TAKEOVERS AND MERGERS

HC Deb 24 November 1972 vol 846 cc1743-836

11.5 a.m.

Mr. Arthur Blenkinsop (South Shields)

I beg to move, That this House expresses its deep concern at the economic and social damage caused by takeovers and asset stripping in recent years; and calls for stronger action by Her Majesty's Government to prevent takeover bids succeeding when unemployment is likely to result, especially in development and special development areas. I am glad to have the opportunity of raising this matter in the House today because of the deep anxiety which is widely felt up and down the country about some of the things we have seen recently and the whole development over recent years of takeovers. I hope very much that I shall be able to galvanise the Government into some sign of effective action, which has been lacking recently; and what action there has been of a rather damaging character.

I am not going to propose prohibiting takeover bids as such. I recognise the value which some have had. I have in my own constituency examples of changes in ownership and development which have been of obvious value. I am concerned, and I believe that the country is concerned, about some of the manifestations which there have been over recent years. We have all been interested, and involved to some extent, even though as spectators, in the mass of publicity which has poured into our newspapers over recent weeks about certain major concerns in this country. I refer to P. & O. and Bowater's, which came under special consideration. Many of the main pages of our major newspapers have been flooded with appeals for support for one side or the other in the campaigns which have been waged. One wondered, indeed, how when the campaigns ended, the Press would find adequate advertising revenue. Nevertheless, that was symptomatic of other cases which have taken place in recent years, and no doubt references will be made in the debate to many other cases as well, including the problems affecting the film studios at Shepperton, amongst others, and the bids for some of our major brewery undertakings.

What is outstandingly clear is that there are these appeals in the Press and elsewhere to the shareholders, but there is little sign of any attempt at any approach to the workers in the businesses concerned or of any concern about the effects of these actions upon the public at large. These are the areas with which I am chiefly concerned. One can say that the public and the workers are little more than impotent bystanders, watching events which are taking place, over which they have no control, but which yet may affect their whole working lives and those of large parts of our population. The fate of major parts of major industries may be being decided by these measures.

The scale of these developments is a matter of concern and importance. Whether it is due to the new tax advantages that may arise from some of these activities I am not in a position to say. In the first quarter of this year there have been 278 takeovers, involving assets of £466 million. Over the last 10 years, while the number of smaller takeovers has remained at a fairly steady level, there has been a sharp increase in the number of major takeovers. In 1960 100 of oar largest firms were responsible for 22 per cent. of the nation's net industrial assets. By 1970 there had been a dramatic change and the 100 largest firms were responsible for 50 per cent. of our industrial assets. That is a much heavier concentration than that in the United States of America, yet the Government have inadequate information about it, if they have any information at all.

Mr. T. H. H. Skeet (Bedford)

Is the hon. Gentleman including nationalised industries in those 100 largest firms?

Mr. Blenkinsop

I am talking about industry in general. It is in the last 10 years that this development has occurred, whereas many of our nationalised industries were established before then. The development in recent years is primarily in private industry, and it is private industry to which I shall be referring.

The Government have insufficient information about the way in which this concentration arises. They may have a general figure, but the effect of this development in particular industries is relatively unknown.

Mr. Thomas Cox (Wandsworth, Central)

I asked the Minister for Trade and Consumer Affairs how many takeovers there had been in the Greater London area in the last five years, to which his answer was: I regret that this information is not available. In reply to a further Question about how many redundancies had occurred because of takeovers his answer was: No such estimate can be made. Redundancies can come about from a wide variety of causes."—[OFFICIAL REPORT, 20th November, 1972; Vol. 846, c. 294.] That exchange substantiates the forceful point which my hon. Friend is making.

Mr. Blenkinsop

My hon. Friend is right, and I hope that he will have an opportunity later of developing his argument.

In each of the last five years there have been 250 mergers involving assets of £½ million or more. If this trend continues the prospect is that within a relatively short time a very small number of firms will dominate our industrial life. Those few firms will almost certainly be multinational. If that situation arises in private industry there will be a strong demand for much more widespread public control.

Mr. Skeet

Nonsense.

Mr. Blenkinsop

The assets of these private empires could be far greater than those available to many individual nations. That is the prospect unless vigorous action is taken.

According to a recent article in the business section of the Observer four private takeovers resulted in the loss of 94,000 jobs. One in five of the employees of those firms lost his job. That leads us to ask whether the present forms of control, such as they are, are adequate.

There are wide variations in the policies advocated. The extreme view of the Industrial Policy Group is that mergers should be left as free of Government intervention as internal Government policy. There are few in industry today who do not look askance at many forms of takeover bid and are concerned about the way in which they operate. In their early post-election stance the Government might have approved of this extreme statement of policy—

Mr. Edmund Dell (Birkenhead)

My hon. Friend had better be careful at this point. He may find that the Government now approve this statement from the Industrial Policy Group.

Mr. Blenkinsop

With the changes that have occurred in Government policy in the last few months I am hoping that we have seen the end of the Government's non-intervention policy, and that even the present Government are taking a much more realistic view.

There has been widespread industrial condemnation of some forms of asset stripping. Some forms of that practice can result in existing assets being put to fuller and more effective use, and one cannot in general terms condemn all forms of asset stripping. There are certain examples which nearly all of us would condemn, and many people have made fortunes by adopting those methods. Many have built up great empires and have now changed their views and adopted a more respectable role. I can give one example that has arisen in my constituency. Nevertheless anxieties have been expressed about the nature of the operation which involves firms being split up and destroyed so that the maximum immediate financial use can be made of some of the assets without regard to the wider economic needs of the country as a whole and the workers involved. We are reaching the position where none of us can tell who owns what without a very great deal of investigation, which very few people are in a position to undertake.

Anybody who pretends to be able to judge the ownership of a firm by the name which appears on its premises and which is advertised as such, whether in the consumer trades or even in major industry, is likely to be very wrong. I suggest that this is a matter of concern to us all. Surely a firm's employees at least are entitled to know what is happening to the control of the company for which they work, and yet very often they do not have that information. Even some of the more senior employees who have worked for a firm for many years are often the last to be informed about financial deals which may well affect their working future. All this means that much more study and information is required both for workers in industry and for the general public.

Although we may criticise some past actions on this topic by Governments of all political persuasions, I am sure we all agree that the Industrial Reorganisation Corporation attempted to look at the wider social problems involved in some of the major takeovers and sought to ensure that regional policies were conformed to. A particular example of this was the AEI/GEC merger, which was strongly supported by the Government of the day. Certainly some benefits and development took place in the area in the north in which I live as a result of those activities, and this is also true of certain areas of Scotland, However, I have no evidence that this kind of concern is now being effectively pursued.

Many recent studies have been made into this problem and many views, authoritative and otherwise, have been put forward on the subject, books have been published about some of the technical problems involved, and private attempts have been made to assess the economic value of some of the takeovers. The broad consensus seems to be that, even on the narrower economic front, it is doubtful whether a large number of takeovers which have been carried through have been of value to the firms concerned. There is no doubt that if we were to extend this argument more widely to take in social considerations, those doubts would increase even more.

Some of the studies which have been made suggest that the main pressure comes from management in securing wider control of particular markets. This is by no means necessarily synonymous with wider national economic values or needs. There is, of course, the pressure for immediate personal financial gain—a pressure which is evident in some of the earlier asset-stripping procedures.

I should like to quote one example from my own constituency, a case which brings out many of the problems and emphasises the need for more effective control and action by Her Majesty's Government. I raised this matter very briefly at the end of the last Session. I refer to the takeover of Wright's Biscuits, a firm employing some 800 people, many of them women and some of them part-time workers. The takeover was in the first place made by Cavenham Foods and, more recently, by the United Biscuit Company.

This is a current example, and I put it forward only as an example, and I have no doubt that many hon. Members will be able to put forward what they regard as more significant examples. Deep concern has been caused in my constituency, in which no fewer than 15 per cent. of male workers are out of work and where female employment is relied upon to help to maintain families when, as all too often happens, the men are unemployed.

Wright's Biscuits was one of the relatively few consumer industries in my area, an area in which the decline in the concentration of heavy industry has been very marked. The company had been long established in the area, having begun its operations there in 1933. I do not pretend that the company's record was unblemished or that from the point of view of trade unionists there was nothing to complain of. For many years the firm did not recognise the rights of trade union organisations and the wages paid were heavily criticised. But, although I am not saying that it was a supremely satisfactory firm, I am saying that it provided a good deal of employment. Furthermore, it was a firm which appeared to be developing.

The company was reconstituted immediately after the war; a good deal of new machinery and many new buildings were then established and there were major developments in food distribution, many such firms were bought in, including quite recently a controlling interest in Moore's Stores, one of the larger food distribution agencies in the North. In 1964 the biscuit firm of Kemp was acquired with a factory in Grimsby. Gradually the numbers employed built up to 800, including 150 men.

The company in 1970 put up proposals for development, and they would have included a major rebuilding of the premises and the installation of new machinery. Those plans were considered by the Board of Trade in 1970. At that time the owner of the controlling interest in shares, a Mr. Webster, sold out to Caverham Foods. At that point Mr. Jimmy Goldsmith came into the picture, and he is a gentleman of the sort to whom I referred a little earlier and whose activities have largely in the past been involved in asset-stripping. He came in with Caverham Foods and gave certain undertakings to the staff and others about his intention to continue redevolpment plans. The employees relied on those undertakings and believed the firm had a good opportunity for the future.

What happened in the event was that when Mr. Goldsmith discovered that he was not likely to become the king of the biscuit trade he lost interest and this year sold the major part of the operation to the United Biscuit Company. That company took over in July of this year, only to announce last month that it was closing down the factory and moving the production to the Grimsby factory of Kemp's and also to Can's factory, which had come into the group via the Caverham interest.

The result of these two takeovers for South Shields has been that people either have lost their jobs or are likely to lose them in the near future. The United Biscuit Company has announced that it intends to close the factory by the end of March.

The Under-Secretary of State will recall that I raised the matter briefly in the House earlier and that he wrote to me giving such information as he could after the debate. Since then there have been one or two developments. Only a few days ago a town's meeting was held by the mayor with representatives of the firms concerned and of the workers. A slight ray of hope was offered in that United Biscuit said that it would at least consider the possibility of putting back the date of closure to give rather more chance for another firm to make use of the premises. Whether that will prove to be of value is uncertain. The point is that United Biscuit has bought over the trade names. They will not be available. It is also taking out the more modern machinery and making use of it elsewhere. That might have attracted another firm. What is more, there was some doubt about whether the company would not rip out all the machinery. I gather that this is not an immediate likelihood, so there is a ray of hope for those concerned.

Many people have worked with that firm for a long period of years. They thought that they had a clear undertaking about future developments. They claim that the firm has been a success financially. The facts are that this factory, as distinct from some of those associated with it, has made regular profits, and trade both at home and abroad has been growing. In the circumstances the people in Shields want to know why what appears to have been a successful operation is being closed, even though all kinds of proposals could be made about improving the premises, the machinery and the like. The people who have not been consulted and who have been misled about their prospects are the workers in that factory. Surely they are entitled to better treatment.

I want an assurance from the Government that they will do more than they have done already to try to ensure that continued use of these premises and that there will be no question of denial of the right to use the premises as a biscuit factory if anyone hopes to carry on operations there. We want an assurance of the Government's support in that way, and we want some fuller understanding of the facts and figures in this whole business. There is a complete clash of evidence about the facts. So far we have only the limited information given us by United Biscuit, the firm taking over the business.

I have no reason to doubt the sincerity of United Biscuit. In some respects, in terms of trade union relations and so on, the company has a good record. I do not wish to condemn it in that sense. However, I am speaking on behalf of those who work in the factory and of a large number of other people in the town. I am sure that the Government's attitude to takeovers will be judged in my constituency by the effectiveness of our joint action in this case which illustrates fairly clearly the problems involved. It is completely unsatisfactory to leave the matter as it stands with those who are most concerned with developments being the last to have any information.

How can we expect groups of workers in industry to have any respect for the firms for which they ostensibly work when behind their backs all kinds of financial deals are being conducted? How can they be expected to have any sense of responsibility for firms in these conditions? After all, the conditions that I am outlining are now becoming the generality rather than the exception. This is not a situation that we can allow to continue.

In this local case the fact was that this firm just did not fit into the new United Biscuit pattern of operations. But that does not mean that it could not have carried on successfully employing large numbers of people and meeting very real demands both in this country and abroad. Therefore, I want a clear independent inquiry into the situation.

We have been promised legislation. We were promised it last Session. It was squeezed out as a result of the activities of what I call "Government Phase One" or "Government Mark One." Now we are told that we have Government with a different face. I am willing to accept the warnings of my right hon. and hon. Friends that it may not be all that different. But cannot we have some indication of the line of action that the Government intend to take? The Labour Government undertook to set up a commission for industry and manpower which could have looked into the workers' side of the problem.

The first requirement is for an assurance from the Government that the real facts about these highly complex financial deals must be made public. The social and economic consequences must be open for clear argument. Above all, it is not just a matter for the shareholders, though it is perfectly understandable that action should be demanded for their protection, and I have no doubt that attention will be given to this aspect. However, I am concerned with others who have just as much right to protection and to information as the shareholders.

Secondly, the Government must undertake to prohibit takeovers and mergers where the likelihood of redundancies and unemployment arises, especially in development areas and special development areas, though not only there. I insist at least that from this debate we have a clear assurance from the Government that no such operation shall be carried through without full public inquiry into the circumstances giving rise to it.

It is in the hope of securing a reply on these matters from the Government that I initiate the debate on this Motion.

11.40 a.m.

Mr. Anthony Fell (Yarmouth)

I congratulate the hon. Member for South Shields (Mr. Blenkinsop) on not only securing his place to move this Motion but giving the House a chance to debate a subject which is exercising the mind of practically every hon. Member. This Chamber is not absolutely full today because most hon. Members have to attend their various constituency functions, and many others, who unfortunately have their feet in the bogs on the other side of the Irish Sea, were here most of the night.

I feel some humility, even added humility, at having being called before my hon. Friend the Member for the Cities of London and Westminster (Mr. Tugendhat) and others who perhaps it would be invidious to name but whom I regard as experts in this sphere. I do not claim to be an expert. However, I wish to raise one or two points.

First, I want to mention the effect of takeover bids on the small town. If we allow mergers to continue as they have been proceeding over the past few years, I fear that the small town will in the end be left with only the large firm instead of many small firms. The small town used to thrive and survive upon the safety valve of having many small firms, and if one firm decided to move or went bust, it did not do enormous damage to the town's economy.

From time to time people in my constituency say, "Would it not be marvellous if we could have an engineering firm employing male labour which could create 500 or 600 jobs?" I do not think that it would be marvellous to put so many eggs in the one basket like that, because if the firm were taken over or perhaps moved to some other area, the effect upon employment in the town and the locality would be disastrous.

We have recently had difficulties in Yarmouth. The right hon. Member for Bristol, South-East (Mr. Benn), at the request of my newly-nominated Labour opponent, kindly intervened in this situation and made a statement, of which I do not have a copy. I warned the right hon. Gentleman that I should mention this matter. He said that he would intervene with one or two of the top Ministers. Although I do not think it was the result of his intervention—I do not blame him for that, because even the strongest people with the greatest reputations cannot always cure such problems—I am pleased that the situation is not going too badly. The majority of the 335 or so people who were put out of work as a result of the closure of this factory have, thank goodness, now obtained other jobs and the sit-in which arose from this difficult situation has been ended with the burning of the placards that were displayed during that sit-in.

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

I am grateful to the hon. Gentleman for telling me that he would mention this point. I should stress that I was raising this matter with the Minister on general industrial grounds, not directly intervening in his constituency as such.

Mr. Fell

I am sure that had the right hon. Gentleman intended to take any kind of interventionary steps in my constituency he would have informed me immediately. The local newspaper reported that the right hon. Gentleman went, or was going, to see the chairman of the firm concerned. I do not know whether he did see him, but he was reported as going to see the chairman of the firm concerned, to intercede. I saw that in the newspaper. Perhaps he was unable to see the chairman. Indeed, perhaps the fact was that it was a mistaken report in the newspaper, which so often happens in these difficult matters.

My first point concerns the danger that increasing numbers of mergers create for the small town which has thrived on many small businesses. If we go on at this rate, it may be that in future if a large firm which is using all the local labour is taken over, moves or collapses, absolute chaos will be created in the small town.

Earlier one of my hon. Friends—I will not mention his constituency as he may want to mention this matter later—told me that when he first represented his constituency there were three companies in the town, all of which have now been taken over in mergers—two by one company and the third by another. If something goes wrong with the company which has taken over the two companies, the whole future of the town will be at risk. Therefore, we must consider carefully what can be done about mergers.

I was delighted to hear the hon. Member for South Shields, who moved the motion so capably, say that he thought the whole matter must be approached in a careful fashion. My right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), apropos the immigration situation, recently said that it was in the most hopeless muddle. I do not dissent from that. I think that it could equally be said that our industrial economy is in a tremendous muddle. Witness, the most common conversation to be heard in the corridors of Westminster over the past month or two has been, "What do we do about inflation?" The most common answer has been, "God alone knows. What do you think we ought to do?"

This is symptomatic of what has been happening over the past 50 years or more in the industrial and general economic situation in Britain. This has always been a country of compromise. For anybody who speaks pure logic—I get on rather well sometimes because I am not frightfully good on pure logic—this is not welcome because in this country everything works on compromise between one committee and another or one group of people and another, and so on.

Since the war we have been governed by two Labour Governments who have wreaked their Socialist ideas upon the economy, even though they said that they were going to do great things for Britain. Intervening between those two Labour Governments there have been Tory Governments who were not in office for long enough to do just what they wanted to do and were driven away from the policies in which they would have liked to have indulged. We are therefore trying to run the economy on a mixture of Socialist and Tory ideas.

I have always believed that the idea of public ownership of everything—the means of production, distribution and exchange—and the idea of free enterprise mix about as well as oil and water, and no better. We are in our present situation because of the enormous upsets which various Governments have imposed upon the economy and because the small, pet measures that have been taken out of pigeon holes every time a new Government have come to power in the belief that they would be marvellous for the country and wonderful for the economy have seldom been carried to their logical end.

We have never had a Socialist Government who have had the courage of their convictions, thank Heavens, for if they had had they would have taken over the money of the nation. They would have taken over all the banks, the insurance companies, and so on. I am not being evil in giving them ideas, because many of the Labour Party's members believe that that is the policy which they should adopt.

It is possible to run a Socialist economy. It is possible to run an economy completely controlled by the State, but the fact that eventually a gun is necessary to reinforce various measures, and that eventually the economy has to be protected because it becomes impossible for it to be productive in the sense of a free enterprise economy and to compete, has been shown time and again in the only Socialist economies that we have known.

This is not my problem. I do not worry about the fact that the only real Socialist economies that we have known have not survived without the gun. Sweden is mentioned from time to time but I do not regard the Swedish economy as really Socialist. In any case comparisons can be odious, and certainly it is odious to make a comparison between this country and Sweden. The real Socialist economies are completely different, and no fully Socialist economy has survived without the support of the gun. The country has to make up its mind about these things. The moment people see the danger of the left-wing of Socialism becoming too powerful they look for a compromise, but they do not relish a compromise which might result in the State being run with the help of the gun We have got ourselves into a dreadful situation because, although it is possible to run a purely Socialist economy—inefficient, hopeless and with no future for the nation—it is also possible to run a free enterprise society as a distinct alternative. But we are not doing either, and that is the terrible situation that faces us.

If somebody says, "Well, this is all very well, but what do you do about mergers?", my reply is that I have no idea what can be done about them immediately, and that we are dealing with an unreal economy, an economy that is not based on a free enterprise system. After 50 years of messing about I do not know how much reality there is left in the free enterprise economy system. I do not know how upsetting the checks and balances of 50 years of interference have been to a free enterprise economy.

I do not know what the result of all that is, but neither does anybody else. My hon. Friend the Under-Secretary of State is splendid on all these matters, and is always tremendously helpful to hon. Members, but he cannot do anything either, for the simple reason that it is necessary to start getting back to a few basics. I am sorry that my right hon. Friend the Member for Wolverhampton, South-West, is not here this morning, because I am sure that if he were here he could tell me the answer to the problem. All that I can do is to pose it.

I remember the speeches of my right hon. and learned Friend the Minister for Trade and Consumer Affairs during the debates on the Common Market issue. His performances were incredible. One always got the feeling that even if he did not give the answer he was an expert and knew all the things that he did not tell hon. Members. My right hon. and learned Friend has a brilliant brain and he will, I am sure, tell us about these things when the monopoly legislation comes before the House. We are not, of course, short of legislation on this subject already, as can be seen from looking at the Statute Book, but do we use it?

One has some idea of what my right hon. and learned Friend is going to say. He will follow the line taken by the hon. Gentleman, namely, that in a matter of this sort we must use care because we are talking about the very basis of the economy. He will say that it would be ridiculous and stupid to bring in a Bill that would alter the whole financial situation that has led to monopolies and mergers on the enormous scale from which the country is suffering, and he will convince us that what he is saying is right, which will be very little, because he cannot be expected to say much until he has given considerable thought to the matter. Nevertheless, we shall have the utmost confidence in what he does not say. I, for one, pray that the confidence that we shall have in him will not be misplaced, for there is no doubt about the importance of this subject.

The whole business of takeover bids, mergers, vast monopoly powers and the people at the seat of power is vulgar in the extreme, and perhaps this is best exemplified by the comment of one gentleman about what would happen if he wrote a cheque, which would be different from what would happen if I were to write one. If I were to write a cheque for a large amount, the bank would return it marked "RD", but this gentleman takes a rather different view. He says, "When I write a cheque, it is the bank that bounces." This is no doubt apocryphal, but it is the sort of vulgarity that goes with power and greatness in the world about which some of us, with some justification, sometimes complain.

I thank the hon. Member for South Shields for so tolerantly and carefully moving this Motion. Although there are some things in it with which I do not agreed, I would not attempt to oppose it. It is a great thing for the House to have a chance of discussing this very deep and very difficult subject. I pray that sooner or later a Government—it must be a Tory Government—will be able to do something about this. On my very analysis, a Socialist Government, unless it were to indulge in full Socialism for the nation, is out. Socialism can no more succeed if it is semi-Socialism than Toryism can succeed if it is Socialist-Toryism. Those two things are non-sequiturs.

I therefore hope that my Government will see what they can do to stop interfering with the roots of the economy. Meanwhile, because interference there must be when we have built an economy that is subject to some of these dreadful financial manipultations, I hope the Government will take the necessary action, if they can, but also that they will aim to reintroduce a free enterprise, Conservative-based society.

12.2 p.m.

Mr. Maurice Edelman (Coventry, North)

I join the hon. Member for Yarmouth (Mr. Fell) in thanking my hon. Friend the Member for South Shields, (Mr. Blenkinsop) for introducing for debate a matter of general and national concern. I will not follow the philosophical speculations of the hon. Member for Yarmouth, which arise from his distress at the schizophrenia of a Government torn between laissez-faire and interventionism. Rather, I want to speak about one particular takeover which is the subject of general concern.

I should perhaps say first that I do not regard all takeovers as of the same kind, or even necessarily detrimental to the economy or to the social condition of our country. If there were not some fluidity in industry, industry would be doomed to paralysis. I do not regard it as undesirable that there should be times when an ailing and incompetent management is taken over by a dynamic and forward-looking alternative source of management. To that extent, the word "takeover" as a bogey can be disposed of.

That does not mean that many—indeed, probably most—of the takeovers of recent times are not the product of speculative greed which needs to be deplored. Some of them arise not from a concern for improving the management or efficiency of the companies concerned but merely from a recognition that some of the firms to be taken over have hidden assets which can be exploited, not necessarily for the productive purposes with which the company taken over is concerned but merely to exploit the sickness of our age, property speculation. The asset strippers are precisely the people concerned with exploiting property values rather than with helping the nation to earn its living.

Mr. Peter Rost (Derbyshire, South-East)

The hon. Member is talking about hidden assets being exposed. Would he not agree that, if a company has hidden assets, there could be something wrong with the management and that another management might be justified in at least trying to suggest to the first management that they should be employed to the better advantage of the economy as a whole?

Mr. Edelman

The hon. Member should be clear about what I mean by "hidden" assets. I am thinking not of machinery which can be used for manufacturing purposes but primarily of the property values or land values possessed by the company which can be exploited speculatively for purposes quite different from those for which the company existed.

I hope to illustrate that by talking about the extraordinary, indeed sordid, story of what has been happening at the Shepperton Film Studios. I am concerned with that transaction not only in the wider sense to which my hon. Friend the Member for South Shields referred—the question of a takeover in which property and land values are likely to be exploited—but mainly because of its effect on the British film industry.

The film industry is not just a matter of cigar-smoking tycoons who are interested in trying to make a quick million pounds. It is the shop window of a nation. The whole of a nation's culture and civilisation is, or could be, expressed by means of that industry. It is a means of communication, by which, when we go into Europe, Britain will first of all be judged. It is through the film industry, that most important communication medium, that a nation is seen abroad.

Not only is it a means of expressing a nation's culture and civilisation: other things flow from it. Exports, for instance, to a great measure flow from the presentation of a nation's way of life on the screen. For instance, the capture by the United States of many markets derives precisely from the fact that it has had the largest film industry in the world, and as a result the face of America could be seen on the screens.

I want to come, therefore, to the question of the Shepperton Film Studios, these 60 acres of Shepperton which represent perhaps the greatest potential of our film industry. To see what has been happening there, one must go back at least to 1964, to our debate on 4th February, when the present Prime Minister was Secretary of State for Industry, Trade and Regional Development.

At that time, the Government offered for sale to a number of competitive consortia their assets at Shepperton which they were holding as British Lion. Those film studios, under Sir Alexander Korda, had reached their heydey and fallen on evil time. In order to transfer the assets to private enterprise, under the philosophy mentioned by the hon. Member for Yarmouth, they decided to sell off the studios to a potential buyer, whether an individual or a consortium. The assets were then valued. That is essential in the argument which I hope to deploy.

On 22nd May, 1972, I asked the Under-Secretary of State for Trade and Industry: … to what extent the continuing use of the Shepperton Film Studios for film making was a criterion in the valuation of ill million by Sir William Lawson of British Lion Limited's assets in 1964, in view of the present valuation of £5½ million. That was the figure for which those assets were later sold to Barclay Securites Ltd. The hon. Gentleman replied, very properly: The 1964 valuation of British Lion's interests in Shepperton Studios Limited was based on the then permitted user of the property. This was for film studio and ancillary purposes, and/or warehousing."—[OFFICIAL REPORT, 22nd May, 1972; Vol. 832, c. 250.] I wish to make it clear beyond peradventure that anything that has been said subsequently does not represent the truth of the matter. Sir Michael Balcon has underlined clearly that the valuation of the assets at Shepperton at that time was based on the assumption that they would be used for film making. It is no good Mr. John Boulting writing in Cinema TV Today on 21st October, 1972, that the value that Sir William Lawson placed upon the company was accepted by the National Film Finance Corporation without any inhibitions upon the sale or use of Shepperton Studios.

On the contrary, on 4th February, 1964, the present Prime Minister, who was then the Secretary of State for Industry, Trade and Regional Development, gave the undertaking to the Opposition that the assets of Shepperton Film Studios would be used for the purposes of making films, that they would not be alienated and, above all, they would not fall into the hands of any assets stripper. The right hon. Gentleman offered the guarantee that Shepperton would continue to be used for film making. He said: These provisions, which will be permanently effective, should ensure that no purchaser of British Lion shares can strip it of its assets or do anything but continue to operate it as a going concern. It will also mean that no cash made from an authorised sale of any assets can be removed from the business without the agreement of the NFFC … the purchasers will be required to give positive assurances to the National Film Finance Corporation that British Lion will continue to provide the facilities for independent producers which it now gives and will continue to maintain an independent position."—[OFFICIAL REPORT, 4th February, 1964; Vol. 688, c. 1076.] The present Prime Minister gave that unequivocal undertaking.

But now let us see what happened. The NFFC was given a preference share in the new company so that it could act as a watchdog for the public interest. More than that, a director was appointed as part of the general undertaking. He was entrusted with the task of supervising the proceedings of the company and of ensuring that the Prime Minister's pledge was fulfilled and that the assets should not be alienated. The gentleman appointed was Sir Leslie Robinson, a most eminent civil servant. But on 30th September 1970 he suddenly disappeared from the company without trace. As far as the company was concerned, in which he was placed to act as a representative of the public, he was no longer present. Not only did he disappear in silence, but no director was substituted for him. Gradually the protective devices to which the present Prime Minister committed himself in 1964 ebbed away and all that was left were the three directors in charge of the operation.

A few months ago the directors announced, and I hope with some mortification, that they were losing £10,000 a week at Shepperton and that they had to sell the property. To whom did they want to sell the property? They wanted to sell it to a group of people concerned with bingo halls, who had some sort of subsidiary operating as the exhibitors of pictures. Ultimately they decided, having reached a point when the days of "I'm all right, Jack" were over and what they regarded as the film potential of Shepperton had failed, that the time had come when they should sell the pro- perty to somebody who would take it off their hands.

It was necessary for the directors to try to find a formula by which they could get all the undertakings fulfilled which had been given by the Prime Minister. In pursuance of that, they made a claim that they were entitled to sell the company—British Lion—provided that they had reached a point where they were suffering what are called "critical losses". At that time the NFFC had the right to grant them permission to sell off their assets on the assumption that they could not continue as a viable firm making films.

The important thing about that codicil is the date. The date on the document which suggests that they were entitled to sell off assets, which the Prime Minister had said would be permanently dedicated to the purpose of making British films, was 31st March, 1964, whereas the debate in which the Prime Minister gave his pledge was 4th February, 1964. In other words, it was a secret codicil issued by the NFFC to the directors of the new company. They were given the letter so that at a time to suit their convenience they could get rid of the assets of the company.

Anyone who is concerned with the future of the British film industry must be deeply distressed by the subsequent proceedings. Mr. Bentley of Barclay Securities made a bid of approximately £5¼ million. By whatever standards one measures that bid, I think that no one will say that British Lion did not make a handsome profit out of it.

Throughout the history of British Lion, since 1964, there were successive stages when the value of the company went up and when the directors and shareholders were largely congruent. Substantial dealings took place and the point was reached when the company was about to be sold to Barclay Securities. I do not think that the previous directors of British Lion and the members of the consortium are entitled, as they appear to have done, to wash their hands of the subsequent purposes for which Shepperton would be used.

I believe that there was no one in the City of London or elsewhere who had any doubt that the object of the purchase by Barclay Securities was to run down the film element at Shepperton and to use what remained of the 60 acres for property development. Despite all the pious noises made by the original directors of British Lion, it was perfectly clear that in that transaction the whole object was ultimately to strip, if not all the assets, certainly the major assets of the company and to make a killing out of the result.

It is no good for the former directors of British Lion or the Minister to say that when the transaction was sanctioned by the NFFC, which had the right of veto, it was not concerned with the potential use to which the assets would be put. No one in his right mind would confuse Mr. Bentley with, say, St. Francis of Assisi. No one meeting him could have any doubt that he was in the business to use the property assets and to continue in his hitherto successful career of asset stripping.

Although I have said that takeovers may be economically and even socially useful from time to time, no one can say that asset stripping in that form can be anything but a very grave and potentially deadly blow where an industry is closed down in whole or in part and its assets diverted simply for speculative or accumulative reasons. That is exactly what is happening in Shepperton today. The place has been carved up. Only 15 acres have been assigned for film-making. Two stages are to be used for filmmaking, and the remaining stages are to be left for a future still undetermined, when no doubt Mr. Bentley hopes that he will be able to exploit the land available for the purposes of speculative building of one kind or another.

Therefore, I ask first: what will happen to the film industry? I can state categorically—I had the information confirmed this morning—that a major filmmaker in this country who wanted to use the silent stage, which is due to be closed down by the Bentley operation, will, finding that it cannot be used for film-making, have to make other arrangements or not proceed with the film.

Mr. Hugh Jenkins (Putney)

I agree with everything my hon. Friend has said up to now. But will he accept that so far there has been only agreement in principle, and we should not accept that that agreement has been finalised and that the silent stage is lost. It would be a great pity if potential film-makers thought that the agreement was irreversible at this stage. It will be part of my hon. Friend's purpose to try to reverse the situation.

Mr. Edelman

I am grateful to my hon. Friend for underlining that point and making it so explicit. The battle is not yet over by any means. The object of part of this debate is to continue that battle and to prevent what some of us regard as a squalid exploitation for commercial and financial advantage of something which was pledged and entailed to the nation as a whole and which for the purposes of private benefit has, through all the contrived formulae, resulted in so large a part of a major studio being diverted from its proper purpose.

I am sure that my hon. Friend will add to what I have said. For the time being, all I want to say is that asset stripping in the form in which we have seen it at Shepperton is a pernicious and deadly wrong, not only to the individuals immediately involved, not just to the men who are made redundant, but to the social and economic health of the nation. With my hon. Friend, I hope that this action, undertaken hugger-mugger behind closed doors, with the arm of the Press being twisted to present sycophantic articles in favour of the transaction, will be adequately exposed. Although it is still late in the day, I very much hope, with my hon. Friend, that the battle, so far from being lost, will result in Shepperton's being restorted to its proper purpose.

12.25 p.m.

Mr. J. Bruce-Gardyne (South Angus)

The hon. Member for Coventry, North (Mr. Edelman) has developed a particular case that is obviously of considerable significance. I am sure he will not expect me to speak on that subject. I hesitate to do so, except to say that he more than once referred to Mr. Bentley as an asset stripper. I am not prepared to go into the case with which the hon. Gentleman was dealing, but it is only fair to say that the intervention of Mr. Bentley has probably been beneficial for the overall future of the toy industry, for example.

Mr. Edelman

May I ask the hon. Gentleman to tell that to the workers in the toy industry in my constituency who were made redundant by Mr. Bentley?

Mr. Bruce-Gardyne

The hon. Gentle man must make his own arguments in his own constituency, but I think it is true to say that some elements in the toy industry have a better future thanks to the intervention of Mr. Bentley than they had appeared to have. But I do not want to pursue the particular case with which the hon. Gentleman was dealing.

I should perhaps begin by apologising for the fact that, owing to a long-standing speaking engagement in Scotland this evening, it is unfortunately rather unlikely that I shall be able to hear the latter part of the debate. But I am very grateful for the opportunity to take part, because the subject chosen by the hon. Member for South Shields (Mr. Blenkinsop) is very important, as were the arguments he advanced in his usual moderate manner, particularly to those of us who represent development areas. But I hope that he will forgive me for saying that he has a bit of a nerve, in view of the terms of the Motion. It refers to what has happened in recent years, but the hon. Gentleman gave the impression that those developments had occurred in the past two years, since the present Government took office. I should like to read a short extract from The Times, which refers to: a year in which no one could afford to laugh off any takeover rumour, a year in which we have witnessed some of the hardest-fought and most bitter takeover battles. That appeared not in 1971 or 1972 but in 1968. Under the Labour Government we saw a conscious effort to promote the system of merger that the Motion is intended to criticise. I go so far as to say that the Labour Opposition are the biggest asset-strippers in the land. I shall explain what I mean in a moment.

In February, 1968 the Financial Times said in a leading article: The current worship of size apart, two factors account for what is now happening The first is the Capital Gains Tax which has conditioned shareholders to expect paper rather than cash for their existing holdings. At a time when the shares of good companies are often at or near all-time peaks, this facilitates life for the bidder. Secondly, the attitude of Government has changed. … Now the Government is positively encouraging mergers and has set up the Industrial Reorganisation Corporation with the specific object of helping companies to get together. … Both Mr. Wilson himself and quite a number of his colleagues sometimes appear to assume that if only British companies were able to match their international competitors in size they would also by that very fact be able to match them in competitive power. I think it a bit rich, therefore, for the Labour Party to present itself as critic of the merger phenomenon which it did so much to advance when in Government.

Mr. John Cronin (Loughborough)

The hon. Gentleman is a little selective in choosing 1968. That was the year when we had the Leyland-BMC takeover, the GEC-English Electric takeover and the Thorn-Radio Rentals takeover, and I think that it has been generally agreed that those large takeovers were beneficial.

Mr. Bruce-Gardyne

I agree that those were very large takeovers, but the fact remains that, at constant prices, the value of assets involved in takeover transactions in that year was the largest ever, and, moreover, at that time—this is the point I am making—the attitude of the Labour Government was one not of neutrality but of positive action to encourage mergers. That is why I say that there is an element of hypocrisy in the attitude which right hon. and hon. Members opposite appear to be adopting today.

Mr. Cronin

The hon. Gentleman cannot get away with that. The purpose of the Motion is, surely, not to condemn all takeovers but to ensure that the public advantage is considered when takeovers take place.

Mr. Bruce-Gardyne

But the Motion expresses, deep concern at the economic and social damage caused by takeovers and asset stripping in recent years. The hon. Gentleman will, no doubt, make his own speech in due course. I think it fair to point out what the attitude of the previous Government was. It was not ust a matter of their setting up the Industrial Reorganisation Corporation for precisely the purpose of promoting shot-gun industrial marriages. There was also the manner in which they handled the whole fiscal system, the way in which the long-term capital gains tax, as the Financial Times pointed out, had a positive effect in making mergers carried through with company paper that much more attractive.

Moreover, a significant element, especially in 1968, was the impact of dividend restraint. I think it no coincidence that that annul mirabilis—if that be the right word—for mergers and takeovers followed the Labour Government's dividend freeze. I only hope that we shall not see a repetition of the same phenomennn following the present dividend freeze. But I can well imagine the Opposition's attitude if my right hon. Friends had not included a dividend freeze in the measures which they put before the House last week.

There is this further justification for saying that the Labour Government could be called the greatest asset strippers of the lot—the process of nationalisation itself. The Labour Government stripped Scotland of its steel industry. We had an independent steel industry in Scotland. We have one no longer. We have a nationalised British Steel Corporation and hon. Members opposite never miss an opportunity to complain about the way in which the corporation has run down the scale of its operations in Scotland. Again, if they were concerned about the interests of the steel industry in Scotland, it seems the height of hypocrisy that they should have left us in Scotland not with our steel industry in independent hands but with it merged into a nationalised corporation. To my mind, that was a classic example of asset stripping to the disadvantage of the development areas, and, in particular, development areas in Scotland. I repeat that it is a bit rich for the Opposition now to present this Motion to the House.

There was another way in which the Labour Government were guilty of asset stripping, though in this case I think it fair to say that the majority of right hon. and hon. Members opposite were unaware of what they were doing. One of the problems of the development areas is that they tend to be places which lack the central units of companies. They tend to be areas which rely too heavily on subsidiaries, subsidiaries which may well be vulnerable to periods of industrial recession. I believe that, over the years, regional policy has done much to encour- age that state of affairs, which is one of the reasons why I deplore the form it has taken.

It is certainly my experience in my area, which I think not untypical, that the one type of company which has its headquarters and its main roots in a development is the private company, the private family company. No company was the object of greater maltreatment by the last Government than the private company. In his days at No. 10 Downing Street, the Leader of the Opposition seemed to regard the family company as some sort of affront to society, and from the Finance Act, 1965 onwards we had discriminatory tax piled on discriminatory tax against the private company.

As I say, I think that most right hon. and hon. Members opposite were not aware of the impact of what they were doing, but I cannot honestly think that the same can be said of the chief architect of that sort of discriminatory taxation, the noble Lord, Lord Diamond. He knew perfectly well what he was doing, and that is why I have referred to him before, and shall again, as the 20th-century curse of Scotland. For in his passionate pursuit of fiscal discrimination against the private company, he did a great deal to damage the future prospects of the economy of areas such as the one I represent.

My right hon. and hon. Friends have done a great deal in two years Ito rectify some of that damage, and we are grateful for that. The way in which the ludicrous and grossly unfair short-fall provisions of the 1965 Act have been trimmed and curtailed has been, and will be, of considerable assistance to the development of the type of private company which is so important to development areas like mine. The way in which the overall close company provisions of the 1965 Act have been trimmed away is greatly of benefit, also.

But I hope that we shall push ahead with what, in my view, is the most important reform of all, perhaps, if we are to reduce the scale of the stripping of the assets of these private companies by enforced takeovers by large public national companies with their headquarters, more often than not, in the south of England or, indeed, on the other side of the Atlantic. I refer here to the whole system of estate duty and the impact it has on the private company, so often forcing the dispersal of its assets for estate duty purposes.

We now have a Green Paper on the reform of estate duty, and I hope that we shall press ahead with it. In passing, I must say that I think that we should be most ill-advised—I hope that my right hon. Friends have no such idea—to defer reform along the lines suggested in the Green Paper for fear that it might disturb the susceptibilities of Mr. Vic Feather and his colleagues. For it is the ruinous higher rates of estate duty as they apply to the family company which, time and again, create the conditions for the sort of takeover and destruction of the identity of locally based companies in development areas which one takes to be at the heart of the concern expressed in the Motion. Far from reform of estate duty in this respect being socially divisive, it would, in my view, be hard to think of any fiscal reform which would be of greater benefit to the development areas and the private companies which are of such importance to them.

I have mentioned my anxiety about the likely impact of dividend restraint. Experience suggests that a period of dividend freeze or restraint is likely to be followed, for fairly obvious reasons which I need not elaborate, by a wave of takeovers as companies become asset rich and their share prices are artificially deflated. We need also to consider the continuing impact of long-term capital gains tax. The introduction of that tax clearly was one of the factors which led to the vast upsurge of mergers which took place during the Labour Government's period of office. I suspect that it is still a factor today.

We need also to look very closely at the impact of investment incentives. It is clear that one or two of the recent large mergers—for instance, the Trafalgar House takeover of Cunard—has been encouraged, to put it no higher, by the system of investment incentives which makes a company with little or no profitability artificially attractive to a company with large profits and insufficient offsetting allowances for its purposes. As my hon. Friend the Under-Secretary of State knows, I am sceptical about the virtue of investment allowances on more general grounds, but we should not lose sight of the part which investment allowances may play in stimulating mergers for reasons which are not necessarily very sensible from an economic point of view.

I remind my hon. Friend the Under-Secretary of State—and this is germane to the subject we are discussing—that before the last election we as a party announced that we should be taking an urgent look at the reform of company law. As my hon. Friend, who is a considerable expert in these matters, is aware, we have not dealt with many of the Jenkins Committee's recommendations. There is a great need for more disclosure by public companies.

The Labour Government's Companies Act was deficient in two respects. First, it imposed quite unnecessary and exaggerated demands of disclosure on the private company; and, secondly, it did not go nearly far enough in demanding greater accountability of the public company to its shareholders. That, too, is relevant to this subject. I therefore hope that we have not lost sight of the case for reform of company law and that we shall be able to fit it into the legislative programme as soon as possible.

The hon. Member for South Shields made his case in his usual moderate and reasonable manner, and I accept his argument that there is considerabe public concern about the impact of mergers and takeovers. I am delighted that we have departed from the theory that "biggest is best". That is not true. It was one of the worst and most fallacious ideas of the Labour Government. But, in view of the way in which the Labour Party behaved when it was in office, it is not very becoming for it to argue that it has suddenly seen the light on this subject.

12.43 p.m.

Mr. Edmund Dell (Birkenhead)

The hon. Member for South Angus (Mr. Bruce-Gardyne) is not the only Member who finds opportunities to make the same speech over and over again under the heading of different Motions. I do it myself from time to time. His speech was no worse for the fact that we had heard it before, and it contained certain elements with which I agreed. For example, I agreed with what the hon. Gentleman said about the consequences of the reintroduction of tax allowances as a form of incentive in promoting certain mergers which cannot be justified on any economic ground. I agreed with what he said about the importance of disclosure by public companies in this area of policy. The hon. Gentleman may remember that during discussion on the abortive Commission for Industry and Manpower Bill in the last Parliament, with which I had something to do, provision was made about disclosure by public companies.

The hon. Gentleman was selective, although not impermissibly, about the Labour Government's record on mergers. I do not know whether he will be surprised to learn that I agreed with a lot of what he said on that matter. On the other hand, I remind him that the Labour Government, perhaps like the present Government, had different emphases during their period of office. The present Government have found many ways of changing their emphasis on a variety of subjects. I remind the hon. Gentleman of the references in January 1969 of the Unilever-Allied Breweries merger and the Rank-De La Rue merger by my right hon. Friend the Member for Grimsby (Mr. Crosland) with the specific and declared object of bringing a pause to the merger mania of the time.

I congratulate my hon. Friend the Member for South Shields (Mr. Blenkinsop) on introducing the Motion, because it goes to the heart of the competition policy question. What my hon. Friend is saying in effect is that in the industrial situations which we have considered under the heading of "competition policy" there is something called the public interest which is concerned with matters like consequences for employment, for the use of industrial resources, and the future of the Shepperton film studios, as well as with competition policy more narrowly defined.

That is what the Motion says, and it puts before the House the most important aspect of the problem. I intervened in my hon. Friend's speech to indicate certain suspicions which I have of the Government's attitude because I believe—this will be my main theme—that this aspect of competition policy, which is traditional in competition policy in this country, is likely to be played down in the legislation which the Government propose soon to introduce.

The Government came to office with the flag of competition very high on their masthead. It was to be something which they would inject into the economy in order to increase the efficiency and productivity of the economy. Now, two and a half years later, not only have we not seen their Bill but we have not had a White Paper. We have not even had a Green Paper. I have pressed the Government again and again to tell the House their thoughts about this area of policy. They have said "We will think about it. We will consider whether there should be a White Paper." But nothing has happened.

I was told yesterday by the Minister for Trade and Consumer Affairs that he will not publish a White Paper but that the Bill will be available shortly. That is not good enough. The Government say that their Bill will be a major piece of competition legislation. If that is so, the Bill should have been preceded by a consultative document so that it could be considered in the country and by the House. The fact that the Government have not produced such a document indicates to me that they have made up their minds only at the last moment about what they want to do and that they had very little idea of what they intended to do when they talked so fluently about competition when they came ino office in June 1970. Because they have not produced a White Paper we are dependent to a large degree on interpretation of the signs we see as to what they intend. At any rate, this debate today gives us an opportunity of having a debate not on a White Paper but on those indications we have seen of the Government's intentions, and we take the opportunity in the desperate hope that the debate may influence the Bill before it is introduced.

I saw that the right hon. and learned Gentleman the Minister for Trade and Consumer Affairs said the other night in a speech to which I shall refer again that there are certain matters which are still under consideration. If there are certain matters which are still under consideration perhaps he will, before introducing the Bill, consider certain of the points which are being made in this debate today, including those made by my hon. Friend the Member for South Shields.

I start with one indication we have of what may be the approach to the new legislation. A couple of weeks ago there was an article about the right hon. Gentleman the Member for Knutsford (Mr. John Davies) in the Sunday Times. It was the sort of valedictory message which politicians often persuade journalists to publish so that they can tell the world what their place in history should be. There were certain remarks in that article about this proposed legislation. One thing which was said was that as a result of this new legislation the Beecham-Glaxo merger would have been allowed to go ahead but the Boots-Glaxo merger would have been prevented. It is true that the original view of the Department of Trade and Industry was not to refer the Beecham-Glaxo merger; the reference was only made when the subsequent Boots-Glaxo merger proposals came along. It may be that the Department was displeased about the view of the Monopolies Commission members and regretted having to accept that report by the Monopolies Commission, but it seems to me rather odd that we should find this out in an article by a journalist in the Sunday Times.

However, the question is: how do the Government imagine, with anything like the concept and administration of competition policy which we have had in this country, that they could create a situation in which the Beecham-Glaxo merger goes ahead but the Boots-Glaxo merger does not go ahead?

I suspect that what the Government are thinking is of attempting to introduce into legislation in this country a pure, narrowly-defined competition test. We have never really had competition legislation in this country at all. What we have had is public interest legislation. What we in our legislation in this country have said, in the 1948 Act and the 1965 Act, is that there are certain industrial situations which are in a sense competition situations, and that we will investigate these situations through administrative tribunals like the Monopolies Commission or through a court like the Restrictive Practices Court and will investigate their relationship to the public interest.

The Restrictive Trade Practices Act 1956 did not even mention the word "competition". What it said was that restrictive practices in the supply of goods were, subject to certain limitations, against the public interest. I think that the first piece of legislation which actu- ally used the word "competition" was a piece of legislation for which I had some responsibility, and that was the Restrictive Trade Practices Act 1968, but we have not really had a competition policy; we have had a public interest policy. We have said to various sorts of tribunal that, given a certain situation referable under legislation, they should look at it in the public interest, it being implied, though never explicit, that competition was to be taken as part of the considerations in determining the public interest; as one of the considerations, even an important consideration, but not the only consideration.

This has been thought to be right in the circumstances in this country, but certain people have said that this whole approach is wrong. Among the groups which have said that the whole approach is wrong is the Industrial Policy Group, to which my hon. Friend was referring. What that group says is that this whole concept of the public interest is very difficult, is very elusive, and that government should limit itself to a single question: Is the situation a situation in which there is reasonable competition? If there is, no other issues arises; if there is, the Government must let it go.

In other words, these gentlemen, these very powerful gentlemen who run very large businesses in this country, and who are, therefore, a market force in this country, and whose exercise of their power is a real market force, have said "Give us our merger, unless it can be shown that there is something in it which is inimical to competition, and if there happen to be other public interest issues"—employment in my hon. Friend's constituency, the use of resources—"well, forget about it. If it is a matter of employment in my hon. Friend's constituency, then, they say, it is for the Government, not for competition policy"

As I say, I have some suspicion, a suspicion which has been increased in the light of a speech by the right hon. and learned Gentlemen the Minister for Trade and Consumer Affairs, that this is the approach which the Government are now developing. There was something in the original statement of the former Secretary of State for Trade and Industry in December, 1970 which suggested that this was the way in which he was thinking because he said, when speaking of making further references, that he would use the power to refer proposed mergers if I consider that competition in the relevant market would be restricted to a damaging degree as a result of the merger."—[OFFICIAL REPORT, 17th December, 1970; Vol. 808, c. 1578.] That is a very relevant consideration, but he seemed to imply that that might be the only consideration.

Again, the Minister for Trade and Consumer Affairs, in his speech the other night, commented on the tendency, which again the Industrial Policy Group criticised, of the Monopolies Commission looking at the consequences of mergers for efficiency and not at the pure question: will a competitive situation continue? The right hon. and learned Gentleman seems to have accepted that point from the Industrial Policy Group. He went on in that same speech to say something which would have seemed welcome to the group. Referring to the public interest question he said: It might be that public interest factors of this kind can be more fruitfully considered in the context of social and regional than of competition policy. I say that if that is the attitude of the Government to this question, if that is the character of the legislation which it is proposed to introduce, it will very drastically change the whole atmosphere, the whole character, of competition legislation in this country.

One could present a quite strong argument in favour of this approach and say that one can in practice do almost everything that one can do under the current approach. I agree, for example, with what the Minister of Trade and Consumer Affairs said about European mergers and the way he cast doubt on whether we really need enormous European companies to compete with American companies. It does not seem to me that the United States economy has been doing so wonderfully in the world that we have to conclude that we need the same size of company to compete with it. One can go on and say that something of the relevant public interest questions are indeed part of the competition policy question. I have myself argued that we should have in legislation in this country a presumption in favour of competition, a presumption in favour of competition which would be something we have never had before in legislation, but have it within this whole public interest approach to this area of policy.

Here I come to the motives of Ministers for thinking in these terms. What is the object of the exercise? We are perfectly clear about the Industrial Policy Group's object in adopting this approach, and my hon. Friend was right in the quotation he gave. The Industrial Policy Group, naturally, thinks that the Government should keep out. There may be a limited number of questions with which the Government should concern themselves, but in general the Government should keep out.

Is that the attitude of the Government? One might conclude so from the Government's record on this issue during the past two and a half years. There are many mergers which they should have referred and did not. The one kind of merger which the Government evidently think that they cannot refer under this approach to competition legislation is the conglomerate merger. It is, apparently, the view of the Minister for Trade and Consumer Affairs that conglomerate mergers have very little impact on competition. I think he is wrong. As the then Board of Trade handbook on mergers said, conglomerate mergers raise many competition policy issues. When the Minister suggests in his speech that it is difficult to refer conglomerate mergers under this approach, I suspect that the Government are accepting both the approach of the Industrial Policy Group and the attitude from which that policy derives, which is that this is an area of policy in which the Government do not need to intervene vigorously to maintain the public interest

I suspect that, instead of the more vigorous competition policy which the Government promised but have not fulfilled, they may be in the process of surrendering to large-scale industry. Of course the Industrial Policy Group does not want the Government to interfere with mergers merely because of public interest questions such as employment and the effect on the regions. These are public interest questions that should legitimately be considered within the ambit of competition policy.

The concept of the public interest which my hon. Friend included in the Motion cannot be eliminated from competition policy. It is a matter for the Government. The Government may decide, with the advice and help of an administrative tribunal such as the Monopolies Commission, on the public interest in industrial situations. If the Government intend to eliminate it or to write it down they will do grave damage. In that event I hope that the legislation which they introduce will be vigorously opposed by the Opposition.

The Minister for Trade and Consumer Affairs hinted at other areas of policy. He referred to possible changes in machinery and the widening of the criteria of market dominance. I am not worried about that. The Labour Government wanted to extend the definition of market dominance in the Commission for Industry and Manpower Bill. The Opposition were against that at the time, but if the Government want to do it, that is fine. I do not mind if the Government want a registrar to help the Monopolies Commission, providing that the Government maintain their final right to determine the public interest. But if the Government go for the fundamental point in our competition legislation and eliminate or write down the public interest approach they will be making a grave error, and that, unfortunately, will be another decision of theirs that we shall have to reverse.

1.5 p.m.

Miss Janet Fookes (Merton and Morden)

I rise as an unashamed supporter of the private enterprise system as a general concept. That does not mean that I approve of every manifestation of it, and I particularly deplore that aspect known as asset stripping—which I take to mean the buying or taking over of a company not for its manufacturing expertise or ability but solely for the value of its property and land. It is akin to the agricultural practice which led to dust bowls, where forests were ruthlessly cut down in pursuit of short-term profit without concern for the longer term.

My feelings are particularly strong because there has been evidence of asset stripping in my constituency by a company which has already been mentioned in connection with Shepperton Studios. I refer to Barclay Securities and its Chair- man, Mr. John Bentley. According to the Financial Times: Mr. Bentley told shareholders at the annual meeting in London that the Group was undergoing a transformation this year in which it demonstrated its catalytic policy of acquiring smaller companies, modernising them over a period and floating them, or selling them off again, as far more efficient and streamlined organisations, 'usually under newly-promoted energetic and proven managements to pursue their own intiative.' Those are splendid phrases, but what did they come down to in my constituency? The reality was very different in the case of Lines Brothers, which is a firm world renowned for its toy production and brands. The names Triang and Pedigree are well known brand names. The company has been in difficulty in recent years and has suffered from management troubles. The toy industry as a whole is undergoing difficulties. In 1971 there was a takeover by Barclay Securities. Glowing assurances were given about the future of the company, the determination to make a go of it, and so on. About six months later, in June 1971, a shock announcement was made that the whole of the Merton complex was to be shut and 1,200 people were to be thrown out of work. To make matters worse, a fortnight before this shock came, vacancies were advertised in the local Press stressing, amongst other benefits and blessings, the security of the job. In the light of events, that was a very sick joke.

I felt sufficiently strongly about this to seek an interview with the Chairman of Barclay Securities. I met him in a luxurious lair in Curzon Street. At the outset of our meeting I put to him that our interests were different he was concerned primarily with profitability and I was concerned with people. Needless to say, he did not much care for this definition of our respective interests and pointed out that the redundancy payments which the company was offering were more than two-and-a-half times the legal limit. That is no more than he should have done. After all, if a person kills someone off the least he can do is to give him a good funeral and look after his relatives—and the company could well afford to do that.

The chairman gave me no figures but, according to the financial columns of the Press, the complex at Merton and a smaller property in Birmingham were purchased for £1.68 million, and the Merton site alone is being sold for £3.3 million. He pointed out that there were various expenses and difficulties and that the profits were more apparent than real. In the end I was moved to ask him whether he would not be operating at a loss, so eloquent were his descriptions of the expenses which he was incurring in this transaction.

The position at the moment is that a number of employees have been made redundant and a smaller wave will be made redundant at the end of the year. Some are finding other jobs, and the local Department of Employment office has been most helpful in trying to place people. South London is not the most difficult of places in terms of employment, but I shudder to think of the effect of this sort of action in less fortunate areas.

There is a hard core of employees in my constituency who will find it difficult to obtain new or comparable jobs because they are long-service employees. Many are middle aged, some perhaps nearing retirement in unskilled or semi-skilled jobs, and I doubt whether they will ever find another job again. But even if they do find alternative employment, we must remember the emotional shock which they have experience over a period of months—and, indeed, years if we remember the previous difficulties which occurred under the old Lines management. If the toy industry had no future there would not be quite so much to worry about, but it obviously has a future and there is no reason why a firm of this calibre should not continue to operate on its site near London. Instead, the firm is, in its own words, to "rationalise production" at Merthyr Tydvil, where there is a very small factory which does not, I understand, contain the same expertise as that to be found in the London factory.

This situation is not one which anybody in the House would welcome. Therefore, I hope this debate will give useful publicity to the facts. No tycoon, however thick-skinned, looks for the kind of publicity which emerges when the exact details of a transaction are revealed. But, above all, we must look to the Government to seek ways of dealing with the situation.

Other contributors to this debate have said that mergers and takeovers need not necessarily be evil or wrong in themselves, and I fully concur. But I believe that certain aspects of the situation demand tighter control. I make no pretence about being an expert in the business of mergers and takeovers and the affairs of the City. Therefore, I ask the Government to come up with some useful ideas on this subject. I share the humility of my hon. Friend the Member for Yarmouth (Mr. Fell), who has now gone, in saying that I am not an expert.

Mr. Fell

I am still here.

Miss Fookes

I beg my hon. Friend's pardon. He is not in his usual place. Perhaps, on reflection, humility is not the first quality I would associate with my hon. Friend. One learns every day. I plead with the Government, when considering the new legislation which we have been promised, to see that this kind of situation does not continue, since it involves the killing off of useful manufacturing industry and may well bring hardship to individuals and their families.

1.15 p.m.

Mr. Hugh Jenkins (Putney)

I shall follow a little later in my speech the remarks made by the hon. Lady the Member for Merton and Morden (Miss Fookes), since I wish first to say how grateful we are to my hon. Friend the Member for South Shields (Mr. Blenkinsop) on bringing this Motion before the House and enabling this debate to take place. I wish to draw attention to one general danger and to refer to one specific case—the situation at Shepperton.

The general danger to which I want to refer, and which it may be appropriate to develop it more fully on another occasion, is the development of the international and multinational company. It seems that mergers, takover bids and asset stripping are daily occurrences. We all know the number of times the Government change their mind on these matters—and certainly the number of times the Government have changed their policy on, and have made announcements about, mergers is quite remarkable. Most of those responsible for mergers and asset stripping—for example, Mr. Bentley—are resident in this country and are answerable to the people for their actions, and it is relevant to discuss these matters in the House.

I hope that what we say will have some effect on the course of events. We can, if we choose, introduce legislation to approve mergers where beneficial and socially acceptable or to prevent mergers where they have neither of these aims. We have the power if we choose to use it. If we fail to control these activities, if we allow those concerned to get away with business operations which, however profitable, are damaging to employees and to the community as a whole, then the trouble will be on our own heads. But if the process becomes international, as it is now becoming, then the situation will get out of control altogether.

I have discussed these matters with those who have studied the subject in detail, and there is one possibility which might well alleviate the situation. We could pass a law providing that no international company shall operate in this country unless 51 per cent. of its assets are located here. This certainly appears to be a possibility. It may not provide the right answer, but it is at least one method of bringing about control of international and multinational concerns. Such a policy would give Her Majesty's Government some sort of control over any anti-social behaviour by such companies. This behaviour could be corrected under threat of Government takeover.

At one time it might have been thought that a takeover by a Conservative Government would be quite impossible. but since the Rolls-Royce affair it appears that the Government have become as enthusiastic nationalisers as those of us on the Labour benches. This would have the advantage of enabling the Government to administer a threat to any international financial concern which did not conform to the various social considerations which we have been discussing today.

I want to devote the remainder of my remarks to Shepperton Films and to take up the matter where it was left by my hon. Friend the Member for Coventry, North (Mr. Edelman). My hon. Friend dealt with the history of the matter, and I shall try to put before the House the current situation at Shepperton.

Shepperton and Pinewood are the two main British film studios. Shepperton is large and has staged major productions such as "The Guns of Navarone", "Cromwell", "Becket" and "A Man for All Seasons". These major British productions have found their way to Shepperton because of the size of its studios. Indeed, Shepperton is unique in Europe because of its ability to spread itself and to provide facilities for the making of major films. This is a subject on which we have an international reputation. It will not be sufficient for us to retire and to decide to make only small, local films, as good as they may be. Since we have a reputation in the film world for making films of significance we surely do not want to lose it—and if we lose Shepperton, we are likely to lose our place.

Shepperton is owned by British Lion. When this important company was denationalised by the previous Conservative Government fears were expressed that more profitable and less risky uses might be found for Shepperton. The present Prime Minister put those fears at rest by saying that the Government had ensured the continuation of British Lion at Shepperton and added that no asset stripping would be allowed. But in April of this year the man who was described in the Financial Times as Britain's No. 1 asset stripper acquired control of British Lion and, with it, Shepperton Studios. This was the same man, Mr. Bentley, to whom the hon. Lady referred in connection with Triang, the toy firm. It is worth mentioning that in 1969 this company took over four other companies, and in 1970 it took over yet four more companies. In 1971, the company acquired nine businesses, including Chad Valley and Triang Pedigree, a number of advertising businesses and so on. So far in 1972, there have been only two, but they include the biggest swallow so far, British Lion itself. So here is a company well experienced in the process of asset-stripping.

The Board of British Lion, which was there by Government favour—Lord Goodman, Sir Max Rayne, Launder and Gilliatt and the Boulting Brothers—as a result of this acquisition by Mr. Bentley found themselves £1 million richer overnight. Since then they have become even richer. Mr. Bentley is in the multimillionaire class, and a £15 investment in his company in 1968 is now worth £182, which represents a capital increase of 1,200 per cent. Clearly this is a very profitable business.

John Bentley will be known to the Secretary of State for Trade and Industry, who is the Walker in the Slater Walker outfit where Mr. Bentley learned his trade. Slater Walker provided the finance for the acquisition of British Lion and for all the other activities carried out by Mr. Bentley, including the acquisition in March of the Triang toy company.

The technique of asset-stripping is simple, and Mr. Bentley is an experienced hand. The method is to acquire a company, to sell off its assets, and to reduce its employment, assuming that it cannot dispose of it. The attraction is that a capital asset is better than income. Once a person has capital appreciation, he is made. There are no troublesome employees to bother about, and no problems in running the business.

When the Board of British Lion announced on 31st July that the company had made a loss, the price of British Lion shares rose. I have referred already to the Prime Minister's 1964 guarantee. It could not have been known then that the value of the Prime Minister's promises would decline during the period of his Government perhaps even more sharply than that of the £. But in addition to that undertaking, there was something more solid. I refer, of course, to the preference share held by the National Film Finance Corporation which guaranteed film production unless it could be shown that a "critical" loss had been suffered by British Lion.

Mr. Bentley had wasted no time in arranging for the dispersal of International Lion's assets—Lion Pacesetter Productions, Pearl and Dean Publications, the Dover Street premises of Pearl and Dean and the publishing company of Davis and Poynter. All were to be sold, and the latter company was to be acquired by Lord Goodman, Sir Max Rayne and John Boulting. But the really rich gravy could not be skimmed off unless most of Shepperton could be sold.

Here I make a courteous complaint to the Under-Secretary. On 7th November, in answer to a Written Question of mine, the Under-Secretary said that the National Film Finance Corporation had agreed in principle to allow Mr. Bentley to dispose of the bulk of Shepperton in return for 20 acres still to be devoted to film production. My complaint is that on the morning of that announcement, having heard that this was to be done, I telephoned the hon. Gentleman and asked whether he would agree to answer the Question orally so that the matter could be dealt with in the House rather than privately. I suggested that as an alternative he might take the opportunity to make a statement in the House so that again the matter could be made public knowledge. Unfortunately the hon. Gentleman chose not to do that. Indeed, if my hon. Friend the Member for South Shields had not initiated today's debate the whole matter may not have been discussed in the House at all. It had occurred to me to ask for a half-day Supply time to discuss the matter. However, I felt that the issue was so important and that concern on both sides of the House was so real that the Government would do themselves a service if they decided to provide Government time in which to discuss it.

The Under-Secretary of State for Trade and Industry (Mr. Anthony Grant)

There was no discourtesy intended. It was in accordance with normal practice. Almost every hon. Member believes that if he is unfortunate not to have an oral Question reached, some special statement should be made. That was the position in this case. As the hon. Gentleman now recognises and as I told the right hon. Member for Barnsley (Mr. Mason), the Opposition had the chance in their own hands. They could have chosen a day or a half-day to discuss the matter on Supply.

Mr. Jenkins

That is not quite good enough. The Minister had a responsibility in this matter, and this was a Question down for Oral reply. He knew beforehand that it would not be reached and answered orally. I gave him an opportunity in the course of my telephone call to him, but he chose not to take advantage of that opportunity. He may have had good reasons. But nothing that he has said so far convinces me that this was not a matter which should have been announced publicly.

In the Written Answer, the hon. Gentleman went on to say that the remaining 40 acres would go and, with it, the famous silent stage where the major feature films that I have mentioned and many others were made. The facilities which made Shepperton unique were to be lost under this provisional agreement.

All this was done without any consultations with the unions concerned. A blanket of secrecy was maintained by the NFFC, just as a blanket of silence was maintained by the Government in this affair. If the unions were now to decide to occupy the site and to refuse to allow it to be truncated, their action would be readily understood.

It is my hope that it is still not too late to rescue the situation, even now. The Federation of Film Unions takes the view that the very assets which the NFFC has agreed may be stripped and sold are precisely those which have made Shepperton the international film centre—the lot, the silent stage, and the smaller stages for television series. Shepperton would thus be reduced to a secondary rôle, it would be easy to show a loss, Lion International would be able to sell off the rest of the site and, if it stayed in film production at all, it could make films at Pinewood and elsewhere. This unique asset of the British film industry would disappear.

However, the agreement announced by the Minister last week was, as he said, only an agreement in principle, and it excluded the trade unions. Since then, they have been brought into the discussions, as they should have been at an earlier stage. They have made it clear that they will fight with whatever means they can command any proposal which destroys Shepperton—that is to say, any proposal which sells off the lot, the great silent stage and the smaller stages.

I understand that alternative proposals are under discussion. I invite the the Minister to tell us what he can about these talks. Nothing is improved by secrecy. The disastrous proposals announced last week were arrived at in secret.

The position of the unions is Shepperton, the whole Shepperton and nothing but Shepperton. Nevertheless I believe that if a proposal were now to emerge which gave industry and the unions the substance of the uniqueness of Shepperton—the lot, or the equivalent of the lot, the silent stage and the smaller stages as well as the areas already preserved—it might still be possible to produce an amicable settlement. It is worthwhile striving to reach an amicable settlement in which the unions concur. This is a prize that the Minister would do well to show that he would like to achieve. It is worth striving for, not only for the British film industry as a whole but also for Mr. Bentley himself if he wants to carry conviction as someone whose horizons are no longer limited, even if they were at the beginning of his career, to being the fastest buck-multiplier in town.

Even if Mr. Bentley becomes a civilised businessman concerned with the product, not merely making money, other young and ruthless money men are always on the warpath. Therefore, it is necessary to regard this as a matter not concerned with one individual, but as an issue which must concern whoever is in charge of our affairs on whichever side of the House they may sit.

The lesson is that there are many activities—film and theatre are only examples—which society needs to be carried on, even if the levels of their profitability are below those which can he secured by other uses. The rôle of the state must be to preserve those activities in the interests of the community at large. If the State abdicates that function, we must increasingly expect those whose lives are bound up in these less profitable employments to step in and say, "No, you do not. We are going to keep them going." The film industry does not lend itself to a work-in quite so readily as some others, but if the will and the necessity is there I have no doubt that ways will be found. The necessity ought not to be there. I think there is a way out.

Land values in our time have risen to the point at which the most profitable use is to erect an office block and keep it empty. This is a ludicrous and new situation which neither side of the House should tolerate.

Refusal by the Government to intervene in these circumstances amounts to an abdication of their duty to protect the electorate from the insatiable greed of the money men. A Government who so abdicate will have only themselves to blame if work people, despairing of protection from Government and Parliament, conclude that the law is not in the interests of the many, but of the few. That is the recipe for direct action. If that takes place, those responsible will be this Government who have taken too long to realise that there are no longer any market laws, that big business has become a jungle, and that if they will not shoot down the man-eating, money-grubbing tigers who roam in it, then people at risk will be forced to protect themselves and their jobs from these predators who contribute nothing to the welfare of the community in return for the human misery which is created; for example, in the film industry if this proposal is allowed to go ahead in its present form.

Their unappeasable search for wealth and irresponsible power is not the last necessity or need of mankind, and it is certainly not the greatest need of our community. There are other higher needs. It is the duty of the Government so to order our affairs that the interests of the community are placed about those of any individual on either side of the House or of industry.

1.33 p.m.

Mr. T. H. H. Skeet (Bedford)

I listened with considerable interest to the hon. Member for Putney (Mr. Hugh Jenkins). He perpetrated a fallacy. While he is right in talking about British Lion, he has attempted to argue from the particular to the general.

In my view, mergers in general are good, but we must have a fairly broad and balanced view about them. Some mergers are bad. It may be that the machinations of Mr. Bentley and others in asset stripping is the wrong way to look at the matter. Surely we must see big changes in society through its own evolution.

I should like to refer to one of the enunciations by the right hon. Member for Birkenhead (Mr. Dell). He indicated that the Government were attempting to play down their competition policy. This comes odd from the Labour Party.

Apparently hon. Members opposite do not appear to have heard about the negotiations with Europe on Articles 85 and 86 which clearly lay down that competition policy is a law of Europe which, under Section 2 of the Act which we have recently passed, also applies to us. I can understand the anxiety of right hon. and hon. Gentlemen opposite, because they are not putting in a team to represent them in Europe. However, it would be better if they co-operated with the rest of us.

My right hon. and learned Friend the Minister for Trade and Consumer Affairs, speaking at a merger seminar at the Institute of Economic Affairs on 22nd November, gave some clues about this matter. I think that what he said indicates that he is moving in the right direction. He commented: it may be that a somewhat lower figure than a one-third share of a market might be appropriate in new legislation. In other words, the one-third rule with which we are all familiar will be altered, and when these mergers go through it may be possible.

The Minister went on to explain this a little further. He said that research carried out since the one-third rule was introduced points towards the conclusion that once market dominance exceeds a certain threshold range, which appears to correspond roughly to a situation in which the four largest suppliers account for 50 per cent. of the relevant market, there is a much greater chance that anti-competitive behaviour will occur. I think that my right hon. and learned Friend gave the clearest indications that we were going ahead in alignment with European policy to ensure that competition works in the United Kingdom. This may have a certain appeal to the right hon. Member for Birkenhead.

I congratulate the hon. Member for South Shields (Mr. Blenkinsop)—

Mr. Bean

Before the hon. Gentleman leaves that point—I am listening with great attention—may I ask whether he believes that Government policy on competition, which was highlighted in speeches before the General Election and in the Tory Party manifesto, can now be regarded as superseded by our entry into Europe, and whether he sees European law, applied under Section 2 of the Act, as representing the Government's contribution to this matter?

Mr. Skeet

The right hon. Gentleman has got it entirely wrong. As he well knows, the European policy, which is laid down in Articles 85 and 86, will supersede; but it is possible for the United Kingdom Government to have fairly strong laws on other matters. For example, the West German Government have the toughest compensation law in Western Europe. It is compatible with the Treaty of Rome, so both can go side by side. The right hon. Gentleman will find that our legislation will be particularly tough to ensure that we do not have any too great concentrations.

I was about to congratulate the hon. Member for South Shields on introducing the Motion. He said that the 100 largest firms which account for 50 per cent. of our total assets include the nationalised industries which the Labour Party has been responsible for putting together. These figures come from the Bolton Report.

Mr. Blenkinsop

I think I understood the gist of what the hon. Gentleman was saying. The point I was making in the comparisons concerned the immense change between 10 years ago and today. Within that period there has been no major development of nationalisation—alas, I should say.

Mr. Skeet

According to the Bolton Report, in 1949 the top 10 companies accounted for 25 per cent. of the pre-taxed profits of all British industrial and commercial companies. By 1969 the figure was about 50 per cent. Therefore, the concentration had doubled in 20 years. This was largely due to the nationalisation which had occurred in the supervening years. A large part of the nationalisation occurred in 1949, although I recognise that we had the Coal Act in 1946, the Gas Act in 1947, and so forth. I am concerned that the Labour Party should be integrating society into a large number of what we may call State concerns in which competition is completely eliminated. At the same time, they eliminate the small firms upon which those concerns are dependent.

The Bolton Report also indicated that small firms, as a share of manufacturing output, accounted in 1924 for 42 per cent. and in 1951 for 32 per cent., and that in 1968 the figure had gone down to 25 per cent.

The argument put forward today is that the State can do no wrong, that once the steel or coal industry has been synthesised everything runs smoothly. The hon. Gentleman referred to the loss of jobs when mergers take place. It has occurred to me that in the State-owned steel and coal industries that are being contracted under scheduled schemes there is a great deal of displacement of labour. This idea has been running back over the years under both Labour and Conservative Governments, and therefore the factor to which the hon. Gentleman refers as being a fallacy of private enterprise runs through his own State contrivances.

The hon. Gentleman also referred to the worker as an impotent bystander. I recollect that when the Gas Bill was introduced in 1947 all the co-partner-ship schemes of the gas industry were terminated at one fell swoop. The worker stood aside as a bystander while his rights were destroyed by the merger that was then contrived.

Mr. Blenkinsop

I am sure that it employees in private undertakings had anything like the provisions in the State nationalised industry about which I know quite a lot they would he happy. The coal industry has set a high standard of consultation with the workers.

Mr. Skeet

I am not certain that I have noticed all that happiness in the coal industry, but my question is not answered by referring to another. I was talking about the demolition of the co-partnership schemes in the gas industry, which were for the benefit of workers, in 1947.

Dame Irene Ward (Tynemouth)

I wonder whether my hon. Friend would consider pointing out to the hon. Member for South Shields (Mr. Blenkinsop) that a lot of projects carried out within the coal mining industry have resulted in tremendous losses which have had to be met by the taxpayer. It is the taxpayer who is doing a great deal to support some of the arrangements that have been made in the coal industry, but the hon. Gentleman always forgets that.

Mr. Skeet

I am obliged to my hon. Friend for that telling answer.

I have here a copy of today's Daily Mail which gives the findings of a national opinion poll. The question asked is: Who do you think is most to blame for Britain's economic problems? I shall not refer to the Government, because the apportionment to them is very small. I am concerned with the trade unions and employers—to employers because it is alleged today that they are responsible for asset stripping, and to trade unions because they are responsible for excessive wage claims. The replies were as follows: trade unions, 53 per cent., and employers 11 per cent. It is interesting to note that the figure for the Government is 27 per cent., which is quite low. What has been argued today—it is correct that various points should be put forward—is that the Government are getting their priorities wrong.

I am a little concerned about one takeover bid which has not been mentioned during the debate, and that is by the British Shoe Corporation, CS Holdings, of William Timpsons Ltd. The British Shoe Corporation produces shoes for sale in 2,000 High Street shops under many names—Saxone, Dolcis, Mansfield, Curtess, True-Form. Lilley and Skinner, and Character Shoes.

What I am concerned about is that a monopoly situation may be developing. The British Shoe Corporation has about 21.5 per cent. of the total market, but if the total multiples are taken together one finds that they will control 68 per cent. of the market. If Timpsons were taken over by the corporation the figure would rise significantly from 21.5 per cent. to 27 per cent. If the one-third rule is to be altered, although I am not trying to pre-judge the issue, it may be that this is a case which could be looked into.

Sears controls 26.5 per cent. of the market for men's and women's footwear. If Timpsons are added, the figure rises to 31.2 per cent. The total of all sales by specialist multiple footwear shops is 45 per cent., and by adding Timpsons the figure rises to 50.2 per cent.

I do not wish to quarrel with the takeover in a particular field—it is for the Monopolies Commission and the Depart- ment to see whether there is a prima facie case—but it may be in the public interest to refer this to the Monopolies Commission so that a careful assessment can be made of the situation.

One important matter that has not been mentioned this afternoon is cross-country or cross-nation mergers. I propose to mention just one or two matters, because these may form the basis of future operations. It is the type of merger that we should recommend and encourage. The more the companies are synthesised, the better. I am thinking of the Royal Dutch-Shell group, Unilever, Agfa-Gaevert, Dunlop-Pirelli, Fiat-Citroen, which are having difficulties, and Hoesch-Hoogovens.

I hope that the Minister will bear in mind that one of the difficulties in the way of these praiseworthy associations is that capital gains tax is imposed on assets. This is not the case of the domestic front, but it applies with cross-country European mergers. Capital gains tax is imposed because if the assets were transferred abroad the tax would be lost. The argument is that the tax of one country is not enforceable in another, and it seems absurd that there cannot be a common market unless there is a Common Market fiscal system.

The other point is the tax on the transfer of assets for similar reasons, and the double taxation and discriminatory withholding taxes. These have not been co-ordinated, and there is, therefore, an element of incompleteness. My suggestion is that they should all be taxed from one source.

I think that we should encourage mergers across countries. They would be of great advantage to the trade unions, to technological research, to the collection of data, and in assisting people in all structures of society. The proposal put forward by the Commission is that there should be a supervisory board and also an executive board, and I think that that should be supported by the United Kingdom.

Mr. Hugh Jenkins

Does not the hon. Gentleman agree that until now nothing in the Common Market rules has prevented international companies from operating to the disadvantage of the members of the Common Market? is not the hon. Gentleman aware that the operations of General Motors are regarded in Germany, in this country and elsewhere as harmful in many cases, not only to the trade unions but to the economies of those countries because of the organisation's power to switch from one country to another without regard to the interests of the countries concerned? What effective machinery does the hon. Gentleman propose to stop that from happening?

Mr. Skeet

I do not believe that General Motors and others have been working against the interests of Europe. Once firms become as large as General Motors they have to take certain economic factors into account. The larger the company, the more responsible it seems to become in the course of time. If the hon. Gentleman can give me a direct indication of Ford of Great Britain having been irresponsible in its actions, I shall be obliged. Had it decided to close Dagenham and move to Europe, that would have been one thing. But that has not happened. Ford regards its investment here as permanent. But I would agree that, if it decided to go against the true interests of the United Kingdom, it should be challenged. I have not seen any indication of that, but the Commission has been faced with this problem. It wants to work along a competition policy which I think is very sound, under Articles 85 and 86, and at the same time it wants to integrate European companies in the chemical and related businesses to stand up against American competition.

The hon. Member will probably say that we have to encourage more indigenous firms. This is precisely what is happening, and it is part of the policy in the United Kingdom to give certain incentives in this respect.

I was talking about cross-European mergers. There are one or two legal problems here. These mergers interest the public and they interest the United Kingdom. A company cannot be absorbed without first being liquidated, which seems an unnecessary encumbrance. The transfer of a registered office is impracticable because of certain blocking rights, and in France one must have the unanimous consent of the shareholders.

The Grand Metropolitan Hotels and Watney merger could never have taken place on the continent, for the simple reason that in Europe the quoted companies total only about 3,700, whereas there are 11,000 on the United Kingdom Stock Exchange.

There is the question of identification of the owners. As they have bearer shares over there they have no share registers, so it is impossible to find out where the shares are and can be acquired. To put the whole into balance, between 1960 and 1969 the number of mergers in the Common Market was no more than 3,153, over 60 per cent. of which were in one member State and not across borders. In the United Kingdom over the same period there were 7,000, and, for technical interest, the figure for the United States was over 14,000.

Mr. Fell

I am sorry to jump back, but my hon. Friend moved on rather quickly from the Grand Metropolitan—Watneys merger. Did I gather that he thought that that was a good thing?

Mr. Skeet

No, I did not pass any comment on it. I just said that that type of merger could not take place in Europe, because there are not as many quoted companies there as there are here. Mergers which take place in Europe are by agreement. I think that mergers by consensus are probably some of the worst, but that is the way it is done in France—one either agrees to the terms or one does not merge.

Europe is faced with this situation, and everyone is actively looking forward to a common European company, I should have thought that cross-country mergers could never occur with the consent of unions at least, because they have their policy of co-determination in coal and steel. If Germany and Holland are to allow co-determination through the medium of the Supervisory Board and the Personal Executive Board, and the United Kingdom and France will not permit it, that would then be one of the basic reasons for preventing a merger. Perhaps something can be done in time to facilitate this.

My essential point is that Article 66 of the ECSC Treaty called for prior approval for all concentrations in the coal and steel industries. Since Euratom, the European Coal and Steel Community and the EEC have now been merged, one would have thought that there might be a notification of mergers to the Commission which would apply to the whole of industry.

Unfortunately, this was tested the other day when a very significant case came forward—that of the Continental Can Company—which related to market dominance inside Commission territories. In that case, an American-based holding company, holding 100 per cent. of the shares in West Germany, was seeking to take over the balance of the shares in Thommassen i Drijver, a company based in the Netherlands with substantial holdings in Belgium, while the parent company has holdings in Italy.

The Commission first of all had the case read in its way, but when it went to appeal, the court decided that there was not much power to control operations under Article 86. According to the Financial Times—I do not have a report of the judgment before me—Dr. Roemer said: It is wrong to read this as a description of the automatic consequences of strengthening a dominant position. The Commission should wait until such consequences appear before taking action. Therefore, domination is not to be read from the size of the enterprise concerned. It may be a veritable giant, it may extend over all the territories concerned, but unless you find actual evidence of abuse, Article 86 cannot be utilised. I would recommend that the Government should support an amendment of Article 236 of the Rome Treaty to ensure that we have an effective system of control of giant monopolies if it is apparent from what is going on that they are likely to lead to great difficulties.

I do not want, in what I have said, to appear to be against certain matters in the United Kingdom and elsewhere. The Government must take certain considerations into account. It is for the Monopolies Commission to deal with competition policy, fundamentally; it was set up for this very purpose, and it has certain criteria. I fully agree that the criteria may be elaborated or extended. It is for the Government to deal with other matters, such as regional policy, the creation of unemployment and its necessary absorption and key factors which we could not use inside the United Kingdom because of the necessity for securing these in time of war.

But the entire responsibility does not lie either on the Monopolies Commission or on the British Government alone. It also lies on what I should have thought would be absolutely fundamental to British capitalism—and I support it—that is, that there should be a City panel which would advise people who featured in takeovers of the necessary rules and guidance. I was very glad to see that the Minister said, when he spoke at the recent seminar, that he did not rule out the possibility of an institutional framework.

There seem to be two functional responsibilities, apart from the Monopolies Commission itself, under the new legislation which I assume will be coming very shortly. First, there is the responsibility of the Government for regional matters and for ensuring the smallest possible unemployment. Such matters as these are germane to Government. The second is a city panel which would see that the rules, guidelines and code of practices were laid down for the guidance of firms which were thinking of taking over others. It would also ensure that this great number of takeovers did not get well and truly out of hand.

But simply to instance in this House a number of takeovers which may have had bad features does not mean that we should stop the taking over of corn-panics, since this may be the only way in which we can revitalise. My sole anxiety with the nationalised industries is that, since they cannot be taken over or referred to the Monopolies Commission, they will become so ossified that they they will crumble under their own weight. It may be possible in future years to have them taken over. If they cannot be taken over they can be referred to the Monopolies Commission and, in practice, those which are bad can be looked into. But I think that they should come under a general scheme or a code of practice. On that basis, all of us, including the general public, would be much better off.

2.1 p.m.

Mr. John Cronin (Loughborough)

The hon. Member for Bedford (Mr. Skeet) made an interesting speech and some valid points. However, I think that it is rather hot—this has been referred to by several hon. Members, including the hon. Member for South Angus (Mr. Bruce-Gardyne)—to suggest that the merger activities of nationalised companies are undesirable. It is important to realise that a nationalised industry is one which is run in the public interest and is responsible to a Minister who is responsible to the House. Therefore, such industries can be kept under continuous surveillance and, if necessary, corrective action can be taken. That does not apply to mergers which involve large companies being run by directors who are responsible to no one.

Mr. Skeet

One problem is that it is difficult to ask questions about nationalised industries. Also, the nationalised industries are debated only once a year.

Mr. Cronin

I accept that, but it is better than being unable to ask any questions, which is a situation which applies to the large industrial conglomerates.

I, too, thank my hon. Friend the Member for South Shields (Mr. Blenkinsop) for taking the opportunity to throw some light on mergers and for his admirable and lucid speech on the subject. There emerges from even a superficial investigation of mergers that a tremendous ignorance prevails about their effects. To a large extent, no one—no Government Department and no hon. Member—knows what is happening about mergers. We know, as my hon. Friend the Member for South Shields pointed out, that there is an enormous increase in merger activity. According to yesterday's Financial Times, the assets involved have risen from £35 million in 1960 to an estimated £2,000 million this year. My hon. Friend pointed out that the proportion of the national assets controlled by the largest 100 companies has risen from 22 per cent. in the early 1950s to 70 per cent. in the 1970s. An interesting feature is that two authorities, Newbould and Jackson, in their book entitled "The Receding Ideal" have pointed out that by 1985 three-quarters of the private sector will be in the hands of 21 companies.

We are moving towards a situation where our industry, our economy and the lives, happiness and welfare of workers and their families will he in the hands of a small group of directors of large companies who are responsible to no one except, theoretically, the shareholders. I am sure that hon. Members will agree that it is absurd to consider that shareholders, apart from a small minority, have the slightest interest in the social effects of what their firm does. They are mainly concerned, quite reasonably, with their profit.

The most important thing is to find out what happens as a result of these mergers. Little work has been done on the subject, but a recent publication, "Management and Merger Activity" shows that mergers are by no means a source of improving the efficiency of industry. The author of that book, Newbould, interviewed approximately 70 directors. He found that economic desirability was hardly ever considered. The basic motive for any firm taking over another firm was to increase its share of the market. The second most common motive was defending oneself from similar attacks by other people.

A gradual and extraordinary transformation in the power structure in this country is taking place, the primary motive being that directors wish to become directors of larger companies, thereby increasing their status and the size of their companies. In other words, human ambition and greed are the driving force for the tremendous merger activity which is concentrating the economic power of the country into so few hands. We know that there are undesirable results. We have heard from my hon. Friend the Member for South Shields about the effect on unemployment. Very few hon. Members can quote examples where there has not been unemployment because of merger activity. Sometimes some form of re-deployment is desirable if workers are being employed in an unproductive and unsatisfactory way. But no public body judges the matter. It is left entirely to the discretion of the boards of directors of the merging companies. That cannot be satisfactory. Employment should not be so largely in the hands of private individuals who are responsible to no one.

There has been talk about asset stripping. My hon. Friend the Members for Coventry, North (Mr. Edelman) and Putney (Mr. Hugh Jenkins) gave some deplorable examples of what happened to the Shepperton Studios. No hon. Member will dispute that there has been some disreputable asset-stripping going on because of merger activity. Even the hon. Member for Merton and Mordern (Miss Fookes) voiced some protest.

Another undesirable feature is diminished competition. I am not saying that competition is always desirable. In some cases it is quite foolish—for example, the competition between BOAC and a private company for the Atlantic route is of value only to our foreign competitors. But there are numerous occasions when the result has been diminished competition which has been contrary to public interest, in spite of the provisions of the Monopolies and Mergers Act, 1965.

Probably the worst aspect of merger activity is the concentration of power in fewer hands which are not responsible to the Government, Parliament or anyone else. Another aspect of merger activity is the evil of inside trading. There are people who make substantial fortunes without any useful contribution to the economy because of their inside knowledge of mergers. There are directors who know that companies will be taken over. I accept that this applies to only a small percentage of directors. Nevertheless, some directors know that a company will be taken over and they use that knowledge to buy its shares and make large fortunes to the detriment of the rest of the community.

Of course, there are provisions designed to prevent such activity, but they are limited. Any director can buy shares in a company through a nominee holding and nobody knows that he possesses the shares. There are instances where companies have their shares assiduously taken over by other groups without anybody being aware of the fact. As hon. Members know, there is a provision under the conventions set up by the takeover panel which prevents anyone from taking over more than 10 per cent. of a company's shares without some disclosure. But there is nothing to stop several directors each holding 9 per cent., together with nominee holdings. That gets around the present situation.

Therefore, the Minister should give serious consideration to certain definite forms of action on merger activity. The first and most important thing is to try to dispel the cloud of ignorance that rests on the whole subject of mergers. At the earliest possible opportunity a committee of inquiry should be set up into merger activities as they affect the whole economy. I am sure that the Under-Secretary, who is a most conscientious Minister, is often harassed and worried by his complete ignorance of what is happening as regards mergers. I am glad to see that he is agreeing with me. A substantial increase in our knowledge of what happens when mergers take place would be beneficial to everyone. Therefore, he and his colleagues should confer and then set up a formal inquiry into the effects of mergers on the economy. That would not involve much time, effort or expenditure, but it would enormously increase our knowledge of something that is becoming an important phenomenon and is completely changing our economy in various important ways.

The Department should also take more positive action about mergers. Under the Monopolies and Mergers Act 1965, only mergers involving companies worth more than £5 million or mergers where there is an increase in share of the market to more than a third can be considered by the Minister as suitable to be referred to the Monopolies Commission. All mergers of that size should be referred to the Monopolies Commission. When such companies are to merge, it should be their duty to show to a responsible authority that the merger will be in the public interest. That would be much more helpful than the present rather limited permissive arrangement.

The Government should also take positive action on inside trading. Directors of companies involved in mergers, and their families, should be totally banned from buying and selling the shares of the affected companies during takeover or merger negotiations. The City takeover panel should have much more power to investigate leakages in merger activities. The Minister should take steps to see that any group that builds up a holding of more than 10 per cent. of a company's assets is obliged to declare its activities.

The time has come for nominee accounts to be banned completely. It is wrong that a person should hold a substantial holding in any company anonymously, with no one knowing what he is doing with his shares.

There should be more Government takeovers. We can only commend the Government's activities in the recent Rolls-Royce takeover, which was urgently necessary. There are quite a few large industrial undertakings letting the country down very badly. There are brontosaurus companies—I shall mention no names—making a negligible return on the capital available. They should be the object of some form of Government intervention.

The time has come for the House and both political parties to give serious consideration to what should be done about the situation of directors being self-appointed, continuing in their office, and being responsible to no one except for a theoretical responsibility to shareholders. My right hon. Friend the Member for Bristol, South-East (Mr. Benn) will remember that a Labour Party conference discussed the matter about 10 years ago. I have not heard that there has been any such discussion in the Conservative Party.

It cannot be right that there should be an increasing concentration of power in the hands of so few people, who are responsible to no one. The directors of the largest companies in some ways resemble the mistresses of absolute monarchs in times past. They have much power but no effective responsibility. That power has been increasing, and is still increasing, and I ask the House to take steps to see that it is diminished.

2.16 p.m.

Dame Irene Ward (Tynemouth)

This has been a most interesting discussion. I congratulate the hon. Member for South Shields (Mr. Blenkinsop) on having raised the matter. There are all sorts of problems of which all hon. Members are well aware. What the House must decide is whether the Government's general policy is better, more realistic and more just for dealing with some of the evils that are very apparent to the people.

I understand that the Labour Party still clings to the idea of the monopoly of nationalisation. The country has had enough of nationalisation, and I know of a number of injustices that need to be put right for the people as a whole. The result of nationalisation in the long run is that the deficiencies of the nationalised industries are paid for first by the Treasury and then by the taxpayer. The ordinary people to whom Labour Members have referred quite often in the debate have no say in how the money should be spent.

Mr. Skeet

Nationalisation is a dead duck.

Dame Irene Ward

I agree. I am against nationalisation. I should much prefer the money that the taxpayer must fork out for the deficiencies of nationalisation to be available to my Government to spend justly on many interests that need support from the taxpayers.

Mr. Blenkinsop

Does the hon. Lady agree that they have been forking out rather heavily recently to make up for the deficiencies of private industry—Rolls-Royce, inevitably and rightly, the Clyde, and many others?

Dame Irene Ward

That may well be so, but I would rather my Government had to deal with that than that the Opposition had to do so. Judging by what I hear from Labour Members, I do not think the Opposition know anything about finance. They are concerned only with projects that will increase the monopoly and nationalisation.

Mr. Skeet

There are only two Opposition Members present.

Dame Irene Ward

The hon. Member for South Shields has not had much support from the Socialist Members in the area that he and I are privileged to represent.

There were two angles to what the hon. Gentleman said today. I think that he decided upon his Motion for the purpose of drawing attention to the unfortunate result of a takeover in South Shields, and in this I do not disagree with him. I, too, have a complaint to put on record about a takeover, or, rather, not so much a takeover as an act of policy by one of Britain's big companies.

I like to think that I am not a dogmatic adherent to any fixed policy. All I know is that I trust my own Government, because they have a great deal more knowledge and understanding of international finance of all kinds than the Labour Party has, and they at least know where they are going. When Labour was in power, we got ourselves into a most abominable financial mess.

The hon. Member for South Shields and I disagree fundamentally on basic political philosophy, but we both try to make what contribution we can, and we encourage our parties to make what contribution they can, to the prosperity and happiness of our part of the world. I know that people on Tyneside at all levels and in all parties were most disturbed at what happened to the hon. Gentleman's biscuit factory in South Shields. Equally, I am sure that, when I state my complaint of injustice on my side of the Tyne, I shall have the hon. Gentleman's sympathy and understanding, even though he and I will have to part company a little later.

It was the Conservative Party that decided to give special assistance to areas of high unemployment. The Labour Party does not like to remember that, but I remember it with gratitude and pleasure, for it illustrates the far-seeing and far-reaching ideas of my party. When we established the trading estate in West Chirton in my constituency, ICI got a grant to set up an establishment, which employed quite a number of people there. They were to do research work for ICI. That research work having been finished, ICI decided recently, this year, to close the establishment down—incidentally, paying back the grants which it received for the setting up of the establishment—and to continue the work at the main ICI establishments, which, I hasten to say, are helpful financially and otherwise to the Northern area.

The representations about that decision were made by my local authority, which happens to be independent-controlled and just as interested in employment on Tyneside as is the hon. Gentleman. Also, curiously enough, the people who came to see me were the trade union representatives. They had seen my local authority, too, and together we made all possible efforts to try to persuade ICI to continue its work at the West Chirton trading estate. But all without effect.

Clearly, therefore, the hon. Member for South Shields with his biscuit factory and I with my ICI establishment have the same regrets to express about what is sometimes done by large firms. I am sure that they do it in their own best interests and, very often, in the interests of the nation as a whole. The Labour Party does not believe in profitability; it never seems to realise that if large profits are made, money goes to the Treasury, and it is then up to Members of Parliament to see that our Chancellors of the Exchequer spend it wisely in the interests of all sections of the community. I have complete faith in my Chancellor of the Exchequer and I know that, if we have sufficient money in the Treasury, we shall be able to get a fair return for the nation and people will profit thereby.

Nevertheless, it has been most unfortunate that we have been affected on Tyneside by these decisions of the main biscuit company and the main ICI company. ICI is a magnificent company for Britain, far better than the National Coal Board or the nationalised railways. It makes large profits which are taxed, and the revenue comes back into the control of our Chancellor the Exchequer, who spends quite a bit of money—much more than the Labour Party ever did or would—for the benefit of the country as a whole through the various Government Departments.

I am not competent to go into the problems of high finance. I know how far my brain will take me. But I have a good idea of some of the basic things to do which would be likely to help the country towards satisfactory economic development. Hon. Members opposite, on the other hand, are moved only by their desire to create more and more nationalisation, more and more failure, and more and more decisions forced on the Chancellor and the taxpayer to make up the deficits of the monopoly nationalised industries.

I thought that the hon. Member for South Shields—I say this quite genuinely—adopted a clever approach in putting his Motion to the House. He wanted to make his case, and I am glad that he did—everyone in the north will be glad—about the biscuit factory. But I dare-say that I could get a bit further in talking to the big business community than I should if I talked to the nationalised industries which are so much controlled by the bureaucratic machine set up under the nationalisation Acts. I prefer to stay with a private economy, though I fully realise that there are good people who do not agree with me. No matter what their party, there are good people to be found in life. There are good people in the Labour Party and in the Liberal Party, just as there are very good people in the Conservative Party.

I look forward to the reply of my hon. Friend the Under-Secretary of State. I know that I shall not agree with a word that the right hon. Member for Bristol, South-East (Mr. Benn) says. I think that he is a mad man, really. He does not know a thing, and, after what he landed us in on Clydeside, heaven help us if he should ever have a hand in such things again.

I want to hear from my Front Bench what they propose to do to try to deal with the evils which sometimes arise from private industry. They cannot do anything about the evils of nationalisation, and the only confidence we can have is that those who suffer from nationalisation will never support the party which believes in it. I hope to hear from my hon. Friend a plain statement that what can be done will be done. We cannot alter life in general, but every now and then we can, by regulation and rules, alter things to create greater justice.

I have listened to the debate with great interest. I always enjoy listening to financiers, even though I find it difficult to follow all their arguments. But what I want is an assurance that moves will be made to try to cure some of the problems which crop up. It would be a good idea if, from time to time, ordinary back benchers heard a bit more from the heads of industry about how they intend to move forward in an effort to help the country's economy as a whole. I look forward to hearing before too long from my Government what they propose to do about the great problems in shipbuilding and shipping. It is necessary that those problems are solved fairly and justly by the Government. I thank the hon. Member for South Shields for having raised this subject, even though I disagreed with most of what he said.

2.30 p.m.

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

I join the hon. Lady the Member for Tynemouth (Dame Irene Ward) in congratulating my hon. Friend the Member for South Shields (Mr. Blenkinsop) on initiating this debate. It has been an extremely good debate.

Whenever we listen to the hon. Lady, we get the perfect exhibition of loyalty, Whatever her colleagues on the Front Bench do, she supports it. Her confidence in them is so unbounded that when they decided to close the Upper Clyde yards she cheered, and when they decided to put in another £47 million she again cheered. She has supported policy change after policy change. I know that she is critical, but basically she is loyally attached to members of the Government Front Bench. She also speaks with great passion on these matters.

Dame Irene Ward

I did not agree with all the money which was spent on the Clyde. It would have been much better if some of it had been spent on the Tyne.

Mr. Benn

A certain amount has been spent on the Tyne. The present Government have put twice as much money into the Clyde as we did. That is one of the changes of policy which have occurred.

A number of hon. Members on both sides of the House are anxious about the effects of takeover bids on their constituencies. The hon. Member for Bedford (Mr. Skeet), after treating the House to an explanation of his general political philosophy, gave the example of a firm in an area in which he was interested which was likely to be taken over. The hon. Lady the Member for Merton and Morden (Miss Fookes) made a telling comment on the asset stripping which she had detected in a takeover by Barclay Securities. My hon. Friends the Members for Putney (Mr. Hugh Jenkins) and Coventry, North (Mr. Edelman) spoke forcefully about the situation affecting British Lion, at Shepperton.

It would be quite wrong for the Under-Secretary of State to underestimate the anxiety which the wave of takeover bids is causing in the community. It is not confined to members of one political party, and it arises for perfectly legitimate reasons. First, the development of the conglomerates, with no industrial logic which is sometimes used to justify other types of merger, appears to be based on motives which have very little to do with the best development of resources. Some of them are motivated partly by a desire to take advantage of the tax laws, which, after all, are man-made and are not necessarily the best guide to takeovers or changes in structure. Others are motivated by the desire to strip assets and to take advantage of inflation and the increase in the price of land which has occurred in the last 2½ years. My hon. Friend the Member for Hayes and Harlington (Mr. Sandelson), if he had the opportunity to speak, he might mention a firm in his constituency which was virtually closed because the land on which it was situated was so valuable that it was better to sack the employees and to exploit the land for other purposes.

There are interests which are totally left out of account. I do not wish to enter into a long discussion about public enterprise, but there is no legal requirement on firms to pay regard to the interests of their workers. That is the fundamental question which is being raised. If a director were to give attention to his workers which might prejudice the interests of his shareholders he would be going beyond the law of the land. That is what is being questioned—not to mention the right of consumers of the development areas and the community as a whole.

There is also some new thinking, certainly not confined to this country, or to the Labour Party, about whether the management problems of the very large companies are beyond the capacity of a small group of men to handle. I do not think that anyone supposes that we shall return entirely to smaller units, but the pressure for decentralisation of decision-making right down the line and pressure from workers in industry for a larger say in the control of their plants and factories, which is not much different, have led people to wonder whether philosophy that "bigger is better" is justified. That was very much the philosophy of the 1950s and 1960s. It is now being challenged.

I agree with my hon. Friend the Member for Loughborough (Mr. Cronin) about the tendency of large companies to return to the feudal system. There is no accountability to anybody within the self-perpetuating hierarchies of big companies. I accept the criticism made of the nationalised industries that accountability within them does not work as well as it should. But we must set that against the total absence of accountability in big companies and multi-national companies. These are new factors which any Government, whatever their political allegiance, must take into account.

The first problem to which the Government must turn their mind is whether they see regional policy and social costs as being in a separate compartment from competition policy or whether it is part of the same aspect of policy. My right hon. Friend the Member for Birkenhead (Mr. Dell), who has spoken and written seriously on these matters and has had ministerial responsibility for them, is in favour of having a competition policy which is easily identifiable as an element in the control of these matters.

However one looks at it, it would be very foolish to suppose that the enormous sums of money spent in supporting the development areas could not be lost by the counter-pressures which tend to lead industry to concentrate in geographically central areas. Since Governments of all parties have tried to make sense of regional policies and none has succeeded in beating the problem, although the gap may have been narrowed, we may well have to ask ourselves whether and to what extent there is a contradiction between the policy which we adopt for industry generally and the policy which we adopt for the regions.

Few hon. Members have set the debate in the context of the free movement of capital in the Common Market which, as from 1st January 1–973 will play a large part in our consideration of these matters. The hon. Member for Bedford paid much attention to this point. I say two things to him. First, he would be very naïve to suppose that transitional companies which he would like to see develop in Europe are in any sense necessarily or even likely automatically to benefit the interests of the men and women who live in the United Kingdom. Charles Wilson of General Motors once said, "What is good for General Motors is good for the United States". That was questioned. What is good for General Motors, or for a European company stretching across the frontiers of Europe, is not necessarily good for us.

Let me give an example of that—although I shall not mention the name of the company in question because it would not be right to do so. There was a very large European multi-national concern operating in Britain which, according to studies, which when in office, we set in hand, was shown to be running a balance of payments deficit because of its own internal payments transfer system at a time when we were having to hold down the rate of growth as a result of the balance of payments gap.

Unless the hon. Member for Bedford is prepared to turn himself psychologically and culturally into a European who regards growth in any part of the extended Community as being as important as it is in this country, he should be much more alert to the danger that the multi-national and trans-national companies in an extended Community may concentrate their investment on the Continent.

Mr. Skeet

I am sure the right hon. Gentleman is aware that two major multinational companies, Royal Dutch Shell and Unilever, for example, are both good employers who take into account social considerations and responsibility to their employees. I would have thought that more of these would have meant greater profitability, for the good of all concerned, including the country.

Mr. Benn

I understand that point and I am not now criticising the morality of the leaders of companies in this country. All I am saying is that we cannot rely on market forces on a Continental or European scale to correspond with the interests of the people whom we in this House represent. I would go further and say what I am sure the hon. Gentleman knows—he will have seen it in the newspapers—that even Government cannot impose their counter-inflationary measures on these multi-national companies. The point is that where the Government for their own reasons of national policy find it necessary to impose a freeze they cannot apply it to one company where there are multi-national implications.

If one turns to the likely effect of British entry into Europe one finds it hard to see how the investment plans of big companies would go. I was privileged recently to see the result of a private survey commissioned on this, which indicated that, of the multi-nationals polled, nearly twice as many planned to expand on the Continent as planned to expand in the United Kingdom. Part of the reason was that EFTA was now no longer a factor, and part of the reason was the geographical advantage of being nearer to major part of the market on the Continent. I would alert the House against the euphoria of supposing that entry into Europe will solve all our problems. We need to consider how we can defend our own interests in the same way as Scotland and Wales have had to defend their own interests even in the context of the United Kingdom. [Interruption.] I cannot pick up the hon. Gentleman's speech while he continues to deliver it from a sitting position.

Mr. Skeet

I am sorry to intervene again, but if the right hon. Gentleman puts this argument, would it not be better to send a Parliamentary Labour delegation to Europe where in the parliament they would be able to argue these points?

Mr. Benn

The hon. Member is now taking the argument well beyond what he knows it is about, and that is how far the Government in their own proposed legislation here can defend the interests of the United Kingdom.

Let us take the social costs. I remember the figures very vividly. They applied when we left office. Unemployment, when it occurred, cost the taxpayer £1,500 for a man in the first year because of redundancy payments and the Government's contribution; it cost £1,000 after that to keep him unemployed; and an-other £1,500 to take a new job to development areas.

The figures may have changed by now, but one is faced with the fact that it may cost £2,000 or £3,000, perhaps more, perhaps £5,000, when a man is sacked by a company. That is not accounted for by the company, and we cannot regard a decision about redundancy as being a decision confined solely to the company in question. The company is concerned with the effect on its own balance sheet, but it could cost the taxpayer £3,000 or £4,000. This is thoroughly bad national accounting, even if we leave out the human considerations.

I remember calculating on the back of an envelope what it would cost the Government to cancel UCS—£47 million—and I gave the figure in the House. The present Government's new investment in the company is £47 million; that is the nature of the investment in the new companies. Therefore, one has to take into account a much wider range of factors than even the best and most enlightened management has to take into account.

It would also be very wrong to suppose that the growing awareness of the workers in what is happening in industry is something which can be disregarded. I know that the work-ins and sit-ins and so on, have been interpreted by some people as being a sudden development of Trotskyite thinking among British working people. I should be surprised if any hon. Members have come across this and have not found exactly the opposite to be the case. The delegations of trade unionists who come here, with some management representatives sitting with them, are deeply concerned at what they regard as the wholly unacceptable and old-fashioned way in which the workers are treated by the boards when closures are involved. They are given no figures; they are told nothing; they are often given no notice. This is part of the reason for their new activities of the trade unions and must be seen in that context in the case of GEC/AEI, UCS, Fisher Bendix, the River Don, Skelmersdale, Briant Colour Printers and Shepperton.

This activity represents a permanent new feature which has to be taken seriously by the Government. The workers rightly regard themselves as the real assets in a company and are not prepared to be treated as if they were of no account. This is something which hon. Members and the Government will have to recognise, and the Government will also have to think hard about it if they are serious about their new tripartism. It is one thing to ask the TUC to come and help plan the economy with the Government, but let the Government not forget, if the trade unionists are to be brought in to advise on the economy, that their real interests in industry and in management in which they are concerned are very directly involved.

My own belief is that we shall soon reach the point where the trade unions will quite properly demand that they should be brought in on questions of competition and monopoly and industrial policies of this kind, because it is their own people who are thrown out of work if the decisions which are taken are wrong, and, as one hon. Member said, such a decision can mean the death sentence for a small town.

We should be blind if we did not see what is actually happening. I have been looking back over the years in which I had some responsibility for these matters. There is great merit in going back over one's own experience. The last Government were engaged in two parallel lines of policy. One was the positive restructuring with the IRC and the Industrial Expansion Act. We encouraged the development of mergers, as with British Leyland, and Swan Hunter received support, notably with the Furness Dock, for which money was needed from the Government without which the development could not have taken place. There was the case of UCS and Robb-Caledon, the British computer industry, ICL, Chrysler and so on. There is no doubt that there were benefits from these mergers. There is no doubt that very large sums of public money were invested in these mergers but it would be quite wrong to describe the outcome as being in any sense private enterprise. ICL would never have come into being and we should not have a British computer industry if there had not been a massive injection of public money into research and development and equity. The management problems of new companies are formidable and for these there was some accountability in many of the decisions made, and this we have to take into account when we look back on our record.

On the other side, there was the whole policy in parallel with the development of industrial structure, the strengthening of accountability through the monopolies and restrictive practices legislation and through the National Board for Prices and Incomes, which supervised to some extent the companies over whose operations it had some responsibility.

I should like to tell the House of two occasions when it was necessary to refer major international companies to the Prices and Incomes Board and which were clearly in the public interests. One was the reference of IBM after devaluation. That exactly illustrates the point I was making to the hon. Member for Bedford (Mr. Skeet). After devaluation, IBM had reorganised some of its prices in such a way as to deny to the British component of that company the benefit supposed to result from devaluation. It upsets their calculations. We had to refer IBM to the NBPI. The other case was a small one, Mallory Batteries. It affected people who acquired apparatus and were not gaining all the advantages they should have gained within the complex of an international company.

If we are to deal with the problem of large international companies there will have to be a continuing agency of supervision. Just before the election we came forward with our proposal for the Commission of Industry and Manpower which would have linked the Monopolies Commission with the NBPI. That proposal had great merit and one day, perhaps, some Government will have to come back to it.

These same twin streams of policy are developing within the Common Market. On the one hand, there is the extremely slow development of a Community industrial policy. Those who study it will have read the Colonna memorandum and all that goes with that. It will be remembered that such mergers as Unilever, Shell, Agfa Gevert, Fokker-VFW, Fiat-Citroen, Dunlop and Pirelli all came in the pre-EEC stage. European company law is being thought about to see how far it is possible to generate this development. There is also the consideration of how far workers' interests should be taken into account, and the German workers' co-determination scheme is much discussed. I am not so enthusiastic about it as others, but it is seen by the Commission as being part of its function to promote it. Changes are being proposed which will allow more trans-national links to take place.

On the other hand, the Community is still struggling with Articles 85 and 86 of the Treaty, and case law will be built up by the court to deal with market sharing, distributors' contracts, licensing, price fixing, market allocation and so on. It would be a great mistake to suppose—as the hon. Member for Bedford implied—that we shall not need a policy for the United Kingdom because we can rest upon European competitive pressures.

I am awaiting with interest the Government's legislation. It is hard to detect, with absolutely no guidance in the past two-and-a-half years, what the Government are thinking, but if I detect any element of Government thinking, it is that the right hon. Gentleman the Chancellor of the Duchy of Lancaster, who began by hoping to get competition going in the United Kingdom and left the Department of Trade and Industry just as his policy was completely reversed, is now hoping that in the European context of free competition these problems will be resolved. I notice—although the policy he advocated as Minister in the early days concerning lame ducks, nonintervention and disengagement has been totally abandoned—that he is again making the same speeches but this time in the context of British membership of the European Community. My belief is that even within the context of the European Community it will not be possible to be non-interventionist.

The Times leading article in the business section on 16th November makes it clear that the assumption that the free market economy would be conducive to the highest material benefit of all is now being questioned within the Common Market. It is clear to me that the Government will have to have their own armoury of intervention and protection, because the free movement of capital within the Common Market will by no means guarantee the interests of those whom we represent.

Mr. Skeet

The case law that has been developed in the Common Market is on exclusive dealings—that is, Article 85. On Article 86 the Continental can case has upset the few cases that have come forward. A large part of the case law on exclusive dealings under Article 85 has now been decided.

Mr. Benn

As an elected representative, of whatever party, the hon. Gentleman will not be able to get away with the explanation, to constituents who are adversely affected by Community policy, that the European Court has determined the matter and there is nothing he can do about it. The reason why the Government have changed their policy, and why we have adapted our policy from what it was in office, is that we are bound to respond to the needs of the people we serve. That is what the democratic process is about. If the hon. Gentleman believes that he will be able to say, "I am sorry, there is nothing I can do about it because it has all been determined by case law built up in Europe", he is being naïve.

I will go over some considerations that should be in the Government's mind. We cannot have this degree of industrial power, however organised, without accountability for the decisions that are made. For the sake of argument, I accept that nationalised industries—which I want to see extended—in respect of the democracy within their organisations have not been as good as they should have been, but a Minister can still sack a chairman of a nationalised board, just as the chairman of the Post Office Corporation, in my judgment wrongly, was sacked. We are dealing with powers commanding resources greater than those of nation States, whose decisions determine employment prospects and the prices that our people pay. Without accountability it will be impossible to protect our own people.

Secondly, company law must be revised to provide for more disclosure of information. That is also part of accountability. There must be a logical reform of company law so that directors are no longer responsible only to shareholders but are made explicitly responsible for the people they employ and to the consumers in the community.

Mr. Fell

How on earth will all that happen?

Mr. Benn

If the hon. Gentleman believes that it is possible to run companies of the size and importance which he fears without legal provision within the company for consideration to be given to the people who work in it, he misunderstands the British temper.

Will the Government, in this debate answer these questions? First, when shall we have the Bill? Before the election it was regarded as a major priority. It was highlighted in the manifesto and it has been endlessly referred to since. All we have had is a hint by the new Minister for Trade and Consumer Affairs of some new criteria about market sharing Secondly, what prospects are there of a Green Paper on competition policy before the Bill comes to the House? In the changing circumstances of European entry and for all the reasons given in the House today, there is no doubt in my mind that a policy of this kind should be fully and publicly aired and discussed before the House is required to take on board a Bill.

Thirdly, would the hon. Gentleman either in his speech, and certainly in a White Paper or Green Paper, explain and set out quite clearly the relationship between the competitive policy which he intends to recommend to the House and the competitive policy that is developing within the Common Market? Meanwhile, does the hon. Gentleman not agree that much serious opinion is now united in thinking that there should be a pause in the great rate of large mergers now taking place until we have had an opportunity, at this appropriate moment, to consider exactly where we are going—a pause before the present rate of takeover bids and asset stripping is allowed to continue? If the hon. Gentleman could answer that question, I believe that this debate will have triggered off an even more important national debate.

3.0 p.m.

The Under-Secretary of State for Trade and Industry (Mr. Anthony Grant)

First of all, I should like to congratulate the hon. Member for South Shields (Mr. Blenkinsop) on giving us the opportunity to have this debate and also on the manner in which he introduced it. I intend to deal as best I can with the specific points which have been raised, including particularly the Wrights Biscuit case and Shepperton, as well as the more general issues.

First, I must endorse what was said by my hon. Friend the hon. Member for South Angus (Mr. Bruce-Gardyne) and remove the impression—an impression which has been so assiduously fostered—that mergers and takovers were an invention of this Government and did not exist during the years of the Labour Government. Those who make this inference forget that the right hon. Member for Bristol, South-East (Mr. Benn) invented a tool for this purpose—namely, the IRC—which was aimed at deliberately fostering amalgamations and mergers and which sometimes had a marked effect on employment.

However, it is right to point out the statistics to put the matter in perspective. In the last two and half years of the Labour Government my Department has recorded the occurrence of 2,201 industrial mergers. Since the present Government took office until September of this year, which is the nearest practical date to which we can take the figures, 2,162 industrial mergers have been recorded. In the last two and half years of the Labour Government 259 industrial mergers were within the ambit of one of the two tests of the Monopolies and Mergers Act. Under the present Government up to 30th September, 219 have come within those tests.

The merger movement is not a new one; it has been going on under a new one; it has been going on under both Labour and Conservative Governments at various times in our industrial history. Therefore, it is absolutely wrong and complete baloney for anyone to suggest that this is something new.

Mr. Benn

The hon. Gentleman will surely concede that the supervision of these large companies has greatly diminished as a result of the abandonment of the National Board for Prices and Incomes, which looked at prices, and also the abandonment of the Consumer Council.

Mr. Grant

I do not accept that for a moment. I do not believe that either of those bodies had any significant effect on the particular matters to which the right hon. Gentleman referred. I shall come on to this matter a little later.

I wish now to say a word about the situation involving the Wrights Biscuit Company in the constituency of the hon. Member for South Shields. Naturally, I was very concerned, as were the Government, with the forthcoming closure in the Tyneside area—as indeed, we are concerned with anything of this nature which takes place in the constituencies of the hon. Gentleman and of my hon. Friend the Member for Tynemouth (Dame Irene Ward), who has also made a contribution to this debate. We look at these matters with very great care. In this instance 820 jobs are involved, and, although over 450 are part-time jobs for women and for a number of seasonally employed people, it is obvious that the closure will seriously affect the employment level in South Shields and will create employment problems. I accept what the hon. Gentleman said on this matter, and he was right to raise the subject in the way in which he did.

My information is that the company has orders to carry it through until Christmas. The final closure is nut expected until the end of March. The full facilities of the Department of Employment will be available to do everything possible to help the people affected, but the size of the problem inevitably will make this difficult. The decision of United Bakers Limited to concentrate production of certain lines at its Grimsby plant is one for the company to make; it alone can make the decision.

Mr. Blenkinsop

I appreciate what the hon. Gentleman is saying, but would he help by giving what assistance he can to persuade the firm to delay the date of closure—a suggestion which the company has offered to consider—until we can try to get somebody else to take work there? Will he try to persuade the firm not to cancel orders from home or abroad which are still being given?

Mr. Grant

Certainly. Beyond that, I was about to say that my Department is ready to consider under the Industry Act any proposals which may be put forward for a project which will provide employment, and our Newcastle office has made that clear to inquirers. Since the closure was announced, from time to time our regional industrial director has been in touch with the local management and with the United Biscuit headquarters. We have asked about the necessity for the closure and about the possibilities of reforming the South Shields unit. The company has taken a responsible attitude, and we shall keep in close touch with it along the lines that the hon. Gentleman suggests. I shall say a little more about this case in the context of monopolies and mergers, which is a broader point.

I turn now to the other specific case, which is that of the Shepperton Studios, raised by the hon. Member for Coventry, North (Mr. Edelman) and the hon. Member for Putney (Mr. Hugh Jenkins).

It is very important in a debate about monopolies and mergers and asset stripping to realise that but for the wise action taken by my right hon. Friend the Prime Minister when he was President of the Board of Trade the whole of these studios would have closed; there would be no retention of a studio there at all.

As the hon. Gentlemen recognise, this power was given to the National Film Finance Corporation, which is an independent body for which I have the highest regard. Its members are men of integrity with a great knowledge of the film industry. But for their decision originally, Shepperton would not be saved as a major studio.

The original request was to dispose of the whole of Shepperton, though other proposals were put forward which were not acceptable to the NFFC. There were subsequent careful and detailed discussions between the two parties, and I am sure that the NFFC took into consideration all the points about the film industry that hon. Members have made. It was for that reason that the NFFC was able to get an agreement in principle which maintains Shepperton as a major studio. I emphasise that it was an agreement in principle. The hon. Member for Putney was right, and the NFFC has confirmed to me today, that the agreement was in principle and that the layout and content of the revised studio complex remained to be approved in detail by the NFFC. In that sense, final detailed agreement has not been reached.

Mr. Edelman

Will the hon. Gentleman say whether the NFFC retains its preference share in the company?

Mr. Grant

Certainly I can confirm that. That was also a wise provision in the agreement in principle. The NFFC retains the power of veto.

I was about to say that it was quite premature to assume that the silent stage, to which the industry and the hon. Member for Putney attach importance, will necessarily disappear. This is one of the matters about which discussions are still being held. If satisfactory results can be obtained, the NFFC believes that it will be possible for British Lion to undertake to keep a self-contained and independent studio capable of sustaining the production of two major films simultaneously.

I share the view of the hon. Members for Putney and Coventry, North that in Britain we have the best film makers, the best artists and the best technicians. We can be very much the best in the world. But we have to look carefully at the way in which our industry is organised. The NFFC believes that at the end of the day the resulting studio may be a more compact, economic and efficient major studio than is the present one.

Mr. Hugh Jenkins

I should like to mention two points. The first is of a negative character. It ought not to be overlooked that this whole situation would not have been precipitated but for the decision of the previous Conservative Government to de-nationalise British Lion in 1963.

The second point is of a more positive character. The hon. Gentleman said that the silent stage, which is a very important part of the whole complex, will be preserved. I think he will agree that that was not provided for in his original provisional statement. Perhaps we may hope that the discussions which are now in progress will lead to a better solution than the provisional solution which the hon. Gentleman indicated in reply to my question.

Mr. Grant

I will not deal with the first point as to who bought, nationalised, denationalised, when and what. On the serious second point, I should make it clear that the details of this arrangement have yet to be finally decided. The National Film Finance Corporation has informed me that the big silent stage is one of the matters to be considered. It would be premature and wrong for people either inside or outside this House to assume that that just goes. I hope I have made that as clear as possible from the information supplied by the NFFC.

The acquisition of Shepperton by Barclay Securities was a special and unique case. Happily, by the action of my right hon. Friend a sensible compromise was achieved. We are dealing with situations outside special arrangements such as that.

The term "asset stripping" is not only highly charged with emotion but imprecise. I should like, in the short time I want to take, because I do not want to inhibit any other debate, to examine closely what is involved. I accept that there is widespread concern at some features of the merger scene. I share this concern. However, it is important to try to see the picture as a whole.

There have been literally thousands of mergers in recent years ranging from the smallest private companies to the very large public corporations with assets valued at hundreds of millions of pounds and employing thousands of people. It is the latter which always hit the headlines. However, we should not forget the many others—indeed, the overwhelming majority—which are in no way designed to build up a monopoly position or to create over-large groups. They are sensible adjustments made by industry to meet changing technological and market conditions by raising the scale of industrial operations. On occasions they may represent the taking over of unsuccessful firms as an alternative to liquidation. I believe that such mergers play an important part in bringing about necessary change in a flexible, growing economy such as ours. The alternative as my hon. Friend the Member for Bedford (Mr. Skeet) indicated, is completely ossified industrial society suffering from rigor mortis with no change. We must face that at the start.

The right hon. Member for Grimsby (Mr. Crosland) when President of the Board of Trade argued that one cannot dogmatically be for or against mergers. He said: In general, mergers are desirable if they lead to better management or genuine economies of scale without eliminating workable competition. In my view, more often than not in Britain mergers will fulfil this condition.I agree. This is a perfectly balanced point of view. I am not under-estimating that, even where mergers bring public and private benefits, the reorganisation which almost inevitably results involves problems and sometimes extremely severe personal difficulties.

Going back to the days when the right hon. Member for Bristol, South-East (Mr. Benn) was in command, the GEC merger resulted in 34,000 redundancies. I am not saying that it was wrong to do it. This was a factor which arose. Indeed, the right hon. Member for Birkenhead (Mr. Dell), who was also in the Government at that time, put it very bluntly in 1967, when he said: It would be incompatible, of course, with the Government's overall strategy for strengthening the structure of British industry to maintain that no rationalisation scheme should ever lead to redundancies in a development area."—[OFFICIAL REPORT, 23rd November, 1967; Vol. 754, c. 1630.] That was the position when hon. Gentlemen opposite were in power.

My hon. Friend referred to the nationalised industries, and that topic has crept into this debate quite a lot. If a rationalisation or merger proposal had been announced in 1964 for, say, a private mining industry, the result of which would be to make 180,000 people redundant in five years' time, or if a proposal had been made for the merger of a major private industrial company which would result in 114,000 people being put out of work within half a decade, the squawk would have been heard from one end of the Labour Party to the other, which is a long distance, but that is what happened with the nationalisation of the coal industry and British Railways.

Mr. Blenkinsop

The hon. Gentleman must accept that the heavy cost involved was appreciated, and that real efforts were made to try to overcome it in financial, social and other ways.

Mr. Grant

I am sure that great efforts were made to overcome the problem but, looking to the future, it is idle to suppose that one can be in that position again, or that proposals for further nationalisation will do nothing but repeat that situation. That is the delusion which we have to get out of our minds. It is the concern of us all to see that benefits of rationalisation are not bought at too high a cost to individuals.

Even if one narrows the range and looks only at the 700 mergers which have been caught by the mergers legislation since it was introduced in 1965—on average there are about 100 a year—it re-remains true that the vast majority are caught only because the gross assets of the companies being taken over exceed the £5 million laid down in the Act and they are unlikely, in the main, to pose any threat to competition or to the national interest, nor are they of any particular economic significance.

The real question is what is to be done with the fairly limited number of mergers—10 to 20 a year—which involve the taking over of large companies, or which create or intensify a significant monopoly, or near monopoly, or are part of a succession of moves towards the building up of what are often called conglomerate groups, or are tied up with questions of employment, particularly in development or special development areas. This is the real area of public interest. It is idle to approve or to condemn mergers in general in broad terms. We must look separately and in detail at each case and attempt to strike a balance in the light of all the factors involved.

The right hon. Member for Birkenhead was seeking to elicit rather more information about our attitude. The Government's main concern in relation to the limited number of more important mergers has been to refer to the Monopolies Commission those proposals which seem likely to result in a damaging restriction on competition. However, this does not mean that references for other important public interest reasons have been ruled out; for example, where there are important social as well as economic issues, such as the implementation of regional policies, or where sheer size in itself raises issues of public significance.

In this connection we must remember that the limited number of important cases to which I have referred vary from year to year both in number and in the nature of the transactions, and that conglomerate mergers can come in waves or cycles. I think that this is generally accepted. There may be a merger or a takeover—and I think that this gives rise to much of the concern—where the sole or dominant motive is short-term gain. In these cases the merger will possess, or seem to possess, no industrial logic, no proper assessment having been made of the strength or weakness of the company being taken over, or of whether the target company's operations, or a great part of them, are profitable, or could be made so. The sole purpose in those cases seems to be to denude the company of its assets and to sell them off for ready cash without regard for the longer-term considerations or the interests of the company and its employees or of the public at large.

This kind of merger piracy is still, fortunately, rare, but we will not hesitate to refer to the Monopolies Commission any proposed mergers which arise where the sole aim is the break-up of a profitable business for short-term gain. [Interruption.] My hon. Friend will not expect me to anticipate decisions which are now being considered. I am speaking in the more general terms, although we will note very carefully what he says in that respect.

Mr. Dell

I welcome what the Minister says, particularly the fact that he says that social and regional considerations will be taken into account in deciding references to the Monopolies Commission. But, as he has said that, could he explain what the Minister for Trade and Consumer Affairs meant in his speech the other night when he said—these are the words that caused me alarm: It might be that public interest factors of this kind can be more fruitfully considered in the context of social and regional than of competition policy. What did he mean?

Mr. Grant

The right hon. Gentleman will have to probe my right hon. and learned Friend, as no doubt he will, about what he meant. Nothing in the broad context of the speech that my right hon. and learned Friend made to that seminar is inconsistent with what I am going to say.

Many mergers will lead to reorganisations which may result in surplus assets which a company cannot usefully use, and which must be sold. This is the only way, of course, in which increased efficiency and production can be obtained. The fact that transactions bring profit to a company and its shareholders does not necessarily mean that the reorganisations are undesirable. On the contrary, they may indeed be the only way in the long run of ensuring a future for the company and of maintaining and eventually expanding employment.

Mr. Neville Sandelson (Hayes and Harlington)

Would the Minister explain what he would do in regard to asset-stripping operations where there is no possibility of a reference to the Monopolies Commission because it simply does not come within the commission's terms of reference?

Mr. Grant

I was going on to deal with the broad policy. I was saying what our policy would be at the moment, where we have the power.

Mr. Fell

My hon. Friend has been telling the House, with his customary courtesy and brevity, what his basic ideas are. But the Department and the Government must take into account the deep unease throughout the nation on the subject. We want something far more defined than we heard from the Opposition Front Bench or than we have so far been told by my hon. Friend.

Mr. Grant

If my hon. Friend would allow me to continue, he may or may not be satisfied at the end, but I shall try to deal with the points.

There is no simple recipe for dealing with all mergers. We remain convinced, although I share completely the anixeties that may hon Friend has expressed, that in present circumstances many mergers can be beneficial or at least neutral in their overall results and that there can be no easy general rules which would automatically decide which mergers should be stopped. What we will do is continue to look at each case as it comes up and assess the often conflicting considerations.

But I would assure the House that the effect on employment, particularly on assisted area employment, will always be a major consideration. The diminution of competition is also absolutely of vital concern. Any diminuation of competition, whether or not involving a technical monopoly, must carry with it the danger of higher prices or discriminatory pricing or pressure on suppliers. Nor are takeovers by conglomerates necessarily immune from such faults. Because of their overall size and power, conglomerates may be able to exercise a degree of influence in particular sectors of industry out of proportion to their share of the markets concerned. But employment repercussions are vitally important, especially large-scale redundancies from development or special development areas. I must emphasise that it is by no means easy to distinguish between unemployment arising directly from mergers and unemployment which would arise in any event from other causes such as excess capacity, technological change or other matters. Stopping all mergers does not stop redundancies.

We must look carefully into all the facts. The United Biscuit's acquisition of the Cavenham biscuit interests, including Wrights Biscuits, came before my Department for consideration. I assure the House that we gave careful consideration to the question of employment in that case. However, it is generally admitted that the plant in South Shields is very old and that the site is unsatisfactory. On the evidence available at the time, there was no reason to believe that a reference to the Monopolies Commission, whether or not followed by a recommendation about the merger, would be likely to have any positive effect on the employment situation in South Shields. On the contrary, it seemed likely that if the merger did not go through the South Shields factory would still have to close. The merger held out the hope of maintaining employment. At least two of the three Cavenham sites, Carlisle and Grimsby, were in assisted areas.

Mr. Blenkinsop

I recognise the Under-Secretary's difficulties, but does he realise that promises were given in the takeover that employment would be safeguarded and that new plant would go in? But all that was thrown to the wind.

Mr. Grant

I will make further inquiries, but my information is that no specific undertaking was given at the time.

The speech of the right hon. Member for Bristol, South-East, was singularly depressing. He made a half-hearted attempt to justify his period of office, but I do not think that he has a clue about Labour's future policy. We are intensely interested—particularly those of us concerned about nationalisation—to find out what it is. We can get some enlightenment by looking at a remarkable document, which is the only clue which we have, called "Labour's Programme for Britain". The print is rather small. Probably that is deliberate because it is not meant to be read. It says: We shall strengthen the existing legislation on mergers by monopolies and provide for extensive powers to order companies to divest. We shall also seek to harness the selective expansion of public sector either through diversification by existing public enterprise or by bringng selected companies into public ownership. Now we know the Labour Party's commitment. It is fairly vague.

The question of multinational companies has flowed through the debate. It has been raised by hon. Members on both sides. It is a little more specifically dealt with in "Labour's Programme for Britain", which says: We shall seek to ensure, for example, that the Government has the right to appoint public directors for the subsidiary companies of long-resident multi nationals and on the main boards of resident multi nationals. If anything is calculated to deter overseas investment and to send all these companies away from the assisted areas, it must be that. As one of my hon. Friend's said, that is jobs for the boys on a multinational scale.

Examples of the amount of employment arising from multinational companies include the 1,300 jobs provided by Procter and Gamble at Newcastle and the 2,000 jobs provided by Stirling Winthrop at Newcastle. Philips-Mullard is soon to open in Durham, where it will employ 1,500 people by the end of next year. In my own constituency we have Kodak, and another example given today is the Ford Motor Company Those companies would hardly be inspired to increase their investment in this country, with resultant further employment, if they had the appalling thought of the right hon. Member for Bristol, South-East or one of his colleagues being compulsorily foisted onto their main or subsidiary boards. There has been a dearth of realistic thinking by Opposition Members. We are entitled to hear in a little greater depth how they would approach the problem if one unhappy day it should fall to their lot to do so.

My hon. Friend the Member for Yarmouth (Mr. Fell) was rightly most concerned about the matter from the point of view of small towns, which are very much affected. Although I think nothing of the Opposition's policy for the future, the Labour Government did take the view that British industry would benefit from rationalisation, and that takeovers and mergers were on the whole in the national interest. I disapprove of some of the means they adopted to bring about that rationalisation, but I agree with their basic view that it had to be done. But the fundamental problem remains of how best to devise a system that will encourage the good and desirable merger and stop the bad.

It is only a minority—though it can be a very important minority—of mergers that will operate against the public interest. The figures I gave at the beginning of my speech show that mergers have been proceeding at about a thousand a year, almost all of which attracted no attention and gave rise to no doubts. That supports the view that most mergers are not detrimental, but I recognise that they give rise to a growing broader social and regional concern and anxiety.

My right hon. and learned Friend the Minister for Trade and Consumer Affairs will shortly introduce major new legislation on fair trading which will make a number of changes and improvements in the existing legislation governing mergers. The House will know only too well that I cannot give an exact date for its introduction. There will be a full opportunity during the passage of the Bill to consider other modifications of existing legislation and practice.

The hon. Member for Loughborough (Mr. Cronin), who has left the Chamber, but who kindly explained to me the reason why, urged certain things upon me. In particular, like other hon. Members, he said that we do not know enough about mergers, about what is going on. We acknowledge that. Therefore, one of the first acts of my right hon. Friend the Secretary of State, in addition to what I have already described, was to institute a review of the whole question of takeovers. In this we shall have the benefit of the National Institute of Economic and Social Affairs research study, recently received, which will be published in 1973.

The hon. Gentleman and other hon. Members also urged further action on the question of companies. The Department is urgently reviewing the whole related field of company law and, in particular, the question of disclosure of more information by public companies. I entirely accept the views expressed on both sides about the need for action in this respect, and legislation will follow. Meanwhile, any decision on whether to refer a particular merger is made after striking a balance, often a very fine balance. But my right hon. Friend the Secretary of State intends to make greater use of the Monopolies Commission in major mergers, and if there is doubt about whether a reference is desirable the balance is likely in future to be struck in favour of referring rather than not referring. Certainly, we expect to refer mergers where the sole aim is quick short-term gains from asset stripping. Although conglomerate mergers do not necessarily diminish competition, where such conglomerate mergers raise doubts we shall not hesitate to refer them to the Commission.

Now, a word about small companies, to which my hon. Friend the Member for Bedford referred. One of the evils of a society in which large amalgamations are urged and developed is that one can be in danger of producing a forest environment in which there is sterile undergrowth. The great trees, the great amalgamations urged, quite rightly in some ways, by the right hon. Member for Bristol, South-East, produce the sort of forest in which the only answer is to support everything with the prop of nationalisation.

We believe, on the contrary, that it is essential to have a healthy undergrowth. Therefore, the encouragement of small firms, which have suffered so much from what was done by the previous Administration, is one of our primary tasks, and I am responsible for it. My hon. Friend the Member for South Angus recognised what we have done so far in this respect to undo the damage done to the small firm sector. We intend to continue that work, following up the Bolton Report, to ensure that the interest of small companies, which must continually grow shall never again go by default.

I am grateful to the hon. Member for South Shields for initiating the debate. I am disappointed, though not surprised, that his right hon. Friend did not take the opportunity to reveal the policy which the Labour Party would adopt. But I assure the House that the Government's policy and the legislation flowing from it will be so formed and administered as to act not in the interests of any one section, no matter how important, but in the interests of the nation as a whole.

3.37 p.m.

Mr. Neville Sandelson (Hayes and Harlington)

I shall be brief, because I am intervening late in the day, and I know that others wish to speak.

The House is greatly indebted to my hon. Friend the Member for South Shields (Mr. Blenkinsop) for having initiated the debate, and I feel that it is a matter for some regret that it should be held on a Friday when attention is necessarily cursory and attendance scant for a subject of such far-reaching importance.

The Stock Exchange Council is at present revealing an extreme sensitivity to outside comment and criticism—as well it might. I hope that that sensitivity reflects a growing awareness of public dissatisfaction with the workings of the City in general and with the lack of effective controls over both dealings and takeover bids.

Only last Wednesday, the Chairman of the Stock Exchange Council, Sir Martin Wilkinson, characterised insider dealing on the stock market as "no better than theft". Few will disagree with him, but, while most people would think that theft in any form should be the subject of criminal prosecution, the chairman is not, apparently, prepared to take the robust and proper attitude. He prefers to leave these appalling abuses to self-regulating action on the part of the Stock Exchange.

Further, the Chairman of the Stock Exchange Council, according to a report in The Times yesterday, delivered himself of the extraordinary statement that a large part of the public is outraged not because others have profited but because they themselves have not. That may be true of the small circle of other insiders in the City, but I utterly condemn, as do all my right hon. and hon. Friends, the attributing of such a cynical and materialist view to the general public.

The nation is sick to death of wheeler dealing and financial manoeuvring which is solely enriching City tycoons and whizzkids but is unproductive for the economy and harmful socially. In the present critical economic climate nothing does more to exacerbate bitterness in industrial relations, as we all know in our constituencies, than takeover bids serving narrow financial interests and founded on narrow financial considerations. Asset stripping is no way in which to create new wealth or to stimulate the growth which Britain so urgently needs.

The point has been made that takeover bids are neutral. If anything, the majority of takeover bids reflect very badly on the standing of management in industry because most of them result from bad management in individual companies with resultant low profits which open the door to the takeover bidder. We should be thinking along parallel lines of thought as to what remedies are required for the defects in the higher reaches of industry, because that is the most effective way of putting a stopper on the financial dealings of which we complain.

Takeover bids resulting only in the break-up of businesses in order to acquire cash pose a very serious threat to employment, and in many instances recently they have simply added to the over-large unemployment from which the nation is suffering. Hon. Members have given examples of where that has occurred.

My main reason for intervening in the debate and the point which I wish to make most strongly concerns the controls over stock market deals and takeover bids generally. Powers in the United Kingdom are divided between the Department of Trade and Industry, the City Takeover Panel and the Stock Exchange Council. The DTI is notoriously bad and slow in dealing with what I term "dodgy situations". Vehicle and General was a scandal which many knew about but nothing was done about it until it was too late. A few Civil Service heads rolled—pour encourager les autres—and that was that.

The Takeover Panel has staggered from case to case, from bid to bid, trying belatedly to block every loophole which ingenious City people have found and exploited. Its code has developed empirically, trying to cope too late with failures by the panel. The Chairman of the panel, Lord Shawcross, is a man of personal integrity which no one would seek to impugn, but the fact remains—and it illustrates my point—that he enjoys a position of profit in one company, the Savoy Hotel Group, which is receiving the unwelcome takeover atten- tions of another company, Trafalgar House. Therefore, the chairman of the panel is wearing two hats, and that cannot be right.

Nor is one encouraged to believe in the competence of the Stock Exchange Council effectively to supervise and scrutinise takeover bids. The council is a body elected by its own members. Every member of it, being either a stockbroker or stockjobber, naturally enjoys close personal connections with businesses and financial organisations. The result is that the degree of independence and impartiality—

Mr. Hugh Dykes (Harrow, East)

On a point of order, Mr. Deputy Sneaker. I apologise for interrupting, but is it in order for the hon. Member to intervene at this late stage on a subject which is tangental to the main subject when other hon. Members have waited all day to speak?

Mr. Deputy Speaker (Mr. E. L. Mallalieu)

I am sure that the hon Member for Hayes and Harlington (Mr. Sandelson) will draw his remarks to a close as soon as possible.

Mr. Sandelson

I am drawing my remarks to a close, Mr. Deputy Speaker. However, I cannot agree that my speech is in any sense tangental to the central issue. It is very close to the central issue of what controls are to be effected over the present situation and the abuses about which we are complaining.

As I was saying, all the members of the Stock Exchange Council enjoy close personal connections with the financial and business organisations that are likely to be very much involved with takeover bids at any one time. The result is that the degree of independence and impartiality which the public should expect and which should exist in relation to effective controls is completely absent.

Public anxiety is running high, and will be stilled only by the appointment of a new outside body to control these bids. I wish that the Minister had been able to tell us whether he intends in the legislation about which he has told us, to embody the proposal for an entirely new, independent and impartial body to supervise takeover bids and produce an effective machinery of scrutiny and control.

Such a body should be staffed by people of the highest professional calibre, completely detached from any business or financial interest with which the body itself would be concerned.

Since I see that a number of hon. Members are anxious to contribute to the debate and time is running short, I shall develop this theme further in due course in the debate of which we are now assured.

3.46 p.m.

Mr. Toby Jessel (Twickenham)

I hope that the hon. Member for Hayes and Harlington (Mr. Sandelson) will forgive me if I do not follow in detail what he said as he, having come into the Chamber not very long ago, made a successful takeover bid for a fairly large proportion of the time remaining for this debate.

Mr. Sandelson

The hon. Member is mistaken, but it does not matter.

Mr. Jessel

I begin by declaring an interest. I am a non-executive director of a company which over the last few years has carried out a number of takeover bids and mergers.

I listened with very great interest to the speech of the hon. Member for South Shields (Mr. Blenkinsop), and found myself very much in agreement with a large proportion of what he had to say. I agree that the present state of affairs is not very satisfactory and that there should be some reform.

I believe that takeover bids are at present too easy and should be made more difficult. They are too easy because the present structure of company law and income tax law results in an inbuilt tendency to encourage them. Basically, there are two ways in which a company can buy another company. It can offer cash for the shares of the other company or it can issue more of its own shares in exchange for those of the company it is trying to take over. There may also be a combination of those two methods.

The issue of more shares is generally preferred both by companies bidding and by shareholders. From the takeover company's point of view, the issue of more shares is convenient because it means that there is no need for it to raise cash. That means that in a very real sense such a company has put itself in a position in which it is able to buy another company without paying for it. On the other hand, if shareholders are offered and accept cash there is immediately a capital gains tax liability, where there has been a capital gain, whereas if they take shares that liability is deferred. These two factors tend to make takeover bids far too easy.

The hon. Member for Hayes and Harlington said that there ought to be some control, and I believe that it should be made compulsory that when a takeover bid is made part of the consideration, perhaps a minimum of 10 per cent., ought to be in the form of cash. This would amount to a better test of the bona fides of the acquiring company, and make it more difficult for it to persuade its own shareholders to consent to the deal. It would also encourage companies to expand more from their internal resources, rather than by taking over other companies.

The right hon. Member for Bristol, South-East (Mr. Benn) said, or so I understood him, that there was no industrial logic in conglomerate companies. As a child I was taken to Boot's the chemist's and I was very surprised to find a lending library of books there. It seemed to me to have nothing to do with chemistry. Nevertheless, both parts of the business got on very well. I buy MY newspapers at a shop which also sells sweets and tobacco. To take an example of a big and famous company, Vickers, it manufactures and has for a long time manufactured aero-engines and office equipment, and it goes in for shipbuilding.

These different forms of trading can be carried on together perfectly well and I see nothing intrinsically evil or even undesirable in that—rather the reverse, because if a company carries on trade in more than one way it can very often, when there are cyclical effects on one part of the trade, be more stable than would otherwise be the case. The hon. Member for South Shields did not lay stress on this so-called lack of industrial logic. I feel that he was right and that the right hon. Gentleman had his eyes on the wrong target.

What worries people about takeover bids is redundancy. It is true and has to be admitted that some takeovers do lead to redundancies. On the other hand, as we heard from the Minister a few minutes ago there are takeovers which save jobs, especially where unsuccessful firms going downhill are saved. I hope the House will bear this in mind.

I will end my speech there to allow time for another hon. Member to speak.

3.52 p.m.

Mr. Hugh Dykes (Harrow, East)

I am most grateful for being called even although, unfortunately, time does not enable me to do justice to the debate or, at the tail end of the debate, to pay the tributes I should like to pay to hon. Members on both sides who have raised important and relevant points. I shall try to give another hon. Member time to get in the debate. I hope it will be possible. In that hope I shall concentrate briefly on one or two aspects of the major part of the arguments.

I thought the point raised by the hon. Member for Hayes and Harlington (Mr. Sandelson)—I do not criticise him overmuch for it—was rather tangential to the main body of the debate, which can be divided into two parts when considering the whole field of takeovers and mergers and the question of asset stripping. There is the restructuring or rationalisation of a business, and that is one aspect, and then there is the aspect of the mechanics of a takeover operation itself. They are separate and distinct. There is some overlap, but they are separate and distinct. Like the hon. Member for Hayes and Harlington, I believe that there is room for improvement in the mechanics. There have been substantial improvements in the control and mechanics of takeovers both in the stock market and outside it. I say that because of my own direct interest, being engaged in the securities business in the City.

The main part of the debate was precisely that with which my hon. Friend the Member for Twickenham (Mr. Jessel) dealt when he said that the greatest fear of all is the fear of redundancy. Society and the Government have to bear this in mind when considering any new policies for control of monopolies and mergers in the future. One suggestion is that redundancy payments should be much higher when there has been a takeover within a certain period, perhaps 12 months, although that might be difficult to put into operation.

What is not right is that, because the House is anxious about the effect of redundancies, we should adopt the philosophy of being totally against the rationalisation of companies by sensible takeovers. Most takeovers produce beneficial results in the long term, and that is what I regard as the first priority.

3.55 p.m.

Mr. Blenkinsop

The debate has been a useful and interesting one in which a wide range of views has been expressed a large number of issues have been raised. It has concentrated mainly on our concern about redundancy and other social problems which arise in development and special development areas. We are, naturally, looking to the Government's proposals to see how effective their actions will be on the wider question of controls. If we can secure a resolution of the immediate problems in my constituency, an example will be provided of action which can be taken elsewhere in similar circumstances.

I hope that the terms of the Motion are sufficiently moderate to enable general approval to be given to it. I accept that some takeover bids may be justifiable. On that basis, I hope that the House will agree to the Motion.

Question put and negatived.