§ Order for Second Reading read.1.56 pm
§ Mr. Geoffrey Rippon (Hexham)
I beg to move, That the Bill be now read a Second time.
The purpose of the Bill is to remedy a grave injustice done to the former owners of the assets nationalised by the Aircraft and Shipbuilding Industries Act 1977 by providing more just and equitable arrangements for compensation.
The House will recall that, when in Opposition, the members of the present Government fought hard to prevent the nationalisation of the aircraft and shipbuilding industries and that they denounced especially the totally unrealistic and unfair provisions for compensation. Those provisions were variously described by the present Financial Secretary to the Treasury as "grossly inadequate" and by the present Secretary of State for the Environment as "more like confiscation than compensation." In another place, to take a neutral comment, Lord Goodman was moved to observe that the compensation provisions were "absolutely Alice in Wonderland."
On 16 July last year, my hon. Friend the Member for Fareham (Mr. Lloyd) gained the support of 153 right hon. and hon. Members for his Ten-Minute Bill on the matter. As he pointed out on that occasion, the 1977 Act, as it stands, restricts compensation to the companies concerned to their average stock market prices in the six months ending February 1974. Apart from the objections that may be made to choosing that arbitrary retrospective date, there are other factors to be taken into account.
As the House will appreciate, stock market prices, whatever date is chosen, have no direct relationship to the value of the underlying assets. Thus, for a number of the companies concerned, and so for their shareholders, the compensation on the formula contained in the 1977 Act was far below their net worth.
Vosper's, for example, was offered only £4½ million for the warship building and ship repairing assets which on vesting day were worth more than £25 million, including £5½ million cash in the bank. It is hard to think of anything more manifestly unjust than offering £4½ million compensation with more than £5½ million in the bank and then to disregard entirely all the rest of the assets. I understand that a slightly higher figure of compensation has been negotiated and accepted, but only under protest and, of course, with the reservation of the right to continue to fight for justice.
As a result of all this, the expropriated companies have been forced to take their case to the European Commission of Human Rights. Following the confiscation by the Nazis of private assets before the war, it was written into the European doctrine that this should not take place in the future. But, whatever the legal merits of the companies' case, there is no doubt about the moral case which they have to present to the European Commission.
Those issues should be settled in the House. As far as I know, no members of the Government have ever denied that the 1977 Act was grossly unfair. On the contrary, they have agreed that it was unfair. Until now, they have said that they cannot see their way to introducing amending legislation because of the difficulties of reopening the 1223 matter. I do not believe that those difficulties are insuperable. They can and should be overcome. The Bill provides means whereby that can be done.
As for the doctrine of the dangerous precedent so beloved by certain sections of our Civil Service, and which, I know, is also invoked by the Government, whatever objections there may be to Parliament imposing a retrospective burden—whether in regard to taxation or otherwise—there is no constitutional objection to conferring a retrospective benefit to remedy a manifest injustice.
The Bill is brought before the House because a manifest injustice has been done. If it is not put right, the House will have condoned a highly dangerous precedent of far greater consequence than any created by remedying what was to all intents and purposes an act of confiscation.
§ 2.1 pm
§ The Under-Secretary of State for Industry (Mr. John MacGregor)
I am glad that my right hon. and learned Friend the Member for Hexham (Mr. Rippon) has had an opportunity to air yet again a matter which, as he will know, has occupied the attention of the House on a number of occasions, especially from the Government side. He has put his case briefly, persuasively and forcefully, as have others before him. We are all familiar with many of the points that he has raised.
As my right hon. and learned Friend will know, the previous Minister of State, Department of Industry, who has now gone to more onerous resposibilities in another Department, and the Under-Secretary who has dealt with this matter until now, are unable to be here. The Minister has duties elsewhere and the Under-Secretary is out of London on important duties. It has fallen to me to respond to the debate. I am sure that my right hon. and learned Friend will recognise that, although in my previous capacity in the Government I have been aware of and familiar with the issues, until now I have not had to grapple with the technicalities and details of the case.
I am grateful to my right hon. and learned Friend, because he has given me my first opportunity to speak from the Dispatch Box. I might have welcomed a different opportunity to make my first speech, although it is pleasant to be able to do so with such an empty House, which will remove some of the shock of finding oneself here. I should have welcomed another opportunity because, as my right hon. and learned Friend will know, the Government have much sympathy and understanding for that case.
As has been suggested, several members of the Government have forcefully criticised with absolute justification the terms for compensation that were originally contained in the 1977 Act. My right hon. and learned Friend has given quotations from some, but it is well known that there are many others. It is true that when we were in the Opposition we carried out a forceful campaign against the terms for compensation and also against the Act.
It is one of the ironies of the situation that our success in delaying that Act from the time when it was first introduced until it reached the statute book in 1977 had the inevitable result that the vesting date was by that stage much later than 1974 when the original Stock Exchange valuations were made. It is ironic that that delay, which 1224 has caused some of the present difficulties, was in part due to our success—alas not complete—in delaying the Bill, but not avoiding its introduction altogether. There can be no doubt where we stand on the terms agreed in the original Bill. In Government we have described them as grossly unfair. I shall shortly quote what my right hon. Friend the Secretary of State said about the decision that we had to take on the compensation terms.
I am sure that my right hon. and learned Friend agrees that the sole responsibility for the situation in which we find ourselves and for the terms originally put forward rests with the Labour Government. The problem that I have to face is that the terms are not the only issue in the case. One of the major difficulties that the Government faced in considering the matter—and my right hon. and learned Friend will be aware that, because of the complexities, it was considered over a long period—was that wider considerations had to be taken into account.
My right hon. Friend's statement last year on the Government's decision on the compensation terms was related not only to those terms, but to the Government's proposal to introduce private sector capital into shipbuilding and ship repair. After quoting the part of he statement dealing with compensation terms I shall go into detail on the points arising out of the arguments put by my right hon. and learned Friend. The Secretary of State said:We recognise that some previous owners and many members of this House"—those were almost all, if not exclusively, Conservative Members—and of the public believe that the terms of compensation imposed by the 1977 Act were grossly unfair to some of the companies and we share this view.That demonstrates that the Government agree with what my right hon. and learned Friend has said about the grossly unfair terms of the compensation.
The majority of companies have not found themselves in difficulty over the compensation terms. A minority of companies are affected, but, of course, they hold their view strongly. My right hon. Friend continued:We have explored every possibility to right the injustice done by the previous Government, but to our very great regret we have concluded that amending legislation to establish new compensation terms retrospectively would be unjust to the many people who sold shares on the basis of the previous terms.We had to recognise, moreveover, that had we wanted as an alternative to offer the companies back to the former owners legislation would have been required. This would inevitably create a long period of uncertainty for the industry during the passage of legislation, the preparation of the detailed offer to the former owners and the consideration of the terms. Moreover we cannot return to the former owners that which was taken from them because the assets and liabilities of the companies concerned have changed. In the case of the aircraft industry the changes are quite clearly irreversible. We have therefore come to the most reluctant conclusion that there is no satisfactory way to alter the 1977 compensation terms."—Official Report, 7 August 1980; Vol 990, c. 290.]It is right to repeat that statement, because it indicates how difficult the decision was for the Government, which explains why they took so long to reach it, and also the reluctance with which we came to the final conclusion.
The purpose of the Bill is worth spelling out. My right hon. and learned Friend is anxious to air the issue yet again and to put further pressure on the Government. As he will realise, there are certain limitations on the Bill. As a result, the Bill will not prove to be the end of the story. It will represent only a small attempt to get the issue reexamined. My right hon. and learned Friend referred briefly to the Bill. It provides for the unlisted securities of 1225 companies—nationalised in 1977—to be valued on an open-market basis at their vesting date in 1977. The vesting date for British Aerospace was 29 April, and that for British Shipbuilders was 1 July.
Under the Bill, the valuation is to be made by the arbitration tribunal, which was established under the 1977 Act. Under the terms of the Bill, that is to be compared with the notional Stock Exchange value of the securities in the six months ended 28 February 1974, as assessed under the 1977 Act. The Bill provides only that where the open market value is higher than the existing compensation figure, the tribunal is required to report to the Secretary of State, who is to lay the report before both Houses of Parliament.
The Bill does no more than attempt to get an outside and no doubt expert assessment of the difference in the case of certain companies. As I indicated earlier, not all the companies that settled, or that are still to settle, under the terms of the 1977 Act will find that their open-market value is higher than the existing compensation figure.
§ Mr. Rippon
Does my hon. Friend agree that if the Government were minded to provide the necessary financial resolutions a more expedited procedure could be arranged in Committee?
§ Mr. MacGregor
I understand that my right hon. and learned Friend is suggesting that there are difficulties with the financial provisions for Private Members' Bills. Indeed, I have discovered that when I have attempted to draft such Bills. If the Bill sought to go further, extra compensation might well be involved, and that in turn would necessitate a money resolution. If the Bill reaches the Committee stage, it can be pursued then.
My right hon. and learned Friend's Bill is limited, but I accept that there are technical difficulties in taking it any further. The Bill has given my right hon. and learned Friend an opportunity to put his arguments forward. If the Bill remains as it stands, figures would be put before the House for those cases in which the existing compensation was less than the open-market value.
The Bill cannot provide any additional compensation. Even such a limited Bill would create difficulties, because of the delays and uncertainty involved. The Bill reopens the issue, but will not lead to action. It would inevitably take a long time to collect the evidence, and to put it before the tribunal and for the tribunal to make a decision. The Government could not stand aside from that process. Therefore, the Government would have to be involved with the financial advisers. Just as those advisers were brought in to establish the existing compensation, they would have to be brought in again. In addition, the former owners would have to bring in financial advisers. Since, as my right hon. and learned Friend knows, the process whereby compensation is disputed has already been fairly lengthy, this would inevitably mean even longer delays.
The proposal would create further uncertainties and delays for the very few still to settle and perhaps even for those who have settled. It would require subsequent legislation, as the Secretary of State pointed out on 7 August, to alter the terms of compensation under the 1977 Act, as would be necessary for certain companies following the tribunal's findings. It would also reopen the uncertainties for stockholders who have already settled and perhaps sold. It would also create a further long period of uncertainty for the whole industry.
§ Mr. Bowen Wells (Hertford and Stevenage)
Does not the Minister agree that to a large extent uncertainty and delay have been caused by the Government? The actual cash compensation, although agreed, has not yet been paid to a large number of companies involved in the scandalous 1977 Act.
§ Mr. MacGregor
I shall return to that point later.
The general delay has been due to the complications of the matter and the hopes of some companies that the Government would still be in a position to change their mind. As the matter was so complicated, we were reluctant to come to the conclusion that we reached eventually on 7 August, and inevitably there were delays in the Government settling their position.
Let me give the up-to-date facts and figures. Twenty-eight companies were vested, four in British Aerospace and 24 in British Shipbuilders. Three of the 28, all in shipbuilding, were already owned by the Government. Thus compensation had to be settled for 25 companies. My hon. Friend the Under-Secretary of State indicated the current position in an Adjournment debate on 29 October 1980. I am now able to bring it up to date. Twenty-two settlements have now been reached by agreement. To be strictly accurate, of those 22 one engaged in arbitration but the proceedings were terminated after about two weeks because a settlement was reached. Of the remainder, arbitration proceedings have been heard for one and a decision is awaited, arbitration proceedings have been initiated for another and no date has yet been fixed for the hearing and the negotiations are stll open for yet another. The last three instances indicate one more reason for the delay. It is significant and important that 22 out of the 25 companies affected have settled.
The agreed amounts, after settlement, were all paid within two weeks of the announcement of each settlement, which includes payments on account. There was no undue delay there. The delay was in reaching the settlements.
I have another point that may be of some comfort to my right hon. and learned Friend. Because of the view that the Government took about the gross injustice of the 1977 compensaton terms, we have been as open-minded as possible within the terms of the 1977 Act, and with financial advice from outside sources—merchant bankers, stockbrokers, accountants and so on—we have tried to reach the fairest settlements.
In the case of the four aerospace companies the compensation now amounts to £158.75 million and in the case of the 21 shipbuilding companies £69.71 million, including £2.45 million on account for unsettled cases. Just as the vast majority of companies have now settled by agreement, so it can be said that the vast preponderance of sums, payable under the terms of the 1977 Act, have been paid. We are in a position where most of the settlements have taken place and most of the compensation paid.
Another point relevant to the difficulty of reopening the matter is that six settlements covering eight companies have been made since the Secretary of State's announcement in August 1980 that we would be making no change in the law. That is the basic, factual position. One of the major problems of my right hon. and learned Friend's Bill is that it would be a lengthy process. It would continue the deep uncertainty in the industry.
I turn to some of the basic issues which face the Government, to which I briefly referred when I read out 1227 the Secretary of State's announcement which led the Government to come to their decision. First, there is entire agreement between us on the injustice of the original terms. We have not pretended otherwise in reaching this decision. Secondly, the Government have looked thoroughly at every possibility of putting right this injustice. That is why it took so long. A way could not be found without introducing much wider repercussions, which the companies most affected, while I have every sympathy with them, have to take into account. These wider arguments must affect any Government decision.
The first of those repercussions is that we would be introducing retrospective legislation. I heard my right hon. and learned Friend's argument that were, a retrospective benefit applied, this would be acceptable to Conservative Members. I hope I may be able to argue that there could be retrospective disadvantages to some people as a result of reopening the compensation terms.
On the constitutional matter, I have frequently heard this argument in Finance Bill Committees on which I have served. I have been tempted to use it myself when I had a case that I wanted especially to press. It is possible that I may have done so. On reflection, it is an extremely difficult argument to argue that retrospective legislation, in principle, is all-right when it benefits someone but disadvantageous when it does not.
§ Mr. Rippon
And when it remedies an injustice that is accepted by everyone, including the Government, to be an injustice.
§ Mr. MacGregor
One of the difficulties is that although we on the Conservative side accept entirely the injustice, I do not think that everyone in the House would accept that there was an injustice. I disagree violently with them. If, however, we are saying that where we feel that there is an injustice we can introduce retrospective legislation, without worrying about the constitutional implications, we run the danger of allowing others to use the same argument.
§ Mr. Bowen Wells
Is the Minister therefore arguing that if the Labour Party gets into office again and nationalises, as it threatens, industry after industry, or renationalises them without compensation, on the welcome return of a Conservative Government we would not return those industries to their former owners? This is the impact of what the Minister is arguing.
§ Mr. MacGregor
I am arguing the case about retrospective legislation in general. I was making the point that if we accept the advisability or desirability of retrospective legislation in one case, others can make the same argument.
§ Mr. Tristan Garel-Jones (Watford)
Are we not closing the door to the possibility of ourselves introducing retrospective legislation in the event that an extreme Left-wing Socialist Government were to confiscate private property? We are putting ourselves in the position where we cannot say to the victims of such confiscation that they would be compensated on the return of a Conservative Government.
§ Mr. MacGregor
I can see the argument that my hon. Friend makes, but perhaps I should say that one of the difficulties in this case—this is where the argument on 1228 retrospection applies quite forcefully—is that we gave no undertaking before taking office, neither when in Opposition nor during the election campaign, or subsequently, that we would repeal or change this particular legislation in relation to the compensation terms themselves. I have checked that carefully. If I may say so, especially in the light of the comments made by my right hon. and learned Friend the Member for Hexham and his quotation of what we said when in Opposition, I have carefully rechecked that we did not commit ourselves to that undertaking. There is, therefore, the difficulty that in this case one would be introducing retrospective legislation without having committed ourselves to it at the time.
§ Sir Albert Costain (Folkestone and Hythe)
In the Burmah Oil case—I think that my memory serves me aright—was there not retrospective legislation, and was it all right in that case, when it was against the individual?
§ Mr. MacGregor
I must tell my hon. Friend that I cannot offhand clearly remember the facts of the Burmah Oil situation, but I well remember the arguments relating to sanctions on Iran, on which strong feelings were expressed in the House about this principle.
§ Mr. Hugh Dykes (Harrow, East)
Notwithstanding the argument that my hon. Friend has just presented, does he agree that there is a well-established tradition whereby Governments will accept the convenient accident of a Private Member's Bill to redress a grievance which they have previously expressed in strong terms when themselves in Opposition? In all logic, therefore, would it not be wise to send the Bill to Committee, where we could argue these detailed points?
§ Mr. MacGregor
This is an issue that could be considered, but I have several other points to make, including points directly in response to what my right hon. and learned Friend the Member for Hexham said, so perhaps I might press on.
Another point I regard as important in relation to retrospection, although it raises other issues as well in this case, is that there is no precedent where compensation laid down in a safeguarding statement and subsequently enacted by Parliament was altered by another Parliament.
I come now to some of the more practical difficulties. I refer, first, to some of the technical difficulties of dealing with the matter at this late stage. There is the problem of how one assesses open market value. It would be a great investigative process. How should it be undertaken? There would be considerable cost. On the technicalities of the matter, there is a particular difficulty in making the assessment.
My right hon. and learned Friend mentioned cash, and that enables me to say a brief word on that subject in this context. Obviously, I cannot comment on the situation of each of the companies, but the cash balances at vesting date to which my right hon. and learned Friend referred were, so it appears if one looks at the balance sheet, in some cases more than the compensation to the company as a whole. That may be true in a few cases, but there are other difficulties about it. It is necessary to look at the origin of the money. For example, much of it was advanced payments by customers which would be expended in carrying out contracts. It was not necessarily money available to the shareholders.
1229 I agree that in the technical discussions it would be possible to analyse what cash was advance payments and how much belonged entirely to the shareholders. But it would take time to establish, and the point that I am trying to make to my right hon. and learned Friend is that they is not simply a matter of fact that, because there were such big cash balances shown in the balance sheet, it necessarily follows that they belonged to the shareholders.
The next difficulty is that to amend the compensation terms retrospectively could be unfair to many individuals. I regard this as an important point when my right hon. and learned Friend talks about retrospective benefits only. There will be situations, we know—
§ Mr. Deputy Speaker (Mr. Bernard Weatherill)
I cannot, after 33 minutes of debate, accept that motion at this stage.
§ Mr. MacGregor
I was dealing with the question of amending the compensation terms retrospectively and the unfairness that this would create to some shareholders.
The problem here is that some shareholders will have settled and many will have sold in the primary companies themselves. I am not talking necessarily about the companies to which the compensation terms apply, but the primary company may well have sold on the basis that it assumed that the terms of the 1977 Act would remain fixed.
To reopen the matter now, and give some shareholders the advantage in companies that would benefit from the proposal, if it were fully followed through, and not to others, would be unfair to those shareholders. So the problem—
§ It being half-past Two o'clock, the debate stood adjourned.
§ Debate to be resumed upon Friday 6 February.