HC Deb 01 July 1980 vol 987 cc1305-14
The Secretary of State for Industry (Sir Keith Joseph)

With permission, Mr. Speaker, I will make a statement about the disposal of the National Enterprise Board's shareholding in Ferranti. I undertook in our recent debate to study what was said and to report to the House.

The overwhelming view of the House was that if the NEB's shares were to be sold, they should be sold in such a way as to safeguard, at least temporarily, Ferranti's independence.

I had told the House that a placing of shares to achieve such a purpose would tend to be below market price, so that the taxpayer would probably get less than he would if bids for the company were considered. Moreover, to place the shares without conditions might not meet the purpose, since it might be possible for an over-bid at an attractive price to succeed. In that case the taxpayer would not have the benefit from the higher price, and the independence of the company, which would have been the purpose of the exercise, would not have been preserved.

I pointed out that conditions could be imposed, but that they would further lower the price. I explained that a placing of shares, with conditions, with a group of institutions, would not provide a guarantee of independence.

The board of the NEB told me that in all the circumstances, as a matter of commercial judgment, it considered that the right course was to place the shares with institutions. But it thought that to impose conditions on the disposal was not a normal commercial action, and accordingly it asked me to give it a direction. This I have done. Under powers in the Industry Act 1975 I directed the NEB yesterday to sell its shares on terms under which each purchaser agrees not to dispose of any interest in them for two years without the consent of the NEB. I have also directed the NEB to retain 4 per cent. of its holding for Ferranti's employees under an appropriate scheme. A copy of this direction has been laid before Parliament.

The NEB hopes to place the shares at £5.30 each. This compares with £5.97, the price immediately prior to the sus- pension of the shares yesterday morning—a discount of about 11 per cent.

The cost to the taxpayer of this arrangement, as distinct from selling the shares to the highest bidder, cannot be known. It must be recognised, however, that a successful bid might—I repeat, might—have been referred to the Monopolies and Mergers Commission, and some months would have passed before the outcome was known. Had the decision gone against the bidder, the taxpayers' interest would have suffered, and even a favourable decision would have deferred the sale receipts for some time. I believe, therefore, that the balance of advantage lies with a placing, subject to conditions, despite a small net loss to the taxpayer.

I believe that the whole House will wish the company well.

Mr. John Silkin

We are glad that the Secretary of State reported to the House, as we asked him to do during the recent debate on Ferranti.

It is just three weeks today since the Prime Minister told us that the NEB would sell Ferranti shares at what she called the best possible price. At least the fear that many of us had, I think overwhelmingly in this House, that Ferranti shares would be sold to one buyer, who would then engage in redundancies, closures and asset stripping—that worst of all solutions—has been avoided, but by the Secretary of State's own admission shares will be sold at a discount. What, then, of his beloved, long-suffering taxpayer? It is the taxpayer who will suffer the 11 per cent. discount of which the Secretary of State speaks.

In the light of that, would not the sensible course, from an industrial, technical and financial point of view, have been to leave them under the public control of the NEB?

Sir K. Joseph

But the taxpayer will be over £50 million better off than he would be if the NEB had kept it.

Mr. Silkin

The taxpayer will not, as the Secretary of State has said, get the full value of the shares, and the full value is the fruits of those shares.

Sir K. Joseph

That is because we tried to take into account the overwhelming wish expressed in the debate. Even then, I have to say that had the shares gone to a highest bidder it is conceivable that a reference to the Monopolies and Mergers Commission would have sharply narrowed the gap—the 11 per cent.

Mr. Churchill

Is my right hon. Friend aware that he is to be warmly congratulated on having followed the guidance given by this House in the recent debate on the disposal of the Ferranti shares, that his decision will be warmly welcomed by all employees of Ferranti, that the taxpayer, with an eightfold increase in his investment, will have done excessively well, and that the 4 per cent. disposal of shares to Ferranti employees is imaginative, and a very important factor in my right hon. Friend's statement?

Sir K. Joseph

I am grateful to my hon. Friend. I repeat that the wishes of the House were taken fully into account, particularly the strongly expressed wish by hon. Members representing Midlands and Scottish constituencies.

Mr. Alfred Morris

First, should not the holding of 4 per cent, for employees be much higher?

Secondly, the right hon. Gentleman said that it was the overwhelming view of the House that the independence of the company should be maintained temporarily. In my view, it is the expressed wish of most people that independence should be much more permanent. Will the right hon. Gentleman give a plain undertaking that if one competitor were to take over control after two years he would report the matter to the Monopolies and Mergers Commission immediately?

Sir K. Joseph

No, I can give no such assurance. The procedure for considering any bid is laid down by statute and, as the right hon. Gentleman well knows, it is not for individual Ministers to decide. The initiative lies with the Director General of Fair Trading, and his recommendation then comes to Ministers.

I think that the 4 per cent. of the NEB shareholding that is reserved for employees makes sense. It is 2 per cent. of the total shareholding. If fully taken up, it would call for £2 million from the employees. That is a substantial sum of money for them to find. If they want more, they can still buy on the market.

Mr. Nicholas Winterton

Will my right hon. Friend accept that his announcement this afternoon will be very warmly received? Will he also accept that the decision of the Government is an example of true Conservatism, which believes in private business, small business, and the wide distribution of share ownership? In his announcement this afternoon he has achieved all three.

Mr. Eastham

I recognise that the Secretary of State is hell-bent on selling the shares, contrary to any sensible practice in the industry, but will he explain to the House what measures he intends to introduce to protect the workers' interests in the industry? As there are 17,000 workers, will he now tell the House how he intends to introduce safeguards that will protect their future?

Sir K. Joseph

The idea of turning a company into a protected sanctuary is deeply hostile to the interests of the workers themselves and the people of this country. It is relatively unusual that we have been able to take steps for a limited number of years in this unique case.

Mr. Cyril Smith

Will the Minister accept the thanks and congratulations of Liberal Members for his statement this afternoon, for the fact that he listened to the debate that took place, and that he took notice of what was said in it? Will he particularly accept our thanks for the 4 per cent. shareholding for employees? May we take it that this is an indication that on occasions the Government are not afraid to intervene?

Mr. Emery

Will my right hon. Friend make plain that his action is for the benefit not only of the workers but of many sub-contractors of the company who were afraid that it would be run down if it were purchased by a particular organisation?

Secondly, will the Minister make clear to the Opposition that when they are talking about a discount on the share price they should understand that any placement by any company, Government, the NEB or any organisation is always at a discount from market rates, and that a discount of between 8 per cent. and 12 per cent. is quite usual.

Mr. van Straubenzee

Does my right hon. Friend understand how welcome his announcement is, and that it will be seen as a vote of confidence in the work force, who are quite determined that the company shall succeed?

Will my right hon. Friend accept that, in particular, we are grateful to him for the allocation of shares for those who work for and have placed their skills in the company?

Mr. Ron Brown

I followed the Secretary of State's statement with interest, particularly as many of my constituents work in Ferranti factories in my part of Scotland. What safeguards does the right hon. Gentleman have to prevent, perhaps, the GEC taking over the company? I ask that question as I have a confidential letter from Lord Weinstock saying that discussions are going on with the NEB to take over at least some of the NEB's shares. What safeguards are there?

Sir K. Joseph

There is a deep gulf between my concept of what is in the interests of the company and the country and that of the hon. Gentleman. I do not think that it is in the interests of either for companies to be permanently safeguarded from bids on the market. If the assets and skills of a company can be better used, it is in the interests of the people in the company as well as of the whole country that they should be better used.

Mr. Ancram

Is my right hon. Friend aware, contrary to the impression given by the hon. Member for Edinburgh, Leith (Mr. Brown), how much his statement will be welcomed in Edinburgh and across Scotland in general as confirmation of the Government's determination to promote successful expanding industry to build up prospects in Scotland? Does he agree that it is now for the financial institutions in Scotland to show their faith in this exciting company by putting their money where their mouths have been for so long?

Sir K. Joseph

Yes. Surely we should all rejoice that Ferranti is one of many successful companies on both sides of the border.

Mr. Ogden

Will the Secretary of State confirm that he told us nothing that was not available to hon. Members who read The Guardian or other newspapers beforehand? How does he justify a premium—[HON. MEMBERS: "Reading."] —facts ought to be right—of 67p for every institutional purchaser of one share? What has happened to the Conservative Party's theory of the wider share-owning democracy? No individual will be able to buy one of these shares, as happened with the BP shares. What has happened to the Conservative Party's policy of wider share-owning?

Sir K. Joseph

I undertook to report to the House. I do not think that the House would have been satisfied if I had used as an excuse the fact that some of the material was in one of the newspapers. Secondly, at least 31 per cent. of the shares is held neither by those who bought from the NEB nor by the Ferranti family. It is open to any individual to seek to buy those on the market.

Mr. Montgomery

Is my right hon. Friend aware that his statement will be warmly welcomed by many Ferranti employees? [HON. MEMBERS: "How do you know?"] Because it was the view put forward by constituents who came to see me about this very issue. The cynicism of the Opposition has been exposed, because my right hon. Friend has shown by his statement today that he listened carefully to the debate that we had on this issue a couple of weeks ago. Should more be done about selling shares to employees? Despite the blathering by the Opposition, is it not worth while that these shares should be sold to employees, because they could not be sold to employees as long as they were held by the National Enterprise Board?

Sir K. Joseph

That is true as to those shares, but it has always been true that employees could bid for shares on the market.

Mr. Gordon Wilson

Will the Secretary of State confirm that all he has done has been to provide a breathing space of two years? In view of the worry that has been expressed in Scotland about the independence of the company and the fact that he has already conceded a trust fund of 4 per cent., will he agree to transfer a proportion of the shares in trust for the Scottish people to the Scottish Development Agency, so that jobs in Scotland can be safeguarded?

Sir K. Joseph

The breathing space was precisely what I was asked for by people who came to see me from the management and work force and by many hon. Members.

Mr. Charles R. Morris

Is the Secretary of State aware that, irrespective of any views that I might hold on the subject, thousands of my constituents who are employed by Ferranti will accept today's statement as a signal victory in their campaign against the selling of the shares to the highest single bidder in one major controlled block? They will also see it as a vindication of their opposition to the Government's and the NEB's policy in this regard.

As for the 4 per cent. of shares allocated for the employees' interests, will the right hon. Gentleman indicate whether the intention is to give those shares full voting rights at the company's annual general meeting, and who is envisaged as exercising those voting rights?

Sir K. Joseph

I should certainly envisage that, but the details will be for working out between the institutions, the NEB, the company and representatives of the work force.

Several Hon. Members

rose—

Mr. Speaker

Order. I propose to call four more hon. Members from either side and then to move on.

Mr. Beaumont-Dark

I welcome the sale in principle to as wide a number of shareholders as possible, but does not the Secretary of State think that it is a retrograde step now to create another kind of shareholder with restrictive rights? I thought that he was trying to get rid of non-voting and restricted voting shares as a principle. If the Monopolies and Mergers Commission can find that the marger is against the public interest, is that not enough of a defence for a fine company, which would have a prosperous record on its own and could justify being kept on its own?

Sir K. Joseph

I have much sympathy with what my hon. Friend said. That is why I hope that this situation will be unique.

Mr. Marks

Would not any sensible financial adviser have told the taxpayer that he had a perfectly good investment in Ferranti and that he should keep it there? Will the employees have the same discount rights as the institutions when the 4 per cent. is decided?

Sir K. Joseph

The taxpayer has a double interest in both recovering a prospect—not a double interest; I am misstating it. The taxpayers' interest is to see that the Government's borrowing is reduced. To the extent that this money comes back to the Government from the NEB, that will enable the Chancellor to reduce the borrowing.

Any discount to employee shareholders will be worked out between the Government, the NEB, the management and the representatives of the work force, not, as I wrongly said in my last answer, by a group including the institutions.

Mr. Bill Walker

The employees of Ferranti who live in my constituency, both in management and in the work force, are all grateful that the combined efforts of both the Scottish Office and hon. Members on both sides of the House have brought an answer that will benefit the company. Will my right hon. Friend confirm that we are looking to the company, its directors, managers and employees, to show that the faith that has been shown will be justified in the company's continued profitable expansion?

Mr. Cook

Does the right hon. Gentleman accept that if a sale must take place the conditions that he has attached to it are welcome? Does he recall that only a fortnight ago, in our debate, he made a compelling case that no number of conditions could protect the company against takeover in the longer run? Does he recognise that if, after two years, the company is taken over, he will be held responsible for interrupting a stable arrangement, which will mean that the company will lose a remarkable chance for expansion at a time when its rivals in the private sector are contracting?

Sir K. Joseph

I think that that misstates the history completely. In the debate I emphasised that no arrangements could guarantee the independence of the company, not only in the longer run but in the shorter run, because 31 per cent. of shares remain on the market, and those shares could give a purchaser a dominating interest in the company despite what has been done.

Mr. Hordern

Do not the institutions that will be getting the shares at a discount represent millions of policyholders? Is it not a matter of congratulation that my right hon. Friend has been able to find one company amongst those held by the National Enterprise Board that can be sold at a profit at all?

Sir K. Joseph

Yes, to the first part of my hon. Friend's question. I think that he overstated his good case a little on the second part of his question.

Mr. Ernie Ross

Does the Secretary of State accept that many Opposition Members will not seek to confuse Ferranti workers by encouraging them to buy shares in the company? If the Secretary of State were really concerned, the best interests of those shareholders would have been served by transferring the whole of the NEB shareholding to the employees.

Sir K. Joseph

I slightly agree with the first part of the hon. Gentleman's proposition. An employee gives careful thought before he invests his savings in the company in which he is employed. However, I cannot agree with the second part of the hon. Gentleman's question.

Mr. Eldon Griffiths

Has my right hon. Friend had any indication that the unions will encourage their members to take up this welcome opportunity to own a part of the company for which those members work? Were the sensible conditions the idea of my right hon. Friend, or of the NEB? Why were they not applied to the similar case of Fairey?

Sir K. Joseph

The idea of conditions came from far and wide. Indeed, it also came from my right hon. Friend the Secretary of State for Scotland. I do not know the degree to which unions will encourage their members to buy shares.

Mr. Spriggs

Is the right hon. Gentleman aware that the 4 per cent. of shares that have been offered to the employees of Ferranti is well below the figure that one would expect in a democratic society? Will the right hon. Gentleman reconsider the number of shares to be made available to workers in that firm? Will he also give those workers full voting rights at all board meetings?

Sir K. Joseph

The hon. Gentleman has failed to understand that it is open to the employees of Ferranti to buy shares on the market on any day.

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