§ Amendments made: No. 123, in page 49, line 25, leave out 'this' and insert 'that'.
§ No. 324, in page 50, leave out lines 32 to 34.—[Mr. Les Huckfield.]
§ Mr, Teddy Taylor
I beg to move Amendment No. 290, in page 50, line 32, after 'means' insert:'whichever of the days hereinafter specified the stockholders' representative may elect namely either the nearest Wednesday to the 926 15th day of each of the months in the period of 12 months beginning with March 1973 or'.
§ Mr. Deputy Speaker
With this amendment we may take Amendment No. 293, in Clause 38, page 51, line 8, leave out from 'the' to end of line 14 and insert:'fair price to pay for such securities taking into account all the circumstances of the acquired company, the base value of whose securities fall to be determined, including the future prospects and the trading record of that company and its net assets'.
§ Mr. Taylor
In Committee I made frequent attempts to improve the Bill, but whenever I did so the Minister said "We connot do that, because it breaks the precedents from the Gas Act". I became almost obsessed with the Gas Act and, therefore, studied it to see the many excellent things in it which the Minister might not have noticed and which we might be able to incorporate in the Bill.
The clause defines the base value of listed securities for compensation purposes as being determined by reference to the average quoted values on each Wednesday in the six months to Wednesday 27th February 1974. Although some concern was expressed on both sides about whether the compensation was too much or too little, everyone seemed to agree that that was a very artificial and short period for the purpose.
The object of my amendment is to provide the stockholders' representative with an election between two periods for valuation purposes, which include one longer period in place of the single six-month period specified in the Bill. Is the selection of only one period unique, or has it been done before? As far as I can see, it is almost exceptional in nationalisation measures. I can find it in no other.
There is a choice of two periods in the Transport Act 1947, the Electricity Act 1947, even in the Gas Act 1948, in the Iron and Steel Act 1949, the Iron and Steel Act 1967—a terrible Act—and the Ports Act 1969, which was even worse. In that dreadful measure, the Iron and Steel Act 1967, and in the Ports Act, the choices were between six months, in the case of steel five years, and in the case of ports three years. It has been recognised in all nationalisation Bills that the only way to try to be fair in all the circumstances is to have a choice between a short period and a 927 longer period. Six months is a very artificial period and can be very unfair.
Apart from that, we must see whether the six months' period is entirely normal and fair. I do not think that it can be, because the six months to the end of February 1974 were most unusual. They were unfair and abnormal months to choose for stock valuation purposes. There were first, the Middle East War; secondly, the oil crisis; thirdly, the miners' strike; fourthly, the three-day working week; fifthly, the run-up to the General Election; and, sixthly, price and dividend control throughout the period.
I appreciate that, as the Minister of State has admitted many times, under a Labour Government, disasters come frequently. It could be alleged that a disaster period was a normal period for valuation purposes, but I think even the hon. Gentleman will agree that to pick those six months when we had all those dreadful and unusual things is not fair.
In addition, no matter what formula is arrived at, if the period is as short as six months it may be fair to some and very unfair to others. My suggestion, which is a compromise based on all the precedents of other nationalisation measures, will be fairer because it gives a choice. It cannot be as fair as Amendment No. 293, which refers to a "fair price". That is the right way, but the Minister has said time and again that he wants to do it on the basis of stock market valuations. If he is doing that, it is better to pick a long period than a short period.
I hope that as a gesture of good will the hon. Gentleman will accept my reasonable amendment. If he is not entirely convinced, I ask him to answer two brief questions. First, why do all the other nationalisation measures adopt what I propose while his is different? Secondly, does he honestly think that it is fair to pick a period when there were events such as the Middle East War, the oil crisis, the miners' strike, the three-day working week, the run-up to the General Election and price and dividend control?
We are moving into a time of cumulative disasters because of Socialist Government. In Scotland there are 165,000 unemployed, and projects such as the Hunterston steel project are not 928 proceeding. Terrible things are happening all the time. But we are here talking about a period just after the golden age of Conservative Government, when things were going well. Therefore, to pick that six-month period is very unfair and unreasonable.
I hope that the Minister will accept my amendment. The only way to be fair to a diversity of companies whose circumstances were different is to give a choice of periods which will ensure that what may be fair for one can also be fair to others.
§ 5.45 p.m.
§ Mr. Kaufman
When the hon. Gentleman asks for a compromise, I am reminded of the late Kingsley Martin's demand for a fair balance between partiality and impartiality. The hon. Gentleman's request for the Government to make a concession to the House is a perfectly understandable request that we make a concession to him. I should like to explain why we cannot do so, although I think that the hon. Gentleman will know some of the reasons, because Amendment No. 290 is identical to an amendment moved and rejected in Committee.
The amendment seeks to offer the stockholders' representative for each company a choice of reference period for the valuation of securities. The hon. Gentleman proposes, in effect, an extension backwards of the existing reference from six months to a year. From the middle of 1972 to early 1975 the stock market generally was in decline. The Financial Times ordinary share index fell from an all-time peak of over 500 in mid-1972 to a low of less than 150 in January 1975. I think everyone would accept that both those extremes represented exceptional circumstances. Both were an exaggeration of the true market situation.
Between those two extremes the Financial Times index averaged about 370, almost identical to the average of the index throughout the reference period prescribed in the Bill. Therefore, I think that it would be accepted by most fair-minded people—from whom I exclude the hon. Gentleman only in this context, and not generally—that the present reference period could not be fairer than it is. It accurately reflects the mid-point of the market over the past three to four 929 years and avoids the period of excessive caution which gave rise to the abnormal low at the start of 1975. At the same time, it does not reflect the high degree of speculation during the golden period of which the hon. Gentleman spoke, which gave rise to the mid-1972 high.
The hon. Gentleman seems to take the view that this fair, mid-point position is not good enough. He believes that shareholders are entitled to make a profit from the historical accident that stock market levels happened to be higher in the early part of 1973 than in the early part of 1974. I cannot accept that. The amendment would inevitably give more to the shareholders at the expense of taxpayers. That cannot be fair.
The fairness of the six months to February 1974, during the golden period of Conservative Government which the hon Gentleman recollects—indeed, when it reached its apotheosis—is that it was the latest period in which stock market prices were unaffected by the prospect of nationalisation. Nobody knew, not even the then Prime Minister, that we should have a General Election on 28th February. Until almost the time when it was announced, nobody could have anticipated it. Pessimists as we are, there were not all that many of us who expected that if such an election came it would result in the return of a Labour Government, pledged to nationalisation of these industries. I recognise that the result of the election was a matter of some concern to the hon. Gentleman although he did unusually well—but he will understand that I hope he will not continue to do so well in the future.
When we discussed the dividend controls in the safeguarding provisions in Committee, hon. Members opposite made great play of what they considered to be the injustice of a remote basis financial year for determining the permitted level of dividends. They claimed that it was inappropriate to control current dividend levels by reference to a past year. But in Amendment No. 290 the Opposition are proposing to extend the reference period for compensation further back in time. If they really believed that for dividends the past was of no relevance, it is hard to accept that in terms of a valuation the past suddenly becomes the most important factor. One is drawn to 930 the conclusion that hon. Members opposite are concerned only with obtaining the maximum possible for shareholders, with no regard to the consistency of their arguments.
The existing reference period offers a fair basis of valuation for the securities of the vesting companies. The alternative proposed in the amendment would destroy this fairness by giving an un-covenanted benefit to shareholders at the expense of the taxpayers. I therefore urge the Committee to reject the amendment.
Amendment No. 290 represents the partisan case put by the Opposition throughout the passage of the Bill on behalf of the shareholders, irrespective of the cost to the taxpayer. The Opposition are suggesting that the existing terms of the Bill are less than fair. We utterly reject that.
The compensation terms in the Bill are for unquoted securities to be valued as if they had been quoted on the Stock Exchange during the six months up to the end of February 1974. The Stock Exchange is well recognised as an impartial and objective judge of the value of securities. Techniques for imputing Stock Exchange valuations to unquoted securities are tried and tested—in the City of London as well as within Government. It is sheer hypocrisy for Opposition to claim otherwise. Where it suits their case they are quite prepared to make use of the value of the stock market indices, either to criticise the present Government or to demonstrate their own achievements. It is therefore right to take into account the condition of the stock market in valuing shares for compensation purposes.
But it now suits them and those whose interests they represent to say that a Stock Exchange basis is not good enough. Instead, they are seeking to set the valuation at what they are pleased to call a fair price. They go on to say that that "fair price" should take account of the trading record and future prospects of the company and its net assets. As everyone knows, without a separate independent assets valuation, which is a very lengthy process, the net assets of a company as recorded in its books reflects only the particular accounting conventions of the company. There is nothing objective 931 about that. The amendment sets no yardstick whatsoever for taking into account past records and future prospects. What the Opposition are asking the House to approve is a compensation package which is open-ended and says little more than "compensation shall be as much as the shareholders can get".
I therefore urge the House to reject Amendment 293 for what it is, a shallow attempt to benefit shareholders at the expense of the community as a whole.
§ Mr. Tom King
In his attack on the amendment, the Minister particularly criticised its wording. But it includes a direct extract from the statement of the previous Secretary of State for Industry when he established the basis of the price that the Government paid for the Court Line shares. It is unusual that the Minister should choose to attack that wording as if it was a totally unrealistic basis on which to proceed. We tabled the amendment on that basis with the words of the Secretary of State in mind. We assumed that if that was the correct basis on which the Government chose to work, it would be acceptable. It is wrong that the Minister should accuse us of inconsistency, because the Secretary of State said that legislation would provide for fair compensation. We wonder what the Government mean by "fair compensation".
We have been through the problem before. We are talking about shareholders, and the Minister made an interesting Freudian slip during our discussions on the Drypool Group when he said that he was not interested in the speculator element in Kingston upon Hull. In other words, in his mind "shareholder" means "speculator".
Does the hon. Gentleman realise that involved in this industry are about 1,000 pension funds? That is the best estimate that can be made. There is also about £200,000 of private money invested by individuals with very small savings. Their interests and their voices should be represented and heard in the House.
The Minister said that the stock market price was a fair way to value the worth of a company, but that is not true. Stock market listed prices are prices for small parcels of shares in daily circulation on the stock market. Why did he support the Felix- 932 stowe Docks Bill when the price quoted was 90p and the British Transport Docks Board recognised that to acquire control it would have to pay £1.50p each for the shares? That is an example of the total inconsistency of the Government.
In Committee the Minister said:We are paying what the shares are worth to the sellers while they are in the hands of the sellers."—[Official Report, Standing Committee D, 9th March 1976; c. 1655.]But he failed to mention that none of these people is a voluntary seller. They are being compulsorily released of their shares and they are certainly entitled to a normal commercial price. Normally, in any acquisition of control of an undertaking, people will pay up to one-third more for their shares. Inflation has increased by about one-third since that time.
I shall illustrate my case by explaining the position of two particular companies. Vosper Thornycroft, which is likely to get about £4 million in compensation, will probably make a profit of about £4 million this year, and it has assets of just under £20 million. No hon. Member can pretend that the proposed compensation comes within any definition of fairness. Yarrow will receive between £4 and £5 million in compensation, but its profits this year will be in excess of £7 million and its assets are worth £10 million.
We are not fighting this case on behalf of a few speculators. We are fighting for fair compensation for the 1,000 pension funds and other investors involved. We regard the Government's present proposals as being quite outrageous and ridiculous. Therefore, we shall press our second amendment to a Division.
§ Amendment, by leave, withdrawn.