HC Deb 19 October 1981 vol 10 cc117-30

  1. 'A new class of company shall be created to be known as a "Common Ownership Company".
  2. In such companies earnings shall accumulate on behalf of or be distributed to those contributing work instead of accumulating on behalf of and being distributed to those contributing the ordinary share capital.
  3. Voting in such Common Ownership Companies shall be equal or in some way other than in proportion to shares held.
  4. No bonus shares shall be issued to the members of such Common Ownership Companies in proportion to shareholdings except to such extent as may be necessary to offset inflation; but bonus shares may be issued to an unlimited extent in proportion to work.
  5. On a winding up any residual assets of any such Common Ownership Company shall not be distributed to shareholders in proportion to shareholdings but may be distributed to members in proportion to work or be transferred to some non-profit or public organisation or to a charity.'.—[Mr. Geoffrey Robinson.]

Brought up, and read the First time.

Mr. Geoffrey Robinson

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this it will be convenient to take new clause 41—Job ownership companies.

Mr. Robinson

It will be to the immense relief, if not yet release, of the House to hear that we do not intend to press the new clause, in its present form, to a Division. I mentioned earlier that it was with the indulgence of my right hon. and hon. Friends that I was at the Dispatch Box. It can well be imagined that it is with their active encouragement that we air yet again an issue that we believe needs to be ventilated in debate and, with regard to one particular incident in very recent times, needs attention drawn to it.

I know well what the Under-Secretary of State will say in reply and I have considerable sympathy with the position of the officials. I believe that the very flexibility of the present legislation has as many advantages as disadvantages. I say that without disregarding the complex new clause that I am sure the right hon. Member for Orkney and Shetland (Mr. Grimond) will introduce with his usual lucidity and originality of mind. I would not wish to follow him into every detail of that clause, which I am sure that he, too, will not wish to press to a Division today.

I am not sure that at this point we can do more than illustrate and draw attention to the principles involved, even in the complexities into which the right hon. Gentleman may have to go—although I hope that he will not—in introducing new clause 41.

We are saying that, given the growing importance of co-ownership and co-operation rather than confrontation in industry, there may at some future time be scope for wider legislation to facilitate that even more. At present, we have the Industrial Common Ownership Act, the Industrial and Provident Societies Acts, the Scott-Bader arrangements, the John Lewis Partnership, and, if I dare mention it—I shall not be tempted to do more than that—the unique arrangements of the Meriden co-operative. There is much to be said for the flexibility that allows all those various arrangements under the present law to be maintained.

In mentioning Meriden I repeat the tribute that I paid to the previous Minister of State, with whom we had the pleasure of dealing on these matters in Committee and outside, for his handling of the Meriden affair. I also congratulate him, in his absence, on his elevation to that central position on the platform as chairman of the Conservative Party, which he must have occupied with great pleasure, although I imagine that the proceedings on the Floor will have given him almost as much displeasure. I pay tribute to his realistic and sensitive handling of the Meriden affair, to the officials of the Export Credits Guarantee Department, with its outstanding staff of high commercial calibre, committed to the pursuit of the national interest—in which I hope that hon. Members in all parts of the House can still share—and to the officials in various Government Departments.

I belong to that dying breed of politician who happens to believe that officials are important in running the Government and that their co-operation is far better than their confrontation. Even when we had a Labour Government I sometimes found it easier to talk to the officials than to the Ministers concerned. Even though it may lead to a restriction on my parliamentary activities, I put that tribute on record. The Meriden co-operative, which exists under present legislation, intends to prove the Government wrong. I sincerely hope that it can.

Having said that, I return to the question of co-ownership and the need for co-operation in industry that co-ownership can involve. Labour Members feel strongly about this because of the dramatic and possibly disastrous confrontation that is about to take place in British Leyland.

It is not for me to advise the Government. Perhaps they have decided to pick on the beleaguered car workers as an example to everyone else. Nor is it for me to advise trade union leaders and their members about the crucial meeting that will probably take place in Coventry on Thursday. I say that in the knowledge that I have my own reselection meeting on Wednesday night. I do not wish to advise those who are taking part in those discussions.

If ever a case demonstrated that co-operation rather than confrontation was required, and if ever a case demonstrated the need for co-ownership—the Government seem intent on getting into disastrous straits—it is surely that of British Leyland.

No doubt Sir Michael Edwardes sees this as yet another dramatic, headline-clinching confrontation and a subjugation of the opponents, but in the four years of his stewardship—even this year after the launch of the Mini Metro—the percentage market share of British Leyland vehicles has dropped. A total of £1.2 billion of public money has been committed to that company. Workers have not gone on strike for an unparalleled two years and have settled for 5 per cent. , 5 per cent. and 6.8 per cent. The result has been a record £500 million loss in 1980.

I do not attribute that to Sir Michael Edwardes. I attribute it almost exclusively to Government policy and the exchange rate. That argument is not central to my point, but, if Conservative Members wish me to do so, I shall be only too happy to argue the case.

We feel it appropriate to make this appeal because our new clause stresses the reality and the need to move towards co-ownership and co-operation in industry. On 16 October the Financial Times published the letter to the employees of BL, in which Sir Michael said: The BL board will"— I can only quote from a newspaper because I am not privy to the letter and have not been shown it by anyone who works in the company— terminate the contracts of all strikers without payment or redundancy payments or payments in lieu of notice. It will not present its corporate plan to the Government". The letter continues in terms of an ultimatum that is so absolute that it is an affront to those who have received it. No letter could have been better calculated in tone and content to get precisely the counter-productive response that it did.

In large and small industries alike, we must move towards co-ownership and co-operation and away from confrontation. It is for that reason that we are debating the new clause. For reasons that are obvious to all hon. Members we shall not push it to a Division, but this is a serious issue and it will become more serious. I urge the Government and Sir Michael carefully to consider the position into which they are unnecessarily getting themselves.

Mr. J. Grimond (Orkney and Shetland)

I support new clause 6. I do not wish it to be thought that new clause 41 is in any way hostile to it, although the former is rather narrow. New clause 41 would possibly enable more companies to benefit.

I hope that the new clause in my name is not complicated. Its purpose is reasonably simple. It has been drafted by experts. There is a certain amount of urgency. First, industrial relations are not so good that we can afford to dismiss new forms of industrial organisation. Secondly, there is a favourable tide for co-operatives and management and work force takeovers and considerable interest in broadening the base of industry and giving workers a share in ownership and, therefore, to some extent in control. New clause 41 stems from proposals in another place by Lord Seebohm, and supported by Lords Caldecote, Boyd-Carpenter, Lloyd QC, Oram, Diamond and others—a formidable list of people who between them have considerable experience and expertise not only in industry but in law and accountancy.

The main object of the new clause is to establish a new form of company—a job ownership company. We hope that once established it would share in the tax advantages given to co-operatives and, as a type of co-operative, to common ownership enterprises as defined in the 1976 Act and in the recent Finance Bill. The concession allows co-operatives to share the tax relief granted to partnership and close companies. The cost of money borrowed by a worker to enable him to take up shares in his company can be set off against his income tax, which is a considerable concession. We hope that that will flow from the recognition of a job ownership company.

The clause has subordinate purposes. Safeguards are written in against abuse and there is a power for job ownership companies to hold their own shares. The definition of a job ownership company is given in subsections (2)(a) and (b). It is a company limited by shares and one in which all those working in it are entitled to take shares and of which only those who take shares are entitled to be members. Those definitions distinguish it from a co-operative.

Subsection (2)(c) excludes certain companies—those dealing with property, insurance and finance. That provision is inserted at the suggestion of the Treasury to avoid possible tax evasion. I regret the exclusion of banks. The Casa Laboral Popular is a key element in the successful group of Mondragon co-operatives, and I believe that the establishment of similar banks associated with local communities or groups of co-operative enterprises in this country is very much needed. However, we are aiming principally at facilitating the setting up of job ownership companies in productive industry and therefore accept the Treasury's fears that if property and finance companies are included there is a danger of the provision being used as a vehicle for tax evasion.

Subsection (2)(d) is inserted for the same reason—to meet Treasury fears of tax evasion.

Subsection (3) allows a job ownership company to hold its own shares in treasury. The significance of "in treasury" is that if the company buys in its own shares it will not be forced to cancel them. They will be available for reissue to new members. 10.15 pm

I shall be asked why it is necessary to create another form of company. The answer, according to my advisers, who are distinguished and experienced people, is that for the type of suggestion now put forward widely the existing forms of company are not wholly suitable. The tax concessions in the recent Finance Bill really apply only to co-operatives or to common ownership companies as defined in the 1976 Act under which they are co-operatives. There are, of course, difficulties about co-operatives. The shares of co-operatives cannot appreciate in value. The only way in which members of co-operatives can share in the increased value of assets is through bonus shares, which, I understand, are liable to tax at the income tax level.

Another possibility is the close company. However, as a Treasury Minister has pointed out, a close company can have only comparatively few members. It is unusual for it to have more than 20 members. We are considering a company in which all the work force would be members. Under existing legislation, a common ownership enterprise, as defined in the 1976 Act, requires not only registration by the registrar as a co-operative, but a certificate from a Minister, which can be withdrawn. It is evident from talking to people who contemplate changing their businesses into co-operatives or setting up new ones that these are unacceptable provisions.

The Mondragon type of co-operative in Spain has proved extremely successful. It is widely recognised as a structure from which we can learn. The Government themselves have encouraged the Welsh Trades Union Council to examine it. One of the features of such a co-operative is that members share in asset growth. This is extremely important for those who are thinking of putting their money into some sort of co-operative. A proportion of shares is held in common—that is, in treasury. I understand that under existing legislation this would not be possible in Britain. The Mondragon type of co-operative has been tested and examined by many people who are competent to fulfil that task. There are lessons that we can learn.

I confess at once that my new clause differs in one important respect from the Mondragon model. It does not insist that every member of the job ownership company should have one vote and one vote only. It does not insist that any profit should be distributed according to the work contributed by a particular member. I agree that this is a good principle. I believe that it is one of the main principles of new clause 6. I do not dissent from it. Hon. Members have been told, however, that in certain cases that are being actively pursued if this were rigorously applied it would be a bar to the companies making their work force into members of a job ownership company. Under subsection (2)(b) of my new clause it is possible for the job ownership company to lay down terms and conditions, among which might be the requirement of one vote per member and that profits should be shared according to the work put into the company.

The clause has not been thought up by theoreticians. It stems from work done by Lord Seebohm. It is drafted largely by lawyers under his direction. It is aimed at the management takeovers and the work force takeovers that are being discussed at the moment. I believe that some such development in our industrial structure is necessary if we are to improve productivity, contain inflation and get the better relations in industry that are so obviously needed.

One case that is being actively pursued is that of the National Freight Company, which is anxious to form a company in which the work force will control most, if not all, of the operation. The managing director, Mr. Thompson, has made it clear to us that if the only vehicle available is a co-operative it will be extremely difficult, if not impossible, to go forward with the idea. I see in tonight's newspaper that he is pushing on, and I am glad to see that. I do not deny that it could be done, but it would be difficult.

Manchester Cold Rollers has already been formed into what might be called a joint ownership company, but it employs few people and the title of a closed company is much more readily available to it than to a larger company in which all the work force are members. A conglomerate is anxious to hive off a company that it took over inadvisedly some years ago and is willing to sell it to its members for £1, but it is running into difficulties over the form of the takeover company.

One of the main reasons why I hope to get the Government to accept a new form of joint ownership company is that from that we can go on to define its relationship with taxation and other matters.

I know a man who employs 750 people and has made profits of between £3 million and £4 million a year for the past two years. He is anxious to involve his work force in the running of the company, but he finds that if he offers it to the work force at less than the market value, which he is willing to do and which is essential for the whole operation, he will have to pay an immense sum in capital transfer tax. Therefore, that operation is being held up and is before the Government. Once we have a definition of a company, it will be possible to legislate to get out of that sort of difficulty.

I urge the Government to consider new forms of industrial organisation. They seem to be the solution to the conflict that can lead to bad relations in some industries. I do not pretend that this is the only way in which industry should organise or that it is not theoretically possible, if one has enough accountants and so on, to get round the difficulties. However, my associates and I have practical experience of four or five new or existing companies that have run into difficulties because of the lack of a definition of a joint ownership company and are therefore facing problems in dealing with their tax and other liabilities.

New clause 6 is another way forward. It is rather more restrictive because it insists on one man, one vote and on distribution not according to the capital held by employees but to the work put in. Those are good principles, but they are more restrictive and in some cases would be thought to be an obstacle to the creation of such an industrial organisation.

I know that the Co-operative Development Agency is doing extremely good work, but it concentrates on co-operatives. I am sure that the Government agree that pure co-operatives are not the solution to the management or work force takeovers about which I am concerned. I hope that the Minister will consider my new clause and if the drafting is inadequate will not make that his reason for rejecting the whole idea.

Sir Brandon Rhys Williams

The right hon. and hon. Members who have tabled these new clauses have done us a service in raising a subject of growing importance. I have often sought to draw attention to the fact that the Companies Acts are based on practice in the creation of wealth which is rapidly becoming obsolete. It can be said to reflect the social division into Normans and Saxons of long ago. In our factories today there are still all too many managers playing the role of Normans and all too many members of the work force who think it appropriate to act as Saxons in an adversarial or at any rate an angry subordinate role.

With the coming of universal suffrage, such games are simply not appropriate and do not help either the management or the work force to make the best of their opportunities. We need to think again, particularly in the economic straits in which we find ourselves, about the best way of conducting businesses, both large and small, so as to ensure that all concerned give of their best and attain the best of which they are capable. It may be said that in this country, for reasons which I have been unable to analyse and do not wish to dwell on here, the development of the law in connection with partnership atrophied at about the end of the nineteenth century. It did not continue to develop in the immensely detailed and specific way that our company law did in relation to the operation of directors, shareholders and participants at all stages in companies of the kind that are publicly quoted on the Stock Exchange.

I wish to draw attention to a completely different system which still exists in this country and which is extremely fruitful, and that is the relationship between landlord and tenant on the land. In that relationship the owner takes a fixed return and the tenant and his wife, who are in effect the workers, take the profit and loss. Everyone knows what a happy relationship normally exists between agricultural landlord and tenant and how successful an enterprise British agriculture is, by and large. In normal public companies the relationship is reversed. There is an echo of the concepts of money barons and wage slaves, where the workers take a fixed return, whether the business is profitable or unprofitable, and the owners take the profit or the loss. The House should note that contrast, and I am glad that we have the opportunity to do so tonight.

I think that I am right in saying that before the war the finance of enterprise was largely derived from fixed interest securities such as debentures and preference shares, and that the equity branch of the capital structure of companies was, for the most part, much less important as a source of finance. However, with the developments of the past 10 years, particularly with the accelerating and uncertain rate of inflation, we have reached the stage where the cult of the equity has gone too far. Boards are under great pressure to find ways, legitimate or illegitimate, of meeting the expectations of investors, and at the same time the antagonism between the interests of workers and the interests of investors has become too painfully obvious. In my view, that antagonism is one which we all know is ruining our country, and yet we are not making sufficiently specific proposals to deal with the situation. In fact, it now appears that it is as bad as it has ever been.

Many companies would welcome a change in the way that the economic environment of our country permits private companies to finance their work. There are many companies whose directors are worried stiff about the extent to which they have become dependent on bank debt—that is to say, on capital commitments for the most part at fixed interest. They wish that they could find a way to cut free from their commitment to the bank, but market circumstances are such that they cannot contemplate in good faith issuing a prospectus with a view to raising money through equity participation. A solution that is beginning to be found is the selling off of the firm to the management.

That is an interesting development. This year, at the Report stage of the Finance Bill, I recommended that the Government should recognise a new class of stock, which I called the value added loan stock. The object would be to enable companies to sell forward not their equity but a fixed share of their value added as a source of finance. I hope that the Government will give this matter further consideration. Indeed, I have had an assurance that they may do so in the forthcoming Green Paper on this subject. For tax purposes such shares should be ranked as debentures because, although they ride with inflation, they offer a fixed return to the investor. They should also be exempt from capital gains tax, because by their very nature they should increase in value year by year and should keep pace with changes in the value of money. 10.30 pm

I have brought up this subject again because if a company went over to value added loan stocks and diminished or even ended its dependence on equity shares, it would turn into the type of company envisaged by those hon. Members and outside experts who are trying to devise a new method of organising company finance in order to reproduce on a large scale the benefits that exist in the small partnership operations that are permitted under the rudimentary state of our partnership law.

I envisage that companies will increasingly have to recognise that the uncertainties of inflation accounting, the effects of the recession trade union pressure and so on will mean that they will be unable to undertake to operate at a profit. However, they may know that intrinsically their businesses are sound and that they have a good market share. They may also know that their work forces are competent and that their capital is not necessarily obsolete. How can they continue unless we make it easy for them to develop into partnerships and to solve their social and financial problems at the same time?

I hope that the Government will consider the merit behind the new clauses. Although the proposers do not intend to divide the House, I hope that it will not be thought that they could not enlist any support. We must move forward to what the Italians call the "historic compromise". In British terms, the investors will have to be ready to take a fair return and to refrain from insisting that they should have all the profits. In return, the employees must accept the responsibilities of partnership and renounce the right to strike.

Mr. Eyre

I cannot take up the industrial wonderings offered by the hon. Member for Coventry, North-West (Mr. Robinson), which seemed to be aimed at his reselection meeting on Wednesday. However, I regret to inform him that I do not depart from the general view put forward by the Government in Committee, namely, that we do not believe that the proposals further the cause of common ownership companies in the way that the Opposition intend.

As some hon. Members will recall, in Committee the Government expressed support for the aims to which the hon. Gentleman referred, namely, of stimulating productive activity and enterprise in as wide a variety of forms as possible. I assure my hon. Friend the Member for Kensington (Sir B. Rhys Williams) that that is so, and that the Government have an open approach to such forms of activity and wish to see progress. We are doing what we can to create a framework in which such enterprise can be encouraged, and the Companies Bill will help by providing for accounting exemptions for small companies and by enabling a company to buy its own shares.

I should like to underline, however, that the present code of company law in Britain affords great flexibility over the constitution of new companies and that, so long as certain conditions are met, matters such as the eligibility to hold shares, rights on voting, appointment of directors and distribution of dividends are deliberately left for the members of the company to determine in their articles of association. There is, therefore, no need for a specific provision for common ownership companies. Indeed, the new clause might well restrict the freedom of common ownership companies to develop. If their constitutions were now to be determined by statute it might be found after a time that desirable innovations were frustrated and that it would have been wiser to leave the subject to the more flexible provision of the general body of company law.

In Committee I tried to set out the case for that view in greater detail. We wish the hon. Member for Coventry, North-West well in the development of such organisations, but they are well able to develop under the existing company law structure.

I turn to new clause 41. I congratulate the right hon. Member for Orkney and Shetland (Mr. Grimond) on the way in which he advocated the merits of the job ownership company. I warmed to his argument when he explained that concept. Job ownership companies might encourage more people to participate in the process of creating wealth, whether by the establishment of new businesses owned and run by their employees or by the reconstruction of existing businesses. I was interested in the right hon. Gentleman's argument in that connection.

It appears that producer co-operatives play a smaller part in the British economy than in the economies of some of our neighbours. The job ownership idea is one way of helping to fill the gap. I believe that it has an important role to play because although, like other producer co-operative models, it does not permit outside equity, it has the advantage of allowing employees to take an equity stake in their company whilst maintaining the principle of equal voting rights.

Our policy is to encourage such experiments in industrial co-ownership. I stress that because I know that it will please my hon. Friend the Member for Kensington, who is also a disciple in this sphere.

This particular model is scarcely well tried in the British environment, but we are happy to give it our encouragement. We therefore stand ready to help spread the good word about job opportunity companies. I shall describe later how we propose to do that.

I am sure that the clause should not be included in the Bill. It would introduce a definition of a JOC into company law. It is claimed that there are two purposes for that, both of which are misconceived.

I wish to dwell on the crucial point of seeking to insert into statute a definition of a JOC. It is argued that the adoption of the JOC form would be helped by statutory recognition. Faith in the evangelical effects of statute law is misplaced. A statutory definition could easily become a straitjacket by casting permanently the JOC in the mould in which it is described in new clause 41, while various adjustments to the definition would become desirable in the light of experience.

I recall the words of Lord Mackay, the Lord Advocate, who, with his usual precise turn of phrase, said that such a definition would be "frozen into statute." Subsequent developments have shown how right he was. I ask the right hon. Member for Orkney and Shetland to bear with me while I quote the evidence that I believe supports my view, but with great respect to the concept that he has in mind.

The definition before the House—I shall call it mark III—differs substantially from that put before another place—mark I—and from that which was withdrawn from the Order Paper only last week—mark II. The two earlier versions differ from each other. Mark III, before us now, would restrict membership to those working in a company. Mark I would have limited membership to individuals bona fide employed by, or whose income was substantially derived from working upon the business of, the company or its subsidiaries, and also to trustees of an employees' share scheme or charity. Mark II, however, omitted the reference to charity. Both earlier versions prohibited the alteration of the membership provisions.

The right hon. Gentleman said that he was advised that existing forms of company were not suitable for his purpose, but he did not identify a single company law impediment to the formation and operation of such a company, with the exception of the prohibition on "in treasury" shares, which I shall deal with in a moment, as it is of specialised interest.

Mr. Grimond

I am grateful to the Minister. I am closely following his remarks. I agree that we have modified our proposals and tried to make them simpler. The difficulty is that the matter falls between company law and finance law. When I put forward proposals during the proceedings on the Finance Bill I was told that it was a matter for company law. When talking to people who want to form such an operation, we find that the great drawback is that they cannot gain the tax advantages. If they formed a co-operative they could settle the cost of borrowing the money for their shares against their tax. For obvious reasons, a co-operative is unsuitable to take over the National Freight Corporation. The drawback is the question not simply of Treasury shares but of tax.

Mr. Eyre

The right hon. Gentleman and his friends are striving to find a suitable definition for their purposes. With respect, more than one definition may be suitable for different purposes. The struggle to find the one perfect answer causes the solution to fall between different stools. There is no single company law impediment to the formation and operation of the sort of company to which the right hon. Gentleman referred, except for the Treasury share difficulty that I shall explain frankly.

The right hon. Gentleman's claim for consideration is really addressed to the Treasury. I am not seeking to avoid his questions in any way. If he and his friends contrived a definition of precisely the form of activities, the qualities, the virtues and the advantages that they wish to encompass in their company, they would have a firm base on which to approach the Treasury. They could form that base in relation to existing company law.

Mr. Grimond

When we approach the Treasury it says that we must go away and talk to the Department of Trade, get a definition of a company, and then come back. We are going backwards and forwards between the Treasury and the Department of Trade.

10.45 pm
Mr. Eyre

I shall make what I hope the right hon. Gentleman will regard as a helpful approach on the part of the Department of Trade. I say that he is able to form the organisation that he has in mind within the existing provisions of company law. The right hon. Gentleman and his hon. Friends would have to decide what virtues they wished to incorporate within that pattern. They would be able to form a company and they would then seek to ask for special consideration on the taxation side, which would be a Treasury matter. I shall explain the positive steps that we shall take in the Department to assist the right hon. Gentleman in his concept where we agree with him. We wish to be helpful.

I turn to the introduction in the present version of a qualification to the right that workers have to become members in subsection (2)(b)(ii) of new clause 41. This permits the board to lay down terms and conditions of membership, which I suggest would be a wide-sweeping power which would be capable of excluding persons other than those favoured by the board. This is the more interesting because, unlike its antecedents, mark III has no provision for allocating one vote to each member irrespective of the size of shareholding, which I understand is a most important co-operative principle. This alteration makes me wonder not so much whether the chameleon has changed colour but whether it is still a chameleon at all. I am reinforced in that reflection by the fact that, unlike its forebears, the latest version is silent on the question whether loans whose return is linked to profits should be permitted and on how directors should be appointed.

Some of the changes appear to introduce greater flexibility of organisation and ability to attract outside finance, which may be sensible as they may enable companies to take advantage of such flexibility to withstand the vicissitudes of fortune better than if the situation were more restricted. That endorses our view that the JOC idea is still evolving. It is one which no doubt will be capable of further improvement. It would be a mistake to frustrate such development by introducing a statutory definition.

I shall deal with the effect that a definition of a JOC would serve in terms of other provisions in the law. There have been a number of changes. Mark I, which was discussed in another place, would have enabled JOCs to purchase their own shares. I believe that it is accepted that the Bill's provisions will remove any obstacles to the establishment of JOCs on this account. Therefore, we improve the situation. It also permitted JOCs to hold any shares so purchased in treasury. Mark II would have permitted them to issue no par value shares. No evidence has been forwarded that JOCs cannot operate successfully, as do the generality of companies, with the use of shares of some nominal value.

Mark III provides that a JOC shall be entitled to hold its shares in treasury—namely, to purchase shares without cancelling them. In our provisions in the Bill on the purchase by a company of its own shares, we require that shares so purchased shall be cancelled. If more are subsequently needed, they will come from a fresh issue. If treasury shares were permitted, accounting procedure would have to be devised so that the balance sheet of the company could reflect the capital available to creditors, taking account of the shares held in treasury but covered by reserve. This would necessitate inevitably complicated additions to the statute book. Our approach is simpler and perfectly well suited to the circumstances of JOCs.

Further complex provisions would also be needed to cover problems arising on the reissue of treasury shares. Ought the rules in the Companies Acts on allotment at a discount, valuation of non-cash consideration received and share premium to apply to the reissue? Ought the rules on shareholders' pre-emption to apply as if the reissue were an allotment? I will not trouble the House with all the ramifications of those difficult questions. They would all need to be dealt with, but the great beauty of our approach is that they do not need to be. The provisions of the Bill providing for cancellation, combined with the rule in clauses 43 and 44 that the authorised capital remains intact on purchase and redemption, ensure that all the advantages of treasury shares are already conferred by the Bill, with none of the novel and complex problems that this proposal would raise.

Therefore, I appeal to the House to support our approach and the decisions which we have made about the non-eligibility of treasury shares on grounds of economy and efficiency, which should benefit all concerned—industry, commerce and the professions.

At this stage I should like to thank again my hon. Friend the Member for Kensington for his interesting speech. I shall consider carefully all the aspects of the approach that he advocates. I understand his enthusiasm for his beliefs.

I now turn to the help that the Government have offered to job ownership. I hope that the right hon. Member for Orkney and Shetland will accept that we want to help. We believe that effective publicity for the concept is important. We are ready to ensure that the JOC idea is brought to the attention of those Government Departments and their related organisations throughout the country which deal with the promotion of industrial and commercial development. They will therefore be able to bear its advantages in mind in the context of the variety of individual cases with which they deal. This is a serious offer of help, which we believe will do far more for the dissemination and implementation of the JOC concept than so-called recognition in company law.

My officials understand that a set of model articles of a JOC will shortly be sent to the Department. They will then be able to get ahead with the job of publicity. I assure the right hon. Member for Orkney and Shetland that I look forward to the arrival of the model articles. We will actively promote the concept that he champions.

That offer of help, made by the Government after the initial debate on the matter in the other place, should satisfy the reasonable and praiseworthy ambitions of the right hon. Member for Orkney and Shetland. He has an imaginative idea. I recommend our response to the House as an appropriately constructive one. However, the incorporation of this clause into the Bill would, for the reasons that I have given, be a source of confusion to those wishing to form such companies and a disservice to the job ownership movement. I hope that the right hon. Member will find my remarks, and also my promise of co-operation, helpful.

I have dealt with most of the points that have been raised. I have stated our attitude to the right hon. Member for Orkney and Shetland and to the hon. Member for Coventry, North-West. I hope that on examination they will find that I have developed reasonable arguments in answer to their points.

Question put and negatived.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

We now come to new clause 14, with which it will be convenient to take new clause 15.

Sir Brandon Rhys Williams

On a point of order, Mr. Deputy Speaker. If it is for the convenience of the House I shall be content not to move new clause 14 tonight, but that is a matter for the House to decide.

Mr. Deputy Speaker

The hon. Gentleman must indicate what he is doing.

Sir Brandon Rhys Williams

I was under the impression that earlier clauses had to be taken before new clause 14 and that the matter might be discussed through the usual channels for the convenience of all concerned. I thought that as a matter of courtesy I should mention this before opening the debate on my new clauses.

Mr. Clinton Davis

On a point of order, Mr. Deputy Speaker. I think that I know what might have misled the hon. Member for Kensington (Sir B. Rhys Williams). New clauses 9, 10 and 11 are on the selection list, but I had no intention tonight of moving them.

While I am on my feet, I invite the Minister to say whether he would be prepared to move the adjournment of the proceedings at this stage, because the new clauses that the hon. Member for Kensington has tabled, dealing with audit committees, are of some substance. We are virtually at the end of the new clauses. It is not my intention to move new clause 39, and the debate on new clause 40 will be very short, so that we have almost completed the new clauses. I know that the Minister and I had agreed that we should finish the new clauses tonight, but I am wondering whether, in fairness to the hon. Member for Kensington, we might postpone the debate on new clauses 14 and 15 until tomorrow. We are at a fairly late hour and I am not sure that we can do justice to them at this stage.

Mr. Eyre

I apologise to the House for my apparent uncertainty, but I was expecting that new clauses 9, 10 and 11 would be moved, although the hon. Member for Hackney, Central (Mr. Davis) had indicated to me that he might withdraw them. I am grateful to him for saying that he has decided not to pursue those new clauses and that he is also not pursuing new clause 39.

I find myself in some difficulty, however. The Bill is a long and technical one. The hon. Member knows and understands that as well as anyone. I have an enormous number of amendments with which I have to deal tomorrow, and it would be extremely difficult for me if we did not get enough time to deal with them. It could be to the detriment of those essential parts of the Bill. I know that the hon. Member would not begin to reproach me tomorrow night if we had to plough on until the late hours, but that is the difficulty that I face. It might be necessary to sit very late tomorrow night in order to deal adequately with the business.

I should be extremely interested to hear the argument of my hon. Friend the Member for Kensington (Sir B. Rhys Williams) as I was informed that he wished to speak today. A message arrived for me saying that my hon. Friend wished to speak today, and I have in part organised the business on that basis. I gathered that that was the wish of my hon. Friend, and I have tried to operate accordingly.

Sir Brandon Rhys Williams

I may have been the cause of misunderstanding, in that I said that I had no particular wish to raise these very technical questions in what might be regarded as the prime time of the House, when hon. Members come to the Report stage again after Question Time tomorrow. I am perfectly happy to be guided by consensus as to whether I move the new clauses now or whether we leave them until tomorrow.

11 pm

Mr. Clinton Davis

Further to that point of order, Mr. Deputy Speaker. Perhaps I can be of assistance to the Minister. As I have indicated, I shall leave the matter in his hands. I do not think that the job tomorrow is as formidable as he thinks. We shall have some controversy on the first two amendments, but after that it will be fairly plain sailing. I doubt very much whether there will be much intervention on my part or on the part of other Labour Members. I hope that I am not being over-optimistic.

Mr. Eyre

I am grateful to the hon. Gentleman. I appreciate the assurance about his performance tomorrow, but the view among my hon. Friends is that they are anxious to hear my hon. Friend's speech. As my hon. Friend knows, I am prepared to discuss this at any time, and we enjoy listening to his speeches on these matters.

Sir Brandon Rhys Williams

The consensus seems to point in the direction of my moving new clause 14.

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