most criticial issues. Unless we get satisfaction here, we do not see how we can have civil aircraft projects in this country again. We cannot see how there will be sufficient money for research and development under the Industry Act, the Civil Aviation Act 1949 or the Science and Technology Act 1965. The Government have an overriding requirement to reduce what they call the public sector borrowing requirement so we wanted some provision for payments for the launching of new projects in the national interest. That is the object of new clause 15(2).

We also want the Secretary of State to have a general power to put money into the company. Under amendment No. 3, clause 1(2)(b) would refer to the Aircraft and Shipbuilding Industries Act and I am sorry if the drafting of the new clause fails to make that clear. This company will face research and development costs of at least £500 million and possibly £1,000 million over the next five years. We do not see how that money will be obtainable without a Treasury guarantee.

The Airbus entry fee—we may not see a pay-off on that for seven or 10 years—was at least £250 million. The 146 project required a commitment of £250 million and the continuation of the series of copies of the BAC 111 provided for by the last Government also required substantial injections of public money.

We do not see that sort of money coming from the moneylenders and private sources. As the Financial Times said in its editorial on 24 July, no civil aircraft project has been launched since the war in this country without some Government assistance. That is the reason for this provision in new clause 15.

On amendment No. 23, our concern is that the new fully fledged successor company will be privileged to have the money put in by the previous Labour Government. Also, it will be a privately owned, non-publicly accountable monopolicy in many areas of its own production.

Because of the relationship which we understand will obtain for a short time between the Department of Industry and the new successor company, we are concerned that, because, for a transitional period, the Secretary of State will be a minority shareholder, he may be tempted to increase his shareholding, with the result, if the company was not making adequate returns, that he could be bolstering private shareholding interests. If the company is having a difficult period, it will not be in the taxpayers' interest to bail out private interests in that way. The Secretary of State may think that that decision is in the public interest, but if so we should be able to debate it.

That is the purpose of amendment No. 23. If the Secretary of State feels impelled to put more money into the company or acquire more shares—I am not sure how he will do that under the investment limit he intends to fix for himself under clause 7—we want to know in what circumstances it will be beneficial to the country to bail out private shareholders. For that reason, we want an adequate opportunity under the affirmative resolution procedure to debate these matters.

The other important amendment we should like implemented is amendment No. 24. To many of us this is a key amendment. It deals with the vital question of how private money lending sources, bank loans, hot money—I presume there may be some hot money going into and out of this company—or the market mechanism will deal with long-term projects which may not make a profit for 15 or 20 years. Many of those projects will not show an adequate return during the whole time they are in operation.

In aviation terms, we are dealing with projects which take a long time to deve- lop and, when developed they may fail. The Secretary of State has acknowledged that that kind of high risk project exists in the sectors of industry in which the National Enterprise Board has interests. He has already said that the market mechanism cannot adequately deal with that. We are not sure that the market mechanism or the Government's monetary policies will be able to deal with projects of that kind. For that reason, we want the Secretary of State to be able to make available moneys to assist longer term research projects when the prevailing rate of interest or the conditions of the money market prevent those projects going ahead.

This batch of amendments and new clauses is critical. We said thoroughout the Committee stage that we could not understand how the new company would be able to continue in its entirety. Without an adequate Treasury guarantee, often faced with extremely high short-term rates of interest and a lack of investment or loans because of the longer term gestation period of projects, we can see all kinds of difficulties, culminating in the company being forced to sell off its more profitable parts. We are led to that conclusion because of the inclusion on the Amendment Paper of further Government amendments that will pave the way for precisely that.

We did not hear much reference by the Minister of State in Committee to the setting up of further subsidiary companies of the successor company. But it is significant that over the weekend there appeared on the Notice Paper, for the first time, provision for the Secretary of State to take up shares in subsidiaries of the successor company. It appears to us, therefore, that the Secretary of State has perhaps foreseen the possibility of the splitting up of certain of the activities of the new company. That is what we are confronted with, and that is what concerns us.

We cannot understand how the Secretary of State is able to insist, as he has tried to do, that the company will not be split up and that parts of it will not be hived off or flogged to friends of the Conservative Party. We cannot understand how the successor company will be able to remain intact in the market conditions in which it will operate.

We are dealing with an industry in which Governments all over the world are becoming more and more involved. We cannot escape the fact that in the United States of America, the land of free-ranging capitalism, even McDonnell Douglas and Boeing sell almost 80 per cent. of their products to the Government. [Interruption.] The hon. Member for Dorking (Mr. Wickenden) was not involved in the Committee stage and has not taken any interest in the Bill so far, but if he doubts me let me tell him that I am only quoting from publicly available research sources. If he has some better information I will certainly give way to him. Clearly he has not because he has not involved himself with the Bill until today.

There is a great deal of Government involvement in this industry in the United States. It is almost totally nationalised in France, and the German Government are increasingly involving themselves in their private companies. There is also Government involvement in Italy, and in most other European aerospace industries. Just at the time when most other Governments are increasing their involvement, and when there is a real threat of American dominance of aviation markets all over the world—through, for example, the success of the Airbus project and European collaboration on the basis of nationalised aerospace industries—this Government have decided that it is time to pull out.

That threatens the future interests of aerospace workers and the aerospace industry. We believe that we shall see a pull-out by this Government just at the time when the British aerospace industry is beginning to match up to its full capacity and range of capabilities. We are dealing with a highly successful industry and it is highly successful because of public money. The hon. Member for Preston, North (Mr. Atkins) chuckles. We know that he spent approximately 19 sittings of the Committee in Committee Room 9 filling out his share applications. We know that he has not yet spoken on the Bill and that the people he represents are waiting to hear him speak.

Photo of Mr Robert Atkins Mr Robert Atkins , Preston North

That is not true. I made a speech on Second Reading of the Bill, so would the hon. Member care to withdraw that last remark?

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

I know that the hon. Gentleman pays only scant attention to the House. I was referring to our proceedings in Standing Committee G in Committee Room 9.

Photo of Mr Robert Atkins Mr Robert Atkins , Preston North

The hon. Gentleman did not say that.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

The hon. Gentleman ought to listen more carefully. He did not listen to one word in Committee, and he is not listening now.

Photo of Mr Robert Atkins Mr Robert Atkins , Preston North

No, because the hon. Gentleman is so boring.

Photo of Dr Maurice Miller Dr Maurice Miller , East Kilbride

In any case, is not the hon. Member for Preston, North (Mr. Atkins) exemplifying the great phrase of golfers that one does not drive for show but putts for dough? When the hon. Gentleman spoke on Second Reading he was speaking for show, and he ought to have involved himself in the Committee proceedings. That was the more important aspect of the Bill.

Photo of Lieut-Colonel Dick Crawshaw Lieut-Colonel Dick Crawshaw , Liverpool Toxteth

Order. The point has been made. It is not customary to make continuing references to other hon. Members who were on the Committee.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

I do not intend to continue with those references, Mr. Deputy Speaker, but we have to get certain things on record for the sake of the constituents of the hon. Member for Preston, North.

This batch of amendments and new clauses deals with the critical question of the financial relationship between the Government and the new successor company. I wish that we could know what kind of company it will be, what the Government's intentions are regarding their percentage of shareholding, their intentions about the directors they want to appoint, and the reporting responsibilities and accountability the Government will expect from them. We do not know those things. We spent 19 Committee sittings trying to get that information. I hope that we shall get some enlightenment now that we have returned to the House.

I know that my hon. Friends are anxious to press these points, though I doubt whether the Minister's hon. Friends are because they have shown no interest in them so far; they did not speak on the Bill in Committee. I hope that the Minister will provide us with more information. If we do not get more information this afternoon, I shall be forced to ask my hon. Friends to join with me in the Division Lobby tonight in support of the new clause.

Photo of Mr Stanley Thorne Mr Stanley Thorne , Preston South

What concerns many Opposition Members and, I am sure, many Conservative Members is that we should have a full consideration of these amendments without incurring your wrath, Mr. Deputy Speaker, because we are rehashing arguments that we had in Committee. But it is very difficult not to be guilty of doing that. I have just been looking through the amendments again. Most are Government amendments. One wonders why some of them were not dealt with in Committee and why we are now faced with the wide-ranging discussions that they involve.

My hon. Friend the Member for Nuneaton (Mr. Huckfield) raised the question of the research commitment that the aerospace industry will have in the future, the need for finance for innovation, and the tremendous cost involved in producing aircraft today, with rising inflation which affects not only ourselves but other countries competing in this market. My hon. Friend asked particularly where the massive sums necessary were to come from.

I think that it is true to say—and obviously the Ministers have the responsibility of proving what I am about to say to be false, if that is so—that prior to the public ownership of this industry, massive inputs of public funds, taxpayers' money, went into it. Then there was no quarrel. Even the Conservative Governments prior to 1964 and post-1970 put finance into the industry. Indeed, it would have been difficult for the aircraft industry to compete favourably in the world without the injection of State funds.

That is why Labour Members are perturbed about the argument that we heard in Committee, that in some ways we are protecting public funds by instituting this legislation, when we know from both history and experience that no aircraft industry, throughout the world, can continue to produce in the world market and to compete without a major Government input.

It seems to me that Conservative Members are relying on a tremendous investment from the public, investors generally, in the successor company, which will enable them to offset some of the money that they would have been called upon to provide, on the basis that this is a highly profitable industry. As you know, Mr. Deputy Speaker, it is a highly profitable industry because it has guaranteed Government contracts for military aircraft. That is what makes it highly profitable. Part of the industry is involved in aerodynamics—again, a highly profitable and, in the past, highly subsidised part of the industry.

The absence of investment in the industry, which faces great competition from some industries, at any rate, will inevitably mean that the industry will turn back to the Government for investment. That is why some of these amendments raise the question whether, it having been made a private company and having been loaned money, there will be any guarantee that loans will be repaid should that become necessary at some future date, and in what way we are guaranteeing that the successor company will not be as dependent on Government funds as, previously, private companies in this country have been.

You will be readily aware, Mr. Deputy Speaker, that there is no way in which we can guarantee the successor company not making approaches for further loans from the Chancellor of the Exchequer. At present, several British manufacturing industries face difficulties—in some cases, because of the penetration of imports. They face losses. In those circumstances, they seek Government aid. Daily in this Chamber we have evidence that the present Government have no intention of assisting some of those industries in this period of recession in the Western capitalist world. More evidence of that emerged from earlier questions today about the steel industry.

If the Government are right, investors who plough funds into the aircraft industry clearly do so in search of high profits. What concerns many workers in the industry is whether, with the sort of greed that promotes this major investment—we are not talking about the £100 sums from various people who think that they can spare that sort of amount for a little flutter; we are talking about millions of pounds—the sort of people who are prepared to put millions of pounds into the aircraft industry are the people who will, in a short time, be looking for an improvement in the return on their investment.

What will that mean? Will it mean a major confrontation in industrial relations terms with the workers in the industry about whether productivity is at a level that will gain investors the sort of profit that they anticipate?

It is for this reason and several others that we are concerned to get a very clear picture from the Government of their intentions in terms of the financial support that this industry will need.

I make no apology for raising the question whether an industry that relies so heavily on the manufacture of military aircraft and other weapons connected with the arms race today should be in private hands. It is totally immoral for private profit to be made out of this sort of investment in military aircraft and subsequently the use of public funds when, as will be inevitable, the private owners in the successor company come back to this House cap in hand for further millions of pounds to innovate and to develop, perhaps, further military weapons in the aircraft industry.

You will recall, Mr. Deputy Speaker, the old saying that war is a terrible thing, but it is a terribly profitable thing in the present world situation. With the sort of language that we hear from the Government Front Bench in terms of the cold war, in this type of industry there are those who are looking to making a killing in terms of massive profits.

I deplore the fact that we are having this debate on a Bill of this type, because it should never happen. We should not, in any circumstances, allow this industry to go into private hands, for some of the reasons that I have indicated.

As you would probably say at this juncture, Mr. Deputy Speaker, my remarks have been like a Third Reading speech, and perhaps I can develop them when we reach Third Reading.

5 pm

Photo of Dr Maurice Miller Dr Maurice Miller , East Kilbride

My hon. Friend the Member for Preston, South (Mr. Thorne) has forcefully pointed out that we do not want this Bill. We believe that the industry is viable and that it does great credit to its 68,000 employees. It is a credit to the country. Indeed, the Minister paid tribute to it. It is on record that the chairman of British Aerospace is proud of the way in which the industry has developed. That was made clear in his recent new year message, both to the workers of that industry and to the country.

However, we must accept the unpalatable fact that, as a result of the Government's adequate majority, they can enact such a Bill. That was evident in Committee. Apart from one minor issue, the Bill was not amended. It is strange that the Government have brought forward several amendments that could have been discussed in Committee.

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel

If the hon. Gentleman looks down the list of amendments, he will notice that a Government amendment has been brought forward in order to implement his suggestion of tidying up some of the English in the Bill.

Photo of Dr Maurice Miller Dr Maurice Miller , East Kilbride

I am grateful for that small amount of consideration. However, the amendment will have no effect on the implications of the Bill.

I wish to confine my remarks to supporting new clause 15. If the industry is to be taken out of public hands and denationalised, we must ensure that it remains intact. One way of realising that possibility would be if finance were made available. New clause 15 sets out ourintention to make payments available to the new company should it require them.

I recently received a letter from the Aerospace Association—a group within the Engineers' and Managers' Association—which says: In reponse to our representationsthe Minister of State has said that the future of the Company will be a matter for the successor company to decide. That is what we are worried about. Although we accept that statements made by the Minister are made in good faith, they do not bind the Government or any successor to the Minister or Secretary of State. The letter points out that the Minister does not regard hiving off as a probable course. However, we must accept that the affairs of the new company will be entirely in its hands. Therefore, anything can happen.

Apart from our total objection to denationalising a successful industry, one of our main arguments in Committee that is at the root of this new clause was that hiving off might take place. The lucrative parts of the industry could be sold into private hands or to private groups. The other aspect of our major onslaught on the Bill concerns the possibility—no more than that—that the industry could be eaten into by foreign interests. There is no adequate safeguard to prevent the industry from being taken over—at least, from the point of view of influence—by foreign interests.

The first pillar of our argument concerns the articles of association. The new company, as well as the old, has a vast range of activities that must be encouraged. The present company is carrying out many of those activities and they are far too numerous to mention. However, any activity in the engineering, woodworking, paint, glass or ceramic industries—among others—can be carried out by the new company. We know from worldwide experience that when one is dealing with the ramifications of such an industry, and with the tremendous sums of money necessary for research and development, it is essential that the industry should not be jeopardised through lack of finance. Money must be spent without any regard for short-term returns, because many of those returns cannot be expected for a long time. Therefore, the Government should commit themselves to ensuring that finance is available.

The famous money market appears to be playing a greater part in the lives of everyone. If that market is unable to comply with demand, Treasury finance should be made available. It is possible that money will be made available from the market on certain conditions. Those conditions might be based on two situations. An investor might be happy with an immediate or short term return of 5 per cent. That is bad. Whatever one says about the industry, it would never have achieved what it has, not only in this country but elsewhere, if it did not take risks. Risks must be taken. The 5 per cent. mentality is not necessarily right for the company.

On the other hand, a larger dividend might be preferred, but the money may not be available unless returns can be expected in a short time. It is a distinct possibility that the market will be touchy about making large sums of money available to the industry without being sure of an almost immediate profit.

We can look at the position in other countries to validate the request that the Government should assist the company should it be required. In France, the largest company is a nationalised company—Aerospatiale. Although there is no nationalised airframe company in the United States, Lockheed and Boeing depend to a great extent on Government contracts. Without them, they would be in great difficulty. Not long ago Lockheed was in great difficulty until a large sum of money was underwritten by the American Government.

The Government are wrong to leave the company entirely to the fluctuations, vagaries and ups and downs of the money market. If they are not prepared to make finance available, in spite of the Minister's feelings that the lucrative parts of the new British Aerospace company should not be hived off, we are afraid that, in the future, a Government may be forced, because of pressing considerations, to hive off certain parts of the company.

Those parts may concern defence—for instance, missiles. In the world today it is not difficult to dispose of what are called weapons of defence but which are, in fact, weapons of war. All over the world there are people who will form companies—and I can see no way to prevent them from coming to this country—specifically to grab parts of the denationalised aerospace industry that they will find lucrative, and immediately lucrative. They will not need to be patriotic and invest money and wait for many years until dividends accrue.

Government Members, in their anxiety to see the Bill through Committee unhampered, untrammeled and untouched, did not speak. Many of them represent constituents with aerospace industries.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

Has my hon. Friend noticed that the hon. Member for Welwyn and Hatfield (Mr. Murphy), I think it is, with a particularly important British Aerospace interest at Stevenage, has not even bothered to turn up?

Photo of Lieut-Colonel Dick Crawshaw Lieut-Colonel Dick Crawshaw , Liverpool Toxteth

Order. The hon. Gentleman cannot give way: he has not eot the Floor.

Photo of Dr Maurice Miller Dr Maurice Miller , East Kilbride

I hope that hon. Gentlemen who took no part in Committee but merely graced the Conservative Benches will defend the Government's attitude in a way that the aerospace workers in their consistuencies will appreciate. I have no aerospace industry in my constituency, but I have a large Rolls-Royce factory. Rolls-Royce and British Aerospace are tied closely together.

I hope that the Minister will listen to the blandishments of my hon. Friends, and the support that I believe we shall get from Conservative Members, and consider favourably the implications, if not the exact wording, of the new clause.

Photo of Mr Ernie Ross Mr Ernie Ross , Dundee West

I also wait anxiously to hear the hon Member for Preston, North (Mr. Atkins). I hope that he will show interest in something other than visits to his constituents in Cyprus or filling out his share forms. The people of Preston would like to know what the hon. Gentleman has been doing in Committee. We found it difficult to get him to speak, and his constituents in the aerospace industry find it difficult to meet him.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

Has my hon. Friend noticed that the hon. Member for Preston, North (Mr. Atkins), who did not say a single word in Committee, has just walked out of the Chamber?

Photo of Lieut-Colonel Dick Crawshaw Lieut-Colonel Dick Crawshaw , Liverpool Toxteth 5:15 pm, 11th February 1980

Order. All Opposition Members make these points, and they are probably equally irrelevant in every case. I believe that we have dealt with the matter. May we proceed with the Bill?

Photo of Mr Ernie Ross Mr Ernie Ross , Dundee West

My interest is more of a trade union one. My union is the largest in British Aerospace. If the Bill goes through, it is doubtful whether there will be many members of any union in aerospace.

Aeronautical engineers are at a high premium. All over the world companies are attempting to recruit them. If British Aerospace is broken up and denationalisation removes the long-term prospects of these engineers, some of my members may, reluctantly, leave British Aerospace, and that will be detrimental to the company.

Aerospace is a high technology, long-term investment industry, as many of my hon. Friends said. A modern commercial aircraft takes approximately 10 years to break even. In Committee, I made the point that the leading aircraft company, Boeing, estimated that future demand for jet air liners would continue to be strong. It is believed that the total market for commercial jet airliners between now and the end of 1989 will amount to £103 billion at today's values.

In that context, we have grave suspicions about the future viability of research and development in civil aircraft if the industry is denationalised. We cannot see large investment companies being particularly interested in investing in a project on which the return may take anything from 10 to 20 years. In our view—the majority of aerospace industries throughout the world accept it—on the civil aircraft side there is a requirement for massive investment and such investment can come only through Government assistance. That is our purpose in presenting new clause 15.

It is crucial that we retain a highly skilled technical work force in British Aerospace. Even if the Bill is to reach the statute book, it is essential that those at present working in British Aerospace feel secure about their own future and the future of the contracts in which they will be involved. There is a requirement upon us also to assure them that we shall not involve them only in the production of weapons of war, whether they be satellites, military aircraft or missiles.

There are a number of people working in British Aerospace today who strongly object to working on military projects of that kind which they do not believe to be for the good of our country. Admittedly, such projects may give them work, but they are not for the good of the country and, at a time of massive cuts in sectors of public expenditure of vital importance for the good of the British people, these workers would not wish to stay in British Aerospace if all that the corporation was engaged in was the manufacture of military aircraft and weapons.

For all those reasons, it is right that the Secretary of State should accept responsibility to ensure that civil research and development continues. Private investors adopt a simple criterion. They are after the "quick buck", the fast profit. The new British Aerospace company will have to convince such people of the benefit of investing in long-term civil projects, and that will not be easy.

In committee, I pointed out that some of the large multinational finance companies which the Government might regard as likely to invest in British Aerospace had a record of investing in British industry which was just about the worst we had seen for many years. There are three major companies which one supposes might be attracted to invest in British Aerospace—the Imperial Group, Lucas, and Milner and Newall—but all have had substantial redundancies in Britain while increasing their work force overseas. There will be no incentive for those three companies to invest as one presumes the Government would wish them to do.

I imagine that the Government are looking to such finance companies to take up some of the investment in British Aerospace, but their present track record gives no guarantee that they would be concerned about British industry since at least over the past few years their interest has been to run down their work force and to cut back their investment in Britain while increasing their work force overseas to compete directly with their workers in this country. This also is cause for the concern which leads us to put the new clause to the House. We recognise the need to retain a viable British aerospace industry.

We on these Opposition Benches do not see the need for the Bill. If this were an ailing company, a lame duck company, the Government might have some vestige of reason behind their Bill, but there is no reason whatever to denationalise one of the most profitable enterprises in our land. In fact, there is nothing behind it save Tory dogma and a failure to recognise that in any modern industrial country the Govern- ment must have a major stake in industry if that country is to have a secure industrial base at all. Each of our competitors accepts that. There is not one of our European partner countries in which the Government do not have a major stake in this industry, but the present Tory Government, with their non-interventionist policy, seem to think that the free market forces of which they are so proud will come in and supply the level of investment required for British Aerospace.

We were not convinced in Committee, and I think it most unlikely that we shall be convinced tonight. The truth is that we are now beginning to see the end of British Aerospace as a British company in that sense. We shall see it slowly run down. The first cuts will come in the research and development on which British Aerospace is at present engaged, since those who might be expected to invest will not wish to spend the money needed or recognise that sometimes at the end of the day a project should not go ahead or perhaps should not go ahead in the form originally suggested.

The money needed is high-risk money. Private investors in this country do not have a record of putting up massive amounts of capital for research and development in high-risk projects, and certainly not in British aerospace. One need look only at the situation in the British aerospace industry prior to nationalisation to understand that that is precisely what did not happen. Indeed, had it not been for nationalisation, the Hawker Siddeley 146 would not have been with us. It was only because the Government were prepared to put in their stake to back the project that the HS146 is going ahead, providing employment and showing a good prospect of being a major selling asset for British Aerospace.

I shall be interested to hear the Minister's efforts to convince us that the new clause and the proposals associated with it should not be incorporated in the Bill. We heard nothing in Committee to suggest that he had consulted those who know best, the people in the industry concerned, the engineers involved in research and development and the manufacture of the projects. In spite of his assurances, he did not consult the trade unions—we know that, and we shall return to it later—and the very same engineers about whom I am talking belong to the unions. They have given their working life to the British aerospace industry and would rather work for British Aerospace, but they might not feel inclined to carry on doing so if British Aerospace was denationalised so that they were then working for a company which in a short time would have no research and development in which they would think it worth being involved. In such circumstances, they would not see any need to stay with the company.

I repeat that there is a need for Government involvement in British Aerospace itself. I ask the Minister to tell us who will invest in British Aerospace. Which are the companies to which he looks to ensure that the vital research and development in our British aerospace industry continues? If he says that the Government will not do it, we can have little confidence that anyone else is likely to do it.

Photo of Mr Bowen Wells Mr Bowen Wells , Hertford and Stevenage

On a point of order, Mr. Deputy Speaker. There have been several interventions by the hon. Member for Nuneaton (Mr. Huckfield), which you have deplored, and they had a specific political intention. They will be on the record, and I wish to correct the inaccurate suggestions made in those interventions to the effect that I, for example, the Member for Hertford and Steven age, was not present. Would you tell me, Mr. Deputy Speaker, how I can have such inaccuracies corrected for the record?

Photo of Lieut-Colonel Dick Crawshaw Lieut-Colonel Dick Crawshaw , Liverpool Toxteth

As the allegation was made, if the hon. Gentleman wishes during his speech merely to point out that he was in fact present, that will be in order. But it is because of the nature of such suggestions and the points which arise from them that the Chair deprecates references to what happened in Committee. Whatever happened in Committee in that connection has nothing to do with the Bill before the House now, but, if the hon. Gentleman takes the course which I suggest, the Chair will not, I am sure, object.

Photo of Hon. Adam Butler Hon. Adam Butler , Bosworth 5:30 pm, 11th February 1980

Much of the ground covered by the new clauses and amendments has been covered before, so I hope that we can proceed apace.

The hon. Member for Preston, South (Mr. Thorne) mentioned that we had been round the course covered by new clauses 6 and 15 on a number of occasions.

Before dealing with the new clauses and amendments, I wish to refer to the question of certain papers being laid before the House—a point which the hon. Member for Nuneaton (Mr. Huckfield) raised, in the way that he raised the same matter in Committee on a large number of occasions. It would be helpful for all Members who were not in Committee to know that the draft memorandum of the successor company is available, and has been available for some time in the Library. We have debated it, which is evidence that it is there.

We have made clear that the articles of association of the company will follow the standard table A articles—brought up to date—with two important exceptions. Table A articles are available for hon. Members to study. One of the exceptions is the question of the limitation of foreign shareholding in British Aerospace, which we shall debate later. That draft article has been in the Library since the Christmas Recess, and a new revised amended article is now also in the Library. The amendments were drawn, at least in part, from the suggestions put forward in Committee.

The second exception concerns the question of Government directors. On Second Reading my right hon. Friend the Secretary of State made clear the position of Government directors. Although the draft article has not been placed in the Library, we made clear in Committee that we would follow exactly what my right hon. Friend said. Therefore, we felt that that was sufficient for our purposes when discussing the position of Government directors.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

I wish to put on record once more our profound dissatisfaction with the Government's inability to put before the House or in the Library the memorandum and articles of association of the fully fledged, publicly quoted new company, British Aerospace Limited. The hon. Gentleman makes constant reference to the private company. He knows that in the transitional period—the shell company period, as he calls it—the memorandum and articles of association can be totally changed by the Secretary of State. For the Minister to rely on that—it is true that they have been in the Library for some time is to mislead the House.

The Minister said that the most important draft article on the exclusion of foreign control had been in the Library for a long time. After a cursory legal glance, that article was found to be full of holes. The new, more watertight version—I hope that it is more watertight I have had no time to take legal advice on it—has been in the Library only since Friday. It is the most important part of the articles. We shall not allow the hon. Gentleman to get away with misleading the House in that way.

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

We found it almost impossible in Committee to satisfy the hon. Member for Nuneaton, largely because he finds it difficult to accept that what a Minister says—either in Committee or from the Dispatch Box—is likely to be kept to. I hope that not only will he listen to what I am saying now but that occassionally he will listen to Ministers and give them credit for intending to do what they say they will do. It was my impression in Committee that his hon. Friends were more frequently ready to accept that simple proposition than he was.

It has been asked why there are so many Government amendments on the Amendment Paper. Hon. Members will have studied them, and we shall deal with them in due and proper course. They are largely technical amendments, but some seek to shorten and clarify the Bill. I shall deal first with the Government amendments and then I shall revert to the various points which have been made by Labour Members.

Government amendment No. 22 seeks to change clause 5. It is a technical and drafting amendment. The purpose of clause 5 is to give the Secretary of State power—if he chooses to exercise it—to maintain a particular proportional shareholding in the successor company. To do that, he must be able to acquire shares or securities convertible into shares, or securities carrying rights to subscribe to shares, or such rights themselves.

The hon. Member for Nuneaton asked on what occasion the Government might wish to acquire shares. They would do so to retain the proportion which they had set themselves—perhaps up to the current investment limit, or to retain 25 per cent. of the shares so that any change to the articles could be blocked if the Government so chose.

Clause 5(1) is deficient in two respects, hence the Government amendments. Although it covers securities convertible into ordinary shares, and rights to subscribe to ordinary shares, it does not cover securities which carry rights to subscribe. Therefore, it would not allow the Secretary of State to acquire loan stock or preference shares that carried with them share warrants. The first purpose of amendment No. 22 is to fill the gap. The second purpose is to overcome the narrowness in the subsection.

On further study, we believe that the Government should be empowered to take up securities of a subsidiary of the successor company, which provides a means of acquiring ordinary shares in the successor company. I am advised that it is not unknown for a company to put out a loan via a subsidiary finance company, and for that to be convertible into, or to carry rights to subscribe for, ordinary voting shares in the parentcompany. We are trying to ensure that there are no loopholes, no ways in which the Government would be prevented from acquiring shares under clause 5 in order to retain their proportionate shareholding.

Amendment No. 28 seeks to shorten and clarify the Bill. We want the Secretary of State to be able to acquire the shares or securities. As the word "acquire" embraces "subscribe for" or "take up", we can rely on the word "acquire"without further elaboration.

Amendment No. 36 is a little more complicated. It is partly consequential on the Government amendments to clause 5, dealing with the types of security that the Government will be able to acquire. Clause 7 provides for an upper limit to be set on the size of the Government shareholding in the successor company. Subsection (5) imposes a duty on the Secretary of State to exercise his powers to secure that the limit is not exceeded. Subsection (6) provides a derogation from that duty in circumstances where it is necessary for the Government to take action, if they wish, to be sure of retaining a given shareholding, but where it is possible, because of the unforeseen behaviour of other people, that the action will result in the Government's shareholding being increased. If that happens, the Government are required to comply with the limit, that is, in practice, to sell the excess shares, as soon as reasonably practicable.

As we have previously explained, though not on the Floor of the House, the most obvious case where that outcome might occur is in a rights issue where the Government subscribe to the full extent of their existing shareholding, but other existing shareholders decide not to do so. That is the only case covered by the subsection as drafted.

However, I am advised that a similar problem could arise with Government-held securities either in the successor company or a subsidiary, which were convertible into, or carried rights to subscribe for, ordinary shares in the successor company. For example, the terms of convertible stock might provide for conversion on a particular day or within a particular period. If the Government wished to be sure of retaining their existing proportionate shareholding, they would have to convert all their stock in the expectation that all other holders would convert theirs.

In fact, some might decide not to exercise conversion rights, with the result that the Government's shareholding would have been increased so that inadvertently the target investment limit was exceeded. The amendment is designed to deal with that eventuality.

Photo of Mr Stanley Thorne Mr Stanley Thorne , Preston South

Does what the Minister has said mean that in certain circumstances the Government would continue to maintain a majority of the shareholdings?

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

No. The hon. Gentleman will remember that once the initial flotation has taken place an investment limit will be fixed.

I have indicated previously that the Government are likely to retain about half the shares, though the figure may be below 50 per cent., because we hope that shares will be taken up by employees. The investment limit will be set, as I say, probably just below 50 per cent., and it will not be proper for the Government to exceed the limit. If they do so, in the circumstances that I have described, for example, the Secretary of State will be required to dispose of the shares in order to bring them down at least to the investment limit.

Photo of Mr Stanley Thorne Mr Stanley Thorne , Preston South

Therefore, in spite of, rather than because of, certain actions, the Government could find themselves with a majority of the shares. They would have to get rid of them. Who would they give them to—the hon. Member for Preston, North (Mr. Atkins)? Would we all get some, free, gratis and for nothing?

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

It would be difficult for the Government to arrive at that position, but to take as an example the rights issue—probably the easiest example—if the other shareholders did not exercise their rights, the Government would, for a short period, hold a majority under the rights issue and they would be required to dispose of the excess shares on the market.

Since the shares would be quoted on the market, there would be a market price for them and they would be absorbed back into the market in the normal way. There would be no problem there.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

We have always forecast that the Government would get themselves into that sort of difficulty, because they have been rigid in clause 7 (4)(a) in insisting that any new target investment limit must be lower than the one that it replaced. The Secretary of State could, as a result, find himself having to sell shares.

I do not want to question the selection of amendments, Mr. Deputy Speaker, but it would be for the convenience of the House to take amendment No. 37 with the group under discussion. That amendment concerns the Government's disposal of shares and the price at which they might dispose of them, rather than foreign ownership. Is it possible to debate amendment No. 37 with this group? This is the place in the Bill where I envisaged that it would come.

Photo of Lieut-Colonel Dick Crawshaw Lieut-Colonel Dick Crawshaw , Liverpool Toxteth

I am in some difficulty. I could have considered the hon. Gentlemen's application if it had been made earlier, but I understood that the debate was coming to a close.

Mr. Huckfield: On a point of order, Mr. Deputy Speaker. Amendment No. 37 is part of this debate. We had always realised that the Minister and the Government might get themselves into difficulty because of what we called the ratchet mechanism and we wanted to clarify what would happen when the Government found themselves having to increase the investment limit in the new company. That is what amendment No. 37 is about.

Photo of Lieut-Colonel Dick Crawshaw Lieut-Colonel Dick Crawshaw , Liverpool Toxteth 5:45 pm, 11th February 1980

It would be difficult to do as the hon. Gentleman requests, because hon. Members would need to speak again, which is not customary in this sort of debate. We shall have to leave amendment No. 37 to a later debate so that hon. Members who have already spoken on the group under discussion will be able to speak again. They would not be allowed to do so if the amendment were taken with the group presently before the House.

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

Amendment No. 37 is down for debate in the third group of amendments.

I do not see why the hon. Member for Nuneaton should say that he always foresaw that the Government would get themselves into a muddle. As always, the hon. Gentleman misunderstands the Bill and what happens when dealing with shares. If he would prefer the Government not to bid in a rights issue, thus reducing their shareholding, he should say so. Since it is the Government's intention that there should be an investment limit, it is right that there should be a means in the Bill for the Government to dispose of their shareholding if, inadvertently, in the sort of circumstances that I have described, they exceed that limit.

Clause 5 as reported from Committee already provided for the Secretary of State to acquire convertible securities of the successor company. As amended, clause 5 will provide also for the acquisition of securities of the successor company which carry rights to subscribe for ordinary shares, and for the acquisition of securities of a subsidiary which are convertible into, or carry rights to subscribe for, ordinary shares in the successor company. It would be wrong for the Secretary of State to be inhibited from exercising the rights conferred by those securities for fear of exceeding the target investment limit. That confirms what I have said. The amendment will ensure that he can exercise them without restriction, provided that any excess shares acquired as a result are disposed of.

Government amendment No. 51 is straightforward. It provides that the word "subsidiary" has the same meaning in the Bill as in the Companies Act 1948.

Photo of Dr Maurice Miller Dr Maurice Miller , East Kilbride

It is commendable that some of the Government amendments tidy up the Bill, even though we do not necessarily agree with the provisions involved. However, since the Government are adding a new word to the definition clause, are they sure that no other words need to be added for clarification? I am not being facetious. The Opposition do not frame the Bill; that is the Government's job. Is the Minister certain that, for the sake of clarity, no other definitions need to be included in the Bill?

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

The hon. Gentleman helped us to go through the Bill with a fine toothcomb. I hope that there are no omissions. This point arises out of amendment No. 36, where the word "subsidiary" appears. Because people have different views about subsidiary companies, we felt it wise to put a clear definition in the Bill and to state that it has the same meaning as in the Companies Act 1948. That seemed to us to be a wise precautionary move.

I turn now to the points made by the hon. Member for Nuneaton and others of his hon. Friends. We heard today a number of the arguments that we heard in Committee. It is probably fair to say that most Opposition Members spoke to new clause 15. We discussed a similar clause in Committee.

The problems associated with funding the new company were considered by Opposition spokesmen from different viewpoints. They raised yet again the question whether private sector companies and investors are suitable for long lead time companies. They seemed to ignore that there are many examples of long lead time companies in the private sector in the chemical, metal processing, oil and power plant industries. They are almost legion household names: ICI, Shell, Rio Tinto-Zinc, British Aluminium. Those are all long lead time companies. I suggest that the lead times are as long in many instances as those for the production of aircraft or defence weapons.

Photo of Mr Ernie Ross Mr Ernie Ross , Dundee West

The Minister mentioned ICI, Rio Tinto-Zinc and British Aluminium as examples of companies that would take up the shares in British Aerospace. Has any of those companies invested substantially in the aircraft industry up to this time?

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

The hon. Member for Dundee, West (Mr. Ross) questions whether these companies will take up shares in British Aerospace Limited. That was not the point that I was making, but perhaps I may deal with it now. If such companies wish to subscribe, it will be up to them to do so. As far as I know, their principal objective in life is not to be involved in holding equity in aerospace projects. However, they and doubtless their pension funds will be free to invest in British Aerospace Ltd. The point is not whether they should but whether it is possible for companies with long lead times to survive in the private sector.

Photo of Mr Ernie Ross Mr Ernie Ross , Dundee West

The difference is that those companies are investing in areas in which they are confident that the lead times will pay off at the end of the day. They have no experience in aerospace. How are they to engender confidence in something they know nothing about? Are hon. Members and the workers in British Aerospace to believe that ICI, for example, which is not involved in aerospace, will suddenly divert millions of pounds into British Aerospace because it is practical for it to do so? Is it not more likely to keep its money for its own long lead time investment projects?

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

The hon. Gentleman is barking up not one wrong tree but a host—a wood—of wrong trees. No one is talking in terms of British Aluminium or ICI investing massively in British Aerospace. They may, if they wish, apply for shares, but they will not be involved in the management of the company. Those involved in the management of British Aerospace will be those at present involved in its management. There is no reason why they should not continue to make the success of it that they have made in the past both before and after nationalisation.

Photo of Dr Maurice Miller Dr Maurice Miller , East Kilbride

The hon. Gentleman gave examples of companies which invest in long lead projects. I accept that there are long lead projects in those companies. I do not propose to be led along the path of suggesting that these companies will invest in British Aerospace. However, there is a difference. If a company invests in its own projects, it takes the rough with the smooth, the good with the bad, and it may have long lead processes going on. But if the company does not have to do that, because it knows that after a little time the Government will hive it off and it can then invest in the lucrative parts of that company, is that not different from the situation in the companies mentioned by the Minister?

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

The hon. Gentleman and his hon. Friends have the idea in their minds that private sector companies do not succeed. The evidence is that private sector companies succeed whereas nationalised industries do not.

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

The hon. Member for Nuneaton says "Absolute rubbish". But the vast majority of nationalised industries are suppliants to the British taxpayer. They are kept afloat with the taxpayers' money and taxes paid by the profitable private sector.

Photo of Mr Stanley Thorne Mr Stanley Thorne , Preston South

How many hundreds of millions of pounds were put into private aerospace companies—for example, BAC and GEC—prior to 1977?

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

I am coming to that vital point, because it is fundamental to new clause 15. I am trying to answer the points that have been made, because anxieties have been expressed about them. One anxiety was that no private sector company could succeed in areas where there are long lead times, such as in British Aerospace. I referred to ICI, Shell, Esso, RTZ and so on. The significant thing is that they are not high-risk companies for investors. They are the blue chips, the safe companies. The definition of a blue chip is that it is as safe as it is possible to be. Such companies yield less on investments than other companies. That surely serves to prove not only that private companies can exist in high lead time industries but that they can do so successfully and can be considered safe investments with secure futures.

Photo of Mr Stanley Thorne Mr Stanley Thorne , Preston South

The hon. Gentleman mentioned Esso. As far as I am aware, Esso is owned by Rockefeller. Is the Minister happy that Rockefeller should take a main interest in British Aerospace?

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

I think that deals with the question whether—

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

If any individual wishes to subscribe to British Aerospace, I hope that, subject to the foreign ownership limitation, he will do so. Indeed, I believe that he, as an individual or as an investment manager, will be encouraged to do so because of the fine future that, despite the moaning minnies on the Opposition Benches, we see for British Aerospace.

Photo of Mr Stanley Thorne Mr Stanley Thorne , Preston South

I have not been called a moaning minnie before.

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

From a number of Labour Members we had the old scare about successful parts of British Aerospace being hived off. I am glad to be able to state on the Foor of the House again, as we did on Second Reading, that that is not the Government's intention.

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

No; I shall develop my argument. The hon. Gentleman can then say what he wishes.

6 pm

We made clear at an early stage last summer that we had a strong preference for keeping British Aerospace together because we believed that this would be to the benefit of British Aerospace. At that time we retained in our minds the possibility that it would be right and better for the industry as a whole if part of it were hived off. But we continued to take advice from many of those concerned in the industry—from the unions, management and many others—and came to the firm conclusion that it would be wrong to split up British Aerospace. We therefore produced the Bill which we are now discussing, which allows for one only successor company to be formed.

If we had intended to split up British Aerospace in the way that I sometimes think Opposition Members would like us to—they have pressed this point despite repeated assurances from Government Ministers—we should have needed to provide for more than one company.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

The hon. Gentleman must not get so irate. It is difficult for the Labour side of the House to accept some of the ministerial assurances that we get from this Government—

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

The hon. Member for Preston, North (Mr. Atkins) has actually returned. I wonder how long he will stay this time. When the Government are doing their best to kill off British Leyland, and when they have made public what we have thought all along were their real intentions, namely, to denationalise British Steel—that is what it is all about—how does the Minister expect us to accept from him assurances that the Government will retain British Aerospace Ltd. as a single entity? How on earth can we accept that assurance from this Government? If the hon. Gentleman is so determined to prevent the break-up of British Aerospace, why does he not put it in the Bill?

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

The hon. Gentleman's presence on the platform with a man better known as Red Robbo

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

—who has done his best to break up British Leyland, is evidence of his attitude towards that company.

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

I hope that the House will accept the repeated assurance that it is not the Government's intention to break up British Aerospace and that it will be kept as an entity under the new successor company.

The next scare, re-run, is that there is a threat of the Government pulling out. In the context of shareholding, we have made clear that it will be the intention of the Government to retain about half of the shares in British Aerospace and that if, in the future, some of those shares are sold we shall retain at least 25 per cent. for the purpose of blocking any change in the articles of association, such as that on foreign shareholding, due for debate later, which we believe would not be in the interests of the company.

The most important consideration is whether it will be possible, in the future, for funds to be made available to British Aerospace Ltd. This is the purpose, I understand, of new clause 15. It is significant that the nationalisation Act of the Labour Government deliberately made it impossible for funds to be made available to British Aerospace, under the Civil Aviation Act 1949, which had been used expressly for the purpose of funding projects. It is interesting that new clause 15 chooses to use virtually the same wording as appears in the Civil Aviation Act 1949 about the design, development and production of civil aircraft. The same words appear in the new clause.

Since the Labour Government chose not to use the Civil Aviation Act 1949 for the purpose of putting money in, but made provision for that in the nationalisation Act, we felt it right, in removing the provisions of the 1977 Act, that we should be able to refer to the provisions of the 1949 Act. In consequence, it will be possible, as happened before aerospace was nationalised in 1977, for Government money to continue to be made available. I have said that this would cover such forms of aid as launching aid for new projects.

I made it clear in Committee that any project put before the Government, who are not spendthrift with taxpayers' money, would have to be justified, but the fact that Conservative Governments have made money available for this sort of project in the past should remove any anxieties about the future.

The hon. Member for Dundee, West made the same speech as he had made in Committee about research and development. He emphasised the fact that new clause 15 refers to the design, development and production of civil aircraft. If he had chosen to look at the Civil Aviation Act 1949, he would have found the same words. So far as research and development can be covered by the Words "design and development", moneys would be availale under that Act.

One of the features of British Aerospace at the moment is that it has to find its own research money. Under the 1977 Act, the 1949 Act was not effective. One could perhaps argue that the 1949 Act, plus the Science and Technology Act 1965, provide more opportunities for research and development finance to be made available to British Aerospace in the future. The hon. Gentleman, however, expects the investors to take a quick buck, and that research and development will be the first to suffer cutbacks. The hon. Gentleman even suggested that there would be no research and development in British Aerospace. Was that the situation before nationalisation?

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

That is what it is all about.

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

Who thinks that the HS146 owed anything to nationalisation in its development? Who thinks that the BAC111 or any of the aircraft flying today owe one penny in research or development to nationalisation? As we are reminded frequently, this is a long-lead time business. One cannot tell me that research and development on aircraft flying in 1977, or even today, started three or four years ago. Of course not. Research and development was put into British Aerospace, or into British Aerospace companies, when it was in private hands. It has continued to be put in under nationalisation. It will continue to be put in in the future.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

Cannot the hon. Gentleman learn to recover from his own business experience in Courtaulds, which seemed to consist of closing down Courtaulds factories? Cannot he understand that Sir Arnold Hall, of Hawker Siddeley, told the previous Labour Government that he was not willing to proceed with the Hawker Siddeley 146, as it was then called, with private money? It was only the Labour Government's public money that enabled that project to succeed. Cannot the hon. Gentleman get that into his head?

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

What I do know is that the board of British Aerospace, in full knowledge of the fact that within a few months it would be a limited company, acting as far as possible as a private sector company, with the Government standing back, recently decided it could continue to develop the 146 to a successful aeroplane, and to produce and fund it in the knowledge that it would have to find its money in the private sector. That is proof of confidence about the future by the management of British Aerospace, because it understands these things.

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

I was about to say something about the hon. Gentleman. I hope that he will not continue to produce this scare in regard to research and development for those members of the union which, I believe, sponsors him. The hon. Gentleman mentioned particularly that a number of them were being tempted away by better offers, perhaps overseas. I shall tell him why they were tempted away. It was because the previous Labour Administration operated a pay policy which made it impossible to reward them in the way that they should have been rewarded. The information that I have is that fortunately, the drain that has taken place in the last year or two has been very much less than previously.

Photo of Mr Ernie Ross Mr Ernie Ross , Dundee West

One of the reasons why some engineers have been tempted abroad is contained in the Finniston report. I hope that the Minister who is responsible for the recommendations of that inquiry will introduce them, because they will ensure that engineers are sufficiently rewarded.

The point that I was making was that if private money is invested in British Aerospace, the emphasis on research and development will be two fold. There will be research and development on military aircraft, which will be guaranteed in the sense that the military or missile programme will be supported by Government. Civil aircraft development is an area that has always been under strain, whether under nationalisation or in the private sector. I believe that that sector will be pushed to the side. There are workers in British Aerospace who perhaps do not agree with a policy of producing weapons that can only injure people. They want to be involved in something that will assist in improving our lives. We may lose those people if all the money that is used for research and development—I am not suggesting that research and development will stop—is devoted to military and missile projects.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. I hope that the hon. Gentleman has finished his intervention.

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

It would be difficult to persuade the hon. Gentleman to forgo his prejudice. I tried for a long time during our debates in Committee. I refer him to those various large companies, which were not companies of recent start-up. They go back a long time in our industrial history. If the hon. Gentleman thinks that they would not have survived today without devoting expenditure to research and development, he is wrong. That is further evidence to him that in a private sector situation research and development expenditure goes in, and will continue to go in, because those who run the business have an interest in its future.

We debated new clause 15 in Committee. At that time I made it clear that various pieces of legislation could be used for funding British Aerospace. The Civil Aviation Act 1949, the Science and Technology Act 1965, and the Industry Act 1972 would all be available, although, as is the case under new clause 15, actual expenditure would be at the discretion of the Secretary of State. That does not change.

I end by quoting what was said by the hon. Member for East Kilbride (Dr. Miller), who, it will be remembered, did not press the equivalent of new clause 15 because: As the Minister has made clear, beyond any reasonable doubt,…what we have set out to achieve in the new clauses can be achieved by other means". [Official Report, Standing Committee G, 24 January 1980; c. 1207.] In consequence, the hon. Gentleman withdrew the equivalent new clause. I hope that we have satisfield Labour Members, just as we did in Committee, and that they will not find it necessary to proceed to a Division on this subject.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

The only thing that I can say is that it gets worse. Each time the Minister of State comes to the Dispatch Box he indicates—as he did each time he rose to his feet in Committee—even more desperately his lack of real knowledge about the true facts of this industry. As well as revealing the true depth of his real ignorance, he also seems to think that ignorance pervades this side of the House. It is significant that even though the draft article of association, which was supposed to prevent foreign takeovers, was submitted in Committee at short notice, we were able to find legal flaws in it with just a cursory legal glance from a cursory legal eye. If we can do that with our meagre resources, I like to think that the vast repository of wisdom which the hon. Gentleman seems to proclaim over this industry at least occasionally pervades this side of the House. Given adequate time, I have no doubt that we shall find a few legal loopholes in the new draft article of association which is supposed to exclude foreign control. Unfortunately, it does not look as if we shall have time to do that.

We were able to find flaws, and no doubt will find others, in the draft article, even though we are backed by diminished and meagre resources. We do not have the resources which are at the Minister's command. All he has to do is read his brief. If he gets into difficulty the hon. Member for Ruislip-Northwood (Mr. Wilkinson), who is sitting behind him, is able to go backwards and forwards and get further flashes of inspiration. We are unable to get those flashes of inspiration; nor are we able to come to the Dispatch Box and read it all out as the Minister does.

Despite our lack of resources, and despite the fact that we have already found some legal loopholes in the draft article, we foresaw the need for the amendments which the Government have tabled today. I refer to Government amendments Nos. 22 and 28. We told the hon. Gentleman in Committee that with the inclusion of the ratchet mechanism—I refer particularly to clause 7(4)(a) in which the Government categorically insist that any new limit must be lower than the one it replaces"— we foresaw all kinds of difficulties. We repeatedly told him that that would place too tight a restriction on the Government's sphere of operations.

Similarly, we saw difficulties for the Government in other respects, again with our meagre resources. I am not suggesting that my hon. Friends are meagre, but we do not have a vast number of civil servants and HEODs in the Department of Industry to back us up. We foresaw the situation that would arise under clause 7(5). If the Government got into a tight corner they might have to dispose of some of their shares and lose some of their voting rights. We warned that the Minister would get himself into that kind of tight situation. We told him then of the need to introduce an amendment along the lines of the one that he has introduced today.

The monopoly of wisdom about this industry does not lie on the Conservative Benches. I think that it pervades the Labour Benches from time to time. In his sometimes scathing and derogatory remarks about my hon. Friends, I hope that the Minister will bear in mind the fact that we have already amended the draft article to prevent foreign ownership, and also that we have foreseen the need to introduce amendments which were rendered necessary by the tight drafting of clause 7, following the provisions in clause 5 which enable the Government to take up further shares.

The other interesting thing is that each time theMinister speaks he makes comparisons with other industries and reveals a little more of what he thinks the new company will be like and what kind of a company it will be. It is interesting to note that the hon. Gentleman thinks that the new British Aerospace Ltd. will be like ICI. But ICI makes paint. It is involved in chemicals and fertilisers. I should not have thought that that was the same as the 146 project. The Minister also compared the company with Rio Tinto-Zinc and Shell. Shell is particularly famous for exploration, extraction and production of North Sea oil. The significant thing about North Sea oil exploration is that it promises a high and immediate pay-off. In other words, the comparisons made by the hon. Gentleman demonstrates that he does not understand the aerospace industry.

The hon. Gentleman's most foolish remark was that all the other private companies, because they were private companies, had funded their own research 1 and development programmes. The important point that he failed to mention was that most foreign Governments pay the research and development costs of military projects undertaken by companies in their countries. Perhaps the hon. Gentleman deliberately failed to mention that. Much of the research and development expenditure of McDonnell Douglas, Boeing and Lockheed is paid for by the American Government. Much of the research and development costs of Aerospatiale and SNECMA are provided by the French Government. The bulk of research and development expenditure of Messerschmidt and other German aircraft manufacturers is paid for either by the German Federal or the German State Governments.

If the hon. Gentleman believes that the new company will be like ICI, Rio Tinto-Zinc, or Shell, he must examine the context of international competition within which British Aerospace Ltd. will operate. In that international competition most other Governments back their aerospace industries to the hilt. That is precisely what this Government have chosen not to do.

The hon. Gentleman made his usual speech about British Aerospace being retained as a single entity company, but he destroyed his own argument. The hon. Gentleman usually does things at the last minute in the hope that we shall not see what he is up to. Over the weekend he has put on the Amendment Paper a provision for the Government to take up shareholdings in subsidiary companies of the successor company. The hon. Gentleman is talking about the creation of more companies. With his new amendments he is paving the way for the creation of more than one company, and he expects us to accept his assurances about British Aerospace Ltd. being a single company. It is precisely because of his tactics that we cannot accept his assurances. The amendments that he has recently put on the Amendment Paper pave the way for British Aerospace to go into joint partnerships by the formation of subsidiary companies.

I hope that the hon. Gentleman will listen to our case. It is difficult for us to ask him to give us the benefit of his understanding, but if he will listen, that will be a start. The hon. Gentleman was right when he said that new clause 15 was based on some of the provisions of the Civil Aviation Act 1949 and that the Government wished to get back to the spirit of that Act. There is nothing wrong with that, except that the hon. Gentleman must remember that previous Governments, operating under the Civil Aviation Act 1949, and realising the nature of the industry, chose to assist the launching of new projects with Government money. We learn daily of examples of how this Government are not prepared to assist new industrial ventures with public money.

If the hon. Gentleman believes that British Aerospace Ltd. will be like ICI, Rio Tinto-Zinc and Shell, and since we know that Conservative Members do not believe in assisting companies such as those, why should the Government be prepared to assist British Aerospace? It is all very well for the hon. Gentleman to say that the Government wish to revert to the practices of previous Administrations. No previous Conservative Administration have been as dogmatic as this one in their endeavours to reduce the public sector borrowing requirement.

We shall continue to say that because of the Government's lack of public commitment to the aerospace industry we may well have seen the launching of the last new civil aviation project in this country. We believe the case to be as desperate as that as a result of what the hon. Gentleman said in response to our new clause 15.

The hon. Gentleman omitted to say, when he spoke of the last Labour Government having chosen not to operate under the provisions of the Civil Aviation Act 1949, that that Government, in the Aircraft and Shipbuilding Industries Act 1977, made adequate provision for money from the national loans fund and other money to be injected into the new corporation in the form of public dividend capital. If that money had not been made available the HS 146 project could not have been launched, nor could our entry fee to the Airbus industry project have been paid. The atttempts of the hon. Gentleman to mislead the House in that way show that he does not understand the kind of capital structure and the mechanism which the last Labour Government created for putting public money into the aerospace industry.

We shall divide the House on new clause 15. We recognise that because the hon. Member for Preston, North (Mr. Atkins) has turned up we might be in a minority. We recognise that because the hon. Member for Hitchin (Mr. Stewart) has seen fit to take an interest in these debates we might be in a minority. Who knows? Before the night is out we might even see the hon. Member for Welwyn and Hatfield (Mr. Murphy). That would not be a sight to delight our eyes, but we presume that since he represents a large number of British Aerospace workers he might see fit to turn up for five minutes of this critical debate.

Because we believe in the British aerospace industry and want to see new civil aviation projects launched in this country, and because we wish to see Britain retain as much as possible of its independent aerospace manufacturing capacity, we shall press new clause 15 to a Division. We hope that the hon. Gentleman, even late in the day, will think again on what he has said.

Question put and negatived.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

On a point of order, Mr. Speaker. There must have been a misunderstanding. I had assumed that we would have a Division on new clause 15.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

We are dealing with new clause 11. We shall reach new clause 15 in due course, and then have a Division formally. When we reach new clause 15 on the Order Paper I shall provide an opportunity for a Division. The hon. Gentleman will call it.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

Further to that point of order, Mr. Speaker, may I put in a bid for a Division on new clause 15?

Photo of Mr George Thomas Mr George Thomas , Cardiff West

I have given a guarantee that I shall put the Question. When I put that Question, if the hon. Member for Nuneaton (Mr. Huckfield) shouts "Aye", I should not be a bit surprised if someone on the Government Benches shouted "No". There will then be a Division.