POWERS OF THE SECRETARY OF STATE IN RELATION TO TRANSFERS UNDER SS. 1 AND 2 (Hansard, 15 January 1971)

§ Mr. Neave
I beg to move Amendment No. 8, in page 6, line 42, at end insert: 'or (c) requiring subsidiary companies to be established within any field he may consider desirable'. At first sight this Amendment does not seem to have very much to do with the Secretary of State. In fact, I put it down in order to raise the whole question of the position of private companies coming into the company that is to be set up under the Bill. The Memorandum of Association of British Nuclear Fuels Limited does not cover the point, although it might be said that as to the setting up of operational subsidiaries it is covered under the Companies Act. The point is worth raising.
The memorandum of association does not go further than to say that the company may acquire and hold an interest in other companies and enter into any arrangements with other companies. Some people feel that although some private companies may subscribe to the whole 395 range of activities in the fuel cycle others will be more interested on a selective basis, in employing their special technical skills in the fuel company, and it may be difficult for them financially or technically to contribute to the whole fuel cycle operation, which could be affected in the future by the centrifuge programme and the possible separation off of the enrichment programme.
There is a possibility that many companies will have only a small interest, but they should nonetheless be encouraged to join in this fuel company. Their financial contribution could be quite small. I envisage that some companies may want to deal only in enrichment, and may merely wish to employ their special skills in fuel element manufacture, reprocessing, and electricity generation. Is there any reason why the fuel company should not set up operational subsidiaries? At present it is not apparent that there is any reason why it should not do so.
I raise this question because the whole fuel service has so far been conducted by the production group and, as was said in the Second Reading debate, that group has done admirable work in that direction. But what happens if the centrifuge project goes ahead and the enrichment process is separated off into a European company, as I believe is envisaged? If the management of the British company has the power to create operational subsidiaries there is no need for the Amendment, and no need to give the Secretary of State special powers under subsection (4), but if my point is sound I hope that my hon. Friend will make certain comments and accept the Amendment.

§ Mr. Ridley
I am grateful to my hon. Friend the Member for Abingdon (Mr. Neave) for raising this point. It enables me, perhaps, to clear up the doubt in his mind as to whether British Nuclear Fuels Limited will be able to establish subsidiaries and to participate in other companies. Article 11 of the draft memorandum of association covers this point, since it says: To acquire and hold interests in other companies and to enter into any arrangements with other companies which may seem to advance the interests of the Company upon such terms as the Company may decide. The sort of things that my hon. Friend was envisaging in relation to the en- 396 richment or the centrifuge part of the business would be perfectly practicable and legal under Article 11.
I think that my hon. Friend will agree that it would be wrong for my right hon. Friend the Secretary of State to take power to direct the companies to set up subsidiaries, which is the power that he very kindly proposes to give my right hon. Friend. I am certain that my right hon. Friend would not wish to interfere in the commercial decisions of the new companies as to whether they should or should not set up subsidiaries. I am certain that my right hon. Friend would feel that it is better to leave these matters to the commercial judgment of the company entirely.
We are, of course, satisfied that control of any sensitive matter is adequately covered by other aspects of the Bill, so I hope that, with the assurance that the company has the power to do it, my hon. Friend will agree that it would be wrong to give the Government powers of direction in the matter. I therefore hope that what I have said will make my hon. Friend feel that his point is covered.

§ Sir H. Legge-Bourke
I am grateful to my hon. Friend the Member for Abingdon (Mr. Neave) for raising this point, because it has extracted from the Under-Secretary a very important statement, quoting the draft article in the proposed Memorandum of Association.
As a former member of the Select Committee on Science and Technology which reported in October, 1967, on this matter, I feel that what we are discussing now goes a long way to meet our recommendations in paragraphs 149 and 150. In paragraph 149, after talking about the nuclear boiler structure which we pro posed, we went on to say: … the nuclear industry would still require an organisation capable of preparing nuclear fuel, enriching it and fabricating it into the shapes and sizes demanded by the designers and also equipped with the facilities for processing irradiated fuels. We then recommended a new British fuel supply and manufacturing company.
But in paragraph 150 we said something else: Your committee are not in a position to suggest in detail the constitution or functions of such a company. They consider, however, that it should be read to propose suitable 397 arrangements for co-operation with other European firms. For example, British fuel enrichment technology and the facilities at Capenhurst might well be offered on mutually agree able terms to foreign fabrication companies who might find it uneconomic to establish their own enrichment plants. I hope that my right hon. Friend and my hon. Friend will consider my point, that there may come a time when, in the best judgment of the company which we are setting up, it would be desirable for a subsidiary to be set up which did not happen to be operating in or based on the United Kingdom. We have to consider that it is highly likely that the Government's opinion would be very important indeed before that was approved.
While I entirely accept my hon. Friend's argument—I welcome his saying it—that the last thing which the Secretary of State visualises is intervening in the proper internal administration of the company, I hope that we shall recognise that it may be in the interests of that company for a foreign subsidiary, working on a trans-frontier basis, to be set up; in that case, I imagine that the Secretary of State's opinion would at least be called for.

§ Mr. Ridley
If I may reply to the point which my hon. Friend just raised, there is no reason at all why the fuel company should not engage in arrangements or agreements with foreign companies. With the powers which are proposed to be given to them under the memorandum of association, it will be enabled to do anything like that which it thinks fit.
It is right to point out that the Government, through their majority shareholding, have adequate powers to prevent its doing anything which would be thought not to be in the national interest. I am sure that that is the right way around this matter—that the Government should have a negative power of control, but not use positive weapons to force the companies to do things which they believe to be against their commercial interests. I can assure my hon. Friend that the point which he has in mind, with which I entirely agree, is covered by this legislation.

§ Mr. Neave
My hon Friend's reply will be an encouragement to private industry. It will now be clear that British Nuclear Fuels Limited will be responsible for 398 matters of this sort, and it will not be a matter for the Secretary of State, and that Article 11 of the draft Memorandum of Association means that the fuel company could set up operational subsidiaries in selected areas. This is the point that I wanted to raise. In those circumstances, I beg to ask leave to withdraw the Amendment.