§ "Pursuant to the provisions of section 2(2) to this Act the Secretary of State shall nominate at least two non-executive directors of the successor company".—[Mr. John Smith.]
§ Brought up, and read the First time.
§ Mr. Speaker
With this we may discuss new clause No. 14—Appointment of Non-Executive Directors of Successor Company.
§ Mr. Smith
The new clause ensures that the Government shall nominate at least two-non-executive directors to the board of the successor company to British Airways. New clause 14, in the name of the hon. Member for Brentwood and Ongar (Mr. McCrindle), has much the same effect.
The Bill, which we opposed strenuously on Second Reading and in Committee, is dangerous and foolish. It seeks to change British Airways from being a successful public corporation into a private sector company. However, the Government say that they do not wish to sell 100 per cent. of the shares. They do not wish to dispose of all their interests in the successor company. Indeed, they say—and we have only ministerial assurances, for what they are worth—that they will retain 51 per cent of the shares.
The Government propose to sell up to 49 per cent. of the value of British Airways to the private sector. We do not know yet what proportion they will sell, nor, therefore, the proportion that they will retain. We do not even know whether they will carry through the exercise. All the signs are that if they attempt to float shares in the reasonably near future the valuation accorded by the market to them will be so low as to be a gross undervaluation of British Airways. That would constitute a substantial fraud on the taxpayer. We have grave doubts about whether the proposal will be carried through. However, we must proceed on the assumption that the Government will go ahead with the operation.
Our case is that at least two of the directors of the successor company should be appointed by the Government. In Committee we opposed the sale of shares at all. We also argued that a majority of the directors should be nominated by the Government because the Government will continue to own the majority of the shares. Our present proposition is modest.
§ Mr. Smith
It is extremely modest. Our original proposition was that the majority of directors should be appointed by the Government, but we would really like the Government to abandon their foolish policy.
1089 Let us consider the Government's proposition. They will retain 51 per cent. of the ownership of the successor company, but they plan to have no directors on the board which will run that company. The Government say that they do not want to interfere in the running of the company, although they will be the majority owners. It is a startling proposition that the majority shareholders in a company should, before the company is set up, say that they will have nothing to do with the appointment of directors. Can anyone imagine a private sector holding company saying "We own 51 per cent. of the company but we do not want anything to do with it. In fact, we are so keen on having nothing to do with it that we shall not have even one director on the board to look after our interests"?
If the successor company comes into existence, the British public will have a majority ownership. I do not know how long that position will be maintained. That is one of the reasons why we want at least one director on the board to look after the substantial British interest and investment. It is a startling and monstrous proposition that the British public owning 51 per cent. of the shares should not have even one director on the board that controls that investment.
When that argument was put to the Secretary of State on Second Reading, he was, as is often the case, hopelessly confused. He did not seem to understand precisely what the Government plan to do with their majority shareholding. We pursued the issue carefully in Committee. All that we heard from the Under-Secretary of State was that in extreme situations, such as if the minority shareholders want to get rid of the whole board, the Government might step in and use their majority votes at the annual general meeting.
The Government are standing back and handing over control of the company to the private sector minority. If the Government sold the majority of the shares it would be unreasonable to deny that majority section control of the board. However, not only is there to be a fraud on the public in terms of the asset value to be obtained for British Airways, but there is a startling twist in the public sector versus private sector argument, namely, that the public sector is to divest itself of all con- 1090 trol, even though it owns a majority of the shares. The proposition is so startling that it is almost unbelievable that any Government would have the face to propose it.
The Government are using the same device and selling off shares in British Aerospace, but two Government directors are to sit on the board. A distinction is being made because British Aerospace is a major Government defence contractor. It is a difference, but it does not explain why one company should have two Government directors and the other should not. The Secretary of State for Industry, who obviously does not keep in close touch with the Secretary of State for Trade, said that it was a good idea to have two outside directors on the board of a company. That does not appear to strike the Secretary of State for Trade as having any value.
The Government propose not only that the assets should be sold but that the whole control of the company should be given to the private sector, even though it will hold a minority shareholding. That is an outrageous and monstrous proposition to which Parliament should not assent.
§ Mr. Michael Colvin (Bristol, North-West)
The right hon. Gentleman refers to the whole control of a company. He is a lawyer and he probably understands such matters better than I. What does "whole control" mean? He insinuates that 51 per cent. of the shares necessarily gives "whole control". Surely whole control of a company can be in the hands of a group with a much smaller proportion of shares.
§ Mr. Smith
That is correct. There would be a case for having Government directors on the board even if the Government held fewer than 51 per cent. of the shares. With 51 per cent. of the shares being in the Government's hands that merely strengthens the case for having Government directors. Shareholders can have effective control of a company with fewer than 51 per cent. of shares if they control the largest voting block. There might also be provisions in the articles of association of a company giving particular rights to certain classes of shareholders. Perhaps the hon. Gentleman can explain how anyone with 51 per cent. of the shares in an undertaking can 1091 say that he does not want to have anything to do with running it. The directors will be in charge of the day-to-day running of the company.
The Government are giving away control of British Airways, our most import ant flag-carrying airline with the largest network of international routes in the world, to a minority, private sector holding. That is a fantastic proposition.
British Airways has been developed to its present international position not only by the skill of those who run it but by substantial public investment. What is likely to happen to the new company? We are suspicious of the Minister's assurances that the Government will retain a 51 per cent. holding.
§ Mr. Tebbit
I think that I made it perfectly plain in Committee that it was the present policy of Her Majesty's Government to hold 51 per cent. or more of the shares but that that policy was not guaranteed by me or any of my colleagues to continue indefinitely.
§ Mr. Smith
The Under-Secretary is saying that he cannot inform us what the Government's policy will be in the next few months. I thought that his position was that for the life of the Government they would retain a 51 per cent. shareholding, but perhaps the hon. Gentleman has taken a U-turn, a Z-turn or a W-turn, or whatever other manoeuvres are carried out by the Government, and he feels unable to assure us on that score. His statement this afternoon provides an added reason for having Government directors on the board of the new company. If the Government are so uncertain about whether they want to keep control of the company, that is all the more reason for their having directors to superintend it.
§ Mr. Tebbit
I cannot see what all the fuss is about. I can understand the right hon. Gentleman's point of view. He put 1092 it in Committee. I cannot understand why he should think that my view has changed or that anything I have just said differs in any way from what I said in Committee. It does not.
§ Mr. Smith
I am always a believer in the possible repentance of the sinner, and I had thought that in the time since we considered these matters in Committee some of these important matters would have dawned on the Under-Secretary. As is often the case, I was unduly generous in my hopes for the hon. Gentleman. I was wildly and unreasonably optimistic, and I apologise for having given the hon. Gentleman the benefit of the doubt in this matter, because it was clearly something that he is not pleased to have.
We therefore do not know what the Government will do with their shareholding. If they cannot tell us, even for the life of the Government, that they will maintain the 51 per cent. holding, when will they make up their minds? Will they change their policy of holding 51 per cent. within the next six weeks, the next year or the next 18 months? There will be hopeless uncertainty surrounding the issuing of shares in the company, and potential investors will want to know the Government's policy. The Under-Secretary had better be able to tell them more than he has told us so far, either in the House or in Committee.
We are very suspicious about what is going on. The whole idea has been sold to the public on the basis that the Government are selling off a minority of shares to the private sector and on the basis that there will be certain assurances for the airline employees and everyone else on the basis that, although the Government will not control events, they will hold a majority shareholding. As anyone who knows the airline industry is aware, it is going through difficult and troubled times. The profit and loss accounts and the balance sheets of the major world airlines, most of which are located in the United States, indicate the extent of the trouble. They have been caught between falling prices and rising fuel costs. It has been extremely hard for any airline to achieve profitability. This fact applies to British Airways and all other British companies be they in the public or private sector, as well as to international organisations.
1093 British Airways faces an added complication in that it is about to embark upon one of the most important re-equipment programmes in its history. It is phasing out the noisier aircraft for the quieter aircraft that are on order. The vast programme is expected to cost about £2.5 billion. However, total uncertainty will be created by the manoeuvre in which the Government are engaged because the Government guarantee on borrowing, which applies automatically to a public corporation, will be withdrawn.
If the company's assets are seriously undervalued, as there is a danger they will be, when the shares are sold the whole of this borrowing programme—not all the money will be borrowed, since a substantial amount will come from the airline's resources—will be put at risk. If that happens and the company finds it difficult to carry out its buying programme, it may have to consider the possibility of realising some of its assets to produce the cash it needs. That is when we become most concerned about what will happen to some of the profitable subsidiary activities of British Airways.
I have in mind particularly the helicopters division which is extremely successful and profitable and is one of the major carriers between production bases and platforms in the North Sea. Two major operators are engaged in this business, Bristow, the private sector company, and British Airways. I believe that British Caledonian also intends to participate. It would be scandalous if the British Airways helicopters subsidiary were sold off to be gobbled up by a private sector competitor. It is a profitable undertaking, which is efficiently run. Its sale would be a shocking example of the Conservative policy of selling off State businesses that make a profit while leaving those that do not to be carried by the taxpayer.
We see that policy in operation across the board. My guess is that the proposals that the Government are likely to make for the British National Oil Corporation may be the most scandouous of all when they will seek to get rid of important public assets to the private sector. We see the policy in operation in other transport undertakings as well.
In order to forestall such an event it would be most useful to have Government directors on the board who could speak up for the public interest because 1094 this 51 per cent. shareholding which the Under-Secretary will not guarantee is open to be raided at any time, especially since the company will be controlled by the minority shareholding interest. In these circumstances it would seem to us only prudent to have the protection which two Government directors would provide. It would not be complete protection, I agree, but those directors would be able to speak up about what was happening if such a raid on the company's resources were contemplated by the Government.
In addition, there is a perfectly reasonable case for having Government directors. They are present in other public corporations. The BNOC, with the establishment of which I was involved in a previous capacity, has two civil servants on the board, one from the Treasury and the other from the Department of Energy. That arrangement works extremely well and I see no signs of the Government changing it. There are other areas where the Government, having a stake in the business, insist on representation on the board. I know that the hon. Member for Brentwood and Ongar believes that there is a lot to be said for having non-executive directors on the board, particularly when there is a substantial public investment in the company.
§ Mr. Cranley Onslow (Woking)
I am not sure that the right hon. Gentleman is strengthening his case. If he is suggesting that it would be a good idea to have two civil servants on the board of British Airways I do not see how he could regard them as being ideal custodians of the public interest against the supposed preferences of the Government for whom they would be working.
§ Mr. Smith
The hon. Gentleman should listen more carefully, because I was not developing such a case. He has set up an Aunt Sally that needs no knocking down. The hon. Gentleman knows perfectly well that I referred to the innovation in another public corporation—BNOC—on the board of which sit two civil servants. The most important factor is to ensure that there are directors on the board who do not represent the minority shareholding group.
One wonders what harm there could conceivably be in having Government 1095 directors on the board, why the Government have so resolutely set their face against this proposition. In Committee I thought that this was a point on which they might have given way, because it would not run a coach and horses through the Bill. In addition, it was an arrangement that the Secretary of State for Industry had proposed for the new British Aerospace company. There cannot be great difficulties in operating in that way because the Department of Industry thinks that it will be able to work perfectly successfully with two Government directors on the board of British Aerospace.
Throughout the Committee stage we heard not a single argument from the Government that it would be difficult, awkward or undesirable to have Government directors on the board of the new company. This thoroughly bad idea in principle is offensive to any conception of equity when a minority shareholder is given total control over the board. Any motion that this is some attempt to fund some new middle way between total public ownership and total private ownership is subverted by the proposition that the private sector will gain control for less than half the money. That is what it amounts to, and it is a ridiculous proposition.
Guardians are needed because we cannot trust the Government. The Under-Secretary made that crystal clear in his intervention. They do not know whether they want 51 per cent. They know that for the next week or so, but they have no idea what will happen after that. It is a serious issue when the control of the company is at stake. Consider all that is invested in the company—all those who have committed their lives to the company at all stages of management, staff and work force. Their future may depend upon the whim of the Under-Secretary or his senior colleagues, who are in such a state that they do not know whether they want to keep 51 per cent. That is all the more reason why they should have people on the board to whom they can look as the guardians of the public interest. They would be Government directors.
We would like a majority of directors. That is the only equitable solution to the 1096 problem. As we do not have a majority in the House we are prepared to settle for something less than that. We may not even achieve that, but if we fail to do so it is because the Conservative Party is not willing to listen to reason, but is prepared to drum the Government's proposals through the House by use of the force of the majority rather than by an appeal to the reason of the House.
§ Mr. R. A. McCrindle (Brentwood and Ongar)
During the 10 years that I have served as a Member in the House the number of occasions on which I have found myself in substantial disagreement with the leadership of my party is extremely small. But I must say that on this occasion, as will be deduced from the fact that I have tabled new clause 14 in similar terms to new clause 5 moved by the right hon. Member for Lanarkshire, North (Mr. Smith), I find myself in substantial agreement with the argument that there should be some element of involvement by Government-nominated directors in the successor company.
Perhaps I could claim some small benefit from the fact that, when the Opposition originally tabled their amendments in Committee, it was their wish to have a majority of all the directors appointed by the Secretary of State and at that time I put forward a similar proposition to that which I am putting forward today. Perhaps I could claim that the new clauses owe more of their parentage to the argument which I consistently deployed than to the Opposition arguments.
I noted that the right hon. Member for Lanarkshire, North engaged in an assessment of almost the whole purport of the Bill while moving a new clause that has a relatively small significance in relation to the total. I do not intend to follow his example, although I agree with the idea of appointing directors via the Secretary of State. I do not accept some of his wider suggestions about what is likely to happen if and when the Bill is enacted. He had basic doubts that the Government would carry through the aims and objectives of the Bill. I have no such doubts. Nor do I wish that that should be so. The difference between the right hon. Gentleman and myself is that I approve of the general aim of part I of the Bill. I hope that it will lead to considerable 1097 success in the injection of private capital into the successor company. The Opposition and myself part company there. I wish to see a successful company take over from British Airways.
That would be better achieved if there were two nominees of the Secretary of State on the board. I accept that the airline industry is going through troubled times. I concede that the timing of the launching of the shares will be absolutely crucial. I also concede that for the next year or so it will be extremely difficult to achieve a successful launching of the minority shareholding which is to be offered to the public. That leads the Opposition to the conclusion that we should abandon the whole project. I do not reach the same conclusion. The timing is critical—and that is not a new conclusion for me. On Second Reading I indicated some concern that the timing chosen might be dictated more by political factors than by economic factors, and that that would not be in the best interests of succeeding in what the Government and I are united in attempting to achieve.
I wish this measure success. I remind the House that it is not intended to be a full denationalisation measure. The objective of this part of the Bill is not to sell off British Airways but to inject an element of private capital participation into a new limited company. I stress that because it is an extremely important point. Surely I am correct in saying that the objective of the Bill, no matter what may be the objective of any successor Bill which may be introduced even within the lifetime of the present Parliament, is not to denationalise British Airways but merely to inject an element of private capital into a limited company. It would be wrong not to continue participation on the board of directors on behalf of the majority shareholders. Because the majority shareholding will be retained by the Government they are in duty bound to represent the majority shareholders—in other words, to represent the taxpayers who are the majority shareholders—in one fashion or another.
One of the better ways of ensuring that the taxpayers' interests continue to be borne in mind by the new company would be for the Secretary of State to appoint two directors. They would not take part in the everyday running of the new company, as that would be at variance with 1098 the Government's proposals, but they would be non-executive directors simply and solely representing the taxpayers who continue to own a majority of the company.
§ Mr. Colvin
I follow my hon. Friend's argument, but if the Secretary of State is to retain in excess of 51 per cent. of the shareholding in the new company, and it is the shareholders who elect the directors, he could use his power as the majority shareholder to elect whom he wishes to the board. Why does that have to be written into the Bill as is suggested in new clause 14?
§ Mr. McCrindle
It was perhaps unfortunate that my hon. Friend did not have the privilege of serving on the Standing Committee on the Bill. If he had, I think he would have heard my hon. Friend the Under-Secretary of State say on more than one occasion that it was the Government's intention merely to allow the shareholders to appoint the directors. If I read that correctly, that is another way of saying that, without necessarily involving himself as the majority shareholder on behalf of the taxpayer, it was a perfectly conceivable—in fact, expected—result that the minority shareholding, that is to say, a maximum of 49 per cent., would be left to appoint the directors.
If I am correct in saying that that is the position that has been outlined by my right hon. Friend the Under-Secretary of State, I imagine that perhaps I am on the point of obtaining my first convert, at least on the Government Benches, because clearly the point of my hon. Friend's intervention would not then apply.
§ Mr. Onslow
My hon. Friend will recall that he and I did not agree in Committee on much of this, and I shall not bother him by rehearsing those arguments in an intervention. He has stated the case as he sees it for there being two people on the board of the new company simply and solely because the Minister puts them there to protect the taxpayers' interest. Will he tell us what sort of people he has in mind as being selected for this purpose, and precisely what their instructions from the Minister would be?
§ Mr. McCrindle
That is a somewhat astonishing intervention. The Secretary of State should first have the power to 1099 make the appointments. Then, as time goes by, any Government change of policy should be reflected in what those people say, because they are continuing to represent the 51 per cent. shareholding and the taxpayer. It is right that we should leave the Secretary of State to make the appointments and then from time to time to inspect the appointees, so that they may reflect Government policy in relation to British Airways as it develops.
I can think of no company of any sort where the majority of the shareholders are not represented on the board of directors. I do not have to look just at private companies; I can look at public corporations. I look not only at the example given by the right hon. Gentleman, namely, British Aerospace, where there are indeed to be two appointees of the Government as non-executive directors. I look considerably into the past and I recall that since 1918 British Petroleum has been in a position not dissimilar to that proposed under the Bill for British Airways. Unless I am very much mistaken, since that time the British Government have appointed one or two persons to the board of British Petroleum, and, pace the intervention of my hon. Friend the Member for Woking (Mr. Onslow)—who had left the Chamber but has just returned—I cannot recall a major occasion on which it has been suggested that those two people were necessarily the puppets of the Government nor that their presence on the board of British Petroleum necessarily prevented British Petroleum from carrying out its objectives and becoming one of Britain's more prosperous companies.
I do not think it at all acceptable that we should have either a private company or a corporation of a mixed type such as is proposed here under the name of British Airways Limited. I simply do not believe that it is correct that there should be no representation on the board of any sort.
I may be told that British Aerospace is a different matter because there are defence involvements. I may be told that British Petroleum is something that happened a long time ago, and that, if we were creating British Petroleum now, we would not appoint non-executive 1100 directors, in which case I would perhaps contrast the position not with that of other British companies but with other airlines where there is an element of Government involvement on behalf of the taxpayer.
I am not here speaking of some small airline in some small country. I am speaking of European airlines of such strength and importance as Lufthansa, SAS, Alitalia, Swissair and KLM. To some degree or other, in all these cases there is an involvement by the Government on behalf of the taxpayer, and in all the cases, as far as I have been able to ascertain, there is a representation on behalf of the taxpayer, through the appointment of the responsible Minister, on to one or other of the boards. I say one or other of the boards because in one or two of these cases there are two boards.
Whether we look at the comparison of a private company—unrepresented, even though there is a majority shareholding—or at British Aerospace or British Petroleum, as precedents in the public sector here, or whether we look to Europe, at airlines of comparable strength and importance to British Airways, the position remains the same. Where there is retained on behalf of the taxpayer a majority involvement in any one of these circumstances, then, through the responsible Minister, there is the appointment of at least one director.
I have suggested that these directors should be appointed purely on a non-executive basis because I repeat that that is the pattern in British Petroleum and in British Aerospace. It is the pattern to a large extent in the European airlines to which I have referred, and so, in my contention should it be the pattern in British Airways Limited.
I accept, as the right hon. Gentleman said, that British Airways are facing very considerable difficulties in the period that lies immediately ahead. They are faced with difficulties of rising oil prices and of fares which are under the microscope in the EEC and in other ways. They are faced with all the threats that whole or partial de-regulation may bring in its train. They must look across the Atlantic to the example of the United States airlines and see that they are in for very troubled times indeed in terms of continuing profitability.
1101 There is an additional element in regard to British Airways—that they are about to become a mixed public-private corporation. Government policy will be extremely important for airlines in the immediately foreseeable future. In those circumstances, it would be impossible for British Airways Limited to ignore developments in Government policy. There is a very real need for my new clause not only in regard to the taxpayer but also in order to keep British Airways Limited advised of the changing thinking on aviation that will no doubt overtake the Department of Trade.
I hope that my hon. Friend the Under-Secretary of State, whatever else he may challenge, will not challenge the suggestion that there may be a change of policy, because some of us have observed from recent ministerial pronouncements concerning aviation that a change of policy may very well take place under the present Government.
§ Mr. Barry Sheerman (Huddersfield, East)
Many of us on the Labour Benches found the arguments advanced cogently by the hon. Member for Brentwood and Ongar (Mr. McCrindle) very convincing on this aspect of the Bill, at least in Committee, and I am only sad that more Conservative Members are not present to hear their colleague's condemnation of the absence of any Government-appointed directors on the proposed new board of British Airways.
Sitting on the Opposition Benches, it is interesting to note that during the hon. Member's speech certain Conservative Members were leaving the Chamber in order to get the annual report of British Airways. It is a pity that some of them did not read it some time before we started on the long hours of debate in Standing Committee.
I shall not speak for long on the new clause because the arguments have already been very well rehearsed in Committee, but I should like to make a very important point that is essential to the whole debate on directorships. It seems to many Opposition Members that the root of the problem is the fact that the Government have an inability to understand that there is a sophisticated and important relationship between Government and autonomous and quasi-autonomous bodies.
1102 The history of the 13 months of the present Government has shown us that the Government look in very black-and-white terms at the relationship between Government and other bodies in which they have an interest or might have an interest. Their whole attitude towards quangos has led us to a ridiculous position in which many bodies doing a great deal of good work have been undermined and some have been abolished, and a great deal of good will in the community has been lost because of this blanket black-and-white attitude—that anything that is a quango, a quasi-autonomous non-governmental body, is necessarily bad.
That is a parallel to the Government's attitude towards the nationalised industries. That seems to be that there must be nationalised industries or there must be private industry, and never the twain shall meet. I am one of those Opposition Members who believe that the future of British industry and of British civil aviation is bound up with a complex relationship between Government and private industry. It necessarily must be, in terms of civil aviation, because of the complex and international nature of civil aviation, and the relationship between Government and civil aviation in Britain must be one of sensitivity, flexibility and change.
This Bill is the wrong kind of Bill to introduce, because I believe, as do many Opposition Members, that it is a short step from this Bill to the complete selling off of the public interest in civil aviation and the national flag carrier of British Airways. Many of us believe that the reason why the proposal to have two Government appointed non-executive directors has been so fiercely resisted by the Government, and the reason why the Under-Secretary is so unforthcoming about whether this is the policy for all time, is that when most Ministers stand at the Dispatch Box, they say "This is Government policy, and we have had done with it." They do not have to fill in any qualifications, any hesitancy, any building-in of escape clauses. It is either Government policy or it is not Government policy.
We have today had rehearsed what we heard time and again in Committee: that it is the Government's policy as of this moment; it is Government policy today. It might not be Government policy tomorrow, next week or next year. So 1103 there is a hesitancy about all the pronouncements regarding the Bill. The Bill is full of question marks, and/or "maybes" and "ifs". When will the Bill be implemented? When will the shares in British Airways be sold off? At what juncture, when and in what way, and how many? What will be the precise relationship between the Government and the new board? We are not altogether sure about that.
When we reach part II, the House will see that my qualifications about the difficulty of the Government's relationship with other bodies outside is highlighted by the strange relationship envisaged between the Government and the CAA, a relationship which, in Committee, we thought had been spelt out relatively clearly. However, two weeks ago we had the announcement about the decision of the Secretary of State for Trade on granting licences for routes to Hong Kong. Many Opposition Members were amazed then because all the arguments that were heard in Committee were turned on their head. Unfortunately, the Under-Secretary was not in the Chamber then. I think I am right in saying that. It was probably a very good thing to spare his blushes in relation to what he said in the hours and weeks that we spent in Standing Committee, because at that juncture everything that he had said was reversed.
I would not want to trap the hon. Gentleman into discussing matters which will no doubt be discussed on a more appropriate part of the Bill. However, I should remind him that the anxiety which he and his colleagues expressed in Committee was that the CAA would make bad decisions and would not be overruled by the Secretary of State.
§ Mr. Sheerman
I certainly agree that we were making a rather different case from that of the Under-Secretary. However, on Report we expect Governments to make the same arguments as were made in Standing Committee and to adhere to them and to maintain the kind of relationship which they envisaged a few weeks ago—although at the same time they make an announcement on route licensing which seems to stand everything that the Government said in Committee on its head.
1104 I return to the main thrust of my remarks. The central ambivalence about external bodies will be highlighted during this Report stage. The relationship between British Airways and the present Government is an uneasy one, as is the relationship between the Government and the CAA. It is about time that we discussed a proper and efficient relationship between the Government and autonomous and quasi-autonomous bodies. From my limited experience, it seems to me that one of the clear things at which we should aim is a proper relationship between the Government and the boards of nationalised corporations. I include those organisations not totally owned by the Government—the British Petroleum-style organisations.
The Minister has very often denied that there was a comparison with BP, but when one looks at the literature that the Conservative Party has produced over the past few years one constantly sees references to the BP model. If they were honest, the Government would admit that it is a BP model in many respects that they found most beguiling when they were designing this new format for British Airways. The one great difference, as the hon. Member for Brentwood and Ongar pointed out, is that the relationship is different in comparison with BP, in that there will be no representation from the Government on the board of British Airways. We find this rather strange.
It is to repeat the arguments to say that I believe that my constituents who are perhaps involved in their leisure time in organising the management and running of things such as working men's clubs would be horrified about the principle that an organisation has 51 per cent. of its shares—perhaps more than 51 per cent.—owned by someone outside who is not represented on the management committee. That does not make sense to ordinary people outside. From what I can judge from response on the Conservative Back Benches from Members who did not serve on the Standing Committee, it does not make sense to them either. If there were more Conservative Members on the Back Benches at present, I think that they would be persuaded by the case which we are making on these two clauses.
It does not make sense to have no Government representations on the BA board. I am sure that, as the people 1105 realise that their national airline is being taken away from them by a group of people who are purchasing only a a minority of the shares, that old fashioned statement will percolate through—"We wuz robbed."
§ Mr. Onslow
Before I turn to the content of the new clauses, I want to say something about the speech of the right hon. Member for Lanarkshire, North (Mr. Smith). One could tell from his speech that he is a lawyer. It was clearly a compôte of all the arguments which had occurred to him, whether mutually consistent or not, inflated into objects which he hoped would frighten, and therefore convince, his audience. These are the typical scaremongering tactics that we became familiar with in Committee from the right hon. Gentleman. He did not say much that he had not already said in Committee. He did not convince the Committee, even though he was then arguing a different proposition. In Committee he argued that a majority on the board of the new company should be Government directors, which is not what he is arguing today.
§ Mr. John Smith
The hon. Gentleman will remember that we put a number of propositions in Committee and that the one that the House is now considering was not defeated. There was a draw.
§ Mr. Onslow
If the right hon. Gentleman had been listening he would know that I did not say that it was defeated; I said that he argued chiefly a different proposition in Committee—that a majority of the board should be Government appointments. The right hon. Gentleman's scaremongering tactics included an attempt to suggest that the board's intention on attaining its independence—that is, in effect, what we are hoping to achieve—is instantly to set about selling off the most prosperous parts of its operations. I must declare an interest as a consultant to Bristow Helicopters Ltd, a company which did much more of the pioneering on the North Sea than British Airways did. It would never occur to me to tell Bristow's that it had a chance of acquiring British Airways helicopters. The Monopolies and Mergers Commission would stop it. That is not a sensible proposition.
1106 The right hon. Gentleman knows that what he has said is nonsense, but he trotted it out as a ritual bone to throw to the hon. Member for Feltham and Heston (Mr. Kerr), who needs something to gnaw on from time to time. I am sure that it has served a useful purpose in that context.
§ Mr. Onslow
I am sure that, if the hon. Member did, he would astonish us all by making a speech. If he says that he does not want publicity, I take his word for it.
The right hon. Member, for Lanarkshire, North seems to have a curious fixation about the forward investment programme of British Airways and the inevitability, as he sees it, that it will be carried through exactly as it was originally conceived, whether circumstances have changed or not. The right hon. Gentleman reminded us that the airline market has changed a great deal. He knows that the re-equipment plan was formulated in market conditions very different from those of today. If he believes that the board of the new company should be slavishly bound to follow every decision made two, three or four years ago—about the acquisition of 747s or whatever—without using its own intelligence and knowledge of market changes to review those decisions, his business experience must be very small.
If the right hon. Gentleman supposes that that is the function of the new board—simply to implement all the decisions taken in the days of nationalisation—he cannot be directing his mind to the functions of the new board. Those functions will be to run the company in the "best interests" of the shareholders. I take those words from the several excellent speeches by my hon. Friend the Under-Secretary in Committee.
The House will find my hon. Friend's remarks best summed up in column 189 onwards of the Committee Hansard. It may be a little misled by the fact that these sensible arguments are attributed to the hon. Member for Huddersfield, East (Mr. Sheerman), in which case I imagine that hon. Members might have skipped them. Even the hon. Member for 1107 Huddersfield, East must have skipped them.
I remind the House particularly of what the Minister said:There will be no Government directors as such. Like any other shareholder, the Government would be able to use their vote in respect of resolutions proposed by the board relating to membership of the board.I do not readily foresee circumstances in which the Government would use their majority to veto the proposals of the board in this respect."—[Official Report. Standing Committee B, 24 January 1980; c. 190.]I believe that that means that the Government would expect the resolutions put to the board to be broadly consistent with their own preferences—in other words, that the people who were to be nominated for membership would have had their names canvassed to the Government, that the Government would have said "Yes, we think that these are the people who can run the business in the best interests of the taxpayers and the shareholders. We see no reason to vote against them".
§ Mr. McCrindle
My hon. Friend intervened earlier to suggest that what he thought I was proposing was that there should be puppet directors on the board. If all this canvassing has gone on beforehand, what is the fundamental difference in his proposition?
§ Mr. Onslow
I am very sorry, but I shall turn to my hon. Friend in a moment, so that he can turn his attention to me. I want to deal with the right hon. Gentleman while I am on this point and to ask him who on the list of non-executive members of the present BA board he expects would not reappear because they had been politically vetted? I remind the right hon. Gentleman who they are, in case he does not have the latest BA report and accounts by him—
§ Mr. Onslow
Because I want to be sure that I have the facts at my fingertips. I know that the hon. Member for Hackney, Central (Mr. Davis) is careless in his research, but I like to give the House the best information I can.
1108 I remind the right hon. Gentleman that Dorothy Barrett, Alan Fisher, Albert E. Frost, Sir Henry Marking, Sir Peter Parker and Jeffrey Maurice Sterling are the non-executive directors listed in the latest available BA report and accounts. I do not detect that they are all of one political persuasion.
§ Mr. Onslow
Yes, but I am sure that he would not claim to have been appointed because his political persuasion was the first recommendation that he had. Therefore, the point about political vetting is a very silly one, even for the right hon. Gentleman to make.
§ Mr. John Smith
The thought occurred to me, in an interrogative fashion, only because the hon. Gentleman was contemplating thorough canvassing of people who would be put on the board—canvassing presumably done by the Government. The point of canvassing people is no doubt to find out their views. If the hon. Gentleman would be happy to see independent-minded people on the board, what is the point of all this canvassing that he envisages?
§ Mr. Onslow
I am sorry, but the right hon. Gentleman has a genius for getting hold of the wrong end of the stick. What I meant and what I said was that the Government, as the majority shareholder, would be likely to be asked, before names were put forward to the AGM, whether they were suitable. It is not the Government who will do the canvassing but the board of the company, which presumably would consult its shareholders before making important decisions.
The right hon. Gentleman does not know boards which do these things—that is his loss—but I think that he would, from his former responsibility for company affairs, endorse the view that a board of directors should keep in touch with its shareholders as best it can about such important matters as board appointments.
§ Mr. Onslow
No, I will not give way, or we shall be up and down all the time.
I now turn to the point that I put to my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle). What sort of people would he see sitting at the board table with the Government's dog collar around their necks and what does he think they would particularly do? Would they be different from the present non-executive directors? Has my hon. Friend some different qualifications in mind? Does he suppose that in one year or two years the board of British Airways non-executive directors will be different from those who are at present non-executive directors? If so, why does he feel that?
Thirdly, my hon. Friend told us that these non-executive directors in the Government dog collar would change their advice to the board as Government policy changed. That was what led me to say that they were puppets—although ventriloquists' dummies might have been a more accurate description. I cannot see that they can be said to have a will of their own if that is what he envisages their function as being.
§ Mr. McCrindle
In order to save a long intervention, the summary reply to my hon. Friend is that I foresee non-executive directors appointed by the Government to the board of British Airways as being similar to the non-executive directors appointed by two other Secretaries of State to other similar boards. The question to which my hon. Friend must address his attention is: where is the fundamental difference between the type of company to which I have referred and the proposed British Airways Limited?
§ Mr. Onslow
It is not that at all. The fundamental question is why should the people whom my hon. Friend wishes to see sitting there—simply because the Government have sent them there as dummies—be there at all? My hon. Friend has not told us this. He has not told us why he thinks that the overall composition of the board will differ so widely from the people who have run British Airways in the past with considerable experience, success, great public responsibility and an awareness of their 1110 duty to the taxpayer as the provider of the funds. Does he think that they will all be swept aside? Who will replace them? What fundamental change does he think will come over the board because of this measure? My hon. Friend has not suggested any reason why this might happen. He has just said that it would be a good idea to have two members of the great and good sitting there in case something goes wrong.
§ Mr. John Smith
Did the hon. Member for Woking (Mr. Onslow) dissent from the proposition put forward by the Secretary of State for Industry on Second Reading of the British Aerospace Bill when he made two points—first, that there was increasing agreement among commentators that company affairs would be strengthened by external directors; and second, that the Government would ensure that the board of British Aerospace Limited would have the benefit of two external directors?
§ Mr. Onslow
That has nothing to do with it. We are discussing a different company which intends to do something different. I do not dissent from the point about external directors. I am all in favour of the right hon. Gentleman being educated as widely as possible by being put on some boards so that he can get it into his head how a company works.
§ Mr. Tebbit
My hon. Friend the Member for Woking (Mr. Onslow) has obviously grasped the point that seems to have eluded a number of hon. Members—that the Government have made it perfectly plain that there will be non-executive directors on the board of the company. I do not really understand the need for the argument about the role of the non-executive director. That argument is finished, over and done with. We have agreed with it. It is another one of the nightmares of the right hon. Member for Lanarkshire, North (Mr. Smith), which he keeps dragging up to no effect?
§ Mr. Onslow
I entirely agree with my hon. Friend. It is a sterile debate into which we have been led by the repetition of the amendments.
Finally, my hon. Friend the Member for Brentwood and Ongar has not given us a reason why there should be two non-executive directors with this qualification only—that the Government have put them 1111 there. Why should the Government do this? Is it so that they can be constantly aware of the changes and shifts in Government policy, or so that other members of the board may be constantly reminded that, if they make decisions which do not conform with Government policy, they might find themselves voted out at the next annual general meeting? My hon. Friend has not said anything about the important point, and the Opposition have not begun to turn their attention to it—the contribution that the appointees in the Government dog collar make to the general efficient management of the company which must be the overall objective and which leads to its taking sensible investment decisions and running the company with the best interests of the country at heart. There is no reason why such people should be on the board and I believe that the amendment should be withdrawn.
§ 4.45 p.m.
§ Mr. Clive Soley (Hammersmith, North)
I do not wish to take up too much time, as we have been over this argument many times before in Committee. Clearly the Government will oppose the argument and clearly they will use their majority to reject both new clauses. But we can say with some certainty—whether we take the view of the hon. Member for Brentwood and Ongar (Mr. McCrindle) that it is an injection of private capital, or whether we take the view that it is a move towards denationalisation—that it is abundantly clear that this is a total abdication by the Government of any responsibility to the taxpayer. That is what this is all about.
There is a terrible lack of understanding, particularly on the part of the hon. Member for Woking (Mr. Onslow), about the interests of shareholders, as opposed to the interests of the taxpayers generally, which may or may not be the same thing. That point is not always grasped, and it is that point to which the Government seldom respond in a debate of this kind.
This debate is about accountability. If one has two Government directors—whether they are in a dog collar or not—they are answerable to a Minister who is answerable to the House. Given that the people of this country have an interest in a successful national airline, be it 1112 nationalised or otherwise, it is right that they should have a voice in the House. Politicians are here to represent the British people and a failure to deliver the goods in an effective interest such as this is a failure of accountability. That is what the hon. Member for Woking fails to understand in his worship of shareholders' rights over and above those of the British public generally.
I am worried about the whole concept of selling in this Bill. The hon. Member for Brentwood and Ongar made the point that timing was crucial. But when will the timing be right? I find it difficult to think of a time in the next 18 months when it will be right. British Airways are facing major problems, given the general state of the financial market, the changes in the airline business and the apparent determination of the Secretary of State to stir up a price war. Already in the newspapers we see advertisements by British Airways for cheap flights to Hong Kong to try to compete with Cathay Pacific and British Caledonian. The problem is that there is a limited number of airlines that will be able to survive this kind of competition in the coming financial climate. That is the problem. When will we sell the shares, at what price, and to whom? If they are sold in the reasonably near future, I suspect that they will have to be sold at a pretty low price to bring off the sale.
I am not an expert on finance and I do not claim to be, but this does not look to most people like a particularly attractive investment in the immediate future. If that is so, who will buy and why? There is potential here for asset-stripping and unless there is some import by the Government to represent the British taxpayer on the board a situation will arise in which the shareholders' interests will clash with the interests of the public. In that case the British taxpayer will lose out. The Minister will be responsible for that, not the shareholders. The Minister consistently ducked this question in Committee.
It is not responsible government to say simply that they have decided to sell off this national asset because they want to sell State organisations, and then say that they will forget the public interest. I understand the Government's philosophy—although I do not agree with it—in wanting to sell State-owned organisations in 1113 order to get more money back from the public sector. That aim has been stated again over the weekend. That philosophy cannot be in the long-term interests of the country unless the sale is right and unless there is some Government representation to respond to the public interest.
In Committee I raised the problem of foreign airlines buying into British Airways. Hon. Members seem to forget—and the Minister did not respond to this in Committee—that in the EEC it is within the law of the Treaty of Rome for one airline to buy in. One reason why other European Governments have a significant holding in their airlines is to prevent that from happening and to represent the public. If there is a desire to see the British national airline decline and others take its place, it should be clearly stated, and there should not be the pretence that it is in the interests of the shareholders and the public not to have Government directors on the board. The only way to protect the interests of the British people is to have Government directors on the board. There is no alternative.
§ Mr. Michael Neubert (Romford)
As on Second Reading, I declare an interest as a travel consultant. I do not have to convince the House of my enthusiasm for competition. Like the Minister, I served on the Competition Bill Committee, which I suspect saved me from serving on the Committee on this Bill.
My enthusiasm is for fair competition. The Bill would create a novel company. How commercial will the new company be if public directors are not appointed to the board? Up to 51 per cent. of the shareholding not being represented on the board is not typical. British Airways is a public sector monopoly, certainly in its domestic operation and some of its subsidiary activities in this country if not internationally. There is more doubt about what kind of creature the new company will be. A public sector company is objectionable enough. However, if there was private participation and potential profit in a public sector monopoly, it would be thoroughly objectionable and unfair competition by any standards. Government directors could exercise their judgment in the public interest.
On 17 March, three days before the conclusion of the Committee stage, my hon. Friend the Under-Secretary of State told me in a letter: 1114As regards the application of monopolies and mergers legislation, the full rigours of the Fair Trading Act and the Competition Bill when it is passed will apply to British Airways when shares are sold just as they apply in the case of any private sector company.In regard to that legislation, my hon. Friend puts the new company on all fours with other private sector companies. Can he give us chapter and verse for that? If my hon. Friend can take time to give me a seminar on the matter, I shall be delighted.
Under the Fair Trading Act 1973 British Airways is excluded from the normal rigours of monopolies legislation. Schedule 7, part I, item 7, wholly excludes the carriage of passengers or goods by air. Will the Bill change that? Will the directors have to take account of that in their activities? I can think of no private sector company with half its shareholding held by a certain shareholder that would not have that holding represented on the board.
The proposed make-up of the board suggests full-blooded commercialism, with financial support but not direction from the public purse. The company would therefore appear to retain at least one characteristic feature of a monopoly. That kind of monopoly is demonstrated by British Airways' present activities—a use of overweening strength and size to dominate the market. As an illustration, I quote from "British Airways News" of 29 February. In describing British Airways' activities in the holiday market, it says:the airline has a range of holiday products marketed under brand names such as Sovereign, Enterprise, Speedbird, Flair and Martin Rooks. Together they make the airline the second largest tour operator in Britain.The next sentence is significant:To have even more control on the development of the market British Airways has moved into hotels worldwide to boost its tour activities.With the benefit of public money and prestige, British Airways can act to control the market in which it is operating in competition with private enterprise. That is my concern. How will the Bill change that?
The Minister's views about the role of the directors have been quoted. It is to run the company in the best interests of the shareholders. That does not surprise me. To what extent will the constitution 1115 of the board and the new legislation temper its necessary and existing disposition to exploit a monopoly share of the market?
On Second Reading the Secretary of State said that there was no intention to divest British Airways of such activities as hotel keeping, running retail travel agencies and tour operating. We have seen examples of the considerable strength that British Airways brings to these activities that are otherwise the province of private enterprise. British Airways has opened a shop in Oxford Street, the most expensive location in the land, with 45 staff and multiple new devices. We are told that British Airways is to be a private sector company like any other. Could any other private sector company afford to do that?
Can my hon. Friend quote evidence in that regard from the United States, which seems to be a pacemaker in aviation policy with regard to deregulation, among other things? Can be confirm that United States' law precludes airlines from engaging in such subsidiary activities? Public sector directors would at least safeguard the industry against such monopolistic practices. One danger is cross-subsidisation. On 22 March British Airways took a double page in The Daily Telegraph to advertise its total range of services, including inclusive holidays. British Airways now announces that it wishes to be known only as "British", which will make it easier for its multifarious activities to come under one heading. It will be even easier for the disposition of funds for one activity rather than another to be made out of sight of the studious public.
Even if my hon. Friend the Under-Secretary were able to assure me that under the Bill the new company will be exposed to the full rigours of monopolies and mergers legislation, the company will take a short cut to its new status. It will not have had to go through the hoop of the 25 or 30 per cent. qualification for a monopoly reference. That will confer an unfair advantage on the company even if, from then on, it is liable to the full rigours of monopolies legislation. To make it clearer, who can imagine that if both BEA and BOAC had been private sector companies at the time of their merger there would not have been a reference to 1116 consider the monopoly aspects of the merger?
British Airways has the largest network of routes of any airline in the world. It is a considerable monopoly. It is subject to intense competition on international routes, but that does not apply to its domestic operations or to its spin-off subsidiary activities in this country, which cause me so much concern.
I hope that my hon. Friend the Under-Secretary will expand a little more than he has been able to do in correspondence with me or on previous occasions when I have raised the matter in the House on how he thinks the new company will compete fairly with existing private enterprise operators.
§ Mr. K. J. Woolmer (Batley and Morley)
Rather than going over the grounds for opposing the whole Bill I should like to concentrate on the new clause. We are discussing the Bill, which provides for the effective denationalisation of British Airways, because of the worst combination of ideology on the part of the Government and financial expediency in their aspiration to raise cash by selling shares in what they hope will be a profitable enterprise.
The new clause is concerned with the appointment of two non-executive directors to the board of the new company. The public want to know why the Government think it right that, while retaining a majority shareholding in the company, they should not appoint any directors, executive or non-executive. Instead of my hon. Friends and some Conservative Members explaining why there should be two non-executive directors to represent the public interest, when the public own 51 per cent. of the shares, the Secretary of State should be explaining why the public's 51 per cent. shareholding is to be accompanied by not one Government appointed director. That is the pertinent matter.
The new company will not be just another private, Companies Act company. It will be at least 51 per cent. owned by the taxpayer and, as the Under-Secretary frequently pointed out in Committee, it will still be our flag, national airline. Yet the Government have said clearly that they do not intend to mobilise the right to appoint directors. We could get into the odd position of the substantial part of the minority shareholding being 1117 purchased by institutions that wished to remain at arm's length from the management and the board of the business. It would be ludicrous if virtually all the main shareholders in our national airline had no wish to have any influence on how the company was run or who appointed the directors.
The Wilson committee report pointed out recently the need for financial institutions—pension funds and insurance companies—to take a much closer interest in the running of companies in which they have a significant shareholding. The tradition of financial institutions with a major shareholding in companies keeping at arm's length from the running of the companies, their prospects, investment programmes and role in the economy, is increasingly questioned. However, the Government are endorsing a policy of a major shareholding having no representation on the board.
The matter goes beyond British Airways alone. It is a pity that the question of Government-appointed directors on the board should become a matter of political ideology and disagreement. It is a pity that we cannot discuss the relationship between the public and private sectors, even to the extent of considering the appointment of one or two non-executive directors by the Government, without the matter becoming a doctrinal or ideological issue. That is at odds with the needs of our economy and with the need for the public and private sectors to find better ways of working together and reconciling the public and private interests.
That may mean an interchange of boards with a mutual understanding of the need for commercial objectives in publicly-owned bodies and the need to take account of the public interest. If it requires an interaction between Government-appointed directors and a largely non-Government appointed board, surely that is the sensible way to proceed.
It is a matter of regret that the Opposition have had to table the new clause to try to get two non-executive directors appointed to the new board. That should be common ground between the two sides of the House, even though we may differ about how the Government should exercise their influence and with what purpose and how to balance the investment requirements, the market objectives and the public and private interests. Foreigners 1118 will regard it as another example of the British sickness that we should disagree over a situation in which the State has more than half the ownership of a public asset and yet, for doctrinal reasons, we cannot reach a political consensus on the need for even a modest representation on the board.
The hon. Member for Woking (Mr. Onslow) came close to saying that the Government would overcome any difficulties by backdoor winks and nudges. That would be the worst of all worlds. We should be going back to the worst sort of relationship between the Government and boards of directors.
Either we have an understanding of the relationship between the Government and mixed companies in our economy or we do not. This seemed to me to be an opportunity to mark out a way that would be workable under different political parties. As sure as we are here today, an incoming Labour Government will alter this arrangement. It is a tragedy that the differences are so wide that we cannot even agree on somewhere between no Government appointees and all Government appointees.
The parties should consider between them how best to work out arrangements between the Government and the nationalised or semi-nationalised industries. I hope that the Minister will not respond simply on the issue of two non-executive directors or on nit-picking issues, but will say why he thinks that there should be no representation of the public interest.
I believe that the new clause should be added to the Bill not only because of its significance for British Airways but as a demonstration of the attempt by the House to find a way to ensure that the public interest is not cast aside, and to show that we reconcile the commercial objectives of publicly owned bodies with the wider interests of the taxpayer.
§ Mr. Tristan Garel-Jones (Watford)
I had not intended to take part in the debate. I was not a member of the Standing Committee, so I shall be brief. I intervene because as the debate developed I was struck by the staggering obtuseness of the remarks from the Opposition Benches.
What the Government propose is fairly simple. We have a company of which on formation every director will have been 1119 Government-appointed The Government are saying that thereafter normal company procedures will operate.
The hon. Member for Hammersmith, North (Mr. Soley) spoke about the House having a duty to represent the taxpayer, who, after all, will be the main shareholder. Amen to that. But I suggest that, if asked, the taxpayer would feel much happier about normal commercial practices, rather than constant Government intervention, prevailing in a company.
The Government's commitment with regard to mobilising their own shareholding is absolutely clear. I quote from what my hon. Friend the Under-Secretary of State told the Committee:The board will…be free to plan and execute its programme of capital and other investments and generally to run the airline on the most successful and profitable basis that can be achieved.The only means of influence available to the Government will be by using the voices which attach to their shareholding…In the normal course of events, such resolutions cover the usual business transactions at annual general meetings of the company—the appointment of directors—very important—the adoption of accounts, the declaration of dividends, and so on.An unbiased reading of my hon. Friend's statement—perhaps he will confirm this when he winds up—is that if Opposition hon. Members in the distant future have any responsibilities for these matters there is nothing to prevent them from using their shareholding to nominate such Government nominees as they choose. So there is nothing obstructive or dogmatic about the Government's proposal.
I very much welcomed the reasonable tone of the hon. Member for Batley and Morley (Mr. Woolmer), who spoke about the need not to be doctrinal and to seek better ways of managing great State enterprises. I agree with all of that, but if we have had any dogmatic, doctrinal approach it has come from the Labour Party. With that party's constantly shifting policies, one is not aware where it stands at present, but I understand that at some point a commitment was given at the party conference to confiscate any shareholding that went into private hands. That is not a very satisfactory and non-doctrinal approach to 1120 seeking the sort of arrangement to which the hon. Gentleman referred and which I would support.
I hinge my support of the Government's case on the fact that the appointment of directors is an option that is always available to the Government and to the taxpayer as a majority shareholder.
§ Mr. Woolmer
If the hon. Gentleman is willing to support the Government in rejecting the clause on those grounds, is it equally his understanding that the Secretary of State has said positively that although the Government have the right to nominate shareholders they do not intend to do so? If the hon. Gentleman agrees with that, why does he think it right for the Government to declare, as the Secretary of State did in the House on 19 November, that the Government do not intend to use that right?
The Government say "except in exceptional circumstances". The option remains open. That is why I think that the Opposition are being obtuse.
What I believe the Government are saying, and what I believe the taxpayer will welcome, is that they will not be breathing down the necks of the management of British Airways every five minutes. Of course, they sensibly reserve the right, which would naturally accrue to any other party that ever had responsibility for these matters, to use their shareholding in the shareholders' interests, if the need should arise. It is wrong for the hon. Gentleman to suggest that the Government are in any way closing the door. They are not.
§ Mr. Woolmer
I was simply quoting from what the Secretary of State said in the House on 19 November. It is in the Official Report in black and white in column 42 that the Government do not intend to use that right.
§ Mr. Garel-Jones
I should like to quote from what my hon. Friend the Under-Secretary said in the Standing Committee, of which the hon. Gentleman was a member:I do not readily foresee circumstances in which the Government would use their majority to veto the proposals of the board in this respect. However, should this occur, 1121 the Government's prime consideration in exercising their rights would be what is in the best interests of the company."—[Official Report, Standing Committee B, 24 January 1980; c. 189–90.]That seems to me to be a reasonable statement. Unless it is a matter of parliamentary tactics that escapes me, I do not understand why the Opposition are making such great play of the matter.
§ Mr. Tebbit
From my experience in the Committee, I concluded that the problem for the Opposition was this; they do not understand how these matters are arranged in companies. Therefore, they are unaware that it is the normal practice for a board of directors to submit to the annual general meeting nominations of directors to the board. What my right hon. Friend the Secretary of State has said is that he will not expect himself to nominate directors. But he and I have made it plain that we have the power, and if necessary would be willing to use it, to veto undesirable directors if they should be nominated.
§ Mr. Garel-Jones
I am grateful to my hon. Friend for that intervention. We might make an exception in the case of the right hon. Member for Lanarkshire, (Mr. Smith) and nominate him to the board, so that in the long time that awaits him in opposition he might gain some experience in these matters.
§ Mr. Bill Walker (Perth and East Perthshire)
I was a member of the Standing Committee, where I listened at great length to the points that were made, just as I am listening today.
The Government are to be congratulated on grasping the nettle. It is business nonsense to have someone nominated to any company wearing a Government-sponsored label and then to pretend that he somehow acts as the public's conscience. Whatever happens in a company or a board of directors, the primary concern is, and should be, profitability and continued profitable operation to continue the employment prospects of all who work in it. That is much more important than playing politics. Non-executive directors should be appointed to make meaningful contributions to the efficient and profitable direction of the company.
I welcome the proposal that there will be no Government directors as such. 1122 Many people share my view. I am against jobs for the boys, wherever the boys come from. I am not worried which old school they attended or which trade union they were members of.
§ Mr. Sheerman
How can the hon. Gentleman be consistent in the point that he makes while supporting his Government on British Aerospace and supporting them on this Bill where the practice is totally different? It seems that the hon. Gentleman does not understand the purpose of non-executive directors.
§ Mr. Walker
I have served as a non-executive director and also as an executive director. I can assure the hon. Gentleman that not once in my career have there been complaints that I did not understand what I was doing or that I was not doing it effectively. Those who think that two companies operating in different markets are alike show that they are completely ignorant of business activity and operations. The more interjections we have of the kind made by the hon. Gentleman, the more Opposition Members will show how little they know about making profits and keeping people in jobs.
The discipline upon board members should be the result achieved by the new company in the market place. That should be the discipline on the directors, so that when they appear at the annual general meeting they are made accountable. I welcome the comments made by my hon. Friend the Under-Secretary of State in Standing Committee when he said:I do not readily foresee circumstances in which the Government would use their majority to veto the proposals of the board in this respect. However, should this occur, the Government's prime consideration in exercising their rights would be what is in the best interests of the company".—[Official Report, Standing Committee B; 24 January 1980; c. 190.]The best interests of the company are what matter. The company will be run by directors in whom the shareholders have confidence. That sums up the situation. The directors will be there because the shareholders have confidence in them and the shareholders will only give that confidence at the annual general meeting based on the results achieved by the new company.
§ Mr. John G. Blackburn (Dudley, West)
I am saddened by the tenor of the debate. As a member of the Standing Committee, I found it a hard-working, constructive and happy Committee. I can appreciate the points made by the hon. Member for Batley and Morley (Mr. Woolmer) about the sadness of the division that exists over the new clause relating to non-executive directors. The hon. Gentleman is, in many respects, justified in informing hon. Members of his misgivings that there should be this impasse at the beginning of the Bill's Report stage.
I would respectfully direct the hon. Gentleman's attention to another sadness. I find it a sadness that we are holding a funeral and an inquest on a company that has not yet been born. I should like to outline some of the positive and constructive things brought about in Committee and now on the Floor of the House regarding the management, at director level, of this company. It has been suggested that this is, or should be, a BP model. I should like to consider the role of BP in that connection. I direct the attention of the House to remarks in Standing Committee.The fact that British Petroleum had a Government director was a significant feature in the relationship although it did not stop it going straight to the Government."—[Official Report, Standing Committee B; 24 January 1980; c. 193.]That is extremely important. Those were the comments of the right hon. Member for Lanarkshire, North (Mr. Smith). I know him to be an honourable and truthful man. I believe that this was his experience. Although there was no director, it was still possible for the company to approach the Government.
Reading on, I find an interesting comment by the Under-Secretary of State which, I think, could be described as the voice of prophecy. The voice of prophecy has become the voice of reality. My hon. Friend said:They are areas in which, clearly, Her Majesty's Government have a policy towards other countries and clearly, an airline, whether it is British Airways Ltd., British Caledonian Ltd. or Laker Airways Ltd., will represent to the Government its views about such matters."—[Official Report, Standing Committee B, 24 January 1980; c. 193.]I believe that the board of British Airways has a solemn responsibility, as a board of directors, to plan the execution of its capital and its investment pro- 1124 gramme and to bring it to profitability and to continue in that vein. The interesting remarks of the hon. Member for Hammersmith, North (Mr. Soley) were a prominent feature in Committee. When will the shares arrive on the market? What will be the timing? What will be their price? It was stated that care would be needed, for the sake of the future investment programme of British Airways, in ensuring that these matters were handled, correctly.
I believe that in business life, in political life, and in the House today, we are being called upon to exercise the gift of faith. The shares must be issued at the right time, at the right price and at a time when the market can respond, when capital will be forthcoming for the future and continued success of British Airways Ltd. whether or not it contains non-executive directors. It would be hypocritical for me to say, on a matter of policy, that it was about time the Government got off the backs of industry. I believe that the Government have no right to run industry. This is not the role of Government. I do not believe that there are people qualified, in Governments of any persuasion, to run an industry such as British Airways. Equally, it is a solemn responsibility of any Government to create an environment in which that industry can prosper. I believe that it will prosper without executive directors. What British Airways want now from this House is a vote of confidence and assurance for their future.
§ Mr. Tebbit
I must apologise to the House in advance if I find little new to say on this matter. We discussed it at great length in Committee. I do not feel too bad about saying that. With the greatest respect, I feel that the right hon. Member for Lanarkshire, North (Mr. Smith) would be the first to admit that he was not able to find anything terribly new to say today. He spoke, as always, with the same charm and general reasonableness with which he puts forward his arguments. There were, nevertheless, no new arguments advanced.
My hon. Friend the Member for Woking (Mr. Onslow), as usual, demonstrated a robust understanding of the commercial facts of life. It was a pleasure to hear my hon. Friend shoot down so crisply the spectre which had been raised by the right hon. Member for Lanarkshire, 1125 North that British Airways Helicopters might be sold off to Bristow's of all people. He did it with a single sentence reminding the right hon. Gentleman that the powers of the Monopolies and Mergers Commission still existed. It would not be for me to prejudge such a matter, but I think that most of us will see that that was likely to be represented to the Government as creating an undesirable monopoly.
I worry sometimes about the hon. Member for Hammersmith, North (Mr, Soley). He seems to find life so gloomy, dull and depressing. As I said in Committee, he enjoys nothing more than a touch of really good misery. He was full of dark hints about the Government directors who should be appointed, and he said that they should be answerable to the Minister—not to the shareholders. I have to ask him what I recollect asking him in Committee. On what issues and in what circumstances does he think it right that Government-appointed directors should act in the interests of the Government and against those of the company to which they are appointed as directors? Legally, the answer is "Never". If they act against the interests of the company, they are coming close to the edge of improper conduct.
§ Mr. Soley
It is very nice of the Minister to think of me as a gloomy person. I do not take that view. Let me put to him the example where the company sees it as advantageous to withdraw from certain routes or even to sell off a certain sector of its organisation to another airline. That might not be in the national interest.
§ Mr. Tebbit
I recollect now what the hon. Gentleman has in mind. He wants a private sector company to subsidise one of its activities out of the profits of another at the behest of the Government. He may have in mind what happened when the British Overseas Airways Corporation, under a Labour Government, decided to withdraw from the South American routes which have since been carried on by a private sector company, British Caledonian Airways Limited. He may have in mind the decision of British Airways to withdraw from some domestic routes which have since been carried on and are to be carried on in future by pri- 1126 vate sector companies which feel that they can operate them profitably, whereas British Airways quite rightly—not because of inefficiency, but because they are a trunk and international carrier and not a local one—decided that it could not. Does the hon. Gentleman think that it is the business of the Government to decide which routes the company should operate? He has to understand that either the company operates commercially or it does not. He is saying that his view of the job of Government directors would be to see that it did not operate commercially.
§ Mr. Soley
I had in mind the running down of certain aspects of the company But let me stand the argument on its head. It is obvious that I shall not convince the Minister with my examples, but why is it that all other major airlines have this sort of Government participation or, if they do not—as is the case in the United States—there are clear regulations about buying in by other airlines?
§ Mr. Tebbit
The hon. Gentleman will be able to come to his argument about buying in by other airlines at a later stage. However, he says "other than the United States". He ignores about half the world's international air transport industry if he ignores the United States. If we are talking about air transport, we should start from the proposition that the greatest air transport Power in the world, the United States, may know something about how to arrange these matters. It is a private enterprise way. It is for the rest of the world to justify the means by which nationalised carriers in Europe, for example, ensure that the consumer pays about twice the fare per mile for a comparable journey than he would in the United States. Presumably that is the role in the mind of the hon. Member for Hammersmith, North of the Government director. It is to make sure that the consumer pays more than he need by forcing the airline into non-commercial practices.
The remarks of the hon. Member for Huddersfield, East (Mr. Sheerman) were very interesting. He seemed sure that Governments should always claim that their policies were immutable and unchanging. He thinks that I am a very odd sort of Minister to say that this is the Government's policy and that it will remain the Government's policy so far 1127 ahead as we can see. But I do not guarantee that it will remain the Government's policy for all time, because circumstances may change and judgments may change. I do not guarantee that even this Administration will maintain a 51 per cent. holding for ever.
I should not have thought that that marked some political bias, arrogance or anything of that kind. It is a realistic attitude. If the Government are to have anything to do with commerce, above all they must shape their policies in accordance with the circumstances of the day, and those circumstances cannot be set out on a tablet of stone as though they were there for ever, in the way that the Labour Party set out its economic policies in the nineteenth century and has made no progress ever since. That is literally true. They were written in the nineteenth century, and they have not changed since because they are in the constitution of the Labour Party. Unhappily, the death of Mr. Gaitskell probably robbed the Labour Party of the chance to come into the twentieth century. It is still in the nineteenth century, and its economic policy is still written on the tablets of stone or on the original sheets of paper.
§ Mr. Sheerman
The Minister cannot get away with it by always grossly caricaturing the Opposition's arguments when we are trying to make a reasonably sophisticated point which I am sure he picked up in Committee. We were trying to make points from which he could learn something. My argument was that most Ministers said "This is our policy" without hedging it round with qualifications, as he did. It marks out that difference between the Minister and his Front Bench colleagues. I remind him also that the Labour Party was founded in this century. It is the Conservative Party whose economic doctrines today belong to the nineteenth century.
§ Mr. Tebbit
The hon. Gentleman may think that I am an unusual Minister. He is entitled to that opinion. However, the Government's policy is and, so far as I can see, will remain, to keep a 51 per cent. or greater holding for as long as it suits them. That policy is unchanging. How much suits us may change from day to day. The hon. Gentleman must take it in that sense.
1128 I come to the speech of the hon. Member for Batley and Morley (Mr. Woolmer). The hon. Gentleman may not be aware that the boards of companies feel under an obligation to keep in touch with their major shareholders, even if the major shareholders do not nominate directors to their boards. Although much more obscure than the hon. Member for Hammersmith, North, the hon. Member for Batley and Morley was just as threatening about the role of Government directors in requiring the company to obey the Government and not commercial needs. I do not think that I need say any more to emphasise the dangers.
My hon. Friend the Member for Romford (Mr. Neubert), as always, made a case which was balanced, reasonable and sensible. He spoke about the extent of the application of competition policy to airlines. Schedule 7 to the Fair Trading Act 1973 sets out certain activities which are excluded from the scope of monopoly references under section 50 of that Act. My comments at column 527 of the Official Report of the Committee proceedings related to merger control under section 65(3), which is not restricted in the same way as section 50.
There are no plans to amend the reference in schedule 7 to the carriage of passengers or goods by air. That is not necessary, because the licensing functions of the Civil Aviation Authority and the presence of foreign operators on foreign routes ensure that there is adequate competition. It would, therefore, not be necessary to use the powers in that way. My point is that British Airways are excluded from complying with any part of competition law only to the same extent, and precisely to the same extent, as are British Caledonian, Laker and other airlines. So they are not in a privileged position in that sense.
There will be no special Government financing for British Airways so it would not be true that when the company is formed taxpayers' money will be used to subsidise some acitvities. The Government may subscribe for voting shares or what may in effect, become voting shares and we shall have further discussion on that precise definition later. The Government will not have any obligation or power to make or guarantee loans.
The company will be an independent company. If it wishes to have an office 1129 in Oxford Street, Piccadilly Circus or anywhere else, it will have to decide that is in its commercial interests. That will be a matter for the directors acting purely in the commercial interests of their company.
There is no intention on my part to make British Airways divest itself of its hotels or other interests any more than I would wish to make British Caledonian divest itself of its hotels or travel interests. We must treat all companies alike. I am not an expert in United States law—nor indeed in British law, let us be honest about it—so I hesitate to say what the position is in the United States. I shall inquire and let my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) know. To my knowledge, both Pan American and TWA have interests in hotels. Clearly, therefore, that is possible under United States law. However, I think that it would be wrong of my hon. Friend to expect that Government directors on the board of British Airways would in any way act against the interests of the company.
My hon. Friend the Member for Watford (Mr. Garel-Jones) summed up the position neatly and clearly on most of the matters we have discussed. He put his finger on it without saying it in so many words. The trouble is that the Opposition think that a company meeting is something like the NEC of the Labour Party or the Labour Party conference. It does not run like that because, apart from anything else, everybody there has the same objective. It starts, therefore, on a different basis—that is, the profitability of the company.
My hon. Friend the Member for Perth and East Perthshire (Mr. Walker) spoke lustily of the need for directors to pursue the commercial interests of the company. My hon. Friend the Member for Dudley, West (Mr. Blackburn) was right to emphasise that what we must do now is get British Airways launched as soon as possible and let it get on with its job. We had lengthy debates on that in Committee and my hon. Friend the Member for Brentwood and Ongar had something to say then. He has tabled new clause 14, which is for discussion this evening. Although I appreciate that it would operate only while the Secretary of State held more than 50 per cent. of the issued shares, I have to say to my hon. Friend 1130 that neither his new clause nor that of the Opposition would be appropriate provisions in this private sector company in which the Government do not commit themselves for ever to retaining a majority of the shares.
The provisions would be viewed by other investors as an unacceptable priviledge attaching to one particular shareholder, and because that shareholder is the Government it could give the impression that the successor company was a creature of Government little different from its predecessor, and that its activities might be, at any rate to some extent, influenced by the Government against the interests of the company in the way that the hon. Member for Hammersmith, North would like.
§ Mr. Sheerman
The Minister has still not explained the difference between this board and the board of British Aerospace. Why is there this simultaneous discrepancy between the two companies? If this were a Conservative Government 10 years ago, I could understand it. But this is a simultaneous piece of legislation.
§ Mr. Tebbit
I had hoped that I would not have to explain this again to the hon. Gentleman. I am, of course, willing to do so and the explanation may come anew to those who were not members of the Standing Committee. Let me put it this way.
British Airways Limited is not a monopoly, or near monopoly, in the sense that British Aerospace is in its sector. They operate in different areas. Those are two points to begin with. The third point, which is perhaps one of the most important, is that British Airways Limited, and British Airways at the moment, are not defence contractors to the British Government but British Areospace is. Therefore, the relationships between the British Airways—Corporation or Limited—and British Aerospace with the Government in future are different on at least three counts.
It is not surprising therefore, that we have come to different conclusions about the manner in which the boards would be set up. The only reason why the hon. Gentleman remarks upon it is that the conclusions have come about at the same time. If they had been separated, as he said, by 10 years he would not have been 1131 surprised. But he is surprised that two Government Departments could look at the facts before them, come to a judgment on those facts, reach conclusions and find that those conclusions were different. They are different facts in different industries.
That may be a surprise to the hon. Gentleman. It is no surprise to me. I am not in the least perturbed about it, nor is my right hon. Friend the Secretary of State for Industry, so I make no apology for it. It is the appropriate way for us to conduct our affairs in relation to British Airways Limited.
I have to emphasise that the company will initially be managed by a board of directors, all of whom will be appointed by the Government. [Interruption.] As the Government will own 100 per cent. of the shares when the company is formed, it is difficult to think of anybody else who could appoint directors. That should not cause undue surprise. The board will consist of full-time executive directors and part-time non-executive directors. The role of the non-executive director is an important one and we take it very seriously. We do not indulge in political bias when we appoint those directors.
I am not sure to what extent I shall please my hon. Friends when I remind the House that Mr. Alan Fisher was reappointed to his post as a non-executive director of British Airways under this Administration. He was reappointed regardless of what any of my hon. Friends, or anyone else, may think of his activities outside British Airways. He was reappointed because he had proved himself to be a useful director. That is the sense in which the Government approach these matters. It may cause a great deal of surprise to Opposition Members that we should do that, but we do it.
§ Mr. Garel-Jones
In view of Mr. Alan Fisher's obvious proficiency as a director, will my hon. Friend consider making him a full-time executive director of the new company?
§ Mr. Tebbit
Perhaps my hon. Friend has the post of director of industrial relations or something of that sort in mind. I shall bear in mind my hon. Friend's views when it comes to the point.
The essential point is that this company will have to be run by directors in whom 1132 the shareholders, including the Government, have confidence. The qualification for board membership will be an ability to contribute to the successful running of the airline and not to please Ministers.
Not a great deal more can be said. We dealt with the matter in Committee. I know that my hon. Friend the Member for Brentwood and Ongar differs from me. I understand his view. He finds it difficult to accept that this rather unusual proposal is right. I hope that he accepts that the Government and most of our hon. Friends believe that it is the best approach. The company will not be the Government's creature. Investors need have no fear that the company's interests will be subordinated to the whims of Ministers. This is the best way to secure investment and the company's future. I have no hesitation in commending this approach to my hon. Friends. The House would be wise to reject the new clauses.
§ Mr. Clinton Davis
Characteristically the Minister has avoided all the essential arguments. The debate has been characterised by the pretence by Members, with one or two exceptions, that they have a unique experise in the commercial facts of life. It is no wonder that sections of British industry are floundering.
The Minister says that there is a difference between British Aerospace and British Airways. He says that British Aerospace is a defence contractor whereas British Airways is not. That is true, as far as it goes. But he did not address himself to the general point made on Second Reading of the British Aerospace Bill by the Secretary of State for Industry that there was a strong case for having non-executive directors and thatthe Government will ensure that the board of British Aerospace Limited will have the benefit of two external directors"—[Official Report, 20 November 1979; Vol. 973, c. 222.]namely, those representative of the Government interest.
§ Mr. Tebbit
I am sorry to be boring, but I have just made it clear that the Government will ensure that there are non-executive directors on the board of British Airways. The only difference is that we shall not appoint the individuals concerned.
§ Mr. Davis
The Minister is being obtuse. The Secretary of State for Industry believes that, apart from the 1133 arguments that the Minister adduced, it is necessary for the Government to have two representatives on the board of British Aerospace. That has been shown to be overwhelmingly right, not only in Committee but in today's debate.
The Minister is flouting the experience of the Secretary of State for Industry. I do not mind if he does, since the Secretary of State for Industry behaves curiously from time to time. However, to say that the argument is nonsense is to repudiate the arguments expressed by the Secretary of State for Industry in that important debate and in that important context. More than that, it is to repudiate the Bank of England's view. The Bank has said that it is increasingly desirable for institutional investors to play a bigger part in company activities.
The Minister said that this is an unusual way of conducting affairs. He is right. The largest investors, the Government, say in advance that they have no intention of mobilising their rights or to safeguard the majority, except in circumstances that cannot be conceived. Would any other majority shareholder renounce in advance the right to influence board decisions? That is inconceivable. The Government are behaving unintelligibly. The issue should not have been controversial. The Government should have taken the action themselves, as the Secretary of State for Industry did.
Who will appoint the directors if the institutional directors do not? The minority will do it and that is not sensible. It was never thought to be sensible for British Petroleum—and I recognise that that is a different case. The Government recognised that it was not sensible to proceed in that way with British Aerospace. There is a need for the provision contained in the new clause.
The Government eschew the experience of the European flag carriers. Even the
§ Swiss, who have a small Government interest, appoint Government directors in one form or another. Are the European flag carriers to be regarded as poodles of their Governments, as the hon. Member for Woking (Mr. Onslow) so elegantly said? The United States Government have deemed it appropriate to protect their airline interests in a different way. I do not believe that the Under-Secretary of State really believes that there is a totally unrestricted market enterprise philosophy in the United States.
§ The Minister is not interested in foreign experience except when it suits him to cite it. He has shown an unreasoning attitude. The case that he has sought to deploy is unconvincing and the House should reject it.
On a point of order, Mr. Speaker. I wonder whether, in summing up the debate, the hon. Member for Hackney, Central (Mr. Davis) was in order in not making any reference to the fact that under the terms of the—
§ Mr. Speaker
Order. I think that the hon. Gentleman is about to pursue the argument. The hon. Member for Hackney, Central (Mr. Davis) made his own speech. If he has not satisfied the hon. Member I know that he will be as disappointed as I am.
§ Question put, That the clause be read a Second time:—
§ The House divided: Ayes 226, Noes 285.1137
|Division No. 378]||AYES||[5.57 pm|
|Abse, Leo||Bradley, Tom||Clark, Dr David (South Shields)|
|Adams, Allen||Bray, Dr Jeremy||Cocks, Rt Hon Michael (Bristol S)|
|Anderson, Donald||Brown, Hugh D. (Provan)||Cohen, Stanley|
|Archer, Rt Hon Peter||Brown, Robert C. (Newcastle W)||Coleman, Donald|
|Armstrong, Rt Hon Ernest||Brown, Ron (Edinburgh, Leith)||Concannon, Rt Hon J. D.|
|Ashley, Rt Hon Jack||Buchan, Norman||Conlan, Bernard|
|Ashton, Joe||Callaghan, Rt Hon J. (Cardiff SE)||Cowans, Harry|
|Atkinson, Norman (H'gey, Tott'ham)||Callaghan, Jim Middleton & P)||Cralgen, J. M. (Glasgow, Maryhill)|
|Barnett, Guy (Greenwich)||Campbell, Ian||Crowther, J. S.|
|Barnett, Rt Hon Joel (Heywood)||Campbell-Savours, Da[...]||Cryer, Bob|
|Bidwell, Sydney||Cant, R. B.||Cunliffe, Lawrence|
|Booth, Rt Hon Albert||Carmichael, Nell||Cunningham, George (Islington S)|
|Boothroyd, Miss Betty||Carter-Jones, Lewis||Cunningham, Dr John (Whitehaven)|
|Bottomley, Rt Hon Arthur (M'brough)||Cartwright, John||Dalyell, Tam|
|Davidson, Arthur||Janner, Hon Greville||Race, Reg|
|Davies, Rt Hon Denzil (Llanelli)||Jay, Rt Hon Douglas||Radice, Giles|
|Davis, Clinton (Hackney Central)||John, Brynmor||Rees, Rt Hon Merlyn (Leeds South)|
|Davis, Terry (B'rm'ham, Stechford)||Johnson, James (Hull West)||Richardson, Jo|
|Deakins, Eric||Johnson, Walter (Derby South)||Roberts, Allan (Bootle)|
|Dean, Joseph (Leeds West)||Jones, Rt Hon Alec (Rhondda)||Roberts, Ernest (Hackney North)|
|Dempsey, James||Jones, Barry (East Flint)||Roberts, Gwilym (Cannock)|
|Dewar, Donald||Jones, Dan (Burnley)||Robertson, George|
|Dixon, Donald||Kaufman, Rt Hon Gerald||Robinson, Geoffrey (Coventry NW)|
|Dobson, Frank||Kilroy-Silk, Robert||Rodgers, Rt Hon William|
|Dormand, Jack||Kinnock, Neil||Rooker, J. W.|
|Douglas, Dick||Lamble, David||Roper, John|
|Douglas-Mann, Bruce||Lamborn, Harry||Ross, Ernest (Dundee West)|
|Dubs, Alfred||Lamond, James||Rowlands, Ted|
|Duffy, A. E. P.||Leadbitter, Ted||Sandelson, Neville|
|Dunnett, Jack||Leighton, Ronald||Sever, John|
|Dunwoody, Mrs Gwyneth||Lestor, Miss Joan (Eton & Slough)||Sheerman, Barry|
|Eadie, Alex||Lewis, Arthur (Newham North West)||Sheldon, Rt Hon Robert (A'ton-u-L)|
|Eastham, Ken||Lewis, Ron (Carlisle)||Shore, Rt Hon Peter (Step and Pop)|
|Ellis, Raymond (NE Derbyshire)||Litherland, Robert||Short, Mrs Renée|
|English, Michael||Lofthouse, Geoffrey||Silkin, Rt Hon John (Deptford)|
|Ennals, Rt Hon David||Lyon, Alexander (York)||Silverman, Julius|
|Evans, Ioan (Aberdare)||Lyons, Edward (Bradford West)||Skinner, Dennis|
|Evans, John (Newton)||Mabon, Rt Hon Dr J. Dickson||Smith, Rt Hon J. (North Lanarkshire)|
|Ewing, Harry||McCartney, Hugh||Soley, Clive|
|Faulds, Andrew||McCrindle, Robert||Spearing, Nigel|
|Field, Frank||McDonald, Dr Oonagh||Spriggs, Leslie|
|Fitch, Alan||McElhone, Frank||Stallard, A. W.|
|Flannery, Martin||McGuire, Michael (Ince)||Stoddart, David|
|Fletcher, Ted (Darlington)||McKay, Allen (Penistone)||Stott, Roger|
|Foot, Rt Hon Michael||McKelvey, William||Strang, Gavin|
|Ford, Ben||MacKenzie, Rt Hon Gregor||Straw, Jack|
|Forrester, John||Maclennan, Robert||Summerskill, Hon Dr Shirley|
|Foster, Derek||McNally, Thomas||Taylor, Mrs Ann (Bolton West)|
|Fraser, John (Lambeth, Norwood)||McWilliam, John||Thomas, Dafydd (Merioneth)|
|Freeson, Rt Hon Reginald||Magee, Bryan||Thomas, Mike (Newcastle East)|
|Garrett, John (Norwich S)||Marks, Kenneth||Thomas, Dr Roger (Carmarthen)|
|George, Bruce||Marshall, David (Gl'sgow, Shetlles'n)||Thorne, Stan (Preston South)|
|Gilbert, Rt Hon Dr John||Marshall, Jim (Leicester South)||Tilley, John|
|Ginsburg, David||Mason, Rt Hon Roy||Tinn, James|
|Golding, John||Maxton, John||Torney, Tom|
|Gourlay, Harry||Maynard, Miss Joan||Varley, Rt Hon Eric G.|
|Graham, Ted||Meacher, Michael||Wainwright, Edwin (Dearne Valley)|
|Grant, George (Morpeth)||Mikardo, Ian||Walker, Rt Hon Harold (Doncaster)|
|Grant, John (Islington C)||Millan, Rt Hon Bruce||Watkins, David|
|Hamilton, James (Bothwell)||Mitchell, R. C. (Soton, Itchen)||Wellbeloved, James|
|Hamilton, W. W. (Central Fife)||Morris, Rt Hon Alfred (Wythenshawe)||Welsh, Michael|
|Harrison, Rt Hon Walter||Morris, Rt Hon Charles (Openshaw)||White, Frank R. (Bury & Radcliffe)|
|Hart, Rt Hon Dame Judith||Morris, Rt Hon John (Aberavon)||White, James (Glasgow, Pollok)|
|Hattersley, Rt Hon Roy||Moyle, Rt Hon Roland||Whitehead, Phillip|
|Haynes, Frank||Newens, Stanley||Whitlock, William|
|Healey, Rt Hon Denis||Oakes, Rt Hon Gordon||Willey, Rt Hon Frederick|
|Heffer, Eric S.||Ogden, Eric||Williams, Rt Hon Alan (Swansea W)|
|Hogg, Norman (E Dunbartonshire)||O'Halloran, Michael||Wilson, William (Coventry SE)|
|Home Robertson, John||O'Neill, Martin||Winnick, David|
|Homewood, William||Orme, Rt Hon Stanley||Woodall, Alec|
|Hooley, Frank||Owen, Rt Hon Dr David||Woolmer, Kenneth|
|Horam, John||Palmer, Arthur||Wrigglesworth, Ian|
|Howell, Rt Hon Denis (B'ham, Sm H)||Park, George||Wright, Sheila|
|Huckfield, Les||Parker, John|
|Hudson Davies, Gwilym Ednyfed||Pendry, Tom||TELLERS FOR THE AYES:|
|Hughes, Mark (Durham)||Powell, Raymond (Ogmore)||Mr. George Morton and Mr. Austin Mitchell.|
|Hughes, Roy (Newport)||Price, Christopher (Lewisham West)|
|Adley, Robert||Boscawen, Hon Robert||Butcher, John|
|Aitken, Jonathan||Bottomley, Peter (Woolwich West)||Butler, Hon Adam|
|Alexander, Richard||Bowden, Andrew||Cadbury, Jocelyn|
|Amery, Rt Hon Julian||Boyson, Dr Rhodes||Carlisle, Kenneth (Lincoln)|
|Ancram, Michael||Braine, Sir Bernard||Carlisle, Rt Hon Mark (Runcorn)|
|Arnold, Tom||Bright, Graham||Chalker, Mrs Lynda|
|Atkins, Robert (Preston North)||Brinton, Tim||Channon, Paul|
|Baker, Kenneth (St. Marylebone)||Brittan, Leon||Chapman, Sydney|
|Baker, Nicholas (North Dorset)||Brocklebank-Fowler, Christopher||Clark, Hon Alan (Plymouth, Sutton)|
|Beaumont-Dark, Anthony||Brooke, Hon Peter||Clark, Sir William (Croydon South)|
|Bell, Sir Ronald||Brotherton, Michael||Clarke, Kenneth (Rushcliffe)|
|Bendall, Vivian||Brown, Michael (Brigg & Sc'thorpe)||Clegg, Sir Walter|
|Benyon, W. (Buckingham)||Bruce-Gardyne, John||Cockeram, Eric|
|Best, Keith||Bryan, Sir Paul||Colvin, Michael|
|Bevan, David Gilroy||Buchanan-Smith, Hon Alick||Cope, John|
|Blackburn, John||Buck, Antony||Cormack, Patrick|
|Blaker, Peter||Budgen, Nick||Corrie, John|
|Body, Richard||Bulmer, Esmond||Costain, A. P.|
|Bonsor, Sir Nicholas||Burden, F. A.||Cranborne, Viscount|
|Critchley, Julian||Kellett-Bowman, Mrs Elaine||Pym, Rt Hon Francis|
|Crouch, David||Kimball, Marcus||Raison, Timothy|
|Dean, Paul (North Somerset)||Kitson, Sir Timothy||Rathbone, Tim|
|Dickens, Geoffrey||Knox, David||Rees, Peter (Dover and Deal)|
|Dorrell, Stephen||Lamont, Norman||Rees-Davies, W. R.|
|Douglas-Hamilton, Lord James||Lang, Ian||Rhodes James, Robert|
|Dover, Denshore||Langford-Holt, Sir John||Rhys Williams, Sir Brandon|
|du Cann, Rt Hon Edward||Latham, Michael||Ridley, Hon Nicholas|
|Dunn, Robert (Dartford)||Lawrence, Ivan||Ridsdale, Julian|
|Durant, Tony||Lawson, Nigel||Rifkind, Malcolm|
|Dykes, Hugh||Lee, John||Rippon, Rt Hon Geoffrey|
|Eden, Rt Hon Sir John||Lester, Jim (Beeston)||Roberts, Michael (Cardiff NW)|
|Edwards, Rt Hon N. (Pembroke)||Lewis, Kenneth (Rutland)||Roberts, Wyn (Conway)|
|Eggar, Timothy||Lloyd, Ian (Havant & Waterloo)||Rost, Peter|
|Elliott, Sir William||Lloyd, Peter (Fareham)||Royle, Sir Anthony|
|Emery, Peter||Loveridge, John||Sainsbury, Hon Timothy|
|Eyre, Reginald||Luce, Richard||St. John-Stevas, Rt Hon Norman|
|Fairgrieve, Russell||Lyell, Nicholas||Scott, Nicholas|
|Faith, Mrs Sheila||Macfarlane, Neil||Shaw, Michael (Scarborough)|
|Farr, John||MacGregor, John||Shelton, William (Streatham)|
|Fell, Anthony||MacKay, John (Argyll)||Shersby, Michael|
|Fenner, Mrs Peggy||Macmillan, Rt Hon M. (Farnham)||Silvester, Fred|
|Finsberg, Geoffrey||McNair-Wilson, Michael (Newbury)||Sims, Roger|
|Fisher, Sir Nigel||McNair-Wilson, Patrick (New Forest)||Skeet, T. H. H.|
|Fletcher, Alexander (Edinburgh N)||McQuarrie, Albert||Speed, Keith|
|Fletcher-Cooke, Charles||Madel, David||Speller, Tony|
|Forman, Nigel||Major, John||Spence, John|
|Fowler, Rt Hon Norman||Marland, Paul||Spicer, Jim (West Dorset)|
|Fox, Marcus||Marlow, Tony||Spicer, Michael (S Worcestershire)|
|Fraser, Rt Hon H. (Stafford & St)||Marshall, Michael (Arundel)||Sproat, Iain|
|Fraser, Peter(South Angus)||Marten, Neil(Banbury)||Squire, Robin|
|Fry, Peter||Mates, Michael||Stanbrook, Ivor|
|Galbraith, Hon T. G. D.||Mather, Carol||Stanley, John|
|Gardiner, George (Reigate)||Maude, Rt Hon Angus||Steen, Anthony|
|Gardner, Edward (South Fylde)||Mawby, Ray||Stevens, Martin|
|Garel-Jones, Tristan||Mawhinney, Dr Brian||Stewart, Ian (Hitchin)|
|Glyn, Dr Alan||Maxwell-Hyslop, Robin||Stewart, John (East Renfrewshire)|
|Goodhew, Victor||Mayhew, Patrick||Stokes, John|
|Goodlad, Alastair||Mellor, David||Stradling Thomas, J.|
|Gorst, John||Meyer, Sir Anthony||Tapsell, Peter|
|Gower, Sir Raymond||Mills, Iain (Meriden)||Taylor, Robert (Croydon NW)|
|Gray, Hamish||Mills, Peter (West Devon)||Taylor, Teddy (Southend East)|
|Griffiths, Eldon (Bury St Edmunds)||Miscampbell, Norman||Tebbit, Norman|
|Griffiths, Peter(Portsmouth N)||Mitchell, David (Basingstoke)||Temple-Morris, Peter|
|Grimond, Rt Hon J.||Moate, Roger||Thomas, Rt Hon Peter (Hendon S)|
|Grist, Ian||Molyneaux, James||Thompson, Donald|
|Grylls, Michael||Monro, Hector||Thorne, Nell (Ilford South)|
|Gummer, John Selwyn||Montgomery, Fergus||Thornton, Malcolm|
|Hamilton, Hon Archie (Eps'm&Ew'll)||Moore, John||Townend, John (Bridlington)|
|Hamilton, Michael (Salisbury)||Morgan, Geraint||Townsend, Cyril D. (Bexleyheath)|
|Hampson, Dr Keith||Morris, Michael (Northampton, Sth)||van Straubenzee, W. R.|
|Hannam, John||Morrison, Hon Charles (Devizes)||Vaughan, Dr Gerard|
|Haselhurst, Alan||Morrison, Hon Peter (City of Chester)||Viggers, Peter|
|Hastings, Stephen||Mudd, David||Waddington, David|
|Havers, Rt Hon Sir Michael||Murphy, Christopher||Wakeham, John|
|Hawksley, Warren||Myles, David||Waldegrave, Hon William|
|Hayhoe, Barney||Neale, Gerrard||Walker, Bill (Perth a E Perthshire)|
|Heath, Rt Hon Edward||Needham, Richard||Walker-Smith, Rt Hon Sir Derek|
|Heddle, John||Nelson, Anthony||Wall, Patrick|
|Henderson, Barry||Neubert, Michael||Walters, Dennis|
|Heseltine, Rt Hon Michael||Newton, Tony||Ward, John|
|Hicks, Robert||Nott, Rt Hon John||Watson, John|
|Higgins, Rt Hon Terence L.||Onslow, Cranley||Wells, John (Maidstone)|
|Hogg, Hon Douglas (Grantham)||Oppenheim, Rt Hon Mrs Sally||Wells, Bowen (Hert'rd & Stev'nage)|
|Holland, Philip (Carlton)||Page, Rt Hon Sir R. Graham||Wheeler, John|
|Hooson, Tom||Page, Richard (SW Hertfordshire)||Whitelaw, Rt Hon William|
|Hordern, Peter||Parkinson, Cecil||Whitney, Raymond|
|Howell, Rt Hon David (Guildford)||Patten, Christopher (Bath)||Wickenden, Keith|
|Howell, Ralph (North Norfolk)||Patten, John (Oxford)||Wiggin, Jerry|
|Howells, Geraint||Pattie, Geoffrey||Williams, Delwyn (Montgomery)|
|Hunt, David (Wirral)||Pawsey, James||Winterton, Nicholas|
|Hunt, John (Ravensbourne)||Peyton, Rt Hon John||Wolfson, Mark|
|Irving, Charles (Cheltenham)||Pollock, Alexander||Young, Sir George (Acton)|
|Jenkin, Rt Hon Patrick||Porter, George|
|Johnson Smith, Geoffrey||Price, David (Eastleigh)||TELLERS FOR THE NOES:|
|Jopling, Rt Hon Michael||Prior, Rt Hon James||Mr. Spencer Le Marchant and Mr. Anthony Berry.|
|Joseph, Rt Hon Sir Keith||Proctor, K. Harvey|
|Kaberry, Sir Donald|
§ Question accordingly negatived.