HC Deb 23 February 1953 vol 511 cc1839-46
Mr. Mikardo

I beg to move, in page 14, line 44, to leave out second "any," and to insert "the majority."

The Temporary Chairman

I suggest that this Amendment, and the other Amendment the hon. Gentleman proposes to this Clause, in page 14, line 44, after "securities," to insert "carrying full voting rights," be discussed together if that is convenient to the Committee.

Mr. Mikardo

I am very grateful to you. Colonel Gomme-Duncan. I am sure that that will meet the wishes of the Committee and will facilitate our discussion. The effect of these two Amendments, taken together, would be to make the beginning of paragraph (a) read as follows: make loans to any company the majority of whose securities carrying full voting rights are held by the Agency … It will be seen that the object of the Amendments is to limit the power of the Agency to make loans to the companies and subsidiaries so that those loans can be made only to those companies in which the Agency themselves hold control.

I do not wish—indeed, I should be out of order if I did so—to anticipate some of the provisions of the next one or two following Clauses, but perhaps I may be allowed to say that by some of their provisions, about which we shall doubtless have some discussion in the near future, it would be possible for the Agency, having sold some assets and obtained some money on that account, then to proceed under this subsection to lend some or all of that money to some companies in which they have an interest. Clearly, there are very grave dangers in that procedure.

The function of the Agency, as we said earlier today, will be ideally fulfilled if they work themselves out of their job at the earliest possible moment. The very word "Realisation" in their title, the Iron and Steel Holding and Realisation Agency, suggests an early finalisation, and it is not desirable—and I should think, quite possibly, from the drafting of the Bill, it is not desired by the Government—that the Agency shall go on dragging out timelessly their somewhat miserable existence.

What is desired is that they should carry out the operation of realisation as far as they can in the shortest possible time. We on this side of the Committee have some views, and I suspect that right hon. and hon. Gentlemen opposite have some grave fears, that it will not be able to do much of its realising away before the next General Election blights the hopes of the party opposite and raises the hopes of those who have the interests of this industry at heart, but, at any rate, the intention is that they should get on with the job and get out.

One of the dangers that lie within this provision is that they will maintain a continuing interest by the action that, so soon as they have got shot of one company, they will take the money and use it to get themselves involved in another company. That, clearly, is not the intention at all. For one thing, it carries with it the possibility that assets realised on a capital basis, the proceeds of the realisation, could be used for revenue purposes, and that clearly would be very bad financially.

It certainly could be argued that where the Agency have control over a company they would be justified in lending that company money for an approved purpose which could be executed with the safeguard that it was under the control of the Agency in their execution. The Agency might, for example, argue that their task of selling the shares of that company would be facilitated if that company were able to undertake some development, and it might well be that that development could be undertaken only if the Agency came along and lent it the money to do so. That, I think, would be a weak case, but at least it would be a comprehensible case and I do not propose to argue that case again because it is not the purpose of the Amendment.

That case could not be applied where the Agency have a minority holding. The Agency here is disposing of public money—and, moreover, public money obtained by the sale of public capital assets—and it would be the height of improvidence if it were able to, even subject to the authority of the Treasury—no doubt we shall revert to that later—and we should be happier if that authority were less general than is envisaged in line 42. Even subject to the same general authority of the Treasury it seems to me somewhat doubtful whether the Agency ought to be able to take public money obtained from a capital sale and pass it over to a company which may use it in ways and for purposes which lie outside the control of the Agency themselves.

It is not the function of this Agency to become a general money-lending institution. It is not even their function to become a general money-lending institution for the steel industry. There are other organisations which have the means and are capable of providing finance for any of these companies, and there is no reason why the Agency should trench on the functions of these other organisations, at least one of which has, in the past, lent large sums of money to companies in the steel industry. What we propose is, in a sense, half a loaf; or perhaps it would be more accurate to say something like two-thirds of a loaf.

We say that, while it is open to us to object to any of this lending of public money obtained on capital account for purposes which may be revenue purposes, we have confined our objections to those cases where the ultimate disposition of that money is outside the control of the lending body. I should have thought the Government would consider these two Amendments as reasonable, and that they would not wish the Agency to become a general money-lending authority and a general finance institution for the whole of the steel industry, including companies in which they have only a minority, and perhaps in some cases a very small minority, holding.

I limit my remarks, not because I think this subject is unimportant, but because I think that little, if anything, further need be said to convince the Government that these are Amendments which they ought reasonably to accept.

Mr. Boyd-Carpenter

The provision in this Clause in respect of loans to companies in which the Agency holds some of the shares is necessary to secure that the development of those companies is not held up while they are at that stage. It might well be that physical development of some importance fitted into the development plan at that time. It is equally not the intention, as the hon. Gentleman has indicated, that the Agency should be a general money-lending Agency. Indeed, the limit of £10 million in the Clause is sufficient confirmation of that.

The question, therefore, which is raised on these Amendments is; Should it be possible, as under the Clause at present, for this money to be lent while the Agency have any holding in the companies, or should it be only possible, as suggested in these two Amendments, for these loans to be made while the Agency retain the majority shareholding? I appreciate that there is some force in the suggestion that where the shareholding by the Agency has fallen to a very small proportion of the total, it would not be the proper function of the Agency to go on lending money. That would be getting the Agency rather into the general money-lending organisation to which the hon. Member referred, and which I indicated it was not our intention it should be.

9.0 p.m.

I think that there is something to be said for imposing a quantity limit. I do not think that we can go as far as suggested and confine the lending policy to the case in which the Agency has a majority of the shares. There may be cases where the Agency has a big minority shareholding in which it would be desirable to lend the money. The fact, for example, that 40 per cent. of the shares of a company were held by the Agency might involve the company in difficulties in obtaining finances from other sources. We must be careful to make sure that the development of companies which are at this stage of disposal should not be interfered with. I am sure that everyone who wants to see the industry properly developed will agree with that.

Mr. G. R. Strauss

I know that the hon. Gentleman is always very clear and we nearly always understand his arguments, but I could not understand the last one at all. Why should it be difficult for a company to borrow money because the Agency own 40 per cent. of the shareholdings? I should have thought that if there was Government interest in the company, they would not handicap that company in seeking loans and might help it. His argument was that the company might be handicapped, and I cannot understand that argument.

Mr. Boyd-Carpenter

The right hon. Gentleman used the word "might." We are to some extent in the realm of uncertainty. I hope that it is no more than a possibility. I think that it is a real possibility. Even if it is only a possibility it is necessary to provide for it.

As I was about to say, I think that we can, up to a point, meet the hon. Member for Reading, South (Mr. Mikardo). I think it would be possible at the next stage of this Bill to introduce a provision limiting the lending power to cases in which the Agency hold a substantial proportion of the shares. That does not go the full way. The hon. Member wanted us to go as far as the holding of a majority of the shares, but it goes some way to meeting his point that it would not be a proper function of the Agency for loans to be made where the Agency holding in the company was trivial.

I would, therefore, suggest to the Committee that the substance of the hon. Member's Amendment could be met in that way, and if it met with the pleasure of the Committee I would be prepared to give an undertaking to introduce such an Amendment on Report.

Mr. Mitchison

Can the hon. Gentleman satisfy me, and possibly other hon. Members, on one very simple point? Is there any real reason why the Government should not say what "substantial" means? Is there any real reason for putting in the word "substantial" instead of a figure? The Government have to make up their mind some day and they might perhaps make it up now, or when drafting the Clause, as to what they mean by the word "substantial."

Mr. Boyd-Carpenter

I am willing to consider the hon. and learned Member's suggestion. My first reaction would be that there would be disadvantages in the insertion of a precise figure which, unless it was put rather lower than the hon. and learned Gentleman would like, might occasionally disable us from doing what quite clearly we ought to do to help the development of a company. My own feeling is that "substantial" would meet the point, but I am prepared to consider the suggestion of the hon. and learned Gentleman, although I believe it is improbable that on consideration a precise figure would appear to be more suitable than "substantial."

Mr. G. R. Strauss

I must press the Financial Secretary again. He did not answer my question. He said the fact that the Agency own 40 per cent. of certain shares and have Government money to that extent might handicap the company in raising money outside. The question I asked there may be a good answer, but I cannot think of it—was in what circumstances that could be detrimental to the company if it was seeking money from the F.C.I. or the money market. How would it be more difficult for the company to raise money through ordinary commercial channels just because the Government or the Agency still own 40 per cent. of the shares and will, no doubt, later on, be trying to sell the 40 per cent.? Unless we can get an answer to the question there seems to be no reason why the hon. Gentleman should reject the Amendment. He put that forward as his only argument for saying that our proposal was unreasonable. I cannot see his argument, and I ask him to give us any circumstances in which his argument could apply.

Mr. Boyd-Carpenter

I am delighted to help the right hon. Gentleman. It is the known policy of the Measure to dispose of Government holdings—the Agency's holdings, as they will be—of the stocks of the companies. The knowledge that a large proportion of the stocks of a certain company is likely to be disposed of in the near future could obviously tend to have a depressing effect upon the market for the stocks of that company and might make it extraordinarily difficult at that moment to raise further funds, for example by a new issue. Surely the right hon. Gentleman is not so naive as he suggests. He must realise that the likelihood of a considerable block of the shares of a company coming on the market in the near future can very often make it extremely difficult to raise further funds by means of a new issue. If the right hon. Gentleman does not appreciate that, he might consult one or two of his hon. Friends, for I am sure they could help him.

Mr. Jack Jones

There is one question I should like to put to the Financial Secretary, although it may be said to be irrelevant. As a layman and a non-financial person, I want to know whether it is the intention of the Government to use money which accrues from the sale of what we call "the cream" to help the less fortunate companies which remain with the Agency. Will the Financial Secretary tell me what happens if the money is lost? How does the Government get it back?

Mr. Boyd-Carpenter

The whole object of the investment is to assist the companies. There is no intention to invest money recklessly or in a manner in which it would be liable to be lost. We shall exercise the common prudence that we do in a considerable number of cases in which Government money is invested, and, of course, proper prudence is exercised by this Government.

Mr. Jones

What happens if the money goes down the drain?

Mr. Boyd-Carpenter

I hope the hon. Gentleman would regard it as a disaster if Government money went down the drain under any Government.

Mr. Mikardo

My elation at finding the Financial Secretary at least partially forthcoming and the expectation that I have that with a little encouragement he will be even more forthcoming during the evening induce me to accept his offer. However, I ask him to pay more than formal attention to the suggestion of my hon. and learned Friend the Member for Kettering (Mr. Mitchison). It would be much more sensible to have a figure in the Bill instead of "substantial." While I am grateful to him for his suggestion that he should put down an Amendment at the next stage, if he decides upon substantial" he must not be surprised to find us moving Amendments to delete "substantial" and to insert a figure. I thank the Financial Secretary for his offer, and beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Mitchison

I only want to say a word on this Clause. In view of what has been said about the Amendment moved by my hon. Friend the Member for Reading, South (Mr. Mikardo), I feel considerable anxiety about the possibility of a general authority covering this sort of matter. I say no more, because a substantial point arises and when we come to Clause 20, which really sets out the financial machinery for this Agency and their accounts, I may have something more to say. I should not like this Clause to pass, however, without saying that one Member of the Committee does not feel happy about that particular phrase, and reserves any right he may have to raise the matter again on the Report stage.

Question put, and agreed to.

Clause ordered to stand part of the Bill.