HC Deb 22 October 1975 vol 898 cc622-34

Lords Amendment No. 26, in page 9, line 11, at beginning insert: Subject to subsection (1A) of this section".

Mr. Kaufman

I beg to move, That this House doth disagree with the Lords in the said amendment.

Mr. Speaker

With this we are taking the following Lords Amendments:

No. 27, in page 9, line 13, after "or" insert: in the circumstances described in subsection (1A) of this section". No. 28, in page 9, line 22, at end insert: (1A) The circumstances referred to in subsection (1) of this section are that the Board has applied to the Secretary of State for a general authority for one of its subsidiaries to make a series of acquisitions of the share capital of specified bodies corporate, or bodies corporate of a specified class, some or all of which acquisitions would entitle the Board to exercise or control the exercise of 30 per cent. or more of the votes at any general meeting of the respective bodies corporate; provided that in the case of no such acquisition shall the value of the consideration exceed £250,000, nor would the total value in the series of acquisitions exceed £10,000,000.

Mr. Kaufman

The Government cannot accept that it is right to limit the Secretary of State's power to give general authorities for the acquisition of shareholdings under Clause 9. The Government accepted on Report a point which had been discussed in Committee, namely, that the requirement for ministerial approval for acquisitions of shares costing more than £10 million or where more than 30 per cent. of the equity was involved, should be extended from acquisitions by the National Enterprise Board and its wholly-owned subsidiaries to include all the Board's subsidiaries. This widened the ambit of control in a way which brought in the business activities of companies with substantial outside shareholders. To avoid a pointless extension of Government oversight resulting from the automatic operation of these provisions, the Government simultaneously amended the Bill to provide that the Secretary of State should have the power to give general authorities.

In making this second amendment the Government had primarily in mind the possibility that the wide operation of the 30 per cent. rule would involve the Secretary of State in approving relatively minor acquisitions, and in particular acquisitions by substantial companies in which the NEB was by no means the only shareholder.

Such companies, and especially companies of the size of British Leyland, not infrequently make acquisitions and disposals in the normal course of business. The bureaucracy involved in obtaining the Secretary of State's permission for all these acquisitions would cause needless delay and cost, and blunt the entrepreneurial outlook which the Government hope that the Board will be able to generate. It is for this reason that the Government introduced the power to give general authorities to cover particular categories of acquisitions and avoid the need for each acquisition to be vetted individually.

Categories which might reasonably qualify for consideration for general authorities include minor acquisitions of less than certain value, acquisitions of private companies which have been negotiated by agreement with the existing owners where some higher limit would probably be right, acquisitions of sales outlets and other necessary facilities overseas, and acquisitions in pursuance of the Board's reorganisation function where the Government have already agreed to fairly specific proposals relating to reorganisation in a particular sector.

The House will recognise that the amendments we are discussing cover only some of these circumstances in which the use of a general authority might be desirable from everybody's point of view. There are also other circumstances in which a general authority might reasonably be exercised. For example, it might be ready to consider a case for a general authority for a single company rather than a category of companies. This could arise where the outside holding was high and where we were persuaded that detailed Government control of each acquisition might adversely affect the interests of the private shareholders.

I am also mindful that the Bill requires the Board to seek the Secretary of State's approval if the value of the consideration for any acquisition together with the value of any consideration paid for share capital previously acquired will exceed £10 million. This means that the Board has to come to the Secretary of State for every further purchase of shares in one company once the £10 million mark has been reached, however small.

We should want to avoid such bureaucracy by the general consent arrangements. The fact is that, unless we build an elaborate legislative edifice, it is impossible to cover every eventuality.

It is against this background that I ask the House to consider these amendments. I hope that I have made clear the many ways in which the power of the Secretary of State to issue a general authority may be used to avoid bureaucracy and unnecessary limitation of the freedom of the NEB and its subsidiaries to behave commercially. I have also made clear that even without a power to grant general authorities the Secretary of State is given unfettered discretion by this clause.

The question at issue is whether in exercising this discretion the Secretary of State should be obliged to follow unnecessary administrative formalities and in his turn oblige the Board and its subsidiaries to do the same.

Mr. Michael Marshall

I listened with care to what the Under-Secretary said, because the outline he gave is important as we are at last beginning to get down to some of the detailed work which many of us hoped we could do tonight. There is no doubt that many parts of the Bill left the Committee stage and this House in an ill-formed and ill-digested state.

I shall put into perspective the clauses that we are discussing. The Under-Secretary believes that the House of Lords should be looked at in perspective. If that is so he should pay tribute to much of the work that has been done in another place in trying to sort out many of the problems that those hon. Members who served on the Committee know were left over.

In this set of amendments this is clearly illustrated. I do not in any way dissent from the way in which the Under-Secretary outlined the progression of the Government's amendments, but I could not help feeling that he was somewhat bland, even by his own bland standards, in the way he read somewhat quickly over the more difficult passages.

I should like to highlight one or two of the problems that remain to be dealt with by this House. First, it is worth recalling that the origin of this part of the Bill stems from the original White Paper, "The Regeneration of British Industry". It stems specifically from the undertaking that parliamentary control should be exercised on the lines of Section 8 of the Industry Act 1972. Hon. Members will recall that that Act provided for single acquisition which had a £5 million limit. Subsequently the Government felt that they had to depart from that figure and it was increased to £10 million. In addition, we moved some way from the notion of parliamentary control because there was the correspondence which my hon. Friend the Member for Henley (Mr. Heseltine) had with the Prime Minister, which sought further clarification. It became obvious as we looked more closely at this part of the Bill that if we opened up the whole acquisition area and spoke about limits and general consents, we would move into an area which was difficult to define but essential to have clarified.

The Prime Minister told my hon. Friend that the matter would be clarified in Committee and that, in effect, all would be made plain. I regret to say that, like a number of other assurances by the Prime Minister, this one was not put into practice. Right throughout the proceedings on this Bill, both here and in another place, we have had all these uncertainties about how we are to draw the line in this area.

The other place has been more active in this matter in recent weeks than we have, and this difficulty was accepted by both sides, including the noble Lord, Lord Beswick, who took a number of opinions and opportunities to try to get a further rationalisation of many of the doubts we had expressed in Committee. This is why I said that die Undersecretary of State has simply fallen back on stonewalling tactics in suggesting that this area is too complex to give us any further opportunities to legislate.

The problem really has three parts. The first is, of course, that if we reject this Lords amendment it is plain that the Secretary of State will be able to disregard the requirement for his consent to be given whenever the Board or one of its subsidiaries proposes to acquire a controlling interest, no matter what that acquisition may cost. It is argued that such a power is unlikely to be invoked, but that is not a point which we as law makers can simply take as read.

There will inevitably be cases where the Secretary of State gives a general authority, and we are now expected to hand a blank cheque to the National Enterprise Board or its subsidiaries to operate within that general authority within the terms of £250,000 for individual acquisitions or the £10 million ceiling.

This brings me to my second major concern. What would "general authority" mean in practice? Lord Beswick properly highlighted this problem in the other place when he described, for example, acquisitions such as those which might apply to British Leyland or Rolls-Royce, since such companies are of the kind for which retail outlets would need to be acquired and perhaps overseas selling agencies set up. The Under-Secretary of State was helpful in giving some examples just now. He mentioned minor acquisitions and acquisitions of private companies by agreement. He admitted that his list covered only some of the circumstances. It seems to me, therefore, that his list is open ended.

The Government accepted this dilemma as recently as 5th August in another place when, on Report, Lord Beswick said: I must confess that I think it wrong if this can be construed as meaning that a company may by general authority invest £10 million in each of a number of different sales outlets. I will look at that aspect again."—[Official Report, House of Lords, 5th August 1975; Vol. 363, c. 1570.] That was a clear statement. It led the other place to consider the matter again on 16th October, in a way which I shall describe.

The third basic problem which still applies is that the Government were unable to give any adequate assurance to another place that they had overcome precisely the difficulty which Lord Beswick himself had underlined on Report. The only assurance which Lord Beswick was able to give on 16th October, which is crucial to the way we should regard the Government's attitude towards the future of the Bill and the way we should expect the NEB to operate, was: It is necessary to recognise that the proper operation of legislation depends upon observance by the Government and the National Enterprise Board of the spirit of the legislative provisions as interpreted by the government and Parliament, and subject to the sanction of the ability of Parliament to call the responsible Minister to account for the discharge of his responsibility"—[Official Report, House of Lords, 16th October 1975; Vol. 364, c. 1030.] That was the only specific undertaking which the Government were able to give on 16th October. I fear that what we have heard tonight does not take us much further forward. What is disappointing about the Minister's case is that he has not been able to show a little willingness.

10.30 p.m.

What is it that the amendments seek to do? They specifically invite the House to specify whether we think we can come up with a better set of numbers. The amendment refers to £250,000 for individual acquisitions and a £10 million ceiling. It was accepted by the Conservative spokesman that they were figures which should be matters for discussion and perhaps for amendment. Apparently the Government have not felt able to consider this argument or to get down to the detailed figures. We are told that the matter becomes too complex if we try to legislate. Surely there must have been consultations with Lord Ryder and the NEB.

I hope that the Minister will feel able to tell us a little more along the lines I have suggested. We are being asked to take a great deal on trust in the way in which this general consent can apply in practice. If the Government feel, even at this stage, that they have something to say about the figures I have quoted I hope that they will do so. If they have nothing to say, the whole approach which we have seen to these amendments illustrate once more only what many of us feared all the way through the earlier proceedings—namely, that much of the Bill is ill-digested and ill thought through.

The nub of the argument was put extremely well in another place by Lord Drumalbyn. On 16th October he said: It does not make sense to stipulate the circumstances…".—[Official Report, House of Lords, 16th October 1975; Vol. 364, c 1028.]

Mr. Speaker

Order. The rule is that the hon. Gentleman can only quote a Minister. If it is not a Minister the hon. Gentleman can paraphrase, but not quote. Quotations must be confined to the words of Ministers.

Mr. Marshall

Lord Drumalbyn said that it did not make sense to stipulate the circumstances under which the Board had to obtain the Secretary of State's permission and then in the same breath to say that that requirement could be waived under any circumstances without further recourse to the House. That seems to be a valid and fair worry which may well be felt on both sides of the House. It is not a matter which we have been able to disentangle.

I am willing at this stage to withhold further judgment in the light of what the Minister may wish to say on reconsidering the matter. I cannot help concluding without pointing out once more that we have a set of amendments from another place which clearly represent an attempt to tidy up a complex and difficult area. It is right that we should put on the record that some of us appreciate the work which was done on both sides in another place.

Mr. Stainton

On the whole, I think that the amendment has much to commend it. It will lead to a great deal more smoothness in the operation of the Board. Having sat through the Committee proceedings I appreciate that it may sound naive to ask the question, but what is the procedure in reverse? What about divesting? We are here preoccupied with acquisition, but will the Minister make the position clear on divesting? Organisations such as British Leylands trade in subsidiaries of this nature on a day-to-day basis—I think those were the very words the Minister used. That must involve disposal as well as acquisition. The emphasis is put on acquiring but perhaps the Minister will explain what happens on disposal.

Mr. Hal Miller

When the Minister replies to the debate perhaps he will be kind enough to be a little clearer about the categories of companies which might be acquired as subsidiaries within the ambit of this general consent. Yesterday during Question Time I raised the position of a component maker in my constituency who fears that he will be bought up by British Leyland with money provided by the public. I was not given a very clear answer. I was listening carefully to the categories enumerated by the Minister. He did not mention such suppliers but on the other hand he did not exclude them. I should be grateful to know whether it is the Government's intention that under the Bill there will be some guidelines such as we were discussing earlier or whether it is to be done in some other way. The Minister owes the House a rather more explicit explanation than we have so far had. Even the other place adjudged this question of permitting the Board and its subsidiaries to operate commercially to be difficult. I am not trying to circumscribe their freedom of action but I should like it to be clear what it comprises and whether there will be guidelines for us.

Mr. Kaufman

By leave of the House. I fear that I cannot anticipate what form the guidelines will take and what will be contained within them. Assurances have been given and the House will have the opportunity to consider them when they are produced. It would be wrong of me to anticipate the guidelines tonight. As for the category of company involved, again it will depend upon how the NEB operates. We will not lay down that it shall or shall not go into component manufacture. What kind of NEB would it be if we laid down the categories it was prohibited from going into before the Board even came into existence?

The hon. Member for Arundel (Mr. Marshall) seems to have been under a misunderstanding. If he looks at paragraph 40 of the White Paper, "The Regeneration of British Industry", from which the Bill stems, he will see that we do not talk of parliamentary control but about Government control. The correspondence between the hon. Member for Henley (Mr. Heseltine) and the Prime Minister, to which reference has been made, was about the difference between the £5 million in the White Paper and the £10 million in the Bill. It did not extend to the question the hon. Gentleman has raised.

Mr. Hal Miller

May I take it that the guidelines will apply to clauses other than that dealing with functions and purposes? Will they extend through the Bill?

Mr. Kaufman

The hon. Gentleman is seeking to draw me on something on which it is not possible to draw me. The guidelines will be made available to the House, as I have assured hon. Members on several occasions. When they are the House will have the answers to the questions put. I cannot answer the hon. Gentleman's questions before the guidelines are available.

Mr. Stainton

But there is no requirement on the Secretary of State to lay such guidelines. That does not come within the Bill. We can assume that they cannot be raised as a matter of order in this Chamber. How do we stand on the guidelines then? Perhaps the Minister could co-operate. I am still waiting patiently for the answer to my question on disposal as opposed to acquisition.

Mr. Kaufman

There is not provision for disposals in the Bill parallel to acquisitions. The matter is not dealt with in that way.

I repeat that the Government have given an assurance that the guidelines will be made available to the House.

Mr. Giles Shaw (Pudsey)

It is a gross abuse of the House that we should be informed that there will possibly be guidelines covering a section of the Bill but no guidelines covering the kind of point raised by my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller). We spent hours in Committee trying to elicit from an extremely reluctant Government any concept of planning structure strategy or thinking in the operations of the Board. The most we got was the belief that there might be guidelines available. I am sure that the Under-Secretary would agree that the guidelines should be made available, should be comprehensive, and should be brought to the House as soon as possible.

Mr. Kaufman

I made it clear to the House on Third Reading that there would be guidelines. My hon. Friend the Member for Liverpool, Walton (Mr. Heffer) made it clear that I had made that clear to the House. If the hon. Gentleman did not take the point, I shall certainly make it clear now. I cannot anticipate what form those guidelines will take. After all, the Bill has been mucked about by the House of Lords. Apart from the necessity for consultation, how can we finalise guidelines for an organisation whose constitution has been lacerated and torn to pieces by another place?

We must have a completed Act of Parliament under which the Board operates before it is sensible to complete guidelines for it. I assure the House that the guidelines will be made available to it. That they will cover several thousand points which hon. Members wish to raise in minute detail, I cannot promise, but they will be made available to the House.

Mr. Tom King

We have had so many promises of guidelines that we do not take the hon. Gentleman's promises with much more assurance than we took the previous ones from the right hon. Member for Bristol, South-East (Mr. Benn). The Under-Secretary might have come clean. We know what is going on. The Government are only half way through their discussion. Whether they will produce any guidelines, God only knows. To suggest that the Government have been waiting because they did not know what the Bill would look like is rubbish, because they have been having informal discussions and we know that the organising committee of the NEB is already in operation.

This is the most inadequate answer that we have had in the whole debate. The hon. Gentleman may have decided to sit down rather quickly because this is a rather technical subject and difficult to answer. He failed to answer the point about disposals.

Mr. Kaufman

I was giving way.

Mr. King

I understood that the hon. Gentleman had sat down. If the Minister has more to say, I shall gladly wait to hear what it is.

Mr. Fairbairn

There should not be a necessity for an Act of Parliament of this importance, length and consideration to have guidelines. Acts of Parliament are meant to mean what they say. It should not require a Minister to tell us what the words that we pass as law are supposed to mean. The Government should get it right.

Mr. Kaufman

I am now in a considerable quandary. One half of the Opposition is nagging me for guidelines, while the more intellectually inclined half of the Opposition says that there should not be any. We have made it clear that we intend to make guidelines available to the House. If the hon. Member for Bridgwater (Mr. King) says that my promises are worth nothing, there is little point in his asking me to make promises. There is a logical inconsistency there which I cannot seek to penetrate at this hour of night. Nor am I prepared to be patronised by the hon. Gentleman. I recognise my considerable inadequacies which are known to the entire membership of the House of Commons. My failure to understand technical details is so notorious that I do not need it to be drummed into me by the hon Gentleman in this way.

10.45 p.m.

I therefore repeat that there will be guidelines, that they will be made available to the House of Commons, that consultations will take place and that when those consultations are completed the guidelines will be made available to the House of Commons.

Mr. Tom King

If that is the end of the Minister's contribution it has not taken us very much further than we were when I thought he had finished before. Will these guidelines be debatable in the House? I am prepared to give way to the Minister to enable him to tell us. He does not rise and he appears to have no knowledge as to whether they will be debatable. This is a crucial aspect.

The second point which is not clear is whether the NEB has any power to dispose. We then come to the main point of the amendments. Protection is given under a general authority under Clause 9, a protection which has been much advertised by the Prime Minister. He has said that these matters will be subject to the control of the Secretary of State, but that is a hollow protection because where the general authority is given it totally bypasses any of the limitations and controls. In their amendments their Lordships were seeking to establish some measure of control under any general authority that is given.

The Minister has the nerve to say that the White Paper does not talk about parliamentary control—and that comes from a party which used to make great play about the need for parliamentary sovereignty. He talks about control by the Government, but he will appreciate that this involves one of the major criticisms of the Bill. It gives a total discretion to the Secretary of State and a lack of effective control by Parliament. In these circumstances we are extremely unhappy that these amendments should be deleted. Nevertheless the Government have imposed a guillotine on these proceedings and there is a crucial debate ahead which we are determined to reach. Under protest, therefore, my right hon. and hon. Friends will not vote against the Government on this amendment, although we deplore the inadequacy of the Government's answer.

Question put and agreed to.

Lords Amendments Nos. 27 and 28 disagreed to.

Subsequent Lords amendments agreed to.

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