Third Standing Committee

on Statutory Instruments, &c.


Thursday 20 July 1989



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The Committee consisted of the following Members:

Chairman: Mr. David Knox

Bradley, Mr. Keith (Manchester, Withington)

Cousins, Mr. Jim (Newcastle-upon-Tyne, Central)

Cummings, Mr. John (Easington)

Forsythe, Mr. Clifford (Antrim, South)

Gill, Mr. Christopher (Ludlow)

Goodlad, Mr. Alastair (Eddisbury)

Gorman, Mrs. Teresa (Billericay)

Gow, Mr. Ian (Eastbourne)

Hanley, Mr. Jeremy (Richmond and Barnes)

Hannam, Mr. John (Exeter)

Hargreaves, Mr. Andrew (Birmingham, Hall Green)

Hinchliffe, Mr. David (Wakefield)

Jack, Mr. Michael (Fylde)

MacKay, Mr. Andrew (Berkshire, East)

Marshall, Mr. Jim (Leicester, South)

Sackville, Mr. Tom (Bolton, West)

Short, Ms. Clare (Birmingham, Ladywood)

Viggers, Mr. Peter (Parliamentary Under-Secretary of State for Northern Ireland)

Mr. S. A. L. Panton, Committee Clerk

3 Third Standing Committee on Statutory Instruments, &c. Thursday 20 July 1989

[MR. DAVID KNOX in the Chair]

Draft Appreciation (No. 3) (Northern Ireland) Order 1989

10.30 am

The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Peter Viggers): I beg to move, "That the Committee has considered the draft Appropriation (No. 3) (Northern Ireland) Order 1989. The order is made under paragraph 1 of schedule 1 of the Northern Ireland Act 1974. While the ambit of the Department of Economic Development's Vote 2 listed in the schedule of the draft order encompasses a number of areas including local enterprise, shipbuilding, tourism and other matters, the specific purpose of the order is to authorise additional expenditure of £294 million by the Department of Economic Development in connection with the privatisation of Short Brothers plc. The figure includes appropriation-in-aid of £30 million, which represents the purchase price to be paid for Shorts. Since my announcement to the House on 21 July 1988 that the Government intended to return Shorts to the private sector, the company, my Department and its advisers have been working hard to effect the transfer and to ensure the best possible future for Shorts. Hon. Members will recall that my right hon. Friend the Secretary of State for Northern Ireland announced to the House on 7 June the details of the financial package agreed with the Canadian company Bombardier for the sale of Shorts. On 8 March, the House approved a Supplementary Estimate which included a £390 million loan to Shorts. The appropriation order before the Committee therefore represents the second part of the package. Of the £294 million, £275 million will be used to recapitalise the company, to repay remaining borrowings and to meet anticipated losses on existing contracts. It is intended that at least £60 million of this will be in the form of an interest-free loan. The loan will be subject to full or partial payment if Bombardier fails to abide by the detailed and specific performance guarantees of related requirements of the loan agreement. Additionally, to encourage investment in research and development, the loan agreement will provide for progressive cancellation of the loan. That will happen if certain specific targets relating to research and development and capital expenditure are met. The remaining £19 million being sought will be used to provide financial assistance for the capital investment and training programmes to be undertaken during this financial year by Shorts under its new ownership, and to meet the fees of the 4 Government's professional advisers. The Government also intend to provide grant aid of £91 million towards Shorts's future capital expenditure and training programmes totalling some £216 million from 1990 to 1993. The approval of the House will be sought in due course for such expenditure. Hon. Members will appreciate that at the point of sale it will be necessary to assess the losses incurred by Shorts since 31 March 1989, and this figure will have to be added to the cost of the sale. The funding required for those losses will be met, in the first instance, by an advance from the Northern Ireland civil contingencies fund. That will be repaid in due course through a supplementary estimate, probably in the autumn. The Government will also retain the financial liabilities and obligations associated with aircraft sold in the past by Shorts under financing deals. Shorts now faces one of the most exciting and challenging periods in its history. The proposed expenditure will enable it to be returned to the private sector with a capital base that will enable it to face the future with confidence. I commend the order to the Committee.

10.34 am

Mr. Jim Marshall(Leicester, South): I think that I can say that I am speaking on behalf of all Opposition Members.

Hon. Members: Where are they?

Mr. Marshall: I say that without fear of contradiction from my hon. Friends. The Minister has outlined what the order will do. It will put in place the second tranche of the privatisation of Short Brothers plc. The Minister referred to the £300 million that was approved in the last appropriation order. We are asked to approve a further £264 million. This Committee is not the proper forum to re-examine the arguments for or against privatisation, but we should consider how that money will affect the employees of Shorts and the people of Northern Ireland. We are asked to approve additional expenditure of £40,000 per employee as the prize for the Government's headlong pursuit of the privatisation of Shorts. That would be £150 for every man, woman and child in the Province. Those figures place the Government's pursuit of privatisation into a stark context. If the Government want to privatise Shorts they should follow the course that they have followed in the rest of the United Kingdom of encouraging companies towards profitability and ensuring that management and production changes take place while companies are in the public sector. They did that with British Airways. Such a course seeks to ensure that a company is profitable and will have a secure future when privatised. In that way, the cost to the taxpayer is much lower than under this scheme, and one can look forward with greater enthusiasm to the success and viability of the privatised company. I shall not oppose the order, but 5 I draw attention to the overall cost to the taxpayer of the doctrinaire approach to the privatisation of Shorts. Having made the polemical and political point, I shall ask about the order's effect on Shorts. In a statement to the House, the Minister and the Secretary of State for Northern Ireland referred to the need to have discussions with and seek the approval of the European Community for certain financial arrangements in the order. How are those discussions proceeding? Is the European Commission likely to approve the financial provisions.? The "Northern Ireland Summer Supplementary Estimate 1989–90", on page 6, section Bl(I) (c) refers to: "Payments to professional advisers appointed by the Department to provide specialist advice on matters relating to the aircraft industry." The sum mentioned is £2 million. Those professional advisers are getting rich pickings at the taxpayer's expense through the Government's privatisation policy. What services did they render the Government, and what sort of professionals are they? While the order deals specifically with the additional moneys required for the privatisation of Shorts, schedule 1 on page 2 refers to the aircraft and shipbuilding industries. Although no money has been appropriated to the shipbuilding industry, it is included in the order. We hear much about the future success of Short Brothers plc, but total silence surrounds the progress of Harland and Wolff. Rumours suggest that its progress towards privatisation is not as smooth as that of Shorts. Does the Minister and the management of Harland and Wolff believe that the company can meet the Government's deadline for privatisation? Will it be privatised? What is the response of the work force to the management's anticipation of a buy-out? The Opposition do not oppose the order and agreed that it should be debated in Committee and not in the House. We are witnessing the price of the Government's headlong and foolhardy pursuit of the privatisation of Shorts. If the Government had adopted the model of British Airways, and encouraged the company towards privatisation the cost to the taxpayer would have been substantially less than £800 million.

10.43 am

Mr. Ian Gow (Eastbourne): Mr. Knox, on many occasions when you have presided over Committees, your attention has been drawn to the absence of a representative of the once mighty Liberal party. Those comments can be repeated today, but honesty, for which the Conservative party is so renowned, obliges me to add that no Liberal was nominated to serve on the Committee. Mercifully, I have only one sentence to add to the proceedings. The Government's policy is so laudable, and my hon. Friend the Minister's speech was so excellent, that the Committee's work is completed.

The Chairman: I should tell the hon. Member that 6 no member of the SLD was selected to serve on the Committee.

Mr. Gow: That is precisely the point that I made.

The Chairman: As the hon. Member knows, it is out of order to criticise the Committee Selection.

10.44 am

Mr. Clifford Forsythe (Antrim, South): Much as I love my work, I cannot be in two places at the same time, and I have been serving on another Committee. I apologise for not being here to listen to the Minister. I do not oppose appropriating £30 million to Northern Ireland. As both Shorts and Harland and Wolff are very important to the Northern Ireland economy, I fully support that. However, I should like to mention some matters. While the Department has done good work in attracting outside investment to Northern Ireland, it seems reluctant to assist local enterprise on residents who work in conjunction with outside agencies setting up in Northern Ireland. I find it annoying that local people are treated differently in some respects from those who come from outside the Province. I recently received phone calls and letters from various firms and people in Northern Ireland making that very point. There is a considerable dragging of feet in the Department with regard to providing assistance for local people and expediting proposed assistance. As the Minister knows, that has happened recently in my constituency. I know that the problem, which is ongoing, is being resolved, and I am pleased about that. But I should like the Minister to consider the matter. If local people have a good idea that will provide employment in Northern Ireland where their home is, the Department should take greater care in giving them assistance—provided that the proposal is feasible. It should be confirmed when outside firms come to Northern Ireland under the auspices of the Department that the factory buildings are in good enough order for operations to begin immediately. Is it true that when the old De Lorean factory was examined by those who were to take it over, it was discovered that all the windows and window frames were smashed and that special doors and their frames were broken? If so, greater care should be taken of empty factories that are proposed as places of employment for outside firms. I repeat that greater consideration should be given not only to local enterprises but to those who are co-operating with people coming to Northern Ireland. Those firms should have their sites confirmed. Plans should not suddenly be changed at the convenience of the Department, with firms being told that their site is going to another company and that they will have to take one elsewhere, whether it suits them or not. The Minister should be aware of those points. I shall be interested in his views on the costs involved in repairing factories that are not properly secured and on giving greater assistance to local enterprise.


10.49 am

Mr. Viggers: I am grateful to hon. Members for the interest that they continue to show in the subject. The hon. Member for Antrim South (Mr. Forsythe) apologised for missing my introductory speech. He need not worry because he heard the speech of my hon. Friend the Member for Eastbourne (Mr. Gow), which said it all.

Mr. Jim Marshall: I am sure that the Minister was pleased to receive the plaudits of his hon. Friend the Member for Eastbourne (Mr. Gow), and interested to hear his views on the lack of a Liberal Member on the Committee. Would the Minister comment on the fact that his hon. Friend absented himself soon after speaking?

Mr. Viggers: My hon. Friend the Member for Eastbourne explained that he had to leave the Committee. I shall not comment on any absences from the Committee, but I am grateful to my hon. Friend's who have shown their interest by attending. I am confident that the extra £294 million that we ask the Committee to authorise will ensure the best possible future for Shorts. I am reinforced in that view by my visit on 26 June to Bombardier, Montreal. I was greatly impressed by what I saw. The hon. Member for Leicester, South (Mr. Marshall) bandied figures with us. He mentioned a figure of £40,000 per employee and sought to show that that was the cost of the Government's privatisation programme. I assure the Committee that the reverse is true. In fact, £390 million—the subject of the comment in the House in March—has had to be written off already. A further £275 million is needed to repay borrowing and losses and to take account of future contractual losses. That is the cost of public, not private, ownership. Only £115 million of the sum that we are discussing is for financial support for future capital investment and new project development. That compares well with Government support to private sector companies in Northern Ireland. We are rectifying the cost of public ownership by moving the company to the private sector. The hon. Member for Leicester, South put in his thumb with his first question and is about to pull out a plum, because I can announce that on 19 July the European Commission approved the package of assistance proposed for the sale of Short Brothers plc to Bombardier. The hon. Gentleman asked about professional advisers and their fees. There is a range of professional advisers to my Department and others involved in the transaction. Kleinwort Benson is our merchant banking adviser and the firm of Norton Rose is our United Kingdom solicitor. We also have American and European lawyers to advise on contracts. Touche Ross is our management consultant, Deloitte Haskins and Sells is the reporting accountant and Jones Lang Wootton provides valuation reports. The hon. Gentleman asked about Harland and Wolff, as he is entitled to, because Vote 2—the subject of the appropriation order—includes 8 shipbuilding. Significant progress has been made on the sale of Harland and Wolff to the management and employee buy-out team, which is backed by Mr. Fred Olsen. Following the signing of the heads of agreement on 22 March, preparations for the formal signing of documents have involved discussions between solicitors and advisers representing the Government and the prospective acquirers. There have also been discussions with the European Commission and a formal notification has been made to the EEC seeking approval. Formal completion of the sale is expected in September. The Government do not share the hon. Gentleman's fear. I am confident that the transaction is proceeding well. I pay tribute to Mr. John Parker and his management team for organising a series of presentations for all Harland and Wolff employees to explain the details of the privatisation arrangements and the proposed new terms and conditions of employment. Meetings between the management, the employee buy-out team and the unions continue, and matters are proceeding well. The hon. Member for Antrim, South suggested that the people of Northern Ireland were not treated as well as they should be, especially in comparison with the treatment of investors from outside Northern Ireland. Constituents in Devonshire, Berkshire, Richmond upon Thames, Hampshire and other places represented on the Committee, would be surprised by the considerable support provided by the Department of Economic Development, the Industrial Development Board and the Local Enterprise Development Unit in Northern Ireland for local organisations and operations. I am delighted that there are 21 local enterprise groups providing premises for approximately 400 firms employing 1,500 people. That local enterprise movement is important for the future of Northern Ireland. The Government welcome new investment from Montupet in France, from Daewoo in South Korea and from others that have come to Northern Ireland in the past few months. However, we think that local companies are especially important, and we have slanted our support towards them, increasing the budget of the Local Enterprise Development Unit to £35 million a year. That emphasises our determination to improve the lot of local people who are trying to set up businesses or to expand. The hon. Gentleman spoke about a rumour that the De Lorean factory had been damaged; that windows had been smashed and framework broken. Perhaps he has not visited the factory. I have done so and can tell the Committee that the premises were in good order when they were handed over to Montupet, which is carrying out building work to make the premises suitable for its operations.

Mr. Clifford Forsythe: Is the Minister saying that the rumour is not true? If I present to the Minister the cases of local people who have approached me, will he reply and tell me whether they are isolated cases?


Mr. Viggers: The hon. Gentleman said that all the windows were smashed and the framework broken at the De Lorean factory. I visited the factory and did not see any broken windows. The premises were in good order.

Mr. Clifford Forsythe: Did the people who examined the premises before they were taken over find that it was damaged? I am not asking about the condition of the factory when the Minister visited it.

Mr. Viggers: The hon. Gentleman has asked a specific question. A small number of windows were broken by vandals in recent weeks. There was no scene of devastation, as described to the Committee by the hon. Gentleman.

Mr. Clifford Forsythe: rose


Mr. Viggers: There is no point in again giving way to the hon. Gentleman. He asked whether he would receive a reply if he took up the cases of constituents. I work closely with the Industrial Development Board and the Local Enterprise Development Unit, and I assure him that local business is promoted to the best of the ability of those organisations. If the hon. Gentleman takes up an individual case with me, I shall do everything possible to assist him, either by providing information or intervening.

Question put and agreed to.

Resolved, That the Committee has considered the draft Appropriation (No. 3) (Northern Ireland) Order 1989.

Committee rose at Eleven o'clock.


Knox, Mr. David (Chairman)

Forsythe, Mr. Clifford

Gill, Mr.

Goodlad, Mr.

Gorman, Mrs.

Gow, Mr.

Hanley, Mr

Hannam, Mr.

Jack, Mr.

Mackay, Mr.Andrew

Marshall, Mr. Jim

Sackville, Mr.

Viggers, Mr.