§ The Minister for Industry and Information Technology (Mr. Kenneth Baker)
I wish to make a statement on Cable and Wireless. On 2 December my right hon. Friend the Secretary of State for Industry told the House that in the British Telecommunications Bill the Government had included a clause broadening their powers to dispose of shares in Cable and Wireless.
Since then we have been considering, in close consultation with the company, whether and how shares might be sold. Before reaching a final conclusion we consulted, through the Foreign and Commonwealth Office, all the Governments of the 30 or so countries in which Cable and Wireless operates telecommunications services under a Government concession. No objections have been raised to the Government's proposals.
The Government have now decided to make a public offer for sale of just less than 50 per cent. of its shares, subject to obtaining the necessary powers in the British Telecommunications Bill. We and the company are agreed that when shares are offered for sale special arrangements will be made for employees to acquire shares.
Cable and Wireless already enjoys a large degree of commercial freedom. The Government intend to refrain from using their rights as a shareholder to intervene in the company's commercial decisions. Cable and Wireless will be freed from the close relationship that exists between the Government and public corporations, which must on occasion constrain the company from being wholly responsive to market forces. The part-ownership formula that we have decided on will follow broadly the precedent set in the case of BP, leaving the Government with a major shareholding capable of safeguarding overseas Governments' interests, as necessary.
The chairman and court of directors of Cable and Wireless are in agreement with this line of action. Cable and Wireless has had a long record of achievement both in private hands and, since 1946, as a public sector company. The proposed sale of shares will create a partnership between the public and private sectors. This new arrangement will provide the commercial flexibility and access to the financial markets necessary to exploit the growth and opportunities in this rapidly expanding telecommunications sector.
§ Mr. Les Huckfield (Nuneaton)
The Labour Party believes that the selling of shares in a highly successful and profitable company is perhaps the silliest and the most doctrinaire activity of a Government who have now lost their way in industrial and economic policy. Is the Minister aware that the original reason for public ownership was that the Lord Reith mission encountered complete unanimity among all Commonwealth Governments that all these matters were too sensitive for purely commercial exploitation? Is he really saying that adequate consultation has taken place, when more than 70 Governments—not 30—are involved? Is he making this statement when no assurance or guarantee has yet been given that these shares will not finally be owned and controlled by foreign purchasers? Finally, is this not one more act of a Government who are prepared to give away prize sectors of the British economy, with good growth prospects in technology, for purely short-term and doctrinaire reasons?
§ Mr. Baker
My reply to the hon. Gentleman's question about consultation is that we have consulted the Governments of those countries where Cable and Wireless has a Government concession. In the other countries where the company operates it does so in a competitive framework and off the commercial service. I have been involved in discussions with the Government of Hong Kong, where Cable and Wireless has its most important concession, and my hon. Friend the Under-Secretary led the discussion with the Government of Bahrein, which is the second most important concession. Both Governments accepted our proposals for the sale of shares. In other countries where Cable and Wireless has concessions the Governments took no objection to our proposals.
The hon. Gentleman asked about shares being owned by foreigners. As nearly two-thirds of the company's employees work overseas, we should not wish to bar overseas people from owning shares in the company.
On the subject of shareholding by foreign companies and Governments, there is no indication that any Government would want to do that. It did not happen with BP. I think that it is highly unlikely that it will happen in this case, but there are some protections in the company's articles of association.
The hon. Gentleman says that we are acting in a doctrinaire way. I remind him that State ownership is doctrinaire. State ownership has dragged down this country's performance for many years. It is an extraordinarily old-fashioned dogma that the State must own 100 per cent. of everything. It is no wonder that so many of the hon. Gentleman's former colleagues have rejected his dead-end thinking and formed a party of their own.
§ Mr. Robin Maxwell-Hyslop (Tiverton)
Can my hon. Friend give me an assurance that Cable and Wireless will be run as a business and not as some sort of organisation to be used, in terms of its chairmanship, as a depository for time-expired Labour Chief Whips?
§ Mr. Ian Mikardo (Bethnal Green and Bow)
I wish to ask the hon. Gentleman two questions. Is he aware that his last remark will be filed for future reference? Secondly, is it not true that some overseas Administrations have agreed to the hon. Gentleman's proposals for the sale of shares because the announcement in the British Telecommunications Bill that the Government are proposing, in part, to break up Cable and Wireless has damaged the company's business so much that its shares have fallen in value, thus giving overseas Administrations a bargain? Does the hon. Gentleman realise that, apart from anything else that may happen in the future, what the Government have done already has inflicted grave damage on the company?
§ Mr. Baker
I completely refute that allegation. There is no evidence at all of that. Since the statement was made in December we have discussed this matter fully in the British Telecommunications Bill. The revenue of the company has not been affected in any way.
§ Several Hon. Members rose—621
§ Mr. Speaker
Order. I propose to call all those right hon. and hon. Members who have been seeking to catch my eye since the beginning of questions on the Minister's statement.
§ Sir William Clark (Croydon, South)
Is my hon. Friend aware that the Government's decision will be welcomed not only by Government supporters but throughout the country? As with previously nationalised industries, is not this the only way—that is, by buying shares—in which the workers can take part in the profitable organisations for which they work?
§ Mr. Baker
I am grateful for my hon. Friend's comments. There is good sense in this proposal by the Government. It will produce a partnership, and I am sure that many of the company's employees will want to buy shares. After all, many employees in British Aerospace have bought shares. There might be some difficulty in some countries about employee shareholdings because of their complicated tax regimes, but we are trying to find ways to meet that difficulty.
§ Mr. Gregor MacKenzie (Rutherglen)
Bearing in mind the fact that the company has a return on capital of about 20 per cent., has paid a dividend of more than £10 million, and is very well geared towards self-financing, can the Minister say what effect his statement will have on the profitability of the company and the benefit that the taxpayer gets from that profitability? Will the Minister also say how much more efficient the company is likely to become as a result of the measures that he has announced, and what benefit this will be to its customers, about whom we hear so much?
§ Mr. Baker
I am sure that there will be a considerable benefit to all the categories to whom the right hon. Gentleman referred. I do not believe that the service will be diminished in any way. In fact, it is likely to be enhanced and improved, because there will be a much more free and commercial attitude when the company is owned partially by the private sector. That is evident. The success of Cable and Wireless in the past has been considerable. I think that its prospects in the future are even greater.
§ Sir Bernard Braine (Essex, South-East)
Although I warmly welcome the Government's decision, may I ask my hon. Friend to clarify the position of potential overseas buyers? He will be aware of the importance of Ascension Island to the Cable and Wireless network. He will know that Ascension Island is a dependent of St. Helena and that St. Helena provides the labour employed on Ascension. Will he assure us that St. Helenians will be able to acquire shares in an interest that is so close to their hearts?
§ Mr. Charles Morris (Manchester, Openshaw)
Will the Minister accept that the success of the Cable and Wireless compay has been built not only on its technical expertise but on the fact that its financial structure has been guaranteed by the British Government? Does he also accept that his statement today will be considered as a form of commercial vandalism by many who have the interests of the company at heart? In refuting the point made by my 622 hon. Friend the Member for Bethnal Green and Bow (Mr. Mikardo), will the Minister confirm that since clause 76 appeared in the British Telecommunications Bill the Cable and Wireless franchises in Hong Kong, Barbados and Bermuda have been under financial attack?
§ Mr. Baker
As for the Cable and Wireless franchises in the three areas mentioned by the right hon. Gentleman, long discussions have been going on with the Hong Kong Telephone Company which predate any statement by this Government on their intentions towards Cable and Wireless, so I refute that allegation. I refute also the allegation that it is vandalism. I am also glad to see that the Opposition Front Bench have not undertaken to renationalise the shares.
§ Mr. David Penhaligon (Truro)
What is the Government's valuation of this company? Can they also let us know what percentage of the shares sold they expect to go to British employees?
§ Mr. Baker
I could not give an estimate on the latter point, but shares will be made available on a wide basis to employees. I can assure the hon. Gentleman of that.
As for the proceeds, the amount, that a sale of shares raised would depend on market conditions prevailing at the time. I am not prepared to speculate. The market knows that Cable and Wireless is a successful company, and I expect the shares to be an attractive investment. I hope that the total net proceeds to the Government will be more than £100 million.
§ Mr. Raymond Whitney (Wycombe)
May I add my congratulations on this welcome measure, especially the opportunity that it gives to employees of Cable and Wireless? Can my hon. Friend say why it was not possible to put a greater percentage of the shares on the market? Will he undertake to advise us that this step towards privatisation could well be copied in other sectors of the nationalised industries?
§ Mr. Baker
Yes. The Government are reviewing constantly areas where such opportunities can arise.
My hon. Friend asked me why it had been decided to sell just short of 50 per cent. of the shares. It was a fine judgment that we took that at this stage it was best to go down what I might call the BP route. But that does not preclude the sale of further shares in future years. We want to assure the Governments who give consessions to Cable and Wireless that there is responsibility and stability there. That sort of shareholding does that. As I have said before, I can assure the Opposition that the services that Cable and Wireless have given in the past will be improved substantially when this has happened.
§ Mr. John Evans (Newton)
Will the Minister explain how public ownership has dragged down Cable and Wireless over the past 30 years?
§ Mr. Michael Morris (Northampton, South)
I congratulate my hon. Friend on his announcement today, following the successful launch of British Aerospace. However, is not the essential element that, as foreign concessions are so important to Cable and Wireless, in any 623 future sell-off as announced today those Governments who wish to take up shareholdings should be enabled to do so, with the caveat that more than 50 per cent. of the ownership will remain in British hands?
§ Mr. Baker
That raises complicated and difficult questions if we envisage other Governments holding shares or parts of the shareholding in a company of this kind. We have to bear in mind such considerations as whether they would want similar shareholdings in neighbouring countries, or countries with which they might not have very good relations. I do not envisage Governments holding blocks of shares in Cable and Wireless. That is highly unlikely. Certainly we have not been asked for any so far.
§ Mr. Michael English (Nottingham, West)
Will the Minister assure us that these capital proceeds will not be used for revenue purposes? I am sure that the Minister is aware that a company director who used capital proceeds for revenue purposes would be put in gaol, and I am sure that the hon. Gentleman does not wish the Government to act in a way that would be criminal if done by a private person.
§ Mr. Archie Hamilton (Epsom and Ewell)
I wish to add my congratulations to my hon. Friend on this rolling back of the State and this adhering to our electoral manifesto. Will my hon. Friend take this opportunity to assure the hon. Member for Nuneaton (Mr. Huckfield) that, although it might be even more desirable to sell off loss-making sectors of the nationalised industries, the trouble is that no one wants to buy them?
§ Mr. Ioan Evans (Aberdare)
Since previous Conservative Governments under Churchill, Macmillan, Douglas-Home and the hon. Member for Sidcup (Mr. 624 Heath) did not seek to denationalise this industry, does not it appear that the Government are being dogmatic? Why do they choose a time to sell off these public assets when the private sector is facing almost total collapse and when many industries are collapsing because they are failing to attract investment?
§ Mr. Les Huckfield
Is the Minister aware that the situation gets worse with every answer that he gives? Is he aware that he keeps revealing that he does not understand that this company has never been a public corporation? It is a limited company, the shares of which are owned by the Government, so it already has maximum commercial freedom. Is the Minister aware that the provisions in the intended articles of association offer no legally watertight formula against foreign control and ownership, so he has given no real assurance against interests abroad gaining majority influence? Finally, on the question of renationalisation—I am not dodging the issue—is the Minister aware that every potential purchaser of the shares should be aware of the commitment and policy of the Labour Party, which has been clearly stated in the House and outside the House?
§ Mr. Baker
In the past, Governments have restricted the commercial freedom of Cable and Wireless. The Government of whom the right hon. Member for Ebbw Vale (Mr. Foot) was deputy leader did the same. Does the hon. Gentleman remember the complaints made by Lord Glenamara about the level imposed by the Government upon the fees of directors of Cable and Wireless? There are many other examples of constraints. As for foreign shareholdings, there are provisions in the articles of association that are of some value, but I shall consider that matter again. With regard to renationalisation of those shares, is the hon. Gentleman saying that a Labour Government of which he would be a member—provided one were re-elected and wanted to renationalise those shares—would have as one of their first priorities the repurchase of the shares of Cable and Wireless from the host of small shareholders, insurance companies and pension funds? If the hon. Gentleman believes that he is being not only stupid but naive.