The Prime Minister (Mrs. Margaret Thatcher)
I beg to move, to leave out from “House” to the end of the Question, and to add instead thereof:
“endorses the Government's consistent objective of supporting Westland plc in its efforts to achieve a financial reconstruction, of supporting United Kingdom participation in collaboration with North Atlantic Treaty Organisation allies and of safeguarding the interests of the company, its employees and its shareholders, recognises the efforts of the Government to ensure that the Westland board had more than one option to secure that objective; affirms that it will be for the company to determine its future course of action; and further recognises the competence of departmental Select Committees of the House of Commons to consider the issues raised by these developments.”
I do not think that there is a great deal to answer in what the right hon. Member for Islwyn (Mr. Kinnock) said. He seems to have made certain conclusions long before the debate started. In so far as he asked me questions, I will try to answer them during the course of my comments.
At the outset, I wish to refer to the correspondence between Sir Austin Pearce and me, which has been published today, to which the right hon. Gentleman referred, dealing with the meeting on 8 January between my right hon. Friend Leon Brittanthe Secretary of State for Trade and Industry and Sir Raymond Lygo. My right hon. Friend the Secretary of State has given the House his account of that meeting, and the record of the meeting taken by the Department of Trade and Industry has been published today in full—every single word has been published today in full. I fully accept hat the record taken by the Department of Trade and Industry is an accurate and fair account of what was said. I very much regret that there is a different recollection in some respects of what was said, but I believe that when the House has had an opportunity to study the record of the meeting right hon. and hon. Members will see that the Secretary of State for Trade and Industry said that he had no view on the merits of the two offers, that it was for the shareholders of Westland to make a decision, and that it was not in the national interest for the present uncertainty to drag on. There are many in the House who will agree with that sentiment.
I have today received a further letter from Sir Austin Pearce, which has also been published. In it he expresses the hope that we shall now be able to concentrate on the important issues concerning the future of Westland. I agree. It seemed to me that the right hon. Member for Islwyn did very little of that.
This afternoon, therefore, I shall first set out the approach taken by the Government towards Westland during its period of difficulty. I shall then deal with the charges——
Mr. John Gorst (Hendon, North)
Before my right hon. Friend leaves the Civil Service minute, may I ask whether she believes, considering the important matters that were discussed on that occasion, and the fact that the civil servants' record was dated two days later, that that record is remarkably skimpy and short? Is she certain that it was not a belated and hindsighted record?
The Prime Minister
No. Ministers and civil servants will have occasion deeply to resent what my hon. Friend has said. The record was taken contemporaneously and was dictated two days later. There were several people present who confirmed that the record is accurate. I do not find it sparse. It is a full account of what happened, and is very much fuller than the alternative which is available in the other letter.[column 1089]
Mr. David Steel (Tweeddale, Ettrick and Lauderdale)
The official record of that matter need not be in doubt, because what is important is the sentence near the bottom of page 3 of Sir Austin 's letter, where he says:
“Whatever the words used were meant to convey, the message was perfectly clear.”
The Prime Minister
That is why it was absolutely vital to get out the full record of the meeting at the Department of Trade and Industry, unusual though it was. The meeting was attended by several people who confirmed that that is a correct record of the meeting.
I shall set out the approach taken by the Government towards Westland during its period of difficulty and then deal with the charges that have been made against the Government and against me personally. My right hon. Friend the Member for Henley (Mr. Heseltine), who served in the Cabinet for more than six and a half years, has now made accusations about what he considers to be the breakdown of constitutional government. The House will therefore expect me to answer that charge.
It may help the House if I begin by setting out the developments in relation to the Westland company during the past 18 months. I do this to demonstrate to the House: first, that the company and the Government's approach to it have been the subject of the most thorough collective consideration by Ministers; secondly, that during this period the Government have been aware of the company's precarious financial position and of the particular legal obligations that that imposes on the board of directors; thirdly, that the Government wished the board of Westland to explore fully all possibilities for minority shareholdings in the company, including what has become known as the European option. It is important that the company should take the course which it judges to be the best safeguard for the future of the work force and the shareholders. Fourthly, I shall show that the defence implications of the company's future were given full weight in our discussion, which took account of the need to ensure that our armed services are given the best equipment to meet their operational requirements. I will then come to the circumstances surrounding the resignation of my right hon. Friend the Member for Henley on 9 January.
Mr. Dave Nellist (Coventry, South-East)
Given the large-scale movements in shares of Westland during the past four to five days, and the possibility—some would say likelihood—of Friday's meeting blocking both offers to Westland, and since the Prime Minister's fourth item said that defence was the highest priority for the Government, have the Government considered following the example of the right hon. Member for Old Bexley and Sidcup (Mr. Heath) in 1971, and pushing an Act through the House in one sitting to secure the public ownership of Westland so that the jobs of the workers in Yeovil and the Isle of Wight can be properly guaranteed? Any surplus capacity could go to civilian use, such as making helicopters for air-sea rescue and food transport in Africa.
The Prime Minister
I shall deal with that point later. Clearly the Opposition line is that the whole lot should be nationalised at the taxpayers' expense.
The fact that Westland faced a difficult situation was first brought to the Government's attention late in 1984. We were told that the company's problems stemmed partly from a decline in the market for civil helicopters, including [column 1090]delays on the prospective Indian order for 21 W30, helicopters and partly from the lack, in the short term, of large orders from the British armed services.
The Government remained in close contact with the firm in the latter part of 1984 and early in 1985. Westland's difficulties were the subject of discussion at both ministerial and official levels between the Department of Trade and Industry and the Ministry of Defence. Careful consideration was given to what action might be open to the Government to help Westland—in particular, whether the services' helicopter requirements could be met by the purchase of the Westland W30. The Government concluded that we could not justify giving Westland orders for helicopters for which our armed forces had no operational requirement. It was judged that there was no defence interest that called for a rescue operation by the public sector. Instead, Westland should be encouraged to seek a market solution to its difficulties that would involve an injection of private sector capital. That was and remains the Government's position.
It was against that background that the Bristow Rotorcraft company announced an offer for Westland in April 1985. As the scale of Westland's problems became apparent to him, Mr. Bristow asked the Government a number of questions, including whether we would procure the W30 helicopter. I took the chair at meetings of Ministers on 18 and 19 June to settle the Government's response, which was in accordance with what I have already said. We also agreed that, if Bristow Rotorcraft withdrew its offer, the Bank of England should be encouraged to bring together the main creditors to develop a recovery strategy. Bristow Rotorcraft did withdraw its bid and on 26 June Sir John Cuckney became chairman of Westland. At the beginning of July, Defence Ministers were told that the United Technologies Corporation, the parent company of Sikorsky, were interested in the possiblity of some form of participation in Westland. On 8 July 1985, as hon. Members will recall, the future of Westland was raised on the Adjournment of the House My hon. Friend Geoffrey Pattiethe Minister for Information Technology made clear in replying to that debate that it was not for the Government to seek to intervene in the management of the company or to seek to influence the form the company's future should take.
Throughout the summer, Ministers and officials at both the Departments of Trade and Industry and the Ministry of Defence kept in close touch with Sir John Cuckney. On 24 September, Sir John showed the Government reports on the company's financial position that had been prepared by Price Waterhouse. He told us his plans for the financial reconstruction of Westland, involving the introduction of a new industrial partner. He revealed that he was having discussions with a number of companies of which those with Sikorsky of America, a part of United Technologies—with whom Westland had a longstanding relationship dating back to 1947—were the most promising. The company had also been in touch with MBB of Germany, Aerospatiale of France and Agusta of Italy. Sir John also stressed the urgency of reaching a solution before Westland had to finalise their accounts later in the year.
At a meeting of Ministers on 16 October, it was decided to encourage Westland to explore further the possibilities of co-operation with the European companies which were partners or potential partners of Westland in a number of collaborative projects. That view was communicated to Sir John Cuckney by Leon Brittanthe Secretary of State for Trade and [column 1091]Industry on 17 October. Sir John said that he had made it clear to the European companies that he would consider any reasonable proposition. He again emphasised Westland's need for a rapid conclusion to its plans for a financial reconstruction.
It was apparent that, unless such a reconstruction was clearly in prospect before the 1984–85 results were announced, the company could be legally obliged to go into receivership. A number of contacts subsequently took place with European companies and Governments and it became known that Fiat of Italy was associated with United Technologies' proposals. But as late as the last week of November, by which time negotiations between Westland and United Technologies-Fiat were in their final stages, no formal proposals had appeared from European helicopter companies for participation in a reconstruction.
It was at this stage, on 29 November, that the national armaments directors, who are senior defence officials, of the United Kingdom, France, West Germany and Italy met in London at the request of their respective defence Ministers. The national armaments directors recommended that the four Governments should cover their main helicopter needs in future solely by helicopters designed and built in Europe. This would have represented an exclusive commitment to buy only helicopters which qualified as European in this special sense, that they were not only built but designed in Europe. That would have gone far beyond the 1978 declaration of principles to which we still adhere.
On 2 December Sir John Cuckney wrote to Leon Brittanthe Secretary of State for Trade and Industry to urge that the recommendation should not be accepted by the Government. He stressed that, if the recommendation was approved, the board felt that it would not be able to recommend to the company's shareholders any reconstruction proposals involving Sikorsky and Fiat. He added that, while Westland had received indications of interest from the European companies, they did not mark any commercial advance over earlier proposals which had been rejected as inadequate. In consequence there was a serious risk that there would be no effective reconstruction proposals in place within the urgent timescale to which the company had to adhere.
In the light of these developments Ministers met under my chairmanship on 5 and again on 6 December to consider their response. In doing so they were very conscious of the approaching deadline for publishing the Westland accounts—with losses publicly predicted to be of the order of £100 million—in fact they were about £98 million attributable to shareholders—and the need therefore for the company to have a financial reconstruction package clearly in prospect by then if it was to avoid going into receivership.
The issues before us were, first, whether to agree to write off the launch aid of nearly £40 million for the W30 project if it were subsequently terminated. It was evident that that was now a condition for any successful financial reconstruction which would allow the company to continue in business. The second issue was how to respond to the recommendation of the national armaments directors. The groups of Ministers to which I have referred considered those two issues at the meetings I have mentioned.[column 1092]
Mr. Jeff Rooker (Birmingham, Perry Barr)
Will the right hon. Lady give way?
The Prime Minister
I shall not give way as I should like to complete these very tightly argued points.
At the end of the second meeting on 6 December it was clear that a majority of the Ministers present were ready to decide that the Government should reject the recommendation from the national armaments directors, thus leaving Westland free to reach its own decision. But because a minority of Ministers—including my right hon. Friend Michael Heseltinethe Member for Henley—felt very strongly about the matter, I decided that a further discussion must be held in Cabinet Committee, namely in the Economic Sub-Committee, for which a full paper should be prepared.
The Economic Sub-Committee of the Cabinet therefore met on Monday, 9 December. Sir John Cuckney and his advisers were invited to attend for part of the time to report on their company's position and to answer questions. After considerable discussion, it was concluded, first, that repayment of launch aid for the W30 would be waived if that project were terminated, and, secondly, that, unless a viable European package which the board of Westland could recommend to its shareholders was in place by 4 pm on 13 December—Friday of that week—the Government would make clear that the country would not be bound by the recommendation of the national armaments directors. That deadline was set in order to allow reasonable time for more specific European proposals to be put together without running up against the deadline imposed by Westland's need to have a financial reconstruction package in place by the time its accounts were published. At the end of the meeting, Sir John Cuckney was informed in confidence of the conclusions so that he knew where the company stood. I repeat that if the national armaments directors' recommendation had remained he could not have brought forward the Sikorsky-Fiat bid. The fact that the Government were not bound by that recommendation enabled there to be a choice of two options eventually—Sikorsky-Fiat and the alternative European option which developed.
The conclusions of the meeting of the Economic Sub-Committee of the Cabinet on 9 December laid down a clear line of policy and made it unnecessary to hold a further meeting. It was recognised in discussion that the timetable would allow for another meeting of Ministers before 4 pm on 13 December if unforeseen developments required one, but no decision to hold such a meeting was taken or recorded. The conclusion was clear, the events happened and the decision took effect. No meeting was agreed, so there was no meeting to cancel.
A firm proposal from the European consortium, which by that stage included British Aerospace, was received by the board on 13 December. The proposal took into account a provisional agreement reached between defence Ministers of the four countries based on the recommendation of the national armaments directors.
The European consortium's proposal was not acceptable to the board. Accordingly, as decided at the meeting on 9 December, the Government were not bound by the NADs' recommendation. In the light of the decisions taken on 9 December, there was no further issue to discuss, though the matter was raised in Cabinet on 12 December. [column 1093]
The position was fully reported to the House in a statement by my right hon. and learned Friend Leon Brittanthe Secretary of State for Trade and Industry on 16 December, including the decision about the national armaments directors' recommendation and the Government not being bound by it. I answered questions on 17 December. On 19 December, as I told the House the same afternoon, Cabinet reaffirmed the Government's view that it was for Westland to decide what was the best course to follow in the interests of the company and its employees.
Westland subsequently put proposals to its shareholders on 21 December to effect a capital reconstruction involving United Technologies and Fiat. Those proposals, and those of the European consortium, which in this period was joined by GEC, were subsequently improved in various respects, but that did not affect our fundamental policy that it was for the company and not for the Government to decide between them.
On 30 December, Sir John Cuckney asked me to confirm that Westland would still be considered a European company by the Government if the UTC-Fiat consortium took a minority shareholding. In replying on 1 January I told him that, as long as Westland continued to carry on business in the United Kingdom, the Government would continue to regard it as a British and therefore a European company and that we would support it in pursuing British interests in Europe. I also said that, whichever of the two proposals currently under consideration the company chose to accept, the Government would continue to support Westland's wish to participate in European collaborative projects and would resist to the best of their ability attempts by others to discriminate against Westland.
Cabinet on 9 January confirmed unanimously the Government's conclusions of 19 December and agreed that to avoid any possible prejudice to the sensitive commercial negotiations then in train all statements by Ministers should be cleared interdepartmentally through the Cabinet Office to ensure that all answers given by the Government were consistent with Government policy. Every member of Cabinet agreed except my right hon. Friend Michael Heseltinethe Member for Henley. He then left the Cabinet. I shall return to that point in a moment.
I have given the House this full account because I think it is important to set the developments of the past month in the wider context of the Government's clear policy and the company's difficulties over a period of a year and a half, the attempts made to find a solution to them and the urgency in the closing weeks of last year of finding a solution which would allow the company to continue trading.
Mr. Jack Straw (Blackburn)
The Prime Minister has now passed 6 January in her account, but she has omitted all reference to the leak of the Solicitor-General's letter. Which I believe took place on that date. Is she satisfied that neither the Secretary of State for Trade and Industry nor any of his officials had anything whatever to do with that leak?
The Prime Minister
I answered written questions either yesterday or this morning making it quite clear that an internal inquiry had been instituted. The hon. Gentleman asks me about a particular leak, but if I had to answer every question raised in the newspapers we should have a very long task. [column 1094]
The Government's approach throughout has been guided by a number of important considerations.
First, the Government concluded that no national interest considerations required the mounting of a public sector rescue bid. It followed that we could not dictate a solution to the company's problems. Responsibility for its future had to remain in the hands of its directors and shareholders—where it ought to be. Had the Government pressed the board of Westland to favour or adopt a particular solution it might have been taken to imply that we were ready to use public funds to underwrite the company's finances. We were not and are not prepared to accept any such liability.
Secondly, and in line with our active support for greater co-operation in European defence procurement, we were ready throughout to encourage the possibility of a European solution, while affirming that it was for the board and the shareholders to decide what was best for the company.
Thirdly, we wished to ensure that our armed forces would have and would continue to have access to the most cost-effective equipment which fully meets our military needs.
I believe that the House will agree that the record shows that the Government have acted consistently with those principles throughout.
There have been suggestions that the Government did not discuss the issues in sufficient depth or in a timely way. The account that I have given shows that such an allegation is absurd. There have been innumerable discussions of Westland's affairs between Departments and with the company over a period of 15 months. The company's future was the subject of collective discussion between Ministers on 18 June, 19 June, 16 October, 5 December, 6 December, 9 December, 12 December, 19 December and 9 January.
There can be no doubt that the problems have been considered properly and responsibly. Colleagues in the Government, particularly those most closely concerned, were given ample opportunity to express their views, and did so, and ample opportunity to seek to persuade other colleagues before the policy was decided.
I have dealt in considerable detail with the points concerning the Government's approach to Westland. I should like to emphasise one particular point in that account. Unanimous agreement was reached at the full Cabinet on 19 December. I repeat—unanimous. On 9 January Cabinet confirmed the identical policy and once again the policy was agreed unanimously. It was vital from that day forward that we should give strict practical effect to the policy as the crucial time for the company's decision was approaching. This was not a technicality. It was essential for the effective discharge of collective responsibility.
The whole of the rest of the Cabinet agreed the procedure that we should adopt—with the sole exception of my right hon. Friend Michael Heseltinethe Member for Henley. He was prepared to acknowledge the advantages of collective responsibility without being prepared to accept the disciplines that it requires. That the rest of the Cabinet could not accept. It would be a denial of the collective responsibility on which our system of constitutional government depends. Cabinet heard his decision with great regret. They recognised his services to Government over six and a half years in office. But the decision was his, and his alone. [column 1095]
It follows from what I have said that the Government have conducted themselves properly and responsibly throughout and that there is no cause for an inquiry. The amendment in my name and those of my right hon. and right hon. and learned Friends recognises the important role of the departmental Select Committees in matters such as this. The Government's concern is to see a financial reconstruction of Westland as soon as possible which maintains a British helicopter design, development and manufacturing capability, supports United Kingdom participation in collaboration with NATO allies, and safeguards the interests of the company, its employees and its shareholders.
I believe both sets of proposals put to the company could achieve these objectives; I hope that the shareholders will be able to take their final decision very shortly.
I commend to the House the amendment which endorses the Government's consistent policy.