§ 9 pm
§ The Under-Secretary of State for Transport (Mr. Kenneth Clarke)
I beg to move,That, for the purposes of any Act of the present Session to provide for the reconstitution of the British Transport Docks Board and to confer on a company powers over that body corresponding to the powers of a holding company over a wholly-owned subsidiary, it is expedient to authorise any charge to tax attributable to provisions treating as dividends payments made by that body to that company.This motion relates to our proceedings on the Transport Bill, which has completed its consideration in Committee. It has proved necessary because of a comparatively small technical problem that has arisen over the treatment for taxation purposes of a new statutory corporation to be known as Associated British Ports, which will be set up once the Bill has received Royal Assent.
Those who served in Committee on the Transport Bill—they constitute a slight majority of the thin House that we have retained for this debate—will be familiar with the background. Part II of the Bill provides for the denationalisation of the British Transport Docks Board. The Government's intention behind that policy is to transform the board from its present wholly publicly owned status to that of a private sector industry. The Government believe that thereby the intention of the board, which has been successful so far under public ownership, will be enhanced and improved.
We believe that the board or its successor companies will thrive when freed from the political control that is inevitably exercised from time to time when a trading company is wholly nationalised. We also believe that the change from a public sector corporation to a private sector business will give the management of the docks company access to private capital uninhibited by the restraints which have to be imposed on a nationalised industry by the Treasury under a Government of any colour. That is the background to the policy.
That policy will be implemented by creating a new two-tier structure for the docks business. The board will become a new statutory corporation which the Committee decided will be known as Associated British Ports. It will be a statutory corporation created entirely by the Bill, especially clauses 5 and 10 and schedule 2. Anyone who wants to know anything about the management of Associated British Ports, its proceedings or the statutory duties under which it will operate, can resort to the Bill and to our debates in Committee. He or she will thus be able to understand the position of Associated British Ports.
The statutory corporation will be subject to a Companies Act holding company, which also will be created under the Bill. That holding company will initially be a Companies Act company wholly owned by the Secretary of State for Transport as the guardian of the public interest. However, it is the Government's policy that as soon as reasonably possible the Secretary of State will sell off 49 per cent. of his interest in the shares of the holding company.
At the same time it has been made clear that my right hon. Friend will not use his 51 per cent. interest to intervene in the day-to-day management of the holding company or in its business policy. As a result of the sale 888 of 49 per cent. of the shares and that declaration of intent on the part of the Secretary of State the holding company will become a private sector company and will operate the docks by the agency of its wholly owned subsidiary, the statutory corporation—namely, Associated British Ports.
That is the structure of the Bill. I shall not burden the House with the reasons for choosing the two-tier structure, with the statutory corporation being the successor to the British Transport Docks Board.
The reason for choosing that apparently curious approach is that it is the nature of docks businesses and of businesses at present conducted by the British Transport Docks Board to be operated under a wide variety of statutory duties, largely contained in local Acts which appertain to ports throughout the country.
The best way in which Associated British Ports can be enabled to continue to discharge those statutory duties is by giving it the nature of a statutory corporation and by charging it with those duties—giving it, therefore, the burden of the day-to-day conduct of the business in the docks concerned. It means that any change in the overall status of the docks business in the future—certainly any change in the burden of the statutory duties which are laid on the owners of the docks—will continue to attach to Associated British Ports. Any change in Associated British Ports will require further legislation.
The practical effect which we hope to achieve is a relationship between the new holding company and its subsidiary—the statutory corporation, Associated British Ports—similar to the relationship between two Companies Act companies when one is the holding company at the head of a group and the other is a wholly-owned subsidiary beneath it.
We intended not only that for most practical purposes the relationship between the two companies should be based on ordinary Companies Act principles but that, for many purposes, the ordinary Companies Act law should apply to the day-to-day proceedings, accounts, and so on, of Associated British Ports. Clause 10, which is already before the House and waiting to come before the whole House on Report stage, sets out in considerable detail the various provisions of the Companies Act which will apply to Associated British Ports, although it will not be a Companies Act company but a statutory corporation.
Some problems still arise. Without the motion, problems would arise in clarifying the position of Associated British Ports for tax purposes. It follows that as Associated British Ports is not a company but a statutory corporation it does not have a share capital. There are other differences which distinguish it from an ordinary Companies Act company.
We hope that for most practical purposes, and particularly for taxation purposes, the corporation will be treated as if it were a Companies Act company. The motion will pave the way for amendments dealing in detail with that point to be taken later. We intend that Associated British Ports will be subject to taxation as if it were a Companies Act company and that for most purposes Associated British Ports and the holding company will be treated as if they were both Companies Act companies.
§ Mr. Bowen Wells (Hertford and Stevenage)
Apart from the motion, from which it is difficult to discover what is intended, I do not understand why, if we want Associated British Ports to be treated as a limited liability company, we do not make it a limited liability company.
889 Why do not we make the ports subject to the normal laws of a limited liability company and if necessary, and if possible, make the shares available to the public and employees of that company?
§ Mr. Clarke
I am not sure whether my hon. Friend was here a few moments ago when I explained the underlying policy. I shall briefly explain it again.
It is the clear intention of the Government to denationalise the British Transport Docks Board. We propose to transform it from a nationalised industry into a private sector company, not under the control of the Government and not governed by Treasury rules for its access to capital, which in future will be obtained by access to the private capital markets in the usual way.
One means by which we could have proceeded was by changing the British Transport Docks Board to a Companies Act company and as soon as possible floating it by selling shares. That was done last year with the National Freight Corporation, which is now the National Freight Company, in which we propose to sell the majority interest, if not all the shares, as soon as possible. However, had we done that with the British Transport Docks Board—even changed to, say, the British Transport Docks Company—the company would still have been subject to a range of statutory duties which apply to all its ports. Any dock undertaking within the British Transport Docks Board collection is normally subject to a range of past legislative provisions that place conservancy functions on the owner of the docks and sometimes obligations to provide services and facilities to ships. Whoever is the owner is subject to those statutory duties.
Had we taken the straightforward course we should have created a curious body—a Companies Act company but one which remained subject to a range of statutory duties in the operation of its business. Among other things, we felt that the structure might stand in the way of denationalisation, because it would be an unusual company in which to float shares. One would be floating a company in which to a considerable extent the development of activities would be inherited by statutory duties and might even require primary legislation if changes were needed.
We therefore chose the other method of merely changing the British Transport Docks Board into a statutory corporation—Associated British Ports—but we are making it a wholly-owned subsidiary of a brand new Companies Act company, which the Bill creates. That brand new company will be wholly owned at first by my right hon. Friend, but he will denationalise, in effect, the holding company; then we shall have a private sector business—that Companies Act company—which will be the controlling owner of the subsidiary, the statutory corporation, and in that way the whole business will go into the private sector.
I know that that still sounds a convoluted structure, but it does have its precedents. Although the analogy is not exact, a similar structure applies at Felixstowe. Felixstowe is owned by a statutory company, which is owned by a holding company, and it is the holding company—I believe, European Ferries Limited—which is the Companies Act company and the private sector business.
My hon. Friend's intervention bears exactly on the point. It is a difficult point to get at. In the end, what we are talking about is making sure that although we have chosen that structure for some purposes, because of the 890 statutory duties on the subsidiary, for taxation as well as for most other purposes, we wish both businesses to be treated as if they were Companies Act companies. In particular, we wish the statutory corporation to be treated for corporation tax purposes, when it makes profits, as a private sector business. We also wish any payments made by the subsidiary business to the holding company—the holding company will derive its income from payments and from its wholly-owned subsidiary—to be treated as dividends for tax purposes.
That will be the effect of the amendments to the Bill that we shall discuss if the motion is passed by the House, but it will not be possible to discuss all the necessary amendments if, for some reason, the House does not approve the motion.
I shall leave the Opposition the chance to make their own points, but I know that they come here with scepticism about what we are doing and no doubt a belief that in some way it facilitates a policy of which they disapprove. They are against denationalisation. They somehow believe that although denationalisation is to the disadvantage of the management—the interference that it suffers and the denial of access to private capital that results—it is, nevertheless, ideologically sound that the corporation should remain wholly nationalised.
Although I know that the Opposition are brought here by those doubts, I suggest that on this occasion those issues are not raised. All that we are paving the way for here is a minor and sensible technical change which will enable these companies to be treated for taxation purposes, as they are for most other purposes, as if they were Companies Act companies.
No particular advantage or disadvantage accrues to the corporation or the holding company as a result. It merely introduces common-sense arrangements with which everyone will be familiar. To some extent, it will enable the holding company to take advantage of group or consortium relief for tax purposes. The motion is particularly required because it would otherwise be arguable that any payments from Associated British Ports to the holding company would not be treated as dividends for corporation tax purposes. The amendments that we have tabled will make it clear beyond peradventure that such payments are to be treated as dividends for corporation tax purposes.
The undertakings will be placed in the same position as Companies Act companies. My guess is that few of those dealing with them in day-to-day business would even realise that they were not both Companies Act companies. The change will mean that the taxation laws apply in a common-sense fashion. They will acquire benefits but also disadvantages from that status, but they will be placed in exactly the same position as any other businesses in their relationship to one another. They will be no better off and no worse off than other equivalent industries. Indeed, had we chosen the straightforward path recommended by my hon. Friend—but for the problem of statutory duties on Associated British Ports—they would have wound up like this in any event.
As I said, the motion is required before the necessary amendments can be taken to make this clear. I therefore hope that although we have had some trouble in our proceedings on the Transport Bill so far, that trouble will not be extended into this minor and not very important technical matter.
§ Mr. Albert Booth (Barrow-in-Furness)
The Under-Secretary of State is to be congratulated on keeping a perfectly straight face when he said that the motion was a minor, technical matter. I submit that it is one of two things. Either it is an attempt by the Government to repair an error made when they presented the Bill on Second Reading—an error so grievous that they cannot now put down the financial amendments that they wish—or the Government have changed their judgment as to what should be the appropriate financial effects and provisions of the Transport Bill.
It is significant that although the motion is in the name of the Financial Secretary to the Treasury, the Under-Secretary of State for Transport introduced it tonight. Had it been the Financial Secretary we should have been asking him whether there is any constitutional precedent in the history of the House for amending what are in effect the provisions of this country's tax law on the basis of a Bill not yet passed by the House.
There are a number of serious objections to passing the motion. First, the House is being asked to pass a motion which will pave the way for a quite specific tax provision relating to a statutory body before Parliament has passed legislation constituting or reconstituting that statutory body. Any change in tax law consequent upon changing the status of a statutory body, reconstituting the British Transport Docks Board as Associated British Ports, is not a matter for inclusion in the Transport Bill at some future stage. However, we are not tonight debating the Transport Bill. This is a matter for the House to decide in a subsequent Finance Bill.
We should not be asked to prejudge the changes that will be needed in our tax law as a result of this special arrangement, by which the holding company will have as a wholly owned subsidiary the concern to be known as Associated British Ports. It is necessary for the House first to take a final decision on whether it wants to turn the BTDB into Associated British Ports and to make ABP the wholly owned subsidiary of a holding company in which there will be a certain degree of public ownership when the change in the tax law takes effect.
No one knows how much of ABP will be owned by the public when the new tax law change becomes effective. As the Under-Secretary says, it might be possible quickly to sell 49 per cent. of the new company to private buyers. We do not know who the private buyers will be. If the 49 per cent. were purchased by a shipping company, for example, certain Conservative Members might take a different view of the arrangement from the one that they would adopt if the shares were dispersed in 5 per cent. lots among the various insurance companies and pension funds. Indeed, we on the Labour Benches might take a different view as well in those circumstances.
In Committee, upon questioning the Under-Secretary we discovered that the Government had no intention of being bound to retaining 51 per cent. of the shares. They want to be free to sell 60 per cent, 70 per cent or perhaps even 100 per cent. of the shares—the last amounting to total denationalisation. If the Government want to put that proposition to the House we shall be happy to debate it. However, on Second Reading most of us were led to believe that the Government would maintain a majority stake in the holding company. As a democratically elected body we are entitled to assume that the Government are 892 not immune from the arguments advanced in the House about what is an appropriate arrangement for ownership and control of the BTDB, which is just about the only remaining collection of ports to be operating profitably against fierce competition at a time of world economic crisis.
There is no financial provision in clauses 13 and 14 or schedule 4 of the Transport Bill for the tax arrangement described by the Under-Secretary this evening. Those seem to be the only parts of the Bill purporting to contain provisions consequent upon the BTDB becoming Associated British Ports, the wholly owned subsidiary of the holding company.
The financial and explanatory memorandum indicates a different arrangement. The House is entitled to work on the assumption that when the Government drafted the Transport Bill they considered the financial and manpower implications and put them before the House in the explantory and financial memorandum. The memorandum states:The British Transport Docks Board's capital liabilities to the Minister of Transport which amount at present to £81 million will be extinguished. They will be replaced by the shares and securities which the Holding Company, owning … (the reconstituted British Transport Docks Board) issues to the Minister. In place of the present fixed interest payments to the National Loans Fund of approximately£5 million in 1980–81, there will be provision for payment into the Consolidated Fund of dividends and any other payments which the Minister receives as owner of shares or securities in the Holding Company.It is reasonable to suggest that in Committee we had every right to assume that that was the financial arrangement between the reconstituted British Transport Docks Board and the Treasury. In other words, the dividends were to be paid directly. It is now proposed that there should be another taxation arrangement.
§ Mr. Kenneth Clarke
The right hon. Gentleman has misunderstood the point. That financial memorandum still applies to dividends or other payments that the Minister receives as the owner of shares or securities in the holding company. The holding company was always a Companies Act company. As long as it remains wholly owned by the Minister, or as long as the Minister owns 51 per cent. of the shares, any income that he receives as a shareholder of the holding company will be paid into the Consolidated Fund. It is public money and it does not go personally to the Minister.
The Ways and Means resolution refers to any payments that are made by Associated British Ports to the holding company. It makes it clear that they will be treated as if they were dividends paid by one Companies Act company to another. That will merely involve payments from ABP to the holding company. As regards the financial memorandum, if the holding company pays anything in turn to the Minister it will be paid into the Consolidated Fund. That is how the public will benefit from the Minister's holding.
§ Mr. Booth
I had thought that the Under-Secretary was a step ahead. However, I am now sorry that I gave way. I am not arguing whether the dividends from the holding company will be paid to the Minister. Some of them will go to the Minister and some to whoever has purchased shares. It depends on how much of the holding company is sold. However, the House gave the Bill a Second Reading and accepted the financial resolution. It was entitled to assume that all the dividends of the wholly owned subsidiary would go to the holding company.
893 The Minister made it clear that that was not the Government's intention. If that had been their intention on Second Reading they could have made it clear in the financial resolution at that time. They did not. If they have changed their minds since then and want to alter the financial provisions, this is not the correct way to do it. They should accept the limitations that they, like others who debate legislation, are placed under in accordance with the terms of the financial resolution accepted on Second Reading. Any straightforward reading of that financial memorandum shows that there are limitations. I challenge the Under-Secretary to find anything in the financial and explanatory memorandum which suggests that the dividends paid by the holding company are anything other than the total dividends which will be declared in the first instance by Associated British Ports or the reconstituted British Transport Docks Board until the holding company begins other activities.
§ Mr. Kenneth Clarke
I shall try again to explain to the right hon. Gentleman, who has got himself into the most unbelievable muddle.
The financial resolution in the original Bill refers merely to any payments that the Minister receives as owner of the shares or securities of the holding company. All that that resolution was meant to do was to make it clear that anything that the Minister receives as a holder of shares in the holding company belongs to the public and goes to the Consolidated Fund and not to the Minister. That remains true. The income that he receives from the holding company will depend on what proportion of the equity he holds at any given time. That is all that that covers.
The financial resolution makes no reference to payments made by Associated British Ports to the holding company because, as we all knew throughout, Associated British Ports remains a wholly owned subsidiary of the holding company, so all payments made by ABP were always destined to go to the holding company and they will continue to go to it.
The ways and means resolution paves the way to ensure that when dividends are paid from ABP to the holding company those payments will be treated as dividends for Companies Act purposes.
§ Mr. Booth
It is the Under-Secretary of State who has not understood the point. I put it to him in two ways. First, on Second Reading the House was entitled to assume, having read the financial resolution, that dividends were the dividends of the holding company and that since the holding company would initially have but one activity, one wholly owned subsidiary, and no other activities, although it was a Companies Act company, they would he the dividends paid by the reconstituted British Transport Docks Board.
If the Under-Secretary now says that the House was expected to assume that the dividends might not be, and that part may be paid in taxation or would be liable to tax before they reached the holding company, he is entitled to make that assertion. If he was entitled to make that assertion and to assume that, why was no provision made in the Bill for that sort of payment? There was no such provision, and that is the reason for the motion. The Government have either made a mistake or changed their financial judgment.
One other consideration became apparent in Committee. Associated British Ports may not be directly 894 owned by the holding company. Under the provisions of clause 13, as we found in Committee, the holding company can nominate another company to take charge of Associated British Ports. If the Secretary of State does not use his 51 per cent. to instruct or tell the holding company what to do, those who purchase any shares can decide that instead of owning Associated British Ports directly they can nominate another company to own it. In those circumstances even the financial resolution would not necessarily enable the Government to tax the dividends of that company. All they can do is to tax the dividends paid to the holding company. That is not a major consideration, but it is one of the effects of the Bill.
Since we started to debate the Bill it has become clear that those who buy shares in the holding company will control it. They will control payments made by ABP and instruct it accordingly. They can instruct ABP what the charges should be. If shipping companies buy in to the holding company, that may influence the way in which they instruct ABP. Having failed to make provision in the Bill, the Government should withdraw the motion until the Bill has been passed and allow the House to decide in a subsequent Finance Bill whether we should have special tax legislation to deal with the matter.
If the Secretary of Stale wants to control payments made by ABP to the holding company, and I can understand why he may wish to do so, his 51 per cent. shareholding will enable him to instruct ABP how much it should pay until the House can deal with the financial effects and taxation consequences of the Bill in the proper way.
I believe that the Secretary of State wants to evade the responsibility of instructing the holding company. He does not want any financial responsibility for ports policy, any more than he wants direct responsibility for the way in which British ports are run. For that reason, we shall oppose the motion.
§ Mr. James Hill (Southampton, Test)
We are making a mountain out of a molehill on this simple motion. The Opposition Front Bench have created confusion because they are unaware of some of the vital points made by my hon. and learned Friend the Under-Secretary in Committee.
My hon. and learned. Friend gave way on the consideration of the Secretary of State's holding 51 per cent. of the shares in the holding company. I suggested that a number of those shares could be given to the work force in the ports. We referred to the British Aerospace form of flotation. A firm commitment had been given that 51 per cent. of the shares would be held by the Secretary of State, but in trying to get a share issue to cover not only the dock labour force but ancillary workers in the ports, I was happy to agree that my right hon. Friend might wish to reduce his holding. There was not too much protest from the Opposition over that provision, because they realised equality of the British Aerospace flotation and both sides of the House want to see a similar flotation and a similar equality in the share issue of ABP.
The holding company was clearly defined in Committee. I had no doubt that my right hon. Friend would set up the holding company and could nominate another company to take over its responsibilities, perhaps at a later date. The decisions were perhaps a little obscured because the holding company, the flotation of shares and 895 perhaps the whole mechanism of forming the subsidiary will be delayed until after the Bill has received Royal Assent.
Both sides of the Committee wanted a clearer definition, but it became clear that my right hon. Friend was aware of some hesitation among his hon. Friends about the fact that he would retain 51 per cent. of the shares and perhaps reduce that holding at a later stage. There was no firm commitment in Committee to the 51 per cent.
We made the point several times about the greatest spread of shares to cover the fears of some of the dock labour force that large shareholdings would, from the beginning, be in the hands of very few people. We also agreed in Committee that it was not possible for my right hon. Friend to lay down a hard and fast rule about where the shares in the subsidiary should lie forever. If people, given a free share issue, care to sell them on the open market, there is no way in which my right hon. Friend can prevent the shares being accumulated if the purchaser so wishes. It is fairly clear to me that hard and fast rules can be made for the first day when the flotation is formed. From then on, the market place will begin to take over. The market place will take over only if Associated British Ports still return the good figures on capital of the last two or three years. It lies with the work force and with the management—the holding company will determine the first board—which will be able to go into other areas of work practice. These are outlined clearly in schedule 3.
This is a point that gave rise to some interesting debates in Committee. It did not seem to me that if the Department had made a genuine omission the House would be so dogmatic that it would not respect the motion tonight. The Transport Bill represented an enormous volume of work for both Front Benches. Given the time available, the depth of debate and the fact that we are discussing an evolution in port management, I believe that the motion should be approved. I am sure that that would be the right decision.
§ Mr. Iain Mills (Meriden)
It is with some hesitation that I address the House on this matter. I was a member of the Standing Committee that examined various matters in the Transport Bill. That afforded a full and free opportunity to contribute views on various aspects of the Bill, including the affairs of the British Transport Docks Board. I do not include in my experience quite the same expertise in financial management as is evidenced by other hon. Members on both sides of the House. I feel however, that as a Member of the Standing Committee it is correct that I exercise my right to speak tonight and to raise a number of small problems.
The words of the motion state:That, for the purposes of any Act of the present Session to provide for the reconstitution of the British Transport Docks Board and to confer on a company powers over that body corresponding to the powers of a holding company over a wholly-owned subsidiary".Those words are not particularly easy to understand. The fundamentals behind the words are, however, important. In terms of philosophy, the motion bears closely upon the twin innovations achieved by the Government in their relationship with industry. It is important to understand 896 these innovations when examining the way in which the fiscal tax and other matters will be reconstituted by amendments introduced through the motion.
First, I ask my hon. and learned Friend to compare the proposed mechanism for selling shares in Associated British Ports—previously the British Transport Docks Board—with the mechanism for the sale of shares in the National Freight Corporation, British Aerospace, and British Rail subsidiaries. Two innovations have been introduced by this Government. First, there has been the denationalising of public assets into a more competitive market through privatisation and, equally important, the demonopolisation enshrined in the term "liberalisation." I realise that Opposition Members are stirred by my rhetoric. They spent many happy hours listening to me in Committee, and no doubt they are looking forward to a lengthy intervention from me now. However, I must disappoint them, because what I wish to say is simple and of necessity superficial, because I lack their grasp of the financial aspects. As an honest man of industry, not as a high-powered financier, it is perhaps better that I should ask those questions rather than those who consider themselves economic intellectuals.
I apologise for being distracted from this important Ways and Means motion. I have spent long nights and days on not just one but two Transport Bills. I was delighted that the Bill finished on Thursday. However, the Iron and Steel Bill is now in Committee, and I seem to be almost permanently in Committee. I therefore feel that I must go into some detail on this occasion.
The Government would not bring a motion of this nature before the House unless they were convinced of its necessity. If the Government can create these innovations of privatisation and liberalisation it is only fair to allow them, in this Ways and Means motion, the mechanism to do so.
Some aspects of my hon. and learned Friend's speech caused me anxiety. I ask him to define more clearly Companies Act companies. In Committee and on the Floor of the House it is easy to discuss Companies Act companies as if the term were enshrined and could not be challenged. However, it is difficult for laymen like myself to understand the commitments.
§ Mr. Mills
As a business man, I want to know exactly the liabilities of a Companies Act company. I hope, therefore, that my hon. and learned Friend will explain the matter to me.
I also want to know how ownership relates to our discussions in Committee. I come back to what was said by my hon. and learned Friend about capital and the obligations of Associated British Ports. On 24 February my hon. and learned Friend was not prepared to go into detail about how the 49 per cent. shareholding was to be sold. However, he took notice, as he always does, of my hon. Friend the Member for Southampton, Test (Mr. Hill), who is very knowledgeable in this respect.
In Committee we discussed the possibility of a substantial employee shareholding in the company. I hope that my hon. and learned Friend will refer to that. My hon. and learned Friend said that the Government would have to examine that but that it was not possible to give precise details.
897 The name of the new corporaion is important. It is strange that Opposition Members were so full of opposition to the new name for the British Transport Docks Board that they voted on many occasions against the name proposed by my hon. Friends the Members for Faversham (Mr. Moate), and Southampton, Test and myself. I have an interest in the matter. We believe that it is just that the name "Associated British Ports" should be brought to the attention of Opposition Members who are muttering from a sedentary position—to coin a phrase in parliamentary language.
Do the Government intend to sell part of the 51 per cent. share at some time'? The Government have said that initially they propose to sell 49 per cent. There is no quick reaction to that, so perhaps I am wrong. Would the company really have to fulfil its statutory duties? My hon. and learned Friend alarmed me when he said that it would have certain obligations to ships. What are those obligations? Are they to supply clean linen and fresh food, or is some other unreasonable obligation involved? Opposition Members may laugh, but the issue is important to people who work on ships. Opposition Members should take an interest.
Can the Minister define a wholly owned subsidiary of a holding company? I find the concept difficult to grasp. As someone who is green to the economic facts of life I do not fully understand the obligations of wholly owned subsidiaries and holding companies. It would be for the benefit of the House and for people who work for the British Transport Docks Board—now named Associated British Ports—to have the Minister's comments.
§ Mr. Bowen Wells (Hertford and Stevenage)
I wish to exercise the unusual right of a Back Bencher to comment on the quality of the debate. If I were the judge I should decide the debate in favour of the Minister. A mistake has obviously been made by my hon. and learned Friend and the Department of Transport in producing a Bill without the proper financial element. Perhaps I shall be corrected about there being a mistake, but such a mistake does not invalidate what the Government seek.
I have always been suspicious of Government-owned companies in which the Government own 51 per cent. What happens to the 49 per cent. minority holding? The Government obviously have a massive majority and can dictate everything that happens.
The resolution is directed at a narrow point—that the new organisation should enjoy rights and privileges similar to thoseof a limited liability company. The subsidiaries of a limited liability company, wholly or majority-owned, pass dividends between the subsidiary companies to the owning company without being taxed on those dividends. That is a reasonable proposition. I am sure that the House will agree to it without Division or further delay.
§ Mr. Kenneth Clarke
My hon. Friend the Member for Hertford and Stevenage (Mr. Wells) touched on the one valid point that was raised by the right hon. Member for Barrow-in-Furness (Mr. Booth)—why the motion has been tabled at this stage. Obviously there has been a change of intention on the part of the Government in producing at this stage a Ways and Means resolution which will pave the way for amendments which will be taken on Report.
898 These taxation provisions were always intended. It always was intended that the holding company and Associated British Ports should both be treated as Companies Act companies for taxation purposes, but there was a choice of legislative vehicle—on the one hand, the Finance Bill and, on the other, the Transport Bill, which we now propose to use. The difficulty that has arisen is a timetabling difficulty in terms of allowing the House to consider the details properly.
The Finance Bill and the Transport Bill are passing parallel through the House, and I am glad to say that the Transport Bill is at the moment in the lead, and with some difficulty has held its lead so far. There would be considerable difficulty in tabling the necessary amendments to the Finance Bill dealing with the taxation treatment of companies which were themselves being created by another provision which at that stage was proceeding elsewhere in the House. Therefore, as it was obvious that the Transport Bill was about to go to its last stage in this House before the Finance Bill had anything like completed its Committee stage, we decided to use the Transport Bill as the legislative vehicle for the purpose of making these tax provisions clear.
The right hon. Member for Barrow-in-Furness appears to believe that we are making great changes in the tax law without the House having the opportunity to consider them. He is very fond of seeing great constitutional significance in comparatively minor procedural points. There are no great constitutional points here. The Ways and Means resolution is needed merely to pave the way for the amendments themselves to be taken, and the House, of course, in its debate and voting—if necessary—on the amendments will have the opportunity of exercising parliamentary judgment on the Government's proposals. It makes no practical difference and no constitutional difference whether these taxation changes are made in a Finance Bill or in a Transport Bill.
The taxation changes are perfectly straightforward. As my hon. Friend the Member for Hertford and Stevenage has just made clear, they merely enable the taxation arrangements for the holding company and Associated British Ports to be exactly the same as they would be if they were both Companies Act companies—no better and no worse in either case. The only effects will be that as a group under the holding company it is possible that there will be some group or consortium relief available for corporation tax purposes in certain circumstances; and if any payments are made, as we trust they will be, by Associated British Ports to the holding company which owns it, those payments will be subject to advance corporation tax payments because they will be treated as if they were dividends for corporation tax purposes.
No one suggested any other arrangement by which these companies could be dealt with for taxation purposes. It is arguable that they would be dealt with in that way whether or not we legislated. What the amendments will do if the House subsequently approves them will be to make that position clear beyond doubt.
§ Mr. Peter Viggers (Gosport)
Does my hon. and learned Friend agree that during the last hour we have had a rather remarkable demonstration of anger from the Opposition Benches which might have been averted had the Government taken the trouble to produce an explanatory memorandum to the Ways and Means resolution rather similar to that which accompanies Bills? 899 All the anger has been misdirected. The point is a very narrow one. All would have been clear had the Government explained the position.
§ Mr. Clarke
That is possibly the case. I am quite prepared to accept that stricture and apologise for the omission. Had he been present throughout the debate my hon. Friend would have seen the danger of providing explanatory memoranda to the Opposition Front Bench because many weeks later hon. Gentlemen rise with a puzzled frown and completely misunderstand the arrangements that have been made in the Bill as printed in the first place. There was some difficulty on the previous financial memorandum.
Nevertheless, I hope that we have now made the position clear. I confirm to my hon. Friends the Members for Southampton, Test (Mr. Hill) and for Meriden (Mr. Mills), who supported this policy throughout the Committee stage, that this does not reflect any underlying change of policy and that there is no difference between the present policy of the Government and the policy of the Government as expounded on Second Reading, despite what the right hon. Member for Barrow-in-Furness said. Once the Bill has obtained Royal Assent the Minister will create a holding company which will be a wholly owned Companies Act company, and that holding company will be the sole owner of Associated British Ports. Thereafter, as soon as is reasonable, he will float the holding company and sell up to 49 per cent. of the shares. The 49 per cent. will be retained by the Government for the foreseeable future, but we cannot give ourselves a timeless guarantee. We are anxious to make room for workers' shareholdings of exactly the kind that was mentioned.
§ Question put:—
§ The House divided: Ayes 168, Noes 93.902
|Division No. 149]||[10.00|
|Alexander, Richard||Channon, Rt. Hon. Paul|
|Ancram, Michael||Chapman, Sydney|
|Aspinwall, Jack||Clark, Hon A. (Plym'th, S'n)|
|Atkins, Robert(Preston N)||Clarke, Kenneth (Rushcliffe)|
|Atkinson, David (B'm'th,E)||Clegg, Sir Walter|
|Baker, Nicholas (N Dorset)||Colvin, Michael|
|Banks, Robert||Cope, John|
|Beaumont-Dark, Anthony||Costain, Sir Albert|
|Bendall, Vivian||Cranborne, Viscount|
|Berry, Hon Anthony||Dorrell, Stephen|
|Best, Keith||Douglas-Hamilton, Lord J.|
|Bevan, David Gilroy||Dover, Denshore|
|Biffen, Rt Hon John||du Cann, Rt Hon Edward|
|Biggs-Davison, John||Dunn, Robert (Dartford)|
|Blackburn, John||Emery, Peter|
|Bottomley, Peter (W'wich W)||Eyre, Reginald|
|Bowden, Andrew||Fairgrieve, Russell|
|Braine, Sir Bernard||Fenner, Mrs Peggy|
|Bright, Graham||Fisher, Sir Nigel|
|Brinton, Tim||Fletcher, A. (Ed'nb'gh N)|
|Brittan, Leon||Fletcher-Cooke, Sir Charles|
|Brooke, Hon Peter||Fookes, Miss Janet|
|Brotherton, Michael||Fraser, Peter (South Angus)|
|Brown, Michael (Brigg & Sc'n)||Gardiner, George (Reigate)|
|Bruce-Gardyne, John||Garel-Jones, Tristan|
|Bryan, Sir Paul||Gilmour, Rt Hon Sir Ian|
|Buchanan-Smith, Alick||Goodlad, Alastair|
|Buck, Antony||Gow, Ian|
|Cadbury, Jocelyn||Gower, Sir Raymond|
|Carlisle, John (Luton West)||Grant, Anthony (Harrow C)|
|Carlisle, Kenneth (Lincoln)||Gray, Hamish|
|Carlisle, Rt Hon M. (R'c'n)||Greenway, Harry|
|Chalker, Mrs. Lynda||Griffiths, Peter Portsm'th N)|
|Gummer, John Selwyn||Page, Richard (SW Herts)|
|Hawksley, Warren||Pattie, Geoffrey|
|Heddle, John||Percival, Sir Ian|
|Hicks, Robert||Proctor, K. Harvey|
|Hogg, Hon Douglas (Gr'th'm)||Pym, Rt Hon Francis|
|Howell, Rt Hon D. (G'ldf'd)||Rathbone, Tim|
|Howells, Geraint||Rees-Davies, W. R.|
|Hunt, John (Ravensbourne)||Renton, Tim|
|Hurd, Hon Douglas||Rhodes James, Robert|
|Jessel, Toby||Rhys Williams, Sir Brandon|
|Jopling, Rt Hon Michael||Ridsdale, Sir Julian|
|Joseph, Rt Hon Sir Keith||Rifkind, Malcolm|
|Kaberry, Sir Donald||Roberts, M. (Cardiff NW)|
|Kilfedder, James A.||Ross, Stephen (Isle of Wight)|
|King, Rt Hon Tom||Rossi, Hugh|
|Lamont, Norman||Sainsbury, Hon Timothy|
|Lang, Ian||Shaw, Giles (Pudsey)|
|Lawrence, Ivan||Shaw, Michael (Scarborough)|
|Le Marchant, Spencer||Shepherd, Colin (Hereford)|
|Lennox-Boyd, Hon Mark||Shersby, Michael|
|Lester, Jim (Beeston)||Skeet, T. H. H.|
|Lloyd, Peter (Fareham)||Speed, Keith|
|Loveridge, John||Speller, Tony|
|Luce, Richard||Spence, John|
|Lyell, Nicholas||Sproat, Iain|
|Macfarlane, Neil||Squire, Robin|
|MacKay, John (Argyll)||Stainton, Keith|
|McNair-Wilson, M. (N'bury)||Stanbrook, Ivor|
|McQuarrie, Albert||Stevens, Martin|
|Major, John||Stewart, A.(E Renfrewshire)|
|Marlow, Tony||Stradling Thomas, J.|
|Mates, Michael||Thorne, Neil (Ilford South)|
|Mather, Carol||Thornton, Malcolm|
|Mawby, Ray||Townend, John (Bridlington)|
|Mawhinney, Dr Brian||Townsend, Cyril D, (B'heath)|
|Maxwell-Hyslop, Robin||Trippier, David|
|Mayhew, Patrick||Trotter, Neville|
|Mellor, David||van Straubenzee, W. R.|
|Meyer, Sir Anthony||Vaughan, Dr Gerard|
|Miller, Hal (B'grove)||Viggers, Peter|
|Mills, Iain (Meriden)||Walker, Rt Hon P. (W'cester)|
|Mitchell, David (Basingstoke)||Walker-Smith, Rt Hon Sir D.|
|Moate, Roger||Waller, Gary|
|Morris, M. (N'hampton S)||Watson, John|
|Morrison, Hon P. (Chester)||Wells, Bowen|
|Murphy, Christopher||Wheeler, John|
|Myles, David||Wickenden, Keith|
|Neale, Gerrard||Wilkinson, John|
|Needham, Richard||Younger, Rt Hon George|
|Onslow, Cranley||Tellers for the Ayes:|
|Osborn, John||Mr. Robert Boscawen and Mr. Donald Thompson.|
|Page, Rt Hon Sir G. (Crosby)|
|Allaun, Frank||Dixon, Donald|
|Ashton, Joe||Dobson, Frank|
|Atkinson, N. (H'gey,)||Dormand, Jack|
|Bennett, Andrew (St'kp't N)||Dubs, Alfred|
|Booth, Rt Hon Albert||Dunwoody, Hon Mrs G.|
|Boothroyd, Miss Betty||Eadie, Alex|
|Bray, Dr Jeremy||Eastham, Ken|
|Brown, Hugh D. (Provan)||Edwards, R. (W'hampt'n S E)|
|Callaghan, Jim (Midd't'n & P)||Ellis, R. (NED'bysh're)|
|Campbell-Savours, Dale||English, Michael|
|Canavan, Dennis||Evans, John (Newton)|
|Carmichael, Neil||Field, Frank|
|Clark, Dr David (S Shields)||Fitt, Gerard|
|Cocks, Rt Hon M. (B'stol S)||Flannery, Martin|
|Concannon, Rt Hon J. D.||Fletcher, Ted (Darlington)|
|Cook, Robin F.||Foster, Derek|
|Cowans, Harry||George, Bruce|
|Craigen, J. M.||Gourlay, Harry|
|Cryer, Bob||Grant, George (Morpeth)|
|Cunliffe, Lawrence||Hamilton, James (Bothwell)|
|Cunningham, G. (Islington S)||Hamilton, W. W. (C'tral Fife)|
|Dalyell, Tam||Harrison, Rt Hon Walter|
|Davidson, Arthur||Haynes, Frank|
|Davies, Ifor (Gower)||Hogg, N. (E Dunb't'nshire)|
|Davis, T. (B'ham, Stechf'd)||Home Robertson, John|
|Homewood, William||Newens, Stanley|
|Hughes, Robert (Aberdeen N)||O'Neill, Martin|
|Jones, Dan (Burnley)||Palmer, Arthur|
|Lamond, James||Pendry, Tom|
|Lestor, Miss Joan||Powell, Raymond (Ogmore)|
|Lofthouse, Geoffrey||Prescott, John|
|Lyons, Edward (Bradf'd W)||Richardson, Jo|
|McCartney, Hugh||Roberts, Albert (Normanton)|
|McElhone, Frank||Ross, Ernest (Dundee West)|
|McKay, Allen (Penistone)||Skinner, Dennis|
|McKelvey, William||Snape, Peter|
|Marks, Kenneth||Soley, Clive|
|Marshall, D(G'gow S'ton)||Spriggs, Leslie|
|Maxton, John||Stoddart, David|
|Miller, Dr M. S. (E Kilbride)||Stott, Roger|
|Mitchell, Austin (Grimsby)||Taylor, Mrs Ann (Bolton W)|
|Morris, Rt Hon A. (W'shawe)||Thorne, Stan (Preston South)|
|Morton, George||Tilley, John|
|Urwin, Rt Hon Tom||Young, David (Bolton E)|
|White, Frank R.||Tellers for the Noes:|
|Wilson, Rt Hon Sir H.(H'ton)||Mr. Joseph Dean and Mr. James Tinn.|
§ Question accordingly agreed to.
That, for the purposes of any Act of the present Session to provide for the reconstitution of the British Transport Docks Board and to confer on a company powers over that body corresponding to the powers of a holding company over a wholly-owned subsidiary, it is expedient to authorise any charge to tax attributable to provisions treating as dividends payments made by that body to that company.