§ "Pursuant to the powers vested in him by section 3 to this Act the Secretary of State shall retain at least 51 per cent. of the issued shares".—[Mr. Clinton Davis.]
§ Brought up, and read the First time.
§ Mr. Speaker
With this, we may take new clause 16—Restriction on disposal of Secretary of State's shareholding—and new clause 17—Secretary of State's majority shareholding.
§ Mr. Davis
Some of the arguments about the Government's retaining a 51 per cent. shareholding in the successor company have been rehearsed in the previous debate. I noticed a different nuance in the way in which the Minister approached the question of retaining a majority interest as against the message that he sought to convey in Committee. When I have put forward my evidence to support that contention, I shall give way to the Minister if he wishes to reply. I wish to quote a number of the Minister's remarks in Committee. He said:it is the Government's policy to maintain a majority holding in the shares.As a way of exhibiting confidence in the company, he said:We still have sufficient confidence…to maintain our 51 per cent. shareholding."—[Official Report, Standing Committee B, 29 January 1980; c. 233–4.]The Minister said also:as far as I can see ahead at the moment, it will be desirable for the Government to retain a majority holding."—[Official Report, Standing Committee B, 31 January 1980; c. 307.]Later on he said something of the same nature, as reported in c. 416 of Hansard.
In what circumstances would that desirability to retain a Government shareholding change? Does the Minister foresee that it is likely to change within the next year, two years or three years? He said today that it was the present intention of the Government. That represents a difference of emphasis at the very least. If the Minister would like me to give way on that point, I shall be happy to do so.
§ Mr. Tebbit
It might shorten the debate if I respond now. The hon. Gentle- 1140 man will recollect that when I said that it would be as far ahead as I could see, I made it clear that I was not willing to say how far that was. I said that the Governmentwill not seek to control even whilst they hold the majority shareholding.I said also:I have never bound the Government in the long term to maintaining a majority shareholding. I have not said that our plans would be to dispose of it, but I have not bound the Government to it."—[Official Report, Standing Committee B, 13 March 1980; c. 956.]That remains the position. I do not wish to alter the impression that springs from the remarks that I made in Committee.
§ Mr. Davis
We emerge with the position that the Minister did not intend to convey a different impression from that which he conveyed in Committee. He argued in Committee that to maintain a majority shareholding would depict a continuing Government confidence in the airline, that it was desirable to do so, that it represented a good investment and that he had confidence in that investment. The House will be grateful to the Minister for adhering to that view, because I believe that he conveyed a somewhat different impression today.
The Secretary of State made that point either on Second Reading or in questioning when he first introduced his policy before the Conservative Party conference. It was before the conference because he wanted to exhibit his well-known virility to the ladies who attended. Each to his own taste; and that is the way that the Minister chose it to be.
Alitalia has a 90 per cent. Government share; KLM, 70 per cent.; Lufthansa about 80 per cent.; SAS, 50 per cent.; and Swissair about 12 per cent. Apart from Swissair, those enterprises felt that it was necessary to retain a majority interest. One of the reasons for that is the very reason adduced by the Minister—at least in part to justify his retention of a 51 per cent. interest—namely, to exhibit confidence in the State carrier. They regard that as important in the air service negotiations that have to be undertaken.
In Committee, the hon. Member for Tynemouth (Mr. Trotter), in an interesting intervention said:I have always worked on the assumption that there would be a majority public shareholding in British Airways. If there is not to 1141 be a public shareholding, that would be a very different concept from the one I envisaged."—[Official Report, Standing Committee B, 29 January 1980; c. 206.]The impression was clearly conveyed to the hon. Gentleman that this was not a temporary policy but something to be continued because, as the Minister said, it was desirable to do so. We are left in some doubt about where the Government stand. Perhaps the Government prefer us to be left in some doubt. We believe that the whole concept of the sale of British Airways shares is misbegotten. It is one that the Government have pursued because it is doctrinaire-ridden. There is very little to commend it. In the present international airline industry it is difficult to conceive how, in the next few years, the shares will become an attractive proposition.
A status report on the United States airlines prepared by a company called Paine Webber Mitchell Hutchins Inc concluded that there would be lower airline earnings in 1980. There is nothing controversial about that. It said that there would be no big earnings recovery in 1981. It said:In order to achieve large near term gains in stock prices, a large rebound in 1981 is a must. Otherwise, the group may continue to drift lower and/or at best offer dead money for some time. Neither possibility argues for heavily owning these stocks.That was a description of the United States market. Even though British Airways may have emerged from the crisis of 1979–80 in a rather more favourable position than many of their competitors, that is nothing to write home about. They only managed to break even.
The position affecting British Airways and most other airlines in the world is not optimistic for the next few years. What sort of track record does that provide for any flotation of shares? I believe that the Government have recognised that. They have not proceeded with the Report stage at any pace. We have been out of Committee for a long time. There does not appear to be much urgency even though for some extraordinary reason—which I can only believe is connected with that which I have already attributed to the Secretary of State—the Government were in such a rush in July of last year. Now they have decided to go slow. They would do better to forget about it altogether. That would be the best way to remove the anxiety that is being caused 1142 at the moment to our flag carrier. It has enough to contend with already in the very difficult field of international competition, without having these unnecessary anxieties imposed upon it. A great deal of uncertainty is introduced for no good reason.
How would it benefit productivity? How would it benefit better industrial relations? Would it not help to stabilise the position and help to erase the anxieties of the work force if the Government were to say "We were wrong. We did not listen to anybody when we decided to embark upon this proposal. Now we have decided that this is a completely wrong climate in which to introduce it." That would be the best way to provide the reassurance about which the Minister spoke in Committee—to drop this madcap scheme altogether.
The hon. Gentleman then said that it would be a good thing, at least for the time being—I do not want to put any words into his mouth—if the Government were to maintain a 51 per cent. interest, because it was a good deal for the taxpayer. That is the view he takes. If it is such a good deal for the taxpayer, why not keep all the shares, taking the argument on that basis? The Minister should feel bound to answer that point tonight.
The Government have refused to say how many shares or what proportion of the shares they intend to float, or when they intend to do it. I can understand the Government's reticence about speculating as to when they might float the shares. In fairness to the Minister, he made a compelling point about why the prospectus should not be made the subject of a statutory instrument. Indeed, we have decided not to pursue the point for that very reason. Nevertheless, if the Government are to retain a 50 per cent. interest, the taxpayer is entitled to know rather more than the Government have begun to disclose about their objectives.
The Minister said, in relation to the 51 per cent. argument, that it is a balance. He has not suggested that we are indulging in a weird fantasy here, as no doubt would be suggested by the hon. Member for Woking (Mr. Onslow). The Minister has said that it is a balance, and a fairly fine balance at that. The Minister argued:Not all policies have to be set in statute. I think that is the best defence I can make" 1143 —[Official Report, Standing Committee B, 31 January 1980; c. 307.]That is most charming, and I know the hon. Gentleman to be very charming from time to time—contrary to the experience of some of my hon. Friends. We enjoyed him in Committee; he was good value. But that is a pretty flimsy defence. If I had suggested such a thing when I was a Minister, the hon. Gentleman would have sailed in with all guns blazing. It is a totally flimsy defence. Many important policies have to be set out in statute, and this is one of them.
§ Mr. Tebbit
In my own defence, I think I ought to read what I said:I think that is the best defence I can make in many ways against the blandishments of the right hon. Gentleman in offering me all these alluring alternatives of possible holdings which the Government might have in the future company."—[Official Report, Standing Committee B, 31 January 1980; c. 307.]That was in the context of an offering of various percentages which the Government should by statute hold. I take the hon. Gentleman's point, but I have to defend myself, at least mildly.
§ Mr. Davis
That is a bit of mitigation, as they say in the criminal courts, rather than defence. The hon. Gentleman is not acquitted of the charge. He went on to say that he could not bind his successors. That is an extraordinary argument. That is precisely what he is trying to do by the Bill—to bind his successors. The best way for him not to bind his successors is not to embark on the legislation. That is another very good reason for not doing it.
It would be perfectly reasonable—even basing the case on the hon. Gentleman's arguments—for him to accept the clause, which, according to him, is finely balanced. What we find difficult to accept is the argument "Trust me, trust Norm, everybody's good friend". I do not think that he would have trusted us, and I am not sure that I should trust him.
Whatever feelings of friendship I have towards the hon. Gentleman from time to time—and sometimes we forget those—we are a little sceptical of some of the promises made by Ministers in this Government. The Government are sceptical about some "norms", and I do not know why they should make an exception here. After the record of the last 13 or 14 1144 months over prescription charges, which were not to be increased, and over the doubling of VAT, and so on, it is asking a bit too much to expect us to repose our trust in him.
I turn to new clauses 16 and 17. They may not be the last word in drafting. The Opposition do not have the benefit—if it is a benefit—of the parliamentary draftsman. Sometimes, as I know from experience, he can create certain difficulties. I can say that now, but the Minister cannot.
In new clauses 16 and 17, we are suggesting alternative approaches.
New clause 16 suggests that the Government should not dispose of a total holding at any given timeexceeding ten per cent. of the shares…without the prior approval of both Houses of Parliament".It also suggests that such approval should not be sought except within certain specific periods.
The alternative approach to that, in new clause 17, is that the Government should notrelinquish majority control…without first obtaining the approval of both Houses of Parliament".There is also a similar provision as to the time within which that can be done. There is nothing very important about the timing. That could be changed if it were thought to be wrong. The Minister is always fair enough to concede that we are debating a principle.
If the Government intend to embark upon a change from majority shareholding, they should be obliged to come to the House. They would probably get their way if it happened during the lifetime of this Parliament, because they have a secure majority, but at least the House would be able to comment on the matter; it would be drawn specifically to the attention of the public. When we are talking about such a valuable stake in a national enterprise, the Government should do no less.
If the argument has been finely balanced before in regard to the much more general way in which we have approached the matter, surely the Government will be reasonable and say that there is something in the argument, and that they will at least look at it carefully before the Bill is debated in another place. 1145 We submit that either of these propositions is reasonable, and in particular we commend new clause 17.
There is a burden that lies very heavily on the shoulders of the hon. Gentleman to indicate why it would be wrong for Parliament to exercise this measure of scrutiny or surveillance—it is hardly control—over the position. I hope that the hon. Gentleman will respond positively in the way that I have invited him to do.
§ Mr. Sheerman
It is repetitious to say that I do not intend to speak for very long on this group of new clauses. It will be evident to those who sat for long hours in Committee that at times we had very enlightened debates there. To a relatively new Member such as myself, it is surprising that we reach this stage debating on the Floor of the House arguments on amendments that we rehearsed through previous months. We have in our hands the collected works of our travail over the months. Perhaps these impress the public, our electors, through the large number of words and column inches. But one wonders: all for what? Brilliant arguments were advanced in Committee on the Opposition Benches. There were erudition and rapier wit and thrust, sometimes on both sides of the Committee. But here we are debating the same points as we made in Committee. Opposition Members seem to have convinced the Government side of very little, and vice versa. It is a sad reflection that the Committee system ends up in a voting system in which most of those concerned have not been intimately connected with the debate.
Many of us have become quite expert—I say that with due modesty—about aviation. I represent part of Huddersfield, which is not close to any of our great airports. My constituency has interests in trade, textiles, chemicals and engineering. Aviation seems to be a far cry from my constituency interests. However, my constituents are extremely concerned about the new clauses and the principles locked into them. That is because they are the one guarantee that they might have about a little bit of investment that they made years ago. Like all good investments, perhaps this one was made on their behalf by people whom they had elected to represent them over 1146 the years. Since 1945 many of my constituents have lived in the fond hope and belief that successive Governments have acted in the national interest. In Committee we had some debates on the national interest which would have done justice to departments of political theory. We debated the concept and nature of the national interest. I suppose that we had quite an average university seminar on the subject. All that we concluded was that we would have to agree to disagree about it.
I put the national interest simply as it strikes most of my constituents. It is the belief that the Government are elected to serve the people—not just the Conservative Party or the Labour Party, but all the people whose hopes and futures are bound up in what we call the common good. I believe that British Airways is seen as a part of some collective common good, common weal, call it what one may. I believe that most people believe that British Airways is theirs, that they own it, and that in some ways they should have a Government representing them who recognise that fact and who believe that their interests should be served over a long period, and not just over a period of time in which Governments come and go. My hon. Friend the Member for Batley and Morley (Mr. Woolmer), whose constituency borders mine, has made the very good point that it is absolutely right that across the party divide there are issues which must be of common concern over a far greater number of years than the four or five for which most Governments exist.
I believe that this is a particular case in point. We are talking about the percentage of shares which will be vested in the Government and the percentage which will be sold off on the stock market. Conservatives, be it at their party conference or in this House, very often talk about entrepreneurial abilities and talents. It seems that, if the Conservative Party has a mandate, Conservatives would say that it is to unleash the entrepreneurial instinct and talent under the present Government. Given their lights, we can see them going about that task.
However, from the Opposition Benches it often looks as though, instead of unleashing entrepreneurial talent and giving opportunities for men and women who can put land, labour and capital together in order to produce a product which 1147 people want to buy around the globe, when Governments proclaim this commitment they are very often working less on the mentality of the entrepreneur and more on the ethos and morals of the market trader. It seems to me that "the market trader" is much more of a description which applies to the Under-Secretary. I do not say that in a rude way. We certainly do not want to reduce the level of the debate. However, there he is, representing the Crown in this matter and giving us assurances about the future of British Airways, but he cannot prevent us from suspecting that what he has on the front of his barrow—the nice, shiny, rosy apples—are not even for the Opposition's consumption, and that the seedy, maggoty apples lying behind the up-front display are the bitter apples which must be eaten not only by the electorate and at a Conservative Party conference but also by those liberal elements which exist within the Conservative Party.
The reason why we are making our case very strongly is that when the Minister is talking about the case against the amendment—I refer particularly to the question of the 51 per cent. shareholding—what he is really doing is speaking over his shoulder to the more liberal and enlightened elements of his own party, because they know very well of the commitment to British Airways as a national institution, a national investment and a public enterprise, of which most people are relatively proud.
There is a sizable element within the Conservative Party, both within the House and outside it, to whom the Minister is talking in order to try to persuade them that the rosy apples that he displays are the real goods which they will be getting. I illustrate that by saying that what they are being offered and what was explained to us in Committee is that we are not really denationalising a national institution and a national investment just at a stroke. People got rather fed up with the "at a stroke" mentality or illustration. What the Conservatives are doing, according to the Under-Secretary, is very gradually injecting a bit of entrepreneurial ability, a bit more commercial mindedness, and just changing a little the general picture within British Airways. It is quite civilised and is something with 1148 which every intelligent Young Conservative would agree.
§ Mr. Sheerman
If there is such a creature.
We cannot pin the Minister down. We used to refer to him affectionately in Committee as a polecat, but he preferred to be known as a ferret, ready to attack any rabbits that came within range. The Minister is providing a set-up which will con the electorate and elements in his own party into believing that, under the guise of gradualism, the party will nibble into British Airways. In fact, this Bill will provide the apparatus for selling off BA, probably for far less than it is worth, to sections of the community who are wealthy enough to take on the shares when they are offered at an appropriately inauspicious moment.
We are genuinely concerned that a national investment will be offered for sale when the Government are in a tight corner, the balance of payments is in a bad way, the Chancellor's economic nostrums are working even less well, and the Government have their backs to the wall. In order to do something to retrieve the position, we fear that they will sell off BA at a knockdown price. That would be the worst kind of tragedy.
The Minister will probably assure us that this is a nightmare and that it is based on fantasy, that no one with common sense could possibly subscribe to it. But I urge hon. Members to take seriously a national institution and an investment made on people's behalf over generations.
Most people in this country do not invest in stocks and shares. They do not even have a friendly bank manager in the wardrobe to advise them. A high proportion do not have a bank account. They would not know a stockbroker if he knocked them down in the City. They are not familiar with financial institutions. Many do not even have a Post Office Savings Bank book. But they realise, in an inchoate way, that they have an investment, they have put something by for a rainy day, in British Airways.
Such people have every right to expect financial probity, common sense and honesty from the custodians of their wealth. 1149 Perhaps I am being rather simple—[HON. MEMBERS: "Hear, hear."] Perhaps, but a simple attitude to complex problems—attempting to understand rather than give answers—is often a great advantage in political life. A more simplistic approach to problems is often what is needed.
I ask the Government to respond to the belief that they are the custodians of a great heritage and a great piece of wealth owned by millions of people. They should take a more responsible attitude to this parcel of wealth. Rather than creating a structure which will allow future Governments to sell off BA lock, stock and barrel, they should act in the interests of the British people and of the future of democratic government.
The Government, even at this late date, could change their minds about how many shares they will sell and even give us a positive assurance such as we are used to from men and women of conviction. I thought that this was the era of conviction politics, when a politician would say "I believe that this will be the position now and for as long as my reputation is nailed to the mast of this Government."
I have often pressed the Under-Secretary of State to be converted. I gave him many chances in Committee to erect the Tebbit memorial to integrity and to conversion on the road to Damascus. I ask him tonight to say that, so long as his colours are nailed to the mast in this matter, the Government will retain a 51 per cent, stake in this company, that that is the only way to ensure that this public wealth and investment is looked after properly. I ask him to say that the Government will not sell off this wealth to speculators and sharp operators.
We know that these are not good years for selling off such an operation as British Airways. If we are not careful, it will become a point of principle in the Conservative Party—a sort of reverse logic—that they must sell off at least 49 per cent., if not more, by the next general election. If that is so, a grave disservice will be done to the people of this country. I ask the Government to think again.
§ Mr. Michael McNair-Wilson (Newbury)
If I really believed that the Government were seeking to sell off a British asset, to deprive the taxpayer of his 1150 inheritance, I might find some sympathy in my heart for new clause 6. But I do not believe that the hon. Member for Huddersfield, East (Mr. Sheerman) believes that proposition any more than I do. He must recognise, as I, and the Government, have recognised, that British Airways will need new entrepreneurial skills if they are to hold their place in the market.
I call in aid of that statement, first, British Airways' own annual report. On page 8, it says:British Airways has always believed firmly that a strong entrepreneurial spirit is needed for effective marketing of its passenger, cargo and mail capacity This approach has also been employed to good effect in the profitable management of our relevant ancillary activities.So BA recognises that entrepreneurial skill is required, of the sort that Sir Freddie Laker has so amply demonstrated by the enormous one-man revolution he has created in the world's airlines, the sort of skill that Mr. Adam Thomson brought into the second force with British Caledonian, an airline which manages to operate successfully and profitably without any of the appalling events with which the hon. Member for Huddersfield, East, sought to terrify the House—about BA falling into the hands of sharp operators who would bring this great airline to its knees.
I believe that new clause 6 highlights the objective of the Bill. Of course the Opposition were bound to move it because, if they were successful, the Bill would fail in one of its main tenets. The Opposition would be sentencing British Airways to continued nationalisation without any arguments in favour of nationalisation as such. It is as if they were saying that British Airways has been supremely successful as a nationalised corporation and therefore it should remain that way.
I question that premise immediately. I do so as a former member of the Select Committee on Nationalised Industries—a Select Committee which we may have to reconstitute. That Committee started to provide the sort of accountability that nationalised industries for too many years had not been forced to meet. I accept that the Committee was an imperfect weapon. Here I pay tribute to the hon. Member for Feltham and Heston (Mr. Kerr), who is not here at present. He 1151 recognised that if that Select Committee was to do the job that Parliament had set it up to do, it would have to make the nationalised industries recognise that they could no longer live in an ivory tower, accountable to no one. He insisted that each one of them brought their annual reports before our Committee, and we went through those reports just like shareholders going through the general meeting.
Bit by bit we began to create the concept of accountability and the need for the chairmen of those great industries to account to Parliament for the way in which they had discharged their duties. That Select Committee has gone now, and without it, accountability has gone. I know that annual reports are sent to the Secretary of State and that they are still obtainable in the Vote Office, but thereafter there is no further process, or anything that any of us in Parliament can do. Therefore, the taxpayers' money, which is so often indulged in large sums by the Government in nationalised industries, is no longer a matter for us in this Chamber. The money is spent on our behalf and we are told in that gladsome phrase that we own the nationalised industries. Why are we not rejoicing? The answer is that we are not always convinced that our money has been spent in the most effective way.
§ Mr. Clinton Davis
How does the hon. Member perceive that there is accountability as long as the Government persist in the policy of retaining a majority shareholding in the successor company? How is that public accountability to be demonstrated? Does the hon. Member believe that it should be there at all?
§ Mr. McNair-Wilson
I had the good fortune to be on the Select Committee on Nationalised Industries when British Petroleum came before it. I heard the then chairman of BP explain that, although the Government owned 49 per cent. of the company, he felt, in almost every sense, that it operated as if it were in the private sector. That meant that the company accepted the disciplines of the private sector. It accepted the need to prove to its shareholders that it was administering its business as well as it knew how and using its assets to the greatest possible benefit, both of the company and the shareholders.
§ Mr. Clinton Davis
Is the hon Member casting serious aspersions on the present board of British Airways? Certainly the Minister did not do so. Is the hon. Member saying that the board is not carrying out its duties properly, or not at all?
§ Mr. McNair-Wilson
The hon. Member must not put words into my mouth. He asked me how I saw the future of British Airways when the Government no longer owned 51 per cent. of the shares. I used the example of British Petroleum to illustrate that this would have a profound effect on British Airways. That did not in any sense suggest that the present management was deficient in the discharge of its duties.
I well remember the inquiry of the Select Committee into British Airways just after BOAC and BEA had amalgamated. I remember that one of the witnesses before the Select Committee said that the result of the amalgamation was to create not one airline, but three. He claimed that there were three different groups of people fighting each other to have the final say. There were the new people in British Airways, and the old people from the other two companies. If that is so—and I suspect that there is some truth in it—it could be that this gigantic airline with its many subsidiaries and offshoots into other areas of commerce, has grown too big to be managed successfully. It may be that the idea of profit centres has been lost because the airline has become so gargantuan. It may well be that, looked at in a commercial light, some very exciting changes could occur in its structure to make it more effective.
§ Mr. McNair-Wilson
It means that the first thing that the new management will have to decide is whether the structure of British Airways is right. The hon. Gentleman knows that the structure has been changed at least twice since British Airways were set up three or four years ago. If one has to change the management structure twice after such a short time, one is bound to ask whether that structure is right. Those running the airline are clearly not convinced that it is right.
Secondly, we must ask ourselves whether a proper return on the assets 1153 available to British Airways is being obtained. British Airways admit that they have fallen down on their target this year and in other years. Then, of course, the advantage of being a commercial enterprise, as opposed to a State-dominated one, is that commercial considerations will come to the fore to a much greater extent. Instead of the meddling of Ministers—and I hope that my hon. Friend will not take offence—we shall see the true managerial functions of those running the airline coming into play. No doubt they will use the atrophied muscle that they have at present—human ingenuity, ideas and improvisation—to ensure that the airline is modern in every aspect of its management approach. Again, many people will say that British Airways' management is not as good as it should be and because of that the airline is not able to meet its targets.
§ Mr. Sheerman
What evidence does the hon. Member have for that statement? This is a serious attack on the quality of British Airways' management. I have found that management to be very good and full of entrepreneurial talent. This is the nub of the Bill. Why are we ruining a perfectly good, efficient nationalised corporation? It has a good record, it is profitable. By what criteria does the hon. Member claim that it is unsuccessful?
§ Mr. McNair-Wilson
Before I answer the hon. Member, I must say that I am glad to see the hon. Member for Feltham and Heston in the Chamber. He knows that just before the general election last year the Select Committee on Nationalised Industries started an inquiry into British Airways with the task of looking at its management structure and its effectiveness as a nationalised corporation. We did not start the inquiry merely for the sake of doing so. It was started because we each had a playback to the effect that matters were not as right as they should be at British Airways. Although we did not complete the inquiry, the hon. Gentleman should not imagine that everything in the garden was, is and always will be, rosy.
§ 7 pm
§ Mr. Russell Kerr
I hesitate to interrupt, as the hon. Gentleman has a wide knowledge of certain aspects of nationalised industries. One of the tenets of that hard-working Committee was to let 1154 the facts speak for themselves. I should hate to think that there was any imputation against the record of British Airways. We did not reach a collective view about British Airways being worth-while or otherwise. As an old stager on the Committee, the hon. Gentleman would be the last person to wish such an imputation to exist without proper evidence to support it.
§ Mr. McNair-Wilson
The inquiry made little progress because of the election. It is no less than the truth that we set up the inquiry because there was concern. Our inquiry never proved whether that concern was genuine. At a meeting at London airport we put to Mr. Ross Stainton and his colleagues some of the problems that worried us. There may be minutes of that meeting available for hon. Members to read.
We should not assume that everything in British Airways' garden is rosy. I do not believe that even British Airways believes that to be so. The chairman's statement says:At £110 million, the result, while satisfactory in a difficult year for the airline industry, is nonetheless some £30 million short of British Airways' own target.When British Airways is prepared to state that it has fallen short by 20 or 30 per cent. of what it hoped to achieve it is difficult to say that everything is rosy.
§ Mr. Clinton Davis
The hon. Gentleman will want to be fair. At present little is rosy for the aviation business, in particular for American airlines, having regard to their returns over the past year.
§ Mr. McNair-Wilson
I shall not pursue the broader point about American airlines. I repeat the words of the chairman of British Airways:At £110 million, the result, while satisfactory in a difficult year for the airline industry, is none the less some £30 million short of British Airways' own target.Doubtless that shortfall can be explained, but it is not unreasonable to say that something better could be achieved.
I quoted the remark that British Airways is now three airlines. As chairman of BEA, Sir Anthony Milward, understood as well as anyone the problems of amalgamating two airlines that do essentially different jobs. When asked whether he thought that the amalgamation made sense, he said that he did not believe that 1155 it was possible to run a single airline when there were long haul and short and medium haul operations which required different skills and types of aircraft. He believed that even though the airlines were given the single name of British Airways, that would not get over the problems of managing such an enterprise or produce a better airline. That advice was not taken, and British Airways emerged.
The Government are asking themselves whether British Airways has failed to meet its targets as often as it could because of circumstances outside its control or because of an essentially faulty structure with which to manage its enterprise. Our conclusion is that the management structure is faulty in a number of respects. In particular, like so many nationalised industries, it is at the mercy of the prying fingers of Ministers, who choose to develop their policies whether or not they make commercial sense or are likely to increase the airline's efficiency. I do not have to recount how many aircraft British Airways has been required to buy because it suited the Government of the day. That is not the best way to maximise State assets.
If we can step back and put management decisions and the running of the business in the hands of those with the necessary management skills, commercial judgment and knowledge of the industry, the best days for British Airways lie ahead. I do not know whether those best days lie in one airline with one name or perhaps BEA and BOAC reconstituted. As a Member of Parliament I do not seek to advise those who understand such matters. I do not believe that British Airways has achieved the results that we might have hoped from the promise given when it was set up. I therefore oppose new clause 6 and commend the Government policy on British Airways.
§ Mr. Woolmer
The remarks of the hon. Member for Newbury (Mr. McNair-Wilson) ranged wide. He demonstrated with forthright honesty the attitude of many Conservative Members to the Bill. They see it as an act of denationalisation. The hon. Gentleman does not even regard a 51 per cent. ownership as fulfilling his expectations. The nub of the matter for many Conservative Members is whether British Airways remains publicly owned. The 51 per cent. Govern- 1156 ment ownership is therefore important and should be properly considered.
The Secretary of State, in introducing the Bill, and the Under-Secretary of State on a number of occasions have emphasised that they do not intend to go below 51 per cent. at present. It is worth considering why the Government feel it necessary to emphasise that the Bill is not designed to meet the underlying objective of many Conservative Members. It would not be right for the Bill to go through unless the Government's intentions are made clear. It would be wrong to say that it was not intended to use the Bill for the final act of denationalisation if that were the real intention. The House should be told clearly the Government's intentions.
I was disturbed by the implication of the hon. Member for Newbury that all nationalised industries are automatically worse in many respects than privately owned industries. A glance at whole areas of nationalised industry will show that productivity, investment, seeking export markets and competing with imports are not the sole virtues of the private sector.
There are deep problems in privately owned and nationally owned enterprises. Whether or not share ownership slips past or stays below the magic 50 per cent. is not the make-or-break factor in productivity or what the hon. Gentleman calls entrepreneurial flair. The productivity record of many nationalised industries is better than that in many areas of private industry.
One of the areas of private industry that I know best is the textile trade, which, for various reasons, has an historically poor record of innovation, keeping up with market trends and investment. In latter years, faced with tremendous pressure, the industry has made great improvements which are much to its credit. The decline in the textile trade has not occurred because it is a nationalised industry, but if it had been a publicly owned industry all its woes would have been blamed on public ownership. We must not get tangled up in arguments that have no substance.
I found the arguments of the hon. Member for Newbury on accountability a little confused, but he seemed to suggest that nationalised industries were not as 1157 accountable to their shareholders as are privately owned industries. However, he went on to refer to how Parliament was seeking to make nationalised industries accountable in a way that some private companies would find objectionable. Shareholders' meetings of most private companies are farcical. True accountability and oversight of the owners of private business does not take place at such meetings.
The hon. Member for Newbury was drawn into commenting on the present position of British Airways. I do not wish to comment in detail on the management of the airline. It is easy in the House to voice support for the management of a company or to voice caution and concern, but this is not the best place to explore the performance of managements, unless there are urgent reasons that force the House to do so.
The airline business throughout the world is not in a happy state. The state of our economy and most of our industries is even more unhappy, with high interest rates, the high value of the pound, high inflation, and a depressed domestic market which brings with it depressed activity. It would be unfair to bandy across the Floor of the House arguments of principle on the Bill which do not depend on whether British Airways is going through a bad few weeks or few months. The Bill will stand or fall by different assessments of the best way to administer our airlines and individual businesses.
British Airways and many other airlines have been suffering problems in recent months. The flotation and sale of shares in the new company will be a success only if potential investors regard it as a profitable concern, not merely immediately but for a number of years. That position will have to be brought about before there can be a successful flotation or the sale of a substantial number of shares.
We have a mutual interest here. Whether British Airways stays completely nationally owned or a proportion of the shares are sold, the taxpayer and the private shareholder will wish British Airways to be a profitable concern. That is common ground.
On the assumption that the airline will be a profitable concern, it is important to ask why a substantial proportion of 1158 shares should be sold. Over the years, the British taxpayer has footed the bill to make sure that British Airways remained our national flag airline. With that has come the present role of British Airways and the role that will, I suspect, remain the cornerstone of the airline's operations.
As the taxpayer has paid in good years and in bad, he should have the benefit of profits when the airline makes them. The Government appear to take the line that if a nationalised industry is making a profit it should be sold and if it is making a loss it is a target for being beaten around the head. Neither nationalised industries nor the taxpayer can win.
If a nationalised industry is making a profit that could bring a return to the taxpayer and help to keep down taxes, the Government will sell it. If it is making a loss so that the taxpayer has to foot the bill, the industry gets a public hammering. That is not satisfactory.
The Bill was introduced to the House as one example of the Government's willingness to denationalise—the word that eventually emerged was "privatise"—certain sectors of nationalised industry.
§ Mr. Michael McNair-Wilson
Would not the hon. Gentleman agree that British Airways not owned by the State and making a profit will pay a substantial amount to the State in taxation on their profit? But if it makes a loss the taxpayer will not suffer at all. Therefore, in effect, the taxpayer does rather better if the company is in the private sector than if it is in the State sector.
§ Mr. Woolmer
My point was that for the sale of shares to have any chance of success British Airways would have to be seen to be profitable and to have a clear promise of significant profits for some years ahead. In the present state of the airline industry and with, unfortunately, the possible impending state of the world economy, it would be a brave person who said tonight that a successful flotation was likely to take place for some time. I say that not as a debating point but as a reasonable assessment of a difficult market.
On the assumption that British Airways were turned round to profit, the question of losses or otherwise would not enter into the matter. If that were not 1159 so, I do not believe that the institutions would be willing to consider buying shares.
Secondly, British Airways is not simply another company. The Minister has said a number of times that it will be a Companies Act company and that the Government will sell off shares in it. But British Airways is not just another company. It is the national flag airline. What do the Government think they will mean by the "national flag airline" in the future? The Under-Secretary said repeatedly in Committee that British Airways would remain the national flag airline. When he explained why it was desirable that the Government should retain at least 51 per cent. of the shares, he gave these two reasons:First…it will be a good investment…Second…there is a token there of the Government's continuing interest and support for the national flag carrier…"[Official Report, Standing Committee B, 31 January 1980; c. 307]carrier. If the latter is a reason for the Government's maintaining at least a 51 per cent. ownership for the foreseeable future, what do the Government mean by that phrase? Does it signify that British Airways are indeed something a bit extra, a bit special and deserving and calling for rather more public and Government support than there would be for a normal private airline?
The third reason why I think that the clauses should be accepted is that the position should be clear for the prospective shareholders. There are hon. Members who know more about these matters than I do, but it seems to me that if the Government of the day are considering selling off shares in a previously nationalised concern prospective private shareholders should know whether they will be faced with a continual dribble to the market of a proportion of the shares. That would have an effect upon the price they would be prepared to pay and on their feeling of security that the market would be supported and would not be undercut by the selling of another 10 or 15 per cent. of the shares. Moreover, they would want to know how firmly committed the Government were to the notion of British Airways as the flag airline. If the ownership came down to 20 per cent. or 30 per cent., that argument would begin to wane.
1160 Private prospective shareholders should have some certainty as to the limits on the sale of Government shares. That is another argument in favour of supporting the clause. If it is not, I shall be grateful if the Minister or other Conservative Members will explain its weakness. If a major institution that owned 100 per cent., or even 70 or 80 per cent., of the shares of a company suddenly announced that it would sell off between 0 per cent. and 80 or 90 per cent. of its shareholding at some time in the future, possibly as quickly as it could, to raise cash for itself, that would have an unsettling effect on the market for the shares of that company.
I suspect also that the Government will have to provide some certainty to the market, that they will have to give an indication of what limit there will be on the timing of the selling of shares. I cannot believe that they will be able to tell the market "Buy 30 or 40 per cent. of the shares from us this year, and possibly in a few months' time we shall want to sell off another 20 or 30 per cent.".
Fourthly, I suspect that a secondary but important reason why the Government have in mind selling off shares has not been simply to denationalise them but to raise cash towards reducing the public sector borrowing requirement. Indeed, the sale featured in the ways in which the Chancellor of the Exchequer was to bring down that infamous thing called the PSBR. That is not the best reason, or even a good reason, for selling off an unlimited and unknown proportion of shares.
My fifth point is really a question to the Under-Secretary. Why do Ministers continually emphasise that they have in mind a lower limit than 51 per cent.? It was emphasised strongly on a number of occasions. Why was it emphasised so strongly if it does not matter? If it does not matter that the ownership is kept at no less than 51 per cent., why keep emphasising it? Why did the Secretary of State himself originally emphasise it, and why was it emphasised in Committee? If 51 per cent. does not matter, if it does not affect entrepreneurial drive, the board's commercial independence or the ability to adjust to market conditions, why object to the 51 per cent. being in the Bill? If the Minister objects to its being in the Bill, how does he explain his so far fairly 1161 firm adherence to that figure as the limit below which he would not go?
The House has already been told that a number of other airlines have a majority Government shareholding. The Minister today found it helpful to look to the United States for other examples, but he knows quite well that if he turned to Europe he would find a whole number of airlines of major nations where the position was quite the opposite, where there was a substantial majority of Government or public sector shareholdings.
The Minister will know the facts and figures better than I do. What I have said is certainly true of Lufthansa and, I think, of Alitalia. It is no accident. It is because the European airline market is not the same as the American—in history, present structure or future opportunities.
The sixth point is the artificial distinction made at one time between the commercial manner of management and the proportion of shares owned by the public sector. The Minister asserted firmly in Standing Committee that it is not the Government's present intention to reduce the shareholding below 51 per cent. The reason for going even that far is to liberate the company into becoming a Companies Act company in order to exercise managerial independence and to be free from Government interference.
It is compatible, according to the Government's argument, to have 51 per cent. share ownership and the commercial freedom and independence of the Government that they wish to achieve. If the commercial independence of the board is not to be jeopardised by a 51 per cent. share ownership, I ask again what is the objection to keeping a 51 per cent. share ownership. I am at a loss to know. Apart from an ideological wish, in some sense, to get below 51 per cent., it appears to have no connection with profitability because profitability has to exist to sell 1 per cent. of the shares. It appears to have no connection with the managerial, commercial independence of the board because that appears fully to satisfy Ministers. The 51 per cent. is becoming rather a symbol in the same way as it was not possible to accept two non-executive directors.
Conservative Members adopt such a fixed ideological position that they can- 1162 not even consider things that appear sensible and rational in their own argument. The argument for two non-executive directors was lost. Now the Government argue that 51 per cent. share ownership is compatible with all their objectives except the ideological commitment that they will denationalise. To denationalise, they must eventually get below 51 per cent. That is a singularly unreasonable way in which to treat a company and to go about considering a balance between public and private interests. That is why the Labour Government, when we take power, after the Conservative Government have denationalised British Airways or any other body, will do just the opposite. We shall go to and fro, like a ping-pong ball, between nationalisation and denationalisation.
§ Mr. Colvin
On the question of to-ing and fro-ing, it has not emerged from the debate—I apologise if there was any mention of the matter during my absence from the Chamber—that there has been much play by the Opposition of the percentage of shares that the Government will retain in British Airways. At no time have the Opposition stated what would be their policy in regard to the shareholding in British Airways. Is it their intention, at some far distant future date when they may have the opportunity to do something about British Airways, to buy back enough shares from the market to make up 51 per cent.? Or do they go along with the expressed intention of the hon. Member for Nuneaton (Mr. Huckfield), who sits on the Opposition Front Bench, with regard to British Aerospace, when he says that it is Labour Party policy to take back from the owners of the shares any that are sold by the Government without paying compensation? Would that be the policy of the Opposition, if they ever achieved power again, regarding the shares sold by this Government to the private sector, including shares sold to employees in the industry on preferential terms? The hon. Gentleman may care to elucidate.
§ Mr. Woolmer
The hon. Gentleman will recall, if he was present during the Second Reading debate, the precise way in which my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) dealt with that point. The pity is that the Government, in introducing the novel 1163 concept of a Companies Act company as a way of dealing with the relationship between public and private ownership, have lost the opportunity of trying to achieve an acceptable balance between the public and private sector. I am responding only to what I have heard in the debate and what appears to be the motivation of Conservative Members. It seems that their approach is to sell as big a proportion as possible to get the Government out of the situation. That seems a great pity in what could have been an interesting experiment in relation to public ownership and the private sector.
The notion of Companies Act companies and the public share of individual companies varying over time bears some consideration. One of the reasons for introducing some of the new clauses is to express concern about companies moving in and out of public ownership, as conventionally described in terms of 51 per cent. ownership, without any legislation or even endorsement by the House. Following the Bill, as hon. Members will appreciate, it will be open to any Government of the day, not only in respect of British Airways, to nationalise or denationalise without ever coming to the House. It would be done simply by buying or selling a proportion of the shares. One of the reasons for these new clauses is to make sure that the House considers it right that companies should be brought into or pass out of ultimately the ownership of the public sector, conventionally defined as 51 per cent.
I hope that the argument for the new clauses will not only be answered constructively but pondered upon by the Government. I hope that the Government will accept that the House should properly consider whether and why any particular company should be denationalised and whether the 51 per cent. ownership is a bar to commercial independence and judgment, which Ministers, I understand, accept is not the case.
§ Mr. Bill Walker
I shall be brief. I am opposed to new clause 6. According to my reading, it means that we shall be writing into a statute something that would require another statute to be changed. The whole idea of selling these shares to the public, however it is done, is that the best possible price should be 1164 obtained at the best possible time. I do not know when that time will be. I do not know what is likely to be the best possible price. Circumstances change and market conditions change. I believe that competition—this is true in the buying and selling of shares as with anything else—forces companies to become more aggressive in their marketing and more competitive in their pricing policies.
A splendid example is the achievement of Laker Airways on the North Atlantic route. People like myself can now take their families on holiday to North America. That could not have been contemplated a few years ago. It was out of the question because of the cost. We are looking to see whether the consumer interest is being served by competition. I remind hon. Members that there are consumers who buy shares. They are looking to get into things where they expect that there will be profits in the future and where they will get a return for their investment.
One reason why there should be a degree of flexibility is that this will affect the pricing and the marketing of the shares. If we write into a statute things that are inflexible, this is bound to be reflected in the value of the shares.
I remind Opposition Members that the Minister made it clear in Committee that the Government were thinking of between nil and 49 per cent. Those were the shares that the Government were considering selling off. The hon. Member for Batley and Morley (Mr. Woolmer) said that he felt the situation could become like a game of ping-pong. To write in this clause would not change the ping-pong ball aspect. Some people would still feel that retaining 51 per cent. provided the opportunity to renationalise. They would see it as the springboard to renationalisation. So the ping-pong ball effect is still there. In my judgment, if it it written into the statute it could affect the value of the shares as they were marketed. That would not be in the best interests of the British taxpayer and the consumer. In my view, that is a very good reason why the clause should be opposed.
§ Mr. Tebbit
Again I have to say that I do not think that we have explored any ground which is new to that which we 1165 explored in Committee. That is not surprising, and I say it in no criticism of those hon. Members who have contributed to the debate.
The hon. Member for Hackney, Central (Mr. Davis) was very anxious to know what were the factors which would cause the Government to reduce their shareholding from the level which was reached immediately after the initial launch or, indeed, below 50 per cent. In reply to the hon. Gentleman, I put forward two suggestions.
First, the company might choose to make a rights issue and the Government might choose not to take up 51 per cent. of that rights issue. If we put in a requirement that the Government's holding should be maintained at 51 per cent., and if 51 per cent. was reached on the first launch, we would be writing into the statute a requirement that every time British Airways made a further issue of capital the Government would have to take up at least 51 per cent. of it. It would be unwise of us to bind our successors in that manner. The Government of the day might think that it was a good investment. They might think that it was a bad investment. They might think that they would prefer to do other things with the money than be forced by statute to spend it on acquiring further shares in the company. That is a clear and cogent reason why we should not write in such a requirement. That is how it might come about that the Government's shareholding fell below 51 per cent.—even without any decision taken by the Secretary of State of the day deliberately to sell the shares for any other reason.
Secondly, I am not sure that I know fully the considerations which moved the Labour Government to dilute their holding in British Petroleum without, I might mention, any form of parliamentary approval by more than one-third, or about 25 per cent. if we include the Burmah Oil shares held by the Bank of England. At no time did right hon. and hon. Gentlemen then in Government and now in Opposition feel it necessary to come to the House to seek statutory approval of their plan to sell a very substantial holding of BP shares. I remind the House of how substantial it was, because some hon. Members may have forgotten and others may wish to forget.
1166 At that time the BP company had a nominal capital issued of £386½ million, of which £186 million was held by the Government, with a further £78 million represented by the Burmah Oil shares held by the Bank of England—a total of £264 million of Government investment. They sold £66½ million of that investment—about one-third of that which was indisputably theirs, as opposed to the Burmah shares—without seeking statutory approval. Yet, when it comes to discussing what might happen to British Airways shares, suddenly right hon. and hon. Gentlemen find that there is a requirement for parliamentary approval.
Why? What is the difference? The Labour Government left themselves only £119¼ million of undisputed shares—exeluding the Burmah shares—in their ownership out of £386½ million issued. This makes their protestations about a 51 per cent. limit and the need for parliamentary approval look pretty thin and shabby. As so often happens, they want us to follow procedures which in their time they found were not proper or suitable for the Government to follow.
The hon. Member for Huddersfield, East (Mr. Sheerman) tried to find common ground with the rest of us on a number of issues. Where I can find common ground with the Opposition, I do. I admit freely that it was the arguments put forward by the Opposition around this matter which convinced me of the desirability of providing that the Secretary of State could buy back shares if he wished to regain the level reached at the launch stage if, after that initial launch, the Government's holding was reduced below the figure which was then reached.
That is another difference between this Bill and the British Aerospace Bill, and I am unashamed to mention it. I do not think that it matters that there are differences between the two and that in this respect it is considerably more advantageous, if that is the word, to the views of the Opposition than the British Aerospace Bill. I am unashamed about it. What does it matter that in dealing with different industries in a different context we come to different conclusions?
As I say, I try to find common ground where I can. However, I assure the hon. 1167 Member for Huddersfield, East that I shall not experience any sudden conversion on the road to Damascus. As a matter of interest, I happen to have driven along that road more often than I care to remember. I can assure the hon. Gentleman that if he drives over the hills from Beirut to Damascus, as one used to be able to do, with a local taxi driver, he may come close to conversion. However, it is conversion to a very religious view, because one feels very near to death at times. I am not likely to experience any other form of conversion, however.
The hon. Member talked about speculators and sharp operators who would come in and buy shares in British Airways. Obviously he regards them as despicable people. However, they are precisely the same speculators and sharp operators who bought an investment in British Caledonian. Recently British Caledonian seems to have been one of the pet creatures of the Opposition. Right hon. and hon. Members are very concerned about the fate of the speculators and sharp operators who bought shares in British Caledonian. They use no pejorative expressions about them. I do not believe that we can take the hon. Member for Huddersfield, East very seriously.
My hon. Friend the Member for Newbury (Mr. McNair-Wilson) was right to point out that BA has a record of which there is a great deal to be proud. It even had the proud privilege at one time of having me as one of its employers. However, its record might have been better had it not suffered from Government interference from time to time. I might add that it would have been better if it had had to compete for its capital investment with other commercial enterprises in the private sector rather than with other Government expenditure totally unrelated to commercial purposes.
The hon. Member for Batley and Morley (Mr. Woolmer) asked one or two questions, and I shall answer them as best I can. He asked what a flag carrier was. It is an expression now which has no concise meaning in the way that it used to. I should define British Caledonian as one of Britain's flag carriers. Similarly, I should describe Pan American, TWA, Delta and many others as American flag 1168 carriers. There is no doubt that British Airways will be the prime British flag carrier, merely because of its size and capability, for as far ahead as I can see in the future.
The hon. Gentleman asked about the private investor who would want to know about the Government's intentions in respect of the final amount of capital in British Airways to be disposed of. The private investor must make up his own mind about these things. If that was the worst of the hon. Gentleman's worries, as opposed to worrying about the Government's intentions he should be worrying about some of the sillier things by people like the hon. Member for Nuneaton (Mr. Huckfield) and the Member for Bristol wherever it is, the odd ball one.
We have been asked why we should sell. There is always the desirability of raising cash. Let me assure hon. Members that the effect of the cash that would come from the sale of shares is relatively small compared with the effect on the PSBR of no longer having a Government guarantee on future loans for capital investment.
I have dealt to some extent with the question of the 51 per cent. shareholding already by pointing out that we do not necessarily wish to bind ourselves to take up 51 per cent. of every rights issue. As for ping-pong and the way in which industries may be nationalised or denationalised, there are several ways of getting around that. One is to make sure that we do not have another Labour Government. That will resolve the situation in the best possible way. The second way, since I wish to see common ground, is the method I have already mentioned of allowing a future Secretary of State, if he wishes, to purchase back shares without any need of further legislation or any need to change the structure of British Airways Limited. He would have the right, if he wished to avail himself of it, to appoint some or all of the directors.
That makes the position plain. The only thing I would add is that there still seems to be a misunderstanding among Opposition Members in the way they refer to the Government retaining majority control in the initial stages after the launch. I must say that even if the Government maintain the majority of the 1169 shares that does not mean that they seek to maintain control of the airline.
I do not think that I can help the House further except to say that I find, on the grounds I have given, that all three new clause are unacceptable, each for slightly different reasons.
§ Mr. Woolmer
I should like to ask, briefly, in view of the Minister's concluding remarks, what he meant by his statement at column 306 of the Official Report for 31 January when he said:What I have said is that we intend to maintain a controlling interest.
§ Mr. Tebbit
I was then speaking of the short to medium term. I also said:The point I am seeking to make is that we wish to maintain a position of flexibility in these areas.Earlier I had said:we are not committed to selling any particular percentage. What I have said is that we intend to maintain a controlling interest.The hon. Member for Batley and Morley (Mr. Woolmer) interrupted me at that point, and I said:That to some extent would frustrate the exercise in which we are engaged."—[Official Report, Standing Committee B, 31 January 1980; c. 306.]The point I am seeking to make is that we wish to maintain a position of flexibility. At column 956 of the Official Report and in other places, I made it plain that we did not bind ourselves in the long term to maintain that position, not least because of the consideration that it would force us always to take up the majority of shares which were issued in a rights issue. For those reasons, I ask the House to reject all three new clauses.
§ Question put and negatived.