HC Deb 17 March 1975 vol 888 cc1146-65
The Secretary of State for Industry (Mr. Anthony Wedgwood Benn)

With permission, Mr. Speaker, I will make a statement on the Government's proposals for the public ownership of the aircraft and shipbuilding industries.

A Bill containing these proposals will be brought before the House shortly after Easter.

I am circulating in the Official Report and have made available in the Vote Office a full statement of the Government's proposals for the shipbuilding, ship repairing and marine engineering industry following discussions with many interested parties on the discussion paper which I published on 31st July 1974. I am grateful to all those who sent in comments on the discussion paper and took part in the consultations.

Turning now to the aircraft industry, I have received a number of comments on the consultative document which I published on 15th January 1975, and I am still considering some aspects of these. I can, however, now announce that the Government have decided in the light of representations made to me to alter the criteria governing the scope of public ownership to include companies with a turnover, including that of subsidiaries, of over £7½ million instead of over £20 million in the relevant year. The effect of this will be to include Scottish Aviation Ltd.

Next, I wish to outline the proposals for compensation which the Government intend to put before the House in the forthcoming Bill, in respect of both aircraft and shipbuilding companies.

Compensation will be determined by reference to the value of the securities of the companies to be acquired. Securities quoted on a recognised stock exchange will be valued at their average price during the six months ending 28th February 1974, subject to any necessary adjustment to take account of rights or capitalisation issues. The value of unquoted securities will be determined, as if they had been quoted during the same period, by agreement between the Secretary of State and a stockholders' representative or, in default of agreement, by arbitration. No deduction will be made from the values so determined in respect of Government aid given before 28th February 1974.

The value of the securities may be held to depend in part on expectations about future Government aid of a discretionary kind. Such expectations will not be taken into account in valuing for compensation unless the terms of the aid had been settled with the company by the 28th February 1974.

There will be separate provision for debts owed by any company to be acquired to companies or persons closely associated with the company—that is to say, inter-company debts. These will be treated in appropriate cases as securities and valued accordingly. Genuine short-term inter-company debts will be compensated in full.

An appropriate deduction will be made from the compensation if a company's assets have been dissipated in anticipation of nationalisation between 28th February 1974 and 17th March 1975. A deduction may also be made for reductions in inter-company debt after 28th February 1974.

The Secretary of State will be open to receive representations from interested persons whether shareholders or other about the value to be placed on securities under the legislation and in the event of arbitration may bring such representations to the attention of the arbitrator.

Finally, I am circulating in the Official Report and have made available in the Vote Office a summary of the provisions which will be in the Bill to safeguard the assets of the aircraft and shipbuilding companies to be taken into public ownership in the period up to vesting day. No company will be penalised as a result of action taken in the normal course of business and in good faith, and commercial contracts, including those with the Government, will remain binding on the new corporations.

The Government reserve the right to strengthen these provisions in the event of serious dissipation of the assets of companies to be nationalised or the adoption of other devices to frustrate the manifest objectives of nationalisation. Any such strengthening may be retrospective in its effect.

Mr. Heseltine

will the Secretary of State understand that I cannot comment on the basis of compensation in view of the period of notice that I received of these terms?

Will the right hon. Gentleman give the House his estimate of the likely total cost of this Bill? Will he also tell us what in his view will be the relationship between the cost of compensation and the underlying assets involved in the companies to be nationalised?

Secondly, can the right hon. Gentleman say whether the underlying basis of valuation with reference to the six-month period ended 28th February 1974 as a basis of valuation will be open to arbitration in the way that the other arbitration provisions apply?

Thirdly, can the right hon. Gentleman say what further plans the Government may have for the control of defence sales?

Fourthly, will the right hon. Gentleman understand that his decision to use one Bill to mix two dissimilar industries and bring them forward for nationalisation will be resented widely in this House and will be resisted totally by the Opposition?

Mr. Benn

I am sorry that the hon. Gentleman did not get the statement in time and in accordance with normal procedures. He will appreciate that where compensation figures are involved there is a very strong commercial security element. But I tried to ensure that the hon. Gentleman got it on the normal basis.

As to cost, it is not possible for me to give a precise figure. It is bound to depend in some cases on arbitration.

On the relative values of shares—[Interruption.] The Government may be involved in arbitration on these matters, as I made clear—[Interruption.] If the House wants to hear my answer, I must be given a chance to answer. For the reasons that I have given and as I made clear in my statement, in the event of a valuation going to arbitration it is not possible to anticipate precisely what the amount will be, and therefore I cannot answer the question precisely. For the same reason—[Interruption.] The hon. Member for Henley (Mr. Heseltine) can come back if he is not satisfied with my answer. I am answering the question as I understood it. For the same reason, the share and asset value comparisons cannot be made.

As to the reference period, this will be provided for in the legislation in accordance with my statement and, therefore, would not itself be the subject of arbitration. It is not possible to arbitrate about whether the legislation should have been different.

The hon. Gentleman asked about defence sales. I take it that he means defence production. There will be special provision for defence requirements.

As for the acquisition of these two industries by a single Bill, this will not prevent the House handling the matter in the proper manner.

Mr. Thorpe

On the question of cost, surely even the right hon. Gentleman can round it off to the nearest £1,000 million.

Can the right hon. Gentleman assure us that if we remain in the European Community we shall not be inhibited from carrying on with this legislation by reason of our membership?

Finally, since only 39 per cent. of the British voters supported this, will the right hon. Gentleman consider having a referendum so that the workers in those firms may say whether they are in favour of this crazy course of action?

Mr. Benn

On the question of cost, I do not think that I can add to the answer which I have given already. Since the valuation may depend upon arbitration, it would not be sensible for the Government in advance of a possible arbitration to indicate the range of figures which we thought might emerge from arbitration.

As to the rôle of the Commission in respect of the powers of a shipbuilding corporation, this would be entirely subject to Articles 92 to 94 of the Treaty of Rome.

As for the right hon. Gentleman's final question, if he ever visited his constituents in the yard in his constituency he would know how much they welcomed the public ownership that was possible last summer.

Mr. Blenkinsop

Can my right hon. Friend say rather more precisely when the Bill will come forward, as we look forward eagerly to its presentation? Dates count rather a lot.

Secondly, is my right hon. Friend aware that shipyard workers on Tyneside have made and repeated only today their declaration of strong support for nationalisation and their eagerness to take part in full participation in the industry in the future?

Mr. Benn

I am well aware of the warm support for public ownership amongst those who work in the shipbuilding industry. As regards the exact time of the legislation, I hope to introduce the Bill after Easter, recalling that Easter is a moveable feast.

Mr. Tebbit

Will the right hon. Gentleman tell the House who asked for Scottish Aviation to be nationalised? Further, will he tell the House whether Britten Norman, which I understand has a turnover of between £15 million and £20 million, will be similarly affected? Will the money spent by the companies concerned between now and the enactment of the Bill, if that day should ever come, be deducted from the compensation? Will the money spent by those companies on campaigns against nationalisation be deducted from the compensation?

Mr. Benn

I received representations regarding Scottish Aviation from a number of people and I will provide—

Hon. Members

Who?

Mr. Benn

I will provide Conservative hon. Members with a list of people who made the representations. There is no change as regards Britten Norman. Unfortunately, I cannot tell the House without notice whether the large amounts of money that have been spent to try to influence the Government by public advertisement will or will not count as a business expense. I am grateful to the hon. Gentleman for alerting me to that possibility.

Dr. J. Dickson Mahon

Will my right hon. Friend tell us a little more about the Bill? Will he confirm that representations have been made to him by all the managements, by most of the workers, if not all of the trade unions, and by all the MPs who came to see him from almost every party in the House asking for decentralisation of the industry and concede that that is in the Bill?

Mr. Benn

As I indicated before—and I am glad that my hon. Friend has mentioned it now—we do not wish to establish a highly centralised control of either shipbuilding or the aircraft industry. These points have been made to me in representations and I think that I have been able to satisfy those people who have put them to me. I think that my hon. Friend will agree that, whatever view might have been held initially by people opposed to public ownership, there is general agreement that, given that this is the policy, the sooner we can proceed with it the better.

Mr. Pattie

The Secretary of State has said that no company will be penalised as a result of action taken in the normal course of business. Does he mean that the money committed by airframe companies to existing ongoing projects will be repaid in full and in lump sums?

Mr. Benn

I think that the hon. Gentleman will want to look at the statement. It is obviously very carefully drafted. On-going business in the normal course of business will not have been to the disadvantage of the firms concerned. Of course there has to be special provision to see that there has not been dissipation of assets. Whereas past aid is not taken into account for reasons that will be apparent, expectations of future aid cannot be held to justify a claim against the Government based on aid that the company might expect from Government.

Mr. Russell Kerr

Will my right hon. Friend tell the House how many thousands of millions of pounds have gone to the succour of the private aviation industry since 1950?

Mr. Benn

Of course, enormous sums of public money have gone in to the industry. The figure for the shipbuilding industry is £169 million. For the aircraft industry the figure is larger. Some of the money has gone to projects like the Concorde, that project being initiated by the Government of the day.

Mr. Peyton

As the right hon. Gentleman was so free with those figures, will he make some special effort to overcome this unusual shyness of his and explain to the House how much the Bill will cost? It is quite without precedent that a nationalisation proposal has been announced without declaring some estimate of the cost.

Mr. Benn

Obviously the Government have estimates that they have made as best they can of the likely cost. The House will fully understand that where the Government might find themselves I say "might", but we hope to get a valuation by agreement—engaged in arbitration it would not necessarily be sensible to give to others the figures in advance.

Mr. R. C. Mitchell

As this is a very important statement which will affect the lives of several thousands of workers in my constituency and in many other constituencies, will my right hon. Friend ensure that if necessary special arrangements are made so that the whole of the statement and all the details that he has given are available in the Vote Office as the Official Report is not available?

Mr. Benn

I have specially provided that copies will be in the Vote Office. If my hon. Friend has any reason to believe that an adequate number of copies is not available I shall see that further copies are rolled off and made available. In view of what my hon. Friend has said I shall make a special effort to see that copies are available in the plants and areas where shipbuilding workers are concerned.

Mr. Hordern

Will the right hon. Gentleman say whether there is any precedent for a date long since past being used as a basis of compensation for nationalisation? Why cannot the right hon. Gentleman give the figures for the asset values of the companies concerned? The figures are already generally known and are adjusted on an almost daily basis. Why cannot the right hon. Gentleman give the House an accurate assessment now that is based on what are known to be the daily asset values of these companies com- pared with the market price of the shares in February? Does he not accept that any compensation should be based more nearly on the assets of the company and not on the market price at any particular date, however selected, which was largely due to his actions and inactions when he had responsibility.

Mr. Benn

I am advised that to attempt a valuation on behalf of the owners of the companies and to put it forward as a Government view would not be sensible or practical. Nor would it be my task to seek to represent for the companies the valuation concerned. The iron and steel industry nationalisation provides some precedent for what has been done today. I thought it right and proper that the reference period should lie before the first election date on which the Labour Government were returned to power so that the charge could not be laid—and it might have been laid—that the values had been affected by the election of a Government committed to the public ownership of these two industries.

Mr. Mike Thomas

Does my right hon. Friend accept my good wishes from Tyneside? Does he appreciate that the people of Tyneside, including my constituents, will welcome the Bill and will be delighted that two items of nationalisation are to be combined if that will mean expedition? Does my right hon. Friend accept that my constituents are prepared to see fair compensation but not more? Does he agree that Conservative hon. Members seem extremely profligate with public funds when they argue that public compensation should be considerably larger than it may be as a result of these proposals?

Mr. Benn

I have always made it clear that fair compensation is the right policy for us to pursue. I have been pressed on this on a number of occasions. I would not have recommended the scheme if I did not think that what was being proposed was fair. Having said that, there has been pressure from the trade unions concerned—notably the General and Municipal Workers' Union—for an assessment board before which the trade unions could make their representations on the valuation of the shares. I have not accepted that proposal. As my hon. Friend will have noticed in my statement, I said that representations from anybody could he made to me and that I would be in a position to pass them on to the arbitrator. That would include representations from the unions.

Mr. Teddy Taylor

Will the right hon. Gentleman say whether shipbuilding will expand or contract under public ownership? Does he agree that the terms of compensation that he has set out represent bare-faced robbery, observing that the six-month period that he has chosen is the time during which market prices were distorted by dividend restraint?

Mr. Benn

As regards the hon. Gentleman's latter point. I do not believe that that is the case. We have looked carefully at the Financial Times index and the industrial index. There has been a fall over the period as between the reference period and the present period. There has, however, been some speculation in this stock on the advice in some newspapers that the terms of compensation might be on a different basis. On the hon. Gentleman's first point, I certainly hope that proper investment and better organisation and greater industrial democracy will mean that in future the industry will do better than it has done over the past 25 years.

Following is the information:

PUBLIC OWNERSHIP OF SHIPBUILDING, SHIPREPAIR AND SLOW SPEED DIESEL MARINE ENGINE INDUSTRIES

WRITTEN STATEMENT BY THE SECRETARY OF STATE FOR INDUSTRY

The scope of public ownership

  1. 1. The Government has decided that the objectives of public ownership will be achieved by nationalising companies incorporated in Great Britain which meet the following definitions. A list of the companies which meet each of the definitions is annexed to this statement.
    1. (i) Shipbuilding Companies. Companies which on 31st July 1974 were entitled, either alone or together with another company which was then a member of the same group of companies, to an interest in possession in a shipyard which on that date was being used for the construction of ships and in which in the period of three years ending on that date were completed ships the total tonnage of which, when aggregated with the total tonnage of ships completed in the same period in shipyards in which any other company in the same group was entitled to an interest in possession, exceeded either:—
      1. (a) 750 standard displacement tons in respect of warships, or
      2. (b) 15,000 gross tons in respect of other ships, or
        3. 1155
      3. (c) 500 standard displacement tons in respect of warships and 10,000 gross tons in respect of other ships.
    2. (ii) Shiprepair Companies. Companies which:—
      1. (a) on 31st July 1974 were engaged in the business of repairing, refitting, converting or maintaining ships; and
      2. (b) on that date were entitled to an interest in possession in a dry-dock or graving-dock; and
      3. (c) whose turnover for the relevant financial year when aggregated with the turnover for the relevant financial year of all their subsidiaries or fellow subsidiaries engaged in the business referred to in sub-paragraph (a) exceeded £3.4 million. For this purpose relevant financial year in relation to a company means that one of the company's financial years, within the meaning of the Companies Act 1948, for which accounts were last laid before it in general meeting before 31st July 1974.
    3. (iii) Slow Speed Diesel Marine Engine Manufacturers. Companies which on 31st July 1974 were engaged in the business of manufacturing diesel engines:—
      1. (a) designed for use for the main propulsion of ships; and
      2. (b) designed to deliver continuously at a crankshaft speed of less than 160 revolutions per minute, a power output greater than 4,000 horsepower as measured under the operating conditions specified in the British Standard Specifications published on 19th February 1958 under the number BS649: 1958 (specification for the performance of reciprocating compression—ignition (diesel) engines, utilising liquid fuel only, for general purposes).
    4. (iv) Training Companies. A company which on 31st July 1974:—
      1. (a) was engaged in the business of training persons in any of the skills required for the repairing, refitting, conversion, maintenance and construction of ships; and
      2. (b) was a member of a group of companies of which another member fulfilled the criteria in paragraph i or ii above.

Effect of public ownership on companies

  1. 2. The Bill will provide for the establishment of a public corporation, to be called British Shipbuilders, in which the shares of the companies to be nationalised will be vested. This means that the companies will be nationalised as going concerns.

Organisation under public ownership

  1. 3. The Secretary of State will appoint the Chairman and other members of the public corporation numbering between seven and twenty. After the Second Reading of the Bill it is intended to set up an Organising Committee consisting of the Chairman Designate and a nucleus of other members of the new Corporation which will work in close consultation with the Government, the managements 1156 and the trade unions in preparing detailed plans for vesting and for the initial organisation.
  2. 4. It will be for the Organising Committee and the Corporation to propose the detailed structure of the organisation in close consultation with the representatives of those who work in the industry and with its customers. The Corporation will be able to adapt its organisation in response to changing conditions. At the same time the Government and Parliament must be concerned with the main features of the organisation of a big publicly owned industry. The legislation will therefore require the Corporation to submit from time to time to the Secretary of State reports on the broad structure of its organisation after full consultations with the representative organisations of those working in the industry. These reports will be laid before Parliament. The Secretary of State's approval will be necessary to implement the proposed initial organisation or any subsequent major change. The Secretary of State will also have powers to give the Corporation specific directions on the main features of its organisation. The Government feels sure that the Organising Committee and the Corporation will give full weight to the view of many on both sides of industry that individual shipyards should be given as much responsibility as is consistent with the discharge of the Corporation's functions.
  3. 5. The headquarters of the Corporation will be in an assisted area with a tradition of shipbuilding.

Industrial democracy

  1. 6. The Government attaches great importance to developing industrial democracy in the shipbuilding, shiprepair and marine engine industries. The comments on the Government's discussion paper of 31st July 1974 have shown that those working in the industry have important and constructive ideas on how this development can be brought about. The flexible arrangements for the organisation of British Shipbuilders will provide scope for the natural and organic growth of industrial democracy taking into account the views and proposals put forward by management, workers and trade unions concerned. The Government will consider provisions in the Bill to encourage and assist this growth.

Powers and duties

  1. 7. The main duty of the Corporation will be to promote the efficient and economical design, development, production, sale, repair and maintenance of ships and slow speed diesel marine engines and to promote related research using the skills and talents of all those working in the industry to the full. The Corporation will also be required to have full regard to the essential needs of national defence.
  2. 8. The Secretary of State will have power to give the Corporation directions, to approve annually its corporate plan, its capital investment and reseach and development programmes and its annual budgets, to monitor progress against annual budgets and to obtain information.
  3. 9. To allow flexibility for the future, provision will be made for some of the main powers and duties of the Corporation and 1157 the powers of the Secretary of State to be capable of amendment by statutory instrument subject to affirmative resolution in both Houses of Parliament.
  4. 10. Finance will be provided by loans on normal terms from the National Loans Fund and by public dividend capital. The Secretary of State will set a financial objective for the Corporation.
  5. 11. The Corporation will not be restricted by its formal powers from undertaking activities which would utilise its resources (including the skills of its workers) in the national interest and allow it to take favourable opportunities to adapt efficiently to changing economic circumstances. The Corporation will therefore have wide powers to diversify its activities, subject to the approval of the Secretary of State, where this does not conflict with its main duties.
  6. 12. The Corporation will have power subject to the Secretary of State's consent to acquire by agreement shareholdings in other companies whether at home or overseas and to enter into partnerships. The Corporation will also have the necessary powers to provide technical assistance overseas.
  7. 13. It will remain Government policy to allow shipowners to build and repair at home or abroad according to their commercial judgment.

ANNEX

LIST OF COMPANIES MEETING THE DEFINITIONS

I. Shipbuilding Companies

  1. 1. The Swan Hunter Group Limited's shipbuilding companies, which comprise:
  2. Swan Hunter Shipbuilders Limited.
  3. Smith's Dock Company Ltd.
  4. The Goole Shipbuilding & Repairing Co. Ltd.
  5. Clelands Shipbuilding Company Ltd. (now a wholly-owned subsidiary of The Goole Shipbuilding & Repairing Co. Ltd.).
  6. 2. Vickers Shipbuilding Group Limited.
  7. 3. Scott Lithgow Limited's shipbuilding companies, which comprise:
  8. Lithgow's Limited.
  9. Scott's Shipbuilding Company Limited.
  10. Ferguson Brothers (Port Glasgow) Limited.
  11. Scott and Sons (Bowling) Limited.
  12. 4. Cammell Laird Shipbuilders Limited (50 per cent. of the ordinary shares owned by Government).
  13. 5. Yarrow (Shipbuilders) Limited.
  14. 6. Vosper Thorneycroft Limited.
  15. 7. Austin & Pickersgill Limited.
  16. 8. Robb Caledon Shipbuilders Limited.
  17. 9. Drypool Group Limited.
  18. 10. Brooke Marine Limited.
  19. 11. Hall Russell & Company Ltd.
  20. 12. Sunderland Shipbuilders Limited (100 per cent. Government owned).
    21. 1158
  21. 13. Govan Shipbuilders Limited (100 per cent. Government owned).
  22. 14. Appledore Shipbuilders Limited (100 per cent. Government owned).

II. Shiprepair Companies

  1. 15. The Swan Hunter Group Limited's ship-repair companies, which comprise:
  2. Swan Hunter Shiprepairers Tyne Limited.
  3. The Wallsend Slipway and Engineering Company Ltd.
  4. The Grangemouth Dockyard Company Limited (a wholly-owned subsidiary of Smith's Dock Company Ltd., listed above)
  5. 16. The P. & O. Steam Navigation Company's shiprepairing companies which have an interest in the possession of a dry dock:
  6. R. & H. Green and Silley Weir Ltd.
  7. Silley Cox & Company Ltd. (a wholly-owned subsidiary of R. & H. Green and Silley Weir Ltd).
  8. 17. The Humber Graving Dock and Engineering Company Ltd.
  9. 18. North East Coast Shiprepairers Ltd (100 per cent. Government owned).
  10. 19. The Laird Group Limited's shiprepairing companies, which comprise:
  11. J. B. Howie Ltd., trading as C.B.S. Engineering Company Western Ship-repairers Limited.
  12. 20. Bristol Channel Ship Repairers Limited.
  13. 21. The London Graving Dock Company Ltd.
  14. 22. Scott Lithgow Drydocks Limited.

III Slow Speed Diesel Marine Engine Manufacturers

  1. 23. Scotts' Engineering Company Limited.
  2. 24. Doxford Engines Limited (a wholly-owned subsidiary of Sunderland Shipbuilders Limited, at 12 above).
  3. 25. John G Kincaid & Company Limited.
  4. 26. George Clark & N.E.M. Limited.
  5. 27. Hawthorn Leslie (Engineers) Ltd.
  6. 28. Barclay, Curie & Company Limited

IV Training Companies

  1. 29. Swan Hunter Training and Safety Company Limited.
  2. 30. Yarrow (Training) Limited.
  3. 31. The Scott Lithgow framing Centre Limited.

Safeguarding provisions for the Aircraft, Shipbuilding, Shiprepairing and Marine Engineering Industries

The Bill will contain provisions to establish two corporate undertakings to which the securities of companies in lists A and B respectively will be transferred on a date to be specified as the vesting date in the Bill. The effect of the provision outlined in paragraph 6 below is that the securities of a company other than one in lists A or B may be transferred to the relevant Corporation and they may be transferred at a date later than the date specified in the Bill. The following provisions apply not only to companies whose securities are transferred to the relevant undertaking but also to the wholly owned subsidiaries of those companies which subsidiaries effectively come into public ownership when the securities of those holding companies are transferred to the relevant Corporation. The "relevant date" where occurring in paragraphs 1 to 11 is 31st July 1974 for those companies in list A and 4th November 1974 for those companies in list B. The "relevant date" where occurring in paragraphs 12 to 19 is 17th March 1975 for all the companies in lists A and B.

The Corporations' Power to Disclaim Leases or Agreements

1. The Bill will contain provision enabling the relevant Corporation within 6 months of the date of transfer of a company coming into public ownership, to direct the company to disclaim any lease or agreement made or varied on or after the relevant date by the company where it considers that the making of the agreement or its variation was not reasonably necessary for the business of that company or imprudent regard being had in either case to the circumstances at the time and, except where there is a reference to arbitration in accordance with paragraph 2 below, such disclaimer will become effective two months after the other parties to the agreement or lease have been notified of it.

2. It will be provided that any person who is party to the lease or agreement which is subject to a disclaimer may, within two months, refer the matter to arbitration under the Bill, and the tribunal will confirm or revoke the disclaimer. If the disclaimer is confirmed, it will become effective at the date of its confirmation by the tribunal. The tribunal will also have exclusive power to determine any claims resulting from the confirmation of any disclaimer referred to it, with respect to the period before the disclaimer becomes effective.

3. These powers will not apply where the Secretary of State has approved in writing the making or variation of the lease or agreement, whether before or after its making or variation.

Termination of Rights to Acquire Shares or Appoint Directors

4. The Bill will contain provision such that an agreement with a company coming into public ownership will, in so far as it entitles another person to acquire securities in the company or to appoint a director, cease to have effect as from the date of transfer of that company. The agreement will otherwise remain effective so that, if the agreement also provides for the lending of money to the company, such money will remain repayable in accordance with the terms of the agreement.

5. Any person who suffers loss by reason of the termination of a right to acquire shares in a company or to appoint a director will be entitled within 12 months of the date of transfer of the company to claim compensation from the revelant Corporation the amount of which will, in default of agreement, be determined by arbitration. This right to compensation will not apply where the right in question is conferred by an agreement made on or after the relevant date without the approval in writing of the Secretary of State. Nor will it apply where the right in question arises from the holding of securities which vest in the relevant Corporation since the general compensation provisions of the Bill will apply in the case of such securities.

Power of Secretary of State to Amend List of Companies to he Taken into Public Ownership

6. The Bill will contain provisions enabling the Secretary of State, up to three months after the date specified as the vesting date, to take steps to acquire the securities of a company not included in List A or List B below as though it had been originally included, if:

  1. (i) the company in question has acquired rights of ownership in or to the user of the whole or a substantial or essential part of a works which, on or after the relevant date, were owned or operated by a company included in List A or List B below or by a subsidiary of such a company; or
  2. (ii) the company in question was, on the relevant date a wholly owned subsidiary of a company included in List A or List B below but had subsequently ceased to be so.

The above provisions will not apply where the Secretary of State has approved in writing, either before or after they have taken place, all the transactions resulting directly or indirectly in the changes outlined above. In addition, any company which has acquired a works in the circumstances outlined in (i) above, will be prohibited from disposing of that works after the Bill receives Royal Assent until three months after the date specified as the vesting date or until any question of the subsequent acquisition of that company has been resolved.

7. As a corollary, the Bill will also contain provisions enabling the Secretary of State, at any time before the date specified as the vesting date, to take steps to prevent any company included in List A or List B below from coming into public ownership if that company has ceased to own or operate the whole or a substantial part of any works owned or operated by it on the relevant date or if one of its subsidiaries has ceased to own or operate the whole or a substantial part of any works owned or operated by that subsidiary on the relevant date.

8. It will be provided that the company in question may, within one month, challenge the Secretary of State's intention on the grounds that the conditions in paragraph 6 or 7 above are not fulfilled. Where agreement is not reached between the Secretary of State and the company, the matter will be resolved by arbitration under the Bill.

The Corporations' Power to Reclaim Rights

9. The Bill will contain provisions enabling the Secretary of State, up to three months after the date of transfer of a company, where he considers that it is in the public interest, to take steps to cause the transfer into public ownership of any rights of ownership in or rights in respect of the user of any works, or any invention or design whether or not subject to statutory protection which the company may have transferred or granted to any person after the relevant date and before the date of transfer of the company.

10. It will be provided that any person whose rights are sought to be acquired under paragraph 9 above may, within one month, challenge the Secretary of State's decision. Where no agreement is reached, the question will be settled by arbitration under the Bill. The date of transfer of the rights and the compensation therefore will be agreed between the relevant Corporation and the transferor or, failing that, will be determined by arbitration. The date of transfer of the rights will in any event not be earlier than the date specified as the vesting date.

11. These provisions will not apply where the Secretary of State has given approval in writing to the transfer or grant by the company of the rights in question, either before or after it takes place, although such approval may include conditions, including conditions empowering the relevant Corporation to reclaim the rights.

Limitation of Interest or Dividend Payments Made by Companies

12. The Bill will contain provisions defining the permitted level of interest payable after the relevant date in respect of the last complete financial year before the relevant date or any subsequent period on debenture or other loans by a company coming into public ownership in respect of any period before the date of transfer as the minimum necessary for the company to meet its obligations. No payments above the permitted levels will be allowed without the prior written approval of the Secretary of State.

13. The Bill will also provide that no dividend will be allowed to be paid after the relevant date by a company coming into public ownership in respect of any period earlier than the most recent completed financial year of the company before the relevant date.

14. Subject to paragraph 13 above the Bill will contain provisions limiting amount of dividend which may be paid in respect of any period before the date of transfer (hereinafter referred to as a "relevant financial year") to the smaller of the following two amounts:—

  1. (a) the net revenue of the company for the relevant financial year as certified by the company auditor,
  2. and
  3. (b) the total amount of dividends paid before 29th October 1974 in respect of the most recent completed financial year of the company in respect of which a final dividend was paid before the relevant date (hereinafter referred to as "the basis financial year) as adjusted in accordance with the rules set out in subparagraph (5) below or, if no final dividend has ever been paid, such amount as the Secretary of State may determine.

For this purpose—

(1) An amount shall be deemed to have been duly certified by a Company's auditor as the amount of the net revenue of the Company for any period, if the auditor has stated in writing that that amount gives a true and fair view of the net revenue for the company for the period,

(2) Any payment to members in their capacity as members out of net revenue shall be treated as a payment of dividend,

(3) Any payment of dividend made before 6th April 1973 shall be brought into account as the gross amount thereof, that is to say, the gross amount thereof before deduction of income tax and any such payment expressed to be made free of tax will be treated as a net amount paid after deduction of tax and will be grossed up accordingly,

(4) any payment of dividend made after 5th April 1973 shall be brought into account as a franked payment, that is to say, the amount brought into, account shall be the dividend when aggregated with such proportion thereof as corresponds to the rate of advance corporation tax in force at the date of payment of the dividend and

(5) the total amount of the dividends paid by a company in respect of the basis financial year shall be adjusted in proportion to—

  1. (a) the amount by which the issued share capital of the company at the end of the relevant financial year exceeds, or is less than, its issued share capital at the end of the basis financial year, and
  2. (b) any difference in the length of the relevant financial year as compared with the length of the basis financial year.

A Company's share capital at the end of the relevant financial year shall be computed by taking its share capital at the end of the basis financial year and adjusting it—

  1. (i) by adding the amount or the value of any consideration actually received in the period between the end of the basis financial year and the end of the relevant financial year for the issue of share capital or on the payment up of issued share capital, and
  2. (ii) by deducting the amount or value of any money or other assets paid or transferred by the company during the said period for the payment or redemption of any share capital,

and the amount of the company's share capital at the end of the basis financial year shall he what was then the amount of the company's paid-up share capital and of any share premium account or any other comparable account by whatever name called.

15. To the rules in paragraph 14 above there are to be the following quantifications:—

  1. (i) The rules will not apply to any payment of dividend made with the prior approval in writing of the Secretary of State or made in pursuance of an authority or recommendation contained in a resolution of the directors of the company passed on or before the relevant date, and
  2. (ii) Dividend paid in respect of any period may, where the figure at paragraph 14(a) exceeds the figure at 14(b) to the extent of that excess include dividend on cumulative preference shares in respect of an earlier period.

16. The Bill will contain provisions such that where a Company coming into public ownership makes payment without the prior written approval of the Secretary of State, which is not allowed by the rules stated in paragraphs 13 to 15 above, following a resolution of the directors passed after the relevant date and before the date of transfer, the directors party to that resolution will be made personally liable to the relevant Corporation for the amount of the payments so disallowed. Any claim by the Corporation against a company must be made within twelve months of the date of transfer and, if not settled by agreement, will be settled by arbitration under the Bill, and the tribunal will make such orders against the directors of the company in respect of their liability as it thinks fit.

Power of the Corporations to seek Compensation for Financial Losses

17. The bill will contain provisions such that, where after the relevant date and before the date of its transfer a company coming into public ownership has without the approval in writing of the Secretary of State—

  1. (a) made any payments to its members for the purpose of reducing the share capital of the company otherwise than by the redemption of any redeemable securities;
  2. (b) redeemed any securities which the company was not under any obligation to redeem before the date of transfer or made payments in respect of the redemption of any securities which exceed the minimum payments required to satisfy the rights existing on the said day of the holders of those securities
  3. (c) made any other payment to the holders of its securities (in their capacity as such) out of capital moneys, or distributed assets other than money to the holders of its securities (in their capacity as such);
  4. (d) made to the holders of any of its securities any payment by way of special dividend thereon;
  5. (e) entered into any transaction the effect of which is that property or rights of the company are transferred or granted to any person, and the consideration for such transfer or grant is received by the holders of securities of the company or any of them (in their capacity as such); or
  6. (f) being the subsidiary of another company, effected (without consideration) a transfer to that other company or a subsidiary thereof of rights of ownership in any works;
the relevant Corporation may, within 12 months of the date of transfer of the company, make application to the Arbitration Tribunal in respect of any such transaction to determine the extent of the net loss resulting to the Corporation from the transaction. The Tribunal may make such orders against the persons responsible for the transaction or benefiting from it, including the directors of the company, for payment by them to the Corporation of sums sufficient to enable the net loss to be made good.

18. The approval given by the Secretary of State for the purposes of paragraph 17 above may be given subject to conditions which may include the reduction of compensation for securities transferred to the relevant Corporation and the reduction of the total amount of dividends which may be paid in accordance with the provisions set out in paragraph 13 to 15 above.

19. Similarly, provision will be included such that, where after the relevant date and before the date of its transfer, a company coming into public ownership has, without the approval in writing of the Secretary of State—

  1. (a) made any payment to any person without consideration or for an inadequate consideration;
  2. (b) sold or disposed of any of its property or rights without consideration or for an inadequate consideration;
  3. (c) acquired any property or rights for an excessive consideration;
  4. (d) entered into or varied any agreement so as to require an excessive consideration to be paid or given by the company; or
  5. (e) entered into any other transaction of such an onerous nature as to cause a loss to or impose a liability on the company substantially exceeding any benefit accruing to the company;
and the transaction in question was not reasonably necessary for the purposes of the company or was imprudent the relevant Corporation may, within 12 months of the date of transfer of that company, make application to the Arbitration Tribunal in respect of any such transaction to determine the extent of the net loss resulting to the Corporation from the transaction. The Tribunal may make such orders against the directors of the company and the persons who were parties to the transaction, having regard to the extent to which those persons were respectively responsible for the transaction or benefiting from it, for the payment by them to the Corporation of sums sufficient to enable the net loss to be made good.

LIST A

LIST B