TRANSFER OF PART OF AUTHORITY'S UNDERTAKING TO NUCLEAR FUELS COMPANY

HC Deb 15 January 1971 vol 809 cc383-9

11.2 a.m.

Mr. Dick Douglas (Clackmannan and East Stirlingshire)

I beg to move Amendment No. 1, in page 2, line 38, at end add: ( ) The Secretary of State shall before the end of the period of one year beginning with the passage of this Act lay before both Houses of Parliament a financial report detailing the valuation of the assets transferred under this section.

The Chairman

It will be convenient to take at the same time Amendment No. 2, page 3, line 14, at end add: ( ) The Secretary of State shall before the end of the period of one year beginning with the passage of this Act lay before both Houses of Parliament a financial report detailing the valuation of the assets transferred under this section.

Mr. Douglas

On Second Reading, we discussed the method of determining the valuation of the assets to be transferred to the two companies. The Under-Secretary of State for Trade and Industry indicated that he was satisfied with the procedure to be adopted in going to a merchant bank for a valuation. But he was a little more forthcoming than that statement would lead one to believe. He said: I assure the House, however, that we have no intention of concealing anything in this matter and that within the proper and prudent confines of commercial practice we shall be frank with the House as is right when the question of valuation is discussed at a later date."—[OFFICIAL REPORT, 17th December, 1970; Vol. 808, c. 1649.] The difficulty is to determine how we can bring to the attention of the House the method of valuation and when the "later date" shall be. Therefore, the intention of the Amendment is to require the Secretary of State to lay before the House a financial report detailing the valuation of assets transferred. That would be only fair because we are transferring to these companies a considerable amount of publicly-financed assets.

I refer to a time when we were going the other way and we were taking assets into public control. I do not want to accuse right hon. and hon Members opposite of dual standards, but when we were transferring privately-owned assets to the public ownership of the National Coal Board a considerable amount of time and trouble was taken to ensure a proper valuation of assets. Valuation boards were set up to determine the valuation and apportionment of those assets. Large sums, totalling £360 million, I think, were involved. On the occasion of the transfer to public owner ship of the National Coal Board considerable trouble was taken over a period of ten years.

The point in this Amendment is that the valuation of these assets and the method of approach was included in the Board's annual report. There was, therefore, an opportunity for this House to review the method and approach taken and an opportunity to question and analyse that method. While the party opposite might suggest that while the Bill was generally promoted in the first case by those of us on this side of the House, they have this responsibility in that they are producing an ethos whereby a large number of possibilities are arising, when publicly-owned assets might be transferred into private hands. I am concerned that this principle should not be taken merely as a guide and precedent for future transfers of publicly-owned assets into private hands.

We from Scotland note in today's Press that some publicly-owned assets in U.C.S. are likely to be transferred once more into private hands. This is not unwelcome. If my right hon. Friend the Member for Bristol, South-East (Mr. Benn) had not taken the action he did when he was Minister there would have been very little of value in those assets. I would like the Minister to tell us where the difficulties arise in making this in formation available to Parliament, either on his own behalf or indicating clearly to the Authority that the method and approach should be embodied in the annual report.

Mr. Anthony Wedgwood Benn (Bristol, South-East)

May I support what has been said by my hon. Friend the Member for East Stirlingshire (Mr. Douglas). He is absolutely right in saying that we are transferring valuable public assets and that this is a matter of public concern. There are other points that I want to put before the Minister. One is that we are transferring them to a company which will be operating under the Companies Act. This is not a transfer to a public corporation subject to the ordinary type of accountability under the Nationalised Industries Committee of the House. Therefore it is necessary for us to be especially careful about the assets transferred. That is the first point.

The second is that the value of these assets is uncertain. We do not know how valuable they are. As with all in vestment and research, it may be found when it comes to industrial application that much of the money spent does not reflect itself in return on capital. If as we hope and believe these assets turn out to be important—and there is every reason to believe that they will—in terms of winning the enormous market, in conjunction with the Dutch and the Germans, a £1,000 million market of nuclear fuel, it could turn out that the assets are of very great value.

The House ought to have some bench mark, or guide line, given at an early stage showing what the valuation was so that later when we come to consider the profitability of the company, which we shall gain from the ordinary company reports, we shall have some way of knowing whether this judgment is right or wrong.

11.15 a.m.

The Under-Secretary of State for Trade and Industry (Mr. Nicholas Ridley)

I would like to make one comment about the wording of the Amendment moved by the hon. Member for East Stirlingshire (Mr. Douglas.) He refers in the Amendment to "assets". What we will be dealing with will be shares. I accept that the shares merely represent the value of the assets, but what we will be considering is not just the assets but such things as property, rights, liabilities and obligations—all those matters which are transferred to the companies under Clause 7 of the Bill. What we are being asked to debate is how the shares of the company will be valued. There would be no disagreement with that.

The right hon. Member for Bristol, South-East (Mr. Benn) and the hon. Member for East Stirlingshire (Mr. Douglas) raised the point of principle that just as under nationalisation Governments have tried to pay fair prices for shares which people have bought, so in a case of this sort fair prices should be paid for assets transferred from the public to the private sector. There are differences between the two operations. In this case it is an entirely voluntary transaction, if it takes place, between a willing buyer and a willing seller. In such a case, the value which can be put on the shares is to some extent limited by what the buyer is prepared to pay. There is, as it were, a market value.

With nationalisation, in most instances, not all, a compulsory purchase system is used and therefore an arbitrary decision has to be made as to what price the State will pay for shares it compulsorily purchases from other companies. It is not the same point. What we are here looking for is to make sure that the price that can be obtained for the shares will be fair and reasonable. This will be conditioned by what the companies who might buy the shares are prepared to pay. In the Second Reading debate on 17th December my hon. Friend the Minister for Industry said that, in conjunction with the Atomic Energy Authority, the Government proposed to commission a merchant bank to advise on the problems of valuation and capital structure and that we proposed to follow a similar course with regard to the radiochemical company. I undertook to consider what further information should be made available to the House in this respect.

In response to the hon. Gentleman's request, I will give him a little more information about how the Government intend to go about the valuation of these shares. I have already explained that the Government favour private participation in the fuel company from an early date and preferably from the outset, provided that satisfactory agreements can be reached on the terms and price of shares. Subject to the provision in the Atomic Energy Authority Bill for the retention of a public majority shareholding, the financial aims of the Government are twofold.

First, the maximum realisation from the public investment in the nuclear fuel business must be obtained and secondly there must be the maximum contribution by private interests to the future financing of the business. The Government and the Atomic Energy Authority are there fore seeking advice from the merchant bank on four aspects of the question. First is the possible approaches to valuation and determination of a price for the shares; second is the desirable capital structure of the company and form of private participation, bearing in mind the need for further substantial investment and that there should be maximum incentive to increase the profitability of the fuel company.

The third aspect on which we are seeking advice is the extent and nature of the interest in participation in the fuel company. The fourth point is the amount of finance likely to be forth coming from private participation, both initially and subsequently. I may add that the Government do not rule out the possibility of a public issue of shares at some stage. In providing advice on these questions the merchant bank will have available an assessment of the financial performance of the trading fund by a firm of outside accountants. Similar advice will be sought on private participation in the radiochemical company.

When this expert advice has been provided the Government and the authority will consider it, but before final decisions are reached the House will be given an opportunity to consider the Government's intentions. The advice which the Government will receive will, of course, be confidential, but there is no doubt—and I give the House this assurance—that full information will be given as soon as decisions have been made. It is right and proper that the extent of ownership of different companies and the prices paid for the shares should be made public at some stage. This is in keeping with the undertaking that I gave on Second Reading that the maximum information would be made available to the House, which the House can, if it wishes, debate or treat in any other way.

In the light of the undertakings that I have given, I do not think that there is any need to include these Amendments in the Bill. We have given an undertaking that this information will be made available in due course. I do not think that it is necessary for the hon. Gentleman to press his Amendment to the point of a Division, because what he requests will be done in the most convenient fashion, and it would not seem to us necessary to build the two Amendments into the Bill.

Mr. Benn

I have no complaint about the Minister's proposal for calling on a merchant bank for a valuation, because I am sure that that is right, but I was a little uneasy when the hon. Gentleman said that this was unlike an act of public ownership because in this case it was a transaction between a willing buyer and a willing seller. The hon. Gentleman lives in a world of laissez faire, where willing buyers meet willing sellers in a state of perfect competition.

We are talking about public assets acquired by means of enormous sums of money voted by Parliament. We are talking about something abnormal and distinct from the ordinary market. We are talking about co-operation between the public sector and the private sector. We are talking about the relationship between different countries and a new company being set up. We are talking about patents which will have to be valued betwen ourselves, the Dutch and the Germans after we know the value of the particular centrifuge technology, and it has no relationship to the world of which the Minister spoke.

However, as the Minister said, there will, in due course, be an opportunity to consider the Government's policy on this matter when the valuations are completed, and I accept that it is unnecessary to press the Amendment to a Division.

Mr. Douglas

I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.